12/9/07 Law Of Large Numbers
Doug Noland: " First, looking at Q3’s record Credit inflation, it is not easy to justify Wall Street’s call for dramatically lower interest rates. Sure, the pace of fourth quarter Credit growth will be meaningfully slower, especially in the mortgage arena. But I believe the key insight to be drawn from the Q3 2007 “Flow of Funds” is the recognition of the enormous scope of ongoing Credit creation now required to sustain the U.S. financial and economic Bubbles. I’m tempted to surmise that the “Law of Large Numbers” has finally caught up with the Great Credit Bubble. In particular, I find it incredibly ominous that the Credit system has faltered so badly in the face ongoing financial sector expansion. Things can clearly get much worse. I don’t expect the Wall Street securitization machine to anytime soon to return as a major force for Credit expansion. And I simply do not view recent spectacular ballooning and Zealous Risk Intermediation in the Banking, Money Fund, and GSE sectors as sustainable. They’re clearly fraught with great risk. Messrs. Bernanke, Paulson, Bush, Frank and others will, at best, manipulate only the pace of the Unfolding Credit Bust."
Barron's: "Allstate looks undervalued, like some of its peers. And it is the most appealing bet because of its far greater exposure to the profitable auto sector and its success in becoming a less risky company."
Sandra Ward: "RUSSIA IS THE PLACE TO BE. TAKE THAT HOT TIP to the bank, since it comes straight from the lips of one of the most successful international stockpickers, Rudolph-Riad Younes. He and his colleague, Richard Pell, consistently have outperformed the broad market averages and their international benchmarks by a wide margin, by being contrarian and opportunistic. More remarkable, they have continued to do so even as the collective assets for which they are responsible have mushroomed to $63 billion. This year, their fund is up a smart 18.4%, compared with 6.6% for the S&P 500 and 13.4% for its peer."
"If the government goes in and changes contracts it will definitely have a chilling effect on the securitization of mortgages,’ said Milton Ezrati, senior economist and market strategist at Lord Abbett & Co…. "When the government comes in and says you have contracted to have this arrangement and you can no longer have it, I think it opens the door for lawsuits.”
Brazilian miner Vale , formerly known as CVRD, has hired bankers to consider a bid for UK-listed rival Xstrata possibly worth more than 38 billion pounds ($77 billion), UK newspapers said on Saturday.
Nick Perry: "This week we find that the broad-based rallied continued as nearly 90% of the ETFs that I track were higher."
Jon Markman: "Homeowner bailout is a lousy idea. Foreign investors will demand a higher "risk premium" to invest in U.S. real estate, which will make it more expensive for future mortgage seekers to get loans. And they are bound to sue to get the payments they thought they were owed, which will drive up mortgage banks' expenses.
Moreover, the courts and bureaucrats will be tied up for years in a struggle to define exactly who deserves loan forgiveness. People who are making payments on time will naturally demand to get something out of the deal -- why should they essentially suffer for being responsible? As the cost of the bailout goes up, there's little doubt that state and federal governments will float bonds to pay the refinancing fees and, of course, interest payments on those obligations will be paid by all citizens."
Keith Olbermann: "Bush is a liar or an idiot." I take issue here. Isn't it possible that Bush is both?
According to Bloomberg, China ordered banks to increase reserves by the most in four years to try to prevent the world's fastest-growing major economy from overheating.
Lenders must put aside 14.5 percent of deposits as reserves, starting Dec. 25, up from the previous 13.5 percent, the People's Bank of China said today on its Web site. The ratio is the highest since at least 1987 when the data began and the increase is twice as much as the nine others this year. Today's move will take about 380 billion yuan ($51 billion) out of the banking system. Local-currency deposits stood at 37.9 trillion yuan at the end of October.
Saturday, December 08, 2007
Friday, December 07, 2007
Employment
12/8/07 Employment
The economy added 94,000 nonfarm payroll jobs last month, and that was down from the 170,000 added in October and slightly above the 85,000 expected by economists. Payroll growth in September and October was revised lower by a total of 48,000. However, a separate survey of households showed the strongest job growth in nearly six years, with 696,000 more people saying they had jobs in November. As a result of strong employment growth in household survey, the unemployment rate was steady at 4.7%.
Hiring was added in education and health services, retail, professional services, and the government. That helped to offset job losses in construction, manufacturing and financial services -- casualties of the housing slump and credit crunch. Average hourly earnings rose to $17.63 in November, a 0.5 percent increase from the prior month. That marked the biggest monthly gain since June. The only other time the monthly gain was higher was in October 2005. Economists were expecting a more moderate rise of 0.3 percent. Over the past 12 months, wages grew by 3.8 percent.
In response to the report, the benchmark 10-year Treasury bond fell 14/32 to 101 17/32, its yield rising to 4.061%.
Merrill Lynch downgraded the ratings on American Express, Capital One and Discover Financial Services, all to sell from neutral, as it believes "that deterioration in consumer credit and spending will continue to undermine the fundamentals of each and lead to share price declines." Separately, Morgan Stanley cut its rating on Capital One to underweight from overweight, citing a growing concern that the U.S. consumer finance industry will face a more severe cycle than markets have yet discounted.
Baker Hughes Inc.said Friday that the number of drilling rigs in use worldwide rose by 37 to 3,161 in November from 3,124 in October and was up from 3,077 a year ago. In the U.S., the number of rigs in use was 1,798, up from 1,762 in October and 1,706 a year ago.
According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $4.408 billion in the week ended 12/5/07 with Domestic funds reporting net inflows of $1.032 billion and Non-domestic funds reporting net inflows of $3.376 billion; Excluding ETF activity, Equity funds report net cash outflows totaling -$3.301 billion with Domestic funds reporting net outflows of -$2.303 billion and Non-domestic funds reporting net outflows totaling -$998 million.
The UK economy is more vulnerable than other countries to the turmoil in financial markets and its housing market is also at greater risk of a downturn, the Organisation for Economic Co-operation and Development said on Thursday.
Peter Schiff: "Without question, the Bush administration's mortgage rescue plan will exacerbate, not alleviate, the problems in the housing market. As the plan will sharply reduce the ability of new buyers to make purchases, it really amounts to a stay of execution and not a pardon."
Richard Daughty: "At the close of fiscal 2007, the deficit for the unified budget was, politicians crowed, down to a mere $162.8 billion. In fact, the U.S. government is overspending at a far greater rate. The total federal debt actually increased by $497.1 billion over the same period."
In short, the Fed must create the money that the government needs to borrow. And now you also know why electing Ron Paul as President is so imperative, and who is the only hope this stupid country has."
Macrovision agreed to buy Gemstar, a media, entertainment and technology company that publishes TV Guide magazine and cable channel, for about $2.8 billion.
Baosteel Group Corp., China's biggest steel producer, confirmed Friday it has no plans to bid for Rio Tinto PLC, which is trying to fend off an acquisition offer from rival BHP Billiton Ltd.
ArcelorMittal, the world's largest steelmaker, said Friday it will offer at least $1.65 billion for the remaining shares in China Oriental Group Co. that it does not own after a ruling by Hong Kong's securities regulator.
But an analyst said Beijing was unlikely to give its approval for foreign majority ownership in such a strategic sector of the Chinese economy as steel.
Tribune still must obtain a third-party solvency opinion showing that it can repay its unusually heavy debts under the new capital structure. But Chief Executive Dennis FitzSimons reiterated Thursday that he fully expects to close by the end of the year, as planned. One source close to the transaction said the debt reduction should lower costs for Tribune. But the move was also intended to comfort banks that are locked into financing the deal even though it is almost certain they will lose money on it, at least in the short term. "It was a trade-off with the underwriters," the source said. "We thought it was the best use of the cash at this point," FitzSimons said in an interview.
The Wall Street Journal says that global outsourcing has caused delays in Boeing's 787 launch. This should come as no surprise to anyone.
Defaults by speculative-grade companies will quadruple next year as the era of ``easy credit'' comes to an end and economic growth slows, Moody's Investors Service said in a report.
The global default rate will rise to 4.2 percent by November from 1 percent now, the lowest since 1981, Kenneth Emery, director of corporate default research at Moody's, wrote in the report.
The RBC Cash Index showed confidence clocking in at 65.9 in early December. That hovered close to a reading of 64 in November, which marked the worst showing since the devastation wrought by the Gulf Coast hurricanes in 2005.
Jon Markman: "The White House intends to fix the mortgage mess by keeping people who weren't creditworthy in debt and rendering contracts meaningless."
Among active-duty military, veterans and their families, only 36 percent say it was worth going to war in Iraq. This compares with an Annenberg survey taken in 2004, one year after the invasion, which showed that 64 percent of service members and their families supported the war.
The views of veterans and their families are now closer in line with overall public sentiment. The poll shows that 32 percent of the general population supports the war.
Mark Kiesel: "A government bailout which alters contractual interest payments to bondholders will fuel moral hazard problems and raise mortgage rates for future borrowers and home buyers," he said. "This is not a path we want to head down in which government intervention bails out homeowners who failed to act responsibly."
According to Bloomberg, the global merchant fleet, including oil tankers, commodity carriers and container ships, last year exceeded 1 billion tons for the first time, expanding faster than the amount of cargo transported, the United Nations said.
The fleet in 2006 expanded 8 percent to 1.04 billion deadweight tons, a measure of vessels' carrying capacity, the UN said today in an e-mailed summary of its Review of Maritime Transport 2007 report.
Seaborne cargoes climbed 4.3 percent to 7.4 billion tons. A third of that amount comprised crude-oil and petroleum products such as gasoline and jet fuel, the UN said.
Global seaborne trade measured by the distance ships travel, the key measure of shipping demand, expanded 5.5 percent to 30.7 billion ton-miles.
Hurricane forecaster William Gray called Friday for seven Atlantic hurricanes, three of them major, during the 2008 season.
Consumer sentiment fell in December, according to a survey released Friday by Reuters and the University of Michigan. The December consumer sentiment index was 74.5, compared with 76.1 in November.
Secretary of State Condoleezza said Friday the United States would continue along a two-track strategy to deal with Iran, pressing for new sanctions and demanding Tehran come clean about its nuclear program while offering talks to sweeten the deal. But Russia ignored her calls to punish Iran.
The Russian economy will expand at least 7.3 percent this year after 6.7 percent growth in 2006, according to Economy Ministry forecasts.
Gold for February delivery closed down 0.9% at $800.20 an ounce on the New York Mercantile Exchange.
Consumer credit rose $4.7 billion in October on an increase in credit card debt, the Federal Reserve said Friday. The overall increase of 2.3% pushed total outstanding consumer credit up to $2.49 trillion in October. Revolving credit like credit card debt climbed $6.4 billion versus $4.5 billion in September. Non-revolving credit, including auto loans, fell by $2.5 billion compared to a $1.4 billion decline in September.
Crude-oil futures for January delivery ended the session down $1.95, or 2.2%, at $88.28 a barrel on the New York Mercantile Exchange.
The economy added 94,000 nonfarm payroll jobs last month, and that was down from the 170,000 added in October and slightly above the 85,000 expected by economists. Payroll growth in September and October was revised lower by a total of 48,000. However, a separate survey of households showed the strongest job growth in nearly six years, with 696,000 more people saying they had jobs in November. As a result of strong employment growth in household survey, the unemployment rate was steady at 4.7%.
Hiring was added in education and health services, retail, professional services, and the government. That helped to offset job losses in construction, manufacturing and financial services -- casualties of the housing slump and credit crunch. Average hourly earnings rose to $17.63 in November, a 0.5 percent increase from the prior month. That marked the biggest monthly gain since June. The only other time the monthly gain was higher was in October 2005. Economists were expecting a more moderate rise of 0.3 percent. Over the past 12 months, wages grew by 3.8 percent.
In response to the report, the benchmark 10-year Treasury bond fell 14/32 to 101 17/32, its yield rising to 4.061%.
