10/22/05 Dangers In Greedville
Weyerhaeuser said it will close a pulp mill in Cosmopolis and a sawmill in Aberdeen due to poor markets, aging machinery and high operating costs. The closures were announced on the same day as the company reported falling profits. Both mills are in timber-dependent Grays Harbor County in Southwest Washington. Weyerhaeuser is the county's largest employer, with about 1,045 workers, according to data from the Grays Harbor County Economic Development Council. The local hospital is the next largest employer with about 590 employees. The two mills employ about 342. The largest is the 50-year-old Cosmopolis mill, which employs 245 making specialty pulp for plastics, photographic papers and cigarette filters. The 81-year-old, large-log lumber mill in Aberdeen produces about 125 million board feet per year of softwood lumber used in residential and commercial construction and appearance-grade millwork.
Weyerhaeuser said it had no choice but to close the under-performing mills, and the company expects more mills to close as it continues to cut costs.
"We recognize the impact of today's announcement for our employees, contractors, local communities and customers and we are committed to working constructively in the months ahead to prepare for the transition," said Steven Rogel, chairman, president and chief executive officer. "In a world of weakening markets and tightening economics we reached the point where we have no alternative."
The Cosmopolis operation is Weyerhaeuser's only specialty pulp operation, and "is not a strategic fit for the company," according to the announcement. But it won't close immediately. The exact date won't be determined until next year, and will be based on customer contracts. The age of the Aberdeen mill was a contributing factor in its closure, as were declining demand and prices and competitive position, Weyerhaeuser said.
Cisco has begun building a $50 million campus in Bangalore, India, which will have enough room for 3,000 employees. The 1-million-square-foot development will be located on the Outer Ring Road in Sarapur and Cisco expects to finish it by June of 2007. It will house Cisco employees working in the areas of research and development, information technology, sales and customer support. "India has been and continues to be a strategic market for Cisco both in terms of business opportunities and as a base for outstanding engineering talent," stated Cisco president and chief executive officer John Chambers.
According to Reuters, Albertsons Inc. has received a preliminary takeover bid from Kroger Co for the entire company, while its drug store unit has attracted bids from CVS, Walgreen’s, and Rite Aid. Kroger will be competing against several teams of private equity firms. Albertsons is the number two grocery chain behind Kroger. On Friday, the WSJ ran an article stating that some bidders had submitted preliminary offers for the company. According to The New York Times. those include consortiums led by investment groups, including one led by Kohlberg Kravis Roberts, one by Thomas H. Lee Partners, and another by the Yucaipa Companies. The Times article stated bids all are in the high-$20s-a-share range. It is wise to remember not to trade with the newspapers. One must do their own homework. With Goldman Sachs and Blackstone Group managing the auction, I continue to believe shareholders of Albertsons will be pleased with the outcome. It should be noted that things don’t always pan out the way I envision. In purchasing PKZ at $38, I thought a fair purchase price would be $52. As a bidding war between China and India appeared more likely, I raised my take-out value to $56 and then $62. India only bid once and we will end up with $55. The situation with Albertsons has many more players and more paths to the finish line. That’s not a negative. It makes for a more fluid bidding process. I remain comfortable with a value of $31 to $33 a share.
What others may believe is of no importance to me. It’s my money and I answer only to me. I should mention that, according to auctionblockdatabase.com, final bids for Albertsons are due the week of October 24.
Wal-Mart Stores, Inc. will web cast its annual analysts' meeting on Tuesday and
Wednesday, October 25-26, 2005. The web cast and conference call will take place at
the times noted below.
October 25 12:15 p.m. - 4:30 p.m. CDT 415-537-1832
October 26 7:30 a.m. - 3:00 p.m. CDT 877-871-4104
Wal-Mart stated today that, for the October reporting period, comparative sales for the U.S. are estimated to be within the company’s guidance of 2 to 4 percent.
Sol Palha on housing problems:
“There is always a way to spin a story and make it look like things are not so bad especially when so much is at stake but the following facts cannot be changed
* Housing prices have been dropping for 3 months in a row.
* In many cities the more expensive houses are taking longer to sell.
* Inventories are slowly building up, nothing dramatic yet but that's how bubbles usually pop.
* Mortgage rates are rising across the board. The 30-year mortgage has just hit a 15-year high.
* More and more individuals are slowly starting to look into the option of renting VS buying. In time this will gather even more steam
* Real Estate is also taking a breather in several hot international markets; China, Australia and Britain are the main ones that come to mind.
? A revision in the US Tax code could also have potentially detrimental effects on the housing sector.”
Liquidity generates a flow of funds but it does not guarantee profits. Year-to-date M3 has expanded at a 7.3% rate, bank credit at 11.9%, and real estate loans at 14.8%. In other words, there is plenty of money available. The cost for that money is rising. That means the need to make more money just to offset the increased cost of funds. The problem is not everyone is invested in Google. Instead, many investors engage in greater risk-taking. Unfortunately, too many risk takers are not smart enough to take that added risk. Many don’t even understand the extent of the risk taken, such as, in derivatives. You have a generation of schmucks who think they are geniuses taking on added risk. Innocent investors get hurt in the process. That’s progress in greedville?
Tim Geithner, NY. Fed President: “Our current account deficit is now running at a rate of above 6 percent of GDP, a level without precedent for a major economy. It matters because of the composition of the imbalance. Our trade deficit is now roughly the size of the current account deficit, and very large relative to our export base. And our net investment income balances are now likely to move into deficit. It matters because of the trajectory of the U.S. imbalance. On reasonable assumptions about its likely near term path, this deficit will produce a very large net deterioration in our net external liabilities relative to national income, with progressively larger net transfers of income to the rest of the world. This pattern should concern us because it is not simply the result of the savings and investment decisions of the private sector. The fact that we are using a substantial part of the savings we are borrowing from the rest of the world to finance an unsustainable level of public borrowing leaves us more vulnerable than if those savings were being used for productive private investment…these imbalances matter because at some point they will have to reverse. Market forces will at some point induce an adjustment. And that inevitable process of adjustment will bring with it the risk of large movements in relative prices, greater volatility in asset prices and slower growth in the United States and in the rest of the world.”
Judge Sturgess: “Justice is open to everyone in the same way as the Ritz Hotel.”
Saturday, October 22, 2005
Friday, October 21, 2005
Unstable Ground
10/21/05 Unstable Ground
Before I get into this morning’s discussion, I’d like to address an article in today’s WSJ.
This paper stated “Refco’s $430 million of bad debts stemmed by multiple customers, including money manager Victor Niederhoffer.” Vic wrote that all his debts to Refco have been paid in full. I believe him. When an entity or entities try to dismember one’s reputation in an unjustified manner, I don’t like it.
Lenny Bruce: “In the Halls of Justice the only justice is in the halls.”
