10/13/05 Consequences And Circumstances
According to the Hindu news, Kazakhstan is believed to have discouraged India from making a rebid for acquiring PetroKazakhstan.
Kazakhstan's Minister for Energy and Mineral Resources V Shkolnik had last week told Petroleum Minister Mani Shankar Aiyar in no uncertain terms that Kazakhstan was looking at nationalising oil properties being sold by foreign companies and would not want ownership to pass on to another foreigner, sources stated.
Kazakhstan's upper house of parliament, the Senate, passed a bill on Wednesday to allow the state to intervene in the sale of foreign-held stakes in oil firms, a move that may hinder CNPC's bid for PetroKazakhstan. The bill, which also seeks to limit property rights for "strategic resources" like oil and gas assets, was passed unanimously by the lower house last week. It now needs President Nursultan Nazarbayev's signature to become law.
China National Petroleum Corp, which has made an agreed takeover offer for Canada-based PetroKazakhstan, is confident it will see the deal through despite the move by Kazakhstan's upper house of parliament, said Tong Xiaoguang, an advisor to CNPC International -- the wholly owned unit of CNPC which is conducting the deal. "Several of our company's main leaders are gone to Kazakhstan for the PetroKazakhstan takeover deal," said Tong, who is also a former vice president of CNPC International.
Tong reaffirmed to Reuters by telephone that CNPC had reached an understanding with the Kazakh government on the transaction. "Before deciding to acquire the company, CNPC communicated with the Kazakh government, and they allowed us to go ahead. As for what is on the mind of the (Kazakh) parliament, I'm not sure," said Tong. "If the Kazakh government had not given the OK for us to bid for the company, why we would bother to do it to begin with?," he asked.
I know it is sundown and the start of Yom Kippur, and this may be the wrong time to discuss consequences; however, when governments or any other entity attempt to reneg on an agreement, it is not enough to be civil and put on a face that does not reflect reality. As such, in my opinion, CNPC needs to dole out consequences to those attempting to create harm. This is not a game. Thugs need to be taught a lesson they will never ever forget.
Joseph Addison: "When a man is made up wholly of the dove, without the least grain of the serpent in his composition, he becomes ridiculous in many circumstances of life, and very often discredits his best actions."
According to an NBC/WSJ poll, for the first time in the poll, Bush’s approval rating has sunk below 40 percent, while the percentage believing the country is heading in the right direction has dipped below 30 percent. In addition, a sizable plurality prefers a Democratic-controlled Congress, and just 29 percent think Supreme Court nominee Harriet Miers is qualified to serve on the nation’s highest court.
Golda Meier: "There will be no peace in the Middle East until the Arabs love their children more than they hate the Jews."
Google Inc. and Comcast Corp are in serious discussions with Time Warner Inc. about buying a minority stake in America Online, the Wall Street Journal reported on its Web site Wednesday, citing people familiar with the situation. The negotiations focus on AOL's Web portal, rather than its dial-up Internet access business, the paper reported.
The Energy Dept stated that heating bills would be 48% higher this winter.
10-year Treasury bonds closed at a six-month high yield of 4.45%. The higher the yield the more mortgage rates will rise. Those with adjustable rate mortgages may begin to feel a pinch.
Research shows that credit card debt in America has almost tripled since1989 and increased 31 percent since 2000. Americans now owe some $800 billion in credit card debt. In addition, owing largely to job instability and medical costs, bankruptcies rose from 616,000 in 1989 to over 1.8 million in 2004. However, too little is known about the causes of America's household debt crisis. Existing data sources tracking debt, such as the Federal ReserveBoard's triennial Survey of Consumer Finances, provide limited information and do not answer basic questions about how long households have been in debt and about the type of charges that lead to outstanding balances. Prior to the survey findings presented in The Plastic Safety Net, there have been few studies that analyze how households are using credit cards and how they are managing their debt. "American families are facing financial hardship not experienced for generations, and we commissioned this survey to tell us precisely why they are turning to credit cards so often," says Tamara Draut, Director of the Economic Opportunity Program at Demos and co-author of the report. "The results are clear: wages have stagnated while medical and housing costs have skyrocketed, and if confronted with a layoff or health emergency there are few, if any, personal or public safety nets adequate enough to help in a crisis. Households are turning to high-cost credit cards to keep afloat." Key survey findings from The Plastic Safety Net: - $8,650 is the average credit card debt of a low- and middle-income indebted household in America. - 59 percent of respondents were in credit debt for longer than one year, with an average length of just over three and a half years. - Seven out of 10 low- and middle-income households reported using their credit cards as a safety net -- relying on credit to pay for car repairs, basic living expenses, medical expenses or house repairs. - One out of three households reported using credit cards to cover basic living expenses on average four out of the last 12 months; households that reported a recent job loss or unemployment, and those without health insurance in the last three years, were almost twice as likely to use credit cards for basic living expenses. - 20 percent of survey homeowners had paid off some credit card debt with a mortgage refinance in the last three years, reducing their home equity $12,000 on average. Further, these households still had average credit card debt over $14,000. As a result, they were carrying 18% more debt than homeowners who had refinanced a mortgage but not paid down credit card debt -- even though their incomes were almost identical. In other words, they were trading unsecured credit card debt for higher mortgage debt secured by their home. The Plastic Safety Net also reports that, as Americans are increasingly relying on credit cards to pay for essentials that wages no longer cover, reliance on credit cards is having a multiplying effect that is creating millions of "debt-stressed" families: - 47 percent of households had been called by a bill collector. - Almost half missed or were late with a payment in the last year, with nearly a quarter of households reporting paying a late fee at least one or two times in the past year. - In addition to charging late fees ranging from $30 and $39, most issuers also penalize cardholders for late payments by increasing the interest rate on the account two- or three-fold, often after only one late payment. A household with the average amount of credit card debt in the survey ($8,650) would pay an additional $1,100 in costs each year if their card's interest rate were increased from the typical 12 percent to the average 25 percent "default rate" for one late payment. "American families are losing the fight against an economy and lending practices that are working against them," said Mark Pearce, President of the Center for Responsible Lending. "It's time for Washington to address this crisis head-on and create policy that protects, and promotes economic vitalityfor all American households."
U.S. 5-year Treasury notes hit a yield of 4.27%, the highest in 3 years.
Countrywide Financial closed at a new 52-week low.
Plato: "Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws."
Wednesday, October 12, 2005
Tuesday, October 11, 2005
Updating
10/12/05 Updating
Investor's Business Daily and TechnoMetrica Market Intelligence stated their economic optimism index rose to 42.0 from a record low of 41.2 in September in the aftermath of Hurricane Katrina. Even a baby step is better than the alternative. Unfortunately, anything below 50 still reflects a lack of optimism.
Michael Asbaugh: "Yet with last week's losses, both the S&P and the Dow are positioned under their major moving averages, and the Nasdaq is getting a good solid test of its 200-day moving average. As suggested repeatedly last week, a more cautious approach to the U.S. markets is probably well advised until better signs of a bottom are in place."
When it comes to Habitat for Humanity, Jimmy Carter builds houses. Bush creates photo-ops.
Microsoft Corp. and RealNetworks Inc. stated yesterday they have reached three agreements valued at $761 million in favor of RealNetworks to settle an antitrust lawsuit and create a new partnership to develop and promote digital music and games. It seems that every quarter Microsoft is settling lawsuits out of court for hundreds of millions of dollars, and, in the case, of Sun Microsystems, for a few billion dollars. There is something wrong with this picture.
The Federal Trade Commission has cleared Kirk Kerkorian to increase his stake in GM from the present 9.53% to more than 9.9% and to seek a seat on the company's board of directors.
Ten-year treasury bonds traded up to a 4.40% yield on Tuesday, and gold traded at the $480 an ounce level. Crude rallied back to the $63 a barrel mark.
According to the notes released yesterday of last month's FOMC meeting, the majority of Fed officials said they did not believe the longer-term growth path of the economy was affected by the hurricane, but did think upside risks to inflation had increased. It's taken two years for the Fed members to seriously worry about the risk of inflation. In my view, they have come very late to the party. As such, since I have little faith in the ability of government employees, I will turn my vigil to deflation rather than inflation.
In New Delhi, Mittal stated they are awaiting clarity in Kazakhstan law before deciding on making a revised bid for PetroKazakhstan."Kazakhstan has amended its oil policy and has preemption rights in any deal where foreign companies acquire Kazakh firms. We will wait for clarity before deciding on the rebid," Mittal Group Chairman and CEO Lakshmi N Mittal told reporters here.
Tolstoi: "The more is given the less the people will work for themselves, and the less they work the more their poverty will increase."
As anticipated, China's planning agency reported Tuesday that the country's gross domestic product grew by 9.4 percent in the first nine months of the year, and is forecast to grow by 9.2 percent for the full year.
Bertrand Russell: "It is preoccupation with possession, more than anything else, that prevents men from living freely and nobly."
The damaging effects of HurricaneKatrina and Hurricane Rita, rising heating oil prices, and escalating housingcosts present challenges for the 2005 holiday retail season, according toDeloitte Research's Leading Index of Consumer Spending and "Outlook for theHolidays" report. High inventories and moderated consumer demand will driveretailers to pursue more substantial promotional strategies. "Consumers have done a heroic job in holding up their end of the economy over the past eight months, with real consumer spending rising by four percent, despite real wages declines, falling savings rates, slow employment growth, and a rising tax burden," says Carl Steidtmann, chief economist of Deloitte Research and author of the monthly index. "Continued weakness in the index poses a challenging sales environment for retailers as they move intothe all important holiday season."
Third Wave Technologies Inc. announced that it has filed two patent suits in federal court in Madison, Wis. The company last Friday filed suit against Digene Corp., seeking a court ruling supporting Third Wave's right to sell its human papilloma virus (HPV) products. Third Wave also filed suit against Chiron Corp., Bayer Corp., and Bayer HealthCare LLC asking for a similar ruling about its right to sell its hepatitis C virus products. Chiron is the owner of several patents relating to HCV; Bayer is its licensee for clinical diagnostics.
Donald Kohn: "The need to compete for business in a globalized economy has quite likely raised the efficiency and flexibility of economic systems as well as reinforcing the requirement for noninflationary monetary policies... the extent and duration of (globalization's) damping influence on inflation are open questions... Inflation will still rise if central banks allow economies to run 'too hot' -- beyond sustainable potential -- and such a pickup could become self-perpetuating if it became embedded in inflation expectations."
Natural gas prices are expected to rise at least $59 a month to an average of nearly $200 starting in November, according to the Michigan Public Service Commission’s latest Winter Energy Appraisal report released in Lansing today.
Norman Cousins: "People are never more insecure than when they become obsessed with their fears at the expense of their dreams."
Investor's Business Daily and TechnoMetrica Market Intelligence stated their economic optimism index rose to 42.0 from a record low of 41.2 in September in the aftermath of Hurricane Katrina. Even a baby step is better than the alternative. Unfortunately, anything below 50 still reflects a lack of optimism.
Michael Asbaugh: "Yet with last week's losses, both the S&P and the Dow are positioned under their major moving averages, and the Nasdaq is getting a good solid test of its 200-day moving average. As suggested repeatedly last week, a more cautious approach to the U.S. markets is probably well advised until better signs of a bottom are in place."
When it comes to Habitat for Humanity, Jimmy Carter builds houses. Bush creates photo-ops.
With tens of millions of people affected by natural disasters over the past 10 months, the American public "may beAccording to Supermarket News, at least three investor consortiums interested in acquiring Albertsons are scheduled to make presentations this week to corporate management, industry observers said last week. The three consortiums, which trade sources said have completed due diligence and are likely to present offers this week, are: 1) Thomas H. Lee Partners, Boston; Bain Capital, Boston; and Warburg Pincus, New York, which are said to be receiving financial input from Morgan Stanley, Banc of America Securities and J.P. Morgan; 2) Kohlberg Kravis Roberts & Co., New York; Apollo Management, New York; and Texas Pacific Group, San Antonio, which are reportedly working with Deutsche Bank, Citigroup and Credit Suisse First Boston; and 3) Cerberus Group, New York, and Kimco Realty Corp., New Hyde Park, N.Y., which sources said are receiving financial advice from UBS and Wachovia Corp. Sources told SN that Yucaipa Cos., Los Angeles, may be involved with one of the groups, but would like to have operational control in any buyout and may prefer to make its own bid to avoid potential conflicts with partners in the future.
reaching an unprecedented level of 'compassion fatigue,'" according to the
president of World Vision.
"These last few months may be unprecedented in regard to human suffering
from earthquakes, hurricanes, droughts and other emergencies," says Richard
Stearns, president and CEO of the U.S. offices of the international
Christian humanitarian organization. "Some people probably are becoming
numb to these tragedies. What we call 'compassion fatigue' may be setting
in."
Microsoft Corp. and RealNetworks Inc. stated yesterday they have reached three agreements valued at $761 million in favor of RealNetworks to settle an antitrust lawsuit and create a new partnership to develop and promote digital music and games. It seems that every quarter Microsoft is settling lawsuits out of court for hundreds of millions of dollars, and, in the case, of Sun Microsystems, for a few billion dollars. There is something wrong with this picture.
The Federal Trade Commission has cleared Kirk Kerkorian to increase his stake in GM from the present 9.53% to more than 9.9% and to seek a seat on the company's board of directors.
Ten-year treasury bonds traded up to a 4.40% yield on Tuesday, and gold traded at the $480 an ounce level. Crude rallied back to the $63 a barrel mark.
According to the notes released yesterday of last month's FOMC meeting, the majority of Fed officials said they did not believe the longer-term growth path of the economy was affected by the hurricane, but did think upside risks to inflation had increased. It's taken two years for the Fed members to seriously worry about the risk of inflation. In my view, they have come very late to the party. As such, since I have little faith in the ability of government employees, I will turn my vigil to deflation rather than inflation.
In New Delhi, Mittal stated they are awaiting clarity in Kazakhstan law before deciding on making a revised bid for PetroKazakhstan."Kazakhstan has amended its oil policy and has preemption rights in any deal where foreign companies acquire Kazakh firms. We will wait for clarity before deciding on the rebid," Mittal Group Chairman and CEO Lakshmi N Mittal told reporters here.
Tolstoi: "The more is given the less the people will work for themselves, and the less they work the more their poverty will increase."
As anticipated, China's planning agency reported Tuesday that the country's gross domestic product grew by 9.4 percent in the first nine months of the year, and is forecast to grow by 9.2 percent for the full year.
Bertrand Russell: "It is preoccupation with possession, more than anything else, that prevents men from living freely and nobly."
The damaging effects of HurricaneKatrina and Hurricane Rita, rising heating oil prices, and escalating housingcosts present challenges for the 2005 holiday retail season, according toDeloitte Research's Leading Index of Consumer Spending and "Outlook for theHolidays" report. High inventories and moderated consumer demand will driveretailers to pursue more substantial promotional strategies. "Consumers have done a heroic job in holding up their end of the economy over the past eight months, with real consumer spending rising by four percent, despite real wages declines, falling savings rates, slow employment growth, and a rising tax burden," says Carl Steidtmann, chief economist of Deloitte Research and author of the monthly index. "Continued weakness in the index poses a challenging sales environment for retailers as they move intothe all important holiday season."
Third Wave Technologies Inc. announced that it has filed two patent suits in federal court in Madison, Wis. The company last Friday filed suit against Digene Corp., seeking a court ruling supporting Third Wave's right to sell its human papilloma virus (HPV) products. Third Wave also filed suit against Chiron Corp., Bayer Corp., and Bayer HealthCare LLC asking for a similar ruling about its right to sell its hepatitis C virus products. Chiron is the owner of several patents relating to HCV; Bayer is its licensee for clinical diagnostics.
Donald Kohn: "The need to compete for business in a globalized economy has quite likely raised the efficiency and flexibility of economic systems as well as reinforcing the requirement for noninflationary monetary policies... the extent and duration of (globalization's) damping influence on inflation are open questions... Inflation will still rise if central banks allow economies to run 'too hot' -- beyond sustainable potential -- and such a pickup could become self-perpetuating if it became embedded in inflation expectations."
Natural gas prices are expected to rise at least $59 a month to an average of nearly $200 starting in November, according to the Michigan Public Service Commission’s latest Winter Energy Appraisal report released in Lansing today.
Norman Cousins: "People are never more insecure than when they become obsessed with their fears at the expense of their dreams."
A Closer Look
10/11/05 A Closer Look
I find that a good way to get a closer look at the housing market is to peek at the results for Countrywide Financial. The company provided this information for the month of September as well as forthe entire third quarter:
Operational highlights for the month of September and the third quarter of 2005 included the following: * Mortgage loan fundings for the month of September reached $49 billion, a 58 percent increase from September 2004. For the third quarter, mortgage loan fundings were a record $146 billion, rising 59 percent over last year's third quarter. Year-to-date mortgage loan fundings were $358 billion. Monthly purchase volume was $23 billion, 35 percent greater than September 2004. For the third quarter, purchase volume was a record $69 billion, up 32 percent over the same period a year ago. Year-to-date purchase activity totaled $171 billion. Adjustable-rate loan fundings for the month were $24 billion, up 14 percent from September 2004. For the quarter, adjustable-rate loan fundings were $75 billion, an increase of 32 percent over last year. Year-to-date adjustable-rate fundings totaled $190 billion. Home equity loan fundings for September advanced 21 percent over last year to $3.8 billion, bringing home equity production for the quarter to $12 billion which was up 28 percent over last year's third quarter. Year-to-date home equity loan fundings reached $31 billion. Nonprime loan fundings totaled $4.0 billion in September, which compares to $3.9 billion for the same period last year. For the third quarter, nonprime fundings reached $12 billion, a gain of 2 percent over last year's third quarter. Year-to-date nonprime fundings totaled $32 billion. On a consolidated basis, Countrywide funded $9.9 billion in pay-option ARM loans and $8.8 billion in interest-only loans for the month of September 2005. This compares to $2.8 billion and $6.3 billion, respectively, for the same periods a year ago. Average daily mortgage loan application activity in September was $3.0 billion, 45 percent higher than the September 2004 level. The mortgage loan pipeline advanced by 51 percent from September 30, 2004 to $77 billion at September 30, 2005. The mortgage loan servicing portfolio continued its uninterrupted growth, reaching a new high of $1.05 trillion at September 30, 2005. This is an increase of $262 billion, or 33 percent, from September 2004. Delinquencies in the servicing portfolio rose 35 basis points from August 2005 to 4.03 percent at the end of September. This increase is primarily attributed to the forbearance granted to customers in the areas affected by Hurricane Katrina and normal seasonal fluctuations.
Further confirming the robust housing market, D.R. Horton stated that 4th quarter comp net sales orders rose 33%. The housing market will not rollover without a fight. Low interest rates are still spurring demand in many sections of the country.
The IEA estimates that global oil demand should approximate 1.75 million barrels a day in 2006. That should keep oil prices at historically high levels.