Merrill Lynch downgraded the ratings on American Express, Capital One and Discover Financial Services, all to sell from neutral, as it believes "that deterioration in consumer credit and spending will continue to undermine the fundamentals of each and lead to share price declines." Separately, Morgan Stanley cut its rating on Capital One to underweight from overweight, citing a growing concern that the U.S. consumer finance industry will face a more severe cycle than markets have yet discounted.
Baker Hughes Inc.said Friday that the number of drilling rigs in use worldwide rose by 37 to 3,161 in November from 3,124 in October and was up from 3,077 a year ago. In the U.S., the number of rigs in use was 1,798, up from 1,762 in October and 1,706 a year ago.
According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $4.408 billion in the week ended 12/5/07 with Domestic funds reporting net inflows of $1.032 billion and Non-domestic funds reporting net inflows of $3.376 billion; Excluding ETF activity, Equity funds report net cash outflows totaling -$3.301 billion with Domestic funds reporting net outflows of -$2.303 billion and Non-domestic funds reporting net outflows totaling -$998 million.
The UK economy is more vulnerable than other countries to the turmoil in financial markets and its housing market is also at greater risk of a downturn, the Organisation for Economic Co-operation and Development said on Thursday.
Peter Schiff: "Without question, the Bush administration's mortgage rescue plan will exacerbate, not alleviate, the problems in the housing market. As the plan will sharply reduce the ability of new buyers to make purchases, it really amounts to a stay of execution and not a pardon."
Richard Daughty: "At the close of fiscal 2007, the deficit for the unified budget was, politicians crowed, down to a mere $162.8 billion. In fact, the U.S. government is overspending at a far greater rate. The total federal debt actually increased by $497.1 billion over the same period."
In short, the Fed must create the money that the government needs to borrow. And now you also know why electing Ron Paul as President is so imperative, and who is the only hope this stupid country has."
Macrovision agreed to buy Gemstar, a media, entertainment and technology company that publishes TV Guide magazine and cable channel, for about $2.8 billion.
Baosteel Group Corp., China's biggest steel producer, confirmed Friday it has no plans to bid for Rio Tinto PLC, which is trying to fend off an acquisition offer from rival BHP Billiton Ltd.
ArcelorMittal, the world's largest steelmaker, said Friday it will offer at least $1.65 billion for the remaining shares in China Oriental Group Co. that it does not own after a ruling by Hong Kong's securities regulator.
But an analyst said Beijing was unlikely to give its approval for foreign majority ownership in such a strategic sector of the Chinese economy as steel.
Tribune still must obtain a third-party solvency opinion showing that it can repay its unusually heavy debts under the new capital structure. But Chief Executive Dennis FitzSimons reiterated Thursday that he fully expects to close by the end of the year, as planned. One source close to the transaction said the debt reduction should lower costs for Tribune. But the move was also intended to comfort banks that are locked into financing the deal even though it is almost certain they will lose money on it, at least in the short term. "It was a trade-off with the underwriters," the source said. "We thought it was the best use of the cash at this point," FitzSimons said in an interview.
The Wall Street Journal says that global outsourcing has caused delays in Boeing's 787 launch. This should come as no surprise to anyone.
Defaults by speculative-grade companies will quadruple next year as the era of ``easy credit'' comes to an end and economic growth slows, Moody's Investors Service said in a report.
The global default rate will rise to 4.2 percent by November from 1 percent now, the lowest since 1981, Kenneth Emery, director of corporate default research at Moody's, wrote in the report.
The RBC Cash Index showed confidence clocking in at 65.9 in early December. That hovered close to a reading of 64 in November, which marked the worst showing since the devastation wrought by the Gulf Coast hurricanes in 2005.
Jon Markman: "The White House intends to fix the mortgage mess by keeping people who weren't creditworthy in debt and rendering contracts meaningless."
Among active-duty military, veterans and their families, only 36 percent say it was worth going to war in Iraq. This compares with an Annenberg survey taken in 2004, one year after the invasion, which showed that 64 percent of service members and their families supported the war.
The views of veterans and their families are now closer in line with overall public sentiment. The poll shows that 32 percent of the general population supports the war.
Mark Kiesel: "A government bailout which alters contractual interest payments to bondholders will fuel moral hazard problems and raise mortgage rates for future borrowers and home buyers," he said. "This is not a path we want to head down in which government intervention bails out homeowners who failed to act responsibly."
According to Bloomberg, the global merchant fleet, including oil tankers, commodity carriers and container ships, last year exceeded 1 billion tons for the first time, expanding faster than the amount of cargo transported, the United Nations said.
The fleet in 2006 expanded 8 percent to 1.04 billion deadweight tons, a measure of vessels' carrying capacity, the UN said today in an e-mailed summary of its Review of Maritime Transport 2007 report.
Seaborne cargoes climbed 4.3 percent to 7.4 billion tons. A third of that amount comprised crude-oil and petroleum products such as gasoline and jet fuel, the UN said.
Global seaborne trade measured by the distance ships travel, the key measure of shipping demand, expanded 5.5 percent to 30.7 billion ton-miles.
Hurricane forecaster William Gray called Friday for seven Atlantic hurricanes, three of them major, during the 2008 season.
Consumer sentiment fell in December, according to a survey released Friday by Reuters and the University of Michigan. The December consumer sentiment index was 74.5, compared with 76.1 in November.
Secretary of State Condoleezza said Friday the United States would continue along a two-track strategy to deal with Iran, pressing for new sanctions and demanding Tehran come clean about its nuclear program while offering talks to sweeten the deal. But Russia ignored her calls to punish Iran.
The Russian economy will expand at least 7.3 percent this year after 6.7 percent growth in 2006, according to Economy Ministry forecasts.
Gold for February delivery closed down 0.9% at $800.20 an ounce on the New York Mercantile Exchange.
Consumer credit rose $4.7 billion in October on an increase in credit card debt, the Federal Reserve said Friday. The overall increase of 2.3% pushed total outstanding consumer credit up to $2.49 trillion in October. Revolving credit like credit card debt climbed $6.4 billion versus $4.5 billion in September. Non-revolving credit, including auto loans, fell by $2.5 billion compared to a $1.4 billion decline in September.
Crude-oil futures for January delivery ended the session down $1.95, or 2.2%, at $88.28 a barrel on the New York Mercantile Exchange.
Thursday, December 06, 2007
Numbers
12/7/07 Numbers
U.S. natural gas inventories fell 88 billion cubic feet to 3,440 billion cubic feet in the week ending Nov. 30, U.S. Energy Information Administration reported on Thursday. Analysts at Global Insight were expecting a decrease of 31 billion cubic feet. After the report, January natural gas futures extended gains, up 23 cents, or 3.2%, at $7.415 per million British thermal units. ``After this morning's storage number the year-over-year excess was cut by more than half and it will become a deficit next week,'' said Peter Linder, an energy analyst and senior adviser with Calgary-based DeltaOne Energy Fund.
A record number of U.S. mortgages were somewhere in the foreclosure process in the third quarter, with 1.69% of all residential borrowers facing the loss of a home, the Mortgage Bankers Association said Thursday. The percentage of homes that entered foreclosure in the third quarter also hit a record at 0.78%, the trade group said. Mortgage delinquencies, those loans with payments that were more than 30 days past due, shot up to a 21-year high at 5.59%, MBA's quarterly survey showed.
Chrysler LLC is on track to lose about $1.6 billion this year, Chief Executive Officer Robert Nardelli told a group of employees this week, The Wall Street Journal reported.
The Bank of England cut its key interest rate by a quarter-point Thursday to 5.5% after economic data in the previous couple of days showed a sharp slowdown in consumer confidence and in services sector growth. The rate cut is the first since August 2005 and comes after five hikes since August 2006.
Costco Wholesale Corp.said November same-store sales rose 9% from a year earlier, due in part to strong international growth.
Wal-Mart Stores Inc on Thursday reported a 1.5 percent rise in November sales at U.S. stores open at least a year, saying it had "solid" sales as the holiday rush got under way the day after Thanksgiving. The results were slightly better than analysts' average forecast for a 1.2 percent gain, according to Reuters Estimates.
Tribune Co. said Thursday it plans to use $500 million in available cash to reduce the amount it needs to borrow to close the $8.2 billion buyout of the company by year's end.
The latest evidence that the long-pending deal is about to close sent its stock up to a six-month high.
Target expects December sales to be down "well short" of its prior view. In November, Target had predicted same-store sales would be down in the low single-digits, on a reported basis.
The stock got hit by close to 7%.
Nonfarm private employment rose by 189,000 in November, the biggest gain of the year, according to ADP Employer Services and Macroeconomic Advisers.
Layoffs in the auto industry accelerated in November, driving announced job reductions to the highest level since August, according to an unscientific tally compiled by outplacement firm Challenger Gray & Christmas released Wednesday.
Total announced job cuts rose 15.9% from October to 73,140, Challenger said, led by 19,144 jobs eliminated in the auto industry and 10,018 in energy industries.
November's cuts were down 4.7% from the previous November. Through the first 11 months of 2007, announced layoffs are down 7.8% compared with the first 11 months in 2006.
Toll Brothers reported its first quarterly loss in two decades; EPS were -$0.52 versus -$0.47 estimates.
Rates on 30-year mortgages fell sharply again this week, dropping to the lowest level in more than two years.
Freddie Mac, the mortgage company, reported Thursday that 30-year, fixed-rate mortgages averaged 5.96 percent. That was down from 6.10 percent last week and was the lowest rate since the week of Sept. 29, 2005, when they averaged 5.91 percent.
Crude oil for January delivery closed up $2.74, or 3.1%, at $90.23 a barrel on the New York Mercantile Exchange. Meanwhile, January natural gas futures rallied 15.6 cents, or 2.2%, to $7.341 per million British thermal units.
Gold for February delivery rose $3.40 to end at $807.10 an ounce on the New York Mercantile Exchange.
The Bush administration offered hope to beleaguered homeowners Thursday with a five-year freeze in loan rates for those who qualify, even as the number of bad mortgages jumped to the highest level ever. The administration said its plan could help 1.2 million homeowners -- either through a freeze or quicker ways to assist homeowners refinance. The Center for Responsible Lending, which battles predatory lending, estimated that only 145,000 homeowners would qualify for the freeze because the criteria are too narrow.
U.S. natural gas inventories fell 88 billion cubic feet to 3,440 billion cubic feet in the week ending Nov. 30, U.S. Energy Information Administration reported on Thursday. Analysts at Global Insight were expecting a decrease of 31 billion cubic feet. After the report, January natural gas futures extended gains, up 23 cents, or 3.2%, at $7.415 per million British thermal units. ``After this morning's storage number the year-over-year excess was cut by more than half and it will become a deficit next week,'' said Peter Linder, an energy analyst and senior adviser with Calgary-based DeltaOne Energy Fund.
A record number of U.S. mortgages were somewhere in the foreclosure process in the third quarter, with 1.69% of all residential borrowers facing the loss of a home, the Mortgage Bankers Association said Thursday. The percentage of homes that entered foreclosure in the third quarter also hit a record at 0.78%, the trade group said. Mortgage delinquencies, those loans with payments that were more than 30 days past due, shot up to a 21-year high at 5.59%, MBA's quarterly survey showed.
Chrysler LLC is on track to lose about $1.6 billion this year, Chief Executive Officer Robert Nardelli told a group of employees this week, The Wall Street Journal reported.
The Bank of England cut its key interest rate by a quarter-point Thursday to 5.5% after economic data in the previous couple of days showed a sharp slowdown in consumer confidence and in services sector growth. The rate cut is the first since August 2005 and comes after five hikes since August 2006.
Costco Wholesale Corp.said November same-store sales rose 9% from a year earlier, due in part to strong international growth.
Wal-Mart Stores Inc on Thursday reported a 1.5 percent rise in November sales at U.S. stores open at least a year, saying it had "solid" sales as the holiday rush got under way the day after Thanksgiving. The results were slightly better than analysts' average forecast for a 1.2 percent gain, according to Reuters Estimates.
