5/3/08 Fragility
Berkshire Hathaway's first-quarter net income dropped 64% as underwriting income wilted and the giant conglomerate led by Warren Buffett reported $1.7 billion in unrealized derivatives losses.
Two-year government yields rose to 2.46%.
Doug Noland: "I believe strongly that if Hyman Minsky were alive today he would see the huge investment fund managers, the hedge fund community, and Wall Street firms as the fundamental force behind today’s Acute Financial and Economic Fragility. He would surely see the current financial order as dysfunctional and unsustainable. And I am quite confident he would view the current trajectory of financial system and policy development as laying the groundwork for the next crash and depression...I am even more convinced today than some six years ago that a whole new financial structure has evolved – and that it is definitely “retrograde.” The title “Financial Arbitrage Capitalism” is fitting for a Credit system and economy now dominated by an expansive “leveraged speculating community” seeking profits from variations and permutations of “borrowing cheap and lending dear”; by bond and investment fund managers whose entire focus is beating some indexed return; by rapidly expanding Wall Street balance sheets and influence; and by the entire wave of new Credit instruments, derivatives, and sophisticated models and strategies used for the paramount purpose of capturing “above-market” returns and resulting huge financial rewards... With “Financial Arbitrage Capitalism,” the bounty of seemingly limitless (until recently) speculative profits has created a reward system encouraging unprecedented debt creation, leveraging, and myriad forms and layers of financial intermediation...Additional non-productive debt growth will also not stabilize dollar devaluation, nor will it help in stabilizing myriad problems at home and abroad associated with our monstrous Current Account Deficits. Instead, any extension of this period of Financial Arbitrage Capitalism will ensure the prolonging of borrowing and consuming excess, the gross mis-allocation of resources, massive trade deficits, a ballooning international pool of unwieldy speculative finance, and even wilder Global Monetary Disorder."
In North Carolina, Zogby says, its latest tracking poll gives Sen. Barack Obama a 9 percentage point lead (46%-37%) over Sen. Hillary Rodham Clinton.
Microsoft Corp. has sweetened its $44.6 billion bid for Yahoo Inc. by several billion dollars, intensifying negotiations between the two technology titans Friday and bringing the proposed megadeal closer to reality, according to sources familiar with the matter. The two sides remain divided over price, but the gap has narrowed.
Brett Steenbarger: "I recently noticed that we had moved well below the 50-day moving average in the VIX, indicating low option volatility on a relative basis. I went back to 1991 (N = 4314 trading days) and found that, when the VIX has been above its 50-day moving average, the next 50 days in the S&P 500 Index (SPY) have averaged a gain of 2.35% (1346 up, 604 down). When the VIX has been below its 50-day average, the next 50 days in SPY have averaged a gain of only 1.26% (1499 up, 865 down). When the VIX has been more than 10% above its 50-day moving average, the next 20 days in SPY have averaged a gain of 1.49% (574 up, 305 down). When the VIX has been more than 10% below its 50-day moving average (as has been the case recently), the next 20 days in SPY have averaged a gain of only .27% (566 up, 401 down)."
According to Bloomberg, Gulf states are considering dropping their pegs to the dollar after the U.S. currency's decline stoked inflation across the region, Kuwaiti Finance Minister Mustafa al- Shimali said. ``Yes, there are some'' Gulf Cooperation Council states considering dropping their pegs to the dollar, which has fallen 13 percent against the euro in the last 12 months, al-Shimali said in an interview in Kuwait late yesterday without naming the countries. ``Some countries will do what we are doing.'' Al-Shimali's comments may restoke speculation of a change in Middle East currency systems that eased after the United Arab Emirates and Qatar last month ruled out any revaluation or dropping the dollar peg in the short term. The issue will remain a key issue as long as inflation remains high.
Mike Burk: "Over the past week breadth indicators deteriorated, money supply growth has been contracting and seasonally the coming week has a modestly negative bias. I expect the major indices to be lower on Friday May 9 than they were on Friday May 2."
Saturday, May 03, 2008
Friday, May 02, 2008
Employment
5/2/08 Employment
The U.S. labor market was not as weak as expected in April, the government said Friday. The economy lost 20,000 nonfarm payroll jobs last month, according to a survey of business establishments.That followed upwardly revised losses of 81,000 jobs in March and 83,000 in February. Employers also cut 76,000 jobs in January, and way below the 78,000 decline expected by economists surveyed by MarketWatch. The unemployment rate inched down to 5.0% in April from 5.1% in March. Economists were expecting the unemployment rate to tick up to 5.2%. U.S. April average hourly earnings up 0.1%, up 3.4% yr-on-yr. The Labor Department said 61,000 construction jobs were lost in April, the largest number for that sector since 103,000 were cut in February 2007. The department said that since peaking in September 2006, some 457,000 construction jobs have been lost.Goods-producing businesses cut 110,000 jobs in April, the largest number of job reductions since January 2002, after trimming 88,000 in March. But service industries added 90,000 jobs - the most since last December - with most of them coming in the health care and professional technical services sectors. Both the number of hours worked and overtime hours weakened slightly in April from March, a sign employers were making every effort to keep a tight lid on employment costs. The dollar index soared 0.6% to 73.62 compared with 73.19 before the data.
George Ure: "The CES Birth-Death model contributed 267,000 jobs including 45-thousand new jobs in construction and an eye popping 83,000 in leisure/.hospitality and 72-thosuand in professional & business services."
The market is assigning long odds BHP Billiton will succeed in its bid to acquire Rio Tinto Plc amid growing fear regulators will block the tie up between the world's first and third-largest miners, according to a media report. A gauge that measures the odds BHP's $162 billion hostile offer will succeed has fallen to its lowest level since the deal was initially unveiled in February, The Wall Street Journal reported Friday.
India's inflation accelerated at 7.57% in the week to April 19 from the year-ago period, its fastest pace in more than three years, official data showed Friday, according to reports.
The U.K. economy will slow markedly in 2008 and 2009 while inflation accelerates, the National Institute of Economic and Social Research said Friday. The think tank said that growth in the U.K. will slow to 1.8% in both years from 3% in 2007 and that consumer spending growth will slacken to 1.2% in 2008, its lowest rate since 1992, and further decelerate to 0.6% in 2009, from 3.1% in 2007. The group also predicted that consumer inflation would reach 3.1% in the third quarter of 2008.
Manufacturing in China, the world's biggest maker of steel and cement, expanded at the fastest pace on record, spurred by new orders from domestic customers as export demand eased. The Purchasing Managers' Index rose to 59.2 from 58.4 in March, the highest since the index began 28 months ago, the China Federation of Logistics and Purchasing said today in an e-mailed statement. The index of new orders rose to 65.0, the highest since April 2007 while export orders dropped for the first time in three months.
Fed funds futures contracts indicate that investors yesterday put a 78 percent probability the target won't be lowered at the June 24-25 FOMC meeting.
John Crudele: "In coming up with the 0.6 percent annual growth figure, the Commerce Department decided that inflation was just 2.6 percent. That's lower than Wall Street had been expecting and a tad higher than in the fourth quarter. Still, the 2.6 percent figure for price increases used for the GDP calculation was nowhere near the 4 percent inflation calculated by other government agencies. If inflation, for instance, had been 4 percent then the nation's economy would have contracted by an 0.8 percent annualized rate. And not only that, if inflation was being honestly reported the economy would have contracted in the fourth quarter of 2007 as well."
Richard Daughty: "We're freaking doomed to death by inflation in consumer prices, and probably deflation in asset prices, too, because the despicable Federal Reserve created all the excess money and credit to finance a series of bubbles that are now popping, by creating the money to buy the enormous debt of a system of governments that is now so large, so freaking large, so overpoweringly large that our system of government constitutes a full half of GDP! Half! And which employs one out of every seven workers! We're freaking doomed, you morons!"
According to AMG Data Services, including ETF activity, Equity funds report net cash outflows totaling -$3.571 billion in the week ended 4/30/08 with Domestic funds reporting net outflows of -$4.404 billion and Non-domestic funds reporting net inflows of $833 million; Excluding ETF activity, Equity funds report net cash outflows totaling -$122 million with Domestic funds reporting net outflows of -$138 million and Non-domestic funds reporting net inflows totaling $16 million.
“It’s about the numbers, and the numbers are the numbers,” said Chris Redfern, the chairman of the Ohio Democratic Party and an uncommitted superdelegate. “It’s not about hand-wringing. And Senator Obama has the lead.” According to the NY Times, Mr. Obama has also picked up superdelegate support from Democratic members of Congress in relatively conservative districts — despite efforts by Republicans to make Mr. Obama a liability for Democrats running in competitive districts, including campaigns for two open seats in the South that are under way. Representative Baron P. Hill of Indiana and Representative Ben Chandler of Kentucky endorsed Mr. Obama, for example, and both face the likelihood of stiff Republican challenges in the fall.
According to Bloomberg, Bank of America Corp said it may not guarantee $38.1 billion of Countrywide Financial Corp.'s debt after taking over the mortgage lender, fueling speculation that Countrywide's bondholders face renewed risk of default.
Rob Hanna: "Whatever the reason, a move through the 200-day moving average has provided the NDX some extra fuel in the past. When the move was strong and decisive like Thursday, that made for even better results. A cross above the 200-day moving average isn’t a magic buy signal – but there are worse ones."
According to Bloomberg, "Financial market turmoil has caused the fixed rate on the newest issue of Series I inflation-indexed savings bonds to fall to zero for the first time, according to the U.S. Treasury's Bureau of Public Debt. Investors still get a return on the investment as long as consumer prices rise, because the government pays additional interest in lockstep with inflation.The fixed rate's decline to zero reflects the decline in returns in money markets in the aftermath of the credit collapse, said Kim Treat, a spokesman for the bureau in Washington. The government promotes the savings bonds as "low- risk'' investments for individuals that protects them against inflation.The so-called earnings rate on the bonds issued between May and October, which is tied to the rate of inflation, is 4.84 percent, the bureau said in a press release. The fixed rate, on top of the compensation for rising consumer prices, is officially 0.00 percent, down from 1.2 percent when the Series I was last issued, in November. That means investors get no returns on their investments other than compensation for inflation. The fixed rate has never fallen so low since inflation-indexed savings bonds were introduced in the 1990s, Treat said."
Brad Setser: "Keith Bradsher of the New York Times reports that Chinese firms exporting to Europe now want to be paid in euros -- and Chinese firms exporting to the US want to be paid quickly. Some firms have apparently gotten burnt promising to deliver goods for dollars in the future only to see the RMB appreciate against the dollar before the goods were delivered, cutting into their profits."
Asian countries sought Friday to tame the spiraling rice market, with Thailand proposing an OPEC-style cartel for exporters and the Philippines shoring up supplies while aiming to end its status as the world's largest importer.
Bill Bonner: "The U.S. government is already $9.3 trillion in debt (not to mention the other $40 trillion 'financing gap'). It is giving out money it doesn't really have - $106 billion worth. But it is doing so for good reason - or so it believes. The president of all the Americans - George W. Bush - said that the handouts will be "good for the consumer economy." Lending money below the inflation rate…giving out money you don't have, when you are already so deep in debt you will never get out - how could any of this be good for the real economy? But by this time we are so far into Never-Never Land that we will never find our way back."
According to Bloomberg, Iran, OPEC's second-largest oil producer, more than doubled the amount stored in tankers idling in the Persian Gulf, sending ship prices higher as demand for some of its crude fell, people familiar with the situation said.The 10 tankers hold at least 20 million barrels of oil, equal to about 5 days of the country's output, said the people, who asked not to be identified because the information isn't public. Rates for tankers have more than tripled since April 8, based on data from the Baltic Exchange and ship-fuel prices. While oil rose to a record $119.93 a barrel on April 28, Iran has a glut of its sulfur-rich crude as refineries that can process the fuel shut down for maintenance. The discount on Iranian Heavy crude compared with Oman and Dubai petroleum has more than doubled since the start of the year, according to data compiled by Bloomberg.
Gold's march higher may have stalled in recent weeks but still-strong demand, limited supply and the possibility of further jitters in the economy mean the longer term upward trend is far from over, BlackRock's head of resources Graham Birch said.
The Federal Reserve along with the European Central Bank and the Swiss National Bank announced a fresh expansion of their liquidity measures. The Federal Reserve announced an increase in the amounts auctioned to eligible depository institutions under its biweekly Term Auction Facility from $50 billion to $75 billion, beginning with the auction on May 5. This increase will bring the amounts outstanding under the TAF to $150 billion. The Federal Open Market Committee also has authorized further increases in its existing temporary reciprocal currency arrangements with the European Central Bank and the Swiss National Bank. These arrangements will now provide dollars in amounts of up to $50 billion and $12 billion to the ECB and the SNB, respectively, representing increases of $20 billion and $6 billion.
Linens Holding Co., the operator of Linens 'n Things home furnishings retail chain, said Friday it filed for Chapter 11 bankruptcy protection. The chain will shut 120 underperforming stores.
Chevron Corp said on Friday its first-quarter earnings rose 10 percent as record oil prices outweighed weak profits from gasoline production.
Crude-oil futures rose Friday, boosted by news reports that Turkish planes bombed bases of separatist Kurds in northern Iraq.
The factory sector showed some signs of life in March, the Commerce Department reported Friday. Factory orders increased 1.4% in March, the fastest growth rate since December. This was well above the 0.2% gain expected by economists surveyed by MarketWatch. Orders for durable goods increased 0.1% in March, revised up from the 0.3% drop estimated a week ago. Orders for nondurable goods rose 2.6% in March.
June crude closed at $116.32 a barrel, up $3.80 for Friday's session. June gold closed at $858 an ounce, up $7.10 for Friday's trading session.
The U.S. labor market was not as weak as expected in April, the government said Friday. The economy lost 20,000 nonfarm payroll jobs last month, according to a survey of business establishments.That followed upwardly revised losses of 81,000 jobs in March and 83,000 in February. Employers also cut 76,000 jobs in January, and way below the 78,000 decline expected by economists surveyed by MarketWatch. The unemployment rate inched down to 5.0% in April from 5.1% in March. Economists were expecting the unemployment rate to tick up to 5.2%. U.S. April average hourly earnings up 0.1%, up 3.4% yr-on-yr. The Labor Department said 61,000 construction jobs were lost in April, the largest number for that sector since 103,000 were cut in February 2007. The department said that since peaking in September 2006, some 457,000 construction jobs have been lost.Goods-producing businesses cut 110,000 jobs in April, the largest number of job reductions since January 2002, after trimming 88,000 in March. But service industries added 90,000 jobs - the most since last December - with most of them coming in the health care and professional technical services sectors. Both the number of hours worked and overtime hours weakened slightly in April from March, a sign employers were making every effort to keep a tight lid on employment costs. The dollar index soared 0.6% to 73.62 compared with 73.19 before the data.
