2/7/09 The Printing Presses
Benjamin Franklin: "Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety."
Regulators closed banks on Friday in Georgia and California, bringing the total of U.S. bank failures to nine this year.
Advanced economies are already in a depression and the financial crisis may deepen unless the banking system is fixed,
International Monetary Fund Managing Director Dominique Strauss-Kahn said.
“The worst cannot be ruled out,”
Strauss-Kahn said in Kuala Lumpur, where he was attending a gathering of central bankers from Southeast Asia. “There’s a lot of downside risk.”
William Somerset Maugham:"If a nation values anything more than freedom, it will lose its freedom; and the irony of it is that, if it is comfort or money it values more, it will lose that too."
Doug Noland: "I would counter that The Burgeoning Bubble in Government Finance is poised to make the Mortgage Finance Bubble appear tiny in comparison....The Fed’s balance sheet has ballooned, although nothing to compare to the unfolding explosion of Trillions of Treasury borrowings, obligations and guarantees (both implied and explicit)....The worst case scenario – that should be avoided at all costs – is a massive inflation of government claims that sets the stage for a devastating bust.
It is imperative for policymakers to ensure that the Government Finance Bubble does not follow in the footsteps of the runaway excess associated with Wall Street/mortgage finance. Yet it’s clear that policymaking (monetary and fiscal) is setting a course to guarantee just such an outcome. And, as has been the case for some time now, markets are keen to fall in love with – and aggressively accommodate – whatever might be the Bubble of the Day....Structural realities dictate that Government Finance cannot simply enter the fray and miraculously make things right. A moderate amount of stimulus would be expected to assist the post-Bubble economic adjustment, while inordinate government Credit inflation and market intervention will only work to compound systemic fragility.... Throwing mega-Trillions at our distorted economy is just asking for trouble....It is in this context that I fear that the Trillions of Government Finance spent to save the world from “deflation” will, in the end, require perpetual needs for Trillions more. There will be no kick-starting asset Bubbles or a return of private-sector Credit excess. Instead, it will be a case of throwing repeated doses of government-directed finance/purchasing power at the system. Temporary but fleeting economic boosts will then require only stronger doses of artificial stimulus.
We’ve commenced a new cycle dominated by government electronic printing presses in all their various forms. The inflationary consequences will be a different variety than we’ve grown accustomed to from previous reflations. But the bottom line is – and there’s ample history to support this view – that once the “printing presses” get humming along it’s going to be darn difficult to slow them down."
The Oil Drum: "At least seven U.S. refiners have announced fuel production cuts as a result of weak profits stemming from softening demand, including Valero Energy Corp and ConocoPhillips -- the nation's two biggest fuel producers. As of the end of January, refiners were running their plants at just 82.5 percent of capacity -- four percentage points below last year, according to government figures.
"There is too much capacity to make gasoline in this environment," Valero Chief Executive Bill Klesse said last week. "If the industry doesn't balance supply with demand we will have negative margins as we had in December."
According to Bloomberg, the Obama administration is considering subjecting banks to a new test to determine whether they require fresh capital injections as part of the rescue plan to be unveiled by Treasury Secretary
Timothy Geithner next week, people familiar with the matter said.
The Treasury may increase its stake in lenders that are judged short of capital, the people said on condition of anonymity. Should extra taxpayer funds result in majority ownership by the government, officials would then decide whether to liquidate the institutions, place them into receivership or retire the companies’ assets over time, they said.
Dow Jones reported that the nonpartisan Congressional Budget Office said Thursday that it estimates that the U.S. has so far recorded a $355 billion deficit for the current fiscal year. The projection applies to the first four months of fiscal year 2009, which began Oct. 1, 2008.”
According to Bloomberg, by replacing a $7,500 tax credit for first-time homebuyers earning less than $150,000 with a $15,000 break for all income groups as part of the economic stimulus package, senators effectively are encouraging purchases by higher-income households with a reduced risk of default.
A sponsor of the measure, Republican Senator
Johnny Isakson of Georgia, said the credit is aimed at helping restart the stalled housing market. It would do so without the “far too loosey-goosey” underwriting standards of recent years that spurred an explosion of defaults by unqualified borrowers, he said.
“By doing it the way we did, people making $120,000 are more likely to be motivated to buy a house,” Isakson said.
Floyd Norris: "Over the 10 years through January, an investor holding the
stocks in the S.& P.’s 500-stock index, and reinvesting the dividends, would have lost about 5.1 percent a year after adjusting for inflation...Ignoring inflation, stocks over that decade returned half a percent a year, not a very good showing but not a loss. But with inflation taking off, the real, inflation-adjusted return was negative.
For the current period, the total return was negative, at minus 2.6 percent a year, even before factoring in inflation.
Perhaps surprisingly, the 10 years after the 1929 crash were not that bad by this measure — which may say as much about the measure as it does about the performance of the stock market. The
deflation of the 1930s helped the after-inflation of the stock market to look better.
For the 10 years after the crash, through Sept. 30, 1939, the compound annual decline of the stock market, with dividends reinvested, was 5 percent a year before considering inflation. That remains the worst 10-year period. But after factoring in deflation, the loss was 2.8 percent a year, which is still bad but not horrid."
Tom Petruno: "If the U.S. were to fall to, say, AA-plus on S&P's scale, we'd be rated the same as Belgium. At A-plus, we'd be in the ranks with Italy.
And at just plain A, the U.S. would be on the same level as its largest state, California -- whose debt rating S&P cut this week to the lowest of any state because of the continuing budget impasse."
OPEC members are expected to cut oil production when they convene in March to try to push up prices to at least $70 a barrel, Iraq's oil minister said Saturday.
Tim Wood: "On November 21, 2007 the primary trend, in accordance to classical Dow theory, was confirmed as bearish. To date, nothing has occurred to invalidate that setup. According to Dow theory, once the primary trend is established, that trend must be considered intact until it is “authoritatively” reversed, which in this case would require a joint move by the averages back above their previous secondary high points. Since that has yet to occur, the primary trend must still be considered bearish."
James Surowiecki: "In the late sixteenth century, the Ottoman Empire was hit by an economic crisis precipitated by a massive devaluation and resultant inflation. As the historian Dan Diner tells the story in his new book “Lost in the Sacred,” in order to reassure the people (and, above all, the army) that he had matters under control, Sultan Murad III “saw no other way to guarantee his authority than by sacrificing the official in charge of the mint…as well as the head of the state treasury.”
Of course, “sacrificing” back then was not really a metaphorical term. The head of the mint and the state treasurer were not fired. They were executed. Which is certainly one way to deal with the threat of moral hazard."
According to rigzone, Baker Hughes announced that the international rig count for January 2009 was 1,044, down 34 from the 1,078 counted in December 2008, and down 9 from the 1,053 counted in January 2008. The international offshore rig count for January 2009 was 279, down 12 from the 291 counted in December 2008 and down 12 from the 291 counted in January 2008.
The US rig count for January 2009 was 1,553, down 229 from the 1,782 counted in December 2008 and down 196 from the 1,749 counted in January 2008. The Canadian rig count for January 2009 was 377, up 16 from the 361 counted in December 2008 and down 117 from the 494 counted in January 2008.
The worldwide rig count for January 2009 was 2,974, down 247 from the 3,221 counted in December 2008 and down 322 from the 3,296 counted in January 2008.
Vega: "While consensus is self-fulfilling in the short-term as speculators push market prices in the direction of the consensus, it is self-negating in the long-term. If everyone agrees home prices will keep going up, developers build more homes so there’s plenty of supply and prices can’t rise. If everyone agrees natural gas will be plentiful and cheap for many years, investors don’t spend to expand production, causing shortages and higher prices in a few years.
Today we pretty much have a consensus on inflation. There’s a lot of debate over whether the inflation will start in 3 months or 3 years, but just about everyone agrees it’s in our future. Does this mean we’re unlikely to actually get inflation? Inflation is an exception to the “anti-consensus rule” because inflation expectations are themselves inflationary. When we expect prices to rise we buy goods today, demand raises, sell treasuries, and buy houses and commodities. Our expectations are self-fulfilling in an endless loop with no end in sight. While the talk of inflation encourages central bankers to tighten the money supply, they face fiscal and political obstacles that also feed the inflationary loop. As inflation expectations increase and prices start rising, unions push harder for raises and the government struggles to finance its debt at higher interest rates. Without some very tough political decisions, the only end of the inflationary loop is a complete collapse of the currency and the introduction of a new currency regime. Let’s hope we don’t have to break the loop."
Simon Cameron: "An honest politician is one who when he is bought will stay bought."
Forest Grove, Oregon circuit board manufacturer Merix said it has laid off 230 of roughly 3,800 employees this month.
The company didn't say how many Oregon workers lost their jobs, but historically two-thirds of Merix employees work overseas.
Late payments on U.S. credit cards topped record levels and defaults rose sharply to just below all time highs last month as consumers struggled further amid the deteriorating economic environment.
Thdifference between yields on notes maturing in two and 10 years touched 2 percentage points yesterday. That was the widest since Nov. 24, after the U.S. said it would rescue Citigroup Inc. with an injection of capital and guarantees for troubled assets. The gap was 1.25 percentage points on Dec. 26.
Nigeria’s main militant group said it attacked a gas plant operated by Royal Dutch Shell Plc, Europe’s second-largest oil company.
Saturday, February 07, 2009
Friday, February 06, 2009
The Real Deal
2/6/09 The Real Deal
In January the unemployment rate jumped to 7.6% while nonfarm payrolls fell by the largest amount in 34 years, the Labor Department reported Friday. Nonfarm payrolls fell by a seasonally adjusted 598,000 in January after a revised loss of 577,000 in December. It's the largest payroll loss since December 1974. "Job losses were large and widespread across the major industry sectors," said Keith Hall, head of the Bureau of Labor Statistics. Manufacturing saw its largest decline in 26 years.
With a revised decline of 597,000 jobs in November, revisions subtracted 66,000 workers from previously reported payroll figures for the last two months of 2008. The U.S. economy has now lost a total of 3.57 million jobs since the recession started in December 2007, the biggest employment slump of any economic contraction in the postwar period.
Last month’s losses mark the first time since records began in 1939 that job cuts exceeded half a million in three consecutive months.
Over the past 12 months, the number of un- employed persons has increased by 4.1 million. Among the unemployed, the number of job losers and persons who completed temporary jobs increased to 7.0 million in January. This measure has grown by 3.2 million during the last 12 months. The number of persons who worked part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged in January at 7.8 million; however, this measure was up by 3.1 million over the past 12 months. The Underemployed and underutilized number is 13.9%.
Toyota Motor Corp said Friday that third fiscal-quarter earnings were a net loss of 164.7 billion yen ($1.81 billion), compared to a 458.6 billion yen net profit a year earlier. Net revenues decreased 28.4% to 4.8 trillion yen during the quarter. Toyota lifted its operating loss estimate for the financial year ending March 31 to 450 billion yen, from its earlier outlook of a 150 billion yen loss.
The US risks being hit by Zimbabwe-style hyperinflation and there are signs that the world's biggest economy risks turning into a banana republic, Marc Faber, author of the Gloom, Doom & Boom report, told CNBC's "Asia Squawk Box." "In the US, we have a totally new school, and it’s called the Zimbabwe school," Faber said. "And it’s founded by one of the great leaders of this world, Mr Robert Mugabe, that has managed to totally impoverish his own country. And that is the monetary policy the US is pursuing."
For 2009, forecasts of full-year growth are as low as 5 percent — the best of any major country but China's weakest in nearly two decades.
Brett Steenbarger: "
When new 20-day highs across the NYSE, NASDAQ, and ASE have exceeded 1000, the next three days in SPY have averaged a loss of -.67% (59 up, 87 down). Across all other occasions, the average three-day change in SPY has been just -.10% (207 up, 171 down).
What this tells us is that much of the market weakness during the bear period has occurred following periods of strength. Selling on strength has provided far better returns than selling on weakness. The implications for executing trade ideas are significant." This observation is important; however, one must focus on the market making lower highs and lower lows. Clearly, this has taken place over the last year and one half.
The Oil Drum: "The fundamental problem facing oil markets at present it this: while present supplies are sufficient to meet present weak demand, these sources of production face rapid decline. The current low oil prices are not sufficient to support the long term investment in future supplies, conservation, and consumption efficiency that will be necessary to mitigate the impact of this decline. Because of the time-lag between a sufficient price signal and oil reaching the market (or demand being reduced), and because of the impact of the recent price collapse on producer psychology, volatility will rapidly increase as the market's price signal must make increasingly exaggerated moves to bring supply and demand into equilibrium."
The Bush administration overpaid tens of billions of dollars for stocks and other assets in its massive bailout last year of Wall Street banks and financial institutions, a new study by a government watchdog says.
The Congressional Oversight Panel, in a report released today, said last year’s overpayments amounted to a taxpayer-financed $78 billion subsidy of the firms.
The findings added to the frustrations of lawmakers already wary of the $700 billion rescue plan, known as the Troubled Asset Relief Program. Congress approved the plan last fall, but members of both parties criticized spending decisions by the Bush administration and former Treasury Secretary Henry Paulson.
Financially ailing insurance giant American International Group, deemed by the Treasury Department to be too big to be allowed to fail, received $40 billion from the Treasury for assets valued at $14.8 billion, the oversight panel found.
More than 200,000 California employees will take a forced unpaid day off in response to the budget crisis. The DMV will be among the departments not open.
General Electric Co.'s troubled industrial and financial businesses are leading to a credit-rating cut, which will likely force the conglomerate to reduce its dividend, J.P. Morgan said Friday in a note to investors. But until the Fairfield, Conn., company lowers its dividend, it will be near impossible for it to restructure with a possible spin-off of GE Capital, the bank said.
Gold for February delivery rose $4.90, or 0.5%, to $918.50 an ounce in early North America trading.
Paul Krugman: "It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world.
Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving — a good thing in the long run, but a huge blow to the economy right now. Developers of commercial real estate, watching rents fall and financing costs soar, are slashing their investment plans. Businesses are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. And exports, which were one of the U.S. economy’s few areas of strength over the past couple of years, are now plunging as the financial crisis hits our trading partners.
Meanwhile, our main line of defense against recessions — the Federal Reserve’s usual ability to support the economy by cutting interest rates — has already been overrun. The Fed has cut the rates it controls basically to zero, yet the economy is still in free fall.
It’s no wonder, then, that most economic forecasts warn that in the absence of government action we’re headed for a deep, prolonged slump. Some private analysts predict double-digit unemployment. The Congressional Budget Office is slightly more sanguine, but its director, nonetheless, recently warned that “absent a change in fiscal policy ... the shortfall in the nation’s output relative to potential levels will be the largest — in duration and depth — since the Depression of the 1930s.”
The State Street Corporation nearly eliminated its dividend and drastically cut bonus payments to employees in a move to increase its capital. State Street, one of the world’s biggest institutional money management companies, cut its 2009 outlook and announced a more conservative reinvestment plan Thursday, where money from maturing mortgage-backed securities would be moved into central bank deposits.
George Ure: "15.86% of workers are doing "government." One person out of every 6.3 people working today in America are being paid for by the other 5.3."
Robert McHugh: "The current proposed stimulus bill is woefully short on infrastructure spending, woefully short on tax rebates that get funds into the hands of American households, instead is loaded with expensive pork that fails to generate a sufficient number of new jobs. The bottom line is this stimulus plan doesn't get sufficient money into the hands of American Households. It is a trillion dollar fraud on America . The current proposed stimulus bill is woefully short on infrastructure spending, woefully short on tax rebates that get funds into the hands of American households, instead is loaded with expensive pork that fails to generate a sufficient number of new jobs. The bottom line is this stimulus plan doesn't get sufficient money into the hands of American Households. It is a trillion dollar fraud on America . "
Martin Hutchinson: "This financing problem is the hidden side of stimulus packages. The federal budget deficit is likely to run around 10% of U.S. gross domestic product (GDP) in 2009 and 2010, and should continue close to that level for several years thereafter (because the government could not risk killing a fragile recovery by pushing too hard to get the budget back into balance).
With Treasury bond issue maturities being so short, producing large refinancing needs, the impact of such huge financing demands on the economy will be huge...Since the U.S. budget deficit - before any stimulus - is already predicted to be $1.19 trillion in the fiscal that ends in September, the economically ideal size of a stimulus package may well be negative."
December's factory orders fell 3.9% vs. -3.0% consensus, the fifth consecutive month of declines. Net of transportation, orders fell 4.4%.
Standard & Poor's Index Services said Friday it expects dividends for components of its S&P 500 Index to drop 13.3% this year. It would be the worst annual decline since 1942 when dividends fell 16.9%, S&P said. It cited a forecast for a $24.60 dividend rate, which would translate into an expected $214.66 billion in payments for S&P 500 companies in 2009, down from $28.39, or $247.9 billion, paid in 2008. "Unless companies believe that their financial future will improve, their need to conserve cash will outweigh their desire to pay dividends," said S&P senior index analyst Howard Silverblatt.
Sharp will post its first loss in more than 50 years for its March 2009 fiscal year and plans to cut 1,500 temporary jobs because of falling demand for LCD televisions.
As we can see, this is not simply a run of the mill recession. It is not a simple business cycle downturn. This is the real deal.
Magma Design Automation will cut its worldwide staff by 17% as part of a cost reduction program. The company, which sells chip design software, says it expects to reduce costs by about $20 million a year. Magma has just over 1,000 employees.
The company also cut management salaries 20%, with a smaller reduction for other employees. And it has closed several sales and support offices.
