8/16/08 Many Commodities At Four Month Lows
Berkshire Hathaway Inc. took a stake in NRG Energy Inc., the second-biggest power producer in Texas, where electricity prices surged 24 percent from a year earlier.
Berkshire had 3.24 million NRG shares as of June 30, the Omaha, Nebraska-based company said yesterday in a regulatory filing disclosing equity investments at the end of the second quarter. Buffett slashed by 61 percent its holding of Anheuser- Busch Cos. before the brewer agreed to be purchased by InBev NV.In addition, Berkshire also added to stakes in refrigeration-equipment maker Ingersoll-Rand Co. and Sanofi-Aventis SA, France's largest drugmaker.
Poland and the United States have signed a preliminary deal to place part of a US ballistic missile defense system in Poland, a plan that has drawn sharp objections from Russia.
George Ure: "This puts a US/Western missile program about 300-miles from the Russian border and right next door to Belarus. How would you feel if the Russians angled to put a missile project in Edmonton, Alberta? That's how close we're talking. So no wonder Russia is pissed."
The average monthly premium for Medicare's prescription drug plan will increase to an estimated $28 in 2009, three dollars more than this year's monthly premium, Medicare officials announced.
Barry Ritholtz: "In New York State, the 16 largest banks sent taxes totaling $5 million in the most recent reporting period; that compare with $173 million from the same period a year ago.Taxes paid are down an astonishing 97%!
And, its not just New York. Other money center regions in the US are running into similar problems: California, Connecticut, Virginia, Illinois, and Massachusetts are also likely to have related tax shortfalls. There will be other cities and states beyond these."
Rob Hanna: "The market bounced on Thursday, but volume was anemic. On the NYSE it was the lowest volume since the July 3rd holiday-shortened session. When the market moves up, you’d normally rather see it occur on strong volume. Exceptionally weak volume, like we saw today, has been followed by some difficult market conditions over the last 10 years."
China's spending on real estate and other fixed urban assets rose 27.3 percent in the first seven months of the year compared with the same period a year ago, the National Statistics Bureau reported Friday.
The spending accelerated amid reconstruction of areas devastated by May's earthquake. The bureau said investment in construction, factory equipment and other such assets totaled 7.2 trillion yuan ($1.1 trillion) in January-July.
The growth rate was greater than the 26.8 percent rise in property and asset investment in the first half of the year.
The dollar raced to a six-month high against the euro on Friday, propelled by growing worries about the health of the euro zone economy and further lifted by liquidation in commodity markets.
OPEC on Friday cut its forecast for global oil demand growth in 2008 for a fifth month and said production is more than adequate, signaling a more comfortable supply and demand balance. The 13-member group, source of two in every five barrels of oil, also said higher OPEC production, easing political tension and a stronger U.S. dollar indicated a weaker outlook for the oil market.
"Given these trends, risks to the outlook for the world oil market appear to be on the downside," the Organization of the Petroleum Exporting Countries said in its August Monthly Oil Market Report.
The Economist: "An option-ARM product called Pick-a-Pay (a name that gave fair warning it could lead to trouble) accounts for 45% of consumer lending at Wachovia, a large bank. Wachovia stopped originating loans that allow negative amortisation in June, and is setting aside heftier reserves to cope with expected losses. It has also waived prepayment penalties for existing product-holders and is marshalling its employees to help move these customers on to conventional mortgages. Such efforts are welcome. But they also signal just how protracted America’s housing woes are likely to be."
Home heating bills are expected to soar this winter and Americans, already struggling with high gas and food prices, are bracing for more financial hardship.
On average, consumers are expected to pay $1,182 to heat their homes this year, up 20% from last year, according to recent estimates from the Energy Information Administration (EIA).
The Oil Drum: "The peak and gradual decline in world oil production is beginning to spawn a set of geopolitical positive-feedback-loops that seem likely to exacerbate depletion and accelerate the effective rate of decline of world oil production. Rather than isolated incidents, these geopolitical feedback loops are the direct result of geological peaking in oil production. Unlike geologically driven peaking, however, the effective rate of decline caused by geopolitical feedback loops has the potential to continually accelerate."
According to Rigzone, the Louisiana Mineral Board collected $93.8 million at its August sale of petroleum lease rights to government-owned land with almost all of the money coming from operators trying to develop a potentially huge natural gas find.
Wednesday's sale was the second largest in history, exceeded only by a $157.7 million sale in May 1980.
Officials said $92.2 million came from leases granted within the Haynesville Shale in northwestern Louisiana, which is a formation that lies in parts of Texas, Oklahoma and Louisiana. Researchers say it could eventually produce 29 to 39 trillion cubic feet of natural gas, making it one of the largest U.S. gas finds ever.
Wednesday's leases covered 4,070 acres in Caddo, Bossier, DeSoto, Bienville and Red River parishes. The royalty rates paid to the state range from 25 percent to 30 percent.
International Rectifier Corp.shares climbed $3.63, or more than 19%, to $22.45 after Vishay Intertechnology made an unsolicited $1.6 billion offer for the power-management chip maker.
Led by an increase in motor vehicles, the output of U.S. factories rose 0.4% in July, the best gain in 10 months, the Federal Reserve reported Friday. Overall, industrial production at the nation's mines, utilities and factories increased a seasonally adjusted 0.2% in July as expected, despite a 1.9% drop in output of utilities. Output of mines increased 0.9% in July. After peaking in January, output is down 0.1% in the past year. Capacity utilization - key gauge of inflationary pressures - rose a tenth to 79.9% in July, still far below the level that would signal tight supply chains.
Manufacturers in New York state said business improved slightly in early August, the New York Federal Reserve Bank reported Friday. The Empire state index rose to 2.8 in August from negative 4.9 in July. The new-orders index fell to negative 2.2 and the shipments index fell to negative 0.9. The price indexes remained elevated.
BluePoint Re Ltd., a unit of banking giant Wachovia Corp., is being liquidated in Bermuda and is seeking protection from a U.S. court to protect its assets, The Wall Street Journal reported Friday.
OPEC, in its monthly oil report, lowered its estimate of world oil demand by 30,000 barrels a day. OPEC estimated world oil demand growing 1 million barrels a day this year, and another 900,000 barrels a day next year. "Summer strong oil demand growth in China, Middle East and Asia has not been enough to offset the huge decline in OECD oil demand in the second quarter," the oil cartel said. The demand for OPEC crude in 2008 is estimated to average 32.1 million barrels a day, a decline of 100,000 barrels over 2007. In 2009, the demand for OPEC crude is expected to average 31.3 million barrels a day. OPEC said it is now producing well above the demand for its crude.
Mexico's central bank increased its benchmark interest rate for the third straight month to stop quickening inflation from spreading throughout the economy.
The bank's five-member board, led by Governor Guillermo Ortiz, raised the key lending rate by a quarter of a percentage point to 8.25 percent today, the highest since December 2005. The decision matched the forecast of 22 of 30 economists surveyed by Bloomberg. Seven others said the rate would stay unchanged and one predicted a half-point increase.
Confidence among U.S. consumers rose in August, a sign that Americans are heartened by lower energy costs.
The Reuters/University of Michigan preliminary index of consumer sentiment increased to 61.7, less than forecast, from 61.2 in July. The measure averaged 85.6 in 2007.
Hershey also announced that it is raising wholesale prices by a weighted average of 11% to offset a sharp increase in raw materials and fuel costs. "Market prices for ingredients such as cocoa, corn sweeteners, sugar and peanuts are up 20% to 45% since the beginning of the year. As such, in 2009 we expect our commodity cost increase to be more than double the 2008 increase," said President and Chief Executive David West.
The Dow Jones Industrial Average gained 43.97 points to end at 11,659.90, losing 0.6% for the week. The S&P 500 rose 5.27 points to end at 1,298.20, a 0.1% advance from last Friday's close, while the Nasdaq Composite fell 1.15 points to 2,452.52, leaving the technology-laden index 1.6% higher on the week.
September crude closed at $113.77 per barrel in New York, down $1.24, or 1.1%, for the session. It lost 1.2% for the week.
For the week, gold futures lost 8.4% and silver futures dropped 16.4%, with a rally in the U.S. dollar putting pressure on the precious metals. December gold closed at $792.10 an ounce, down $22.40, or 2.8%, for the session Friday. September silver closed at $12.815 an ounce, down $1.415, or 9.9%, for the day.
Mohamed El-Erian, co-chief executive officer of Pacific Investment Management Co., said it has become harder for financial firms to raise capital because investors such as sovereign wealth funds have gotten ``smarter.''
``We are in the process of a major adjustment of the banking system which is made harder because you don't have the capital to lubricate it,'' El-Erian said in an interview from Newport Beach, California, on Bloomberg Radio.
We got a nice bump up in our refiner holdings, and at the same time, we had sold the Sunoco Aug. 45 calls, the Valero Aug 35 calls, the Frontier Aug 20 calls, and the Tesoro Aug 20 calls. As such, we'll sell the Sept calls now and raise the strike price up to the next higher level.
A top Russian general said Friday that Poland's agreement to accept a U.S. missile interceptor base exposes the ex-communist nation to attack, possibly by nuclear weapons, the Interfax news agency reported.
The statement by Gen. Anatoly Nogovitsyn is the strongest threat that Russia has issued against the plans to put missile defense elements in former Soviet satellite nations.
Barron's: "IT MAY BE CURTAINS SOON FOR THE MANAGEMENTS and shareholders of beleaguered housing giants Fannie Mae and Freddie Mac. It is growing increasingly likely that the Treasury will recapitalize Fannie and Freddie in the months ahead on the taxpayer's dime, availing itself of powers granted it under the new housing bill signed into law last month. Such a move almost certainly would wipe out existing holders of the agencies' common stock, with preferred shareholders and even holders of the two entities' $19 billion of subordinated debt also suffering losses."
California's unemployment rate climbed to a 12-year high last month as the state continued to bleed jobs in the real estate and construction industries.
The rate jumped to 7.3% in July from 7% in June. It was even worse in the Inland Empire, where the unemployment rate is approaching 9%, the state reported Friday.
Tahani Karrar: "Banks are scrambling for cash," says Malcolm D'Souza, president of the United Arab Emirates' Financial Markets Association. "They are lending money at such a fast pace that they are unable to find depositors...
The problem is especially acute for Dubai's booming real-estate market, which the Middle East Economic Digest estimates has active construction projects valued at almost $300 billion -- almost three times the region's gross domestic product.
"No doubt about it, there are more barriers," says Ramesh Efe, vice president of finance at the U.A.E.'s largest closely held property developer, Damac Properties. He reports trouble raising funds for setting up overseas offices and buying land for future projects.
The International Monetary Fund is aware of the problem and is working with government authorities to develop the region's capital markets."
Business Week: "Despite the recent softening of oil prices, the U.S. could be looking at double-digit inflation as early as 2009."
Saturday, August 16, 2008
Friday, August 15, 2008
Retail Sales
8/15/08 Retail Sales
Joseph Feldman, a retail analyst with the Telsey AdvisoryGroup, said investors may be disappointed by Wal-Mart's forecast, given the strong profit rise in the second quarter.
"Investors may read this negatively and will want to better understand if the company is being overly cautious or the outlook has slowed," Feldman told Reuters via an e-mail. "If the outlook has slowed, I view that as bad news for all retailers." Wal-Mart Stores Inc reported a 17 percent rise in quarterly profit and raised its full-year earnings view, as shoppers seek low prices on food, health-care products and electronics its stores.
But Wal-Mart, the world's largest retailer, also forecast on Thursday profit for the current quarter that could miss Wall Street targets. It now sees annual earnings between $3.43 and $3.50 a share -- up from an earlier view of $3.30 to $3.43 -- and third-quarter earnings between 73 and 76 cents a share.
U.S. foreclosure activity in July rose 55 percent from a year earlier as a slump in once-sizzling housing markets forced yet more borrowers to default on their mortgages, according to a monthly report.
Foreclosure filings -- default notices, auction sale notices and bank repossessions -- rose 8 percent from June and 55 percent from July 2007 to 272,171, according to RealtyTrac, which records property in various stages of foreclosure.
That means one in every 464 U.S. households received a foreclosure filing in July, the firm said. Bank repossessions (REOs) rose 184 percent year-over-year. Default notices were up 53 percent, and auction notices rose 11 percent.
U.S. consumer prices jumped a greater-than-expected 0.8% in July, marked by big increases in energy, food, clothing and cigarettes, the Labor Department reported Thursday. The core consumer price index - which excludes volatile food and energy prices - rose 0.3% for the second straight month. The report was much worse than expected. Economists had predicted the seasonally adjusted CPI to rise 0.5% and the core CPI to increase 0.2%. Consumer prices are up 5.6% in the past year, the biggest year-over-year increase since January 1991. The core CPI has risen 2.5% in the past year, the biggest gain since January.
First-time applications for state unemployment benefits fell by 10,000 in the latest week to 450,000, but the smoothed trend in new claims moved to its highest level in more than six years, the Labor Department reported Thursday. Initial claims have been boosted in recent weeks by publicity about a new federal program of extended benefits. The four-week average of new claims rose by 19,500 to 440,500, the highest since April 2002. The number of people receiving state benefits rose by 114,000 to 3.42 million, the most since November 2003. The four-week average of continuing claims rose by 75,250 to 3.27 million, the most since December 2003.
The Oil Drum: "I see a number of reasons why there is likely to be a very short path from petroleum shortages to electricity shortages:
1. All of the fuels used today for electricity generation are dependent to some extent on petroleum for their production and transport.
Unless there is an amazingly good allocation system, once there is a shortage of oil, of say, 20%, it is going to start affecting electricity production, because the oil deficit will start affecting fuels used for electricity production.
Electrical fuel dependence on petroleum
Coal. Surface mining uses large diesel powered machinery. Below ground mining almost certainly uses some diesel powered equipment, since diesel is so portable. Workers in mines use gasoline or diesel fuel to get to work. Transportation of coal is primarily by rail and barge, and these are petroleum powered in the US.
Natural gas. Drilling rigs are often powered by diesel fuel. Workers who visit wells to make adjustments drive trucks that use diesel or gasoline. Roads to the wells are maintained using diesel operated equipment. In arid places like Wyoming, the food that workers eat needs to be shipped long distances.
Uranium. Uranium mining is very volume-intensive, because it is only available in low concentrations. Earth-movers used to mine uranium use diesel fuel; the process for separating out the ore from the waste most likely uses petroleum as well. Once the ore is mined and suitably processed, it must be transported to the ultimate location, again using some form of petroleum as fuel.
Petroleum. If petroleum itself is used as a fuel, there is clearly a direct link between petroleum shortages and electricity shortages. In the US, petroleum is primarily used in Hawaii (since it is a group of islands) and for backup generation. Outside the US, there are many countries that use oil for power generation because oil is easy to transport and plants powered by petroleum are easy to build.
Wood or switchgrass. If biomass is used as a fuel, it must be harvested and transported to the place where it will be used. Diesel operated trucks and other equipment are currently used for this purpose.
Wind turbines. Wind turbines are very large. Roads must be maintained to transport the equipment to the site where it is used. Trucks are needed when maintenance is performed. If the turbines are located offshore, boats are needed for maintenance. Wind turbines must be serviced regularly because of wear and tear on the gearbox.
Hydroelectric. Needs less petroleum inputs than most. Petroleum is used for maintaining the transmission lines to the electrical power plant; for replacing parts of the hydroelectric dam when they wear out, and for dredging out the area behind the dam when it gets filled with silt.
Solar power generation. Today, solar generates only 0.01% of grid electric power. If solar power stations are situated in the desert to produce electrical power for the grid, oil is needed to transport the equipment to the desert location, and to bring food for the workers. Oil is needed in the initial manufacture of the equipments, and for building and maintaining transmission lines.
Geothermal. Less oil dependent than most. Oil is needed in building the initial station, for making and transporting replacement parts, and for maintaining electrical transmission lines from the plant.
