5/23/08 Money Flows
The average price for a gallon of gasoline rose 3 cents in the last day to $3.83, a new record ahead of the Memorial Day Weekend, according to the Daily Fuel Gauge Report from AAA. A week ago, the price was $3.51 a gallon and a year ago it was $3.22 a gallon. A Rice professor says national fuel prices could reach $4.20 a gallon in coming days as Americans take to the roads.
BHP Biliton's proposed acquisition of Rio Tinto is facing closer scrutiny from European regulators over fears that it could push steel prices higher, according to a report in The Wall Street Journal Friday.
British oil field services firm Expro International , which agreed to a takeover in April, said it had received a higher approach worth 1.7 billion pounds ($3.4 billion) from U.S. rival Halliburton. Fast-growing Expro said the proposal from Halliburton, the world's second-biggest oil services company behind Schlumberger , was pitched at 1,525 pence per share and subject to conditions.
According to AMG Data Services, including ETF activity, Equity funds report net cash outflows totaling -$1.063 billion in the week ended 5/21/08 with Domestic funds reporting net outflows of -$2.865 billion and Non-domestic funds reporting net inflows of $1.802 billion; Excluding ETF activity, Equity funds report net cash inflows totaling $1.475 billion with Domestic funds reporting net inflows of $1.040 billion and Non-domestic funds reporting net inflows totaling $436 million.
Brett Steenbarger: "After money flows turned modestly positive in April, we've seen a resumption of dollar outflows in May. Indeed, we've seen net dollar outflows from the Dow stocks on 13 of the last 15 trading sessions.
Interestingly, 19 of the 30 Dow issues are showing net outflows for the last ten trading sessions; 11 are showing inflows despite recent market weakness."
Nearly 50 San Diego County dwellings per day were lost to foreclosure in April, as the tally of mortgage failures rose 169 percent above last year, DataQuick Information Systems reported yesterday. Buckling under the weight of risky adjustable-rate loans, many borrowers are giving up on ever bringing their debt current.
Nickel fell to the lowest in almost two years in London as a surplus over the past year discouraged buying. “You have a lack of interest in the metal after stainless-steel mills have been cutting output,” Leon Westgate, a metals analyst at Standard Bank Group, said. Aluminum gained for a third consecutive day, despite a 4.5% surge in inventories to a four-year high.
Chinese and Russian officials signed a $1 billion deal Friday to have Moscow build a nuclear fuel enrichment plant in China and supply uranium.
Brunswick Corp., one of the largest manufacturers and distributors of consumer marine products in the country, will cease production of its Bluewater Marine brands -- including Sea Pro, Sea Boss, Palmetto and Laguna boats -- with the upcoming 2009 model year, which commences July 1. As a result of this action, Brunswick will close its production facility in Newberry, SC, by the end of June.
GM is laying off 1,212 employees at its Pontiac Assembly Center in Pontiac and 747 employees at its Flint Assembly Plant in Flint.
French consumer spending unexpectedly declined for the second month in a row due to a fall in purchases of cars and clothes. A report from the statistical office INSEE said Friday that French consumer spending on manufactured goods, a major growth driver, dropped 0.8% in April from the prior month.
Joe Kay: "FBI agents who witnessed the torture of detainees at the US prison camp in Guantánamo Bay, Cuba created what they called a “war crimes” file documenting what they had seen, according to a report released Tuesday by the Justice Department’s Office of the Inspector General (OIG)."
Kimberly Clark said prices will be 6% to 8% higher on Kleenex facial tissue, Cottonelle and Scott bathroom tissue, Viva paper towels, Huggies diapers and Pull-Ups training pants.These products accounted for U.S. sales of about $4.5 billion in 2007.
Russian President Dmitry Medvedev and his Chinese counterpart, Hu Jintao, denounced U.S. plans to deploy a missile-defense system in Europe.The two leaders, in a joint communiqué signed in Beijing today, said both countries believe that creating a global missile-defense system and deploying it ``in certain regions'' won't ``assist international efforts on arms control and non- proliferation and strengthening trust between states.''
The U.S. housing market weakened further in April, with a flood of homes coming on the market even as sales and prices declined, the National Association of Realtors reported Friday. Resales of U.S. houses and condos dropped 1% to a seasonally adjusted annualized rate of 4.89 million from 4.94 million in March. Resales have sunk 17.5% in the past year and are down 33% from the peak in 2005.The inventory of unsold homes jumped 10.5% to 4.55 million, an "uncomfortably high" level, said Lawrence Yun, chief economist for the real estate trade group. Inventories represented an 11.2 month supply at the April sales pace, the highest since the records began in 1999.
Belgium-based InBev NV, the world's second largest brewer, is considering making an unsolicited offer for Anheuser-Busch, the world's third largest brewer.
July crude closed at $132.19 a barrel in New York, up $1.38 for the session to score a gain of 4.9% for the week. June natural gas finished at $11.857 per million British thermal units, up 15.7 cents for the day and up 6.9% for the week.
June gold closed at $925.80 an ounce Friday, up $7.50 for the session and 2.9% higher for the week.
With gasoline and diesel prices soaring to record levels, American drivers are cutting back sharply on the miles they travel, the Department of Transportation reported Friday. Total vehicle miles driven fell in March by 4.3%, or 11 billion miles, compared with the year earlier. It was the largest year-over-year decline in miles driven since the government began keeping records in 1942. Americans drive more than 3 trillion miles each year.
The dollar index was at 71.970, down from 72.147 in late North American trading Thursday.
The United States is already in a recession and it will be longer as well as deeper than many people expect, U.S. investor Warren Buffett said in an interview published in German magazine Der Spiegel on Saturday.
Saturday, May 24, 2008
Thursday, May 22, 2008
Rising Prices
5/22/08 Rising Prices
Through April 2008, core producer prices rose by 3.0% for the year, the highest since December 1991.
The Oil Drum: "In April world production of total liquids decreased by 400,000 barrels per day from March according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 86.76 million b/d. Average global production in 2007 was 85.41 million b/d according to the IEA. In the first four months of 2008 an average of 87.12 million b/d was produced. The EIA in their International Petroleum Monthly puts the average global 2007 production at 84.60 million b/d and for the first two months of 2008 at 85.80 million b/d."
Nouriel Roubini: "It looks increasingly likely that the deal of Bank of America (BAC) buying Countrywide (CFC) may collapse: according to many banking experts once BAC does its due diligence on this deal it will become obvious that Countrywide is effectively bankrupt (negative equity) and saddled with a mountain of litigation and potential liabilities whose size are likely to be extremely large and uncertain. The point that is becoming clear is that BAC will be better off paying the modest break-up fee and walk away from a deal that sucks in every dimension. So if CFC goes bankrupt (its bank subsidiary into a FDIC receivership and the holding company into Chapter 7 liquidation) what will be the systemic implication of the biggest banking bust in US history? Remember that CFC originated almost 20% of all mortgages in the US in the last few years. So the collapse of the biggest mortgage lender will have massive and systemic ripple effects in financial markets."
Activity in the British manufacturing sector is slowing, but prices of manufactured goods are likely to rise steeply in coming months, the Confederation of British Industry's monthly industrial trends survey for May indicated Thursday.
The world's leading banks have stepped up pressure to relax accounting rules with a plan aimed at breaking the "downward spiral" of huge writedowns, emergency fundraisings and fire-sales of assets, the Financial Times reported Thursday. A plan by the Institute of International Finance, an alliance of 300-plus companies chaired by Josef Ackermann, Deutsche Bank's chairman, would allow banks to value illiquid assets using historical, rather than market, prices, the report said.
Japan's trade surplus narrowed a larger-than-expected 46.3% in April from a year earlier, as surging crude oil prices pushed up the value of imports. Japan's net trade surplus fell to 485 billion yen ($4.7 billion) from 903.1 billion yen a year earlier, preliminary data from the Finance Ministry showed Thursday.
China's crude oil imports for the January to April period climbed 10% from a year earlier to 448.3 million barrels, according to data released by the General Administration of Customs Thursday. Imports for the month of April fell 4% to 106.80 million barrels, the bureau said.
UBS announced it would raise more than expected in the deeply discounted rights issue that was approved last month.The Swiss bank said it would offer shareholders seven new shares for every 20 held, with the new stock priced at SFr21. That would raise almost SFr16bn ($15.6bn), SFr1bn more than initially indicated. The rights offering is at a discount of over 30% to where the stock currently trades.
Rob Hanna: "So far I am not seeing anything that would lead me to believe there is a strong chance that the selloff has completely run its course."
First-time claims for state unemployment dropped by 9,000 to 365,000 on a seasonally adjusted basis in the week ending May 17, the Labor Department reported Thursday. Initial claims were the lowest since the week ended April 5. The four-week average of initial claims rose by 5,000 to 372,250. The number of continuing jobless claims was unchanged for the week ending May 10, at 3.07 million. The four-week average of those claims rose by 31,750, to 3.05 million.
According to Bloomberg, BCE Inc. plunged 15 percent in early trading in the U.S. as investors bet the Canadian phone company's record C$52 billion ($52.9 billion) leveraged buyout may collapse or be renegotiated at a lower price. Bondholders won an unexpected court ruling yesterday, allowing investors to challenge the LBO because BCE didn't take their interests into account. BCE fell to $32.19 at 7:38 a.m. in New York and may sink 14 percent to C$32 when trading opens in Canada, based on bids submitted to the Toronto Stock Exchange.
NRG Energy has made an unsolicited bid to buy competitor Calpine for about $11 billion in stock, the companies said Under the terms of that proposal, Calpine shareholders would receive 0.534 shares of NRG stock for every Calpine share.That would value Calpine shares at around $22.70 a share, giving shareholders a premium of about 6.7 percent based on the shares' Wednesday closing prices.
Rigzone: "The largest prize in Mexico's oil patch, the offshore Cantarell oil field, has seen output slide by nearly half to 1.2 million barrels a day at present. Many observers doubt Pemex can reverse waning output without selling exploration blocks to outside firms - a prospect currently illegal - but oil field service companies will see increased demand for their equipment and know-how regardless of the country's overall production."