George Ure: "The CES Birth-Death model contributed 267,000 jobs including 45-thousand new jobs in construction and an eye popping 83,000 in leisure/.hospitality and 72-thosuand in professional & business services."
The market is assigning long odds BHP Billiton will succeed in its bid to acquire Rio Tinto Plc amid growing fear regulators will block the tie up between the world's first and third-largest miners, according to a media report. A gauge that measures the odds BHP's $162 billion hostile offer will succeed has fallen to its lowest level since the deal was initially unveiled in February, The Wall Street Journal reported Friday.
India's inflation accelerated at 7.57% in the week to April 19 from the year-ago period, its fastest pace in more than three years, official data showed Friday, according to reports.
The U.K. economy will slow markedly in 2008 and 2009 while inflation accelerates, the National Institute of Economic and Social Research said Friday. The think tank said that growth in the U.K. will slow to 1.8% in both years from 3% in 2007 and that consumer spending growth will slacken to 1.2% in 2008, its lowest rate since 1992, and further decelerate to 0.6% in 2009, from 3.1% in 2007. The group also predicted that consumer inflation would reach 3.1% in the third quarter of 2008.
Manufacturing in China, the world's biggest maker of steel and cement, expanded at the fastest pace on record, spurred by new orders from domestic customers as export demand eased. The Purchasing Managers' Index rose to 59.2 from 58.4 in March, the highest since the index began 28 months ago, the China Federation of Logistics and Purchasing said today in an e-mailed statement. The index of new orders rose to 65.0, the highest since April 2007 while export orders dropped for the first time in three months.
Fed funds futures contracts indicate that investors yesterday put a 78 percent probability the target won't be lowered at the June 24-25 FOMC meeting.
John Crudele: "In coming up with the 0.6 percent annual growth figure, the Commerce Department decided that inflation was just 2.6 percent. That's lower than Wall Street had been expecting and a tad higher than in the fourth quarter. Still, the 2.6 percent figure for price increases used for the GDP calculation was nowhere near the 4 percent inflation calculated by other government agencies. If inflation, for instance, had been 4 percent then the nation's economy would have contracted by an 0.8 percent annualized rate. And not only that, if inflation was being honestly reported the economy would have contracted in the fourth quarter of 2007 as well."
Richard Daughty: "We're freaking doomed to death by inflation in consumer prices, and probably deflation in asset prices, too, because the despicable Federal Reserve created all the excess money and credit to finance a series of bubbles that are now popping, by creating the money to buy the enormous debt of a system of governments that is now so large, so freaking large, so overpoweringly large that our system of government constitutes a full half of GDP! Half! And which employs one out of every seven workers! We're freaking doomed, you morons!"
According to AMG Data Services, including ETF activity, Equity funds report net cash outflows totaling -$3.571 billion in the week ended 4/30/08 with Domestic funds reporting net outflows of -$4.404 billion and Non-domestic funds reporting net inflows of $833 million; Excluding ETF activity, Equity funds report net cash outflows totaling -$122 million with Domestic funds reporting net outflows of -$138 million and Non-domestic funds reporting net inflows totaling $16 million.
“It’s about the numbers, and the numbers are the numbers,” said Chris Redfern, the chairman of the Ohio Democratic Party and an uncommitted superdelegate. “It’s not about hand-wringing. And Senator Obama has the lead.” According to the NY Times, Mr. Obama has also picked up superdelegate support from Democratic members of Congress in relatively conservative districts — despite efforts by Republicans to make Mr. Obama a liability for Democrats running in competitive districts, including campaigns for two open seats in the South that are under way. Representative Baron P. Hill of Indiana and Representative Ben Chandler of Kentucky endorsed Mr. Obama, for example, and both face the likelihood of stiff Republican challenges in the fall.
According to Bloomberg, Bank of America Corp said it may not guarantee $38.1 billion of Countrywide Financial Corp.'s debt after taking over the mortgage lender, fueling speculation that Countrywide's bondholders face renewed risk of default.
Rob Hanna: "Whatever the reason, a move through the 200-day moving average has provided the NDX some extra fuel in the past. When the move was strong and decisive like Thursday, that made for even better results. A cross above the 200-day moving average isn’t a magic buy signal – but there are worse ones."
According to Bloomberg, "Financial market turmoil has caused the fixed rate on the newest issue of Series I inflation-indexed savings bonds to fall to zero for the first time, according to the U.S. Treasury's Bureau of Public Debt. Investors still get a return on the investment as long as consumer prices rise, because the government pays additional interest in lockstep with inflation.The fixed rate's decline to zero reflects the decline in returns in money markets in the aftermath of the credit collapse, said Kim Treat, a spokesman for the bureau in Washington. The government promotes the savings bonds as "low- risk'' investments for individuals that protects them against inflation.The so-called earnings rate on the bonds issued between May and October, which is tied to the rate of inflation, is 4.84 percent, the bureau said in a press release. The fixed rate, on top of the compensation for rising consumer prices, is officially 0.00 percent, down from 1.2 percent when the Series I was last issued, in November. That means investors get no returns on their investments other than compensation for inflation. The fixed rate has never fallen so low since inflation-indexed savings bonds were introduced in the 1990s, Treat said."
Brad Setser: "Keith Bradsher of the New York Times reports that Chinese firms exporting to Europe now want to be paid in euros -- and Chinese firms exporting to the US want to be paid quickly. Some firms have apparently gotten burnt promising to deliver goods for dollars in the future only to see the RMB appreciate against the dollar before the goods were delivered, cutting into their profits."
Asian countries sought Friday to tame the spiraling rice market, with Thailand proposing an OPEC-style cartel for exporters and the Philippines shoring up supplies while aiming to end its status as the world's largest importer.
Bill Bonner: "The U.S. government is already $9.3 trillion in debt (not to mention the other $40 trillion 'financing gap'). It is giving out money it doesn't really have - $106 billion worth. But it is doing so for good reason - or so it believes. The president of all the Americans - George W. Bush - said that the handouts will be "good for the consumer economy." Lending money below the inflation rate…giving out money you don't have, when you are already so deep in debt you will never get out - how could any of this be good for the real economy? But by this time we are so far into Never-Never Land that we will never find our way back."
According to Bloomberg, Iran, OPEC's second-largest oil producer, more than doubled the amount stored in tankers idling in the Persian Gulf, sending ship prices higher as demand for some of its crude fell, people familiar with the situation said.The 10 tankers hold at least 20 million barrels of oil, equal to about 5 days of the country's output, said the people, who asked not to be identified because the information isn't public. Rates for tankers have more than tripled since April 8, based on data from the Baltic Exchange and ship-fuel prices. While oil rose to a record $119.93 a barrel on April 28, Iran has a glut of its sulfur-rich crude as refineries that can process the fuel shut down for maintenance. The discount on Iranian Heavy crude compared with Oman and Dubai petroleum has more than doubled since the start of the year, according to data compiled by Bloomberg.
Gold's march higher may have stalled in recent weeks but still-strong demand, limited supply and the possibility of further jitters in the economy mean the longer term upward trend is far from over, BlackRock's head of resources Graham Birch said.
The Federal Reserve along with the European Central Bank and the Swiss National Bank announced a fresh expansion of their liquidity measures. The Federal Reserve announced an increase in the amounts auctioned to eligible depository institutions under its biweekly Term Auction Facility from $50 billion to $75 billion, beginning with the auction on May 5. This increase will bring the amounts outstanding under the TAF to $150 billion. The Federal Open Market Committee also has authorized further increases in its existing temporary reciprocal currency arrangements with the European Central Bank and the Swiss National Bank. These arrangements will now provide dollars in amounts of up to $50 billion and $12 billion to the ECB and the SNB, respectively, representing increases of $20 billion and $6 billion.
Linens Holding Co., the operator of Linens 'n Things home furnishings retail chain, said Friday it filed for Chapter 11 bankruptcy protection. The chain will shut 120 underperforming stores.
Chevron Corp said on Friday its first-quarter earnings rose 10 percent as record oil prices outweighed weak profits from gasoline production.
Crude-oil futures rose Friday, boosted by news reports that Turkish planes bombed bases of separatist Kurds in northern Iraq.
The factory sector showed some signs of life in March, the Commerce Department reported Friday. Factory orders increased 1.4% in March, the fastest growth rate since December. This was well above the 0.2% gain expected by economists surveyed by MarketWatch. Orders for durable goods increased 0.1% in March, revised up from the 0.3% drop estimated a week ago. Orders for nondurable goods rose 2.6% in March.
June crude closed at $116.32 a barrel, up $3.80 for Friday's session. June gold closed at $858 an ounce, up $7.10 for Friday's trading session.
Thursday, May 01, 2008
Mission Accomplished
5/1/08 Mission Accomplished
On 1 May 2003, President George Bush strode onto the deck of the aircraft carrier, USS Abraham Lincoln. Overhead was a banner saying "Mission Accomplished." President Bush said, "Major combat operations in Iraq have ended. In the battle of Iraq, the United States and our allies have prevailed." Five years later, some 140,000 U.S. troops remain in Iraq. More than 4,000 members of the U.S. military have died in the conflict. The number of Iraqi civilians killed in sectarian and other violence is sometimes estimated in the hundreds of thousands.
U.S. companies' planned layoffs jumped 68 percent in April from the prior month to the highest since September 2006, pointing to further deterioration in the labor market, a report showed on Thursday. Planned job cuts in U.S. companies totaled 90,015 last month, up from 53,579 in March and up 27 percent from a year earlier, employment consulting firm Challenger, Gray & Christmas Inc. reported. The April layoffs were the steepest since the 100,315 cuts announced in September 2006.
Erasing the drop in claims reported last week, first-time filings for state unemployment benefits surged 35,000 to 380,000 in the week ending April 26, the Labor Department reported Thursday.The four-week moving average of initial claims fell 6,500 to 363,750. For the week ending April 19, continuing jobless claims rose 74,000 to 3.02 million - the highest level since April 2004. The four-week average of continuing claims rose 16,750 to 2.98 million - the highest since May 2004.
Higher prices took away all the income gains U.S. households received in March, the Commerce Department estimated Thursday. Consumer prices rose 0.3% during the month, matching the 0.3% rise in incomes. Real disposable incomes were unchanged in March after accounting for taxes and inflation. Consumer spending increased 0.4%, or just 0.1% after adjusting for rising prices. Core prices - which exclude food and energy - rose 0.2%, a tick higher than expected.
The average conforming 30-year fixed mortgage rate increased to 6.16% from 6.11% a week ago, while the average 15-year fixed mortgage rose to 5.71% from 5.70%. The average rate on 30-year jumbo loans rose to 7.35%. Adjustable mortgage rates also tacked on gains, with the average one-year ARM jumping to 6.96% and the 5/1 ARM rising to 5.96% from 5.92%.
Exxon Mobil Corp on Thursday said its first-quarter earnings rose 17 percent on crude oil prices that surged to record levels during the quarter.
Paul Kasriel: "It sure is a good thing that $150 billion of checks from the IRS are in the mail to U.S. households because these same households experienced an evaporation in paper wealth in February to the tune of about $544 billion according to my admittedly back-of-the-envelope arithmetic. It was reported today that the Case-Shiller house price index for 20 major metropolitan areas fell 2.66% month-to-month in February. Applying that percentage decline in house prices to the fourth-quarter value of $20,154.7 billion for household residential real estate from the Fed's flow-of-funds data yields a decline of $536 billion. Now, this is a very rough approximation for at least two reasons. Firstly, the Case-Shiller price index is for only 20 metropolitan areas, not the whole country. So, the Case-Shiller index captures the decline in house prices in the Manhattan, New York area but not the Manhattan, Kansas area. Second, the value of residential real estate in the Fed's flow-of-funds accounts is based on the OFHEO house price index. But even with these qualifications, I feel confident in saying that the value of households' residential real estate assets fell in February by some multiple of the aggregate value of the checks households will receive as part of the Economic Stimulus Act of 2008."
Contradicting Ballmer's recent public statements, Microsoft privately has indicated it might be willing to boost its offer to as much as $33 per share, up from the bid's initial value of $31 per share, the Journal reported Wednesday.
Bob Lang: "Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.This tells us the Fed is still very worried about the affects of the banking crisis, housing mess and credit crunch. This deadly trio is so overwhelming that the Fed may not only cut more, but may keep rates LOW for a very long time to come. This of course is not a precedent...but is still quite dangerous. The credit markets have not loosened up, on the contrary... lenders have become reluctant to lend to businesses, while home equity loans are being locked up or reduced to protect equity that continues to deteriorate. The big issues are housing, spending and jobs and the Fed is all to aware of it."
Nouriel Roubini: First, the Q1 GDP figures were ugly. The headline +0.6% hides a fall in real final sales of domestic product as a build-up of inventories of unsold homes added 0.8% to GDP; the payback will come in Q2 as unsold inventories are unwound. In Q4 GDP growth was also 0.6% but final sales growth was a strong 2.4% and a run down of inventory of 1.8% subtracted that much to GDP. So with final sales growth slowing from +2.4% or a -0.2% the collapse in final demand in Q1 is extremely sharp. We were already in a recession in Q1 that will get much worse in Q2. Second, the Fed has signaled a pause but the FOMC statement was extremely dovish and stressing the weakness in growth and the problems in the financial markets. Yesterday, the Fed had to provide to the media - on deep background - further explanation of the meaning of the statement to signal that a "pause" had started as the statement was initially read as ambiguous. But in practice this pause will be short-lived as a significantly worsening economy will force the Fed to keep on cutting rates starting in Q3. So, this will not be much of a pause, just a most brief interruption, on a path of further lower Fed Fund rates."
Guess who wants to tax your 401k and other retirement accounts now? The answer is Nancy Pelosi, who wants a windfall tax on all stock profits, including retirement funds, to benefit the 12 million illegal immigrants and other unemployed minorities so they can experience a higher standard of living like the rest of the Americans! It wasn't enough that she took impeachment off the table!
George Ure : "The dollar has only 26.39% of the purchasing power it had in 1976."
Governments added 76,800 jobs in the first three months of 2008, the Bureau of Labor Statistics reports. That's the biggest jump in first-quarter hiring since a boom in 2002 that followed the 9/11 terrorist attacks. Big government means big taxes, big deficits, a lower standard of living, less freedoms, and a quality of life headed in the soup.
