7/24/05 Calm And Order
What happens to the innocent during times besieged by terrorists? If you are an American journalist, you are sent to jail and your Fifth Amendment rights are eliminated. If you are an electrician of Egyptian descent on your way to work, you are the victim of shoot and kill orders. If you are an individual investor in the stock, bond, and commodity markets, you are dumbfounded by the calm and order generated by professional money managers who dominate day-to-day trading volume and overtake the remnants of volatility. But, wait, there is a different vision on the Washington State ferry system. You can walk on and off the ferry and/or drive onto or off the ferry without any check of a person or a vehicle. However, five minutes before landing in Seattle, out of nowhere will come two speeding Coast Guard gun boats each manned by four Service personnel. They will accompany the ferry into the port with one boat on each side of the ferry. Has this rush of activity helped to reduce the terrorist threat? Has calm and order been restored? Does this represent our billions spent on Homeland Security? Actually, I feel much better. I can rest easy now. Our ports are safe from harm.
John P. Hussman: “The further the market gets away from normal valuations – especially when it's overbought, the more the distribution of future expected returns tends to skew. You get a high probability of small further gains, coupled with a small but above “normal” probability of damaging losses.”
The PBGC estimates that total corporate under funding is roughly $450 billion. That does not include another $700 billion for municipal and state pension funds. Should the stock market not show a gain for 2005, what will the combined under funding total?
Mike Burk: “ In the first year of the presidential cycle the last five trading days of July have been up 70% of the time.”
There appears to be an oversupply of stainless steel and hot-rolled coil steel. Production and prices are being cut. China is rapidly building up capacity in lower-grade steel products. It is difficult to compete with China in this segment of the steel market. The current revaluation of the yuan will not be of assistance.
Nouriel Roubini: The more China will let its currency will move over time, the larger will be the appreciation of other Asian currencies.”
Since we invaded Iraq 28 months ago, at least 1,775 U.S. service personnel have been killed.
Sunday, July 24, 2005
Saturday, July 23, 2005
Restructuring And Re-balancing
7/23/05 Restructuring And Re-balancing
The job cuts and the plant closing continue in the U.S. Kimberly Clark will sell or close about 20 plants and cut 6,000 from the payroll. National Spinning will close a plant and cut 100 jobs. Ball Corp. will eliminate 90 jobs. Oscar Suris of Ford stated “we have operating challenges that include our cost structure and excessive production capacity, and we have plans to address that. With Ford’s U.S. sales down nearly 4% in the first six months of 2005 and a loss from North American operations amounting to $907 million in this year’s first half, one can expect thousands more of its 35,000 salaried workers to be cut from the payroll. Interestingly, our auto industry has two things in common with China’s manufacturing sector--- excess capacity and lack of pricing power.
Yu Yongding in discussing the yuan: “The principle is stability as well as flexibility. We don’t want to encourage speculative capital inflows.” The yuan may have been revalued but much for China will remain the same--- surplus capacity, declining manufacturing prices, rising trade and current account surpluses, large capital inflows, and rising forex reserves. Re-balancing and restructuring takes time—possibly decades rather than months or years.
Zhang Yisheng, director of Chai Da Garment: “It’s impossible to ask international buyers to accept a higher price. The competition is too fierce.”
Whirlpool raised its bid for Maytag to $18.
China’s Nanjing Automotive will buy Rover.
UK’s economic growth is the slowest in a dozen years.
For the fourth straight week, bond prices declined. At 3.90%, the yield on 2-year Treasury bonds is the highest in 4 years. The return is beginning to look like a viable alternative to expectations for common stocks.
John Challenger: “We don’t know till afterward, but I do think we may be seeing a tipping point in the economic cycle that these big layoffs are flagging.”
Have you considered the possibility of rising employment cuts combined with higher interest rates?
"Our focus is to make sure they're doing a good job in underwriting, make sure that the borrower does have the repayment capacity to absorb potential (rate) increases, not just to underwrite borrowers at the teaser rate," said Barbara Grunkemeyer, deputy comptroller for credit risk at the OCC. If the availability of interest-only loans and other “teaser” ARM loans should diminish greatly, what will that do to housing prices? What will it do to construction jobs?
For Wal-Mart’s July reporting period, comparative sales for the U.S. are estimated to be within its guidance of 3 to 5 percent. For the week, general merchandise sales were stronger than food. Average ticket drove the comp sales and the West was the strongest region.
The job cuts and the plant closing continue in the U.S. Kimberly Clark will sell or close about 20 plants and cut 6,000 from the payroll. National Spinning will close a plant and cut 100 jobs. Ball Corp. will eliminate 90 jobs. Oscar Suris of Ford stated “we have operating challenges that include our cost structure and excessive production capacity, and we have plans to address that. With Ford’s U.S. sales down nearly 4% in the first six months of 2005 and a loss from North American operations amounting to $907 million in this year’s first half, one can expect thousands more of its 35,000 salaried workers to be cut from the payroll. Interestingly, our auto industry has two things in common with China’s manufacturing sector--- excess capacity and lack of pricing power.
Yu Yongding in discussing the yuan: “The principle is stability as well as flexibility. We don’t want to encourage speculative capital inflows.” The yuan may have been revalued but much for China will remain the same--- surplus capacity, declining manufacturing prices, rising trade and current account surpluses, large capital inflows, and rising forex reserves. Re-balancing and restructuring takes time—possibly decades rather than months or years.
Zhang Yisheng, director of Chai Da Garment: “It’s impossible to ask international buyers to accept a higher price. The competition is too fierce.”
Whirlpool raised its bid for Maytag to $18.
China’s Nanjing Automotive will buy Rover.
UK’s economic growth is the slowest in a dozen years.
For the fourth straight week, bond prices declined. At 3.90%, the yield on 2-year Treasury bonds is the highest in 4 years. The return is beginning to look like a viable alternative to expectations for common stocks.
John Challenger: “We don’t know till afterward, but I do think we may be seeing a tipping point in the economic cycle that these big layoffs are flagging.”
Have you considered the possibility of rising employment cuts combined with higher interest rates?
"Our focus is to make sure they're doing a good job in underwriting, make sure that the borrower does have the repayment capacity to absorb potential (rate) increases, not just to underwrite borrowers at the teaser rate," said Barbara Grunkemeyer, deputy comptroller for credit risk at the OCC. If the availability of interest-only loans and other “teaser” ARM loans should diminish greatly, what will that do to housing prices? What will it do to construction jobs?
For Wal-Mart’s July reporting period, comparative sales for the U.S. are estimated to be within its guidance of 3 to 5 percent. For the week, general merchandise sales were stronger than food. Average ticket drove the comp sales and the West was the strongest region.
Thursday, July 21, 2005
After Shocks
7/22/05 After Shocks
When it comes to our U.S. dollar, the message has forever been "In God We Trust." For better or for worse, the rest of the word has shared that belief ----until today. With China's revaluation, the message has been transformed to "In a basket of currencies we trust." That changes the ground rules for investment in stocks, bonds, commodities, and currencies. Our dollars and our Treasury bonds no longer are the center of the investment universe. They play a large part, and nothing more. There is a visible shifting of power. The yuan will continue to gain in value, and, at least in the short term, increasing amount of money will flock into China. As was the case today, over time, interest rates will rise and the value of the dollar will resume its decline. There will be some regional strength left in certain housing markets, but the thrill will be gone, so to speak. The froth will vanish, and lo and behold, prices could even decline. Imagine that!
After the announcement of the yuan revaluation, the Indian rupee soared to its highest price against the U.S. dollar in 6 years with the rupee standing at 43.17 to the dollar. I have stated repeatedly over the past year that the rupee was my currency of choice. For the prior two years it had been the New Zealand dollar. A stronger yuan will assist India's exports, which account for about $10% of its economy. In the latest fiscal year, India's exports grew close to 25%.
Some folks believe the small revaluation of the yuan will help our exports. According to the Strategic Research Institute, in an effort to reduce costs, shorten time-to -market, and possible receive simultaneous approval in multiple markets, the pharmaceutical and biotech industry is increasingly looking to China to conduct clinical trials. The same advantages have already been found to exist in India.
With the yuan revaluation, shares of PetroChina jumped to $83, a new all-time high. The shares are trading at twice the P/E of PetroKazakhstan and make it possible for PetroChina to outbid others and still make an acquisition of PKZ that will be accretive to earnings at the outset.
Of the nearly 43,000 workers in Honeywell's aerospace division, more than 11,000 are at several sites in the Phoenix area. Within this division, about 2,000 jobs will be cut.
According to the Department of Labor, the median weekly earnings of the nation's 103.3 million full-time wage and salary workers were $643 in the second quarter of 2005. This was 0.6 percent higher than a year earlier, compared with a gain of 3% in the CPI.
Rep. Joe Barton will allow a vote on whether to add a provision to the energy bill aimed at blocking CNOOC's proposal to buy Unocal.
The revised Conference Board's U.S. Leading Economic Indicators Index has increased at a 1.2 percent annual rate over the last six months, but this is down from a peak of about 10 percent at the end of 2003.
Citing the positive trends in the economy, bond data, and corporate activity, Standard & Poor's Ratings Services painted a rosy picture of current conditions in the U.S., but cautioned that existing risks could lead to a turnaround. "Things are about as good as they get," stated David Wyss, chief economist, at Standard & Poor's Midyear Economic and Credit Update and Outlook. "This trend is going to continue for the next several quarters." He highlighted growth at 3.7%, inflation at 2% excluding energy, and unemployment at 5%. Corporate cash balances have set record highs, posting double-digit increases for the past 12 consecutive quarters. But skyrocketing energy prices and the trade deficit are casting a bit of a shadow over this upbeat assessment. With its tightening stance, which includes nine rate increases and three more expected by the end of 2005, the Federal Reserve is trying to achieve a neutral federal funds rate without slowing down the economy. However, Treasury bond yields are now lower than when the Fed began ratcheting up short-term rates in June 2004. The federal funds rate has risen to 3.25% from 1%, while rates on 10-year issues have actually dropped, to 4.2% from 4.8% during this period. Mr. Wyss predicted that bond yields should start to rise, though not as much as short-term rates. Although this will produce a flatter yield curve, he said this is no cause for worry: "Periods when the yield curve has been flat but positively sloped have shown about the same economic growth and actually better performance than periods in which the yield curve has been steep." Mr. Wyss did express concern about pensions, because 80% of those at corporations in the S&P 500 Index of stocks currently have a net underfunding of 11%. While this marks an improvement over the 13% underfunding in 2003, he questioned how the shortfall would improve, and pointed out that pension fund managers' projections of 8.25% average returns over the next few years seem overly optimistic.
When it comes to our U.S. dollar, the message has forever been "In God We Trust." For better or for worse, the rest of the word has shared that belief ----until today. With China's revaluation, the message has been transformed to "In a basket of currencies we trust." That changes the ground rules for investment in stocks, bonds, commodities, and currencies. Our dollars and our Treasury bonds no longer are the center of the investment universe. They play a large part, and nothing more. There is a visible shifting of power. The yuan will continue to gain in value, and, at least in the short term, increasing amount of money will flock into China. As was the case today, over time, interest rates will rise and the value of the dollar will resume its decline. There will be some regional strength left in certain housing markets, but the thrill will be gone, so to speak. The froth will vanish, and lo and behold, prices could even decline. Imagine that!
After the announcement of the yuan revaluation, the Indian rupee soared to its highest price against the U.S. dollar in 6 years with the rupee standing at 43.17 to the dollar. I have stated repeatedly over the past year that the rupee was my currency of choice. For the prior two years it had been the New Zealand dollar. A stronger yuan will assist India's exports, which account for about $10% of its economy. In the latest fiscal year, India's exports grew close to 25%.
Some folks believe the small revaluation of the yuan will help our exports. According to the Strategic Research Institute, in an effort to reduce costs, shorten time-to -market, and possible receive simultaneous approval in multiple markets, the pharmaceutical and biotech industry is increasingly looking to China to conduct clinical trials. The same advantages have already been found to exist in India.
With the yuan revaluation, shares of PetroChina jumped to $83, a new all-time high. The shares are trading at twice the P/E of PetroKazakhstan and make it possible for PetroChina to outbid others and still make an acquisition of PKZ that will be accretive to earnings at the outset.
Of the nearly 43,000 workers in Honeywell's aerospace division, more than 11,000 are at several sites in the Phoenix area. Within this division, about 2,000 jobs will be cut.
According to the Department of Labor, the median weekly earnings of the nation's 103.3 million full-time wage and salary workers were $643 in the second quarter of 2005. This was 0.6 percent higher than a year earlier, compared with a gain of 3% in the CPI.
Rep. Joe Barton will allow a vote on whether to add a provision to the energy bill aimed at blocking CNOOC's proposal to buy Unocal.
The revised Conference Board's U.S. Leading Economic Indicators Index has increased at a 1.2 percent annual rate over the last six months, but this is down from a peak of about 10 percent at the end of 2003.
Citing the positive trends in the economy, bond data, and corporate activity, Standard & Poor's Ratings Services painted a rosy picture of current conditions in the U.S., but cautioned that existing risks could lead to a turnaround. "Things are about as good as they get," stated David Wyss, chief economist, at Standard & Poor's Midyear Economic and Credit Update and Outlook. "This trend is going to continue for the next several quarters." He highlighted growth at 3.7%, inflation at 2% excluding energy, and unemployment at 5%. Corporate cash balances have set record highs, posting double-digit increases for the past 12 consecutive quarters. But skyrocketing energy prices and the trade deficit are casting a bit of a shadow over this upbeat assessment. With its tightening stance, which includes nine rate increases and three more expected by the end of 2005, the Federal Reserve is trying to achieve a neutral federal funds rate without slowing down the economy. However, Treasury bond yields are now lower than when the Fed began ratcheting up short-term rates in June 2004. The federal funds rate has risen to 3.25% from 1%, while rates on 10-year issues have actually dropped, to 4.2% from 4.8% during this period. Mr. Wyss predicted that bond yields should start to rise, though not as much as short-term rates. Although this will produce a flatter yield curve, he said this is no cause for worry: "Periods when the yield curve has been flat but positively sloped have shown about the same economic growth and actually better performance than periods in which the yield curve has been steep." Mr. Wyss did express concern about pensions, because 80% of those at corporations in the S&P 500 Index of stocks currently have a net underfunding of 11%. While this marks an improvement over the 13% underfunding in 2003, he questioned how the shortfall would improve, and pointed out that pension fund managers' projections of 8.25% average returns over the next few years seem overly optimistic.
It's Only The Beginning
7/21/05 It’s Only The Beginning
The People's Bank of China said the current yuan-dollar peg of 8.3 is being dropped in favor of a peg vs. a basket of currencies. The new peg vs. the dollar will be 8.11, and this represents a 3% change. The currencies included in the basket will most likely be the yen, euro, Singapore dollar, and other Asian currencies. The change means China will need to purchase less dollars and less dollar-denominated Treasuries to maintain the peg. It is only the beginning. There will more 3-4% changes in the future. Our dollar will become less important for foreign investors and less important in international trade. I continue to believe that, in the future, stocks, bonds, and commodities will be traded on the world markets against a basket of currencies rather than the dollar as it is presently. The reaction today was a decline in the value of the dollar and Treasury bonds. The yen surged in value, and gold, the euro, and the Singapore dollar gained in value. Over the long term, the market will look back and realize that today was the beginning of the air going out of the bubble on our low Treasury yields. Higher yields on Treasuries will lead to higher yields on mortgages, and that will reduce the housing sizzle.
Yesterday, the Nasdaq and the S&P 400 hit 4-year highs.
Bay Area apartment rents cost about 15% less than 4 years ago.
Greenspan: “History cautions that long periods of relative stability often engender unrealistic expectations of its permanence and, at times, may lead to financial excess and economic stress.”
PNC Financial is cutting 3,000 jobs.
Crude closed under $57 a barrel. U.S. crude stocks declined 900,000 barrels in the week ended July 15, while imports rose 871,000 barrels per day. Gasoline supplies fell by 1.3 million barrels and distillate stocks rose by 2.3 million barrels.
D.R. Horton, a large homebuilder, stated it has a record $7 billion sales order backlog at 6/30/05.
Greenspan: “The apparent froth in housing markets appears to have interacted with evolving practices in mortgage markets. The increase in the prevalence of interest-only loans and the introduction of non-exotic forms of adjustable-rate mortgages are developments of particular concern.”
Last week first-time jobless claims fell by 34,000, and the number of people receiving unemployment checks fell 41,000 to 2.577 million in the week ending July 9.
The People's Bank of China said the current yuan-dollar peg of 8.3 is being dropped in favor of a peg vs. a basket of currencies. The new peg vs. the dollar will be 8.11, and this represents a 3% change. The currencies included in the basket will most likely be the yen, euro, Singapore dollar, and other Asian currencies. The change means China will need to purchase less dollars and less dollar-denominated Treasuries to maintain the peg. It is only the beginning. There will more 3-4% changes in the future. Our dollar will become less important for foreign investors and less important in international trade. I continue to believe that, in the future, stocks, bonds, and commodities will be traded on the world markets against a basket of currencies rather than the dollar as it is presently. The reaction today was a decline in the value of the dollar and Treasury bonds. The yen surged in value, and gold, the euro, and the Singapore dollar gained in value. Over the long term, the market will look back and realize that today was the beginning of the air going out of the bubble on our low Treasury yields. Higher yields on Treasuries will lead to higher yields on mortgages, and that will reduce the housing sizzle.
Yesterday, the Nasdaq and the S&P 400 hit 4-year highs.
Bay Area apartment rents cost about 15% less than 4 years ago.
Greenspan: “History cautions that long periods of relative stability often engender unrealistic expectations of its permanence and, at times, may lead to financial excess and economic stress.”
PNC Financial is cutting 3,000 jobs.
Crude closed under $57 a barrel. U.S. crude stocks declined 900,000 barrels in the week ended July 15, while imports rose 871,000 barrels per day. Gasoline supplies fell by 1.3 million barrels and distillate stocks rose by 2.3 million barrels.
D.R. Horton, a large homebuilder, stated it has a record $7 billion sales order backlog at 6/30/05.
Greenspan: “The apparent froth in housing markets appears to have interacted with evolving practices in mortgage markets. The increase in the prevalence of interest-only loans and the introduction of non-exotic forms of adjustable-rate mortgages are developments of particular concern.”
Last week first-time jobless claims fell by 34,000, and the number of people receiving unemployment checks fell 41,000 to 2.577 million in the week ending July 9.
Wednesday, July 20, 2005
Sealed With A Kiss
7/20/05 Sealed With A Kiss
Chevron provided a timely kiss by raising its offer for Unocal to 40% in $69 per share in cash and 60% in 1.03 Chevron shares. On an after-tax basis, this is superior to CNOOC’s cash proposal plus Unocal shareholders can vote and close on the Chevron deal in 3 weeks. It’s a no-brainer. This might have been a bitter pill for the Chinese government, but they got great news in Kazakhstan. The new pipeline to China will be completed in December and oil will flow in January 2006. This is important for China, PetroChina, and PetroKazakhstan. The main issue for PetroKazakhstan is the cost of transporting oil and not the cost of finding the oil. With the pipeline, the combined cost of exploration and transportation should not exceed $5 a barrel. This makes PetroKasakhstan hugely profitable, and PetroChina should be the likely buyer for the company. China needs the oil for this pipeline and the fit with PetroKazakhstan is right on the money. I am raising my buyout price, and believe the value far exceeds the present $3 billion market cap. It should also be noted that the possible oil reserves for the company have been raised to 300 million barrels, and that makes the proven, probable, and possible a total of 850 million barrels.
Eastman Kodak will cut an additional 7,500 to 10,000 jobs. Tyson is closing plants and cutting 450 employees. VF, maker of Wrangler and Lee jeans, is closing its last garment manufacturing plant in El Paso and it is also the company’s last sewing facility in the U.S. It will leave 395 employees without jobs. VF was once El Paso’s largest private employer.
The median home price in the Bay Area exceeds $600,000.
Results of a survey released Tuesday by Mercer Human Resource Consulting show the size of the average raise this year is little changed from 2004, when pay hikes averaged 3.5 percent. A separate survey issued last month by the Conference Board was in line with Mercer's, finding that salaries are expected to rise an average 3.5 percent.
Amgen raised its earnings forecast for 2005 to $3.10 to $3.20 per share from $2.80 to $2.90 per share. The great ones find a way to exceed expectations.