Legislators are working through the government's proposed stimulus package to expand unemployment benefits, including an additional $25 a week in unemployment pay, 20- to 33-week extensions in unemployment compensation, suspending some taxes for unemployed workers and health care subsidies for those receiving COBRA, insurance provided by former employers. States overwhelmed by demands for unemployment insurance are set to receive $7 billion in additional funding to cover more unemployment claims and $500 million for administrative costs.
According to AMG Data Services, Including ETF activity, Equity funds report net cash outflows totaling -$227 million in the week ended 2/4/09 with Domestic funds reporting net outflows of -$218 million and Non-domestic funds reporting net outflows of -$9 million;
Excluding ETF activity, Equity funds report net cash outflows totaling -$277 million with Domestic funds reporting net outflows of -$244 million and Non-domestic funds reporting net outflows totaling -$33 million. Exchange Traded (Equity) funds report net inflows of $50 million.
“We know the economy will get weaker,” said Theodore Ake, head of U.S. Treasury trading at Mizuho Securities USA Inc. in New York, one of 17 primary dealers that trade with the Federal Reserve. “The uncertainties are, ‘How much paper, who’s going to buy all that paper and at what point will the Fed step in to purchase longer term paper?’”
Benchmark 10-year note yields rose five basis points, or 0.05 percentage point, to 2.95 percent at 9:38 a.m. in New York, according to BGCantor Market Data. Yields touched 2.96 percent, the highest since Nov. 28. The 10-year yield fell to a record low of 2.04 percent on Dec. 18, compared with an average 4.28 percent for the past five years.
Thirty-year bond yields increased three basis points to 3.68 percent.
U.S. Steel Corp. said Friday about 500 of its employees have taken a voluntary early retirement package. The date for most employees to leave is Feb. 28.
Crude oil for March delivery ended down $1, or 2.4%, at $40.17 a barrel on the New York Mercantile Exchange. Gold for February delivery closed up 30 cents at $913.90 an ounce on the Comex division of the New York Mercantile Exchange.
Tightening credit and recession concerns have led U.S. consumers to reduce their debt in December for the third straight month. Total seasonally adjusted consumer debt decreased by $6.60 billion, or a 3.1% annual rate, in December to $2.56 trillion, the Federal Reserve reported Friday. This is the first three-month drop in credit since the second half of 1991. Consumer credit fell at a 5.1% pace in November and 1.0% in October. Credit-card debt had the biggest decline in December, falling by $6.3 billion, or 7.8%, in December to $976 billion. Non-revolving credit - such as auto loans, personal loans and student loans - fell a slim $287.7 million or 0.2% to $1.60 trillion had the biggest drop in October, falling by $3.3 billion, or 2.5%, to $1.60 trillion.
The dollar index, which measures the U.S. unit against a trade-weighted basket of six major currencies, fell 0.9% to 85.14.
Emerson Plans to Cut as Many as 14,000 Jobs in 2009.
General Motors Corp., trying to cut enough costs by a March 31 deadline to keep $13.4 billion in U.S. aid, is readying a plan to fire thousands of salaried employees, people familiar with the plans said.
The Dow Jones industrials rose 216 to 8,279, bringing their two-day advance to more than 220. The Standard & Poor's 500 index is up 22 at 868, and the Nasdaq composite is up 45 at 1,591.
Senators reached a tenative deal on a $780 billion economic stimulus plan late Friday, CNN reported. Dow Jones Newswires, citing a senior Democratic source, also reported that a compromise is being circulated.
FirstBank Financial Services of McDonough, Ga. became the seventh bank of 2009 to fail and the 32nd of the recession on Friday, according to the Federal Deposit Insurance Corporation.
Culver City, Calif.-based Alliance Bank was closed by regulators Friday, marking the eighth bank failure of the year amid the ongoing credit crisis, the Federal Deposit Insurance Corporation said.
In January the unemployment rate jumped to 7.6% while nonfarm payrolls fell by the largest amount in 34 years, the Labor Department reported Friday. Nonfarm payrolls fell by a seasonally adjusted 598,000 in January after a revised loss of 577,000 in December. It's the largest payroll loss since December 1974. "Job losses were large and widespread across the major industry sectors," said Keith Hall, head of the Bureau of Labor Statistics. Manufacturing saw its largest decline in 26 years.
With a revised decline of 597,000 jobs in November, revisions subtracted 66,000 workers from previously reported payroll figures for the last two months of 2008. The U.S. economy has now lost a total of 3.57 million jobs since the recession started in December 2007, the biggest employment slump of any economic contraction in the postwar period.
Last month’s losses mark the first time since records began in 1939 that job cuts exceeded half a million in three consecutive months.
Over the past 12 months, the number of un- employed persons has increased by 4.1 million. Among the unemployed, the number of job losers and persons who completed temporary jobs increased to 7.0 million in January. This measure has grown by 3.2 million during the last 12 months. The number of persons who worked part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged in January at 7.8 million; however, this measure was up by 3.1 million over the past 12 months. The Underemployed and underutilized number is 13.9%.
Toyota Motor Corp said Friday that third fiscal-quarter earnings were a net loss of 164.7 billion yen ($1.81 billion), compared to a 458.6 billion yen net profit a year earlier. Net revenues decreased 28.4% to 4.8 trillion yen during the quarter. Toyota lifted its operating loss estimate for the financial year ending March 31 to 450 billion yen, from its earlier outlook of a 150 billion yen loss.
The US risks being hit by Zimbabwe-style hyperinflation and there are signs that the world's biggest economy risks turning into a banana republic, Marc Faber, author of the Gloom, Doom & Boom report, told CNBC's "Asia Squawk Box." "In the US, we have a totally new school, and it’s called the Zimbabwe school," Faber said. "And it’s founded by one of the great leaders of this world, Mr Robert Mugabe, that has managed to totally impoverish his own country. And that is the monetary policy the US is pursuing."
For 2009, forecasts of full-year growth are as low as 5 percent — the best of any major country but China's weakest in nearly two decades.
Brett Steenbarger: "
When new 20-day highs across the NYSE, NASDAQ, and ASE have exceeded 1000, the next three days in SPY have averaged a loss of -.67% (59 up, 87 down). Across all other occasions, the average three-day change in SPY has been just -.10% (207 up, 171 down).
What this tells us is that much of the market weakness during the bear period has occurred following periods of strength. Selling on strength has provided far better returns than selling on weakness. The implications for executing trade ideas are significant." This observation is important; however, one must focus on the market making lower highs and lower lows. Clearly, this has taken place over the last year and one half.
The Oil Drum: "The fundamental problem facing oil markets at present it this: while present supplies are sufficient to meet present weak demand, these sources of production face rapid decline. The current low oil prices are not sufficient to support the long term investment in future supplies, conservation, and consumption efficiency that will be necessary to mitigate the impact of this decline. Because of the time-lag between a sufficient price signal and oil reaching the market (or demand being reduced), and because of the impact of the recent price collapse on producer psychology, volatility will rapidly increase as the market's price signal must make increasingly exaggerated moves to bring supply and demand into equilibrium."
The Bush administration overpaid tens of billions of dollars for stocks and other assets in its massive bailout last year of Wall Street banks and financial institutions, a new study by a government watchdog says.
The Congressional Oversight Panel, in a report released today, said last year’s overpayments amounted to a taxpayer-financed $78 billion subsidy of the firms.
The findings added to the frustrations of lawmakers already wary of the $700 billion rescue plan, known as the Troubled Asset Relief Program. Congress approved the plan last fall, but members of both parties criticized spending decisions by the Bush administration and former Treasury Secretary Henry Paulson.
Financially ailing insurance giant American International Group, deemed by the Treasury Department to be too big to be allowed to fail, received $40 billion from the Treasury for assets valued at $14.8 billion, the oversight panel found.
More than 200,000 California employees will take a forced unpaid day off in response to the budget crisis. The DMV will be among the departments not open.
General Electric Co.'s troubled industrial and financial businesses are leading to a credit-rating cut, which will likely force the conglomerate to reduce its dividend, J.P. Morgan said Friday in a note to investors. But until the Fairfield, Conn., company lowers its dividend, it will be near impossible for it to restructure with a possible spin-off of GE Capital, the bank said.
Gold for February delivery rose $4.90, or 0.5%, to $918.50 an ounce in early North America trading.
Paul Krugman: "It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world.
Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving — a good thing in the long run, but a huge blow to the economy right now. Developers of commercial real estate, watching rents fall and financing costs soar, are slashing their investment plans. Businesses are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. And exports, which were one of the U.S. economy’s few areas of strength over the past couple of years, are now plunging as the financial crisis hits our trading partners.
Meanwhile, our main line of defense against recessions — the Federal Reserve’s usual ability to support the economy by cutting interest rates — has already been overrun. The Fed has cut the rates it controls basically to zero, yet the economy is still in free fall.
It’s no wonder, then, that most economic forecasts warn that in the absence of government action we’re headed for a deep, prolonged slump. Some private analysts predict double-digit unemployment. The Congressional Budget Office is slightly more sanguine, but its director, nonetheless, recently warned that “absent a change in fiscal policy ... the shortfall in the nation’s output relative to potential levels will be the largest — in duration and depth — since the Depression of the 1930s.”
The State Street Corporation nearly eliminated its dividend and drastically cut bonus payments to employees in a move to increase its capital. State Street, one of the world’s biggest institutional money management companies, cut its 2009 outlook and announced a more conservative reinvestment plan Thursday, where money from maturing mortgage-backed securities would be moved into central bank deposits.
George Ure: "15.86% of workers are doing "government." One person out of every 6.3 people working today in America are being paid for by the other 5.3."
Robert McHugh: "The current proposed stimulus bill is woefully short on infrastructure spending, woefully short on tax rebates that get funds into the hands of American households, instead is loaded with expensive pork that fails to generate a sufficient number of new jobs. The bottom line is this stimulus plan doesn't get sufficient money into the hands of American Households. It is a trillion dollar fraud on America . The current proposed stimulus bill is woefully short on infrastructure spending, woefully short on tax rebates that get funds into the hands of American households, instead is loaded with expensive pork that fails to generate a sufficient number of new jobs. The bottom line is this stimulus plan doesn't get sufficient money into the hands of American Households. It is a trillion dollar fraud on America . "
Martin Hutchinson: "This financing problem is the hidden side of stimulus packages. The federal budget deficit is likely to run around 10% of U.S. gross domestic product (GDP) in 2009 and 2010, and should continue close to that level for several years thereafter (because the government could not risk killing a fragile recovery by pushing too hard to get the budget back into balance).
With Treasury bond issue maturities being so short, producing large refinancing needs, the impact of such huge financing demands on the economy will be huge...Since the U.S. budget deficit - before any stimulus - is already predicted to be $1.19 trillion in the fiscal that ends in September, the economically ideal size of a stimulus package may well be negative."
December's factory orders fell 3.9% vs. -3.0% consensus, the fifth consecutive month of declines. Net of transportation, orders fell 4.4%.
Standard & Poor's Index Services said Friday it expects dividends for components of its S&P 500 Index to drop 13.3% this year. It would be the worst annual decline since 1942 when dividends fell 16.9%, S&P said. It cited a forecast for a $24.60 dividend rate, which would translate into an expected $214.66 billion in payments for S&P 500 companies in 2009, down from $28.39, or $247.9 billion, paid in 2008. "Unless companies believe that their financial future will improve, their need to conserve cash will outweigh their desire to pay dividends," said S&P senior index analyst Howard Silverblatt.
Sharp will post its first loss in more than 50 years for its March 2009 fiscal year and plans to cut 1,500 temporary jobs because of falling demand for LCD televisions.
As we can see, this is not simply a run of the mill recession. It is not a simple business cycle downturn. This is the real deal.
Magma Design Automation will cut its worldwide staff by 17% as part of a cost reduction program. The company, which sells chip design software, says it expects to reduce costs by about $20 million a year. Magma has just over 1,000 employees.
The company also cut management salaries 20%, with a smaller reduction for other employees. And it has closed several sales and support offices.
Legislators are working through the government's proposed stimulus package to expand unemployment benefits, including an additional $25 a week in unemployment pay, 20- to 33-week extensions in unemployment compensation, suspending some taxes for unemployed workers and health care subsidies for those receiving COBRA, insurance provided by former employers. States overwhelmed by demands for unemployment insurance are set to receive $7 billion in additional funding to cover more unemployment claims and $500 million for administrative costs.
According to AMG Data Services, Including ETF activity, Equity funds report net cash outflows totaling -$227 million in the week ended 2/4/09 with Domestic funds reporting net outflows of -$218 million and Non-domestic funds reporting net outflows of -$9 million;
Excluding ETF activity, Equity funds report net cash outflows totaling -$277 million with Domestic funds reporting net outflows of -$244 million and Non-domestic funds reporting net outflows totaling -$33 million. Exchange Traded (Equity) funds report net inflows of $50 million.
“We know the economy will get weaker,” said Theodore Ake, head of U.S. Treasury trading at Mizuho Securities USA Inc. in New York, one of 17 primary dealers that trade with the Federal Reserve. “The uncertainties are, ‘How much paper, who’s going to buy all that paper and at what point will the Fed step in to purchase longer term paper?’”
Benchmark 10-year note yields rose five basis points, or 0.05 percentage point, to 2.95 percent at 9:38 a.m. in New York, according to BGCantor Market Data. Yields touched 2.96 percent, the highest since Nov. 28. The 10-year yield fell to a record low of 2.04 percent on Dec. 18, compared with an average 4.28 percent for the past five years.
Thirty-year bond yields increased three basis points to 3.68 percent.
U.S. Steel Corp. said Friday about 500 of its employees have taken a voluntary early retirement package. The date for most employees to leave is Feb. 28.
Crude oil for March delivery ended down $1, or 2.4%, at $40.17 a barrel on the New York Mercantile Exchange. Gold for February delivery closed up 30 cents at $913.90 an ounce on the Comex division of the New York Mercantile Exchange.
Tightening credit and recession concerns have led U.S. consumers to reduce their debt in December for the third straight month. Total seasonally adjusted consumer debt decreased by $6.60 billion, or a 3.1% annual rate, in December to $2.56 trillion, the Federal Reserve reported Friday. This is the first three-month drop in credit since the second half of 1991. Consumer credit fell at a 5.1% pace in November and 1.0% in October. Credit-card debt had the biggest decline in December, falling by $6.3 billion, or 7.8%, in December to $976 billion. Non-revolving credit - such as auto loans, personal loans and student loans - fell a slim $287.7 million or 0.2% to $1.60 trillion had the biggest drop in October, falling by $3.3 billion, or 2.5%, to $1.60 trillion.
The dollar index, which measures the U.S. unit against a trade-weighted basket of six major currencies, fell 0.9% to 85.14.
Emerson Plans to Cut as Many as 14,000 Jobs in 2009.
General Motors Corp., trying to cut enough costs by a March 31 deadline to keep $13.4 billion in U.S. aid, is readying a plan to fire thousands of salaried employees, people familiar with the plans said.
The Dow Jones industrials rose 216 to 8,279, bringing their two-day advance to more than 220. The Standard & Poor's 500 index is up 22 at 868, and the Nasdaq composite is up 45 at 1,591.
Senators reached a tenative deal on a $780 billion economic stimulus plan late Friday, CNN reported. Dow Jones Newswires, citing a senior Democratic source, also reported that a compromise is being circulated.
FirstBank Financial Services of McDonough, Ga. became the seventh bank of 2009 to fail and the 32nd of the recession on Friday, according to the Federal Deposit Insurance Corporation.
Culver City, Calif.-based Alliance Bank was closed by regulators Friday, marking the eighth bank failure of the year amid the ongoing credit crisis, the Federal Deposit Insurance Corporation said.
Thursday, February 05, 2009
Formal Default?
2/5/09 Formal Default?
James West: "The prospect of the United States defaulting on its debt is not just likely. It's inevitable, and imminent.The regulatory black holes into which sanity and reason disappear on a daily basis are soon to collapse under the mass of their sheer size. The circle jerk going on among G7 governments has to end – the steady advance of gold, even in the face of a managed price, exposes the real value of the U.S. dollar, as opposed to its apparent value expressed in the dollar index.
Is 2009 the year that the United States formally defaults? And with that, will the dollar collapse be rolled back ten for one or more?
There are a lot of reasons to support that theory. To Wall Street economists, such an event is heresy and therefore unthinkable. Yet Wall Street is the very La-la-land that bred the idea of a perpetually indebted nation in the first place.
Number one among the indicators favoring this scenario is what is happening in the U.S. Treasuries auction market.
Last Thursday, a $30 billion auction in five-year notes failed to stir the interest of traditional primary dealers. The auction itself was saved by an anonymous “indirect” bid.
Buyers are discouraged by the prospect of what is expected to amount to $2 trillion total issuance for the full year of 2009."
The Aaa-rating coveted by the U.S. is still stable, though it's unclear how much the government's interventions in financial markets and economic stimulus will affect its deteriorating financial position, Moody's Investors Service said Thursday.The government had $5.8 trillion in debt held by the public at the end of 2008, the rating agency said. The government's ratio of debt to gross domestic product, and debt and interest payments to federal revenue, will rise to levels that are high for a country rated Aaa-rated. "Whether in 2010 or after, interest rates are almost certain to rise from their current low levels and the affordability of the federal government debt will deteriorate," analysts said.
