1/26/08 Troubles Continue
Jeremy Grantham: "Be particularly alert to potential problems beyond subprime mortgages. If U.S. house prices decline by over 20%, which we believe is likely, and if there is a recession, which we believe is very possible, then there will be painful defaults in regular mortgages. Commercial real estate debt is likely to have some write-downs as office estate prices decline and borrowing terms become more onerous. Write-downs and defaults in other debt will also be plentiful. Private equity deals in particular will probably turn out very badly indeed. In my opinion it is the most under appreciated risk of all and is likely to be the center of another phase of the crisis. The longer-term problem is that all debt standards fell so that losses will accumulate right across the entire credit system. In the end perhaps only government intervention and public funds will stabilize the system... Markets are well into a massive repricing of both risk and asset prices but it has far to go outside the original subprime area, where repricing may have already run its course.... This of course will be a painful process and will be a considerable drag on economic activity. Unfortunately, it is likely to take several years. To house clean completely by the end of 2010 would be a reasonable target."
Caterpillar stuck to its forecast for a 5% to 15% boost to 2008 earnings from the 2007 level of $5.37 a share. "It's gratifying to be able to maintain an outlook for 2008 that reflects continued growth and all-time records for sales and revenues and profit at a time when we're expecting recessionary conditions to persist in key markets we serve in the United States," the company said. "While we expect anemic growth in the U.S. economy, we continue to see positive conditions for our sales in most of the rest of the world."
Weatherford International reported that its fourth-quarter net income rose 22% to $331 million, or 95 cents a share, with revenue up 21% to $2.19 billion on increased rig count activity. Excluding two cents a share from exiting operations, and it would've earned 97 cents a share. Analysts polled by Thomson Financial expected the firm to earn 96 cents a share.
In early Friday trading, gold futures rose $16 to $921.80 an ounce. U.S. crude rose 79 cents to $90.20 a barrel by 7:40 a.m. EST, off highs of $90.44 earlier in the session.
Brewers Carlsberg and Heineken will buy beermaker Scottish & Newcastle for $15.3 billion, the companies said Friday. Scottish & Newcastle PLC, which rejected two earlier bids, agreed to an all-cash offer of 800 pence ($15.68) per share.
Henry To: "As for the reasons why I don't believe we are in a full-blown bear market just yet, there are many reasons - so I would only list out some of them here, in no particular order:
1.First of all, unlike the late 1990s technology bubble, the current bubble did not originate in the stock market - but rather, in the US residential housing market that was further aided by financial engineering and a loose monetary policy during 2003 to 2004. Because of this, much of the retail speculation had focused on US housing, or more specifically, housing in California, Florida, Nevada, and Arizona. To the extent there was retail speculation in the US stock market, it had centered on shares of homebuilding and mortgage companies. In my humble opinion, the bubble in mortgage companies, and to a lesser extent, homebuilding companies, had already burst a long time ago and is close to being fully wounded down. Because of this lack of retail speculation in the US stock market in recent years, valuations, in particular in the consumer discretionary, technology, health care, and consumer staples sectors, have never really gotten out of hand, unlike during the late 1990s bull market.
2.While one could argue that many companies in the financial sector had over-inflated earnings due to the structured finance boom in recent years, subscribers should remember that any "crisis" that originates out of the financial sector - unlike the capital overspending and the aftermath in the technology sector during 2000 to 2002 - is usually easy to fix. Whether the crisis was the S&L crisis during the early 1990s, the Russian/LTCM crises in 1998, or the current crisis in subprime - the easiest strategy has always been to inflate, inflate, and inflate. Make no mistake: The Fed will continue to ease aggressively going forward. It will also do everything in its power to make sure LIBOR stays at the Fed Funds rate. From a fiscal standpoint, we have already seen what the Bush Administration and Congress is willing to do to prop up consumer spending this year. Moreover, they have committed to agreeing on a solution by the State of the Union address on January 28th. Not only that, the FDIC Chairman has publicly declared that if a market solution isn't enough to solve the subprime problem, the government will step in. This is akin to the Federal government printing money and using it to soak up on the excess Cisco routers and Intel processors during the 2001 to 2002 debacle unwinding of the technology bubble. Sure, many mediocre companies will still fail - but the overall stock market and the stronger companies will be propped up or "bailed out."
3.The change in investors' sentiment had been very dramatic since the beginning of the year. Right before New Year's (and when we had already been short for nearly three months), everything was still "hunky dory" according to stock market analysts and economists alike - and now after a dismal unemployment number and a breakdown in the chart patterns, most if not all market analysts are now calling for a US recession and the end of the October 2002 to October 2007 bull market. Given that the majority of these analysts and economists had not anticipated the current market decline last year, it doesn't make too much sense in betting on them now.
4.As for basing your equity allocation based on "chart patterns" alone - I want to ask my subscribers this: Would you bet your life on a chart pattern, and if not, why would you bet your retirement portfolio on a chart pattern? If one can call the beginning of a major bull or bear market simply by looking at moving average cross-overs, then there would be no market. 20 years ago, this would have been a useful endeavor - given that this kind of data was not easily available. Nowadays - with a few simple mouse clicks, anyone can bring up a chart of the S&P 500, along with every technical tool one can dream of, for free. That is not to say that this author doesn't look at charts. However - to me - trading or making decisions based on chart patterns is only useful on the condition that: 1) Not many other analysts are observing the same patterns at the same time, and 2) The chart pattern is being confirmed by my other indicators, especially from a valuation and sentiment standpoint. On both counts, the bearish case based on the current S&P chart pattern (and to a lesser extent, the bearish implications of the Nikkei chart pattern) does not pass much muster."
Around 2.7 million people have incorrect Social Security payment information on a needed tax document, the Social Security Administration said Thursday as the agency moved quickly to mail out corrections. The document affected is the Social Security Benefit Statement, or Form SSA-1099. That document is needed by Social Security recipients to complete their federal income tax return and to find out whether their benefits are subject to income tax. The Social Security Administration mailed those statements to 53 million people in January. It goes to people who received a Social Security payment during the previous calendar year. The agency said a computer programming error caused Medicare Part C and/or Part D premium deduction amounts, and some garnishment deduction amounts, for 2006 to be included in the amounts reported for 2007.
That meant the "Benefits for 2007" fields, which are boxes 3 and 5 of the SSA-1099, and the "Description of Amount in Box 3" field had incorrect amounts for the affected people. Corrected SSA-1099s and an apology will be in the mail by Friday, the agency said. The programming error also has been fixed.
Clear Channel Communications Inc. has agreed to sell radio stations in 42 markets as part of a deal reached with federal regulators that will allow the company to complete its sale to private investors. Word that the Federal Communications Commission had unanimously approved the $19.5 billion buyout surfaced two weeks ago. The agency released the details Thursday.
According to AMG Data Services, Including ETF activity, Equity funds report net cash inflows totaling $7.331 billion in the week ended 1/16/08 with Domestic funds reporting net inflows of $7.127 billion and Non-domestic funds reporting net inflows of $204 million; Excluding ETF activity, Equity funds report net cash outflows totaling -$3.989 billion with Domestic funds reporting net outflows of -$3.020 billion and Non-domestic funds reporting net outflows totaling -$969 million; Excluding ETF activity, net outflows are reported in all Equity fund fund sectors except Gold & NR ($167 Mil; 0.48% Assets), Healthcare/Biotech ($134 Mil; 0.94% Assets), Utility ($87 Mil; 0.53% Assets), and Energy ($26 Mil; 0.52% Assets).
In the latest quarter, the weak dollar benefited Microsoft's revenue to the tune of $410 million.
"While we anticipate softer global economic conditions in 2008, we remain confident in Honeywell's ability to outperform," the company said. "We will continue to invest in innovation, expand globally, and execute on productivity initiatives to drive double digit earnings per share growth and higher free cash flow in 2008."
U.S. investment bank Goldman Sachs plans to release about 5 percent of its global workforce in coming months, a company spokesman said on Friday. This would equate to about 1,500 jobs eliminated.
John Mauldin: "I believe the monoline insurance companies like Ambac and MBIA are in worse shape than most realize, the counter-party risk in the $45 trillion Credit Default Swap market is much worse than we realize, and the exposure by various banks to their problems is much larger than currently understood. The Fed understands this, and realizes that they have been behind the curve but need to catch up...I think the concern that there is the potential for a much worse credit crisis than we are currently experiencing is what is driving the Fed. They are looking at the problem from the inside, and realize that they simply have to engineer a much steeper yield curve to allow the banks to make enough profits so that they might be able to grow their way out of the crisis over time...If I am wrong and the Fed was responding to the stock market, then we will likely not see a cut this next week. But if we get another 50-basis-point cut, as I think we will, then it means the Fed is responding to concerns about the credit crisis. And we will get another cut the next meeting and the next until we get down to 2% or below."
Crude oil for March delivery ended the session up $1.3, or 1.5%, at $90.71 a barrel on the New York Mercantile Exchange. February gold rose $4.90 to end at $910.70 an ounce on Nymex. Natural gas rallied to $8.
The Federal Reserve will offer banks $30 billion in 28-day loans on Monday, the Fed said Friday.
Saturday, January 26, 2008
Thursday, January 24, 2008
Enjoying The Rally?
1/25/08 Enjoying The Rally?
Robert McHugh: "Houston, we have a bottom. Nasty wave down, wasn't it? We are not totally out of the woods, but there is some breathing room here short-term, by the looks of things. We got the large price move, and how, that the small change in the M.O. was predicting yesterday. The Dow Industrials finished their down-leg with a slightly truncated small degree fifth wave Wednesday. The S&P actually hit a lower low for its wave five bottom. After being down 327 points in the morning, the Dow staged a dramatic technical rebound from a deep oversold level, from a completed wave count, and exploded 625 points higher to close at 12,270.17. Amazing. Shorts had a moment, then got killed. We saw the highest volume ever on the most bizarre day in years. We mentioned last night that the near record number of New Lows screamed for a bottom here. We got it. Also, as it turns out, our phi mate turn date is January 22nd's 11,971.19 bottom, one day after our best fit estimate of January 18th, Friday. Pretty close.
NYSE volume was higher on the rally, at 139 percent of its 10 day average, with upside volume leading at 74 percent, with advancing issues at 72 percent, with upside points at 81 percent. S&P 500 Demand Power rose 18 points to 397, while Supply Pressure fell 5 points to 457, telling us the decline was strong, but a huge chunk of it was short-covering. Later on, it seemed genuine buyers pitched in."
Textron expects 2008 earnings from continuing operations between $3.75 and $3.95 a share, which is lower than analyst estimates of $4.04 a share.
Rockwell Collins ups 2008 EPS estimate by 5c to $3.85-$4.00.
Kimberly-Clark sees 2008 adjusted EPS $4.45 to $4.60.
Assured Guaranty Ltd. had an unrealized mark-to-market loss on derivatives associated with financial guaranties written as credit default swaps totaling $302.9 million on an after-tax basis for the fourth quarter. This amounts to a loss of $4.39 a share, the Bermuda-based company said. Through the first two months of the quarter, the company's unrealized mark-to-market loss on credit default swaps had totaled about $220 million. "Our home equity line of credit exposures continue to experience rising delinquencies," said Dominic Frederico, Assured Guaranty's president and chief executive. However, "the remainder of our portfolio, including our pooled corporate and U.S. subprime residential mortgage-backed securities exposures, is performing in line with expectations," he said.
Potash Corp. is expecting first-quarter earnings per share in a range of $1.30 to $1.60 and fiscal-year earnings per share in a range of $6.25 to to $7.25. This company continues to be my favorite investment in the agricultural commodity area.
Societe Generale had a 4.9 billion euro trading loss generated by a rogue trader, as well as a 2 billion write-down on its collateralized debt obligation and indirect bond insurer exposure.
Japan's benchmark Nikkei 225 average Thursday advanced for the second day in a row to regain the psychologically key 13,000-point level.
The New Zealand central bank Thursday left a key interest rate unchanged at 8.25% as it was consistent with the expected inflation in the medium term, but added the level of uncertainty over the outlook for rates has increased. Reserve Bank of New Zealand Governor Alan Bollard wrote in a statement the central bank will be closely watching the ongoing turbulence in global financial markets and "deterioration" in the outlook for the U.S. and European economies to ascertaining implications for Asian and Australian economies as well as global commodity prices.
Japan's trade surplus dropped 20.9% in December from a year-ago for the second month in a row as growth in imports outpaced exports. Data released by the ministry of finance Thursday showed that trade surplus for the month shrank to 877.87 billion yen ($8.28 billion) from 1.11 trillion yen a year ago, as exports to the U.S. declined 4.5% during the month while imports grew 3.4%. Japan's surplus for 2007, however, jumped 37% after registering a negative growth in the previous two years, led by higher exports in the earlier months.
Ford Motor Co. is expected to offer a new round of buyouts to all of its 54,000 U.S. hourly workers, a move that could trim thousands of jobs and pave the way for lower-wage replacements.
Randall Forsyth: "Rallies actually do take place in the course of bear markets. And when they do, they tend to be violent affairs. The rush for the exits suddenly reverses and becomes a rush to the entrance. Usually, it's because market psychology has gotten so negative that every seller already has sold. At the first hint that the world isn't actually coming to an end, stocks jump faster and farther than a bull's wildest fantasy. That certainly seems to explain Wednesday's market, with the Dow Industrials swinging 600 points from 300 points in the red to that far into the green during a wild afternoon...short-covering played a major role in the session's surge. Those who had profited so handsomely on their bets against the credit-sensitive financials and homebuilders found it a propitious time to cash in some of those chips. Nothing had changed so dramatically in the space of a few hours to boost the value of these enterprises by billions of dollars. Of course, the proximate reason for the turnaround was news (broken by the FT.com, to give credit where it's due) that the powerful New York State insurance commissioner had urged bank executives to provide $15 billion in new capital for strapped monoline bond insurers...But the question remains, would a bailout of the bond insurers resolve the credit crisis? Notes Egan-Jones Ratings, a $5 billion bailout pales in comparison to the $20 billion in losses it estimates that MBIA faces. Egan-Jones also estimates Ambac needs to raise $5 billion to cover its guarantees.
Michael Kahn: "The market, now soothed, can think about recovering for a while. However, this time, with several rate cuts already under its belt, the durability of the market's newfound optimism is questionable. Whereas the long-term trend in August was up, it is no longer the case today and that means investors should be using market rebounds as opportunities to pare risk...Further, the intermediate-term trend is now down and the combination of the two means that buying into any short-term rallies that materialize is for the nimble only."
“This is not a normal crisis,” George Soros, the hedge fund pioneer turned philosopher, said today to a group of reporters he had invited to lunch at the World Economic Forum. “It is the end of an era.” It was the “era of superleverage,” he said, and regulators have not appreciated how serious it is. “Systemic failure,” he said, may be taking place.
John Lee: "According to the ABX index at Markit.com, AAA mortgages are selling at .70 cents on the dollar and look to go down further. This means that on every mortgage Freddie Mac and Fannie Mae guarantee, they are losing .30 cents on the dollar right away. Given that the mortgage exposure of Fannie and Freddie are in the hundreds of $billions, we look for Freddie to announce insolvency unless bailed out by the government...Subprime debts are changing hands at less than .20 cents on the dollar. The entire subprime market, a key driver of the US economy and money creation, is over. Given there is upwards of $2 trillion of subprime debts, which are selling at .20 cents on the dollar, we will see a lot more subprime write downs to come not just from banks, but pension funds and endowments throughout 2008...Last year we speculated that credit card backed asset securities would be the next victim. The following chart of Capital One, America's top credit card issuer, confirms our belief. The company announced mounting payment delinquencies and failed to deliver target earnings. We anticipate much further room to fall for COF, and most credit card issuers to come under pressure. Credit card debts/backed securities are a multi trillion dollar market. The fall out from this market will make headlines no less spectacular than ones created by subprime...Commercial, municipal debts are now under pressure. Ambac is a AAA debt issuer with municipalities, cities, and private companies as clients. Ambac's clients have lesser credit quality. Ambac makes money by pawning its Moody AAA's rating and issuing tens of billions of its AAA bonds to fund Ambac client projects, and charging a nice spread/fee in the process.
What does this mean for 2008?
1. The US debt binge is over. Foreign investors will increasingly shun US debt assets backed by mortgages, credit cards, car loans, and third party guarantees such as Ambac. This will create downward pressure for the dollar.
2. Both the US economy and money supply growth will slow. The economy grows in dollar terms by the increase of dollar aggregates. Dollars are created and supplied through borrowing. If banks can't sell/flip those loans and mortgages they originated, they are likely to create a lot fewer loans and mortgages.
3. US consumers are tapped out. Regardless of interest rates, frivolous lending of credits cards and home loans has come to an end through tightening lending practices. This will slow down consumer spending.
4. Interest rates will remain tame. Can't raise them or it will crash trillions of already distressed debts, can't lower them much more with oil already at $100.
5. Unlike debts which are strictly paper instruments; equities tend to survive through financial turmoil in the long run as they are quasi-tangible assets. Equity markets won't crash but will be volatile. With vastly diversified multinational listings, there is already a decoupling effect between the US economy and US stock market."
Mike Shedlock: "The US is in a Mad Rush To Nowhere. "Testifying before the Senate Finance Committee, the official, Peter Orszag, said workload issues at the Internal Revenue Service would prevent the mailing of rebate checks until after the peak tax filing in late May or early June. And then it could take 8 to 10 weeks to distribute the checks, meaning the impact of the action might not be felt until the second half of 2008 or early 2009." Add that to the growing list of reasons the Fiscal "Stimulus" Plan Doomed To Fail.
China's economy grew by a blistering 11.2 percent in the fourth quarter, propelling annual growth to its fastest rate in 13 years, the government said Thursday.
Lennar, one of the nation's largest homebuilders, said quarterly losses ballooned to $7.92 per share, from $195.6 million, or $1.24 per share, a year ago. Lennar's 2007 third-quarter loss of $513.9 million had been largest in the Miami-based company's 53-year history. Excluding a charge of $7.50 per share to write down the value of land options, the company would have lost 42 cents per share in the latest period. Revenue tumbled 49 percent to $2.18 billion from $4.27 billion in the 2006 period, as home deliveries fell 50 percent to 7,044 homes, and new orders slid 50 percent to 4,761 homes with a cancellation rate of 33 percent.