Today, Wal-Mart is opening a new 292,000 square foot experimental supercenter in McKinney, Texas. It will be open 24 hours a day, seven days a week, and employ about 450 people. This store “will experiment with materials, technology, and processes, which include: reducing the amounts of energy and natural resources required to operate and maintain the stores; reducing the amount of raw materials needed to construct the facility; and substituting, when appropriate the amount of renewable materials used to construct and maintain the facility.”
The June semiconductor book-to-bill rate was 0.93. The 3-month average of orders for the month was a 33% drop posted a year earlier, but 5.5% above May 2005 levels.
HP contributed $1.2 billion to its pension and post-retirement plans in 2003, $613 million in 2004, and expect to spend $910 million in 2005. Any U.S. worker hired after Jan. 1, 2006 will only receive a 401K plan. It will be more generous than the present plan.
In the past year, the wholesale price of diesel has increased 54 cents to $1.75 a gallon. The current average national diesel price of $2.39, according to the U.S. Department of Energy, doesn’t cover the added costs truck stops pay for taxes and transporting the fuel.
Beginning this week, 4,689 businesses in Beijing will take mandatory weeklong breaks on rotation to save daily kilowatt usage. Worker salaries will not be reduced or cut. They will six days instead of five day weeks from September in order to make up for lost production, according to the Xinhua News Agency.
Chevron provided a timely kiss by raising its offer for Unocal to 40% in $69 per share in cash and 60% in 1.03 Chevron shares. On an after-tax basis, this is superior to CNOOC’s cash proposal plus Unocal shareholders can vote and close on the Chevron deal in 3 weeks. It’s a no-brainer. This might have been a bitter pill for the Chinese government, but they got great news in Kazakhstan. The new pipeline to China will be completed in December and oil will flow in January 2006. This is important for China, PetroChina, and PetroKazakhstan. The main issue for PetroKazakhstan is the cost of transporting oil and not the cost of finding the oil. With the pipeline, the combined cost of exploration and transportation should not exceed $5 a barrel. This makes PetroKasakhstan hugely profitable, and PetroChina should be the likely buyer for the company. China needs the oil for this pipeline and the fit with PetroKazakhstan is right on the money. I am raising my buyout price, and believe the value far exceeds the present $3 billion market cap. It should also be noted that the possible oil reserves for the company have been raised to 300 million barrels, and that makes the proven, probable, and possible a total of 850 million barrels.
Eastman Kodak will cut an additional 7,500 to 10,000 jobs. Tyson is closing plants and cutting 450 employees. VF, maker of Wrangler and Lee jeans, is closing its last garment manufacturing plant in El Paso and it is also the company’s last sewing facility in the U.S. It will leave 395 employees without jobs. VF was once El Paso’s largest private employer.
The median home price in the Bay Area exceeds $600,000.
Results of a survey released Tuesday by Mercer Human Resource Consulting show the size of the average raise this year is little changed from 2004, when pay hikes averaged 3.5 percent. A separate survey issued last month by the Conference Board was in line with Mercer's, finding that salaries are expected to rise an average 3.5 percent.
Amgen raised its earnings forecast for 2005 to $3.10 to $3.20 per share from $2.80 to $2.90 per share. The great ones find a way to exceed expectations.
Today, Wal-Mart is opening a new 292,000 square foot experimental supercenter in McKinney, Texas. It will be open 24 hours a day, seven days a week, and employ about 450 people. This store “will experiment with materials, technology, and processes, which include: reducing the amounts of energy and natural resources required to operate and maintain the stores; reducing the amount of raw materials needed to construct the facility; and substituting, when appropriate the amount of renewable materials used to construct and maintain the facility.”
The June semiconductor book-to-bill rate was 0.93. The 3-month average of orders for the month was a 33% drop posted a year earlier, but 5.5% above May 2005 levels.
HP contributed $1.2 billion to its pension and post-retirement plans in 2003, $613 million in 2004, and expect to spend $910 million in 2005. Any U.S. worker hired after Jan. 1, 2006 will only receive a 401K plan. It will be more generous than the present plan.
In the past year, the wholesale price of diesel has increased 54 cents to $1.75 a gallon. The current average national diesel price of $2.39, according to the U.S. Department of Energy, doesn’t cover the added costs truck stops pay for taxes and transporting the fuel.
Beginning this week, 4,689 businesses in Beijing will take mandatory weeklong breaks on rotation to save daily kilowatt usage. Worker salaries will not be reduced or cut. They will six days instead of five day weeks from September in order to make up for lost production, according to the Xinhua News Agency.
Tuesday, July 19, 2005
The Fog Will Clear
7/19/05 The Fog Will Clear
In June, UK house prices declined for the 11th consecutive month. Could that happen in the U.S.? The NAR-Wells Fargo housing market index dipped to 70 in July from a six-year high of 72 in June. The index of current single family home sales fell to 75 in July from 77 in June. Prospective sales fell to 77 from 80. Buyers’ traffic was unchanged at 55. New construction remains at about a 2 million annual unit pace, and, with 70% of Americans now homeowners, that is a heady figure to maintain.
Greenspan talks about slowing economic growth and more Fed rate hikes. I don’t hear him discussing Fed tightening of the money supply. Telling the whole story would be refreshing. Real M2 money supply growth contracted in the quarter ended June 2005.
Bill Gates: “"So even [though] India and China are going to grow quite a bit, it's a big problem for us that we can't get these great students."
IBM stock jumped about 5% yesterday after trading on the NYSE had ended. The company’s earnings in the quarter exceeded expectations. The media did not report that IBM ended the 2nd quarter with $8.7 billion in cash, and that IBM had repurchased shares totaling $1.6 billion. Outstanding debt stands at $23.7 billion with a debt-to-equity ratio of 6.7 to 1. Basically, net income for the six months was $3.23 billion, and that amount was used to repurchase IBM shares. This is a recurring theme and may help to explain why IBM’s stock has been a poor investment for some time. Where’s the organic growth?
Foreign capital inflows to the U.S. increased to $60 billion in May. Foreign central banks purchased $13.2 billion in long-term U.S. assets in May. However, Central banks purchased $6.8 billion in U.S. Treasuries in May, down sharply from April’s $13.9 billion.
There are a couple of points I would like to reiterate about CNOOC and Unocal. CNOOC will not raise its bid without Unocal’s endorsement. Will all the political upheaval surrounding the CNOOC proposal, it is difficult for the Unocal board to be certain that CNOOC will be in a position to close on the purchase. Japan is also voicing concerns behind the scenes because most of Unocal’s Indonesian gas field production is delivered to Japan and other Asian destinations. Should CNOOC buy Unocal, would Japan still get that gas production? Don’t bet on it.
HP will cut 14,500 jobs or about 10% of its workforce.
According to Project Construction Office in Iraq, the U.S. has not spent 60% of its pledged $21 billion for reconstruction.
In June, UK house prices declined for the 11th consecutive month. Could that happen in the U.S.? The NAR-Wells Fargo housing market index dipped to 70 in July from a six-year high of 72 in June. The index of current single family home sales fell to 75 in July from 77 in June. Prospective sales fell to 77 from 80. Buyers’ traffic was unchanged at 55. New construction remains at about a 2 million annual unit pace, and, with 70% of Americans now homeowners, that is a heady figure to maintain.
Greenspan talks about slowing economic growth and more Fed rate hikes. I don’t hear him discussing Fed tightening of the money supply. Telling the whole story would be refreshing. Real M2 money supply growth contracted in the quarter ended June 2005.
Bill Gates: “"So even [though] India and China are going to grow quite a bit, it's a big problem for us that we can't get these great students."
IBM stock jumped about 5% yesterday after trading on the NYSE had ended. The company’s earnings in the quarter exceeded expectations. The media did not report that IBM ended the 2nd quarter with $8.7 billion in cash, and that IBM had repurchased shares totaling $1.6 billion. Outstanding debt stands at $23.7 billion with a debt-to-equity ratio of 6.7 to 1. Basically, net income for the six months was $3.23 billion, and that amount was used to repurchase IBM shares. This is a recurring theme and may help to explain why IBM’s stock has been a poor investment for some time. Where’s the organic growth?
Foreign capital inflows to the U.S. increased to $60 billion in May. Foreign central banks purchased $13.2 billion in long-term U.S. assets in May. However, Central banks purchased $6.8 billion in U.S. Treasuries in May, down sharply from April’s $13.9 billion.
There are a couple of points I would like to reiterate about CNOOC and Unocal. CNOOC will not raise its bid without Unocal’s endorsement. Will all the political upheaval surrounding the CNOOC proposal, it is difficult for the Unocal board to be certain that CNOOC will be in a position to close on the purchase. Japan is also voicing concerns behind the scenes because most of Unocal’s Indonesian gas field production is delivered to Japan and other Asian destinations. Should CNOOC buy Unocal, would Japan still get that gas production? Don’t bet on it.
HP will cut 14,500 jobs or about 10% of its workforce.
According to Project Construction Office in Iraq, the U.S. has not spent 60% of its pledged $21 billion for reconstruction.
Monday, July 18, 2005
Zazzle
7/18/05 Zazzle
Emily, a category 4 hurricane with winds of 135 mph, slammed into the Yucatan Peninsula, which is best known for Cozumel. To those in the oil business, it is known for the Cantarell oil field that supplies about 3% of the global supply of 84 million barrels of oil daily. Shell abandoned three offshore facilities, suspending output of around 1,000 barrels daily and halting 20 million cubic feet of gas production. Mexico's state oil company, Petroleos Mexicanos, has evacuated its Bay of Campeche staff on offshore rigs and closed its taps. Petroleos Mexicanos exports 80 percent of its 3.4 million barrels in daily production to the United States, the world's largest consumer of energy. Emily appears headed for the Gulf Coast between Cabo Rojo, Mexico and Baffin Bay, Texas.
MMM revised its 2005 adjusted earnings estimate to $4.20 to $4.25 from $4.15 to $4.25 per share.
Citigroup's earnings fell short of 2nd quarter estimates and revenues declined 3.2%.
Bank of America's earnings exceeded estimates.
A preliminary $17 per share bid in cash and stock by Whirlpool for Maytag topped the offer by
Haier and others. Whirpool will decide by August 9th whether it will be a binding bid. There are potential anti-trust concerns.
Zazzle of Palo Alto, the Internet's leading customized products marketplace, received $16 million in funding from Kleiner Perkins and Sherpalo Venures, the same VC combo that funded Google in the beginning. At Zazzle, individuals, groups, and businesses can celebrate and share their interests by creating, buying, and selling high quality, uniquely customized products including apparel, posters, cards, and stamps. For example, for the first time, Walt Disney has made 130 of its legendary characters (3,500 images) available to the public for the purpose of creating personalized gifts and apparel.
Emily, a category 4 hurricane with winds of 135 mph, slammed into the Yucatan Peninsula, which is best known for Cozumel. To those in the oil business, it is known for the Cantarell oil field that supplies about 3% of the global supply of 84 million barrels of oil daily. Shell abandoned three offshore facilities, suspending output of around 1,000 barrels daily and halting 20 million cubic feet of gas production. Mexico's state oil company, Petroleos Mexicanos, has evacuated its Bay of Campeche staff on offshore rigs and closed its taps. Petroleos Mexicanos exports 80 percent of its 3.4 million barrels in daily production to the United States, the world's largest consumer of energy. Emily appears headed for the Gulf Coast between Cabo Rojo, Mexico and Baffin Bay, Texas.
MMM revised its 2005 adjusted earnings estimate to $4.20 to $4.25 from $4.15 to $4.25 per share.
Citigroup's earnings fell short of 2nd quarter estimates and revenues declined 3.2%.
Bank of America's earnings exceeded estimates.
A preliminary $17 per share bid in cash and stock by Whirlpool for Maytag topped the offer by
Haier and others. Whirpool will decide by August 9th whether it will be a binding bid. There are potential anti-trust concerns.
Zazzle of Palo Alto, the Internet's leading customized products marketplace, received $16 million in funding from Kleiner Perkins and Sherpalo Venures, the same VC combo that funded Google in the beginning. At Zazzle, individuals, groups, and businesses can celebrate and share their interests by creating, buying, and selling high quality, uniquely customized products including apparel, posters, cards, and stamps. For example, for the first time, Walt Disney has made 130 of its legendary characters (3,500 images) available to the public for the purpose of creating personalized gifts and apparel.
Sunday, July 17, 2005
Are You Peeing On An Electric Fence?
7/17/05 Are You Peeing On An Electric Fence?
Never underestimate the potential carnage that can be produced by a hurricane. Emily’s winds are currently at 155 mph and it is tracking to hit Mexico’s Yucatan peninsula on its way to the Gulf of Mexico and possibly the southern tip of Texas, and that could mean Houston where there recently has been severe flooding.
I am always amazed when the future is projected based on past history involving the word “always.” A typical example is stating that, for consecutive decades stretching from 1885 to 1995, the 5th year of the decade has always seen higher prices for the Dow Jones Industrials. Predicated on that performance, we should see higher prices by year-end 2005. Could something happen to interrupt that streak? When was the last time Florida experienced 4 major hurricanes in 5 weeks as it did in 2004?
The unprecedented can take place. Robert Shiller diagnosed, in advance, the dotcom bubble in stocks. He recently concluded that, after adjusting for inflation, home prices increased annually between 1890 and 1994 by 0.4%, and after periods when home prices outpaced inflation, they slowed down—possibly declining or stagnating.
How often has the Fed reduced the Fed funds rate to 1%? Would not that be considered an artificially manufactured low rate to stimulate housing, construction, and stock and bond prices, and hopefully lead to a higher rate of consumer spending? Nevertheless, the artificial can generate real results. Last week all-time highs were seen for mid cap and small cap indices. The NAR has upped their housing estimates to new all-time highs. The Russell 2000 and the 3000, the S&P 500, and the Wilshire 5000 hit multi-year highs. Up through last Thursday, the Philadelphia Semiconductor Index had risen for 9 straight days. All the while, inflation was muted. Right? Gas at the tank was at an all-time high. Corn prices were at their highest level in over a year. The Fed stated that home values increased 55% since 2000 to $18 trillion or more than 1 ½ times the size of our GDP. That is unprecedented! The Administration pointed to the strength in our June industrial production. It rose 0.9% thanks to a 5.3% increase in the output of utilities (it was hot and required more air conditioning) and the rise in auto production created by the employee discount program. Without utilities and autos, the June industrial production was up a meager 0.1%. What would the inflation rate be counting energy and food prices? Not muted.
Will Rogers: “There are three kinds of men:
1. the one that learns by reading.
2. the few who learn by observation.
3. the rest of them have to pee on the electric fence for themselves.”
Never underestimate the potential carnage that can be produced by a hurricane. Emily’s winds are currently at 155 mph and it is tracking to hit Mexico’s Yucatan peninsula on its way to the Gulf of Mexico and possibly the southern tip of Texas, and that could mean Houston where there recently has been severe flooding.
I am always amazed when the future is projected based on past history involving the word “always.” A typical example is stating that, for consecutive decades stretching from 1885 to 1995, the 5th year of the decade has always seen higher prices for the Dow Jones Industrials. Predicated on that performance, we should see higher prices by year-end 2005. Could something happen to interrupt that streak? When was the last time Florida experienced 4 major hurricanes in 5 weeks as it did in 2004?
The unprecedented can take place. Robert Shiller diagnosed, in advance, the dotcom bubble in stocks. He recently concluded that, after adjusting for inflation, home prices increased annually between 1890 and 1994 by 0.4%, and after periods when home prices outpaced inflation, they slowed down—possibly declining or stagnating.
How often has the Fed reduced the Fed funds rate to 1%? Would not that be considered an artificially manufactured low rate to stimulate housing, construction, and stock and bond prices, and hopefully lead to a higher rate of consumer spending? Nevertheless, the artificial can generate real results. Last week all-time highs were seen for mid cap and small cap indices. The NAR has upped their housing estimates to new all-time highs. The Russell 2000 and the 3000, the S&P 500, and the Wilshire 5000 hit multi-year highs. Up through last Thursday, the Philadelphia Semiconductor Index had risen for 9 straight days. All the while, inflation was muted. Right? Gas at the tank was at an all-time high. Corn prices were at their highest level in over a year. The Fed stated that home values increased 55% since 2000 to $18 trillion or more than 1 ½ times the size of our GDP. That is unprecedented! The Administration pointed to the strength in our June industrial production. It rose 0.9% thanks to a 5.3% increase in the output of utilities (it was hot and required more air conditioning) and the rise in auto production created by the employee discount program. Without utilities and autos, the June industrial production was up a meager 0.1%. What would the inflation rate be counting energy and food prices? Not muted.
Will Rogers: “There are three kinds of men:
1. the one that learns by reading.
2. the few who learn by observation.
3. the rest of them have to pee on the electric fence for themselves.”
Saturday, July 16, 2005
Bulletin-- wrong stock symbol-IMPORTANT
7/16/05 Wrong Stock Symbol--- IMPORTANT
PTZ should have been PKZ !!!!!
PTZ should have been PKZ !!!!!
Tie A Red Ribbon
7/16/05 Tie A Red Ribbon
Shopping at Wal-Mart is evolving. A good example is their Roanoke, Virginia location where Wednesday is now singles night. Singles tie a red ribbon to their shopping carts and mingle and mix in the aisles. It has been a great success. Another example is walmart.com. where, according to ComScore Networks, in May this website became the third most popular online retail site, up from fourth place. Wal-Mart stated its online sales growth is running at 2 to 3 times the industry average. In June, traffic to the website rose by 37% to 22.6 million visitors. It should get better in July as walmart.com is charging $16.66 for the new Harry Potter book compared to $17.99 at Amazon, Barnes & Nobles, and Borders. Meanwhile, for the July reporting period, comparative sales for the U.S. are estimated to be within our guidance of 3 to 5 percent. For the week ended July 15, food comparative sales were stronger than general merchandise. Average ticket drove the comp sales and the West was the strongest region.
Discussions at the Unocal boardroom must be getting interesting. On Friday, Senator Byron Dorgan, D-ND, introduced a bill in the Senate to prevent a CNOOC purchase of Unocal. Meanwhile, CNOOC is attempting to garner support at Unocal CNOOC by offering to set aside $2.5 billion in an escrow account in the United States that would be paid to Unocal shareholders if the Chinese firm walked away from the deal. But CNOOC will not owe any money if the U.S. government blocks the deal, as long as it meets all conditions set in its contract to address U.S. security concerns. CNOOC is also offering to put an additional $500 million in escrow, which will be used to pay Chevron as a break-up fee if Unocal accepts the Chinese bid. The problems are simple to contemplate. The upfront good-faith money is not enough to offset the political unrest over this deal and the monetary differential between the Chevron approved deal and the CNOOC proposal is not sufficient to overcome the time risks to possible completion. I firmly believe a small kiss from Chevron will put an end to the discussions.
JP Morgan reports that year-to-date home equity loans amount to $244 billion, 28% higher than year earlier levels.
June import prices for the U.S. rose 7% above year ago levels.
By year end 2005, China’s foreign exchange reserves could exceed $800 billion or at least 30% above 2004 levels.
China consumes close to 7 million barrels of oil a day. With 1.3 billion people, that consumption can only grow in time. With a growing hoard of foreign exchange reserves, it is only to be expected that the country will actively search out potential sources of crude reserves. By purchasing these reserves with dollars, they are able to find an avenue other than buying our Treasury bonds. PetroChina is an active bidder for PetroKazakhstan. They will go head to head in the bidding with India’s Oil and Natural Gas Corp (ONGC). A senior oil minister from India stated yesterday “the Kazakh government is happy with India’s proposal and has assured us of full support. We are in the process of preparing an attractive bid for PetroKazakhstan which the Canadians cannot refuse.” At $38+, PKZ is selling at a low 5-6 p/e. The current price is setting a $5 a barrel value on its reserves. The stock is $8 below its high for the year. ONGC will have strong bidding competition from PetroChina. In my view, there is significant upside with low risk. Goldman Sachs will see to it that PKZ is sold to the highest bidder. PKZ currently produces 150,000 barrels of oil a day and has a refinery. The production and the reserves are attractive to both bidders. I much prefer investing in PKZ than speculating on whether the S&P 500, the Dow, and the Nasdaq will be rising or falling.