First-time claims for state unemployment benefits surged in the latest week to the highest level in over 26 years, the Labor Department reported Thursday. The number of initial claims in the week ending January 31 rose 35,000 to 626,000. It's the highest level since the week ended Oct. 30, 1982.Claims in the previous week were revised to an increase of 6,000 to 591,000 compared with the initial estimate of a rise of 3,000 to 588,000. The four-week average of initial claims rose 39,000 to 582,250. Meanwhile, the number of Americans receiving state jobless benefits rose 20,000 to a record 4.79 million in the week ending January 24. The four-week moving average of continuing claims rose 44,000 to 4.67 million.
Productivity of the U.S. non-farm business sector expanded at a 3.2% annual rate in the fourth quarter, the Labor Department estimated Thursday.Both output and hours worked fell in the fourth quarter. For all of 2008, productivity expanded at a 2.8% pace, the fastest since 2003. Durable goods manufacturing productivity was down 13.4% in the fourth quarter
The US economy is suffering its steepest downturn since at least the 1970s and could descend into a depression, Jeff Immelt,
General Electric’s chief executive, warned on Thursday.
He said businesses and consumers alike were struggling to contend with tumultuous markets and a financial-services industry under siege. “Unlike the other downturns that I’ve been a part of, this one is faced with limited liquidity,” Mr Immelt, GE’s chief since 2001 told a conference. “Once you break through ’74-’75, you don’t stop ’til you get to 1929.”
.
British drug maker GlaxoSmithKline PLC said Thursday it would cut jobs and costs as fourth quarter net profit dropped 1 percent due to higher research and sales spending. Media reports have estimated as many as 10,000 layoffs, 10 percent of the company's work force.
The Estee Lauder Companies Inc said Thursday it would cut 2,000 jobs, or 6% of its work force, over the next two years as the apparel firm grappled with a 30% drop in its second-quarter profit and a difficult outlook for the coming year.
Wal-Mart Corp. said Thursday that January same-store sales, with fuel, rose 1.5%. January same-store sales excluding fuel rose 2.1%. January total world sales for the company rose 1.8%. Wal-Mart expects U.S. comparable sales without fuel during the period from January 31 through May 1 to increase between one and three percent.
Cardinal Health expects its full fiscal 2009 adjusted earnings to come in at $3.50 to $3.60 a share.
The Bank of England's rate-setting Monetary Policy Committee on Thursday dropped the central bank's key lending rate to 1% from 1.5%.
For 2009, Bunge expects to earn between $6.90 to $7.60 per share.
Gold for February delivery was last up $16.60, or 1.8%, at $918.20 an ounce in early North America electronic trading.
Gap Inc. said Thursday that its January sales at stores open at least one year fell 23%,
Saks down 23%, Nordstrom down 11%, Penney down 16% etc etc.
MasterCard Inc , the world's second-largest credit card network, reported a 21 percent decline in fourth-quarter earnings, hit by a slowdown in consumer spending as recession deepens.
Walter Wainwright, president of the Houston Automobile Dealers Association: “This is the toughest climate I’ve seen in the almost 35 years I’ve been in the business."
Electronic claim filing systems in New York, North Carolina and Ohio crashed recently because of the heavy volume and technical problems.
The problems have become so severe that legal aid offices in Northern Virginia, for example, report that complaints from people seeking unemployment benefits from the state have tripled since early last year.
“If you spent a million dollars every day since Jesus was born,
you would have spent three-quarters of a trillion dollars. A million seconds
is about 11.5 days. A billion seconds is about 32 years, and a trillion seconds
is 32,000 years.” - John Allen Paulos, Ph.D., Math Prof., Temple Univ.
Jon Markman: "ISI Group analysts figure that U.S. corporate profits will decline from their 2007 peak to a 2010 trough by a record 30%, though a 50% fall is not out of the question. They're already down 20%.
Customers are disappearing as wages and jobs falter and families raid their emergency funds. U.S. home equity decline has accelerated to a 30% annual rate, which combined with the stock market plunge, has slashed consumers' net worth by $12 trillion."
Bank of America traded below $4. The VIX has rallied back up to the 46 area.
Feb. 5 (Bloomberg) --General Electric Co. Chief Executive Officer Jeffrey Immelt said he’s prepared to run the company without the highest available credit rating.
“We’ve got a lot of cash inside the company, we philosophically run the company to be triple-A,” Immelt said today in New York. “We’ve said we’re going to reduce commercial paper and we’ve said we’re going to shrink the balance sheet. We will run it as a triple-A, we’re prepared to run the company as a double-A.”
The rating agencies ultimately “have the power” to decide, he said. On the divided, Immelt says the company the has cash flow to pay it. At $10+, the shares traded at a new 52-week low.
Orders placed with U.S. factories fell in December for a fifth month, reflecting a pullback in business spending that will extend the recession.
Bookings declined 3.9 percent, more than forecast, after a revised 6.5 percent drop in November, the Commerce Department said today in Washington. Other reports showed firings jumped at the end of January.
The peso touched a record low of 14.7059 yesterday and is down 27 percent over the past five months, the worst among the major currencies, as a deepening U.S. recession throttles demand for Mexican exports.
Moody’s Corp., the world’s second- largest credit rating company, reported a 30 percent drop in fourth-quarter profit and forecast further declines for 2009 as the financial market crisis damped demand for new bond ratings.
U.S. natural gas inventories fall 195 bcf last week: EIA. At 2,179 billion cubic feet, stocks were 60 billion cubic feet higher than last year at this time and 17 billion cubic feet above the five-year average, the EIA reported. After the data, March natural gas futures rose 1.1% to $4.641 per million British thermal units.
Fortunoff Fine Jewelry & Silverware LLC, the luxury goods chain that closed its flagship Manhattan store last month, filed for bankruptcy a year after it last sought Chapter 11 court protection.
There is no end yet to the global financial crisis, the IMF said in its latest report released Thursday. "Policy actions to resolve the financial crisis have been broad in scope, but have not yet achieved a decisive breakthrough," the IMF said.
Canada's Bombardier Aerospace said Thursday it is cutting 1,360 jobs, or about 4.5 percent of its work force, to deal with a drop in orders for business jets.
Feb. gold ends up $12, or 1.3%, at $913.60 an ounce.
Brent crude is back up to a 5 dollar premium to WTI crude. Crude oil for March delivery rose 85 cents to end at $41.17 a barrel on the New York Mercantile Exchange.
The Dow Jones Industrial Average added 106.41 points, or 1.3%, to 8,063.07. The S&P 500 climbed 13.6 points, or 1.6%, to 845.84. The Nasdaq Composite rose 31.19 points, or 2.1%, to end at 1,546.24.
Weyerhaeuser Co. said late Thursday that it will indefinitely close its veneer and lumber mills in Pine Hill, Ala., effective immediately. The closure will affect about 300 employees at the site.
Obama:"spending is 'the whole point' of stimulus." It sounds like Bush telling Americans to go out and shop after 9/11. How about cutting federal, state, and local spending and reducing the size of government.
According to the WSJ, unemployment filings have soared so high in recent months that seven states have already emptied their unemployment-insurance trust funds, which were supposed to see them through recessionary periods. Another 11 states are in jeopardy of depleting reserves by year's end, according to the National Conference of State Legislatures, which published a January report entitled "The Crisis in State Unemployment Trust Funds." So far, states have borrowed more than $2.3 billion in emergency funds from the federal government, money they are required to pay back.
James West: "The prospect of the United States defaulting on its debt is not just likely. It's inevitable, and imminent.The regulatory black holes into which sanity and reason disappear on a daily basis are soon to collapse under the mass of their sheer size. The circle jerk going on among G7 governments has to end – the steady advance of gold, even in the face of a managed price, exposes the real value of the U.S. dollar, as opposed to its apparent value expressed in the dollar index.
Is 2009 the year that the United States formally defaults? And with that, will the dollar collapse be rolled back ten for one or more?
There are a lot of reasons to support that theory. To Wall Street economists, such an event is heresy and therefore unthinkable. Yet Wall Street is the very La-la-land that bred the idea of a perpetually indebted nation in the first place.
Number one among the indicators favoring this scenario is what is happening in the U.S. Treasuries auction market.
Last Thursday, a $30 billion auction in five-year notes failed to stir the interest of traditional primary dealers. The auction itself was saved by an anonymous “indirect” bid.
Buyers are discouraged by the prospect of what is expected to amount to $2 trillion total issuance for the full year of 2009."
The Aaa-rating coveted by the U.S. is still stable, though it's unclear how much the government's interventions in financial markets and economic stimulus will affect its deteriorating financial position, Moody's Investors Service said Thursday.The government had $5.8 trillion in debt held by the public at the end of 2008, the rating agency said. The government's ratio of debt to gross domestic product, and debt and interest payments to federal revenue, will rise to levels that are high for a country rated Aaa-rated. "Whether in 2010 or after, interest rates are almost certain to rise from their current low levels and the affordability of the federal government debt will deteriorate," analysts said.
First-time claims for state unemployment benefits surged in the latest week to the highest level in over 26 years, the Labor Department reported Thursday. The number of initial claims in the week ending January 31 rose 35,000 to 626,000. It's the highest level since the week ended Oct. 30, 1982.Claims in the previous week were revised to an increase of 6,000 to 591,000 compared with the initial estimate of a rise of 3,000 to 588,000. The four-week average of initial claims rose 39,000 to 582,250. Meanwhile, the number of Americans receiving state jobless benefits rose 20,000 to a record 4.79 million in the week ending January 24. The four-week moving average of continuing claims rose 44,000 to 4.67 million.
Productivity of the U.S. non-farm business sector expanded at a 3.2% annual rate in the fourth quarter, the Labor Department estimated Thursday.Both output and hours worked fell in the fourth quarter. For all of 2008, productivity expanded at a 2.8% pace, the fastest since 2003. Durable goods manufacturing productivity was down 13.4% in the fourth quarter
The US economy is suffering its steepest downturn since at least the 1970s and could descend into a depression, Jeff Immelt,
General Electric’s chief executive, warned on Thursday.
He said businesses and consumers alike were struggling to contend with tumultuous markets and a financial-services industry under siege. “Unlike the other downturns that I’ve been a part of, this one is faced with limited liquidity,” Mr Immelt, GE’s chief since 2001 told a conference. “Once you break through ’74-’75, you don’t stop ’til you get to 1929.”
.
British drug maker GlaxoSmithKline PLC said Thursday it would cut jobs and costs as fourth quarter net profit dropped 1 percent due to higher research and sales spending. Media reports have estimated as many as 10,000 layoffs, 10 percent of the company's work force.
The Estee Lauder Companies Inc said Thursday it would cut 2,000 jobs, or 6% of its work force, over the next two years as the apparel firm grappled with a 30% drop in its second-quarter profit and a difficult outlook for the coming year.
Wal-Mart Corp. said Thursday that January same-store sales, with fuel, rose 1.5%. January same-store sales excluding fuel rose 2.1%. January total world sales for the company rose 1.8%. Wal-Mart expects U.S. comparable sales without fuel during the period from January 31 through May 1 to increase between one and three percent.
Cardinal Health expects its full fiscal 2009 adjusted earnings to come in at $3.50 to $3.60 a share.
The Bank of England's rate-setting Monetary Policy Committee on Thursday dropped the central bank's key lending rate to 1% from 1.5%.
For 2009, Bunge expects to earn between $6.90 to $7.60 per share.
Gold for February delivery was last up $16.60, or 1.8%, at $918.20 an ounce in early North America electronic trading.
Gap Inc. said Thursday that its January sales at stores open at least one year fell 23%,
Saks down 23%, Nordstrom down 11%, Penney down 16% etc etc.
MasterCard Inc , the world's second-largest credit card network, reported a 21 percent decline in fourth-quarter earnings, hit by a slowdown in consumer spending as recession deepens.
Walter Wainwright, president of the Houston Automobile Dealers Association: “This is the toughest climate I’ve seen in the almost 35 years I’ve been in the business."
Electronic claim filing systems in New York, North Carolina and Ohio crashed recently because of the heavy volume and technical problems.
The problems have become so severe that legal aid offices in Northern Virginia, for example, report that complaints from people seeking unemployment benefits from the state have tripled since early last year.
“If you spent a million dollars every day since Jesus was born,
you would have spent three-quarters of a trillion dollars. A million seconds
is about 11.5 days. A billion seconds is about 32 years, and a trillion seconds
is 32,000 years.” - John Allen Paulos, Ph.D., Math Prof., Temple Univ.
Jon Markman: "ISI Group analysts figure that U.S. corporate profits will decline from their 2007 peak to a 2010 trough by a record 30%, though a 50% fall is not out of the question. They're already down 20%.
Customers are disappearing as wages and jobs falter and families raid their emergency funds. U.S. home equity decline has accelerated to a 30% annual rate, which combined with the stock market plunge, has slashed consumers' net worth by $12 trillion."
Bank of America traded below $4. The VIX has rallied back up to the 46 area.
Feb. 5 (Bloomberg) --General Electric Co. Chief Executive Officer Jeffrey Immelt said he’s prepared to run the company without the highest available credit rating.
“We’ve got a lot of cash inside the company, we philosophically run the company to be triple-A,” Immelt said today in New York. “We’ve said we’re going to reduce commercial paper and we’ve said we’re going to shrink the balance sheet. We will run it as a triple-A, we’re prepared to run the company as a double-A.”
The rating agencies ultimately “have the power” to decide, he said. On the divided, Immelt says the company the has cash flow to pay it. At $10+, the shares traded at a new 52-week low.
Orders placed with U.S. factories fell in December for a fifth month, reflecting a pullback in business spending that will extend the recession.
Bookings declined 3.9 percent, more than forecast, after a revised 6.5 percent drop in November, the Commerce Department said today in Washington. Other reports showed firings jumped at the end of January.
The peso touched a record low of 14.7059 yesterday and is down 27 percent over the past five months, the worst among the major currencies, as a deepening U.S. recession throttles demand for Mexican exports.
Moody’s Corp., the world’s second- largest credit rating company, reported a 30 percent drop in fourth-quarter profit and forecast further declines for 2009 as the financial market crisis damped demand for new bond ratings.
U.S. natural gas inventories fall 195 bcf last week: EIA. At 2,179 billion cubic feet, stocks were 60 billion cubic feet higher than last year at this time and 17 billion cubic feet above the five-year average, the EIA reported. After the data, March natural gas futures rose 1.1% to $4.641 per million British thermal units.
Fortunoff Fine Jewelry & Silverware LLC, the luxury goods chain that closed its flagship Manhattan store last month, filed for bankruptcy a year after it last sought Chapter 11 court protection.
There is no end yet to the global financial crisis, the IMF said in its latest report released Thursday. "Policy actions to resolve the financial crisis have been broad in scope, but have not yet achieved a decisive breakthrough," the IMF said.
Canada's Bombardier Aerospace said Thursday it is cutting 1,360 jobs, or about 4.5 percent of its work force, to deal with a drop in orders for business jets.
Feb. gold ends up $12, or 1.3%, at $913.60 an ounce.
Brent crude is back up to a 5 dollar premium to WTI crude. Crude oil for March delivery rose 85 cents to end at $41.17 a barrel on the New York Mercantile Exchange.
The Dow Jones Industrial Average added 106.41 points, or 1.3%, to 8,063.07. The S&P 500 climbed 13.6 points, or 1.6%, to 845.84. The Nasdaq Composite rose 31.19 points, or 2.1%, to end at 1,546.24.
Weyerhaeuser Co. said late Thursday that it will indefinitely close its veneer and lumber mills in Pine Hill, Ala., effective immediately. The closure will affect about 300 employees at the site.
Obama:"spending is 'the whole point' of stimulus." It sounds like Bush telling Americans to go out and shop after 9/11. How about cutting federal, state, and local spending and reducing the size of government.
According to the WSJ, unemployment filings have soared so high in recent months that seven states have already emptied their unemployment-insurance trust funds, which were supposed to see them through recessionary periods. Another 11 states are in jeopardy of depleting reserves by year's end, according to the National Conference of State Legislatures, which published a January report entitled "The Crisis in State Unemployment Trust Funds." So far, states have borrowed more than $2.3 billion in emergency funds from the federal government, money they are required to pay back.
Wednesday, February 04, 2009
Job Losses
2/4/09 Job Losses
The U.S. private sector shed 522,000 jobs in January, according to the ADP employment index, pointing to another hefty month of job losses when the government reports its payroll figures on Friday. The ADP index, compiled from anonymous payroll data, showed the goods-producing industries lost 243,000 jobs, while the service-producing industries lost 279,000 jobs. The ADP index covers only private-sector jobs, adding in some 10,000 government jobs created in a typical month, the report suggests nonfarm payrolls fell by about 510,000 in January. Economists now expect payrolls to fall by 525,000, the fifth straight month of at least 400,000 jobs lost.
Japan's Panasonic to cut 15,000 jobs, shut 27 plants to cope with slump; forecasts annual loss.
The multi-family market is poised to weaken in the beginning half of 2009 due to significant local job loss and oversupply, according to the 2009 National Apartment Report issued by Marcus & Millichap.
Senator Charles Schumer, who closely follows the banking crisis, estimates the costs of the next stage of the bailout at between $3 and $4 trillion. If true, this means U.S. banks and broker dealers are effectively insolvent.
GM said it estimated the overall annualised selling rate for cars at 9.8m in the US in January, compared with 10.3m in December, and less than China’s estimated selling rate of 10.7m last month.
”This is the first time in history that China has surpassed the US,” said Michael DiGiovanni, GM’s head of global sales and industry analysis.
Allergan Inc. said it will lay off approximately 460 employees, or about 5% of its global workforce, primarily in the U.S. and Europe.
For 2009, Clorox affirmed earnings-per-share guidance of $3.60 to $3.75 and sales growth of 3% to 5%.