The Nikkei rose 2.5%, the biggest one day percentage increase in a year.
Inco offered to buy Falconbridge in a cash and stock deal representing a 9% premium over yesterday's closing price. Boards of both companies approved the deal.
Natural gas closed at a 2-week low of $12.975 per million BTU. Crude ended at $61.80 per barrel.
Xilinx and International Rectifier issued warnings for the quarter.
Sugar prices have recently hit 7-year highs. More and more suger is being blended into the manufacture of gasoline. Flexible fuel cars are the rage in Brazil. The cars offer fuel savings as well as appealing to those who wish to drive a vehicle on cleaner fuel. According to the National Ethanol Vehicle Association, there are about 4 million flex cars in the U.S. but there are 14 states without even one ethanol pump.
Due to inflation, next year's Social Security benefits will rise about 3.8% or approximately an additional $36 per month.
Douglas Malloch: "The river belongs to the Nation,
the Levee they say, to the State;
the Government runs navigation,
the Commonwealth, though, pays the freight.
Now, here is the problem that's heavy--
Please, which is the right or the wrong--
When the water runs over the Levee,
To whom does the river belong?"
I find that a good way to get a closer look at the housing market is to peek at the results for Countrywide Financial. The company provided this information for the month of September as well as forthe entire third quarter:
Operational highlights for the month of September and the third quarter of 2005 included the following: * Mortgage loan fundings for the month of September reached $49 billion, a 58 percent increase from September 2004. For the third quarter, mortgage loan fundings were a record $146 billion, rising 59 percent over last year's third quarter. Year-to-date mortgage loan fundings were $358 billion. Monthly purchase volume was $23 billion, 35 percent greater than September 2004. For the third quarter, purchase volume was a record $69 billion, up 32 percent over the same period a year ago. Year-to-date purchase activity totaled $171 billion. Adjustable-rate loan fundings for the month were $24 billion, up 14 percent from September 2004. For the quarter, adjustable-rate loan fundings were $75 billion, an increase of 32 percent over last year. Year-to-date adjustable-rate fundings totaled $190 billion. Home equity loan fundings for September advanced 21 percent over last year to $3.8 billion, bringing home equity production for the quarter to $12 billion which was up 28 percent over last year's third quarter. Year-to-date home equity loan fundings reached $31 billion. Nonprime loan fundings totaled $4.0 billion in September, which compares to $3.9 billion for the same period last year. For the third quarter, nonprime fundings reached $12 billion, a gain of 2 percent over last year's third quarter. Year-to-date nonprime fundings totaled $32 billion. On a consolidated basis, Countrywide funded $9.9 billion in pay-option ARM loans and $8.8 billion in interest-only loans for the month of September 2005. This compares to $2.8 billion and $6.3 billion, respectively, for the same periods a year ago. Average daily mortgage loan application activity in September was $3.0 billion, 45 percent higher than the September 2004 level. The mortgage loan pipeline advanced by 51 percent from September 30, 2004 to $77 billion at September 30, 2005. The mortgage loan servicing portfolio continued its uninterrupted growth, reaching a new high of $1.05 trillion at September 30, 2005. This is an increase of $262 billion, or 33 percent, from September 2004. Delinquencies in the servicing portfolio rose 35 basis points from August 2005 to 4.03 percent at the end of September. This increase is primarily attributed to the forbearance granted to customers in the areas affected by Hurricane Katrina and normal seasonal fluctuations.
Further confirming the robust housing market, D.R. Horton stated that 4th quarter comp net sales orders rose 33%. The housing market will not rollover without a fight. Low interest rates are still spurring demand in many sections of the country.
The IEA estimates that global oil demand should approximate 1.75 million barrels a day in 2006. That should keep oil prices at historically high levels.
The Nikkei rose 2.5%, the biggest one day percentage increase in a year.
Inco offered to buy Falconbridge in a cash and stock deal representing a 9% premium over yesterday's closing price. Boards of both companies approved the deal.
Natural gas closed at a 2-week low of $12.975 per million BTU. Crude ended at $61.80 per barrel.
Xilinx and International Rectifier issued warnings for the quarter.
Sugar prices have recently hit 7-year highs. More and more suger is being blended into the manufacture of gasoline. Flexible fuel cars are the rage in Brazil. The cars offer fuel savings as well as appealing to those who wish to drive a vehicle on cleaner fuel. According to the National Ethanol Vehicle Association, there are about 4 million flex cars in the U.S. but there are 14 states without even one ethanol pump.
Due to inflation, next year's Social Security benefits will rise about 3.8% or approximately an additional $36 per month.
Douglas Malloch: "The river belongs to the Nation,
the Levee they say, to the State;
the Government runs navigation,
the Commonwealth, though, pays the freight.
Now, here is the problem that's heavy--
Please, which is the right or the wrong--
When the water runs over the Levee,
To whom does the river belong?"
Monday, October 10, 2005
Nature As A Risk
10/10/05 Nature As A Risk
If Columbus were sailing the seas today, he would need to be careful where he put into port. Nature and its impact on the planet is quite different today. In my view, there is a lack of appreciation of this specific risk in the management of equity and debt portfolios. Unless you had a real reason to own property and casualty insurance stocks and/or reinsurance companies, I would steer clear of them. If you were looking at a chart of the number of natural disasters over the last three years, the trend would be clearly visible. It's not the recent days of the horrible earthquake in Pakistan/India, the mudslides in Guatemala, or the floods from North Carolina to New Hampshire. The world's growing population is altering nature's landscape, and that change is decidedly negative. I don't know where the next natural disaster will occur, but I would not dismiss this risk as I would not dismiss the growing risk created by derivatives.
It is not unsual for me to disagree with analysts, and today's take by Lehman on Albertson's is no exception. According to marketwatch.com, Lehman Brothers cut supermarket chain Albertson's, Inc. to underweight from neutral weight, saying it believes the company will break up as no buyer will want to purchase and operate all of its assets in the long term. The broker told clients it values most of the stores as ongoing businesses rather than as pure real estate since its analysis shows the ongoing business value as higher. In my view, the parts are clearly worth more than the whole and that's what would be enticing to a financial buyer. The 750 free-standing drug stores alone have significant worth. Just look at the purchase price realized by JC Penney in its sale of Eckerd's, and the latter was not operating smoothly. In the end, the parts will drive the price and not the operating company by itself.
Lincoln Financial will purchase Jefferson Pilot for $7.5 billion in cash and stock.
U.S. trade rep Portman offered to end farm export subsidies in 5 years and substantially reduce U.S. domestic subsidies. I'm sure Portman is sincere. In my view, most of these reductions will not to come to pass. I've had significant experience with farm politics and I would not underestimate the power of the farm bloc, and particularly, the sugar growers.
According to the Detroit Free Press, GM could be forced to pay the Delphi pensions and that would cost $12 billion. In addition, it is likely that at least 11 plants will be closed, creating large layoffs.
There are 16,000 homes listed for sale in Las Vegas, and that is up from 10,000 last year.
It was over a year ago that I suggested going long the Nikkei and shorting the Dow as a hedge. In answer to some emails, I would not alter that position. I consider it a core part of a portfolio.
John Hussman: "Wednesday was particularly decisive – to an extent that I closed the bulk of our remaining exposure to market fluctuations in the Strategic Growth Fund about mid-afternoon. There has to be a lot wrong with market action to provoke me to increase hedges when the market is down rather than up. There was a lot wrong on Wednesday – it was singularly the worst technical showing I can recall in years...We don't have sufficient reason to accept broad market risk. Both valuations and market action are unfavorable here."
This morning gold hit a new 18-year high of $480 an ounce.
Today, crude has stabilized aroud $62 a barrel.
Joann Wolfgang von Goethe: "Nature knows no pause in progress and development, and attaches her curse on all inaction."
If Columbus were sailing the seas today, he would need to be careful where he put into port. Nature and its impact on the planet is quite different today. In my view, there is a lack of appreciation of this specific risk in the management of equity and debt portfolios. Unless you had a real reason to own property and casualty insurance stocks and/or reinsurance companies, I would steer clear of them. If you were looking at a chart of the number of natural disasters over the last three years, the trend would be clearly visible. It's not the recent days of the horrible earthquake in Pakistan/India, the mudslides in Guatemala, or the floods from North Carolina to New Hampshire. The world's growing population is altering nature's landscape, and that change is decidedly negative. I don't know where the next natural disaster will occur, but I would not dismiss this risk as I would not dismiss the growing risk created by derivatives.
It is not unsual for me to disagree with analysts, and today's take by Lehman on Albertson's is no exception. According to marketwatch.com, Lehman Brothers cut supermarket chain Albertson's, Inc. to underweight from neutral weight, saying it believes the company will break up as no buyer will want to purchase and operate all of its assets in the long term. The broker told clients it values most of the stores as ongoing businesses rather than as pure real estate since its analysis shows the ongoing business value as higher. In my view, the parts are clearly worth more than the whole and that's what would be enticing to a financial buyer. The 750 free-standing drug stores alone have significant worth. Just look at the purchase price realized by JC Penney in its sale of Eckerd's, and the latter was not operating smoothly. In the end, the parts will drive the price and not the operating company by itself.
Lincoln Financial will purchase Jefferson Pilot for $7.5 billion in cash and stock.
U.S. trade rep Portman offered to end farm export subsidies in 5 years and substantially reduce U.S. domestic subsidies. I'm sure Portman is sincere. In my view, most of these reductions will not to come to pass. I've had significant experience with farm politics and I would not underestimate the power of the farm bloc, and particularly, the sugar growers.
According to the Detroit Free Press, GM could be forced to pay the Delphi pensions and that would cost $12 billion. In addition, it is likely that at least 11 plants will be closed, creating large layoffs.
There are 16,000 homes listed for sale in Las Vegas, and that is up from 10,000 last year.
It was over a year ago that I suggested going long the Nikkei and shorting the Dow as a hedge. In answer to some emails, I would not alter that position. I consider it a core part of a portfolio.
John Hussman: "Wednesday was particularly decisive – to an extent that I closed the bulk of our remaining exposure to market fluctuations in the Strategic Growth Fund about mid-afternoon. There has to be a lot wrong with market action to provoke me to increase hedges when the market is down rather than up. There was a lot wrong on Wednesday – it was singularly the worst technical showing I can recall in years...We don't have sufficient reason to accept broad market risk. Both valuations and market action are unfavorable here."
This morning gold hit a new 18-year high of $480 an ounce.
Today, crude has stabilized aroud $62 a barrel.
Joann Wolfgang von Goethe: "Nature knows no pause in progress and development, and attaches her curse on all inaction."
Sunday, October 09, 2005
Round Numbers
10/9/05 Round Numbers
The M3 money supply is about to reach the $10 trillion mark. When you have year-to-date M3 expanding at a 7% rate, how can you expect inflation to subside and the dollar to retain value in the long-term? The U.S. federal debt will soon touch the $8 trillion level, and that excludes liabilities for Medicare and Medicaid in the coming years. It is a matter of pure math that the interest on the growing debt will prevent deficits from decreasing. Should there be a recession over the horizon, then the tax receipts will plunge. Will the Congress pass legislation to cut spending to offset the decline in tax receipts? I'd prefer the odds on winning the lottery.
The Economic Cycle Research Institute said its Future Inflation Gauge rose to 122.7 last month, its highest since June 2000, the tail end of the late 1990s economic boom. August's reading was revised down to 120.7. However, all that was last month. In the just-in-time market world, last week crude dropped $4.40 a barrel, unleaded gas declined 13%, and natural gas had a downdraft of 5%. These are not insignificant drops. Will they be a mere blip in the long-term rise of energy products? Part of the answer depends on the winter weather for natural gas and heating oil usage. As for gasoline and crude, the peak driving period is behind us. However, Spring is only six months from now.
Inflation in the 12 eurozone nations rose to 2.5% in September. As such, the ECB may have a need to raise its 2% benchmark rate in the coming months. This possibility might provide a further lift to the euro.
Delphi, the largest U.S. auto parts manufacturer, filed for bankruptcy protection. This action was anticipated; however, it will have an impact on employee wages and benefits as well as layoffs.
On this Sunday morning, I would like to re-visit a statement that Freddie Mac recently made. The company mentioned that 74% of Freddie Mac-owned loans that were refinanced in the second quarter resulted in new mortgages with loan amounts that were at least 5% higher than the original mortgage balances, the highest such share since early 2000. This statement reflects significantly on the rise of real estate prices as well as the increasing spending appetite on the part of consumers. The last chapter has not been written.
Thomas Jefferson: "I sincerely believe that banking establishments are more dangerous than standing armies, and that the principles of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."
The M3 money supply is about to reach the $10 trillion mark. When you have year-to-date M3 expanding at a 7% rate, how can you expect inflation to subside and the dollar to retain value in the long-term? The U.S. federal debt will soon touch the $8 trillion level, and that excludes liabilities for Medicare and Medicaid in the coming years. It is a matter of pure math that the interest on the growing debt will prevent deficits from decreasing. Should there be a recession over the horizon, then the tax receipts will plunge. Will the Congress pass legislation to cut spending to offset the decline in tax receipts? I'd prefer the odds on winning the lottery.
The Economic Cycle Research Institute said its Future Inflation Gauge rose to 122.7 last month, its highest since June 2000, the tail end of the late 1990s economic boom. August's reading was revised down to 120.7. However, all that was last month. In the just-in-time market world, last week crude dropped $4.40 a barrel, unleaded gas declined 13%, and natural gas had a downdraft of 5%. These are not insignificant drops. Will they be a mere blip in the long-term rise of energy products? Part of the answer depends on the winter weather for natural gas and heating oil usage. As for gasoline and crude, the peak driving period is behind us. However, Spring is only six months from now.
Inflation in the 12 eurozone nations rose to 2.5% in September. As such, the ECB may have a need to raise its 2% benchmark rate in the coming months. This possibility might provide a further lift to the euro.
Delphi, the largest U.S. auto parts manufacturer, filed for bankruptcy protection. This action was anticipated; however, it will have an impact on employee wages and benefits as well as layoffs.
On this Sunday morning, I would like to re-visit a statement that Freddie Mac recently made. The company mentioned that 74% of Freddie Mac-owned loans that were refinanced in the second quarter resulted in new mortgages with loan amounts that were at least 5% higher than the original mortgage balances, the highest such share since early 2000. This statement reflects significantly on the rise of real estate prices as well as the increasing spending appetite on the part of consumers. The last chapter has not been written.
Thomas Jefferson: "I sincerely believe that banking establishments are more dangerous than standing armies, and that the principles of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."
Saturday, October 08, 2005
If Only
10/8/05 If Only
If it is possible that Bush truly gets his directions from God, I wish he'd request having earnings from jobs exceed inflation. Do you really care whether there are more or less leisure and hspitality workers, food employees, or amusement and gambling jobs? If the factory workweek and overtime remains unchanged and wages can't even rise a plug nickel, isn't that more vital. Year over year average hourly earnings rose 2.6%. This compares with a Consumer Price Index that rose 3.6% for the 12 months ended August. How come that doesn't bother Bush?
During the 12 months ended August, the year-over-year gain in the CPI exceeded the year-over-year growth in average hourly earnings in all but one of those months. The average worker, the man or woman on Main Street, busts their ass at work and gets little reward and certainly little appreciation. An increasing number cannot afford health care. Every day the media focuses on the price of gas, heating oil, and the housing bubble. I too am guilty of this. More attention needs to paid to take-home pay versus the inflation rate.
Do you think those shopping at Tiffany's also shop at Big Lots or even have heard of Big Lots? The latter is closing 126 underperforming stores and all 41 of its freestanding furniture outlets.
In the most recent AP-Ipsos poll, the number of people who strongly approve of Bush's job performance has eroded over the last year, most notably among key groups like evangelical voters, down from 49 percent who strongly approved in January to 33 percent now; Republican men, down from 57 percent to 42 percent; Protestants, down from 36 percent to 25 percent; and Southerners, down from 32 percent to 22 percent.
While four of five Republicans say they approve of Bush's job performance, enthusiasm in that support has dipped over the last year.
In December 2004, soon after his re-election, nearly two-thirds of Republicans strongly approved of his job performance. The AP-Ipsos survey found that just half in his own party feel that way now. Where is Pastor Parsley now?
"I think we've hit the tipping point, and think that in many areas you're seeing a leveling off of prices," Countrywide CEO Angelo Mozilo told Reuters at this week's meeting of the Business Council, which includes chief executives of various companies.
Mozilo said he thinks housing prices will especially moderate in areas where there has been speculative buying in condominiums such as South Florida.
"Wherever you see speculators, no matter where it is in the country, that's trouble, because as soon as there's a little blip, they're gone," Mozilo said.
Media reports from India maintain that, after a failed attempt at buying PetroKazakhstan, theLN Mittal group and Oil and Natural Gas Corporation(ONGC) are now exploring investment opportunities inNigeria. Nigerian President Olusegun Obasabjo has written to the Mittals seeking investments in export-oriented refineries, liquefied natural gas projects and railways. The Indian government is using the opportunity to seek exploration and production (E&P)contracts in the African nation. The Mittal group is now facilitating meetings in Indiafor a ministerial delegation from Nigeria, which is expected to arrive on Monday. The delegation will hold discussions with ONGC regarding E&P projects on Tuesday. Only recently, ONGC was outbid for some oil exploration sites in Nigeria.
Adelaide's housing market has recorded its first fall in house prices in five years. A 1.09 per cent fall in the September quarter ends the run of 19 consecutive quarters in Adelaide in which prices had grown or remained constant. The last time house prices fell was in the September 2000 quarter.
State Government figures released to The Advertiser show the Adelaide median house price fell from $275,000 to $272,000 in the September quarter. For the year, prices grew 3.82 per cent. The Real Estate Institute of SA said the latest figures were "nothing to be alarmed about". "I am not distressed by this at all," president Robin Turner said. "The market is getting some normality back and there is more buyers' resistance. "We don't want to drive homeowners out of the market with never-ending increases in prices. "We are coming off an incredible high which has been sustained for five years and this is a very small change in value and a very soft landing." Robin Turner sounds like he could sell manure in farming country.
At $477.70 per ounce, gold had the highest close since late 1987, and silver at $7.77 had its highest close since March 2005.
When the BLS reported the latest nonfarm payrolls, for some reason the headlines did not mention that the number of unemployed rose by 270,000 in September. It must have been an oversight.
Last year, the British-based Hong Kong and Shanghai Banking Corporation (HSBC) bought 19.9 percent of the Bank of Communications for $2.25 billion. In June, the Bank of America invested $3 billion for a 10 percent stake in the Bank of China (BOC). In July, the Royal Bank of Scotland bought another 10 percent of the BOC for $3.1 billion, while Singapore’s Temasek committed $2.5 billion to the China Construction Bank. In August, Goldman Sachs paid out $3 billion for a 10 percent stake in the Industrial & Commercial Bank of China.