Tribune Co. said Thursday it plans to use $500 million in available cash to reduce the amount it needs to borrow to close the $8.2 billion buyout of the company by year's end.
The latest evidence that the long-pending deal is about to close sent its stock up to a six-month high.
Target expects December sales to be down "well short" of its prior view. In November, Target had predicted same-store sales would be down in the low single-digits, on a reported basis.
The stock got hit by close to 7%.
Nonfarm private employment rose by 189,000 in November, the biggest gain of the year, according to ADP Employer Services and Macroeconomic Advisers.
Layoffs in the auto industry accelerated in November, driving announced job reductions to the highest level since August, according to an unscientific tally compiled by outplacement firm Challenger Gray & Christmas released Wednesday.
Total announced job cuts rose 15.9% from October to 73,140, Challenger said, led by 19,144 jobs eliminated in the auto industry and 10,018 in energy industries.
November's cuts were down 4.7% from the previous November. Through the first 11 months of 2007, announced layoffs are down 7.8% compared with the first 11 months in 2006.
Toll Brothers reported its first quarterly loss in two decades; EPS were -$0.52 versus -$0.47 estimates.
Rates on 30-year mortgages fell sharply again this week, dropping to the lowest level in more than two years.
Freddie Mac, the mortgage company, reported Thursday that 30-year, fixed-rate mortgages averaged 5.96 percent. That was down from 6.10 percent last week and was the lowest rate since the week of Sept. 29, 2005, when they averaged 5.91 percent.
Crude oil for January delivery closed up $2.74, or 3.1%, at $90.23 a barrel on the New York Mercantile Exchange. Meanwhile, January natural gas futures rallied 15.6 cents, or 2.2%, to $7.341 per million British thermal units.
Gold for February delivery rose $3.40 to end at $807.10 an ounce on the New York Mercantile Exchange.
The Bush administration offered hope to beleaguered homeowners Thursday with a five-year freeze in loan rates for those who qualify, even as the number of bad mortgages jumped to the highest level ever. The administration said its plan could help 1.2 million homeowners -- either through a freeze or quicker ways to assist homeowners refinance. The Center for Responsible Lending, which battles predatory lending, estimated that only 145,000 homeowners would qualify for the freeze because the criteria are too narrow.
Wednesday, December 05, 2007
Slowdown
12/6/07 Slowdown
The U.K. government has drafted a bill that could see mortgage bank Northern Rock nationalized as early as February if it can't strike a deal to be bought, according to a report in the Telegraph newspaper Wednesday.
Abbott Laboratories plans to lay off 1,200 employees at two of its vascular products manufacturing facilities due to a slowdown in the coronary stent market.
Euro zone retail sales volumes dropped 0.7% in October, compared to a 0.2% rise in September, according to data released by Eurostat. On an annual basis, sales edged up 0.2% in the euro area. Economists had been expecting sales to slip by 0.3% in the month and rise 1.2% year on year, according to data compiled by Dow Jones Newswires. The euro traded down 0.3% at $1.4713 against the dollar after the data.
OPEC agreed on Wednesday to keep oil supplies unchanged, Nigerian Oil Minister Odein Ajumogobia said. Crude futures rose about $2 a barrel.
The services sector purchasing managers index in the U.K. fell to 51.9 in November from 53.0 in October, a weaker-than-forecast reading and the worst reading since May 2003.
Halifax, a division of U.K. mortgage bank HBOS said Wednesday that U.K. house prices fell 1.1% in November following a 0.5% drop in October.
The Reserve Bank of Australia Wednesday said its board has decided to leave a key interest rate unchanged at 6.75%, as expected, but said it remained concerned about the outlook for inflation.
China has decided to adopt tight monetary policies next year, marking the first change in its stance in a decade, state media said Wednesday. The decision to change to "tight monetary policies" was announced at the end of the three-day Central Economic Work Conference, which brought together top decision-makers from the Communist Party and government. The meeting also concluded it would be a priority in 2008 to prevent overheating and curb inflation, while controlling the volume and pace of loans, according to Xinhua. "China will strictly control the volume and... pace of loans, so as to better regulate domestic demand and balance international payments," Xinhua said, citing the conference. China's economy is expected to expand 11.5 percent this year, fuelled mainly by investment spending, according to Xinhua. It will be the fifth consecutive year of double-digit growth. In 2008, too, the economy is likely to experience double-digit growth, according to the Chinese Academy of Social Sciences, the nation's top think tank.
Real estate crash or not, the U.S. economy and California will escape recession in 2008, a UCLA study released today predicts. Despite rising oil prices, sinking housing prices and a turbulent stock market, the national economy will be saved by some of its apparent weak spots, the quarterly UCLA Anderson forecast. stated.
Nouriel Roubini: "The worsening of the US and global liquidity and credit crunch - and the now high risks of a US hard landing that will spread to the rest of the world as recopling replaces decoupling - suggest that all major central should cut policy rates as soon as possible. It is not time to temporize and wishfully hope that the credit crunch will go away; conditions in interbank markets and credit markets are much worse now than they were in the peak of the crisis in August as measured by various Libor spreads relative to policy rate or to same maturity government bond yields; thus, the minimum that central banks should do now is to cut policy rates."
Wal-Mart Stores has raised its stake in money-losing Japanese retailer Seiyu to 95.1 percent, the retailers said Wednesday.
The FT writes that Legg Mason says the credit markets are the worst they have been in 47 years.
Barron's writes that Comcast cut its outlook and its shares fell after hours on Tuesday.
"We are concerned about growing evidence of slowing economic growth that would inevitably affect passenger demand, coupled with a surge in energy prices," Gary Kelly, Southwest's chief executive, said in a prepared statement.
Crude inventories fell by 8 million barrels to 304.6 million barrels in the week ending Nov. 30, the American Petroleum Institute reported on Wednesday. Distillate stocks rose by 744,000 barrels to 135.3 million barrels in the same period, and gasoline stocks rose by 3.6 million barrels to 201.6 million barrels, the API said. Also on Wednesday, the Energy Department reported that crude supplies fell by 8 million barrels to 305.2 million barrels in the latest week.
.
The U.K. government has drafted a bill that could see mortgage bank Northern Rock nationalized as early as February if it can't strike a deal to be bought, according to a report in the Telegraph newspaper Wednesday.
Abbott Laboratories plans to lay off 1,200 employees at two of its vascular products manufacturing facilities due to a slowdown in the coronary stent market.
Euro zone retail sales volumes dropped 0.7% in October, compared to a 0.2% rise in September, according to data released by Eurostat. On an annual basis, sales edged up 0.2% in the euro area. Economists had been expecting sales to slip by 0.3% in the month and rise 1.2% year on year, according to data compiled by Dow Jones Newswires. The euro traded down 0.3% at $1.4713 against the dollar after the data.
OPEC agreed on Wednesday to keep oil supplies unchanged, Nigerian Oil Minister Odein Ajumogobia said. Crude futures rose about $2 a barrel.
The services sector purchasing managers index in the U.K. fell to 51.9 in November from 53.0 in October, a weaker-than-forecast reading and the worst reading since May 2003.
Halifax, a division of U.K. mortgage bank HBOS said Wednesday that U.K. house prices fell 1.1% in November following a 0.5% drop in October.
The Reserve Bank of Australia Wednesday said its board has decided to leave a key interest rate unchanged at 6.75%, as expected, but said it remained concerned about the outlook for inflation.
China has decided to adopt tight monetary policies next year, marking the first change in its stance in a decade, state media said Wednesday. The decision to change to "tight monetary policies" was announced at the end of the three-day Central Economic Work Conference, which brought together top decision-makers from the Communist Party and government. The meeting also concluded it would be a priority in 2008 to prevent overheating and curb inflation, while controlling the volume and pace of loans, according to Xinhua. "China will strictly control the volume and... pace of loans, so as to better regulate domestic demand and balance international payments," Xinhua said, citing the conference. China's economy is expected to expand 11.5 percent this year, fuelled mainly by investment spending, according to Xinhua. It will be the fifth consecutive year of double-digit growth. In 2008, too, the economy is likely to experience double-digit growth, according to the Chinese Academy of Social Sciences, the nation's top think tank.
Real estate crash or not, the U.S. economy and California will escape recession in 2008, a UCLA study released today predicts. Despite rising oil prices, sinking housing prices and a turbulent stock market, the national economy will be saved by some of its apparent weak spots, the quarterly UCLA Anderson forecast. stated.
Nouriel Roubini: "The worsening of the US and global liquidity and credit crunch - and the now high risks of a US hard landing that will spread to the rest of the world as recopling replaces decoupling - suggest that all major central should cut policy rates as soon as possible. It is not time to temporize and wishfully hope that the credit crunch will go away; conditions in interbank markets and credit markets are much worse now than they were in the peak of the crisis in August as measured by various Libor spreads relative to policy rate or to same maturity government bond yields; thus, the minimum that central banks should do now is to cut policy rates."
Wal-Mart Stores has raised its stake in money-losing Japanese retailer Seiyu to 95.1 percent, the retailers said Wednesday.
The FT writes that Legg Mason says the credit markets are the worst they have been in 47 years.
Barron's writes that Comcast cut its outlook and its shares fell after hours on Tuesday.
"We are concerned about growing evidence of slowing economic growth that would inevitably affect passenger demand, coupled with a surge in energy prices," Gary Kelly, Southwest's chief executive, said in a prepared statement.
Crude inventories fell by 8 million barrels to 304.6 million barrels in the week ending Nov. 30, the American Petroleum Institute reported on Wednesday. Distillate stocks rose by 744,000 barrels to 135.3 million barrels in the same period, and gasoline stocks rose by 3.6 million barrels to 201.6 million barrels, the API said. Also on Wednesday, the Energy Department reported that crude supplies fell by 8 million barrels to 305.2 million barrels in the latest week.
.
Tuesday, December 04, 2007
Keep It Simple
12/5/07 Keep It Simple
Baosteel chairman Lejiang Xu reportedly told the 21st Business Herald website the group was considering an offer to rival an offer from BHP Billiton Ltd, according to Agence France Presse. Separately, China's ninth-largest steel producer Shougang Corp denied reports it was part of a consortium, which included the Chinese government, formulating a counter bid for Rio Tinto. Chinese steelmakers worry that a combined Rio-BHP could lead to an increase in iron ore prices.
According to the WSJ, a U.S. report concludes that Iran halted development of atomic weapons in 2003, a finding that could undercut calls from Bush administration hawks for military strikes. Michael Rubin, an American Enterprise Institute scholar and a leading Iran hawk: "Certainly it makes diplomacy a lot more difficult," he said. "It almost gives Berlin, Beijing and Moscow an excuse not to come together for a third round of sanctions."
According to Barron's, two weeks after Nordstrom posted strong third-quarter earnings, three insiders are buying the department-store company's battered shares. Paul Favaro, Nordstrom's executive vice president for strategy and development, spent $347,900 for 10,000 shares last Friday -- a per-share cost of $34.79. He now has direct holdings of 22,348 shares, according to a Friday filing with the Securities and Exchange Commission. Also, last week, Nordstrom's general counsel, Lisa Iglesias, bought 590 shares for $20,000, while director Philip Satre spent $101,746 for 3,000 shares.
Eric Savitz: "The Federal Trade Commission is close to approving Google’s (GOOG) pending $3.1 billion acquisition of DoubleClick with no conditions, according to TechConfidential, a blog published by The Deal. The story is sourced to “a lawyer involved in the merger review.” The story reports that FTC approval is expected as early as next week."
Martin Hutchinson: "While the Chinese stock market, as measured by the China Securities Index 300, is down 18% since October 16, that follows a period of almost two years during which the CSI 300 had soared 535% since January 1, 2006. Chinese economic growth is currently running at over 11% and the big money is convinced that it will continue, while the country’s foreign exchange reserves are $1.4 trillion, the largest in the world.