Consulting firm Oliver Wyman recently concluded that US financial institutions could face another $300 billion in subprime write-downs this year, according to Bloomberg.
Rigzone: "Kuwait's budget for the next fiscal year projects record spending, record revenues, and a record deficit of U.S.$18.8 billion, reports Dow Jones. Kuwait's budget includes oil revenues estimated at more than $42 billion, which are 56% more than what was projected for the current fiscal year. Kuwait, a member of OPEC, produces some 2.5 million bbl/d, a rate reports indicate will be maintained throughout the year. Kuwait owns about 10% of the world's oil reserves, which equates to 96.5 billion barrels."
According to Bloomberg, the number of Americans filing first-time claims for unemployment benefits unexpectedly dropped for a fourth week, indicating companies are reluctant to fire workers until they get a better read on the economic slowdown. Initial jobless claims decreased by 1,000 to 301,000 in the week ended Jan. 19, from a revised 302,000 a week earlier, the Labor Department said today in Washington. The four-week moving average, a less volatile measure, fell to a three-month low of 314,750, from 328,750 the prior week.
The Baltic Dry Index, a measure of shipping costs for commodities, tumbled 4.8 percent in London. The index, which tracks transport costs on international trade routes, fell 298 points to 5,948 points today, according to the Baltic Exchange.
U.S. fixed-rate mortgages fell in the latest week to their lowest levels since the spring of 2004, according to Freddie Mac's survey released Thursday. The national average interest rate on the benchmark 30-year, fixed-rate loan averaged 5.48% in the week ending Thursday, down from 5.69% a week ago and 6.25% a year ago. The rate hasn't been lower since late March 2004, when it averaged 5.40%.
Ryland reported a 4Q loss of $201.9 mln, or $4.80 a share, compared with a profit of $87.2 mln, or $1.98 a share a year ago. The homebuilder took pretax charges and write-offs. Revenue dropped to $845.1 mln, down from $1.35 bln a year ago.
Rob Hanna: "I believe in the days and perhaps weeks to come there is going to be more volatility and ultimately more upside. While I normally like to stick to the numbers in this blog, logically it makes sense to me that we get some upside here. Here’s my thought process. It seems the whole world is convinced we’re in a bear market. Most of what I see and hear is saying “sell into any rallies”. It is this disbelief which should help fuel to the rise. This may or may not be “the” bottom. If it is, then we will certainly see a nice rally. If it isn’t “the” bottom the rally should still be nice enough to suck in a good number of people before the next serious leg down begins. That’s what bear-market rallies do. They make believers out of suckers then take their money. In either case my studies indicate the rally should be strong enough to grab some profits."
In bear market rallies I prefer to bottom fish, get a hit, and run. I'm looking for singles and maybe a double or two. I do not try to look like a hero in a market this volatile.
Freddie Mac said the aggregate unpaid principal balance of its retained portfolio rose to $720.8 billion as of Dec. 31.
Gold futures surged 2% to trade above $900 an ounce early Thursday. Platinum jumped to a record high of $1,591.50 an ounce.
Allis-Chalmers Energy Inc., which provides oil and natural gas exploration services and equipment, said Thursday it will acquire Bronco Drilling Co. for $437.8 million in cash and stock. The total purchase price includes $280 million in cash and $157.8 million in stock. The $16.33 per-share price represents a 22 percent premium to Bronco's closing price on Wednesday.
The dollar index, which tracks the performance of the greenback against six other major currencies, was at 75.879, compared with 76.320 late Wednesday.
Resales of U.S. homes fell 2.2% in December to a seasonally adjusted annual rate of 4.89 million, the lowest in nine years, the National Association of Realtors reported Thursday. Resales are down 22% compared with the previous December and are down 32% from the peak two years ago. Sales of single-family homes dropped 2% in December to a 4.31 million annual rate, the lowest in 10 years. For all of 2007, the median sales price of an existing single-family home fell for the first time in the 40-year history of the data, dropping 1.8%. Resales of single family homes fell 13%, the largest decline since 1982.
With world coking coal prices already high, the world's largest supplier of seaborne coking coal, a joint venture of BHP Billiton and Mitsubishi Development, warned Thursday that its coal deliveries would be delayed as a result of the record flooding over the past two weeks across the Australian state of Queensland. The BHP Mitsubishi Alliance, a 50-50 joint venture between the world's largest miner and a subsidiary of Mitsubishi Corp., Japan's largest trading company, said Thursday that the recent extreme weather has impacted the production of its mines across the Bowen Basin in the northeastern Australian state of Queensland.
U.S. crude inventories rose by 2.3 million barrels to 289.4 million barrels in the week ending Jan. 18, U.S. Energy Information Administration reported on Thursday. Gasoline supplies rose by 5 million barrels in the latest week, while distillate stocks fell by 1.3 million barrels, EIA reported.
Natural gas supplies declined by 155 billion cubic feet to 2,536 billion cubic feet in the week ending Jan. 18, the Energy Department reported on Thursday.
Bipartisan leaders of Congress have reached a tentative deal to authorize tax rebates of $300 to $1,200 per family and provide business tax cuts to reinvigorate the economy, The Associated Press reported Thursday, citing officals close to the matter. The AP reported that individuals earning over $75,000 and couples making more than $150,000 would likely be ineligible for the rebates, and that tax breaks for businesses could cost as much as $70 billion.
New York Insurance Superintendent Eric Dinallo sounded a cautious note on the possibility of a bond insurer bailout on Thursday, saying any plan will take time and is complex. "These are complicated issues involving a number of parties and any effective plan will take some time to finalize," he said
Wilbur Ross, who specializes in buying distressed assets, is in talks to acquire Ambac Financial, U.K. newspaper The Evening Standard reported late Thursday.
Microsoft said net income for the period ended in December rose to $4.7 billion, or 50 cents a share, from $2.6 billion, or 26 cents a share in the same period a year earlier. Meanwhile revenue rose 31% to $16.37 billion. Analysts on average have been estimating Microsoft would post earnings of 46 cents a share, on $15.95 billion in revenue for the quarter, according to Thomson Financial. In after hours trading, the shares jumped to $34.75. But Chief Financial Officer Chris Liddell told Reuters in an interview the company was "a little cautious" about second-half sales in North America."We're probably a little cautious in the back half of the year, but that's made up for in the other parts of the (global) economy," he said. "Even if we shave a few percentage points off, we think the overall level of growth is still very healthy." For the fiscal year ending in June, Microsoft lifted its outlook. It now expects earnings per share to range between $1.85 and $1.88 per share, up from its previous estimate of $1.78 to $1.81. It boosted its revenue outlook to between $59.9 billion and $60.5 billion, up from $58.8 billion to $59.7 billion before.
Amgen Inc. posted a profit of $835 million or 76 cents a share, compared with $833 million or 71 cents a share, for the same period in 2006. Excluding various items, Amgen would have reported earnings of $1.00 a share, versus 90 cents last year. Revenue declined 2% to $3.74 billion, from $3.94 billion last year.
The Dow Jones Industrial Average rose 108.4 points to 12,378.6. The S&P 500 climbed 13.47 points to 1,352.07, while the Nasdaq Composite added 44.51 points to 2,360.92.
Crude for March delivery closed up $2.42, or 2.8%, at $89.41 a barrel on the New York Mercantile Exchange. Gold for February delivery rose $22.70 at $905.80 an ounce on the New York Mercantile Exchange.
Morgan Stanley will cut about 1,000 jobs.
Eric Hoffer: “In human affairs, the best stimulus for running ahead is to have something we must run from."
Robert McHugh: "Houston, we have a bottom. Nasty wave down, wasn't it? We are not totally out of the woods, but there is some breathing room here short-term, by the looks of things. We got the large price move, and how, that the small change in the M.O. was predicting yesterday. The Dow Industrials finished their down-leg with a slightly truncated small degree fifth wave Wednesday. The S&P actually hit a lower low for its wave five bottom. After being down 327 points in the morning, the Dow staged a dramatic technical rebound from a deep oversold level, from a completed wave count, and exploded 625 points higher to close at 12,270.17. Amazing. Shorts had a moment, then got killed. We saw the highest volume ever on the most bizarre day in years. We mentioned last night that the near record number of New Lows screamed for a bottom here. We got it. Also, as it turns out, our phi mate turn date is January 22nd's 11,971.19 bottom, one day after our best fit estimate of January 18th, Friday. Pretty close.
NYSE volume was higher on the rally, at 139 percent of its 10 day average, with upside volume leading at 74 percent, with advancing issues at 72 percent, with upside points at 81 percent. S&P 500 Demand Power rose 18 points to 397, while Supply Pressure fell 5 points to 457, telling us the decline was strong, but a huge chunk of it was short-covering. Later on, it seemed genuine buyers pitched in."
Textron expects 2008 earnings from continuing operations between $3.75 and $3.95 a share, which is lower than analyst estimates of $4.04 a share.
Rockwell Collins ups 2008 EPS estimate by 5c to $3.85-$4.00.
Kimberly-Clark sees 2008 adjusted EPS $4.45 to $4.60.
Assured Guaranty Ltd. had an unrealized mark-to-market loss on derivatives associated with financial guaranties written as credit default swaps totaling $302.9 million on an after-tax basis for the fourth quarter. This amounts to a loss of $4.39 a share, the Bermuda-based company said. Through the first two months of the quarter, the company's unrealized mark-to-market loss on credit default swaps had totaled about $220 million. "Our home equity line of credit exposures continue to experience rising delinquencies," said Dominic Frederico, Assured Guaranty's president and chief executive. However, "the remainder of our portfolio, including our pooled corporate and U.S. subprime residential mortgage-backed securities exposures, is performing in line with expectations," he said.
Potash Corp. is expecting first-quarter earnings per share in a range of $1.30 to $1.60 and fiscal-year earnings per share in a range of $6.25 to to $7.25. This company continues to be my favorite investment in the agricultural commodity area.
Societe Generale had a 4.9 billion euro trading loss generated by a rogue trader, as well as a 2 billion write-down on its collateralized debt obligation and indirect bond insurer exposure.
Japan's benchmark Nikkei 225 average Thursday advanced for the second day in a row to regain the psychologically key 13,000-point level.
The New Zealand central bank Thursday left a key interest rate unchanged at 8.25% as it was consistent with the expected inflation in the medium term, but added the level of uncertainty over the outlook for rates has increased. Reserve Bank of New Zealand Governor Alan Bollard wrote in a statement the central bank will be closely watching the ongoing turbulence in global financial markets and "deterioration" in the outlook for the U.S. and European economies to ascertaining implications for Asian and Australian economies as well as global commodity prices.
Japan's trade surplus dropped 20.9% in December from a year-ago for the second month in a row as growth in imports outpaced exports. Data released by the ministry of finance Thursday showed that trade surplus for the month shrank to 877.87 billion yen ($8.28 billion) from 1.11 trillion yen a year ago, as exports to the U.S. declined 4.5% during the month while imports grew 3.4%. Japan's surplus for 2007, however, jumped 37% after registering a negative growth in the previous two years, led by higher exports in the earlier months.
Ford Motor Co. is expected to offer a new round of buyouts to all of its 54,000 U.S. hourly workers, a move that could trim thousands of jobs and pave the way for lower-wage replacements.
Randall Forsyth: "Rallies actually do take place in the course of bear markets. And when they do, they tend to be violent affairs. The rush for the exits suddenly reverses and becomes a rush to the entrance. Usually, it's because market psychology has gotten so negative that every seller already has sold. At the first hint that the world isn't actually coming to an end, stocks jump faster and farther than a bull's wildest fantasy. That certainly seems to explain Wednesday's market, with the Dow Industrials swinging 600 points from 300 points in the red to that far into the green during a wild afternoon...short-covering played a major role in the session's surge. Those who had profited so handsomely on their bets against the credit-sensitive financials and homebuilders found it a propitious time to cash in some of those chips. Nothing had changed so dramatically in the space of a few hours to boost the value of these enterprises by billions of dollars. Of course, the proximate reason for the turnaround was news (broken by the FT.com, to give credit where it's due) that the powerful New York State insurance commissioner had urged bank executives to provide $15 billion in new capital for strapped monoline bond insurers...But the question remains, would a bailout of the bond insurers resolve the credit crisis? Notes Egan-Jones Ratings, a $5 billion bailout pales in comparison to the $20 billion in losses it estimates that MBIA faces. Egan-Jones also estimates Ambac needs to raise $5 billion to cover its guarantees.
Michael Kahn: "The market, now soothed, can think about recovering for a while. However, this time, with several rate cuts already under its belt, the durability of the market's newfound optimism is questionable. Whereas the long-term trend in August was up, it is no longer the case today and that means investors should be using market rebounds as opportunities to pare risk...Further, the intermediate-term trend is now down and the combination of the two means that buying into any short-term rallies that materialize is for the nimble only."
“This is not a normal crisis,” George Soros, the hedge fund pioneer turned philosopher, said today to a group of reporters he had invited to lunch at the World Economic Forum. “It is the end of an era.” It was the “era of superleverage,” he said, and regulators have not appreciated how serious it is. “Systemic failure,” he said, may be taking place.
John Lee: "According to the ABX index at Markit.com, AAA mortgages are selling at .70 cents on the dollar and look to go down further. This means that on every mortgage Freddie Mac and Fannie Mae guarantee, they are losing .30 cents on the dollar right away. Given that the mortgage exposure of Fannie and Freddie are in the hundreds of $billions, we look for Freddie to announce insolvency unless bailed out by the government...Subprime debts are changing hands at less than .20 cents on the dollar. The entire subprime market, a key driver of the US economy and money creation, is over. Given there is upwards of $2 trillion of subprime debts, which are selling at .20 cents on the dollar, we will see a lot more subprime write downs to come not just from banks, but pension funds and endowments throughout 2008...Last year we speculated that credit card backed asset securities would be the next victim. The following chart of Capital One, America's top credit card issuer, confirms our belief. The company announced mounting payment delinquencies and failed to deliver target earnings. We anticipate much further room to fall for COF, and most credit card issuers to come under pressure. Credit card debts/backed securities are a multi trillion dollar market. The fall out from this market will make headlines no less spectacular than ones created by subprime...Commercial, municipal debts are now under pressure. Ambac is a AAA debt issuer with municipalities, cities, and private companies as clients. Ambac's clients have lesser credit quality. Ambac makes money by pawning its Moody AAA's rating and issuing tens of billions of its AAA bonds to fund Ambac client projects, and charging a nice spread/fee in the process.
What does this mean for 2008?
1. The US debt binge is over. Foreign investors will increasingly shun US debt assets backed by mortgages, credit cards, car loans, and third party guarantees such as Ambac. This will create downward pressure for the dollar.
2. Both the US economy and money supply growth will slow. The economy grows in dollar terms by the increase of dollar aggregates. Dollars are created and supplied through borrowing. If banks can't sell/flip those loans and mortgages they originated, they are likely to create a lot fewer loans and mortgages.
3. US consumers are tapped out. Regardless of interest rates, frivolous lending of credits cards and home loans has come to an end through tightening lending practices. This will slow down consumer spending.
4. Interest rates will remain tame. Can't raise them or it will crash trillions of already distressed debts, can't lower them much more with oil already at $100.
5. Unlike debts which are strictly paper instruments; equities tend to survive through financial turmoil in the long run as they are quasi-tangible assets. Equity markets won't crash but will be volatile. With vastly diversified multinational listings, there is already a decoupling effect between the US economy and US stock market."
Mike Shedlock: "The US is in a Mad Rush To Nowhere. "Testifying before the Senate Finance Committee, the official, Peter Orszag, said workload issues at the Internal Revenue Service would prevent the mailing of rebate checks until after the peak tax filing in late May or early June. And then it could take 8 to 10 weeks to distribute the checks, meaning the impact of the action might not be felt until the second half of 2008 or early 2009." Add that to the growing list of reasons the Fiscal "Stimulus" Plan Doomed To Fail.
China's economy grew by a blistering 11.2 percent in the fourth quarter, propelling annual growth to its fastest rate in 13 years, the government said Thursday.
Lennar, one of the nation's largest homebuilders, said quarterly losses ballooned to $7.92 per share, from $195.6 million, or $1.24 per share, a year ago. Lennar's 2007 third-quarter loss of $513.9 million had been largest in the Miami-based company's 53-year history. Excluding a charge of $7.50 per share to write down the value of land options, the company would have lost 42 cents per share in the latest period. Revenue tumbled 49 percent to $2.18 billion from $4.27 billion in the 2006 period, as home deliveries fell 50 percent to 7,044 homes, and new orders slid 50 percent to 4,761 homes with a cancellation rate of 33 percent.
Consulting firm Oliver Wyman recently concluded that US financial institutions could face another $300 billion in subprime write-downs this year, according to Bloomberg.
Rigzone: "Kuwait's budget for the next fiscal year projects record spending, record revenues, and a record deficit of U.S.$18.8 billion, reports Dow Jones. Kuwait's budget includes oil revenues estimated at more than $42 billion, which are 56% more than what was projected for the current fiscal year. Kuwait, a member of OPEC, produces some 2.5 million bbl/d, a rate reports indicate will be maintained throughout the year. Kuwait owns about 10% of the world's oil reserves, which equates to 96.5 billion barrels."
According to Bloomberg, the number of Americans filing first-time claims for unemployment benefits unexpectedly dropped for a fourth week, indicating companies are reluctant to fire workers until they get a better read on the economic slowdown. Initial jobless claims decreased by 1,000 to 301,000 in the week ended Jan. 19, from a revised 302,000 a week earlier, the Labor Department said today in Washington. The four-week moving average, a less volatile measure, fell to a three-month low of 314,750, from 328,750 the prior week.
The Baltic Dry Index, a measure of shipping costs for commodities, tumbled 4.8 percent in London. The index, which tracks transport costs on international trade routes, fell 298 points to 5,948 points today, according to the Baltic Exchange.
U.S. fixed-rate mortgages fell in the latest week to their lowest levels since the spring of 2004, according to Freddie Mac's survey released Thursday. The national average interest rate on the benchmark 30-year, fixed-rate loan averaged 5.48% in the week ending Thursday, down from 5.69% a week ago and 6.25% a year ago. The rate hasn't been lower since late March 2004, when it averaged 5.40%.
Ryland reported a 4Q loss of $201.9 mln, or $4.80 a share, compared with a profit of $87.2 mln, or $1.98 a share a year ago. The homebuilder took pretax charges and write-offs. Revenue dropped to $845.1 mln, down from $1.35 bln a year ago.