Yesterday’s negative NYSE action was the biggest one-day drop in 4 months and must be viewed very carefully. Why? It came right after the biggest one-day up move in 3 months. This is more than out of the ordinary and helps to explain the rise in the VIX. Yesterday there were 144 new lows on the NYSE and only 39 new highs for the year. More troubling was that over three-quarters of the volume on the NYSE just happened to be on the downside. Now, please take the following with a grain of salt. Earlier in the week we had that $1.4 billion trade in ExxonMobil. This was followed by large buying in S&P futures that created short covering. Then there was yesterday’s down day. It appears to me that one or more large accounts are being liquidated. They appear to be heavily centered in energy commodities and energy-related equities. Today is option expiration. It could be a highly volatile ride.
Ford will be closing plants and announcing significant layoffs. What else is new?
I don’t write often about Google because it rubs salt in the wounds of many. I have been writing about Google for three years. It is a superior technology company and they offer many beta programs that can make your daily life a great deal more efficient. It serves no purpose to remind readers that I suggested a couple of years ago to purchase shares in this company when and if it went public. That’s not the purpose for mentioning Google. The company’s results for the quarter rose seven-fold. Whether Google goes to $335 or higher, it cannot hold up the rest of the market. There will always be a few companies that shine in dimming times, but eventually, when they raid the whorehouse, they take all the girls. Your beautiful sister, in this case, Google, might be the last to go, but it will go. The stay may be short, but it will go.
Crude is trading around $60 a barrel this morning. It is only a $10 decline from the recent top, and a natural reaction to less demand for gasoline as the peak driving season is behind us. That does not mean we should ignore $2.75 a gallon gas and high prices for heating oil and natural gas. The International Council of Shopping Centers thinks it is business as usual. They see same-store holiday sales in Nov. and Dec. rising by 3 to 3 ½ percent. In 2004, it was 2.3%. I think they’re nuts. They should be happy as a pig in manure if this season matched last year’s. The consumer is stumbling around the ring as if hit by Rocky Marciano.
Russian oil major Lukoil has proposed to PetroKazakhstan and China's CNPC to settle ownership disputes over a joint venture in Kazakhstan, two Russian news agencies reported.
"We have contacted PetroKazakhstan and CNPC - I sent a letter to these two companies - with a proposal to meet and hold talks to resolve our disputes," Interfax quoted Lukoil Vice President Andrei Kuzyayev as telling a press conference in Astana on Thursday.
The RIA Novosti agency also quoted Kuzyayev as making the similar remarks.
With regards to Albertson’s, according to auctionblockdatabase.com,
"Sources confirmed that due diligence began the week of Oct. 3, and that the KKR group has already gone to Albertson's headquarters for management presentations.
The other two groups were scheduled to go the week ofOct. 10. A deal announcement is expected around the end of November."
According to the People’s Daily in China, “The first pipeline for recycling natural gas concomitant in Kazakhstan, solely financed by the Chinese side, went into official operation on October 5 and the recycling levels have surpassed the standards set by the
Kazakhstan government, winning the full affirmation from the government…According to local media quoting well-informed sources, the government's support for CNPC's
acquisition is because it not only benefits the two oil companies, but also Kazakhstan. Firstly, located at the middle point of the China-Kazakhstan oil pipeline, the Kumkol oilfields under PetroKazakhstan produce nearly 7 million tons of oil annually, which
is very advantageous to the oil-transmitting pipeline scheduled to be complete by the end of this year. Secondly, CNPC's successful settlement concerning the rational use of petroleum concomitant gas is beneficial to solving the issue of resources waste and
environmental pollution for PetroKazakhstan. Thirdly, being favorable to eliminating contradictions existed between PetroKazakhstan and the Kazakhstan government
in the areas of petroleum exploitation and management, and to turning around the company's economic losses resulting from these. Fourthly, the Kazakhstan government wishes to realize multilateral capital structure in the energy resource area in order to
change the situation of western capital concentration in this area. More analyses show that the repeated enhancement between China and Kazakhstan in the area of energy resource cooperation is in line with the long-term strategic interests of the two countries.”
Seven-Eleven Japan increased its offer for Seven-Eleven (U.S.) to $37.50 from $32.50 per share. Before everyone gets excited for the arb community, the average cost for the arbs is about $35.50. That 2 dollar profit per share is overwhelmed by the losses on the books in Guidant. In addition, the positions in Guidant are significantly larger than those in Seven-Eleven. There is a spread of $1.75 remaining in PKZ. The deal should close in 5 days. That appears to me as an opportunity rather than a red flag (no pun intended).
The Conference Board announced yesterday that the U.S.leading index decreased 0.7 percent, the coincident index decreased 0.1 percent and the lagging index increased 0.2 percent in September.
* The leading index decreased sharply in September
as the economic impact of the hurricanes in the Gulf
region began to be reflected in the component data.
September’s decline in the leading index is its third
consecutive fall. In September, the largest negative
contributors to the leading index were the index of
consumer expectations and initial claims for
unemployment insurance. The growth rate of the leading
index has been slowing down steadily from a peak
growth of about 10.0 percent at the end of 2003, and
it is now fluctuating in the 0.5 to 1.5 percent annual
rate range in recent months.
* The coincident index, a measure of current
economic activity, decreased in September, and the
slight increase in August was revised down to a slight
decrease as actual data for personal income, which
partially reflects the impact of Hurricane Katrina,
became available. September’s decline in the
coincident index is also partly due to the effect of
the hurricanes as employment and industrial production
registered decreases. The coincident index has been
increasing at a relatively steady 2.5 percent annual
rate since April 2003, but its growth rate has
moderated in recent months.
* The leading index has slowed down steadily since
mid-2004. The impact of the hurricanes reinforced an
already existing moderation in the leading index.
Excluding the large positive contributions from the
interest rate spread, the leading index has been
fluctuating around a relatively flat trend throughout
2005. At the same time, the growth rate of real GDP
has slowed to a 3.3 percent annual rate in the second
quarter of 2005, down from a 4.3 percent rate in the
first quarter of 2004. Although it is too soon to tell
if the negative impact of the hurricanes on the
leading index will be lasting, the recent behavior of
the leading index is still consistent with the economy
continuing to expand more moderately in the near term.
Leading Indicators. Four of the ten indicators that
make up the leading index increased in September. The
positive contributors – beginning with the largest
positive contributor – were vendor performance,
building permits, interest rate spread, and stock
prices. The negative contributors – beginning with the
largest negative contributor – were average weekly
initial claims for unemployment insurance (inverted),
index of consumer expectations, real money supply*,
manufacturers’ new orders for nondefense capital
goods*, and manufacturers’ new orders for consumer
goods and materials*. The average weekly manufacturing
hours held steady in September.
