Saturday, December 22, 2007

Impaired Wall Street Securities

12/23/07 Impaired Wall Street Securities

In November, Google had a 58.6% share of the search market, compared to a 58.4% share the previous month, according to ComScore data. Meanwhile Yahoo Inc. continued a downward trend in the month, falling to a 22.4% share in November from a 22.8% share the previous month, according to the data. Microsoft Corp. held steady from month to month, according to the data, with a 9.8% share. Time Warner, which owns AOL, saw a jump in its share of the search market in November, to 4.5% from 4.2% in the previous month.

News Corp. agreed to sell eight TV stations for $1.1 billion to investment firm Oak Hill Capital Partners.

Alcoa announced late Friday it has agreed to sell its packaging and consumer businesses, which include Reynolds Wrap, to New Zealand's Rank Group Ltd. for $2.7 billion in cash.

Doug Noland: "The financial guarantors suffer today from a confluence of terminal forces. First of all, current and future Credit Insurer losses are unknowable. And it’s not that loss estimates are difficult to reasonably quantify – it’s much more a case of requiring a series of assumptions with respect to the Credit cycle, market environment and economic performance on top of a bunch of guesses as to how various interrelated risk exposures will react to myriad possible scenarios. Such an exercise would require sophisticated models based on various other models, when we know full well today that even basic securities valuation modeling has broken down. Moreover, it is likely that prospects for writing profitable new business will be dismal for years to come. The market has lost trust in the insurance. At this point only a massive and highly-complex multi-government-orchestrated industry bailout would avert a collapse...Broker/Dealer assets ballooned 140% in just four and one-half years to $3.2 TN. During this same period, the asset-backed securities market (including “private-label” MBS) inflated 120% to almost $4.3 TN. Myriad sophisticated structures, financial guarantees, liquidity agreements, and leveraging strategies were implemented to perpetuate the greatest financial Bubble in history. As with all great schemes of leveraged speculation, the minute the music stops collapse ensues. Underlying Acute Fragility is exposed with the inevitable reversal of speculative and leverage-based market liquidity. To keep the music playing required increasingly egregious excesses – ever greater quantities of increasingly risky loans, structures and leveraging. The Credit Insurers came to play a critical role in perpetuating the Bubble. They could not resist the allure of easy “profits” insuring Wall Street’s creative “structured Credit products,” while at the same time aggressively expanding their traditional guarantee business at the top of a Historic Credit Cycle. The Credit insurers destroyed themselves...We expect further significant and imminent weakness in “structured Credit products” – certainly in the illiquid markets for CDOs and Credit default swaps (CDS). Keep in mind that the economy is only now succumbing to recessionary forces, and we’ve yet to experience the failure of a major financial institution in the U.S. There will be many, and it’s worth noting that Rescap’s CDS prices surged again this week. It’s amazing to watch the massive central bank liquidity injections inflate the value of government and quasi-government backed securities, while having minimal impact on the imploding market for Wall Street-backed securities. It’s impossible to rectify the damage from the bursting Bubble, and there’s today literally trillions of increasingly impaired Wall Street securities overhanging the debt markets."

According to the LA Times, Schwarzenegger's remedy for a $14.5-billion deficit includes cutting school funds and freeing inmates.

Gerald Celente, Editor and Publisher, The Trends Journal, Rhinebeck, New York: “Economic 9/11, we believe is going to hit the United States in 2008. And just as the World Trade Centers toppled from the top down, we’re going to see the crash happen from the top down as well. This talk about the sub-prime market. Yes, that’s a problem, but nothing compared to when the big firms start failing, when banks go bust, brokerages go out of business. In 2008, we’re going to see some major, giant firms fall and get hit by an economic 9/11. We don’t know what the fuse will look like, but we know that the bomb is set already. And when it’s lit, we believe it’s going to happen before June of 2008...The central banks have already pumped in more than half a trillion dollars already! They have been pumping money in ... actually, if you go back to our Trends Journal, the Summer 2007 edition’s mid-year report – we said two weeks before the Dow hit 14000, and the Chinese markets hit their highest level ever – to get ready because we saw a financial crisis hitting. The financial crisis hit exactly on July 24, 2007, when the Dow lost well over 200 points. That was the beginning of the crack. And they (Feds) have been pumping money into the banking system since that time. They’ve had bigger bailouts than even happened after 9/11. It’s out of control! All of the currencies are going to be worth dimes on the dollars in the future, and the first one to go is going to be the American dollar.
That’s why one of our big trends for 2008 is ‘Bye, Bye Bucks!’"

Brett Steenbarger: "With Friday's strong up move, we saw a surge in short-term new highs among the issues in the 40-stock basket... It thus appears that, after a surge in new highs, we've tended to see some consolidation of those gains in the near term, which has led to under performance over the next five trading sessions. This consolidation has, however, been a buying opportunity on average over the next three weeks as the burst of strength has been followed by further strength."

According to Bloomberg, Wal-Mart Stores Inc., Macy's Inc. and other U.S. retailers are extending hours and deepening discounts to entice procrastinating shoppers in the final weekend before Christmas.

Cleaning up old legal problems saddled Visa Inc. with an $861 million loss in its latest fiscal year, according to documents the credit card network filed Friday in preparation for its initial public offering of stock. The loss for the fiscal year ending Sept. 30 stemmed mostly from a $2.25 billion settlement that Visa reached in November with American Express Co. to rid itself of a potential albatross before its highly anticipated IPO, expected early next year. The IPO will be the second largest in U.S. history, based on Visa's preliminary fundraising target of $10 billion. Visa still hasn't specified a price range for its stock or how many shares it will issue, so the amount of money the San Francisco-based company actually raises will likely be different.

United Rentals lost a court battle to force Cerberus Capital Managment to complete its proposed $4 billion buyout of the equipment rental company. Cerberus withdrew its $34.50-per-share takeover offer for United Rentals in November, one of several leveraged buyouts that fizzled when the credit crunch made financing a deal more difficult. United Rentals sued Cerberus in a Delaware court in a bid to force the buyout firm to complete deal. In a statement, United Rentals said: "While we are disappointed by Chancellor Chandler's decision, we respect it and thank the Court for its prompt review of this matter. The Board of Directors and management team of United Rentals will consider its alternatives under the circumstances and they continue to believe strongly in United Rentals' future prospects."

According to naplesnews.com, "WCI Communities Inc. may have struck a megamillion-dollar deal to sell its luxury, Italian-inspired Tuscany Reserve community off Livingston Road near the Lee-Collier line to another developer.The possible sale has created a buzz among residents. In recent days, it has been a hot topic on the public company’s online message board, stirring speculation about the selling price and the closing date. Some say it’s a deal that’s already done, though it hasn’t been formally announced...Realtors, brokers and others say they know the buyer to be Anthony Salce, with Gulf Coast Development Group LLC in Naples. He’s also developing Naples Reserve Golf Club off Collier Boulevard, which has been approved for up to 1,154 units. Salce couldn’t be reached for comment."

According to a survey last week for Discover Financial Services , 42 percent of those questioned said they had either not started their holiday shopping, or had completed some -- but not much -- gift buying. According to ShopperTrak, December 21-24 last year accounted for 13.6 percent of holiday sales.

Friday, December 21, 2007

Doings

12/22/07 Doings

Russia's OAO Vimpel Communications agreed to buy broadband and fixed-line operator Golden Telecom Inc. for about $4.3 billion. Under the deal announced Friday, VimpelCom will pay $105 for each Golden Telecom share, a 5% premium to where the shares closed Thursday. Golden Telecom is listed on the Nasdaq Stock Market, but its business is located in Russia.
General Motors has sold more than 1 million vehicles in China this year, becoming the first international automaker to nudge the seven-figure sales mark in a single year.

Switzerland's UBS is facing a shareholder revolt over its plans for a cash injection from Singapore and the Middle East, according to a report in the Financial Times Friday.

Philips Electronics is buying Respironics, a Murrysville, Pa.-based provider of sleep apnea and home respiratory care, for $5.1 billion, or $66 a share.

Merrill Lynch & Co. Inc. is in advanced talks with Temasek Holdings Pte. Ltd., the Singaporean state-owned investment company, for a cash infusion of as much as $5 billion, according to a media report Thursday.

KeyCorp will eliminate about 1,040 jobs as a part of its cost reduction effort.

Insurance broker Marsh & McLennan Cos. said Friday its board, responding to shareholders' concerns over the company's recent financial performance, has begun a search for a chief executive to replace Michael G. Cherkasky.

According to the WSJ, Chrysler is in a serious financial crunch and trying to sell assets just months after Cerberus and new CEO Robert Nardelli stepped in to save the auto maker. The acquisition is turning into a case study of how deals made during the boom are going sour.

The Bay Area housing market showed no signs of recovery in November, as sales fell to a nearly two-decade low and buyers still struggled to find mortgages. A total of 5,127 new and existing houses and condos traded hands last month, free-falling 36.2 percent from the 8,042 sold in November 2006, according to a report released Thursday by DataQuick Information Systems. That's the lowest sales count for the month since at least 1988, when the research company began tracking the market, and represents the 34th consecutive month of declines.

A day after Target delayed a decision about whether to sell its credit-card receivables, the company said Thursday that net "charge-offs" -- loans written off as not being repaid -- rose to 7.05 percent of receivables in November, up from 6.42 percent in October. Charge-offs have increased 25 percent since the end of August. Another potentially risky sign is that customers are paying off their debts more slowly, which often leads to higher defaults, financial analysts said. In November, the sum of all customer payments totaled 13.95 percent of the discount retailer's receivables, down from 15.86 percent a year earlier.