Rob Hanna: "I believe in the days and perhaps weeks to come there is going to be more volatility and ultimately more upside. While I normally like to stick to the numbers in this blog, logically it makes sense to me that we get some upside here. Here’s my thought process. It seems the whole world is convinced we’re in a bear market. Most of what I see and hear is saying “sell into any rallies”. It is this disbelief which should help fuel to the rise. This may or may not be “the” bottom. If it is, then we will certainly see a nice rally. If it isn’t “the” bottom the rally should still be nice enough to suck in a good number of people before the next serious leg down begins. That’s what bear-market rallies do. They make believers out of suckers then take their money. In either case my studies indicate the rally should be strong enough to grab some profits."
In bear market rallies I prefer to bottom fish, get a hit, and run. I'm looking for singles and maybe a double or two. I do not try to look like a hero in a market this volatile.
Freddie Mac said the aggregate unpaid principal balance of its retained portfolio rose to $720.8 billion as of Dec. 31.
Gold futures surged 2% to trade above $900 an ounce early Thursday. Platinum jumped to a record high of $1,591.50 an ounce.
Allis-Chalmers Energy Inc., which provides oil and natural gas exploration services and equipment, said Thursday it will acquire Bronco Drilling Co. for $437.8 million in cash and stock. The total purchase price includes $280 million in cash and $157.8 million in stock. The $16.33 per-share price represents a 22 percent premium to Bronco's closing price on Wednesday.
The dollar index, which tracks the performance of the greenback against six other major currencies, was at 75.879, compared with 76.320 late Wednesday.
Resales of U.S. homes fell 2.2% in December to a seasonally adjusted annual rate of 4.89 million, the lowest in nine years, the National Association of Realtors reported Thursday. Resales are down 22% compared with the previous December and are down 32% from the peak two years ago. Sales of single-family homes dropped 2% in December to a 4.31 million annual rate, the lowest in 10 years. For all of 2007, the median sales price of an existing single-family home fell for the first time in the 40-year history of the data, dropping 1.8%. Resales of single family homes fell 13%, the largest decline since 1982.
With world coking coal prices already high, the world's largest supplier of seaborne coking coal, a joint venture of BHP Billiton and Mitsubishi Development, warned Thursday that its coal deliveries would be delayed as a result of the record flooding over the past two weeks across the Australian state of Queensland. The BHP Mitsubishi Alliance, a 50-50 joint venture between the world's largest miner and a subsidiary of Mitsubishi Corp., Japan's largest trading company, said Thursday that the recent extreme weather has impacted the production of its mines across the Bowen Basin in the northeastern Australian state of Queensland.
U.S. crude inventories rose by 2.3 million barrels to 289.4 million barrels in the week ending Jan. 18, U.S. Energy Information Administration reported on Thursday. Gasoline supplies rose by 5 million barrels in the latest week, while distillate stocks fell by 1.3 million barrels, EIA reported.
Natural gas supplies declined by 155 billion cubic feet to 2,536 billion cubic feet in the week ending Jan. 18, the Energy Department reported on Thursday.
Bipartisan leaders of Congress have reached a tentative deal to authorize tax rebates of $300 to $1,200 per family and provide business tax cuts to reinvigorate the economy, The Associated Press reported Thursday, citing officals close to the matter. The AP reported that individuals earning over $75,000 and couples making more than $150,000 would likely be ineligible for the rebates, and that tax breaks for businesses could cost as much as $70 billion.
New York Insurance Superintendent Eric Dinallo sounded a cautious note on the possibility of a bond insurer bailout on Thursday, saying any plan will take time and is complex. "These are complicated issues involving a number of parties and any effective plan will take some time to finalize," he said
Wilbur Ross, who specializes in buying distressed assets, is in talks to acquire Ambac Financial, U.K. newspaper The Evening Standard reported late Thursday.
Microsoft said net income for the period ended in December rose to $4.7 billion, or 50 cents a share, from $2.6 billion, or 26 cents a share in the same period a year earlier. Meanwhile revenue rose 31% to $16.37 billion. Analysts on average have been estimating Microsoft would post earnings of 46 cents a share, on $15.95 billion in revenue for the quarter, according to Thomson Financial. In after hours trading, the shares jumped to $34.75. But Chief Financial Officer Chris Liddell told Reuters in an interview the company was "a little cautious" about second-half sales in North America."We're probably a little cautious in the back half of the year, but that's made up for in the other parts of the (global) economy," he said. "Even if we shave a few percentage points off, we think the overall level of growth is still very healthy." For the fiscal year ending in June, Microsoft lifted its outlook. It now expects earnings per share to range between $1.85 and $1.88 per share, up from its previous estimate of $1.78 to $1.81. It boosted its revenue outlook to between $59.9 billion and $60.5 billion, up from $58.8 billion to $59.7 billion before.
Amgen Inc. posted a profit of $835 million or 76 cents a share, compared with $833 million or 71 cents a share, for the same period in 2006. Excluding various items, Amgen would have reported earnings of $1.00 a share, versus 90 cents last year. Revenue declined 2% to $3.74 billion, from $3.94 billion last year.
The Dow Jones Industrial Average rose 108.4 points to 12,378.6. The S&P 500 climbed 13.47 points to 1,352.07, while the Nasdaq Composite added 44.51 points to 2,360.92.
Crude for March delivery closed up $2.42, or 2.8%, at $89.41 a barrel on the New York Mercantile Exchange. Gold for February delivery rose $22.70 at $905.80 an ounce on the New York Mercantile Exchange.
Morgan Stanley will cut about 1,000 jobs.
Eric Hoffer: “In human affairs, the best stimulus for running ahead is to have something we must run from."
Wednesday, January 23, 2008
Another Huge Market Swing
1/24/08 Another Huge Market Swing
Jeremy Grantham: "Well, the Minsky Meltdown has clearly arrived, and one shoe after another of the market centipede drops onto the floor, and we are waiting for many more. This is the most important U.S. financial crisis since World War II: it is of course far more global than previous crises, with tentacles reaching everywhere, and it coincides with broad overpricing of assets.
... Stocks meanwhile, relative bystanders last year, are overpriced, particularly at the risky end of the spectrum. And profit margins are spectacularly above average precisely for companies at the riskier end of the spectrum. Margins are declining now and the markets are finally getting the point that all risk is dangerous. Markets are well into a massive repricing of both risk and asset prices but it has far to go outside the original subprime area, where repricing may have already run its course.
Recommendations for 2008: I'm afraid cash is the ugly answer that no one ever wants to hear. For the first time, in many bear markets, traditional value stocks are unlikely to help much and may even hurt, as they entered the decline badly overpriced. And, once again, if you literally cannot resist buying some stocks, we recommend a mix of the highest quality U.S. blue chips and emerging markets. The bigger the fundamental problems, the more quality stocks are likely to outperform."
Robert McHugh: "The Dow Industrials crashed at the open, then recovered about two thirds of its loss, falling 128.11 points Tuesday, closing at 11,971.19. NYSE volume was higher on the decline, at 127 percent of its 10 day average, with downside volume leading at 56 percent, with declining issues at 58 percent, with downside points at 63 percent. A 90 percent up day soon would confirm a multi-week rally had started. Without one, we cannot be sure."
Coach said it expects to generate sales of at least $3.15 billion and earnings of $2.06 a share in fiscal 2008.
Goldman Sachs said it no longer recommends shorting gold, as it has since Dec. 11, which on paper resulted in a loss of $54 an ounce. After the Fed rate cut, "we believe that there is now greater pressure for continued U.S. dollar weakness. We have long held that the gold price trades inversely with the U.S. dollar; thus, with the increased uncertainty in global financial markets and a higher probability of continued U.S. dollar weakness, we believe that the risk/reward of our short gold trade has diminished," it said.
"We remain confident in our earnings per share target of $6.41 for 2008," said Wayne DeVeydt, Wellpoint's chief financial officer.
Merrill Lynch forecasts nationwide U.S. home prices could decline 25% to 30% over the next three years, as new supply and weak demand weigh on the market. "This sounds dire... but would only reverse part of the unprecedented 130% price surge from 2000 to 2006," wrote economist David Rosenberg in a research note released Wednesday. Rosenberg added the S&P 500 may decline an additional 20% to 25% to breach the 1,100-point level if the market follows historical precedents at times when the U.S. economy is in recession.
Motorola's net income fell sharply to $100 million as sales of mobile devices fell 38%.
In Seattle, Starbucks is test marketing an 8 ounce cup of coffee priced at $1 as well as free refills.
Richard Benson: "Inflation is raging now and even with hedonic adjustments and chain weighting tricks, the CPI is up 4.1 percent year-over-year. (Without the tricks used to distort the CPI down, the actual inflation rate is probably more like 6 percent). The American worker is also on life support because the cost of food and fuel is eating them alive and stagnant wages aren’t helping to pay the bills, now that home equity extraction is no longer an option.
So where do we go from here? Today’s prescribed cure (more like a band aid solution over a sword wound) will fuel even fatter federal deficits funded by new money printed up by the Federal Reserve. So the prognosis for the economy may not be death by heart attack, but it will remain in intensive care or in a comma for years. The citizens of our great country experienced an intense sugar rush over the last decade as their waistlines expanded and they ran up very fat personal deficits amounting to over $14 trillion dollars. (It is estimated that $500 billion dollars of that easy money created debt could be in default very soon). Too much sugar, too much fat, a collapsing dollar, and higher inflation can cause an economic heart attack. It happened this week, and you should watch for it to happen again and again."
An economic activity index calculated by the Federal Reserve Bank of Chicago showed its lowest level in more than four years in December, dragged down by a sharp contraction in employment-related indicators, the bank said Tuesday.
The three-month moving average of the Chicago Fed's national activity index was negative 0.67, as the single-month reading for December fell to negative 0.91 from negative 0.29 in November.
The three-month average, which the Chicago Fed says provides a more consistent picture of national economic growth than the volatile monthly readings, hit its lowest level since May 2003, when it was negative 0.74. The December three-month average surpassed the negative 0.66 reading at the end of October.
The Philadelphia Fed reported Tuesday that the economy shrunk in 23 states last month, including Ohio, Missouri and Arizona, and was stagnant in seven others. California and Florida, with their plunging home values, may soon join the recession list.
Richard Daughty: "The point is that the government's promises for future benefits payable under the Social Security and Medicare programs are now estimated to be at $53 trillion, in current dollars. This is up from about $20 trillion in 2000."
Swiss Reinsurance, the biggest reinsurer, said billionaire investor Warren Buffett’s Berkshire Hathaway took a 3 percent stake and will assume a share of its non-life business, giving Swiss Re’s shares their biggest spike in four years.
Berkshire will get 20 percent of Swiss Re’s property and casualty business over the next five years, Swiss Re said Wednesday in an e-mailed statement from Zurich. Swiss Re will use capital freed up by the transaction to finance an additional share buyback of up to 1.75 billion Swiss francs ($1.6 billion).
Tellabs Inc. reported sharply lower fourth-quarter earnings, and unveiled a new cost-cutting plan that will eliminate 225 jobs.
Brett Steenbarger: "My measure of Demand finished at 44, while Supply was 88. It surprised me to see twice as many stocks closing below their volatility envelopes compared to those closing above. Yesterday's bounce was strongest in the sectors that had been weakest: homebuilders and banks, a sign of short-covering more than fresh, sustained buying across the stock universe. We now see only 15% of SPX and NYSE stocks trading above their 200-day moving averages, a level seen near many bear market lows in the past 20 years."
According to one media report, BHP Billiton is preparing a hostile $127 billion bid for rival Rio Tinto Plc.
Cerberus Capital Management LP Chairman John Snow said banks need to ``purge'' about $200 billion of loans for which they haven't found buyers before leveraged buyout firms can resume last year's record pace.
Rob Hanna: "Today’s action put the market squarely into capitulation territory. The CBI broke 10 as expected. Price is now more stretched and some of the measures I use there (RSI, Bollinger Bands, etc.) are now giving extreme readings. Time was already stretched. I’m expecting a significant multi-day bounce to materialize within the next few days. If it materializes, I expect the most beaten down areas to bounce the most."
Freeport-McMoRan forecasts 2008 sales from mines of 4.3 billion pounds of copper, 1.3 million ounces of gold and 75 million pounds of molybdenum, including 885 million pounds of copper, 170 thousand ounces of gold and 19 million pounds of molybdenum for first-quarter.
The dollar fell 1.9% to 105.22 yen -- its worst level since May 2005.
ConocoPhillips net income rose to $4.37 billion, or $2.71 per share, compared with $3.2 billion, or $1.91 per share, during the same period a year earlier.
Crude oil for March delivery dropped $1.91, or nearly 2%, to $87.30 a barrel on the New York Mercantile Exchange in early trading, and gold for February delivery dropped $13.30 to $877 an ounce on the New York Mercantile Exchange.
Pfizer Inc.'s fourth-quarter net income sank 70%, absent a large year-earlier gain, and the drug company's top-seller, Lipitor, posted its first yearly sales decline.
However, Pfizer raised the bottom end of its 2008 earnings outlook and boosted its sales view.
The budget deficit for the current budget year will jump to about $250 billion, the Congressional Budget Office estimated Wednesday, citing the weakening economy. And that figure does not reflect at least $100 billion in additional red ink from an upcoming deficit-financed economic stimulus measure.
A study by two nonprofit journalism organizations found that President Bush and top administration officials issued hundreds of false statements about the national security threat from Iraq in the two years following the 2001 terrorist attacks. The study counted 935 false statements in the two-year period. It found that in speeches, briefings, interviews and other venues, Bush and administration officials stated unequivocally on at least 532 occasions that Iraq had weapons of mass destruction or was trying to produce or obtain them or had links to al-Qaida or both.
Todd Sullivan: Lost in all the wailing over Fed funds rate, a stimulus plan, the election, and bank right offs has been perhaps the most important news facing home owners with ARM's. The LIBOR rate, the interest rate that most adjustable rate mortgages are tied to has fallen from a multi year high of near 6% in early 2007 to a level of 3.9%, the lowest since Sept. 2005. What this means is that the $385 billion in mortgages tied to it that will reset in 2008 will do so at far lower levels than homeowners were looking at less than a year ago. Of all the news we have been assaulted with in the past three weeks, this news is what really matters most. While Bernanke has been constantly criticized by stock investors this month, his actions at the Fed ought to be cheered by homeowners. The stabilizing of this market will help all our home values and in turn our stock portfolios."
Excluding accounting treatments for securitizations and derivatives, SLM had a loss of $139 million, or 36 cents a share, from year-earlier earnings of $326 million or 74 cents a share. Sallie Mae last month had forecast earnings, excluding costs related to its collapsed buyout, of 52 cents to 57 cents a share. "While there were some bright spots, we are obviously disappointed by our fourth-quarter results overall," said Chief Executive Albert Lord. "Our cost of funds and loan loss expectations were impacted by weakening credit markets." The provision for loan losses increased more than sixfold to $574.2 million.
For the period ended Dec. 31, EBAY earned $530.9 million, or 39 cents a share, compared with earnings of $346.5 million or 25 cents a share for the same quarter the previous year. Excluding charges related to stock-option expenses and other items, the company said that it earned $611 million, or 45 cents a share, for the fourth quarter. Revenue grew nearly 27% to $2.18 billion. Analysts had been expecting revenue of $2.14 billion for the quarter. However, EBay Inc warned that 2008 results would fall below Wall Street expectations, sending its shares more than 5 percent lower.
The Dow Jones Industrial Average climbed 299 points to 12,270.2. The S&P 500 rose 28.10 points to 1,338.60, while the Nasdaq Composite gained 24.14 points to 2,316.41.
Crude oil for March delivery closed down $2.22, or 2.5%, at $86.99 a barrel on the New York Mercantile Exchange.
ConocoPhillips CEO Jim Mulva said he doesn't plan any major mergers or acquisitions by the oil giant in 2008 or 2009.
Japanese Proverb: “The reverse side also has a reverse side.”
Jeremy Grantham: "Well, the Minsky Meltdown has clearly arrived, and one shoe after another of the market centipede drops onto the floor, and we are waiting for many more. This is the most important U.S. financial crisis since World War II: it is of course far more global than previous crises, with tentacles reaching everywhere, and it coincides with broad overpricing of assets.
... Stocks meanwhile, relative bystanders last year, are overpriced, particularly at the risky end of the spectrum. And profit margins are spectacularly above average precisely for companies at the riskier end of the spectrum. Margins are declining now and the markets are finally getting the point that all risk is dangerous. Markets are well into a massive repricing of both risk and asset prices but it has far to go outside the original subprime area, where repricing may have already run its course.
Recommendations for 2008: I'm afraid cash is the ugly answer that no one ever wants to hear. For the first time, in many bear markets, traditional value stocks are unlikely to help much and may even hurt, as they entered the decline badly overpriced. And, once again, if you literally cannot resist buying some stocks, we recommend a mix of the highest quality U.S. blue chips and emerging markets. The bigger the fundamental problems, the more quality stocks are likely to outperform."
Robert McHugh: "The Dow Industrials crashed at the open, then recovered about two thirds of its loss, falling 128.11 points Tuesday, closing at 11,971.19. NYSE volume was higher on the decline, at 127 percent of its 10 day average, with downside volume leading at 56 percent, with declining issues at 58 percent, with downside points at 63 percent. A 90 percent up day soon would confirm a multi-week rally had started. Without one, we cannot be sure."
Coach said it expects to generate sales of at least $3.15 billion and earnings of $2.06 a share in fiscal 2008.
Goldman Sachs said it no longer recommends shorting gold, as it has since Dec. 11, which on paper resulted in a loss of $54 an ounce. After the Fed rate cut, "we believe that there is now greater pressure for continued U.S. dollar weakness. We have long held that the gold price trades inversely with the U.S. dollar; thus, with the increased uncertainty in global financial markets and a higher probability of continued U.S. dollar weakness, we believe that the risk/reward of our short gold trade has diminished," it said.
"We remain confident in our earnings per share target of $6.41 for 2008," said Wayne DeVeydt, Wellpoint's chief financial officer.
Merrill Lynch forecasts nationwide U.S. home prices could decline 25% to 30% over the next three years, as new supply and weak demand weigh on the market. "This sounds dire... but would only reverse part of the unprecedented 130% price surge from 2000 to 2006," wrote economist David Rosenberg in a research note released Wednesday. Rosenberg added the S&P 500 may decline an additional 20% to 25% to breach the 1,100-point level if the market follows historical precedents at times when the U.S. economy is in recession.