India Times: " MUMBAI: As crude oil prices keep soaring and the Centre refuses to bail out public sector oil marketing companies, which are under tremendous strain, the oil crisis has literally reached your neighbourhood gas station. Vehicle owners can no longer be sure that petrol or diesel will be available on demand. Beginning Tuesday, Bharat Petroleum Corporation Limited has put its petrol pumps across the country on a "rationed" supply. BPCL has adopted the drastic system because of a severe cash crunch for buying oil products."
Ford Motor Co. no longer expects to return to profitability by 2009 and is cutting North American production of pickups and SUVs for the rest of this year as high gas prices and the weak economy hurt sales, the company announced Thursday.
In the first quarter U.S. home prices fell a seasonally adjusted 1.7% -- the largest quarterly price decline on record, the Office of Federal Housing Enterprise Oversight reported Thursday. Prices fell 3.1% in the past year. In the prior quarter, prices declined 1.4%. For March, prices fell 0.4%. The OFHEO index is based on repeat sales of homes mortgaged through Fannie Mae and Freddie Mac. Prices for previously owned single-family homes fell in 43 states, with values in California and Nevada tumbling more than 8 percent, the Office of Federal Housing Enterprise Oversight, known as Ofheo, said. Potential buyers are waiting for prices to hit bottom, causing the inventory of unsold properties to swell. People who are ready to buy face difficulty obtaining financing as lenders tighten standards and cut back on the number of mortgages they are writing, according to Paul Kasriel, chief economist at Northern Trust Corp. in Chicago. ``It's a dismal picture, there's no way around it,'' Kasriel said. ``A complicating factor is the fact that so many homeowners owe more on their mortgages than their houses are worth. This is a financial crisis. You can't put lipstick on this pig.''
Brazil's state-run oil company Petroleo Brasileiro SA says it has struck more oil in ultra-deep waters near the huge offshore Tupi field. Petrobras says it discovered oil at 22,221 feet below the surface in the Santos Basin, 155 miles off the coast of the state of Sao Paulo.
With interest rates rising for U.S. Treasuries, what impact will that have on the demand for equities? Meanwhile, the Australian dollar gained to its highest since being allowed to trade freely in 1983 versus the U.S. dollar on speculation the nation's higher-yielding government bonds will draw investors and as commodities rose.
Natural-gas inventories rose by 85 billion cubic feet for the week ended May 16, the Energy Department said Thursday. Global Insight expected the data to show an increase of 82 billion. Total stocks now stand at 1.614 trillion cubic feet, down 302 billion cubic feet from the year-ago level and 3 billion cubic feet below the five-year average, the government data said.
Americans getting an early start on the Memorial Day weekend found that gasoline prices again sprinted to a new record high overnight, reaching a national average above $3.83 a gallon. Some analysts predict gas will break past $4 as early as next week.
Yahoo said it is postponing its annual meeting, which had been scheduled to take place on July 3. The company said it was postponing the meeting to "around the end of July," according to a Thursday filing with the U.S. Securities and Exchange Commission.
Crude fell back $2.36 to close at $130.81.
According to comScore, in April, Google (GOOG) picked up 1.8% more of the US market to move from 59.8% in March to 61.6%. Yahoo!'s share dropped from 21.3% to 20.4%, which is brutal. Microsoft say its piece move from 9.4% to 9.1%.
Through April 2008, core producer prices rose by 3.0% for the year, the highest since December 1991.
The Oil Drum: "In April world production of total liquids decreased by 400,000 barrels per day from March according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 86.76 million b/d. Average global production in 2007 was 85.41 million b/d according to the IEA. In the first four months of 2008 an average of 87.12 million b/d was produced. The EIA in their International Petroleum Monthly puts the average global 2007 production at 84.60 million b/d and for the first two months of 2008 at 85.80 million b/d."
Nouriel Roubini: "It looks increasingly likely that the deal of Bank of America (BAC) buying Countrywide (CFC) may collapse: according to many banking experts once BAC does its due diligence on this deal it will become obvious that Countrywide is effectively bankrupt (negative equity) and saddled with a mountain of litigation and potential liabilities whose size are likely to be extremely large and uncertain. The point that is becoming clear is that BAC will be better off paying the modest break-up fee and walk away from a deal that sucks in every dimension. So if CFC goes bankrupt (its bank subsidiary into a FDIC receivership and the holding company into Chapter 7 liquidation) what will be the systemic implication of the biggest banking bust in US history? Remember that CFC originated almost 20% of all mortgages in the US in the last few years. So the collapse of the biggest mortgage lender will have massive and systemic ripple effects in financial markets."
Activity in the British manufacturing sector is slowing, but prices of manufactured goods are likely to rise steeply in coming months, the Confederation of British Industry's monthly industrial trends survey for May indicated Thursday.
The world's leading banks have stepped up pressure to relax accounting rules with a plan aimed at breaking the "downward spiral" of huge writedowns, emergency fundraisings and fire-sales of assets, the Financial Times reported Thursday. A plan by the Institute of International Finance, an alliance of 300-plus companies chaired by Josef Ackermann, Deutsche Bank's chairman, would allow banks to value illiquid assets using historical, rather than market, prices, the report said.
Japan's trade surplus narrowed a larger-than-expected 46.3% in April from a year earlier, as surging crude oil prices pushed up the value of imports. Japan's net trade surplus fell to 485 billion yen ($4.7 billion) from 903.1 billion yen a year earlier, preliminary data from the Finance Ministry showed Thursday.
China's crude oil imports for the January to April period climbed 10% from a year earlier to 448.3 million barrels, according to data released by the General Administration of Customs Thursday. Imports for the month of April fell 4% to 106.80 million barrels, the bureau said.
UBS announced it would raise more than expected in the deeply discounted rights issue that was approved last month.The Swiss bank said it would offer shareholders seven new shares for every 20 held, with the new stock priced at SFr21. That would raise almost SFr16bn ($15.6bn), SFr1bn more than initially indicated. The rights offering is at a discount of over 30% to where the stock currently trades.
Rob Hanna: "So far I am not seeing anything that would lead me to believe there is a strong chance that the selloff has completely run its course."
First-time claims for state unemployment dropped by 9,000 to 365,000 on a seasonally adjusted basis in the week ending May 17, the Labor Department reported Thursday. Initial claims were the lowest since the week ended April 5. The four-week average of initial claims rose by 5,000 to 372,250. The number of continuing jobless claims was unchanged for the week ending May 10, at 3.07 million. The four-week average of those claims rose by 31,750, to 3.05 million.
According to Bloomberg, BCE Inc. plunged 15 percent in early trading in the U.S. as investors bet the Canadian phone company's record C$52 billion ($52.9 billion) leveraged buyout may collapse or be renegotiated at a lower price. Bondholders won an unexpected court ruling yesterday, allowing investors to challenge the LBO because BCE didn't take their interests into account. BCE fell to $32.19 at 7:38 a.m. in New York and may sink 14 percent to C$32 when trading opens in Canada, based on bids submitted to the Toronto Stock Exchange.
NRG Energy has made an unsolicited bid to buy competitor Calpine for about $11 billion in stock, the companies said Under the terms of that proposal, Calpine shareholders would receive 0.534 shares of NRG stock for every Calpine share.That would value Calpine shares at around $22.70 a share, giving shareholders a premium of about 6.7 percent based on the shares' Wednesday closing prices.
Rigzone: "The largest prize in Mexico's oil patch, the offshore Cantarell oil field, has seen output slide by nearly half to 1.2 million barrels a day at present. Many observers doubt Pemex can reverse waning output without selling exploration blocks to outside firms - a prospect currently illegal - but oil field service companies will see increased demand for their equipment and know-how regardless of the country's overall production."
India Times: " MUMBAI: As crude oil prices keep soaring and the Centre refuses to bail out public sector oil marketing companies, which are under tremendous strain, the oil crisis has literally reached your neighbourhood gas station. Vehicle owners can no longer be sure that petrol or diesel will be available on demand. Beginning Tuesday, Bharat Petroleum Corporation Limited has put its petrol pumps across the country on a "rationed" supply. BPCL has adopted the drastic system because of a severe cash crunch for buying oil products."
Ford Motor Co. no longer expects to return to profitability by 2009 and is cutting North American production of pickups and SUVs for the rest of this year as high gas prices and the weak economy hurt sales, the company announced Thursday.
In the first quarter U.S. home prices fell a seasonally adjusted 1.7% -- the largest quarterly price decline on record, the Office of Federal Housing Enterprise Oversight reported Thursday. Prices fell 3.1% in the past year. In the prior quarter, prices declined 1.4%. For March, prices fell 0.4%. The OFHEO index is based on repeat sales of homes mortgaged through Fannie Mae and Freddie Mac. Prices for previously owned single-family homes fell in 43 states, with values in California and Nevada tumbling more than 8 percent, the Office of Federal Housing Enterprise Oversight, known as Ofheo, said. Potential buyers are waiting for prices to hit bottom, causing the inventory of unsold properties to swell. People who are ready to buy face difficulty obtaining financing as lenders tighten standards and cut back on the number of mortgages they are writing, according to Paul Kasriel, chief economist at Northern Trust Corp. in Chicago. ``It's a dismal picture, there's no way around it,'' Kasriel said. ``A complicating factor is the fact that so many homeowners owe more on their mortgages than their houses are worth. This is a financial crisis. You can't put lipstick on this pig.''
Brazil's state-run oil company Petroleo Brasileiro SA says it has struck more oil in ultra-deep waters near the huge offshore Tupi field. Petrobras says it discovered oil at 22,221 feet below the surface in the Santos Basin, 155 miles off the coast of the state of Sao Paulo.
With interest rates rising for U.S. Treasuries, what impact will that have on the demand for equities? Meanwhile, the Australian dollar gained to its highest since being allowed to trade freely in 1983 versus the U.S. dollar on speculation the nation's higher-yielding government bonds will draw investors and as commodities rose.