National Oilwell Varco said "While near term economic conditions are challenging, we enter 2009 with a healthy backlog of equipment and technology to deliver to our customers, and a balance sheet with considerably more cash than debt," the Houston based oil services firm said. "We believe that the oil and gas industry's challenge to replace depleting reserves will require upgrading the world's rig fleet, and we look forward to continuing to help our customers retool their rigs after years of underinvestment."
The Oil Drum: "Merrill Lynch on Tuesday said that crude oil production from non-OPEC nations may have already peaked, nothing that oil production decline rates were a function of investment rates, as well as the size and age of oil fields. 'All these factors point to steeper oil output declines going forward,' the firm wrote.
...'Should the credit crunch push decline rates to 6 percent, however, non-OPEC production could decline precipitously toward million barrels per day by 2015 from the current levels,' it wrote."
Cisco Systems Inc.reported a fiscal second quarter net income of $1.5 billion, or 26 cents a share, compared with $2.1 billion, or 33 cents a share, for the year-earlier period. Revenue was $9.1 billion, down from $9.8 billion for the same quarter last year. Cisco Systems Inc said it expects revenue in the current quarter to fall 15 percent to 20 percent from a year ago as the economic weakness deepens, sending its shares down 3 percent.
The Walt Disney Co. reported a 32 percent decline in quarterly profits Tuesday amid a downturn that Chief Executive Robert Iger called "likely to be the weakest economy in our lifetime."
Polo Ralph Lauren Corp. lowered its fiscal full-year earnings and revenue outlooks Wednesday, citing current economic conditions.
The apparel maker also reported its third-quarter profit dropped as sales slipped amid a pullback in consumer spending.
Nominal final sales to domestic producers -- GDP after stripping away the fudge factor for inflation and adjustments for inventories and exports -- collapsed at an astounding 9.4% annual rate in the fourth quarter, Robert Barbera, chief economist at ITG, points out.
Abu Dhabi says it will pump $4.36 billion into its banks to shore up confidence in the oil-rich Gulf emirate's financial sector.
UBS AG said today gold will average $1,000 an ounce this year, up 43 percent from its previous forecast. Investment in the
SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose to a record 853.4 metric tons on Feb. 2.
The industry-funded American Petroleum Institute reported yesterday that crude oil inventories rose 8.13 million barrels to 346.2 million last week. The EIA also reported that inventories at Cushing, Okla., the delivery point of Nymex futures, rose to a new record level of 34.3 million barrels. Meanwhile, gasoline inventories rose by 300,000 barrels and distillate stockpiles fell by 1.4 million barrels in the same week, the EIA reported.
Time Warner Cable Inc. says it is laying off 1,250 people over the next few weeks in the face of slowing growth at the nation's second largest cable operator.
AOL suffered a 27% hit in subscription revenue and an 18% drop in ad revenue. As of December 31, AOL had 6.9 million U.S. access subscribers, down 573,000 sequentially and off 2.4 million year over year.
The U.S. government's Small Business Administration said losses from loans made through its lending programs more than doubled in 2008, reaching nearly $1.3 billion. In 2007, the SBA charged off -- or took permanent losses against -- $504 million of the loans; in 2005, it charged off a much smaller $276 million. From October through December of last year, Bank of America Corp. said it took permanent losses on about 2.9% of its outstanding small business loans, an annual loss rate of almost 12%. As of one year ago, the Charlotte bank's permanent loss rate on small business loans was about half its current level, or about 6%.
U.S. nonmanufacturing sectors continued to contract but at a slower pace in January, according to a Wednesday report from the Institute for Supply Management, with the global slowdown taking its toll on demand. The ISM non-manufacturing index rose to 42.9% in January from 40.1% in December. In November, the index reached a record low of 37.4%.
Philip Morris International Inc. forecast 2009 earnings of $2.85 to $3 a share, compared with Wall Street's estimate of $3.42 a share.
Treasurys declined Wednesday, sending yields to the highest in at least two months, after the Treasury Department said it will sell $67 billion in notes and bonds next week.
The government also plans to resume issuing seven-year notes later this month and will sell its so-called long bonds more frequently.
Crude for March delivery fell 46 cents, or 1.1%, to end at $40.32 a barrel on the New York Mercantile Exchange. Gold for February delivery ended up $9.60, or 1.1%, at $901.60 an ounce on the Comex division of the New York Mercantile Exchange.
Pier 1 Imports may close up to 125 stores and a distribution center as well as reducing up to 10% of its permanent workforce.
The Senate voted Wednesday night to give a tax break of up to $15,000 to homebuyers in hopes of revitalizing the housing industry.
Visa said net income for the lastest quarter was $599 million, or 78 cents per class A common share. Visa shares were up 5.2 percent to $51.70 in after-hours trade.
BMC Software said it's raising guidance for earnings excluding items for the full fiscal year, to between $2.20 and $2.30 a share.
Pulte Homes narrowed its quarterly loss, and sales at the homebuilding company rose from the same period last year. The homebuilder reported a loss of $1.33 a share in its fourth quarter on sales of $1.65 billion, compared with a deficit of $3.54 a share on sales of $2.9 billion in the same period last year.
U.S. credit card delinquencies hit a record high in January, and further deterioration is likely as the economy slows down and unemployment rises, Fitch Ratings says. Payments at least 60 days late rose almost half a percentage point last month to a record 3.75 per cent, said Fitch. Credit card lenders also wrote off loans to delinquent borrowers at close to record levels, and such “charge-offs” were expected to breach records in the coming months.
The U.S. private sector shed 522,000 jobs in January, according to the ADP employment index, pointing to another hefty month of job losses when the government reports its payroll figures on Friday. The ADP index, compiled from anonymous payroll data, showed the goods-producing industries lost 243,000 jobs, while the service-producing industries lost 279,000 jobs. The ADP index covers only private-sector jobs, adding in some 10,000 government jobs created in a typical month, the report suggests nonfarm payrolls fell by about 510,000 in January. Economists now expect payrolls to fall by 525,000, the fifth straight month of at least 400,000 jobs lost.
Japan's Panasonic to cut 15,000 jobs, shut 27 plants to cope with slump; forecasts annual loss.
The multi-family market is poised to weaken in the beginning half of 2009 due to significant local job loss and oversupply, according to the 2009 National Apartment Report issued by Marcus & Millichap.
Senator Charles Schumer, who closely follows the banking crisis, estimates the costs of the next stage of the bailout at between $3 and $4 trillion. If true, this means U.S. banks and broker dealers are effectively insolvent.
GM said it estimated the overall annualised selling rate for cars at 9.8m in the US in January, compared with 10.3m in December, and less than China’s estimated selling rate of 10.7m last month.
”This is the first time in history that China has surpassed the US,” said Michael DiGiovanni, GM’s head of global sales and industry analysis.
Allergan Inc. said it will lay off approximately 460 employees, or about 5% of its global workforce, primarily in the U.S. and Europe.
For 2009, Clorox affirmed earnings-per-share guidance of $3.60 to $3.75 and sales growth of 3% to 5%.
National Oilwell Varco said "While near term economic conditions are challenging, we enter 2009 with a healthy backlog of equipment and technology to deliver to our customers, and a balance sheet with considerably more cash than debt," the Houston based oil services firm said. "We believe that the oil and gas industry's challenge to replace depleting reserves will require upgrading the world's rig fleet, and we look forward to continuing to help our customers retool their rigs after years of underinvestment."
The Oil Drum: "Merrill Lynch on Tuesday said that crude oil production from non-OPEC nations may have already peaked, nothing that oil production decline rates were a function of investment rates, as well as the size and age of oil fields. 'All these factors point to steeper oil output declines going forward,' the firm wrote.
...'Should the credit crunch push decline rates to 6 percent, however, non-OPEC production could decline precipitously toward million barrels per day by 2015 from the current levels,' it wrote."
Cisco Systems Inc.reported a fiscal second quarter net income of $1.5 billion, or 26 cents a share, compared with $2.1 billion, or 33 cents a share, for the year-earlier period. Revenue was $9.1 billion, down from $9.8 billion for the same quarter last year. Cisco Systems Inc said it expects revenue in the current quarter to fall 15 percent to 20 percent from a year ago as the economic weakness deepens, sending its shares down 3 percent.
The Walt Disney Co. reported a 32 percent decline in quarterly profits Tuesday amid a downturn that Chief Executive Robert Iger called "likely to be the weakest economy in our lifetime."
Polo Ralph Lauren Corp. lowered its fiscal full-year earnings and revenue outlooks Wednesday, citing current economic conditions.
The apparel maker also reported its third-quarter profit dropped as sales slipped amid a pullback in consumer spending.
Nominal final sales to domestic producers -- GDP after stripping away the fudge factor for inflation and adjustments for inventories and exports -- collapsed at an astounding 9.4% annual rate in the fourth quarter, Robert Barbera, chief economist at ITG, points out.
Abu Dhabi says it will pump $4.36 billion into its banks to shore up confidence in the oil-rich Gulf emirate's financial sector.
UBS AG said today gold will average $1,000 an ounce this year, up 43 percent from its previous forecast. Investment in the
SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose to a record 853.4 metric tons on Feb. 2.
The industry-funded American Petroleum Institute reported yesterday that crude oil inventories rose 8.13 million barrels to 346.2 million last week. The EIA also reported that inventories at Cushing, Okla., the delivery point of Nymex futures, rose to a new record level of 34.3 million barrels. Meanwhile, gasoline inventories rose by 300,000 barrels and distillate stockpiles fell by 1.4 million barrels in the same week, the EIA reported.
Time Warner Cable Inc. says it is laying off 1,250 people over the next few weeks in the face of slowing growth at the nation's second largest cable operator.
AOL suffered a 27% hit in subscription revenue and an 18% drop in ad revenue. As of December 31, AOL had 6.9 million U.S. access subscribers, down 573,000 sequentially and off 2.4 million year over year.
The U.S. government's Small Business Administration said losses from loans made through its lending programs more than doubled in 2008, reaching nearly $1.3 billion. In 2007, the SBA charged off -- or took permanent losses against -- $504 million of the loans; in 2005, it charged off a much smaller $276 million. From October through December of last year, Bank of America Corp. said it took permanent losses on about 2.9% of its outstanding small business loans, an annual loss rate of almost 12%. As of one year ago, the Charlotte bank's permanent loss rate on small business loans was about half its current level, or about 6%.
U.S. nonmanufacturing sectors continued to contract but at a slower pace in January, according to a Wednesday report from the Institute for Supply Management, with the global slowdown taking its toll on demand. The ISM non-manufacturing index rose to 42.9% in January from 40.1% in December. In November, the index reached a record low of 37.4%.
Philip Morris International Inc. forecast 2009 earnings of $2.85 to $3 a share, compared with Wall Street's estimate of $3.42 a share.
Treasurys declined Wednesday, sending yields to the highest in at least two months, after the Treasury Department said it will sell $67 billion in notes and bonds next week.
The government also plans to resume issuing seven-year notes later this month and will sell its so-called long bonds more frequently.
Crude for March delivery fell 46 cents, or 1.1%, to end at $40.32 a barrel on the New York Mercantile Exchange. Gold for February delivery ended up $9.60, or 1.1%, at $901.60 an ounce on the Comex division of the New York Mercantile Exchange.
Pier 1 Imports may close up to 125 stores and a distribution center as well as reducing up to 10% of its permanent workforce.
The Senate voted Wednesday night to give a tax break of up to $15,000 to homebuyers in hopes of revitalizing the housing industry.
Visa said net income for the lastest quarter was $599 million, or 78 cents per class A common share. Visa shares were up 5.2 percent to $51.70 in after-hours trade.
BMC Software said it's raising guidance for earnings excluding items for the full fiscal year, to between $2.20 and $2.30 a share.
Pulte Homes narrowed its quarterly loss, and sales at the homebuilding company rose from the same period last year. The homebuilder reported a loss of $1.33 a share in its fourth quarter on sales of $1.65 billion, compared with a deficit of $3.54 a share on sales of $2.9 billion in the same period last year.
U.S. credit card delinquencies hit a record high in January, and further deterioration is likely as the economy slows down and unemployment rises, Fitch Ratings says. Payments at least 60 days late rose almost half a percentage point last month to a record 3.75 per cent, said Fitch. Credit card lenders also wrote off loans to delinquent borrowers at close to record levels, and such “charge-offs” were expected to breach records in the coming months.
The Stimulus Plan Is A Spending Plan
2/3/09 The Stimulus Plan Is A Spending Plan Created By More Debt
Rep. Ron Paul: "First of all, just as the best cure for a hangover is not to drink so much, the best cure for a recession is a recession. It is time to sober up and return to free market sanity, risk and reward, supply and demand, without political intervention. Politicians are good at catering to the needs of special interests, but very bad at determining what needs to take place in the market. Government should stick to punishing fraud and enforcing contracts. When they use the tax code, bureaucratic departments and their manipulative rules and regulations to dictate social and economic behavior, we end up with distortions and malinvestments. Bailing out banks, continuing failed Fed policies and strapping the taxpayer with toxic debt will worsen the pain, and punish the innocent.
If Congress really wanted to do something helpful, it would cut taxes. Ideally, we would repeal the income tax altogether and get the IRS off the economy's back, which would be a huge boon. We should also cut spending. Cut every unconstitutional department and program, every wasteful governmental encroachment on the people's liberty and money, starting with our massive overseas empire. The cost of our empire is bringing us to our knees, just as the Soviets' empire did to them. Congress should also abolish the Federal Reserve and take back its responsibilities to ensure sound money, safe from the manipulations of powerful banking interests.
These things would constitute real change, real economic stimulus. The plans being bandied about Washington are just more of the same. As long as no one seriously considers the cure, we are unfortunately destined to prolong the disease."
Eric Sprott, the Canadian money manager who last year predicted banking stocks would collapse, said the U.S. is at the beginning of an economic depression that will help gold prices more than double.
Bullion may top $2,000 an ounce in coming years amid a series of financial catastrophes, the chairman and founder of Toronto-based Sprott Asset Management Inc. said yesterday in an interview. Banks will battle to replenish capital, Treasury auctions stand the risk of failing and the moribund economy will create a dire operating outlook for many companies, he said.
“The trend is down, and there’s not one signpost that says it’s changing yet,” Sprott said yesterday from Toronto. “We’ll stand by to wait to see those, and until it does, you have to assume it gets worse.”
The Reserve Bank of Australia lowered interest rates by 1-percentage point to 3.25% Tuesday, citing moderating inflation pressures and the need to help spur demand to head off recession. In announcing its decision, the RBA said it took into account the stimulus package announced by the government earlier in the day. "The combination of expansionary monetary policies and fiscal policies now in place will help cushion the Australian economy from the contractionary forces coming from abroad," Gov. Glenn Stevens said in a statement.
The Hong Kong Monetary Authority has said the number of residential mortgage loans in negative equity nearly quadrupled in the quarter ended Dec. 31 as property prices dropped in the special administrative region in the wake of the global economic crisis.
“The U.S. housing market lost $3.3 trillion in value last year and almost one in six owners with mortgages owed more than their homes were worth as the economy went into recession, Zillow.com said. The median estimated home price declined 11.6 percent in 2008 to $192,119 and homeowners lost $1.4 trillion in value in the fourth quarter alone, the Seattle-based real estate data service said in a report today.
About $6.1 trillion of value has been lost since the housing market peaked in the second quarter of 2006 and last year’s decline was almost triple the $1.3 trillion lost in 2007, Zillow said.”
According to Zillow, 29% of homes in the Seattle-Tacoma-Bellevue area sold at a loss during the final three months of 2008.
Bay Area homes lost $202 billion in value in 2008, according to a real estate valuation service. The jaw-dropping number, courtesy of Zillow.com, totals the equity lost in all homes in the nine counties as real estate values tumbled under the pressure of foreclosures, recession and tightened lending standards.
"It's an increasingly negative picture in that market," said Stan Humphries, vice president of data and analytics for Zillow in Seattle.
Zillow said home values for the area fell 18.3 percent in the fourth quarter compared with a year ago, reaching a median value of $503,397. That was bigger than the overall U.S. decline of 11.6 percent in the quarter.
The Bay Area "is definitely in the pack of metropolitan areas that are declining worse than the national average," Humphries said. "Those areas are our usual suspects - metro areas in California, Florida, Phoenix, Las Vegas and Detroit."
The vacancy rate for homes typically occupied by the owner rose to 2.9% in the fourth quarter of 2008 from 2.8%, matching the all-time high set a year ago, the Commerce Department reported Tuesday. Prior to the housing bubble bursting in 2005, the vacancy rate had never been above 2%. For rental properties, the vacancy rate rose to 10.1% from 9.9%. The homeownership rate fell to 67.5%, the lowest since 2001. In the fourth quarter, 2.2 million homes were vacant and for sale, virtually unchanged from a year earlier. The nation's housing stock increased by 2.2 million in 2008 to 130.8 million.
"The high-end market relies on equities," says Walter Molony, spokesman for the National Association of Realtors. "If stocks are doing well, so too does high-end housing."
Though only 2 percent of the overall housing market, high-end home sales have seen a dramatic drop, according to Molony. Homes valued at $750,000 or more plunged a whopping 47 percent in the year ended in November. By comparison, homes valued at $400,000 or less fell by only 3 percent during the same period.
A look at the markets during the same time period shows the Dow Jones fell 33.1 percent, while the S&P shows a 37.5 percent drop in value.
Real estate professionals agree that sliding markets and a ravaged economy are hurting prospective high-end buyers and sellers. And that means prices will likely decline even more before there is any recovery.