Motorola's net income fell sharply to $100 million as sales of mobile devices fell 38%.
In Seattle, Starbucks is test marketing an 8 ounce cup of coffee priced at $1 as well as free refills.
Richard Benson: "Inflation is raging now and even with hedonic adjustments and chain weighting tricks, the CPI is up 4.1 percent year-over-year. (Without the tricks used to distort the CPI down, the actual inflation rate is probably more like 6 percent). The American worker is also on life support because the cost of food and fuel is eating them alive and stagnant wages aren’t helping to pay the bills, now that home equity extraction is no longer an option.
So where do we go from here? Today’s prescribed cure (more like a band aid solution over a sword wound) will fuel even fatter federal deficits funded by new money printed up by the Federal Reserve. So the prognosis for the economy may not be death by heart attack, but it will remain in intensive care or in a comma for years. The citizens of our great country experienced an intense sugar rush over the last decade as their waistlines expanded and they ran up very fat personal deficits amounting to over $14 trillion dollars. (It is estimated that $500 billion dollars of that easy money created debt could be in default very soon). Too much sugar, too much fat, a collapsing dollar, and higher inflation can cause an economic heart attack. It happened this week, and you should watch for it to happen again and again."
An economic activity index calculated by the Federal Reserve Bank of Chicago showed its lowest level in more than four years in December, dragged down by a sharp contraction in employment-related indicators, the bank said Tuesday.
The three-month moving average of the Chicago Fed's national activity index was negative 0.67, as the single-month reading for December fell to negative 0.91 from negative 0.29 in November.
The three-month average, which the Chicago Fed says provides a more consistent picture of national economic growth than the volatile monthly readings, hit its lowest level since May 2003, when it was negative 0.74. The December three-month average surpassed the negative 0.66 reading at the end of October.
The Philadelphia Fed reported Tuesday that the economy shrunk in 23 states last month, including Ohio, Missouri and Arizona, and was stagnant in seven others. California and Florida, with their plunging home values, may soon join the recession list.
Richard Daughty: "The point is that the government's promises for future benefits payable under the Social Security and Medicare programs are now estimated to be at $53 trillion, in current dollars. This is up from about $20 trillion in 2000."
Swiss Reinsurance, the biggest reinsurer, said billionaire investor Warren Buffett’s Berkshire Hathaway took a 3 percent stake and will assume a share of its non-life business, giving Swiss Re’s shares their biggest spike in four years.
Berkshire will get 20 percent of Swiss Re’s property and casualty business over the next five years, Swiss Re said Wednesday in an e-mailed statement from Zurich. Swiss Re will use capital freed up by the transaction to finance an additional share buyback of up to 1.75 billion Swiss francs ($1.6 billion).
Tellabs Inc. reported sharply lower fourth-quarter earnings, and unveiled a new cost-cutting plan that will eliminate 225 jobs.
Brett Steenbarger: "My measure of Demand finished at 44, while Supply was 88. It surprised me to see twice as many stocks closing below their volatility envelopes compared to those closing above. Yesterday's bounce was strongest in the sectors that had been weakest: homebuilders and banks, a sign of short-covering more than fresh, sustained buying across the stock universe. We now see only 15% of SPX and NYSE stocks trading above their 200-day moving averages, a level seen near many bear market lows in the past 20 years."
According to one media report, BHP Billiton is preparing a hostile $127 billion bid for rival Rio Tinto Plc.
Cerberus Capital Management LP Chairman John Snow said banks need to ``purge'' about $200 billion of loans for which they haven't found buyers before leveraged buyout firms can resume last year's record pace.
Rob Hanna: "Today’s action put the market squarely into capitulation territory. The CBI broke 10 as expected. Price is now more stretched and some of the measures I use there (RSI, Bollinger Bands, etc.) are now giving extreme readings. Time was already stretched. I’m expecting a significant multi-day bounce to materialize within the next few days. If it materializes, I expect the most beaten down areas to bounce the most."
Freeport-McMoRan forecasts 2008 sales from mines of 4.3 billion pounds of copper, 1.3 million ounces of gold and 75 million pounds of molybdenum, including 885 million pounds of copper, 170 thousand ounces of gold and 19 million pounds of molybdenum for first-quarter.
The dollar fell 1.9% to 105.22 yen -- its worst level since May 2005.
ConocoPhillips net income rose to $4.37 billion, or $2.71 per share, compared with $3.2 billion, or $1.91 per share, during the same period a year earlier.
Crude oil for March delivery dropped $1.91, or nearly 2%, to $87.30 a barrel on the New York Mercantile Exchange in early trading, and gold for February delivery dropped $13.30 to $877 an ounce on the New York Mercantile Exchange.
Pfizer Inc.'s fourth-quarter net income sank 70%, absent a large year-earlier gain, and the drug company's top-seller, Lipitor, posted its first yearly sales decline.
However, Pfizer raised the bottom end of its 2008 earnings outlook and boosted its sales view.
The budget deficit for the current budget year will jump to about $250 billion, the Congressional Budget Office estimated Wednesday, citing the weakening economy. And that figure does not reflect at least $100 billion in additional red ink from an upcoming deficit-financed economic stimulus measure.
A study by two nonprofit journalism organizations found that President Bush and top administration officials issued hundreds of false statements about the national security threat from Iraq in the two years following the 2001 terrorist attacks. The study counted 935 false statements in the two-year period. It found that in speeches, briefings, interviews and other venues, Bush and administration officials stated unequivocally on at least 532 occasions that Iraq had weapons of mass destruction or was trying to produce or obtain them or had links to al-Qaida or both.
Todd Sullivan: Lost in all the wailing over Fed funds rate, a stimulus plan, the election, and bank right offs has been perhaps the most important news facing home owners with ARM's. The LIBOR rate, the interest rate that most adjustable rate mortgages are tied to has fallen from a multi year high of near 6% in early 2007 to a level of 3.9%, the lowest since Sept. 2005. What this means is that the $385 billion in mortgages tied to it that will reset in 2008 will do so at far lower levels than homeowners were looking at less than a year ago. Of all the news we have been assaulted with in the past three weeks, this news is what really matters most. While Bernanke has been constantly criticized by stock investors this month, his actions at the Fed ought to be cheered by homeowners. The stabilizing of this market will help all our home values and in turn our stock portfolios."
Excluding accounting treatments for securitizations and derivatives, SLM had a loss of $139 million, or 36 cents a share, from year-earlier earnings of $326 million or 74 cents a share. Sallie Mae last month had forecast earnings, excluding costs related to its collapsed buyout, of 52 cents to 57 cents a share. "While there were some bright spots, we are obviously disappointed by our fourth-quarter results overall," said Chief Executive Albert Lord. "Our cost of funds and loan loss expectations were impacted by weakening credit markets." The provision for loan losses increased more than sixfold to $574.2 million.
For the period ended Dec. 31, EBAY earned $530.9 million, or 39 cents a share, compared with earnings of $346.5 million or 25 cents a share for the same quarter the previous year. Excluding charges related to stock-option expenses and other items, the company said that it earned $611 million, or 45 cents a share, for the fourth quarter. Revenue grew nearly 27% to $2.18 billion. Analysts had been expecting revenue of $2.14 billion for the quarter. However, EBay Inc warned that 2008 results would fall below Wall Street expectations, sending its shares more than 5 percent lower.
The Dow Jones Industrial Average climbed 299 points to 12,270.2. The S&P 500 rose 28.10 points to 1,338.60, while the Nasdaq Composite gained 24.14 points to 2,316.41.
Crude oil for March delivery closed down $2.22, or 2.5%, at $86.99 a barrel on the New York Mercantile Exchange.
ConocoPhillips CEO Jim Mulva said he doesn't plan any major mergers or acquisitions by the oil giant in 2008 or 2009.
Japanese Proverb: “The reverse side also has a reverse side.”
Tuesday, January 22, 2008
Remain Calm In The Eye of The Storm
1/23/08 Remain Calm In The Eye of The Storm
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 3.5 percent. "The committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."
European Central Bank governing council member Vitor Constancio said Tuesday that the recent sell-off in equity markets wouldn't necessarily change ECB policy. "Monetary policy doesn't react to the stock market, but of course we assess what's going on in the real economy," he told Dow Jones Newswires on the sidelines of a conference. Some European share markets posted their heaviest losses since Sept. 11, 2001 on Monday amid growing worries about the strength of the U.S. economy.
About $490bn was wiped off the market value of Europe's FTSE Eurofirst 300 index and $148bn from the FTSE 100 index in London, which suffered its biggest points slide since it was formed in 1983. Germany's Xetra Dax slumped 7.2 per cent to 6,790.19 and France's CAC-40 fell 6.8 per cent to 4,744.45, its worst one-day percentage point fall since September 11 2001.
Hong Kong plunged 8.7% and Japan dropped 5.7%.
Chinese stocks plunged Tuesday, with the benchmark Shanghai Composite Index falling 7.2 percent to its lowest close since early August amid the second straight day of global declines.
Nouriel Roubini: "The Monday Massacre in global stock markets is – more than a case of financial contagion – a revenge of economic fundamentals as investors are waking up from the delusion that the US would avoid a hard landing and that the rest of the world could decouple from such hard landing. A reality check is now occurring after stock markets remained for too long in the delusional triple dream of a US soft landing, of a Fed being able to ease and avoid the hard landing, and of a world miraculously decoupling from the US hard landing. As predicted here at the beginning of the year 2008 will be ugly bearish for US and global equity markets."
Target Corp. sees January sales coming in at the low end of its previous expectations. Its updated forecast was based on Target's actual sales for the first two weeks of January and its prediction for the remainder of the month. Target had expected January same-store sales to come in within a range of a 1% decline and a 1% increase.
Bank of America Q4 EPS 5 cents vs $1.16 with $5.4 billion in trading losses.
National bank Wachovia Corp. said Tuesday its fourth-quarter earnings tumbled 98 percent due to a $1.7 billion reduction in the value of certain portfolios and $1.5 billion set aside to cover bad loans. Fourth-quarter net income fell to $51 million, or 3 cents per share, from $2.3 billion, or $1.20 per share, during the same period the previous year.
BJ Services: "During the second quarter of fiscal 2008, we expect relatively flat drilling activity with continued pricing pressures in the U.S. market. We expect improved results in Canada as we enter the winter drilling season, and we also anticipate increased revenue and improved margins in the International Pressure Pumping segment. Our Oilfield Services group is projected to be up slightly in the second quarter as we expect revenue growth from Completion Tools and Completion Fluids will be partially offset by continued seasonal decline in our Process and Pipeline Services business. We are projecting earnings per share for the second fiscal quarter to be in the range of $0.55 to $0.57." BJ's North American operations experienced a flat rig count, harsh weather and lower pricing during the first quarter, though its revenue improved.
Buffets Holdings said it's filed for Chapter 11 bankruptcy protection. All 626 restaurants are open for business.
Fifth Third Bancorp reported fourth-quarter net income of $38 million, or 7 cents a share, down from $66 million, or 12 cents, earned in the final three months of 2006. On an operating basis, the Cincinnati-based holding company said, quarterly earnings would have been $260 million, or 49 cents a share, down from $357 million, or 64 cents a share, in the year-earlier period. "The credit environment remains challenging, and we expect credit conditions and the performance of our loan portfolio to continue to deteriorate in the near term." In particular, higher loss reserves on loans and leases -- $284 million in the latest quarter, up 166% from a year earlier -- are to be expected in the short run, the CEO said.
March-dated light sweet crude futures fell $3.24 to $86.68 a barrel. Metals futures also were under heavy pressure, with the February gold contract losing $14.80 to $866.90 an ounce.
UnitedHealth Group said that it continues to expect 2008 earnings in a range of $3.95 to $4.00 a share. First quarter 2008 earnings are seen in a range of 82 cents to 84 cents a share.
DuPont expects 2008 earnings between $3.35 and $3.55 a share and first-quarter earnings of $1.12 to $1.17 a share. Analysts expected 2008 earnings of $3.43 a share and first-quarter earnings of $1.15.
The Bank of Japan voted unanimously to keep interest rates on hold at Tuesday, marking the second straight meeting the nine-member board has voted in one voice on the motion. The policy board opted to keep the unsecured overnight loan rate unchanged at 0.5%.
India's Sensitive Index tumbled 11.5% within the first two minutes of trading on Tuesday, forcing a trade halt for an hour. The index stumbled 2,029.05 points to 15,576.30, after slumping 7.4% in the previous session.
According to the WSJ, EBay CEO Meg Whitman is preparing to retire, and John Donahoe, president of eBay's auction business unit, has emerged as the leading candidate to succeed her.
According to the WSJ, Bank of China Ltd. appears increasingly likely to report a large write-down on its investments in U.S. mortgage securities, illustrating the broadening reach of the global financial downturn -- and how one of China's biggest lenders was less astute at avoiding the problem than it initially thought. Analysts estimate that the state-owned lender, traditionally the most international of the country's big banks, may have to write off a quarter of the nearly $8 billion it holds in securities backed by subprime mortgages.
We can count sub-prime mortgages and other pieces of over-valued paper as one of our country's exports during the past 24 months.
Roche raised its bid from $75 to $89.50 a share, valuing Arizona-based Ventana Medical Systems at $3.4bn, or $400m more than its repeatedly spurned initial offer.
Eaton's net income in the fourth quarter rose 6 percent $256 million, or $1.71 a share, from $241 million, or $1.59 a share, a year earlier.
Serbia said Tuesday it had agreed to a multibillion dollar gas pipeline project as part of an energy deal with Russia that would boost Moscow's control over supplies to Europe. A majority stake of the Serbian oil monopoly NIS will be sold to Russian energy company Gazprom. Russia would route part of the gas pipeline through Serbia, as part of the deal announced in a short statement by the Serbian government. Financial terms were not revealed.
According to the Chicago Tribune, the option-ARM trouble stems from the loose lending practices that inundated the subprime business. Loans often were granted on the basis of stated income, not proof of a borrower's income, giving rise to their nickname, "liar's loans." "This is not a subprime crisis. This is a stated-income crisis," said Robert Simpson, chief executive of Investors Mortgage Asset Recovery Co. in Irvine, Calif., which works with lenders, insurers and investors to recover losses related to mortgage fraud.
Microsoft said Monday it plans to acquire Calista Technologies Inc., a San Jose, Calif.-based startup founded in 2006. Calista's technology makes logging on to a virtual desktop feel more like working on a physical Windows computer, Microsoft said. No financial details of the agreement were disclosed. Microsoft is changing how it prices and licenses its software to encourage virtualization; rolling out new tools for managing virtualization in different situations; and broadening its partnerships with other companies in the area.
Brett Steenbarger: "We're on pace this morning to be down over 10% on a five-day basis in the S&P 500 Index. I went all the way back to 1960 (N = 12,074 trading days) and examined what happened after historic five-day drops in $SPX. To give an idea of how rare it is for stocks to drop more than 10% in a five-day period, we've only had 11 such instances since 1960. Five of the greatest five-day declines were registered on October 19, 20, 21, 22, and 23 of 1987. Two of the instances occurred on July 22 and 23 of 2002. So, really, we've only had six periods of negative five-day returns exceeding 10%:
October, 1987
May, 1962
August, 1998
September, 2001
July, 2002
April, 2000
On 10 of those 11 occasions, the S&P 500 Index was higher 10 days later by a very large average of 5.62%. When I loosened the criteria and looked at all five-day drops in the average of over 6% (N = 83), we find that, ten days later, the market was up by an average of 2.8% (53 up, 30 down). By contrast, the average 10-day gain over the rest of the period was .29% (6870 up, 5121 down).
To be sure, a weak market can get weaker: Of the 83 occasions in which we had five-day drops of 6% or more, 14 drew down another 3% or more over the next five trading days. Five of those instances were drops of over 5%. By contrast, however, 40 of the 83 occasions were up over 3% over the next five trading days.
The takeaway is that periods of great short-term crisis have, on average, been periods of opportunity. If you look at those occasions of 10+% declines, all have occurred at times in which it would have paid handsomely to be a buyer for the long-term. That doesn't mean that there can't be further turbulence ahead, but--as a rule--selling into panic has lost investors money."
Qatar’s oil minister said there is no need for OPEC to raise output when it meets Feb.1 in Vienna.
Pemex awarded Halliburton Co. a three-year, U.S. $683 million contract for drilling management and completion of 58 land wells in southern Mexico.
The International Swaps and Derivatives Association said global losses on credit-default swaps will be nearer $15 billion than the $250 billion forecast by Pacific Investment Management Co.'s Bill Gross.
According to Bloomberg, President George W. Bush is poised to leave the federal government in worse financial shape than he found it, making it harder for whoever succeeds him to deliver on the promises of this year's election campaign. Bush may end his eight years in office with a larger-than- forecast budget deficit approaching 2004's record $413 billion, as an increasingly likely recession slashes tax receipts and raises spending. He'll also leave behind a host of thorny, longer-term problems -- from the expiration of his big tax cuts in 2010 to spiraling spending on senior citizens -- that will dog his successor's budgets for years.
In sum, in my view, Bush's presidency has undermined the well-being of all Americans.
OAO Gazprom, Russia's state- controlled natural-gas export monopoly, pumped 548.5 billion cubic meters of gas in 2007, 1.3 percent less than the previous year, as milder weather reduced demand for the fuel. Gazprom produced 556 billion cubic meters of gas in 2006, the Moscow-based company said in an e-mailed statement today. It raised reserves by more than 585 billion cubic meters, according to preliminary data.
Troubled bond insurer Ambac Financial said Tuesday its fourth quarter results swung to a loss of $3.26 billion, or $31.85 a share as the firm wrote off $5.2 billion of credit derivative exposures. The company earned $202.7 million or $1.88 a share a year ago.
John Hussman: "It's instructive that the total return of the S&P 500 over the past 4 years has now averaged just 5.7% annually, despite the fact that the recent decline is still well short of a minimal bear market. The return on the S&P is close enough to the return on risk-free Treasury bills that our hedging over this entire period has cost us close to nothing. Equally instructive is that the S&P 500 has now lagged Treasury bills since April 1998. Valuations do indeed drive long-term market returns. The recent bull market began at the highest valuations of any prior bull market in history. It has predictably achieved below-average overall returns, and the cycle isn't even over yet. Though every market cycle is different, an “average” bull market represents a span of about 3.75 years, with total returns averaging about 27% annually, followed by a bear market of about 1.25 years, with total returns averaging about -27% annually. That means that, on average, a typical bear market loss of just over 30% has shaved a typical bull market gain of 145% down to a cumulative return of about 65% (for a full cycle of about 5 years and overall annual total returns of about 10.6%)."