“When borrowers cannot afford to meet their payment obligations, they and their communities suffer significant injury,” the Fed writes in explaining its proposal. “If a neighborhood has a concentration of unaffordable loans, then the entire neighborhood may endure a decline in homeowner equity. Moreover, if disregard for repayment ability contributes to a rise in delinquencies and foreclosures, as appears to have happened recently, then the credit tightening that may follow can injure all consumers who are potentially in the market for a mortgage loan.”

Japanese Prime Minister Yasuo Fukuda will make his first visit to China next week.

Mayer Brown plans to announce Friday an agreement to join forces with a large Hong Kong firm in a deal that would dramatically expand the Chicago law firm's Asian presence, the Chicago Tribune has learned.
Mayer Brown is teaming up with Johnson, Stokes & Master, one of Hong Kong's oldest law firms known for its stellar reputation in banking and finance, also a strength of Mayer's.

Brett Steenbarger: "One measure I'll be following is the Cumulative Adjusted NYSE TICK, which has actually been negative during this recent market bounce. That bias in selling sentiment has shown up in other measures as well, including tepid advance-decline numbers and persistent high levels in the number of stocks making fresh 20-day lows. On Thursday we saw 480 stocks make 20-day highs, but also 1262 register new 20-day lows. Momentum figures were good for Thursday (Demand was 101, Supply 48) and that seems to be carrying forward this AM. We need to be seeing rising numbers of stocks making new highs, but also fewer stocks making new lows. If we just look at common stocks traded on the NYSE, new lows actually increased on Thursday over Wednesday."

China’s economy may expand 10.9% next year and inflation may rise 4.5%, the central bank’s research bureau forecast.

Jim Rogers: "Cotton is a good way to buy oil-- hear me out. Much apparel has been made from synthetics. Synthetics come from oil. So many textile makers are converting back to natural fibers because oil is at an all-time high. So if you want to buy oil, buy sugar [because it is easy to turn into ethanol], or buy cotton. What I'm buying right now is agriculture."

There are "major uncertainties" swirling around the economic outlook for the euro zone in 2008, the president of the European Central Bank said. In an interview with EuroNews that aired Friday, Jean-Claude Trichet said that the bank's governing council, which sets interest rates for the 13-nation euro zone, are worried about the risk of weaker growth."It is true there are major uncertainties with regard to the economic situation," he said. "The council of governors of the ECB feels that there is a greater risk of weaker growth, with it going below around 2 percent."

Campbell sold Godiva chocolates for $850 million.

Boeing has tentatively agreed to send as much as $1 billion in aerospace manufacturing work to state-owned Hindustan Aeronautics in India over the next 10 years. Under the deal announced Thursday, Boeing will help the Indian company in developing manufacturing processes and capabilities needed for the production of military hardware for Boeing and its subcontractors.

Mexican oil production fell for a second month in a row in November as output at the country's largest field declined by 3.5% in the month.

According to Rigzone, Russia, Kazakhstan and Turkmenistan signed a landmark agreement Thursday to build a natural gas pipeline along the Caspian Sea coast that would strengthen Moscow's monopoly on energy exports from the resource-rich region.The deal, which follows a preliminary agreement reached in May, ended months of tense arguments over the price of gas supplies. It reaffirms Russia's monopoly on gas supplies from Central Asia and deals a strong blow to Western hopes of securing alternate energy export routes. "We have just signed an extremely important agreement between Russia, Kazakhstan and Turkmenistan on building the Caspian pipeline," President Vladimir Putin said. "It will become a new important contribution of our nations into strengthening the European energy security."

According to AMG Data Services, "including ETF activity, Equity funds report net cash outflows totaling -$204 million in the week ended 12/19/07 with Domestic funds reporting net inflows of $5.184 billion and Non-domestic funds reporting net outflows of -$5.388 billion; Excluding ETF activity, Equity funds report net cash outflows totaling -$15.171 billion with Domestic funds reporting net outflows of -$9.062 billion and Non-domestic funds reporting net outflows totaling -$6.109 billion; Many investors opted for cash redemptions of large capital gain distributions this week significantly reducing assets because of net outflows. These are \'seasonal\' and exacerbate an inference of active negative sentiment."

According to Bloomberg, declines in the cost of shipping Middle East crude to Asia may slow after falling the most in eight months yesterday because of a shortage of vessels. Hire rates for very large crude carriers fell as owners tried to secure near-record tariffs before year-end holidays, said Halvor Ellefsen, a tanker broker at SeaLeague AS in Oslo.The decline ``was bound to happen,'' after ``a few quiet days,'' Ellefsen wrote in an e-mailed note today. ``But there are still lots of cargoes to be lifted, so I can't see this tumbling.''

Walgreen reported net earnings of $455.5 million, or 46 cents a share, for the fiscal first quarter ended Nov. 30, compared with $431.7 million, or 43 cents a share, a year earlier. Sales rose 10.4 percent to $14.03 billion, with sales at stores open at least a year up 5.4 percent.

U.S. consumers spent more than they earned in November, driving the personal savings rate negative for the first time in 15 months but giving a boost to a sagging economy, the Commerce Department reported Friday. After taking out taxes and adjusting for the highest inflation since September 2005, real disposable incomes fell 0.3%. Nominal consumer spending increased 1.1%, the most in three and a half years. After adjusting for inflation of 0.6% in November, real consumer spending increased 0.5%.

Circuit City Stores Inc.'s third-quarter loss widened to $207.3 million, or $1.26 a share, from $20.4 million, or 12 cents, a year earlier. Sales fell to $2.94 billion from $3.06 billion. Sales in stores open at least 12 months fell 5.6 percent in the third quarter, compared with a gain for Best Buy Co. Warranties, typically the most profitable items electronics retailers sell, were 2.4 percent of U.S. sales in the third quarter, down from 3.6 percent a year ago. Gross margin, or the share of sales after subtracting the cost of goods sold, narrowed by 3 percentage points to 19.1 percent of sales.

The Lakota Sioux Indians, whose ancestors include Sitting Bull, Red Cloud and Crazy Horse, have withdrawn from all treaties their forefathers signed with the U.S. government and have declared their independence. A delegation delivered the news to the State Department earlier this week.Portions of Nebraska, South Dakota, North Dakota, Montana and Wyoming comprise Lakota country, and the tribe says that if the federal government doesn't begin diplomatic discussions promptly, liens will be filed on property in the five-state region.

The Federal Reserve announced Friday it had auctioned another $20 billion in funds to commercial banks at an interest rate of 4.67 percent.

"I came back from a trip to Israel in November convinced that Israel would attack Iran," Bruce Riedel, a former CIA official and senior adviser to three US presidents, George W. Bush among them, told the American Newsweek magazine in an article published Friday. Citing conversations he had in Israel with officials in Mossad and the Israeli defense establishment, Riedel concluded that "Israel is not going to allow its nuclear monopoly to be threatened."

Student lender First Marblehead is selling a 19.99% stake in itself to Goldman Sachs' GS Capital Partners for up to $260.5 million. Under the deal, Goldman will also provide a warehouse facility of $1 billion to provide cash for the firm to lend.

AMR Corp expects overall fourth quarter passenger unit revenue to increase between 3.6 percent and 4.6 percent over the year-earlier quarter. It said cargo and other revenue is expected to be about flat compared with the fourth quarter of 2006.

Barry Ritholtz: "Net net, all these liquidity injections are merely moderating the collapsing credit facilities, and not actually injecting much in the way of credit into the economy."

In November, employers took 1,300 mass layoff actions, seasonally
adjusted, as measured by new filings for unemployment insurance benefits
during the month, the Bureau of Labor Statistics of the U.S. Department
of Labor reported today. Each action involved at least 50 persons from a
single employer; the number of workers involved totaled 136,924, on a
seasonally adjusted basis. The number of mass layoff events in November
decreased by 20 from the prior month, while the number of associated
initial claims rose by 5,144. Over the month, 402 mass layoff events were
reported in the manufacturing sector, seasonally adjusted, resulting in
55,926 initial claims. Compared with October, mass layoff activity in
manufacturing decreased by 22 events, and initial claims decreased by 367.
From January through November 2007, the total number of events (seasonally
adjusted), at 13,734, and initial claims (seasonally adjusted), at 1,408,852,
were higher than in January-November 2006 when the totals were 12,627 and
1,328,251, respectively.

Gold for February delivery rose $12.20, or 1.6%, to end at $815.40 an ounce on
the New York Mercantile Exchange.

Banks planning on bailing out investment vehicles hurt in the subprime mortgage crisis, known as SIVs, will not proceed with the bailout plan, The Wall Street Journal reported Friday on its Web site, citing sources close to the matter.

Crude oil for February delivery ended the session up $2.25, or 2.5%, at $93.31 a barrel on the New York Mercantile Exchange.

Thursday, December 20, 2007

Banking

12/21/07 Banking

China's central bank boosted its benchmark lending rate by 0.18-percentage point Thursday, marking its sixth rate tightening this year as Beijing struggles to cool its overheating asset markets and rein in surging inflation. The People's Bank of China will lift the one-year lending rate to 7.47% from 7.29% effective Friday, according to reports which cited a statement on the central bank's Web site. The central bank will also reportedly reduce the deposit rate on deposit accounts by 0.09-percentage point to 0.72%.