Shopping at Wal-Mart is evolving. A good example is their Roanoke, Virginia location where Wednesday is now singles night. Singles tie a red ribbon to their shopping carts and mingle and mix in the aisles. It has been a great success. Another example is walmart.com. where, according to ComScore Networks, in May this website became the third most popular online retail site, up from fourth place. Wal-Mart stated its online sales growth is running at 2 to 3 times the industry average. In June, traffic to the website rose by 37% to 22.6 million visitors. It should get better in July as walmart.com is charging $16.66 for the new Harry Potter book compared to $17.99 at Amazon, Barnes & Nobles, and Borders. Meanwhile, for the July reporting period, comparative sales for the U.S. are estimated to be within our guidance of 3 to 5 percent. For the week ended July 15, food comparative sales were stronger than general merchandise. Average ticket drove the comp sales and the West was the strongest region.
Discussions at the Unocal boardroom must be getting interesting. On Friday, Senator Byron Dorgan, D-ND, introduced a bill in the Senate to prevent a CNOOC purchase of Unocal. Meanwhile, CNOOC is attempting to garner support at Unocal CNOOC by offering to set aside $2.5 billion in an escrow account in the United States that would be paid to Unocal shareholders if the Chinese firm walked away from the deal. But CNOOC will not owe any money if the U.S. government blocks the deal, as long as it meets all conditions set in its contract to address U.S. security concerns. CNOOC is also offering to put an additional $500 million in escrow, which will be used to pay Chevron as a break-up fee if Unocal accepts the Chinese bid. The problems are simple to contemplate. The upfront good-faith money is not enough to offset the political unrest over this deal and the monetary differential between the Chevron approved deal and the CNOOC proposal is not sufficient to overcome the time risks to possible completion. I firmly believe a small kiss from Chevron will put an end to the discussions.
JP Morgan reports that year-to-date home equity loans amount to $244 billion, 28% higher than year earlier levels.
June import prices for the U.S. rose 7% above year ago levels.
By year end 2005, China’s foreign exchange reserves could exceed $800 billion or at least 30% above 2004 levels.
China consumes close to 7 million barrels of oil a day. With 1.3 billion people, that consumption can only grow in time. With a growing hoard of foreign exchange reserves, it is only to be expected that the country will actively search out potential sources of crude reserves. By purchasing these reserves with dollars, they are able to find an avenue other than buying our Treasury bonds. PetroChina is an active bidder for PetroKazakhstan. They will go head to head in the bidding with India’s Oil and Natural Gas Corp (ONGC). A senior oil minister from India stated yesterday “the Kazakh government is happy with India’s proposal and has assured us of full support. We are in the process of preparing an attractive bid for PetroKazakhstan which the Canadians cannot refuse.” At $38+, PKZ is selling at a low 5-6 p/e. The current price is setting a $5 a barrel value on its reserves. The stock is $8 below its high for the year. ONGC will have strong bidding competition from PetroChina. In my view, there is significant upside with low risk. Goldman Sachs will see to it that PKZ is sold to the highest bidder. PKZ currently produces 150,000 barrels of oil a day and has a refinery. The production and the reserves are attractive to both bidders. I much prefer investing in PKZ than speculating on whether the S&P 500, the Dow, and the Nasdaq will be rising or falling.
Friday, July 15, 2005
The Sleeper
7/15/05 The Sleeper
Consumer worries over rising gas prices, the London terrorist attack and a drop in job security combined to produce a sharp drop in consumer confidence among Americans surveyed by the July RBC CASH (Consumer Attitudes and Spending by Household) Index. The surveyof 1,000 individuals taken across the U.S. this week showed increasing pessimism about the economy, jobs and investing. The RBC CASH Index for July dropped to its lowest level since October2003, exhibiting increasing pessimism by respondents about the current and future state of local economies, job security, and investment. The RBC CASH Index stands at 73.9, down from 84.0 one month ago. This decrease drops consumer confidence to the lowest point in 2005, and represents the lowest level since October 2003, when the index stood at 74.4. The RBC Current Conditions Index dropped significantly this month to 87.0, from 100.8 last month. Similarly, the RBC Investment Index was down sharply this month to81.3,a decrease from 93.0 last month. Both the RBC Current Conditions Index and the RBC Investment Index stand roughly where they were one year ago. The Conference Board’s CEO survey revealed that chief executives are less confident about the state of the economy now than they were in the first quarter of this year. This could negatively impact corporate spending on capital projects as well as hiring. CEOs’ short-term outlook as well as expectations for their own industry deteriorated in the second quarter. Their measure of confidence declined to the lowest level since the first quarter of 2003. Their view of current economic conditions vs. 6 months ago dropped to the lowest level since the second quarter of 2003. Their expectations for the economy looking out six months were lower than any point in the past three and one half years, and that is also true for the expectations for their own industry looking out six months. As for the current condition in their own industry vs. six months ago, expectations dropped to the level of the first quarter in 2002. With the S&P 500 at a 4 year high and the Nasdaq at a 2005 high, one can come to the conclusion that the market has recently climbed a big wall of worry. Sometimes buying breeds buying, and that includes nervous short-covering. I prefer, in most cases, to sell into strength. Taking profits never hurt one’s bank account. Unfortunately, these same profits inflate the tax revenues for the government, and enable our lawmakers and the Administration to chow on the pork programs. Supertanker shipping rates are soaring once again with transporting oil from the Middle East reaching its highest level in 2005 in July. Freight rates to the U.S. Gulf coast have risen by 66 percent over the past three weeks. Those increases help to buoy the cost of oil. Yesterday, there was a decline of 4% to $57.80 a barrel. Yesterday, gold had another bad day as it declined to $420.20 an ounce. I still am waiting to buy at $412 and below. Rep. Richard Pombo, R-CA, is chairman of the House Resources Committee, which has the authority to approve or reject proposed acquisitions by entities controlled by foreign entities. He wants to add language to the energy bill requiring an immediate review of CNOOC’s proposal to buy Unocal. In the week ended July 8, U.S. natural gas supplies rose by 94 billion cubic feet. The CEO of Countrywide Financial made an interesting comment. He stated “high funding volume during the quarter created significant economic value, not all of which will be reflected in second quarter earnings as a substantial portion of this production was retained in portfolio...Had these $9 billion in loans been sold during the quarter, management estimates that an incremental pre-tax gain of approximately $150 million would have been recognized.” PetroKazakhstan Inc. is Calgary-based with assets in Central Asia. They have been exploring in Kazakhstan for the last 8 years, and have proven and probable oil reserves of 550 million barrels in the South Turgai Basin of south-central Kazakhstan. Their cost to get the oil out of the ground is similar to the costs in the Middle East, or about $3+ a barrel. They hired Goldman Sachs to solicit bids for the company. Some of the bidders suggested are from China, India, and Italy. The $700 million pipeline funded by China from this region to China will be operational in 2006. PetroKazakhstan, stock symbol PKZ on the N.Y. Stock Exchange, are trading at about 5 to 6 times estimated earnings. With all the attention on Unocal, this company could well be the oil takeover sleeper. As a reminder, Kazakhstan comprises over 1 million square miles with a population of 15.4 million people. Its literacy rate is 99 percent! Located on the Caspian Sea, the country borders Russia, China, and four former Russian republic countries. It is geographically located close to Afghanistan, Iran, Iraq, Syria, Turkey, and Saudi Arabia. Hence, it is centrally located in this part of the world.
Consumer worries over rising gas prices, the London terrorist attack and a drop in job security combined to produce a sharp drop in consumer confidence among Americans surveyed by the July RBC CASH (Consumer Attitudes and Spending by Household) Index. The surveyof 1,000 individuals taken across the U.S. this week showed increasing pessimism about the economy, jobs and investing. The RBC CASH Index for July dropped to its lowest level since October2003, exhibiting increasing pessimism by respondents about the current and future state of local economies, job security, and investment. The RBC CASH Index stands at 73.9, down from 84.0 one month ago. This decrease drops consumer confidence to the lowest point in 2005, and represents the lowest level since October 2003, when the index stood at 74.4. The RBC Current Conditions Index dropped significantly this month to 87.0, from 100.8 last month. Similarly, the RBC Investment Index was down sharply this month to81.3,a decrease from 93.0 last month. Both the RBC Current Conditions Index and the RBC Investment Index stand roughly where they were one year ago. The Conference Board’s CEO survey revealed that chief executives are less confident about the state of the economy now than they were in the first quarter of this year. This could negatively impact corporate spending on capital projects as well as hiring. CEOs’ short-term outlook as well as expectations for their own industry deteriorated in the second quarter. Their measure of confidence declined to the lowest level since the first quarter of 2003. Their view of current economic conditions vs. 6 months ago dropped to the lowest level since the second quarter of 2003. Their expectations for the economy looking out six months were lower than any point in the past three and one half years, and that is also true for the expectations for their own industry looking out six months. As for the current condition in their own industry vs. six months ago, expectations dropped to the level of the first quarter in 2002. With the S&P 500 at a 4 year high and the Nasdaq at a 2005 high, one can come to the conclusion that the market has recently climbed a big wall of worry. Sometimes buying breeds buying, and that includes nervous short-covering. I prefer, in most cases, to sell into strength. Taking profits never hurt one’s bank account. Unfortunately, these same profits inflate the tax revenues for the government, and enable our lawmakers and the Administration to chow on the pork programs. Supertanker shipping rates are soaring once again with transporting oil from the Middle East reaching its highest level in 2005 in July. Freight rates to the U.S. Gulf coast have risen by 66 percent over the past three weeks. Those increases help to buoy the cost of oil. Yesterday, there was a decline of 4% to $57.80 a barrel. Yesterday, gold had another bad day as it declined to $420.20 an ounce. I still am waiting to buy at $412 and below. Rep. Richard Pombo, R-CA, is chairman of the House Resources Committee, which has the authority to approve or reject proposed acquisitions by entities controlled by foreign entities. He wants to add language to the energy bill requiring an immediate review of CNOOC’s proposal to buy Unocal. In the week ended July 8, U.S. natural gas supplies rose by 94 billion cubic feet. The CEO of Countrywide Financial made an interesting comment. He stated “high funding volume during the quarter created significant economic value, not all of which will be reflected in second quarter earnings as a substantial portion of this production was retained in portfolio...Had these $9 billion in loans been sold during the quarter, management estimates that an incremental pre-tax gain of approximately $150 million would have been recognized.” PetroKazakhstan Inc. is Calgary-based with assets in Central Asia. They have been exploring in Kazakhstan for the last 8 years, and have proven and probable oil reserves of 550 million barrels in the South Turgai Basin of south-central Kazakhstan. Their cost to get the oil out of the ground is similar to the costs in the Middle East, or about $3+ a barrel. They hired Goldman Sachs to solicit bids for the company. Some of the bidders suggested are from China, India, and Italy. The $700 million pipeline funded by China from this region to China will be operational in 2006. PetroKazakhstan, stock symbol PKZ on the N.Y. Stock Exchange, are trading at about 5 to 6 times estimated earnings. With all the attention on Unocal, this company could well be the oil takeover sleeper. As a reminder, Kazakhstan comprises over 1 million square miles with a population of 15.4 million people. Its literacy rate is 99 percent! Located on the Caspian Sea, the country borders Russia, China, and four former Russian republic countries. It is geographically located close to Afghanistan, Iran, Iraq, Syria, Turkey, and Saudi Arabia. Hence, it is centrally located in this part of the world.
Thursday, July 14, 2005
When The Fog Clears
7/14/05 When The Fog Clears
In Carmel and San Francisco, two of the most beautiful places on the planet, most often there is heavy fog in the summer months. By the Golden Gate Bridge, when the fog makes visibility near impossible, the fog horns will blare. Sometimes the fog will remain until late morning, and then return in early evening. Sometimes it will be a clear day, but that is more of a rarity. This morning the heavy fog is present. One cannot see clearly across the street.
ECB board member Jose Manuel Gonzalez-Paramo: “Global imbalances have widened and disruptive unwinding remains a possibility.”
China’s money supply grew 15.7% in June, up from 14.6% in May. It was the biggest gain since June 2004. Meanwhile, China’s foreign exchange reserves presently stand at $711 billion, and growing.
It serves no purpose to delude Americans by stating core CPI(ex food and energy) is up 2% in the past 12 months—not while the CPI includes rent prices and excludes the prices of homes. We will get a better picture of the CRB with the new weightings. The energy sector will comprise 39% and the metals 20%. Maybe it is time we revamped the way we factor the CPI.
First-time filings for state unemployment rose by 16,000 to a six-week high of 336,000 in the week ending July 9, the Labor Department said Thursday. Meanwhile, the number of former workers collecting unemployment checks rose by 45,000 in the week ending July 2 to 2.62 million, a four-week high.
Are you paying attention to the rising yield on Treasury bonds?
The American Petroleum Institute sated distillate inventories for the week ended July 8 climbed by 5.8 million barrels, gasoline inventories rose by 684,000 barrels, and crude supplies declined by 1.4 million barrels. Meanwhile, crude has dipped below the $60 a barrel mark.
A Wall Street Journal/NBC of 1,090 adults showed that 73% objected to CNOOC’s efforts to buy Unocal. Meanwhile, CNOOC’s board stands by to tweak their offer. Price, in my opinion, will not determine the outcome.
The NAR now sees existing-home sales rising to 6.89 million this year and new-home sales to increase 3.2% to 1.24 million in 2005.
Bush’s overall approval rating stands at 46%. They must be Larry Kudlow clones.
According to the Energy Ministry, recoverable hydrocarbon reserves in the Kazakh sector of the Caspian amount to about 8 billion tones.
Yesterday, nearly 11,000 members of Boeing’s machinists union gathered at Safeco Field in Seattle for the official kickoff of bargaining for the union’s next three-year contract. The 67% turnout was the highest percentage in the union’s history. Of those present, 98.5% approved the strike authorization.
An analysis of California hospital costs and revenues released yesterday by Blue Shield of California indicates that low reimbursement rates paid by Medicare and Medi-Cal may result in cost-shifting onto private insurers amounting to 9.5% of premiums. This translates to an average of $950 per policy for employer-sponsored family coverage.
According to Deloitte Research’s Leading Index of Consumer Spending, the rising tax burden and continued slowdown in home price growth will put pressure on consumer spending during the upcoming back-to-school retail sales season. Federal tax revenues rose 32.3% over the past 12 months, straining consumer purchasing power. Real home prices fell sharply in May but are still up slightly from a year ago.
San Francisco is reporting that the fog horns are blaring away.
In Carmel and San Francisco, two of the most beautiful places on the planet, most often there is heavy fog in the summer months. By the Golden Gate Bridge, when the fog makes visibility near impossible, the fog horns will blare. Sometimes the fog will remain until late morning, and then return in early evening. Sometimes it will be a clear day, but that is more of a rarity. This morning the heavy fog is present. One cannot see clearly across the street.
ECB board member Jose Manuel Gonzalez-Paramo: “Global imbalances have widened and disruptive unwinding remains a possibility.”
China’s money supply grew 15.7% in June, up from 14.6% in May. It was the biggest gain since June 2004. Meanwhile, China’s foreign exchange reserves presently stand at $711 billion, and growing.
It serves no purpose to delude Americans by stating core CPI(ex food and energy) is up 2% in the past 12 months—not while the CPI includes rent prices and excludes the prices of homes. We will get a better picture of the CRB with the new weightings. The energy sector will comprise 39% and the metals 20%. Maybe it is time we revamped the way we factor the CPI.
First-time filings for state unemployment rose by 16,000 to a six-week high of 336,000 in the week ending July 9, the Labor Department said Thursday. Meanwhile, the number of former workers collecting unemployment checks rose by 45,000 in the week ending July 2 to 2.62 million, a four-week high.
Are you paying attention to the rising yield on Treasury bonds?
The American Petroleum Institute sated distillate inventories for the week ended July 8 climbed by 5.8 million barrels, gasoline inventories rose by 684,000 barrels, and crude supplies declined by 1.4 million barrels. Meanwhile, crude has dipped below the $60 a barrel mark.
A Wall Street Journal/NBC of 1,090 adults showed that 73% objected to CNOOC’s efforts to buy Unocal. Meanwhile, CNOOC’s board stands by to tweak their offer. Price, in my opinion, will not determine the outcome.
The NAR now sees existing-home sales rising to 6.89 million this year and new-home sales to increase 3.2% to 1.24 million in 2005.
Bush’s overall approval rating stands at 46%. They must be Larry Kudlow clones.
According to the Energy Ministry, recoverable hydrocarbon reserves in the Kazakh sector of the Caspian amount to about 8 billion tones.
Yesterday, nearly 11,000 members of Boeing’s machinists union gathered at Safeco Field in Seattle for the official kickoff of bargaining for the union’s next three-year contract. The 67% turnout was the highest percentage in the union’s history. Of those present, 98.5% approved the strike authorization.
An analysis of California hospital costs and revenues released yesterday by Blue Shield of California indicates that low reimbursement rates paid by Medicare and Medi-Cal may result in cost-shifting onto private insurers amounting to 9.5% of premiums. This translates to an average of $950 per policy for employer-sponsored family coverage.
According to Deloitte Research’s Leading Index of Consumer Spending, the rising tax burden and continued slowdown in home price growth will put pressure on consumer spending during the upcoming back-to-school retail sales season. Federal tax revenues rose 32.3% over the past 12 months, straining consumer purchasing power. Real home prices fell sharply in May but are still up slightly from a year ago.
San Francisco is reporting that the fog horns are blaring away.
Wednesday, July 13, 2005
Waging War Over Oil
7/13/05 Waging War Over Oil
Crude is back over $61 a barrel this morning, and this despite the International Energy Agency cutting its 2005 global demand forecast by 200,000 barrels a day, to 1.58 million barrels a day, due to a weaker outlook for China and the U.S. They said demand should rise 2.1% in 2006. It’s hard to buy a projection of a weaker outlook for China with their growth for 2005 expected at 9% and the Fed comfortable with a growth rate of over 3% for the U.S. for the balance of this year.
May’s trade deficit was $55.3 billion or annualized a mere $663.6 billion. Exports rose to a new record and imports declined a bit. The monthly trade deficit with China was $15.8 billion or almost enough to fund a purchase of CNOOC.
Import prices in June rose 1%. The deflation exported to our shores from China was not enough to overcome inflation from imported energy supplies.
The House energy panel will hold a hearing on CNOOC’s proposed bid for Unocal on July 19. Chairman Barton, R-Texas, stated “it’s my judgment that U.S. strategic interests are not served by the Chinese Communist party.” The Financial Times is reporting that CNOOC’s board is expected to approve changes to its offer. That’s called negotiating with yourself.
Tong Lixia, an energy expert affiliated with China’s Commerce Ministry opined “the turning point in China’s energy strategy was the Iraq war.”
A total of 5 million barrels, or 0.9% of yearly oil output in the Gulf, and 17.7 billion cubic feet , or 0.6% of yearly natural gas output, have been shut in due to Hurricane Dennis between July 8 and July 12, according to the latest report from the U.S. Minerals Management Service.
Demand for ARMs fell to its lowest level in over a year. Possibly it was due to the July 4 holiday shortened week.
The yield on the 10-year Treasury bond has risen to 4.17% this morning.
Steve Saville stated that, in comparing 30-year Treasury bonds with the price of gold, “in real terms, bonds have lost about one-third of their value over the past 4-and-a-bit years.” I don’t believe you have heard Pimco provide that observation.
The Labor Department stated that the number of job openings in May declined 3.1% from April, while hirings rose 3.7% from April’s numbers.
According to a new survey conducted by Investors’s Business Daily and TechnoMetrica Market Intelligence, their economic optimism index slipped 1.9% to 48.6 in July from 50.5 in June. A reading below 50 indicates pessimism.
The Iran-Libya Sanctions Act (ILSA) empowers President Bush to order punitive measures against any international company that invests more than $20 million a year in Iran’s energy sector. The ILSA disallows any move that would aid Iran’s economic expansion. The sanctions provision apply only to investments in Iran and not to any purchase of oil or gas. Behind the scenes the situation is beginning to boil over. Recently, public information sources, such as, a Bulgarian newspaper, point to China and Russia supplying Iran with arms (these are not mortgages) and in return Iran builds a pipeline providing energy supplies to China and Russia. It is public knowledge that there is a Turkestan air base located at Kharsi-Khanabad that served as a base for our efforts in Afghanistan. General Franks mentioned frequently that there was no long-term arrangement made for that base. There have been reports that our troops have been requested to leave that base. The last few days there have been reports that we will have a large troop withdrawal in Iraq. Interestingly, those same reports have not mentioned that our troops are getting ready to mobilize into Iran. Many believed back in 2002 that an invasion of Iraq would only be a prelude to forced entry into Iran and then Syria.