2. If there is a shortage of oil, people will tend to substitute other fuels for petroleum. This substitution is likely to lead to other shortages."
Palatin Technologies, Inc. announced today the completion of a Phase 2a clinical trial of PL-3994, a novel, long-acting natriuretic peptide receptor A (NPRA) agonist under development for treatment of heart failure (HF). The Phase 2a trial was a randomized, double-blind, placebo-controlled, single ascending dose study in 21 volunteers with controlled hypertension who received the medication or placebo subcutaneously. The purpose of the study was to demonstrate that
PL-3994 can be given safely to patients taking antihypertensive medications commonly administered to heart failure and hypertension patients. The evaluations included safety, tolerability, pharmacokinetics and several pharmacodynamic endpoints, including levels of cyclic guanosine monophosphate (cGMP), a natural messenger nucleotide.
Dosing concluded with the successful achievement of the primary endpoint of the study, a pre-specified reduction in systemic blood pressure. No volunteer experienced a serious or severe adverse event. Elevations in plasma cGMP levels were all observed for several hours after single subcutaneous doses. Additional data analysis is ongoing and will be submitted for presentation when the analysis is complete.
"We are excited to confirm that PL-3994 can be given safely to patients who are taking blood pressure medications," stated Dr. Trevor Hallam, Palatin's Executive Vice President for Research and Development. "As we proceed with an additional Phase 2 study later this year, we will focus on the heart failure patients most in need of new therapies."
The previously announced Phase 1 study demonstrated that PL-3994 can be given safely and leads to a dose-related decrease in blood pressure and increase in cGMP levels, diuresis (kidney excretion of water) and natriuresis (kidney excretion of sodium). The data from this first study has been accepted for presentation at the 12th Annual Scientific Meeting of the Heart Failure Society of America to be held in Toronto, Canada on September 21-24, 2008.
China's industrial output slowed to its weakest pace of gains in 18 months in July, as the government put the brakes on factory output to curb air pollution, in addition to other measures to tighten security, ahead of the Olympic Games. The nation's value-added industrial production rose 14.7% in July from a year earlier, easing from a 16% rise in June, the statistics bureau said Thursday.
Anglo American has held secret talks with Zimbabwe's Movement for Democratic Change (MDC) about getting lucrative platinum mining concessions should the opposition gain power, the Financial Times said.
The Mervyns department store chain said Wednesday that it planned to close nearly 15% of its stores -- including seven in Southern California -- as it attempted to rework its finances two weeks after filing for bankruptcy protection.
The company will shutter 26 of its 176 mid-priced locations in California, Arizona, Idaho, Nevada and Texas by late October or early November.
Bloomberg reports that The Baltic Dry Index, the benchmark for shipping costs, fell for 23 consecutive sessions through Aug. 12, the worst decline since the third quarter of 2005. The index will average 40 percent less next year and sink another 47 percent in 2010, according to Goldman Sachs Group Inc. STX Pan Ocean Co. Ltd. and the other 11 smaller members of the Bloomberg Dry Ships Index have retreated as much as 34 percent in three months.
``What we have is a classic cyclical downturn,'' said Andreas Vergottis, research director at Tufton Oceanic Ltd., the world's largest shipping hedge fund manager. ``People are not buying cars and people are not buying houses, and when that stops, it travels backwards all the way back to the mine.''
Commodities, as measured by the Standard & Poor's GSCI index of 24 raw materials, are in a bear market after plunging as much as 22 percent from a record set July 3. China, the world's biggest consumer of coal, iron ore and industrial metals, expanded at the slowest pace since 2005 in the second quarter. Supertankers that ship oil are trading below the break-even rental rate of Frontline Ltd., the biggest owner of the ships.
The Baltic Dry Index reached a record 11,793 on May 20 and has dropped 40 percent since then. The index will average 8,498 this year, 5,099 next year and 2,719 in 2010, according to Hong Kong-based Goldman Sachs analysts Tom Kim and Edman Wong.
Economic activity in the eurozone fell in the three months to the end of June for the first time since the launch of the euro a decade ago. Confirmation of the slowdown comes a day after Japan reported a fall in second quarter GDP and the Bank of England gave a bleak outlook for the UK economy, suggesting inflation is becoming less of a concern for policymakers and boosting growth is now the main objective.
BP's share of oil and gas output cut at fields in the Caspian Sea is about 100,000 barrels of oil equivalent per day, a source close to the company said on Wednesday.
The German economy shrank for the first time in nearly four years in the second quarter as consumer spending and capital investment declined, according to government figures released Thursday. Europe's biggest economy contracted by 0.5 percent in the April-June period compared with the previous quarter, the Federal Statistical Office said. It was the first decline since the third quarter of 2004.
The Guardian's Seumas Milne: "This is a tale of U.S. expansion not Russian aggression. War in the Caucasus is as much the product of an American imperial drive as local conflicts. It's likely to be a taste of things to come."
George Ure: "If I had to speculate, I'd venture that the US and Russia are playing a cat & mouse game designed, on the part of the West, to cause Russia a large enough distraction to keep them 'busy' as the US/Wes moves toward an attack on Iran over its nuclear development as we get into the fall."
September crude closed at $115.01 per barrel in New York Thursday. December gold closed at $814.50 an ounce Thursday in New York. It lost $17 for the session.
Gannett Co.will cut 1,000 newspaper jobs, or about 3% of that division's workforce, the company said Thursday.
Median home prices fell in more than three-quarters of U.S. cities in the second quarter, the latest sign of the breadth of the housing market decline, according to new data Thursday.
Nevertheless, home sales rose in areas where the market is flooded with foreclosures, indicating that borrowers are taking advantage of steep discounts.
Nevada and California, battered by a housing market bust, were the only states to show sales gains in the second quarter compared with a year earlier, according to a report by the National Association of Realtors.
Sales were up 18 percent in Nevada compared with last year, after median prices fell by nearly 24 percent in the Las Vegas area. Sales in California were up 3.7 percent. Prices in Los Angeles, Riverside and Sacramento have plunged by 30 percent or more, according to the NAR's data.
Nationally, sales fell by 16.3 percent in the second quarter compared with the same period a year ago.
In recent months, the biggest home sales gains "have been in some of the markets with the steepest and fastest price drops," said Lawrence Yun, the trade group's chief economist. "Buyers in these areas are responding to deeply discounted home prices."
The Realtors group said median prices for existing single-family homes dropped in 115 of 150 metropolitan areas in the April-June period, while 35 metro areas saw prices increase.
Oil dropped by $2 to $113 a barrel on Friday to trade near the lowest since early May, pressured by faltering global demand and rising supply. In early Friday trading, silver futures fell $1.19 to $13.04 an ounce while gold futures fell $20.80 to $787.40 an ounce on Friday.
Hong Kong's economy grew at a slower-than-expected 4.2 percent in the second quarter from a year earlier, buffeted by weakening global economies and financial market woes, the government said Friday.
That compared to first-quarter growth of 7.3 percent and was the territory's first quarter-on-quarter decline since 2003, the government said.
Abercrombie & Fitch Co. says a consumer spending slowdown hurt fiscal second-quarter results, and it expects full-year results below analyst expectations.
Retail sales in New Zealand fell at their fastest pace in more than a decade in the second quarter, as consumers tightened spending amid what's emerging as the sharpest consumption downturn since the 1997 Asian financial crisis. Retail sales volume fell a seasonally-adjusted 1.5% in the April-to-June period on quarter, after falling 1.2% in the first quarter, according to Statistics New Zealand Friday.
According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $3.909 billion in the week ended 8/13/08 with Domestic funds reporting net inflows of $5.419 billion and Non-domestic funds reporting net outflows of -$1.510 billion;
Excluding ETF activity, Equity funds report net cash outflows totaling -$286 million with Domestic funds reporting net inflows of $578 million and Non-domestic funds reporting net outflows totaling -$863 million;
Exchange Traded (Equity) funds report net inflows of $4.195 billion.
Joseph Feldman, a retail analyst with the Telsey AdvisoryGroup, said investors may be disappointed by Wal-Mart's forecast, given the strong profit rise in the second quarter.
"Investors may read this negatively and will want to better understand if the company is being overly cautious or the outlook has slowed," Feldman told Reuters via an e-mail. "If the outlook has slowed, I view that as bad news for all retailers." Wal-Mart Stores Inc reported a 17 percent rise in quarterly profit and raised its full-year earnings view, as shoppers seek low prices on food, health-care products and electronics its stores.
But Wal-Mart, the world's largest retailer, also forecast on Thursday profit for the current quarter that could miss Wall Street targets. It now sees annual earnings between $3.43 and $3.50 a share -- up from an earlier view of $3.30 to $3.43 -- and third-quarter earnings between 73 and 76 cents a share.
U.S. foreclosure activity in July rose 55 percent from a year earlier as a slump in once-sizzling housing markets forced yet more borrowers to default on their mortgages, according to a monthly report.
Foreclosure filings -- default notices, auction sale notices and bank repossessions -- rose 8 percent from June and 55 percent from July 2007 to 272,171, according to RealtyTrac, which records property in various stages of foreclosure.
That means one in every 464 U.S. households received a foreclosure filing in July, the firm said. Bank repossessions (REOs) rose 184 percent year-over-year. Default notices were up 53 percent, and auction notices rose 11 percent.
U.S. consumer prices jumped a greater-than-expected 0.8% in July, marked by big increases in energy, food, clothing and cigarettes, the Labor Department reported Thursday. The core consumer price index - which excludes volatile food and energy prices - rose 0.3% for the second straight month. The report was much worse than expected. Economists had predicted the seasonally adjusted CPI to rise 0.5% and the core CPI to increase 0.2%. Consumer prices are up 5.6% in the past year, the biggest year-over-year increase since January 1991. The core CPI has risen 2.5% in the past year, the biggest gain since January.
First-time applications for state unemployment benefits fell by 10,000 in the latest week to 450,000, but the smoothed trend in new claims moved to its highest level in more than six years, the Labor Department reported Thursday. Initial claims have been boosted in recent weeks by publicity about a new federal program of extended benefits. The four-week average of new claims rose by 19,500 to 440,500, the highest since April 2002. The number of people receiving state benefits rose by 114,000 to 3.42 million, the most since November 2003. The four-week average of continuing claims rose by 75,250 to 3.27 million, the most since December 2003.
The Oil Drum: "I see a number of reasons why there is likely to be a very short path from petroleum shortages to electricity shortages:
1. All of the fuels used today for electricity generation are dependent to some extent on petroleum for their production and transport.
Unless there is an amazingly good allocation system, once there is a shortage of oil, of say, 20%, it is going to start affecting electricity production, because the oil deficit will start affecting fuels used for electricity production.
Electrical fuel dependence on petroleum
Coal. Surface mining uses large diesel powered machinery. Below ground mining almost certainly uses some diesel powered equipment, since diesel is so portable. Workers in mines use gasoline or diesel fuel to get to work. Transportation of coal is primarily by rail and barge, and these are petroleum powered in the US.
Natural gas. Drilling rigs are often powered by diesel fuel. Workers who visit wells to make adjustments drive trucks that use diesel or gasoline. Roads to the wells are maintained using diesel operated equipment. In arid places like Wyoming, the food that workers eat needs to be shipped long distances.
Uranium. Uranium mining is very volume-intensive, because it is only available in low concentrations. Earth-movers used to mine uranium use diesel fuel; the process for separating out the ore from the waste most likely uses petroleum as well. Once the ore is mined and suitably processed, it must be transported to the ultimate location, again using some form of petroleum as fuel.
Petroleum. If petroleum itself is used as a fuel, there is clearly a direct link between petroleum shortages and electricity shortages. In the US, petroleum is primarily used in Hawaii (since it is a group of islands) and for backup generation. Outside the US, there are many countries that use oil for power generation because oil is easy to transport and plants powered by petroleum are easy to build.
Wood or switchgrass. If biomass is used as a fuel, it must be harvested and transported to the place where it will be used. Diesel operated trucks and other equipment are currently used for this purpose.
Wind turbines. Wind turbines are very large. Roads must be maintained to transport the equipment to the site where it is used. Trucks are needed when maintenance is performed. If the turbines are located offshore, boats are needed for maintenance. Wind turbines must be serviced regularly because of wear and tear on the gearbox.
Hydroelectric. Needs less petroleum inputs than most. Petroleum is used for maintaining the transmission lines to the electrical power plant; for replacing parts of the hydroelectric dam when they wear out, and for dredging out the area behind the dam when it gets filled with silt.
Solar power generation. Today, solar generates only 0.01% of grid electric power. If solar power stations are situated in the desert to produce electrical power for the grid, oil is needed to transport the equipment to the desert location, and to bring food for the workers. Oil is needed in the initial manufacture of the equipments, and for building and maintaining transmission lines.
Geothermal. Less oil dependent than most. Oil is needed in building the initial station, for making and transporting replacement parts, and for maintaining electrical transmission lines from the plant.
2. If there is a shortage of oil, people will tend to substitute other fuels for petroleum. This substitution is likely to lead to other shortages."
Palatin Technologies, Inc. announced today the completion of a Phase 2a clinical trial of PL-3994, a novel, long-acting natriuretic peptide receptor A (NPRA) agonist under development for treatment of heart failure (HF). The Phase 2a trial was a randomized, double-blind, placebo-controlled, single ascending dose study in 21 volunteers with controlled hypertension who received the medication or placebo subcutaneously. The purpose of the study was to demonstrate that
PL-3994 can be given safely to patients taking antihypertensive medications commonly administered to heart failure and hypertension patients. The evaluations included safety, tolerability, pharmacokinetics and several pharmacodynamic endpoints, including levels of cyclic guanosine monophosphate (cGMP), a natural messenger nucleotide.
Dosing concluded with the successful achievement of the primary endpoint of the study, a pre-specified reduction in systemic blood pressure. No volunteer experienced a serious or severe adverse event. Elevations in plasma cGMP levels were all observed for several hours after single subcutaneous doses. Additional data analysis is ongoing and will be submitted for presentation when the analysis is complete.
"We are excited to confirm that PL-3994 can be given safely to patients who are taking blood pressure medications," stated Dr. Trevor Hallam, Palatin's Executive Vice President for Research and Development. "As we proceed with an additional Phase 2 study later this year, we will focus on the heart failure patients most in need of new therapies."
The previously announced Phase 1 study demonstrated that PL-3994 can be given safely and leads to a dose-related decrease in blood pressure and increase in cGMP levels, diuresis (kidney excretion of water) and natriuresis (kidney excretion of sodium). The data from this first study has been accepted for presentation at the 12th Annual Scientific Meeting of the Heart Failure Society of America to be held in Toronto, Canada on September 21-24, 2008.
China's industrial output slowed to its weakest pace of gains in 18 months in July, as the government put the brakes on factory output to curb air pollution, in addition to other measures to tighten security, ahead of the Olympic Games. The nation's value-added industrial production rose 14.7% in July from a year earlier, easing from a 16% rise in June, the statistics bureau said Thursday.
Anglo American has held secret talks with Zimbabwe's Movement for Democratic Change (MDC) about getting lucrative platinum mining concessions should the opposition gain power, the Financial Times said.
The Mervyns department store chain said Wednesday that it planned to close nearly 15% of its stores -- including seven in Southern California -- as it attempted to rework its finances two weeks after filing for bankruptcy protection.
The company will shutter 26 of its 176 mid-priced locations in California, Arizona, Idaho, Nevada and Texas by late October or early November.
Bloomberg reports that The Baltic Dry Index, the benchmark for shipping costs, fell for 23 consecutive sessions through Aug. 12, the worst decline since the third quarter of 2005. The index will average 40 percent less next year and sink another 47 percent in 2010, according to Goldman Sachs Group Inc. STX Pan Ocean Co. Ltd. and the other 11 smaller members of the Bloomberg Dry Ships Index have retreated as much as 34 percent in three months.
``What we have is a classic cyclical downturn,'' said Andreas Vergottis, research director at Tufton Oceanic Ltd., the world's largest shipping hedge fund manager. ``People are not buying cars and people are not buying houses, and when that stops, it travels backwards all the way back to the mine.''