Citigroup analysts upped their oil price forecast for the third time this year, moving 2008 Brent crude estimates by $10 a barrel to $80 a barrel, 2009 by $10 a barrel to $75 a barrel and "mid-cycle" estimates by $15 to $75 a barrel. "Risks to non-OPEC supply, and OPEC signalling a willingness to defend a higher price appear to us to be dominant factors in sustaining a higher near-term and long-term oil price," analysts said.

Britain's current account deficit widened to 20 billin pounds in the third quarter, up from 13.7 billion pound deficit in the second quarter, the National Statistics Office said. The deficit is equivalent to 5.7% of GDP, compared with 4% the prior quarter.

The Bank of Japan said the Japanese economy is decelerating as a result of slowing housing investment following the introduction of new building standards that slowed the approval of building permits. "The pace of growth seems to be slowing mainly due to the drop in housing investment," the central bank said in its monthly economic report released Thursday. The report followed the central bank's decision to hold interest rates steady at 0.5% earlier in the day. The central bank also said business investment and consumption spending are likely to rise, helped by robust corporate profits and moderately rising household income.

Navistar International Corp. is buying General Motors Corp.'s medium-duty truck unit for an undisclosed amount, The Wall Street Journal reported in its online edition.

According to the Financial Times, nearly one in six Americans did not have basic coverage last year, and recent census data show the uninsured problem is getting worse. Last year the number of uninsured rose by more than 2m, to 47m. A prime driver of that trend was a decrease in people receiving health insurance from their emp­loyer – the main channel for coverage. The percentage covered by emp­loyer insurance fell to 59.7 per cent last year, from 60.2 per cent in 2005. Rising healthcare costs have forced some companies to stop or trim benefits, while employees more often refuse coverage as employers pass on more of the costs through measures such as higher insurance premiums.

China, which produces one third of the world’s steel, may reduce net exports of the alloy by 20 million metric tons next year, an official from the China Iron and Steel Association said.

The Oil Drum: "For perhaps as many as 27 million American adults, keeping warm this winter will mean borrowing money and 20 million will use credit cards to be able to afford their heating bills, according to a CreditCards.com poll. Nearly 12 percent of Americans say they will need to borrow money to pay winter heating bills; 9 percent will need to use credit cards to be able to afford their heating bills. The poll, commissioned by CreditCards.com and conducted by GfK Roper Public Affairs & Media, surveyed 1,004 randomly selected American adults by telephone Dec. 7-9, 2007 to gauge their attitudes about energy costs in 2008. A majority say they expect oil and gasoline prices to get worse in 2008."

Nouriel Roubini: "Thus, at this point the debate is less on whether the US will experience a soft landing or hard landing but rather on how hard the landing will be, i.e. whether the coming recession will be "mild" or "severe". That is a radical change of the macro debate relative to a few months ago. The combination of a worsening housing recession, a severe liquidity and credit crunch, oil prices well above $90, a retrenchment of capex by the corporate sector, and a saving-less and debt-burdened US consumers being buffeted by a variety of negative shocks is making the recession as the leading scenario for the US economy."

Footnoted.org: "Hewlett-Packard filed its 10-K late yesterday and there were so many interesting details in the 182-page filing that it’s hard to know where to begin. But the thing that really seemed to resonate throughout was growing concerns about the economy and what impact that was likely to have on HP. The K comes on the heels of the analyst’s meeting last week where HP predicted its estimates would meet, rather than outperform analysts expectations. (Of course, footnoted regulars know that the whole analyst prediction thing remains a giant game, but that doesn’t seem to stop these sorts of events from happening). While HP didn’t mention the sub-prime crisis by name, it did note that it could experience weakness, particularly in its consumer and financial services businesses due to “conditions in the residential real estate and mortgage markets, access to credit and other macroeconomic factors affecting spending behavior”. It also noted in the filing that the “inability of suppliers to borrow funds in the credit markets” could also have a negative impact on the company. Both are new disclosures and while it’s true that companies tend to put anything (and everything) into their risk factors, it’s usually because some attorney is making that call."

Marc Faber: "Cost-of-living increases vastly exceed the reported inflation figures and are squeezing the consumer, which leads to revenue pressure for the corporate sector. (According to the Kaiser Family Foundation, health insurance premiums have risen 78% since 2001, while wages have gained only 19% and "the government's inflation measure during that stretch was 17%".) At the same time, corporations are faced with a squeeze on margins due to rising costs. Pressure on revenues and cost increases contributed to the dismal performance of earnings in the third quarter of 2007...we believe inflation-adjusted U.S. GDP contracted at about a 10% annual rate in Q3 2007. This rate of economic contraction would seem to be consistent with the analysis of the corporate profit slump discussed above, and with the observations made in earlier reports that the US economy is already in recession."

Seasonally adjusted initial jobless claims rose 12,000 to 346,000 in the week ended Dec. 15, the government reported Thursday. The four-week moving average for initial jobless claims rose 4,250 to 343,000, according to the Labor Department. Continuing jobless claims also gained 12,000, reaching 2.65 million for the week ended Dec. 8. The four-week moving average for continuing jobless claims rose 23,000 to 2.63 million -- reaching the highest level in almost two years.

Bear Stearns Cos. said for the quarter ended Nov. 30, total mortgage-related write-downs totaled $1.9 billion, up from its earlier estimate of $1.2 billion. The company said fixed-income net revenue was negative $1.5 billion in the fourth quarter. "The continued repricing of credit risk and the severe dislocation in the structured products market led to illiquidity in the fixed-income markets, lower levels of client activity across the fixed-income sector and a significant revaluation of mortgage inventory," Bear Stearns said. After the writedowns, Bear Stearns Cos. reported a fourth-quarter loss of $854 million, or $6.90 a share, compared with net income of $563 million, or $4 a share, in the year-ago period.
Bear Stearns Cos. holds $43.6 billion of mortgage and other asset-backed securities, down 5% from the end of November, Chief Financial Officer Sam Molinaro said during a conference call with analysts on Thursday. The bank had roughly $500 million of exposure to subprime mortgage loans originated in 2007 and about $750 million of exposure to collateralized debt obligations at the end of November. However, hedging has reduced the bank's mortgage-related exposures significantly, he added.

Fedex Corp. said its second-quarter earnings slipped to $479 million, or $1.54 a share, from $511 million, or $1.64 a share in the year ago period due to the rising cost of fuel.

According to Jacques Diouf, head of the UN Food and Agriculture Organization, the agency's food price index rose by more than 40 percent this year, compared with 9 percent the year before - a rate that was already unacceptable, he said. New figures show that the total cost of foodstuffs imported by the neediest countries rose 25 percent, to $107 million, in the last year.

Qualcomm sees 1Q EPS of 52c-$53c vs 43c a year ago.

Yahoo and Latin America's top mobile phone company America Movil said on Thursday they have struck a deal to provide mobile Web services to 16 countries in Latin America and the Caribbean. The agreement calls for Yahoo's oneSearch service to be the default on America Movil's wireless carriers' portals. Yahoo plans to offer localized versions of oneSearch for each region, and said other Yahoo services may be added in coming months.

The Conference Board reported a decline of 0.4% for the index of leading economic indicators. Only three of the 10 leading economic indicators rose in November, with the largest positive contribution from vendor performance. Stocks prices were the largest negative contributor. Also, the coincident indicator index, which measures where the economy is at present, has shown some signs of yielding to "unrelenting pressure" from factors such as the housing slump and energy prices, according to Ken Goldstein, labor economist at the Conference Board. He added that the future gauge could show some "consistent declines" after the new year.

Rite Aid posted a wider-than-expected quarterly net loss Thursday and cut its full-year estimates, citing a slow flu season and a more cautious consumer.

The National Oceanic and Atmospheric Administration's Climate Prediction Center said in its three-month forecast that temperatures from the Pacific Northwest east through the Great Lakes region are expected to be cooler than the average of recent years, the report said. The rest of the nation will have higher-than-normal temperatures.

Chad Hudson: "Inflation is not a threat anymore, its here. Corporate margins are at a record high level and will be under pressure from rising cost, but from lower sales volumes as economic growth slides and likely heads into recession. Stagflation has started to be discussed recently as economic growth has slowed as prices have accelerating. While the inflation levels of the late 70s are not anticipated, it’s likely that asset prices, namely real estate, will decline while the price of goods and services rise."

The daily newsstand price of The Washington Post will increase to 50 cents from 35 cents on Dec. 31 in the Washington metropolitan area, the paper's owner said Thursday. The last time the Washington Post Co. raised the newsstand price of its flagship paper was in 2001, from 25 cents. The Sunday newsstand price of $1.50 and the home delivery price of 35 cents per day remains unchanged, the company said.

U.S. Energy Information Administration reported U.S. natural gas inventories dropped 121 billion cubic feet to 3,173 billion cubic feet in the week ending Dec. 14.

Antitrust regulators approved Google Inc.'s $3.1 billion purchase of DoubleClick Inc.

For the quarter ended Dec. 1, Research In Motion reported earnings of $370.5 million, or 65 cents a share, compared to earnings of $175.2 million, or 31 cents a share, for the same period last year. The company said earnings for the recent quarter got a $10.7 million boost from the resolution of a tax issue. Revenue grew 100% to $$1.67 billion. Analysts were expecting earnings of 62 cents a share on revenue of $1.65 billion, according to estimates from Thomson Financial.

Tribune Co. said Thursday it completed its move to go private by merging with an acquisition unit of the Tribune Employee Stock Ownership Plan. Sam Zell, who financed the $8.2 billion transaction, will serve as chairman and chief executive of the company. Under the agreement, public Tribune shares, except for those owned by the employee stock ownership plan and those held by shareholders who validly exercise appraisal rights, will be cashed out at $34 a share.