The fight over Unocal has significance. Unocal has gas fields and a pipeline in Burma. There is an important Unocal project on the drawing boards--- transporting energy supplies from Turkmenistan, Uzbekistan, Kyrgyzstan, and Kazakhstan, and acquiring access to most of the oil from the former Soviet republics in Central Asia. These oil supplies are vitally important to both China and the U.S. There is a corporate fight over Unocal, but the fight goes well beyond the boardroom and a shareholder vote. You can buy oil on the commodity exchange but you cannot buy long-term reserve there. It is these reserves that are the battleground, and it will not be just a war of words. Iraq provided proof of that. The weapon of mass destruction is the quest to acquire energy reserves. This quest will not be squelched by sanctions or by words.
Crude is back over $61 a barrel this morning, and this despite the International Energy Agency cutting its 2005 global demand forecast by 200,000 barrels a day, to 1.58 million barrels a day, due to a weaker outlook for China and the U.S. They said demand should rise 2.1% in 2006. It’s hard to buy a projection of a weaker outlook for China with their growth for 2005 expected at 9% and the Fed comfortable with a growth rate of over 3% for the U.S. for the balance of this year.
May’s trade deficit was $55.3 billion or annualized a mere $663.6 billion. Exports rose to a new record and imports declined a bit. The monthly trade deficit with China was $15.8 billion or almost enough to fund a purchase of CNOOC.
Import prices in June rose 1%. The deflation exported to our shores from China was not enough to overcome inflation from imported energy supplies.
The House energy panel will hold a hearing on CNOOC’s proposed bid for Unocal on July 19. Chairman Barton, R-Texas, stated “it’s my judgment that U.S. strategic interests are not served by the Chinese Communist party.” The Financial Times is reporting that CNOOC’s board is expected to approve changes to its offer. That’s called negotiating with yourself.
Tong Lixia, an energy expert affiliated with China’s Commerce Ministry opined “the turning point in China’s energy strategy was the Iraq war.”
A total of 5 million barrels, or 0.9% of yearly oil output in the Gulf, and 17.7 billion cubic feet , or 0.6% of yearly natural gas output, have been shut in due to Hurricane Dennis between July 8 and July 12, according to the latest report from the U.S. Minerals Management Service.
Demand for ARMs fell to its lowest level in over a year. Possibly it was due to the July 4 holiday shortened week.
The yield on the 10-year Treasury bond has risen to 4.17% this morning.
Steve Saville stated that, in comparing 30-year Treasury bonds with the price of gold, “in real terms, bonds have lost about one-third of their value over the past 4-and-a-bit years.” I don’t believe you have heard Pimco provide that observation.
The Labor Department stated that the number of job openings in May declined 3.1% from April, while hirings rose 3.7% from April’s numbers.
According to a new survey conducted by Investors’s Business Daily and TechnoMetrica Market Intelligence, their economic optimism index slipped 1.9% to 48.6 in July from 50.5 in June. A reading below 50 indicates pessimism.
The Iran-Libya Sanctions Act (ILSA) empowers President Bush to order punitive measures against any international company that invests more than $20 million a year in Iran’s energy sector. The ILSA disallows any move that would aid Iran’s economic expansion. The sanctions provision apply only to investments in Iran and not to any purchase of oil or gas. Behind the scenes the situation is beginning to boil over. Recently, public information sources, such as, a Bulgarian newspaper, point to China and Russia supplying Iran with arms (these are not mortgages) and in return Iran builds a pipeline providing energy supplies to China and Russia. It is public knowledge that there is a Turkestan air base located at Kharsi-Khanabad that served as a base for our efforts in Afghanistan. General Franks mentioned frequently that there was no long-term arrangement made for that base. There have been reports that our troops have been requested to leave that base. The last few days there have been reports that we will have a large troop withdrawal in Iraq. Interestingly, those same reports have not mentioned that our troops are getting ready to mobilize into Iran. Many believed back in 2002 that an invasion of Iraq would only be a prelude to forced entry into Iran and then Syria.
The fight over Unocal has significance. Unocal has gas fields and a pipeline in Burma. There is an important Unocal project on the drawing boards--- transporting energy supplies from Turkmenistan, Uzbekistan, Kyrgyzstan, and Kazakhstan, and acquiring access to most of the oil from the former Soviet republics in Central Asia. These oil supplies are vitally important to both China and the U.S. There is a corporate fight over Unocal, but the fight goes well beyond the boardroom and a shareholder vote. You can buy oil on the commodity exchange but you cannot buy long-term reserve there. It is these reserves that are the battleground, and it will not be just a war of words. Iraq provided proof of that. The weapon of mass destruction is the quest to acquire energy reserves. This quest will not be squelched by sanctions or by words.
Monday, July 11, 2005
Genentech Is On A Roll
7/12/05 Genentech Is On A Roll
The company now expects 2005 earnings of at least 35% over 2004 levels.
"I am tremendously pleased that our efforts to discover and developpotential therapies may change clinical practice and improve the lives ofpatients. We are actively working with the FDA to prioritize the ninepotential filings relating to our significant Phase III trial results, while we continue to develop more than 30 projects in the pipeline primarily in ouroncology and immunology focus areas," said Susan D. Hellmann, M.D., M.P.H.,president of Product Development. "We currently anticipate filing Herceptin for adjuvant breast cancer in the first quarter of 2006 and expect to provide updates on filing timelines for Avastin data upon the completion ofpreliminary discussions with the FDA." Genentech is preparing for potential U.S. Food and Drug Administration(FDA) filings for Avastin for second-line metastatic colorectal cancer; Avastin for first-line non-squamous non-small cell lung cancer; Avastin formetastatic breast cancer; Herceptin for adjuvant breast cancer; Herceptin incombination with Taxotere for first-line metastatic breast cancer; Lucentis inwet age-related macular degeneration; Rituxan for front-line aggressivenon-Hodgkins lymphoma (NHL); Rituxan for front-line indolent/maintenance (1)NHL; and Rituxan for rheumatoid arthritis in inadequate anti-TNF responders. Genentech announced that in the second quarter of 2005 it began enrollingpatients in several Phase III studies, including Rituxan in systemic lupuserythematosus, Avastin in prostate cancer, and combination Avastin and Tarcevain second-line non-small cell lung cancer. It also began enrollment in a PhaseI study of a small molecule hedgehog antagonist in basal cell carcinoma incollaboration with Curis.
An Austin-based consulting firm whose vice chairman, Mark McKinnon, has close ties with President Bush has been tapped by the China National Offshore Oil Co. to wage a public relations campaign in its bid to buy Unocal Corp. Meanwhile, Unocal's board of directors meet on Thursday. I continue to believe it is most probable that Chevron will provide a kiss of 4% before they close on the purchase of Unocal. The sky is not the limit here. As I previously noted, environmental clean-up problems, which are expensive, have been outlined by Unocal. I should also mention that, according to the Financial Times, China will more than double the amount of money foreign investors can put into its stock market to a total of $10 billion. How will Mark McKinnon reconcile that $10 billion ceiling with a possible purchase of $18 billion in Unocal shares? What's good for the goose should be good for the gander.
The CRB Index is revised today. Greater weighting will be given to energy prices.
Pimco's Paul McCulley: "It is not yet time to cyclically go way short duration. That time will be when the bond market starts romancing not just an end to Fed tightening, but the beginning of a Fed easing process."
Now that Dennis has passed through, we can keep our eye on Emily.
According to a Platts survey, OPEC produced 30.1 million barrels per day in June, representing an increase of 80,000 barrels per day over May. Saudi Arabia produced an average of 9.5 million barrels per day, a decrease of 5,000 barrels per day from May. The country with the biggest increase in June was Nigeria with a rise of 50,000 barrels per day.
Coldwell Banker's Luxury Index surveys 300 households with incomes of $100,000 or more and ones that have purchased a million-dollar home within the last 24 months. Some of the findings: 31% expect a tax refund this year, and 51% will put much or all of that refund back into their homes. A total of 31% plan to expand or remodel their homes in the next 12 months. During the past 12 months, 36% have refinanced or taken out home equity loans, and 42% will use the money for home improvement or other real estate purposes.
While we're on the subject of real estate, let's take a look at Centex, a company founded in 1950. You may not know this company. They reported sales for their 2005 fiscal year of $13 billion, up 24%, and earnings of $7.64, a rise of 27% from the previous year. This homebuilder's stock still sells at only 10 times actual earnings. They have more than 17,500 employees in more than 1,500 offices and construction job sites. The company went public in 1969, and has never reported a quarterly or annual loss or a major write-off. Had you purchased stock in 1969, you would have needed immense patience. Until mid-1997, the stock never sold above $10 a share.
Yesterday the stock sold above $76 to a new all-time high. This is a first-class outfit. It's nice to see good guys get their just rewards.
Warren Buffett: "Trust is like the air we breathe. When it's present, nobody really notices. When it's absent, everybody notices."
Sara Lee cut 775 jobs.
Last night, Bobby Abreu of the Phillies really put on some record-breaking show in the Home Run Derby. It was quite a thrill for fans all over the world. Bobby is from Venezuela.
The company now expects 2005 earnings of at least 35% over 2004 levels.
"I am tremendously pleased that our efforts to discover and developpotential therapies may change clinical practice and improve the lives ofpatients. We are actively working with the FDA to prioritize the ninepotential filings relating to our significant Phase III trial results, while we continue to develop more than 30 projects in the pipeline primarily in ouroncology and immunology focus areas," said Susan D. Hellmann, M.D., M.P.H.,president of Product Development. "We currently anticipate filing Herceptin for adjuvant breast cancer in the first quarter of 2006 and expect to provide updates on filing timelines for Avastin data upon the completion ofpreliminary discussions with the FDA." Genentech is preparing for potential U.S. Food and Drug Administration(FDA) filings for Avastin for second-line metastatic colorectal cancer; Avastin for first-line non-squamous non-small cell lung cancer; Avastin formetastatic breast cancer; Herceptin for adjuvant breast cancer; Herceptin incombination with Taxotere for first-line metastatic breast cancer; Lucentis inwet age-related macular degeneration; Rituxan for front-line aggressivenon-Hodgkins lymphoma (NHL); Rituxan for front-line indolent/maintenance (1)NHL; and Rituxan for rheumatoid arthritis in inadequate anti-TNF responders. Genentech announced that in the second quarter of 2005 it began enrollingpatients in several Phase III studies, including Rituxan in systemic lupuserythematosus, Avastin in prostate cancer, and combination Avastin and Tarcevain second-line non-small cell lung cancer. It also began enrollment in a PhaseI study of a small molecule hedgehog antagonist in basal cell carcinoma incollaboration with Curis.
An Austin-based consulting firm whose vice chairman, Mark McKinnon, has close ties with President Bush has been tapped by the China National Offshore Oil Co. to wage a public relations campaign in its bid to buy Unocal Corp. Meanwhile, Unocal's board of directors meet on Thursday. I continue to believe it is most probable that Chevron will provide a kiss of 4% before they close on the purchase of Unocal. The sky is not the limit here. As I previously noted, environmental clean-up problems, which are expensive, have been outlined by Unocal. I should also mention that, according to the Financial Times, China will more than double the amount of money foreign investors can put into its stock market to a total of $10 billion. How will Mark McKinnon reconcile that $10 billion ceiling with a possible purchase of $18 billion in Unocal shares? What's good for the goose should be good for the gander.
The CRB Index is revised today. Greater weighting will be given to energy prices.
Pimco's Paul McCulley: "It is not yet time to cyclically go way short duration. That time will be when the bond market starts romancing not just an end to Fed tightening, but the beginning of a Fed easing process."
Now that Dennis has passed through, we can keep our eye on Emily.
According to a Platts survey, OPEC produced 30.1 million barrels per day in June, representing an increase of 80,000 barrels per day over May. Saudi Arabia produced an average of 9.5 million barrels per day, a decrease of 5,000 barrels per day from May. The country with the biggest increase in June was Nigeria with a rise of 50,000 barrels per day.
Coldwell Banker's Luxury Index surveys 300 households with incomes of $100,000 or more and ones that have purchased a million-dollar home within the last 24 months. Some of the findings: 31% expect a tax refund this year, and 51% will put much or all of that refund back into their homes. A total of 31% plan to expand or remodel their homes in the next 12 months. During the past 12 months, 36% have refinanced or taken out home equity loans, and 42% will use the money for home improvement or other real estate purposes.
While we're on the subject of real estate, let's take a look at Centex, a company founded in 1950. You may not know this company. They reported sales for their 2005 fiscal year of $13 billion, up 24%, and earnings of $7.64, a rise of 27% from the previous year. This homebuilder's stock still sells at only 10 times actual earnings. They have more than 17,500 employees in more than 1,500 offices and construction job sites. The company went public in 1969, and has never reported a quarterly or annual loss or a major write-off. Had you purchased stock in 1969, you would have needed immense patience. Until mid-1997, the stock never sold above $10 a share.
Yesterday the stock sold above $76 to a new all-time high. This is a first-class outfit. It's nice to see good guys get their just rewards.
Warren Buffett: "Trust is like the air we breathe. When it's present, nobody really notices. When it's absent, everybody notices."
Sara Lee cut 775 jobs.
Last night, Bobby Abreu of the Phillies really put on some record-breaking show in the Home Run Derby. It was quite a thrill for fans all over the world. Bobby is from Venezuela.
Dodging The Bullet
7/11/05 Dodging The Bullet
It pays to be lucky. At the very last minute, Dennis weakened. There was significantly less damage than Ivan. Dennis missed the U.S. rigs in the Gulf. The price of crude declined towards $58 a barrel, but that was too late for help at the pump. Gas prices hit a record average of $2.33 a gallon. The high gas prices are negatively impacting the values received for used SUVs.
Stephen Roach: “The extraordinary stagnation of earned labor income in the past four years reflects a fundamental breakdown of the relationship between worker pay and productivity. The saga of the income-short American consumer remains very much intact…Not only has private sector job growth fallen nearly 10 percentage points short of the typical recovery path, but fully 42 months into this recovery, the inflation-adjusted hourly wage rate is fractionally below the level prevailing at the trough of the last recession in November 2001. Adding in the benefits piece of worker compensation does not change the bottom line of an unprecedented shortfall in labor income generation.”
China’s exports surged 30.6% in June to $66 billion, while imports rose 15.1% to $56.3 billion. This provided a monthly trade surplus of $9.7 trillion, their third-highest ever. Meanwhile, Japan’s Kyodo news agency reported Russia’s Putin stated his country will prioritize China over Japan as the recipient of oil supplies from a pipeline linking eastern Siberia with the Russian Far East.
Michael Pettis, associate professor of finance at the Guanghua School of Management at Beijing University, observed “since the dollars spent on IBM, Unocal, and Maytag don’t need to be exchanged for local renminbi (yuan), they represent a real contraction of the renminbi money supply.”
Jim Press, president of Toyota Motor Sales USA: “After September 11, it was necessary to provide stronger incentives, and they worked in the short term. But over time, they undermine the value of the product. Generally, we try to pass on savings to our customers so that they get better value.” Transaction prices on Toyota vehicles declined between 2002 and 2005, according to Edmunds.com. Toyota has been able to offset these lower vehicle prices by driving down its production costs.
John P. Hussman: “In the data since 1970, a 1% increase in the 10-year bond yield has been associated with a 2.63% increase in the S&P 500’s total return over the following year. Similarly, a 1% decline in the 10-year bond yield has been associated with the S&P 500 total returns over the following year being 2.63% lower than they would otherwise have been. Similar results hold if you look at subsequent market returns over longer periods of time…Using the data since 1929, the fitted projection for the S&P 500 is 1.24%. Using the data since 1940, 2.64%. Since 1960, 2.55%, and since 1970,-.32%...Explaining P/E multiples using interest rates is not nearly the same thing as justifying them.” I believe Hussman does really good work, and the performance at his funds reflect that. His web site is www.hussman.net.
The market’s performance ebbs and flows with psychology, and not simply statistics. It is impossible to get into the head of all buyers and sellers of securities. In the short run, your performance may be impacted by the psychology of others. However, if you ride the right horse, you will finish in the money. It comes down to picking the right stock for investment. That requires hours of analysis, and not the kind associated with a psychiatrist’s couch.
It pays to be lucky. At the very last minute, Dennis weakened. There was significantly less damage than Ivan. Dennis missed the U.S. rigs in the Gulf. The price of crude declined towards $58 a barrel, but that was too late for help at the pump. Gas prices hit a record average of $2.33 a gallon. The high gas prices are negatively impacting the values received for used SUVs.
Stephen Roach: “The extraordinary stagnation of earned labor income in the past four years reflects a fundamental breakdown of the relationship between worker pay and productivity. The saga of the income-short American consumer remains very much intact…Not only has private sector job growth fallen nearly 10 percentage points short of the typical recovery path, but fully 42 months into this recovery, the inflation-adjusted hourly wage rate is fractionally below the level prevailing at the trough of the last recession in November 2001. Adding in the benefits piece of worker compensation does not change the bottom line of an unprecedented shortfall in labor income generation.”
China’s exports surged 30.6% in June to $66 billion, while imports rose 15.1% to $56.3 billion. This provided a monthly trade surplus of $9.7 trillion, their third-highest ever. Meanwhile, Japan’s Kyodo news agency reported Russia’s Putin stated his country will prioritize China over Japan as the recipient of oil supplies from a pipeline linking eastern Siberia with the Russian Far East.
Michael Pettis, associate professor of finance at the Guanghua School of Management at Beijing University, observed “since the dollars spent on IBM, Unocal, and Maytag don’t need to be exchanged for local renminbi (yuan), they represent a real contraction of the renminbi money supply.”
Jim Press, president of Toyota Motor Sales USA: “After September 11, it was necessary to provide stronger incentives, and they worked in the short term. But over time, they undermine the value of the product. Generally, we try to pass on savings to our customers so that they get better value.” Transaction prices on Toyota vehicles declined between 2002 and 2005, according to Edmunds.com. Toyota has been able to offset these lower vehicle prices by driving down its production costs.
John P. Hussman: “In the data since 1970, a 1% increase in the 10-year bond yield has been associated with a 2.63% increase in the S&P 500’s total return over the following year. Similarly, a 1% decline in the 10-year bond yield has been associated with the S&P 500 total returns over the following year being 2.63% lower than they would otherwise have been. Similar results hold if you look at subsequent market returns over longer periods of time…Using the data since 1929, the fitted projection for the S&P 500 is 1.24%. Using the data since 1940, 2.64%. Since 1960, 2.55%, and since 1970,-.32%...Explaining P/E multiples using interest rates is not nearly the same thing as justifying them.” I believe Hussman does really good work, and the performance at his funds reflect that. His web site is www.hussman.net.
The market’s performance ebbs and flows with psychology, and not simply statistics. It is impossible to get into the head of all buyers and sellers of securities. In the short run, your performance may be impacted by the psychology of others. However, if you ride the right horse, you will finish in the money. It comes down to picking the right stock for investment. That requires hours of analysis, and not the kind associated with a psychiatrist’s couch.
Sunday, July 10, 2005
Will Dennis Be Like Ivan?
7/10/05 Will Dennis Be Like Ivan?
There is a 50 percent chance that Hurricane Dennis will reach landfall within 65 miles of Pensacola or Mobile, and a 27 percent chance it strike near Panama City, said the latest report from the National Hurricane Center. Hurricane Dennis' winds are at 145 mph, making it a dangerous Category 4 storm ( which carry sustained winds between 131 mph and 155 mph). Forecasters expect it to strengthen by landfall, according to the National Hurricane Center. It should hit the northern Gulf Coast between 3pm and 8pm today.
Weather Service official Don Shepherd stated “it’s looking like it will be every bit as strong as Hurricane Ivan.”
Kinky Friedman: "Golf is the only opportunity that middle-aged WASPS have to dress up like a pimp."
Despite the price of gasoline being, on average, 33 cents a gallon higher than 1 year ago, U.S. gasoline demand has risen 2.7% over the last 12 months, and that is higher than the forecasts made by the U.S. Energy Department.
The U.S. Health & Human Services Department estimates that 12 million Americans went to Canada last year to purchase cheaper prescription drugs and/or healthcare products not approved for sale in the U.S., such as, sunscreens containing Mexoryl that protect the skin from Ultraviolet-A rays that cause wrinkles.
Mike Burk pointed out that “for the past 30 years or so the 2nd week of July during the first year of the presidential cycle has had a slightly positive bias.” With 85% of the stocks in the Russell 2000 above their 50-day moving average, it is likely some more attention will be given to the large cap quality growth stocks, such as, the ones I recently mentioned.