"Unless they are forced to move, they are staying put," says Mary Cassidy, a licensed real estate broker in Bronxville, New York, a wealthy suburb of New York City that is home to many Wall Streeters. "People are not buying and people are not selling. When everyone’s uncertain as to whether they have a job, why go out and buy something?"
Willem Buiter: "There is little doubt that if the Buy American provisions of the Economic Stimulus Package were to become law, this would amount to an economic declaration of war on the rest of the world. The response of the assembled non-US finance ministers in Davos made this clear. Retaliation from the EU countries and the rest of the world would follow swiftly. Because this disastrous US Congressional actions follows so closely on Treasury Secretary Geithner’s declaration that China is manipulating its currency, it is essential that the Obama administration draw a clear line in the sand. If anything like the Buy American clause inserted by the House survives in the bill president Obama gets on his desk, he must veto it. The questionable value of the fiscal stimulus is overwhelmed by the unquestionable domestic and global harm caused by the Buy American clause. If president Obama fails to veto a protectionism-laced bill, it will be clear that we have a wuss in the White House. If such is the case, God help us all."
Avon Chief Executive Andrea Jung said 2009 "will be a challenging year."
Looking ahead, Celanese said it's engineering cost reductions of $100 million to $120 million a year. "With the current global economic recession and continued weak consumer demand, we would expect volumes to remain under pressure in 2009." The chemical maker will "adjust staffing with the short-term demand environment."
For 2009 Emerson expects to report earnings of $2.70 to $2.95 a share, with underlying sales falling between 3% and 6%.
Citigroup Inc., plans to use $36.5 billion for consumer and company lending and to fund U.S. mortgage loans from the $45 billion it got from the government in bailout funds last year, according to Bloomberg, which obtained a copy of a report the company is expected to issue on Tuesday. The bank will use $25.7 billion for mortgages, $1 billion for student loans, $5.8 billion for credit card lending and $1.5 billion for corporate loans, the report said, according to Bloomberg.
The Dow Chemical Co.swung to a $1.55 billion loss in the fourth quarter and said low demand will continue "for several quarters and possibly beyond." The Midland, Mich. firm lost $1.68 a share during the quarter, of 62 cents a share when excluding items. Sales fell 23% to $10.9 billion, with prices falling 6% and volume dropping 17%.
The U.K. FTSE 100 index declined 0.7% to 4,049.51, the German DAX 30 index lost 0.7% at 4,241.68 and the French CAC-40 index declined 0.9% to 2,905.10. The Nikkei 225 Average, which hit a high of 8,084.41 during the session, ended down 0.6% at 7,825.51, while the broader Topix fell 0.5% to 773.79. The decline came in spite of news that the Bank of Japan will revive a plan to purchase shares held by financial institutions and spend up to 1 trillion yen ($111.5 billion) through April 2010.
Scandinavian airline group SAS AB says its losses widened in the fourth quarter and that it plans to slash 3,000 jobs as part of a new savings plan.
Motorola says it lost $3.6 billion, or $1.57 per share, in the fourth quarter as it took massive non-cash charges for goodwill impairment and an increase in a deferred tax reserve.
Hammered by a decline in sales, the maker of telecommunications equipment also said it would suspend its dividend, and its
chief financial officer Paul Liska is leaving.
The company also says it is undertaking cost-cutting measures meant to save $1.5 billion in 2009.
“Subordinated bank debt is really, really suffering,” said
Phil Roantree, a portfolio manager who helps oversee $14 billion at New Star Asset Management in London. “Something is seriously wrong. Regulators need to restore confidence.”
D.R. Horton, the nation's biggest homebuilder, said Tuesday its fiscal first-quarter loss narrowed as it cut costs to cope with the worsening housing market slumpFort Worth, Texas-based Horton posted a loss of $62.6 million, or 20 cents per share, for the quarter ended Dec. 31. That compares with a loss of $128.8 million, or 41 cents per share, a year earlier.
The company said homebuilding revenue fell by more than 47 percent to $900.3 million from $1.71 billion as sales shrank. D.R. Horton sold 4,068 homes in the first quarter, compared with 6,549 in the period a year ago.
The number of homes under contract to be sold also fell sharply. D.R. Horton had 4,006 homes worth $900 million under contract at the end of the quarter. It had 8,138 homes valued at $2 billion under contract on the same day a year earlier.
Donald R. Horton, the company's chairman, said in a statement that the company is cutting the number of homes it has under construction and the amount of land it owns.
GMAC Financial Services said Tuesday that its fourth-quarter earnings were $7.45 billion compared to a year-ago loss of $724 million. Results in the quarter were largely driven by an $11.4 billion after-tax gain from the extinguishment of debt related to GMAC's fourth-quarter bond exchange, which was partially offset by losses in the global automotive finance and mortgage businesses.
Northrop expects 2009 earnings of $4.50 to $4.75 a share, compared to the Wall Street target of $5.06 a share.
BP Plc said replacement cost net profit fell in the fourth quarter to $2.587 billion and undershot forecasts as oil prices collapsed and its Russian unit reported a big loss.
Excluding non-operating items which amounted to a net charge of $18 million, the result was $2.605 billion, compared to an average forecast of $2.98 billion in a Reuters poll of 6 analysts.
Merck reaffirmed its 2009 financial forecasts, saying it expects earnings per share of $2.95 to $3.17, excluding up to about 20 cents' worth of one-time items, and revenue between $23.7 million and $24.2 billion.
United Parcel Service Inc., the world’s largest package-delivery company, forecast first-quarter profit of 52 cents to 68 cents a share, less than the 69 cents analyst estimate.
Gold prices may hit $1,500 (Dh5,509) an ounce in the next 12 to 15 months, Gary Dugan, the Chief Investment Officer (CIO) of Merrill Lynch, said yesterday.
Dugan termed his apprehensions of gold striking such a high as a "fear" that may come true. He reasoned that such a price would mean the other commodities and streams of investments have been shunned by investors.
With confidence in currencies shaken to the core, the yellow metal is increasingly assuming the role of "the most trusted currency", Dugan said. "We have never seen such a rush to buy gold. It's bringing in security and it's still affordable."
PNC Financial Services Group said it plans to cut 5,800 jobs following its recent purchase of troubled lender National City, and posted a fourth-quarter loss tied to the transaction.
The job cuts cover 9.7 percent of the combined banks' 59,595-person workforce. Pittsburgh-based PNC expects to complete the cuts by 2011 to help save $1.2 billion annually.
Fashion company Liz Claiborne said Tuesday that it planned to cut 725 jobs, or 8 percent of its U.S. workforce, as it aims to reduce costs in a difficult retail market.
King Pharmaceuticals to cut 760 jobs or 22% of workforce.
"2008 was a year of extreme market volatility with record high crude prices at midyear, followed by a rapid and steep decline in crude prices," said Clarence P. Cazalot, Jr., Marathon president and CEO. "Through this cycle of volatility, Marathon delivered solid upstream production growth and continued high downstream operating reliability, resulting in income from our operating segments increasing 59 percent for the fourth quarter and 15 percent for the full year, compared to the fourth quarter and full year of 2007....In the Bakken Shale in North Dakota, the Company continues to achieve best-in-class drilling and completion performance, and improved drilling time and well costs. Marathon increased its year-over-year Bakken production by 215 percent, with a December 2008 production rate of 8,200 net boepd, compared to 2,600 boepd at the end of 2007."
According to Robert Shiler, housing prices from 1890 onward have increased at a real rate of 0.4%.
Ningbo Sunhu Chemical Products Co., China ’s biggest nickel trader, said its post-Lunar New Year sales slumped as 90% of its customers remained closed because of lack of demand. Sales in the first two days after the week-long holiday dropped 95% from the same period last year, Kevin Ji, chief analyst, said in a phone interview today. “The global nickel industry seems to be pinning much hope on post-vacation Chinese demand, yet we’re feeling pretty desperate right here,” Ji said. China accounts for about 25% of global nickel demand. Ningbo Sunhu, which trades around 50,000 metric tons of the metal yearly, sells most of its products in the weeks after the Lunar New Year holiday and in the fourth quarter.
Standard & Poor's Index Services on Tuesday said it expects the companies in the S&P 500 Index to post their first-ever negative "as reported" GAAP earnings for the fourth quarter of 2008 as the economy continued to weaken. S&P said 244 issues have already reported quarterly results. "Operating earnings for the S&P 500 companies are expected to remain positive, since unusual charges (layoff provisions, write-offs, & etc.) are not included," S&P said. "However, operating earnings are expected to be the worst in over a decade." It added that reported quarterly sales are down nearly 11% while financials are set for the fifth consecutive quarter of negative earnings per share.
The National Association of Realtors Pending Home Sales Index, based on contracts signed in December, surged 6.3 percent to 87.7, rising for the first time since August. Compared with the same period a year-ago, pending homes sale were up 2.1 percent in December. It will be interesting to see what percentage were foreclosures. One must remember a record 19 million U.S. houses stood empty at the end of 2008 as banks seized homes faster than they could sell them and prices continued to fall.
Ford Motor Co posted a 40 percent drop in January sales in the United States, the sharpest decline for the No. 2 U.S. automaker in 10 months of double-digit sales declines in the world's largest market for new cars and trucks.
The results from Ford on Tuesday were among the first from major automakers for a month expected to show overall sales near 27-year lows, extending a stretch of 15 months of consecutive auto sales declines.
Toyota Motor Corp. said Tuesday that U.S. January sales fell 31.7% to 117,287 vehicles from 171,849 a year ago. Chrysler LLC on Tuesday reported its U.S. sales in January fell 54.8% to 62,157 vehicles from 137,392 in January 2008. General Motors Corp.on Tuesday reported a 48.9% drop in January U.S. light vehicle sales to 128,198 cars and trucks from 250,926 in January 2008. Sales of cars fell 57.9% to 43,943 while truck sales declined 42.5% to 84,255.
Electronic Arts to layoff 1,100 workers.
The United Steelworkers union on Tuesday said it reached a tentative agreement with a unit of Royal Dutch Shell, the lead company for the oil industry that becomes the minimum standard of wages, benefits and working conditions for all 30,000 refinery workers in the U.S. that belong to the union. The move effectively averts a possible strike at facilities that handle the majority of the U.S.'s crude oil refining.
The Dow Jones Industrial Average gained 141.61 points, or 1.8%, to finish at 8,078.36. The S&P 500 added 13.06 points, or 1.6%, to end at 838.50, while the Nasdaq Composite rose 21.87 points, or 1.5%, to 1,516.30.
Crude for March delivery ended up 70 cents, or 1.7%, at $40.78 a barrel on the New York Mercantile Exchange. Gold for February delivery closed down $14.70, or 1.6%, at $892 an ounce on the Comex division of the New York Mercantile Exchange.
Harley-Davidson says Berkshire and Harley's biggest shareholder, Davis Selected Advisers, L.P., have each committed to buying $300 million in senior unsecured notes, due in 2014. The interest rate is 15%.
The Senate voted Tuesday to give a tax break to new car buyers, setting aside bipartisan concerns over the size of an economic stimulus bill with a price tag approaching $900 billion. The vote was 71-26 to allow many car buyers to claim an income tax deduction for the cost of automobile sales taxes and interest payments on car loans.
Planned layoffs at U.S. firms in January reached their highest monthly level in seven years.
According to outplacement company Challenger, Gray & Christmas, job cuts announced in January totaled 241,749, up 45 percent from December's 166,348. Layoffs were up from 74,986 in the year-ago period.
Costco Wholesale Corp said it expects second-quarter earnings to be below analyst expectations as it reported a 2 percent fall in monthly sales at stores open at least a year, hurt mainly by lower gasoline prices and foreign exchange.
The warehouse club operator, which will report second-quarter results on March 4, also said it would not provide an earnings forecast for the rest of this fiscal year due to economic uncertainties.
Food makers Kraft Foods Inc and Sara Lee Corp cut their profit forecasts for the current year as a stronger dollar hurts international sales and U.S. consumers seek lower-priced products.
Rep. Ron Paul: "First of all, just as the best cure for a hangover is not to drink so much, the best cure for a recession is a recession. It is time to sober up and return to free market sanity, risk and reward, supply and demand, without political intervention. Politicians are good at catering to the needs of special interests, but very bad at determining what needs to take place in the market. Government should stick to punishing fraud and enforcing contracts. When they use the tax code, bureaucratic departments and their manipulative rules and regulations to dictate social and economic behavior, we end up with distortions and malinvestments. Bailing out banks, continuing failed Fed policies and strapping the taxpayer with toxic debt will worsen the pain, and punish the innocent.
If Congress really wanted to do something helpful, it would cut taxes. Ideally, we would repeal the income tax altogether and get the IRS off the economy's back, which would be a huge boon. We should also cut spending. Cut every unconstitutional department and program, every wasteful governmental encroachment on the people's liberty and money, starting with our massive overseas empire. The cost of our empire is bringing us to our knees, just as the Soviets' empire did to them. Congress should also abolish the Federal Reserve and take back its responsibilities to ensure sound money, safe from the manipulations of powerful banking interests.
These things would constitute real change, real economic stimulus. The plans being bandied about Washington are just more of the same. As long as no one seriously considers the cure, we are unfortunately destined to prolong the disease."
Eric Sprott, the Canadian money manager who last year predicted banking stocks would collapse, said the U.S. is at the beginning of an economic depression that will help gold prices more than double.
Bullion may top $2,000 an ounce in coming years amid a series of financial catastrophes, the chairman and founder of Toronto-based Sprott Asset Management Inc. said yesterday in an interview. Banks will battle to replenish capital, Treasury auctions stand the risk of failing and the moribund economy will create a dire operating outlook for many companies, he said.
“The trend is down, and there’s not one signpost that says it’s changing yet,” Sprott said yesterday from Toronto. “We’ll stand by to wait to see those, and until it does, you have to assume it gets worse.”
The Reserve Bank of Australia lowered interest rates by 1-percentage point to 3.25% Tuesday, citing moderating inflation pressures and the need to help spur demand to head off recession. In announcing its decision, the RBA said it took into account the stimulus package announced by the government earlier in the day. "The combination of expansionary monetary policies and fiscal policies now in place will help cushion the Australian economy from the contractionary forces coming from abroad," Gov. Glenn Stevens said in a statement.
The Hong Kong Monetary Authority has said the number of residential mortgage loans in negative equity nearly quadrupled in the quarter ended Dec. 31 as property prices dropped in the special administrative region in the wake of the global economic crisis.
“The U.S. housing market lost $3.3 trillion in value last year and almost one in six owners with mortgages owed more than their homes were worth as the economy went into recession, Zillow.com said. The median estimated home price declined 11.6 percent in 2008 to $192,119 and homeowners lost $1.4 trillion in value in the fourth quarter alone, the Seattle-based real estate data service said in a report today.
About $6.1 trillion of value has been lost since the housing market peaked in the second quarter of 2006 and last year’s decline was almost triple the $1.3 trillion lost in 2007, Zillow said.”
According to Zillow, 29% of homes in the Seattle-Tacoma-Bellevue area sold at a loss during the final three months of 2008.
Bay Area homes lost $202 billion in value in 2008, according to a real estate valuation service. The jaw-dropping number, courtesy of Zillow.com, totals the equity lost in all homes in the nine counties as real estate values tumbled under the pressure of foreclosures, recession and tightened lending standards.
"It's an increasingly negative picture in that market," said Stan Humphries, vice president of data and analytics for Zillow in Seattle.
Zillow said home values for the area fell 18.3 percent in the fourth quarter compared with a year ago, reaching a median value of $503,397. That was bigger than the overall U.S. decline of 11.6 percent in the quarter.
The Bay Area "is definitely in the pack of metropolitan areas that are declining worse than the national average," Humphries said. "Those areas are our usual suspects - metro areas in California, Florida, Phoenix, Las Vegas and Detroit."
The vacancy rate for homes typically occupied by the owner rose to 2.9% in the fourth quarter of 2008 from 2.8%, matching the all-time high set a year ago, the Commerce Department reported Tuesday. Prior to the housing bubble bursting in 2005, the vacancy rate had never been above 2%. For rental properties, the vacancy rate rose to 10.1% from 9.9%. The homeownership rate fell to 67.5%, the lowest since 2001. In the fourth quarter, 2.2 million homes were vacant and for sale, virtually unchanged from a year earlier. The nation's housing stock increased by 2.2 million in 2008 to 130.8 million.
"The high-end market relies on equities," says Walter Molony, spokesman for the National Association of Realtors. "If stocks are doing well, so too does high-end housing."
Though only 2 percent of the overall housing market, high-end home sales have seen a dramatic drop, according to Molony. Homes valued at $750,000 or more plunged a whopping 47 percent in the year ended in November. By comparison, homes valued at $400,000 or less fell by only 3 percent during the same period.
A look at the markets during the same time period shows the Dow Jones fell 33.1 percent, while the S&P shows a 37.5 percent drop in value.
Real estate professionals agree that sliding markets and a ravaged economy are hurting prospective high-end buyers and sellers. And that means prices will likely decline even more before there is any recovery.
"Unless they are forced to move, they are staying put," says Mary Cassidy, a licensed real estate broker in Bronxville, New York, a wealthy suburb of New York City that is home to many Wall Streeters. "People are not buying and people are not selling. When everyone’s uncertain as to whether they have a job, why go out and buy something?"