Due to further deterioration in mortgage markets and write-downs at other investment banks, Merrill Lynch & Co. could take a fourth-quarter mark-down as high as $8.6 billion on collateralized debt obligations and subprime exposure, according to analysts at Fox-Pitt Kelton.

Cisco Systems Inc. development chief Charles Giancarlo, often mentioned as a successor to Chief Executive Officer John Chambers, plans to resign to join private equity firm Silver Lake.

Wednesday, December 19, 2007

The China Effect

12/20/07 The China Effect

In all, 201,950 foreclosure filings were reported last month, compared with 120,334 in November 2006, Irvine-based RealtyTrac Inc. said Wednesday. Last month's filings fell 10 percent from October's 224,451.

Utah-based Zions Bancorp said in a filing to the Securities and Exchange Commission it's taking a charge of $94 million before tax after significant declines in dealer price quotes in seven of 12 REIT trust preferred CDO securities. The hit amounts to 52 cents after tax.

Banks including Merrill Lynch and Bear Stearns are in talks to bail out over-the-counter-listed bond insurer ACA Capital, The New York Times reported.

The Bank of England's rate-setting committee voted 9-0 to cut its key interest rate in December, according to the minutes of the meeting published Wednesday. The bank cut its rate by a quarter-point to 5.5% at the meeting.

Edge Petroleum Corp., the Houston exploration and production company, said it retained Merrill Lynch to help assess strategic alternatives, including selling or merging the company.

European Central Bank President Jean-Claude Trichet said today the region's economy faced a ``more protracted'' period of elevated inflation than previously expected, signaling no imminent plan to cut interest rates to ease a credit squeeze in financial markets. European stocks dropped today.

According to the WSJ, as the housing market slump deepens, disguised discounts are making it harder to tell exactly how much people are paying for homes. Buyers, sellers and other market participants typically monitor fluctuating home values through sale records that legally have to be listed with county clerks. But incentives offered to buyers -- ranging from free cars or furniture to cash rebates -- are making those prices less reliable as a sign of what buyers actually paid, netting out the giveaways. And that may be misleading lenders and people shopping for homes, some real-estate lawyers and appraisers warn.

Steven Pearlstein: "The problem is that banks everywhere are suddenly short of cash. The traditional year-end demands of customers is part of it. But it's also that the banks with extra cash are reluctant to lend to the others because they're unsure of the borrowers' financial conditions. The banks also anticipate they will have to take more write-offs and reserves for bad loans when they close their books on the year. The result is that there's less money available for loans to businesses and consumers. So in an effort to forestall an economy-wide credit crunch, central banks are offering what amounts to unlimited funds at an interest rate of 4.25 percent, hoping banks will lend it out at 7.25 percent or more. So far, the results have been positive, but less than expected given the huge sums involved."

Robert J. Samuelson: "The subprime debacle also posed a question: What if it's not the only problem? Consider "credit default swaps" (CDS) as a possible sequel. CDS's are, in effect, insurance contracts on loans or bonds: The seller receives a payment and, in return, agrees to pay the buyer some or all of the amount of a designated loan or bond if the borrowing company (say, General Motors or IBM) defaults. But note, neither party to the CDS has to be the underlying lender or borrower. They usually are outsiders. They are simply betting on the creditworthiness of different borrowers. Since 2004, the volume of CDS's has increased about sevenfold. Possible losses could dwarf those on subprime mortgages, argues Ted Seides of Prot¿g¿ Partners, an investment fund."

According to the Chicago Tribune, Tribune Co. Chairman, President and Chief Executive Dennis FitzSimons announced his resignation today, as the media company finalizes its $8.2 billion deal to go private under Chicago billionaire Sam Zell, who is expected to take over as CEO. After some last minute wrangling, the four banks financing the transaction have told Tribune they will close the deal on Thursday as planned, said a source close to the transaction. The source also said a key positive solvency opinion needed as a condition of closing had been reviewed by Tribune's board.

J.C. Penney Co. stores will be open until midnight Friday and Saturday. At Mervyns, you'll be able to keep buying until 2 a.m. all weekend, and the chain will throw in $10 gift cards for the first 200 people through the doors each day at 5 a.m. In case you have nothing else to do, Kmart will stage a nonstop 64-hour sale beginning at 6 a.m. Saturday at most of its stores around the nation.
The record may be set on the East Coast, where many Macy's stores in the Greater New York area will remain open for 83 consecutive hours. The Macy's in Queens Center Mall will unlock its doors at 7 a.m. Thursday and not close them until 6 p.m. Monday -- 107 hours later.

Mastercard must drop fees it charges for cross-border transactions or face daily fines of 3.5 percent of daily global turnover, European Union regulators said Tuesday. The European Commission said that multilateral interchange fees charged to consumers for payments made in a different European country with either their MasterCard credit cards or Maestro debit cards unfairly inflated costs for retailers.

Brett Steenbarger: "Until we see some signs that measures from the Fed and Treasury are renewing confidence in the financial sector, I am not quick to be buying this market, particularly when we see sector performance deteriorating."

The Prudent Investor: "Liquidity" actions by central banks will only delay, rather than deter, the inevitable process of deflating the layers of debt created in this century. After all, what is a few hundred billions of Euros for all European banks when only the off-balance risk of the banking sector of tiny Austria reels under 2.1 trillion of derivatives risk, while having equity of only 73 billion Euros? (This is according to data compiled by Oesterreichische Nationalbank.)"

Morgan Stanley's $9.4 billion worth of writedowns reduced earnings by $5.80 per share in the fourth quarter. Morgan Stanley said it has entered into an agreement with China Investment Corp. to issue new capital of about $5 billion through equity units with mandatory conversion into common stock. China Investment Corp.'s total passive ownership in Morgan Stanley common shares, including the conversion of the equity units, will be 9.9% or less of total shares outstanding, the company said.

CNN Money writes that Hovnanian's (HOV) losses increased 4 times in the last quarter.

Exxon Mobil Corp. workers went on strike at a refinery in the southern French port of Fos-sur-Mer in a dispute over pay. The action has reduced output and production may be stopped entirely, a representative of France's CGT union said. The protest follows the end of a strike at five other refineries in France by employees of Total SA.

Frank Barbera: "All investors take heed, you are staring at a market that is NOT responding well to “Good News.” Markets that cannot rally on Good News tend to accelerate downward on any type of bad news, and that is the kind of market which appears to be taking shape."

Daily Reckoning: "Here's an article sent to us yesterday describing China's remarkable effect on world commodity prices, especially food (the following comes a recent issue of Mother Jones):
"Per-capita income in China is less than 1/10 of America's and its per-capita greenhouse gas emission is less than 1/5 of ours. But if 1.3 billion Chinese were to consume at the level Americans do, we'd need several more Earths. China's effect on world resources, quantified:
China is:

* The world's largest consumer of coal, grain, fertilizer, cell phones, refrigerators, and televisions
* The leading importer of iron ore, steel, copper, tin, zinc, aluminum, and nickel
* The top producer of coal, steel, cement, and 10 kinds of metal
* The No. 1 importer of illegally logged wood
* The third-largest producer of cars after Japan and the United States; by 2015, it could be the world's largest car producer. By 2020, there could be 130 million cars on its roads, compared to 33 million now.

More Facts:

* China produces half of the world's cameras, 1/3 of its television sets, and 1/3 of all the planet's garbage.
* There are towns in China that make 60% of the world's button supply, 1/2 of all silk neckties, and 1/2 of all fireworks.
* China uses half of the world's steel and concrete and will probably construct half of the world's new buildings over the next decade.
* Some Chinese factories can fit as many as 200,000 workers.
* China used 2.5 billion tons of coal in 2006, more than the next three highest-consuming nations-Russia, India, and the United States-combined.
* It has more than 2,000 coal-fired power plants and puts a new one into operation every 4 to 7 days.
* Between 2003 and 2006, worldwide coal consumption increased as much as it did in the 23 years before that. China was responsible for 90% of the increase.
* China became the world's top carbon dioxide emitter in 2006, overtaking the United States.
* Russia is China's largest timber supplier; half of all logging there is illegal. In Indonesia, another timber supplier to China, up to 80% of all logging takes place illegally.
* 90% of all wood products made in China are consumed in the country, including 45 billion pairs of wooden chopsticks each year.
* The value of China's timber-product exports exceeds $17 billion. About 40 percent go to the United States.
* More than 3/4 of China's forests have disappeared; 1/4 of the country's land mass is now desert.
* Until recently, China was losing a Rhode Island-sized parcel of land to desertification each year.
* 80% of the Himalayan glaciers that feed Chinese rivers could melt by 2035.
* In 2005, China's sulfur-dioxide emissions were nearly twice those of the United States.
* Acid rain caused by air pollution now affects 1/3 of China's land.
* Each year, at least 400,000 Chinese die prematurely of air-pollution-linked respiratory illnesses or diseases.
* A quarter of a million people die because of motor-vehicle traffic each year-6 times as many as in the United States, even though Americans have 18 times as many cars.
* Of the world's 20 most polluted cities, 16 are in China.
* Half of China's population-600 to 700 million people-drinks water contaminated with human and animal waste. A billion tons of untreated sewage is dumped into the Yangtze each year.
* 4/5 of China's rivers are too polluted to support fish.
* The Mi Yun reservoir, Beijing's last remaining reliable source of drinking water, has dropped more than 50 feet since 1993.
* Overuse of groundwater has caused land subsidence that cost Shanghai alone $12.9 billion in economic losses.
* Dust storms used to occur once a year. Now, they happen at least 20 times a year.
* Chinese dust storms can cause haziness and boost particulate matter in the United States, all the way over to Maine.
* In 2001, a huge Chinese storm dumped 50,000 metric tons of dust on the United States. That's 2.5 times as much as what U.S. sources produce in a typical day.
* Currently, up to 36 percent of man-made mercury emissions settling on America originated in Asia.
* Particulate matter from Asia accounts for nearly half of California's annual pollution limit.
* Environmental damage reportedly costs China 10 percent of its GDP. Pollution-related death and disability heath care costs alone are estimated at up to 4 percent of GDP.
* In 2005, there were 50,000 pollution-related disputes and protests in China.
* China's middle class is expected to jump from 100 million people today to 700 million people by 2020.