A crash would appear to be imminent!"
Nokia's ``competitors and suppliers may have a hard time with margins,'' said Raffaella Sommariva, a fund manager at AZ Fund Management SA in Luxembourg, which oversees the equivalent of $14.5 billion. ``Growth in mobile phones is in emerging markets where selling prices are lower.''
Copper for delivery in three months dropped as much as 2.7 percent to $6,620 a ton. LME aluminum was down 1.1 percent at $2,432 a ton. Zinc futures on the Shanghai Futures Exchange fell the maximum daily limit after a sharp decline in international prices.
MDU Resources Group Inc., owner of utilities in Montana and the Dakotas, forecast 2008 earnings of $1.65 to $1.90 a share, less than the $1.99 average estimate of analysts surveyed by Bloomberg.
Rising global temperatures as well as growing food consumption in rapidly developing countries such as China and India are pressuring the world food system, meaning that food prices will rise for the foreseeable future, according to the International Food Policy Research Institute.
According to the LA Times, credit market turmoil has slowed sales and softened prices for office buildings in Southern California.
The crisis in subprime loans and collateralised debt obligations bears an "uncanny similarity" to previous woes in split capital investment trusts, according to Martin Gilbert, chief executive of Aberdeen Asset Management. "It will take longer to resolve and is worse than anyone thinks," Mr Gilbert said on Monday.
"As we head into year end, we are witnessing a resurgence of risk aversion and continued impaired liquidity across the credit spectrum," Assistant Secretary for Financial Matters Anthony Ryan told a financial markets conference in Paris."It will take additional time for markets to regain confidence, and we will likely witness more unforeseen challenges leading to more headlines and volatility as additional disclosures are made," Ryan, the senior Treasury official in charge of debt management, told the Euromoney Euro Fixed Income Forum.
China's demand for gold jewelry may increase by about 20 percent this year as rising personal incomes help it to race ahead of the U.S. as the world's second- biggest market, researcher GFMS Ltd. said. Gold use in jewelry in China jumped 24 percent from a year earlier to 221 metric tons in the first nine months, GFMS analyst Veronica Han said by phone from Beijing yesterday, citing data compiled for the World Gold Council. That compares with 515 tons in India, the biggest consumer, and 165 tons in the U.S.
According to the FT, Morgan Stanley further hit confidence in the battered UK banks on Tuesday as it warned that the sector was hitting a “confluence of headwinds”. In a bearish note to clients, Morgan Stanley said the effects of the credit squeeze meant this year was likely to represent the peak of banks’ earnings cycle.
Jim Jubak: "Europe's inflation is likely to prompt its central bank to raise interest rates -- five days before the Fed is expected to lower them here. That's bad news for the buck. On Nov. 13, I wrote that the U.S. dollar was being pummeled by a perfect storm. Just three weeks later, the storm is even stronger. The force of the winds punishing the dollar is building, and there's a real danger that the currency will tumble out of control. What has changed so much in just three weeks? Inflation in Europe has picked up and is now above the range the European Central Bank has said it will tolerate. There's a good chance the bank will raise short-term interest rates to 4.25% from 4% when it meets Thursday."
According to Bloomberg, world wheat stockpiles will probably rise for the first time in four years in 2008-2009 because of increased plantings, which may help push down prices, said Etsuo Kitahara, executive director of the International Grains Council.
The Oil Drum: "Electric power is a fundamental part of our everyday life. Outside of the impact of the occasional storm, we expect that when we flip a light switch, the light will go on. Yet few give much thought to the power station that is generating that power. In recent years the new power stations that have been built have largely got their power from natural gas. But if the world oil is within that zone that we will, in future years, refer to as the peak plateau, the state of US Natural Gas is in a much more perilous position...The current complacency over the longer term natural gas supply extends to the lack of viable replacement sources, and to what will need to be done to supply us, in the short-term, with the power that puts the light on, when I flip that switch. The other problem, of course, is that you don’t change power station fuel sources at the drop of a hat, and if, concurrently, we are hesitating to build the stations that we anticipate will be needed to match future growth, then the supply issue on the other side of that switch may give us concern sooner than we think."
When you compare $7.25 natural gas with $89 crude, one can clearly see that natural gas is cheap by comparison. If you question the reserves of natural gas in our country, then being long UNG makes an even more compelling investment.
U.K. power for delivery tomorrow rose, following the price of natural gas, the fuel used to produce about 40 percent of Britain's electricity. Day-ahead baseload power gained 40 pence, or 1 percent, to 41.90 pounds ($86.53) a megawatt-hour as of 9:03 a.m. London time, according to data from Spectron Group Plc. Baseload electricity is delivered around the clock. Swings in gas prices tend to affect wholesale electricity costs. Next-day gas climbed for a third day, rising 1 percent to 46.25 pence a therm, according to broker ICAP Plc. Power for next month rose 1.8 percent to 56.85 pounds a megawatt-hour, according to Spectron.
Goldman, Sachs & Co. strategists cut their earnings estimates for companies in the Standard & Poor's 500 Index to account for profit shortfalls in the banking industry. Michael Moran, Abby Joseph Cohen and Michelle Kim, who are part of Goldman's New York-based research team, reduced their prediction for per-share profit growth this year to 0.7 percent, down from 4 percent previously. The earnings forecast fell to $90 per share from $93. Earnings in 2008 will increase 5.6 percent for companies in the benchmark, down from an earlier estimate 7.5 percent growth, according to the report dated today. Earnings per share will be $95 for next year, down from the $100 previously estimated.
Nestle USA is planning to sell smoothie maker Jamba drinks at grocery stores in eight states in the western United States, the Wall Street Journal said in its online edition.
Walgreen's November same-store sales up 4.4%.
Merck expects 2008 profit in a range of $3.28 to $3.38 a share, excluding certain items.
Cerberus Capital Management LP and H&R Block Inc. said Tuesday they terminated their agreement for Cerberus to purchase H&R Block's mortgage subsidiary, which has now stopped accepting new mortgage applications.H&R Block said it will lay off about 620 employees, close three offices and take a $75 million restructuring charge as it shuts down lending at Option One Mortgage Corp.
Dow Chemical Co said on Tuesday it would shut down a number of plants and eliminate about 1,000 jobs to cut costs and direct capital toward businesses with better growth prospects.
Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. fell after JPMorgan analysts said the brokerages may write down debt-related holdings in the fourth quarter. Brokerages also declined after Punk Ziegel & Co. analyst Richard Bove advised selling shares of Bear Stearns Cos., Goldman and Lehman.
Clear Channel Communications Inc. doesn't expect the buyout of the company by an affiliate of a private equity group, led by Bain Capital Partners LLC and Thomas H. Lee Partners LP, to close by the end of the year. Clear Channel said it intends to extend the termination date of the agreement to June 12. The San Antonio media company is "actively" pursuing the satisfaction of the conditions to closing the deal. The remaining material conditions to be satisfied are obtaining requisite Federal Communications Commission consent and the expiration or termination of the waiting period under the Hart Scott Rodino Act. Clear Channel said it is "confident" the conditions will be met. The company expects the deal to close during the first quarter of 2008.
Dell announced a $10 billion stock buyback.
The Bank of Canada cut interest rates for the first time in more than three years after a soaring Canadian dollar and financial market ``volatility'' restrained inflation faster than the bank forecast. The central bank lowered its target rate for overnight loans between commercial banks by a quarter point to 4.25 percent, reversing a July increase.
The dollar index was at 75.695.
Freddie Mac's Conventional Mortgage Home Price Index Classic Series fell 1.3% in the third quarter, representing the largest quarterly drop in U.S. house prices in 25 years.
Fannie Mae will cut its dividend by 30% and raise $7 billion by selling new stock as the mortgage giant tries to bolster capital after recent subprime losses. Fannie shares fell 3.9% to $33.91 during late trading. The company said it plans to sell $7 billion of non-convertible preferred stock in one or more offerings this month. The quarterly common stock dividend will be cut to 35 cents a share from 50 cents a share beginning in the first quarter of 2008, Fannie added.
Gold for February delivery rose $12.90 to finish at $807.60 an ounce on the New York Mercantile Exchange. January platinum gained $10.90 to end at $1,472.30 an ounce.
Moody's Investors Service on Tuesday downgraded the ratings of 59 tranches of asset-backed securities held by Bear Stearns Cos., and has placed under review for possible downgrade the ratings of 16 other tranches from five transactions.
Crude dipped almost $1 to $88.32 and natural gas was off 6 cents at $7.16.
Only 30% of consumers think now is a good time to spend their money, the lowest percentage in 14 years, ABC News and the Washington Post reported Wednesday. "Consumers have faced troubling economic news lately, and initial reports indicate that good turnout on Black Friday was tempered by bargain hunting," said Madeleine Perez of ABC.
Ludwig Wittgenstein: “The aspects of things that are most important for us are hidden because of their simplicity and familiarity”
Baosteel chairman Lejiang Xu reportedly told the 21st Business Herald website the group was considering an offer to rival an offer from BHP Billiton Ltd, according to Agence France Presse. Separately, China's ninth-largest steel producer Shougang Corp denied reports it was part of a consortium, which included the Chinese government, formulating a counter bid for Rio Tinto. Chinese steelmakers worry that a combined Rio-BHP could lead to an increase in iron ore prices.
According to the WSJ, a U.S. report concludes that Iran halted development of atomic weapons in 2003, a finding that could undercut calls from Bush administration hawks for military strikes. Michael Rubin, an American Enterprise Institute scholar and a leading Iran hawk: "Certainly it makes diplomacy a lot more difficult," he said. "It almost gives Berlin, Beijing and Moscow an excuse not to come together for a third round of sanctions."
According to Barron's, two weeks after Nordstrom posted strong third-quarter earnings, three insiders are buying the department-store company's battered shares. Paul Favaro, Nordstrom's executive vice president for strategy and development, spent $347,900 for 10,000 shares last Friday -- a per-share cost of $34.79. He now has direct holdings of 22,348 shares, according to a Friday filing with the Securities and Exchange Commission. Also, last week, Nordstrom's general counsel, Lisa Iglesias, bought 590 shares for $20,000, while director Philip Satre spent $101,746 for 3,000 shares.
Eric Savitz: "The Federal Trade Commission is close to approving Google’s (GOOG) pending $3.1 billion acquisition of DoubleClick with no conditions, according to TechConfidential, a blog published by The Deal. The story is sourced to “a lawyer involved in the merger review.” The story reports that FTC approval is expected as early as next week."
Martin Hutchinson: "While the Chinese stock market, as measured by the China Securities Index 300, is down 18% since October 16, that follows a period of almost two years during which the CSI 300 had soared 535% since January 1, 2006. Chinese economic growth is currently running at over 11% and the big money is convinced that it will continue, while the country’s foreign exchange reserves are $1.4 trillion, the largest in the world.
A crash would appear to be imminent!"
Nokia's ``competitors and suppliers may have a hard time with margins,'' said Raffaella Sommariva, a fund manager at AZ Fund Management SA in Luxembourg, which oversees the equivalent of $14.5 billion. ``Growth in mobile phones is in emerging markets where selling prices are lower.''
Copper for delivery in three months dropped as much as 2.7 percent to $6,620 a ton. LME aluminum was down 1.1 percent at $2,432 a ton. Zinc futures on the Shanghai Futures Exchange fell the maximum daily limit after a sharp decline in international prices.
MDU Resources Group Inc., owner of utilities in Montana and the Dakotas, forecast 2008 earnings of $1.65 to $1.90 a share, less than the $1.99 average estimate of analysts surveyed by Bloomberg.
Rising global temperatures as well as growing food consumption in rapidly developing countries such as China and India are pressuring the world food system, meaning that food prices will rise for the foreseeable future, according to the International Food Policy Research Institute.
According to the LA Times, credit market turmoil has slowed sales and softened prices for office buildings in Southern California.