Natural-gas inventories rose by 85 billion cubic feet for the week ended May 16, the Energy Department said Thursday. Global Insight expected the data to show an increase of 82 billion. Total stocks now stand at 1.614 trillion cubic feet, down 302 billion cubic feet from the year-ago level and 3 billion cubic feet below the five-year average, the government data said.
Americans getting an early start on the Memorial Day weekend found that gasoline prices again sprinted to a new record high overnight, reaching a national average above $3.83 a gallon. Some analysts predict gas will break past $4 as early as next week.
Yahoo said it is postponing its annual meeting, which had been scheduled to take place on July 3. The company said it was postponing the meeting to "around the end of July," according to a Thursday filing with the U.S. Securities and Exchange Commission.
Crude fell back $2.36 to close at $130.81.
According to comScore, in April, Google (GOOG) picked up 1.8% more of the US market to move from 59.8% in March to 61.6%. Yahoo!'s share dropped from 21.3% to 20.4%, which is brutal. Microsoft say its piece move from 9.4% to 9.1%.
The Forecast
5/21/08 The Forecast
The Federal Reserve on Wednesday cut its forecast for economic growth in 2008 and warned of higher inflation and unemployment but also signaled it was unlikely to cut interest rates again soon. Their forecast for headline inflation as measured by the personal consumption index jumped to a range of 3.1 to 3.4%, much higher than their previous forecast of a 2.1 to 2.4% rise.
Israel and Syria have started indirect talks with the aim of signing a comprehensive peace agreement, the first attempt in eight years to end the decades-old conflict between the two neighbors.
Barack Obama moved to the brink of the Democratic presidential nomination on Tuesday after a victory in the Oregon primary election that brought him within 64 delegates of the total needed to win the race.
Barack Obama has opened an 8-point national lead on John McCain as the U.S. presidential rivals turn their focus to a general election race, according to a Reuters/Zogby poll released on Wednesday.
"We've never had a nominee in the modern era who won a majority of the pledged delegates who did not win the nomination,'' said Tad Devine, a strategist for Democrat John Kerry's 2004 presidential bid.
The Bay Area housing market displayed its first positive sign in months as the volume of April sales rose by its highest percentage in at least 20 years. Real estate experts, however, warned that the trough of the real estate downturn still could lie ahead. A looser mortgage market and shoppers snagging bargains in areas hammered by foreclosures helped propel sales of existing homes more than 30 percent from March, according to DataQuick Information Systems. It was the first monthly sales gain in six months and the largest increase for that time period since at least 1988, when the La Jolla (San Diego County) research firm began tracking statistics.
Frank Barbera: "While we still believe there is a good chance that equities may not actually break down to new multi-month lows until the fall, there is nevertheless a high risk that prices are at present very close to a major interim peak.
According to Rigzone, oilfield services company Expro International Group Tuesday said Halliburton continues to carry out due diligence, which may or may not lead it to make an offer for Expro.
Brazil: The Blanket is Short
Claudio L. S. Haddad | May 21, 2008
The government is worried about the exchange rate appreciation and the current account deficit. At the same time, its primary expenses are increasing more than the growth rate of GDP. Apparently the government cannot or is not willing to see the direct relationship between the two facts. In trying to attain the impossible, resources will be wasted which will decrease the productivity of the economy and worsen the fiscal situation. In the recent years, Federal government primary expenditures have been increasing much faster than the GDP, rising from 15.9% of GDP in 2003 to 17.9% in 2007. This suggests that expenditures increased by 0.5% of GDP every year. According to Cristiano Romero (Valor 5/7) the payroll and the social security expenses should increase by 9% and 8.1% respectively in real terms this year. Besides, although the government estimates signal primary expenses equal to 18.2% of GDP for 2008, more realistic estimates suggest 18.8%, with the Federal Government primary surplus decreasing to 1.1% of GDP, corroborating the expansionist character of fiscal policy.
Applications for U.S. home mortgages fell to its second-lowest level of the year last week as interest rates rose, an industry group said Wednesday. The Mortgage Bankers association said its seasonally adjusted index of mortgage application activity fell 7.8 percent to 621.6 in the week ended May 16.
Shares of Red Robin Gourmet Burgers Inc. declined in late trading Tuesday, after soft restaurant sales in California, Arizona and Nevada tugged down quarterly profit. Earnings slipped 3 percent and missed Wall Street expectations.
Earnings slipped 3 percent and missed Wall Street expectations.
Average U.S. retail gasoline prices continued their move into record territory on Wednesday, with a rise of a penny to $3.81 a gallon for regular unleaded, according to the Daily Fuel Gauge Report from AAA.
American Airlines said on Wednesday it plans to cut domestic capacity by 11 percent to 12 percent this year as fuel prices reach record highs and the weak U.S. economy casts a shadow over the summer travel season.
Time Warner Inc. will get a $9.25 billion one-time cash dividend from its Time Warner Cable Inc. unit before spinning off the business to shareholders
More than 7,600 Bear Stearns Cos' employees, about 55 percent of its staff, are expected to lose their jobs as the troubled investment bank is absorbed into JPMorgan Chase & Co , JPMorgan Chief Executive James Dimon said Tuesday.
The American Petroleum Institute reported a fall of 4.1 million barrels in crude supplies for the week ended May 16. The Energy Department had reported a decline of 5.4 million barrels for the latest week. Motor gasoline supplies were up 820,000 barrels, the API said. The government had reported that supplies were down 800,000 barrels. Distillate supplies climbed by 2 million barrels, the API said. They were up 700,000 barrels, according to the Energy Department. Oil prices bolted to a new record above $132 a barrel Wednesday after the government reported that supplies of crude oil and gasoline fell unexpectedly last week.
Telecommunications gear maker Avaya is cutting about 400 jobs by the end of May due to the weak economy and slow sales of telecommunications equipment, the Associated Press reported Wednesday.
Boeing Co. will cut about 750 workers in Southern California, citing a "downturn in its satellite assembly and integration business."
July crude closed at $133.17 a barrel, up $4.19, or 3.3%, in New York. June gold closed at $928.60 an ounce Wednesday, up $8.40 for the session to mark its highest closing level in five weeks.
On Thursday, energy watchdog IEA is preparing a sharp downward revision of its global oil-supply forecast, a development that could further rattle the oil market. Oil hit a new record above $135, with supply worries, rising global demand and a slumping dollar keeping crude prices on an upward track.
The Federal Reserve on Wednesday cut its forecast for economic growth in 2008 and warned of higher inflation and unemployment but also signaled it was unlikely to cut interest rates again soon. Their forecast for headline inflation as measured by the personal consumption index jumped to a range of 3.1 to 3.4%, much higher than their previous forecast of a 2.1 to 2.4% rise.
Israel and Syria have started indirect talks with the aim of signing a comprehensive peace agreement, the first attempt in eight years to end the decades-old conflict between the two neighbors.
Barack Obama moved to the brink of the Democratic presidential nomination on Tuesday after a victory in the Oregon primary election that brought him within 64 delegates of the total needed to win the race.
Barack Obama has opened an 8-point national lead on John McCain as the U.S. presidential rivals turn their focus to a general election race, according to a Reuters/Zogby poll released on Wednesday.
"We've never had a nominee in the modern era who won a majority of the pledged delegates who did not win the nomination,'' said Tad Devine, a strategist for Democrat John Kerry's 2004 presidential bid.
The Bay Area housing market displayed its first positive sign in months as the volume of April sales rose by its highest percentage in at least 20 years. Real estate experts, however, warned that the trough of the real estate downturn still could lie ahead. A looser mortgage market and shoppers snagging bargains in areas hammered by foreclosures helped propel sales of existing homes more than 30 percent from March, according to DataQuick Information Systems. It was the first monthly sales gain in six months and the largest increase for that time period since at least 1988, when the La Jolla (San Diego County) research firm began tracking statistics.
Frank Barbera: "While we still believe there is a good chance that equities may not actually break down to new multi-month lows until the fall, there is nevertheless a high risk that prices are at present very close to a major interim peak.
According to Rigzone, oilfield services company Expro International Group Tuesday said Halliburton continues to carry out due diligence, which may or may not lead it to make an offer for Expro.
Brazil: The Blanket is Short
Claudio L. S. Haddad | May 21, 2008
The government is worried about the exchange rate appreciation and the current account deficit. At the same time, its primary expenses are increasing more than the growth rate of GDP. Apparently the government cannot or is not willing to see the direct relationship between the two facts. In trying to attain the impossible, resources will be wasted which will decrease the productivity of the economy and worsen the fiscal situation. In the recent years, Federal government primary expenditures have been increasing much faster than the GDP, rising from 15.9% of GDP in 2003 to 17.9% in 2007. This suggests that expenditures increased by 0.5% of GDP every year. According to Cristiano Romero (Valor 5/7) the payroll and the social security expenses should increase by 9% and 8.1% respectively in real terms this year. Besides, although the government estimates signal primary expenses equal to 18.2% of GDP for 2008, more realistic estimates suggest 18.8%, with the Federal Government primary surplus decreasing to 1.1% of GDP, corroborating the expansionist character of fiscal policy.
Applications for U.S. home mortgages fell to its second-lowest level of the year last week as interest rates rose, an industry group said Wednesday. The Mortgage Bankers association said its seasonally adjusted index of mortgage application activity fell 7.8 percent to 621.6 in the week ended May 16.
Shares of Red Robin Gourmet Burgers Inc. declined in late trading Tuesday, after soft restaurant sales in California, Arizona and Nevada tugged down quarterly profit. Earnings slipped 3 percent and missed Wall Street expectations.
Earnings slipped 3 percent and missed Wall Street expectations.
Average U.S. retail gasoline prices continued their move into record territory on Wednesday, with a rise of a penny to $3.81 a gallon for regular unleaded, according to the Daily Fuel Gauge Report from AAA.
American Airlines said on Wednesday it plans to cut domestic capacity by 11 percent to 12 percent this year as fuel prices reach record highs and the weak U.S. economy casts a shadow over the summer travel season.