Why invest in a Treasury bond that has a yield below the inflation rate? That is an insane way to invest.
Home Depot Inc.will reduce its new store capital spending by about $1 billion over the next three years to focus on its existing stores as it has been hurt by the slowdown in the home market. The retailer said it'll no longer pursue the opening of about 50 U.S. stores that have been in its new store pipeline, in some cases for more than 10 years. It will take a charge of about $400 million. Home Depot also will shut 15 underperforming U.S. stores and take another charge of $186 million. The closings will affect 1,300 staff, Home Depot said.
The Timken Company plans to increase its base prices on hot-rolled, cold-finished and thermal-treated special bar quality products by up to $50 per ton, based on size. It said the price increase would be effective with shipments beginning on July 1 and that raw-material surcharges will remain in effect.
Marathon Oil Corp said on Thursday first-quarter earnings edged up 2 percent as profits from record oil prices outweighed weak margins at its refining business. Net income rose to $731 million from $717 million a year earlier.
The Oil Drum: "At the end of a cold and stormy winter, China has just 12 days of coal reserves at most power stations. Some provinces, including Hebei, bordering Beijing, have less than a week's coal left. This is a record low, the state electricity regulatory commission revealed on Tuesday."
Barely half of Generation Y pays its bills on time and a third of all adults don't know their credit scores, a financial survey released Tuesday has found. The joint survey of 1,001 Americans, conducted by Princeton Survey Research Associates International for the National Foundation for Credit Counseling and MSN Money, found an America largely unprepared for economic hard times. "If there were ever a time that Americans needed to embrace financial literacy, it is now," said Susan C. Keating, president and CEO of the nonprofit counseling agency.
Higher utility bills are on the way with higher gas prices, higher coal prices, and higher raw materials and transportation costs.
Prudent Investor: "There are no signs that the Fed will veer from its textbook course of inciting hyper-inflation in order to satisfy the financial sector's unrelenting demand for more cheap money. As the Fed has not changed its questionable strategy, I see no reason to change mine and stay thus remain long commodities and precious metals."
Manufacturing activity contracted again in April for the third straight month, the Institute for Supply Management reported Thursday. The ISM index was steady at 48.6% in April, the same as in March.
U.S. natural gas inventories rose 86 billion cubic feet to 1,371 Bcf in the week ending April 25, the Energy Information Administration reported Thursday. Analysts at Global Insight expected an increase of 70 Bcf. Stocks were 255 Bcf less than last year at this time and 3 Bcf below the five-year average of 1,374 Bcf, EIA said.
Ford's April sales down 12% and GM's down 16.2%.
Gold for June delivery dropped $14.20, or 1.6%, to settle at $850.90 an ounce on the New York Mercantile Exchange. Crude for June delivery dropped 94 cents, or 0.8%, to settle at $112.52 a barrel on the New York Mercantile Exchange. June natural gas futures fell 28.2 cents to close at $10.561 per million British thermal units.
The Pentagon Thursday urged troops to get psychiatric counseling for wartime mental health problems, saying it will not be used to deny them security clearances for sensitive jobs.
A leader of the Democratic Party under Bill Clinton switched his allegiance to Barack Obama on Thursday and urged fellow Democrats to end the bruising nomination fight. "This has got to come to an end," former Democratic National Committee Chairman Joe Andrew told reporters in his hometown of Indianapolis just days before Tuesday's crucial state primary. He said he planned to call all the other superdelegates he knows and encourage them to back Obama. Bill Clinton appointed Andrew chairman of the DNC in 1999, and he led the party through the disputed 2000 presidential race before stepping down in 2001. Andrew endorsed Hillary Rodham Clinton last year on the day she declared her candidacy for the White House. In a lengthy letter explaining his decision, Andrew said he is switching his support because "a vote for Hillary Clinton is a vote to continue this process, and a vote to continue this process is a vote that assists (Republican) John McCain." "The ship is taking on water right now," Andrew said at the news conference. "We need to patch those holes, heal the rift and go forward to beat John McCain."
Former President Jimmy Carter has given Barack Obama a major boost by calling for the bitter Democratic nomination battle to end on June 3rd and speaking glowingly of his ability to “transform the image” of America.
Sun Micro to cut between 1,500 and 2,500 jobs.
Thursday the Dow closed at its session high of 1409, which is the first time since January that it closed above 1400. The S&P 500 is now 12% off its 52-week low, which was hit in March.
On 1 May 2003, President George Bush strode onto the deck of the aircraft carrier, USS Abraham Lincoln. Overhead was a banner saying "Mission Accomplished." President Bush said, "Major combat operations in Iraq have ended. In the battle of Iraq, the United States and our allies have prevailed." Five years later, some 140,000 U.S. troops remain in Iraq. More than 4,000 members of the U.S. military have died in the conflict. The number of Iraqi civilians killed in sectarian and other violence is sometimes estimated in the hundreds of thousands.
U.S. companies' planned layoffs jumped 68 percent in April from the prior month to the highest since September 2006, pointing to further deterioration in the labor market, a report showed on Thursday. Planned job cuts in U.S. companies totaled 90,015 last month, up from 53,579 in March and up 27 percent from a year earlier, employment consulting firm Challenger, Gray & Christmas Inc. reported. The April layoffs were the steepest since the 100,315 cuts announced in September 2006.
Erasing the drop in claims reported last week, first-time filings for state unemployment benefits surged 35,000 to 380,000 in the week ending April 26, the Labor Department reported Thursday.The four-week moving average of initial claims fell 6,500 to 363,750. For the week ending April 19, continuing jobless claims rose 74,000 to 3.02 million - the highest level since April 2004. The four-week average of continuing claims rose 16,750 to 2.98 million - the highest since May 2004.
Higher prices took away all the income gains U.S. households received in March, the Commerce Department estimated Thursday. Consumer prices rose 0.3% during the month, matching the 0.3% rise in incomes. Real disposable incomes were unchanged in March after accounting for taxes and inflation. Consumer spending increased 0.4%, or just 0.1% after adjusting for rising prices. Core prices - which exclude food and energy - rose 0.2%, a tick higher than expected.
The average conforming 30-year fixed mortgage rate increased to 6.16% from 6.11% a week ago, while the average 15-year fixed mortgage rose to 5.71% from 5.70%. The average rate on 30-year jumbo loans rose to 7.35%. Adjustable mortgage rates also tacked on gains, with the average one-year ARM jumping to 6.96% and the 5/1 ARM rising to 5.96% from 5.92%.
Exxon Mobil Corp on Thursday said its first-quarter earnings rose 17 percent on crude oil prices that surged to record levels during the quarter.
Paul Kasriel: "It sure is a good thing that $150 billion of checks from the IRS are in the mail to U.S. households because these same households experienced an evaporation in paper wealth in February to the tune of about $544 billion according to my admittedly back-of-the-envelope arithmetic. It was reported today that the Case-Shiller house price index for 20 major metropolitan areas fell 2.66% month-to-month in February. Applying that percentage decline in house prices to the fourth-quarter value of $20,154.7 billion for household residential real estate from the Fed's flow-of-funds data yields a decline of $536 billion. Now, this is a very rough approximation for at least two reasons. Firstly, the Case-Shiller price index is for only 20 metropolitan areas, not the whole country. So, the Case-Shiller index captures the decline in house prices in the Manhattan, New York area but not the Manhattan, Kansas area. Second, the value of residential real estate in the Fed's flow-of-funds accounts is based on the OFHEO house price index. But even with these qualifications, I feel confident in saying that the value of households' residential real estate assets fell in February by some multiple of the aggregate value of the checks households will receive as part of the Economic Stimulus Act of 2008."
Contradicting Ballmer's recent public statements, Microsoft privately has indicated it might be willing to boost its offer to as much as $33 per share, up from the bid's initial value of $31 per share, the Journal reported Wednesday.
Bob Lang: "Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.This tells us the Fed is still very worried about the affects of the banking crisis, housing mess and credit crunch. This deadly trio is so overwhelming that the Fed may not only cut more, but may keep rates LOW for a very long time to come. This of course is not a precedent...but is still quite dangerous. The credit markets have not loosened up, on the contrary... lenders have become reluctant to lend to businesses, while home equity loans are being locked up or reduced to protect equity that continues to deteriorate. The big issues are housing, spending and jobs and the Fed is all to aware of it."
Nouriel Roubini: First, the Q1 GDP figures were ugly. The headline +0.6% hides a fall in real final sales of domestic product as a build-up of inventories of unsold homes added 0.8% to GDP; the payback will come in Q2 as unsold inventories are unwound. In Q4 GDP growth was also 0.6% but final sales growth was a strong 2.4% and a run down of inventory of 1.8% subtracted that much to GDP. So with final sales growth slowing from +2.4% or a -0.2% the collapse in final demand in Q1 is extremely sharp. We were already in a recession in Q1 that will get much worse in Q2. Second, the Fed has signaled a pause but the FOMC statement was extremely dovish and stressing the weakness in growth and the problems in the financial markets. Yesterday, the Fed had to provide to the media - on deep background - further explanation of the meaning of the statement to signal that a "pause" had started as the statement was initially read as ambiguous. But in practice this pause will be short-lived as a significantly worsening economy will force the Fed to keep on cutting rates starting in Q3. So, this will not be much of a pause, just a most brief interruption, on a path of further lower Fed Fund rates."
Guess who wants to tax your 401k and other retirement accounts now? The answer is Nancy Pelosi, who wants a windfall tax on all stock profits, including retirement funds, to benefit the 12 million illegal immigrants and other unemployed minorities so they can experience a higher standard of living like the rest of the Americans! It wasn't enough that she took impeachment off the table!
George Ure : "The dollar has only 26.39% of the purchasing power it had in 1976."
Governments added 76,800 jobs in the first three months of 2008, the Bureau of Labor Statistics reports. That's the biggest jump in first-quarter hiring since a boom in 2002 that followed the 9/11 terrorist attacks. Big government means big taxes, big deficits, a lower standard of living, less freedoms, and a quality of life headed in the soup.
Why invest in a Treasury bond that has a yield below the inflation rate? That is an insane way to invest.
Home Depot Inc.will reduce its new store capital spending by about $1 billion over the next three years to focus on its existing stores as it has been hurt by the slowdown in the home market. The retailer said it'll no longer pursue the opening of about 50 U.S. stores that have been in its new store pipeline, in some cases for more than 10 years. It will take a charge of about $400 million. Home Depot also will shut 15 underperforming U.S. stores and take another charge of $186 million. The closings will affect 1,300 staff, Home Depot said.
The Timken Company plans to increase its base prices on hot-rolled, cold-finished and thermal-treated special bar quality products by up to $50 per ton, based on size. It said the price increase would be effective with shipments beginning on July 1 and that raw-material surcharges will remain in effect.
Marathon Oil Corp said on Thursday first-quarter earnings edged up 2 percent as profits from record oil prices outweighed weak margins at its refining business. Net income rose to $731 million from $717 million a year earlier.
The Oil Drum: "At the end of a cold and stormy winter, China has just 12 days of coal reserves at most power stations. Some provinces, including Hebei, bordering Beijing, have less than a week's coal left. This is a record low, the state electricity regulatory commission revealed on Tuesday."
Barely half of Generation Y pays its bills on time and a third of all adults don't know their credit scores, a financial survey released Tuesday has found. The joint survey of 1,001 Americans, conducted by Princeton Survey Research Associates International for the National Foundation for Credit Counseling and MSN Money, found an America largely unprepared for economic hard times. "If there were ever a time that Americans needed to embrace financial literacy, it is now," said Susan C. Keating, president and CEO of the nonprofit counseling agency.
Higher utility bills are on the way with higher gas prices, higher coal prices, and higher raw materials and transportation costs.
Prudent Investor: "There are no signs that the Fed will veer from its textbook course of inciting hyper-inflation in order to satisfy the financial sector's unrelenting demand for more cheap money. As the Fed has not changed its questionable strategy, I see no reason to change mine and stay thus remain long commodities and precious metals."
Manufacturing activity contracted again in April for the third straight month, the Institute for Supply Management reported Thursday. The ISM index was steady at 48.6% in April, the same as in March.
U.S. natural gas inventories rose 86 billion cubic feet to 1,371 Bcf in the week ending April 25, the Energy Information Administration reported Thursday. Analysts at Global Insight expected an increase of 70 Bcf. Stocks were 255 Bcf less than last year at this time and 3 Bcf below the five-year average of 1,374 Bcf, EIA said.
Ford's April sales down 12% and GM's down 16.2%.
Gold for June delivery dropped $14.20, or 1.6%, to settle at $850.90 an ounce on the New York Mercantile Exchange. Crude for June delivery dropped 94 cents, or 0.8%, to settle at $112.52 a barrel on the New York Mercantile Exchange. June natural gas futures fell 28.2 cents to close at $10.561 per million British thermal units.
The Pentagon Thursday urged troops to get psychiatric counseling for wartime mental health problems, saying it will not be used to deny them security clearances for sensitive jobs.
A leader of the Democratic Party under Bill Clinton switched his allegiance to Barack Obama on Thursday and urged fellow Democrats to end the bruising nomination fight. "This has got to come to an end," former Democratic National Committee Chairman Joe Andrew told reporters in his hometown of Indianapolis just days before Tuesday's crucial state primary. He said he planned to call all the other superdelegates he knows and encourage them to back Obama. Bill Clinton appointed Andrew chairman of the DNC in 1999, and he led the party through the disputed 2000 presidential race before stepping down in 2001. Andrew endorsed Hillary Rodham Clinton last year on the day she declared her candidacy for the White House. In a lengthy letter explaining his decision, Andrew said he is switching his support because "a vote for Hillary Clinton is a vote to continue this process, and a vote to continue this process is a vote that assists (Republican) John McCain." "The ship is taking on water right now," Andrew said at the news conference. "We need to patch those holes, heal the rift and go forward to beat John McCain."
Former President Jimmy Carter has given Barack Obama a major boost by calling for the bitter Democratic nomination battle to end on June 3rd and speaking glowingly of his ability to “transform the image” of America.
Sun Micro to cut between 1,500 and 2,500 jobs.
Thursday the Dow closed at its session high of 1409, which is the first time since January that it closed above 1400. The S&P 500 is now 12% off its 52-week low, which was hit in March.