These statistics are drawn from "The Last Empire: Can the world survive China's rush to emulate the American way of life?" in the current issue of Mother Jones."

Rambus Inc. cut its fourth-quarter sales forecast amid delays in completing new license agreements for its computer-memory technology.

Chemtura Corporation announced that its Board of Directors has authorized management to consider a wide range of strategic alternatives available to the company to enhance shareholder value. In support of this ongoing initiative, a Special Committee of independent directors of the Board of Directors has been formed to oversee the process. To assist in this process, Chemtura has retained the services of Merrill Lynch & Co., which is acting as its exclusive financial advisor. Strategic alternatives to be considered may include, among others, select business divestitures, value-creating acquisitions, changes to the company’s capital structure, or a possible sale, merger or other business combination involving the entire company.There can be no assurance that this review will result in any specific transaction.

Sales at stores open more than a year increased 2.1 percent in the week through Dec. 15, the International Council of Shopping Centers and UBS Securities LLC said today in a joint statement. December sales at stores open more than 12 months may grow 1.5 percent from a year earlier, the group said, matching an earlier forecast.

India's savings rate, after stagnating for almost two decades, rose to a record 34 percent of the gross domestic product last year and the investment rate crossed 35 percent. "These high rates, which are based on improvements in both private and public savings, are likely to go up in future because of a young population profile," Singh said. About 54 percent of India's nearly 1.1 billion people are below 25 years of age, according to government statistics.

Randall Forsyth: "In the grown-up world of financial markets, what's not known is far more frightening than what is. And that's why money markets are nearly paralyzed with fear. According to Bridgewater Associates' chief Ray Dalio and his associate, Fred Post, the widely known problems are manageable while those beneath the surface are big and pose the potential problems. Rational or not, those "unknown unknowns," to use former Defense Secretary Donald Rumsfeld's tortured terminology, are keeping banks from lending to each other over the new year. On Dec. 31, banks and other financial institutions don't want to have any dealings with other parties that might prove an embarrassment to show up when their year-end accounts have to be revealed to the world."

U.S. banks have borrowed $20 billion from the Federal Reserve for 28 days at 4.65%, the Fed announced Wednesday. It was the first of several planned auctions of short-term credits to alleviate a liquidity crunch in credit markets. A total of 93 banks bid in the auction on Monday, asking for $61.6 billion. The bid-to-cover ratio was 3.08. At 4.65%, the stop-out interest rate for the auction offered a 10 basis point discount from the Fed's discount window rate of 4.75% and 28 basis points below the prevailing interbank lending rate of 4.93%. The loans are fully collateralized and will be repaid on Jan. 17.

U.S. crude inventories fell by 8.5 million barrels to 297.5 million barrels in the week ending Dec. 14, the American Petroleum Institute reported on Wednesday, according to Moody's Economy.com. Distillate stocks fell by 1.9 million barrels to 131.7 million barrels in the same period, while gasoline stocks rose by 2.9 million barrels to 208.4 million barrels, the API reported. Also on Wednesday, U.S. Energy Information Administration reported U.S. crude supplies fell by 7.6 million barrels to 296.9 million barrels in the same period.

Union Pacific Corp lowered its fourth-quarter outlook by roughly 20 cents per share due to rapidly rising fuel costs, sending its shares down as much as 6 percent. Union Pacific also said a recent, unexpected decline in freight volumes - which it blamed on severe winter storms in December - would eat into earnings.

The House passed a one-year "patch" for the alternative minimum tax on Wednesday, joining the Senate in acting to shield taxpayers from an average hike of about $2,000.

Accenture raised its full-year earnings-per-share forecast by 15 cents to a range of $2.36 to $2.41.

The Dow Jones Industrial Average fell 25.2 points to close at 13,207.3. The S&P 500 fell 1.98 points to 1,453. The Nasdaq Composite bucked the trend, with the technology-heavy index gaining 4.98 points to close at 2,601.01.

Excluding special items, Oracle said earnings for the quarter were 31 cents a share. Analysts polled by Thomson Financial had been estimating Oracle would post earnings of 27 cents a share.

Crude oil for February delivery ended the day up $1.16, or 1.3%, at $91.24 a barrel on the New York Mercantile Exchange. Gold for February delivery fell $2 to end at $805.40 an ounce on the New York Mercantile Exchange.

Richmond Fed President Jeffrey Lacker, a noted-inflation-hawk, said the economy wouldn't plunge into recession next year in part because consumers continue to spend. "I have learned not to underestimate the resilience of the American consumer, and here I see some reasonably encouraging signs," Lacker said in giving his economic outlook in Charlotte. He said growth would be very slow for the next several months, but the economy would improve as 2008 progresses. He agreed that the risks to his forecast were to the downside, but said his view wasn't based on a return to calm financial markets. Lacker said he was "uncomfortable" with the inflation picture, saying he was "disappointed that the improvement we saw earlier this year was not more lasting."

The Blackstone Group LP is planning a $9 billion commercial mortgage-backed securities offering backed by Hilton Hotels next quarter, according to a Credit Suisse research note. The deal would be the largest ever CMBS issue, according to analysts.

Tuesday, December 18, 2007

The Rally

12/19/07 The Rally

Mervyn King, governor of the Bank of England, told a Treasury committee that the rise in inter-bank spreads is not due to any shortage of cash, but rather to concerns about where derivative losses come to rest, and over the past four weeks, growing doubts about the health of the U.S. economy.

The U.K. Treasury said Tuesday that guarantee arrangements for lender Northern Rock are being extended, at the request of Northern Rock, to cover a wider range of wholesale products.

Royal Philips Electronics will buy clinical IT and service provider Visicu Inc. for $12 a share, or $430 million in total.

Platinum rose to a record on demand in China. Platinum advanced $10, or 0.7 percent, to $1,509 and earlier rose to a record $1,511, partly on speculation Russia, the world's second-biggest producer, won't approve export licenses for next year. Demand is also climbing in China as jewelers stock up for the lunar new year holidays in February, said John Reade, an analyst at UBS AG in London. China is the biggest user of platinum for jewelry.

``The people who think the dollar rally isn't coming to an end believe in Santa Claus,'' Nicholas Betsky, a partner at Moscow-based DBM Capital Partners, an investment company that owns $55 million of gold and gold shares, said by phone today. ``Gold has not fallen too much with the dollar rally and that's a really positive sign for gold.''

The People's Bank of China has instructed a number of banks and rural credit cooperatives they must place additional funds with it as reserves on Dec. 27, according to media reports. The special deposits will pay interest of 3.37% on three-month deposits and 3.99% on one year deposits, reports said. The moves were part of additional measures being draw up to help drain liquidity from the banking system, according to reports.

The World Trade Organization said Monday it will investigate if the $286 billion farm subsidy bill passed by the U.S. Senate violates international limits and offers too much support to farmers who grow crops used to make ethanol, according to a media report.

Jacques Diouf, head of the UN Food and Agriculture Organization, said the agency's food price index rose by more than 40 percent this year, compared with 9 percent the year before - a rate that was already unacceptable, he said. New figures show that the total cost of foodstuffs imported by the neediest countries rose 25 percent, to $107 million, in the last year.

Biopharmaceutical company Medarex Inc. said Tuesday it will receive an undisclosed milestone payment from licensing partner Amgen for advancing an antibody into human clinical trials. The antibody was developed using Medarex's UltiMAb technology and is the fifth UltiMAb-derived antibody in clinical development by Amgen, including two antibodies in Phase II clinical studies.

The United States is providing Turkey with real-time intelligence that has helped the Turkish military target a series of attacks this month against Kurdish separatists holed up in northern Iraq, including a large airstrike on Sunday, according to Pentagon officials.
Turkish troops began to withdraw from several areas in Iraq's Kurdish region after 700 soldiers crossed the frontier late yesterday to target Kurdish militants who have carried out cross-border attacks.
Turkey's forces started to pull back after they penetrated 8 kilometers (5 miles) into Iraq's majority-Kurdish north, Iraqi President Jalal Talabani's Patriotic Union of Kurdistan said on the party's Web site.


Copper declined to a nine-month low in London on concern that a deepening U.S. housing slump will curb demand for industrial metals in the world's second-largest user.

The sharp rise in food prices seen in 2007 is expected to be followed by another higher-than-normal jump next year, the USDA said Monday. And 2008's punch will be to the bread basket...This year is expected to go on record as having one of the largest increases in food prices since 1990 – a jump of 4 percent, according to economists at the U.S. Department of Agriculture. And 2008 will bring another rise of at least 3 percent, according to the USDA forecast. Both rates are substantially higher than the 2.4 percent gains seen each year in 2005 and 2006 and the 1.8 percent rise in 2002. Meanwhile, the Energy Information Administration forecasts a 17.7 percent jump in crude oil prices next year, with a corresponding 10.7 percent boost in the price of a gallon of regular gasoline.