Time Warner Inc. will get a $9.25 billion one-time cash dividend from its Time Warner Cable Inc. unit before spinning off the business to shareholders
More than 7,600 Bear Stearns Cos' employees, about 55 percent of its staff, are expected to lose their jobs as the troubled investment bank is absorbed into JPMorgan Chase & Co , JPMorgan Chief Executive James Dimon said Tuesday.
The American Petroleum Institute reported a fall of 4.1 million barrels in crude supplies for the week ended May 16. The Energy Department had reported a decline of 5.4 million barrels for the latest week. Motor gasoline supplies were up 820,000 barrels, the API said. The government had reported that supplies were down 800,000 barrels. Distillate supplies climbed by 2 million barrels, the API said. They were up 700,000 barrels, according to the Energy Department. Oil prices bolted to a new record above $132 a barrel Wednesday after the government reported that supplies of crude oil and gasoline fell unexpectedly last week.
Telecommunications gear maker Avaya is cutting about 400 jobs by the end of May due to the weak economy and slow sales of telecommunications equipment, the Associated Press reported Wednesday.
Boeing Co. will cut about 750 workers in Southern California, citing a "downturn in its satellite assembly and integration business."
July crude closed at $133.17 a barrel, up $4.19, or 3.3%, in New York. June gold closed at $928.60 an ounce Wednesday, up $8.40 for the session to mark its highest closing level in five weeks.
On Thursday, energy watchdog IEA is preparing a sharp downward revision of its global oil-supply forecast, a development that could further rattle the oil market. Oil hit a new record above $135, with supply worries, rising global demand and a slumping dollar keeping crude prices on an upward track.
Wednesday, May 21, 2008
Credit Crisis
5/20/08 Credit Crisis
The credit crisis will likely extend well into the next year and beyond, resulting in three years of multi-billion dollar revenue reversals, according to a prominent U.S. banking analyst, Meredith Whitney, who also slashed her earnings outlook for four Wall Street investment banks. By the end of 2009, over $170 billion of reserve builds will flow through bank earnings on top of "business as usual" loan loss provisions, said the Oppenheimer & Co analyst, who in October correctly predicted that Citigroup would cut its dividend and go on a capital-raising spree. "Either in the form of write-downs or reserve builds, we believe the effect is the same: revenue reversal from years worth of inherently flawed underwriting," Whitney said.The analyst lowered her 2008 outlook for JPMorgan Chase, Citigroup, Bank of America and Wachovia. She, however, cut her second-quarter earnings view for Bank of America and JPMorgan while raising it by a cent each for Citigroup and Wachovia.
"With the information now in hand, it is my judgment that monetary policy appears to be appropriately calibrated for now to promote both rising employment and moderating inflation," Federal Reserve Vice Chairman Donald Kohn said in a speech to a business group in New Orleans.
Robert McHugh: "There is a Bullish seasonal tendency this week, the Memorial Day Holiday occurring a week from today. Stocks tend to rally into significant U.S. holiday weekends, so it is possible prices will jockey back and forth, hanging around these high levels into early next week. Our next phi mate turn date is early June, June 3rd +/-, so we cannot rule out that prices hang around into that turn. This is a risk factor for Bears. On the other hand, there are a ton of indicators that are leaning Bearish intermediate term, so once a top is in, we should see a significant decline. Could it start this week? Sure. But with the holiday weekend close at hand, that could mitigate any wave three decline in stocks so that downside momentum does not pick up steam until next week. Rallies tend to occur in slow motion, while declines occur like lightening. It could get ugly the other side of Memorial Day."
US-Led Capitalist System Headed for Collapse?
Syed Rashid Husain, Arab News
Oil prices continue to rise and rise, with no end in sight. Virtually all other commodities seem to be following to be the same suit. Some now say a new economic system is emerging from the ashes of the old and now crumbling financial structure. Failing to meet even the basic needs of the common man, the current economic system is facing its worst crisis and appears in doldrums. It has miserably failed the underprivileged of this world. Markets appear divorced from the fundamentals. F. William Engdahl strongly says in a recent write up that the oil markets (and other markets too) today are controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60 percent of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. And the end-result is growing deprivation to a large number of people across geographical boundaries!
Crude oil rose above $129 a barrel in New York for the first time after Boone Pickens said that oil will reach $150 a barrel this year.
The dollar fell against the yen and euro after the International Monetary Fund said the U.S. housing slump still poses ``serious risks'' to financial markets.
Imperial Tobacco on Tuesday said it's going to issue 4.9 billion pounds ($9.6 billion) of discounted stock to help pay for its 11.3-billion-pound acquisition of Franco-Spanish cigarette maker Altadis, as the world's fourth-largest tobacco firm reported a 44% profit drop for the six months ended in March.
Amgen released a late-stage clinical study that showed its new osteoporosis-fighting compound denosumab was more effective in building up bone density than Merck & Co.'s Fosamax, a leading therapy for the condition.
The region's most exclusive neighborhoods suffered big drops in April, data show. Median sale prices fell 13% in Beverly Hills, 34% in one area of Newport Beach.
When they raid the whore house, they take all the girls!
Excluding the sale of Godiva chocolate, Campbell Soup's adjusted earnings from continuing operations were $154.0 million, or 40 cents per share, missing the consensus estimate of analysts surveyed by Thomson Financial by 4 cents. Revenues for the quarter were up 5.6%, to $1.9 billion, matching analysts' expectations.
Barack Obama is poised to have a majority of pledged delegates after voting in Kentucky and Oregon. On Monday he received the support of five more super delegates. The results of today's primaries will help ``make an argument to any superdelegates remaining that we should be the nominee,'' Obama said.
''Let me be clear, privatizing Social Security was a bad idea when George W. Bush proposed it, it's a bad idea today,'' Obama said.
Financing from all sources topped $21.3 billion for U.S. biotech companies in 2007, and the $5.5 billion contributed by venture capital firms beat the record set in the heady year of 2000, when the Human Genome Project ignited interest in the sector.
“There are more than 100 public retirement systems in the U.S. managing a combined $2.3 trillion. The amount is $380 billion short of the funds needed to pay pensions over the next 30 years, according to the National Association of State Retirement Administrators in Baton Rouge, Louisiana.”
Medtronic expects 2009 profit of $2.94 to $3.02 a share, excluding items.
Target Corp.'s first-quarter profit dropped 7.5% after economic downturns have left consumers with less money to spend on discretionary items. Target CFO says second-quarter profit may miss estimates.
Wholesale prices rose a smaller-than-expected 0.2% in April The core PPI - which excludes food and energy prices - rose 0.4% in April, more than expected. Core prices are up 3% in the past year, the biggest year-over-year rise since late 1991. If you believe the accuracy of these numbers, then you must be smoking rope.
German consumer prices rose 2.6 percent in April from a year earlier after jumping 3.3 percent the previous month, the most in 12 years. German producer-price inflation accelerated to 5.2 percent in April, the fastest in almost two years, the Federal Statistics Office said today. The European Central Bank aims to keep inflation in the euro region just below 2 percent.
The White House on Tuesday denied a published report in Israel that said President Bush intends to attack Iran before the end of his term in January.
Palatin Technologies, Inc. announced that dosing has been initiated in a Phase 2a clinical study of PL-3994, a novel, long-acting natriuretic peptide receptor A agonist, in subjects with controlled hypertension. The study is placebo-controlled and double-blinded, and will include up to five cohorts receiving escalating doses. As many as 35 subjects will be included, with six active subjects and one placebo subject per dose cohort. Subjects passing screening are admitted to a research clinic, placed on a controlled diet and have baseline blood pressures and laboratory values monitored for 24 hours. The next morning, subjects receive a single dose of PL-3994 or placebo with blood pressures and laboratory values monitored for 24 hours. Every other week, another cohort of subjects will receive a higher dose of PL-3994 until a pre-specified blood pressure decrease is observed. "We are excited with our PL-3994 program's rapid progress. Data from these hypertensive patients will provide key indications of the compound's therapeutic potential," stated Dr. Trevor Hallam, Palatin's Executive Vice President for Research and Development. "We look forward to the completion of this study as well as the reporting of results next quarter." Based on the results of this study and the previously completed Phase 1 trial in healthy, non-hypertensive volunteers, a Phase 2 trial in patients with episodes of hypertensive urgency is planned for later this calendar year. Palatin is also developing PL-3994 for the treatment of acute decompensated congestive heart failure and plans to initiate a separate Phase 2 study in these patients later this calendar year.
June gold climbed $14.40 to finish Tuesday at $920.20 an ounce in New York. The contract has now tallied a gain of $53.70 in four trading sessions.
The dollar index was at 72.400, down from 73.059 in late North American trading Monday.
BJ's Wholesale Club Inc.'s first-quarter net income rose 26% to $17.2 million, or 29 cents a share, from $13.7 million, or 21 cents, a year earlier.
Crude-oil futures topped the $130-a-barrel mark for the first time on Wednesday.
The 13% rise in Brent crude oil in sterling terms during April wasn't driven by speculation, the Bank of England said in minutes from the last interest-rate meeting.
Corporate Express NV, the Amsterdam office-products distributor, agreed to buy closely held Lyreco, the Marly, France, office-supplies provider, for 1.73 billion euros ($2.71 billion).
The credit crisis will likely extend well into the next year and beyond, resulting in three years of multi-billion dollar revenue reversals, according to a prominent U.S. banking analyst, Meredith Whitney, who also slashed her earnings outlook for four Wall Street investment banks. By the end of 2009, over $170 billion of reserve builds will flow through bank earnings on top of "business as usual" loan loss provisions, said the Oppenheimer & Co analyst, who in October correctly predicted that Citigroup would cut its dividend and go on a capital-raising spree. "Either in the form of write-downs or reserve builds, we believe the effect is the same: revenue reversal from years worth of inherently flawed underwriting," Whitney said.The analyst lowered her 2008 outlook for JPMorgan Chase, Citigroup, Bank of America and Wachovia. She, however, cut her second-quarter earnings view for Bank of America and JPMorgan while raising it by a cent each for Citigroup and Wachovia.