By 2007, it is estimated that foreign financial groups will control one sixth of China’s banking system.
The evolving reason for war in Iraq has gone through stages. First, Bush stated there were WMD. Then there were no WMD so the reason became getting rid of the tyrant Saddam Hussein. Now Hussein is in jail and the new reasoning, states Bush, is "would the United States and other free nations be more safe, or less safe, with Zarqawi and bin Laden in control of Iraq, its people, and its resources?" Maybe we should just get bin Laden and Zarqawi and dispense with the war in Iraq where 1,950 U.S. service personnel have died. We've had over 4 years to get bin Laden. How many more do we need? If only Ross Perot had been president. The results would have been quite different.
If it is possible that Bush truly gets his directions from God, I wish he'd request having earnings from jobs exceed inflation. Do you really care whether there are more or less leisure and hspitality workers, food employees, or amusement and gambling jobs? If the factory workweek and overtime remains unchanged and wages can't even rise a plug nickel, isn't that more vital. Year over year average hourly earnings rose 2.6%. This compares with a Consumer Price Index that rose 3.6% for the 12 months ended August. How come that doesn't bother Bush?
During the 12 months ended August, the year-over-year gain in the CPI exceeded the year-over-year growth in average hourly earnings in all but one of those months. The average worker, the man or woman on Main Street, busts their ass at work and gets little reward and certainly little appreciation. An increasing number cannot afford health care. Every day the media focuses on the price of gas, heating oil, and the housing bubble. I too am guilty of this. More attention needs to paid to take-home pay versus the inflation rate.
Do you think those shopping at Tiffany's also shop at Big Lots or even have heard of Big Lots? The latter is closing 126 underperforming stores and all 41 of its freestanding furniture outlets.
In the most recent AP-Ipsos poll, the number of people who strongly approve of Bush's job performance has eroded over the last year, most notably among key groups like evangelical voters, down from 49 percent who strongly approved in January to 33 percent now; Republican men, down from 57 percent to 42 percent; Protestants, down from 36 percent to 25 percent; and Southerners, down from 32 percent to 22 percent.
While four of five Republicans say they approve of Bush's job performance, enthusiasm in that support has dipped over the last year.
In December 2004, soon after his re-election, nearly two-thirds of Republicans strongly approved of his job performance. The AP-Ipsos survey found that just half in his own party feel that way now. Where is Pastor Parsley now?
"I think we've hit the tipping point, and think that in many areas you're seeing a leveling off of prices," Countrywide CEO Angelo Mozilo told Reuters at this week's meeting of the Business Council, which includes chief executives of various companies.
Mozilo said he thinks housing prices will especially moderate in areas where there has been speculative buying in condominiums such as South Florida.
"Wherever you see speculators, no matter where it is in the country, that's trouble, because as soon as there's a little blip, they're gone," Mozilo said.
Media reports from India maintain that, after a failed attempt at buying PetroKazakhstan, theLN Mittal group and Oil and Natural Gas Corporation(ONGC) are now exploring investment opportunities inNigeria. Nigerian President Olusegun Obasabjo has written to the Mittals seeking investments in export-oriented refineries, liquefied natural gas projects and railways. The Indian government is using the opportunity to seek exploration and production (E&P)contracts in the African nation. The Mittal group is now facilitating meetings in Indiafor a ministerial delegation from Nigeria, which is expected to arrive on Monday. The delegation will hold discussions with ONGC regarding E&P projects on Tuesday. Only recently, ONGC was outbid for some oil exploration sites in Nigeria.
Adelaide's housing market has recorded its first fall in house prices in five years. A 1.09 per cent fall in the September quarter ends the run of 19 consecutive quarters in Adelaide in which prices had grown or remained constant. The last time house prices fell was in the September 2000 quarter.
State Government figures released to The Advertiser show the Adelaide median house price fell from $275,000 to $272,000 in the September quarter. For the year, prices grew 3.82 per cent. The Real Estate Institute of SA said the latest figures were "nothing to be alarmed about". "I am not distressed by this at all," president Robin Turner said. "The market is getting some normality back and there is more buyers' resistance. "We don't want to drive homeowners out of the market with never-ending increases in prices. "We are coming off an incredible high which has been sustained for five years and this is a very small change in value and a very soft landing." Robin Turner sounds like he could sell manure in farming country.
At $477.70 per ounce, gold had the highest close since late 1987, and silver at $7.77 had its highest close since March 2005.
When the BLS reported the latest nonfarm payrolls, for some reason the headlines did not mention that the number of unemployed rose by 270,000 in September. It must have been an oversight.
Last year, the British-based Hong Kong and Shanghai Banking Corporation (HSBC) bought 19.9 percent of the Bank of Communications for $2.25 billion. In June, the Bank of America invested $3 billion for a 10 percent stake in the Bank of China (BOC). In July, the Royal Bank of Scotland bought another 10 percent of the BOC for $3.1 billion, while Singapore’s Temasek committed $2.5 billion to the China Construction Bank. In August, Goldman Sachs paid out $3 billion for a 10 percent stake in the Industrial & Commercial Bank of China.
By 2007, it is estimated that foreign financial groups will control one sixth of China’s banking system.
The evolving reason for war in Iraq has gone through stages. First, Bush stated there were WMD. Then there were no WMD so the reason became getting rid of the tyrant Saddam Hussein. Now Hussein is in jail and the new reasoning, states Bush, is "would the United States and other free nations be more safe, or less safe, with Zarqawi and bin Laden in control of Iraq, its people, and its resources?" Maybe we should just get bin Laden and Zarqawi and dispense with the war in Iraq where 1,950 U.S. service personnel have died. We've had over 4 years to get bin Laden. How many more do we need? If only Ross Perot had been president. The results would have been quite different.
Friday, October 07, 2005
Affordability
10/7/05 Affordability
In the Bay Area, the CAR estimates only 12 percent could afford a median priced home, which it pegs at $730,360. That's down from 14 percent last August when the median home there went for $644,920.
Of course, you can always take a trip to Las Vegas and try your luck. Maybe you can win the home of your dreams like the lady with $4 in quarters. In the meantime, the lack of affordability will be the downfall to the housing market in California.
A tax benefit added 4 cents to Costco's per-share earnings in the last quarter, while lower state taxes contributed 3 cents. That helped lower the company's tax rate to 28.9 percent from 37 percent a year ago. In reading the third quarter earnings reports coming out, it would be wise to check the comparative tax rates for 2005 and 2004.
According to the Detroit Free Press, Delphi Corp. has demanded such drastic cuts in wages and benefits for workers that, according to one UAW local, its members would no longer be able to afford the cars they help build. According to a flyer sent to at least two UAW locals Thursday, the company is asking for wage cuts of as much as 63%, to $10 an hour, and for workers to pay 27% of their health care costs versus 7% currently. Rather than generate more animosity, maybe Delphi would be better advised and just shut up and file for bankruptcy.
In the Bay Area, the CAR estimates only 12 percent could afford a median priced home, which it pegs at $730,360. That's down from 14 percent last August when the median home there went for $644,920.
Of course, you can always take a trip to Las Vegas and try your luck. Maybe you can win the home of your dreams like the lady with $4 in quarters. In the meantime, the lack of affordability will be the downfall to the housing market in California.
A tax benefit added 4 cents to Costco's per-share earnings in the last quarter, while lower state taxes contributed 3 cents. That helped lower the company's tax rate to 28.9 percent from 37 percent a year ago. In reading the third quarter earnings reports coming out, it would be wise to check the comparative tax rates for 2005 and 2004.
According to the Detroit Free Press, Delphi Corp. has demanded such drastic cuts in wages and benefits for workers that, according to one UAW local, its members would no longer be able to afford the cars they help build. According to a flyer sent to at least two UAW locals Thursday, the company is asking for wage cuts of as much as 63%, to $10 an hour, and for workers to pay 27% of their health care costs versus 7% currently. Rather than generate more animosity, maybe Delphi would be better advised and just shut up and file for bankruptcy.
Federated CEO Terry Lundgren blamed weaker-than-expected sales in September on Hurricanes Katrina and Rita, high gasoline prices, dampened consumer confidence and poor sales of Bloomingdale's and Macy's furniture and home furnishings. Other than that, everything was coming up roses. One more thing, the CFO stated they had challenges in turning around May. No one forced them to buy May.
Strong Sino-Kazakh ties are likely to ensure that China's state oil company CNPC wins its $4.2 billion Kazakh oil prize, even as signs emerge that the Kazakhstan government wants a piece of the action. Tong Xiaoguang, a senior adviser to CNPC's overseas operations, said the company had an understanding with the Kazakh government ahead of the deal.
"Before we decided to acquire it, we had notified the Kazakh government and they agreed to the plan," he said I have never doubted that. It's unfortunate though that ONGC/Mittal did not walk the talk. In the future, I will remember that. Fool me once....According to the India Times, it is understood that the Indian Government has failed to make a “substantive” bid approach for PetroKazakhstan, despite its many declarations that it may scupper Chinese plans to buy the oil company.
U.S. nonfarm payrolls fell by an estimated 35,000 in September, the first decline in more than two years, the Labor Department said Friday. The drop was much less than the 150,000 expected. Payrolls in July and August were revised higher by a total of 77,000 jobs. The unemployment rate rose as expected to 5.1% from 4.9%. The government would not precisely quantify the impact of Hurricane Katrina, but gave a rough estimate of 230,000 lost jobs based on the assumption hiring was normal elsewhere. Job losses were concentrated in manufacturing, retail and leisure. Don't look now but the 10-year Treasury yield has jumped to 4.42%. Are you starting to feel the interest rate pinch on your ARM? You can always file for bankruptcy. That's the American way.
China's trade surplus from January to August reached $60 billion, already far exceeding the $32 billion recorded for all of 2004. By year's end, the surplus is expected to balloon to $90 billion to $100 billion, the Commerce Ministry said, according to a report in the official China Daily newspaper.
Rodman & Renshaw, LLC initiated research coverage of Palatin Technologies PTN with a Market Outperform Rating and a 12-month price target $5. Ilya Kravets, Senior Specialty Pharmaceuticals Analyst, issued the report. It's a little like chicken soup. It can't hurt.
Almost one third (31%) of Americans say they are using more credit to pay the higher prices for energy and other consumer goods resulting from Hurricane Katrina, according to the Cambridge Consumer Credit Index. 19% say they are using less credit, while 50% say they are using the same amount of credit as they did a year ago. "The results of the Cambridge Consumer Credit Index wildcard question show that higher prices for energy and other consumer items brought on by the aftermath of Hurricane Katrina are causing a large amount of Americans to use more credit than they did a year ago because they just don't have enough income to pay these higher costs. Lower income Americans are feeling the pinch most, since they have little discretionary income to start with," says Jordan Goodman, spokesperson/financial analyst for the Cambridge Consumer Credit Index.
Wednesday, October 05, 2005
Never A Dull Moment
10/6/05 Never A Dull Moment
The American Petroleum Institute said crude inventories fell by 4.2 million barrels for the week ended Sept. 30. The government data showed a 300,000-barrel decline. Motor gasoline inventories dropped 4.8 million barrels. Distillate stocks were down 4.9 million barrels, the API said.
Planned job reductions by major U.S. corporations rose 1.8% in September to 71,836, according to Challenger, Gray & Christmas. Layoffs were down 33% from September 2004. Layoffs in the third quarter were down 2.5% from the third quarter of 2004. It was the smallest number of layoffs in five quarters. However, layoffs are up 8.2% year-to-date
The U.S. ISM Services Index for September tumbled to 53.3% from 65% in August, the lowest level in 2 ½ years.
Kazakh lawmakers voted in the lower house to allow the state to intervene in sales of oil firms, adding uncertainty to PetroKazkahstan's takeover by China's CNPC.
The bill becomes law only after it wins approval by Kazakhstan's upper house and President Nursultan Nazarbayev -- and that is not assured. There is never a dull moment in risk arbitrage.
The Energy Information Administration (EIA) reported that the average price truckers paid for diesel fuel had soared 34.6 cents over the last week to a record $3.14 a gallon.
Motorola is cutting 1,900 jobs.
The Dow, S&P 500, and the Nasdaq had one of their worst days in quite a while. My portfolio didn't
ring the register either.
India's ONGC Videsh Ltd and Kazakhstan's KazMunaiGaz will jointly develop oil and gas properties in the Caspian sea region, Kazakhstan's Energy Minister V Shkolnik said on Tuesday.
"We have agreed to have strategic energy cooperation. KazMunaiGaz and OVL will work together in the Caspian Sea." The arrangement concerns two medium sized blocks. Importantly, it indicates to me that this strategic cooperation is no different than the long-standing relationship between PKZ, the Kazakh government, and LUKOIL. It is one more indication that the deal with CNPC will go forward on October 18.
The American Petroleum Institute said crude inventories fell by 4.2 million barrels for the week ended Sept. 30. The government data showed a 300,000-barrel decline. Motor gasoline inventories dropped 4.8 million barrels. Distillate stocks were down 4.9 million barrels, the API said.
Planned job reductions by major U.S. corporations rose 1.8% in September to 71,836, according to Challenger, Gray & Christmas. Layoffs were down 33% from September 2004. Layoffs in the third quarter were down 2.5% from the third quarter of 2004. It was the smallest number of layoffs in five quarters. However, layoffs are up 8.2% year-to-date
The U.S. ISM Services Index for September tumbled to 53.3% from 65% in August, the lowest level in 2 ½ years.
Kazakh lawmakers voted in the lower house to allow the state to intervene in sales of oil firms, adding uncertainty to PetroKazkahstan's takeover by China's CNPC.
The bill becomes law only after it wins approval by Kazakhstan's upper house and President Nursultan Nazarbayev -- and that is not assured. There is never a dull moment in risk arbitrage.
The Energy Information Administration (EIA) reported that the average price truckers paid for diesel fuel had soared 34.6 cents over the last week to a record $3.14 a gallon.
Motorola is cutting 1,900 jobs.
The Dow, S&P 500, and the Nasdaq had one of their worst days in quite a while. My portfolio didn't
ring the register either.
India's ONGC Videsh Ltd and Kazakhstan's KazMunaiGaz will jointly develop oil and gas properties in the Caspian sea region, Kazakhstan's Energy Minister V Shkolnik said on Tuesday.
"We have agreed to have strategic energy cooperation. KazMunaiGaz and OVL will work together in the Caspian Sea." The arrangement concerns two medium sized blocks. Importantly, it indicates to me that this strategic cooperation is no different than the long-standing relationship between PKZ, the Kazakh government, and LUKOIL. It is one more indication that the deal with CNPC will go forward on October 18.
Tuesday, October 04, 2005
What A Bad Joke
10/5/05 What A Bad Joke
Dallas Fed President Fisher: "If the Federal Reserve were to resist the upward pressure on interest rates, it would in effect monetize the burgeoning fiscal deficits. The Federal Reserve has staunchly resisted monetizing deficits for more than a quarter century, and I feel strongly that it can ill afford to monetize them today." With twin tower deficits looming larger by the day, who is printing the money to cover the bills? Just remember that, over the last 92 years, the dollar has lost 95% of its purchasing power. There is a reason investors are purchasing gold and Goldcorp common stock.
90% of daily Gulf oil output offline vs 93% Monday and 72% of daily natural gas output offline vs 75% on Monday, according to the MMS.
Hugo Chavez: "We've had to move the international reserves from U.S. banks because of the threats from the U.S."
Sun will include the Google Toolbar as an option in its consumer downloads of the Java Runtime Environment. In addition, the companies have agreed to explore opportunities to promote and enhance Sun technologies, like the Java Runtime Environment and theOpenOffice.org productivity suite.
PetroKazakhstan said Tuesday that its planned sale of the company for $4.2 billion US to China's largest state-owned energy firm will continue regardless of Kazakh intentions to gain control of parts of the company. PetroKazakhstan officials said it will go ahead with a special shareholders meeting in Calgary on Oct. 18 to vote on the takeover deal by China National Petroleum Corp. And the company said that because it is Canadian-based and the deal is a corporate transaction rather than an asset sale, Kazakh approvals are not required. The takeover will be finalized with two-thirds of shareholder support and approval by an Alberta court, said spokesman Ihor Wasylkiw. "Comments coming out of Kazakhstan don't have any impact in terms of us holding that meeting," Wasylkiw said from Calgary Tuesday. "All we need to do is follow the laws of the land and the laws of Kazakhstan do not come into play here," he said. "Once we have the transaction done, the government of Kazakhstan has every right to review its asset base and do what it feels is right." Energy analyst Wilf Gobert of Calgary-based Peters & Co. said he expected the takeover to proceed. "It kind of looks like that the sale of the company is going ahead and subsequently the Chinese will be negotiating with Kazakhstan over portions of the company," he said Tuesday. It should be noted that Peters & Co. have had an investment banking relationship with PKZ and Gobert probably knows the management of PKZ better than any one else in the investment community.
Dallas Fed President Fisher: "If the Federal Reserve were to resist the upward pressure on interest rates, it would in effect monetize the burgeoning fiscal deficits. The Federal Reserve has staunchly resisted monetizing deficits for more than a quarter century, and I feel strongly that it can ill afford to monetize them today." With twin tower deficits looming larger by the day, who is printing the money to cover the bills? Just remember that, over the last 92 years, the dollar has lost 95% of its purchasing power. There is a reason investors are purchasing gold and Goldcorp common stock.
90% of daily Gulf oil output offline vs 93% Monday and 72% of daily natural gas output offline vs 75% on Monday, according to the MMS.
Hugo Chavez: "We've had to move the international reserves from U.S. banks because of the threats from the U.S."
Sun will include the Google Toolbar as an option in its consumer downloads of the Java Runtime Environment. In addition, the companies have agreed to explore opportunities to promote and enhance Sun technologies, like the Java Runtime Environment and theOpenOffice.org productivity suite.
PetroKazakhstan said Tuesday that its planned sale of the company for $4.2 billion US to China's largest state-owned energy firm will continue regardless of Kazakh intentions to gain control of parts of the company. PetroKazakhstan officials said it will go ahead with a special shareholders meeting in Calgary on Oct. 18 to vote on the takeover deal by China National Petroleum Corp. And the company said that because it is Canadian-based and the deal is a corporate transaction rather than an asset sale, Kazakh approvals are not required. The takeover will be finalized with two-thirds of shareholder support and approval by an Alberta court, said spokesman Ihor Wasylkiw. "Comments coming out of Kazakhstan don't have any impact in terms of us holding that meeting," Wasylkiw said from Calgary Tuesday. "All we need to do is follow the laws of the land and the laws of Kazakhstan do not come into play here," he said. "Once we have the transaction done, the government of Kazakhstan has every right to review its asset base and do what it feels is right." Energy analyst Wilf Gobert of Calgary-based Peters & Co. said he expected the takeover to proceed. "It kind of looks like that the sale of the company is going ahead and subsequently the Chinese will be negotiating with Kazakhstan over portions of the company," he said Tuesday. It should be noted that Peters & Co. have had an investment banking relationship with PKZ and Gobert probably knows the management of PKZ better than any one else in the investment community.