Commodities, as measured by the Standard & Poor's GSCI index of 24 raw materials, are in a bear market after plunging as much as 22 percent from a record set July 3. China, the world's biggest consumer of coal, iron ore and industrial metals, expanded at the slowest pace since 2005 in the second quarter. Supertankers that ship oil are trading below the break-even rental rate of Frontline Ltd., the biggest owner of the ships.
The Baltic Dry Index reached a record 11,793 on May 20 and has dropped 40 percent since then. The index will average 8,498 this year, 5,099 next year and 2,719 in 2010, according to Hong Kong-based Goldman Sachs analysts Tom Kim and Edman Wong.
Economic activity in the eurozone fell in the three months to the end of June for the first time since the launch of the euro a decade ago. Confirmation of the slowdown comes a day after Japan reported a fall in second quarter GDP and the Bank of England gave a bleak outlook for the UK economy, suggesting inflation is becoming less of a concern for policymakers and boosting growth is now the main objective.
BP's share of oil and gas output cut at fields in the Caspian Sea is about 100,000 barrels of oil equivalent per day, a source close to the company said on Wednesday.
The German economy shrank for the first time in nearly four years in the second quarter as consumer spending and capital investment declined, according to government figures released Thursday. Europe's biggest economy contracted by 0.5 percent in the April-June period compared with the previous quarter, the Federal Statistical Office said. It was the first decline since the third quarter of 2004.
The Guardian's Seumas Milne: "This is a tale of U.S. expansion not Russian aggression. War in the Caucasus is as much the product of an American imperial drive as local conflicts. It's likely to be a taste of things to come."
George Ure: "If I had to speculate, I'd venture that the US and Russia are playing a cat & mouse game designed, on the part of the West, to cause Russia a large enough distraction to keep them 'busy' as the US/Wes moves toward an attack on Iran over its nuclear development as we get into the fall."
September crude closed at $115.01 per barrel in New York Thursday. December gold closed at $814.50 an ounce Thursday in New York. It lost $17 for the session.
Gannett Co.will cut 1,000 newspaper jobs, or about 3% of that division's workforce, the company said Thursday.
Median home prices fell in more than three-quarters of U.S. cities in the second quarter, the latest sign of the breadth of the housing market decline, according to new data Thursday.
Nevertheless, home sales rose in areas where the market is flooded with foreclosures, indicating that borrowers are taking advantage of steep discounts.
Nevada and California, battered by a housing market bust, were the only states to show sales gains in the second quarter compared with a year earlier, according to a report by the National Association of Realtors.
Sales were up 18 percent in Nevada compared with last year, after median prices fell by nearly 24 percent in the Las Vegas area. Sales in California were up 3.7 percent. Prices in Los Angeles, Riverside and Sacramento have plunged by 30 percent or more, according to the NAR's data.
Nationally, sales fell by 16.3 percent in the second quarter compared with the same period a year ago.
In recent months, the biggest home sales gains "have been in some of the markets with the steepest and fastest price drops," said Lawrence Yun, the trade group's chief economist. "Buyers in these areas are responding to deeply discounted home prices."
The Realtors group said median prices for existing single-family homes dropped in 115 of 150 metropolitan areas in the April-June period, while 35 metro areas saw prices increase.
Oil dropped by $2 to $113 a barrel on Friday to trade near the lowest since early May, pressured by faltering global demand and rising supply. In early Friday trading, silver futures fell $1.19 to $13.04 an ounce while gold futures fell $20.80 to $787.40 an ounce on Friday.
Hong Kong's economy grew at a slower-than-expected 4.2 percent in the second quarter from a year earlier, buffeted by weakening global economies and financial market woes, the government said Friday.
That compared to first-quarter growth of 7.3 percent and was the territory's first quarter-on-quarter decline since 2003, the government said.
Abercrombie & Fitch Co. says a consumer spending slowdown hurt fiscal second-quarter results, and it expects full-year results below analyst expectations.
Retail sales in New Zealand fell at their fastest pace in more than a decade in the second quarter, as consumers tightened spending amid what's emerging as the sharpest consumption downturn since the 1997 Asian financial crisis. Retail sales volume fell a seasonally-adjusted 1.5% in the April-to-June period on quarter, after falling 1.2% in the first quarter, according to Statistics New Zealand Friday.
According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $3.909 billion in the week ended 8/13/08 with Domestic funds reporting net inflows of $5.419 billion and Non-domestic funds reporting net outflows of -$1.510 billion;
Excluding ETF activity, Equity funds report net cash outflows totaling -$286 million with Domestic funds reporting net inflows of $578 million and Non-domestic funds reporting net outflows totaling -$863 million;
Exchange Traded (Equity) funds report net inflows of $4.195 billion.
Wednesday, August 13, 2008
Credit Crisis
8/14/08 Credit Crisis
Brett Steenbarger: "It's not stress and emotion that get in the way of trading; it's the stress and emotion that results when trading becomes personal: about you, rather than about supply and demand."
Mick P.:"The Georgian foreign ministry in Tbilisi said the Black Sea port of Poti, the site of a major oil shipment facility, had also been "devastated" by a Russian air raid."
The credit crisis is ``broad, deep, and global'' and ``far from over'' for financial companies even after they reported $500 billion in writedowns and credit losses, Merrill Lynch & Co.'s chief investment strategist said.
``Investors are significantly underestimating both the scope and the extent of the credit bubble and the consequences of its subsequent deflation,'' Richard Bernstein wrote in a note to clients. ``The problems are not confined to large institutions that are overexposed to U.S. subprime loans.''
The lingering effects of the crisis mean banks and brokerages need ``massive'' consolidation because of the glut of lending worldwide, Bernstein said.
Democratic presidential candidate Barack Obama has opened up clear lead over John McCain in New Jersey, though more Garden State voters agree with the Republican on energy, a new poll finds. The Quinnipiac University poll released Wednesday has Obama leading McCain 51 percent to 41 percent among likely voters here. The Illinois senator is favored by 94 percent of African-Americans and maintains a 15-point lead among women, the poll found.
A Quinnipiac poll in June found Obama leading by 6 percentage points.
A leading Republican moderate with a foreign policy background endorsed Democrat Barack Obama yesterday, aiding the candidate's efforts to demonstrate appeal to members of both political parties.
Former US representative Jim Leach of Iowa was among a group of Republicans, including former senator Lincoln Chafee of Rhode Island, who said they were crossing party lines to support Obama.
"I'm convinced that the national interest demands a new approach to our interaction with the world," Leach, a foreign service officer before being elected to Congress, said in a conference call with reporters.
Leach served 30 years in Congress before losing a reelection bid in 2006. As a moderate, he was often at odds with the conservative GOP leadership, and like Obama opposed the Iraq war.
Leach predicted many Republicans and Independents would be attracted by Obama's campaign but said his decision to endorse a Democratic presidential candidate for the first time wasn't easy.
Whole Foods Market's recent voluntary recall of fresh ground beef sold between June 2 and August 6 in certain states has led the retailer to tighten oversight of its food suppliers, the New York Times reports.
The Bank of England cut its forecast for U.K. economic growth and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.
Deere now projects construction sales may fall as much as 5 percent this year, compared with a May forecast of down as much as 3 percent. Higher prices for tractors and combines weren't enough to counter a $140 million increase in raw-material costs from a year earlier.
Soybeans rose for a third day, extending a rally from the lowest in more than four months, as a government report showed U.S. production and inventories will be reduced by the worst Midwest flooding in 15 years.
Farmers will harvest 2.973 billion bushels compared with 3 billion bushels forecast in July, the U.S. Department of Agriculture said yesterday. Yields are forecast to fall to 40.5 bushels an acre from a July estimate of 41.6 bushels. U.S. inventories before next year's harvest will total 135 million bushels, less than the 140 million forecast a month ago.
Two-thirds of firms doing business in the U.S. paid no federal income taxes from 1998-05.
Richard Daughty: " I will turn you over to Robert Ross, who provides an interesting lesson in going to a fiat currency from a gold money in an article posted at FinancialSense.com, where he reminds us that "in Rome, 277 BC, the denarius was born. It was a silver coin, and for the first 250 years, its silver content declined only modestly. The modest decline corresponded with Rome's rise to become an empire. From the original 66 grains of silver, the value had only declined 10% to 60 grains, by the time of Julius Caesar (49 BC). But soon afterwards monetary tumult commenced in earnest." This was 228 years, which is just a little more than the time since 1776.
I could tell by the look on his face that he was not interested in me interrupting with that little factoid about America or how I cleverly subtracted 1776 from 2008 to get 228, and continues, "In 54 AD Emperor Nero started to inflate and debase the value of Rome's money. Nero took 14.3% of the silver out of the denarius coin and 11% of the gold out of the aureus coin, replacing the precious metals with base metals."
Finally, "As Rome continued on its moral, political and monetary decline, by 193 AD, the denarius had only 26 grains of silver - a 61% devaluation from the original 66 grains. Shortly thereafter, Rome's denarius stopped being accepted in trade by the rest of the world. By 268, the denarius was nothing but base metal with a thin silver coating."
What's this got to do with anything we care about, which is ourselves? I thought you'd never ask! He says, "If we flash forward to the U.S. in the 1960s, we find that, in one fell swoop, all of the silver was taken out of our coins and replaced with base metals. Are we Rome on steroids???" Hahaha! Yes! Yes, we are!
But snide comments about what a bunch of corrupt, bloodthirsty, power-crazed, commie hedonists we have become aside, he doesn't mention what an ounce of gold was worth all along the way when valued in the local currency, so I will. It went up! The whole time!
And by 268 A.D., when the currency went to zero, gold was selling at a zillion denarii an ounce! Dollars. Denarius. Denarius. Dollar. Ponder and be instructed!"
The U.S. budget deficit widened to a record for July as tax rebates boosted government spending, a slower economy cut revenue and regulators covered insured deposits at failed banks.
The $102.8 billion deficit last month compares with a shortfall of $36.4 billion in July 2007, the Treasury said in a report issued in Washington. Spending last month rose 27.3 percent to a record $263.3 billion from a year earlier, and revenue decreased 5.8 percent to $160.5 billion.
Since the start of the fiscal year on Oct. 1, 2007, the government has accumulated a deficit of $371.4 billion compared with a shortfall of $157.4 billion at the same point a year earlier, according to the Treasury.
Year-to-date spending totaled $2.466 trillion, and revenue totaled $2.094 trillion, the Treasury said.
The Bush Legacy: A collapsing standard of living on Main Street, a war founded on lies, trampling of the Constitution, record and rising budget and trade deficits, spiraling inflation, a dollar shunned by foreigners, a bulging government workforce, a severe recession with no end in sight, bubblemania created by irresponsible lending practices, a debt limit approaching $10 trillion, torture, etc.
The Federal Deposit Insurance Corp. spent $15 billion last month to cover insured deposits at failed banks. The FDIC insures deposits of as much as $100,000 per depositor per bank and as much as $250,000 for some retirement accounts at 8,494 lenders with $13.4 trillion in assets.
To finance the excess of spending over revenue, the Treasury sells bonds, notes and bills. The department said July 28 that it would need to borrow $171 billion in the July- September quarter, $59 billion more than it predicted in April.
Macy's cut its full-year profit forecast to $1.70 to $1.85 a share from a previous projection of $1.85 to $2.15 a share, excluding restructuring costs.
Liz Claiborne lowered the top end of its fiscal 2008 forecast to as much as $1.50 from a previous projection of as much as $1.60 a share as it said the difficult macroeconomic environment leads it to be cautious in its outlook.
Russian steelmaker Novolipetsk Steel has signed an agreement to expand its presence in the U.S. by buying U.S. steel pipe and tube manufacturer John Maneely Company from a shareholder group including private equity firm Carlyle Group for $3.53 billion, Novolipetsk said in a statement today.
The Beechwood, Ohio-headquartered John Maneely Company, or JMC, is the largest independent maker of tubular steel in North America and has estimated 2008 sales of around $3 billion, Novolipetsk said.
India's economic growth is likely to slow to 7.7 percent for the fiscal year that started April 1, due to the drag of higher food and oil prices and tightening in credit and equity markets after the U.S. subprime crisis, a government report said Wednesday.
Growth in agriculture is likely to be at 2 percent, sharply lower than 4.5 percent growth in the last fiscal year, the report from the Economic Advisory Council to India's prime minister said. Growth in industry and services will also slow to 7.5 percent and 9.6 percent, respectively, compared with 8.5 percent and 10.8 percent a piece in the last year, it said.
India's economy grew 9 percent in the fiscal year through March. And it grew at an annual average of 8.8 percent over the past five years, the report said, but it added that "a number of factors inimical to growth have intensified in 2008."
The report specifically cited higher oil prices, tightening in credit and equity markets and a global slowdown in growth.
"Overall, economic growth will slow down," the report said.
U.S. import prices rose by 1.7% in July, mostly on prices for imported petroleum and natural gas, the Labor Department reported Wednesday. Prices were up 21.6% over the past 12 months, the largest 12-month increase in the history of the index. Petroleum import prices climbed by 4% in the month, while natural gas prices rose by 5.8%. Excluding all fuels, import prices rose by 0.7% in July.
The Oil Drum: "An Australian researcher has warned that the drive to put cleaner, hydrogen-fuelled cars on the road will stall unless new reserves of platinum are found. Platinum is one of the key components of catalytic converters, catalysing carbon monoxide from exhaust fumes. It is also a critical component of fuel cells for hydrogen-powered cars. However 80 per cent of the world's reserves come from just three mines. John Mavrogenes says a team of geochemists from the Australian National University has identified new methods to detect platinum deposits. They are simulating the intense heat and pressure of the Earth's magma to discover whether platinum can be extracted from other minerals. "This work may help geologists find new reserves around the world in places that haven't been searched before," he said. Professor Mavrogenes says if the platinum price remains at its current high, Australia could mine lower-grade deposits. ...The three major mines that produce platinum are in South Africa, Siberia and the United States. "If we go to more and more uses of platinum we're going to need more than they can produce," Professor Mavrogenes said. "Existing reserves would meet less than 20 per cent of the world's platinum demand if all cars went hydrogen."
EIA estimates that members of OPEC earned $671 billion in net oil export revenues in 2007, a 10 percent increase from 2006.
Footnoted.org: "The carrying value of Countrywide's loans held for investment at the time of the merger were $94.2 billion, which Bank of America paid $8.1 billion for."
Americans drove 53.2 billion fewer miles over the last 10 months than they did over the same period a year earlier, according to the U.S. Department of Transportation. The figure tops the 1970s' total decline of 49.3 billion miles. Americans drove 4.7% less, or 12.2 billion miles fewer, in June 2008 than June 2007. Meanwhile, average retail gasoline prices fell a penny to $3.79 a gallon in the last day, according to the Daily Fuel Gauge Report from AAA. A month ago, gasoline prices were near a record of $4.11 a gallon. A year ago, gasoline sold for $2.77 a gallon.
Total sales at U.S. retailers edged down 0.1 percent in July on another big drop in auto sales, as consumers strain to keep up spending amid rising prices.
A report on growing disparities in the concentration of U.S. aluminum-can wealth, released Tuesday by the Department of Commerce, revealed that 66 percent of the nation's recyclable assets are now held by the poorest 1 percent of the population.
According to the sobering report, the disproportionate distribution of soda-can wealth is greater than ever before, and has become one of the worst instances of economic inequality in the nation's history. Data showed that over-salvaging of cans by a small and elite group of can-hoarders has created a steadily growing and possibly unbridgeable gap between the rich and the mega-poor.
Genentech's board of directors said Wednesday that it has unanimously concluded that Roche Holdings Ltd.'s bid to buy Genentech for $89.00 per share substantially undervalues the company. However, it would consider a higher bid.
U.S. June inventory-to-sales ratio falls to record-low 1.23.