Why have so many Americans been unemployed for at least six months while the unemployment rate declined to 5%? How is it that corporate job creation remains so lukewarm while record cash levels rise and profit margins stand at historically-high percentages? The labor participation rate of 66% is inconsistent with an unemployment rate of 5%. Is it possible the latter is a bogus number?
It's a great time to be an oil refiner. Demand for crude keeps growing, supplies are tight, and no refineries are coming on stream. Refiners are operating at 98% of capacity and making a profit of about $16 a barrel. That sure helps to make up for all those lean years.
Kinky Friedman: "Sleep came slower than a frigid woman."
There is a 50 percent chance that Hurricane Dennis will reach landfall within 65 miles of Pensacola or Mobile, and a 27 percent chance it strike near Panama City, said the latest report from the National Hurricane Center. Hurricane Dennis' winds are at 145 mph, making it a dangerous Category 4 storm ( which carry sustained winds between 131 mph and 155 mph). Forecasters expect it to strengthen by landfall, according to the National Hurricane Center. It should hit the northern Gulf Coast between 3pm and 8pm today.
Weather Service official Don Shepherd stated “it’s looking like it will be every bit as strong as Hurricane Ivan.”
Kinky Friedman: "Golf is the only opportunity that middle-aged WASPS have to dress up like a pimp."
Despite the price of gasoline being, on average, 33 cents a gallon higher than 1 year ago, U.S. gasoline demand has risen 2.7% over the last 12 months, and that is higher than the forecasts made by the U.S. Energy Department.
The U.S. Health & Human Services Department estimates that 12 million Americans went to Canada last year to purchase cheaper prescription drugs and/or healthcare products not approved for sale in the U.S., such as, sunscreens containing Mexoryl that protect the skin from Ultraviolet-A rays that cause wrinkles.
Mike Burk pointed out that “for the past 30 years or so the 2nd week of July during the first year of the presidential cycle has had a slightly positive bias.” With 85% of the stocks in the Russell 2000 above their 50-day moving average, it is likely some more attention will be given to the large cap quality growth stocks, such as, the ones I recently mentioned.
Why have so many Americans been unemployed for at least six months while the unemployment rate declined to 5%? How is it that corporate job creation remains so lukewarm while record cash levels rise and profit margins stand at historically-high percentages? The labor participation rate of 66% is inconsistent with an unemployment rate of 5%. Is it possible the latter is a bogus number?
It's a great time to be an oil refiner. Demand for crude keeps growing, supplies are tight, and no refineries are coming on stream. Refiners are operating at 98% of capacity and making a profit of about $16 a barrel. That sure helps to make up for all those lean years.
Kinky Friedman: "Sleep came slower than a frigid woman."
Saturday, July 09, 2005
Lopsided Employment
7/9/05 Lopsided Employment
Employment in financial activities has increased by 151,000 jobs over the past 12 months. More than half of the gain is in credit intermediation and the remainder of the gain is largely in real estate. Over the past year, construction has added 282,000 jobs and healthcare another 249,000 jobs. Meanwhile, 96,000 manufacturing employment jobs have been lost since August 2004. While wage gains amounted to 2.7% over the past year, inflation is not contained. Natural rubber hit a 9-year high, sugar a 7-year high, and orange juice a 3-year high. The Goldman Sachs Commodity Index has risen over 28% this year. Meanwhile, from 2000 to 2004, health insurance costs for workers surged 59%, and this year we can expect another double-digit increase.
Paul Kasriel: “If the Fed continues to push up the funds rate and the bond yield continues to fall, the Fed will be flirting with the disaster of a recession in 2006.”
Be careful about calling someone “trailer trash.” Some mobile homes are selling for more than $1 million.
Everything is not rosy at Unocal. There’s a small problem called environmental obligations. The company has estimated these potential obligations at about $771 million. That supposedly covers states like Texas, California, Montana, and New Mexico. There is also the possibility of future responsibility at 20 additional sites.
The Council of Economic Advisors is forecasting growth of 3.4% in 2005 for the U.S.
Countrywide Financial stated it is cheaper to do business in Arizona than in California. There are putting their money behind that statement by erecting twin 175,000 square foot office buildings and an employee center, in addition to two existing buildings, in Chandler, Arizona. Within several years, the company plans to employ up to 4,000 in that city.
In analyzing the Federal deficit, John Williams stated “much of the increase in the broad GAAP-based deficit was due to a set-up charge from booking the 2004 “enhancements” to the Medicare system. Net of the $6.4 trillion one-time increase in net unfunded liabilities, the annual broad deficit was about $4.7 trillion, which still would have been a shortfall with 100% taxation.” John anticipates the Fed will monetize the federal debt and trigger hyperinflation, and that gold will be the platform for credibility and trust.
I don't ever remember a day when every single one of the stocks I own was up. Except that happened yesterday. I'm not that smart and not that lucky for that to occur. I've been at investing for 40 years. It's not a hobby. Thursday and Friday's resounding rally made me think. This was not just short-covering. The Nasdaq is at a six-month high and some other indices are at all-time highs. Could it be? Is it possible that oil-related money and real estate-related money are switching gears and headed to another venue---into high-grade growth stocks? We're talking MMM, Wal-Mart, Cisco, Intel, Microsoft, and other large cap companies with good growth prospects selling at historically-low evaluations.
U.S. May consumer credit declined by 1.7% or $3 billion. It was the first drop since November 2003.
For the week ended July 8, Wal-Mart stated "food comparative sales were stronger than general merchandise. Average ticket drove the comp sales and the Southeast was the strongest region as customers prepared for Hurricane Dennis." The company reiterated that comp sales for July would rise between 3 and 5 percent.
Warren Buffett: "You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right – and that's the only thing that makes you right."
Employment in financial activities has increased by 151,000 jobs over the past 12 months. More than half of the gain is in credit intermediation and the remainder of the gain is largely in real estate. Over the past year, construction has added 282,000 jobs and healthcare another 249,000 jobs. Meanwhile, 96,000 manufacturing employment jobs have been lost since August 2004. While wage gains amounted to 2.7% over the past year, inflation is not contained. Natural rubber hit a 9-year high, sugar a 7-year high, and orange juice a 3-year high. The Goldman Sachs Commodity Index has risen over 28% this year. Meanwhile, from 2000 to 2004, health insurance costs for workers surged 59%, and this year we can expect another double-digit increase.
Paul Kasriel: “If the Fed continues to push up the funds rate and the bond yield continues to fall, the Fed will be flirting with the disaster of a recession in 2006.”
Be careful about calling someone “trailer trash.” Some mobile homes are selling for more than $1 million.
Everything is not rosy at Unocal. There’s a small problem called environmental obligations. The company has estimated these potential obligations at about $771 million. That supposedly covers states like Texas, California, Montana, and New Mexico. There is also the possibility of future responsibility at 20 additional sites.
The Council of Economic Advisors is forecasting growth of 3.4% in 2005 for the U.S.
Countrywide Financial stated it is cheaper to do business in Arizona than in California. There are putting their money behind that statement by erecting twin 175,000 square foot office buildings and an employee center, in addition to two existing buildings, in Chandler, Arizona. Within several years, the company plans to employ up to 4,000 in that city.
In analyzing the Federal deficit, John Williams stated “much of the increase in the broad GAAP-based deficit was due to a set-up charge from booking the 2004 “enhancements” to the Medicare system. Net of the $6.4 trillion one-time increase in net unfunded liabilities, the annual broad deficit was about $4.7 trillion, which still would have been a shortfall with 100% taxation.” John anticipates the Fed will monetize the federal debt and trigger hyperinflation, and that gold will be the platform for credibility and trust.
I don't ever remember a day when every single one of the stocks I own was up. Except that happened yesterday. I'm not that smart and not that lucky for that to occur. I've been at investing for 40 years. It's not a hobby. Thursday and Friday's resounding rally made me think. This was not just short-covering. The Nasdaq is at a six-month high and some other indices are at all-time highs. Could it be? Is it possible that oil-related money and real estate-related money are switching gears and headed to another venue---into high-grade growth stocks? We're talking MMM, Wal-Mart, Cisco, Intel, Microsoft, and other large cap companies with good growth prospects selling at historically-low evaluations.
U.S. May consumer credit declined by 1.7% or $3 billion. It was the first drop since November 2003.
For the week ended July 8, Wal-Mart stated "food comparative sales were stronger than general merchandise. Average ticket drove the comp sales and the Southeast was the strongest region as customers prepared for Hurricane Dennis." The company reiterated that comp sales for July would rise between 3 and 5 percent.
Warren Buffett: "You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right – and that's the only thing that makes you right."
Friday, July 08, 2005
Typo And Misspellings
I apologize for a typo and two misspellings in this morning's blog. Haste makes waste and I did not proof read my writing this morning. I especially apologize to Nouriel Roubini about mistakenly insertin the word "not" in the sentence describing his piece on terroism. The misspellings will not be the last---unfortunately.
Thursday, July 07, 2005
Terrorism
7/8/05 Terrorism
I grieve for all Londoners, and especially the families who lost loved ones and for those who lost limbs and incurred serious injuries.
Frank I. Cobb: "If the author of the Declaration of Independence were to utter such a sentiment today, the Post Office Department could exclude him from the mail, grand juries could indict him for sedition and criminal syndicalism, legislative committees could seize his private papers ... and United States Senators would be clamoring for his deportation that he... should be sent back to live with the rest of the terrorists."
Rocco Galati: "19 terrorists in 6 weeks have been able to command 300 million North Americans to do away with the entirety of their civil liberties that took 700 years to advance from the Magna Carta onward. The terrorists have already won the political and ideological war with one terrorist act. It is mindboggling that we are that weak as a society."
Does Bush have a new consigliore in Bono?
It was reported that $175 million was spent on security at the G-8 meeting. Maybe it would have been better spent on London. There was advanced intel that yesterday's attack was a possibility.
Sam Kinison: "I don't worry about terrorism. I was married for 2 years."
Gold, crude, and the equity market had a volatile day yesterday. Gold could not hold a $5 an ounce rally, crude bounced back from a $4 a barrel loss, and the Dow climbed from pre-market trading down 170 points to close with a gain of better than 30 points. These fireworks make those on July 4th look pretty puny. With Dennis approaching our shores, crude has risen above $61 a barrel this morning.
With the 30-year Treasury yielding 4.31%, the spread is down to 60 basis points with the 2-year. You might want to read John Williams' piece entitled the Federal Deficit Reality: An Update. John has done a fine analysis and it should be read by all Americans. Using generally accepted accounting principles, John shows that the actual budget deficit is $11.1 trillion. That is not a misprint. His work can be found at www.shadowstats.com. Meanwhile, the CBO sees the 2005 U.S. deficit possibly declining to $325 billion. Williams and the CBO are both talking about the same country---ours!
Nouriel Roubini did not a fine piece entitled The Economic and Financial Impacts of Terrorism. It can be found at www.rgemonitor.com
Not surprisingly, the pound made a 18-month low versus the dollar.
For the week ended July 1, crude supplies dropped by 2.7 million barrels, gas by 483,000, and distillate supplies rose by 1.2 million.
Gartner Inc. stated that world-wide semiconductor capital equipment sales will decline 11.9% in 2005.
Vitria will cut 15% of its workforce. U.S. Airwyas will reduce its Philly crew by 89 people.
Wal-Mart estimates their U.S. comp sales for July will rise between 3 and 5 percent. They estimate earnings per share for the second quarter will meet expectations of 65 cents.
China's central bank expects their GDP to grow 9.2% in the first six months of this year, and 9% for the full year.
According to iSuppli, India's contract-manufacturing business is expected to nearly triple in revenue over the next five years to $2.03 billion.
Costco Wholesale Corp. said sales at warehouses open at least a year were up 9 percent in June, compared with a year ago, beating the consensus estimate of 7.6 percent. But the 9 percent figure is deceptive, as a shift in the timing of the Fourth of July holiday added 2 percent to 3 percent to the figure, Costco said in a press release.
The percentage of households in California able to afford a median-priced home stood at 16 percent in May, a 3 percentage-point decrease compared with the same period a year ago when the Index was at 19 percent, according to a report released today by the California Association of REALTORS® (C.A.R.). The May Housing Affordability Index (HAI) declined 1 percentage point from April, when it stood at 17 percent.
What can you say about a golden parachute being worth close to $114 million for Purcell at Morgan Stanley---except maybe that golden is really golden at that firm---except when it comes to producing profits for its shareholders. This firm has truly tarnished its once-proud image.
Back to the real world for the average person. In June, the average hourly earnings rose 3 cents to $16.06 or $541.22 per week, and earnings rose 2.7% over the past year-- not even enough to fill a tank up with gas. The average workweek was unchanged at 33.7 hours. To come close to Purcell's golden parachute the average worker would need to work how many hours, how many weeks, and how many years? Could it be? Over 100 years?
Once again, the economists got the employment number wrong for June. Their projection was light by 50,000 jobs. The total was 146,000 with 150,000 new services jobs, such as, 56,000 professional and business; 25,000 healthcare; 18,000 construction; 19,000 hospitality; 9,000 temp; and 9,000 retail. Naturally, factories lost jobs.
I grieve for all Londoners, and especially the families who lost loved ones and for those who lost limbs and incurred serious injuries.
Frank I. Cobb: "If the author of the Declaration of Independence were to utter such a sentiment today, the Post Office Department could exclude him from the mail, grand juries could indict him for sedition and criminal syndicalism, legislative committees could seize his private papers ... and United States Senators would be clamoring for his deportation that he... should be sent back to live with the rest of the terrorists."
Rocco Galati: "19 terrorists in 6 weeks have been able to command 300 million North Americans to do away with the entirety of their civil liberties that took 700 years to advance from the Magna Carta onward. The terrorists have already won the political and ideological war with one terrorist act. It is mindboggling that we are that weak as a society."
Does Bush have a new consigliore in Bono?
It was reported that $175 million was spent on security at the G-8 meeting. Maybe it would have been better spent on London. There was advanced intel that yesterday's attack was a possibility.
Sam Kinison: "I don't worry about terrorism. I was married for 2 years."
Gold, crude, and the equity market had a volatile day yesterday. Gold could not hold a $5 an ounce rally, crude bounced back from a $4 a barrel loss, and the Dow climbed from pre-market trading down 170 points to close with a gain of better than 30 points. These fireworks make those on July 4th look pretty puny. With Dennis approaching our shores, crude has risen above $61 a barrel this morning.
With the 30-year Treasury yielding 4.31%, the spread is down to 60 basis points with the 2-year. You might want to read John Williams' piece entitled the Federal Deficit Reality: An Update. John has done a fine analysis and it should be read by all Americans. Using generally accepted accounting principles, John shows that the actual budget deficit is $11.1 trillion. That is not a misprint. His work can be found at www.shadowstats.com. Meanwhile, the CBO sees the 2005 U.S. deficit possibly declining to $325 billion. Williams and the CBO are both talking about the same country---ours!
Nouriel Roubini did not a fine piece entitled The Economic and Financial Impacts of Terrorism. It can be found at www.rgemonitor.com
Not surprisingly, the pound made a 18-month low versus the dollar.
For the week ended July 1, crude supplies dropped by 2.7 million barrels, gas by 483,000, and distillate supplies rose by 1.2 million.
Gartner Inc. stated that world-wide semiconductor capital equipment sales will decline 11.9% in 2005.
Vitria will cut 15% of its workforce. U.S. Airwyas will reduce its Philly crew by 89 people.
Wal-Mart estimates their U.S. comp sales for July will rise between 3 and 5 percent. They estimate earnings per share for the second quarter will meet expectations of 65 cents.
China's central bank expects their GDP to grow 9.2% in the first six months of this year, and 9% for the full year.
According to iSuppli, India's contract-manufacturing business is expected to nearly triple in revenue over the next five years to $2.03 billion.
Costco Wholesale Corp. said sales at warehouses open at least a year were up 9 percent in June, compared with a year ago, beating the consensus estimate of 7.6 percent. But the 9 percent figure is deceptive, as a shift in the timing of the Fourth of July holiday added 2 percent to 3 percent to the figure, Costco said in a press release.
The percentage of households in California able to afford a median-priced home stood at 16 percent in May, a 3 percentage-point decrease compared with the same period a year ago when the Index was at 19 percent, according to a report released today by the California Association of REALTORS® (C.A.R.). The May Housing Affordability Index (HAI) declined 1 percentage point from April, when it stood at 17 percent.
What can you say about a golden parachute being worth close to $114 million for Purcell at Morgan Stanley---except maybe that golden is really golden at that firm---except when it comes to producing profits for its shareholders. This firm has truly tarnished its once-proud image.
Back to the real world for the average person. In June, the average hourly earnings rose 3 cents to $16.06 or $541.22 per week, and earnings rose 2.7% over the past year-- not even enough to fill a tank up with gas. The average workweek was unchanged at 33.7 hours. To come close to Purcell's golden parachute the average worker would need to work how many hours, how many weeks, and how many years? Could it be? Over 100 years?
Once again, the economists got the employment number wrong for June. Their projection was light by 50,000 jobs. The total was 146,000 with 150,000 new services jobs, such as, 56,000 professional and business; 25,000 healthcare; 18,000 construction; 19,000 hospitality; 9,000 temp; and 9,000 retail. Naturally, factories lost jobs.
Wednesday, July 06, 2005
Turmoil
7/7/05 Turmoil
Seven separate explosions hit the London subway system today, and one hit a double-decker bus. The source of the explosions is unnamed. The extent of the casualties has not been defined. The subway system has been shut down.
OPEC stated they will not be able to meet demand in 2015. Fortunately, they are not the only game in town. Briefly, crude traded above $62 a barrel this morning, and then settled back towards the $60 level. We can expect volatility to be the norm.
According to PresidentNazarbayev of Kazakhstan, the Atasau-Alashankou pipeline, which is to transport oil from Kazakhstan to China, is to be operational as of December 2005. Contractors are hard at work and have promised President Nazarbayev that the pipeline will be ready by December 16th 2005, declared the President in a press conference following the talks between Kazakhstan and China,represented by the country's president, Hu Jinato. "Cooperation between our nations is now at another level, that of the realisation of great projects, and this pipeline is the first great bilateral project we have launched this year," stated President Nazarbayev. He added that both countries had also looked at the possibility of constructing a gas pipeline between both countries. Negotiations are under way between KazMunaiGas - Kazakhstan's national oil and gas company - and the Chinese National Petroleum Corporation (CNPC)on the construction of such a gas pipeline. This pipeline would open the Chinese market to Kazakh natural gas suppliers. This market is in constant growth: according to Chinese experts, the country's requirements in natural gas supply will grow beyond the 200 billion cubic metres by 2020 -representing a yearly growth of between 11 and 13%. The Atasau-Alashankou pipeline is 988 kilometres long and is the second phase of the petroleum transportation project between Kazakhstan and China. The pipeline starts from the rail link at Atasau in the Karaganda region (Central Kazakhstan) and crosses the border at the Droujba-Alashankou rail terminal. The cost of the construction of this section of the pipeline is estimatedat US$ 700 million. Private investments in the project are at US$ 650 million. Upon completion of the Atasau-Alashankou pipeline, the route WesternKazakhstan - China will have carrying capacity of 10 million tons of oil per year at the initial stage, and 20 million tons of oil per year by 2008. Maximum carrying capacity of the project makes up 50 million tons and that can only be reached by 2035; that is why it is most likely that the oil exports from Kazkahstan to China along this route will reach 20 million tons of oil per year by 2015. Predictions for Kazaktsan's oil and condensated gas production for 2005 stand at 60 million tonnes, 51 of which is destined for export (including 10 million tonnes destined to China). Total oil reserves are estimated at over 6 billion tons (ground-based fields), for the most part concentrated in Western Kazakhstan. The Caspian Sea basin has a number of large oilfields such as Tengiz, Astrakhanskoye, and the oilfields of Buzachi Peninsula. Taking into account the recently discovered Kashagan oilfield - with forecasted oil reserves estimated at about 7 billion tons - the total oil reserves of Kazakhstan are estimated at 13 billion tons, which will allow Kazakhstan to enter the top ten oil producing countries.
U.S. stocks funds fell 0.3% on average during the first half of 2005.
Challenger, Gray & Christmas stated that June planned job cuts rose to 110,996 and that, year-to-date, planned job reductions rose 14% to 538,274. Is everyone looking for a great June nonfarm payrolls report?