"With the information now in hand, it is my judgment that monetary policy appears to be appropriately calibrated for now to promote both rising employment and moderating inflation," Federal Reserve Vice Chairman Donald Kohn said in a speech to a business group in New Orleans.
Robert McHugh: "There is a Bullish seasonal tendency this week, the Memorial Day Holiday occurring a week from today. Stocks tend to rally into significant U.S. holiday weekends, so it is possible prices will jockey back and forth, hanging around these high levels into early next week. Our next phi mate turn date is early June, June 3rd +/-, so we cannot rule out that prices hang around into that turn. This is a risk factor for Bears. On the other hand, there are a ton of indicators that are leaning Bearish intermediate term, so once a top is in, we should see a significant decline. Could it start this week? Sure. But with the holiday weekend close at hand, that could mitigate any wave three decline in stocks so that downside momentum does not pick up steam until next week. Rallies tend to occur in slow motion, while declines occur like lightening. It could get ugly the other side of Memorial Day."
US-Led Capitalist System Headed for Collapse?
Syed Rashid Husain, Arab News
Oil prices continue to rise and rise, with no end in sight. Virtually all other commodities seem to be following to be the same suit. Some now say a new economic system is emerging from the ashes of the old and now crumbling financial structure. Failing to meet even the basic needs of the common man, the current economic system is facing its worst crisis and appears in doldrums. It has miserably failed the underprivileged of this world. Markets appear divorced from the fundamentals. F. William Engdahl strongly says in a recent write up that the oil markets (and other markets too) today are controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60 percent of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. And the end-result is growing deprivation to a large number of people across geographical boundaries!
Crude oil rose above $129 a barrel in New York for the first time after Boone Pickens said that oil will reach $150 a barrel this year.
The dollar fell against the yen and euro after the International Monetary Fund said the U.S. housing slump still poses ``serious risks'' to financial markets.
Imperial Tobacco on Tuesday said it's going to issue 4.9 billion pounds ($9.6 billion) of discounted stock to help pay for its 11.3-billion-pound acquisition of Franco-Spanish cigarette maker Altadis, as the world's fourth-largest tobacco firm reported a 44% profit drop for the six months ended in March.
Amgen released a late-stage clinical study that showed its new osteoporosis-fighting compound denosumab was more effective in building up bone density than Merck & Co.'s Fosamax, a leading therapy for the condition.
The region's most exclusive neighborhoods suffered big drops in April, data show. Median sale prices fell 13% in Beverly Hills, 34% in one area of Newport Beach.
When they raid the whore house, they take all the girls!
Excluding the sale of Godiva chocolate, Campbell Soup's adjusted earnings from continuing operations were $154.0 million, or 40 cents per share, missing the consensus estimate of analysts surveyed by Thomson Financial by 4 cents. Revenues for the quarter were up 5.6%, to $1.9 billion, matching analysts' expectations.
Barack Obama is poised to have a majority of pledged delegates after voting in Kentucky and Oregon. On Monday he received the support of five more super delegates. The results of today's primaries will help ``make an argument to any superdelegates remaining that we should be the nominee,'' Obama said.
''Let me be clear, privatizing Social Security was a bad idea when George W. Bush proposed it, it's a bad idea today,'' Obama said.
Financing from all sources topped $21.3 billion for U.S. biotech companies in 2007, and the $5.5 billion contributed by venture capital firms beat the record set in the heady year of 2000, when the Human Genome Project ignited interest in the sector.
“There are more than 100 public retirement systems in the U.S. managing a combined $2.3 trillion. The amount is $380 billion short of the funds needed to pay pensions over the next 30 years, according to the National Association of State Retirement Administrators in Baton Rouge, Louisiana.”
Medtronic expects 2009 profit of $2.94 to $3.02 a share, excluding items.
Target Corp.'s first-quarter profit dropped 7.5% after economic downturns have left consumers with less money to spend on discretionary items. Target CFO says second-quarter profit may miss estimates.
Wholesale prices rose a smaller-than-expected 0.2% in April The core PPI - which excludes food and energy prices - rose 0.4% in April, more than expected. Core prices are up 3% in the past year, the biggest year-over-year rise since late 1991. If you believe the accuracy of these numbers, then you must be smoking rope.
German consumer prices rose 2.6 percent in April from a year earlier after jumping 3.3 percent the previous month, the most in 12 years. German producer-price inflation accelerated to 5.2 percent in April, the fastest in almost two years, the Federal Statistics Office said today. The European Central Bank aims to keep inflation in the euro region just below 2 percent.
The White House on Tuesday denied a published report in Israel that said President Bush intends to attack Iran before the end of his term in January.
Palatin Technologies, Inc. announced that dosing has been initiated in a Phase 2a clinical study of PL-3994, a novel, long-acting natriuretic peptide receptor A agonist, in subjects with controlled hypertension. The study is placebo-controlled and double-blinded, and will include up to five cohorts receiving escalating doses. As many as 35 subjects will be included, with six active subjects and one placebo subject per dose cohort. Subjects passing screening are admitted to a research clinic, placed on a controlled diet and have baseline blood pressures and laboratory values monitored for 24 hours. The next morning, subjects receive a single dose of PL-3994 or placebo with blood pressures and laboratory values monitored for 24 hours. Every other week, another cohort of subjects will receive a higher dose of PL-3994 until a pre-specified blood pressure decrease is observed. "We are excited with our PL-3994 program's rapid progress. Data from these hypertensive patients will provide key indications of the compound's therapeutic potential," stated Dr. Trevor Hallam, Palatin's Executive Vice President for Research and Development. "We look forward to the completion of this study as well as the reporting of results next quarter." Based on the results of this study and the previously completed Phase 1 trial in healthy, non-hypertensive volunteers, a Phase 2 trial in patients with episodes of hypertensive urgency is planned for later this calendar year. Palatin is also developing PL-3994 for the treatment of acute decompensated congestive heart failure and plans to initiate a separate Phase 2 study in these patients later this calendar year.
June gold climbed $14.40 to finish Tuesday at $920.20 an ounce in New York. The contract has now tallied a gain of $53.70 in four trading sessions.
The dollar index was at 72.400, down from 73.059 in late North American trading Monday.
BJ's Wholesale Club Inc.'s first-quarter net income rose 26% to $17.2 million, or 29 cents a share, from $13.7 million, or 21 cents, a year earlier.
Crude-oil futures topped the $130-a-barrel mark for the first time on Wednesday.
The 13% rise in Brent crude oil in sterling terms during April wasn't driven by speculation, the Bank of England said in minutes from the last interest-rate meeting.
Corporate Express NV, the Amsterdam office-products distributor, agreed to buy closely held Lyreco, the Marly, France, office-supplies provider, for 1.73 billion euros ($2.71 billion).
Tuesday, May 20, 2008
Credit Crunch and Inflation
5/19/08 Credit Crunch and Inflation
The credit crunch is far from over and is likely to hit sectors other than housing, Marc Faber, Editor and Publisher of “The Gloom, Boom & Doom Report”, told "Squawk Box Europe."
The average price of regular gasoline rose to a record $3.79 a gallon, the Lundberg survey of 7,000 stations nationwide reported Sunday.The price climbed 17 cents on May 16 from two weeks earlier, according to oil-industry analyst Trilby Lundberg. "It is entirely higher crude-oil prices," Lundberg said.
With the continued escalation in fuel prices, U.S. airlines are in a nose dive that could leave some major carriers in bankruptcy.
According to Bloomberg, banks and securities firms, reeling from record losses resulting from the collapse of the mortgage securities market, are failing to acknowledge in their income statements at least $35 billion of additional writedowns included in their balance sheets, regulatory filings show.
Manitowoc Co., the biggest ice-machine maker in the US, raised its bid for Enodis Plc to 1.08 billion pounds ($2.11 billion), topping Illinois Tool Works Inc.'s offer for the UK supplier of fryers and warmers.
Consumers expect prices to rise 5.2 percent in the next 12 months, according to a monthly survey by the University of Michigan in Ann Arbor, the most pessimistic they've been since 1982. Treasury Inflation Protected Securities, or TIPS, show traders anticipate inflation of about 2.9 percent by January, in line with its average of 3.1 percent the last 20 years.
Now 56 percent of the economists think the economy has started or will enter a recession this year. That's up from 45 percent in a survey in February. If there is a recession, it probably will be short and shallow, economists said. Forecasters downgraded their projections for economic growth. They now predict the economy, which grew by 2.2 percent last year, will slow to 1.4 percent this year. That's lower than the 1.8 percent growth projected in February. If the new figure proves correct, it would mark the weakest growth since the last recession in 2001. Next year, the economy should grow by 2.3 percent, less than previously forecast and a pace that is still considered subpar. "Although housing and credit markets will gradually loosen their grip, U.S economic growth is expected to only slowly return to health," said Ellen Hughes-Cromwick, president of NABE and chief economist at Ford Motor Co. Given the outlook for sluggish overall economic activity, companies are likely to remain cautious in their spending and hiring.
Rob Hanna: "I'm having a hard time finding anything suggesting prices are likely to continue higher."
According to the NY Times, "the prices paid for online ads bought through ad networks dropped 23 percent from March to April, according to PubMatic."
Citigroup slashed its earnings outlook for Wall Street investment banks, Goldman Sachs Group Inc, Lehman Brothers Holdings Inc, and Morgan Stanley, citing a tough operating environment.
Brett Steenbarger: "Though we may be due for some correction--we have not seen the last of the rally following the double-bottom in January/March. I continue to harbor doubts that this rally will bring us significant new price highs for the major averages. Rather, I see it as a late, selective continuation of the bull cycle that began in August, 2006. Some sectors (financials) have likely seen their bull peaks; others (energy) are still making them. If that conjecture is correct, the good news is that we should see further price strength in the major averages into the summer. The bad news is that a more significant bear may lie beyond."
Electronic Arts Inc.will extend its offer for Take-Two Interactive Software Inc. to June 16.