Wednesday, April 30, 2008
Liquidity At The Fed
4/30/08 Liquidity At The Fed
The story for today was not that the FOMC decided to cut the Fed Funds Rate 0.25% to 2% and the Discount Rate by 0.25% to 2.25% or the fact that no signal was given about this being the last rate cut. The story is the worsening liquidity at the Fed. Why is this not front page news?
Paul Kasriel: "The non-partisan Congressional Budget Office is projecting that the fiscal year 2008 federal budget deficit will increase to $396 billion from $162 billion in fiscal year 2007. So, federal borrowing in this fiscal year is projected to be 2.4 times as much as last year. And on top of this increased federal borrowing, we now have the Federal Reserve providing $601 billion less support to the Treasury securities market at an annual rate. Is it any wonder why the yields on Treasury securities are rising now? You might want to put your IRS tax-rebate manna into some sort of saving account for your children so that they can pay the higher taxes needed to service the public debt that is being incurred to bailout imprudent borrowers and lenders in the recent housing bubble."
In addition, to meet growing financing needs, the Treasury announced that it is bringing back the 52-week T-bill. The first of the monthly auctions will take place on June 3. In a report to the government, a panel of experts said that the department must take more steps to meet the projected deficit. "The majority of members believe that the addition of the year bill combined with increases to the size and frequency of existing coupon debt over coming quarters will still not be sufficient to satisfy the increased financing needs of the Treasury over the intermediate and longer term," the panel said. Analysts believe the next option will be to bring back the 3-year note.
The Treasury Department said it is discussing with the Federal Reserve what options might be available if the central bank strains its balance sheet in its efforts to provide liquidity to the financial markets, said Anthony Ryan, the Treasury assistant secretary for financial markets. "We are in close contact...and will continue to work with them" to review all scenarios, Ryan told reporters at a briefing Wednesday in connection with the quarterly refunding auction of notes and bonds.
Struggling with mounting debt and rising prices, faced with the toughest economic times since the early 1990s, Americans are selling prized possessions online and at flea markets at alarming rates. At Craigslist, the number of for-sale listings has soared 70 percent since last July. In March, the number of listings more than doubled to almost 15 million from the year-ago period.
At AuctionPal.com, which helps novices sell things online, for-sale listings rose 66 percent from February to March, much faster than the 25 percent to 30 percent average monthly pace since the company was formed in September, CEO Maureen Ellenberger said. She said she was surprised to see that most of her clients desperately needed to sell items to raise cash.
Donations to the Salvation Army were down 20 percent in the January-to-March period. George Hood, the charity's national community relations and development secretary, said that was probably partly because people were selling their belongings instead.
Rob Hanna: "Don’t get too caught up in the reaction to the Fed tomorrow. The move likely won’t last longer than a day or two before reversing itself."
The ADP employment report showed that companies in the U.S. private sector added 10,000 jobs in April.
Growth in real gross domestic product in the first quarter was estimated at 0.6% for the second straight quarter, ahead of the 0.2% expected by economists. Final sales of domestic product fell 0.2%, while final domestic sales dropped 0.4%, the first decline since the recession of 1991. Rising inventories, likely an unintended buildup that could come back to haunt the economy, helped prevent a slump.
Overall employment costs rose by 0.7% in the first quarter, falling back from a 0.8% gain in the prior three-month period. In the first quarter, wage and salary costs rose by 0.8%. Benefit costs increased by 0.6% compared to 0.8% in the fourth quarter of 2007.
Microsoft Corp's board met on Wednesday to discuss its stand-off with Yahoo Inc over its $41.8 billion takeover bid, but failed to reach a decision on what to do next, according to a Wall Street Journal report. Microsoft Corp has considered earmarking $1.5 billion to retain Yahoo Inc employees if it acquires the company.
Starbucks Corp.will introduce two healthier drinks -- one a fresh-fruit-and-whey smoothie-like drink, the other an icy and sweet beverage developed with an Italian company. The company warned Wednesday its total operating margin by 2011 will remain below 2007's level of 11.2%, "driven by erosion in the U.S. business." That said, Starbucks is forecasting its earnings to pick up over the next three years. It pegged fiscal 2009 earnings to be as much as $1 a share, growing as high as a $1.50 a share in fiscal 2011. Starbucks posted fiscal second-quarter net income of $108.7 million, or 15 cents a share, compared with net income of $150.8 million, or 19 cents a share, in the year-earlier quarter. Sales rose 12% to $2.5 billion.
National Oilwell Varco Inc. said first-quarter net income rose 44% to $397.6 million, or $1.11 a share from $275.9 million, or 78 cents a share in the year-ago period. Revenue rose 245 to $2.69 billion.
GfK NOP's British Consumer Confidence Barometer fell in April to its lowest level in more than 15 years, the consulting firm said Wednesday. The barometer's main index fell five points to -24, the lowest reading since November 1992, with all five component indexes posting declines.
U.K. house prices fell by 1.1% in April, or 1% year-on-year, according to the Nationwide building society. The April decline was the sixth successive month-on-month fall and reflects weakening sentiment in the market brought about by poor affordability and tighter financial market conditions, the lender said. This is the first year-on-year fall in prices since March 1996 and brings the price of a typical house to 178,555 pounds.
Japan's jobless rate averaged 3.8% in the fiscal year ending March 31, its lowest level in 10 years, according to government released Wednesday. The declines mark the fifth straight fiscal year Japan's jobless rate has fallen since peaking at 5.4% in fiscal 2002.
Japan's central bank, facing sharply weakening growth in the economy as soaring raw materials costs bite, gave up its long-standing bias to raising rates on Wednesday and governor Masaaki Shirakawa warned that downside risks were likely to dominate over the next year.
Panera Bread lowered its second half per-share earnings target to a range of $1.17 to $1.28 from a range of $1.22 to $1.32. The company backed its 2008 earnings of $2 to $2.11
Earnings prospects for China's 1,500-plus listed companies have brightened after they posted better-than-forecast profits in the first quarter, bolstered by unexpectedly brisk economic growth. Six fund managers and securities analysts surveyed by Reuters on Wednesday predicted median profit growth for listed Chinese firms of 25 percent in 2008, up from a forecast of 20 percent about a month ago..
Oil fell to $115 a barrel on Wednesday as a Nigerian oil union agreed to return to work, raising hopes that production shut down in the OPEC oil exporter will come back on line.
According to the WSJ, Iraqi oil revenue will top a record $70 billion this year, a new forecast said.
Charles Plosser, the president of the Federal Reserve Bank of Philadelphia, is one of two central bankers who are part of the Fed's "hawkish" wing, warning that inflation is a big threat as the nation teeters close to recession. The other is Richard Fisher, president of the Federal Reserve Bank of Dallas. The two men fear that the Fed is cutting interest rates too fast, potentially fueling a run-up in consumer prices. Lower interest rates fuel economic activity by making borrowing cheaper, but that can lead to shortages and higher prices.
"We're at a watershed moment," said Jay P. Feldman, an economist with Credit Suisse in New York. "The era of consumers living beyond their incomes is at an end."
"This is going to usher in a period when consumption is going to be as weak as we've seen it in two decades," predicted Edward F. McKelvey, senior economist with Goldman, Sachs & Co. in New York.
If gas and milk price hikes seem steep, check out health insurance premiums. They have increased 10 times faster than incomes in recent years, a study shows. Workers with job-based coverage for their families saw earnings rise 3% from 2001 to 2005, while their health insurance premium contribution increased 30%, according to the study by researchers at the State Health Access Data Assistance Center at the University of Minnesota. The average cost nationally of family coverage during the period increased nearly $2,500, to $10,728 from $8,281. The average cost for job-based family coverage in California increased more than $2,650, to $10,551 from $7,898.
Iranian president Mahmoud Ahmadi-Nejad arrived in India in an effort to seal a $7.6bn gas pipeline deal. The trip has sparked tension between New Delhi and Washington, which fears the pipeline will fund Iran's nuclear ambitions.
Agriculture and development experts say the world has few alternatives to its growing dependence on fertilizer. As population increases and a rising global middle class demands more food, fertilizer is among the most effective strategies to increase crop yields. “Putting fertilizer on the ground on a one-acre plot can, in typical cases, raise an extra ton of output,” said Jeffrey D. Sachs, the Columbia University economist who has focused on eradicating poverty. “That’s the difference between life and death.” Overall global consumption of fertilizer increased by an estimated 31 percent from 1996 to 2008, driven by a 56 percent increase in developing countries, according to the International Fertilizer Industry Association.
This year, about a quarter of U.S. corn will go to feeding ethanol plants instead of poultry or livestock. "The price of grain is now directly tied to the price of oil," says Lester Brown, president of Earth Policy Institute, a Washington research group. "We used to have a grain economy and a fuel economy. But now they're beginning to fuse." The price of corn is up 23% this year.
Gov. Arnold Schwarzenegger said this week that the state's budget deficit could grow to as much as $20 billion as he prepared to unveil a revised spending plan for the coming year that is likely to include deep cuts in education, health services and prisons.
The Bank of England needs to take ``aggressive action'' and cut interest rates soon to avert a recession, policy maker David Blanchflower said.
A monthly Energy Department report said demand for finished petroleum products dropped 8.5% in February from January, and demand for gasoline fell 6.2%. Though some of that drop can be attributed to February's being a shorter month, it still suggests high prices are cutting American's appetite for fuel.m "That's a dramatic drop," said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill.
Dubai has told the EU that it will not sign any pacts which restrict how and where it will invest in the region. It considers the request a form a discrimination.
Euro assets have gone from a little over 18% of world reserves to nearly 26% in 2007. The British Pound has also gained, to 4.7% of total reserves in 2007.
General Motors Corp.reported a first-quarter loss of $3.25 billion after a year-earlier profit because of mortgage losses at a finance unit and plant shutdowns caused by a supplier strike. GM revised its outlook for US car sales in 2008 down to 15 million.
P&G reported earnings of $2.71 billion, or 82 cents a share, in the January-March quarter, compared with $2.51 billion, or 74 cents per share, a year earlier.
According to the Oil Drum, the risk of electricity blackouts in Southern California during the hottest days this summer is more than triple that of previous years because power plant additions have failed to keep up with demand, the state's grid manager said. The likelihood of a Stage 3 emergency, when reserves dip below 3% and power is cut to some customers to prevent a system collapse, rose to 10% for Southern California from 3% in last year's forecast, the California Independent System Operator said in a report Monday.
First Solar Inc.said first-quarter net income rose to $46.6 million, or 57 cents a share from $5 million, or 7 cents a share in the year-ago period. In the fourth quarter of 2007, First Solar earned $62.9 million, or 77 cents a share. First-quarter revenue rose to $197 million from $67 million in the year-ago period. Analysts had forecast earnings of 48 cents a share and revenue of $187 million for the thin film solar module maker, according to a survey by FactSet.
Garmin Ltd said Wednesday that its first quarter profit rose 6% to $147.8 million, or 69 cents a share, from $139.9 million, or 64 cents a share. Net sales during the period were $663.8 million, compared to $492.2 million.
SPX raised its earnings guidance for 2008 to a range of $6.20 to $6.40 a share from a range of $6.00 to $6.20.
Kraft Foods Inc posted a lower quarterly profit, hit by rising ingredient and commodity costs and spending on new products and marketing, although sales jumped. Profit was $608 million, or 40 cents a share, compared with $702 million, or 43 cents a share, a year earlier. Excluding one-time items, earnings were 44 cents a share, unchanged from a year earlier.
Shares in British fashion brand Burberry Group gained almost 4 percent on Wednesday as traders cited market talk of a possible bid from U.S. handbag maker Coach.
The killings of three U.S. soldiers in separate attacks in Baghdad pushed the American death toll for April up to 47, making it the deadliest month since September.
Kellogg Co. reported Wednesday that its first-quarter profit dipped 2 percent, despite recent price increases intended to offset higher costs.
U.S. crude inventories rose more than expected, up 3.8 million barrels to 319.9 million barrels in the week ending April 25, U.S. Energy Information Administration reported on Wednesday. Analysts surveyed by energy information provider Platts expected an increase of 1.6 million barrels. After the data, crude-oil futures for June delivery fell 23 cents to $115.40 a barrel on the New York Mercantile Exchange. Futures were trading higher before the report. Gasoline supplies fell by 1.5 million barrels in the latest week, while distillate stocks rose by 1.1 million barrels, EIA reported.
Time Warner Inc.Chief Executive Jeff Bewkes told analysts Wednesday that the company was "not satisfied" with a decline in sales of display advertising at AOL during the first quarter, which led to another quarter of slowing ad growth at the entire unit. AOL's display ad sales are expected to decline again in the second quarter, Chief Financial Offficer John Martin said.
Crude closed down $2.17, or 1.9%, at $113.46 a barrel on the New York Mercantile Exchange. Gold for June delivery was last up $6.40 at $871.50 an ounce on the New York Mercantile Exchange.
Centex saw a quarterly loss of $910.5 million, or $7.36 a share, compared to net income of $198.9 million, or $1.65 a share, a year ago. The loss from continuing operations for the fourth quarter was $7.34 a share. Revenue slid to $2.31 billion from $3.64 billion in the year-ago period.
Analysts polled by FactSet Research had expected a loss of $2.14 a share on revenue of $2.09 billion. Home closings during the period decreased 33% to 7,100 homes and average sales price slid 15% to $267,953.
The story for today was not that the FOMC decided to cut the Fed Funds Rate 0.25% to 2% and the Discount Rate by 0.25% to 2.25% or the fact that no signal was given about this being the last rate cut. The story is the worsening liquidity at the Fed. Why is this not front page news?
Paul Kasriel: "The non-partisan Congressional Budget Office is projecting that the fiscal year 2008 federal budget deficit will increase to $396 billion from $162 billion in fiscal year 2007. So, federal borrowing in this fiscal year is projected to be 2.4 times as much as last year. And on top of this increased federal borrowing, we now have the Federal Reserve providing $601 billion less support to the Treasury securities market at an annual rate. Is it any wonder why the yields on Treasury securities are rising now? You might want to put your IRS tax-rebate manna into some sort of saving account for your children so that they can pay the higher taxes needed to service the public debt that is being incurred to bailout imprudent borrowers and lenders in the recent housing bubble."
In addition, to meet growing financing needs, the Treasury announced that it is bringing back the 52-week T-bill. The first of the monthly auctions will take place on June 3. In a report to the government, a panel of experts said that the department must take more steps to meet the projected deficit. "The majority of members believe that the addition of the year bill combined with increases to the size and frequency of existing coupon debt over coming quarters will still not be sufficient to satisfy the increased financing needs of the Treasury over the intermediate and longer term," the panel said. Analysts believe the next option will be to bring back the 3-year note.