Brad Setser, senior economist for Roubini Global Economics, estimates that the amount of foreign assets the Chinese accumulate each month by exporting more than they import is valued at around $20 billion. No wonder they can afford to build pipelines.
Tropical storm Cindy passed through the Gulf. The U.S. Minerals Management Service stated that Cindy forced the shut-in of 12.7% of daily oil production, representing 190,506 barrels, in the Gulf of Mexico. The energy markets are focused on Dennis, a possible very early hurricane. With that concern, crude closed above $61 a barrel for the first time. For August delivery, both heating oil and gasoline contracts closed at a record price of $1.79. In certain locations, $3 a gallon at the pump may become a reality sooner than later.
Interestingly, even though crude hit a record price, both ExxonMobil and Chevron were down on the day.
Some analysts suggest that half the battle to making money in the market is to be in the right sector. It's not a good thing to make sweeping statements. Take the gold sector. Until a few days ago, gold was selling for $440 an ounce. Newmont Mining is 12 points from its 52-week high and only about three points from the low. On the other hand, Goldcorp is only a small fraction from making a new 52-week high. In sum, your sector may be ok but you can lose your ass in the wrong stock-- even if the sector has legs.
United Healthcare announced they will purchase PacifiCare for $8.1 billion in cash and stock.
Walgreens pharmacists in northern Illinois and northwest Indiana went on strike Wednesday night, complaining of inadequate staffing levels they say could threaten patients' health. Walgreens announced those pharmacies would remain open.
With Dennis expected to hit in a day or so, Transocean, the world's largest offshore oil and natural gas driller, stated it will be evacuating about 250 workers from three deep-water rigs. BP said nonessential workers were evacuated from deep-water facilities in the eastern gulf.
Franzia Wine brought you two buck Chuck (Charles Shaw) and now will provide $4 a bottle Napa Creek wine made from Napa Valley grapes. That means at least 85% of the wine must come from grapes grown in the Napa Valley. I have a feeling this product will fly off the shelves at Trader Joe's.
Yesterday we had a triple-digit down day for the Dow. Today's opening will not be pretty.
Having been the chairman of the board and chairman of the executive committee of a company listed on the N.Y. Stock Exchange, I know a bit about meetings to discuss the best interests of shareholders. The board of Unocal is faced with a higher proposal from CNOOC; however, absolutely no assurance can be provided that this deal can close. Hence, in my view, the decision to go with Chevron is a no-brainer. A bird in the hand is worth plenty in this uncertain environment.
Seven separate explosions hit the London subway system today, and one hit a double-decker bus. The source of the explosions is unnamed. The extent of the casualties has not been defined. The subway system has been shut down.
OPEC stated they will not be able to meet demand in 2015. Fortunately, they are not the only game in town. Briefly, crude traded above $62 a barrel this morning, and then settled back towards the $60 level. We can expect volatility to be the norm.
According to PresidentNazarbayev of Kazakhstan, the Atasau-Alashankou pipeline, which is to transport oil from Kazakhstan to China, is to be operational as of December 2005. Contractors are hard at work and have promised President Nazarbayev that the pipeline will be ready by December 16th 2005, declared the President in a press conference following the talks between Kazakhstan and China,represented by the country's president, Hu Jinato. "Cooperation between our nations is now at another level, that of the realisation of great projects, and this pipeline is the first great bilateral project we have launched this year," stated President Nazarbayev. He added that both countries had also looked at the possibility of constructing a gas pipeline between both countries. Negotiations are under way between KazMunaiGas - Kazakhstan's national oil and gas company - and the Chinese National Petroleum Corporation (CNPC)on the construction of such a gas pipeline. This pipeline would open the Chinese market to Kazakh natural gas suppliers. This market is in constant growth: according to Chinese experts, the country's requirements in natural gas supply will grow beyond the 200 billion cubic metres by 2020 -representing a yearly growth of between 11 and 13%. The Atasau-Alashankou pipeline is 988 kilometres long and is the second phase of the petroleum transportation project between Kazakhstan and China. The pipeline starts from the rail link at Atasau in the Karaganda region (Central Kazakhstan) and crosses the border at the Droujba-Alashankou rail terminal. The cost of the construction of this section of the pipeline is estimatedat US$ 700 million. Private investments in the project are at US$ 650 million. Upon completion of the Atasau-Alashankou pipeline, the route WesternKazakhstan - China will have carrying capacity of 10 million tons of oil per year at the initial stage, and 20 million tons of oil per year by 2008. Maximum carrying capacity of the project makes up 50 million tons and that can only be reached by 2035; that is why it is most likely that the oil exports from Kazkahstan to China along this route will reach 20 million tons of oil per year by 2015. Predictions for Kazaktsan's oil and condensated gas production for 2005 stand at 60 million tonnes, 51 of which is destined for export (including 10 million tonnes destined to China). Total oil reserves are estimated at over 6 billion tons (ground-based fields), for the most part concentrated in Western Kazakhstan. The Caspian Sea basin has a number of large oilfields such as Tengiz, Astrakhanskoye, and the oilfields of Buzachi Peninsula. Taking into account the recently discovered Kashagan oilfield - with forecasted oil reserves estimated at about 7 billion tons - the total oil reserves of Kazakhstan are estimated at 13 billion tons, which will allow Kazakhstan to enter the top ten oil producing countries.
U.S. stocks funds fell 0.3% on average during the first half of 2005.
Challenger, Gray & Christmas stated that June planned job cuts rose to 110,996 and that, year-to-date, planned job reductions rose 14% to 538,274. Is everyone looking for a great June nonfarm payrolls report?
Brad Setser, senior economist for Roubini Global Economics, estimates that the amount of foreign assets the Chinese accumulate each month by exporting more than they import is valued at around $20 billion. No wonder they can afford to build pipelines.
Tropical storm Cindy passed through the Gulf. The U.S. Minerals Management Service stated that Cindy forced the shut-in of 12.7% of daily oil production, representing 190,506 barrels, in the Gulf of Mexico. The energy markets are focused on Dennis, a possible very early hurricane. With that concern, crude closed above $61 a barrel for the first time. For August delivery, both heating oil and gasoline contracts closed at a record price of $1.79. In certain locations, $3 a gallon at the pump may become a reality sooner than later.
Interestingly, even though crude hit a record price, both ExxonMobil and Chevron were down on the day.
Some analysts suggest that half the battle to making money in the market is to be in the right sector. It's not a good thing to make sweeping statements. Take the gold sector. Until a few days ago, gold was selling for $440 an ounce. Newmont Mining is 12 points from its 52-week high and only about three points from the low. On the other hand, Goldcorp is only a small fraction from making a new 52-week high. In sum, your sector may be ok but you can lose your ass in the wrong stock-- even if the sector has legs.
United Healthcare announced they will purchase PacifiCare for $8.1 billion in cash and stock.
Walgreens pharmacists in northern Illinois and northwest Indiana went on strike Wednesday night, complaining of inadequate staffing levels they say could threaten patients' health. Walgreens announced those pharmacies would remain open.
With Dennis expected to hit in a day or so, Transocean, the world's largest offshore oil and natural gas driller, stated it will be evacuating about 250 workers from three deep-water rigs. BP said nonessential workers were evacuated from deep-water facilities in the eastern gulf.
Franzia Wine brought you two buck Chuck (Charles Shaw) and now will provide $4 a bottle Napa Creek wine made from Napa Valley grapes. That means at least 85% of the wine must come from grapes grown in the Napa Valley. I have a feeling this product will fly off the shelves at Trader Joe's.
Yesterday we had a triple-digit down day for the Dow. Today's opening will not be pretty.
Having been the chairman of the board and chairman of the executive committee of a company listed on the N.Y. Stock Exchange, I know a bit about meetings to discuss the best interests of shareholders. The board of Unocal is faced with a higher proposal from CNOOC; however, absolutely no assurance can be provided that this deal can close. Hence, in my view, the decision to go with Chevron is a no-brainer. A bird in the hand is worth plenty in this uncertain environment.
What A Day!
7/6/05 What A Day!
Yesterday, one had to stay especially alert to all the happenings. Advancing stocks led decliners by close to 2 to 1. This was in the headwind provided by $60 crude oil and rising copper, soybeans, wheat and factory orders in May, excluding civilian and defense orders, declining 0.3%. You might ask how is it then possible that gold hit a 1-month low of $423? I don’t walk on water, and surely don’t have all the answers.
I was happy to see GM extend the employee discount through August 1. Ford and Chrysler finally decided to join the effort.
The Financial Times reported that Chevron has ruled out selling any Unocal Asian assets. Meanwhile, the Chinese Foreign Ministry stated “we demand that the U.S. Congress correct its mistaken ways of politicizing economic and trade issues and stop interfering in the normal commercial exchanges between enterprises of the two countries.” Rather than cry sour grapes, the Chinese should attempt to produce counterfeit oil and gas. Then, they’d really have customers lined up at their doorstep.
The State Department’s Sean McCormack said the Defense Production Act of 1950 “provides a process for reviewing foreign acquisitions of U.S. companies to determine the effect on U.S. national security.” Something tells me that such a review would take more than 35 days.
According to J.P. Morgan, $100 billion of repatriation (bring back profits made outside the U.S. The one-year window provides taxation of these profits at 5.25% or close to a free lunch. It does reduce the federal deficit this year by $5.25 billion.
Corporate M&A activity will remain strong during the second half of 2005 as companies seek growth through acquisitions in consolidating industries such as automotive, retail, utilities, energy,healthcare and financial services according to the Transaction Services group of PricewaterhouseCoopers. However, the combination of a stalled junk bond market and potentially higher interest rates could pose a problem later in the year. On Monday, July 11, there will be a meeting of the U.S.-China Joint Commission on Commerce and Trade. The meeting will be held in China. It should make for some worthless quotes, such as, developing bilateral economic and trade cooperation is in the interests of both countries. For the week ended July 1, mortgage applications rose 9.6% from the prior week. The International Council of Shopping Centers stated same-store retain chain sales would rise 4.5% in June, the best performance since February’s gain of 4.7%.
Yesterday, one had to stay especially alert to all the happenings. Advancing stocks led decliners by close to 2 to 1. This was in the headwind provided by $60 crude oil and rising copper, soybeans, wheat and factory orders in May, excluding civilian and defense orders, declining 0.3%. You might ask how is it then possible that gold hit a 1-month low of $423? I don’t walk on water, and surely don’t have all the answers.
I was happy to see GM extend the employee discount through August 1. Ford and Chrysler finally decided to join the effort.
The Financial Times reported that Chevron has ruled out selling any Unocal Asian assets. Meanwhile, the Chinese Foreign Ministry stated “we demand that the U.S. Congress correct its mistaken ways of politicizing economic and trade issues and stop interfering in the normal commercial exchanges between enterprises of the two countries.” Rather than cry sour grapes, the Chinese should attempt to produce counterfeit oil and gas. Then, they’d really have customers lined up at their doorstep.
The State Department’s Sean McCormack said the Defense Production Act of 1950 “provides a process for reviewing foreign acquisitions of U.S. companies to determine the effect on U.S. national security.” Something tells me that such a review would take more than 35 days.
According to J.P. Morgan, $100 billion of repatriation (bring back profits made outside the U.S. The one-year window provides taxation of these profits at 5.25% or close to a free lunch. It does reduce the federal deficit this year by $5.25 billion.
Corporate M&A activity will remain strong during the second half of 2005 as companies seek growth through acquisitions in consolidating industries such as automotive, retail, utilities, energy,healthcare and financial services according to the Transaction Services group of PricewaterhouseCoopers. However, the combination of a stalled junk bond market and potentially higher interest rates could pose a problem later in the year. On Monday, July 11, there will be a meeting of the U.S.-China Joint Commission on Commerce and Trade. The meeting will be held in China. It should make for some worthless quotes, such as, developing bilateral economic and trade cooperation is in the interests of both countries. For the week ended July 1, mortgage applications rose 9.6% from the prior week. The International Council of Shopping Centers stated same-store retain chain sales would rise 4.5% in June, the best performance since February’s gain of 4.7%.
Tuesday, July 05, 2005
Happenings
7/5/05 Happenings
In his first public appearance last week, new Toyota President Katsuaki Watanabe decided to give his engineers something to keep them on their toes: Develop a car that could travel across the United States on one tank of fuel.
Chevron is calling for a review of U.S. takeover policy. Reviews take time. Only 35 days remain until the Unocal shareholders vote on the merger with Chevron.
The dollar is trading at a 14-month high versus the euro, and yet, stocks in Europe are trading near a 3-year high.
Will the euro carry trade replace the dollar carry trade?
Chicago’s sales tax increase took effect Friday. The quarter-point increase to 9% is only exceeded by Stone Park’s 9.25% in the entire state of Illinois.
Much was made of the improvement in the ISM Index; however, the ISM job index only climbed to 49.9 from 48.8 in May. If the nonfarm payrolls report is to show an increase of 192,000 jobs in June, then the rise will need to come from the service sector. A big deal might be made of that increase, but what will be the change in average hourly earnings? Not much I’m afraid.
Pan Rui, professor at Fudan University in Shanghai: “We invest too much in U.S. federal bonds, and they don’t make us much money. Now we’re learning to invest more wisely, to try to invest in American companies and industries.” Professor, you need to have China’s proposed purchases be made in a timely manner. Maybe a Swiss watch would help instead of a counterfeit Rolex.
Don’t be surprised to see Chevron provide a little kiss to Unocal shareholders by increasing the stock portion of their offer from 1.03 Chevron shares to 1.07. With the increased price of oil and natural gas, the deal should still be accretive to Chevron on slightly improved terms.
Bruce Springsteen: “In America everything’s about who’s number one.”
Economists forecast that the Commerce Department will report that factory orders rose 3% in May after a slim increase of 0.9% in April.
Walgreen's June same-store sales increased 7.8%.
Mercury Interactive warned on 2nd quarter results.
So far this year, Boeing has been the star performer in the Dow. Going forward, I believe that Wal-Mart will hold that position.
In his first public appearance last week, new Toyota President Katsuaki Watanabe decided to give his engineers something to keep them on their toes: Develop a car that could travel across the United States on one tank of fuel.
Chevron is calling for a review of U.S. takeover policy. Reviews take time. Only 35 days remain until the Unocal shareholders vote on the merger with Chevron.
The dollar is trading at a 14-month high versus the euro, and yet, stocks in Europe are trading near a 3-year high.
Will the euro carry trade replace the dollar carry trade?
Chicago’s sales tax increase took effect Friday. The quarter-point increase to 9% is only exceeded by Stone Park’s 9.25% in the entire state of Illinois.
Much was made of the improvement in the ISM Index; however, the ISM job index only climbed to 49.9 from 48.8 in May. If the nonfarm payrolls report is to show an increase of 192,000 jobs in June, then the rise will need to come from the service sector. A big deal might be made of that increase, but what will be the change in average hourly earnings? Not much I’m afraid.
Pan Rui, professor at Fudan University in Shanghai: “We invest too much in U.S. federal bonds, and they don’t make us much money. Now we’re learning to invest more wisely, to try to invest in American companies and industries.” Professor, you need to have China’s proposed purchases be made in a timely manner. Maybe a Swiss watch would help instead of a counterfeit Rolex.
Don’t be surprised to see Chevron provide a little kiss to Unocal shareholders by increasing the stock portion of their offer from 1.03 Chevron shares to 1.07. With the increased price of oil and natural gas, the deal should still be accretive to Chevron on slightly improved terms.
Bruce Springsteen: “In America everything’s about who’s number one.”
Economists forecast that the Commerce Department will report that factory orders rose 3% in May after a slim increase of 0.9% in April.
Walgreen's June same-store sales increased 7.8%.
Mercury Interactive warned on 2nd quarter results.
So far this year, Boeing has been the star performer in the Dow. Going forward, I believe that Wal-Mart will hold that position.
Sunday, July 03, 2005
Freedom And Bravery
7/4/05 Freedom And Bravery
Elmer Davis: "This nation was conceived in liberty and dedicated to the principle - among others - that honest men may honestly disagree; that if they all say what they think, a majority of the people will be able to distinguish truth from error."
Evelyn Waugh: “Beer commercials are so patriotic: 'Made the American Way.' What does that have to do with America? Is that what America stands for? Feeling sluggish and urinating frequently?”
Bruce Springsteen: " People deserve better. They deserve truth. They deserve honesty. The best music... is essentially there to provide you something to face the world with."
There is a way to discover whether a housing bubble truly exists. Let's take the area in and around Tampa, Florida. Rick T. Murray, a housing industry analyst for Raymond James & Associates Inc., quantified the number of buyer investors in Hillsborough County by tracking Homestead exemption filings. Florida offers a tax break for primary residences, known as the Homestead Act. The act allows an individual to shelter $25,000 of assessed value of his or her primary residence from real estate taxes. In a research report titled "Condos Gone Wild" issued June 20, Murray concluded that individuals who failed to claim the Homestead Act deduction owned the property as an investment or a second home. According to the Hillsborough County Property Appraiser's Office, 45 percent of all townhomes and condos sold in 2004 were for investment purposes. Additionally, 38 percent of all single-family homebuyers in 2004 did not file for Homestead exemption. The sum of non-filing buyers of condos, townhomes and single-family homes as a percentage of total sales was 39 percent for the county, up from 25 percent in 2000 -- an increase of 56 percent.
Misery loves company. The euro and the pound fell to their lowest level in 13 months against the dollar.
Roger Federer consistently plays tennis at a level seldom attained by others. The others, such as, Sampras and Borg, retired some years back.
Klaus Kleinfeld, Siemens CEO: "If you want to earn a lot, you have to add a lot of value." It doesn't always work that way. Frequently, those at the top take credit for the contributions made by others.
China National Petroleum Corporation holds a 75% interest and Iran's Naftgaran Company a 25% interest in a southern Masjed Soleyman project in Iran, which aims to increase the output of oil wells to 28,000 barrels per day from the present 5,000 barrels per day in the first phase. Additionally, they will seek production od another 10,000 barrels per day. The Masjed Soleyman field was discovered 97 years ago.
Elmer Davis: "This nation was conceived in liberty and dedicated to the principle - among others - that honest men may honestly disagree; that if they all say what they think, a majority of the people will be able to distinguish truth from error."
Evelyn Waugh: “Beer commercials are so patriotic: 'Made the American Way.' What does that have to do with America? Is that what America stands for? Feeling sluggish and urinating frequently?”
Bruce Springsteen: " People deserve better. They deserve truth. They deserve honesty. The best music... is essentially there to provide you something to face the world with."
There is a way to discover whether a housing bubble truly exists. Let's take the area in and around Tampa, Florida. Rick T. Murray, a housing industry analyst for Raymond James & Associates Inc., quantified the number of buyer investors in Hillsborough County by tracking Homestead exemption filings. Florida offers a tax break for primary residences, known as the Homestead Act. The act allows an individual to shelter $25,000 of assessed value of his or her primary residence from real estate taxes. In a research report titled "Condos Gone Wild" issued June 20, Murray concluded that individuals who failed to claim the Homestead Act deduction owned the property as an investment or a second home. According to the Hillsborough County Property Appraiser's Office, 45 percent of all townhomes and condos sold in 2004 were for investment purposes. Additionally, 38 percent of all single-family homebuyers in 2004 did not file for Homestead exemption. The sum of non-filing buyers of condos, townhomes and single-family homes as a percentage of total sales was 39 percent for the county, up from 25 percent in 2000 -- an increase of 56 percent.
Misery loves company. The euro and the pound fell to their lowest level in 13 months against the dollar.
Roger Federer consistently plays tennis at a level seldom attained by others. The others, such as, Sampras and Borg, retired some years back.
Klaus Kleinfeld, Siemens CEO: "If you want to earn a lot, you have to add a lot of value." It doesn't always work that way. Frequently, those at the top take credit for the contributions made by others.
China National Petroleum Corporation holds a 75% interest and Iran's Naftgaran Company a 25% interest in a southern Masjed Soleyman project in Iran, which aims to increase the output of oil wells to 28,000 barrels per day from the present 5,000 barrels per day in the first phase. Additionally, they will seek production od another 10,000 barrels per day. The Masjed Soleyman field was discovered 97 years ago.
Independence And Liberty
7/3/05 Independence And Liberty
George Carlin: "I do this real moron thing, it's called thinking, and I'm not a very good American because I like to form my own opinion."
Thomas Jefferson: "The natural progress of things is for liberty to yield and government to gain ground."
If you think more, there is a much greater opportunity for you to save more. You'll have less time to spend money on things you don't really need or want.