N.Y. Times ad revenue down 5.1% in April. N.Y. Times circulation revenue down 3.3% in April.
Sheila Weinberg, Institute for Truth in Accounting CEO: "We're running deficits in the trillions of dollars, not the hundreds of billions of dollars we're being told."
Jon Markman: "If there is a single word to sum up the global rallies in steel, iron ore, gold, grains and energy over the past three years, it is Brazil. The biggest country in South America has become the world's biggest exporter of raw materials and is prospering like none other on the planet. Its stock market hit an all-time high last week as all others faltered."
Global demand and a bad crop year in Europe and Australia have tightened supplies for hops, barley and wheat. That combined with a hike in transportation costs is driving beer producers, big and small to raise prices.
Charlie Munger: “General Re needed a derivative book like I needed a case of syphilis."
The fallout from the global credit crisis is not over yet, Warren Buffett said on Monday. "I'll talk about the United States. I don't think the effects of the credit crunch are far from over at all," he told a news conference in response to a question. "I think there will be rippling secondary, tertiary effects...It is really more an effect of the residential real estate bubble which led to the credit crunch in some degree," he said.
The Federal Reserve said Monday it will auction $75 billion of 28-day loans at a minimum bid rate of 1.99% under its new term-auction facility.
The U.S. economy is likely to remain weak, but is not in a recession, economists for the Conference Board said Monday after announcing that the index of leading economic indicators rose slightly in April for a second straight month. The index rose 0.1% in April, matching March's gain after falling for the five prior months. "These data certainly reflect a weak economy, but not one in recession," said Ken Goldstein, labor economist at the private research group. The small increases in March and April "could be a signal that the economy may not weaken further."
BCE is Canada's largest telecommunications company, and operates Bell Canada. The C$34.8 billion buyout of BCE Inc is in trouble as investment banks financing the deal sought to renegotiate lending terms, the New York Times said on Monday, citing people on both sides of the transaction.
Microsoft Corp.is considering buying Yahoo Inc.'s search business and taking a minority passive stake in the company after Yahoo has spun off its Asian assets, Thomson Reuters reported Monday on its website late Monday, citing a person familiar with the discussions.
June crude closed at $127.05 a barrel, marking its highest close ever. June gold closed at $905.80 an ounce in New York Monday, up $5.90 for the session to finish at its highest level since April 23.
Staples Inc.launched its public offer of 8 euros ($12.4) a share in cash for all ordinary shares, including shares represented by American Depositary Shares, in the share capital of Corporate Express.
Thomson Reuters Corp. will cut 1,500 jobs as the newly combined financial and professional information provider moves to consolidate operations and reduce costs, a person familiar with the matter said Monday.
A group led by Spanish infrastructure operator Abertis Infraestructuras SA and Citigroup Inc. won bidding for the 75-year lease of the Pennsylvania Turnpike with a cash offer of $12.8 billion in what could be the largest privatization in the U.S. infrastructure sector to date.
Platinum prices could surge a further 15 per cent to a record $2,500 an ounce within the next six months as disruptions to production in South Africa lead to a “substantial” supply deficit this year, one of the biggest users of the metal has forecast.
Eni, the Italian oil group, has discovered a large oil sands deposit in the Republic of Congo that is expected to become Africa’s first large unconventional oil development and could hold several billion barrels. Paolo Scaroni, Eni’s chief executive, said the project, due to begin production in 2011, opened “a new front” in the development of “unconventional” oil.
Home Depot Inc. reported Tuesday that first-quarter net income fell 66%, hurt by economic worries that curtailed home-improvement spending and by costs it incurred to close stores and abandon some new openings in its pipeline.
Credit Suisse said it's upping its oil price estimates, to $120 a barrel this year, $110 a barrel in 2009 and $100 a barrel long term. The brokerage previously expected $91 a barrel oil this year, $90 in 2009 and $75 over the longer term.
The government raised its one-month-old forecast of how much food prices will rise in 2008 by half a percentage point to a range of 4.5% to 5.5%.
The credit crunch is far from over and is likely to hit sectors other than housing, Marc Faber, Editor and Publisher of “The Gloom, Boom & Doom Report”, told "Squawk Box Europe."
The average price of regular gasoline rose to a record $3.79 a gallon, the Lundberg survey of 7,000 stations nationwide reported Sunday.The price climbed 17 cents on May 16 from two weeks earlier, according to oil-industry analyst Trilby Lundberg. "It is entirely higher crude-oil prices," Lundberg said.
With the continued escalation in fuel prices, U.S. airlines are in a nose dive that could leave some major carriers in bankruptcy.
According to Bloomberg, banks and securities firms, reeling from record losses resulting from the collapse of the mortgage securities market, are failing to acknowledge in their income statements at least $35 billion of additional writedowns included in their balance sheets, regulatory filings show.
Manitowoc Co., the biggest ice-machine maker in the US, raised its bid for Enodis Plc to 1.08 billion pounds ($2.11 billion), topping Illinois Tool Works Inc.'s offer for the UK supplier of fryers and warmers.
Consumers expect prices to rise 5.2 percent in the next 12 months, according to a monthly survey by the University of Michigan in Ann Arbor, the most pessimistic they've been since 1982. Treasury Inflation Protected Securities, or TIPS, show traders anticipate inflation of about 2.9 percent by January, in line with its average of 3.1 percent the last 20 years.
Now 56 percent of the economists think the economy has started or will enter a recession this year. That's up from 45 percent in a survey in February. If there is a recession, it probably will be short and shallow, economists said. Forecasters downgraded their projections for economic growth. They now predict the economy, which grew by 2.2 percent last year, will slow to 1.4 percent this year. That's lower than the 1.8 percent growth projected in February. If the new figure proves correct, it would mark the weakest growth since the last recession in 2001. Next year, the economy should grow by 2.3 percent, less than previously forecast and a pace that is still considered subpar. "Although housing and credit markets will gradually loosen their grip, U.S economic growth is expected to only slowly return to health," said Ellen Hughes-Cromwick, president of NABE and chief economist at Ford Motor Co. Given the outlook for sluggish overall economic activity, companies are likely to remain cautious in their spending and hiring.
Rob Hanna: "I'm having a hard time finding anything suggesting prices are likely to continue higher."
According to the NY Times, "the prices paid for online ads bought through ad networks dropped 23 percent from March to April, according to PubMatic."
Citigroup slashed its earnings outlook for Wall Street investment banks, Goldman Sachs Group Inc, Lehman Brothers Holdings Inc, and Morgan Stanley, citing a tough operating environment.
Brett Steenbarger: "Though we may be due for some correction--we have not seen the last of the rally following the double-bottom in January/March. I continue to harbor doubts that this rally will bring us significant new price highs for the major averages. Rather, I see it as a late, selective continuation of the bull cycle that began in August, 2006. Some sectors (financials) have likely seen their bull peaks; others (energy) are still making them. If that conjecture is correct, the good news is that we should see further price strength in the major averages into the summer. The bad news is that a more significant bear may lie beyond."
Electronic Arts Inc.will extend its offer for Take-Two Interactive Software Inc. to June 16.
N.Y. Times ad revenue down 5.1% in April. N.Y. Times circulation revenue down 3.3% in April.
Sheila Weinberg, Institute for Truth in Accounting CEO: "We're running deficits in the trillions of dollars, not the hundreds of billions of dollars we're being told."
Jon Markman: "If there is a single word to sum up the global rallies in steel, iron ore, gold, grains and energy over the past three years, it is Brazil. The biggest country in South America has become the world's biggest exporter of raw materials and is prospering like none other on the planet. Its stock market hit an all-time high last week as all others faltered."
Global demand and a bad crop year in Europe and Australia have tightened supplies for hops, barley and wheat. That combined with a hike in transportation costs is driving beer producers, big and small to raise prices.
Charlie Munger: “General Re needed a derivative book like I needed a case of syphilis."
The fallout from the global credit crisis is not over yet, Warren Buffett said on Monday. "I'll talk about the United States. I don't think the effects of the credit crunch are far from over at all," he told a news conference in response to a question. "I think there will be rippling secondary, tertiary effects...It is really more an effect of the residential real estate bubble which led to the credit crunch in some degree," he said.
The Federal Reserve said Monday it will auction $75 billion of 28-day loans at a minimum bid rate of 1.99% under its new term-auction facility.
The U.S. economy is likely to remain weak, but is not in a recession, economists for the Conference Board said Monday after announcing that the index of leading economic indicators rose slightly in April for a second straight month. The index rose 0.1% in April, matching March's gain after falling for the five prior months. "These data certainly reflect a weak economy, but not one in recession," said Ken Goldstein, labor economist at the private research group. The small increases in March and April "could be a signal that the economy may not weaken further."
BCE is Canada's largest telecommunications company, and operates Bell Canada. The C$34.8 billion buyout of BCE Inc is in trouble as investment banks financing the deal sought to renegotiate lending terms, the New York Times said on Monday, citing people on both sides of the transaction.
Microsoft Corp.is considering buying Yahoo Inc.'s search business and taking a minority passive stake in the company after Yahoo has spun off its Asian assets, Thomson Reuters reported Monday on its website late Monday, citing a person familiar with the discussions.
June crude closed at $127.05 a barrel, marking its highest close ever. June gold closed at $905.80 an ounce in New York Monday, up $5.90 for the session to finish at its highest level since April 23.
Staples Inc.launched its public offer of 8 euros ($12.4) a share in cash for all ordinary shares, including shares represented by American Depositary Shares, in the share capital of Corporate Express.
Thomson Reuters Corp. will cut 1,500 jobs as the newly combined financial and professional information provider moves to consolidate operations and reduce costs, a person familiar with the matter said Monday.
A group led by Spanish infrastructure operator Abertis Infraestructuras SA and Citigroup Inc. won bidding for the 75-year lease of the Pennsylvania Turnpike with a cash offer of $12.8 billion in what could be the largest privatization in the U.S. infrastructure sector to date.