The leading index now stands at 136.8 (1996=100).
Based on revised data, this index decreased 0.1
percent in August and decreased 0.1 percent in July.
During the six-month span through September, the
leading index increased 0.4 percent, with seven out of
ten components advancing (diffusion index, six-month
span equals seventy percent).
Coincident Indicators. Two of the four indicators that
make up the coincident index increased in September.
The positive contributors to the index – beginning
with the largest positive contributor – were personal
income less transfer payments*, and manufacturing and
trade sales*. The negative contributors to the index –
beginning with the largest negative contributor – were
industrial production and employees on nonagricultural
payrolls.
The coincident index now stands at 120.7 (1996=100).
Based on revised data, this index decreased 0.1
percent in August and increased 0.2 percent in July.
During the six-month period through September, the
coincident index increased 0.8 percent.
Lagging Indicators. The lagging index stands at 120.3
(1996=100) in September, with four of the seven
components advancing. The positive contributors to the
index – beginning with the largest positive
contributor – were average duration of unemployment
(inverted), average prime rate charged by banks, ratio
of consumer installment credit to personal income*,
and ratio of manufacturing and trade inventories to
sales*. The negative contributors – beginning with the
largest negative contributor – were commercial and
industrial loans outstanding*, change in CPI for
services, and change in labor cost per unit of
output*. Based on revised data, the lagging index
remained unchanged in August and increased 0.2 percent
in July.
The Philly Fed Index rose to 17.3 in Oct. from 2.2 in Sept. Troubling were the prices received sector increasing to 32.6 from 8.6 and the prices paid sector rising to 76.6 from 52.7. The latter was the highest level in 25 years. You remember 1980, don’t you? Inflation was not a pretty sight during the Carter years.
According to a national poll conducted by the Sacred Heart University Polling Institute, gas prices are seriously impacting the quality of life in America.
* Over three-quarters of all respondents, 77.6%, indicated that recent
gasoline price increases are very seriously (42.3%) or somewhat
seriously (35.3%) impacting their own quality of life. This is an
increase from 71.3% recorded in April 2005.
* Over half of all Americans surveyed, 55.8%, indicated they will travel
less this coming holiday season as a direct result of higher gasoline
prices. Another 37.4% suggested they would not travel less and 6.8%
were unsure. In April 2005, 43.5% of those surveyed said they would
travel less over the summer of 2005.
* Americans are using their credit cards to pay for gas much more
frequently today than a year ago. One-third (31.2%) of respondents who
have a car, truck or SUV said they are using credit cards to pay for
gas more frequently today than they were one year ago as a result of
higher prices.
* Increasing numbers of Americans surveyed are reporting their next car
will be smaller and more gas-efficient. Among those currently owning a
car, 56.0% now report their next car will be smaller and more gas-
efficient -- up from 45.7% in April 2005.
* 45.2% of those who will purchase a new car will consider a "hybrid"
vehicle, while 38.0% suggest they will not consider the new "hybrids."
According to John Gerlach, associate professor in the Economics and
Finance Department at Sacred Heart University, "The new survey clearly shows
that the continuation of high gas prices is forcing Americans to change their life style.
"More of us are also planning to buy more fuel-efficient cars than was the
case five months ago, and the sales of large SUVs have already declined from
their highs of a year ago. This is not good news for U.S. auto makers, who
have relied on the sales of these vehicles to offset losses on their
automobiles.
"Given the continuation of high gas prices and the outlook for more of the
same (not to mention higher home heating costs this winter), it is not
surprising that a growing number of Americans feel that their quality of life
is being negatively impacted. And it may very well get worse in the next six
months." Jerry Lindsley, director of the Polling Institute, commented that,
"spiraling gas and home heating oil prices may be the 'stealth issue' that
will impact the careers of incumbent elected officials in '06 and possibly '08
as much as they are impacting Americans' quality of life. With our survey
showing the President's approval rating down to 42% positive and recent
ratings of Congress down to 29% positive -- it may be 'incumbents beware.'
Consumer anger may impact both political parties alike if they don't get it
together on this quality-of-life issue."
The number of Pennsylvanians with employer-provided health insurance declined by 4.1 percent between 2000 and 2004 according to a new study by the Keystone Research Center and Washington D.C.-based Economic Policy Institute. The decline means that about 494,000 fewer Pennsylvanians get health insurance through their employer today than did in 2000. One in seven of the people who lost employer-provided health insurance coverage in the U.S. between 2000 and 2004 lived in Pennsylvania.
Justice Brandeis: “Our government... teaches the whole people by its example. If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.”
Before I get into this morning’s discussion, I’d like to address an article in today’s WSJ.
This paper stated “Refco’s $430 million of bad debts stemmed by multiple customers, including money manager Victor Niederhoffer.” Vic wrote that all his debts to Refco have been paid in full. I believe him. When an entity or entities try to dismember one’s reputation in an unjustified manner, I don’t like it.
Lenny Bruce: “In the Halls of Justice the only justice is in the halls.”
Yesterday’s negative NYSE action was the biggest one-day drop in 4 months and must be viewed very carefully. Why? It came right after the biggest one-day up move in 3 months. This is more than out of the ordinary and helps to explain the rise in the VIX. Yesterday there were 144 new lows on the NYSE and only 39 new highs for the year. More troubling was that over three-quarters of the volume on the NYSE just happened to be on the downside. Now, please take the following with a grain of salt. Earlier in the week we had that $1.4 billion trade in ExxonMobil. This was followed by large buying in S&P futures that created short covering. Then there was yesterday’s down day. It appears to me that one or more large accounts are being liquidated. They appear to be heavily centered in energy commodities and energy-related equities. Today is option expiration. It could be a highly volatile ride.
Ford will be closing plants and announcing significant layoffs. What else is new?
I don’t write often about Google because it rubs salt in the wounds of many. I have been writing about Google for three years. It is a superior technology company and they offer many beta programs that can make your daily life a great deal more efficient. It serves no purpose to remind readers that I suggested a couple of years ago to purchase shares in this company when and if it went public. That’s not the purpose for mentioning Google. The company’s results for the quarter rose seven-fold. Whether Google goes to $335 or higher, it cannot hold up the rest of the market. There will always be a few companies that shine in dimming times, but eventually, when they raid the whorehouse, they take all the girls. Your beautiful sister, in this case, Google, might be the last to go, but it will go. The stay may be short, but it will go.
Crude is trading around $60 a barrel this morning. It is only a $10 decline from the recent top, and a natural reaction to less demand for gasoline as the peak driving season is behind us. That does not mean we should ignore $2.75 a gallon gas and high prices for heating oil and natural gas. The International Council of Shopping Centers thinks it is business as usual. They see same-store holiday sales in Nov. and Dec. rising by 3 to 3 ½ percent. In 2004, it was 2.3%. I think they’re nuts. They should be happy as a pig in manure if this season matched last year’s. The consumer is stumbling around the ring as if hit by Rocky Marciano.