Wal-Mart Stores, Inc. announced today that the number of associates who now have health care coverage through its new associate-tailored plans for 2008 or another source has significantly increased from 90.4 percent to 92.7 percent, and the number of uninsured associates decreased by more than 20 percent, compared to one year ago.
Palatin Technologies, Inc.announced today that it entered into an agreement to settle all outstanding litigation and disputes with Competitive Technologies, Inc. related to a license agreement between the companies. Under the terms of the settlement, Palatin retains all rights to bremelanotide, its peptide in clinical development for male erectile dysfunction and female sexual dysfunction, with no obligations for any future payments to Competitive Technologies. Both the pending arbitration initiated by Competitive Technologies and the action in Connecticut Superior Court will be dismissed with prejudice. The existing license agreement between Palatin and Competitive Technologies has been terminated, with Competitive Technologies receiving all rights to a peptide developed at the University of Arizona and called MT-II or PT-14, which Palatin ceased developing in 2000. As part of the settlement, Palatin remitted a one-time payment to Competitive Technologies of $800,000.
J&J reported net income of $2.37 billion, or 82 cents per share, up from $2.17 billion, or 74 cents per share, a year earlier. Excluding one-time items, net income would have been 88 cents per share. Revenues totaled $15.96 billion, up 16.6 percent from $13.7 billion in the year-ago quarter.
"Flooding the market with liquidity is a disaster for the purchasing power of the dollar," says David Gitlitz, chief economist for Trend Macrolytics.
George Ure: "Collapse of Fractional Reserve Banking: I must be reading the Federal Reserve's H.3 "Aggregate Reserve of Depository Institutions and the Monetary Base" all wrong. If you scroll down to Table 2 and look at the not-seasonally adjusted figures for the "Reserves of depository institutions" you will see three columns on the left. Total (Reserves) "nonborrowed (reserves) and "required" (reserves). The shocker is that the preliminary January 16th number showed that the required reserve of banks was $39,989 million dollars. This means how much money the banks claim to have on hand as their portion of the 'fractional reserve' banking system is (ballpark) $40 billion.
OK, the third column says the amount of reserves they are required to have by the Federal Reserve is only $38,278 million. (*$32.3 billion, ballpark).
OK, I've saved the scariest for last: Column #2. It says the amount of nonborrowed money (*money that the banksters didn't have to borrow to meet their reserve requirements was negative. In other words, if I am reading this right, the whole fractional reserve banking system's reserves required is being held afloat strictly by borrowed money at this point!...As much as I regret writing this, we may end up with runs on financial and so-called 'investment' houses over the coming few weeks and months."
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
Sean Owen: "The U.S. economy is starting to show its soft underbelly, and the steps the Fed is taking to mitigate the problem will only serve to exacerbate its true source - overindulgence in cheap liquidity. So whichever way the wind blows, the best strategy will be the same - the same as it has been for some time now. Hold assets with real intrinsic value that is not linked to the value of any particular currency. There are plenty to choose from - infrastructure, precious metals, and commodities, just to name a few, but my personal favorite is also the most renewable - Timber."
Ignoring the fact that Blackstone has a deal to buy Alliance Data, one should note the company will earn $3.75 a share for 2007 and more in 2008. The Feb. 30 puts are selling for 45 cents and the Feb 35 puts are selling for $1. I sold both at those prices today. I like the risk/reward.
Apple Inc. on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company's shares tumbled in after-hours trading as the consumer-electronics maker gave an earnings outlook that fell short of Wall Street analysts' forecasts. Apple expects to earn 94 cents a share on $6.8 billion in sales for its second quarter. The forecast fell below analysts' consensus estimates for earnings of $1.09 a share on revenue of $6.99 billion. The outlook helped send Apple's shares down more than $17 a share, or 11%, to $138.49 in after-hours trading.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
"Despite the difficulties in the market, I don't expect you'll see banks defaulting on legally binding commitments and I expect most of these deals will close," said Gregory Gooding, a partner at law firm Debevoise & Plimpton LLP.
"There may be circumstances where buyers have terms on the contracts allowing them to get out of deals and I wouldn't be surprised if there are a couple more deals where those are taken advantage (of)," Gooding said. "But I expect that to be rare and it's a case-by-case analysis."
Benjamin Franklin: “If you can't pay for a thing, don't buy it. If you can't get paid for it, don't sell it. Do this, and you will have calm and drowsy nights, with all of the good business you have now and none of the bad. If you have time, don't wait for time.”
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 3.5 percent. "The committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."
European Central Bank governing council member Vitor Constancio said Tuesday that the recent sell-off in equity markets wouldn't necessarily change ECB policy. "Monetary policy doesn't react to the stock market, but of course we assess what's going on in the real economy," he told Dow Jones Newswires on the sidelines of a conference. Some European share markets posted their heaviest losses since Sept. 11, 2001 on Monday amid growing worries about the strength of the U.S. economy.
About $490bn was wiped off the market value of Europe's FTSE Eurofirst 300 index and $148bn from the FTSE 100 index in London, which suffered its biggest points slide since it was formed in 1983. Germany's Xetra Dax slumped 7.2 per cent to 6,790.19 and France's CAC-40 fell 6.8 per cent to 4,744.45, its worst one-day percentage point fall since September 11 2001.
Hong Kong plunged 8.7% and Japan dropped 5.7%.
Chinese stocks plunged Tuesday, with the benchmark Shanghai Composite Index falling 7.2 percent to its lowest close since early August amid the second straight day of global declines.
Nouriel Roubini: "The Monday Massacre in global stock markets is – more than a case of financial contagion – a revenge of economic fundamentals as investors are waking up from the delusion that the US would avoid a hard landing and that the rest of the world could decouple from such hard landing. A reality check is now occurring after stock markets remained for too long in the delusional triple dream of a US soft landing, of a Fed being able to ease and avoid the hard landing, and of a world miraculously decoupling from the US hard landing. As predicted here at the beginning of the year 2008 will be ugly bearish for US and global equity markets."
Target Corp. sees January sales coming in at the low end of its previous expectations. Its updated forecast was based on Target's actual sales for the first two weeks of January and its prediction for the remainder of the month. Target had expected January same-store sales to come in within a range of a 1% decline and a 1% increase.
Bank of America Q4 EPS 5 cents vs $1.16 with $5.4 billion in trading losses.
National bank Wachovia Corp. said Tuesday its fourth-quarter earnings tumbled 98 percent due to a $1.7 billion reduction in the value of certain portfolios and $1.5 billion set aside to cover bad loans. Fourth-quarter net income fell to $51 million, or 3 cents per share, from $2.3 billion, or $1.20 per share, during the same period the previous year.
BJ Services: "During the second quarter of fiscal 2008, we expect relatively flat drilling activity with continued pricing pressures in the U.S. market. We expect improved results in Canada as we enter the winter drilling season, and we also anticipate increased revenue and improved margins in the International Pressure Pumping segment. Our Oilfield Services group is projected to be up slightly in the second quarter as we expect revenue growth from Completion Tools and Completion Fluids will be partially offset by continued seasonal decline in our Process and Pipeline Services business. We are projecting earnings per share for the second fiscal quarter to be in the range of $0.55 to $0.57." BJ's North American operations experienced a flat rig count, harsh weather and lower pricing during the first quarter, though its revenue improved.
Buffets Holdings said it's filed for Chapter 11 bankruptcy protection. All 626 restaurants are open for business.
Fifth Third Bancorp reported fourth-quarter net income of $38 million, or 7 cents a share, down from $66 million, or 12 cents, earned in the final three months of 2006. On an operating basis, the Cincinnati-based holding company said, quarterly earnings would have been $260 million, or 49 cents a share, down from $357 million, or 64 cents a share, in the year-earlier period. "The credit environment remains challenging, and we expect credit conditions and the performance of our loan portfolio to continue to deteriorate in the near term." In particular, higher loss reserves on loans and leases -- $284 million in the latest quarter, up 166% from a year earlier -- are to be expected in the short run, the CEO said.
March-dated light sweet crude futures fell $3.24 to $86.68 a barrel. Metals futures also were under heavy pressure, with the February gold contract losing $14.80 to $866.90 an ounce.
UnitedHealth Group said that it continues to expect 2008 earnings in a range of $3.95 to $4.00 a share. First quarter 2008 earnings are seen in a range of 82 cents to 84 cents a share.
DuPont expects 2008 earnings between $3.35 and $3.55 a share and first-quarter earnings of $1.12 to $1.17 a share. Analysts expected 2008 earnings of $3.43 a share and first-quarter earnings of $1.15.
The Bank of Japan voted unanimously to keep interest rates on hold at Tuesday, marking the second straight meeting the nine-member board has voted in one voice on the motion. The policy board opted to keep the unsecured overnight loan rate unchanged at 0.5%.
India's Sensitive Index tumbled 11.5% within the first two minutes of trading on Tuesday, forcing a trade halt for an hour. The index stumbled 2,029.05 points to 15,576.30, after slumping 7.4% in the previous session.
According to the WSJ, EBay CEO Meg Whitman is preparing to retire, and John Donahoe, president of eBay's auction business unit, has emerged as the leading candidate to succeed her.
According to the WSJ, Bank of China Ltd. appears increasingly likely to report a large write-down on its investments in U.S. mortgage securities, illustrating the broadening reach of the global financial downturn -- and how one of China's biggest lenders was less astute at avoiding the problem than it initially thought. Analysts estimate that the state-owned lender, traditionally the most international of the country's big banks, may have to write off a quarter of the nearly $8 billion it holds in securities backed by subprime mortgages.
We can count sub-prime mortgages and other pieces of over-valued paper as one of our country's exports during the past 24 months.
Roche raised its bid from $75 to $89.50 a share, valuing Arizona-based Ventana Medical Systems at $3.4bn, or $400m more than its repeatedly spurned initial offer.
Eaton's net income in the fourth quarter rose 6 percent $256 million, or $1.71 a share, from $241 million, or $1.59 a share, a year earlier.
Serbia said Tuesday it had agreed to a multibillion dollar gas pipeline project as part of an energy deal with Russia that would boost Moscow's control over supplies to Europe. A majority stake of the Serbian oil monopoly NIS will be sold to Russian energy company Gazprom. Russia would route part of the gas pipeline through Serbia, as part of the deal announced in a short statement by the Serbian government. Financial terms were not revealed.
According to the Chicago Tribune, the option-ARM trouble stems from the loose lending practices that inundated the subprime business. Loans often were granted on the basis of stated income, not proof of a borrower's income, giving rise to their nickname, "liar's loans." "This is not a subprime crisis. This is a stated-income crisis," said Robert Simpson, chief executive of Investors Mortgage Asset Recovery Co. in Irvine, Calif., which works with lenders, insurers and investors to recover losses related to mortgage fraud.
Microsoft said Monday it plans to acquire Calista Technologies Inc., a San Jose, Calif.-based startup founded in 2006. Calista's technology makes logging on to a virtual desktop feel more like working on a physical Windows computer, Microsoft said. No financial details of the agreement were disclosed. Microsoft is changing how it prices and licenses its software to encourage virtualization; rolling out new tools for managing virtualization in different situations; and broadening its partnerships with other companies in the area.
Brett Steenbarger: "We're on pace this morning to be down over 10% on a five-day basis in the S&P 500 Index. I went all the way back to 1960 (N = 12,074 trading days) and examined what happened after historic five-day drops in $SPX. To give an idea of how rare it is for stocks to drop more than 10% in a five-day period, we've only had 11 such instances since 1960. Five of the greatest five-day declines were registered on October 19, 20, 21, 22, and 23 of 1987. Two of the instances occurred on July 22 and 23 of 2002. So, really, we've only had six periods of negative five-day returns exceeding 10%:
October, 1987
May, 1962
August, 1998
September, 2001
July, 2002
April, 2000
On 10 of those 11 occasions, the S&P 500 Index was higher 10 days later by a very large average of 5.62%. When I loosened the criteria and looked at all five-day drops in the average of over 6% (N = 83), we find that, ten days later, the market was up by an average of 2.8% (53 up, 30 down). By contrast, the average 10-day gain over the rest of the period was .29% (6870 up, 5121 down).
To be sure, a weak market can get weaker: Of the 83 occasions in which we had five-day drops of 6% or more, 14 drew down another 3% or more over the next five trading days. Five of those instances were drops of over 5%. By contrast, however, 40 of the 83 occasions were up over 3% over the next five trading days.
The takeaway is that periods of great short-term crisis have, on average, been periods of opportunity. If you look at those occasions of 10+% declines, all have occurred at times in which it would have paid handsomely to be a buyer for the long-term. That doesn't mean that there can't be further turbulence ahead, but--as a rule--selling into panic has lost investors money."
Qatar’s oil minister said there is no need for OPEC to raise output when it meets Feb.1 in Vienna.
Pemex awarded Halliburton Co. a three-year, U.S. $683 million contract for drilling management and completion of 58 land wells in southern Mexico.
The International Swaps and Derivatives Association said global losses on credit-default swaps will be nearer $15 billion than the $250 billion forecast by Pacific Investment Management Co.'s Bill Gross.
According to Bloomberg, President George W. Bush is poised to leave the federal government in worse financial shape than he found it, making it harder for whoever succeeds him to deliver on the promises of this year's election campaign. Bush may end his eight years in office with a larger-than- forecast budget deficit approaching 2004's record $413 billion, as an increasingly likely recession slashes tax receipts and raises spending. He'll also leave behind a host of thorny, longer-term problems -- from the expiration of his big tax cuts in 2010 to spiraling spending on senior citizens -- that will dog his successor's budgets for years.
In sum, in my view, Bush's presidency has undermined the well-being of all Americans.
OAO Gazprom, Russia's state- controlled natural-gas export monopoly, pumped 548.5 billion cubic meters of gas in 2007, 1.3 percent less than the previous year, as milder weather reduced demand for the fuel. Gazprom produced 556 billion cubic meters of gas in 2006, the Moscow-based company said in an e-mailed statement today. It raised reserves by more than 585 billion cubic meters, according to preliminary data.
Troubled bond insurer Ambac Financial said Tuesday its fourth quarter results swung to a loss of $3.26 billion, or $31.85 a share as the firm wrote off $5.2 billion of credit derivative exposures. The company earned $202.7 million or $1.88 a share a year ago.
John Hussman: "It's instructive that the total return of the S&P 500 over the past 4 years has now averaged just 5.7% annually, despite the fact that the recent decline is still well short of a minimal bear market. The return on the S&P is close enough to the return on risk-free Treasury bills that our hedging over this entire period has cost us close to nothing. Equally instructive is that the S&P 500 has now lagged Treasury bills since April 1998. Valuations do indeed drive long-term market returns. The recent bull market began at the highest valuations of any prior bull market in history. It has predictably achieved below-average overall returns, and the cycle isn't even over yet. Though every market cycle is different, an “average” bull market represents a span of about 3.75 years, with total returns averaging about 27% annually, followed by a bear market of about 1.25 years, with total returns averaging about -27% annually. That means that, on average, a typical bear market loss of just over 30% has shaved a typical bull market gain of 145% down to a cumulative return of about 65% (for a full cycle of about 5 years and overall annual total returns of about 10.6%)."
Wal-Mart Stores, Inc. announced today that the number of associates who now have health care coverage through its new associate-tailored plans for 2008 or another source has significantly increased from 90.4 percent to 92.7 percent, and the number of uninsured associates decreased by more than 20 percent, compared to one year ago.
Palatin Technologies, Inc.announced today that it entered into an agreement to settle all outstanding litigation and disputes with Competitive Technologies, Inc. related to a license agreement between the companies. Under the terms of the settlement, Palatin retains all rights to bremelanotide, its peptide in clinical development for male erectile dysfunction and female sexual dysfunction, with no obligations for any future payments to Competitive Technologies. Both the pending arbitration initiated by Competitive Technologies and the action in Connecticut Superior Court will be dismissed with prejudice. The existing license agreement between Palatin and Competitive Technologies has been terminated, with Competitive Technologies receiving all rights to a peptide developed at the University of Arizona and called MT-II or PT-14, which Palatin ceased developing in 2000. As part of the settlement, Palatin remitted a one-time payment to Competitive Technologies of $800,000.
J&J reported net income of $2.37 billion, or 82 cents per share, up from $2.17 billion, or 74 cents per share, a year earlier. Excluding one-time items, net income would have been 88 cents per share. Revenues totaled $15.96 billion, up 16.6 percent from $13.7 billion in the year-ago quarter.
"Flooding the market with liquidity is a disaster for the purchasing power of the dollar," says David Gitlitz, chief economist for Trend Macrolytics.
George Ure: "Collapse of Fractional Reserve Banking: I must be reading the Federal Reserve's H.3 "Aggregate Reserve of Depository Institutions and the Monetary Base" all wrong. If you scroll down to Table 2 and look at the not-seasonally adjusted figures for the "Reserves of depository institutions" you will see three columns on the left. Total (Reserves) "nonborrowed (reserves) and "required" (reserves). The shocker is that the preliminary January 16th number showed that the required reserve of banks was $39,989 million dollars. This means how much money the banks claim to have on hand as their portion of the 'fractional reserve' banking system is (ballpark) $40 billion.
OK, the third column says the amount of reserves they are required to have by the Federal Reserve is only $38,278 million. (*$32.3 billion, ballpark).
OK, I've saved the scariest for last: Column #2. It says the amount of nonborrowed money (*money that the banksters didn't have to borrow to meet their reserve requirements was negative. In other words, if I am reading this right, the whole fractional reserve banking system's reserves required is being held afloat strictly by borrowed money at this point!...As much as I regret writing this, we may end up with runs on financial and so-called 'investment' houses over the coming few weeks and months."
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
Sean Owen: "The U.S. economy is starting to show its soft underbelly, and the steps the Fed is taking to mitigate the problem will only serve to exacerbate its true source - overindulgence in cheap liquidity. So whichever way the wind blows, the best strategy will be the same - the same as it has been for some time now. Hold assets with real intrinsic value that is not linked to the value of any particular currency. There are plenty to choose from - infrastructure, precious metals, and commodities, just to name a few, but my personal favorite is also the most renewable - Timber."