Mikhail Gorbachev: "What happened on the night of August 7 is beyond comprehension. The Georgian military attacked the South Ossetian capital of Tskhinvali with multiple rocket launchers designed to devastate large areas. Russia had to respond. To accuse it of aggression against "small, defenceless Georgia" is not just hypocritical but shows a lack of humanity.
The Georgian leadership could do this only with the perceived support and encouragement of a much more powerful force. Georgian armed forces were trained by hundreds of US instructors, and its sophisticated military equipment was bought in a number of countries. This, coupled with the promise of Nato membership, emboldened Georgian leaders.
Now that the military assault has been routed, both the Georgian government and its supporters should rethink their position. When the problems of South Ossetia and Abkhazia first flared up, I proposed that they be settled through a federation that would grant broad autonomy to the two republics. This idea was dismissed, particularly by the Georgians. Attitudes gradually shifted, but after last week it will be much more difficult to strike a deal even on such a basis...Of course, peace in the Caucasus is in everyone's interest. But it is simply common sense to recognise that Russia is rooted there by common geography and centuries of history. Russia is not seeking territorial expansion, but it has legitimate interests in this region... A lesson from recent events is that geopolitical games are dangerous anywhere, not just in the Caucasus."
The U.K. pound fell to a 22-month low against the dollar and government bonds advanced after the Bank of England cut its growth forecast and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.
Motor gasoline supplies fell by 6.4 million barrels to 202.8 million for the week ended August 8, according to the Energy Department Wednesday. Crude supplies fell 400,000 barrels to 296.5 million barrels. Distillate stocks were down 1.7 million barrels at 131.6 million barrels. Refinery utilization was at 85.9% compared with 87% of capacity a week earlier.
Skechers USA Inc.said late Wednesday it is offering to buy Heelys Inc. for about $142.8 million in cash, or for $5.25 a share.
September crude closed at $116 per barrel Wednesday, up $2.99, or 2.7%, for the session.
December gold closed at $831.50 an ounce Wednesday, up $16.90, or 2.1%, on the New York Mercantile Exchange.
Lehman Brothers Holdings Inc., seeking to restore investor confidence after a $2.8 billion second-quarter loss, is negotiating to sell commercial real estate assets to a group including BlackRock Inc., said three people briefed on the discussions.
Lehman is seeking to sell about $14 billion of its $40 billion in commercial property and related securities by the end of the year, according to two potential buyers approached by the New York- based firm.
Brett Steenbarger: "It's not stress and emotion that get in the way of trading; it's the stress and emotion that results when trading becomes personal: about you, rather than about supply and demand."
Mick P.:"The Georgian foreign ministry in Tbilisi said the Black Sea port of Poti, the site of a major oil shipment facility, had also been "devastated" by a Russian air raid."
The credit crisis is ``broad, deep, and global'' and ``far from over'' for financial companies even after they reported $500 billion in writedowns and credit losses, Merrill Lynch & Co.'s chief investment strategist said.
``Investors are significantly underestimating both the scope and the extent of the credit bubble and the consequences of its subsequent deflation,'' Richard Bernstein wrote in a note to clients. ``The problems are not confined to large institutions that are overexposed to U.S. subprime loans.''
The lingering effects of the crisis mean banks and brokerages need ``massive'' consolidation because of the glut of lending worldwide, Bernstein said.
Democratic presidential candidate Barack Obama has opened up clear lead over John McCain in New Jersey, though more Garden State voters agree with the Republican on energy, a new poll finds. The Quinnipiac University poll released Wednesday has Obama leading McCain 51 percent to 41 percent among likely voters here. The Illinois senator is favored by 94 percent of African-Americans and maintains a 15-point lead among women, the poll found.
A Quinnipiac poll in June found Obama leading by 6 percentage points.
A leading Republican moderate with a foreign policy background endorsed Democrat Barack Obama yesterday, aiding the candidate's efforts to demonstrate appeal to members of both political parties.
Former US representative Jim Leach of Iowa was among a group of Republicans, including former senator Lincoln Chafee of Rhode Island, who said they were crossing party lines to support Obama.
"I'm convinced that the national interest demands a new approach to our interaction with the world," Leach, a foreign service officer before being elected to Congress, said in a conference call with reporters.
Leach served 30 years in Congress before losing a reelection bid in 2006. As a moderate, he was often at odds with the conservative GOP leadership, and like Obama opposed the Iraq war.
Leach predicted many Republicans and Independents would be attracted by Obama's campaign but said his decision to endorse a Democratic presidential candidate for the first time wasn't easy.
Whole Foods Market's recent voluntary recall of fresh ground beef sold between June 2 and August 6 in certain states has led the retailer to tighten oversight of its food suppliers, the New York Times reports.
The Bank of England cut its forecast for U.K. economic growth and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.
Deere now projects construction sales may fall as much as 5 percent this year, compared with a May forecast of down as much as 3 percent. Higher prices for tractors and combines weren't enough to counter a $140 million increase in raw-material costs from a year earlier.
Soybeans rose for a third day, extending a rally from the lowest in more than four months, as a government report showed U.S. production and inventories will be reduced by the worst Midwest flooding in 15 years.
Farmers will harvest 2.973 billion bushels compared with 3 billion bushels forecast in July, the U.S. Department of Agriculture said yesterday. Yields are forecast to fall to 40.5 bushels an acre from a July estimate of 41.6 bushels. U.S. inventories before next year's harvest will total 135 million bushels, less than the 140 million forecast a month ago.
Two-thirds of firms doing business in the U.S. paid no federal income taxes from 1998-05.
Richard Daughty: " I will turn you over to Robert Ross, who provides an interesting lesson in going to a fiat currency from a gold money in an article posted at FinancialSense.com, where he reminds us that "in Rome, 277 BC, the denarius was born. It was a silver coin, and for the first 250 years, its silver content declined only modestly. The modest decline corresponded with Rome's rise to become an empire. From the original 66 grains of silver, the value had only declined 10% to 60 grains, by the time of Julius Caesar (49 BC). But soon afterwards monetary tumult commenced in earnest." This was 228 years, which is just a little more than the time since 1776.
I could tell by the look on his face that he was not interested in me interrupting with that little factoid about America or how I cleverly subtracted 1776 from 2008 to get 228, and continues, "In 54 AD Emperor Nero started to inflate and debase the value of Rome's money. Nero took 14.3% of the silver out of the denarius coin and 11% of the gold out of the aureus coin, replacing the precious metals with base metals."
Finally, "As Rome continued on its moral, political and monetary decline, by 193 AD, the denarius had only 26 grains of silver - a 61% devaluation from the original 66 grains. Shortly thereafter, Rome's denarius stopped being accepted in trade by the rest of the world. By 268, the denarius was nothing but base metal with a thin silver coating."
What's this got to do with anything we care about, which is ourselves? I thought you'd never ask! He says, "If we flash forward to the U.S. in the 1960s, we find that, in one fell swoop, all of the silver was taken out of our coins and replaced with base metals. Are we Rome on steroids???" Hahaha! Yes! Yes, we are!
But snide comments about what a bunch of corrupt, bloodthirsty, power-crazed, commie hedonists we have become aside, he doesn't mention what an ounce of gold was worth all along the way when valued in the local currency, so I will. It went up! The whole time!
And by 268 A.D., when the currency went to zero, gold was selling at a zillion denarii an ounce! Dollars. Denarius. Denarius. Dollar. Ponder and be instructed!"
The U.S. budget deficit widened to a record for July as tax rebates boosted government spending, a slower economy cut revenue and regulators covered insured deposits at failed banks.
The $102.8 billion deficit last month compares with a shortfall of $36.4 billion in July 2007, the Treasury said in a report issued in Washington. Spending last month rose 27.3 percent to a record $263.3 billion from a year earlier, and revenue decreased 5.8 percent to $160.5 billion.
Since the start of the fiscal year on Oct. 1, 2007, the government has accumulated a deficit of $371.4 billion compared with a shortfall of $157.4 billion at the same point a year earlier, according to the Treasury.
Year-to-date spending totaled $2.466 trillion, and revenue totaled $2.094 trillion, the Treasury said.
The Bush Legacy: A collapsing standard of living on Main Street, a war founded on lies, trampling of the Constitution, record and rising budget and trade deficits, spiraling inflation, a dollar shunned by foreigners, a bulging government workforce, a severe recession with no end in sight, bubblemania created by irresponsible lending practices, a debt limit approaching $10 trillion, torture, etc.
The Federal Deposit Insurance Corp. spent $15 billion last month to cover insured deposits at failed banks. The FDIC insures deposits of as much as $100,000 per depositor per bank and as much as $250,000 for some retirement accounts at 8,494 lenders with $13.4 trillion in assets.
To finance the excess of spending over revenue, the Treasury sells bonds, notes and bills. The department said July 28 that it would need to borrow $171 billion in the July- September quarter, $59 billion more than it predicted in April.
Macy's cut its full-year profit forecast to $1.70 to $1.85 a share from a previous projection of $1.85 to $2.15 a share, excluding restructuring costs.
Liz Claiborne lowered the top end of its fiscal 2008 forecast to as much as $1.50 from a previous projection of as much as $1.60 a share as it said the difficult macroeconomic environment leads it to be cautious in its outlook.
Russian steelmaker Novolipetsk Steel has signed an agreement to expand its presence in the U.S. by buying U.S. steel pipe and tube manufacturer John Maneely Company from a shareholder group including private equity firm Carlyle Group for $3.53 billion, Novolipetsk said in a statement today.
The Beechwood, Ohio-headquartered John Maneely Company, or JMC, is the largest independent maker of tubular steel in North America and has estimated 2008 sales of around $3 billion, Novolipetsk said.
India's economic growth is likely to slow to 7.7 percent for the fiscal year that started April 1, due to the drag of higher food and oil prices and tightening in credit and equity markets after the U.S. subprime crisis, a government report said Wednesday.
Growth in agriculture is likely to be at 2 percent, sharply lower than 4.5 percent growth in the last fiscal year, the report from the Economic Advisory Council to India's prime minister said. Growth in industry and services will also slow to 7.5 percent and 9.6 percent, respectively, compared with 8.5 percent and 10.8 percent a piece in the last year, it said.
India's economy grew 9 percent in the fiscal year through March. And it grew at an annual average of 8.8 percent over the past five years, the report said, but it added that "a number of factors inimical to growth have intensified in 2008."
The report specifically cited higher oil prices, tightening in credit and equity markets and a global slowdown in growth.
"Overall, economic growth will slow down," the report said.
U.S. import prices rose by 1.7% in July, mostly on prices for imported petroleum and natural gas, the Labor Department reported Wednesday. Prices were up 21.6% over the past 12 months, the largest 12-month increase in the history of the index. Petroleum import prices climbed by 4% in the month, while natural gas prices rose by 5.8%. Excluding all fuels, import prices rose by 0.7% in July.
The Oil Drum: "An Australian researcher has warned that the drive to put cleaner, hydrogen-fuelled cars on the road will stall unless new reserves of platinum are found. Platinum is one of the key components of catalytic converters, catalysing carbon monoxide from exhaust fumes. It is also a critical component of fuel cells for hydrogen-powered cars. However 80 per cent of the world's reserves come from just three mines. John Mavrogenes says a team of geochemists from the Australian National University has identified new methods to detect platinum deposits. They are simulating the intense heat and pressure of the Earth's magma to discover whether platinum can be extracted from other minerals. "This work may help geologists find new reserves around the world in places that haven't been searched before," he said. Professor Mavrogenes says if the platinum price remains at its current high, Australia could mine lower-grade deposits. ...The three major mines that produce platinum are in South Africa, Siberia and the United States. "If we go to more and more uses of platinum we're going to need more than they can produce," Professor Mavrogenes said. "Existing reserves would meet less than 20 per cent of the world's platinum demand if all cars went hydrogen."
EIA estimates that members of OPEC earned $671 billion in net oil export revenues in 2007, a 10 percent increase from 2006.
Footnoted.org: "The carrying value of Countrywide's loans held for investment at the time of the merger were $94.2 billion, which Bank of America paid $8.1 billion for."
Americans drove 53.2 billion fewer miles over the last 10 months than they did over the same period a year earlier, according to the U.S. Department of Transportation. The figure tops the 1970s' total decline of 49.3 billion miles. Americans drove 4.7% less, or 12.2 billion miles fewer, in June 2008 than June 2007. Meanwhile, average retail gasoline prices fell a penny to $3.79 a gallon in the last day, according to the Daily Fuel Gauge Report from AAA. A month ago, gasoline prices were near a record of $4.11 a gallon. A year ago, gasoline sold for $2.77 a gallon.
Total sales at U.S. retailers edged down 0.1 percent in July on another big drop in auto sales, as consumers strain to keep up spending amid rising prices.
A report on growing disparities in the concentration of U.S. aluminum-can wealth, released Tuesday by the Department of Commerce, revealed that 66 percent of the nation's recyclable assets are now held by the poorest 1 percent of the population.
According to the sobering report, the disproportionate distribution of soda-can wealth is greater than ever before, and has become one of the worst instances of economic inequality in the nation's history. Data showed that over-salvaging of cans by a small and elite group of can-hoarders has created a steadily growing and possibly unbridgeable gap between the rich and the mega-poor.
Genentech's board of directors said Wednesday that it has unanimously concluded that Roche Holdings Ltd.'s bid to buy Genentech for $89.00 per share substantially undervalues the company. However, it would consider a higher bid.
U.S. June inventory-to-sales ratio falls to record-low 1.23.
Mikhail Gorbachev: "What happened on the night of August 7 is beyond comprehension. The Georgian military attacked the South Ossetian capital of Tskhinvali with multiple rocket launchers designed to devastate large areas. Russia had to respond. To accuse it of aggression against "small, defenceless Georgia" is not just hypocritical but shows a lack of humanity.
The Georgian leadership could do this only with the perceived support and encouragement of a much more powerful force. Georgian armed forces were trained by hundreds of US instructors, and its sophisticated military equipment was bought in a number of countries. This, coupled with the promise of Nato membership, emboldened Georgian leaders.
Now that the military assault has been routed, both the Georgian government and its supporters should rethink their position. When the problems of South Ossetia and Abkhazia first flared up, I proposed that they be settled through a federation that would grant broad autonomy to the two republics. This idea was dismissed, particularly by the Georgians. Attitudes gradually shifted, but after last week it will be much more difficult to strike a deal even on such a basis...Of course, peace in the Caucasus is in everyone's interest. But it is simply common sense to recognise that Russia is rooted there by common geography and centuries of history. Russia is not seeking territorial expansion, but it has legitimate interests in this region... A lesson from recent events is that geopolitical games are dangerous anywhere, not just in the Caucasus."
The U.K. pound fell to a 22-month low against the dollar and government bonds advanced after the Bank of England cut its growth forecast and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.
Motor gasoline supplies fell by 6.4 million barrels to 202.8 million for the week ended August 8, according to the Energy Department Wednesday. Crude supplies fell 400,000 barrels to 296.5 million barrels. Distillate stocks were down 1.7 million barrels at 131.6 million barrels. Refinery utilization was at 85.9% compared with 87% of capacity a week earlier.
Skechers USA Inc.said late Wednesday it is offering to buy Heelys Inc. for about $142.8 million in cash, or for $5.25 a share.
September crude closed at $116 per barrel Wednesday, up $2.99, or 2.7%, for the session.
December gold closed at $831.50 an ounce Wednesday, up $16.90, or 2.1%, on the New York Mercantile Exchange.
Lehman Brothers Holdings Inc., seeking to restore investor confidence after a $2.8 billion second-quarter loss, is negotiating to sell commercial real estate assets to a group including BlackRock Inc., said three people briefed on the discussions.
Lehman is seeking to sell about $14 billion of its $40 billion in commercial property and related securities by the end of the year, according to two potential buyers approached by the New York- based firm.
Credit Crisis
8/14/08 Credit Crisis
Brett Steenbarger: "It's not stress and emotion that get in the way of trading; it's the stress and emotion that results when trading becomes personal: about you, rather than about supply and demand."