Willem Buiter: "There is little doubt that if the Buy American provisions of the Economic Stimulus Package were to become law, this would amount to an economic declaration of war on the rest of the world. The response of the assembled non-US finance ministers in Davos made this clear. Retaliation from the EU countries and the rest of the world would follow swiftly. Because this disastrous US Congressional actions follows so closely on Treasury Secretary Geithner’s declaration that China is manipulating its currency, it is essential that the Obama administration draw a clear line in the sand. If anything like the Buy American clause inserted by the House survives in the bill president Obama gets on his desk, he must veto it. The questionable value of the fiscal stimulus is overwhelmed by the unquestionable domestic and global harm caused by the Buy American clause. If president Obama fails to veto a protectionism-laced bill, it will be clear that we have a wuss in the White House. If such is the case, God help us all."
Avon Chief Executive Andrea Jung said 2009 "will be a challenging year."
Looking ahead, Celanese said it's engineering cost reductions of $100 million to $120 million a year. "With the current global economic recession and continued weak consumer demand, we would expect volumes to remain under pressure in 2009." The chemical maker will "adjust staffing with the short-term demand environment."
For 2009 Emerson expects to report earnings of $2.70 to $2.95 a share, with underlying sales falling between 3% and 6%.
Citigroup Inc., plans to use $36.5 billion for consumer and company lending and to fund U.S. mortgage loans from the $45 billion it got from the government in bailout funds last year, according to Bloomberg, which obtained a copy of a report the company is expected to issue on Tuesday. The bank will use $25.7 billion for mortgages, $1 billion for student loans, $5.8 billion for credit card lending and $1.5 billion for corporate loans, the report said, according to Bloomberg.
The Dow Chemical Co.swung to a $1.55 billion loss in the fourth quarter and said low demand will continue "for several quarters and possibly beyond." The Midland, Mich. firm lost $1.68 a share during the quarter, of 62 cents a share when excluding items. Sales fell 23% to $10.9 billion, with prices falling 6% and volume dropping 17%.
The U.K. FTSE 100 index declined 0.7% to 4,049.51, the German DAX 30 index lost 0.7% at 4,241.68 and the French CAC-40 index declined 0.9% to 2,905.10. The Nikkei 225 Average, which hit a high of 8,084.41 during the session, ended down 0.6% at 7,825.51, while the broader Topix fell 0.5% to 773.79. The decline came in spite of news that the Bank of Japan will revive a plan to purchase shares held by financial institutions and spend up to 1 trillion yen ($111.5 billion) through April 2010.
Scandinavian airline group SAS AB says its losses widened in the fourth quarter and that it plans to slash 3,000 jobs as part of a new savings plan.
Motorola says it lost $3.6 billion, or $1.57 per share, in the fourth quarter as it took massive non-cash charges for goodwill impairment and an increase in a deferred tax reserve.
Hammered by a decline in sales, the maker of telecommunications equipment also said it would suspend its dividend, and its
chief financial officer Paul Liska is leaving.
The company also says it is undertaking cost-cutting measures meant to save $1.5 billion in 2009.
“Subordinated bank debt is really, really suffering,” said
Phil Roantree, a portfolio manager who helps oversee $14 billion at New Star Asset Management in London. “Something is seriously wrong. Regulators need to restore confidence.”
D.R. Horton, the nation's biggest homebuilder, said Tuesday its fiscal first-quarter loss narrowed as it cut costs to cope with the worsening housing market slumpFort Worth, Texas-based Horton posted a loss of $62.6 million, or 20 cents per share, for the quarter ended Dec. 31. That compares with a loss of $128.8 million, or 41 cents per share, a year earlier.
The company said homebuilding revenue fell by more than 47 percent to $900.3 million from $1.71 billion as sales shrank. D.R. Horton sold 4,068 homes in the first quarter, compared with 6,549 in the period a year ago.
The number of homes under contract to be sold also fell sharply. D.R. Horton had 4,006 homes worth $900 million under contract at the end of the quarter. It had 8,138 homes valued at $2 billion under contract on the same day a year earlier.
Donald R. Horton, the company's chairman, said in a statement that the company is cutting the number of homes it has under construction and the amount of land it owns.
GMAC Financial Services said Tuesday that its fourth-quarter earnings were $7.45 billion compared to a year-ago loss of $724 million. Results in the quarter were largely driven by an $11.4 billion after-tax gain from the extinguishment of debt related to GMAC's fourth-quarter bond exchange, which was partially offset by losses in the global automotive finance and mortgage businesses.
Northrop expects 2009 earnings of $4.50 to $4.75 a share, compared to the Wall Street target of $5.06 a share.
BP Plc said replacement cost net profit fell in the fourth quarter to $2.587 billion and undershot forecasts as oil prices collapsed and its Russian unit reported a big loss.
Excluding non-operating items which amounted to a net charge of $18 million, the result was $2.605 billion, compared to an average forecast of $2.98 billion in a Reuters poll of 6 analysts.
Merck reaffirmed its 2009 financial forecasts, saying it expects earnings per share of $2.95 to $3.17, excluding up to about 20 cents' worth of one-time items, and revenue between $23.7 million and $24.2 billion.
United Parcel Service Inc., the world’s largest package-delivery company, forecast first-quarter profit of 52 cents to 68 cents a share, less than the 69 cents analyst estimate.
Gold prices may hit $1,500 (Dh5,509) an ounce in the next 12 to 15 months, Gary Dugan, the Chief Investment Officer (CIO) of Merrill Lynch, said yesterday.
Dugan termed his apprehensions of gold striking such a high as a "fear" that may come true. He reasoned that such a price would mean the other commodities and streams of investments have been shunned by investors.
With confidence in currencies shaken to the core, the yellow metal is increasingly assuming the role of "the most trusted currency", Dugan said. "We have never seen such a rush to buy gold. It's bringing in security and it's still affordable."
PNC Financial Services Group said it plans to cut 5,800 jobs following its recent purchase of troubled lender National City, and posted a fourth-quarter loss tied to the transaction.
The job cuts cover 9.7 percent of the combined banks' 59,595-person workforce. Pittsburgh-based PNC expects to complete the cuts by 2011 to help save $1.2 billion annually.
Fashion company Liz Claiborne said Tuesday that it planned to cut 725 jobs, or 8 percent of its U.S. workforce, as it aims to reduce costs in a difficult retail market.
King Pharmaceuticals to cut 760 jobs or 22% of workforce.
"2008 was a year of extreme market volatility with record high crude prices at midyear, followed by a rapid and steep decline in crude prices," said Clarence P. Cazalot, Jr., Marathon president and CEO. "Through this cycle of volatility, Marathon delivered solid upstream production growth and continued high downstream operating reliability, resulting in income from our operating segments increasing 59 percent for the fourth quarter and 15 percent for the full year, compared to the fourth quarter and full year of 2007....In the Bakken Shale in North Dakota, the Company continues to achieve best-in-class drilling and completion performance, and improved drilling time and well costs. Marathon increased its year-over-year Bakken production by 215 percent, with a December 2008 production rate of 8,200 net boepd, compared to 2,600 boepd at the end of 2007."
According to Robert Shiler, housing prices from 1890 onward have increased at a real rate of 0.4%.
Ningbo Sunhu Chemical Products Co., China ’s biggest nickel trader, said its post-Lunar New Year sales slumped as 90% of its customers remained closed because of lack of demand. Sales in the first two days after the week-long holiday dropped 95% from the same period last year, Kevin Ji, chief analyst, said in a phone interview today. “The global nickel industry seems to be pinning much hope on post-vacation Chinese demand, yet we’re feeling pretty desperate right here,” Ji said. China accounts for about 25% of global nickel demand. Ningbo Sunhu, which trades around 50,000 metric tons of the metal yearly, sells most of its products in the weeks after the Lunar New Year holiday and in the fourth quarter.
Standard & Poor's Index Services on Tuesday said it expects the companies in the S&P 500 Index to post their first-ever negative "as reported" GAAP earnings for the fourth quarter of 2008 as the economy continued to weaken. S&P said 244 issues have already reported quarterly results. "Operating earnings for the S&P 500 companies are expected to remain positive, since unusual charges (layoff provisions, write-offs, & etc.) are not included," S&P said. "However, operating earnings are expected to be the worst in over a decade." It added that reported quarterly sales are down nearly 11% while financials are set for the fifth consecutive quarter of negative earnings per share.
The National Association of Realtors Pending Home Sales Index, based on contracts signed in December, surged 6.3 percent to 87.7, rising for the first time since August. Compared with the same period a year-ago, pending homes sale were up 2.1 percent in December. It will be interesting to see what percentage were foreclosures. One must remember a record 19 million U.S. houses stood empty at the end of 2008 as banks seized homes faster than they could sell them and prices continued to fall.
Ford Motor Co posted a 40 percent drop in January sales in the United States, the sharpest decline for the No. 2 U.S. automaker in 10 months of double-digit sales declines in the world's largest market for new cars and trucks.
The results from Ford on Tuesday were among the first from major automakers for a month expected to show overall sales near 27-year lows, extending a stretch of 15 months of consecutive auto sales declines.
Toyota Motor Corp. said Tuesday that U.S. January sales fell 31.7% to 117,287 vehicles from 171,849 a year ago. Chrysler LLC on Tuesday reported its U.S. sales in January fell 54.8% to 62,157 vehicles from 137,392 in January 2008. General Motors Corp.on Tuesday reported a 48.9% drop in January U.S. light vehicle sales to 128,198 cars and trucks from 250,926 in January 2008. Sales of cars fell 57.9% to 43,943 while truck sales declined 42.5% to 84,255.
Electronic Arts to layoff 1,100 workers.
The United Steelworkers union on Tuesday said it reached a tentative agreement with a unit of Royal Dutch Shell, the lead company for the oil industry that becomes the minimum standard of wages, benefits and working conditions for all 30,000 refinery workers in the U.S. that belong to the union. The move effectively averts a possible strike at facilities that handle the majority of the U.S.'s crude oil refining.
The Dow Jones Industrial Average gained 141.61 points, or 1.8%, to finish at 8,078.36. The S&P 500 added 13.06 points, or 1.6%, to end at 838.50, while the Nasdaq Composite rose 21.87 points, or 1.5%, to 1,516.30.
Crude for March delivery ended up 70 cents, or 1.7%, at $40.78 a barrel on the New York Mercantile Exchange. Gold for February delivery closed down $14.70, or 1.6%, at $892 an ounce on the Comex division of the New York Mercantile Exchange.
Harley-Davidson says Berkshire and Harley's biggest shareholder, Davis Selected Advisers, L.P., have each committed to buying $300 million in senior unsecured notes, due in 2014. The interest rate is 15%.
The Senate voted Tuesday to give a tax break to new car buyers, setting aside bipartisan concerns over the size of an economic stimulus bill with a price tag approaching $900 billion. The vote was 71-26 to allow many car buyers to claim an income tax deduction for the cost of automobile sales taxes and interest payments on car loans.
Planned layoffs at U.S. firms in January reached their highest monthly level in seven years.
According to outplacement company Challenger, Gray & Christmas, job cuts announced in January totaled 241,749, up 45 percent from December's 166,348. Layoffs were up from 74,986 in the year-ago period.
Costco Wholesale Corp said it expects second-quarter earnings to be below analyst expectations as it reported a 2 percent fall in monthly sales at stores open at least a year, hurt mainly by lower gasoline prices and foreign exchange.
The warehouse club operator, which will report second-quarter results on March 4, also said it would not provide an earnings forecast for the rest of this fiscal year due to economic uncertainties.
Food makers Kraft Foods Inc and Sara Lee Corp cut their profit forecasts for the current year as a stronger dollar hurts international sales and U.S. consumers seek lower-priced products.
Monday, February 02, 2009
Change
2/2/09 Change
With spending falling faster than incomes, the personal savings rate rose to 3.6% in December.
Gold for February delivery was last down $19.10, or 2.1%, at $908.20 an ounce in early North America electronic trading. Oil futures fell below $41 a barrel early Monday, pressured by ongoing worries over slowing energy demand. Crude oil for March delivery dropped $1.21, or 3%, to $40.45 a barrel in electronic trading on Globex.
Global sales of semiconductors dropped for the first year since 2001, the Semiconductor Industry Association reported Monday. Global semiconductor sales tumbled 22% in December from a year earlier, putting 2008's decline at 2.8%.
Conditions in China's manufacturing sector declined in January, marking the sixth straight month of falls, while the pace of layoffs jumped to the highest recorded in a four-year-old survey published by CLSA Asia-Pacific Markets. The headline PMI index stood at 42.2, rising slightly from 41.2 in December, but well below the 50-level that indicates the manufacturing sector is neither growing nor shirking. The reading was the third-sharpest deterioration on record, following declines in December and November.
The euro-zone manufacturing sector saw another sharp contraction in January, but shrank at a slower pace than December, according to the Markit euro-zone manufacturing purchasing managers index released Monday. January PMI came in at 34.4, slightly lower than a preliminary estimate of 34.5, but up from the all-time low of 33.9 posted in December.
Nouriel Roubini, 50, says worse lies ahead. Banks face bigger credit losses than they realize, more financial companies will require state takeovers and the world economy will keep shrinking throughout 2009, he says.
“The consensus is catching up with me, but it’s still behind,” Roubini said in an interview in Davos. “I don’t know what some people are smoking.”
"Everybody is concerned about this. The state of California is on the edge of going into the abyss," said Bill Hauck, president of the California Business Roundtable, which represents the state's largest employers.
Toyota has cut its production forecasts for 2009 for the third time.
Major U.S. banks sought government permission to bring thousands of foreign workers into the country for high-paying jobs even as the system was melting down last year and Americans were getting laid off, according to an Associated Press review of visa applications.
Ford Motor Co may need to access U.S. government aid in late 2009, an analyst at Barclays Capital said on Monday, just days after the automaker said it would have the cash to survive the worst downturn in auto sales in a decade without a state bailout.
Analyst Brian Johnson downgraded the U.S. automaker's stock to "underweight" from "equal-weight" and cut his price target on the stock to $1 from $4, citing cash concerns and an increase in the company's net debt.
“You don't have a clue what is going on and neither do the American people because if they did, there would be a revolution in this country.”
Former Texas Gov. John Connally to Gerald Celente, 1992
The cost of three-month dollar loans between banks rose Monday to the highest level since Jan. 9 on worries that a deeper economic downturn will keep the financial sector under pressure.
The rate on three-month loans in dollars — known as the London Interbank Offered Rate, or Libor — rose 0.05 percentage points to 2.23 percent, according to the British Bankers' Association. Since the start of the year, decreases in the rate have leveled off and become increases as concerns about the banking sector re-emerged.
The
ruble slumped to its weakest level against the dollar in 11 years.
Outlays for construction projects declined 1.4% in December after a revised 1.2% drop in November, the Commerce Department reported Monday. Spending on residential projects fell 3.2%. Spending on nonresidential projects fell 0.4%. Since December 2007, total outlays fell 3.6%. Residential spending fell 22.3%, while nonresidential outlays rose 8.9%.
Renew Energy LLC, the ethanol producer based in Jefferson, Wisconsin, filed for bankruptcy protection from creditors and plans to sell itself amid falling prices for the grain-based fuel and rising costs for corn.
Dallas Federal Reserve President Richard Fisher warned on Monday against "Buy America'' provisions in a proposed fiscal stimulus law and said it could lead to devastating protectionism.
"Protectionism is the crack cocaine of economics,'' Fisher told C-Span television in an interview for its "Washington Journal'' program.
"It provides an immediate high that leads to economic death. We cannot afford to go down that route,'' said Fisher, who is not a voting member of the Fed's policy-setting committee this year.
The $800 billion stimulus package passed by the U.S. House of Representatives includes "buy American" clauses that appear to unfairly favor U.S. steel producers.
"I hope the senators will be wise enough ... to make sure the U.S. complies with its international obligations," said Pascal Lamy, the head of the World Trade Organization.
On the same panel, Brazilian Foreign Minister said subsidies are the "most scandalous way of damaging developing countries."
Macy's Inc slashed about 7,000 jobs on Monday, cut its quarterly dividend and said it would integrate all its divisions into a single unit as it expects the remainder of 2009 to remain very tough for retail.
Personal bankruptcies surged to more than 1 million filings in the United States in 2008 -- the most since a rewrite of bankruptcy laws went into effect in 2005.
Filings of Chapter 7 and Chapter 13 bankruptcies rose 33% in 2008 as the economy worsened, according to data from U.S. bankruptcy courts and compiled by bankruptcy data firm Automated Access to Court Electronic Records.
The Dow Jones Industrial Average fell 64.11 points to 7,936.76. The S&P 500 lost half a point to 825.41, while the Nasdaq advanced 18.01 points to finish at 1,494.43.
Crude oil for March delivery lost $1.60, or 3.8%, to end at $40.08 a barrel on the New York Mercantile Exchange. Gold for February delivery ended down $20.60, or 2.2%, at $906.70 an ounce on the Comex division of the New York Mercantile Exchange.
Morgan Stanley may announce a cut up to 4% of its workforce this month, The Wall Street Journal reported Monday on its Web site, citing a source close to the investment bank's plans. The Journal said that Morgan Stanley is expected to announce 1,500 to 1,800 job cuts, or about 3% to 4% of its workforce.
During the campaign Obama talked about bringing change to Washington. I now have a clear picture of that change. In order to be chosen for a cabinet position it can work in one's favor to have cheated on one's tax return and/or having been fired from Harvard University for making disparaging remarks about women. These are the people to take a leadership role in the cabinet? What does that tell you about the regard for ethics, morals, honesty, and the like? How about the reflection on one's judgment? This country is in a lot deeper trouble than simply unemployment, underemplyment, foreclosures, bankruptcies, indebtedness, deflation, etc etc. Broken promises do not represent change in Washington.