The crisis in subprime loans and collateralised debt obligations bears an "uncanny similarity" to previous woes in split capital investment trusts, according to Martin Gilbert, chief executive of Aberdeen Asset Management. "It will take longer to resolve and is worse than anyone thinks," Mr Gilbert said on Monday.
"As we head into year end, we are witnessing a resurgence of risk aversion and continued impaired liquidity across the credit spectrum," Assistant Secretary for Financial Matters Anthony Ryan told a financial markets conference in Paris."It will take additional time for markets to regain confidence, and we will likely witness more unforeseen challenges leading to more headlines and volatility as additional disclosures are made," Ryan, the senior Treasury official in charge of debt management, told the Euromoney Euro Fixed Income Forum.
China's demand for gold jewelry may increase by about 20 percent this year as rising personal incomes help it to race ahead of the U.S. as the world's second- biggest market, researcher GFMS Ltd. said. Gold use in jewelry in China jumped 24 percent from a year earlier to 221 metric tons in the first nine months, GFMS analyst Veronica Han said by phone from Beijing yesterday, citing data compiled for the World Gold Council. That compares with 515 tons in India, the biggest consumer, and 165 tons in the U.S.
According to the FT, Morgan Stanley further hit confidence in the battered UK banks on Tuesday as it warned that the sector was hitting a “confluence of headwinds”. In a bearish note to clients, Morgan Stanley said the effects of the credit squeeze meant this year was likely to represent the peak of banks’ earnings cycle.
Jim Jubak: "Europe's inflation is likely to prompt its central bank to raise interest rates -- five days before the Fed is expected to lower them here. That's bad news for the buck. On Nov. 13, I wrote that the U.S. dollar was being pummeled by a perfect storm. Just three weeks later, the storm is even stronger. The force of the winds punishing the dollar is building, and there's a real danger that the currency will tumble out of control. What has changed so much in just three weeks? Inflation in Europe has picked up and is now above the range the European Central Bank has said it will tolerate. There's a good chance the bank will raise short-term interest rates to 4.25% from 4% when it meets Thursday."
According to Bloomberg, world wheat stockpiles will probably rise for the first time in four years in 2008-2009 because of increased plantings, which may help push down prices, said Etsuo Kitahara, executive director of the International Grains Council.
The Oil Drum: "Electric power is a fundamental part of our everyday life. Outside of the impact of the occasional storm, we expect that when we flip a light switch, the light will go on. Yet few give much thought to the power station that is generating that power. In recent years the new power stations that have been built have largely got their power from natural gas. But if the world oil is within that zone that we will, in future years, refer to as the peak plateau, the state of US Natural Gas is in a much more perilous position...The current complacency over the longer term natural gas supply extends to the lack of viable replacement sources, and to what will need to be done to supply us, in the short-term, with the power that puts the light on, when I flip that switch. The other problem, of course, is that you don’t change power station fuel sources at the drop of a hat, and if, concurrently, we are hesitating to build the stations that we anticipate will be needed to match future growth, then the supply issue on the other side of that switch may give us concern sooner than we think."
When you compare $7.25 natural gas with $89 crude, one can clearly see that natural gas is cheap by comparison. If you question the reserves of natural gas in our country, then being long UNG makes an even more compelling investment.
U.K. power for delivery tomorrow rose, following the price of natural gas, the fuel used to produce about 40 percent of Britain's electricity. Day-ahead baseload power gained 40 pence, or 1 percent, to 41.90 pounds ($86.53) a megawatt-hour as of 9:03 a.m. London time, according to data from Spectron Group Plc. Baseload electricity is delivered around the clock. Swings in gas prices tend to affect wholesale electricity costs. Next-day gas climbed for a third day, rising 1 percent to 46.25 pence a therm, according to broker ICAP Plc. Power for next month rose 1.8 percent to 56.85 pounds a megawatt-hour, according to Spectron.
Goldman, Sachs & Co. strategists cut their earnings estimates for companies in the Standard & Poor's 500 Index to account for profit shortfalls in the banking industry. Michael Moran, Abby Joseph Cohen and Michelle Kim, who are part of Goldman's New York-based research team, reduced their prediction for per-share profit growth this year to 0.7 percent, down from 4 percent previously. The earnings forecast fell to $90 per share from $93. Earnings in 2008 will increase 5.6 percent for companies in the benchmark, down from an earlier estimate 7.5 percent growth, according to the report dated today. Earnings per share will be $95 for next year, down from the $100 previously estimated.
Nestle USA is planning to sell smoothie maker Jamba drinks at grocery stores in eight states in the western United States, the Wall Street Journal said in its online edition.
Walgreen's November same-store sales up 4.4%.
Merck expects 2008 profit in a range of $3.28 to $3.38 a share, excluding certain items.
Cerberus Capital Management LP and H&R Block Inc. said Tuesday they terminated their agreement for Cerberus to purchase H&R Block's mortgage subsidiary, which has now stopped accepting new mortgage applications.H&R Block said it will lay off about 620 employees, close three offices and take a $75 million restructuring charge as it shuts down lending at Option One Mortgage Corp.
Dow Chemical Co said on Tuesday it would shut down a number of plants and eliminate about 1,000 jobs to cut costs and direct capital toward businesses with better growth prospects.
Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. fell after JPMorgan analysts said the brokerages may write down debt-related holdings in the fourth quarter. Brokerages also declined after Punk Ziegel & Co. analyst Richard Bove advised selling shares of Bear Stearns Cos., Goldman and Lehman.
Clear Channel Communications Inc. doesn't expect the buyout of the company by an affiliate of a private equity group, led by Bain Capital Partners LLC and Thomas H. Lee Partners LP, to close by the end of the year. Clear Channel said it intends to extend the termination date of the agreement to June 12. The San Antonio media company is "actively" pursuing the satisfaction of the conditions to closing the deal. The remaining material conditions to be satisfied are obtaining requisite Federal Communications Commission consent and the expiration or termination of the waiting period under the Hart Scott Rodino Act. Clear Channel said it is "confident" the conditions will be met. The company expects the deal to close during the first quarter of 2008.
Dell announced a $10 billion stock buyback.
The Bank of Canada cut interest rates for the first time in more than three years after a soaring Canadian dollar and financial market ``volatility'' restrained inflation faster than the bank forecast. The central bank lowered its target rate for overnight loans between commercial banks by a quarter point to 4.25 percent, reversing a July increase.
The dollar index was at 75.695.
Freddie Mac's Conventional Mortgage Home Price Index Classic Series fell 1.3% in the third quarter, representing the largest quarterly drop in U.S. house prices in 25 years.
Fannie Mae will cut its dividend by 30% and raise $7 billion by selling new stock as the mortgage giant tries to bolster capital after recent subprime losses. Fannie shares fell 3.9% to $33.91 during late trading. The company said it plans to sell $7 billion of non-convertible preferred stock in one or more offerings this month. The quarterly common stock dividend will be cut to 35 cents a share from 50 cents a share beginning in the first quarter of 2008, Fannie added.
Gold for February delivery rose $12.90 to finish at $807.60 an ounce on the New York Mercantile Exchange. January platinum gained $10.90 to end at $1,472.30 an ounce.
Moody's Investors Service on Tuesday downgraded the ratings of 59 tranches of asset-backed securities held by Bear Stearns Cos., and has placed under review for possible downgrade the ratings of 16 other tranches from five transactions.
Crude dipped almost $1 to $88.32 and natural gas was off 6 cents at $7.16.
Only 30% of consumers think now is a good time to spend their money, the lowest percentage in 14 years, ABC News and the Washington Post reported Wednesday. "Consumers have faced troubling economic news lately, and initial reports indicate that good turnout on Black Friday was tempered by bargain hunting," said Madeleine Perez of ABC.
Ludwig Wittgenstein: “The aspects of things that are most important for us are hidden because of their simplicity and familiarity”
Monday, December 03, 2007
Ticking Time Bomb
12/4/07 Ticking Time Bomb
Like a ticking time bomb, the national debt is an explosion waiting to happen. It's expanding by about $1.4 billion a day — or nearly $1 million a minute.
Moody's Investors Service said it is preparing the biggest credit-rating cuts since subprime-mortgage defaults rocked financial markets.
The cost of borrowing in pounds for a month climbed the most in more than 10 years as banks sought funds to cover their commitments through to the start of 2008 amid a credit squeeze. The London interbank offered rate that banks charge each other for such loans due after the end of the year jumped 63 basis points to 6.72 percent, the highest since December 1998, the British Bankers' Association said Monday.
According to Bloomberg, Florida schools and towns with money frozen in a state-run investment account are unlikely to get their cash back tomorrow, when officials meet to discuss a crisis prompted by withdrawals that drained almost half of the fund's $27 billion in assets, a policy officer said. ``If we reopen the window without limitations on Tuesday, and we see behavior like we've seen up to now, there's simply no way to meet that demand without having a fire sale on assets,'' said James Francis, senior policy officer for the State Board of Administration, manager of the Local Government Investment Pool. Officials raised the possibility of paying less than 100 cents on the dollar to governments seeking cash in a conference call with participants Nov. 30, a day after freezing withdrawals. The board also hired BlackRock Inc., the largest U.S. publicly traded money manager, as an adviser.
The NY Times reported that Montana school districts, cities and counties withdrew $247 million from the state’s $2.4 billion investment fund over the past three days after officials said the rating on one of the pool’s holdings was lowered to default. The fund, managed by the Montana Board of Investments, holds $90 million in Axon Financial, a structured investment vehicle, or SIV, that was cut to “D” by Standard & Poor’s amid the collapse of the subprime mortgage market.
According to IndiaTimes, banks have stopped giving dollar loans to exporters. According to banking industry officials, they can no longer afford to offer dollar loans as their own foreign currency credit lines have dried up.
Indian banks have been drawing foreign currency credit lines from international banks to lend to local exporters. Now, with the subprime fiasco severely impacting the global money market, high-street banks in the US and Europe, even reluctant to lend each other in the term money market, are in no mood to extend credit lines to Indian banks.
For the year, MetLife's numbers should come in at $6.04 to $6.09 a share, against $5.21 in 2006. A survey of analysts by Thomson Financial produced consensus estimates of $1.43 for the quarter and $6.08 for 2007. MetLife also said it would buy back $2.2 billion of its common stock in 2008.
Bank of Japan Governor Toshihiko Fukui said the end of the U.S. housing adjustment isn't in sight and that current Japanese rates were too low in light of economic conditions. The dollar fell 0.7% at 110.42 yen, while it was virtually flat against the euro at $1.4646.
Amgen said an interim Phase III study of Aranesp concluded there was so significant difference in breast-cancer tumor response to chemotherapy between patients taking Aranesp and those who did not. The company said no definitive conclusions should be drawn until the final study report is completed.
Vivendi advanced 2.6% after it said over the weekend that it will merge its video game division with Activision. The combination brings together some of the most popular video game titles, such as Activisions's "Guitar Hero" with Blizzard Entertainment's No. 1 subscription-base title, "World of Warcraft." Vivendi will contribute Vivendi Games, valued at $8.1 billion, plus $1.7 billion in cash in exchange for a stake of approximately 52% in Activision Blizzard at closing. The total deal is valued at $18.9 billion. Activision Blizzard will make a post-closing tender offer for up to 146.5 million of its shares at $27.50 a share, representing a 31% premium for Activision shares based on a 20-trading-day average.
Shares of China Railway Group surged 65% in debut trading on the Shanghai Stock Exchange Monday.
The Federal Reserve will cut interest rates by 100 basis points before June to help the housing market, Citigroup's chief economist, Lewis Alexander, said on Monday.
Chávez conceded that Venezuelan voters narrowly defeated constitutional reforms he sought to expand his executive powers and allow him to stand for election as president indefinitely.