Mick P.:"The Georgian foreign ministry in Tbilisi said the Black Sea port of Poti, the site of a major oil shipment facility, had also been "devastated" by a Russian air raid."
The credit crisis is ``broad, deep, and global'' and ``far from over'' for financial companies even after they reported $500 billion in writedowns and credit losses, Merrill Lynch & Co.'s chief investment strategist said.
``Investors are significantly underestimating both the scope and the extent of the credit bubble and the consequences of its subsequent deflation,'' Richard Bernstein wrote in a note to clients. ``The problems are not confined to large institutions that are overexposed to U.S. subprime loans.''
The lingering effects of the crisis mean banks and brokerages need ``massive'' consolidation because of the glut of lending worldwide, Bernstein said.
Democratic presidential candidate Barack Obama has opened up clear lead over John McCain in New Jersey, though more Garden State voters agree with the Republican on energy, a new poll finds. The Quinnipiac University poll released Wednesday has Obama leading McCain 51 percent to 41 percent among likely voters here. The Illinois senator is favored by 94 percent of African-Americans and maintains a 15-point lead among women, the poll found.
A Quinnipiac poll in June found Obama leading by 6 percentage points.
A leading Republican moderate with a foreign policy background endorsed Democrat Barack Obama yesterday, aiding the candidate's efforts to demonstrate appeal to members of both political parties.
Former US representative Jim Leach of Iowa was among a group of Republicans, including former senator Lincoln Chafee of Rhode Island, who said they were crossing party lines to support Obama.
"I'm convinced that the national interest demands a new approach to our interaction with the world," Leach, a foreign service officer before being elected to Congress, said in a conference call with reporters.
Leach served 30 years in Congress before losing a reelection bid in 2006. As a moderate, he was often at odds with the conservative GOP leadership, and like Obama opposed the Iraq war.
Leach predicted many Republicans and Independents would be attracted by Obama's campaign but said his decision to endorse a Democratic presidential candidate for the first time wasn't easy.
Whole Foods Market's recent voluntary recall of fresh ground beef sold between June 2 and August 6 in certain states has led the retailer to tighten oversight of its food suppliers, the New York Times reports.
The Bank of England cut its forecast for U.K. economic growth and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.
Deere now projects construction sales may fall as much as 5 percent this year, compared with a May forecast of down as much as 3 percent. Higher prices for tractors and combines weren't enough to counter a $140 million increase in raw-material costs from a year earlier.
Soybeans rose for a third day, extending a rally from the lowest in more than four months, as a government report showed U.S. production and inventories will be reduced by the worst Midwest flooding in 15 years.
Farmers will harvest 2.973 billion bushels compared with 3 billion bushels forecast in July, the U.S. Department of Agriculture said yesterday. Yields are forecast to fall to 40.5 bushels an acre from a July estimate of 41.6 bushels. U.S. inventories before next year's harvest will total 135 million bushels, less than the 140 million forecast a month ago.
Two-thirds of firms doing business in the U.S. paid no federal income taxes from 1998-05.
Richard Daughty: " I will turn you over to Robert Ross, who provides an interesting lesson in going to a fiat currency from a gold money in an article posted at FinancialSense.com, where he reminds us that "in Rome, 277 BC, the denarius was born. It was a silver coin, and for the first 250 years, its silver content declined only modestly. The modest decline corresponded with Rome's rise to become an empire. From the original 66 grains of silver, the value had only declined 10% to 60 grains, by the time of Julius Caesar (49 BC). But soon afterwards monetary tumult commenced in earnest." This was 228 years, which is just a little more than the time since 1776.
I could tell by the look on his face that he was not interested in me interrupting with that little factoid about America or how I cleverly subtracted 1776 from 2008 to get 228, and continues, "In 54 AD Emperor Nero started to inflate and debase the value of Rome's money. Nero took 14.3% of the silver out of the denarius coin and 11% of the gold out of the aureus coin, replacing the precious metals with base metals."
Finally, "As Rome continued on its moral, political and monetary decline, by 193 AD, the denarius had only 26 grains of silver - a 61% devaluation from the original 66 grains. Shortly thereafter, Rome's denarius stopped being accepted in trade by the rest of the world. By 268, the denarius was nothing but base metal with a thin silver coating."
What's this got to do with anything we care about, which is ourselves? I thought you'd never ask! He says, "If we flash forward to the U.S. in the 1960s, we find that, in one fell swoop, all of the silver was taken out of our coins and replaced with base metals. Are we Rome on steroids???" Hahaha! Yes! Yes, we are!
But snide comments about what a bunch of corrupt, bloodthirsty, power-crazed, commie hedonists we have become aside, he doesn't mention what an ounce of gold was worth all along the way when valued in the local currency, so I will. It went up! The whole time!
And by 268 A.D., when the currency went to zero, gold was selling at a zillion denarii an ounce! Dollars. Denarius. Denarius. Dollar. Ponder and be instructed!"
The U.S. budget deficit widened to a record for July as tax rebates boosted government spending, a slower economy cut revenue and regulators covered insured deposits at failed banks.
The $102.8 billion deficit last month compares with a shortfall of $36.4 billion in July 2007, the Treasury said in a report issued in Washington. Spending last month rose 27.3 percent to a record $263.3 billion from a year earlier, and revenue decreased 5.8 percent to $160.5 billion.
Since the start of the fiscal year on Oct. 1, 2007, the government has accumulated a deficit of $371.4 billion compared with a shortfall of $157.4 billion at the same point a year earlier, according to the Treasury.
Year-to-date spending totaled $2.466 trillion, and revenue totaled $2.094 trillion, the Treasury said.
The Bush Legacy: A collapsing standard of living on Main Street, a war founded on lies, trampling of the Constitution, record and rising budget and trade deficits, spiraling inflation, a dollar shunned by foreigners, a bulging government workforce, a severe recession with no end in sight, bubblemania created by irresponsible lending practices, a debt limit approaching $10 trillion, torture, etc.
The Federal Deposit Insurance Corp. spent $15 billion last month to cover insured deposits at failed banks. The FDIC insures deposits of as much as $100,000 per depositor per bank and as much as $250,000 for some retirement accounts at 8,494 lenders with $13.4 trillion in assets.
To finance the excess of spending over revenue, the Treasury sells bonds, notes and bills. The department said July 28 that it would need to borrow $171 billion in the July- September quarter, $59 billion more than it predicted in April.
Macy's cut its full-year profit forecast to $1.70 to $1.85 a share from a previous projection of $1.85 to $2.15 a share, excluding restructuring costs.
Liz Claiborne lowered the top end of its fiscal 2008 forecast to as much as $1.50 from a previous projection of as much as $1.60 a share as it said the difficult macroeconomic environment leads it to be cautious in its outlook.
Russian steelmaker Novolipetsk Steel has signed an agreement to expand its presence in the U.S. by buying U.S. steel pipe and tube manufacturer John Maneely Company from a shareholder group including private equity firm Carlyle Group for $3.53 billion, Novolipetsk said in a statement today.
The Beechwood, Ohio-headquartered John Maneely Company, or JMC, is the largest independent maker of tubular steel in North America and has estimated 2008 sales of around $3 billion, Novolipetsk said.
India's economic growth is likely to slow to 7.7 percent for the fiscal year that started April 1, due to the drag of higher food and oil prices and tightening in credit and equity markets after the U.S. subprime crisis, a government report said Wednesday.
Growth in agriculture is likely to be at 2 percent, sharply lower than 4.5 percent growth in the last fiscal year, the report from the Economic Advisory Council to India's prime minister said. Growth in industry and services will also slow to 7.5 percent and 9.6 percent, respectively, compared with 8.5 percent and 10.8 percent a piece in the last year, it said.
India's economy grew 9 percent in the fiscal year through March. And it grew at an annual average of 8.8 percent over the past five years, the report said, but it added that "a number of factors inimical to growth have intensified in 2008."
The report specifically cited higher oil prices, tightening in credit and equity markets and a global slowdown in growth.
"Overall, economic growth will slow down," the report said.
U.S. import prices rose by 1.7% in July, mostly on prices for imported petroleum and natural gas, the Labor Department reported Wednesday. Prices were up 21.6% over the past 12 months, the largest 12-month increase in the history of the index. Petroleum import prices climbed by 4% in the month, while natural gas prices rose by 5.8%. Excluding all fuels, import prices rose by 0.7% in July.
The Oil Drum: "An Australian researcher has warned that the drive to put cleaner, hydrogen-fuelled cars on the road will stall unless new reserves of platinum are found. Platinum is one of the key components of catalytic converters, catalysing carbon monoxide from exhaust fumes. It is also a critical component of fuel cells for hydrogen-powered cars. However 80 per cent of the world's reserves come from just three mines. John Mavrogenes says a team of geochemists from the Australian National University has identified new methods to detect platinum deposits. They are simulating the intense heat and pressure of the Earth's magma to discover whether platinum can be extracted from other minerals. "This work may help geologists find new reserves around the world in places that haven't been searched before," he said. Professor Mavrogenes says if the platinum price remains at its current high, Australia could mine lower-grade deposits. ...The three major mines that produce platinum are in South Africa, Siberia and the United States. "If we go to more and more uses of platinum we're going to need more than they can produce," Professor Mavrogenes said. "Existing reserves would meet less than 20 per cent of the world's platinum demand if all cars went hydrogen."
EIA estimates that members of OPEC earned $671 billion in net oil export revenues in 2007, a 10 percent increase from 2006.
Footnoted.org: "The carrying value of Countrywide's loans held for investment at the time of the merger were $94.2 billion, which Bank of America paid $8.1 billion for."
Americans drove 53.2 billion fewer miles over the last 10 months than they did over the same period a year earlier, according to the U.S. Department of Transportation. The figure tops the 1970s' total decline of 49.3 billion miles. Americans drove 4.7% less, or 12.2 billion miles fewer, in June 2008 than June 2007. Meanwhile, average retail gasoline prices fell a penny to $3.79 a gallon in the last day, according to the Daily Fuel Gauge Report from AAA. A month ago, gasoline prices were near a record of $4.11 a gallon. A year ago, gasoline sold for $2.77 a gallon.
Total sales at U.S. retailers edged down 0.1 percent in July on another big drop in auto sales, as consumers strain to keep up spending amid rising prices.
A report on growing disparities in the concentration of U.S. aluminum-can wealth, released Tuesday by the Department of Commerce, revealed that 66 percent of the nation's recyclable assets are now held by the poorest 1 percent of the population.
According to the sobering report, the disproportionate distribution of soda-can wealth is greater than ever before, and has become one of the worst instances of economic inequality in the nation's history. Data showed that over-salvaging of cans by a small and elite group of can-hoarders has created a steadily growing and possibly unbridgeable gap between the rich and the mega-poor.
Genentech's board of directors said Wednesday that it has unanimously concluded that Roche Holdings Ltd.'s bid to buy Genentech for $89.00 per share substantially undervalues the company. However, it would consider a higher bid.
U.S. June inventory-to-sales ratio falls to record-low 1.23.
Mikhail Gorbachev: "What happened on the night of August 7 is beyond comprehension. The Georgian military attacked the South Ossetian capital of Tskhinvali with multiple rocket launchers designed to devastate large areas. Russia had to respond. To accuse it of aggression against "small, defenceless Georgia" is not just hypocritical but shows a lack of humanity.
The Georgian leadership could do this only with the perceived support and encouragement of a much more powerful force. Georgian armed forces were trained by hundreds of US instructors, and its sophisticated military equipment was bought in a number of countries. This, coupled with the promise of Nato membership, emboldened Georgian leaders.
Now that the military assault has been routed, both the Georgian government and its supporters should rethink their position. When the problems of South Ossetia and Abkhazia first flared up, I proposed that they be settled through a federation that would grant broad autonomy to the two republics. This idea was dismissed, particularly by the Georgians. Attitudes gradually shifted, but after last week it will be much more difficult to strike a deal even on such a basis...Of course, peace in the Caucasus is in everyone's interest. But it is simply common sense to recognise that Russia is rooted there by common geography and centuries of history. Russia is not seeking territorial expansion, but it has legitimate interests in this region... A lesson from recent events is that geopolitical games are dangerous anywhere, not just in the Caucasus."
The U.K. pound fell to a 22-month low against the dollar and government bonds advanced after the Bank of England cut its growth forecast and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.
Motor gasoline supplies fell by 6.4 million barrels to 202.8 million for the week ended August 8, according to the Energy Department Wednesday. Crude supplies fell 400,000 barrels to 296.5 million barrels. Distillate stocks were down 1.7 million barrels at 131.6 million barrels. Refinery utilization was at 85.9% compared with 87% of capacity a week earlier.
Skechers USA Inc.said late Wednesday it is offering to buy Heelys Inc. for about $142.8 million in cash, or for $5.25 a share.
September crude closed at $116 per barrel Wednesday, up $2.99, or 2.7%, for the session.
December gold closed at $831.50 an ounce Wednesday, up $16.90, or 2.1%, on the New York Mercantile Exchange.
Lehman Brothers Holdings Inc., seeking to restore investor confidence after a $2.8 billion second-quarter loss, is negotiating to sell commercial real estate assets to a group including BlackRock Inc., said three people briefed on the discussions.
Lehman is seeking to sell about $14 billion of its $40 billion in commercial property and related securities by the end of the year, according to two potential buyers approached by the New York- based firm.
Brett Steenbarger: "It's not stress and emotion that get in the way of trading; it's the stress and emotion that results when trading becomes personal: about you, rather than about supply and demand."
Mick P.:"The Georgian foreign ministry in Tbilisi said the Black Sea port of Poti, the site of a major oil shipment facility, had also been "devastated" by a Russian air raid."
The credit crisis is ``broad, deep, and global'' and ``far from over'' for financial companies even after they reported $500 billion in writedowns and credit losses, Merrill Lynch & Co.'s chief investment strategist said.
``Investors are significantly underestimating both the scope and the extent of the credit bubble and the consequences of its subsequent deflation,'' Richard Bernstein wrote in a note to clients. ``The problems are not confined to large institutions that are overexposed to U.S. subprime loans.''
The lingering effects of the crisis mean banks and brokerages need ``massive'' consolidation because of the glut of lending worldwide, Bernstein said.
Democratic presidential candidate Barack Obama has opened up clear lead over John McCain in New Jersey, though more Garden State voters agree with the Republican on energy, a new poll finds. The Quinnipiac University poll released Wednesday has Obama leading McCain 51 percent to 41 percent among likely voters here. The Illinois senator is favored by 94 percent of African-Americans and maintains a 15-point lead among women, the poll found.
A Quinnipiac poll in June found Obama leading by 6 percentage points.
A leading Republican moderate with a foreign policy background endorsed Democrat Barack Obama yesterday, aiding the candidate's efforts to demonstrate appeal to members of both political parties.
Former US representative Jim Leach of Iowa was among a group of Republicans, including former senator Lincoln Chafee of Rhode Island, who said they were crossing party lines to support Obama.
"I'm convinced that the national interest demands a new approach to our interaction with the world," Leach, a foreign service officer before being elected to Congress, said in a conference call with reporters.
Leach served 30 years in Congress before losing a reelection bid in 2006. As a moderate, he was often at odds with the conservative GOP leadership, and like Obama opposed the Iraq war.
Leach predicted many Republicans and Independents would be attracted by Obama's campaign but said his decision to endorse a Democratic presidential candidate for the first time wasn't easy.
Whole Foods Market's recent voluntary recall of fresh ground beef sold between June 2 and August 6 in certain states has led the retailer to tighten oversight of its food suppliers, the New York Times reports.
The Bank of England cut its forecast for U.K. economic growth and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.
Deere now projects construction sales may fall as much as 5 percent this year, compared with a May forecast of down as much as 3 percent. Higher prices for tractors and combines weren't enough to counter a $140 million increase in raw-material costs from a year earlier.
Soybeans rose for a third day, extending a rally from the lowest in more than four months, as a government report showed U.S. production and inventories will be reduced by the worst Midwest flooding in 15 years.