Wal-Mart's weekly sale summary for July 2nd: "Comparative sales for the U.S. are estimated to be 4.5% compared to our guidance of 2 to 4 percent. Strength was seen in seasonal merchandise sales during the reporting period. For the week, general merchandise comparative sales were stronger than food. The Northeast was the strongest region and average ticket drove the comp sales." In my view, Wal-Mart shares are an uncommon value at the present level of $48+.
All this talk about Unocal and CNOOC is crap. It's not about the Chinese government acquiring American oil interests. If it were, Venezuela would not own Citgo and its refineries. This deal is about value and timing. Where do you think Chevron shares would sell without arbitrage shorting pressure? Before the deal was announced, Chevron was $64 and not Friday's $57. At $57 a share, Chevron represents uncommon value. The stock yields about 3%. If it sells at just 10 times rearnings, it will trade at $65. You get 1.03 shares for 70% of your Unocal stock. At 65, that 1.03 equates to about $67 a share. A shareholder would receive those shares tax-free. With the CNOOC proposal, a tax would be paid. You end up getting about $54 a share with no call on the future growth of Chevron. This deal is a no-brainer. That's assuming others are like George Carlin and do the moron thing called thinking.
Here we are at the beginning of the second half of 2005, and we have three uncommon values in Wal-Mart, Chevron, and MMM. Does it get better than that? Those ham sandwiches will be served up sooner rather than later. How sweet it is!
Rene Rivkin: "When buying shares, ask yourself, would you buy the whole company."
George Carlin: "I do this real moron thing, it's called thinking, and I'm not a very good American because I like to form my own opinion."
Thomas Jefferson: "The natural progress of things is for liberty to yield and government to gain ground."
If you think more, there is a much greater opportunity for you to save more. You'll have less time to spend money on things you don't really need or want.
Wal-Mart's weekly sale summary for July 2nd: "Comparative sales for the U.S. are estimated to be 4.5% compared to our guidance of 2 to 4 percent. Strength was seen in seasonal merchandise sales during the reporting period. For the week, general merchandise comparative sales were stronger than food. The Northeast was the strongest region and average ticket drove the comp sales." In my view, Wal-Mart shares are an uncommon value at the present level of $48+.
All this talk about Unocal and CNOOC is crap. It's not about the Chinese government acquiring American oil interests. If it were, Venezuela would not own Citgo and its refineries. This deal is about value and timing. Where do you think Chevron shares would sell without arbitrage shorting pressure? Before the deal was announced, Chevron was $64 and not Friday's $57. At $57 a share, Chevron represents uncommon value. The stock yields about 3%. If it sells at just 10 times rearnings, it will trade at $65. You get 1.03 shares for 70% of your Unocal stock. At 65, that 1.03 equates to about $67 a share. A shareholder would receive those shares tax-free. With the CNOOC proposal, a tax would be paid. You end up getting about $54 a share with no call on the future growth of Chevron. This deal is a no-brainer. That's assuming others are like George Carlin and do the moron thing called thinking.
Here we are at the beginning of the second half of 2005, and we have three uncommon values in Wal-Mart, Chevron, and MMM. Does it get better than that? Those ham sandwiches will be served up sooner rather than later. How sweet it is!
Rene Rivkin: "When buying shares, ask yourself, would you buy the whole company."
Friday, July 01, 2005
Quotations
7/2/05 QUOTATIONS
When Barry Goldwater, in response to Jerry Falwell’s statement that “good Christians” should oppose Sandra Day O’Connor’s nomination to the Supreme Court, stated “ I every good Christian ought to kick Falwell’s ass.”
Sandra Day O’Connor: “No one learns more about a problem than the person at the bottom.”
Luther Vandross: “When I was larger, people said I was fat. Now that I’ve lost weight, they say I died.”
Paul Kasriel: “Over 60% of commercial bank loans and investments are mortgage related.”
Bank for International Settlements: “One simply cannot ignore the number of indicators that are now simultaneously exhibiting marked deviations from historical norms. Among the internal imbalances that compel attention, real policy rates in many industrial countries and in emerging Asia continue to hover around zero. Nominal rates on long bonds, as well as credit spreads and measures of market volatility, are remarkably low. The household saving rate in many industrial countries has been trending sharply downwards, and debt levels are at record highs. House prices in many countries have never been higher. And in China, the investment ratio has risen to a startling 50% of GDP. Finally, external imbalances have never been larger in the postwar period. Any or all of these numbers might well revert to the mean, with associated implications for global economic growth. Such an unwinding might be gradual, and possibly benign, but it could also be rapid and disruptive. In large part, what happens will be determined by real-financial interactions that we should not pretend to fully understand.”
GM Advertising: "You pay what we pay." It paid off in June. The company's truck sales rose 68% and car sales increased 4%.
Yesterday was an interesting start to the holiday weekend. Crude jumped up to $58.75 a barrel, gold dived to $428.80 an ounce, and 10-year Treasury yields bumped up to 4.04%. Meanwhile, some got excited to learn that the ISM Index in Jine rose to 53.8 from May's weak 51.4. On the downside, U.S. construction spending in May dipped 0.9% and residential construction declined 1.7%.
I want to thank Morgan Stanley for saying that MMM would be dead money for at least the near-term. Their comments helped to drive the stock down, and I was able to buy shares at $71.05. It was the first time I have felt the stock was a good value in well over two years. The stock closed at $73. I hope it continues to trade like this example of dead money. I might end up making a ham sandwich.
Approximately 8,000 hedge funds have approximately $1 trillion in assets under management. With all the derivatives in their portfolios, does anyone know the extent of the potential liabilities for those 8,000 hedge funds?
Here we are at the start of summer and the price for heating oil is surging. Isn't that rather unusual?
Ayn Rand: "Thinking men cannot be ruled.'
When Barry Goldwater, in response to Jerry Falwell’s statement that “good Christians” should oppose Sandra Day O’Connor’s nomination to the Supreme Court, stated “ I every good Christian ought to kick Falwell’s ass.”
Sandra Day O’Connor: “No one learns more about a problem than the person at the bottom.”
Luther Vandross: “When I was larger, people said I was fat. Now that I’ve lost weight, they say I died.”
Paul Kasriel: “Over 60% of commercial bank loans and investments are mortgage related.”
Bank for International Settlements: “One simply cannot ignore the number of indicators that are now simultaneously exhibiting marked deviations from historical norms. Among the internal imbalances that compel attention, real policy rates in many industrial countries and in emerging Asia continue to hover around zero. Nominal rates on long bonds, as well as credit spreads and measures of market volatility, are remarkably low. The household saving rate in many industrial countries has been trending sharply downwards, and debt levels are at record highs. House prices in many countries have never been higher. And in China, the investment ratio has risen to a startling 50% of GDP. Finally, external imbalances have never been larger in the postwar period. Any or all of these numbers might well revert to the mean, with associated implications for global economic growth. Such an unwinding might be gradual, and possibly benign, but it could also be rapid and disruptive. In large part, what happens will be determined by real-financial interactions that we should not pretend to fully understand.”
GM Advertising: "You pay what we pay." It paid off in June. The company's truck sales rose 68% and car sales increased 4%.
Yesterday was an interesting start to the holiday weekend. Crude jumped up to $58.75 a barrel, gold dived to $428.80 an ounce, and 10-year Treasury yields bumped up to 4.04%. Meanwhile, some got excited to learn that the ISM Index in Jine rose to 53.8 from May's weak 51.4. On the downside, U.S. construction spending in May dipped 0.9% and residential construction declined 1.7%.
I want to thank Morgan Stanley for saying that MMM would be dead money for at least the near-term. Their comments helped to drive the stock down, and I was able to buy shares at $71.05. It was the first time I have felt the stock was a good value in well over two years. The stock closed at $73. I hope it continues to trade like this example of dead money. I might end up making a ham sandwich.
Approximately 8,000 hedge funds have approximately $1 trillion in assets under management. With all the derivatives in their portfolios, does anyone know the extent of the potential liabilities for those 8,000 hedge funds?
Here we are at the start of summer and the price for heating oil is surging. Isn't that rather unusual?
Ayn Rand: "Thinking men cannot be ruled.'
It's The Yellow Flag
7/1/05 It’s The Yellow Flag
As we begin the second half of 2005, the yellow flag calls for caution. Our economy is essentially based on the consumer. U.S. consumer spending in May was flat. Wages increased a slim 0.1%, the smallest gain in 11 months. With 70% of our citizens owning homes, we had better root for continued advances in housing prices. That will enable more extraction of equity from the housing sector and provided the needed cash for consumers to spend. The average worker cannot depend on wages rises, and those out of work, can’t depend on finding a job that pays a living wage after accounting for taxes and inflation.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. Ad volume has proven to be sensitive to labor market conditions. The Conference Board’s Help-Wanted Advertising Index declined two points in May. The Index now stands at 37. It was 39 one year ago. Ken Goldstein, the Conference Board’s labor economist, stated “hiring intentions have turned cautious as business executives face the prospect of slower overall economic activity in the second half of 2005…The biggest obstacle to more hiring is the increase in labor costs relative to the rate of price increases.” It is important to note that, in May 2004, 73% of labor markets surveyed had rising want-ad volume. In May 2005, that percentage plummeted to 39%.
Chevron is seeking the WTO review of CNOOC’s proposal to buy Unocal. The Senate appears set to review the proposal. Meanwhile, Unocal stated its second quarter earnings would be $1.65 to $1.70 per share, up from street expectations of $1.37. Once again, reviews take time and the Unocal shareholder vote on the merger with Chevron is only 40 days away. Time has a way of racing during the summer vacation period.
Diebold is cutting 300 jobs.
As expected, the Fed announced no changes in its planned course for rate-hike action. One should begin to ask what might account for this decision. The GDP is growing around 3.5%. Despite historically high corporate profit margins, workers see almost no change in their weekly paychecks. The Fed maintains inflation is under control, but wage gains trail the inflation rate. Will further interest rate hikes finally break the back of surging home prices? Is that the underlying Fed intention? If so, why not change some of the rules, so to speak, for real estate loans? After all, margin requirements can be changed, and they have been in the past. Maybe the new world order is growing accustomed to declining long-rates in the face of rising short rates. I wouldn’t count on that for much longer. Buffett has been wrong about the dollar’s rally in 2005, and Gross can be just as wrong about 3% long-term bonds. We can all make lousy forecasts. I’ve made plenty, and will make more in the future. You can go to the bank on that.
As we begin the second half of 2005, the yellow flag calls for caution. Our economy is essentially based on the consumer. U.S. consumer spending in May was flat. Wages increased a slim 0.1%, the smallest gain in 11 months. With 70% of our citizens owning homes, we had better root for continued advances in housing prices. That will enable more extraction of equity from the housing sector and provided the needed cash for consumers to spend. The average worker cannot depend on wages rises, and those out of work, can’t depend on finding a job that pays a living wage after accounting for taxes and inflation.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. Ad volume has proven to be sensitive to labor market conditions. The Conference Board’s Help-Wanted Advertising Index declined two points in May. The Index now stands at 37. It was 39 one year ago. Ken Goldstein, the Conference Board’s labor economist, stated “hiring intentions have turned cautious as business executives face the prospect of slower overall economic activity in the second half of 2005…The biggest obstacle to more hiring is the increase in labor costs relative to the rate of price increases.” It is important to note that, in May 2004, 73% of labor markets surveyed had rising want-ad volume. In May 2005, that percentage plummeted to 39%.
Chevron is seeking the WTO review of CNOOC’s proposal to buy Unocal. The Senate appears set to review the proposal. Meanwhile, Unocal stated its second quarter earnings would be $1.65 to $1.70 per share, up from street expectations of $1.37. Once again, reviews take time and the Unocal shareholder vote on the merger with Chevron is only 40 days away. Time has a way of racing during the summer vacation period.
Diebold is cutting 300 jobs.
As expected, the Fed announced no changes in its planned course for rate-hike action. One should begin to ask what might account for this decision. The GDP is growing around 3.5%. Despite historically high corporate profit margins, workers see almost no change in their weekly paychecks. The Fed maintains inflation is under control, but wage gains trail the inflation rate. Will further interest rate hikes finally break the back of surging home prices? Is that the underlying Fed intention? If so, why not change some of the rules, so to speak, for real estate loans? After all, margin requirements can be changed, and they have been in the past. Maybe the new world order is growing accustomed to declining long-rates in the face of rising short rates. I wouldn’t count on that for much longer. Buffett has been wrong about the dollar’s rally in 2005, and Gross can be just as wrong about 3% long-term bonds. We can all make lousy forecasts. I’ve made plenty, and will make more in the future. You can go to the bank on that.
Thursday, June 30, 2005
The First Six Months Of 2005
6/30/05 The First Six Months Of 2005
There have been a surprising number of key stories so far this year. I say surprising because one of the highlights has been the low volatility in the equity markets. Let’s review the first six months--- in no particular order of importance.
Despite some pretty bright people like Buffett being short the dollar, the greenback has rebounded strongly against the euro, yen, and pound.
The domestic budget deficit has declined but the trade account has surged to record deficit levels. Fortunately, the savings in Asian countries have been there to bale us out by buying our Treasury bonds.
The Fed will once again raise Fed Funds today—to 3.25%. At the same time, long-term rates have been declining to the 4% level, and this fact has made the yield curve flatten to a differential of less than 40 basis points.
The Fed makes much of the personal consumption expenditures price index, a measure tied to consumer spending, only rising by 2%. This does not jibe with record gas prices at the pump and the Goldman Sachs Commodity Index rising 28% year-to-date.
The economies in the eurozone have slowed to growth of 1% or less, our economy is growing by 3.5% or more, but GDP in India and China continues to surge in the 8 to 9% range.
GM and Ford bonds were downgraded to junk levels. Health care costs, especially for retirees, are weighing heavily on the bottom line. That did not prevent Kerkorian from tendering for GM shares at $31. This created some large losses at hedge funds.
The death toll continued to rise in Iraq and Afghanistan and the American public no longer support Bush’s decision to invade Iraq.
Crude jumped to $60 a barrel, and growing demand from China has illustrated the need for more global refining capacity. China’s thirst for oil has led to CNOOC making a proposal to acquire Unocal. The proposal took 6 months in the making, and placed CNOOC at a time disadvantage since there will be a shareholder vote on the Chevron merger on August 10.
Housing starts continued at high levels, housing prices escalated even further, mortgage rates remained low, and real estate loans surged to record levels.
The Dow and the Nasdaq have gone nowhere over the first six months of 2005. Once again, a lesson can be learned. This is a market of stocks. Google is a perfect example as it surged to $300 a share and it’s market cap rose to $85 billion. By comparison, Yahoo’s is $50 billion and eBay’s is $45 billion.
In recent days, there has been more news. Mittal Steel plans to reduce global steel production by 1 million tons in the 3rd quarter in order “to restore equilibrium to the global supply and demand situation.” Crude dipped further to $57.26 a barrel as inventories for crude, gas, and distillates rose. Visteon stated they would end salaried retirees’ paid health care unless salaried workers leave by 2007. A total of 6,700 white-collar employees could be impacted. The CEO of MMM jumped over to Boeing as its CEO and Chairman. The Bank of America agreed to pay $35 billion for MBNA, the number one independent credit-card lender in the U.S. Due to pricing pressure in the marketplace for generic drugs, Dey Labs of Napa is reducing its workforce by 107 employees.
Finally, fatherdan.com illustrated what’s good for the goose is good for the gander. Could a hotel be built on the land owned by Supreme Court Justice David H. Souter? A new ruling by the Supreme Court which was supported by Justice Souter himself itself might allow it. A private developer is seeking to use this very law to build a hotel on Souter's land.Justice Souter's vote in the "Kelo vs. City of New London" decision allows city governments to take land from one private owner and give it to another if the government will generate greater tax revenue or other economic benefits when the land is developed by the new owner. On Monday June 27, Logan Darrow Clements, faxed a request to Chip Meany the code enforcement officer of the Towne of Weare, New Hampshire seeking to start the application process to build a hotel on 34 Cilley Hill Road. This is the present location of Mr. Souter's home. Clements, CEO of Freestar Media, LLC, points out that the City of Weare will certainly gain greater tax revenue and economic benefits with a hotel on 34 Cilley Hill Road than allowing Mr. Souter to own the land.The proposed development, called "The Lost Liberty Hotel" will feature the "Just Desserts Café" and include a museum, open to the public, featuring a permanent exhibit on the loss of freedom in America. Instead of a Gideon's Bible each guest will receive a free copy of Ayn Rand's novel "Atlas Shrugged." Clements indicated that the hotel must be built on this particular piece of land because it is a unique site being the home of someone largely responsible for destroying property rights for all Americans.This is not a prank" said Clements, "The Towne of Weare has five people on the Board of Selectmen. If three of them vote to use the power of eminent domain to take this land from Mr. Souter we can begin our hotel development." Machiavelli must be smiling.
There have been a surprising number of key stories so far this year. I say surprising because one of the highlights has been the low volatility in the equity markets. Let’s review the first six months--- in no particular order of importance.
Despite some pretty bright people like Buffett being short the dollar, the greenback has rebounded strongly against the euro, yen, and pound.
The domestic budget deficit has declined but the trade account has surged to record deficit levels. Fortunately, the savings in Asian countries have been there to bale us out by buying our Treasury bonds.
The Fed will once again raise Fed Funds today—to 3.25%. At the same time, long-term rates have been declining to the 4% level, and this fact has made the yield curve flatten to a differential of less than 40 basis points.
The Fed makes much of the personal consumption expenditures price index, a measure tied to consumer spending, only rising by 2%. This does not jibe with record gas prices at the pump and the Goldman Sachs Commodity Index rising 28% year-to-date.
The economies in the eurozone have slowed to growth of 1% or less, our economy is growing by 3.5% or more, but GDP in India and China continues to surge in the 8 to 9% range.
GM and Ford bonds were downgraded to junk levels. Health care costs, especially for retirees, are weighing heavily on the bottom line. That did not prevent Kerkorian from tendering for GM shares at $31. This created some large losses at hedge funds.
The death toll continued to rise in Iraq and Afghanistan and the American public no longer support Bush’s decision to invade Iraq.
Crude jumped to $60 a barrel, and growing demand from China has illustrated the need for more global refining capacity. China’s thirst for oil has led to CNOOC making a proposal to acquire Unocal. The proposal took 6 months in the making, and placed CNOOC at a time disadvantage since there will be a shareholder vote on the Chevron merger on August 10.
Housing starts continued at high levels, housing prices escalated even further, mortgage rates remained low, and real estate loans surged to record levels.
The Dow and the Nasdaq have gone nowhere over the first six months of 2005. Once again, a lesson can be learned. This is a market of stocks. Google is a perfect example as it surged to $300 a share and it’s market cap rose to $85 billion. By comparison, Yahoo’s is $50 billion and eBay’s is $45 billion.
In recent days, there has been more news. Mittal Steel plans to reduce global steel production by 1 million tons in the 3rd quarter in order “to restore equilibrium to the global supply and demand situation.” Crude dipped further to $57.26 a barrel as inventories for crude, gas, and distillates rose. Visteon stated they would end salaried retirees’ paid health care unless salaried workers leave by 2007. A total of 6,700 white-collar employees could be impacted. The CEO of MMM jumped over to Boeing as its CEO and Chairman. The Bank of America agreed to pay $35 billion for MBNA, the number one independent credit-card lender in the U.S. Due to pricing pressure in the marketplace for generic drugs, Dey Labs of Napa is reducing its workforce by 107 employees.
Finally, fatherdan.com illustrated what’s good for the goose is good for the gander. Could a hotel be built on the land owned by Supreme Court Justice David H. Souter? A new ruling by the Supreme Court which was supported by Justice Souter himself itself might allow it. A private developer is seeking to use this very law to build a hotel on Souter's land.Justice Souter's vote in the "Kelo vs. City of New London" decision allows city governments to take land from one private owner and give it to another if the government will generate greater tax revenue or other economic benefits when the land is developed by the new owner. On Monday June 27, Logan Darrow Clements, faxed a request to Chip Meany the code enforcement officer of the Towne of Weare, New Hampshire seeking to start the application process to build a hotel on 34 Cilley Hill Road. This is the present location of Mr. Souter's home. Clements, CEO of Freestar Media, LLC, points out that the City of Weare will certainly gain greater tax revenue and economic benefits with a hotel on 34 Cilley Hill Road than allowing Mr. Souter to own the land.The proposed development, called "The Lost Liberty Hotel" will feature the "Just Desserts Café" and include a museum, open to the public, featuring a permanent exhibit on the loss of freedom in America. Instead of a Gideon's Bible each guest will receive a free copy of Ayn Rand's novel "Atlas Shrugged." Clements indicated that the hotel must be built on this particular piece of land because it is a unique site being the home of someone largely responsible for destroying property rights for all Americans.This is not a prank" said Clements, "The Towne of Weare has five people on the Board of Selectmen. If three of them vote to use the power of eminent domain to take this land from Mr. Souter we can begin our hotel development." Machiavelli must be smiling.