Lennar Corp. has sold about 11,000 home sites to a venture mostly owned by the real-estate arm of Morgan Stanley for $525 million, a large land sale that signals that investors have begun to pounce on bargain deals.The sites -- in 32 communities in areas hit hard by the housing downturn -- were valued on Lennar's books at $1.3 billion as of Sept. 30.
Deutsche Bank analyst Paul Ginocchio stated the reason Tribune will be able to close its deal largely boils down to contracts.
The company has firm credit commitments with its banks that should lock in a rate somewhere between 3.5 and 4 percentage points above the bank-to-bank rate, Ginocchio said. Since that means Tribune's banks would be lending below market rates, they likely would have to sit on the debt and hope the market turns so they can sell it to investors later.
Those banks -- Citicorp, Merrill Lynch, Bank of America and JPMorgan Chase -- could exit the deal if Tribune failed to show enough cash flow to meet the explicit coverage ratios in its credit agreement.
But those targets have probably been met, Ginocchio and Puchalla said. If the company is ready to close in the fourth quarter as anticipated, the credit agreement allows Tribune to use cash-flow results from the previous 12 months to calculate its ratios. Using those results, Ginocchio said, it appears those numbers are "in the bag."
The banks' other out would be if Tribune were to suffer what lawyers call a "material adverse change," a broad term that can take in everything from badly deteriorated results to malfeasance. Tribune's revenue has fallen steadily since April, and the slide accelerated in October. But after a dismal second quarter, cash flow has held up better than revenue in recent months, largely due to cost cutting. And one source with knowledge of the situation said that while Tribune's results are below the plan it presented to the banks in April, the numbers are not far enough off to trigger the material-adverse-change clause, according to the Chicago Tribune.
Brett Steenbarger: "We're only about 5% off the bull market highs in the NYSE Composite Index, but a look at the Advance/Decline specific to NYSE common stocks (just the operating companies, not including funds and preferred issues) shows us in a clear downtrend, with the line well below its previous peak, even after the recent market rebound. An even more evident downtrend in the A/D line can be found among the S&P 600 small cap issues. The A/D lines for the S&P 500 stocks and NASDAQ 100 issues held above their August lows during the market drop, despite a lower high at the prior market peak. Interestingly, the line for the Dow 30 stocks is very near its bull market high. In some ways this market reminds me of the 2000-early 2001 period, in which the large caps held their value while the formerly strong tech stocks entered a bear market. In the present market, of course, it's the financials taking the role of the tech stocks."
``We're in a period of a commodity bull market and inflation,'' Jim Rogers said. ``I would not buy government long-term bonds. We'll be going down for years to come. Commodities are telling you to sell Treasuries. Inflation is everywhere.'' He holds positions that will benefit if Treasuries fall.
``The earnings recession has already arrived,'' says David Rosenberg, North America economist for Merrill Lynch & Co. in New York. ``We are going to see an economic recession in '08.''
The United Arab Emirates, the second-largest Arab economy, will consider revaluing its currency against the dollar after a meeting in Qatar with Gulf neighbors including Saudi Arabia and Kuwait.
According to the China Business Journal, China will cap commercial banks’ expansion of lending at 13% in 2008 after growth exceeded the 15% target this year.
Should gift cards, internet sales, and mail order business comprise 30% of this holiday's sales, what is the future for department stores on Main Street?
Regarding the OPEC meeting on Dec. 5, "We will not increase output unless there is a need in the market," said Algerian Oil Minister Chakib Khelil. "For the moment there is no need. Stocks are high."
John Hussman: "How much “liquidity” has the Federal Reserve “pumped” into the $12.7 trillion U.S. banking system since March 2007?
a) $1.2 trillion, which banks have used to firm up their balance sheets
b) $600 billion, which banks can now use to make new loans
c) $16 billion, all of which has been drawn out of the banking system as currency in circulation
If you answered c, move to the head of the class. Investors who answered a or b have not only been misled by analysts and media stories, but have no idea how irrelevant the Fed's actions are likely to be, except on short-term market psychology...I appeared briefly on CNBC last week to discuss recession risk, but beforehand, I was asked to put a positive tone on my comments, to which I responded – “Look, my interest is in making sure that investors have positions that they are able to hold through the complete market cycle, including a potential 30% bear market loss off the highs, without having their financial security endangered. If they're carrying more risk than they could endure through the course of a bear market, they should cut back now. I'm not going to wave my arms around about doom and gloom, but I think it's a crucial time for investors to think about the risk they're taking, and if you don't want me to say that, please don't have me on.” Well, I went on, and though we ran short of time, that's still my message."
Dutch staffing company Randstad Holding said Monday it will bid around $5.17 billion in cash and shares for Vedior in a management-backed takeover that would create the world's second-largest employment agency.
Research in Motion downgraded to Market Perform at Morgan Keegan.
Fred Smith, the CEO of FedEx, thinks that the global recession can't be avoided. The American economy is not growing, and its multinational companies won't find enough business outside the US to offset problems at home.
Fed funds futures are now pricing in a 100% chance of a 25-basis-point rate cut on Dec. 11, but less than 50% odds of a 50-basis point rate cut.
Agrium Inc. has entered into an agreement to acquire UAP Holding Corp. for $39 a share. The Calgary fertilizer producer said the transaction is valued at $2.65 billion, including about $487 million of assumed debt. It said the offer price represents a premium of 27% over the 20-day weighted-average price. It said the boards of both companies have approved the agreement, and the UAP board has recommended that its shareholders accept the offer.
Research at the Boston Fed suggests that the foreclosure crisis in subprime mortgages will get worse before it gets better, said Bank president Eric Rosengren on Monday.
Speaking on CNN's "Late Edition," Paul said he had raised roughly $10.4 million so far in the quarter beginning Oct. 1, an amount that is already double the $5.2 million he pulled in during the third quarter. A big online fundraising effort planned for Dec. 16 could push the fourth quarter's total higher by several million, he said. "We are going to be way over our goal of $12 million," said the 10-term Texas congressman. "And, I mean, at this rate, it could be, you know, maybe $14 million or $15 million. It just is astounding."
U.K. manufacturing growth unexpectedly rebounded in November, weakening the case for an interest-rate cut by the Bank of England this week.
The Russian online media company SUP has acquired blogging and community site livejournal from Six Apart.
PeopleSupport Inc received a letter from IPVG Corp and AO Capital Partners proposing to acquire the offshore business process outsourcing firm for $15.00 per share. The offer is 6.76 percent more than the company's Friday closing price of $14.05 on the Nasdaq. PeopleSupport said its board will consider and evaluate the unsolicited proposal.
The ISM Manufacturing index inched lower to 50.8% in November from 50.9% in October. This is the fifth straight monthly slip in the index. The group's gauge of prices paid rose to 67.5 from 63. The inventory index fell to 46.9 from 47.2. ``The economy is starting to show signs of weakness outside of the depressed housing sector,'' Michelle Meyer, an economist at Lehman Brothers Holdings Inc., said before the report. Businesses are ``becoming more cautious. Tighter credit is likely to continue to restrain capital expenditures.''
Several times over the past few months I have written about natural gas, which now trades at $7.16. The bearish sentiment is based on the fact that stockpiles are 3.528 trillion cubic feet, about 9.3 percent above the five-year average. The U.S. typically draws about 2 trillion cubic feet during winter. However, in recent winters, cold spells have been below average. We are overdue for a winter colder than average. The risk/reward in my view is in favor of going long the natural gas ETF, UNG, at $35+, the level last seen in the beginning of September (when we mentioned it then). Since that time, it rallied up to the $44 level at the start of November.
Montana and Connecticut state-run investment funds hold debt tainted by the subprime mortgage collapse that was cut or put under review by Moody's Investors Service, leaving local governments vulnerable to losses.
On Monday, Monsanto traded at a new 52-week high. Insiders have been heavy sellers of the stock for the last four months. Go figure.
At $119+, Bunge is only 3 points from a 52-week high. There was big insider selling in November. This is the same company we liked in June 2006 at $50.
One might consider taking some money off the table.
At $177, Deere made a new 52-week high. The size of insider selling picked up in late November. This is the same company we liked 15 months ago at $75. One might consider taking some money off the table.
Winston Churchill: “Always remember, a cat looks down on man, a dog looks up to man, but a pig will look man right in the eye and see his equal.”
San Francisco Fed Bank president Janet Yellen said that economic growth in the next six months is going to be weaker than she expected only recently, and said there are serious risks that it may be still lower. Yellen raised a red flag about consumer spending.
Crude oil for January delivery ended the session up 60 cents, or 0.7%, at $89.31 a barrel on the New York Mercantile Exchange. Earlier it fell to an intraday low of $87.20.
Gold for February delivery rose $5.60 to end at $794.70 an ounce on the New York Mercantile Exchange. In contrast, copper for December delivery dropped 9.60 cents, or 3%, at $3.0610 a pound.
African Proverb: “By the time the fool has learned the game, the players have dispersed”
Like a ticking time bomb, the national debt is an explosion waiting to happen. It's expanding by about $1.4 billion a day — or nearly $1 million a minute.
Moody's Investors Service said it is preparing the biggest credit-rating cuts since subprime-mortgage defaults rocked financial markets.
The cost of borrowing in pounds for a month climbed the most in more than 10 years as banks sought funds to cover their commitments through to the start of 2008 amid a credit squeeze. The London interbank offered rate that banks charge each other for such loans due after the end of the year jumped 63 basis points to 6.72 percent, the highest since December 1998, the British Bankers' Association said Monday.
According to Bloomberg, Florida schools and towns with money frozen in a state-run investment account are unlikely to get their cash back tomorrow, when officials meet to discuss a crisis prompted by withdrawals that drained almost half of the fund's $27 billion in assets, a policy officer said. ``If we reopen the window without limitations on Tuesday, and we see behavior like we've seen up to now, there's simply no way to meet that demand without having a fire sale on assets,'' said James Francis, senior policy officer for the State Board of Administration, manager of the Local Government Investment Pool. Officials raised the possibility of paying less than 100 cents on the dollar to governments seeking cash in a conference call with participants Nov. 30, a day after freezing withdrawals. The board also hired BlackRock Inc., the largest U.S. publicly traded money manager, as an adviser.
The NY Times reported that Montana school districts, cities and counties withdrew $247 million from the state’s $2.4 billion investment fund over the past three days after officials said the rating on one of the pool’s holdings was lowered to default. The fund, managed by the Montana Board of Investments, holds $90 million in Axon Financial, a structured investment vehicle, or SIV, that was cut to “D” by Standard & Poor’s amid the collapse of the subprime mortgage market.
According to IndiaTimes, banks have stopped giving dollar loans to exporters. According to banking industry officials, they can no longer afford to offer dollar loans as their own foreign currency credit lines have dried up.
Indian banks have been drawing foreign currency credit lines from international banks to lend to local exporters. Now, with the subprime fiasco severely impacting the global money market, high-street banks in the US and Europe, even reluctant to lend each other in the term money market, are in no mood to extend credit lines to Indian banks.
For the year, MetLife's numbers should come in at $6.04 to $6.09 a share, against $5.21 in 2006. A survey of analysts by Thomson Financial produced consensus estimates of $1.43 for the quarter and $6.08 for 2007. MetLife also said it would buy back $2.2 billion of its common stock in 2008.
Bank of Japan Governor Toshihiko Fukui said the end of the U.S. housing adjustment isn't in sight and that current Japanese rates were too low in light of economic conditions. The dollar fell 0.7% at 110.42 yen, while it was virtually flat against the euro at $1.4646.
Amgen said an interim Phase III study of Aranesp concluded there was so significant difference in breast-cancer tumor response to chemotherapy between patients taking Aranesp and those who did not. The company said no definitive conclusions should be drawn until the final study report is completed.