Ignoring the fact that Blackstone has a deal to buy Alliance Data, one should note the company will earn $3.75 a share for 2007 and more in 2008. The Feb. 30 puts are selling for 45 cents and the Feb 35 puts are selling for $1. I sold both at those prices today. I like the risk/reward.
Apple Inc. on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company's shares tumbled in after-hours trading as the consumer-electronics maker gave an earnings outlook that fell short of Wall Street analysts' forecasts. Apple expects to earn 94 cents a share on $6.8 billion in sales for its second quarter. The forecast fell below analysts' consensus estimates for earnings of $1.09 a share on revenue of $6.99 billion. The outlook helped send Apple's shares down more than $17 a share, or 11%, to $138.49 in after-hours trading.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
"Despite the difficulties in the market, I don't expect you'll see banks defaulting on legally binding commitments and I expect most of these deals will close," said Gregory Gooding, a partner at law firm Debevoise & Plimpton LLP.
"There may be circumstances where buyers have terms on the contracts allowing them to get out of deals and I wouldn't be surprised if there are a couple more deals where those are taken advantage (of)," Gooding said. "But I expect that to be rare and it's a case-by-case analysis."
Benjamin Franklin: “If you can't pay for a thing, don't buy it. If you can't get paid for it, don't sell it. Do this, and you will have calm and drowsy nights, with all of the good business you have now and none of the bad. If you have time, don't wait for time.”
Remain Calm In The Eye of The Storm
1/23/08 Remain Calm In The Eye of The Storm
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 3.5 percent. "The committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."
European Central Bank governing council member Vitor Constancio said Tuesday that the recent sell-off in equity markets wouldn't necessarily change ECB policy. "Monetary policy doesn't react to the stock market, but of course we assess what's going on in the real economy," he told Dow Jones Newswires on the sidelines of a conference. Some European share markets posted their heaviest losses since Sept. 11, 2001 on Monday amid growing worries about the strength of the U.S. economy.
About $490bn was wiped off the market value of Europe's FTSE Eurofirst 300 index and $148bn from the FTSE 100 index in London, which suffered its biggest points slide since it was formed in 1983. Germany's Xetra Dax slumped 7.2 per cent to 6,790.19 and France's CAC-40 fell 6.8 per cent to 4,744.45, its worst one-day percentage point fall since September 11 2001.
Hong Kong plunged 8.7% and Japan dropped 5.7%.
Chinese stocks plunged Tuesday, with the benchmark Shanghai Composite Index falling 7.2 percent to its lowest close since early August amid the second straight day of global declines.
Nouriel Roubini: "The Monday Massacre in global stock markets is – more than a case of financial contagion – a revenge of economic fundamentals as investors are waking up from the delusion that the US would avoid a hard landing and that the rest of the world could decouple from such hard landing. A reality check is now occurring after stock markets remained for too long in the delusional triple dream of a US soft landing, of a Fed being able to ease and avoid the hard landing, and of a world miraculously decoupling from the US hard landing. As predicted here at the beginning of the year 2008 will be ugly bearish for US and global equity markets."
Target Corp. sees January sales coming in at the low end of its previous expectations. Its updated forecast was based on Target's actual sales for the first two weeks of January and its prediction for the remainder of the month. Target had expected January same-store sales to come in within a range of a 1% decline and a 1% increase.
Bank of America Q4 EPS 5 cents vs $1.16 with $5.4 billion in trading losses.
National bank Wachovia Corp. said Tuesday its fourth-quarter earnings tumbled 98 percent due to a $1.7 billion reduction in the value of certain portfolios and $1.5 billion set aside to cover bad loans. Fourth-quarter net income fell to $51 million, or 3 cents per share, from $2.3 billion, or $1.20 per share, during the same period the previous year.
BJ Services: "During the second quarter of fiscal 2008, we expect relatively flat drilling activity with continued pricing pressures in the U.S. market. We expect improved results in Canada as we enter the winter drilling season, and we also anticipate increased revenue and improved margins in the International Pressure Pumping segment. Our Oilfield Services group is projected to be up slightly in the second quarter as we expect revenue growth from Completion Tools and Completion Fluids will be partially offset by continued seasonal decline in our Process and Pipeline Services business. We are projecting earnings per share for the second fiscal quarter to be in the range of $0.55 to $0.57." BJ's North American operations experienced a flat rig count, harsh weather and lower pricing during the first quarter, though its revenue improved.
Buffets Holdings said it's filed for Chapter 11 bankruptcy protection. All 626 restaurants are open for business.
Fifth Third Bancorp reported fourth-quarter net income of $38 million, or 7 cents a share, down from $66 million, or 12 cents, earned in the final three months of 2006. On an operating basis, the Cincinnati-based holding company said, quarterly earnings would have been $260 million, or 49 cents a share, down from $357 million, or 64 cents a share, in the year-earlier period. "The credit environment remains challenging, and we expect credit conditions and the performance of our loan portfolio to continue to deteriorate in the near term." In particular, higher loss reserves on loans and leases -- $284 million in the latest quarter, up 166% from a year earlier -- are to be expected in the short run, the CEO said.
March-dated light sweet crude futures fell $3.24 to $86.68 a barrel. Metals futures also were under heavy pressure, with the February gold contract losing $14.80 to $866.90 an ounce.
UnitedHealth Group said that it continues to expect 2008 earnings in a range of $3.95 to $4.00 a share. First quarter 2008 earnings are seen in a range of 82 cents to 84 cents a share.
DuPont expects 2008 earnings between $3.35 and $3.55 a share and first-quarter earnings of $1.12 to $1.17 a share. Analysts expected 2008 earnings of $3.43 a share and first-quarter earnings of $1.15.
The Bank of Japan voted unanimously to keep interest rates on hold at Tuesday, marking the second straight meeting the nine-member board has voted in one voice on the motion. The policy board opted to keep the unsecured overnight loan rate unchanged at 0.5%.
India's Sensitive Index tumbled 11.5% within the first two minutes of trading on Tuesday, forcing a trade halt for an hour. The index stumbled 2,029.05 points to 15,576.30, after slumping 7.4% in the previous session.
According to the WSJ, EBay CEO Meg Whitman is preparing to retire, and John Donahoe, president of eBay's auction business unit, has emerged as the leading candidate to succeed her.
According to the WSJ, Bank of China Ltd. appears increasingly likely to report a large write-down on its investments in U.S. mortgage securities, illustrating the broadening reach of the global financial downturn -- and how one of China's biggest lenders was less astute at avoiding the problem than it initially thought. Analysts estimate that the state-owned lender, traditionally the most international of the country's big banks, may have to write off a quarter of the nearly $8 billion it holds in securities backed by subprime mortgages.
We can count sub-prime mortgages and other pieces of over-valued paper as one of our country's exports during the past 24 months.
Roche raised its bid from $75 to $89.50 a share, valuing Arizona-based Ventana Medical Systems at $3.4bn, or $400m more than its repeatedly spurned initial offer.
Eaton's net income in the fourth quarter rose 6 percent $256 million, or $1.71 a share, from $241 million, or $1.59 a share, a year earlier.
Serbia said Tuesday it had agreed to a multibillion dollar gas pipeline project as part of an energy deal with Russia that would boost Moscow's control over supplies to Europe. A majority stake of the Serbian oil monopoly NIS will be sold to Russian energy company Gazprom. Russia would route part of the gas pipeline through Serbia, as part of the deal announced in a short statement by the Serbian government. Financial terms were not revealed.
According to the Chicago Tribune, the option-ARM trouble stems from the loose lending practices that inundated the subprime business. Loans often were granted on the basis of stated income, not proof of a borrower's income, giving rise to their nickname, "liar's loans." "This is not a subprime crisis. This is a stated-income crisis," said Robert Simpson, chief executive of Investors Mortgage Asset Recovery Co. in Irvine, Calif., which works with lenders, insurers and investors to recover losses related to mortgage fraud.
Microsoft said Monday it plans to acquire Calista Technologies Inc., a San Jose, Calif.-based startup founded in 2006. Calista's technology makes logging on to a virtual desktop feel more like working on a physical Windows computer, Microsoft said. No financial details of the agreement were disclosed. Microsoft is changing how it prices and licenses its software to encourage virtualization; rolling out new tools for managing virtualization in different situations; and broadening its partnerships with other companies in the area.
Brett Steenbarger: "We're on pace this morning to be down over 10% on a five-day basis in the S&P 500 Index. I went all the way back to 1960 (N = 12,074 trading days) and examined what happened after historic five-day drops in $SPX. To give an idea of how rare it is for stocks to drop more than 10% in a five-day period, we've only had 11 such instances since 1960. Five of the greatest five-day declines were registered on October 19, 20, 21, 22, and 23 of 1987. Two of the instances occurred on July 22 and 23 of 2002. So, really, we've only had six periods of negative five-day returns exceeding 10%:
October, 1987
May, 1962
August, 1998
September, 2001
July, 2002
April, 2000
On 10 of those 11 occasions, the S&P 500 Index was higher 10 days later by a very large average of 5.62%. When I loosened the criteria and looked at all five-day drops in the average of over 6% (N = 83), we find that, ten days later, the market was up by an average of 2.8% (53 up, 30 down). By contrast, the average 10-day gain over the rest of the period was .29% (6870 up, 5121 down).
To be sure, a weak market can get weaker: Of the 83 occasions in which we had five-day drops of 6% or more, 14 drew down another 3% or more over the next five trading days. Five of those instances were drops of over 5%. By contrast, however, 40 of the 83 occasions were up over 3% over the next five trading days.
The takeaway is that periods of great short-term crisis have, on average, been periods of opportunity. If you look at those occasions of 10+% declines, all have occurred at times in which it would have paid handsomely to be a buyer for the long-term. That doesn't mean that there can't be further turbulence ahead, but--as a rule--selling into panic has lost investors money."
Qatar’s oil minister said there is no need for OPEC to raise output when it meets Feb.1 in Vienna.
Pemex awarded Halliburton Co. a three-year, U.S. $683 million contract for drilling management and completion of 58 land wells in southern Mexico.
The International Swaps and Derivatives Association said global losses on credit-default swaps will be nearer $15 billion than the $250 billion forecast by Pacific Investment Management Co.'s Bill Gross.
According to Bloomberg, President George W. Bush is poised to leave the federal government in worse financial shape than he found it, making it harder for whoever succeeds him to deliver on the promises of this year's election campaign. Bush may end his eight years in office with a larger-than- forecast budget deficit approaching 2004's record $413 billion, as an increasingly likely recession slashes tax receipts and raises spending. He'll also leave behind a host of thorny, longer-term problems -- from the expiration of his big tax cuts in 2010 to spiraling spending on senior citizens -- that will dog his successor's budgets for years.
In sum, in my view, Bush's presidency has undermined the well-being of all Americans.
OAO Gazprom, Russia's state- controlled natural-gas export monopoly, pumped 548.5 billion cubic meters of gas in 2007, 1.3 percent less than the previous year, as milder weather reduced demand for the fuel. Gazprom produced 556 billion cubic meters of gas in 2006, the Moscow-based company said in an e-mailed statement today. It raised reserves by more than 585 billion cubic meters, according to preliminary data.
Troubled bond insurer Ambac Financial said Tuesday its fourth quarter results swung to a loss of $3.26 billion, or $31.85 a share as the firm wrote off $5.2 billion of credit derivative exposures. The company earned $202.7 million or $1.88 a share a year ago.
John Hussman: "It's instructive that the total return of the S&P 500 over the past 4 years has now averaged just 5.7% annually, despite the fact that the recent decline is still well short of a minimal bear market. The return on the S&P is close enough to the return on risk-free Treasury bills that our hedging over this entire period has cost us close to nothing. Equally instructive is that the S&P 500 has now lagged Treasury bills since April 1998. Valuations do indeed drive long-term market returns. The recent bull market began at the highest valuations of any prior bull market in history. It has predictably achieved below-average overall returns, and the cycle isn't even over yet. Though every market cycle is different, an “average” bull market represents a span of about 3.75 years, with total returns averaging about 27% annually, followed by a bear market of about 1.25 years, with total returns averaging about -27% annually. That means that, on average, a typical bear market loss of just over 30% has shaved a typical bull market gain of 145% down to a cumulative return of about 65% (for a full cycle of about 5 years and overall annual total returns of about 10.6%)."
Wal-Mart Stores, Inc. announced today that the number of associates who now have health care coverage through its new associate-tailored plans for 2008 or another source has significantly increased from 90.4 percent to 92.7 percent, and the number of uninsured associates decreased by more than 20 percent, compared to one year ago.
Palatin Technologies, Inc.announced today that it entered into an agreement to settle all outstanding litigation and disputes with Competitive Technologies, Inc. related to a license agreement between the companies. Under the terms of the settlement, Palatin retains all rights to bremelanotide, its peptide in clinical development for male erectile dysfunction and female sexual dysfunction, with no obligations for any future payments to Competitive Technologies. Both the pending arbitration initiated by Competitive Technologies and the action in Connecticut Superior Court will be dismissed with prejudice. The existing license agreement between Palatin and Competitive Technologies has been terminated, with Competitive Technologies receiving all rights to a peptide developed at the University of Arizona and called MT-II or PT-14, which Palatin ceased developing in 2000. As part of the settlement, Palatin remitted a one-time payment to Competitive Technologies of $800,000.
J&J reported net income of $2.37 billion, or 82 cents per share, up from $2.17 billion, or 74 cents per share, a year earlier. Excluding one-time items, net income would have been 88 cents per share. Revenues totaled $15.96 billion, up 16.6 percent from $13.7 billion in the year-ago quarter.
"Flooding the market with liquidity is a disaster for the purchasing power of the dollar," says David Gitlitz, chief economist for Trend Macrolytics.
George Ure: "Collapse of Fractional Reserve Banking: I must be reading the Federal Reserve's H.3 "Aggregate Reserve of Depository Institutions and the Monetary Base" all wrong. If you scroll down to Table 2 and look at the not-seasonally adjusted figures for the "Reserves of depository institutions" you will see three columns on the left. Total (Reserves) "nonborrowed (reserves) and "required" (reserves). The shocker is that the preliminary January 16th number showed that the required reserve of banks was $39,989 million dollars. This means how much money the banks claim to have on hand as their portion of the 'fractional reserve' banking system is (ballpark) $40 billion.
OK, the third column says the amount of reserves they are required to have by the Federal Reserve is only $38,278 million. (*$32.3 billion, ballpark).
OK, I've saved the scariest for last: Column #2. It says the amount of nonborrowed money (*money that the banksters didn't have to borrow to meet their reserve requirements was negative. In other words, if I am reading this right, the whole fractional reserve banking system's reserves required is being held afloat strictly by borrowed money at this point!...As much as I regret writing this, we may end up with runs on financial and so-called 'investment' houses over the coming few weeks and months."
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
Sean Owen: "The U.S. economy is starting to show its soft underbelly, and the steps the Fed is taking to mitigate the problem will only serve to exacerbate its true source - overindulgence in cheap liquidity. So whichever way the wind blows, the best strategy will be the same - the same as it has been for some time now. Hold assets with real intrinsic value that is not linked to the value of any particular currency. There are plenty to choose from - infrastructure, precious metals, and commodities, just to name a few, but my personal favorite is also the most renewable - Timber."
Ignoring the fact that Blackstone has a deal to buy Alliance Data, one should note the company will earn $3.75 a share for 2007 and more in 2008. The Feb. 30 puts are selling for 45 cents and the Feb 35 puts are selling for $1. I sold both at those prices today. I like the risk/reward.
Apple Inc. on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company's shares tumbled in after-hours trading as the consumer-electronics maker gave an earnings outlook that fell short of Wall Street analysts' forecasts. Apple expects to earn 94 cents a share on $6.8 billion in sales for its second quarter. The forecast fell below analysts' consensus estimates for earnings of $1.09 a share on revenue of $6.99 billion. The outlook helped send Apple's shares down more than $17 a share, or 11%, to $138.49 in after-hours trading.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
Sean Owen: "The U.S. economy is starting to show its soft underbelly, and the steps the Fed is taking to mitigate the problem will only serve to exacerbate its true source - overindulgence in cheap liquidity. So whichever way the wind blows, the best strategy will be the same - the same as it has been for some time now. Hold assets with real intrinsic value that is not linked to the value of any particular currency. There are plenty to choose from - infrastructure, precious metals, and commodities, just to name a few, but my personal favorite is also the most renewable - Timber."
Ignoring the fact that Blackstone has a deal to buy Alliance Data, one should note the company will earn $3.75 a share for 2007 and more in 2008. The Feb. 30 puts are selling for 45 cents and the Feb 35 puts are selling for $1. I sold both at those prices today. I like the risk/reward.
Apple Inc. on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company's shares tumbled in after-hours trading as the consumer-electronics maker gave an earnings outlook that fell short of Wall Street analysts' forecasts. Apple expects to earn 94 cents a share on $6.8 billion in sales for its second quarter. The forecast fell below analysts' consensus estimates for earnings of $1.09 a share on revenue of $6.99 billion. The outlook helped send Apple's shares down more than $17 a share, or 11%, to $138.49 in after-hours trading.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
"Despite the difficulties in the market, I don't expect you'll see banks defaulting on legally binding commitments and I expect most of these deals will close," said Gregory Gooding, a partner at law firm Debevoise & Plimpton LLP.
"There may be circumstances where buyers have terms on the contracts allowing them to get out of deals and I wouldn't be surprised if there are a couple more deals where those are taken advantage (of)," Gooding said. "But I expect that to be rare and it's a case-by-case analysis."
Benjamin Franklin: “If you can't pay for a thing, don't buy it. If you can't get paid for it, don't sell it. Do this, and you will have calm and drowsy nights, with all of the good business you have now and none of the bad. If you have time, don't wait for time.”
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 3.5 percent. "The committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."
European Central Bank governing council member Vitor Constancio said Tuesday that the recent sell-off in equity markets wouldn't necessarily change ECB policy. "Monetary policy doesn't react to the stock market, but of course we assess what's going on in the real economy," he told Dow Jones Newswires on the sidelines of a conference. Some European share markets posted their heaviest losses since Sept. 11, 2001 on Monday amid growing worries about the strength of the U.S. economy.