Tuesday, June 28, 2005
Facts Speak Volumes
6/29/05 Facts Speak Volumes
It is the President's job to protect the American people. It is not accomplished by confusing the facts. Iraq had nothing to do with September 11th. Absolutely nothing at all. We all know that, and this includes each and every member of the Bush administration. They would like you to think otherwise. Unfortunately, by invading Iraq, the President has not protected the American people. He has made our country less safe. He has created hatred in a foreign land where thousands and thousands of innocent Iraqis have been killed along with at least 1,740 of our fighting men and women. Thousands and thousands of innocent Iraqis have been injured along with close to 15,000 Americans. If the President wants support for his agenda, he should invite Tony Blair to the White House. The two deserve one another's company.
Bush maintains that sacrifices are worth the war in Iraq. Maybe that statement has to do with who might be doing the sacrificing. Veterans Affairs budget documents projected 23,553 would return this year from Iraq and Afghanistan and seek medical treatment. However, VA Secretary Jim Nicholson told a Senate committee the number has been revised upward to 103,000 for the fiscal year that ends September 30. The VA expects to be short $2.6 billion for veterans care. House Appropriations Committee Chairman Jerry Lewis, R-California, told Nicholson the failure to alert Congress earlier to the problems "borders on stupidity."
Rep. Ron Paul: "Continuing to justify our presence in Iraq because we must punish those responsible for 9/11 is disingenuous to say the least. We are sadly now at greater risk than before 9/11."
"Apple is taking podcasting mainstream by building it right into iTunes," says Steve Jobs, CEO of Apple in a written statement. The new Podcast Directory in iTunes 4.9 features over 3,000 free audio programs, making it one of the largest podcast directories in the world, the company claims.
Japan's industrial production fell 2.3% in May as demand from China and the U.S. slowed.
In the week ended 6/24, mortgage applications declined 1.1% from the prior week.
Crude has dipped below $58 a barrel.
Ecopave Australia is a Melbourne-based family-owned organization with a long asphalt manufacturing background. The company stated it has taken more than 20 years and extensive testing to develop a road-grade bitumen substitute, the first commercially viable, non-petroleum based, asphalt bitumen substitute for roads. It is made from the waste material derived in refining sugar cane, molasses.
The U.S. June Conference Board's Consumer Confidence Index rose to 105.8 from 103.1, the highest since June 2002. The present situations index increased to 120.7, the highest since September 2001, from 117.8, and the expectations index rose to 95.8 from 93.4. Interestingly, the percentage of the 5,000 households polled expecting to buy a home in the next six months dipped to 3.4% from 3.5%, and the share expecting to buy a car fell to 6.5% from 7.8%. I wonder how much of the rise in consumer confidence is due to record housing prices.
"The economic and social price of yuan revaluation is climbing higher by the day," senior economist Liang Hong wrote in the China Economic Times, which is published by the State Council, or China's cabinet. "As more 'hot money' flows into the country and the trade surplus grows worse, the task at hand becomes more complicated."
All Aboard!!!! With Unocal now trading at $65, an increasing number of analysts are writing about a bidding war for the company. Interestingly, I never read one thing from these same analysts when Unocal traded at $55 only a short time ago. How often are sheep herded to the slaughter?
It is the President's job to protect the American people. It is not accomplished by confusing the facts. Iraq had nothing to do with September 11th. Absolutely nothing at all. We all know that, and this includes each and every member of the Bush administration. They would like you to think otherwise. Unfortunately, by invading Iraq, the President has not protected the American people. He has made our country less safe. He has created hatred in a foreign land where thousands and thousands of innocent Iraqis have been killed along with at least 1,740 of our fighting men and women. Thousands and thousands of innocent Iraqis have been injured along with close to 15,000 Americans. If the President wants support for his agenda, he should invite Tony Blair to the White House. The two deserve one another's company.
Bush maintains that sacrifices are worth the war in Iraq. Maybe that statement has to do with who might be doing the sacrificing. Veterans Affairs budget documents projected 23,553 would return this year from Iraq and Afghanistan and seek medical treatment. However, VA Secretary Jim Nicholson told a Senate committee the number has been revised upward to 103,000 for the fiscal year that ends September 30. The VA expects to be short $2.6 billion for veterans care. House Appropriations Committee Chairman Jerry Lewis, R-California, told Nicholson the failure to alert Congress earlier to the problems "borders on stupidity."
Rep. Ron Paul: "Continuing to justify our presence in Iraq because we must punish those responsible for 9/11 is disingenuous to say the least. We are sadly now at greater risk than before 9/11."
"Apple is taking podcasting mainstream by building it right into iTunes," says Steve Jobs, CEO of Apple in a written statement. The new Podcast Directory in iTunes 4.9 features over 3,000 free audio programs, making it one of the largest podcast directories in the world, the company claims.
Japan's industrial production fell 2.3% in May as demand from China and the U.S. slowed.
In the week ended 6/24, mortgage applications declined 1.1% from the prior week.
Crude has dipped below $58 a barrel.
Ecopave Australia is a Melbourne-based family-owned organization with a long asphalt manufacturing background. The company stated it has taken more than 20 years and extensive testing to develop a road-grade bitumen substitute, the first commercially viable, non-petroleum based, asphalt bitumen substitute for roads. It is made from the waste material derived in refining sugar cane, molasses.
The U.S. June Conference Board's Consumer Confidence Index rose to 105.8 from 103.1, the highest since June 2002. The present situations index increased to 120.7, the highest since September 2001, from 117.8, and the expectations index rose to 95.8 from 93.4. Interestingly, the percentage of the 5,000 households polled expecting to buy a home in the next six months dipped to 3.4% from 3.5%, and the share expecting to buy a car fell to 6.5% from 7.8%. I wonder how much of the rise in consumer confidence is due to record housing prices.
"The economic and social price of yuan revaluation is climbing higher by the day," senior economist Liang Hong wrote in the China Economic Times, which is published by the State Council, or China's cabinet. "As more 'hot money' flows into the country and the trade surplus grows worse, the task at hand becomes more complicated."
All Aboard!!!! With Unocal now trading at $65, an increasing number of analysts are writing about a bidding war for the company. Interestingly, I never read one thing from these same analysts when Unocal traded at $55 only a short time ago. How often are sheep herded to the slaughter?
Obesity
6/28/05 Obesity
According to a study published in the journal Health Affairs, between 1987 and 2002, private spending on obesity-linked medical problems catapulted from $3.6 billion, or 2% of all health spending, to $36.5 billion or 11.6% of spending. Treating diseases, such as, diabetes and heart disease, is a leading reason for the double-digit health insurance premium hikes. The U.S. Centers for Disease Control and Prevention suggest that about 60 million Americans are obese. The fact is that obesity prevention is a major objective in the medical profession. This Thursday, Trevor Hallam, executive VP for R&D for Palatin Technologies, will present data from preclinical evaluation of PT-15 for the treatment of obesity at the GTCbio metabolic diseases partnering and deal-making summit in San Francisco. PT-15 is Palatin’s novel, small molecule, melancortin receptor subtype-4 selective agonist that is in development for the treatment of obesity. Administration of PT-15 results in a decreases in food intake that is associated with a significant reduction in body weight and improvement in metabolic parameters in rodent models of obesity. After 11 days of treatment, daily food consumption was reduced by approximately 30-50%, accompanied by up to a 15% reduction in body weight. A significant decrease in blood glucose and plasma insulin levels was also observed. These findings were not associated with adverse effects such as sickness, taste aversion or disruption of normal behavior. Carl Spana, President and CEO of Palatin, stated “the concomitant improvement in metabolic parameters is especially supportive of the potential for PT-15 as treatment for obesity in humans.”
John Hussman: “The key is to allow for uncertainty in every specific instance…the longer the horizon, the narrower the range that uncertainty becomes.”
International Paper’s quarterly results are below expectations. Creative Technology warned MP3 player sales are slowing.
Lear Corp. to cut up to 7,700 jobs globally. Kemet will cut 150 jobs. Cray will eliminate 90 jobs.
Paul Kasriel pointed out that, in the week ended June 15, holdings of Mortgage Backed Securities in large domestically chartered U.S. banks dropped $65 billion.
Bill Gross: “If the asset pumps run dry and the kerosene cans empty, the inevitable path of the U.S. economy will reflect slow growth at best and recession as a realistic alternative. Inflation then would return to low 1% levels in the ensuing years and be pressing the deflationary crossover line. Nominal Treasury paper would enter the 3-4% zone for 10-year maturities and lower still for shorter intermediates.”
The yen fell to an 8-month low and the Japanese 10-year bond hit a 22-month low. The Nikkei 225 fell to a 2-week low. It will be interesting to note the Tankan survey of business sentiment that is released this Friday.
According to a study published in the journal Health Affairs, between 1987 and 2002, private spending on obesity-linked medical problems catapulted from $3.6 billion, or 2% of all health spending, to $36.5 billion or 11.6% of spending. Treating diseases, such as, diabetes and heart disease, is a leading reason for the double-digit health insurance premium hikes. The U.S. Centers for Disease Control and Prevention suggest that about 60 million Americans are obese. The fact is that obesity prevention is a major objective in the medical profession. This Thursday, Trevor Hallam, executive VP for R&D for Palatin Technologies, will present data from preclinical evaluation of PT-15 for the treatment of obesity at the GTCbio metabolic diseases partnering and deal-making summit in San Francisco. PT-15 is Palatin’s novel, small molecule, melancortin receptor subtype-4 selective agonist that is in development for the treatment of obesity. Administration of PT-15 results in a decreases in food intake that is associated with a significant reduction in body weight and improvement in metabolic parameters in rodent models of obesity. After 11 days of treatment, daily food consumption was reduced by approximately 30-50%, accompanied by up to a 15% reduction in body weight. A significant decrease in blood glucose and plasma insulin levels was also observed. These findings were not associated with adverse effects such as sickness, taste aversion or disruption of normal behavior. Carl Spana, President and CEO of Palatin, stated “the concomitant improvement in metabolic parameters is especially supportive of the potential for PT-15 as treatment for obesity in humans.”
John Hussman: “The key is to allow for uncertainty in every specific instance…the longer the horizon, the narrower the range that uncertainty becomes.”
International Paper’s quarterly results are below expectations. Creative Technology warned MP3 player sales are slowing.
Lear Corp. to cut up to 7,700 jobs globally. Kemet will cut 150 jobs. Cray will eliminate 90 jobs.
Paul Kasriel pointed out that, in the week ended June 15, holdings of Mortgage Backed Securities in large domestically chartered U.S. banks dropped $65 billion.
Bill Gross: “If the asset pumps run dry and the kerosene cans empty, the inevitable path of the U.S. economy will reflect slow growth at best and recession as a realistic alternative. Inflation then would return to low 1% levels in the ensuing years and be pressing the deflationary crossover line. Nominal Treasury paper would enter the 3-4% zone for 10-year maturities and lower still for shorter intermediates.”
The yen fell to an 8-month low and the Japanese 10-year bond hit a 22-month low. The Nikkei 225 fell to a 2-week low. It will be interesting to note the Tankan survey of business sentiment that is released this Friday.
Monday, June 27, 2005
Caught Unaware
6/27/05 Caught Unaware
The saying goes that the market climbs a wall of worry. Unfortunately, there are times when the market is caught flat-footed and possibly is unaware of the extent of the problems lurking around the corner. Such can be the case in an extended period of low volatility.
Do you really believe it is business as usual with gas nearing all-time highs and crude approaching $61 a barrel? When will consumers be impacted by harsher borrowing criteria? Households have spending thresholds. It may not seem possible, but it is. Debt- to-income ratios are reaching alarming levels in the U.S. The vulnerability card should soon be in sight in most areas of the country. The lenders will discover the meaning of stressed cash-flow conditions. Those searching for investment yield will get a kick in the groin. Being unappreciative of potential risks will serve as an ugly lesson. When psychology changes, liquidity can turn on a dime. This can lead to violent swings in asset prices. Profit warnings will increase, and the flight to quality will become a stampede. That will not include our dollar and our Treasury bonds. Gold will glitter.
The press in Detroit report Iraqi Americans were once some of Bush's biggest supporters among Michigan’s Middle Eastern communities. In April 2003, Iraqi Americans jammed a hall in Dearborn to cheer Bush during a speech he delivered celebrating Iraqi freedom. A May 2003 poll by EPIC/MRA showed 72% of local Michigan Iraqis approved of Bush's handling of the war. But now the mood has changed, according to a poll taken of 503 Arab Americans in Michigan. Among all Arab Americans, including Iraqis, 77% gave Bush a negative rating on the Iraq war. The poll was conducted June 13-22 by Lansing-based EPIC/MRA and has an error margin of plus or minus 4.4 percentage points. Among Iraqi Christians, known as Chaldeans, only 31% gave Bush a positive rating on the war, while 66% gave a negative rating.
Rumsfeld stated insurgency in Iraq could continue for up to 12 years? Do you think he really has a clue? In March 2003, do you believe Rumsfeld thought approximately 1,740 of our soldiers would be killed in the ensuing 27 months or that almost 15,000 would be injured? The Administration either was caught unaware of the dangers in Iraq or possibly did not fully appreciate those dangers. Over-confidence has a way of shielding one from the truth.
This week we will read about another Fed interest rate hike and their measured plan going forward. Meanwhile, the convergence of short-term and long-term rates come into sharper view. So many reasons are provided for declining long-term rates: the global savings glut; corporate savings levels; low inflation worries and expectations; excess global capacity; and the carry trade. We are now to believe that low interest rates will be the norm for some time to come. I’ve never believed going with the crowd was profitable over the long-term. The majority view of economists is hardly a road to riches.
The saying goes that the market climbs a wall of worry. Unfortunately, there are times when the market is caught flat-footed and possibly is unaware of the extent of the problems lurking around the corner. Such can be the case in an extended period of low volatility.
Do you really believe it is business as usual with gas nearing all-time highs and crude approaching $61 a barrel? When will consumers be impacted by harsher borrowing criteria? Households have spending thresholds. It may not seem possible, but it is. Debt- to-income ratios are reaching alarming levels in the U.S. The vulnerability card should soon be in sight in most areas of the country. The lenders will discover the meaning of stressed cash-flow conditions. Those searching for investment yield will get a kick in the groin. Being unappreciative of potential risks will serve as an ugly lesson. When psychology changes, liquidity can turn on a dime. This can lead to violent swings in asset prices. Profit warnings will increase, and the flight to quality will become a stampede. That will not include our dollar and our Treasury bonds. Gold will glitter.
The press in Detroit report Iraqi Americans were once some of Bush's biggest supporters among Michigan’s Middle Eastern communities. In April 2003, Iraqi Americans jammed a hall in Dearborn to cheer Bush during a speech he delivered celebrating Iraqi freedom. A May 2003 poll by EPIC/MRA showed 72% of local Michigan Iraqis approved of Bush's handling of the war. But now the mood has changed, according to a poll taken of 503 Arab Americans in Michigan. Among all Arab Americans, including Iraqis, 77% gave Bush a negative rating on the Iraq war. The poll was conducted June 13-22 by Lansing-based EPIC/MRA and has an error margin of plus or minus 4.4 percentage points. Among Iraqi Christians, known as Chaldeans, only 31% gave Bush a positive rating on the war, while 66% gave a negative rating.
Rumsfeld stated insurgency in Iraq could continue for up to 12 years? Do you think he really has a clue? In March 2003, do you believe Rumsfeld thought approximately 1,740 of our soldiers would be killed in the ensuing 27 months or that almost 15,000 would be injured? The Administration either was caught unaware of the dangers in Iraq or possibly did not fully appreciate those dangers. Over-confidence has a way of shielding one from the truth.
This week we will read about another Fed interest rate hike and their measured plan going forward. Meanwhile, the convergence of short-term and long-term rates come into sharper view. So many reasons are provided for declining long-term rates: the global savings glut; corporate savings levels; low inflation worries and expectations; excess global capacity; and the carry trade. We are now to believe that low interest rates will be the norm for some time to come. I’ve never believed going with the crowd was profitable over the long-term. The majority view of economists is hardly a road to riches.
Sunday, June 26, 2005
Struggles And Exit Strategies
6/26/05 Struggles And Exit Strategies
According to the Detroit News, United Auto Workers President Ron Gettelfinger said the union won't be bullied into making health care concessions to General Motors Corp. or Delphi Corp. despite the deep financial problems threatening the automaker and its largest supplier. The union, which represents factory workers at GM and Delphi, will continue talking to both companies but will not take any hurried action. "We're not even thinking about doing anything until we get our arms wrapped around the magnitude of the issue," Gettelfinger said of the situation at GM. "It may turn out that we don't need to do anything at all. It may be smoke and mirrors."
We should keep a watchful eye on Nigeria, the fifth largest oil supplier to the U.S., but more importantly, it provides our country with light, sweet crude oil preferred by refiners.
We consume 20.8 million barrels of oil per day out of the 84 million barrels per day consumed around the globe. Something has to give. Americans are not even 5% of the world’s 6 billion people.
Over the past three decades, no single major oil discovery has been made in our universe.
John Zogby: “Bush’s second-term agenda has been very strange. He is not talking about anything America cares about.” Bush will speak to the American people on Tuesday. Let’s see how many will be watching.
Glen Beaman: "Stubborness does have its helpful features. You always know what you are going to be thinking tomorrow."
In the struggles surrounding Iraq, Social Security, John Bolton, stem cell research and other matters, an exit strategy can be devised. In the struggle over oil supplies, only long-term deals and alliances are viable.
Chevron and CNOOC co-own a project to import LNG from Australia. CNOOC is involved with Chevron in offshore oil production in the Bohai Bay of northeast China. In my view, Unocal will become one more asset partially-owned by both parties. Everyone will come out a winner.
China’s central bank Governor Xiaochuan stated it’s too soon to drop the yuan’s decade-old peg to our dollar.
Mike Burk: “Typically there is a rally during the last 2- 3 trading days of June… I expect the major indices to be higher on July 1 than they were on Friday June 24.”
Alcoa announced that 6,500 more jobs would be cut from their payroll.
According to the Detroit News, United Auto Workers President Ron Gettelfinger said the union won't be bullied into making health care concessions to General Motors Corp. or Delphi Corp. despite the deep financial problems threatening the automaker and its largest supplier. The union, which represents factory workers at GM and Delphi, will continue talking to both companies but will not take any hurried action. "We're not even thinking about doing anything until we get our arms wrapped around the magnitude of the issue," Gettelfinger said of the situation at GM. "It may turn out that we don't need to do anything at all. It may be smoke and mirrors."
We should keep a watchful eye on Nigeria, the fifth largest oil supplier to the U.S., but more importantly, it provides our country with light, sweet crude oil preferred by refiners.
We consume 20.8 million barrels of oil per day out of the 84 million barrels per day consumed around the globe. Something has to give. Americans are not even 5% of the world’s 6 billion people.
Over the past three decades, no single major oil discovery has been made in our universe.
John Zogby: “Bush’s second-term agenda has been very strange. He is not talking about anything America cares about.” Bush will speak to the American people on Tuesday. Let’s see how many will be watching.
Glen Beaman: "Stubborness does have its helpful features. You always know what you are going to be thinking tomorrow."
In the struggles surrounding Iraq, Social Security, John Bolton, stem cell research and other matters, an exit strategy can be devised. In the struggle over oil supplies, only long-term deals and alliances are viable.
Chevron and CNOOC co-own a project to import LNG from Australia. CNOOC is involved with Chevron in offshore oil production in the Bohai Bay of northeast China. In my view, Unocal will become one more asset partially-owned by both parties. Everyone will come out a winner.
China’s central bank Governor Xiaochuan stated it’s too soon to drop the yuan’s decade-old peg to our dollar.
Mike Burk: “Typically there is a rally during the last 2- 3 trading days of June… I expect the major indices to be higher on July 1 than they were on Friday June 24.”
Alcoa announced that 6,500 more jobs would be cut from their payroll.
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