Vivendi advanced 2.6% after it said over the weekend that it will merge its video game division with Activision. The combination brings together some of the most popular video game titles, such as Activisions's "Guitar Hero" with Blizzard Entertainment's No. 1 subscription-base title, "World of Warcraft." Vivendi will contribute Vivendi Games, valued at $8.1 billion, plus $1.7 billion in cash in exchange for a stake of approximately 52% in Activision Blizzard at closing. The total deal is valued at $18.9 billion. Activision Blizzard will make a post-closing tender offer for up to 146.5 million of its shares at $27.50 a share, representing a 31% premium for Activision shares based on a 20-trading-day average.
Shares of China Railway Group surged 65% in debut trading on the Shanghai Stock Exchange Monday.
The Federal Reserve will cut interest rates by 100 basis points before June to help the housing market, Citigroup's chief economist, Lewis Alexander, said on Monday.
Chávez conceded that Venezuelan voters narrowly defeated constitutional reforms he sought to expand his executive powers and allow him to stand for election as president indefinitely.
Lennar Corp. has sold about 11,000 home sites to a venture mostly owned by the real-estate arm of Morgan Stanley for $525 million, a large land sale that signals that investors have begun to pounce on bargain deals.The sites -- in 32 communities in areas hit hard by the housing downturn -- were valued on Lennar's books at $1.3 billion as of Sept. 30.
Deutsche Bank analyst Paul Ginocchio stated the reason Tribune will be able to close its deal largely boils down to contracts.
The company has firm credit commitments with its banks that should lock in a rate somewhere between 3.5 and 4 percentage points above the bank-to-bank rate, Ginocchio said. Since that means Tribune's banks would be lending below market rates, they likely would have to sit on the debt and hope the market turns so they can sell it to investors later.
Those banks -- Citicorp, Merrill Lynch, Bank of America and JPMorgan Chase -- could exit the deal if Tribune failed to show enough cash flow to meet the explicit coverage ratios in its credit agreement.
But those targets have probably been met, Ginocchio and Puchalla said. If the company is ready to close in the fourth quarter as anticipated, the credit agreement allows Tribune to use cash-flow results from the previous 12 months to calculate its ratios. Using those results, Ginocchio said, it appears those numbers are "in the bag."
The banks' other out would be if Tribune were to suffer what lawyers call a "material adverse change," a broad term that can take in everything from badly deteriorated results to malfeasance. Tribune's revenue has fallen steadily since April, and the slide accelerated in October. But after a dismal second quarter, cash flow has held up better than revenue in recent months, largely due to cost cutting. And one source with knowledge of the situation said that while Tribune's results are below the plan it presented to the banks in April, the numbers are not far enough off to trigger the material-adverse-change clause, according to the Chicago Tribune.
Brett Steenbarger: "We're only about 5% off the bull market highs in the NYSE Composite Index, but a look at the Advance/Decline specific to NYSE common stocks (just the operating companies, not including funds and preferred issues) shows us in a clear downtrend, with the line well below its previous peak, even after the recent market rebound. An even more evident downtrend in the A/D line can be found among the S&P 600 small cap issues. The A/D lines for the S&P 500 stocks and NASDAQ 100 issues held above their August lows during the market drop, despite a lower high at the prior market peak. Interestingly, the line for the Dow 30 stocks is very near its bull market high. In some ways this market reminds me of the 2000-early 2001 period, in which the large caps held their value while the formerly strong tech stocks entered a bear market. In the present market, of course, it's the financials taking the role of the tech stocks."
``We're in a period of a commodity bull market and inflation,'' Jim Rogers said. ``I would not buy government long-term bonds. We'll be going down for years to come. Commodities are telling you to sell Treasuries. Inflation is everywhere.'' He holds positions that will benefit if Treasuries fall.
``The earnings recession has already arrived,'' says David Rosenberg, North America economist for Merrill Lynch & Co. in New York. ``We are going to see an economic recession in '08.''
The United Arab Emirates, the second-largest Arab economy, will consider revaluing its currency against the dollar after a meeting in Qatar with Gulf neighbors including Saudi Arabia and Kuwait.
According to the China Business Journal, China will cap commercial banks’ expansion of lending at 13% in 2008 after growth exceeded the 15% target this year.
Should gift cards, internet sales, and mail order business comprise 30% of this holiday's sales, what is the future for department stores on Main Street?
Regarding the OPEC meeting on Dec. 5, "We will not increase output unless there is a need in the market," said Algerian Oil Minister Chakib Khelil. "For the moment there is no need. Stocks are high."
John Hussman: "How much “liquidity” has the Federal Reserve “pumped” into the $12.7 trillion U.S. banking system since March 2007?
a) $1.2 trillion, which banks have used to firm up their balance sheets
b) $600 billion, which banks can now use to make new loans
c) $16 billion, all of which has been drawn out of the banking system as currency in circulation
If you answered c, move to the head of the class. Investors who answered a or b have not only been misled by analysts and media stories, but have no idea how irrelevant the Fed's actions are likely to be, except on short-term market psychology...I appeared briefly on CNBC last week to discuss recession risk, but beforehand, I was asked to put a positive tone on my comments, to which I responded – “Look, my interest is in making sure that investors have positions that they are able to hold through the complete market cycle, including a potential 30% bear market loss off the highs, without having their financial security endangered. If they're carrying more risk than they could endure through the course of a bear market, they should cut back now. I'm not going to wave my arms around about doom and gloom, but I think it's a crucial time for investors to think about the risk they're taking, and if you don't want me to say that, please don't have me on.” Well, I went on, and though we ran short of time, that's still my message."
Dutch staffing company Randstad Holding said Monday it will bid around $5.17 billion in cash and shares for Vedior in a management-backed takeover that would create the world's second-largest employment agency.
Research in Motion downgraded to Market Perform at Morgan Keegan.
Fred Smith, the CEO of FedEx, thinks that the global recession can't be avoided. The American economy is not growing, and its multinational companies won't find enough business outside the US to offset problems at home.
Fed funds futures are now pricing in a 100% chance of a 25-basis-point rate cut on Dec. 11, but less than 50% odds of a 50-basis point rate cut.
Agrium Inc. has entered into an agreement to acquire UAP Holding Corp. for $39 a share. The Calgary fertilizer producer said the transaction is valued at $2.65 billion, including about $487 million of assumed debt. It said the offer price represents a premium of 27% over the 20-day weighted-average price. It said the boards of both companies have approved the agreement, and the UAP board has recommended that its shareholders accept the offer.
Research at the Boston Fed suggests that the foreclosure crisis in subprime mortgages will get worse before it gets better, said Bank president Eric Rosengren on Monday.
Speaking on CNN's "Late Edition," Paul said he had raised roughly $10.4 million so far in the quarter beginning Oct. 1, an amount that is already double the $5.2 million he pulled in during the third quarter. A big online fundraising effort planned for Dec. 16 could push the fourth quarter's total higher by several million, he said. "We are going to be way over our goal of $12 million," said the 10-term Texas congressman. "And, I mean, at this rate, it could be, you know, maybe $14 million or $15 million. It just is astounding."
U.K. manufacturing growth unexpectedly rebounded in November, weakening the case for an interest-rate cut by the Bank of England this week.
The Russian online media company SUP has acquired blogging and community site livejournal from Six Apart.
PeopleSupport Inc received a letter from IPVG Corp and AO Capital Partners proposing to acquire the offshore business process outsourcing firm for $15.00 per share. The offer is 6.76 percent more than the company's Friday closing price of $14.05 on the Nasdaq. PeopleSupport said its board will consider and evaluate the unsolicited proposal.
The ISM Manufacturing index inched lower to 50.8% in November from 50.9% in October. This is the fifth straight monthly slip in the index. The group's gauge of prices paid rose to 67.5 from 63. The inventory index fell to 46.9 from 47.2. ``The economy is starting to show signs of weakness outside of the depressed housing sector,'' Michelle Meyer, an economist at Lehman Brothers Holdings Inc., said before the report. Businesses are ``becoming more cautious. Tighter credit is likely to continue to restrain capital expenditures.''
Several times over the past few months I have written about natural gas, which now trades at $7.16. The bearish sentiment is based on the fact that stockpiles are 3.528 trillion cubic feet, about 9.3 percent above the five-year average. The U.S. typically draws about 2 trillion cubic feet during winter. However, in recent winters, cold spells have been below average. We are overdue for a winter colder than average. The risk/reward in my view is in favor of going long the natural gas ETF, UNG, at $35+, the level last seen in the beginning of September (when we mentioned it then). Since that time, it rallied up to the $44 level at the start of November.
Montana and Connecticut state-run investment funds hold debt tainted by the subprime mortgage collapse that was cut or put under review by Moody's Investors Service, leaving local governments vulnerable to losses.
On Monday, Monsanto traded at a new 52-week high. Insiders have been heavy sellers of the stock for the last four months. Go figure.
At $119+, Bunge is only 3 points from a 52-week high. There was big insider selling in November. This is the same company we liked in June 2006 at $50.
One might consider taking some money off the table.
At $177, Deere made a new 52-week high. The size of insider selling picked up in late November. This is the same company we liked 15 months ago at $75. One might consider taking some money off the table.
Winston Churchill: “Always remember, a cat looks down on man, a dog looks up to man, but a pig will look man right in the eye and see his equal.”
San Francisco Fed Bank president Janet Yellen said that economic growth in the next six months is going to be weaker than she expected only recently, and said there are serious risks that it may be still lower. Yellen raised a red flag about consumer spending.
Crude oil for January delivery ended the session up 60 cents, or 0.7%, at $89.31 a barrel on the New York Mercantile Exchange. Earlier it fell to an intraday low of $87.20.
Gold for February delivery rose $5.60 to end at $794.70 an ounce on the New York Mercantile Exchange. In contrast, copper for December delivery dropped 9.60 cents, or 3%, at $3.0610 a pound.
African Proverb: “By the time the fool has learned the game, the players have dispersed”
Sunday, December 02, 2007
Opinions Differ
12/3/07 Opinions Differ
According to the NY Times, a new report concluded that personal income from wages and salaries grew at an annual rate of 1.6 percent in the second quarter, far below the 4.5 percent that had previously been estimated. The government did not explain why the revision was made, and it is possible that some of it came from reducing estimates of wages or of the profits that employees received from exercising stock options. But it was most likely, said Robert J. Barbera, the chief economist of ITG, that the largest part of the revision came from a change in employment estimates. If so, he said, he expected the government would revise its estimate of the number of jobs created in the quarter, to as little as 50,000 a month from 126,000 a month. That would indicate that the economy was much weaker than had been thought.
The job report has overstated employment for a long time. The NY Times story should not come as a surprise. Most government numbers, such as on inflation, are not even close to being accurate.
ContraryInvestor.com: "It's always tough in a market like this to maintain composure and emotional stability, but indeed those are two of the most important personal characteristics of successful investors. In order to try to maintain our own sense of balance, in periods like this we believe it's absolutely critical to remember that risk management is really the first and foremost focal point of our activities necessarily at all times. We'll leave trying to pick pro forma short term trading bottoms to those courageously willing to test their fortunes and their will. Although the character of margin debt circumstances of the moment is indeed a warning flag in our eyes, we need to remember that this is but one indicator of emotion. In the spirit of continuing to watch our backs while trying to "see" what lies ahead, a number of technical tools have also helped us in the past in terms of macro risk management. For if indeed margin debt circumstances of the here and now is truly warning of the potential for an important top, then identifying multiple corroboration points of such becomes the order of the day as we move ahead. In relatively simple fashion, we try to look back and develop a sense of technical risk points that have fit our market environment of recent years and at least respect those points until they perhaps ultimately show us they are no longer valid. Given that the financial markets are ever changing beasts, nothing works forever. Nothing. So we respect what has worked until it doesn't. At least since 2003, one such corroboration point, if you will, has really been "staying alive at 75" that has been a big help in terms of the macro. And by that we're talking about the 75 week moving average of the S&P 500, as is seen below. The SPX crossed the 75 week MA for the first time to the upside in the current bull sequence during May of 2003, clearly in hindsight heralding the sustainable up move that was to come. Since that time it has acted as consistent downside resistance at most important market lows, breached on very few intra week occasions. It just so happens that again in recent weeks the 75 week MA has again been tested, and at least for now has held. One macro risk management warning flag lies below the 75 week MA for the S&P. If we close sustainably below the 75 week MA for the SPX, we need to start thinking defense."