George Carlin: "I know a transsexual guy who's only ambition is to eat, drink, and be Mary."
With spending falling faster than incomes, the personal savings rate rose to 3.6% in December.
Gold for February delivery was last down $19.10, or 2.1%, at $908.20 an ounce in early North America electronic trading. Oil futures fell below $41 a barrel early Monday, pressured by ongoing worries over slowing energy demand. Crude oil for March delivery dropped $1.21, or 3%, to $40.45 a barrel in electronic trading on Globex.
Global sales of semiconductors dropped for the first year since 2001, the Semiconductor Industry Association reported Monday. Global semiconductor sales tumbled 22% in December from a year earlier, putting 2008's decline at 2.8%.
Conditions in China's manufacturing sector declined in January, marking the sixth straight month of falls, while the pace of layoffs jumped to the highest recorded in a four-year-old survey published by CLSA Asia-Pacific Markets. The headline PMI index stood at 42.2, rising slightly from 41.2 in December, but well below the 50-level that indicates the manufacturing sector is neither growing nor shirking. The reading was the third-sharpest deterioration on record, following declines in December and November.
The euro-zone manufacturing sector saw another sharp contraction in January, but shrank at a slower pace than December, according to the Markit euro-zone manufacturing purchasing managers index released Monday. January PMI came in at 34.4, slightly lower than a preliminary estimate of 34.5, but up from the all-time low of 33.9 posted in December.
Nouriel Roubini, 50, says worse lies ahead. Banks face bigger credit losses than they realize, more financial companies will require state takeovers and the world economy will keep shrinking throughout 2009, he says.
“The consensus is catching up with me, but it’s still behind,” Roubini said in an interview in Davos. “I don’t know what some people are smoking.”
"Everybody is concerned about this. The state of California is on the edge of going into the abyss," said Bill Hauck, president of the California Business Roundtable, which represents the state's largest employers.
Toyota has cut its production forecasts for 2009 for the third time.
Major U.S. banks sought government permission to bring thousands of foreign workers into the country for high-paying jobs even as the system was melting down last year and Americans were getting laid off, according to an Associated Press review of visa applications.
Ford Motor Co may need to access U.S. government aid in late 2009, an analyst at Barclays Capital said on Monday, just days after the automaker said it would have the cash to survive the worst downturn in auto sales in a decade without a state bailout.
Analyst Brian Johnson downgraded the U.S. automaker's stock to "underweight" from "equal-weight" and cut his price target on the stock to $1 from $4, citing cash concerns and an increase in the company's net debt.
“You don't have a clue what is going on and neither do the American people because if they did, there would be a revolution in this country.”
Former Texas Gov. John Connally to Gerald Celente, 1992
The cost of three-month dollar loans between banks rose Monday to the highest level since Jan. 9 on worries that a deeper economic downturn will keep the financial sector under pressure.
The rate on three-month loans in dollars — known as the London Interbank Offered Rate, or Libor — rose 0.05 percentage points to 2.23 percent, according to the British Bankers' Association. Since the start of the year, decreases in the rate have leveled off and become increases as concerns about the banking sector re-emerged.
The
ruble slumped to its weakest level against the dollar in 11 years.
Outlays for construction projects declined 1.4% in December after a revised 1.2% drop in November, the Commerce Department reported Monday. Spending on residential projects fell 3.2%. Spending on nonresidential projects fell 0.4%. Since December 2007, total outlays fell 3.6%. Residential spending fell 22.3%, while nonresidential outlays rose 8.9%.
Renew Energy LLC, the ethanol producer based in Jefferson, Wisconsin, filed for bankruptcy protection from creditors and plans to sell itself amid falling prices for the grain-based fuel and rising costs for corn.
Dallas Federal Reserve President Richard Fisher warned on Monday against "Buy America'' provisions in a proposed fiscal stimulus law and said it could lead to devastating protectionism.
"Protectionism is the crack cocaine of economics,'' Fisher told C-Span television in an interview for its "Washington Journal'' program.
"It provides an immediate high that leads to economic death. We cannot afford to go down that route,'' said Fisher, who is not a voting member of the Fed's policy-setting committee this year.
The $800 billion stimulus package passed by the U.S. House of Representatives includes "buy American" clauses that appear to unfairly favor U.S. steel producers.
"I hope the senators will be wise enough ... to make sure the U.S. complies with its international obligations," said Pascal Lamy, the head of the World Trade Organization.
On the same panel, Brazilian Foreign Minister said subsidies are the "most scandalous way of damaging developing countries."
Macy's Inc slashed about 7,000 jobs on Monday, cut its quarterly dividend and said it would integrate all its divisions into a single unit as it expects the remainder of 2009 to remain very tough for retail.
Personal bankruptcies surged to more than 1 million filings in the United States in 2008 -- the most since a rewrite of bankruptcy laws went into effect in 2005.
Filings of Chapter 7 and Chapter 13 bankruptcies rose 33% in 2008 as the economy worsened, according to data from U.S. bankruptcy courts and compiled by bankruptcy data firm Automated Access to Court Electronic Records.
The Dow Jones Industrial Average fell 64.11 points to 7,936.76. The S&P 500 lost half a point to 825.41, while the Nasdaq advanced 18.01 points to finish at 1,494.43.
Crude oil for March delivery lost $1.60, or 3.8%, to end at $40.08 a barrel on the New York Mercantile Exchange. Gold for February delivery ended down $20.60, or 2.2%, at $906.70 an ounce on the Comex division of the New York Mercantile Exchange.
Morgan Stanley may announce a cut up to 4% of its workforce this month, The Wall Street Journal reported Monday on its Web site, citing a source close to the investment bank's plans. The Journal said that Morgan Stanley is expected to announce 1,500 to 1,800 job cuts, or about 3% to 4% of its workforce.
During the campaign Obama talked about bringing change to Washington. I now have a clear picture of that change. In order to be chosen for a cabinet position it can work in one's favor to have cheated on one's tax return and/or having been fired from Harvard University for making disparaging remarks about women. These are the people to take a leadership role in the cabinet? What does that tell you about the regard for ethics, morals, honesty, and the like? How about the reflection on one's judgment? This country is in a lot deeper trouble than simply unemployment, underemplyment, foreclosures, bankruptcies, indebtedness, deflation, etc etc. Broken promises do not represent change in Washington.
George Carlin: "I know a transsexual guy who's only ambition is to eat, drink, and be Mary."
Incomes and Spending Decline
2/1/09 Incomes and Spending Decline
U.S. consumers cut spending for a sixth straight month in December and their incomes shrank, according to a government report on Monday that underscored the rapid deterioration in the economy.
The Commerce Department said spending decreased by 1.0 percent after falling by a revised 0.8 percent in November. That figure was previously reported as a 0.6 percent drop. Incomes fell by 0.2 percent after November's 0.4 percent decline, previously reported as a 0.2 percent decline.
Cliffs Natural Resources Inc., the Cleveland miner of iron ore and coal, said it would suspend production at its Pinnacle metallurgical-coal complex near Pineville, W.Va., from Feb. 2 through Feb. 28.
The production halt will idle 360 workers.
"Metallurgical-coal demand has been reduced as the steel industry has cut back production in the face of the global economic slowdown," Cliffs said in the statement.
Major U.S. refiners and the United Steelworkers union have extended their talks on a new contract day to day, averting a strike for now.
The negotiations cover workers at plants representing about 64% of U.S. refining capacity, Bloomberg reported. About 24,000 workers are covered by the contract, the Associated Press reported.
British drugs company GlaxoSmithKline Plc. is set to announce about 6,000 job losses when it posts results on Thursday, the Sunday Telegraph newspaper said.
Federal Reserve Bank of Richmond President Jeffrey Lacker said Saturday that his recent monetary-policy dissent wasn't directed at the target for short-term interest rates but rather at the composition of the Fed's balance sheet.
The government’s civilian, nonmilitary work force peaked in the late 1960s at about 2.3 million. It was 2 million or more through the mid-1990s, when the government cut more than 400,000 jobs — many through military base closings. Since 2001, civilian employment in the executive branch, excluding postal employees, has edged upward from 1.7 million to about 2 million, largely because of new homeland security jobs.
More federal job openings are on the horizon.
A report released in January by Christina Romer, head of the White House Council of Economic Advisers, and Jared Bernstein, an economic policy adviser to Vice President Joe Biden, predicted that more than 90 percent of the 3 million to 4 million jobs that Obama proposes to save or create would be in the private sector.
But the report also estimated that 244,000 government jobs — some at the federal level, but more at the state and local level — would be created or saved.
That was based on a $600 billion stimulus package; the one being debated in Congress is more than $800 billion.
Tom Fowler: "LNG can be competitive priced as low as $3 per million British thermal units, said Zach Allen, head of Pan EurAsian Enterprises, a management advisory firm that follows LNG markets. That’s a price the U.S. hasn’t seen since 2002.
While LNG generally is sold in contracts between importers and exporters, its price is influenced by the price of natural gas traded on the New York Mercantile exchange, which closed Friday at $4.42 per million Btu.
“Some cash is better than none, especially for producers who rely heavily on that cash for social and other programs that would be politically explosive to cut off or cut back,” Allen said.
Some of Qatar’s natural gas fields produce other valuable liquids that are stripped out and sold at prices that essentially cover all production costs before the gas even makes it to market, Douglas said.
“They are essentially producing the gas for free,” Douglas said.
The cost of getting the LNG from its foreign origin to other markets can be relatively low, Johnson said.
The 43-day round trip from the huge export terminal in Qatar to the Lake Charles, La., LNG terminal costs $2.09 per million British thermal units.
From Egypt to Lake Charles takes 30 days and $1.29 per million Btu."
It was a remarkable accomplishment when Nadal beat Fernando Verdasco in the Australian Open semi finals in a 5-set five hour, 14 minute match and then in Sunday's finals beat Federer in another 5-set match lasting almost 4 1/2 hours.
LA Times: "The stimulus package offers the most direct benefits to Americans who have lost their jobs and their health insurance in the downturn, and to those already receiving public assistance.
Roughly 3.5 million Americans who lose their jobs will be able to receive unemployment benefits for 59 weeks, instead of being cut off after 26 weeks. And 20 million people would see a $25-a-week increase in their aid checks; the average weekly benefit is now $200.
The government also will provide $7.5 billion more to help states assist unemployed workers who otherwise might not have qualified for aid because they earned too little or only worked part time before losing their jobs. Democrats estimate that could help up to 650,000 workers.
The bill would provide an extra month's check -- about $450 -- for some 7.5 million poor and elderly disabled people who rely on Supplemental Security Income. Couples would get $630 more.
An estimated 8.5 million Americans would get help keeping their health insurance after losing their jobs.
The so-called COBRA law currently allows people to retain employer-based health insurance for 18 months if they pay the premiums. But that often costs more than $1,000 a month -- so much that relatively few people do it."
Mike Burk: "Since 1928 the SPX has been up 52% of the time in February with an average loss of 0.3% making it second to September as the worst month of the year. During the 1st year of the Presidential Cycle the SPX has only been up 40% of the time with an average loss of 1.7% making it second to September again as the worst month of the entire 4 year Presidential Cycle...The market appears to be hopeless. In spite of exploding money supply and a deeply oversold condition, it continues to fall. Seasonally we are entering one of the worst months of the entire 4 year Presidential Cycle.
I expect the major indices to be lower on Friday February 6 than they were on Friday January 30."
South Korean exports in January fell a record 32.8 percent over a year earlier, worse than analysts had expected, as the deepening global downturn batters Asian economies. South Korea is the first big Asian exporter to report trade data each month, providing an early indication of the state of global demand. Analysts say the poor outlook for trade may prompt its central bank to cut interest rates further. Imports fell 32.1 percent in January from a year earlier, data on the Korea Customs Service's website.
Cable television system operator Charter Communications, struggling with a $21 billion debt load, is preparing a bankruptcy filing, according to sources familiar with the situation.
The action comes after the company missed a $73.7 million interest payment in mid-January and as it continues to negotiate a financial restructuring with its bondholders, sources said on condition of anonymity.
A steep drop in sales to rental car companies and other fleet buyers is expected to weigh heavily on carmakers when they report their January sales results Tuesday. It remains to be seen whether injecting government cash into automakers' financing arms helped consumers make up the difference.
"It is an automotive hurricane moving through this industry," said Jim Farley, Ford Motor Co.'s marketing chief, at last weekend's National Automotive Dealers Association convention. Farley predicted a big drop in business from fleet buyers, which are keeping their current vehicles longer to pare costs.
Bad bank idea is simply a "covert way to recapitalize banks by paying more for the assets than the market would," Meredith Whitney tells Fortune. Besides which,
it won't even work.
An Iraqi oil official says Iraq's January oil exports inched up to about 1.89 million barrels a day from about 1.82 million in the previous month.
Falah al-Amiri, the head of the State Oil Marketing Organization, says about 1.38 million barrels per day were exported through the Persian Gulf, while 500,000 barrels a day were exported via Turkey's port of Ceyhan.
Al-Amiri told The Associated Press on Sunday that exports through Turkey were the biggest since 2003. Sabotage had left the pipeline generally idle until late August 2007.
The Nikkei 225 Average fell 1.7% to 7,856.10 and the broader Topix index gave up 1.7% to 780.64 in Tokyo. Australia's S&P/ASX 200 lost 1.4% to 3,490.10 and New Zealand's NZX 50 slipped 0.5% to 2,759.55.
According to the FT,Rio Tinto, the Anglo-Australian mining group, is in talks with Chinese state-owned aluminium producer Chinalco over potential asset sales and a purchase of shares that could help it avoid a rights issue.
.
U.S. consumers cut spending for a sixth straight month in December and their incomes shrank, according to a government report on Monday that underscored the rapid deterioration in the economy.
The Commerce Department said spending decreased by 1.0 percent after falling by a revised 0.8 percent in November. That figure was previously reported as a 0.6 percent drop. Incomes fell by 0.2 percent after November's 0.4 percent decline, previously reported as a 0.2 percent decline.
Cliffs Natural Resources Inc., the Cleveland miner of iron ore and coal, said it would suspend production at its Pinnacle metallurgical-coal complex near Pineville, W.Va., from Feb. 2 through Feb. 28.
The production halt will idle 360 workers.
"Metallurgical-coal demand has been reduced as the steel industry has cut back production in the face of the global economic slowdown," Cliffs said in the statement.
Major U.S. refiners and the United Steelworkers union have extended their talks on a new contract day to day, averting a strike for now.
The negotiations cover workers at plants representing about 64% of U.S. refining capacity, Bloomberg reported. About 24,000 workers are covered by the contract, the Associated Press reported.
British drugs company GlaxoSmithKline Plc. is set to announce about 6,000 job losses when it posts results on Thursday, the Sunday Telegraph newspaper said.
Federal Reserve Bank of Richmond President Jeffrey Lacker said Saturday that his recent monetary-policy dissent wasn't directed at the target for short-term interest rates but rather at the composition of the Fed's balance sheet.
The government’s civilian, nonmilitary work force peaked in the late 1960s at about 2.3 million. It was 2 million or more through the mid-1990s, when the government cut more than 400,000 jobs — many through military base closings. Since 2001, civilian employment in the executive branch, excluding postal employees, has edged upward from 1.7 million to about 2 million, largely because of new homeland security jobs.
More federal job openings are on the horizon.
A report released in January by Christina Romer, head of the White House Council of Economic Advisers, and Jared Bernstein, an economic policy adviser to Vice President Joe Biden, predicted that more than 90 percent of the 3 million to 4 million jobs that Obama proposes to save or create would be in the private sector.
But the report also estimated that 244,000 government jobs — some at the federal level, but more at the state and local level — would be created or saved.
That was based on a $600 billion stimulus package; the one being debated in Congress is more than $800 billion.
Tom Fowler: "LNG can be competitive priced as low as $3 per million British thermal units, said Zach Allen, head of Pan EurAsian Enterprises, a management advisory firm that follows LNG markets. That’s a price the U.S. hasn’t seen since 2002.
While LNG generally is sold in contracts between importers and exporters, its price is influenced by the price of natural gas traded on the New York Mercantile exchange, which closed Friday at $4.42 per million Btu.
“Some cash is better than none, especially for producers who rely heavily on that cash for social and other programs that would be politically explosive to cut off or cut back,” Allen said.
Some of Qatar’s natural gas fields produce other valuable liquids that are stripped out and sold at prices that essentially cover all production costs before the gas even makes it to market, Douglas said.
“They are essentially producing the gas for free,” Douglas said.
The cost of getting the LNG from its foreign origin to other markets can be relatively low, Johnson said.
The 43-day round trip from the huge export terminal in Qatar to the Lake Charles, La., LNG terminal costs $2.09 per million British thermal units.
From Egypt to Lake Charles takes 30 days and $1.29 per million Btu."
It was a remarkable accomplishment when Nadal beat Fernando Verdasco in the Australian Open semi finals in a 5-set five hour, 14 minute match and then in Sunday's finals beat Federer in another 5-set match lasting almost 4 1/2 hours.
LA Times: "The stimulus package offers the most direct benefits to Americans who have lost their jobs and their health insurance in the downturn, and to those already receiving public assistance.
Roughly 3.5 million Americans who lose their jobs will be able to receive unemployment benefits for 59 weeks, instead of being cut off after 26 weeks. And 20 million people would see a $25-a-week increase in their aid checks; the average weekly benefit is now $200.