Home prices in San Diego County tumbled nearly 10 percent last month from year-ago levels, taking the median down to $440,000, the lowest in more than three years, DataQuick Information Systems reported Monday. The latest price represents a 15 percent fallback from the all-time record of $517,500 set in November 2005. It was a bigger decline than the 11.7 percent peak-to-trough drop from 1992 to 1996, when the San Diego economy slid into a deep, prolonged recession.

China is studying extra lending curbs to prevent overheating in the world's fastest-growing major economy, according to a central bank official. The People's Bank of China is considering requiring a larger proportion of new deposits to be set aside as reserves, said a central bank official who declined to be named because he's not authorized to speak publicly. It's also studying larger reserve requirements for bigger banks with faster loan growth, he said.

Rep. Ron Paul: "The fact is we have huge trade imbalances, massive deficits, and a $9 trillion national debt, which balloons to $60 trillion if unfunded future liabilities in social security and other promises we have made to Americans are included. We are at a crucial point in history right now. We must think very carefully about our next moves. There is coming a time, if we continue on this path, when all that our tax dollars and government revenues will be able to do is pay interest on the mountain of debt we have compiled in the past few decades. That will mean no government programs or services of any kind will be funded, yet future generations of Americans will still struggle under a crushing tax burden with nothing to show for it. That is why fiscal restraint and common sense with the budget are so vitally important in government. The difference now is that our printing presses at the Federal Reserve are getting worn out as we have expanded our money supply to the breaking point with yet another rate cut this week. As the dollar falls, it is losing its reserve currency status as many countries are shifting to the Euro or the Chinese yuan or other currencies. The more that trend continues, the weaker we become on the world stage. Those foreign governments and entities that enabled us to spend so much for so long are wearing thin and cutting us off. The truth is our enemies won't need a nuclear weapon to harm us if we keep spending phantom dollars at the current rate. In fact, they won't need to do anything but sit back and watch as we spend ourselves into oblivion. Historically, empires fail because they run out of money, or more accurately, run out of the ability to spend or inflate. Unfortunately, that is exactly the direction we are headed. We need to control spending, immediately, before it is too late."

Illinois Tool Works Inc., which makes automotive parts, construction supplies and food service equipment, lowered its fourth-quarter earnings estimate Monday due to what it said is weakness in North American markets. Its stock tumbled.
The company said it now expects to earn between 82 cents and 86 cents per share for the final quarter of 2007, down 4 cents per share from previous guidance. Based on the company's earlier estimate, analysts polled by Thomson Financial had been forecasting earnings of 88 cents per share for the quarter.
North American base revenues grew less than 1 percent during the three-month period ending Nov. 30, Illinois Tool Works said, while international revenues increased 5 percent. The company now anticipates earnings growth of approximately 9 percent for the quarter and 11 percent for the year.

Forest Laboratories Inc. and Mylan Inc. won U.S. approval for a new medicine for high blood pressure after 2 1/2 years of delays. The Food and Drug Administration will permit the companies to market the drug, Bystolic, the agency said.

Bloomberg writes that the world economy is facing the risk of both recession and faster inflation.

Voracious demand for books and a crackdown on small, polluting paper mills have caused a paper crunch in China, pushing up the price of paper by 10 percent so far this year and forcing printers to delay books and publishers to raise prices. So far, the problems have been largely confined to China, but experts say that if the trend is unchecked, publishers worldwide could find themselves paying higher costs — and consumers facing higher book prices.

Rigzone: "We think $100 per barrel oil is on the horizon in 2008, perhaps in the spring," said Brian Hicks, co-manager of the Global Resources Fund. "Our forecast sees an average oil price around $80-$85, up from about an average of $70 in 2007." He's far from alone. About 54% of a Barclays survey of 150 commodity investors expect the average price of oil over the next five years to top $100 a barrel, with 27% responding that it would be $80-$100 a barrel and 16% expecting $60-$80 a barrel. This view is largely backed up by the Energy Information Administration, the official statistics center of the U.S., which just upped its oil price outlook to an average of $84.93 in 2008, from its earlier view of $80 a month earlier. "Expectations that tight market conditions will persist into 2008 are keeping oil prices high," the EIA said in its latest short-term outlook. "Despite the OPEC decision...to hold production quotas steady and downward revisions to projected consumption growth in 2008, the oil balance outlook remains characterized by rising consumption, modest growth in non-OPEC supply, fairly low surplus capacity, and continuing risks of supply disruptions in a number of major producing nations."

According to Bloomberg, the cost of shipping Middle East crude to Asia, at its highest since 2004, may rise as refineries hire ships for longer-haul shipments to Europe and the U.S., crimping vessel supply.There are 21 modern double-hull tankers available for hire within the next 30 days, according to a report today from Paris- based Barry Rogliano Salles. Two months ago there were 40 such ships competing for cargoes, according to the shipbroker.

Wireless carrier Sprint Nextel Corp. named Daniel Hesse as president and chief executive Tuesday, ending a two-month search to replace Gary Forsee, who was forced out in October over falling subscriber numbers. Hesse previously served as president and chief executive of Embarq Corp., Sprint's former local-phone unit that was spun off as a public company last year.

Brad Setser: "Who provided the most financing to the US in October? Simple: the Kremlin. Russian short-term claims rose by $18.5b, mostly from a rise in short-term Agency holdings. Russia also bought $4.4b in long-term claims (mostly Agencies).The Gulf also chipped in, though not on as large a scale. The Gulf added $4.3b to its short-term holdings, about $3b of long-term securities (mostly equities)."

Best Buy raised its full-year per-share profit forecast to as much as $3.20 from a previous estimate of as much as $3.15.

The Goldman Sachs Group, Inc. reported net revenues of $45.99 billion and net earnings of $11.60 billion for the year ended November 30, 2007. Diluted earnings per common share were $24.73, an increase of 26% compared with $19.69 for the year ended November 24, 2006. Return on average tangible common shareholders’ equity (1) (ROTE) was 38.2% and return on average common shareholders’ equity (ROE) was 32.7% for 2007. Fourth quarter net revenues were $10.74 billion and net earnings were $3.22 billion. Diluted earnings per common share were $7.01 compared with $6.59 for the same 2006 quarter and $6.13 for the third quarter of 2007. Annualized ROTE (1) was 40.1% and annualized ROE was 34.6% for the fourth quarter of 2007.
Goldman Sachs Chief Financial Officer David Viniar said the subprime market is closer to reaching a bottom, but is not there yet. Viniar said he expected there would be many leveraged buyouts in 2008, but not the "mega public-to-private" deals in the prior years.
Despite fourth-quarter profit that topped Wall Street's expectations, Goldman Sachs Group Inc.suffered through a "horrible" November, in a signal that the credit crunch may continue, CNBC reported Tuesday, citing an unnamed Goldman senior executive. Additionally, the business channel reported that Goldman recently endured the worst two weeks in the company's history.

New construction of single-family homes slowed to the weakest pace in 16 years in November as U.S. home builders scrambled to reduce their inventories of unsold homes, the Commerce Department reported Tuesday. Starts of single-family homes fell 5.4% to a seasonally adjusted annual rate of 829,000, the lowest since April 1991. Total starts, including the 0.6% rise for multifamily units, fell 3.7% to an annual rate of 1.19 million, the government said. Authorized building permits fell 1.5% in November to a seasonally adjusted annual rate of 1.15 million, the lowest in 14 years. Single-family permits fell 5.6% to 764,000, the lowest in 16 years.

"The fourth quarter of GDP is going to have a substantial drag from the second leg down in construction, but the bright spot is that it's unlikely that we're going to see this rate of decline continue," said Michael Darda, chief economist at MKM Partners in Greenwich, Connecticut.

The most recent government data show that households spent $524, on average, on cell phone bills in 2006, compared with $542 for residential and pay-phone services.

More consumers are planning to spend less this holiday season than a year ago, according to a survey released on Tuesday that adds a fresh note of caution to what is shaping up to be a ho-hum holiday shopping season. The survey, conducted between December 4 and December 11, found that 33.4 percent of shoppers said they intend to spend less this year, compared with 29 percent who said the same thing a year ago. Meanwhile, 16.4 percent of survey respondents said they plan to spend more this holiday, down from the 20.4 percent who indicated last year that they would spend more.

U.S. lenders would have to determine that a borrower can afford a mortgage before making the loan under a Federal Reserve staff proposal on new regulations released on Tuesday.

The U.S. Federal Communications Commission voted today to allow media companies to own both daily newspapers and broadcast stations in the 20 largest U.S. markets, defying opposition from Congress and consumer groups. In a party line vote, Chairman Kevin Martin and the other two Republicans on the panel supported the plan, which modifies a ban on cross-ownership adopted in 1975. Both Democratic panel members voted against the rule, first presented on Nov. 13.

Natural gas for January delivery rose 11.5 cents, or 1.6 percent, to $7.15 per million British thermal units at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices have advanced 1.9 percent this week and are 1.1 percent higher than a year ago. Meanwhile, crude declined 14 cents to $90.49.

Gold futures for February delivery rose $6.60, or 0.8 percent, to $805.90 an ounce at 10:56 a.m. on the Comex division of the New York Mercantile Exchange, after earlier rising to $811.40. Silver futures for March delivery rose 10.5 cents, or 0.8 percent, to $14.085 an ounce on the Comex. Before today, the metal had gained 8.1 percent this year.