Mike Burk: "It is likely we saw an intermediate term low last Monday. As of last Wednesday everything turned sharply upward. Most importantly, new lows all but disappeared on both the NYSE and NASDAQ. This implies a lower risk profile for the next month or two...The secondaries lead both up and down and, at least so far, they are not leading the up move that began last Tuesday...The rapid decrease in new lows suggests we have seen a short term bottom, but, the extreme number of new lows at or near the bottom and the continued under performance of the secondaries relative to the blue chips is indicative of a large developing top...Next week includes the first 5 trading days in December during the 3rd year of the Presidential Cycle...Historically this has been volatile week. In 1975 the OTC was down 5.27%% and in 1999 it was up 7.32%. On average the week has been modestly positive by all measures. The OTC has been up a little more than half of the time while the SPX has been up about 2/3's of the time...December has been one of the better months for the market. Since 1928 the SPX has been up 75% of the time in December with an average gain of 1.4%. During the 3rd year of the Presidential Cycle the performance has been even better up 84% of the time with an average gain of 2.3%. The OTC has been a little more volatile, it has been up 61% of the time in December with an average gain of 1.5% and during the 3rd year of the Presidential Cycle up 73% of the time with an average gain of 4.9%. The average was helped noticeably by a 21.3% gain in 1999...The market is at the beginning of an up move that should last a couple months. I expect the major indices to be higher on Friday December 7 than they were on Friday November 30."
I should point out once again that the market accommodates the fewest number of people at any one time. September and October are normally not very good investing months and November is just the reverse. This year we saw the exact opposite results.
Tim Wood: "In the previous November posting here I explained that in accordance to Dow's theory we had an important non-confirmation at play, which served as a warning that something was wrong. I also explained that we were then in what is known as a Sell Spot in anticipation of a Primary Trend change. On November 21, 2007 this Primary Trend change occurred. As a result, the "Stock Market Barometer," as it was described by William Peter Hamilton back in the 1920's, is telling us that conditions are now stormy. This Primary Bear market will remain in force until negated by another confirmed bullish indication in accordance with Dow theory...The next question in regard to Dow theory is how long and how far down will this Bearish Primary Trend take the market. In accordance with Dow theory, the extent nor the duration of the Primary Trend once established is known. All I can tell you from a Dow theory perspective about this is that we are now operating within the context of a Primary Bear market, which will remain intact until it is reversed."
Brett Steenbarger: "We have bounced solidly off the market lows; Friday saw 865 new 20-day highs across the three exchanges, against 499 new lows. To give an idea of the magnitude of the turnaround, I looked at the 40 stocks in my basket and their Technical Strength (a quantification of trending). Interestingly, only 3 stocks are technically weak, 9 neutral, and 28 strong--quite a reversal of the weakness we had been seeing. Here's how it shapes up, sector by sector:
Materials: +120
Industrials: +100
Consumer Discretionary: +240
Consumer Staples: +180
Energy: +160
Health Care: +260
Financials: +180
Technology: -60
TOTAL: +1180
What is perhaps most fascinating is how one of the strongest sectors (technology) is now the weakest and how two of the weakest sectors (consumer discretionary, financial) are now stronger.
Meanwhile, we continue to see healthy upside momentum. My Demand/Supply measure, which is an index of the number of issues closing above the volatility envelopes surrounding their moving averages, was once again highly skewed to the bulls. Demand was 158 on Friday; Supply was 51. We're now seeing 44% of S&P 500 stocks trading above their 50-day moving averages, up from 20% at the market low. Small caps continue to lag, as only 33% of the S&P 600 stocks are above their 50-day MAs."
Bill Gross: "What we are witnessing is essentially the breakdown of our modern-day banking system, a complex of leveraged lending so hard to understand that Federal Reserve Chairman Ben Bernanke required a face-to-face refresher course from hedge-fund managers in mid-August. My Pimco colleague Paul McCulley has labeled it the "shadow banking system" because it has lain hidden for years, untouched by regulation, yet free to magically and mystically create and then package subprime loans into a host of three-letter conduits that only Wall Street wizards could explain... Now, as the subprimes undermine those structures and the confidence in them, it is a stretch of the imagination to suggest that 75 basis points of interest rate cuts by the Fed will bring back the love."
Royal Bank of Scotland could reveal writedowns of as much as £1.5bn ($3.1bn) in its global markets business when it gives its trading statement next week, according to analysts.
Further UN sanctions will not solve the dispute with the West over Iran's nuclear plans, the Iranian Foreign Ministry said Sunday, a day after six world powers discussed imposing new penalties on Tehran.
Bertrand Russell: “The fact that an opinion has been widely held is no evidence whatever that it is not utterly absurd.”
According to the NY Times, a new report concluded that personal income from wages and salaries grew at an annual rate of 1.6 percent in the second quarter, far below the 4.5 percent that had previously been estimated. The government did not explain why the revision was made, and it is possible that some of it came from reducing estimates of wages or of the profits that employees received from exercising stock options. But it was most likely, said Robert J. Barbera, the chief economist of ITG, that the largest part of the revision came from a change in employment estimates. If so, he said, he expected the government would revise its estimate of the number of jobs created in the quarter, to as little as 50,000 a month from 126,000 a month. That would indicate that the economy was much weaker than had been thought.
The job report has overstated employment for a long time. The NY Times story should not come as a surprise. Most government numbers, such as on inflation, are not even close to being accurate.
ContraryInvestor.com: "It's always tough in a market like this to maintain composure and emotional stability, but indeed those are two of the most important personal characteristics of successful investors. In order to try to maintain our own sense of balance, in periods like this we believe it's absolutely critical to remember that risk management is really the first and foremost focal point of our activities necessarily at all times. We'll leave trying to pick pro forma short term trading bottoms to those courageously willing to test their fortunes and their will. Although the character of margin debt circumstances of the moment is indeed a warning flag in our eyes, we need to remember that this is but one indicator of emotion. In the spirit of continuing to watch our backs while trying to "see" what lies ahead, a number of technical tools have also helped us in the past in terms of macro risk management. For if indeed margin debt circumstances of the here and now is truly warning of the potential for an important top, then identifying multiple corroboration points of such becomes the order of the day as we move ahead. In relatively simple fashion, we try to look back and develop a sense of technical risk points that have fit our market environment of recent years and at least respect those points until they perhaps ultimately show us they are no longer valid. Given that the financial markets are ever changing beasts, nothing works forever. Nothing. So we respect what has worked until it doesn't. At least since 2003, one such corroboration point, if you will, has really been "staying alive at 75" that has been a big help in terms of the macro. And by that we're talking about the 75 week moving average of the S&P 500, as is seen below. The SPX crossed the 75 week MA for the first time to the upside in the current bull sequence during May of 2003, clearly in hindsight heralding the sustainable up move that was to come. Since that time it has acted as consistent downside resistance at most important market lows, breached on very few intra week occasions. It just so happens that again in recent weeks the 75 week MA has again been tested, and at least for now has held. One macro risk management warning flag lies below the 75 week MA for the S&P. If we close sustainably below the 75 week MA for the SPX, we need to start thinking defense."
Mike Burk: "It is likely we saw an intermediate term low last Monday. As of last Wednesday everything turned sharply upward. Most importantly, new lows all but disappeared on both the NYSE and NASDAQ. This implies a lower risk profile for the next month or two...The secondaries lead both up and down and, at least so far, they are not leading the up move that began last Tuesday...The rapid decrease in new lows suggests we have seen a short term bottom, but, the extreme number of new lows at or near the bottom and the continued under performance of the secondaries relative to the blue chips is indicative of a large developing top...Next week includes the first 5 trading days in December during the 3rd year of the Presidential Cycle...Historically this has been volatile week. In 1975 the OTC was down 5.27%% and in 1999 it was up 7.32%. On average the week has been modestly positive by all measures. The OTC has been up a little more than half of the time while the SPX has been up about 2/3's of the time...December has been one of the better months for the market. Since 1928 the SPX has been up 75% of the time in December with an average gain of 1.4%. During the 3rd year of the Presidential Cycle the performance has been even better up 84% of the time with an average gain of 2.3%. The OTC has been a little more volatile, it has been up 61% of the time in December with an average gain of 1.5% and during the 3rd year of the Presidential Cycle up 73% of the time with an average gain of 4.9%. The average was helped noticeably by a 21.3% gain in 1999...The market is at the beginning of an up move that should last a couple months. I expect the major indices to be higher on Friday December 7 than they were on Friday November 30."
I should point out once again that the market accommodates the fewest number of people at any one time. September and October are normally not very good investing months and November is just the reverse. This year we saw the exact opposite results.
Tim Wood: "In the previous November posting here I explained that in accordance to Dow's theory we had an important non-confirmation at play, which served as a warning that something was wrong. I also explained that we were then in what is known as a Sell Spot in anticipation of a Primary Trend change. On November 21, 2007 this Primary Trend change occurred. As a result, the "Stock Market Barometer," as it was described by William Peter Hamilton back in the 1920's, is telling us that conditions are now stormy. This Primary Bear market will remain in force until negated by another confirmed bullish indication in accordance with Dow theory...The next question in regard to Dow theory is how long and how far down will this Bearish Primary Trend take the market. In accordance with Dow theory, the extent nor the duration of the Primary Trend once established is known. All I can tell you from a Dow theory perspective about this is that we are now operating within the context of a Primary Bear market, which will remain intact until it is reversed."
Brett Steenbarger: "We have bounced solidly off the market lows; Friday saw 865 new 20-day highs across the three exchanges, against 499 new lows. To give an idea of the magnitude of the turnaround, I looked at the 40 stocks in my basket and their Technical Strength (a quantification of trending). Interestingly, only 3 stocks are technically weak, 9 neutral, and 28 strong--quite a reversal of the weakness we had been seeing. Here's how it shapes up, sector by sector:
Materials: +120
Industrials: +100
Consumer Discretionary: +240
Consumer Staples: +180
Energy: +160
Health Care: +260
Financials: +180
Technology: -60
TOTAL: +1180
What is perhaps most fascinating is how one of the strongest sectors (technology) is now the weakest and how two of the weakest sectors (consumer discretionary, financial) are now stronger.
Meanwhile, we continue to see healthy upside momentum. My Demand/Supply measure, which is an index of the number of issues closing above the volatility envelopes surrounding their moving averages, was once again highly skewed to the bulls. Demand was 158 on Friday; Supply was 51. We're now seeing 44% of S&P 500 stocks trading above their 50-day moving averages, up from 20% at the market low. Small caps continue to lag, as only 33% of the S&P 600 stocks are above their 50-day MAs."
Bill Gross: "What we are witnessing is essentially the breakdown of our modern-day banking system, a complex of leveraged lending so hard to understand that Federal Reserve Chairman Ben Bernanke required a face-to-face refresher course from hedge-fund managers in mid-August. My Pimco colleague Paul McCulley has labeled it the "shadow banking system" because it has lain hidden for years, untouched by regulation, yet free to magically and mystically create and then package subprime loans into a host of three-letter conduits that only Wall Street wizards could explain... Now, as the subprimes undermine those structures and the confidence in them, it is a stretch of the imagination to suggest that 75 basis points of interest rate cuts by the Fed will bring back the love."
Royal Bank of Scotland could reveal writedowns of as much as £1.5bn ($3.1bn) in its global markets business when it gives its trading statement next week, according to analysts.
Further UN sanctions will not solve the dispute with the West over Iran's nuclear plans, the Iranian Foreign Ministry said Sunday, a day after six world powers discussed imposing new penalties on Tehran.
Bertrand Russell: “The fact that an opinion has been widely held is no evidence whatever that it is not utterly absurd.”
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