The Treasury Department said it is discussing with the Federal Reserve what options might be available if the central bank strains its balance sheet in its efforts to provide liquidity to the financial markets, said Anthony Ryan, the Treasury assistant secretary for financial markets. "We are in close contact...and will continue to work with them" to review all scenarios, Ryan told reporters at a briefing Wednesday in connection with the quarterly refunding auction of notes and bonds.
Struggling with mounting debt and rising prices, faced with the toughest economic times since the early 1990s, Americans are selling prized possessions online and at flea markets at alarming rates. At Craigslist, the number of for-sale listings has soared 70 percent since last July. In March, the number of listings more than doubled to almost 15 million from the year-ago period.
At AuctionPal.com, which helps novices sell things online, for-sale listings rose 66 percent from February to March, much faster than the 25 percent to 30 percent average monthly pace since the company was formed in September, CEO Maureen Ellenberger said. She said she was surprised to see that most of her clients desperately needed to sell items to raise cash.
Donations to the Salvation Army were down 20 percent in the January-to-March period. George Hood, the charity's national community relations and development secretary, said that was probably partly because people were selling their belongings instead.
Rob Hanna: "Don’t get too caught up in the reaction to the Fed tomorrow. The move likely won’t last longer than a day or two before reversing itself."
The ADP employment report showed that companies in the U.S. private sector added 10,000 jobs in April.
Growth in real gross domestic product in the first quarter was estimated at 0.6% for the second straight quarter, ahead of the 0.2% expected by economists. Final sales of domestic product fell 0.2%, while final domestic sales dropped 0.4%, the first decline since the recession of 1991. Rising inventories, likely an unintended buildup that could come back to haunt the economy, helped prevent a slump.
Overall employment costs rose by 0.7% in the first quarter, falling back from a 0.8% gain in the prior three-month period. In the first quarter, wage and salary costs rose by 0.8%. Benefit costs increased by 0.6% compared to 0.8% in the fourth quarter of 2007.
Microsoft Corp's board met on Wednesday to discuss its stand-off with Yahoo Inc over its $41.8 billion takeover bid, but failed to reach a decision on what to do next, according to a Wall Street Journal report. Microsoft Corp has considered earmarking $1.5 billion to retain Yahoo Inc employees if it acquires the company.
Starbucks Corp.will introduce two healthier drinks -- one a fresh-fruit-and-whey smoothie-like drink, the other an icy and sweet beverage developed with an Italian company. The company warned Wednesday its total operating margin by 2011 will remain below 2007's level of 11.2%, "driven by erosion in the U.S. business." That said, Starbucks is forecasting its earnings to pick up over the next three years. It pegged fiscal 2009 earnings to be as much as $1 a share, growing as high as a $1.50 a share in fiscal 2011. Starbucks posted fiscal second-quarter net income of $108.7 million, or 15 cents a share, compared with net income of $150.8 million, or 19 cents a share, in the year-earlier quarter. Sales rose 12% to $2.5 billion.
National Oilwell Varco Inc. said first-quarter net income rose 44% to $397.6 million, or $1.11 a share from $275.9 million, or 78 cents a share in the year-ago period. Revenue rose 245 to $2.69 billion.
GfK NOP's British Consumer Confidence Barometer fell in April to its lowest level in more than 15 years, the consulting firm said Wednesday. The barometer's main index fell five points to -24, the lowest reading since November 1992, with all five component indexes posting declines.
U.K. house prices fell by 1.1% in April, or 1% year-on-year, according to the Nationwide building society. The April decline was the sixth successive month-on-month fall and reflects weakening sentiment in the market brought about by poor affordability and tighter financial market conditions, the lender said. This is the first year-on-year fall in prices since March 1996 and brings the price of a typical house to 178,555 pounds.
Japan's jobless rate averaged 3.8% in the fiscal year ending March 31, its lowest level in 10 years, according to government released Wednesday. The declines mark the fifth straight fiscal year Japan's jobless rate has fallen since peaking at 5.4% in fiscal 2002.
Japan's central bank, facing sharply weakening growth in the economy as soaring raw materials costs bite, gave up its long-standing bias to raising rates on Wednesday and governor Masaaki Shirakawa warned that downside risks were likely to dominate over the next year.
Panera Bread lowered its second half per-share earnings target to a range of $1.17 to $1.28 from a range of $1.22 to $1.32. The company backed its 2008 earnings of $2 to $2.11
Earnings prospects for China's 1,500-plus listed companies have brightened after they posted better-than-forecast profits in the first quarter, bolstered by unexpectedly brisk economic growth. Six fund managers and securities analysts surveyed by Reuters on Wednesday predicted median profit growth for listed Chinese firms of 25 percent in 2008, up from a forecast of 20 percent about a month ago..
Oil fell to $115 a barrel on Wednesday as a Nigerian oil union agreed to return to work, raising hopes that production shut down in the OPEC oil exporter will come back on line.
According to the WSJ, Iraqi oil revenue will top a record $70 billion this year, a new forecast said.
Charles Plosser, the president of the Federal Reserve Bank of Philadelphia, is one of two central bankers who are part of the Fed's "hawkish" wing, warning that inflation is a big threat as the nation teeters close to recession. The other is Richard Fisher, president of the Federal Reserve Bank of Dallas. The two men fear that the Fed is cutting interest rates too fast, potentially fueling a run-up in consumer prices. Lower interest rates fuel economic activity by making borrowing cheaper, but that can lead to shortages and higher prices.
"We're at a watershed moment," said Jay P. Feldman, an economist with Credit Suisse in New York. "The era of consumers living beyond their incomes is at an end."
"This is going to usher in a period when consumption is going to be as weak as we've seen it in two decades," predicted Edward F. McKelvey, senior economist with Goldman, Sachs & Co. in New York.
If gas and milk price hikes seem steep, check out health insurance premiums. They have increased 10 times faster than incomes in recent years, a study shows. Workers with job-based coverage for their families saw earnings rise 3% from 2001 to 2005, while their health insurance premium contribution increased 30%, according to the study by researchers at the State Health Access Data Assistance Center at the University of Minnesota. The average cost nationally of family coverage during the period increased nearly $2,500, to $10,728 from $8,281. The average cost for job-based family coverage in California increased more than $2,650, to $10,551 from $7,898.
Iranian president Mahmoud Ahmadi-Nejad arrived in India in an effort to seal a $7.6bn gas pipeline deal. The trip has sparked tension between New Delhi and Washington, which fears the pipeline will fund Iran's nuclear ambitions.
Agriculture and development experts say the world has few alternatives to its growing dependence on fertilizer. As population increases and a rising global middle class demands more food, fertilizer is among the most effective strategies to increase crop yields. “Putting fertilizer on the ground on a one-acre plot can, in typical cases, raise an extra ton of output,” said Jeffrey D. Sachs, the Columbia University economist who has focused on eradicating poverty. “That’s the difference between life and death.” Overall global consumption of fertilizer increased by an estimated 31 percent from 1996 to 2008, driven by a 56 percent increase in developing countries, according to the International Fertilizer Industry Association.
This year, about a quarter of U.S. corn will go to feeding ethanol plants instead of poultry or livestock. "The price of grain is now directly tied to the price of oil," says Lester Brown, president of Earth Policy Institute, a Washington research group. "We used to have a grain economy and a fuel economy. But now they're beginning to fuse." The price of corn is up 23% this year.
Gov. Arnold Schwarzenegger said this week that the state's budget deficit could grow to as much as $20 billion as he prepared to unveil a revised spending plan for the coming year that is likely to include deep cuts in education, health services and prisons.
The Bank of England needs to take ``aggressive action'' and cut interest rates soon to avert a recession, policy maker David Blanchflower said.
A monthly Energy Department report said demand for finished petroleum products dropped 8.5% in February from January, and demand for gasoline fell 6.2%. Though some of that drop can be attributed to February's being a shorter month, it still suggests high prices are cutting American's appetite for fuel.m "That's a dramatic drop," said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill.
Dubai has told the EU that it will not sign any pacts which restrict how and where it will invest in the region. It considers the request a form a discrimination.
Euro assets have gone from a little over 18% of world reserves to nearly 26% in 2007. The British Pound has also gained, to 4.7% of total reserves in 2007.
General Motors Corp.reported a first-quarter loss of $3.25 billion after a year-earlier profit because of mortgage losses at a finance unit and plant shutdowns caused by a supplier strike. GM revised its outlook for US car sales in 2008 down to 15 million.
P&G reported earnings of $2.71 billion, or 82 cents a share, in the January-March quarter, compared with $2.51 billion, or 74 cents per share, a year earlier.
According to the Oil Drum, the risk of electricity blackouts in Southern California during the hottest days this summer is more than triple that of previous years because power plant additions have failed to keep up with demand, the state's grid manager said. The likelihood of a Stage 3 emergency, when reserves dip below 3% and power is cut to some customers to prevent a system collapse, rose to 10% for Southern California from 3% in last year's forecast, the California Independent System Operator said in a report Monday.
First Solar Inc.said first-quarter net income rose to $46.6 million, or 57 cents a share from $5 million, or 7 cents a share in the year-ago period. In the fourth quarter of 2007, First Solar earned $62.9 million, or 77 cents a share. First-quarter revenue rose to $197 million from $67 million in the year-ago period. Analysts had forecast earnings of 48 cents a share and revenue of $187 million for the thin film solar module maker, according to a survey by FactSet.
Garmin Ltd said Wednesday that its first quarter profit rose 6% to $147.8 million, or 69 cents a share, from $139.9 million, or 64 cents a share. Net sales during the period were $663.8 million, compared to $492.2 million.
SPX raised its earnings guidance for 2008 to a range of $6.20 to $6.40 a share from a range of $6.00 to $6.20.
Kraft Foods Inc posted a lower quarterly profit, hit by rising ingredient and commodity costs and spending on new products and marketing, although sales jumped. Profit was $608 million, or 40 cents a share, compared with $702 million, or 43 cents a share, a year earlier. Excluding one-time items, earnings were 44 cents a share, unchanged from a year earlier.
Shares in British fashion brand Burberry Group gained almost 4 percent on Wednesday as traders cited market talk of a possible bid from U.S. handbag maker Coach.
The killings of three U.S. soldiers in separate attacks in Baghdad pushed the American death toll for April up to 47, making it the deadliest month since September.
Kellogg Co. reported Wednesday that its first-quarter profit dipped 2 percent, despite recent price increases intended to offset higher costs.
U.S. crude inventories rose more than expected, up 3.8 million barrels to 319.9 million barrels in the week ending April 25, U.S. Energy Information Administration reported on Wednesday. Analysts surveyed by energy information provider Platts expected an increase of 1.6 million barrels. After the data, crude-oil futures for June delivery fell 23 cents to $115.40 a barrel on the New York Mercantile Exchange. Futures were trading higher before the report. Gasoline supplies fell by 1.5 million barrels in the latest week, while distillate stocks rose by 1.1 million barrels, EIA reported.
Time Warner Inc.Chief Executive Jeff Bewkes told analysts Wednesday that the company was "not satisfied" with a decline in sales of display advertising at AOL during the first quarter, which led to another quarter of slowing ad growth at the entire unit. AOL's display ad sales are expected to decline again in the second quarter, Chief Financial Offficer John Martin said.
Crude closed down $2.17, or 1.9%, at $113.46 a barrel on the New York Mercantile Exchange. Gold for June delivery was last up $6.40 at $871.50 an ounce on the New York Mercantile Exchange.
Centex saw a quarterly loss of $910.5 million, or $7.36 a share, compared to net income of $198.9 million, or $1.65 a share, a year ago. The loss from continuing operations for the fourth quarter was $7.34 a share. Revenue slid to $2.31 billion from $3.64 billion in the year-ago period.
Analysts polled by FactSet Research had expected a loss of $2.14 a share on revenue of $2.09 billion. Home closings during the period decreased 33% to 7,100 homes and average sales price slid 15% to $267,953.
Tuesday, April 29, 2008
Home Prices
4/29/08 Home Prices
A closely watched index shows that U.S. home prices fell by 12.7 percent in February versus last year, with 17 of the 20 metro areas reporting record annual declines.The Standard & Poor's/Case-Shiller home price index of 20 cities also showed Tuesday that home values in 10 cities plunged by double digits led by Las Vegas and Miami. Only Charlotte, N.C., posted a positive return year-over-year. All 20 metro areas have declined for six straight months.The narrower 10-city index set a record monthly decline of 13.6 percent.
U.K. retail sales volume in April was at its weakest level since November 2005, according to the Confederation of British Industry's monthly distributive trades survey released Tuesday. The survey found 52% of retailers said sales volumes declined compared to a year ago, while 25% said they were up, for a rounded balance of -26. That's down from +1 in March and weaker than the market consensus forecast for a reading of -4.
Shares of Indian software firms soared Tuesday after Finance Minister Palaniappan Chidambaram proposed extension of a tax-holiday plan for software exporters by an year, according to media reports. The tax-holiday, available to firms with software-development units in designated technology parks in the country, will now expire in March 2010, instead of March 2009.
Mining company Anglo American said Tuesday that its first-quarter production of platinum fell 24.2% to 428,600 ounces and that production of palladium, rhodium and nickel had fallen by a similar percentage. Gold production fell 11.6% to 23,700 ounces, while production of copper, iron ore and manganese ore rose.
Oil producer Royal Dutch Shell said first-quarter profit rose 25% to $9.08 billion as oil prices climbed.
Japanese banks and brokerages are expected to post a combined loss of more than 1 trillion yen ($9.6 billion) in investments tied to the U.S. mortgage market in the recently-ended fiscal year, according to a Japanese media report Tuesday. Japanese banks, which are due to release their fiscal 2007 earnings in the first half of next month, will push the tally for subprime-related losses above the 673 billion yen reported by Japan's top brokerages so far, according to a Nikkei newspaper report. Brokerages Mizuho Securities Co. and Nomura Holdings Inc.
According to the WSJ, among elected officials, Sen. Obama leads in endorsements from governors and senators. He is behind among House members by one, but both camps expect him to pull ahead unless he does badly in next Tuesday's Indiana and North Carolina primaries. If he doesn't stumble, enough elected Democrats are expected to back Sen. Obama after the last primaries June 3 to give him the delegate majority needed for nomination. Many of them see Sen. Obama as more electable than Sen. Clinton. But even those who don't have been impressed by his grass-roots organizing and fund raising and the legions of new voters he has attracted, particularly younger and African-American voters.