Insurance company Allstate Corp. said Tuesday that the wildfires that blanketed southern California in October have resulted in over 7,000 claims, and up to $335 million in "catastrophe losses" to be recorded in the fourth quarter of 2007.

Palm Inc. told analysts Tuesday that it expects a "tight component supply" that could strain shipments of its smartphones for the current third fiscal quarter. In a conference call to discuss the company's second-quarter results, Palm officers said the component supply situation is "mostly" centered on its popular Centro device, a $99 smartphone the company sells through an exclusive deal with carrier Sprint. Palm Inc. swung to a net loss for its second fiscal quarter ended Nov. 30. The maker of wireless smartphone devices reported a net loss of $9.6 million, or 9 cents a share, compared to earnings of $12.8 million, or 12 cents a share, for the same period last year. The company said net loss on a non-GAAP basis, which exclude certain charges, would have been $7.8 million, or 7 cents a share. Revenue fell 11% to $349.6 million.

Japan's government slashed its economic growth forecast by a third after stricter rules for obtaining building permits caused housing starts to plummet to a four-decade low. The world's second-biggest economy will probably grow 1.3 percent in the year ending March 31 and 2 percent in the following 12 months, the Cabinet Office said in Tokyo today. It had previously expected a 2.1 percent expansion for this year.

Monday, December 17, 2007

Retail

12/18/07 Retail

SpendingPulse said that over the first 20 days of the holiday shopping season, from November 23 to December 12, sales at U.S. specialty apparel chains, which include Gap Inc , Aeropostale Inc and Urban Outfitters Inc , rose 0.5 percent this year, down from a 5.1 percent gain last year. "Across the board we've had a regression in growth since Black Friday to moderate levels or somewhat flat levels," said Michael McNamara, SpendingPulse's vice president of research and analysis.

So far, online spending is up 18% this holiday season, compared with the same days in 2006, according to data from comScore.
Between Nov. 1 and Dec. 14, online sales totaled $22.7 billion, the online measuring firm reported on Sunday. That's up from $19.2 billion in 2006.

From high-end dresses to bargain coats, spending on women’s apparel dropped nearly 6 percent during the first half of the Christmas season, compared with the same period last year, according to MasterCard Advisors, a division of the credit card company. The drop-off, which the credit card company described Sunday as “surprising,” bodes poorly for chains like Chico’s FAS and Ann Taylor, which specialize in women’s clothing, and could result in steeper-than-expected discounts on their merchandise in the final week before Christmas.

"We are beginning to get not stagflation, but the early symptoms of it," Greenspan said.

Jas Jain: "On Wednesday, December 12, 2007, leading Central Banks surprised the markets by promising to "rain money" on American and European banks. After years of Fed facilitating the pushing of debt on households by private financial institutions, including turning blind-eye to obvious abuses in the mortgage market, it suddenly is pushing debt on banks (ready money, or reserves, in exchange for questionable collateral) with the hope that they would continue lending to households. Would it work? Hell no. How do I know? I happened to listen to Alan Greenspan, during a question answer season in London few weeks ago, midnight California time, in which he said, "During early 1990s the money supply numbers stopped working [money supply was growing but banks were reluctant to lend]. We [Fed] put buckets of money out there [in the banks, similar to what the Fed is trying to do now] and it didn't work. It was only after Wall Street came up with more [or newer] CDO products ["innovations" in securitization of debt] and took debt off the banks' balance sheets that banks started to lend again and the economy began to respond." Presently, the securitization of debt is in trouble due to its abuses. The process that took debt off banks' balance sheets is clogged. Pouring rapid water in a clogged sink doesn't work too well. It makes a mess...There is nothing else that the Fed can do to keep the economy from slipping into recession, or depression, than to keep the debt-push going at an elevated pace. Unfortunately, Fed can't directly push debt on households (no helicopter drops!). It needs banks as conduits and banks are in trouble. As Schumpeter noted, bankers' mischief leads to catastrophes (his term for depressions). And he was talking about the private bankers. The role of the private bankers in causing the Great Depression is kept very quiet. Federal Reserve exists to get the blame! We have arrived at the juncture where the Fed becomes impotent. It has reached level of impotence beyond the economic equivalent of VIAGRA. That is what gross abuse of a function can lead to...
For those of you who are worried about inflation, the total household debt growth below $300B annual rate will lead to outright deflation within months (inflation always lags). Household debt growth is inflationary in the present and deflationary in the future. Fed has been fighting deflation for the past five years by maintaining elevated rate of household debt growth! Controlled inflation, around 3%, has been Fed's policy for the past 25 years, after Volcker tamed inflation. There is no such thing as "corrosive deflation," Mr. Greenspan; there is only corrosive inflation. The policy of controlled corrosion in purchasing power is a bad one for the American workers and, especially, the poor. Sen. Bernie Sanders was right when he said to Greenspan, "that you see your major function in your position as the need to represent the wealthy and large corporations." Who helped Greenspan get the appointment?!
It Is the Debt, Stupid!"

Plains Exploration & Production Company said it would sell oil and gas properties to Occidental Petroleum and XTO Energy for $1.75 billion. The Houston energy firm also set plans to buy back $1 billion in stock and spend $1.15 billion on its 2008 capital budget.

Compton Petroleum said it's "puzzled" by a request from a shareholder representing 19.8% of its capital -- Centennial Energy Partners, according to an SEC filing -- to consider strategic alternatives. "The current business environment for Compton and the Canadian natural gas industry at large is challenging to say the least. Our current share price reflects the depressed state of the natural gas industry, particularly in Alberta, resulting from (a) low natural gas prices, (b) the rapid appreciation of the Canadian dollar, (c) the high cost structure of the basin, and (d) regulatory issues including uncertainties relating to the proposed new Crown royalty structure in Alberta," it said. The company said it is bullish on the outlook for natural gas and is confident that its longer-term strategy is sound and achievable.

Trane Inc., the Piscataway, N.J., producer of heating, ventilation and air-conditioning systems, definitively agreed to be acquired for cash and stock by Ingersoll Rand, Ingersoll Rand said on Monday. IR is the Hamilton, Bermuda, provider of solutions in fields including transportation of food and perishables, property security and more. Ingersoll Rand said it agreed to pay $36.50 a share cash plus 0.23 share for each share of Trane, which used to be known as American Standard Cos. Based on Friday's closing prices, the deal is valued at $47.81 a share, a 29% premium for Trane holders.

The wheat Price Surges Above $10 for First Time on Supply Concerns.

Mike Burk: "Since 1929 the S&P 500 (SPX) has been up 79% of the time in the last 10 trading days of the year and 84% of the time during the 3rd year of the Presidential Cycle. The market is oversold. As of Friday's close the SPX had given back 40% of its gains off the November 26 low, the Russell 2000 (R2K) had given up 61.8% of its gains, both at or close to Fibonacci numbers. The NASDAQ composite (OTC) is 52% off its December 10 high. If, as new lows indicate, there was an intermediate term low on November 26, the market should be at or near its low for this move...Historically next week has been up a little over half of the time with modest gains. I expect the major indices to be higher on Friday December 21 than they were on Friday December 14."

John Hussman: " But every time the Federal government issues more debt to finance its deficits, the new issuance cancels out any beneficial increase in liquidity the Fed could possibly provide."

National Oilwell Varco will acquire all of the outstanding shares of Grant Prideco. The total consideration will equate to $58.00 per share in cash and stock. Based on December 14, 2007 closing share prices for each company, the $58.00 per share consideration represents a premium of 22% for Grant Prideco holders. The breakdown is being put at $23.20 in cash and 0.4498 shares of National Oilwell Varco per share of Grant Prideco. This is a $7.5 billion deal. Grant Prideco, Inc. is engaged in drill stem technology development, drill pipe manufacturing, sales and service, and drill bit technology and specialty tools, manufacturing, sales and service. It is also a provider of performance engineered connections and premium tubular products and services.

Loews Corp.'s board approved a spinoff of its interest in Lorillard Inc., one of the nation's largest cigarette makers, into a separate publicly traded company. Lorillard makes Newport, True and Kent cigarettes. Loews, which is led by the Tisch family, owns CNA Financial Corp., Loews Hotels, Bulova Corp. and Diamond Offshore Drilling Inc. Loews' interest in Lorillard will be spun off to Carolina Group shareholders and Loews shareholders in a tax-free transaction, the company said. Carolina Group is a tracking stock designed to reflect the performance of the tobacco business. Under terms of the deal, Loews will redeem all outstanding Carolina shares in exchange for Lorillard shares. Carolina stockholders will get one Lorillard share for each share they own. The Lorillard stock being distributed makes up about 62 percent of the company's outstanding shares. Loews will then sell the remaining 38 percent of Lorillard outstanding stock in exchange for some of its own outstanding shares if deemed appropriate. If Loews does not view this as a proper transaction, it will distribute the remaining Lorillard stock to Loews shareholders as a dividend.The spinoff is expected to close in mid-2008.

Manufacturing activity in New York State factories declined sharply in December to a seventh-month low with falling new order and shipment indexes, New York Federal Reserve said Monday. Empire State" general business conditions index fell to 10.31 in December from 27.37 in November. It was the lowest reading since May and below the 20.00 forecast by economists polled by Reuters. The index on new orders dropped to 14.26 in December from 24.49 in November, while the reading on shipments fell to 21.08 in December from 32.19 in November. The inventories component fell to -10.00 in December from -1.19 in November, while the prices paid component fell to 35.00 in December from 42.86 in November.