Farmers will harvest 2.973 billion bushels compared with 3 billion bushels forecast in July, the U.S. Department of Agriculture said yesterday. Yields are forecast to fall to 40.5 bushels an acre from a July estimate of 41.6 bushels. U.S. inventories before next year's harvest will total 135 million bushels, less than the 140 million forecast a month ago.
Two-thirds of firms doing business in the U.S. paid no federal income taxes from 1998-05.
Richard Daughty: " I will turn you over to Robert Ross, who provides an interesting lesson in going to a fiat currency from a gold money in an article posted at FinancialSense.com, where he reminds us that "in Rome, 277 BC, the denarius was born. It was a silver coin, and for the first 250 years, its silver content declined only modestly. The modest decline corresponded with Rome's rise to become an empire. From the original 66 grains of silver, the value had only declined 10% to 60 grains, by the time of Julius Caesar (49 BC). But soon afterwards monetary tumult commenced in earnest." This was 228 years, which is just a little more than the time since 1776.
I could tell by the look on his face that he was not interested in me interrupting with that little factoid about America or how I cleverly subtracted 1776 from 2008 to get 228, and continues, "In 54 AD Emperor Nero started to inflate and debase the value of Rome's money. Nero took 14.3% of the silver out of the denarius coin and 11% of the gold out of the aureus coin, replacing the precious metals with base metals."
Finally, "As Rome continued on its moral, political and monetary decline, by 193 AD, the denarius had only 26 grains of silver - a 61% devaluation from the original 66 grains. Shortly thereafter, Rome's denarius stopped being accepted in trade by the rest of the world. By 268, the denarius was nothing but base metal with a thin silver coating."
What's this got to do with anything we care about, which is ourselves? I thought you'd never ask! He says, "If we flash forward to the U.S. in the 1960s, we find that, in one fell swoop, all of the silver was taken out of our coins and replaced with base metals. Are we Rome on steroids???" Hahaha! Yes! Yes, we are!
But snide comments about what a bunch of corrupt, bloodthirsty, power-crazed, commie hedonists we have become aside, he doesn't mention what an ounce of gold was worth all along the way when valued in the local currency, so I will. It went up! The whole time!
And by 268 A.D., when the currency went to zero, gold was selling at a zillion denarii an ounce! Dollars. Denarius. Denarius. Dollar. Ponder and be instructed!"
The U.S. budget deficit widened to a record for July as tax rebates boosted government spending, a slower economy cut revenue and regulators covered insured deposits at failed banks.
The $102.8 billion deficit last month compares with a shortfall of $36.4 billion in July 2007, the Treasury said in a report issued in Washington. Spending last month rose 27.3 percent to a record $263.3 billion from a year earlier, and revenue decreased 5.8 percent to $160.5 billion.
Since the start of the fiscal year on Oct. 1, 2007, the government has accumulated a deficit of $371.4 billion compared with a shortfall of $157.4 billion at the same point a year earlier, according to the Treasury.
Year-to-date spending totaled $2.466 trillion, and revenue totaled $2.094 trillion, the Treasury said.
The Bush Legacy: A collapsing standard of living on Main Street, a war founded on lies, trampling of the Constitution, record and rising budget and trade deficits, spiraling inflation, a dollar shunned by foreigners, a bulging government workforce, a severe recession with no end in sight, bubblemania created by irresponsible lending practices, a debt limit approaching $10 trillion, torture, etc.
The Federal Deposit Insurance Corp. spent $15 billion last month to cover insured deposits at failed banks. The FDIC insures deposits of as much as $100,000 per depositor per bank and as much as $250,000 for some retirement accounts at 8,494 lenders with $13.4 trillion in assets.
To finance the excess of spending over revenue, the Treasury sells bonds, notes and bills. The department said July 28 that it would need to borrow $171 billion in the July- September quarter, $59 billion more than it predicted in April.
Macy's cut its full-year profit forecast to $1.70 to $1.85 a share from a previous projection of $1.85 to $2.15 a share, excluding restructuring costs.
Liz Claiborne lowered the top end of its fiscal 2008 forecast to as much as $1.50 from a previous projection of as much as $1.60 a share as it said the difficult macroeconomic environment leads it to be cautious in its outlook.
Russian steelmaker Novolipetsk Steel has signed an agreement to expand its presence in the U.S. by buying U.S. steel pipe and tube manufacturer John Maneely Company from a shareholder group including private equity firm Carlyle Group for $3.53 billion, Novolipetsk said in a statement today.
The Beechwood, Ohio-headquartered John Maneely Company, or JMC, is the largest independent maker of tubular steel in North America and has estimated 2008 sales of around $3 billion, Novolipetsk said.
India's economic growth is likely to slow to 7.7 percent for the fiscal year that started April 1, due to the drag of higher food and oil prices and tightening in credit and equity markets after the U.S. subprime crisis, a government report said Wednesday.
Growth in agriculture is likely to be at 2 percent, sharply lower than 4.5 percent growth in the last fiscal year, the report from the Economic Advisory Council to India's prime minister said. Growth in industry and services will also slow to 7.5 percent and 9.6 percent, respectively, compared with 8.5 percent and 10.8 percent a piece in the last year, it said.
India's economy grew 9 percent in the fiscal year through March. And it grew at an annual average of 8.8 percent over the past five years, the report said, but it added that "a number of factors inimical to growth have intensified in 2008."
The report specifically cited higher oil prices, tightening in credit and equity markets and a global slowdown in growth.
"Overall, economic growth will slow down," the report said.
U.S. import prices rose by 1.7% in July, mostly on prices for imported petroleum and natural gas, the Labor Department reported Wednesday. Prices were up 21.6% over the past 12 months, the largest 12-month increase in the history of the index. Petroleum import prices climbed by 4% in the month, while natural gas prices rose by 5.8%. Excluding all fuels, import prices rose by 0.7% in July.
The Oil Drum: "An Australian researcher has warned that the drive to put cleaner, hydrogen-fuelled cars on the road will stall unless new reserves of platinum are found. Platinum is one of the key components of catalytic converters, catalysing carbon monoxide from exhaust fumes. It is also a critical component of fuel cells for hydrogen-powered cars. However 80 per cent of the world's reserves come from just three mines. John Mavrogenes says a team of geochemists from the Australian National University has identified new methods to detect platinum deposits. They are simulating the intense heat and pressure of the Earth's magma to discover whether platinum can be extracted from other minerals. "This work may help geologists find new reserves around the world in places that haven't been searched before," he said. Professor Mavrogenes says if the platinum price remains at its current high, Australia could mine lower-grade deposits. ...The three major mines that produce platinum are in South Africa, Siberia and the United States. "If we go to more and more uses of platinum we're going to need more than they can produce," Professor Mavrogenes said. "Existing reserves would meet less than 20 per cent of the world's platinum demand if all cars went hydrogen."
EIA estimates that members of OPEC earned $671 billion in net oil export revenues in 2007, a 10 percent increase from 2006.
Footnoted.org: "The carrying value of Countrywide's loans held for investment at the time of the merger were $94.2 billion, which Bank of America paid $8.1 billion for."
Americans drove 53.2 billion fewer miles over the last 10 months than they did over the same period a year earlier, according to the U.S. Department of Transportation. The figure tops the 1970s' total decline of 49.3 billion miles. Americans drove 4.7% less, or 12.2 billion miles fewer, in June 2008 than June 2007. Meanwhile, average retail gasoline prices fell a penny to $3.79 a gallon in the last day, according to the Daily Fuel Gauge Report from AAA. A month ago, gasoline prices were near a record of $4.11 a gallon. A year ago, gasoline sold for $2.77 a gallon.
Total sales at U.S. retailers edged down 0.1 percent in July on another big drop in auto sales, as consumers strain to keep up spending amid rising prices.
A report on growing disparities in the concentration of U.S. aluminum-can wealth, released Tuesday by the Department of Commerce, revealed that 66 percent of the nation's recyclable assets are now held by the poorest 1 percent of the population.
According to the sobering report, the disproportionate distribution of soda-can wealth is greater than ever before, and has become one of the worst instances of economic inequality in the nation's history. Data showed that over-salvaging of cans by a small and elite group of can-hoarders has created a steadily growing and possibly unbridgeable gap between the rich and the mega-poor.
Genentech's board of directors said Wednesday that it has unanimously concluded that Roche Holdings Ltd.'s bid to buy Genentech for $89.00 per share substantially undervalues the company. However, it would consider a higher bid.
U.S. June inventory-to-sales ratio falls to record-low 1.23.
Mikhail Gorbachev: "What happened on the night of August 7 is beyond comprehension. The Georgian military attacked the South Ossetian capital of Tskhinvali with multiple rocket launchers designed to devastate large areas. Russia had to respond. To accuse it of aggression against "small, defenceless Georgia" is not just hypocritical but shows a lack of humanity.
The Georgian leadership could do this only with the perceived support and encouragement of a much more powerful force. Georgian armed forces were trained by hundreds of US instructors, and its sophisticated military equipment was bought in a number of countries. This, coupled with the promise of Nato membership, emboldened Georgian leaders.
Now that the military assault has been routed, both the Georgian government and its supporters should rethink their position. When the problems of South Ossetia and Abkhazia first flared up, I proposed that they be settled through a federation that would grant broad autonomy to the two republics. This idea was dismissed, particularly by the Georgians. Attitudes gradually shifted, but after last week it will be much more difficult to strike a deal even on such a basis...Of course, peace in the Caucasus is in everyone's interest. But it is simply common sense to recognise that Russia is rooted there by common geography and centuries of history. Russia is not seeking territorial expansion, but it has legitimate interests in this region... A lesson from recent events is that geopolitical games are dangerous anywhere, not just in the Caucasus."
The U.K. pound fell to a 22-month low against the dollar and government bonds advanced after the Bank of England cut its growth forecast and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.
Motor gasoline supplies fell by 6.4 million barrels to 202.8 million for the week ended August 8, according to the Energy Department Wednesday. Crude supplies fell 400,000 barrels to 296.5 million barrels. Distillate stocks were down 1.7 million barrels at 131.6 million barrels. Refinery utilization was at 85.9% compared with 87% of capacity a week earlier.
Skechers USA Inc.said late Wednesday it is offering to buy Heelys Inc. for about $142.8 million in cash, or for $5.25 a share.
September crude closed at $116 per barrel Wednesday, up $2.99, or 2.7%, for the session.
December gold closed at $831.50 an ounce Wednesday, up $16.90, or 2.1%, on the New York Mercantile Exchange.
Lehman Brothers Holdings Inc., seeking to restore investor confidence after a $2.8 billion second-quarter loss, is negotiating to sell commercial real estate assets to a group including BlackRock Inc., said three people briefed on the discussions.
Lehman is seeking to sell about $14 billion of its $40 billion in commercial property and related securities by the end of the year, according to two potential buyers approached by the New York- based firm.
U.S. Homeowners
8/13/08 U.S. Homeowners
The U.S. trade gap narrowed by 4.1% to $56.8 billion in June on record exports and a decline in non-oil imports, the Commerce Department estimated Tuesday. The non-petroleum trade deficit fell to the lowest level in five years, the government said. Exports jumped 4% in June to a record $164.4 billion, the biggest gain in four years. Imports rose 1.8% to a record $221.2 billion, largely because of the record $117 price for a barrel of crude oil. After adjusting for inflation, the real trade deficit fell by 10.3% to the lowest level in 6 1/2 years.
Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.
Second-quarter home prices fell 9.9 percent from a year earlier, giving 29 percent of owners negative equity, said Zillow, the Seattle-based service that offers values for more than 80 million homes. For those who bought at the 2006 peak of the housing market, 45 percent are now underwater, Zillow said.
Lehman Brothers Holdings Inc. may reap $7 billion by selling Neuberger Berman LLC, its asset-management unit, as mortgage-related assets further erode capital, said analyst Brad Hintz at Sanford C. Bernstein Co.
The U.S. corn crop will be 4.9 percent larger than forecast a month ago, the government said, after favorable weather helped Midwest crops recover from the worst flooding in 15 years.
Maurilio Biagi Filho, the world's second-biggest sugar-cane grower, will spend about $250 million to quadruple electricity generation at his mills to tap rising demand for energy in Latin America's biggest economy.
Wall Street's mortgage losses have grown so large that some firms may pay little or no taxes for years, widening New York City and state deficits and challenging their ability to provide services, Mayor Michael Bloomberg said.
Mitsubishi UFJ Group (MUFG) on Tuesday offered $3bn to buy the remaining 35 per cent in Union Bank of California it does not already own, in a move aimed at giving Japan’s largest lender a greater presence in the US.
MUFG is offering shareholders $63 per share, or an 8 per cent premium over UNBC’s closing price on Monday and a 24.5 per cent premium on the bank’s average closing price over the last four weeks. UNBC is a commercial bank with 300 branches across the state of California.
Consumer price inflation rate leapt to 4.4 percent in July, the government said Tuesday, making it difficult for the Bank of England to consider lowering interest rates to ward off the risk of recession.
The report from the Office for National Statistics showed inflation is now at more than double the government's target of 2 percent, after rising from 3.8 percent in June.
The 0.6 percentage-point jump was the biggest monthly rise since records began in January 1997 and outpaced the 4.2 percent predicted by many economists.
"This is a really disturbing set of data that will not go down at all well at the Bank of England," said Global Insight economist Howard Archer. "The rise in consumer price inflation to a series high ... was well above expectations."
World oil demand growth will rise by approximately 60,000 barrels per day to 930,000 bpd in 2009 as consumption in non-OECD countries increases, the International Energy Agency said on Tuesday.
China National Offshore Oil Corp., or Cnooc, and China National Petrochemical Corp., or Sinopec, are joining forces to bid for an Angolan oil and gas asset owned by U.S.-based Marathon Oil Corp. that is expected to fetch about US$1.5 billion, the South China Morning Post reported Monday, citing unnamed sources.
The report said India's Oil & Natural Gas Corp. and Brazil's Petroleo Brasileiro SA (PBR), or Petrobras. are among the rival bidders. Marathon Oil will select the winning bid over the next few days, the paper said.
Nouriel Roubini: "There is now an increasing probability that the global economy - not just the US - will experience a serious and protracted recession. Macro developments in the last few weeks suggest that now all of the G7 economies (the group of the major advanced economies including US, UK, Japan, Germany, France, Italy and Canada) are already in a recession or close to tipping into one. Other advanced economies or emerging markets (the rest of the Eurozone including Spain. Ireland the the other Euro members; New Zealand, Iceland, Estonia, Latvia and some other South-East Europe economies) are also on the tip of a recessionary hard landing.
And once this group of twenty plus economies enters into a recession there will be a sharp growth slowdown in the BRICs (Brazil, Russia, India and China) and other emerging market economies. The IMF defines a global recession as a global growth rate below 2.5% as emerging market economies usually grow much faster (6%) than advanced economies where growth averages about 2%. For example, a country like China - that even with a growth rate of 10% plus has officially thousands of riots and protests a year - needs to move 15 million poor rural farmers to the modern urban industrial sector with higher wages every year just to maintain the legitimacy of its regime; so for China a growth rate of 6% would be equivalent to a recessionary hard landing. It now looks like that, by the end of this year or early 2009, the global economy will enter a recession."
The Russians now supply about 25 percent of the European Union's crude oil needs and half of its natural gas.
The Oil Drum: "An analysis of recent crude oil production data for Saudi Arabia, in conjunction with data on recent projects which have added additional supply, indicates that the most recent production peak in 2006 will be surpassed with the additions of the Khurais and Manifa producing areas. Beyond these, however, more rapid decline of Ghawar and other older fields will overwhelm any potential additions from their remaining as yet undeveloped fields."
Crude oil prices are expected to average $119 a barrel this year, the Energy Information Administration said Tuesday in an August forecast. That was down from the EIA's July forecast of $127 a barrel. Next year's average price is expected to stand at $124 a barrel, down from the $133 a barrel the EIA expected in July.