``The Fed will be indicating that if we aren't at the bottom, we're very close to the bottom of the rate cycle,'' said Simon Derrick, London-based head of currency strategy at Bank of New York Mellon Corp. ``The dollar is on the turn.''
China may revalue the yuan by 10 to 15 percent in the coming months as policy makers seek to temper inflation close to an 11-year high, according to Frank Gong, head of China research at JPMorgan Chase & Co.
India's central bank on Tuesday hiked the amount of cash banks must hold in reserve for the second time in two weeks, as it struggles to tame inflation in Asia's third-largest economy. In an unexpected move, The Reserve Bank of India raised the cash reserve ratio (CRR) by 25 basis points to 8.25 percent to reduce cash available for loans and try to check inflation now around three-year highs at 7.33 percent.
Royal Bank of Scotland Group Plc may cut about 7,000 jobs at its global securities and corporate lending unit, or almost 25 percent of the workforce, following the purchase of ABN Amro Holding NV's investment bank and credit market losses, two people with knowledge of the plan said.
Deutsche Bank on Tuesday reported its first quarterly loss in five years and revealed the drastic impact of the credit crisis on its profitable investment banking activities.
BP Plc's Forties pipeline prepared to start after a two-day shutdown.
Yahoo Inc. is outsourcing the Internet telephone functions of its instant messaging program to the startup Jajah. Jajah will connect the calls to and from users of Yahoo Messenger and handle billing and customer care, the startup said Tuesday. Terms of the deal where not announced. No employees are moving over to Jajah. Jajah's main product is a service that allows users to make cheap international calls by entering two phone numbers on the Jajah Web site — their own and the number they want to call. The company calls both numbers. If the calls are answered, Jajah connects them to each other, making it a high-tech version of the long-distance calling card.
According to Bloomberg, Eli Broad, a philanthropist and co- founder of KB Home, the fifth-largest U.S. homebuilder by revenue, said he expects home prices to drop another 20 percent. "I don't think we're anywhere near a bottom in housing,'' Broad told Bloomberg TV at the Milken Institute Conference in Beverly Hills, California. "We're going to have a big inventory of unsold, unoccupied homes that's going to take three or four years to clear out.'' Homebuilders, hurt by banks' stricter requirements for granting home loans and concern over the rising number of homeowners failing to pay their mortgages, have begun work on the fewest number of houses since 1991, according to the U.S. Department of Commerce."
Former World Bank chief James Wolfensohn thinks the credit crisis will take $1 trillion in losses out of the market.
Reuters reports that Lewis Ranieri who helped create the current mortgage market says that house prices are off more than most analysts think.
Reuters writes that the Fed is thinking about paying interest on bank reserves.
100-pound bags of North Dakota flour now above $50 -- more than double what they were a few months ago.
Standard & Poor's on Monday said chances have increased that it will downgrade credit ratings on some large U.S. banks, noting that current high ratings have little cushion for volatile earnings.
U.S. foreclosure filings more than doubled in the first quarter as payments rose for subprime adjustable mortgages and falling home prices left property owners unable to sell or refinance without losing money. Almost 650,000 properties were in some stage of foreclosure during the quarter, or 1 in every 194 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of foreclosure data, said today in a statement. The number was 112 percent above a year ago. Nevada, California and Arizona had the highest rates.
"A continued housing deflation of several trillion more dollars now threatens to impact the real economy which in turn might produce a reversal of financial market fortunes,", wrote Bill Gross, chief investment officer of PIMCO or Pacific Investment Management Co. in a May Investment Outlook letter on the firm's Web site. Gross added that from this point on, lowering the fed funds target rate, the benchmark lending rate which the Federal Reserve sets, might do more damage than good.
Valero said benchmark Gulf Coast gasoline margins narrowed by $6 per barrel, or 59%, in the first quarter versus the first quarter of 2007. Partially offsetting these weaker margins were substantially higher margins on diesel and jet fuel as global demand for these products remained high.
Countrywide Financial Corp posted a surprisingly large $893 million first-quarter loss, as it took more than $3 billion of charges for write-downs and bad loans
MasterCard's profit more than doubled in the first quarter, the card processor said Tuesday, as more customers outside the United States used their credit and debit cards for purchases.
Goldman Sachs on Tuesday added Chevron to its buy list as part of its upgrade of integrated oils to attractive from neutral. Goldman also spotlighted ConocoPhillips as a top pick. Better-than-expected first-quarter earnings from Conoco and Occidental Petroleum, "indicate that the Street may have become too cautious on the combination of price realizations, costs, and taxes for the integrated oils," Goldman said in a note to clients.
The April consumer confidence index declined to 62.3 from a March reading that was revised up to 65.9 from a prior estimate of 64.5. Consumer confidence is at its lowest since March 2003.
"This continued weakening suggests that not only has the feeble level of growth in the first quarter spilled over into the second quarter, but that economic conditions may have slowed even further," said Lynn Franco, director of consumer research at the private Conference Board.
The April expectations index rose to 50.1 from 49.4 in March. The expectations index has been lower only five times since 1967 - when they survey started.
The present situation index fell to 80.7 in April from 90.6 in March. That's the lowest since December 2003.
Consumers expect prices to rise 6.8% in the next 12 months, the highest inflation expectations since late 2005. In March, consumers' inflation expectations were 6.1%.
Masco slashed its 2008 profit target to 50 cents to 65 cents a share, down from 85 cents to $1.15 a share. In its earnings report, Masco said that it expects market conditions for the industry over the next several quarters "to be very challenging," although it insisted "the long-term fundamentals for the new home construction and home improvement products markets are positive."
It added that "business conditions remain difficult" in many markets and estimates that 2008 housing starts will decline an additional 25% to 33%, to a level of 900,000 to 1 million units. In the first quarter of 2008 alone, housing starts were off 30%, it said.
GMAC LLC, the auto and home lender that General Motors Corp. sold to a private equity group, posted a $589 million loss in the first quarter and said it may not make a profit until next year.
United Rentals forecast a 2008 profit of $2.65 to $2.85 a share on revenue of $3.4 billion to $3.5 billion.
Citigroup Inc.said late Tuesday it commenced an offering of about $3 billion in common stock and will include an over-allotment option to purchase additional shares.
Express Scripts sees a 2008 earnings from continuing operations of $2.95 to $3.03 a share.
Crude oil for June delivery dropped $3.12, or 2.6%, to close at $115.63 a barrel on the New York Mercantile Exchange. Gold for June delivery dropped $18.70 to end at $876.80 an ounce on the New York Mercantile Exchange.
Daniel Mudd, the chief executive of Fannie Mae, said he does not expect a real recovery in the U.S. housing market before 2010, Reuters reported Tuesday.
Medicare is lurching toward disaster and it is too late for the Bush Administration and Congress to do anything about it, U.S. Health and Human Services Secretary Michael Leavitt said on Tuesday. "There is serious danger here," he added. "Medicare is drifting towards disaster."
BG Group Plc, the U.K.'s third- largest natural gas producer, made an unsolicited offer to buy Origin Energy Ltd., Australia's second-biggest electricity and gas retailer, for A$12.91 billion ($12 billion) in cash. BG offered A$14.70 a share for Origin, the Sydney-based company said in a statement to the Australian Stock Exchange today. The proposal from BG is at a 40 percent premium to Origin's last traded share price of A$10.47 yesterday.
People close to Microsoft told CNBC yesterday that the software company is likely this week to wage a fight to replace Yahoo's board with directors of its own choosing.
Kathy Lien: "Although a pause from the Fed would be perceived as dollar positive, I continue to believe that the US economy will deteriorate further. Job losses will extend not only for another month, but for at least the next 3 or 4 months."
A closely watched index shows that U.S. home prices fell by 12.7 percent in February versus last year, with 17 of the 20 metro areas reporting record annual declines.The Standard & Poor's/Case-Shiller home price index of 20 cities also showed Tuesday that home values in 10 cities plunged by double digits led by Las Vegas and Miami. Only Charlotte, N.C., posted a positive return year-over-year. All 20 metro areas have declined for six straight months.The narrower 10-city index set a record monthly decline of 13.6 percent.
U.K. retail sales volume in April was at its weakest level since November 2005, according to the Confederation of British Industry's monthly distributive trades survey released Tuesday. The survey found 52% of retailers said sales volumes declined compared to a year ago, while 25% said they were up, for a rounded balance of -26. That's down from +1 in March and weaker than the market consensus forecast for a reading of -4.
Shares of Indian software firms soared Tuesday after Finance Minister Palaniappan Chidambaram proposed extension of a tax-holiday plan for software exporters by an year, according to media reports. The tax-holiday, available to firms with software-development units in designated technology parks in the country, will now expire in March 2010, instead of March 2009.
Mining company Anglo American said Tuesday that its first-quarter production of platinum fell 24.2% to 428,600 ounces and that production of palladium, rhodium and nickel had fallen by a similar percentage. Gold production fell 11.6% to 23,700 ounces, while production of copper, iron ore and manganese ore rose.
Oil producer Royal Dutch Shell said first-quarter profit rose 25% to $9.08 billion as oil prices climbed.
Japanese banks and brokerages are expected to post a combined loss of more than 1 trillion yen ($9.6 billion) in investments tied to the U.S. mortgage market in the recently-ended fiscal year, according to a Japanese media report Tuesday. Japanese banks, which are due to release their fiscal 2007 earnings in the first half of next month, will push the tally for subprime-related losses above the 673 billion yen reported by Japan's top brokerages so far, according to a Nikkei newspaper report. Brokerages Mizuho Securities Co. and Nomura Holdings Inc.
According to the WSJ, among elected officials, Sen. Obama leads in endorsements from governors and senators. He is behind among House members by one, but both camps expect him to pull ahead unless he does badly in next Tuesday's Indiana and North Carolina primaries. If he doesn't stumble, enough elected Democrats are expected to back Sen. Obama after the last primaries June 3 to give him the delegate majority needed for nomination. Many of them see Sen. Obama as more electable than Sen. Clinton. But even those who don't have been impressed by his grass-roots organizing and fund raising and the legions of new voters he has attracted, particularly younger and African-American voters.
``The Fed will be indicating that if we aren't at the bottom, we're very close to the bottom of the rate cycle,'' said Simon Derrick, London-based head of currency strategy at Bank of New York Mellon Corp. ``The dollar is on the turn.''
China may revalue the yuan by 10 to 15 percent in the coming months as policy makers seek to temper inflation close to an 11-year high, according to Frank Gong, head of China research at JPMorgan Chase & Co.
India's central bank on Tuesday hiked the amount of cash banks must hold in reserve for the second time in two weeks, as it struggles to tame inflation in Asia's third-largest economy. In an unexpected move, The Reserve Bank of India raised the cash reserve ratio (CRR) by 25 basis points to 8.25 percent to reduce cash available for loans and try to check inflation now around three-year highs at 7.33 percent.
Royal Bank of Scotland Group Plc may cut about 7,000 jobs at its global securities and corporate lending unit, or almost 25 percent of the workforce, following the purchase of ABN Amro Holding NV's investment bank and credit market losses, two people with knowledge of the plan said.
Deutsche Bank on Tuesday reported its first quarterly loss in five years and revealed the drastic impact of the credit crisis on its profitable investment banking activities.
BP Plc's Forties pipeline prepared to start after a two-day shutdown.
Yahoo Inc. is outsourcing the Internet telephone functions of its instant messaging program to the startup Jajah. Jajah will connect the calls to and from users of Yahoo Messenger and handle billing and customer care, the startup said Tuesday. Terms of the deal where not announced. No employees are moving over to Jajah. Jajah's main product is a service that allows users to make cheap international calls by entering two phone numbers on the Jajah Web site — their own and the number they want to call. The company calls both numbers. If the calls are answered, Jajah connects them to each other, making it a high-tech version of the long-distance calling card.
According to Bloomberg, Eli Broad, a philanthropist and co- founder of KB Home, the fifth-largest U.S. homebuilder by revenue, said he expects home prices to drop another 20 percent. "I don't think we're anywhere near a bottom in housing,'' Broad told Bloomberg TV at the Milken Institute Conference in Beverly Hills, California. "We're going to have a big inventory of unsold, unoccupied homes that's going to take three or four years to clear out.'' Homebuilders, hurt by banks' stricter requirements for granting home loans and concern over the rising number of homeowners failing to pay their mortgages, have begun work on the fewest number of houses since 1991, according to the U.S. Department of Commerce."
Former World Bank chief James Wolfensohn thinks the credit crisis will take $1 trillion in losses out of the market.
Reuters reports that Lewis Ranieri who helped create the current mortgage market says that house prices are off more than most analysts think.
Reuters writes that the Fed is thinking about paying interest on bank reserves.
100-pound bags of North Dakota flour now above $50 -- more than double what they were a few months ago.
Standard & Poor's on Monday said chances have increased that it will downgrade credit ratings on some large U.S. banks, noting that current high ratings have little cushion for volatile earnings.
U.S. foreclosure filings more than doubled in the first quarter as payments rose for subprime adjustable mortgages and falling home prices left property owners unable to sell or refinance without losing money. Almost 650,000 properties were in some stage of foreclosure during the quarter, or 1 in every 194 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of foreclosure data, said today in a statement. The number was 112 percent above a year ago. Nevada, California and Arizona had the highest rates.
"A continued housing deflation of several trillion more dollars now threatens to impact the real economy which in turn might produce a reversal of financial market fortunes,", wrote Bill Gross, chief investment officer of PIMCO or Pacific Investment Management Co. in a May Investment Outlook letter on the firm's Web site. Gross added that from this point on, lowering the fed funds target rate, the benchmark lending rate which the Federal Reserve sets, might do more damage than good.
Valero said benchmark Gulf Coast gasoline margins narrowed by $6 per barrel, or 59%, in the first quarter versus the first quarter of 2007. Partially offsetting these weaker margins were substantially higher margins on diesel and jet fuel as global demand for these products remained high.
Countrywide Financial Corp posted a surprisingly large $893 million first-quarter loss, as it took more than $3 billion of charges for write-downs and bad loans
MasterCard's profit more than doubled in the first quarter, the card processor said Tuesday, as more customers outside the United States used their credit and debit cards for purchases.
Goldman Sachs on Tuesday added Chevron to its buy list as part of its upgrade of integrated oils to attractive from neutral. Goldman also spotlighted ConocoPhillips as a top pick. Better-than-expected first-quarter earnings from Conoco and Occidental Petroleum, "indicate that the Street may have become too cautious on the combination of price realizations, costs, and taxes for the integrated oils," Goldman said in a note to clients.