Russian oil major Lukoil has proposed to PetroKazakhstan and China's CNPC to settle ownership disputes over a joint venture in Kazakhstan, two Russian news agencies reported.
"We have contacted PetroKazakhstan and CNPC - I sent a letter to these two companies - with a proposal to meet and hold talks to resolve our disputes," Interfax quoted Lukoil Vice President Andrei Kuzyayev as telling a press conference in Astana on Thursday.
The RIA Novosti agency also quoted Kuzyayev as making the similar remarks.
With regards to Albertson’s, according to auctionblockdatabase.com,
"Sources confirmed that due diligence began the week of Oct. 3, and that the KKR group has already gone to Albertson's headquarters for management presentations.
The other two groups were scheduled to go the week ofOct. 10. A deal announcement is expected around the end of November."
According to the People’s Daily in China, “The first pipeline for recycling natural gas concomitant in Kazakhstan, solely financed by the Chinese side, went into official operation on October 5 and the recycling levels have surpassed the standards set by the
Kazakhstan government, winning the full affirmation from the government…According to local media quoting well-informed sources, the government's support for CNPC's
acquisition is because it not only benefits the two oil companies, but also Kazakhstan. Firstly, located at the middle point of the China-Kazakhstan oil pipeline, the Kumkol oilfields under PetroKazakhstan produce nearly 7 million tons of oil annually, which
is very advantageous to the oil-transmitting pipeline scheduled to be complete by the end of this year. Secondly, CNPC's successful settlement concerning the rational use of petroleum concomitant gas is beneficial to solving the issue of resources waste and
environmental pollution for PetroKazakhstan. Thirdly, being favorable to eliminating contradictions existed between PetroKazakhstan and the Kazakhstan government
in the areas of petroleum exploitation and management, and to turning around the company's economic losses resulting from these. Fourthly, the Kazakhstan government wishes to realize multilateral capital structure in the energy resource area in order to
change the situation of western capital concentration in this area. More analyses show that the repeated enhancement between China and Kazakhstan in the area of energy resource cooperation is in line with the long-term strategic interests of the two countries.”
Seven-Eleven Japan increased its offer for Seven-Eleven (U.S.) to $37.50 from $32.50 per share. Before everyone gets excited for the arb community, the average cost for the arbs is about $35.50. That 2 dollar profit per share is overwhelmed by the losses on the books in Guidant. In addition, the positions in Guidant are significantly larger than those in Seven-Eleven. There is a spread of $1.75 remaining in PKZ. The deal should close in 5 days. That appears to me as an opportunity rather than a red flag (no pun intended).
The Conference Board announced yesterday that the U.S.leading index decreased 0.7 percent, the coincident index decreased 0.1 percent and the lagging index increased 0.2 percent in September.
* The leading index decreased sharply in September
as the economic impact of the hurricanes in the Gulf
region began to be reflected in the component data.
September’s decline in the leading index is its third
consecutive fall. In September, the largest negative
contributors to the leading index were the index of
consumer expectations and initial claims for
unemployment insurance. The growth rate of the leading
index has been slowing down steadily from a peak
growth of about 10.0 percent at the end of 2003, and
it is now fluctuating in the 0.5 to 1.5 percent annual
rate range in recent months.
* The coincident index, a measure of current
economic activity, decreased in September, and the
slight increase in August was revised down to a slight
decrease as actual data for personal income, which
partially reflects the impact of Hurricane Katrina,
became available. September’s decline in the
coincident index is also partly due to the effect of
the hurricanes as employment and industrial production
registered decreases. The coincident index has been
increasing at a relatively steady 2.5 percent annual
rate since April 2003, but its growth rate has
moderated in recent months.
* The leading index has slowed down steadily since
mid-2004. The impact of the hurricanes reinforced an
already existing moderation in the leading index.
Excluding the large positive contributions from the
interest rate spread, the leading index has been
fluctuating around a relatively flat trend throughout
2005. At the same time, the growth rate of real GDP
has slowed to a 3.3 percent annual rate in the second
quarter of 2005, down from a 4.3 percent rate in the
first quarter of 2004. Although it is too soon to tell
if the negative impact of the hurricanes on the
leading index will be lasting, the recent behavior of
the leading index is still consistent with the economy
continuing to expand more moderately in the near term.
Leading Indicators. Four of the ten indicators that
make up the leading index increased in September. The
positive contributors – beginning with the largest
positive contributor – were vendor performance,
building permits, interest rate spread, and stock
prices. The negative contributors – beginning with the
largest negative contributor – were average weekly
initial claims for unemployment insurance (inverted),
index of consumer expectations, real money supply*,
manufacturers’ new orders for nondefense capital
goods*, and manufacturers’ new orders for consumer
goods and materials*. The average weekly manufacturing
hours held steady in September.
The leading index now stands at 136.8 (1996=100).
Based on revised data, this index decreased 0.1
percent in August and decreased 0.1 percent in July.
During the six-month span through September, the
leading index increased 0.4 percent, with seven out of
ten components advancing (diffusion index, six-month
span equals seventy percent).
Coincident Indicators. Two of the four indicators that
make up the coincident index increased in September.
The positive contributors to the index – beginning
with the largest positive contributor – were personal
income less transfer payments*, and manufacturing and
trade sales*. The negative contributors to the index –
beginning with the largest negative contributor – were
industrial production and employees on nonagricultural
payrolls.
The coincident index now stands at 120.7 (1996=100).
Based on revised data, this index decreased 0.1
percent in August and increased 0.2 percent in July.
During the six-month period through September, the
coincident index increased 0.8 percent.
Lagging Indicators. The lagging index stands at 120.3
(1996=100) in September, with four of the seven
components advancing. The positive contributors to the
index – beginning with the largest positive
contributor – were average duration of unemployment
(inverted), average prime rate charged by banks, ratio
of consumer installment credit to personal income*,
and ratio of manufacturing and trade inventories to
sales*. The negative contributors – beginning with the
largest negative contributor – were commercial and
industrial loans outstanding*, change in CPI for
services, and change in labor cost per unit of
output*. Based on revised data, the lagging index
remained unchanged in August and increased 0.2 percent
in July.
The Philly Fed Index rose to 17.3 in Oct. from 2.2 in Sept. Troubling were the prices received sector increasing to 32.6 from 8.6 and the prices paid sector rising to 76.6 from 52.7. The latter was the highest level in 25 years. You remember 1980, don’t you? Inflation was not a pretty sight during the Carter years.
According to a national poll conducted by the Sacred Heart University Polling Institute, gas prices are seriously impacting the quality of life in America.