The government also will provide $7.5 billion more to help states assist unemployed workers who otherwise might not have qualified for aid because they earned too little or only worked part time before losing their jobs. Democrats estimate that could help up to 650,000 workers.
The bill would provide an extra month's check -- about $450 -- for some 7.5 million poor and elderly disabled people who rely on Supplemental Security Income. Couples would get $630 more.
An estimated 8.5 million Americans would get help keeping their health insurance after losing their jobs.
The so-called COBRA law currently allows people to retain employer-based health insurance for 18 months if they pay the premiums. But that often costs more than $1,000 a month -- so much that relatively few people do it."
Mike Burk: "Since 1928 the SPX has been up 52% of the time in February with an average loss of 0.3% making it second to September as the worst month of the year. During the 1st year of the Presidential Cycle the SPX has only been up 40% of the time with an average loss of 1.7% making it second to September again as the worst month of the entire 4 year Presidential Cycle...The market appears to be hopeless. In spite of exploding money supply and a deeply oversold condition, it continues to fall. Seasonally we are entering one of the worst months of the entire 4 year Presidential Cycle.
I expect the major indices to be lower on Friday February 6 than they were on Friday January 30."
South Korean exports in January fell a record 32.8 percent over a year earlier, worse than analysts had expected, as the deepening global downturn batters Asian economies. South Korea is the first big Asian exporter to report trade data each month, providing an early indication of the state of global demand. Analysts say the poor outlook for trade may prompt its central bank to cut interest rates further. Imports fell 32.1 percent in January from a year earlier, data on the Korea Customs Service's website.
Cable television system operator Charter Communications, struggling with a $21 billion debt load, is preparing a bankruptcy filing, according to sources familiar with the situation.
The action comes after the company missed a $73.7 million interest payment in mid-January and as it continues to negotiate a financial restructuring with its bondholders, sources said on condition of anonymity.
A steep drop in sales to rental car companies and other fleet buyers is expected to weigh heavily on carmakers when they report their January sales results Tuesday. It remains to be seen whether injecting government cash into automakers' financing arms helped consumers make up the difference.
"It is an automotive hurricane moving through this industry," said Jim Farley, Ford Motor Co.'s marketing chief, at last weekend's National Automotive Dealers Association convention. Farley predicted a big drop in business from fleet buyers, which are keeping their current vehicles longer to pare costs.
Bad bank idea is simply a "covert way to recapitalize banks by paying more for the assets than the market would," Meredith Whitney tells Fortune. Besides which,
it won't even work.
An Iraqi oil official says Iraq's January oil exports inched up to about 1.89 million barrels a day from about 1.82 million in the previous month.
Falah al-Amiri, the head of the State Oil Marketing Organization, says about 1.38 million barrels per day were exported through the Persian Gulf, while 500,000 barrels a day were exported via Turkey's port of Ceyhan.
Al-Amiri told The Associated Press on Sunday that exports through Turkey were the biggest since 2003. Sabotage had left the pipeline generally idle until late August 2007.
The Nikkei 225 Average fell 1.7% to 7,856.10 and the broader Topix index gave up 1.7% to 780.64 in Tokyo. Australia's S&P/ASX 200 lost 1.4% to 3,490.10 and New Zealand's NZX 50 slipped 0.5% to 2,759.55.
According to the FT,Rio Tinto, the Anglo-Australian mining group, is in talks with Chinese state-owned aluminium producer Chinalco over potential asset sales and a purchase of shares that could help it avoid a rights issue.
.
Sunday, February 01, 2009
The Trend
1/31/09 The Trend
Goldman Sachs Group estimates that troubled assets could exceed $5 trillion in the U.S. financial system.
In the past week silver rose 5.9% to $12.64.
Doug Noland: "I find it regrettable that pundits paint deflation risks as so catastrophic as to not even discuss the risks associated with a full-fledged bout of Inflationism....The financial sector is a black hole right now. With myriad assets Bubbles having burst, there is an enormous amount of debt today insufficiently backed by asset values. At the same time, there is a tremendous amount of debt backed by households, businesses, municipalities and our federal government. In terminology I have used in the past, the Credit Bubble has left both the Financial Sphere and the Economic Sphere grossly inflated. Total system debt has been severely impaired....There is very real risk at this point that policymaking is about to set course for bankrupting the country....With the goal of avoiding national bankruptcy, I suggest that policymakers focus on incomes as opposed to both asset markets and incomes. And the key is promoting sound long-term investment in real economic wealth creation. “Money” created today to artificially inflate asset prices and incomes will simply require more inflationary fuel next year and the year after. The focus instead needs to be on real investment in real things that produce real wealth.... “Money” should be directed toward jobs rather than home and asset prices....The focus should instead be on supporting the financial and economic systems toward a path of much less dependency on Credit growth and the asset markets."
Randall Forsyth: "If you had bought the S&P just on days following a down day, the cumulative return since the beginning of 2008 would have been 36%. If you had only held the S&P on days following an up day, you would have lost 58%. (This ignores complications such as transaction costs.)
Measured on a daily basis, you would have made 0.28% a day following down days and lost an average of 0.62% on days following up days, a difference of 0.91 percentage points (after rounding.) Since October, this divergence has become more pronounced, according to Goldman. After down days, the average daily return on the S&P was 0.24%; after up days, it was minus 1.06%, a difference of 1.29 percentage points. Since December, the average gain following down days was 1.15% and the average decline after up days was 1.24%, a bigger difference of 1.39%.
Goldman's researchers found that this anomaly was the most pronounced in its records, which go back to the Great Depression. In other words, the trend has not been your friend."
Amidst parent Tribune Co.'s struggle to emerge from bankruptcy protection, the Los Angeles Times said Friday it is cutting 300 positions and will shrink the number of daily sections to four from five.
GE is only a small fraction of a point from making a new 52-week low.
We’re ready to do “whatever it takes” to get prices rising again, says the new U.S. Treasury Secretary, Tim Geithner.
The Obama administration has asked the military's Joint Chiefs of Staff to cut the Pentagon's budget request for the fiscal year 2010 by more than 10 percent -- about $55 billion -- a senior U.S. defense official tells FOX News.
Last year's defense budget was $512 billion.
Zman: "At this point gas storage is only slightly above the five year average and year ago levels and is below 2007 and 2006 levels at this time of the year. Those years saw much higher January gas prices. The perception remains that we will see storage at the end of the withdrawal season well above the seasonal troughs." At $4.40 natural gas is taking into account the most negative storage and production forecasts going forward. I believe the forecasts will prove inaccurate.
Pres. Obama: "No one bill, no matter how comprehensive, can cure what ails our economy."
China's consumer spending rose strongly during the week-long Lunar New Year holiday period which just ended, despite the slowdown in the Chinese economy, the Ministry of Commerce said on Saturday.
Retail sales climbed to 290 billion yuan ($42.5 billion) in the week through Saturday, up 13.8 percent from the equivalent holiday week in 2008, the ministry estimated.
According to Bloomberg, IndyMac Bank and four unidentified U.S. savings and loan associations violated Office of Thrift Supervision policies when revising their capital reports, a disclosure the agency admitted may further erode its reputation.
The agency let IndyMac backdate a capital injection that helped the lender avoid regulatory restrictions, and also found four other cases where lenders failed to follow reporting policies, OTS Director
John Reich wrote yesterday to Treasury Secretary Timothy Geithner, his boss, and four U.S. lawmakers.
“Let me assure you that the OTS takes this matter very seriously, and fully appreciates its potential impact on the reputation of the agency and the perception of the quality of OTS bank supervision,” Reich wrote.
“The recession is going to last through most of 2009, and we’ll be lucky to have growth back at zero by the end of the year,”
Kenneth Rogoff, a Harvard University economics professor, said in a Bloomberg Television interview from Davos, Switzerland, yesterday. Economic growth “will be pretty tepid for a long time.”
Nobel laureate Joseph Stiglitz said any decision by President Barack Obama to establish a so-called bad bank to rid financial companies of toxic assets risks swelling the national debt.That amounts to swapping taxpayers’ “cash for trash,” Stiglitz said in a panel discussion at the World Economic Forum in Davos, Switzerland today. “You shouldn’t chase good money after bad. We’re talking about a national debt that’s very hard to manage.”
“The U.S. needs to show some proof they have a plan to get out of the fiscal problem,” said
Ernesto Zedillo, the former Mexican president who helped steer his country through a financial crisis in 1994. “We, as developing countries, need to know we won’t be crowded out of the capital markets, which is already happening.”
Mr. Zedillo said that Washington, unlike most other countries, had the option of simply printing more money, because
the dollar was a reserve currency for the rest of the world.
Over the long run, that could force long-term interest rates higher and drive down the value of the dollar, undermining the benefits that come with its special status.
24/7wallst.com mentioned Macy's may layoff as many as a thousand people next week.
Michael Panzner: "Although some people claim that stocks are "cheap," history suggests that during turbulent times -- e.g., the Great Depression, World War II, the late-1970s stagflation -- P-E ratios fell to single digits, while dividend yields were two to four times higher than they are now. Since most people agree that the current crisis is one of the worst this century, that would imply that we have a long way to go before we reach bottom."
With a third contract offer rejected, some 24,000 refinery workers from the Gulf of Mexico to Montana prepared to head to the picket lines Saturday just hours before an existing labor agreement expires.
The nation's biggest refiner, Valero Energy Corp., said it would shut down some facilities if workers strike. So did European oil company BP PLC.
Shell Oil Co., the lead negotiator for the industry, along with Exxon Mobil Corp., said its refineries would continue to make gasoline, diesel and other fuels using nonunion or replacement workers.
Chemical refiners would also be affected. LyondellBassell Industries said it was bringing in managers from locations not involved in contract negotiations to keep refineries going.
A strike would affect 60 producers, according to Lynne Baker, a spokeswoman for the United Steelworkers, which represents more than 30,000 oil workers nationwide.
Bobby Hollis, chairman of the negotiating committee for the Steelworkers at Valero, said it was doubtful that there would be an agreement by the midnight deadline.
Thursday, union negotiators turned down the most recent offer of a 2.5 percent wage increase for each of the next three years, in addition to changes in medical coverage.
On Jan. 23 Alcoa'S board declared a regular quarterly dividend of 17 cents per share.
The dividend is payable Feb. 25 to shareholders of record Feb. 6. The shares are trading at $7+ or about oone point above their 52-week low which is also a 21-year low. Is the board irresponsible in declaring and paying this dividend? I would think not from a long-term perspective. Is the company going through a tough time? Yes. Will it survive? I think so and therefore it might be worthy of consideration for those willing to look beyond the immediate situation.
Goldman Sachs Group estimates that troubled assets could exceed $5 trillion in the U.S. financial system.
In the past week silver rose 5.9% to $12.64.
Doug Noland: "I find it regrettable that pundits paint deflation risks as so catastrophic as to not even discuss the risks associated with a full-fledged bout of Inflationism....The financial sector is a black hole right now. With myriad assets Bubbles having burst, there is an enormous amount of debt today insufficiently backed by asset values. At the same time, there is a tremendous amount of debt backed by households, businesses, municipalities and our federal government. In terminology I have used in the past, the Credit Bubble has left both the Financial Sphere and the Economic Sphere grossly inflated. Total system debt has been severely impaired....There is very real risk at this point that policymaking is about to set course for bankrupting the country....With the goal of avoiding national bankruptcy, I suggest that policymakers focus on incomes as opposed to both asset markets and incomes. And the key is promoting sound long-term investment in real economic wealth creation. “Money” created today to artificially inflate asset prices and incomes will simply require more inflationary fuel next year and the year after. The focus instead needs to be on real investment in real things that produce real wealth.... “Money” should be directed toward jobs rather than home and asset prices....The focus should instead be on supporting the financial and economic systems toward a path of much less dependency on Credit growth and the asset markets."
Randall Forsyth: "If you had bought the S&P just on days following a down day, the cumulative return since the beginning of 2008 would have been 36%. If you had only held the S&P on days following an up day, you would have lost 58%. (This ignores complications such as transaction costs.)
Measured on a daily basis, you would have made 0.28% a day following down days and lost an average of 0.62% on days following up days, a difference of 0.91 percentage points (after rounding.) Since October, this divergence has become more pronounced, according to Goldman. After down days, the average daily return on the S&P was 0.24%; after up days, it was minus 1.06%, a difference of 1.29 percentage points. Since December, the average gain following down days was 1.15% and the average decline after up days was 1.24%, a bigger difference of 1.39%.
Goldman's researchers found that this anomaly was the most pronounced in its records, which go back to the Great Depression. In other words, the trend has not been your friend."
Amidst parent Tribune Co.'s struggle to emerge from bankruptcy protection, the Los Angeles Times said Friday it is cutting 300 positions and will shrink the number of daily sections to four from five.
GE is only a small fraction of a point from making a new 52-week low.
We’re ready to do “whatever it takes” to get prices rising again, says the new U.S. Treasury Secretary, Tim Geithner.
The Obama administration has asked the military's Joint Chiefs of Staff to cut the Pentagon's budget request for the fiscal year 2010 by more than 10 percent -- about $55 billion -- a senior U.S. defense official tells FOX News.
Last year's defense budget was $512 billion.
Zman: "At this point gas storage is only slightly above the five year average and year ago levels and is below 2007 and 2006 levels at this time of the year. Those years saw much higher January gas prices. The perception remains that we will see storage at the end of the withdrawal season well above the seasonal troughs." At $4.40 natural gas is taking into account the most negative storage and production forecasts going forward. I believe the forecasts will prove inaccurate.
Pres. Obama: "No one bill, no matter how comprehensive, can cure what ails our economy."
China's consumer spending rose strongly during the week-long Lunar New Year holiday period which just ended, despite the slowdown in the Chinese economy, the Ministry of Commerce said on Saturday.
Retail sales climbed to 290 billion yuan ($42.5 billion) in the week through Saturday, up 13.8 percent from the equivalent holiday week in 2008, the ministry estimated.
According to Bloomberg, IndyMac Bank and four unidentified U.S. savings and loan associations violated Office of Thrift Supervision policies when revising their capital reports, a disclosure the agency admitted may further erode its reputation.
The agency let IndyMac backdate a capital injection that helped the lender avoid regulatory restrictions, and also found four other cases where lenders failed to follow reporting policies, OTS Director
John Reich wrote yesterday to Treasury Secretary Timothy Geithner, his boss, and four U.S. lawmakers.
“Let me assure you that the OTS takes this matter very seriously, and fully appreciates its potential impact on the reputation of the agency and the perception of the quality of OTS bank supervision,” Reich wrote.
“The recession is going to last through most of 2009, and we’ll be lucky to have growth back at zero by the end of the year,”
Kenneth Rogoff, a Harvard University economics professor, said in a Bloomberg Television interview from Davos, Switzerland, yesterday. Economic growth “will be pretty tepid for a long time.”
Nobel laureate Joseph Stiglitz said any decision by President Barack Obama to establish a so-called bad bank to rid financial companies of toxic assets risks swelling the national debt.That amounts to swapping taxpayers’ “cash for trash,” Stiglitz said in a panel discussion at the World Economic Forum in Davos, Switzerland today. “You shouldn’t chase good money after bad. We’re talking about a national debt that’s very hard to manage.”
“The U.S. needs to show some proof they have a plan to get out of the fiscal problem,” said
Ernesto Zedillo, the former Mexican president who helped steer his country through a financial crisis in 1994. “We, as developing countries, need to know we won’t be crowded out of the capital markets, which is already happening.”
Mr. Zedillo said that Washington, unlike most other countries, had the option of simply printing more money, because
the dollar was a reserve currency for the rest of the world.
Over the long run, that could force long-term interest rates higher and drive down the value of the dollar, undermining the benefits that come with its special status.
24/7wallst.com mentioned Macy's may layoff as many as a thousand people next week.
Michael Panzner: "Although some people claim that stocks are "cheap," history suggests that during turbulent times -- e.g., the Great Depression, World War II, the late-1970s stagflation -- P-E ratios fell to single digits, while dividend yields were two to four times higher than they are now. Since most people agree that the current crisis is one of the worst this century, that would imply that we have a long way to go before we reach bottom."
With a third contract offer rejected, some 24,000 refinery workers from the Gulf of Mexico to Montana prepared to head to the picket lines Saturday just hours before an existing labor agreement expires.
The nation's biggest refiner, Valero Energy Corp., said it would shut down some facilities if workers strike. So did European oil company BP PLC.
Shell Oil Co., the lead negotiator for the industry, along with Exxon Mobil Corp., said its refineries would continue to make gasoline, diesel and other fuels using nonunion or replacement workers.
Chemical refiners would also be affected. LyondellBassell Industries said it was bringing in managers from locations not involved in contract negotiations to keep refineries going.
A strike would affect 60 producers, according to Lynne Baker, a spokeswoman for the United Steelworkers, which represents more than 30,000 oil workers nationwide.
Bobby Hollis, chairman of the negotiating committee for the Steelworkers at Valero, said it was doubtful that there would be an agreement by the midnight deadline.
Thursday, union negotiators turned down the most recent offer of a 2.5 percent wage increase for each of the next three years, in addition to changes in medical coverage.
On Jan. 23 Alcoa'S board declared a regular quarterly dividend of 17 cents per share.
The dividend is payable Feb. 25 to shareholders of record Feb. 6. The shares are trading at $7+ or about oone point above their 52-week low which is also a 21-year low. Is the board irresponsible in declaring and paying this dividend? I would think not from a long-term perspective. Is the company going through a tough time? Yes. Will it survive? I think so and therefore it might be worthy of consideration for those willing to look beyond the immediate situation.
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