The April consumer confidence index declined to 62.3 from a March reading that was revised up to 65.9 from a prior estimate of 64.5. Consumer confidence is at its lowest since March 2003.
"This continued weakening suggests that not only has the feeble level of growth in the first quarter spilled over into the second quarter, but that economic conditions may have slowed even further," said Lynn Franco, director of consumer research at the private Conference Board.
The April expectations index rose to 50.1 from 49.4 in March. The expectations index has been lower only five times since 1967 - when they survey started.
The present situation index fell to 80.7 in April from 90.6 in March. That's the lowest since December 2003.
Consumers expect prices to rise 6.8% in the next 12 months, the highest inflation expectations since late 2005. In March, consumers' inflation expectations were 6.1%.
Masco slashed its 2008 profit target to 50 cents to 65 cents a share, down from 85 cents to $1.15 a share. In its earnings report, Masco said that it expects market conditions for the industry over the next several quarters "to be very challenging," although it insisted "the long-term fundamentals for the new home construction and home improvement products markets are positive."
It added that "business conditions remain difficult" in many markets and estimates that 2008 housing starts will decline an additional 25% to 33%, to a level of 900,000 to 1 million units. In the first quarter of 2008 alone, housing starts were off 30%, it said.
GMAC LLC, the auto and home lender that General Motors Corp. sold to a private equity group, posted a $589 million loss in the first quarter and said it may not make a profit until next year.
United Rentals forecast a 2008 profit of $2.65 to $2.85 a share on revenue of $3.4 billion to $3.5 billion.
Citigroup Inc.said late Tuesday it commenced an offering of about $3 billion in common stock and will include an over-allotment option to purchase additional shares.
Express Scripts sees a 2008 earnings from continuing operations of $2.95 to $3.03 a share.
Crude oil for June delivery dropped $3.12, or 2.6%, to close at $115.63 a barrel on the New York Mercantile Exchange. Gold for June delivery dropped $18.70 to end at $876.80 an ounce on the New York Mercantile Exchange.
Daniel Mudd, the chief executive of Fannie Mae, said he does not expect a real recovery in the U.S. housing market before 2010, Reuters reported Tuesday.
Medicare is lurching toward disaster and it is too late for the Bush Administration and Congress to do anything about it, U.S. Health and Human Services Secretary Michael Leavitt said on Tuesday. "There is serious danger here," he added. "Medicare is drifting towards disaster."
BG Group Plc, the U.K.'s third- largest natural gas producer, made an unsolicited offer to buy Origin Energy Ltd., Australia's second-biggest electricity and gas retailer, for A$12.91 billion ($12 billion) in cash. BG offered A$14.70 a share for Origin, the Sydney-based company said in a statement to the Australian Stock Exchange today. The proposal from BG is at a 40 percent premium to Origin's last traded share price of A$10.47 yesterday.
People close to Microsoft told CNBC yesterday that the software company is likely this week to wage a fight to replace Yahoo's board with directors of its own choosing.
Kathy Lien: "Although a pause from the Fed would be perceived as dollar positive, I continue to believe that the US economy will deteriorate further. Job losses will extend not only for another month, but for at least the next 3 or 4 months."
Monday, April 28, 2008
Oil
4/28/08 Oil
Oil prices hit an all-time high near $120 a barrel Monday after a weekend refinery strike closed a pipeline system that delivers a third of Britain's North Sea oil to refineries in the U.K.
OPEC President Chakib Khelil does not rule out oil prices reaching $200 a barrel, even though supply is adequate, because the market is driven by the dollar's slide, Algerian government newspaper El Moudjahid reported on Monday.
Continental Airlines Inc. said Sunday it would not pursue a combination with another carrier right away, a surprising move after weeks of growing speculation that it would join with United Airlines to create the world's biggest airline.
Maguire Properties Inc., the Los Angeles real-estate-investment trust, said its chairman and chief executive proposed a series of transactions through which he would acquire 75% of a slimmed-down version of the company. The deal values the company at $21 a share, a 23% premium to its closing price of $17.07 on Friday, Maguire said in a statement on Monday
Humana raised its earnings guidance for the year to a range of $4.10 to $4.35 a share..
Royal Bank of Scotland may cut 7,000 jobs in its global markets division, or about 25% of its workforce in that area, the Financial Times reported without attribution.
Mars Inc. announced an agreement to acquire Wm. Wrigley Jr. Co. for about $23 billion with financial backing from Warren Buffett's Berkshire Hathaway Inc.
The deal comes to $80 a share.
Mars said Wrigley will become a separate, stand-alone subsidiary, with Berkshire holding a minority stake. A Wrigley press statement said Berkshire Hathaway had committed to purchase an equity interest in the business for $2.1 billion at a "discount to the share price being paid to the stockholders of Wrigley." Funding for the roughly $23 billion Wrigley transaction includes about $11 billion from Mars, a $5.7 billion committed senior debt facility from Goldman Sachs Group Inc. (GS), and $4.4 billion of subordinated debt from Berkshire Hathaway. At closing, Berkshire will also buy a $2.1 billion stake in Wrigley at a discount to the price being paid to Wrigley shareholders.
Tracinda has amassed a 4.7% position in Ford and plans an offer to buy more shares at a 13% premium as Kerkorian endorses the auto makers turnaround efforts. Kerkorian announced a bid of $8.50 a share for up to 20 million shares.
The Russian central bank raised its main interest rates by a quarter of a percentage point, effective tomorrow, to curb inflation. The minimum rate for taking out one-day loans from the central bank in repurchase auctions will increase to 6.5 percent, the Moscow-based Bank Rossii said in an e-mailed statement today.
According to Bloomberg, Brazil's plan to become one of the world's biggest oil exporters hinges on exploiting crude six miles below the ocean surface in deposits so hot they can melt the metal used to carry uranium to nuclear plants. Tapping what may be the biggest oil finds in the Western Hemisphere in three decades will require equipment that can withstand 18,000 pounds per square inch of pressure, enough to crush a pickup truck, pipes that can carry oil at temperatures above 500 degrees Fahrenheit (260 Celsius) and drill bits that can penetrate layers of salt more than one mile thick.
Verizon Wireless had 1.5 million net additions taking it to 67.2 million total customers.
According to Bloomberg, the Japanese, who own $586.6 billion, or 12 percent of U.S. government debt, had their worst quarter in Treasuries this decade, losing 7 percent in the first three months of the year as the dollar fell to the lowest since 1995 versus the yen, Merrill Lynch & Co. indexes show. Dai-ichi Mutual Life Insurance Co., Meiji Yasuda Life Insurance Co. and Sumitomo Life Insurance Co., three of the nation's four-biggest insurers, would rather accept the world's lowest bond yields in Japan than buy U.S. debt.``It's too early to say the dollar will stop falling,'' said Masataka Horii, head of the investment team in Tokyo for the $53.1 billion Kokusai Global Sovereign Open, Asia's biggest bond fund. ``The U.S. economy will be slow for a while.''
PetroChina Co., the nation's biggest oil producer, said first-quarter profit fell 32 percent as losses at its refineries and a tax on oil sales eroded earnings from record crude prices.
John Hussman: "As a rule, once a market becomes overvalued and speculation becomes overextended, it becomes wise to panic before everyone else does, even at the risk of being early...We've now observed a dot-com bubble, a techology bubble, a general bubble in equities ending in 2000 but "echoing" to rich valuations in recent years (especially on the basis of normalized profit margins), a bubble in housing, a bubble in private equity and low-grade debt, a mini-bubble in Shanghai (which has lost about half its value in recent months), and now a bubble in commodities that is well underway. When, when will we learn to recognize these for what they are?...But presently, market conditions are strenuously overbought in an unfavorable Market Climate – a condition followed often enough by spectacular vertical losses to be taken as a serious risk, if not a forecast. We continue to be out of financials, in the belief that delinquencies and foreclosures are only presently entering the heavy season, that losses have not been taken, and that lending and liquidity will enter a second phase of crisis as capital ratios are compressed...Meanwhile, with 10-year Treasury yields no longer significantly negative in real terms, and increasing divergences in market action within the commodity space, we are rapidly cutting our exposure to commodities and oil."
Two- thirds of Microsoft's sales come from users outside the U.S. The company expects its tax rate to decline to 28% in the new fiscal year beginning July 1.
Loews Corp said on Monday first-quarter profit fell 14 percent as declining results from its insurance and tobacco units offset improved results from drilling operations.
Dozens of minor earthquakes shook Reno on Sunday as a series of temblors entered its third month and prompted some frazzled residents to leave their homes. More than 150 aftershocks have been recorded on the western edge of northern Nevada's largest city after a magnitude-4.7 quake hit Friday night, the strongest quake in a sequence that began Feb. 28. There were no reports of injuries or widespread damage.
Shareholders of Bear Stearns Cos. will be asked to vote on the proposed deal to sell the company to JPMorgan Chase & Co. at a special meeting on May 29, the investment bank said Monday. JPMorgan Chase is offering stock worth roughly $10 per share for Bear Stearns.
There is one element not discussed in the Microsoft-Yahoo battle. Bill Gates and Susan Decker of Yahoo both sit on the board of Berkshire Hathaway. Could Warren Buffett play a role in this saga?
The glut of homes on the U.S. housing market worsened in the first quarter, according to government data released Monday. The number of vacant homes in the United States rose by 1 million in the past year to a record 18.6 million, the Commerce Department said. Of those 18.6 million vacant homes, a record 2.3 million were for sale at the end of the first quarter, pushing the vacancy rate for owner-occupied units to a record 2.9%. Meanwhile, a record 4.1 million vacant homes are for rent, with the rental vacancy rate rising to 10.1%. The percentage of homes occupied by owners was steady at 67.8% in the first quarter, matching the lowest percentage in five years.
About 4 percent of the U.S. corn crop was planted as of April 20, compared with 9 percent a year earlier and the five- year average of 17 percent, the U.S. Department of Agriculture said April 21 in a report.
Visa's operating income fell during the quarter, to $349 million from a pro forma $394 million in the same quarter in 2007, hurt by higher advertising and marketing expenses and more money being set aside for litigation.
The Treasury Department expects to paydown $35 billion in the third fiscal quarter, down about $87 billion from the projection given in January, the government said Monday. The decrease is primarily due to lower receipts, redemptions of portfolio holdings by the Federal Reserve and less net issuance of state and local government series securities. For the fourth fiscal quarter, which begins in July, the government expects to borrow $112 billion. This assumes quarter-end cash balances of $45 billion on June 30 and $45 billion on September 30.
The average price of gasoline in the United States rose by 9 cents last week to a record $3.65 a gallon, the Energy Department reported Monday.
Crude closed up 23 cents, or 0.2%, at $118.75 a barrel on the New York Mercantile Exchange. Gold for June delivery gained $5.80, or 0.7%, to end at $895.50 an ounce on the New York Mercantile Exchange.
Exxon Mobil spokeswoman Margaret Ross said in an e-mail to MarketWatch that all of the oil giant's Nigeria production of about 800,000 barrels a day remained shut down Monday as the result of a labor dispute.
The Fed's intervention to stave off bankruptcy at Bear Stearns will come to be seen as "the worst policy mistake in a generation," said Vincent Reinhart, the former head of monetary affairs at the Fed.
Bombardments by suspected militants killed four U.S. soldiers Monday as troops tried to push Shiite fighters farther from the U.S.-protected Green Zone and out of range of their rockets and mortars. At least 44 American soldiers have been killed in Iraq in April, making it the deadliest month for U.S. forces since September.
Sagging pickup truck and sport utility vehicle sales have forced General Motors Corp. to shut down one shift each at four North American factories and lay off about 3,500 workers.
The Audit Bureau of Circulations reported Monday that average weekday circulation at 534 daily newspapers fell 3.6% for the six months ended March 31, compared with the year-earlier period.
Charles "Tremendous" Jones:"Loyalty is something you give regardless of what you get back, and in giving loyalty, you're getting more loyalty; and out of loyalty flow other great qualities."
Oil prices hit an all-time high near $120 a barrel Monday after a weekend refinery strike closed a pipeline system that delivers a third of Britain's North Sea oil to refineries in the U.K.
OPEC President Chakib Khelil does not rule out oil prices reaching $200 a barrel, even though supply is adequate, because the market is driven by the dollar's slide, Algerian government newspaper El Moudjahid reported on Monday.
Continental Airlines Inc. said Sunday it would not pursue a combination with another carrier right away, a surprising move after weeks of growing speculation that it would join with United Airlines to create the world's biggest airline.
Maguire Properties Inc., the Los Angeles real-estate-investment trust, said its chairman and chief executive proposed a series of transactions through which he would acquire 75% of a slimmed-down version of the company. The deal values the company at $21 a share, a 23% premium to its closing price of $17.07 on Friday, Maguire said in a statement on Monday
Humana raised its earnings guidance for the year to a range of $4.10 to $4.35 a share..
Royal Bank of Scotland may cut 7,000 jobs in its global markets division, or about 25% of its workforce in that area, the Financial Times reported without attribution.
Mars Inc. announced an agreement to acquire Wm. Wrigley Jr. Co. for about $23 billion with financial backing from Warren Buffett's Berkshire Hathaway Inc.
The deal comes to $80 a share.
Mars said Wrigley will become a separate, stand-alone subsidiary, with Berkshire holding a minority stake. A Wrigley press statement said Berkshire Hathaway had committed to purchase an equity interest in the business for $2.1 billion at a "discount to the share price being paid to the stockholders of Wrigley." Funding for the roughly $23 billion Wrigley transaction includes about $11 billion from Mars, a $5.7 billion committed senior debt facility from Goldman Sachs Group Inc. (GS), and $4.4 billion of subordinated debt from Berkshire Hathaway. At closing, Berkshire will also buy a $2.1 billion stake in Wrigley at a discount to the price being paid to Wrigley shareholders.
Tracinda has amassed a 4.7% position in Ford and plans an offer to buy more shares at a 13% premium as Kerkorian endorses the auto makers turnaround efforts. Kerkorian announced a bid of $8.50 a share for up to 20 million shares.
The Russian central bank raised its main interest rates by a quarter of a percentage point, effective tomorrow, to curb inflation. The minimum rate for taking out one-day loans from the central bank in repurchase auctions will increase to 6.5 percent, the Moscow-based Bank Rossii said in an e-mailed statement today.