* Over three-quarters of all respondents, 77.6%, indicated that recent
gasoline price increases are very seriously (42.3%) or somewhat
seriously (35.3%) impacting their own quality of life. This is an
increase from 71.3% recorded in April 2005.
* Over half of all Americans surveyed, 55.8%, indicated they will travel
less this coming holiday season as a direct result of higher gasoline
prices. Another 37.4% suggested they would not travel less and 6.8%
were unsure. In April 2005, 43.5% of those surveyed said they would
travel less over the summer of 2005.
* Americans are using their credit cards to pay for gas much more
frequently today than a year ago. One-third (31.2%) of respondents who
have a car, truck or SUV said they are using credit cards to pay for
gas more frequently today than they were one year ago as a result of
higher prices.
* Increasing numbers of Americans surveyed are reporting their next car
will be smaller and more gas-efficient. Among those currently owning a
car, 56.0% now report their next car will be smaller and more gas-
efficient -- up from 45.7% in April 2005.
* 45.2% of those who will purchase a new car will consider a "hybrid"
vehicle, while 38.0% suggest they will not consider the new "hybrids."
According to John Gerlach, associate professor in the Economics and
Finance Department at Sacred Heart University, "The new survey clearly shows
that the continuation of high gas prices is forcing Americans to change their life style.
"More of us are also planning to buy more fuel-efficient cars than was the
case five months ago, and the sales of large SUVs have already declined from
their highs of a year ago. This is not good news for U.S. auto makers, who
have relied on the sales of these vehicles to offset losses on their
automobiles.
"Given the continuation of high gas prices and the outlook for more of the
same (not to mention higher home heating costs this winter), it is not
surprising that a growing number of Americans feel that their quality of life
is being negatively impacted. And it may very well get worse in the next six
months." Jerry Lindsley, director of the Polling Institute, commented that,
"spiraling gas and home heating oil prices may be the 'stealth issue' that
will impact the careers of incumbent elected officials in '06 and possibly '08
as much as they are impacting Americans' quality of life. With our survey
showing the President's approval rating down to 42% positive and recent
ratings of Congress down to 29% positive -- it may be 'incumbents beware.'
Consumer anger may impact both political parties alike if they don't get it
together on this quality-of-life issue."
The number of Pennsylvanians with employer-provided health insurance declined by 4.1 percent between 2000 and 2004 according to a new study by the Keystone Research Center and Washington D.C.-based Economic Policy Institute. The decline means that about 494,000 fewer Pennsylvanians get health insurance through their employer today than did in 2000. One in seven of the people who lost employer-provided health insurance coverage in the U.S. between 2000 and 2004 lived in Pennsylvania.
Justice Brandeis: “Our government... teaches the whole people by its example. If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.”
Thursday, October 20, 2005
Revealing Numbers
10/20/05 Revealing Numbers
Nearly forty percent of U.S. families plan to go out less and entertain more at home because of recent increases in fuel and energy costs, according to a just-completed national survey from retailer Circuit City Stores, Inc. More than 4,200 men and women responded to Circuit City's holiday survey. With the 2005 holiday shopping season about to begin, a majority (55 percent) said they plan to buy a gift for the entire family; of those respondents, 33 percent plan to buy home electronics for the family.
Other survey findings:
Thirty-one percent said they would most like to receive a flat panel TV
as a tech gift this holiday; 17 percent want a digital camera; and 13
percent want DVDs and CDs.
The appeal of digital music is spreading beyond young enthusiasts.
Seventy-eight percent of survey respondents said their interest in MP3
players is growing and heightened interest is seen across all adult age
groups.
Seventy-four percent said the ability to carry and manage a large music
collection in a portable device attracts them to MP3 players; other
respondents cited the availability of easy and legal downloads.
Ashraf Laidi: “The foreign official (usually central banks) portion of total net foreign purchases of US Treasuries remained relatively understated at 11% and 13% in August and September. The 58% decline in net foreign purchases of US agency bonds to $15.7 bln was the biggest percentage decrease since October 2003 and was the lowest figure since April 2005.”
Yesterday’s September construction numbers revealed that 3.4% more new homes were built at an annual rate of 2.108 million. Building permits rose 2.4% to their highest annual rate in 32 years. This activity goes to explain the rising supply of homes on the market, the increasing time it requires to sell a home, and that the rising supply has had an impact on price levels. It’s the old story of supply and demand. Barry Ritholtz reminds us that “the Home Affordability Index -- comprised of the primary expenses of owning a Home, including purchase price, mortgage rates, insurance, property taxes, and maintenance -- has reached a 14 year low.” Let’s take a close look at one of the hottest housing markets—the Bay Area.
Sales in the nine-county Bay Area eased back a notch for the sixth month in a row as prices continued to rise at the same pace they have since the beginning of the year, a real estate information service reported. There were 11,205 homes sold in the nine-county region last month, down 7.8 percent from 12,154 for August, and down 7.2 percent from 12,075 for September last year, the real estate information service DataQuick said.
In the first nine months of this year, 96,591 homes have been sold, down 5 percent from 101,693 for the same period last year. That would make this the second highest since DataQuick started keeping records in 1988. Last year's sales were the highest.
"The Bay Area real estate market seems to have settled into a steady state, with few indicators pointing to any upcoming change." said Marshall Prentice, DataQuick president. "Supply and demand seem stable. We are keeping an eye on rising mortgage interest rates which could slow things down somewhat before the end of the year,"
The median price paid for a Bay Area home in September was $616,000, down 0.5 percent from $619,000 in August, and up 19.4 percent from $516,000 for September a year ago. DataQuick said a slight decline from August to September is normal for the season. Annual price increases so far this year have ranged from 17.6 percent to 20.5 percent. Sales in Santa Clara county were down 6.1 percent compared to last September, at 2,689, with the median price up 19 percent to $646,000. Sales in San Mateo county dropped the most in the area, down 17.9 percent to 819, but the median price rose 18.1 percent to $752,000.
The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,713 in September. That was down from $2,761 in August. A year ago it was $2,283.
Michael Ashton: “Headline PPI over the past year has now outpaced headline CPI by 2.2%. That is the least-favorable spread (for industry) since the mid- 1970s!”
Crude has dipped to the $62 a barrel level.
Tony Sagami has connected some dots for us. In 1974, “the cost of an home averaged $38,900, the median household income $11,197, a first-class stamp costs 8 cents, a dozen eggs cost 78 cents, and a gallon of regular gas was 53 cents…Fast forward to October 18, 2005. The Labor Department reported that inflation at the wholesale level -- the Producer Price Index or PPI -- jumped by 1.9% in September. That is the biggest single-month jump in the Producer Price Index in 31 years. On an annualized basis, you're looking at over a 22% inflation rate. The last time wholesale inflation has been this rampant was -- you guessed it -- 1974.”