Platinum prices could surge a further 15 per cent to a record $2,500 an ounce within the next six months as disruptions to production in South Africa lead to a “substantial” supply deficit this year, one of the biggest users of the metal has forecast.
Eni, the Italian oil group, has discovered a large oil sands deposit in the Republic of Congo that is expected to become Africa’s first large unconventional oil development and could hold several billion barrels. Paolo Scaroni, Eni’s chief executive, said the project, due to begin production in 2011, opened “a new front” in the development of “unconventional” oil.
Home Depot Inc. reported Tuesday that first-quarter net income fell 66%, hurt by economic worries that curtailed home-improvement spending and by costs it incurred to close stores and abandon some new openings in its pipeline.
Credit Suisse said it's upping its oil price estimates, to $120 a barrel this year, $110 a barrel in 2009 and $100 a barrel long term. The brokerage previously expected $91 a barrel oil this year, $90 in 2009 and $75 over the longer term.
The government raised its one-month-old forecast of how much food prices will rise in 2008 by half a percentage point to a range of 4.5% to 5.5%.
Monday, May 19, 2008
Breadth
5/18/08 Breadth
Tim Wood: "The fact that breadth is not expanding along with the price advance is reason to question the health of this advance."
Gretchen Morgenson: "Brokerage firms swapping securities at their new Fed window — the Term Securities Lending Facility — do not supply the excess collateral that commercial banks do. And look at the securities the Fed accepts in these swaps: residential and commercial mortgages and other asset-backed issues.Sure, the Fed requires that the securities must be rated triple-A to qualify for a Treasury swap. But as we’ve learned over the last year and a half, such ratings are unreliable.SOME Fed officials agree. Last month, Donald L. Kohn, vice chairman of the Federal Reserve, addressed bankers at a credit market symposium in North Carolina. “I think part of the work-list for the regulators is to re-examine the extent to which we ourselves are relying on these rating agencies to gauge the risks that you guys are taking,” he said. “I think there was far, far too much reliance on credit ratings all round.”And in a speech on April 10, Ben S. Bernanke, the Fed chairman, said: “Investors must take responsibility for developing independent views of the risks of these instruments and not rely solely on credit ratings.”Yet the Fed is doing precisely that when it accepts triple-A rated mortgage securities. “This is classic ‘do as I say, not as I do,’ ” Mr. Rosner said.More worrisome, he added, is the fact that the Fed doesn’t examine the basis for bestowing a triple-A rating on these securities. Are they triple-A based on the soundness of the issuer? Or because of an insurance policy guaranteed by M.B.I.A. or the Ambac Financial Group, the troubled financial guarantors?"
Bill Bonner: "Our view is that higher consumer price inflation is in the pipes and will soon be backing up in the bathtub drains. Dorsch says the U.S. money supply is now increasing at a 16% rate; higher inflation can't be far behind."
"Californians are cutting back on spending," says James Saft in the International Herald Tribune. "Besides causing woes for state and local government, the cutback is giving California's economy another knock and makes further job losses, home repossessions and banking problems more likely."
Oil markets are balanced and there is no need for an emergency OPEC meeting before September despite record oil prices, Qatari Oil Minister Abdullah bin Hamad al-Attiyah said on Saturday."The oil market is balanced... There is no threat to or crisis in supply," he told Al Arabiya TV by telephone. "At the moment, I don't think there is a situation that is big or dangerous that requires a meeting before September."
Wary of losing much-needed cash from recession-battered Americans, Mexico for the first time is dropping its sales tax for tourists. Starting in June at five main airports, foreign tourists who have spent at least 1,200 pesos ($115) in approved shops will be able to use kiosks to claim back the 15% tax that had been charged on souvenirs and other goods they bought at various resorts and cities, the Mexico Tourism Ministry said on May 15.
President Rafael Correa says Ecuador wants to buy out private oil companies unwilling to negotiate new deals with his government. Correa has asked companies now suing over an October decree that slashed their share of windfall oil profits to 1 percent to drop their lawsuits. Ecuador on Friday offered to boost those companies' share of soaring windfall profits to 30 percent. If companies aren't happy with that offer, Correa says his government will buy their assets at "a fair price."
In a statement Sunday, Microsoft says it is considering a different kind of deal with Yahoo. "Microsoft is not proposing to make a new bid to acquire all of Yahoo at this time, but reserves the right to reconsider that alternative," the statement said.
John Hussman: "As of last week, valuations remained unfavorable for stocks. Meanwhile, however, market action continued to hover near the point where speculation could begin to feed on itself. The behavior of trading volume and leadership remains relatively uninspiring, but some popular moving averages have been crossed (such as the 200-day moving average of the S&P 500), which has fed some amount of technical buying. Stocks are clearly overbought on a short-term basis, and given that, it's likely we'll observe some sideways movement for a bit even if the speculative interest of investors ends up continuing in the weeks ahead. Meanwhile, that same overbought condition, given a still-unfavorable Market Climate overall, leaves us braced for a possibly hard retreat."
Lowe's Cos.said first-quarter profit fell after the worst U.S. slump in more than 25 years slowed spending on remodeling projects. Net income decreased to $607 million, or 41 cents a share, from $739 million, or 48 cents, a year earlier. Sales declined to $12 billion. The company forecast annual earnings that trail an earlier projection.
Tim Wood: "The fact that breadth is not expanding along with the price advance is reason to question the health of this advance."
Gretchen Morgenson: "Brokerage firms swapping securities at their new Fed window — the Term Securities Lending Facility — do not supply the excess collateral that commercial banks do. And look at the securities the Fed accepts in these swaps: residential and commercial mortgages and other asset-backed issues.Sure, the Fed requires that the securities must be rated triple-A to qualify for a Treasury swap. But as we’ve learned over the last year and a half, such ratings are unreliable.SOME Fed officials agree. Last month, Donald L. Kohn, vice chairman of the Federal Reserve, addressed bankers at a credit market symposium in North Carolina. “I think part of the work-list for the regulators is to re-examine the extent to which we ourselves are relying on these rating agencies to gauge the risks that you guys are taking,” he said. “I think there was far, far too much reliance on credit ratings all round.”And in a speech on April 10, Ben S. Bernanke, the Fed chairman, said: “Investors must take responsibility for developing independent views of the risks of these instruments and not rely solely on credit ratings.”Yet the Fed is doing precisely that when it accepts triple-A rated mortgage securities. “This is classic ‘do as I say, not as I do,’ ” Mr. Rosner said.More worrisome, he added, is the fact that the Fed doesn’t examine the basis for bestowing a triple-A rating on these securities. Are they triple-A based on the soundness of the issuer? Or because of an insurance policy guaranteed by M.B.I.A. or the Ambac Financial Group, the troubled financial guarantors?"
Bill Bonner: "Our view is that higher consumer price inflation is in the pipes and will soon be backing up in the bathtub drains. Dorsch says the U.S. money supply is now increasing at a 16% rate; higher inflation can't be far behind."
"Californians are cutting back on spending," says James Saft in the International Herald Tribune. "Besides causing woes for state and local government, the cutback is giving California's economy another knock and makes further job losses, home repossessions and banking problems more likely."
Oil markets are balanced and there is no need for an emergency OPEC meeting before September despite record oil prices, Qatari Oil Minister Abdullah bin Hamad al-Attiyah said on Saturday."The oil market is balanced... There is no threat to or crisis in supply," he told Al Arabiya TV by telephone. "At the moment, I don't think there is a situation that is big or dangerous that requires a meeting before September."
Wary of losing much-needed cash from recession-battered Americans, Mexico for the first time is dropping its sales tax for tourists. Starting in June at five main airports, foreign tourists who have spent at least 1,200 pesos ($115) in approved shops will be able to use kiosks to claim back the 15% tax that had been charged on souvenirs and other goods they bought at various resorts and cities, the Mexico Tourism Ministry said on May 15.
President Rafael Correa says Ecuador wants to buy out private oil companies unwilling to negotiate new deals with his government. Correa has asked companies now suing over an October decree that slashed their share of windfall oil profits to 1 percent to drop their lawsuits. Ecuador on Friday offered to boost those companies' share of soaring windfall profits to 30 percent. If companies aren't happy with that offer, Correa says his government will buy their assets at "a fair price."
In a statement Sunday, Microsoft says it is considering a different kind of deal with Yahoo. "Microsoft is not proposing to make a new bid to acquire all of Yahoo at this time, but reserves the right to reconsider that alternative," the statement said.
John Hussman: "As of last week, valuations remained unfavorable for stocks. Meanwhile, however, market action continued to hover near the point where speculation could begin to feed on itself. The behavior of trading volume and leadership remains relatively uninspiring, but some popular moving averages have been crossed (such as the 200-day moving average of the S&P 500), which has fed some amount of technical buying. Stocks are clearly overbought on a short-term basis, and given that, it's likely we'll observe some sideways movement for a bit even if the speculative interest of investors ends up continuing in the weeks ahead. Meanwhile, that same overbought condition, given a still-unfavorable Market Climate overall, leaves us braced for a possibly hard retreat."
Lowe's Cos.said first-quarter profit fell after the worst U.S. slump in more than 25 years slowed spending on remodeling projects. Net income decreased to $607 million, or 41 cents a share, from $739 million, or 48 cents, a year earlier. Sales declined to $12 billion. The company forecast annual earnings that trail an earlier projection.
Sunday, May 18, 2008
Heightened Monetary Disorder
5/17/08 Heightened Monetary Disorder
Robert McHugh: "The VIX has popped higher to the point where should it close where it is at now, around 17.83 (it is up 1.5 Friday), we will have a new "sell" signal. As mentioned in Thursday evening's newsletter, the past three times the VIX generated a "sell" signal, stocks dropped sharply, for several weeks. Other indicators we follow also suggest a significant top is close at hand, should be in over the next week."
Lehman Brothers will begin trimming its workforce by around 5% starting on Monday, cable news network CNBC reported Friday.
The transports are up 17.5% year to date.