CVS Caremark Corp. late Tuesday said it will buy Longs Drug Stores Corp. for $2.9 billion, or $71.50 a share. The deal, which also includes the assumption of debt, is a 32% premium over Longs Drug's closing stock price.
Applied Materials Inc. reported a 65% drop in net income for its third fiscal quarter amid a drop in sales for the company's semiconductor manufacturing tools. For the period ended July 27, Applied Materials said its net income was $164.5 million, or 12 cents a share, compared to earnings of $473.5 million, or 34 cents a share, for the same period last year. The company said earnings excluding charges for stock-option expenses and acquisition charges would have been $228 million, or 17 cents a share.
The U.S. economy faces a prolonged period of anemic growth, but that's no reason to get complacent on inflation, said Dallas Fed President Richard Fisher in an interview with the Dallas Morning News published Tuesday. "I expect that in the second half of this year we will broach zero growth," he said. Fisher, a voting member of the Federal Open Market Committee who's been on the losing side on the past five votes on interest rates, said the credit crunch is worse than the S&L crisis of the late 1980s. "We go through these periods of correction. It's not unhealthy. It's the way capitalism works." Fisher said everyone on the FOMC would be concerned if inflationary expectations became unanchored.
Japan's economy contracted last quarter, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less.
Gross domestic product shrank an annualized 2.4 percent in the three months ended June 30 after expanding a revised 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo. The median estimate of 29 economists surveyed by Bloomberg News was for a 2.3 percent contraction.
CSL Ltd., the world's second-largest maker of specialized blood transfusion products, agreed to buy Talecris Biotherapeutics Holding Corp. for $3.1 billion cash, boosting sales by more than a third with its biggest acquisition.
The purchase will be partly funded by a $1.5 billion share sale to shareholders, the Melbourne-based company said today in a statement. CSL today reported net income rose 30 percent to A$701.8 million ($610 million) in the 12 months to June 30, from A$539.3 million a year earlier.
Short-selling limits on financial stocks are lifted with Wednesday's open.
Shares of Deere & Co sank 6.1 percent to $65.10 in premarket trade on Wednesday after the world's largest maker of farm machinery posted its third-quarter results.
Deere & Co, the world's largest maker of farm machinery, said earnings in the latest quarter rose 7 percent as soaring crop prices boosted global demand for its agricultural equipment.
Net profit rose to $575.2 million, or $1.32 a share, in its fiscal third quarter, from $537.2 million, or $1.18 a share, a year earlier.
Revenue increased 17 percent to $7.74 billion.
Luxury home builder Toll Brothers said fiscal third quarter to July 31 home-building revenue fell 34% to $796.5 million, with its bakclog down 52% and contracts signed down 35% in dollar terms. Chairman and CEO Robert Toll said there's growing pent-up demand from those who have postponed buying during the last three years, and said total cancellations of 195 were the lowest quarterly total in over two years.
Chinese retail sales jumped 23.3% in July from the year-earlier period, boosted by strong demand for oil and oil products as well as cosmetics and jewelry, official data showed Wednesday, according to media reports. The increase was higher than the 23% growth registered in June, and improved retail sales in the first seven months of 2008 to 21.7% over the year-ago period.
The U.S. trade gap narrowed by 4.1% to $56.8 billion in June on record exports and a decline in non-oil imports, the Commerce Department estimated Tuesday. The non-petroleum trade deficit fell to the lowest level in five years, the government said. Exports jumped 4% in June to a record $164.4 billion, the biggest gain in four years. Imports rose 1.8% to a record $221.2 billion, largely because of the record $117 price for a barrel of crude oil. After adjusting for inflation, the real trade deficit fell by 10.3% to the lowest level in 6 1/2 years.
Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.
Second-quarter home prices fell 9.9 percent from a year earlier, giving 29 percent of owners negative equity, said Zillow, the Seattle-based service that offers values for more than 80 million homes. For those who bought at the 2006 peak of the housing market, 45 percent are now underwater, Zillow said.
Lehman Brothers Holdings Inc. may reap $7 billion by selling Neuberger Berman LLC, its asset-management unit, as mortgage-related assets further erode capital, said analyst Brad Hintz at Sanford C. Bernstein Co.
The U.S. corn crop will be 4.9 percent larger than forecast a month ago, the government said, after favorable weather helped Midwest crops recover from the worst flooding in 15 years.
Maurilio Biagi Filho, the world's second-biggest sugar-cane grower, will spend about $250 million to quadruple electricity generation at his mills to tap rising demand for energy in Latin America's biggest economy.
Wall Street's mortgage losses have grown so large that some firms may pay little or no taxes for years, widening New York City and state deficits and challenging their ability to provide services, Mayor Michael Bloomberg said.
Mitsubishi UFJ Group (MUFG) on Tuesday offered $3bn to buy the remaining 35 per cent in Union Bank of California it does not already own, in a move aimed at giving Japan’s largest lender a greater presence in the US.
MUFG is offering shareholders $63 per share, or an 8 per cent premium over UNBC’s closing price on Monday and a 24.5 per cent premium on the bank’s average closing price over the last four weeks. UNBC is a commercial bank with 300 branches across the state of California.
Consumer price inflation rate leapt to 4.4 percent in July, the government said Tuesday, making it difficult for the Bank of England to consider lowering interest rates to ward off the risk of recession.
The report from the Office for National Statistics showed inflation is now at more than double the government's target of 2 percent, after rising from 3.8 percent in June.
The 0.6 percentage-point jump was the biggest monthly rise since records began in January 1997 and outpaced the 4.2 percent predicted by many economists.
"This is a really disturbing set of data that will not go down at all well at the Bank of England," said Global Insight economist Howard Archer. "The rise in consumer price inflation to a series high ... was well above expectations."
World oil demand growth will rise by approximately 60,000 barrels per day to 930,000 bpd in 2009 as consumption in non-OECD countries increases, the International Energy Agency said on Tuesday.
China National Offshore Oil Corp., or Cnooc, and China National Petrochemical Corp., or Sinopec, are joining forces to bid for an Angolan oil and gas asset owned by U.S.-based Marathon Oil Corp. that is expected to fetch about US$1.5 billion, the South China Morning Post reported Monday, citing unnamed sources.
The report said India's Oil & Natural Gas Corp. and Brazil's Petroleo Brasileiro SA (PBR), or Petrobras. are among the rival bidders. Marathon Oil will select the winning bid over the next few days, the paper said.
Nouriel Roubini: "There is now an increasing probability that the global economy - not just the US - will experience a serious and protracted recession. Macro developments in the last few weeks suggest that now all of the G7 economies (the group of the major advanced economies including US, UK, Japan, Germany, France, Italy and Canada) are already in a recession or close to tipping into one. Other advanced economies or emerging markets (the rest of the Eurozone including Spain. Ireland the the other Euro members; New Zealand, Iceland, Estonia, Latvia and some other South-East Europe economies) are also on the tip of a recessionary hard landing.
And once this group of twenty plus economies enters into a recession there will be a sharp growth slowdown in the BRICs (Brazil, Russia, India and China) and other emerging market economies. The IMF defines a global recession as a global growth rate below 2.5% as emerging market economies usually grow much faster (6%) than advanced economies where growth averages about 2%. For example, a country like China - that even with a growth rate of 10% plus has officially thousands of riots and protests a year - needs to move 15 million poor rural farmers to the modern urban industrial sector with higher wages every year just to maintain the legitimacy of its regime; so for China a growth rate of 6% would be equivalent to a recessionary hard landing. It now looks like that, by the end of this year or early 2009, the global economy will enter a recession."
The Russians now supply about 25 percent of the European Union's crude oil needs and half of its natural gas.
The Oil Drum: "An analysis of recent crude oil production data for Saudi Arabia, in conjunction with data on recent projects which have added additional supply, indicates that the most recent production peak in 2006 will be surpassed with the additions of the Khurais and Manifa producing areas. Beyond these, however, more rapid decline of Ghawar and other older fields will overwhelm any potential additions from their remaining as yet undeveloped fields."
Crude oil prices are expected to average $119 a barrel this year, the Energy Information Administration said Tuesday in an August forecast. That was down from the EIA's July forecast of $127 a barrel. Next year's average price is expected to stand at $124 a barrel, down from the $133 a barrel the EIA expected in July.
CVS Caremark Corp. late Tuesday said it will buy Longs Drug Stores Corp. for $2.9 billion, or $71.50 a share. The deal, which also includes the assumption of debt, is a 32% premium over Longs Drug's closing stock price.
Applied Materials Inc. reported a 65% drop in net income for its third fiscal quarter amid a drop in sales for the company's semiconductor manufacturing tools. For the period ended July 27, Applied Materials said its net income was $164.5 million, or 12 cents a share, compared to earnings of $473.5 million, or 34 cents a share, for the same period last year. The company said earnings excluding charges for stock-option expenses and acquisition charges would have been $228 million, or 17 cents a share.
The U.S. economy faces a prolonged period of anemic growth, but that's no reason to get complacent on inflation, said Dallas Fed President Richard Fisher in an interview with the Dallas Morning News published Tuesday. "I expect that in the second half of this year we will broach zero growth," he said. Fisher, a voting member of the Federal Open Market Committee who's been on the losing side on the past five votes on interest rates, said the credit crunch is worse than the S&L crisis of the late 1980s. "We go through these periods of correction. It's not unhealthy. It's the way capitalism works." Fisher said everyone on the FOMC would be concerned if inflationary expectations became unanchored.
Japan's economy contracted last quarter, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less.
Gross domestic product shrank an annualized 2.4 percent in the three months ended June 30 after expanding a revised 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo. The median estimate of 29 economists surveyed by Bloomberg News was for a 2.3 percent contraction.
CSL Ltd., the world's second-largest maker of specialized blood transfusion products, agreed to buy Talecris Biotherapeutics Holding Corp. for $3.1 billion cash, boosting sales by more than a third with its biggest acquisition.
The purchase will be partly funded by a $1.5 billion share sale to shareholders, the Melbourne-based company said today in a statement. CSL today reported net income rose 30 percent to A$701.8 million ($610 million) in the 12 months to June 30, from A$539.3 million a year earlier.
Short-selling limits on financial stocks are lifted with Wednesday's open.
Shares of Deere & Co sank 6.1 percent to $65.10 in premarket trade on Wednesday after the world's largest maker of farm machinery posted its third-quarter results.
Deere & Co, the world's largest maker of farm machinery, said earnings in the latest quarter rose 7 percent as soaring crop prices boosted global demand for its agricultural equipment.
Net profit rose to $575.2 million, or $1.32 a share, in its fiscal third quarter, from $537.2 million, or $1.18 a share, a year earlier.
Revenue increased 17 percent to $7.74 billion.
Luxury home builder Toll Brothers said fiscal third quarter to July 31 home-building revenue fell 34% to $796.5 million, with its bakclog down 52% and contracts signed down 35% in dollar terms. Chairman and CEO Robert Toll said there's growing pent-up demand from those who have postponed buying during the last three years, and said total cancellations of 195 were the lowest quarterly total in over two years.
Chinese retail sales jumped 23.3% in July from the year-earlier period, boosted by strong demand for oil and oil products as well as cosmetics and jewelry, official data showed Wednesday, according to media reports. The increase was higher than the 23% growth registered in June, and improved retail sales in the first seven months of 2008 to 21.7% over the year-ago period.
Tuesday, August 12, 2008
Credit Squeeze
8/12/08 Credit Squeeze
Fed survey shows credit squeeze getting worse. The U.S. economy was squeezed further by the credit crunch in the past three months, and most banks expect to keep a lid on credit for the next year at least, the Federal Reserve reported Monday. A record percentage of banks were making it more difficult for borrowers in the three months ending in July, the Fed said in its quarterly senior loan officer survey of 52 major banks. A majority of banks tightened their rules for granting loans to businesses and consumers. The survey shows little appetite at banks to lend for home mortgages, credit cards, home equity loans, commercial real estate loans, or commercial and industrial loans.
Gold futures closed at their lowest level of the year Monday, with the December contract down $36.50, or 4.2%, at $828.30 an ounce.
Iran and Algeria, holders of the second and sixth-largest natural gas reserves, support the formation of a gas exporters group similar to OPEC, state-run Shana reported, citing the countries' oil ministers.
Chakib Khelil, Algeria's minister of energy and mines, said gas contract data should be shared among members of the Gas Exporting Countries Forum and producers should have more control over contract terms, the news agency reported. Khelil was in Tehran yesterday and met with his Iranian counterpart Gholamhossein Nozari.
China's trade surplus swelled in July to its highest level in eight months as its trade gaps with the United States and Europe grew despite concern about weaker global demand, according to data reported Monday.
Export growth rebounded in July, the customs agency said, after a June slowdown prompted Beijing to boost tax rebates for struggling textile exporters.
"Though we expect a continued deterioration as the year goes on, as American and European consumers stay at home, the resilience of demand for China's exports is still remarkable," said Standard Chartered economist Stephen Green in a report to clients.
China's global trade surplus in July was $25.3 billion, the agency said, up 4 percent from the same month in 2007.
Exports in July soared by 26.9 percent to $136.7 billion, the data showed. That came after export growth fell in June to 18.2 percent, down from May's 28 percent rate. Imports in July also grew strongly, rising by 33 percent to $111.4 billion
Brett Steenbarger: "In sum, I retain my doubts that a bull market has begun, but the market's late week resilience, expansion of 20-day highs, and rising NYSE TICK line all suggest that we could see further movement to the upside. Global weakness has pressured commodities and aided the U.S. dollar: these dynamics are worth following as we move forward, as they may be catalysts for further share gains."
Rob Hanna: "Even with the strong move to a new 30-day high on Friday new highs were unimpressive. In fact they were beneath new lows."
Pilgrim's Pride Corp. set plans to idle a chicken-processing plant in Clinton, Ark., and a further-processing facility in Bossier City, La., citing its ongoing struggle with high feed costs and an oversupply of chicken. The company said both moves, which will likely be completed within 60 days, will eliminate about 600 jobs.
Azerbaijan has stopped oil exports via the Georgian ports of Batumi and Kulevi because of the escalating military conflict between Georgia and Russia over the breakaway region of South Ossetia, AFP reported over the weekend, citing the head of the Azeri state oil company SOCAR. "Since last night the import and export of oil through the Georgian ports of Kulevi and Batumi have been halted," said Rovnag Abdullayev, the head of the Azeri state oil company SOCAR, in televised comments on Saturday, according to AFP. Abdullayev said that SOCAR was "looking into the possibility of exporting oil through the Baku-Novorossiysk pipeline, but the capacity of this pipeline is quite low," AFP reported.
Wachovia Corp , the fourth-largest U.S. bank, said on Monday it expected to eliminate 11,350 jobs, more than it previously disclosed, as conditions deteriorate in the housing market.
Fluor raised its earnings view to $3.65 to $3.80 a share for 2008, compared with a previous outlook of $3.30 to $3.45 a share.
Crude futures marked another three-month low Monday, with the September contract closing at $114.45 per barrel, down 75 cents on the New York Mercantile Exchange.
Petroleo Brasileiro SA, Brazil's state-controlled oil company, said second-quarter profit jumped 29 percent to a record on increased oil production and higher prices for crude and fuel.
Consolidated net income rose to 8.78 billion reais ($5.40 billion), or 1 real a share, from 6.80 billion reais, or 78 centavos, a year earlier, Petrobras, as the company is known, said today in a statement to Brazil's securities regulator. Net sales climbed 31 percent to 54.6 billion reais.
JA Solar reaffirmed its 2008 revenue forecast in a range of $1.05 billion to $1.17 billion, and said it foresees 2009 revenue coming in between $2.0 billion and $2.2 billion.
Russian President Dmitry Medvedev has ordered an end to Russia's military operations against Georgia, according to a report from Russian news agency Interfax.
J.P. Morgan Chase, in a filing to the Securities and Exchange Commission late on Monday, said it's had to take a $1.5 billion write-off on mortgage-backed securities and loans.