If we wanted to worry, there are plenty of items on the plate: hurricane Wilma; the bird flu; rising interest rates; rising inflation; slowing economic growth; profit margin pressures; wages trailing the rate of inflation; energy prices squeezing the consumer; Fitzgerald’s investigation coming to a head; the Iraq war; Cheney, Rumsfeld, and others “hijacking the government’s foreign policy apparatus” (quote from the Financial Times); our twin tower deficits and…. With all of these worries how did the equity markets manage such a big rally yesterday? The answer is simple. There are many rallies in bear markets. There are some that would argue the general market is oversold and that it was poised to have a big rally. So what? Unless you trade day in and day out, short-term fluctuations don’t mean very much. They are good for headline news. My recommendation has not changed for months. Use rallies to cut back on holdings- - especially in companies that are weak sisters. Use pullbacks to increase positions in undervalued companies. A good example would be Wal-Mart.
Study results of more than 8,000 women worldwide who took the breast-cancer drug Herceptin are "simply stunning" and suggest the treatment is a potential cure for the disease, according to an editorial published today in the New England Journal of Medicine. Treatment must change today so that all patients who would benefit from the drug, also known as trastuzumab, can receive it, according to the editorial written by Gabriel Hortobagyi, director of the Breast Cancer Research Program at the M. D. Anderson Cancer Center of the University of Texas. "This observation suggests a dramatic and perhaps permanent perturbation of the natural history of the disease, maybe even a cure," Dr. Hortobagyi wrote. "Longer follow-up will determine whether this interpretation is correct."
Rumsfeld predicted in February 2003 that the Iraq war could "last six days, six weeks, I doubt six months." When do Americans demand accountability? Do they ever?
PetroKazakhstan’s CEO Isautier: “We think that Lukoil has no right to preemption. We consider Lukoil's maneuver obstructive and unfounded. The takeover poses no prejudice to Lukoil's rights. As far as we are concerned, we remain confident that this transaction will receive the judge's approval and that it will take place.”
Isautier said he remained 'attentive and vigilant' regarding Lukoil, 'which in the past has had a less-than-outstanding behavior according to Western standards.'
In yesterday’s International Herald Tribune there was an article stating that, Sean Dunphy, a Toronto-based lawyer from Stikeman Elliott, who spoke on behalf of Lukoil, said that the Russian company was trying to protect its rights in Kazakhstan, not to derail the transaction. "We're not trying to hold the shareholders up to ransom," he stated.
Just to set the record straight. Since purchasing shares at $38, I have not sold one share. In fact, I added to my holdings last week at the $47 level. I too am confident that this transaction will have a successful conclusion.
Claude McDonald: “Most worries are reruns.”
Mortgage rates climbed for the sixth consecutive week, and haven't been this high since July 2004. The average 30-year fixed rate mortgage increased from 6.1 percent to
6.17 percent, according to Bankrate.com's weekly national survey of large lenders.
Ford Motor Credit Company reported net income of $577 million in the third quarter of 2005, down $157 million from a year earlier. On a pre-tax basis from continuing
operations, Ford Motor Credit earned $901 million in the third quarter,
compared with $1.1 billion in the previous year. The decrease in earnings
primarily reflected higher borrowing costs and the impact of lower receivable
levels, offset partially by improved credit loss performance. Ford Motor Company reported a net loss of 15 cents per share, or $284 million.
The loss from continuing operations was 10 cents per share, or $191 million,
excluding special items. There was a worldwide automotive pre-tax loss of $1.3 billion, excluding special items. Full-year earnings results are expected to be at the low end of the current guidance range of $1.00 to $1.25 per share from continuing operations, excluding special items.
"The third quarter of 2005 was characterized by both accomplishments and
challenges," said Hank McKinnell, Pfizer’s chairman and chief executive officer
"While 2005 revenues have been reduced by the loss of exclusivity of certain
major products and by lower sales of the selective COX-2 inhibitors, the
remainder of Pfizer's product portfolio in aggregate continues to grow
strongly. And the next generation of Pfizer medications continues to advance,
with a number of U.S. launches, positive regulatory reviews, U.S. and E.U.
filings of Sutent, and the completion of the Phase III clinical program for
varenicline.
"Revenues in the third quarter of 2005 reflected lower prescription growth
and increased competition in key therapeutic markets in the U.S., such as the
lipid-lowering market, where the rate of growth in the third quarter declined
significantly versus the first half of the year; and the erectile-dysfunction
market, which has been in decline compared to 2004. The effects of these
considerations are expected to temper fourth-quarter revenues as well. As a
result, Pfizer now expects full-year 2005 adjusted diluted earnings per share*
of $1.92-$1.94 and full-year 2005 reported diluted EPS of $1.02-$1.04. We are
evaluating our financial prospects for 2006 and 2007 in light of current and
anticipated business conditions and are withdrawing our prior guidance for
those years at this time. We plan to provide new guidance early next year,
after we have completed our annual planning process.”
With Pfizer temporarily withdrawing guidance for 2006 and 2007, some investors
could get spooked. As such, for long-term investors one should consider this weakness an opportunity rather than a concern. It might be wise to note that seven of
Pfizer's top ten medications showed growth in the third quarter of 2005 over
the same period in the previous year. On a year-to-date basis, through the
first nine months of 2005, nine of Pfizer's ten top-selling medications show
growth over the same period in the previous year. Six of these ten show
double-digit year-to-date growth. Considering the sales volume for these drugs, this performance should not be considered chopped liver.
Coca Cola repurchased $1.6 billion of its stock year-to-date and intends to repurchase a total of at least $2 billion of its stock for the full year 2005. The currency benefit to operating income in the third quarter was 6%. The company had previously estimated that its underlying effective tax rate on operations would be approximately 24 percent
for the full year. The Company now anticipates that the underlying effective tax rate for the full year 2005 will be approximately 23.5 percent, primarily because of the mix of profit contributions from lower taxed locations. To bring the effective tax rate for the first nine months of 2005 in line with the company's currently estimated full year underlying effective tax rate, Coca Cola recorded income tax expense at an underlying effective tax rate of approximately 22.5 percent in the third quarter. The company decided in the first quarter of 2005 to repatriate accumulated income earned outside the United States of approximately $2.5 billion under the provisions of the American Jobs Creation Act (the "Act") and recorded a related tax provision in prior quarters. The maximum amount that the Company can repatriate under the Act is $6.1 billion. The company approved in October, subject to Board of Directors approval later today, a plan to repatriate the remaining $3.6 billion. Therefore, the Company would record a
tax provision of approximately $200 million in the fourth quarter of 2005
related to the additional repatriation. As I have stated so often, it is a good thing to check the comparative tax rate, currency fluctuations and their impact on earnings, and the repatriation of foreign earnings for U.S. corporations. Headline reports do not tell the story for Coca Cola and others.