About $490bn was wiped off the market value of Europe's FTSE Eurofirst 300 index and $148bn from the FTSE 100 index in London, which suffered its biggest points slide since it was formed in 1983. Germany's Xetra Dax slumped 7.2 per cent to 6,790.19 and France's CAC-40 fell 6.8 per cent to 4,744.45, its worst one-day percentage point fall since September 11 2001.
Hong Kong plunged 8.7% and Japan dropped 5.7%.
Chinese stocks plunged Tuesday, with the benchmark Shanghai Composite Index falling 7.2 percent to its lowest close since early August amid the second straight day of global declines.
Nouriel Roubini: "The Monday Massacre in global stock markets is – more than a case of financial contagion – a revenge of economic fundamentals as investors are waking up from the delusion that the US would avoid a hard landing and that the rest of the world could decouple from such hard landing. A reality check is now occurring after stock markets remained for too long in the delusional triple dream of a US soft landing, of a Fed being able to ease and avoid the hard landing, and of a world miraculously decoupling from the US hard landing. As predicted here at the beginning of the year 2008 will be ugly bearish for US and global equity markets."
Target Corp. sees January sales coming in at the low end of its previous expectations. Its updated forecast was based on Target's actual sales for the first two weeks of January and its prediction for the remainder of the month. Target had expected January same-store sales to come in within a range of a 1% decline and a 1% increase.
Bank of America Q4 EPS 5 cents vs $1.16 with $5.4 billion in trading losses.
National bank Wachovia Corp. said Tuesday its fourth-quarter earnings tumbled 98 percent due to a $1.7 billion reduction in the value of certain portfolios and $1.5 billion set aside to cover bad loans. Fourth-quarter net income fell to $51 million, or 3 cents per share, from $2.3 billion, or $1.20 per share, during the same period the previous year.
BJ Services: "During the second quarter of fiscal 2008, we expect relatively flat drilling activity with continued pricing pressures in the U.S. market. We expect improved results in Canada as we enter the winter drilling season, and we also anticipate increased revenue and improved margins in the International Pressure Pumping segment. Our Oilfield Services group is projected to be up slightly in the second quarter as we expect revenue growth from Completion Tools and Completion Fluids will be partially offset by continued seasonal decline in our Process and Pipeline Services business. We are projecting earnings per share for the second fiscal quarter to be in the range of $0.55 to $0.57." BJ's North American operations experienced a flat rig count, harsh weather and lower pricing during the first quarter, though its revenue improved.
Buffets Holdings said it's filed for Chapter 11 bankruptcy protection. All 626 restaurants are open for business.
Fifth Third Bancorp reported fourth-quarter net income of $38 million, or 7 cents a share, down from $66 million, or 12 cents, earned in the final three months of 2006. On an operating basis, the Cincinnati-based holding company said, quarterly earnings would have been $260 million, or 49 cents a share, down from $357 million, or 64 cents a share, in the year-earlier period. "The credit environment remains challenging, and we expect credit conditions and the performance of our loan portfolio to continue to deteriorate in the near term." In particular, higher loss reserves on loans and leases -- $284 million in the latest quarter, up 166% from a year earlier -- are to be expected in the short run, the CEO said.
March-dated light sweet crude futures fell $3.24 to $86.68 a barrel. Metals futures also were under heavy pressure, with the February gold contract losing $14.80 to $866.90 an ounce.
UnitedHealth Group said that it continues to expect 2008 earnings in a range of $3.95 to $4.00 a share. First quarter 2008 earnings are seen in a range of 82 cents to 84 cents a share.
DuPont expects 2008 earnings between $3.35 and $3.55 a share and first-quarter earnings of $1.12 to $1.17 a share. Analysts expected 2008 earnings of $3.43 a share and first-quarter earnings of $1.15.
The Bank of Japan voted unanimously to keep interest rates on hold at Tuesday, marking the second straight meeting the nine-member board has voted in one voice on the motion. The policy board opted to keep the unsecured overnight loan rate unchanged at 0.5%.
India's Sensitive Index tumbled 11.5% within the first two minutes of trading on Tuesday, forcing a trade halt for an hour. The index stumbled 2,029.05 points to 15,576.30, after slumping 7.4% in the previous session.
According to the WSJ, EBay CEO Meg Whitman is preparing to retire, and John Donahoe, president of eBay's auction business unit, has emerged as the leading candidate to succeed her.
According to the WSJ, Bank of China Ltd. appears increasingly likely to report a large write-down on its investments in U.S. mortgage securities, illustrating the broadening reach of the global financial downturn -- and how one of China's biggest lenders was less astute at avoiding the problem than it initially thought. Analysts estimate that the state-owned lender, traditionally the most international of the country's big banks, may have to write off a quarter of the nearly $8 billion it holds in securities backed by subprime mortgages.
We can count sub-prime mortgages and other pieces of over-valued paper as one of our country's exports during the past 24 months.
Roche raised its bid from $75 to $89.50 a share, valuing Arizona-based Ventana Medical Systems at $3.4bn, or $400m more than its repeatedly spurned initial offer.
Eaton's net income in the fourth quarter rose 6 percent $256 million, or $1.71 a share, from $241 million, or $1.59 a share, a year earlier.
Serbia said Tuesday it had agreed to a multibillion dollar gas pipeline project as part of an energy deal with Russia that would boost Moscow's control over supplies to Europe. A majority stake of the Serbian oil monopoly NIS will be sold to Russian energy company Gazprom. Russia would route part of the gas pipeline through Serbia, as part of the deal announced in a short statement by the Serbian government. Financial terms were not revealed.
According to the Chicago Tribune, the option-ARM trouble stems from the loose lending practices that inundated the subprime business. Loans often were granted on the basis of stated income, not proof of a borrower's income, giving rise to their nickname, "liar's loans." "This is not a subprime crisis. This is a stated-income crisis," said Robert Simpson, chief executive of Investors Mortgage Asset Recovery Co. in Irvine, Calif., which works with lenders, insurers and investors to recover losses related to mortgage fraud.
Microsoft said Monday it plans to acquire Calista Technologies Inc., a San Jose, Calif.-based startup founded in 2006. Calista's technology makes logging on to a virtual desktop feel more like working on a physical Windows computer, Microsoft said. No financial details of the agreement were disclosed. Microsoft is changing how it prices and licenses its software to encourage virtualization; rolling out new tools for managing virtualization in different situations; and broadening its partnerships with other companies in the area.
Brett Steenbarger: "We're on pace this morning to be down over 10% on a five-day basis in the S&P 500 Index. I went all the way back to 1960 (N = 12,074 trading days) and examined what happened after historic five-day drops in $SPX. To give an idea of how rare it is for stocks to drop more than 10% in a five-day period, we've only had 11 such instances since 1960. Five of the greatest five-day declines were registered on October 19, 20, 21, 22, and 23 of 1987. Two of the instances occurred on July 22 and 23 of 2002. So, really, we've only had six periods of negative five-day returns exceeding 10%:
October, 1987
May, 1962
August, 1998
September, 2001
July, 2002
April, 2000
On 10 of those 11 occasions, the S&P 500 Index was higher 10 days later by a very large average of 5.62%. When I loosened the criteria and looked at all five-day drops in the average of over 6% (N = 83), we find that, ten days later, the market was up by an average of 2.8% (53 up, 30 down). By contrast, the average 10-day gain over the rest of the period was .29% (6870 up, 5121 down).
To be sure, a weak market can get weaker: Of the 83 occasions in which we had five-day drops of 6% or more, 14 drew down another 3% or more over the next five trading days. Five of those instances were drops of over 5%. By contrast, however, 40 of the 83 occasions were up over 3% over the next five trading days.
The takeaway is that periods of great short-term crisis have, on average, been periods of opportunity. If you look at those occasions of 10+% declines, all have occurred at times in which it would have paid handsomely to be a buyer for the long-term. That doesn't mean that there can't be further turbulence ahead, but--as a rule--selling into panic has lost investors money."
Qatar’s oil minister said there is no need for OPEC to raise output when it meets Feb.1 in Vienna.
Pemex awarded Halliburton Co. a three-year, U.S. $683 million contract for drilling management and completion of 58 land wells in southern Mexico.
The International Swaps and Derivatives Association said global losses on credit-default swaps will be nearer $15 billion than the $250 billion forecast by Pacific Investment Management Co.'s Bill Gross.
According to Bloomberg, President George W. Bush is poised to leave the federal government in worse financial shape than he found it, making it harder for whoever succeeds him to deliver on the promises of this year's election campaign. Bush may end his eight years in office with a larger-than- forecast budget deficit approaching 2004's record $413 billion, as an increasingly likely recession slashes tax receipts and raises spending. He'll also leave behind a host of thorny, longer-term problems -- from the expiration of his big tax cuts in 2010 to spiraling spending on senior citizens -- that will dog his successor's budgets for years.
In sum, in my view, Bush's presidency has undermined the well-being of all Americans.
OAO Gazprom, Russia's state- controlled natural-gas export monopoly, pumped 548.5 billion cubic meters of gas in 2007, 1.3 percent less than the previous year, as milder weather reduced demand for the fuel. Gazprom produced 556 billion cubic meters of gas in 2006, the Moscow-based company said in an e-mailed statement today. It raised reserves by more than 585 billion cubic meters, according to preliminary data.
Troubled bond insurer Ambac Financial said Tuesday its fourth quarter results swung to a loss of $3.26 billion, or $31.85 a share as the firm wrote off $5.2 billion of credit derivative exposures. The company earned $202.7 million or $1.88 a share a year ago.
John Hussman: "It's instructive that the total return of the S&P 500 over the past 4 years has now averaged just 5.7% annually, despite the fact that the recent decline is still well short of a minimal bear market. The return on the S&P is close enough to the return on risk-free Treasury bills that our hedging over this entire period has cost us close to nothing. Equally instructive is that the S&P 500 has now lagged Treasury bills since April 1998. Valuations do indeed drive long-term market returns. The recent bull market began at the highest valuations of any prior bull market in history. It has predictably achieved below-average overall returns, and the cycle isn't even over yet. Though every market cycle is different, an “average” bull market represents a span of about 3.75 years, with total returns averaging about 27% annually, followed by a bear market of about 1.25 years, with total returns averaging about -27% annually. That means that, on average, a typical bear market loss of just over 30% has shaved a typical bull market gain of 145% down to a cumulative return of about 65% (for a full cycle of about 5 years and overall annual total returns of about 10.6%)."
Wal-Mart Stores, Inc. announced today that the number of associates who now have health care coverage through its new associate-tailored plans for 2008 or another source has significantly increased from 90.4 percent to 92.7 percent, and the number of uninsured associates decreased by more than 20 percent, compared to one year ago.
Palatin Technologies, Inc.announced today that it entered into an agreement to settle all outstanding litigation and disputes with Competitive Technologies, Inc. related to a license agreement between the companies. Under the terms of the settlement, Palatin retains all rights to bremelanotide, its peptide in clinical development for male erectile dysfunction and female sexual dysfunction, with no obligations for any future payments to Competitive Technologies. Both the pending arbitration initiated by Competitive Technologies and the action in Connecticut Superior Court will be dismissed with prejudice. The existing license agreement between Palatin and Competitive Technologies has been terminated, with Competitive Technologies receiving all rights to a peptide developed at the University of Arizona and called MT-II or PT-14, which Palatin ceased developing in 2000. As part of the settlement, Palatin remitted a one-time payment to Competitive Technologies of $800,000.
J&J reported net income of $2.37 billion, or 82 cents per share, up from $2.17 billion, or 74 cents per share, a year earlier. Excluding one-time items, net income would have been 88 cents per share. Revenues totaled $15.96 billion, up 16.6 percent from $13.7 billion in the year-ago quarter.
"Flooding the market with liquidity is a disaster for the purchasing power of the dollar," says David Gitlitz, chief economist for Trend Macrolytics.
George Ure: "Collapse of Fractional Reserve Banking: I must be reading the Federal Reserve's H.3 "Aggregate Reserve of Depository Institutions and the Monetary Base" all wrong. If you scroll down to Table 2 and look at the not-seasonally adjusted figures for the "Reserves of depository institutions" you will see three columns on the left. Total (Reserves) "nonborrowed (reserves) and "required" (reserves). The shocker is that the preliminary January 16th number showed that the required reserve of banks was $39,989 million dollars. This means how much money the banks claim to have on hand as their portion of the 'fractional reserve' banking system is (ballpark) $40 billion.
OK, the third column says the amount of reserves they are required to have by the Federal Reserve is only $38,278 million. (*$32.3 billion, ballpark).
OK, I've saved the scariest for last: Column #2. It says the amount of nonborrowed money (*money that the banksters didn't have to borrow to meet their reserve requirements was negative. In other words, if I am reading this right, the whole fractional reserve banking system's reserves required is being held afloat strictly by borrowed money at this point!...As much as I regret writing this, we may end up with runs on financial and so-called 'investment' houses over the coming few weeks and months."
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
Sean Owen: "The U.S. economy is starting to show its soft underbelly, and the steps the Fed is taking to mitigate the problem will only serve to exacerbate its true source - overindulgence in cheap liquidity. So whichever way the wind blows, the best strategy will be the same - the same as it has been for some time now. Hold assets with real intrinsic value that is not linked to the value of any particular currency. There are plenty to choose from - infrastructure, precious metals, and commodities, just to name a few, but my personal favorite is also the most renewable - Timber."
Ignoring the fact that Blackstone has a deal to buy Alliance Data, one should note the company will earn $3.75 a share for 2007 and more in 2008. The Feb. 30 puts are selling for 45 cents and the Feb 35 puts are selling for $1. I sold both at those prices today. I like the risk/reward.
Apple Inc. on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company's shares tumbled in after-hours trading as the consumer-electronics maker gave an earnings outlook that fell short of Wall Street analysts' forecasts. Apple expects to earn 94 cents a share on $6.8 billion in sales for its second quarter. The forecast fell below analysts' consensus estimates for earnings of $1.09 a share on revenue of $6.99 billion. The outlook helped send Apple's shares down more than $17 a share, or 11%, to $138.49 in after-hours trading.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
Sean Owen: "The U.S. economy is starting to show its soft underbelly, and the steps the Fed is taking to mitigate the problem will only serve to exacerbate its true source - overindulgence in cheap liquidity. So whichever way the wind blows, the best strategy will be the same - the same as it has been for some time now. Hold assets with real intrinsic value that is not linked to the value of any particular currency. There are plenty to choose from - infrastructure, precious metals, and commodities, just to name a few, but my personal favorite is also the most renewable - Timber."
Ignoring the fact that Blackstone has a deal to buy Alliance Data, one should note the company will earn $3.75 a share for 2007 and more in 2008. The Feb. 30 puts are selling for 45 cents and the Feb 35 puts are selling for $1. I sold both at those prices today. I like the risk/reward.
Apple Inc. on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company's shares tumbled in after-hours trading as the consumer-electronics maker gave an earnings outlook that fell short of Wall Street analysts' forecasts. Apple expects to earn 94 cents a share on $6.8 billion in sales for its second quarter. The forecast fell below analysts' consensus estimates for earnings of $1.09 a share on revenue of $6.99 billion. The outlook helped send Apple's shares down more than $17 a share, or 11%, to $138.49 in after-hours trading.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
"Despite the difficulties in the market, I don't expect you'll see banks defaulting on legally binding commitments and I expect most of these deals will close," said Gregory Gooding, a partner at law firm Debevoise & Plimpton LLP.
"There may be circumstances where buyers have terms on the contracts allowing them to get out of deals and I wouldn't be surprised if there are a couple more deals where those are taken advantage (of)," Gooding said. "But I expect that to be rare and it's a case-by-case analysis."
Benjamin Franklin: “If you can't pay for a thing, don't buy it. If you can't get paid for it, don't sell it. Do this, and you will have calm and drowsy nights, with all of the good business you have now and none of the bad. If you have time, don't wait for time.”
Monday, January 21, 2008
The Futures Are Down Huge
1/22/08 The Futures Are Down Huge
After the heavy losses nursed by Asian and European stock markets, U.S. stock futures are pointing to huge losses when markets re-open on Tuesday. Futures on the Dow Jones Industrial Average dropped 476 points, the S&P 500 futures contract fell 62 points and the Nasdaq 100 futures contract declined 81 points.
Shares in London tumbled Monday, briefly hitting their 18-month lows, as a sharp downturn in mining and banking shares pointed to growing investor fears of a slowdown in global economic growth and a U.S. recession.
Asian markets declined sharply on concerns the U.S. economy is sliding toward recession, with Japan dropping nearly 4% and Hong Kong plummeting 5.5%.
India's benchmark index plunged 7.4 percent Monday, its second-biggest percentage loss ever, amid a regional market rout sparked by worries that the U.S. economy may enter a recession.
A massive sell off in Asian and European stocks appeared to light a fire under the Japanese yen, fueling strong gains against major counterparts as markets unwound carry trades. Since suggesting going long th yen versus the dollar at 123, in Monday trading the yen rallied to 105.82. I continue to believe the demise of the yen carry trade will provide additional strength for the yen.
In Canada, the S&P/TSX index dropped 3.9% in early trade, with losers including Bombardier, down nearly 10%, and Talisman Energy, down nearly 9%.
Quebecor World, one of the world's biggest commercial printers, has filed for protection from creditors after failing to negotiate a rescue package from Quebecor, its Montreal-based media-group parent, and a Canadian private-equity fund.
247wallst.com: "For the Dow to drop 1,000 points it would have to sell of 8%. On October 19, 1987 the index sold off over 22% and it lost 7% of its value in one trading day on both September 21, 2001 and April 14, 2000. With the deep concerns with the market, it could happen again."
Production of crude oil by China National Offshore Oil Corp. fell 3.2% in 2007 from a year earlier, while pretax profit climbed 15%, according to reports. Cnooc, China's largest off-shore energy explorer and third largest by output produced 213.38 million barrels last year, according to wire reports citing an unnamed company executive. The falling crude oil output follows a 1.3% decline in 2006. Cnooc's 2007 pretax profit climbed 15% to 56.52 billion yuan ($7.8 billion). The big driver behind the profit growth were gains from securities trading, which totaled 3.33 billion yuan, an increase of more than four fold over the preceding year.
BHP Billiton has brought in more banks to help it find the $70 billion it needs to fund its planned takeover of Rio Tinto , Britain's Sunday Times newspaper reported. However, BHP Billiton is unlikely to increase its $130 billion unsolicited proposal to acquire mining rival Rio Tinto by a February 6 deadline, The Wall Street Journal reported on Monday. BHP could be trying to pressure Rio to negotiate by holding firm with its three-for-one share offer, which has yet to be formalized, the newspaper said, citing sources familiar with the company's plans.