La-Z-Boy Incorporated announced that one of its key suppliers of polyurethane
foam has put its customers, including La-Z-Boy, on notice of allocation, due
to the lack of availability of TDI (toluene diisocyanate), a key chemical
component of polyurethane foam which is used throughout the upholstery and
bedding industry. The company also said that this situation, coupled with the
continued soft retail environment and damage to one of its plants by a tornado
spawned from Hurricane Rita, will have a significant adverse impact on its
results for the fiscal 2006 second quarter and potentially beyond.
Kurt Darrow, President and CEO of La-Z-Boy said, "Several TDI suppliers
have communicated that because of the effects of Hurricanes Katrina and Rita
they have had to declare Force Majeure, a condition which allows companies to
depart from the strict terms of a contract because of an event that cannot be
reasonably controlled. As a result they will be limiting the amount of TDI
they will be supplying which will limit the amount of polyurethane that can be
produced. We have been advised by one of our significant polyurethane
suppliers to the La-Z-Boy(R) branded product of their industry-wide notice of
an allocation of 50% of normal polyurethane supply. This situation will have
a greater impact on us relative to the rest of the furniture industry given
the higher percentage of upholstery in our overall product mix."
Darrow noted, "Polyurethane foam, because of the volume of storage space
it requires, is shipped on a just in time inventory basis and therefore our
inventories of this raw material are very minimal. Each of our divisions has
a different mix of polyurethane suppliers and finished goods inventories and
thus will be individually impacted. We anticipate that the price of
polyurethane will increase and that our production schedules at various plants
will also be modified according to availability of supply. We will therefore
work judiciously to minimize the potential interruption to our customers in
all effected divisions by closely communicating with them to assess and
balance their product needs to the degree possible."
Lexmark and Clorox issued profit warnings.
Although crude dipped to $63.90 a barrel, natural gas closed at a record high
of $14.224.
Georgia Pacific will cut 1,100 jobs.
At least 1,941 U.S. service personnel have died in Iraq.
On Iraq, Bush said that "more and more Iraqis are able to take the fight to the
enemy." Maybe they didn't teach math in Texas.
Mayor Ray Nagin said Tuesday that New Orleans has to lay off as many as 3,000 workers, about 40% of its total
payroll, because of the damage done to the city's finances by Hurricane Katrina.
The FDIC stated only seven California markets (Bakersfield, Merced, Stockton, Visalia,
Modesto, Yuba City, and Fresno) ranked among the nation's top 20 for home price appreciation during the second quarter,
down from 14 in the first quarter.
Weyerhaeuser will close its Prince Albert pulp and paper mill in Saskatchewan as a result of poor market
conditions, eliminating the jobs of 690 employees.
"Although royalty revenues were better than expected, it was not enough
to offset a disappointing contract revenue shortfall," said John
Bourgoin, MIPS president and CEO, in a prepared release. "A number of
our customers delayed their investment decisions, especially for deal
values in excess of $1 million. This slowdown has reduced the number
and the corresponding dollar value of agreements completed in the
quarter."
Futures-market predictions that the Federal Reserve will raise its target interest rate by a half- percentage point over two remaining meetings this year are ``reasonable,'' St. Louis Fed Bank President William Poole said.
``I think that the market's expectation is reasonable. That is not the same thing as saying we have a commitment to produce exactly that outcome.''
Two hurricanes, one of them particularly intense, are expected to develop this month in the Atlantic, says William Gray, a leading hurricane forecaster.
Uzakbai Karabalin, head of Kazakh state oil and gas firm KazMunaiGas, said fast-growing output would make it possible to export natural gas for a trans-China pipeline. "The Chinese side has been offered several routes of Kazakh natural gas shipments for the East-West pipeline (within China)," Karabalin said.
Chinese President Hu Jintao and his Kazakh counterpart Nursultan Nazarbayev signed a feasibility study project in July after reaching understanding on future investment in a gas pipeline that would run from Kazakhstan to energy-hungry China. Do you really think the Kazakh government is going to disrupt a long-term relationship over PKZ? What country wants to puke on its future bread and butter? In the end, money talks and so does graft.
For the second consecutive month, U.S. worker confidence fell to an historic low, as the Hudson
Employment Index(SM) declined 1.4 points to 96.8. The aftermath of Hurricanes
Katrina and Rita contributed to a steep decline in workers' optimism about
their personal finances, which were previously impacted by high energy prices.
Additionally, hiring plans stalled slightly. This month's Index is ten points
lower than one year ago as well as the start of 2005.
While there was virtually no change in how workers rated their finances
this month, 47 percent indicated their financial situation is getting worse.
This is the highest figure on record and seven points higher than the 2005
yearly average of 40 percent. Just 36 percent of the workforce claimed that
their finances were improving in September, compared to this year's average of
41 percent.
Hiring expectations also suffered another slight setback as only 29
percent of employees reported their firms expected to hire in the coming
months. After holding steady at about 31 percent for nine successive months,
this was the second month in a row where hiring outlook dropped by one point.
The percent of workers anticipating layoffs remained at 17 percent.
McNeil Nutritionals, LLC, the maker of SPLENDA(R) Brand retail products,
announced the all-new SPLENDA(R) Brown Sugar Blend, just in time for
the popular fall baking season. A first-of-its-kind reduced calorie brown
sugar product, SPLENDA(R) Brown Sugar Blend is a proprietary blend of brown
sugar and SPLENDA(R) Brand Sweetener, or sucralose.
The volume of mortgage applications slipped 1.1% in the week ended Sept. 30 compared to the prior week,
data compiled by the Mortgage Bankers Association show. Also on a seasonally adjusted basis, applications for mortgages to
purchase homes dropped 1.9%, while refinancing applications nosed 0.1% higher on a week-to-week basis.
According to the Detroit News, the UAW and GM are near a deal on healthcare that would save GM $1 billion
annually, while impacting active UAW members as well as the hundreds
of thousands of retirees nationwide by increasing co-pays for
prescription drugs and perhaps instituting cost-sharing of monthly premiums.
Will Rogers: "The trouble with practical jokes is that very often they get elected."
Based On The Past
10/4/05 Based On The Past
John Challenger: “According to the our analysis, employers cut 10,149,381 jobs from 1993 through 2004. Of those, 38 percent occurred between September 1 and December 31. In 2004, 41 percent of the year’s job cuts were announced in the last four months. This year, the jump may not be as large, simply due to the fact that layoff announcements were heavier than normal during the summer months, but we are still likely to see an increase. The last part of the year is crunch time for many organizations in terms of meeting earnings goals, as well as establishing budget levels for the coming year.”
Small business statistics highlighted in the 2005 Small Business FAQ
include:
* Small businesses represent 99.7 percent of all employer firms.
* Over the past decade, small business net job creation fluctuated between
60 and 80 percent.
* Small businesses generate more than 50 percent of the nonfarm private
gross domestic product (GDP).
* Two-thirds of new employer establishments survive at least two years
after start-up, and 44 percent survive at least four years.
* Small businesses employ half of all private sector employees.
* Very small firms with fewer than 20 employees spend 45 percent more per
employee than the largest firms to comply with federal regulations.
* Minorities own 4.1 million firms that generate $694.1 billion in
revenues and employ 4.8 million workers.
* Women own 6.5 million businesses that generate $950.6 billion in
revenues, and employ 7.2 million workers.
* In 2004, an estimated 580,900 employer firms opened while an estimated
576,200 closed.
The Institute for Supply Management's national factory index rose to 59.4% in September from 53.6% in August. The 5.8-point increase was the biggest monthly gain since March 1991 and a big surprise. How much of this gain can be attributed to rebuilding in the Gulf? The prices paid index surged to 78 from August’s 56.4, the biggest jump in 15 years. This jump spooked the bond market and the yield on the 10-year Treasury increased to 4.39%.
The NY Times reported that more sellers are putting their homes on the market, houses are selling less quickly and prices are increasing less rapidly.
In September, truck and SUV sales plunged at Ford and GM. Overall vehicle sales for Ford declined 19% and for GM 24%; however, Toyota’s sales increased 10.3%.
A 30-year study finds that most adults -- nine out of 10 men, seven out of 10 women -- are likely to be or become overweight as they grow older. The report, published today in the Annals of Internal Medicine, was based on the experience of more than 4,000 white adults who were the second generation of a long-term study of heart disease sponsored by the National Heart, Lung and Blood Institute. Participants were the offspring of the original Framingham Heart Study subjects, and were 30 to 59 years old when the next-generation study began. They were followed from 1971 to 2001.
Kazakh Oil Minister Vladimir Shkolnik said Tuesday that Kazakhstan would seek to acquire a portion of Canadian-based oil producer PetroKazakhstan Inc., which had reached a takeover deal in August with China's largest state oil company. China National Petroleum Corp. agreed to pay $4.2 billion US for Calgary-based PetroKazakhstan (TSX:PKZ). An agreement by CNPC to sell part of PetroKazakhstan to a Kazakh state company could help to smooth approval of its agreement to buy the Canadian firm. It might be wise to remember that Kazakhstan has only 3 oil refineries, and PKZ’s is by far the best of the 3. In addition, the new pipeline carrying oil from Kazakhstan to China, and paid for by China, will begin flowing on Jan1, 2006. PKZ will transport its oil to China through this pipeline and transportation costs will be reduced by $7 a barrel. This fact has not been lost on the Kazakh government, China, or ONGC/Mittal.
Royal Ahold NV, the owner of Stop & Shop and Giant stores, might be interested in buying parts of Albertson's Inc., Chief Executive Anders Moberg said. He ruled out buying all of Albertson's, the second-largest U.S. supermarket company.
The latest world investment report by UNCTAD has rated India as an attractive destination for pharma and clinical research for companies looking at faster and efficient ways to test drugs. The report said that drug firms could reduce costs 20-30 percent by moving R&D activities to India while they save from hiring clinical researchers, nurses and IT staff at less than a third of the wages in the West. The findings also said India has really skilled R&D personnel.
Kazakhstan’s President said oil production from Kazakhstan's share of the Caspian Sea could reach "oil production levels of 100-150 million tons (per year) by 2015. When completed, this National Program will allow us to export 2 million barrels (of oil) a day in 2010 and 3 million barrels (a day) in 2015. The natural gas output will reach 100 billion cubic meters a year.”
According to the Energy Information Administration of the U.S. government, in 2004 Kuwait and Nigeria both produced 2.51 million barrels per day and Iraq produced 2.03 million bpd. Only two nations in the world, Saudi Arabia and Russia, exported more than 3 million bpd each in 2004: Saudi Arabia exported 8.73 million bpd and Russia exported 6.67 million bpd.
A new study in the New England Journal of Medicine says China's health-care problems "make those of the United States seem almost trivial by comparison and ... constitute a major potential threat to China's domestic tranquility."
Gary Lammert, The Economic Fractalist: “By using day 288 as the ideal third fractal top, using 72 days (fromSeptember 30) to an expected low and 72 days as an expected low with the 52/130/104/day 5 of 78 to an expected low, the first decay base most likely started 31 August 2005. The initial decay fractal base
was 16 days. This ideally would be followed by second and third decay fractals of 40 days for a total of 79 trading days from 22 September 2005. This is in exact agreement to a day of the major 144/360/288/72
daily fractal sequence and the final third fractal 52/130/104/78 day sequence both which end within one day of each other.”
The West Amazon rain forest is in severe drought with rainfall down 70% from 2004.
Sears Canada is cutting 1,200 jobs across Canada.
John Challenger: “According to the our analysis, employers cut 10,149,381 jobs from 1993 through 2004. Of those, 38 percent occurred between September 1 and December 31. In 2004, 41 percent of the year’s job cuts were announced in the last four months. This year, the jump may not be as large, simply due to the fact that layoff announcements were heavier than normal during the summer months, but we are still likely to see an increase. The last part of the year is crunch time for many organizations in terms of meeting earnings goals, as well as establishing budget levels for the coming year.”
Small business statistics highlighted in the 2005 Small Business FAQ
include:
* Small businesses represent 99.7 percent of all employer firms.
* Over the past decade, small business net job creation fluctuated between
60 and 80 percent.
* Small businesses generate more than 50 percent of the nonfarm private
gross domestic product (GDP).
* Two-thirds of new employer establishments survive at least two years
after start-up, and 44 percent survive at least four years.
* Small businesses employ half of all private sector employees.
* Very small firms with fewer than 20 employees spend 45 percent more per
employee than the largest firms to comply with federal regulations.
* Minorities own 4.1 million firms that generate $694.1 billion in
revenues and employ 4.8 million workers.
* Women own 6.5 million businesses that generate $950.6 billion in
revenues, and employ 7.2 million workers.
* In 2004, an estimated 580,900 employer firms opened while an estimated
576,200 closed.
The Institute for Supply Management's national factory index rose to 59.4% in September from 53.6% in August. The 5.8-point increase was the biggest monthly gain since March 1991 and a big surprise. How much of this gain can be attributed to rebuilding in the Gulf? The prices paid index surged to 78 from August’s 56.4, the biggest jump in 15 years. This jump spooked the bond market and the yield on the 10-year Treasury increased to 4.39%.
The NY Times reported that more sellers are putting their homes on the market, houses are selling less quickly and prices are increasing less rapidly.
In September, truck and SUV sales plunged at Ford and GM. Overall vehicle sales for Ford declined 19% and for GM 24%; however, Toyota’s sales increased 10.3%.
A 30-year study finds that most adults -- nine out of 10 men, seven out of 10 women -- are likely to be or become overweight as they grow older. The report, published today in the Annals of Internal Medicine, was based on the experience of more than 4,000 white adults who were the second generation of a long-term study of heart disease sponsored by the National Heart, Lung and Blood Institute. Participants were the offspring of the original Framingham Heart Study subjects, and were 30 to 59 years old when the next-generation study began. They were followed from 1971 to 2001.
Kazakh Oil Minister Vladimir Shkolnik said Tuesday that Kazakhstan would seek to acquire a portion of Canadian-based oil producer PetroKazakhstan Inc., which had reached a takeover deal in August with China's largest state oil company. China National Petroleum Corp. agreed to pay $4.2 billion US for Calgary-based PetroKazakhstan (TSX:PKZ). An agreement by CNPC to sell part of PetroKazakhstan to a Kazakh state company could help to smooth approval of its agreement to buy the Canadian firm. It might be wise to remember that Kazakhstan has only 3 oil refineries, and PKZ’s is by far the best of the 3. In addition, the new pipeline carrying oil from Kazakhstan to China, and paid for by China, will begin flowing on Jan1, 2006. PKZ will transport its oil to China through this pipeline and transportation costs will be reduced by $7 a barrel. This fact has not been lost on the Kazakh government, China, or ONGC/Mittal.
Royal Ahold NV, the owner of Stop & Shop and Giant stores, might be interested in buying parts of Albertson's Inc., Chief Executive Anders Moberg said. He ruled out buying all of Albertson's, the second-largest U.S. supermarket company.
The latest world investment report by UNCTAD has rated India as an attractive destination for pharma and clinical research for companies looking at faster and efficient ways to test drugs. The report said that drug firms could reduce costs 20-30 percent by moving R&D activities to India while they save from hiring clinical researchers, nurses and IT staff at less than a third of the wages in the West. The findings also said India has really skilled R&D personnel.
Kazakhstan’s President said oil production from Kazakhstan's share of the Caspian Sea could reach "oil production levels of 100-150 million tons (per year) by 2015. When completed, this National Program will allow us to export 2 million barrels (of oil) a day in 2010 and 3 million barrels (a day) in 2015. The natural gas output will reach 100 billion cubic meters a year.”
According to the Energy Information Administration of the U.S. government, in 2004 Kuwait and Nigeria both produced 2.51 million barrels per day and Iraq produced 2.03 million bpd. Only two nations in the world, Saudi Arabia and Russia, exported more than 3 million bpd each in 2004: Saudi Arabia exported 8.73 million bpd and Russia exported 6.67 million bpd.
A new study in the New England Journal of Medicine says China's health-care problems "make those of the United States seem almost trivial by comparison and ... constitute a major potential threat to China's domestic tranquility."
Gary Lammert, The Economic Fractalist: “By using day 288 as the ideal third fractal top, using 72 days (fromSeptember 30) to an expected low and 72 days as an expected low with the 52/130/104/day 5 of 78 to an expected low, the first decay base most likely started 31 August 2005. The initial decay fractal base
was 16 days. This ideally would be followed by second and third decay fractals of 40 days for a total of 79 trading days from 22 September 2005. This is in exact agreement to a day of the major 144/360/288/72
daily fractal sequence and the final third fractal 52/130/104/78 day sequence both which end within one day of each other.”
The West Amazon rain forest is in severe drought with rainfall down 70% from 2004.
Sears Canada is cutting 1,200 jobs across Canada.
Monday, October 03, 2005
Should We Worry?
10/3/05 Should We Worry?
Up to 150 million people could die in a global avian flu pandemic if action is not taken to prevent it being transferred from human to human, the United Nations has warned.
Dr David Nabarro of the Geneva-based World Health Organisation said preparations for an expected mutation of the virus enabling it to spread from human to human must be carried out. "I am almost certain there will be another pandemic soon," Mr Nabarro added.
The U.S. government reported that GM’s pension deficit is $31 billion. That’s the bad news. The good news is that government figures are rarely correct.
The PBGC had a $23 billion deficit prior to bankruptcy filings by Delta and Northwest, and both have requested up to 25 years to make up their pension shortfalls. The PBGC stated that corporate defined benefit pension plans were underfunded by $450 billion one year ago. The good news is that these defined benefit pension plans are voluntary. That’s also the bad news.
Napoleon Bonaparte: “The torment of precautions often exceeds the dangers to be avoided.”
How important have company stock buy backs been to the resiliency of the equity markets? Companies in the S&P 500 repurchased $82 billion of their shares in the second quarter. When the third quarter numbers are released, I would expect a continuance of this activity.
Jay Leno: “They had to let Judith Miller out of jail. They had to make room for DeLay.”
Wal-Mart’s September same-store sales rose about 3.8%.
With 3-month Treasury bills yielding about 3.5%, is it prudent to buy a 10-year Ttreasury bond yielding only 4.32%? For such a small pick up in yield, why take the risk. You are not getting paid to take that risk.
Bush, according to a media report, will nominate Harriet Miers, currently counsel to the president, to succeed Sandra Day O'Connor as an associate justice of the Supreme Court. Miers, 60, was the first woman president of the Texas state bar. Bush named her White House counsel in November 2004. This may be Bush's idea for diversity on the court. Miers has had no prior experience as a judge.