Book of Odes: “He who depends on himself will attain the greatest happiness.”
The number of Americans collecting jobless benefits rose by 36,000 to 2.89 million in the week ending Oct. 8, the most since August 2004. Continuing claims are up by about 300,000 since Katrina devastated the Gulf Coast on Aug. 29.
Nearly forty percent of U.S. families plan to go out less and entertain more at home because of recent increases in fuel and energy costs, according to a just-completed national survey from retailer Circuit City Stores, Inc. More than 4,200 men and women responded to Circuit City's holiday survey. With the 2005 holiday shopping season about to begin, a majority (55 percent) said they plan to buy a gift for the entire family; of those respondents, 33 percent plan to buy home electronics for the family.
Other survey findings:
Thirty-one percent said they would most like to receive a flat panel TV
as a tech gift this holiday; 17 percent want a digital camera; and 13
percent want DVDs and CDs.
The appeal of digital music is spreading beyond young enthusiasts.
Seventy-eight percent of survey respondents said their interest in MP3
players is growing and heightened interest is seen across all adult age
groups.
Seventy-four percent said the ability to carry and manage a large music
collection in a portable device attracts them to MP3 players; other
respondents cited the availability of easy and legal downloads.
Ashraf Laidi: “The foreign official (usually central banks) portion of total net foreign purchases of US Treasuries remained relatively understated at 11% and 13% in August and September. The 58% decline in net foreign purchases of US agency bonds to $15.7 bln was the biggest percentage decrease since October 2003 and was the lowest figure since April 2005.”
Yesterday’s September construction numbers revealed that 3.4% more new homes were built at an annual rate of 2.108 million. Building permits rose 2.4% to their highest annual rate in 32 years. This activity goes to explain the rising supply of homes on the market, the increasing time it requires to sell a home, and that the rising supply has had an impact on price levels. It’s the old story of supply and demand. Barry Ritholtz reminds us that “the Home Affordability Index -- comprised of the primary expenses of owning a Home, including purchase price, mortgage rates, insurance, property taxes, and maintenance -- has reached a 14 year low.” Let’s take a close look at one of the hottest housing markets—the Bay Area.
Sales in the nine-county Bay Area eased back a notch for the sixth month in a row as prices continued to rise at the same pace they have since the beginning of the year, a real estate information service reported. There were 11,205 homes sold in the nine-county region last month, down 7.8 percent from 12,154 for August, and down 7.2 percent from 12,075 for September last year, the real estate information service DataQuick said.
In the first nine months of this year, 96,591 homes have been sold, down 5 percent from 101,693 for the same period last year. That would make this the second highest since DataQuick started keeping records in 1988. Last year's sales were the highest.
"The Bay Area real estate market seems to have settled into a steady state, with few indicators pointing to any upcoming change." said Marshall Prentice, DataQuick president. "Supply and demand seem stable. We are keeping an eye on rising mortgage interest rates which could slow things down somewhat before the end of the year,"
The median price paid for a Bay Area home in September was $616,000, down 0.5 percent from $619,000 in August, and up 19.4 percent from $516,000 for September a year ago. DataQuick said a slight decline from August to September is normal for the season. Annual price increases so far this year have ranged from 17.6 percent to 20.5 percent. Sales in Santa Clara county were down 6.1 percent compared to last September, at 2,689, with the median price up 19 percent to $646,000. Sales in San Mateo county dropped the most in the area, down 17.9 percent to 819, but the median price rose 18.1 percent to $752,000.
The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,713 in September. That was down from $2,761 in August. A year ago it was $2,283.
Michael Ashton: “Headline PPI over the past year has now outpaced headline CPI by 2.2%. That is the least-favorable spread (for industry) since the mid- 1970s!”
Crude has dipped to the $62 a barrel level.
Tony Sagami has connected some dots for us. In 1974, “the cost of an home averaged $38,900, the median household income $11,197, a first-class stamp costs 8 cents, a dozen eggs cost 78 cents, and a gallon of regular gas was 53 cents…Fast forward to October 18, 2005. The Labor Department reported that inflation at the wholesale level -- the Producer Price Index or PPI -- jumped by 1.9% in September. That is the biggest single-month jump in the Producer Price Index in 31 years. On an annualized basis, you're looking at over a 22% inflation rate. The last time wholesale inflation has been this rampant was -- you guessed it -- 1974.”
If we wanted to worry, there are plenty of items on the plate: hurricane Wilma; the bird flu; rising interest rates; rising inflation; slowing economic growth; profit margin pressures; wages trailing the rate of inflation; energy prices squeezing the consumer; Fitzgerald’s investigation coming to a head; the Iraq war; Cheney, Rumsfeld, and others “hijacking the government’s foreign policy apparatus” (quote from the Financial Times); our twin tower deficits and…. With all of these worries how did the equity markets manage such a big rally yesterday? The answer is simple. There are many rallies in bear markets. There are some that would argue the general market is oversold and that it was poised to have a big rally. So what? Unless you trade day in and day out, short-term fluctuations don’t mean very much. They are good for headline news. My recommendation has not changed for months. Use rallies to cut back on holdings- - especially in companies that are weak sisters. Use pullbacks to increase positions in undervalued companies. A good example would be Wal-Mart.
Study results of more than 8,000 women worldwide who took the breast-cancer drug Herceptin are "simply stunning" and suggest the treatment is a potential cure for the disease, according to an editorial published today in the New England Journal of Medicine. Treatment must change today so that all patients who would benefit from the drug, also known as trastuzumab, can receive it, according to the editorial written by Gabriel Hortobagyi, director of the Breast Cancer Research Program at the M. D. Anderson Cancer Center of the University of Texas. "This observation suggests a dramatic and perhaps permanent perturbation of the natural history of the disease, maybe even a cure," Dr. Hortobagyi wrote. "Longer follow-up will determine whether this interpretation is correct."
Rumsfeld predicted in February 2003 that the Iraq war could "last six days, six weeks, I doubt six months." When do Americans demand accountability? Do they ever?
PetroKazakhstan’s CEO Isautier: “We think that Lukoil has no right to preemption. We consider Lukoil's maneuver obstructive and unfounded. The takeover poses no prejudice to Lukoil's rights. As far as we are concerned, we remain confident that this transaction will receive the judge's approval and that it will take place.”
Isautier said he remained 'attentive and vigilant' regarding Lukoil, 'which in the past has had a less-than-outstanding behavior according to Western standards.'
In yesterday’s International Herald Tribune there was an article stating that, Sean Dunphy, a Toronto-based lawyer from Stikeman Elliott, who spoke on behalf of Lukoil, said that the Russian company was trying to protect its rights in Kazakhstan, not to derail the transaction. "We're not trying to hold the shareholders up to ransom," he stated.