Doug Noland: "The problem with post-asset Bubble “accommodation” is that it specifically accommodates the very Credit infrastructure and related Monetary Processes that financed the preceding boom. It works to validate the present course of financial innovation (think “Wall Street securitizations,” “CDOs” and “carry trades”), while emboldening those at the cutting edge of risk-taking (think “leveraged speculating community”). To be sure, the same Wall Street Credit infrastructure that financed the tech Bubble was empowered to regroup, reemerge, and aggressively expand to grossly over-finance much more expansive Credit and speculative booms in mortgage-related securitizations and housing. These days, powerful forces have been unleashed to over-finance the world.
Moreover, a commitment to aggressively cut rates in response to faltering asset Bubbles openly courts leveraged bond market speculation – a market dynamic that especially engenders artificially low market yields and exacerbates liquidity excess during the late-stage of asset bubbles (think bond market “conundrum”). The last thing a central bank should encourage is an entire industry dedicated to placing leveraged bets on the direction of Federal Reserve policy responses. A strong case can be made that U.S. Treasury and agency markets have become one massive Bubble. The overriding flaw in the Greenspan/Bernanke approach has been to openly disregard Credit Bubble dynamics, in particular the increasingly profound role played by Wall Street-backed finance in fueling Credit, market liquidity and speculative excesses. I believe The Ultimate Objective of a Central Bank is to Foster Monetary Stability in the broadest sense. In this regard, asset Bubbles should be viewed primarily as important indicators of some type of underlying Monetary Disorder. The key analytical focus must be on the underlying Credit and speculative dynamics fueling the asset price distortions – to better understand and rectify the source of “disorder” – and the earlier, the better... No doubt about it, Heightened Monetary Disorder - the cost associated with the Fed’s U.S. Credit system bailout - is increasingly on display. Destabilizing speculation is returning with a vengeance, and it’s anything but limited to commodities markets."
Brett Steenbarger: "At a 30-minute time frame, markets are moving half as much now as they were in January. Is it any wonder that traders looking for big moves are becoming frustrated?"
The dollar fell the most against the euro since March as a drop in consumer confidence and record crude oil prices raised concern U.S. economic growth will slow. The dollar's second consecutive weekly decline against the euro pared its increase from the all-time low reached last month to 2.7 percent. The Australian dollar rose to the strongest level against the greenback since 1984 as oil pushed up prices of other commodities. Mexico's peso rose to a five-year high, while the Brazilian real strengthened to the most since 1999.
Mike Burk: "The market is over bought. As of last Friday, the S&P mid cap index was up for the 7 consecutive days for the first time in over a year. Longer term this is a good sign, but, for the next week or so continued upward progress is likely to be limited."
John Mauldin: "Inflation is uncomfortably high at 4%. Even core inflation is well above the 1-2% comfort zone. But the economy is soft and getting softer. Even with the stimulus package kicking in this quarter, consumer spending is likely to be weak. There are some at the Fed who would like to raise rates as soon as possible to deal with inflation, but the economy is not cooperating. The housing crisis just keeps getting worse, and the credit crisis is causing banks to tighten lending standards on every manner of credit, even with Fed fund rates low. LIBOR and other credit costs and spreads are not dropping as one might have thought they would in response to low Fed fund rates. Tax receipts are slowing well below projections, especially sales tax receipts.Let's look at some of the pressures on the economy. According to the National Small Business Association, more than 5,000 firms filed for bankruptcy in April 2008, the most in any month since new bankruptcy laws took effect in 2005. The data also show that in the first quarter of 2008 13,155 businesses filed for bankruptcy, an increase of nearly 45% from the 9,103 business bankruptcy filings during the same period in 2007.Economists suggest that the leap in bankruptcy filings is a result of the troubles that started with subprime mortgages and other financial instruments of Wall Street, which are now trickling down to Main Street. The ensuing credit crunch, skyrocketing commodity prices, and dormant consumer sales are likely culprits for pushing many more businesses to the brink of bankruptcy throughout 2008.The debt of 174 large US companies is trading at distressed levels, at well over 10% above comparable treasuries. Diane Vazza, S&P's credit chief, says defaults are rising at almost twice the rate of past downturns."US and European banks and financial institutions have 'enormous losses' from bad loans they haven't yet recognized and may have a harder time wooing sovereign-fund rescuers, Carlyle Group Chairman David Rubenstein said."'Based on information I see,' it will take at least a year before all losses are realized, and some financial institutions may fail, Rubenstein said... He didn't name any companies." (Bloomberg)"
Because of the rising cost of fuel, British Airways will ground part of its fleet to save money.
Floyd Norris: "For all nonpetroleum imports, prices in April were up 6.2 percent from a year earlier. That is the fastest rate of gain in almost 20 years, reflecting increases in products from most countries and in most categories. The reasons for the increases include strong world demand for many products, thanks to the emergence of China and India, and a weakening dollar."
Robert McHugh: "The VIX has popped higher to the point where should it close where it is at now, around 17.83 (it is up 1.5 Friday), we will have a new "sell" signal. As mentioned in Thursday evening's newsletter, the past three times the VIX generated a "sell" signal, stocks dropped sharply, for several weeks. Other indicators we follow also suggest a significant top is close at hand, should be in over the next week."
Lehman Brothers will begin trimming its workforce by around 5% starting on Monday, cable news network CNBC reported Friday.
The transports are up 17.5% year to date.
Doug Noland: "The problem with post-asset Bubble “accommodation” is that it specifically accommodates the very Credit infrastructure and related Monetary Processes that financed the preceding boom. It works to validate the present course of financial innovation (think “Wall Street securitizations,” “CDOs” and “carry trades”), while emboldening those at the cutting edge of risk-taking (think “leveraged speculating community”). To be sure, the same Wall Street Credit infrastructure that financed the tech Bubble was empowered to regroup, reemerge, and aggressively expand to grossly over-finance much more expansive Credit and speculative booms in mortgage-related securitizations and housing. These days, powerful forces have been unleashed to over-finance the world.
Moreover, a commitment to aggressively cut rates in response to faltering asset Bubbles openly courts leveraged bond market speculation – a market dynamic that especially engenders artificially low market yields and exacerbates liquidity excess during the late-stage of asset bubbles (think bond market “conundrum”). The last thing a central bank should encourage is an entire industry dedicated to placing leveraged bets on the direction of Federal Reserve policy responses. A strong case can be made that U.S. Treasury and agency markets have become one massive Bubble. The overriding flaw in the Greenspan/Bernanke approach has been to openly disregard Credit Bubble dynamics, in particular the increasingly profound role played by Wall Street-backed finance in fueling Credit, market liquidity and speculative excesses. I believe The Ultimate Objective of a Central Bank is to Foster Monetary Stability in the broadest sense. In this regard, asset Bubbles should be viewed primarily as important indicators of some type of underlying Monetary Disorder. The key analytical focus must be on the underlying Credit and speculative dynamics fueling the asset price distortions – to better understand and rectify the source of “disorder” – and the earlier, the better... No doubt about it, Heightened Monetary Disorder - the cost associated with the Fed’s U.S. Credit system bailout - is increasingly on display. Destabilizing speculation is returning with a vengeance, and it’s anything but limited to commodities markets."
Brett Steenbarger: "At a 30-minute time frame, markets are moving half as much now as they were in January. Is it any wonder that traders looking for big moves are becoming frustrated?"
The dollar fell the most against the euro since March as a drop in consumer confidence and record crude oil prices raised concern U.S. economic growth will slow. The dollar's second consecutive weekly decline against the euro pared its increase from the all-time low reached last month to 2.7 percent. The Australian dollar rose to the strongest level against the greenback since 1984 as oil pushed up prices of other commodities. Mexico's peso rose to a five-year high, while the Brazilian real strengthened to the most since 1999.
Mike Burk: "The market is over bought. As of last Friday, the S&P mid cap index was up for the 7 consecutive days for the first time in over a year. Longer term this is a good sign, but, for the next week or so continued upward progress is likely to be limited."
John Mauldin: "Inflation is uncomfortably high at 4%. Even core inflation is well above the 1-2% comfort zone. But the economy is soft and getting softer. Even with the stimulus package kicking in this quarter, consumer spending is likely to be weak. There are some at the Fed who would like to raise rates as soon as possible to deal with inflation, but the economy is not cooperating. The housing crisis just keeps getting worse, and the credit crisis is causing banks to tighten lending standards on every manner of credit, even with Fed fund rates low. LIBOR and other credit costs and spreads are not dropping as one might have thought they would in response to low Fed fund rates. Tax receipts are slowing well below projections, especially sales tax receipts.Let's look at some of the pressures on the economy. According to the National Small Business Association, more than 5,000 firms filed for bankruptcy in April 2008, the most in any month since new bankruptcy laws took effect in 2005. The data also show that in the first quarter of 2008 13,155 businesses filed for bankruptcy, an increase of nearly 45% from the 9,103 business bankruptcy filings during the same period in 2007.Economists suggest that the leap in bankruptcy filings is a result of the troubles that started with subprime mortgages and other financial instruments of Wall Street, which are now trickling down to Main Street. The ensuing credit crunch, skyrocketing commodity prices, and dormant consumer sales are likely culprits for pushing many more businesses to the brink of bankruptcy throughout 2008.The debt of 174 large US companies is trading at distressed levels, at well over 10% above comparable treasuries. Diane Vazza, S&P's credit chief, says defaults are rising at almost twice the rate of past downturns."US and European banks and financial institutions have 'enormous losses' from bad loans they haven't yet recognized and may have a harder time wooing sovereign-fund rescuers, Carlyle Group Chairman David Rubenstein said."'Based on information I see,' it will take at least a year before all losses are realized, and some financial institutions may fail, Rubenstein said... He didn't name any companies." (Bloomberg)"
Because of the rising cost of fuel, British Airways will ground part of its fleet to save money.
Floyd Norris: "For all nonpetroleum imports, prices in April were up 6.2 percent from a year earlier. That is the fastest rate of gain in almost 20 years, reflecting increases in products from most countries and in most categories. The reasons for the increases include strong world demand for many products, thanks to the emergence of China and India, and a weakening dollar."
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