Three days ago, we unleashed “Iron Fist” in Iraq. Two and one half years ago we unleashed “Shock and Awe.” We have yet to announce the capture of Osama bin Laden or Zarqawi. However, since we invaded Iraq in March 2003, at least 1,920 U.S. military personnel have been killed in that country.
David Letterman: “Al Gore has gained a lot of weight lately. Of course, unlike his former boss he only has to worry about getting into his own pants.”
Up to 150 million people could die in a global avian flu pandemic if action is not taken to prevent it being transferred from human to human, the United Nations has warned.
Dr David Nabarro of the Geneva-based World Health Organisation said preparations for an expected mutation of the virus enabling it to spread from human to human must be carried out. "I am almost certain there will be another pandemic soon," Mr Nabarro added.
The U.S. government reported that GM’s pension deficit is $31 billion. That’s the bad news. The good news is that government figures are rarely correct.
The PBGC had a $23 billion deficit prior to bankruptcy filings by Delta and Northwest, and both have requested up to 25 years to make up their pension shortfalls. The PBGC stated that corporate defined benefit pension plans were underfunded by $450 billion one year ago. The good news is that these defined benefit pension plans are voluntary. That’s also the bad news.
Napoleon Bonaparte: “The torment of precautions often exceeds the dangers to be avoided.”
How important have company stock buy backs been to the resiliency of the equity markets? Companies in the S&P 500 repurchased $82 billion of their shares in the second quarter. When the third quarter numbers are released, I would expect a continuance of this activity.
Jay Leno: “They had to let Judith Miller out of jail. They had to make room for DeLay.”
Wal-Mart’s September same-store sales rose about 3.8%.
With 3-month Treasury bills yielding about 3.5%, is it prudent to buy a 10-year Ttreasury bond yielding only 4.32%? For such a small pick up in yield, why take the risk. You are not getting paid to take that risk.
Bush, according to a media report, will nominate Harriet Miers, currently counsel to the president, to succeed Sandra Day O'Connor as an associate justice of the Supreme Court. Miers, 60, was the first woman president of the Texas state bar. Bush named her White House counsel in November 2004. This may be Bush's idea for diversity on the court. Miers has had no prior experience as a judge.
Three days ago, we unleashed “Iron Fist” in Iraq. Two and one half years ago we unleashed “Shock and Awe.” We have yet to announce the capture of Osama bin Laden or Zarqawi. However, since we invaded Iraq in March 2003, at least 1,920 U.S. military personnel have been killed in that country.
David Letterman: “Al Gore has gained a lot of weight lately. Of course, unlike his former boss he only has to worry about getting into his own pants.”
Sunday, October 02, 2005
Coming Up Roses In Fall Weather
10/2/05 Coming Up Roses In Fall Weather
San Francisco has more than 20,000 one million dollar homes and another 46,000 or so are in Orange County, Calif. The average price for an apartment in all but Harlem and the borough's northern tip climbed above $1.2 million in the second quarter of 2005, said Gregory Heym, chief economist for Terra Holdings, an owner of real estate brokerages in the city. "For a million dollars, you couldn't get a two-bedroom on the East Side," Heym said. The Census Bureau's 2004 American Community Survey found 1,034,386 homes worth at least $1 million in 2004, compared with 595,441 in 2002 and only 394,878 in 2000.
"When you're living in a place with home values up 50 percent, you have what Alan Greenspan calls a piggy bank," said Elizabeth Warren, a Harvard law professor and an author of "The Fragile Middle Class" (Yale University Press, 2000), a study of bankruptcy. "The bubble has operated like wreckage from the Titanic - you could climb on and float along for a while. The question is for how long."
According to the Houston Chronicle, in the wake of Katrina and Rita, Houston's apartment market has made one of the quickest turnarounds in history. More than 17,600 apartments have been absorbed since Labor Day, according to preliminary estimates from O'Connor & Associates, a real estate research firm. They also show that Houston landlords will absorb more than 10 times the normal level of apartments in September.
U.S. bankruptcy courts, like the one for Northern California, in San Francisco, have been inundated with cases. In San Francisco, Chapter 7 filings increased 32 percent in August and 125 percent in September from the same months last year. Chapter 13 filings dipped a bit in August but rose 24 percent in September compared with the same months last year. The new bankruptcy law takes effect at 12:01 a.m. on Monday, Oct. 17.
Seneca: "The greatest loss of time is delay and expectation, which depend upon the future. We let go the present, which we have in our power, and look forward to that which depends upon chance, and so relinquish a certainty for an uncertainty."
According to a separate study released last month by Boston-based Ceres, a coalition of institutional investors and environmental groups, insured and total property losses are already rising more quickly than premiums, population and economic growth.
"It's unclear how the insurance industry is going to survive in the sort of world that we're expecting," said Andrew Logan, an insurance analyst with Ceres.
"For obvious reasons, people really focus on the huge catastrophic events like hurricanes and earthquakes," he said. "But the damage from smaller events is also expected to rise, from hailstorms to forest fires to lightning strikes to floods to heat waves to droughts."
Ford Motor Co. took over 23 plants and facilities from auto supplier Visteon Corp. on Saturday in a deal designed to make Visteon profitable while assuring a supply of parts to Ford.
The consensus forecast for third-quarter profit growth now stands at 17.8 percent, up from 15.1 percent at the start of the quarter, according to Thomson Financial. Fourth-quarter estimates have also risen - to 16.5 percent from 12.2 percent in July. Now let’s take out earnings from the energy sector. That’s only fair since the government looks at inflation ex- food and energy. If you eliminate the earnings of energy companies, earnings growth would not be much higher than the inflation rate. Maybe everything is not coming up roses in the Fall weather.
Stephen Roach: “According to the Greenspan-Kennedy framework, US homeowners tapped the ever-expanding home equity till to the tune of about $600 billion in 2004 -- equivalent to about 7% of disposable personal income, or more than double the 3% share recorded in 2000. In a companion speech, Greenspan goes on to concede that this equity extraction from ever rising property values was large enough to have accounted for all of the decline in the personal saving rate since 1995 (see his 26 September speech, “Mortgage Banking”).”
In a major endorsement of India’s IT capability, a survey by the Santa Clara University revealed on Friday that 53% of the jobs being outsourced by Silicon Valley companies are going to India.
Foreigners control 52% of our U.S. debt. Those who control the debt ultimately control the equity.
Housing prices in San Francisco are in need of a good dose of reality. Approximately, only one in ten people living in that city can afford to buy a home. Equally important, the population in San Francisco is declining. According to the Census Bureau, between 2000 and 2004, the population declined from 776,733 to 744,230. I feel comfortable in stating the population will be even lower on December 31, 2005. The picture is not a pretty one for those trying to cash in on million dollar homes in 2006.
Confucius: “Life is really simple, but we insist on making it more complicated.”
San Francisco has more than 20,000 one million dollar homes and another 46,000 or so are in Orange County, Calif. The average price for an apartment in all but Harlem and the borough's northern tip climbed above $1.2 million in the second quarter of 2005, said Gregory Heym, chief economist for Terra Holdings, an owner of real estate brokerages in the city. "For a million dollars, you couldn't get a two-bedroom on the East Side," Heym said. The Census Bureau's 2004 American Community Survey found 1,034,386 homes worth at least $1 million in 2004, compared with 595,441 in 2002 and only 394,878 in 2000.
"When you're living in a place with home values up 50 percent, you have what Alan Greenspan calls a piggy bank," said Elizabeth Warren, a Harvard law professor and an author of "The Fragile Middle Class" (Yale University Press, 2000), a study of bankruptcy. "The bubble has operated like wreckage from the Titanic - you could climb on and float along for a while. The question is for how long."
According to the Houston Chronicle, in the wake of Katrina and Rita, Houston's apartment market has made one of the quickest turnarounds in history. More than 17,600 apartments have been absorbed since Labor Day, according to preliminary estimates from O'Connor & Associates, a real estate research firm. They also show that Houston landlords will absorb more than 10 times the normal level of apartments in September.
U.S. bankruptcy courts, like the one for Northern California, in San Francisco, have been inundated with cases. In San Francisco, Chapter 7 filings increased 32 percent in August and 125 percent in September from the same months last year. Chapter 13 filings dipped a bit in August but rose 24 percent in September compared with the same months last year. The new bankruptcy law takes effect at 12:01 a.m. on Monday, Oct. 17.
Seneca: "The greatest loss of time is delay and expectation, which depend upon the future. We let go the present, which we have in our power, and look forward to that which depends upon chance, and so relinquish a certainty for an uncertainty."
According to a separate study released last month by Boston-based Ceres, a coalition of institutional investors and environmental groups, insured and total property losses are already rising more quickly than premiums, population and economic growth.
"It's unclear how the insurance industry is going to survive in the sort of world that we're expecting," said Andrew Logan, an insurance analyst with Ceres.
"For obvious reasons, people really focus on the huge catastrophic events like hurricanes and earthquakes," he said. "But the damage from smaller events is also expected to rise, from hailstorms to forest fires to lightning strikes to floods to heat waves to droughts."
Ford Motor Co. took over 23 plants and facilities from auto supplier Visteon Corp. on Saturday in a deal designed to make Visteon profitable while assuring a supply of parts to Ford.
The consensus forecast for third-quarter profit growth now stands at 17.8 percent, up from 15.1 percent at the start of the quarter, according to Thomson Financial. Fourth-quarter estimates have also risen - to 16.5 percent from 12.2 percent in July. Now let’s take out earnings from the energy sector. That’s only fair since the government looks at inflation ex- food and energy. If you eliminate the earnings of energy companies, earnings growth would not be much higher than the inflation rate. Maybe everything is not coming up roses in the Fall weather.
Stephen Roach: “According to the Greenspan-Kennedy framework, US homeowners tapped the ever-expanding home equity till to the tune of about $600 billion in 2004 -- equivalent to about 7% of disposable personal income, or more than double the 3% share recorded in 2000. In a companion speech, Greenspan goes on to concede that this equity extraction from ever rising property values was large enough to have accounted for all of the decline in the personal saving rate since 1995 (see his 26 September speech, “Mortgage Banking”).”
In a major endorsement of India’s IT capability, a survey by the Santa Clara University revealed on Friday that 53% of the jobs being outsourced by Silicon Valley companies are going to India.
Foreigners control 52% of our U.S. debt. Those who control the debt ultimately control the equity.
Housing prices in San Francisco are in need of a good dose of reality. Approximately, only one in ten people living in that city can afford to buy a home. Equally important, the population in San Francisco is declining. According to the Census Bureau, between 2000 and 2004, the population declined from 776,733 to 744,230. I feel comfortable in stating the population will be even lower on December 31, 2005. The picture is not a pretty one for those trying to cash in on million dollar homes in 2006.
Confucius: “Life is really simple, but we insist on making it more complicated.”
Saturday, October 01, 2005
The Fourth Quarter
10/1/05 The Fourth Quarter
Many Wall Street pundits are wishing for a repeat of last year’s year-end rally, and many expect such a happening. Maybe that will be the case. I prefer to focus on more sure things. When you walk into stores, you will notice the holiday merchandise is beginning to fill the shelves. You also know that $3 a gallon gas is crimping your spending ability. Therefore, two things will happen. More time will be spent shopping online. Secondly, the purchase of gift cards will increase. For example, you can buy a gift card for an entire mall. What companies will benefit the most? Amazon, Wal-Mart.com, and Target.com.
PGE sent out a notice to its customers in San Francisco that heating bills could be 80% higher than last winter. Don’t sound so shocked. The price of natural gas in the third quarter rose by 80%. It means more shopping for blankets, sweaters, sweat pants and sweat shirts, and flannel sheets, flannel nightgowns, and flannel pajamas. Wal-Mart’s prices are the lowest on these items.
If folks conserve and drive less after work, then more time will be spent at home- - not just watching TV, but also listening to music and reading. Amazon will benefit the most.
As we get into the end of the fourth quarter, people will think about their April 2006 tax bill. I have been writing about the alternative minimum tax for years. As a reminder, 2 million Americans were hit by the AMT in 2002, 4 million in 2004, and 20 million will be impacted in 2006. This tax is a cancer. The combination of $3 gas, 80% higher natural gas for heating, the AMT, little or no wage growth after inflation, and higher interest rates- - - these five nails will puncture the air out of consumer spending. You can bank on it. These five nails are a lot more certain than a year-end rally. Hope springs eternal, or saying it more eloquently, if the queen had cajones she’d be king.
In the third quarter that just ended, the focal points were clearly Katrina and Rita. After that, it was the 80% increase in the price of natural gas, gasoline rising 44%, and crude up 13%. By comparison, the Dow rose 2.9%, the S&P 3.1%, and the Nasdaq 4.5%. Gold held its own as it rose 6.4%. Unfortunately, for those who think treasury bonds are a safe investment, that sector declined 0.9% in the third quarter.
"One could argue strongly that a key element driving inflation is indeed energy," says Lakshman Achuthan, managing director of the Economic Cycle Research Institute, which produces a leading inflation indicator that includes energy prices. "I don't know what you accomplish by removing energy from the discussion -- it's 'core' to the discussion."
August personal incomes declined 0.1%, while consumer spending dropped 0.5%, the biggest decline in 4 years. Meanwhile, the personal savings rate was -0.7% in August. You can’t save what you don’t have. Looking at it from another perspective, adjusted for inflation, consumer spending dropped 1% in August. The last time that happened was in September 2001. Not surprisingly, due to the hurricanes, the University of Michigan sentiment index plunged to 76.9 in September from 89.1 in August.
The bulls had something on their plate. The Chicago PMI for September rebounded nicely to 60.5% from 49.2% in August. Unfortunately, the cheering was short-lived with the prices paid sector climbing to 76.3% from 62.9% in August. Inflation is alive and well. Of course, you already knew that from the price of gold near an 18-year high.
The Big Picture: "Investors should be aware that Risk levels are on the rise."
Omnicare will reduce its workforce by 730 employees.
Albertsons continues to close under-performing stores and announced it will close the doors of at least three Colorado grocery stores on November 1, cutting 200 jobs. According to The Shelby Report, Albertsons has 52 stores in Colorado and ranks fourth in market share in that state behind King Soopers, Safeway, and Wal-Mart Supercenters.
According to timesonline.co.uk, Kazakhstan’s proven reserves stand at 26 million barrels of oil and 1.8 trillion meters of gas. The Kazakh government aims to raise oil production to 3 million barrels per day by 2015, making it one of the world’s top ten producers.
Reynaldo Rios, an elementary school teacher in Lajas, Puerto Rico, with permission, installed a sign on Francisco Negron's property that reads "Extraterrestial Route." "I can't say exactly when they will come, but I know it will happen," Rios said. "I want to keep believing in my dreams."
Albert Einstein: ""How I wish that somewhere there existed an island for those who are wise and of good will."
Many Wall Street pundits are wishing for a repeat of last year’s year-end rally, and many expect such a happening. Maybe that will be the case. I prefer to focus on more sure things. When you walk into stores, you will notice the holiday merchandise is beginning to fill the shelves. You also know that $3 a gallon gas is crimping your spending ability. Therefore, two things will happen. More time will be spent shopping online. Secondly, the purchase of gift cards will increase. For example, you can buy a gift card for an entire mall. What companies will benefit the most? Amazon, Wal-Mart.com, and Target.com.
PGE sent out a notice to its customers in San Francisco that heating bills could be 80% higher than last winter. Don’t sound so shocked. The price of natural gas in the third quarter rose by 80%. It means more shopping for blankets, sweaters, sweat pants and sweat shirts, and flannel sheets, flannel nightgowns, and flannel pajamas. Wal-Mart’s prices are the lowest on these items.
If folks conserve and drive less after work, then more time will be spent at home- - not just watching TV, but also listening to music and reading. Amazon will benefit the most.
As we get into the end of the fourth quarter, people will think about their April 2006 tax bill. I have been writing about the alternative minimum tax for years. As a reminder, 2 million Americans were hit by the AMT in 2002, 4 million in 2004, and 20 million will be impacted in 2006. This tax is a cancer. The combination of $3 gas, 80% higher natural gas for heating, the AMT, little or no wage growth after inflation, and higher interest rates- - - these five nails will puncture the air out of consumer spending. You can bank on it. These five nails are a lot more certain than a year-end rally. Hope springs eternal, or saying it more eloquently, if the queen had cajones she’d be king.
In the third quarter that just ended, the focal points were clearly Katrina and Rita. After that, it was the 80% increase in the price of natural gas, gasoline rising 44%, and crude up 13%. By comparison, the Dow rose 2.9%, the S&P 3.1%, and the Nasdaq 4.5%. Gold held its own as it rose 6.4%. Unfortunately, for those who think treasury bonds are a safe investment, that sector declined 0.9% in the third quarter.
"One could argue strongly that a key element driving inflation is indeed energy," says Lakshman Achuthan, managing director of the Economic Cycle Research Institute, which produces a leading inflation indicator that includes energy prices. "I don't know what you accomplish by removing energy from the discussion -- it's 'core' to the discussion."
August personal incomes declined 0.1%, while consumer spending dropped 0.5%, the biggest decline in 4 years. Meanwhile, the personal savings rate was -0.7% in August. You can’t save what you don’t have. Looking at it from another perspective, adjusted for inflation, consumer spending dropped 1% in August. The last time that happened was in September 2001. Not surprisingly, due to the hurricanes, the University of Michigan sentiment index plunged to 76.9 in September from 89.1 in August.
The bulls had something on their plate. The Chicago PMI for September rebounded nicely to 60.5% from 49.2% in August. Unfortunately, the cheering was short-lived with the prices paid sector climbing to 76.3% from 62.9% in August. Inflation is alive and well. Of course, you already knew that from the price of gold near an 18-year high.
The Big Picture: "Investors should be aware that Risk levels are on the rise."
Omnicare will reduce its workforce by 730 employees.
Albertsons continues to close under-performing stores and announced it will close the doors of at least three Colorado grocery stores on November 1, cutting 200 jobs. According to The Shelby Report, Albertsons has 52 stores in Colorado and ranks fourth in market share in that state behind King Soopers, Safeway, and Wal-Mart Supercenters.
According to timesonline.co.uk, Kazakhstan’s proven reserves stand at 26 million barrels of oil and 1.8 trillion meters of gas. The Kazakh government aims to raise oil production to 3 million barrels per day by 2015, making it one of the world’s top ten producers.
Reynaldo Rios, an elementary school teacher in Lajas, Puerto Rico, with permission, installed a sign on Francisco Negron's property that reads "Extraterrestial Route." "I can't say exactly when they will come, but I know it will happen," Rios said. "I want to keep believing in my dreams."
Albert Einstein: ""How I wish that somewhere there existed an island for those who are wise and of good will."
Friday, September 30, 2005
Resiliency, Complacency, Window Dressing, Or Street Magic?
9/30/05 Resiliency, Complacency, Window Dressing, Or Street Magic?