Brazilian miner CVRD is preparing to offer as much as $90 billion to buy Swiss mining company Xstrata PLC, two leading Brazilian newspapers reported Monday. Companhia Vale do Rio Doce SA, the planet's biggest producer of the raw ingredient in steel, wants to pay as much as $60 billion of the amount in stock, the Valor Economico and O Estado de S. Paulo newspapers reported. Vale says talks have not yet produced material result.
I find press reports unusual. They stated Clinton won Nevada. In actuality, Obama picked up 13 delegates and 12 delegates went to Clinton. Could the press be biased?
German bank WestLB said it's going to post a loss of approximately 1 billion euros ($1.46 billion) in 2007 and may write down almost 1 billion euros. The German state of North Rhine-Westphalia, the regional associations and the savings banks associations will balance out the annual loss and up to 1 billion euros of write-downs in a planned capital increase, WestLB said.
According to the NY Times, Getty Images, the world’s biggest supplier of pictures and video to media and advertising companies, has put itself on the auction block and could fetch more than $1.5 billion, people briefed on the situation said Sunday. The firm hired Goldman Sachs to advise it on a potential sale, these people said. The company has attracted interest from several buyers, mostly private equity firms, including Kohlberg Kravis Roberts, Bain Capital and others.Final bids are due by the end of the month, but people briefed on the auction cautioned that it was unclear which firms would submit a final bid. Last year, Getty held takeover talks with the publicly held Jupitermedia Corporation, but the discussions ended quickly without a deal.Its main rivals, Jupitermedia, and the Corbis Corporation, a private company owned by the Microsoft founder Bill Gates, have also made a number of acquisitions, though they remain far smaller than Getty.
According to Bloomberg, ACA Capital Holdings Inc., the bond insurer being run by regulators after subprime-mortgage losses, won a month's grace to unwind $60 billion of credit-default swap contracts that it can't pay. ACA, under the control of the Maryland Insurance Administration, extended an agreement that waives collateral requirements, policy claims and termination rights until Feb. 19, the New York-based company said in a statement on Business Wire late yesterday.
Shares in China's banks fell sharply today after news reports said its No. 2 lender, Bank of China, might write down holdings of U.S. mortgage securities and two others increased reserves for possible losses.The reports were the first indication that Chinese lenders, which have so far avoided damage from the U.S. credit crisis, might face problems due to their holdings of subprime securities. Also today, China's banking regulator warned that lenders might face risks from fluctuations in fast-rising real estate prices.
Rob Hanna: "Mean reversion trades can be especially difficult in markets like this where price is in a freefall and there is no support nearby and no reasonable place to set a stop. Limiting exposure to control risk is therefore extremely important. And since exact timing is difficult and the market may still have a good amount left to fall, it is imperative that traders have additional capital they can put to work should the setup improve.
To sum up, the time stretch is indicating a bounce is likely coming soon and the rising CBI is indicating the bounce could be sharp. These two factors are providing a quantifiable edge. Aggressive traders could consider adding a small amount of long exposure in anticipation of this bounce."
Cisco Systems said on Monday it would invest about 5.8 billion dirhams ($1.58 billion) in the United Arab Emirates over five years. The company would spend part of the money through its Cisco Systems Capital Corp and could eventually set up a financial services unit in Dubai, it said in a statement.
According to the WSJ, Genentech Inc. discovered two new genes linked to lupus, raising hopes of earlier diagnosis and better targeted treatment of the auto-immune disease, which affects an estimated 1.5 million Americans. Discovery of the new genes, labeled BLK and ITGAM, was reported by Genentech scientist Timothy W. Behrens and his colleagues in the New England Journal of Medicine's online edition Sunday. The report coincided with that of a rival team from the International Consortium for Systemic Lupus Erythematosus Genetics in Nature Genetics.
The World Gold Council has reported that demand for gold from the jewelery sector decreased in the fourth-quarter of 2007.
Citigroup cuts 2008 US GDP view to 1.2% from 2.4%. We'll see whether that is too optimistic.
Futures markets in Hong Kong were pointing to a 600-point decline in Hong Kong's Hang Seng Index in pre-market trading Tuesday, with the blue chip index expected to extend the slump seen in the previous session.
Japan's Nikkei 225 average tumbled 3.9% to 12,800.90, while the broader Topix index skidded 3.5% to 1,248.61. Earlier in the day, the Nikkei dropped as low as 12,674.57 -- its lowest level since September 2005.
Australia's S&P/ASX 200 extended losses into the 12th straight session, slumping 5% to 5,303.70 and New Zealand's NZX 50 index lost 2.6% at 3,553.20, while South Korea's Kospi shed 3.9% at 1,617.23.
According to Bloomberg, European finance ministers said a global stock-market slump and an economic slowdown in the U.S. threaten to slow growth in Europe more than forecast.``The economic situation and financial markets are highly volatile and uncertain, a good deal more uncertain than usual,'' Luxembourg Finance Minister Jean-Claude Juncker said yesterday in Brussels after presiding over a meeting of counterparts from the euro region. ``If there is a real slowdown in the U.S., obviously that would be felt in the euro zone.''
After the heavy losses nursed by Asian and European stock markets, U.S. stock futures are pointing to huge losses when markets re-open on Tuesday. Futures on the Dow Jones Industrial Average dropped 476 points, the S&P 500 futures contract fell 62 points and the Nasdaq 100 futures contract declined 81 points.
Shares in London tumbled Monday, briefly hitting their 18-month lows, as a sharp downturn in mining and banking shares pointed to growing investor fears of a slowdown in global economic growth and a U.S. recession.
Asian markets declined sharply on concerns the U.S. economy is sliding toward recession, with Japan dropping nearly 4% and Hong Kong plummeting 5.5%.
India's benchmark index plunged 7.4 percent Monday, its second-biggest percentage loss ever, amid a regional market rout sparked by worries that the U.S. economy may enter a recession.
A massive sell off in Asian and European stocks appeared to light a fire under the Japanese yen, fueling strong gains against major counterparts as markets unwound carry trades. Since suggesting going long th yen versus the dollar at 123, in Monday trading the yen rallied to 105.82. I continue to believe the demise of the yen carry trade will provide additional strength for the yen.
In Canada, the S&P/TSX index dropped 3.9% in early trade, with losers including Bombardier, down nearly 10%, and Talisman Energy, down nearly 9%.
Quebecor World, one of the world's biggest commercial printers, has filed for protection from creditors after failing to negotiate a rescue package from Quebecor, its Montreal-based media-group parent, and a Canadian private-equity fund.
247wallst.com: "For the Dow to drop 1,000 points it would have to sell of 8%. On October 19, 1987 the index sold off over 22% and it lost 7% of its value in one trading day on both September 21, 2001 and April 14, 2000. With the deep concerns with the market, it could happen again."
Production of crude oil by China National Offshore Oil Corp. fell 3.2% in 2007 from a year earlier, while pretax profit climbed 15%, according to reports. Cnooc, China's largest off-shore energy explorer and third largest by output produced 213.38 million barrels last year, according to wire reports citing an unnamed company executive. The falling crude oil output follows a 1.3% decline in 2006. Cnooc's 2007 pretax profit climbed 15% to 56.52 billion yuan ($7.8 billion). The big driver behind the profit growth were gains from securities trading, which totaled 3.33 billion yuan, an increase of more than four fold over the preceding year.
BHP Billiton has brought in more banks to help it find the $70 billion it needs to fund its planned takeover of Rio Tinto , Britain's Sunday Times newspaper reported. However, BHP Billiton is unlikely to increase its $130 billion unsolicited proposal to acquire mining rival Rio Tinto by a February 6 deadline, The Wall Street Journal reported on Monday. BHP could be trying to pressure Rio to negotiate by holding firm with its three-for-one share offer, which has yet to be formalized, the newspaper said, citing sources familiar with the company's plans.
Brazilian miner CVRD is preparing to offer as much as $90 billion to buy Swiss mining company Xstrata PLC, two leading Brazilian newspapers reported Monday. Companhia Vale do Rio Doce SA, the planet's biggest producer of the raw ingredient in steel, wants to pay as much as $60 billion of the amount in stock, the Valor Economico and O Estado de S. Paulo newspapers reported. Vale says talks have not yet produced material result.
I find press reports unusual. They stated Clinton won Nevada. In actuality, Obama picked up 13 delegates and 12 delegates went to Clinton. Could the press be biased?
German bank WestLB said it's going to post a loss of approximately 1 billion euros ($1.46 billion) in 2007 and may write down almost 1 billion euros. The German state of North Rhine-Westphalia, the regional associations and the savings banks associations will balance out the annual loss and up to 1 billion euros of write-downs in a planned capital increase, WestLB said.
According to the NY Times, Getty Images, the world’s biggest supplier of pictures and video to media and advertising companies, has put itself on the auction block and could fetch more than $1.5 billion, people briefed on the situation said Sunday. The firm hired Goldman Sachs to advise it on a potential sale, these people said. The company has attracted interest from several buyers, mostly private equity firms, including Kohlberg Kravis Roberts, Bain Capital and others.Final bids are due by the end of the month, but people briefed on the auction cautioned that it was unclear which firms would submit a final bid. Last year, Getty held takeover talks with the publicly held Jupitermedia Corporation, but the discussions ended quickly without a deal.Its main rivals, Jupitermedia, and the Corbis Corporation, a private company owned by the Microsoft founder Bill Gates, have also made a number of acquisitions, though they remain far smaller than Getty.
According to Bloomberg, ACA Capital Holdings Inc., the bond insurer being run by regulators after subprime-mortgage losses, won a month's grace to unwind $60 billion of credit-default swap contracts that it can't pay. ACA, under the control of the Maryland Insurance Administration, extended an agreement that waives collateral requirements, policy claims and termination rights until Feb. 19, the New York-based company said in a statement on Business Wire late yesterday.
Shares in China's banks fell sharply today after news reports said its No. 2 lender, Bank of China, might write down holdings of U.S. mortgage securities and two others increased reserves for possible losses.The reports were the first indication that Chinese lenders, which have so far avoided damage from the U.S. credit crisis, might face problems due to their holdings of subprime securities. Also today, China's banking regulator warned that lenders might face risks from fluctuations in fast-rising real estate prices.
Rob Hanna: "Mean reversion trades can be especially difficult in markets like this where price is in a freefall and there is no support nearby and no reasonable place to set a stop. Limiting exposure to control risk is therefore extremely important. And since exact timing is difficult and the market may still have a good amount left to fall, it is imperative that traders have additional capital they can put to work should the setup improve.
To sum up, the time stretch is indicating a bounce is likely coming soon and the rising CBI is indicating the bounce could be sharp. These two factors are providing a quantifiable edge. Aggressive traders could consider adding a small amount of long exposure in anticipation of this bounce."
Cisco Systems said on Monday it would invest about 5.8 billion dirhams ($1.58 billion) in the United Arab Emirates over five years. The company would spend part of the money through its Cisco Systems Capital Corp and could eventually set up a financial services unit in Dubai, it said in a statement.
According to the WSJ, Genentech Inc. discovered two new genes linked to lupus, raising hopes of earlier diagnosis and better targeted treatment of the auto-immune disease, which affects an estimated 1.5 million Americans. Discovery of the new genes, labeled BLK and ITGAM, was reported by Genentech scientist Timothy W. Behrens and his colleagues in the New England Journal of Medicine's online edition Sunday. The report coincided with that of a rival team from the International Consortium for Systemic Lupus Erythematosus Genetics in Nature Genetics.
The World Gold Council has reported that demand for gold from the jewelery sector decreased in the fourth-quarter of 2007.
Citigroup cuts 2008 US GDP view to 1.2% from 2.4%. We'll see whether that is too optimistic.
Futures markets in Hong Kong were pointing to a 600-point decline in Hong Kong's Hang Seng Index in pre-market trading Tuesday, with the blue chip index expected to extend the slump seen in the previous session.
Japan's Nikkei 225 average tumbled 3.9% to 12,800.90, while the broader Topix index skidded 3.5% to 1,248.61. Earlier in the day, the Nikkei dropped as low as 12,674.57 -- its lowest level since September 2005.
Australia's S&P/ASX 200 extended losses into the 12th straight session, slumping 5% to 5,303.70 and New Zealand's NZX 50 index lost 2.6% at 3,553.20, while South Korea's Kospi shed 3.9% at 1,617.23.
According to Bloomberg, European finance ministers said a global stock-market slump and an economic slowdown in the U.S. threaten to slow growth in Europe more than forecast.``The economic situation and financial markets are highly volatile and uncertain, a good deal more uncertain than usual,'' Luxembourg Finance Minister Jean-Claude Juncker said yesterday in Brussels after presiding over a meeting of counterparts from the euro region. ``If there is a real slowdown in the U.S., obviously that would be felt in the euro zone.''
Sunday, January 20, 2008
Our Declining Standard of Living
1/21/08 Our Declining Standard of Living
According to the BLS, median weekly earnings of the nation's 108.3 million full-time wage and salary workers were $700 in the fourth quarter of 2007.This was 2.6 percent higher than a year earlier compared with a gain of 4.0 percent in the Consumer Price Index for All Urban Consumers(CPI-U) over the same period.
California's jobless rate jumped to 6.1% in December, up from 4.8% a year earlier, prompting Gov. Arnold Schwarzenegger to move to expedite public works projects in an effort to stimulate the economy. The surge in unemployment, up from 5.6% in November, was the latest sign of the toll of the housing slump, the sub-prime mortgage debacle and production shutdowns during the Hollywood writers strike.
Petro Rabigh, a joint venture of the state-run oil company Saudi Aramco and Sumitomo Chemical of Japan, is Saudi Arabia’s boldest bet yet that this oil-rich kingdom can transform itself into an industrial powerhouse. The plant is part of a $500 billion investment program to build new cities, create millions of jobs and diversify the economy away from petroleum exports over the next two decades. The kingdom, which has a population of 24.5 million, including nearly 7 million foreigners, has what one analyst called a “human time bomb.” About 40 percent of Saudis are under 15, and because the country has one of the world’s highest birth rates, the population is expected to reach nearly 40 million by 2025. “It has been a social, and therefore a political, imperative of the Saudi government to develop the economy and to create employment opportunities,” said Timothy S. Gray, the chief executive of HSBC Saudi Arabia.
Mike Burk: "The market is nearly as oversold as it has ever been. As of Friday's close 8% of the component issues of the S&P 500 (SPX) are above their respective 50 day EMA's. There have been lower numbers, but not many...When the market hits a low with an extreme number of new lows it usually retests that low. Near the August low there were 480 new lows on the NASDAQ implying a retest of that low. Near the late November low there were 359 new lows, less than the August low, but still enough to suggest another retest. On Friday there were 485 new lows on the NASDAQ suggesting another retest...Historically the coming week has been the weakest week in January which is usually a strong month. Given the recent lack of conformity to seasonal patterns, it will probably be up."
U.S. stocks posted the steepest weekly drop since July 2002.
Billie Joe Armstrong: “A guy walks up to me and asks 'What's Punk?'. So I kick over a garbage can and say 'That's punk!'. So he kicks over the garbage can and says 'That's Punk?', and I say 'No, that's trend!'”
"If U.S. consumption really comes down, that's bad news for us. That will have a pretty severe impact on our exports," Zhang Tao, deputy head of the international department of the People's Bank of China told a group including Reuters.
The Nasdaq Composite index has fallen 17 percent from its 52-week closing high set in October.
Yahoo has 12,000 employees. There are rumors that the company may lay off 1,500 to 2,000 employees in its European operations. The stock has been making new 52-week lows.
According to the BLS, median weekly earnings of the nation's 108.3 million full-time wage and salary workers were $700 in the fourth quarter of 2007.This was 2.6 percent higher than a year earlier compared with a gain of 4.0 percent in the Consumer Price Index for All Urban Consumers(CPI-U) over the same period.
California's jobless rate jumped to 6.1% in December, up from 4.8% a year earlier, prompting Gov. Arnold Schwarzenegger to move to expedite public works projects in an effort to stimulate the economy. The surge in unemployment, up from 5.6% in November, was the latest sign of the toll of the housing slump, the sub-prime mortgage debacle and production shutdowns during the Hollywood writers strike.
Petro Rabigh, a joint venture of the state-run oil company Saudi Aramco and Sumitomo Chemical of Japan, is Saudi Arabia’s boldest bet yet that this oil-rich kingdom can transform itself into an industrial powerhouse. The plant is part of a $500 billion investment program to build new cities, create millions of jobs and diversify the economy away from petroleum exports over the next two decades. The kingdom, which has a population of 24.5 million, including nearly 7 million foreigners, has what one analyst called a “human time bomb.” About 40 percent of Saudis are under 15, and because the country has one of the world’s highest birth rates, the population is expected to reach nearly 40 million by 2025. “It has been a social, and therefore a political, imperative of the Saudi government to develop the economy and to create employment opportunities,” said Timothy S. Gray, the chief executive of HSBC Saudi Arabia.
Mike Burk: "The market is nearly as oversold as it has ever been. As of Friday's close 8% of the component issues of the S&P 500 (SPX) are above their respective 50 day EMA's. There have been lower numbers, but not many...When the market hits a low with an extreme number of new lows it usually retests that low. Near the August low there were 480 new lows on the NASDAQ implying a retest of that low. Near the late November low there were 359 new lows, less than the August low, but still enough to suggest another retest. On Friday there were 485 new lows on the NASDAQ suggesting another retest...Historically the coming week has been the weakest week in January which is usually a strong month. Given the recent lack of conformity to seasonal patterns, it will probably be up."
U.S. stocks posted the steepest weekly drop since July 2002.
Billie Joe Armstrong: “A guy walks up to me and asks 'What's Punk?'. So I kick over a garbage can and say 'That's punk!'. So he kicks over the garbage can and says 'That's Punk?', and I say 'No, that's trend!'”
"If U.S. consumption really comes down, that's bad news for us. That will have a pretty severe impact on our exports," Zhang Tao, deputy head of the international department of the People's Bank of China told a group including Reuters.
The Nasdaq Composite index has fallen 17 percent from its 52-week closing high set in October.
Yahoo has 12,000 employees. There are rumors that the company may lay off 1,500 to 2,000 employees in its European operations. The stock has been making new 52-week lows.
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