China's consumer price index rose 6.3% in July from a year earlier, the slowest pace of gains in 10 months, according to data released by the National Bureau of Statistics Tuesday.
Japan's wholesale inflation rate surged to its highest level in 27 years in July, as companies raised prices to offset higher fuel and commodity input costs. Wholesale prices climbed 7.1% from a year earlier, accelerating from a 5.7% rise in June, the Bank of Japan said Tuesday.
Fed survey shows credit squeeze getting worse. The U.S. economy was squeezed further by the credit crunch in the past three months, and most banks expect to keep a lid on credit for the next year at least, the Federal Reserve reported Monday. A record percentage of banks were making it more difficult for borrowers in the three months ending in July, the Fed said in its quarterly senior loan officer survey of 52 major banks. A majority of banks tightened their rules for granting loans to businesses and consumers. The survey shows little appetite at banks to lend for home mortgages, credit cards, home equity loans, commercial real estate loans, or commercial and industrial loans.
Gold futures closed at their lowest level of the year Monday, with the December contract down $36.50, or 4.2%, at $828.30 an ounce.
Iran and Algeria, holders of the second and sixth-largest natural gas reserves, support the formation of a gas exporters group similar to OPEC, state-run Shana reported, citing the countries' oil ministers.
Chakib Khelil, Algeria's minister of energy and mines, said gas contract data should be shared among members of the Gas Exporting Countries Forum and producers should have more control over contract terms, the news agency reported. Khelil was in Tehran yesterday and met with his Iranian counterpart Gholamhossein Nozari.
China's trade surplus swelled in July to its highest level in eight months as its trade gaps with the United States and Europe grew despite concern about weaker global demand, according to data reported Monday.
Export growth rebounded in July, the customs agency said, after a June slowdown prompted Beijing to boost tax rebates for struggling textile exporters.
"Though we expect a continued deterioration as the year goes on, as American and European consumers stay at home, the resilience of demand for China's exports is still remarkable," said Standard Chartered economist Stephen Green in a report to clients.
China's global trade surplus in July was $25.3 billion, the agency said, up 4 percent from the same month in 2007.
Exports in July soared by 26.9 percent to $136.7 billion, the data showed. That came after export growth fell in June to 18.2 percent, down from May's 28 percent rate. Imports in July also grew strongly, rising by 33 percent to $111.4 billion
Brett Steenbarger: "In sum, I retain my doubts that a bull market has begun, but the market's late week resilience, expansion of 20-day highs, and rising NYSE TICK line all suggest that we could see further movement to the upside. Global weakness has pressured commodities and aided the U.S. dollar: these dynamics are worth following as we move forward, as they may be catalysts for further share gains."
Rob Hanna: "Even with the strong move to a new 30-day high on Friday new highs were unimpressive. In fact they were beneath new lows."
Pilgrim's Pride Corp. set plans to idle a chicken-processing plant in Clinton, Ark., and a further-processing facility in Bossier City, La., citing its ongoing struggle with high feed costs and an oversupply of chicken. The company said both moves, which will likely be completed within 60 days, will eliminate about 600 jobs.
Azerbaijan has stopped oil exports via the Georgian ports of Batumi and Kulevi because of the escalating military conflict between Georgia and Russia over the breakaway region of South Ossetia, AFP reported over the weekend, citing the head of the Azeri state oil company SOCAR. "Since last night the import and export of oil through the Georgian ports of Kulevi and Batumi have been halted," said Rovnag Abdullayev, the head of the Azeri state oil company SOCAR, in televised comments on Saturday, according to AFP. Abdullayev said that SOCAR was "looking into the possibility of exporting oil through the Baku-Novorossiysk pipeline, but the capacity of this pipeline is quite low," AFP reported.
Wachovia Corp , the fourth-largest U.S. bank, said on Monday it expected to eliminate 11,350 jobs, more than it previously disclosed, as conditions deteriorate in the housing market.
Fluor raised its earnings view to $3.65 to $3.80 a share for 2008, compared with a previous outlook of $3.30 to $3.45 a share.
Crude futures marked another three-month low Monday, with the September contract closing at $114.45 per barrel, down 75 cents on the New York Mercantile Exchange.
Petroleo Brasileiro SA, Brazil's state-controlled oil company, said second-quarter profit jumped 29 percent to a record on increased oil production and higher prices for crude and fuel.
Consolidated net income rose to 8.78 billion reais ($5.40 billion), or 1 real a share, from 6.80 billion reais, or 78 centavos, a year earlier, Petrobras, as the company is known, said today in a statement to Brazil's securities regulator. Net sales climbed 31 percent to 54.6 billion reais.
JA Solar reaffirmed its 2008 revenue forecast in a range of $1.05 billion to $1.17 billion, and said it foresees 2009 revenue coming in between $2.0 billion and $2.2 billion.
Russian President Dmitry Medvedev has ordered an end to Russia's military operations against Georgia, according to a report from Russian news agency Interfax.
J.P. Morgan Chase, in a filing to the Securities and Exchange Commission late on Monday, said it's had to take a $1.5 billion write-off on mortgage-backed securities and loans.
China's consumer price index rose 6.3% in July from a year earlier, the slowest pace of gains in 10 months, according to data released by the National Bureau of Statistics Tuesday.
Japan's wholesale inflation rate surged to its highest level in 27 years in July, as companies raised prices to offset higher fuel and commodity input costs. Wholesale prices climbed 7.1% from a year earlier, accelerating from a 5.7% rise in June, the Bank of Japan said Tuesday.
Sunday, August 10, 2008
Bubbles
8/10/08 News
According to Bloomberg, “Yields on commercial real estate securities relative to benchmark rates rose to the highest since March on concern that retailers won’t be able to repay debt as consumers cut spending. Spreads on AAA rated commercial mortgage-backed bonds widened 10 bps during the week… to 250.5 bps more than 10-year swap rates… Demand for commercial real estate securities is waning as retailers are forced into bankruptcy during the economic slowdown.”
Florida homes, businesses and other real estate lost $153 billion in value between 2007 and 2008, the Miami Herald reported, citing state economists who appraise property for tax purposes.
Doug Noland: "I tend to believe rapidly retreating commodities markets should be viewed in the context of a Bursting Leveraged Speculating Community Bubble...Crude ended the first half at $140. Major commodities indices concluded June at record highs – sporting spectacular y-t-d gains. There’s no doubt that the speculator community had all crowded into the energy/commodities trade, one of a rapidly narrowing menu of speculations offering juicy (and desperately needed) returns. At the same time, the long energy/short financials “pairs trade” was also put on in great excess. The speculator community as well likely crowded further into dollar short positions, for years now an almost surefire winner. The more the crowded industry struggled for performance, the more they were forced to crowd into the same crowded trades. I would argue that the Bubble in the leveraged speculating community played a significant role in fueling energy/commodities prices inflation beyond what was justified by exceptionally bullish fundamentals. I wouldn’t, however, write off energy and commodities as burst Bubbles... The energy trade has unraveled badly. Commodities markets have been in near freefall. The dollar has mustered its most ferocious rally in quite some time. At the same time, agency debt and MBS spreads have widened, while global bond prices have offered little performance help. Corporate debt prices have performed poorly, while “private-label” MBS and various mortgage-related derivatives have traded dismally. Meanwhile, the financial stocks and other heavily shorted equities have rallied significantly. In short, a whole host of popular trades have gone wrong at the same time – a huge problem for the fragile industry...We’re now in the midst of another one of these precarious periods. I believe global markets – equities, debt, currencies, and commodities – are all in some stage of dislocation (perhaps not emerging debt, at least yet). Trading conditions across the spectrum of markets are as chaotic as I’ve ever witnessed, a dislocation chiefly related to the now forced unwinds of speculative positions. Recent extreme global market volatility is part and parcel to the Heightened Monetary Disorder I have been addressing for months now. The Massive Global Pool of Speculative Finance has Run Amuck. The bulls will celebrate the rally, yet markets this unstable are prone to “melt-ups” that lead to breakdowns...Enormous short positions have built up, the vast majority as part of “market neutral,” “quant” and myriad risk hedging strategies. If today’s dislocation develops into a significant unwind of these positions, the market immediately then becomes vulnerable to a disorderly “melt-up” followed almost inevitably by a sharp reversal and disorderly decline. The unwind of bearish speculations and hedges would be a most problematic market development, unleashing a final bout of speculative excess and disorder that would set the stage for a major market crisis...To be sure, the unfolding change of fortunes for the leveraged speculating community is one more key facet of tighter system Credit and faltering Marketplace Liquidity – extremely problematic Financial Conditions for the finance-driven U.S. Bubble Economy. And this makes the current market dislocations in the face of rapidly deteriorating fundamentals such a dangerous development."
Wachovia Corp , the fourth-largest U.S. bank, will stop making mortgage loans through its branch offices in 19 U.S. states, a published report said.
The bank will eliminate 125 jobs in connection with the cutback, but still plans to offer mortgages through branches in 18 other states, Bloomberg News reported on Friday.
"The downward pace still has a way to go," said Edward Meir, senior commodities analyst at MF Global in New York. "People are now coming around to the fact that growth is slowing, both in the U.S. and overseas, so demand for commodities will decline."
Highlighting the spiral, the Jefferies-Reuters CRB index, a global commodities benchmark, plunged 10 percent in July, its biggest monthly drop since 1980, when the U.S. was in a recession.
"There was a commodities bubble and it has burst," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
The Oil Drum: "The world has been discovering less for the last 40 years; for every barrel we discover we consume three; output is in terminal decline in 60 of the 98 oil-producing countries; and hundreds of billions of dollars in investment since the turn of the century have failed to stem declining production at many of the world's biggest oil companies.
As a result, it is widely agreed that oil production in the non-Opec world will "peak" - reach its maximum possible level - within two years, if it has not already done so. This means that the huge profits being made by multi-nationals such as Shell or ExxonMobil may turn out to be their last hurrah. "The days of the international oil companies are coming to a glorious end," said Fatih Birol, chief economist of the International Energy Agency, last month. "Their reserves are declining and they will have difficulty accessing new ones."
Unfortunately, this means that the global oil supply will soon depend on Opec as never before. Many analysts suspect that the Opec countries, which claim to hold three quarters of known reserves, have been exaggerating their size for decades - in other words, they too will soon reach the physical limits of production."
iShares Silver Trust (SLV) has plunged from $20 to $15. A year ago it began trading at $12 and mentioned it as a good way to participate in the potential rise of silver. One might consider taking a position from $14+ on and scale down.
A year ago I pounded the table for weeks to begin buying the United States Natural Gas Fund (UNG) at $35. Back in late June I suggested it was time to lock in the profits at $60+.
The recent decline has been vicious. UNG is back down to $38. I think this is a good spot to initiate a position and to scale down with the orders.
According to Bloomberg, “Yields on commercial real estate securities relative to benchmark rates rose to the highest since March on concern that retailers won’t be able to repay debt as consumers cut spending. Spreads on AAA rated commercial mortgage-backed bonds widened 10 bps during the week… to 250.5 bps more than 10-year swap rates… Demand for commercial real estate securities is waning as retailers are forced into bankruptcy during the economic slowdown.”
Florida homes, businesses and other real estate lost $153 billion in value between 2007 and 2008, the Miami Herald reported, citing state economists who appraise property for tax purposes.
Doug Noland: "I tend to believe rapidly retreating commodities markets should be viewed in the context of a Bursting Leveraged Speculating Community Bubble...Crude ended the first half at $140. Major commodities indices concluded June at record highs – sporting spectacular y-t-d gains. There’s no doubt that the speculator community had all crowded into the energy/commodities trade, one of a rapidly narrowing menu of speculations offering juicy (and desperately needed) returns. At the same time, the long energy/short financials “pairs trade” was also put on in great excess. The speculator community as well likely crowded further into dollar short positions, for years now an almost surefire winner. The more the crowded industry struggled for performance, the more they were forced to crowd into the same crowded trades. I would argue that the Bubble in the leveraged speculating community played a significant role in fueling energy/commodities prices inflation beyond what was justified by exceptionally bullish fundamentals. I wouldn’t, however, write off energy and commodities as burst Bubbles... The energy trade has unraveled badly. Commodities markets have been in near freefall. The dollar has mustered its most ferocious rally in quite some time. At the same time, agency debt and MBS spreads have widened, while global bond prices have offered little performance help. Corporate debt prices have performed poorly, while “private-label” MBS and various mortgage-related derivatives have traded dismally. Meanwhile, the financial stocks and other heavily shorted equities have rallied significantly. In short, a whole host of popular trades have gone wrong at the same time – a huge problem for the fragile industry...We’re now in the midst of another one of these precarious periods. I believe global markets – equities, debt, currencies, and commodities – are all in some stage of dislocation (perhaps not emerging debt, at least yet). Trading conditions across the spectrum of markets are as chaotic as I’ve ever witnessed, a dislocation chiefly related to the now forced unwinds of speculative positions. Recent extreme global market volatility is part and parcel to the Heightened Monetary Disorder I have been addressing for months now. The Massive Global Pool of Speculative Finance has Run Amuck. The bulls will celebrate the rally, yet markets this unstable are prone to “melt-ups” that lead to breakdowns...Enormous short positions have built up, the vast majority as part of “market neutral,” “quant” and myriad risk hedging strategies. If today’s dislocation develops into a significant unwind of these positions, the market immediately then becomes vulnerable to a disorderly “melt-up” followed almost inevitably by a sharp reversal and disorderly decline. The unwind of bearish speculations and hedges would be a most problematic market development, unleashing a final bout of speculative excess and disorder that would set the stage for a major market crisis...To be sure, the unfolding change of fortunes for the leveraged speculating community is one more key facet of tighter system Credit and faltering Marketplace Liquidity – extremely problematic Financial Conditions for the finance-driven U.S. Bubble Economy. And this makes the current market dislocations in the face of rapidly deteriorating fundamentals such a dangerous development."
Wachovia Corp , the fourth-largest U.S. bank, will stop making mortgage loans through its branch offices in 19 U.S. states, a published report said.
The bank will eliminate 125 jobs in connection with the cutback, but still plans to offer mortgages through branches in 18 other states, Bloomberg News reported on Friday.
"The downward pace still has a way to go," said Edward Meir, senior commodities analyst at MF Global in New York. "People are now coming around to the fact that growth is slowing, both in the U.S. and overseas, so demand for commodities will decline."
Highlighting the spiral, the Jefferies-Reuters CRB index, a global commodities benchmark, plunged 10 percent in July, its biggest monthly drop since 1980, when the U.S. was in a recession.
"There was a commodities bubble and it has burst," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
The Oil Drum: "The world has been discovering less for the last 40 years; for every barrel we discover we consume three; output is in terminal decline in 60 of the 98 oil-producing countries; and hundreds of billions of dollars in investment since the turn of the century have failed to stem declining production at many of the world's biggest oil companies.
As a result, it is widely agreed that oil production in the non-Opec world will "peak" - reach its maximum possible level - within two years, if it has not already done so. This means that the huge profits being made by multi-nationals such as Shell or ExxonMobil may turn out to be their last hurrah. "The days of the international oil companies are coming to a glorious end," said Fatih Birol, chief economist of the International Energy Agency, last month. "Their reserves are declining and they will have difficulty accessing new ones."
Unfortunately, this means that the global oil supply will soon depend on Opec as never before. Many analysts suspect that the Opec countries, which claim to hold three quarters of known reserves, have been exaggerating their size for decades - in other words, they too will soon reach the physical limits of production."
iShares Silver Trust (SLV) has plunged from $20 to $15. A year ago it began trading at $12 and mentioned it as a good way to participate in the potential rise of silver. One might consider taking a position from $14+ on and scale down.
A year ago I pounded the table for weeks to begin buying the United States Natural Gas Fund (UNG) at $35. Back in late June I suggested it was time to lock in the profits at $60+.
The recent decline has been vicious. UNG is back down to $38. I think this is a good spot to initiate a position and to scale down with the orders.
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