Itay Slonim: “In 2003 and 2004, world central banks (mainly in Asia) printed roughly $1.2 trillion, which has increased the global money base by over 60%[1]. In 2005, the annual rate of printing is roughly $500 billion. This is the greatest quantity of money printed in history (other than in wartime).”
The total notional value outstanding of credit derivatives rose to $12.4 trillion in June, up 48% from January and up 128% from a year earlier, according to the International Swaps and Derivatives Association. However, many of these trades have not been confirmed because of a processing backlog. Our GDP is less than the notional value of derivatives outstanding, and yet, many of the derivative trades have not been confirmed due to back office overload. The potential fallout from this backlog could clearly dim complacency.
The S&P has been up for six straight days. Today is the last day of the quarter and the last day of September. It is quite probable that the Dow will end on the plus side for September, and that has not been the case in recent years.
Heading into its final day, the Dow industrials have climbed 2.7 percent, the Nasdaq is up 4.1 percent and the S&P is up 3.1 percent during the third quarter.
Is the Fed raising interest rates in an effort to fight inflation or rather to attract foreign capital to cover our twin tower deficits as well as bolstering the dollar? Would the money supply be increasing faster than the stated inflation rate if the Fed’s primary concern were fighting inflation? Does the price of gold at $475+ an ounce indicate the Fed is trying to monetize the country’s $8 trillion debt?
The Conference Board’s help-wanted index in August fell to 35 from 39 in July. One year ago it was 37. Only 20% of the labor markets had rising want-ad volume compared with 47% one year ago. Online job ads rose 4% from June 2005.
Jesse Ventura: “When the government lies to the American people, they start a war. When the American people lie to the government, they go to jail.”
Recently, our country has experienced Katrina, Rita, rising interest rates, a flattening yield curve, a huge decline in consumer confidence, a 9.9% decline in new home sales, record natural gas prices, $3 gas at the pump, consumer pocketbooks getting pinched from rising costs, a rising death toll in Iraq, the lowest support for the Iraq war, the lowest support for Bush, and yet, the stock and bond markets are resilient and investors appear quite complacent. Yesterday and today’s results will be masked by end of the quarter window dressing.
"We were able to make progress, particularly with product coverage and quota levels, but we did not reach an agreement with the Chinese, "lead U.S. textile negotiator David Spooner said in a statement announcing that the talks ended Wednesday night.
"We will be meeting with the Chinese again next month and will be consulting with them soon on the location and exact date of the next round of negotiations," Spooner said.
According to insiders, the differences mainly focus on the duration of the pact, the base figure for determining exports and the growth rate.
The United States wants to calculate annual growth based on the 2004 figure but China would not accept the proposal because textile trade that year was skewed under a regime of international quotas, said Zhou Shjian, an expert on WTO issues.
Here’s a little street magic for you. It’s not David Blaine but still pretty good. The government reported that GDP rose 3.3% in this year’s second quarter. Are you sure that is a real number? If the government measures GDP by actual output rather than price increases, how accurate is the 3.3%? If the Fed is fighting inflation, then why not measure GDP with price increases too? It’s just a shell game.
NASA and the National Snow and Ice Data Center at the University of Colorado stated that the Arctic ice which floats at the North Pole melted to its smallest size - ever! - in records going back for at least a century. In fact, this summer ships could travel through both the North East and North West passages. Unlike the bond and stock markets, Mother Nature reflects reality and does not get complacent. There is no street magic at the North Pole.
OAO Lukoil, Russia's biggest oil company, offered to pay $2 billion to buy Nelson Resources Ltd. to expand in Kazakhstan. The price is a 15% discount from yesterday’s closing price for Nelson, and Dmitry Lukashov from Aton Capital brokerage stated the price is “37% below our fair value, and the reasons for this discount are not clear. We will recommend to those of our clients, who are shareholders in Nelson, to vote against this deal.” Nelson stated its net proven and probable reserves are around 270 million barrels.
The Deal.com reported that the interest in Albertson’s is moving toward the due diligence process, and that three bidding groups have been formed: KKR, Apollo, and Texas Pacific; Thomas H. Lee, Bain, and Yucaipa; and Cerebus and Kimco Realty. They stated the KKR and Lee groups have lined up financing while Cerberus would need to find outside financing. I don’t believe Cerberus would have difficulty in doing so.
Congress dealt a deadly blow to the protections provided by the Endangered Species Act by passing Congressman Pombo's bill weakening this important conservation law.
This bill:
* replaces the current mandatory critical habitat system with a system of
purported recovery plans that are discretionary and fail to protect
habitat essential for recovery;
* allows federal agencies to avoid consultation, resulting in agencies
with little to no experience in wildlife issues deciding if projects
will harm wildlife;
* exempts all pesticide decisions from ESA compliance, taking away the
ability under the ESA to stop pesticide use. even when necessary to
prevent extinction;
* requires the federal government to use taxpayer dollars to pay
developers for complying with the law, setting no limits on these
payments.
Mom, I'll light a birthday candle for you.
Itay Slonim: “In 2003 and 2004, world central banks (mainly in Asia) printed roughly $1.2 trillion, which has increased the global money base by over 60%[1]. In 2005, the annual rate of printing is roughly $500 billion. This is the greatest quantity of money printed in history (other than in wartime).”
The total notional value outstanding of credit derivatives rose to $12.4 trillion in June, up 48% from January and up 128% from a year earlier, according to the International Swaps and Derivatives Association. However, many of these trades have not been confirmed because of a processing backlog. Our GDP is less than the notional value of derivatives outstanding, and yet, many of the derivative trades have not been confirmed due to back office overload. The potential fallout from this backlog could clearly dim complacency.
The S&P has been up for six straight days. Today is the last day of the quarter and the last day of September. It is quite probable that the Dow will end on the plus side for September, and that has not been the case in recent years.
Heading into its final day, the Dow industrials have climbed 2.7 percent, the Nasdaq is up 4.1 percent and the S&P is up 3.1 percent during the third quarter.
Is the Fed raising interest rates in an effort to fight inflation or rather to attract foreign capital to cover our twin tower deficits as well as bolstering the dollar? Would the money supply be increasing faster than the stated inflation rate if the Fed’s primary concern were fighting inflation? Does the price of gold at $475+ an ounce indicate the Fed is trying to monetize the country’s $8 trillion debt?
The Conference Board’s help-wanted index in August fell to 35 from 39 in July. One year ago it was 37. Only 20% of the labor markets had rising want-ad volume compared with 47% one year ago. Online job ads rose 4% from June 2005.
Jesse Ventura: “When the government lies to the American people, they start a war. When the American people lie to the government, they go to jail.”
Recently, our country has experienced Katrina, Rita, rising interest rates, a flattening yield curve, a huge decline in consumer confidence, a 9.9% decline in new home sales, record natural gas prices, $3 gas at the pump, consumer pocketbooks getting pinched from rising costs, a rising death toll in Iraq, the lowest support for the Iraq war, the lowest support for Bush, and yet, the stock and bond markets are resilient and investors appear quite complacent. Yesterday and today’s results will be masked by end of the quarter window dressing.
"We were able to make progress, particularly with product coverage and quota levels, but we did not reach an agreement with the Chinese, "lead U.S. textile negotiator David Spooner said in a statement announcing that the talks ended Wednesday night.
"We will be meeting with the Chinese again next month and will be consulting with them soon on the location and exact date of the next round of negotiations," Spooner said.
According to insiders, the differences mainly focus on the duration of the pact, the base figure for determining exports and the growth rate.
The United States wants to calculate annual growth based on the 2004 figure but China would not accept the proposal because textile trade that year was skewed under a regime of international quotas, said Zhou Shjian, an expert on WTO issues.
Here’s a little street magic for you. It’s not David Blaine but still pretty good. The government reported that GDP rose 3.3% in this year’s second quarter. Are you sure that is a real number? If the government measures GDP by actual output rather than price increases, how accurate is the 3.3%? If the Fed is fighting inflation, then why not measure GDP with price increases too? It’s just a shell game.
NASA and the National Snow and Ice Data Center at the University of Colorado stated that the Arctic ice which floats at the North Pole melted to its smallest size - ever! - in records going back for at least a century. In fact, this summer ships could travel through both the North East and North West passages. Unlike the bond and stock markets, Mother Nature reflects reality and does not get complacent. There is no street magic at the North Pole.
OAO Lukoil, Russia's biggest oil company, offered to pay $2 billion to buy Nelson Resources Ltd. to expand in Kazakhstan. The price is a 15% discount from yesterday’s closing price for Nelson, and Dmitry Lukashov from Aton Capital brokerage stated the price is “37% below our fair value, and the reasons for this discount are not clear. We will recommend to those of our clients, who are shareholders in Nelson, to vote against this deal.” Nelson stated its net proven and probable reserves are around 270 million barrels.
The Deal.com reported that the interest in Albertson’s is moving toward the due diligence process, and that three bidding groups have been formed: KKR, Apollo, and Texas Pacific; Thomas H. Lee, Bain, and Yucaipa; and Cerebus and Kimco Realty. They stated the KKR and Lee groups have lined up financing while Cerberus would need to find outside financing. I don’t believe Cerberus would have difficulty in doing so.
Congress dealt a deadly blow to the protections provided by the Endangered Species Act by passing Congressman Pombo's bill weakening this important conservation law.
This bill:
* replaces the current mandatory critical habitat system with a system of
purported recovery plans that are discretionary and fail to protect
habitat essential for recovery;
* allows federal agencies to avoid consultation, resulting in agencies
with little to no experience in wildlife issues deciding if projects
will harm wildlife;
* exempts all pesticide decisions from ESA compliance, taking away the
ability under the ESA to stop pesticide use. even when necessary to
prevent extinction;
* requires the federal government to use taxpayer dollars to pay
developers for complying with the law, setting no limits on these
payments.
Mom, I'll light a birthday candle for you.
Thursday, September 29, 2005
Street Magic
9/29/05 Street Magic
Before I get to this morning’s chief topic, I’d like to cover a few points.
The International Energy Agency says China relies on overseas producers for just about one-third of supplies but accounts for about 7% of world oil demand. In contrast, India, despite importing 70% of its oil needs, consumes a little more than 2 million barrels (3% of world oil demand) a day - compared to China's 6.75 million barrels a day. According to the China National Center for Biotechnology Development, China’s reserves of biomass fuel are estimated to equal 7 times the projected crude oil output capacity of Daqing, China’s major oil field. The director of the Center stated China now has a practical technique for converting aged grains, sorghum, sugarcane, and sweet potato into diesel oil. With oil above $45 per barrel, he stated it was economically feasible to mass-produce biomass fuels without government subsidies
Renewable sources account for 25 percent of Sweden's energy use and 45 percent in Norway. The United States lagged behind, with only 4.2 percent of its energy consumption coming from renewable sources.
In Mumbai, the BSE Sensex closed above 8600 for the first time Buying in ONGC helped to lift the index. The interest in ONGC was attributed to a Bloomberg article stating that ONGC may counter China’s plan to buy PetroKazakhstan. It should be noted that the energy combine of ONGC and Mittal becomes effective in October.
Sanyo stated it would cut 10,000 workers and DaimlerChrysler 8,500 Mercedes employees. Independence Air will cut 600 jobs.
Now to street magic. My favorite magician is David Blaine. He is an extraordinary talent. Having watched him for years, I have yet to figure out how he accomplishes any of his tricks. He makes it look both easy and yet impossible to achieve. Why do I bring up David Blaine and his street magic? In my view, there is street magic being performed every day in the equity markets on Wall Street and the debt markets around the globe. At the center stage is the thought that Americans want to believe. They do not want to be doubters and have their lives interrupted by the likes of Abramoff, DeLay, Rove, and others. Everyone wants to have a nice day and a nice life. So where’s the magic?
The magic is in the false sense of well being. The table is set by government employees proclaiming that everything is okay and not to worry. All bumps in the road are temporary. The ABA reported yesterday that the percentage of credit card accounts 30 or more days past due climbed to an all-time high of 4.81% in the April-June period. I predict it will be higher in the July-Sept. quarter. Jim Chessen, the ABA’s chief economist, stated “the last two quarters have not been pretty. The rise in gas prices is really stretching budgets to the breaking point for some people. Gas prices are taking huge chunks out of wallets, leaving some individuals with little left to meet their financial obligations.”
The problem is that ONLY 69% of Americans own their homes. That 69% can have an equity line of credit using their homes as collateral. If the rise in their income falls below inflation, they simply take money from the equity line of credit to pay for gas, heating bills, and other expenses. There are no worries because the value of the home keeps rising. Of course, the debt levels against the home keep rising too. This ATM crowd should not worry though. Greenspan stated most homeowners are in good shape financially. We know that he pays your bills and you can always borrow more money at increasing rates of interest.
Speaking of increasing rates of interest, there is street magic. We have an $8 trillion national debt (excluding Medicare and Medicaid and other goodies), and that debt is climbing to where in a few years it will equal our GDP. It might exceed our GNP sooner, but we did away with GNP--- magically. Can you imagine twin tower debts amounting to $1.2 trillion this year and 10-year Treasury bond yields not rising? That is not a conundrum. It is street magic.
Isn’t it interesting that the sale of existing homes remains near record levels but sales of new homes are starting to fall off a cliff? What’s wrong with new homes? There are too many of them. This is similar to having too many GM and Ford vehicles. They left the door at a rapid rate with employee discount sales. Maybe home builders will need to provide prospective buyers with the employee discount. The housing market is beginning to run out of steam. The MBA stated its index of total mortgage applications for home purchase and refinancing loans fell 6.6% in the week ended Sept. 23. The volume of refinancing and purchase loans declined – the first time both sectors fell simultaneously in a month, according to MBA figures. I feel confident that Fed members can blame it on Katrina and Rita. Those storms would not explain the drop in demand for ARMs and refinancings. Americans are not saving through their earnings from work. Expenses are rising. Bills need to be paid. Mouths need to be fed. You can’t eat perceptions.
Street magic can carry you just so far.
Do you think gold would have rallied $200 an ounce over the last few years without inflation fears burning brightly and the purchasing power of the dollar declining? How can inflation be muted if the Goldman Sachs Commodity Index has risen over 45% this year? How can it be muted and under control when natural gas prices reached record high levels and gas at the pump approaches $3 a gallon? There won’t be any street magic to help you pay winter heating bills. I suggest you go to Wal-Mart and buy some blankets and sweaters. Was that Cramer recommending the purchase of Wal-Mart last evening?
Tom Robbins: “Disbelief in magic can force a poor soul into believing in government and business."
Before I get to this morning’s chief topic, I’d like to cover a few points.
The International Energy Agency says China relies on overseas producers for just about one-third of supplies but accounts for about 7% of world oil demand. In contrast, India, despite importing 70% of its oil needs, consumes a little more than 2 million barrels (3% of world oil demand) a day - compared to China's 6.75 million barrels a day. According to the China National Center for Biotechnology Development, China’s reserves of biomass fuel are estimated to equal 7 times the projected crude oil output capacity of Daqing, China’s major oil field. The director of the Center stated China now has a practical technique for converting aged grains, sorghum, sugarcane, and sweet potato into diesel oil. With oil above $45 per barrel, he stated it was economically feasible to mass-produce biomass fuels without government subsidies
Renewable sources account for 25 percent of Sweden's energy use and 45 percent in Norway. The United States lagged behind, with only 4.2 percent of its energy consumption coming from renewable sources.
In Mumbai, the BSE Sensex closed above 8600 for the first time Buying in ONGC helped to lift the index. The interest in ONGC was attributed to a Bloomberg article stating that ONGC may counter China’s plan to buy PetroKazakhstan. It should be noted that the energy combine of ONGC and Mittal becomes effective in October.
Sanyo stated it would cut 10,000 workers and DaimlerChrysler 8,500 Mercedes employees. Independence Air will cut 600 jobs.
Now to street magic. My favorite magician is David Blaine. He is an extraordinary talent. Having watched him for years, I have yet to figure out how he accomplishes any of his tricks. He makes it look both easy and yet impossible to achieve. Why do I bring up David Blaine and his street magic? In my view, there is street magic being performed every day in the equity markets on Wall Street and the debt markets around the globe. At the center stage is the thought that Americans want to believe. They do not want to be doubters and have their lives interrupted by the likes of Abramoff, DeLay, Rove, and others. Everyone wants to have a nice day and a nice life. So where’s the magic?
The magic is in the false sense of well being. The table is set by government employees proclaiming that everything is okay and not to worry. All bumps in the road are temporary. The ABA reported yesterday that the percentage of credit card accounts 30 or more days past due climbed to an all-time high of 4.81% in the April-June period. I predict it will be higher in the July-Sept. quarter. Jim Chessen, the ABA’s chief economist, stated “the last two quarters have not been pretty. The rise in gas prices is really stretching budgets to the breaking point for some people. Gas prices are taking huge chunks out of wallets, leaving some individuals with little left to meet their financial obligations.”
The problem is that ONLY 69% of Americans own their homes. That 69% can have an equity line of credit using their homes as collateral. If the rise in their income falls below inflation, they simply take money from the equity line of credit to pay for gas, heating bills, and other expenses. There are no worries because the value of the home keeps rising. Of course, the debt levels against the home keep rising too. This ATM crowd should not worry though. Greenspan stated most homeowners are in good shape financially. We know that he pays your bills and you can always borrow more money at increasing rates of interest.
Speaking of increasing rates of interest, there is street magic. We have an $8 trillion national debt (excluding Medicare and Medicaid and other goodies), and that debt is climbing to where in a few years it will equal our GDP. It might exceed our GNP sooner, but we did away with GNP--- magically. Can you imagine twin tower debts amounting to $1.2 trillion this year and 10-year Treasury bond yields not rising? That is not a conundrum. It is street magic.
Isn’t it interesting that the sale of existing homes remains near record levels but sales of new homes are starting to fall off a cliff? What’s wrong with new homes? There are too many of them. This is similar to having too many GM and Ford vehicles. They left the door at a rapid rate with employee discount sales. Maybe home builders will need to provide prospective buyers with the employee discount. The housing market is beginning to run out of steam. The MBA stated its index of total mortgage applications for home purchase and refinancing loans fell 6.6% in the week ended Sept. 23. The volume of refinancing and purchase loans declined – the first time both sectors fell simultaneously in a month, according to MBA figures. I feel confident that Fed members can blame it on Katrina and Rita. Those storms would not explain the drop in demand for ARMs and refinancings. Americans are not saving through their earnings from work. Expenses are rising. Bills need to be paid. Mouths need to be fed. You can’t eat perceptions.
Street magic can carry you just so far.
Do you think gold would have rallied $200 an ounce over the last few years without inflation fears burning brightly and the purchasing power of the dollar declining? How can inflation be muted if the Goldman Sachs Commodity Index has risen over 45% this year? How can it be muted and under control when natural gas prices reached record high levels and gas at the pump approaches $3 a gallon? There won’t be any street magic to help you pay winter heating bills. I suggest you go to Wal-Mart and buy some blankets and sweaters. Was that Cramer recommending the purchase of Wal-Mart last evening?