According to Bloomberg, Brazil's plan to become one of the world's biggest oil exporters hinges on exploiting crude six miles below the ocean surface in deposits so hot they can melt the metal used to carry uranium to nuclear plants. Tapping what may be the biggest oil finds in the Western Hemisphere in three decades will require equipment that can withstand 18,000 pounds per square inch of pressure, enough to crush a pickup truck, pipes that can carry oil at temperatures above 500 degrees Fahrenheit (260 Celsius) and drill bits that can penetrate layers of salt more than one mile thick.
Verizon Wireless had 1.5 million net additions taking it to 67.2 million total customers.
According to Bloomberg, the Japanese, who own $586.6 billion, or 12 percent of U.S. government debt, had their worst quarter in Treasuries this decade, losing 7 percent in the first three months of the year as the dollar fell to the lowest since 1995 versus the yen, Merrill Lynch & Co. indexes show. Dai-ichi Mutual Life Insurance Co., Meiji Yasuda Life Insurance Co. and Sumitomo Life Insurance Co., three of the nation's four-biggest insurers, would rather accept the world's lowest bond yields in Japan than buy U.S. debt.``It's too early to say the dollar will stop falling,'' said Masataka Horii, head of the investment team in Tokyo for the $53.1 billion Kokusai Global Sovereign Open, Asia's biggest bond fund. ``The U.S. economy will be slow for a while.''
PetroChina Co., the nation's biggest oil producer, said first-quarter profit fell 32 percent as losses at its refineries and a tax on oil sales eroded earnings from record crude prices.
John Hussman: "As a rule, once a market becomes overvalued and speculation becomes overextended, it becomes wise to panic before everyone else does, even at the risk of being early...We've now observed a dot-com bubble, a techology bubble, a general bubble in equities ending in 2000 but "echoing" to rich valuations in recent years (especially on the basis of normalized profit margins), a bubble in housing, a bubble in private equity and low-grade debt, a mini-bubble in Shanghai (which has lost about half its value in recent months), and now a bubble in commodities that is well underway. When, when will we learn to recognize these for what they are?...But presently, market conditions are strenuously overbought in an unfavorable Market Climate – a condition followed often enough by spectacular vertical losses to be taken as a serious risk, if not a forecast. We continue to be out of financials, in the belief that delinquencies and foreclosures are only presently entering the heavy season, that losses have not been taken, and that lending and liquidity will enter a second phase of crisis as capital ratios are compressed...Meanwhile, with 10-year Treasury yields no longer significantly negative in real terms, and increasing divergences in market action within the commodity space, we are rapidly cutting our exposure to commodities and oil."
Two- thirds of Microsoft's sales come from users outside the U.S. The company expects its tax rate to decline to 28% in the new fiscal year beginning July 1.
Loews Corp said on Monday first-quarter profit fell 14 percent as declining results from its insurance and tobacco units offset improved results from drilling operations.
Dozens of minor earthquakes shook Reno on Sunday as a series of temblors entered its third month and prompted some frazzled residents to leave their homes. More than 150 aftershocks have been recorded on the western edge of northern Nevada's largest city after a magnitude-4.7 quake hit Friday night, the strongest quake in a sequence that began Feb. 28. There were no reports of injuries or widespread damage.
Shareholders of Bear Stearns Cos. will be asked to vote on the proposed deal to sell the company to JPMorgan Chase & Co. at a special meeting on May 29, the investment bank said Monday. JPMorgan Chase is offering stock worth roughly $10 per share for Bear Stearns.
There is one element not discussed in the Microsoft-Yahoo battle. Bill Gates and Susan Decker of Yahoo both sit on the board of Berkshire Hathaway. Could Warren Buffett play a role in this saga?
The glut of homes on the U.S. housing market worsened in the first quarter, according to government data released Monday. The number of vacant homes in the United States rose by 1 million in the past year to a record 18.6 million, the Commerce Department said. Of those 18.6 million vacant homes, a record 2.3 million were for sale at the end of the first quarter, pushing the vacancy rate for owner-occupied units to a record 2.9%. Meanwhile, a record 4.1 million vacant homes are for rent, with the rental vacancy rate rising to 10.1%. The percentage of homes occupied by owners was steady at 67.8% in the first quarter, matching the lowest percentage in five years.
About 4 percent of the U.S. corn crop was planted as of April 20, compared with 9 percent a year earlier and the five- year average of 17 percent, the U.S. Department of Agriculture said April 21 in a report.
Visa's operating income fell during the quarter, to $349 million from a pro forma $394 million in the same quarter in 2007, hurt by higher advertising and marketing expenses and more money being set aside for litigation.
The Treasury Department expects to paydown $35 billion in the third fiscal quarter, down about $87 billion from the projection given in January, the government said Monday. The decrease is primarily due to lower receipts, redemptions of portfolio holdings by the Federal Reserve and less net issuance of state and local government series securities. For the fourth fiscal quarter, which begins in July, the government expects to borrow $112 billion. This assumes quarter-end cash balances of $45 billion on June 30 and $45 billion on September 30.
The average price of gasoline in the United States rose by 9 cents last week to a record $3.65 a gallon, the Energy Department reported Monday.
Crude closed up 23 cents, or 0.2%, at $118.75 a barrel on the New York Mercantile Exchange. Gold for June delivery gained $5.80, or 0.7%, to end at $895.50 an ounce on the New York Mercantile Exchange.
Exxon Mobil spokeswoman Margaret Ross said in an e-mail to MarketWatch that all of the oil giant's Nigeria production of about 800,000 barrels a day remained shut down Monday as the result of a labor dispute.
The Fed's intervention to stave off bankruptcy at Bear Stearns will come to be seen as "the worst policy mistake in a generation," said Vincent Reinhart, the former head of monetary affairs at the Fed.
Bombardments by suspected militants killed four U.S. soldiers Monday as troops tried to push Shiite fighters farther from the U.S.-protected Green Zone and out of range of their rockets and mortars. At least 44 American soldiers have been killed in Iraq in April, making it the deadliest month for U.S. forces since September.
Sagging pickup truck and sport utility vehicle sales have forced General Motors Corp. to shut down one shift each at four North American factories and lay off about 3,500 workers.
The Audit Bureau of Circulations reported Monday that average weekday circulation at 534 daily newspapers fell 3.6% for the six months ended March 31, compared with the year-earlier period.
Charles "Tremendous" Jones:"Loyalty is something you give regardless of what you get back, and in giving loyalty, you're getting more loyalty; and out of loyalty flow other great qualities."
Sunday, April 27, 2008
Caution
4/26/08 Caution
Reuters reports the U.S. Midwest has enjoyed nearly 20 years without a major drought but forecasters worry the corn belt's luck could dry up this year, further squeezing tight global supplies amid soaring food prices. With its last major drought in 1988, the Midwest has reached its average span of 18.6 years between droughts. Considering that statistic and current weather conditions, Iowa State University extension climatologist Elwynn Taylor said the corn belt has a one in three chance of drought this year. "We do have to be prepared," Taylor said. "A 33 percent chance is high, that's a risk."
In a country with 20 percent of the world’s population, China accounts for only 2 percent of world consumption.
Houston-based regional carrier ExpressJet said Friday it is willing to listen to merger offers but rejected a buyout offer from competitor SkyWest because its bid of $3.50 per share was too low.
Hundreds of workers at Scotland's only oil refinery on Sunday began a 48-hour strike that has forced BP PLC to shut a pipeline system that delivers almost a third of Britain's North Sea oil. 1,200 workers at the Grangemouth refinery in central Scotland walked off the job. The pipeline brings in 700,000 barrels of oil a day from the North Sea to BP's Kinneil plant, which is powered from the Grangemouth site.
Losses at Redmond, Washington-based Microsoft's Internet business widened to $228 million last quarter and sales rose to $843 million, at the low end of company forecasts.
Eos Airlines, a premium-class airline operating flights between New York and London, said on Saturday that it filed for protection from its creditors under Chapter 11 of federal bankruptcy law and would wind down its operations. The all-business-class carrier had needed, and was unable to secure, additional capital in "today's extremely challenging economic and credit environment," the carrier's chief executive officer, Jack Williams, said in a statement.
Mike Burk: "The market has been in a pattern of higher highs and higher lows for over a month now...On average the OTC has been up 56% of the time in May with an average gain of 0.4%. During the 4th year of the Presidential Cycle it has been up 64% of the time with an average loss of 0.1% attributable to the 14.1% loss in 2000. The best May ever for the OTC was 1997 when it was up 10.2%...On average the SPX has also been up 56% of the time in May (since 1928) with an average loss of 0.2% (helped by a 22.1% loss in 1932 and a 22.9% loss in 1940). During the 4th year of the Presidential Cycle it has been up 70% of the time with an average loss of 1.4% (both 1932 and 1940 were 4th years in the Presidential Cycle). The best May ever for the SPX was 1990 when it rose 8.7%...The market is a bit overbought and there is little strength in the breadth indicators, but there could be some seasonal strength showing up near the end of the week.I expect the major indices to be higher on Friday May 2 than they were on Friday April 25."
The Oil Drum: "As easily accessible global stocks of oil dwindle, the world supply of oil and gas has been concentrated in a smaller and smaller number of hands over just the past decade. Some 80 percent of all reserves now are concentrated in fewer than 10 nations. The biggest consumers desperately want to protect their secure flows of oil and gas from this handful of key suppliers, while simultaneously preventing their rivals from inking deals with resource-rich nations."
According to Bloomberg, Microsoft Corp. Chief Executive Officer Steve Ballmer may start a fight to oust Yahoo! Inc.'s board and pave the way for a takeover, after the Internet company let his deadline pass without agreeing to a deal.
OPEC won't consider increasing crude output before September, even amid investor concern that record oil prices may cause a global economic recession, according to the group's president, Chakib Khelil.``OPEC will not increase crude oil output,'' Khelil, who is also the oil minister of Algeria, said in an interview today in Algiers. ``Supply is more than sufficient in the international market. Prices are not the consequence of demand and supply, they are the consequence of speculation.''
``What we're seeing now is a big shift in market sentiment regarding the Fed,'' said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG's Private Wealth Management unit in New York. ``The feeling is the Fed may pause after it meets next week.'' The two-year Treasury yield rose 29 basis points this week, or 0.29 percentage point, to 2.41 percent, according to BGCantor Market Data. The two-year note yield reached 2.50 percent yesterday, or 0.25 percentage point above the Fed's target for overnight loans between banks, the most since June 2006. The new two-year note auctioned April 23, with a 2 1/8 percent coupon, ended the week at 99 14/32.
Reuters reports the U.S. Midwest has enjoyed nearly 20 years without a major drought but forecasters worry the corn belt's luck could dry up this year, further squeezing tight global supplies amid soaring food prices. With its last major drought in 1988, the Midwest has reached its average span of 18.6 years between droughts. Considering that statistic and current weather conditions, Iowa State University extension climatologist Elwynn Taylor said the corn belt has a one in three chance of drought this year. "We do have to be prepared," Taylor said. "A 33 percent chance is high, that's a risk."
In a country with 20 percent of the world’s population, China accounts for only 2 percent of world consumption.
Houston-based regional carrier ExpressJet said Friday it is willing to listen to merger offers but rejected a buyout offer from competitor SkyWest because its bid of $3.50 per share was too low.
Hundreds of workers at Scotland's only oil refinery on Sunday began a 48-hour strike that has forced BP PLC to shut a pipeline system that delivers almost a third of Britain's North Sea oil. 1,200 workers at the Grangemouth refinery in central Scotland walked off the job. The pipeline brings in 700,000 barrels of oil a day from the North Sea to BP's Kinneil plant, which is powered from the Grangemouth site.
Losses at Redmond, Washington-based Microsoft's Internet business widened to $228 million last quarter and sales rose to $843 million, at the low end of company forecasts.
Eos Airlines, a premium-class airline operating flights between New York and London, said on Saturday that it filed for protection from its creditors under Chapter 11 of federal bankruptcy law and would wind down its operations. The all-business-class carrier had needed, and was unable to secure, additional capital in "today's extremely challenging economic and credit environment," the carrier's chief executive officer, Jack Williams, said in a statement.
Mike Burk: "The market has been in a pattern of higher highs and higher lows for over a month now...On average the OTC has been up 56% of the time in May with an average gain of 0.4%. During the 4th year of the Presidential Cycle it has been up 64% of the time with an average loss of 0.1% attributable to the 14.1% loss in 2000. The best May ever for the OTC was 1997 when it was up 10.2%...On average the SPX has also been up 56% of the time in May (since 1928) with an average loss of 0.2% (helped by a 22.1% loss in 1932 and a 22.9% loss in 1940). During the 4th year of the Presidential Cycle it has been up 70% of the time with an average loss of 1.4% (both 1932 and 1940 were 4th years in the Presidential Cycle). The best May ever for the SPX was 1990 when it rose 8.7%...The market is a bit overbought and there is little strength in the breadth indicators, but there could be some seasonal strength showing up near the end of the week.I expect the major indices to be higher on Friday May 2 than they were on Friday April 25."
The Oil Drum: "As easily accessible global stocks of oil dwindle, the world supply of oil and gas has been concentrated in a smaller and smaller number of hands over just the past decade. Some 80 percent of all reserves now are concentrated in fewer than 10 nations. The biggest consumers desperately want to protect their secure flows of oil and gas from this handful of key suppliers, while simultaneously preventing their rivals from inking deals with resource-rich nations."
According to Bloomberg, Microsoft Corp. Chief Executive Officer Steve Ballmer may start a fight to oust Yahoo! Inc.'s board and pave the way for a takeover, after the Internet company let his deadline pass without agreeing to a deal.
OPEC won't consider increasing crude output before September, even amid investor concern that record oil prices may cause a global economic recession, according to the group's president, Chakib Khelil.``OPEC will not increase crude oil output,'' Khelil, who is also the oil minister of Algeria, said in an interview today in Algiers. ``Supply is more than sufficient in the international market. Prices are not the consequence of demand and supply, they are the consequence of speculation.''
``What we're seeing now is a big shift in market sentiment regarding the Fed,'' said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG's Private Wealth Management unit in New York. ``The feeling is the Fed may pause after it meets next week.'' The two-year Treasury yield rose 29 basis points this week, or 0.29 percentage point, to 2.41 percent, according to BGCantor Market Data. The two-year note yield reached 2.50 percent yesterday, or 0.25 percentage point above the Fed's target for overnight loans between banks, the most since June 2006. The new two-year note auctioned April 23, with a 2 1/8 percent coupon, ended the week at 99 14/32.
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