The Commerce Department said on Monday the U.S. current account deficit contracted in the third quarter to $178.5 billion, from a downwardly revised gap of $188.9 billion in the second quarter. Stronger U.S. exports and a rise in income earned on U.S.-assets held abroad helped trim the deficit to its lowest since third quarter 2005, when it was $173.4 billion. October's inflows of $97.8 billion in October from a revised $32.8 billion outflow in September, were more than sufficient to cover the month's U.S. trade deficit of $57.8 billion.

Aon, one of the world's largest insurance brokers, said on Monday it has agreed to sell two units for about $2.75 billion and will devote the proceeds of the deal to a share buyback. The company said it sold its Combined Insurance unit to ACE for $2.4 billion in cash and that Munich Re is buying its Sterling Life Insurance unit for $352 million.

Republican presidential hopeful Ron Paul's supporters raised over $6 million Sunday to boost the 10-term Texas congressman's campaign for the White House. Called a "Money Bomb," the goal was to raise as much money as possible on the Internet in one day. The campaign's previous fundraiser brought in $4.2 million.At midnight EST, donations were over $6 million, according to the campaign Web site.

Moody's Investors Services warned it could lower bond insurer credit ratings because of subprime losses.

According to Bloomberg, coal prices at Australia's Newcastle port stayed near a record on concern that congestion at the harbor will worsen after a regulator rejected plans to change the way shipping capacity is allocated. Power station coal excluding shipping cost for delivery within three months settled at $88.35 a metric ton in the week ended Dec. 14, down $1.41 from a record $89.76 the previous week, according to the globalCOAL NEWC Index, an Asian benchmark calculated each Friday. Bottlenecks at Australian ports, unusually heavy rain in Indonesia and increased imports by China have constrained the supply of the fuel to Asian customers. Ship queues will grow as Rio Tinto Group, Xstrata Plc and other mining companies are left with no plan to share port and rail capacity, Newcastle coal terminal operator Port Waratah Coal Services Ltd. said.

Natural gas in New York advanced on speculation winter storms in the Midwest and Northeast will prompt above-average withdrawals from U.S. inventories. The winter-weather systems blanketed an areas from Michigan to Maine with freezing rain, sleet and snow. ``This week we expect another substantial storage withdrawal'' for the seven days ended Dec. 14, Mike Dane, gas analyst at SunTrust Robinson Humphrey in Houston, said in a note today.

Advanced Micro Devices Inc has delayed shipments of a key, high-end microprocessor until the first quarter of next year and does not expect to break even until the second quarter, the chipmaker said on Thursday. Meanwhile, the company still expects fourth-quarter revenue to increase in line with seasonality. On Monday, the stock made another 52-week low at $7.94

The home builders' housing market index stayed at 19 for the third straight month in December, matching the lowest reading ever in the 22-year history of the index released by the National Association of Home Builders and Wells Fargo.

Crude oil for January delivery ended the session down 64 cents, or 0.7%, at $90.63 a barrel on the New York Mercantile Exchange.

Gold for February delivery gained $1.30 to end at $799.30 an ounce on the New York Mercantile Exchange.

The European Central Bank will offer unlimited funds at a fixed rate to eurozone financial institutions for a two-week period, according to a media report Monday. The central bank's move is intended to encourage banks to make loans and to reduce potential end-of-year tensions, The Wall Street Journal reported in its online edition. It is the second time in the bank's nine-year history and the second time since August, when overnight-lending rates peaked on fears of European exposure to U.S. subprime mortgage problems, that the bank has made such an offer, according to the report.

Range Resources Corp.will replace Tribune Co.in the S&P 500 index after the close of trading on Thursday, Standard & Poor's said late Monday. Tribune is being taken private in a deal expected to close on or about that date, pending final approvals.

The Dow has lost 560 points in the last five trading sessions.

Russia delivered nuclear fuel for an Iranian power plant that is at the center of the dispute over Iran’s nuclear program.

Barbara Ehrenreich: “A free-enterprise economy depends only on markets, and according to the most advanced mathematical macroeconomic theory, markets depend only on moods: specifically, the mood of the men in the pinstripes, also known as the Boys on the Street. When the Boys are in a good mood, the market thrives; when they get scared or sullen, it is time for each one of us to look into the retail apple business.”

Sunday, December 16, 2007

90% Odds

12/17/07 90% Odds

Ford Motor Co is poised to name India's Tata Motors as preferred bidder for its Jaguar and Land Rover brands, Britain's Sunday Times newspaper reported.

Two offers for ailing airline Alitalia under serious consideration by Italy are both well below market price with that of domestic minnow Air One just one euro cent per share, a source close to the talks said on Friday. Air France-KLM has bid 35 euro cents per share, the source added -- giving the carrier a value of about 485 million euros ($712.4 million), less than half its market worth. Alitalia also carries about 1.2 billion euros of debt.

Airbus plans to agree in the coming week to sell four of its European factories to U.S. group Spirit AeroSystems Holdings , a German newspaper reported on Saturday.The Internet edition of the Frankfurter Allgemeine Sonntagszeitung reported that Airbus chief Tom Enders believed it was possible the company could decide by next Friday to sell three plants in Germany and one in Britain to Spirit.

According to a report released by the International Energy Agency, Iraq is producing 2.3 million barrels of oil a day, up from 1.9 million at the outbreak of war in 2003 and substantially higher than January this year, when it dipped to a low of 1.7 million barrels. It is estimated that there have been nearly 500 attacks on oil-related targets since 2003. The current rise is due to increased production in the north, where the oil is exported to Turkey. The south of Iraq provides the mainstay of its oil exports, running at about two million barrels a day.

Laura Tyson: "The economy faces a vicious downward spiral of foreclosures, declining property values and mounting losses on mortgage-backed securities and related financial assets. The resetting of interest rates on more than 2 million subprime loans will prompt a large number of foreclosures, perhaps a million a year in both 2008 and 2009. These huge waves of foreclosures will depress the price of residential real estate still further. Plummeting real estate values and escalating foreclosures will cause further losses on mortgage-related securities and will further burden American consumers already dealing with higher energy prices and substantial debt. Given the dampening effects of these developments on both consumption and investment spending, it is increasingly likely that the economy will slip into recession next year. The Federal Reserve should continue to cut interest rates and to experiment with new ways to pump liquidity into the financial system."

Abraham Lincoln: "Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration."

Tim Wood: "The primary bear market confirmation that occurred on November 21st when the Industrials confirmed the Transport's break below the August closing low remains in place in spite of the recent rally. In fact, the rally that began out of the November 26th low was anticipated and I stated before this rally began that it was going to cause many to question the integrity surrounding the November 21st Dow Theory primary bear market confirmation. That has definitely proven correct...As I read the averages the last primary bearish trend change in which the averages forecasted stormy conditions occurred on February 25, 2000 and following that confirmed primary trend change the Industrials ultimately fell by over 27% from that date and by over 37% from their January 2000 closing high. According to Richard Russell's read of the Dow theory at that time, the primary trend change occurred on September 23, 1999, which was prior to a final unconfirmed push to new highs by the Industrials. In either case, regardless of whether the last bearish primary trend change occurred on September 23, 1999 or on February 25, 2000, the outcome ultimately ended very badly...As for the current case, it is my read that a primary trend change occurred on November 21, 2007 and I have spoken with Richard Russell in regard to this matter and he too agrees with this assessment. In my December newsletter I examined every primary bearish primary trend change since 1896. I cannot share all of these details here, but I will tell you that of the 30 previous bearish primary trend changes only 3 were "false." When I say false, I mean that nothing material develop following the trend change. However, the remaining 27 primary bearish tend changes were meaningful. Thus, history has proven that 90% of the primary bearish trend changes since 1896 were indeed worth respecting. I for one will not bet against 90% odds...It is my opinion we are already in a recession and the Dow theory is confirming it. Of course it seems that few believe the Dow theory. In any event, you have been warned."

Daily Reckoning: "Let's get this straight. China holds the price of fuel down so that its factories can continue making cheap products for the United States. The United States, meanwhile, prints dollars so that its consumers can continue buying cheap products from China. Then, China accumulates dollars - its trade surplus is nearly a quarter of a trillion this year. Then what happens? What do they do with the money? Ah, this is where it gets interesting. There's a new trend in global finance. Both the exporters - like China - and the oil producers - such as Saudi Arabia - have to figure out what to do with the loot. They need to find a way to use it without destroying its value. So, they are creating their own Sovereign Wealth Funds."

Brett Steenbarger: "Small caps and value are behaving as though we're in the midst of a bear market. Large caps and growth act more in a corrective mode. As the odds of recession have grown and credit concerns have not diminished, large cap growth has been a haven for those seeking stability and earnings. Even in the last week, the loss in large cap growth was less than half that in small cap value. Such a defensive mindset does not speak well for overall market sentiment."

Personal spending in the U.S. probably rose in November by the most in 10 months, fueled by income gains that will help the economy weather a deepening slump in homebuilding, economists said reports this week may show. A 0.7 percent rise in purchases would follow a 0.2 percent October increase, according to the median estimate of economists surveyed by Bloomberg News ahead of the Commerce Department's Dec. 21 report. A separate Commerce report may show builders broke ground last month on the fewest houses in 14 years.

James Bovard: "With attention deficit democracy, I am trying to wake up people to how the combination of mass ignorance, fear mongering by the government, and lying politicians is putting our entire system of government to a death
spiral."