Tom Robbins: “Disbelief in magic can force a poor soul into believing in government and business."
Wednesday, September 28, 2005
Exuberance
9/28/05 Exuberance
Greenspan: "History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets. Because it is difficult to suppress growing market exuberance when the economic environment is perceived as more stable, a highly flexible system needs to be in place to rebalance an economy in which psychology and asset prices could change rapidly."
Montecito Property Company made sales history this past weekend September 24-25, 2005 when the fastest growing property development company in America sold almost 90 percent of its
homes at the grand opening of LaVista at Laguna Niguel. The community of 280 units is the first California condo conversion in a series, planned by the Jacksonville, Florida-based developer.
More than 1,000 potential homeowners converged at the new home community
when the doors opened Saturday morning. "With the median price of a home in Orange County topping out in July,2005 at $706,820 as reported this past week in the Los Angeles Times, Montecito's enclave of luxury condo conversions is a great value for the money," says President Edward "Chip" Conk of Montecito Property Company, LLC. Added Conk, "We were not at all surprised by the overwhelming response and interest in LaVista at Laguna Niguel because of its spectacular location only
three miles from the Pacific Ocean.
Delphi Corp. acknowledged today that it continues to be in discussions with its major unions and General Motors Corp. concerning a comprehensive restructuring designed to address Delphi's existing U.S. legacy liabilities and the resulting high-cost structure of its U.S. operations going forward.
Robert S. "Steve" Miller, Delphi's chairman and CEO, said, "While I'm pleased that we continue to be in discussions on a consensual restructuring, as everyone is aware we have been working on this for quite some time and our board is committed to achieving a successful restructuring of Delphi, one way
or another."
Bush urges Americans to drive less and to van pool. I guess that’s the Administration’s energy policy.
Ann Sexton: "Put your ear down close to your soul and listen hard."
Iran threatened to resume uranium conversion, block inspections of its nuclear sites, and cut trade with countries who backed an IAEA resolution that calls for its referral to the UN Security Council, the Associated Press news agency reported.
Norman Cousins: "Wisdom consists of the anticipation of the consequeces."
China has invited India to take part in its offshore and deep water exploration blocks. During their discussion at the 18th World Petroleum Congress, the two countries also agreed to move together for bidding in third countries. The Indian delegation to the World Petroleum Congress, led by secretary petroleum SC Tripathi, held a series of discussions with Chinese representatives on cooperation in the exploration and production side. The Chinese side has invited India to forge a strategic partnership and wants petroleum sector to be a part of it. The head of the Chinese delegation, Wang Tao, a former minister and now senior vice-president of World Petroleum Congress, said his country attached importance to cooperation with India since both the countries have made tremendous impact with their increasing demand. The China National Petroleum Company in its presentation to the Indian delegation stressed on holding dialogues in advance and not at the last moment when a bid is to be submitted. It said though some competition would continue to happen, there should be an attempt for partnership so that competition could be reduced. The other Chinese companies represented included Sinopec, Sinochem and China National Offshore Oil Company.
Light, sweet crude for November delivery on the New York Mercantile Exchange dropped 14 cents to $64.93 a barrel. Heating oil was down nearly 2 cents at $2.0510 a gallon, while gasoline was trading at $2.1615 a gallon, down half a cent.
Nouriel Roubini:” And yes oil will go above $100 per barrel in the next three years. Why? Because of the basic laws of demand and supply. Global demand for oil is growing at about 2.1% per year or about 2 mmb/d (million barrels a day) per year. So, new net supply has to increase by as much just to maintain prices at current high levels. But since existing production fields get depleted at the rate of over 4 mmb/d per year, new production from new oil fields has to be at least 6 mmb/d per year just to ensure that the additional net demand is satisfied.”
There are Fed members worrying about inflation and providing indications for future rate hikes. This sentiment is counterbalanced by the economic fallout from Katrina and Rita and the rapid deterioration in consumer confidence. So far this year, the 10-year Treasury bonds have ranged from a yield of 3.90% to 4.45%. Presently, the yield is 4.31%. Once again, Greenspan stated that investors should not be lulled into a false sense of security just because interest rates have remained low for such a long stretch of time. On the other hand, he noted it is “difficult to suppress growing market exuberance when the economic environment is perceived as more stable.” How stable is the environment when August new home sales decline 9.9% and the supply of homes reaches a record high at 4.7 months? How stable is the consumer-dependent economy when the U.S. September Conference Board’s Consumer Confidence Index has its biggest decline in 15 years to 86.6 from August’s 105.5? Possibly more telling was the sharp decline in the expectations index to 71.7 from 93.3. Especially troubling was the finding that 25% of respondents expect fewer jobs in coming months, down sharply from 17.3% one month earlier.
Sidonie-Gabrielle Colette: "Look for a long time at what pleases you, and for a longer time at what pains you."
Yesterday, on the NYSE, there were 86 new highs and 108 new lows.
In a recent CNN survey, 63% were in favor of a strategy to leave Iraq. One year ago it was 38%.
Google Inc. is expected to announce plans today to build a 1million-square-foot campus at NASA Ames Research Center in Mountain View, California.
The U.K. economy expanded at the slowest annual pace in more than 12 years in the second quarter, reinforcing expectations Chancellor of the Exchequer Gordon Brown will have to scale back plans to increase spending. Europe's second-largest economy grew 1.5 percent from a year earlier instead of the 1.8 percent estimated on Aug. 26, the Office for National Statistics said in London today.
At least 5,000 workers with the Mercedes Car Group faced the prospect Wednesday that their jobs could be cut as the flagship brand of DaimlerChrysler AG struggles to cut costs.
Those affected by Hurricane Rita have until November 30 to file for Disaster Unemployment Assistance, the Louisiana Department of Labor announced today.
Greenspan: "History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets. Because it is difficult to suppress growing market exuberance when the economic environment is perceived as more stable, a highly flexible system needs to be in place to rebalance an economy in which psychology and asset prices could change rapidly."
Montecito Property Company made sales history this past weekend September 24-25, 2005 when the fastest growing property development company in America sold almost 90 percent of its
homes at the grand opening of LaVista at Laguna Niguel. The community of 280 units is the first California condo conversion in a series, planned by the Jacksonville, Florida-based developer.
More than 1,000 potential homeowners converged at the new home community
when the doors opened Saturday morning. "With the median price of a home in Orange County topping out in July,2005 at $706,820 as reported this past week in the Los Angeles Times, Montecito's enclave of luxury condo conversions is a great value for the money," says President Edward "Chip" Conk of Montecito Property Company, LLC. Added Conk, "We were not at all surprised by the overwhelming response and interest in LaVista at Laguna Niguel because of its spectacular location only
three miles from the Pacific Ocean.
Delphi Corp. acknowledged today that it continues to be in discussions with its major unions and General Motors Corp. concerning a comprehensive restructuring designed to address Delphi's existing U.S. legacy liabilities and the resulting high-cost structure of its U.S. operations going forward.
Robert S. "Steve" Miller, Delphi's chairman and CEO, said, "While I'm pleased that we continue to be in discussions on a consensual restructuring, as everyone is aware we have been working on this for quite some time and our board is committed to achieving a successful restructuring of Delphi, one way
or another."
Bush urges Americans to drive less and to van pool. I guess that’s the Administration’s energy policy.
Ann Sexton: "Put your ear down close to your soul and listen hard."
Iran threatened to resume uranium conversion, block inspections of its nuclear sites, and cut trade with countries who backed an IAEA resolution that calls for its referral to the UN Security Council, the Associated Press news agency reported.
Norman Cousins: "Wisdom consists of the anticipation of the consequeces."
China has invited India to take part in its offshore and deep water exploration blocks. During their discussion at the 18th World Petroleum Congress, the two countries also agreed to move together for bidding in third countries. The Indian delegation to the World Petroleum Congress, led by secretary petroleum SC Tripathi, held a series of discussions with Chinese representatives on cooperation in the exploration and production side. The Chinese side has invited India to forge a strategic partnership and wants petroleum sector to be a part of it. The head of the Chinese delegation, Wang Tao, a former minister and now senior vice-president of World Petroleum Congress, said his country attached importance to cooperation with India since both the countries have made tremendous impact with their increasing demand. The China National Petroleum Company in its presentation to the Indian delegation stressed on holding dialogues in advance and not at the last moment when a bid is to be submitted. It said though some competition would continue to happen, there should be an attempt for partnership so that competition could be reduced. The other Chinese companies represented included Sinopec, Sinochem and China National Offshore Oil Company.
Light, sweet crude for November delivery on the New York Mercantile Exchange dropped 14 cents to $64.93 a barrel. Heating oil was down nearly 2 cents at $2.0510 a gallon, while gasoline was trading at $2.1615 a gallon, down half a cent.
Nouriel Roubini:” And yes oil will go above $100 per barrel in the next three years. Why? Because of the basic laws of demand and supply. Global demand for oil is growing at about 2.1% per year or about 2 mmb/d (million barrels a day) per year. So, new net supply has to increase by as much just to maintain prices at current high levels. But since existing production fields get depleted at the rate of over 4 mmb/d per year, new production from new oil fields has to be at least 6 mmb/d per year just to ensure that the additional net demand is satisfied.”
There are Fed members worrying about inflation and providing indications for future rate hikes. This sentiment is counterbalanced by the economic fallout from Katrina and Rita and the rapid deterioration in consumer confidence. So far this year, the 10-year Treasury bonds have ranged from a yield of 3.90% to 4.45%. Presently, the yield is 4.31%. Once again, Greenspan stated that investors should not be lulled into a false sense of security just because interest rates have remained low for such a long stretch of time. On the other hand, he noted it is “difficult to suppress growing market exuberance when the economic environment is perceived as more stable.” How stable is the environment when August new home sales decline 9.9% and the supply of homes reaches a record high at 4.7 months? How stable is the consumer-dependent economy when the U.S. September Conference Board’s Consumer Confidence Index has its biggest decline in 15 years to 86.6 from August’s 105.5? Possibly more telling was the sharp decline in the expectations index to 71.7 from 93.3. Especially troubling was the finding that 25% of respondents expect fewer jobs in coming months, down sharply from 17.3% one month earlier.
Sidonie-Gabrielle Colette: "Look for a long time at what pleases you, and for a longer time at what pains you."
Yesterday, on the NYSE, there were 86 new highs and 108 new lows.
In a recent CNN survey, 63% were in favor of a strategy to leave Iraq. One year ago it was 38%.
Google Inc. is expected to announce plans today to build a 1million-square-foot campus at NASA Ames Research Center in Mountain View, California.
The U.K. economy expanded at the slowest annual pace in more than 12 years in the second quarter, reinforcing expectations Chancellor of the Exchequer Gordon Brown will have to scale back plans to increase spending. Europe's second-largest economy grew 1.5 percent from a year earlier instead of the 1.8 percent estimated on Aug. 26, the Office for National Statistics said in London today.
At least 5,000 workers with the Mercedes Car Group faced the prospect Wednesday that their jobs could be cut as the flagship brand of DaimlerChrysler AG struggles to cut costs.
Those affected by Hurricane Rita have until November 30 to file for Disaster Unemployment Assistance, the Louisiana Department of Labor announced today.
Tuesday, September 27, 2005
Surprise
9/27/05 Surprise
Finally, at last, Greenspan stated consumers have become enormously dependent on borrowing against their homes to fuel their spending, and that a rise in mortgage rates could trigger a spending pullback. However, he observed that homeowners are not overly in debt. "The vast majority of homeowners have a sizable equity cushion with which to absorb a potential decline in house prices," he said. Meanwhile, existing-home sales climbed 2% in August, and the median price of a home increased close to 16% over the past 12 months.
Congress already has given the president about $350 billion for combat and reconstruction in Iraq and Afghanistan and fighting terrorism worldwide since the Sept. 11 attacks, according to the Congressional Research Service. That total includes $82 billion that lawmakers approved in May. Now, the Senate would give President Bush $50 billion more for wars in Iraq and Afghanistan as part of a $440 billion defense-spending measure a panel approved yesterday. In my view, any Senator and/or member of Congress who votes to approve this added spending should not be re-elected.
At least 40 percent of current state employees in 20 states will be eligible for retirement by 2015, according to a 37-state survey released earlier this year by the Government Performance Project. Washington, Maine, Tennessee, Michigan and Pennsylvania will have the most employees reaching retirement age in the next 10 years, according to the study by GPP, which like Stateline.org is funded by The Pew Charitable Trusts.
In addition to an aging workforce, CanagaRetna of CSG said other factors are creating unfunded liabilities in state pension programs. For example, states such as Illinois, New Jersey and North Carolina decreased payments into their retirement systems to help balance their books during the fiscal crisis and are now scrambling to catch up, he said. Experts say states, counties and cities are short $292.4 billion in money promised through their public employee retirement systems.
Fed’s Moskow: "We feel it's necessary to reduce accommodation.”
The 10-year Treasury bond yield has risen to 4.29%, and the 118 point basis point yield spread with the 10-year German bond is the widest in 5 years.
Palatin Technologies, Inc. announced that it will present at the UBS Global Life Sciences Conference at 9:30 a.m. Eastern Time on Tuesday, September 27, 2005 at the Grand Hyatt New York in New York City.
Yesterday, PTN had this year’s best day of trading. The vast majority of the heavy volume, 737,500 shares, traded on the upside, and the stock closed at $2.28, the highest closing price in 6 months. This morning, Palatin issued an important announcement that today the company is in receipt of $10 million from King Pharmaceuticals, Inc. pursuant to their strategic alliance to jointly develop PT-141 for the treatment of male and female sexual dysfunction. King will receive 4,499,336 shares of common stock plus warrants to purchase 719,894 shares of common stock at an exercise price of $2.22. Stephen Wills, Palatin’s CFO, commented: "We are very pleased with our relationship with King and the progress of the PT-141 program. With ongoing Phase 2 trials in both male and female sexual dysfunction patients, the commercial development program is in full swing and we look forward to the successful and continued advancement of the program towards Phase 3 pivotal trials."
Lowe’s, one of the great ones, estimates its 2006 EPS will increase by 17-20% and 16-20% in 2007.
Lennar lifted its estimate for 2005 t $8.05 per share.
The dollar advanced to its best level versus the euro since July.
Some refineries, such as Valero’s Pt. Arthur refinery, may be down for weeks. As such, gasoline rose to $2.04 and crude to $65.50 per barrel.
The Big Picture: “Ignoring energy - the inflationary data in the CPI - is less than pointless; It shifts the focus away from exactly where it should be: On the part of CPI that has been rapidly increasing in price.”
Dreamworks terminated talks to be acquired by NBC Universal.
According to the Financial Times, Wellpoint is near a deal to acquire WellChoice for about $6.5 billion in cash and stock.
Had Frist not voted to support stem cell research would he have had a problem over his sale of HCA stock?
Had Cindy Sheehan not camped out in Crawford, TX and held news conferences against the Iraq war would she had been arrested yesterday in DC for not having a permit to demonstrate?
Bush and his Administration will come to be known as the gang that couldn’t shoot straight. Unfortunately,
he is taking a nation down with him. By the way, are the Democrats still a political party? When did they ever offer a viable plan on any important national subject? Criticism is not an action plan.
Gary Lammert, The Economic Fractalist: “By this fractal reckoning the first decay base low will be reached in 5-6 more days and the entire three phase fractal decay cycle will be reached in 77 more trading days. Considering the enormity of imbalances, entitlements, and outstanding debt, this devolution could
potentially represent the 147 year nonlinear fall into the abyss. The collapsing financial picture will tax the American banking system with its inadequate fractional cash reserves in its ability to redeem deposits of concerned savers. This is not investment advice. It is a rather specific prospectively identified potential pattern that can be tested. Again as the daily fractal valuations evolve, further prognostic refinements may be indicated. However, the odds that the preceding identified daily Wilshire's fractals since March 2003, characterized by easily identifiable valuation lows, are occurring by chance and randomness alone -
resulting in exquisitely perfect quantum fractal patterns must, from a statistical point of view, approach zero. Based on this significant statistical improbability, the macro economy may very well operate via
its own predictable scientific fractal law. Time will tell.”
The U.S. Minerals Management Services reported that, in the Gulf of Mexico, shut-in oil production is 1,527,630 BOPD. This shut-in oil production is equivalent to 100% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.
A newly-discovered virus has killed dogs in at least seven states, and veterinarians, kennel operators and pet owners are concerned because researchers say there is no vaccine and dogs do not have immunity to the new flu.
The Financial Times notes that Fitch Ratings pointed out that, in addition to the growth impact, higher oil prices could push the US current account deficit higher, thus accentuating global imbalances. It calculates, for example, that a higher oil import bill could see the US current account deficit reach $1,000bn in 2006, over seven per cent of GDP – and warns this could “amplify concerns about its sustainability and the risk of increased volatility in global currencies and other asset markets.”
The European Union posted a 3.2 billion euro ($3.86 billion) overall trade deficit in July, nearly double the total of the previous month, according to first estimates from the EU statistics agency Eurostat released Tuesday.The total deficit for the 25 nations of the EU increased from a deficit of 1.8 billion euros ($2.17 billion) in June, and compared with a 1 billion euro surplus in July 2004.
Helen Keller: "We could never learn to be brave and patient, if there were only joy in the world."
Finally, at last, Greenspan stated consumers have become enormously dependent on borrowing against their homes to fuel their spending, and that a rise in mortgage rates could trigger a spending pullback. However, he observed that homeowners are not overly in debt. "The vast majority of homeowners have a sizable equity cushion with which to absorb a potential decline in house prices," he said. Meanwhile, existing-home sales climbed 2% in August, and the median price of a home increased close to 16% over the past 12 months.
Congress already has given the president about $350 billion for combat and reconstruction in Iraq and Afghanistan and fighting terrorism worldwide since the Sept. 11 attacks, according to the Congressional Research Service. That total includes $82 billion that lawmakers approved in May. Now, the Senate would give President Bush $50 billion more for wars in Iraq and Afghanistan as part of a $440 billion defense-spending measure a panel approved yesterday. In my view, any Senator and/or member of Congress who votes to approve this added spending should not be re-elected.
At least 40 percent of current state employees in 20 states will be eligible for retirement by 2015, according to a 37-state survey released earlier this year by the Government Performance Project. Washington, Maine, Tennessee, Michigan and Pennsylvania will have the most employees reaching retirement age in the next 10 years, according to the study by GPP, which like Stateline.org is funded by The Pew Charitable Trusts.
In addition to an aging workforce, CanagaRetna of CSG said other factors are creating unfunded liabilities in state pension programs. For example, states such as Illinois, New Jersey and North Carolina decreased payments into their retirement systems to help balance their books during the fiscal crisis and are now scrambling to catch up, he said. Experts say states, counties and cities are short $292.4 billion in money promised through their public employee retirement systems.
Fed’s Moskow: "We feel it's necessary to reduce accommodation.”
The 10-year Treasury bond yield has risen to 4.29%, and the 118 point basis point yield spread with the 10-year German bond is the widest in 5 years.
Palatin Technologies, Inc. announced that it will present at the UBS Global Life Sciences Conference at 9:30 a.m. Eastern Time on Tuesday, September 27, 2005 at the Grand Hyatt New York in New York City.
Yesterday, PTN had this year’s best day of trading. The vast majority of the heavy volume, 737,500 shares, traded on the upside, and the stock closed at $2.28, the highest closing price in 6 months. This morning, Palatin issued an important announcement that today the company is in receipt of $10 million from King Pharmaceuticals, Inc. pursuant to their strategic alliance to jointly develop PT-141 for the treatment of male and female sexual dysfunction. King will receive 4,499,336 shares of common stock plus warrants to purchase 719,894 shares of common stock at an exercise price of $2.22. Stephen Wills, Palatin’s CFO, commented: "We are very pleased with our relationship with King and the progress of the PT-141 program. With ongoing Phase 2 trials in both male and female sexual dysfunction patients, the commercial development program is in full swing and we look forward to the successful and continued advancement of the program towards Phase 3 pivotal trials."
Lowe’s, one of the great ones, estimates its 2006 EPS will increase by 17-20% and 16-20% in 2007.
Lennar lifted its estimate for 2005 t $8.05 per share.
The dollar advanced to its best level versus the euro since July.
Some refineries, such as Valero’s Pt. Arthur refinery, may be down for weeks. As such, gasoline rose to $2.04 and crude to $65.50 per barrel.
The Big Picture: “Ignoring energy - the inflationary data in the CPI - is less than pointless; It shifts the focus away from exactly where it should be: On the part of CPI that has been rapidly increasing in price.”
Dreamworks terminated talks to be acquired by NBC Universal.
According to the Financial Times, Wellpoint is near a deal to acquire WellChoice for about $6.5 billion in cash and stock.
Had Frist not voted to support stem cell research would he have had a problem over his sale of HCA stock?
Had Cindy Sheehan not camped out in Crawford, TX and held news conferences against the Iraq war would she had been arrested yesterday in DC for not having a permit to demonstrate?
Bush and his Administration will come to be known as the gang that couldn’t shoot straight. Unfortunately,
he is taking a nation down with him. By the way, are the Democrats still a political party? When did they ever offer a viable plan on any important national subject? Criticism is not an action plan.
Gary Lammert, The Economic Fractalist: “By this fractal reckoning the first decay base low will be reached in 5-6 more days and the entire three phase fractal decay cycle will be reached in 77 more trading days. Considering the enormity of imbalances, entitlements, and outstanding debt, this devolution could
potentially represent the 147 year nonlinear fall into the abyss. The collapsing financial picture will tax the American banking system with its inadequate fractional cash reserves in its ability to redeem deposits of concerned savers. This is not investment advice. It is a rather specific prospectively identified potential pattern that can be tested. Again as the daily fractal valuations evolve, further prognostic refinements may be indicated. However, the odds that the preceding identified daily Wilshire's fractals since March 2003, characterized by easily identifiable valuation lows, are occurring by chance and randomness alone -
resulting in exquisitely perfect quantum fractal patterns must, from a statistical point of view, approach zero. Based on this significant statistical improbability, the macro economy may very well operate via
its own predictable scientific fractal law. Time will tell.”
The U.S. Minerals Management Services reported that, in the Gulf of Mexico, shut-in oil production is 1,527,630 BOPD. This shut-in oil production is equivalent to 100% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.
A newly-discovered virus has killed dogs in at least seven states, and veterinarians, kennel operators and pet owners are concerned because researchers say there is no vaccine and dogs do not have immunity to the new flu.
The Financial Times notes that Fitch Ratings pointed out that, in addition to the growth impact, higher oil prices could push the US current account deficit higher, thus accentuating global imbalances. It calculates, for example, that a higher oil import bill could see the US current account deficit reach $1,000bn in 2006, over seven per cent of GDP – and warns this could “amplify concerns about its sustainability and the risk of increased volatility in global currencies and other asset markets.”
The European Union posted a 3.2 billion euro ($3.86 billion) overall trade deficit in July, nearly double the total of the previous month, according to first estimates from the EU statistics agency Eurostat released Tuesday.The total deficit for the 25 nations of the EU increased from a deficit of 1.8 billion euros ($2.17 billion) in June, and compared with a 1 billion euro surplus in July 2004.
Helen Keller: "We could never learn to be brave and patient, if there were only joy in the world."
Monday, September 26, 2005
Good News
9/26/05 Good News
Boeing and the Machinists Union have reached agreement on a new contract, and the 3+ week strike will come end. Terms of the contract offer include:
-- A pension multiplier of $70 per month for each year of service,
-- Maintaining existing health care plans under the same cost provisions
of the IAM's previous contract with Boeing,
-- A ratification bonus equaling 8 percent of each employee's total pay
during the past 12 months, which will average about $5,200 per
individual, and
-- Two lump sum bonuses, of $3,000 each, which will be paid at the end of
2006 and 2007.
The new three-year agreement at DaimlerChrysler has been overwhelmingly ratified by CAW members at meetings across Ontario, Canada. In addition to modest improvements in wages, pensions, and other benefits, the agreement ensures the continued operation of all existing facilities and shifts and commits the company to a major new investment in its Windsor assembly plant. The contract also provides for changes in the delivery of health benefits that will save tens of millions of dollars annually. Without harming the quality of the benefits which CAW members receive.
Only 3 refineries were hurt by Rita, and major damage was averted. Crude has declined to $63.20 per barrel.
The Nikkei hit a new 4-year high.
India’s GDP grew 7.1% in this year’s second quarter.
China’s GDP is expected to grow at a 9.2% rate this year.
According to the WSJ Online and Business Week Online, the buyout interest for Albertson’s is heating up.
China continues to aim for full yuan convertibility.
According to the Lundberg survey, in the past two weeks the retail price of gasoline declined 20 cents a gallon nationwide.
The United States has called for expansion of the Group of Seven, a club of world's wealthiest nations, to include India.
During Katrina and Rita, the nation has witnessed the toll on human capital and, to a much less important extent, political capital. Through all the devastation, life will continue. Life will change for many, but life will still go on. Hopefully, our citizens can now have a more keen focus on the daily quality of life and the pursuit of mutual caring and the respect for the rights and freedoms of the individual. The hurricanes have proven that government cannot deliver well being to your doorstep. Only the individual has the power to accomplish such a feat.
Boeing and the Machinists Union have reached agreement on a new contract, and the 3+ week strike will come end. Terms of the contract offer include:
-- A pension multiplier of $70 per month for each year of service,
-- Maintaining existing health care plans under the same cost provisions
of the IAM's previous contract with Boeing,
-- A ratification bonus equaling 8 percent of each employee's total pay
during the past 12 months, which will average about $5,200 per
individual, and
-- Two lump sum bonuses, of $3,000 each, which will be paid at the end of
2006 and 2007.
The new three-year agreement at DaimlerChrysler has been overwhelmingly ratified by CAW members at meetings across Ontario, Canada. In addition to modest improvements in wages, pensions, and other benefits, the agreement ensures the continued operation of all existing facilities and shifts and commits the company to a major new investment in its Windsor assembly plant. The contract also provides for changes in the delivery of health benefits that will save tens of millions of dollars annually. Without harming the quality of the benefits which CAW members receive.
Only 3 refineries were hurt by Rita, and major damage was averted. Crude has declined to $63.20 per barrel.
The Nikkei hit a new 4-year high.
India’s GDP grew 7.1% in this year’s second quarter.
China’s GDP is expected to grow at a 9.2% rate this year.
According to the WSJ Online and Business Week Online, the buyout interest for Albertson’s is heating up.
China continues to aim for full yuan convertibility.
According to the Lundberg survey, in the past two weeks the retail price of gasoline declined 20 cents a gallon nationwide.
The United States has called for expansion of the Group of Seven, a club of world's wealthiest nations, to include India.
During Katrina and Rita, the nation has witnessed the toll on human capital and, to a much less important extent, political capital. Through all the devastation, life will continue. Life will change for many, but life will still go on. Hopefully, our citizens can now have a more keen focus on the daily quality of life and the pursuit of mutual caring and the respect for the rights and freedoms of the individual. The hurricanes have proven that government cannot deliver well being to your doorstep. Only the individual has the power to accomplish such a feat.
Sunday, September 25, 2005
Lost Control
9/25/05 Lost Control
According to Reuters, U.S. Federal Reserve Chairman Alan Greenspan told France's Finance Minister Thierry Breton the United States has "lost control" of its budget deficit, the French minister said on Saturday.
"'We have lost control,' that was his expression," Breton told reporters after a bilateral meeting with Greenspan.
"The United States has lost control of their budget at a time when racking up deficits has been authorized without any control (from Congress)," Breton said.
"We were both disappointed that the management of debt is not a political priority today," he added.
People’s Bank of China Governor Zhou Xiaochuan: "Along with time, we are going to allow our exchange rate to depend more and more on stabilizing market relationships.
That also means that the role of the reference basket of currencies will gradually be reduced. We are not in a hurry to move forward, but we have this direction,"
Porsche AG, the maker of the Boxster sports car, said it plans to buy 20 percent of Volkswagen AG to prevent a takeover of that company.
Overall, Rita did minimal damage to the oil refineries along the Gulf coast, crude declined close to $1 per barrel. However, Valero Energy Corp. said it will take two weeks to a month to repair and restart its 255,000-barrel-per-day Port Arthur refinery, which sustained "significant damage to two cooling towers and a flare stack." It’s important to remember that the hurricane season does not end until November.
The procedure involving endovascular repair of arterial aneurysms behind Cheney’s right and left knees lasted 6 hours. The procedure was performed by Dr. Anthony
Venbrux, Director of Interventional Radiology, Dr. Jonathan Reiner, Director of the Cardiac Catheterization Laboratory, and Dr. Joseph Giordano, Chairman of Surgery. Joining the team were Dr. Barry Katzen, Director of the Baptist Heart and Vascular Institute at Baptist Hospital in Miami and Dr. PeterGloviczki, Chair of Vascular Surgery at Mayo Clinic. Cheney will remain in the hospital for 48 hours. The procedure went well, but at the same time, it was a big deal, and going forward, significant risk exists.
Jim Williams of Williams Inference Center: "The medication for Parkinson's, the desire to gamble and the craving for excess food have one common denominator, dopamine.
Dopamine is a pleasure-inducing brain chemical, a neurotransmitter that controls action. Dopamine is associated with addiction of all types…Dopamine has been associated with the novelty of drinking, gambling and other addictions, but it is also connected with curiosity, adventure, entrepreneurship and accomplishments.”
China has developed its own typing reagent of hematopoietic stem cell, which could be used to cure leukemia, according to sources with the Chinese Academy of Military Medical Sciences. The home-made HLA-DRB1 typing reagent is cheaper than imported reagent of its kind and is easier and quicker in use, said Wang Shengqi, head of the key laboratory of biological genetic chips under the academy, who has led the team of this research for five years.
The new typing reagent can be used to test all the 13 discovered genetic types of HLA-DRB1, covering all the 18 known serological types, according to Wang.
Yesterday, there was gibberish from Lukoil that they would try to make trouble at the 11th hour on the acquisition of PetroKazakhstan. It’s always vital to take note of what actions are taken rather than words spoken. The most important task for Lukoil's new representative office in China, which was officially registered in Beijing on Thursday, is to develop and deepen business in the Asia-Pacific region and in China in particular, Lukoil Vice-President Valery Golovushkin told Russian journalists. The representative office's main activities will be preparing information and developing projects that will enhance cooperation between Lukoil and its Chinese partners in such areas as oil exploration and production, the development of infrastructure in the oil industry, oil refining and the sales market, Golovushkin said. Lukoil is prepared to establish such cooperation with China based on understandings and conditions the two sides set together, he said. At the current stage, Lukoil will work on expanding trade activities in China and in the region as a whole, Golovushkin said. Lukoil plans to deliver about 1 million tonnes of oil to China in 2005 mainly by sea, the vice-president said. Golovushkin did not rule out the possibility that Lukoil may participate in filling the Kazakh-Chinese oil pipeline with oil from Western Siberia.
Swiss Bank UBS’ global shipping analyser said freight fees would tumble 15pc in 2006 and a further 5pc in 2007, ending the profits bonzana for shipping companies. It said oil tanker rates would remain strong.
"Not only is demand softening, but the supply order-book is shortening," said the bank, predicting that container capacity would rise by 14.5pc next year. It said the "staggering growth" led by Chinese exports since December 2001 was now clearly over. "Total sea export growth to the US and northern Europe is now slowing across all industry, with the exception of clothing," it said. Exports of Chinese furniture, toys and shoes have reached "saturation level", while there are signs that China is "moving up the value chain" to more sophisticated products that required less ship space. Freight rates for shipping manufactured goods have shot up 46pc since 2002 on the main Atlantic and Pacific routes but may now have peaked.
The Baltic Exchange Dry Index, which measures the cost of shipping coal, grain, iron ore and other goods worldwide, soared over 500pc from the beginning of the decade to late 2004, but has since given up half the gains.
The Gulf IT (GITEX) opened at the World Trade Center in Dubai. A design center was established in Dubai to attract the world’s multi-national high technology firms to establish cost-effective R&D and manufacturing operations. Today, it was announced that LSI Logic Corporation is establishing a semiconductor design and engineering development center focused on the design of high performance consumer electronics solutions. The LSI Logic development center will be located at Dubai’s DSO Microelectronics Innovation Center.
Logan.P. Smith: “It is through the cracks in our brains that ecstasy creeps in.”
According to Reuters, U.S. Federal Reserve Chairman Alan Greenspan told France's Finance Minister Thierry Breton the United States has "lost control" of its budget deficit, the French minister said on Saturday.
"'We have lost control,' that was his expression," Breton told reporters after a bilateral meeting with Greenspan.
"The United States has lost control of their budget at a time when racking up deficits has been authorized without any control (from Congress)," Breton said.
"We were both disappointed that the management of debt is not a political priority today," he added.
People’s Bank of China Governor Zhou Xiaochuan: "Along with time, we are going to allow our exchange rate to depend more and more on stabilizing market relationships.
That also means that the role of the reference basket of currencies will gradually be reduced. We are not in a hurry to move forward, but we have this direction,"
Porsche AG, the maker of the Boxster sports car, said it plans to buy 20 percent of Volkswagen AG to prevent a takeover of that company.
Overall, Rita did minimal damage to the oil refineries along the Gulf coast, crude declined close to $1 per barrel. However, Valero Energy Corp. said it will take two weeks to a month to repair and restart its 255,000-barrel-per-day Port Arthur refinery, which sustained "significant damage to two cooling towers and a flare stack." It’s important to remember that the hurricane season does not end until November.
The procedure involving endovascular repair of arterial aneurysms behind Cheney’s right and left knees lasted 6 hours. The procedure was performed by Dr. Anthony
Venbrux, Director of Interventional Radiology, Dr. Jonathan Reiner, Director of the Cardiac Catheterization Laboratory, and Dr. Joseph Giordano, Chairman of Surgery. Joining the team were Dr. Barry Katzen, Director of the Baptist Heart and Vascular Institute at Baptist Hospital in Miami and Dr. PeterGloviczki, Chair of Vascular Surgery at Mayo Clinic. Cheney will remain in the hospital for 48 hours. The procedure went well, but at the same time, it was a big deal, and going forward, significant risk exists.
Jim Williams of Williams Inference Center: "The medication for Parkinson's, the desire to gamble and the craving for excess food have one common denominator, dopamine.
Dopamine is a pleasure-inducing brain chemical, a neurotransmitter that controls action. Dopamine is associated with addiction of all types…Dopamine has been associated with the novelty of drinking, gambling and other addictions, but it is also connected with curiosity, adventure, entrepreneurship and accomplishments.”
China has developed its own typing reagent of hematopoietic stem cell, which could be used to cure leukemia, according to sources with the Chinese Academy of Military Medical Sciences. The home-made HLA-DRB1 typing reagent is cheaper than imported reagent of its kind and is easier and quicker in use, said Wang Shengqi, head of the key laboratory of biological genetic chips under the academy, who has led the team of this research for five years.
The new typing reagent can be used to test all the 13 discovered genetic types of HLA-DRB1, covering all the 18 known serological types, according to Wang.
Yesterday, there was gibberish from Lukoil that they would try to make trouble at the 11th hour on the acquisition of PetroKazakhstan. It’s always vital to take note of what actions are taken rather than words spoken. The most important task for Lukoil's new representative office in China, which was officially registered in Beijing on Thursday, is to develop and deepen business in the Asia-Pacific region and in China in particular, Lukoil Vice-President Valery Golovushkin told Russian journalists. The representative office's main activities will be preparing information and developing projects that will enhance cooperation between Lukoil and its Chinese partners in such areas as oil exploration and production, the development of infrastructure in the oil industry, oil refining and the sales market, Golovushkin said. Lukoil is prepared to establish such cooperation with China based on understandings and conditions the two sides set together, he said. At the current stage, Lukoil will work on expanding trade activities in China and in the region as a whole, Golovushkin said. Lukoil plans to deliver about 1 million tonnes of oil to China in 2005 mainly by sea, the vice-president said. Golovushkin did not rule out the possibility that Lukoil may participate in filling the Kazakh-Chinese oil pipeline with oil from Western Siberia.
Swiss Bank UBS’ global shipping analyser said freight fees would tumble 15pc in 2006 and a further 5pc in 2007, ending the profits bonzana for shipping companies. It said oil tanker rates would remain strong.
"Not only is demand softening, but the supply order-book is shortening," said the bank, predicting that container capacity would rise by 14.5pc next year. It said the "staggering growth" led by Chinese exports since December 2001 was now clearly over. "Total sea export growth to the US and northern Europe is now slowing across all industry, with the exception of clothing," it said. Exports of Chinese furniture, toys and shoes have reached "saturation level", while there are signs that China is "moving up the value chain" to more sophisticated products that required less ship space. Freight rates for shipping manufactured goods have shot up 46pc since 2002 on the main Atlantic and Pacific routes but may now have peaked.
The Baltic Exchange Dry Index, which measures the cost of shipping coal, grain, iron ore and other goods worldwide, soared over 500pc from the beginning of the decade to late 2004, but has since given up half the gains.
The Gulf IT (GITEX) opened at the World Trade Center in Dubai. A design center was established in Dubai to attract the world’s multi-national high technology firms to establish cost-effective R&D and manufacturing operations. Today, it was announced that LSI Logic Corporation is establishing a semiconductor design and engineering development center focused on the design of high performance consumer electronics solutions. The LSI Logic development center will be located at Dubai’s DSO Microelectronics Innovation Center.
Logan.P. Smith: “It is through the cracks in our brains that ecstasy creeps in.”
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