Just to set the record straight. Since purchasing shares at $38, I have not sold one share. In fact, I added to my holdings last week at the $47 level. I too am confident that this transaction will have a successful conclusion.
Claude McDonald: “Most worries are reruns.”
Mortgage rates climbed for the sixth consecutive week, and haven't been this high since July 2004. The average 30-year fixed rate mortgage increased from 6.1 percent to
6.17 percent, according to Bankrate.com's weekly national survey of large lenders.
Ford Motor Credit Company reported net income of $577 million in the third quarter of 2005, down $157 million from a year earlier. On a pre-tax basis from continuing
operations, Ford Motor Credit earned $901 million in the third quarter,
compared with $1.1 billion in the previous year. The decrease in earnings
primarily reflected higher borrowing costs and the impact of lower receivable
levels, offset partially by improved credit loss performance. Ford Motor Company reported a net loss of 15 cents per share, or $284 million.
The loss from continuing operations was 10 cents per share, or $191 million,
excluding special items. There was a worldwide automotive pre-tax loss of $1.3 billion, excluding special items. Full-year earnings results are expected to be at the low end of the current guidance range of $1.00 to $1.25 per share from continuing operations, excluding special items.
"The third quarter of 2005 was characterized by both accomplishments and
challenges," said Hank McKinnell, Pfizer’s chairman and chief executive officer
"While 2005 revenues have been reduced by the loss of exclusivity of certain
major products and by lower sales of the selective COX-2 inhibitors, the
remainder of Pfizer's product portfolio in aggregate continues to grow
strongly. And the next generation of Pfizer medications continues to advance,
with a number of U.S. launches, positive regulatory reviews, U.S. and E.U.
filings of Sutent, and the completion of the Phase III clinical program for
varenicline.
"Revenues in the third quarter of 2005 reflected lower prescription growth
and increased competition in key therapeutic markets in the U.S., such as the
lipid-lowering market, where the rate of growth in the third quarter declined
significantly versus the first half of the year; and the erectile-dysfunction
market, which has been in decline compared to 2004. The effects of these
considerations are expected to temper fourth-quarter revenues as well. As a
result, Pfizer now expects full-year 2005 adjusted diluted earnings per share*
of $1.92-$1.94 and full-year 2005 reported diluted EPS of $1.02-$1.04. We are
evaluating our financial prospects for 2006 and 2007 in light of current and
anticipated business conditions and are withdrawing our prior guidance for
those years at this time. We plan to provide new guidance early next year,
after we have completed our annual planning process.”
With Pfizer temporarily withdrawing guidance for 2006 and 2007, some investors
could get spooked. As such, for long-term investors one should consider this weakness an opportunity rather than a concern. It might be wise to note that seven of
Pfizer's top ten medications showed growth in the third quarter of 2005 over
the same period in the previous year. On a year-to-date basis, through the
first nine months of 2005, nine of Pfizer's ten top-selling medications show
growth over the same period in the previous year. Six of these ten show
double-digit year-to-date growth. Considering the sales volume for these drugs, this performance should not be considered chopped liver.
Coca Cola repurchased $1.6 billion of its stock year-to-date and intends to repurchase a total of at least $2 billion of its stock for the full year 2005. The currency benefit to operating income in the third quarter was 6%. The company had previously estimated that its underlying effective tax rate on operations would be approximately 24 percent
for the full year. The Company now anticipates that the underlying effective tax rate for the full year 2005 will be approximately 23.5 percent, primarily because of the mix of profit contributions from lower taxed locations. To bring the effective tax rate for the first nine months of 2005 in line with the company's currently estimated full year underlying effective tax rate, Coca Cola recorded income tax expense at an underlying effective tax rate of approximately 22.5 percent in the third quarter. The company decided in the first quarter of 2005 to repatriate accumulated income earned outside the United States of approximately $2.5 billion under the provisions of the American Jobs Creation Act (the "Act") and recorded a related tax provision in prior quarters. The maximum amount that the Company can repatriate under the Act is $6.1 billion. The company approved in October, subject to Board of Directors approval later today, a plan to repatriate the remaining $3.6 billion. Therefore, the Company would record a
tax provision of approximately $200 million in the fourth quarter of 2005
related to the additional repatriation. As I have stated so often, it is a good thing to check the comparative tax rate, currency fluctuations and their impact on earnings, and the repatriation of foreign earnings for U.S. corporations. Headline reports do not tell the story for Coca Cola and others.
Book of Odes: “He who depends on himself will attain the greatest happiness.”
The number of Americans collecting jobless benefits rose by 36,000 to 2.89 million in the week ending Oct. 8, the most since August 2004. Continuing claims are up by about 300,000 since Katrina devastated the Gulf Coast on Aug. 29.
Wednesday, October 19, 2005
No Laughing Matter
10/19/05 No Laughing Matter
Hurricane Wilma is serious business. There is no telling where it’s landing destination will be on our shores. The current forecast is Florida. As a category 5 hurricane with 150-175 winds, the potential devastation could be enormous. It’s no laughing matter.
Ken Goldstein, Labor Economist at the Conference Board: “The September data indicate a general weakening in the job picture nationwide—a trend we were seeing before the recent hurricanes. That data was consistent with the Conference Board’s latest CEO Confidence Survey, which is also down.” This survey sagged to its lowest level in four years. In addition, their Consumer Confidence Survey revealed consumers stated jobs are “hard to get” and fewer claimed jobs are “plentiful.” The Conference Board also stated the number of new online job ads declined 4.4% in September from the level in August.
This general weakening is no laughing matter. Wages on Main Street already trail the inflation rate. Now jobs are getting harder to get and less plentiful. Hurricane Wilma can only make the situation worse.
Rodney Dangerfield: “I told my psychiatrist that everyone hates me. He said I was being ridiculous - everyone hasn't met me yet.”
Janet Yellen is president of the SF Fed. Yesterday she gave a speech in Salt Lake City. In sum, she stated that the current Fed funds rate of 3.75% is at the lower end of her estimate of a neutral rate policy, which she places in a range of 3.5% to 5.5%. Yellen observed “this suggests a presumption that the rate will need to be raised further.” In addition, she mentioned that core inflation is already near the top of her “comfort range.”
It appears that the Fed could raise rates at their next two meetings, and this would bring Fed funds to 4.25%, near the mid-point of the range provided by Yellen. This means mortgage rates will continue to increase and so will interest on credit cards. More importantly, the U.S. government will be paying more interest on the national debt and that will increase the yearly budget deficit. All in all, this is no laughing matter.
Approximately 10 months ago, J&J agreed to acquire Guidant for about $25 billion. Inasmuch as Guidant’s annual sales did not exceed $4 billion, I thought the purchase price was ridiculously high. Unfortunately, for many, my view was not shared. That’s not unusual. More unfortunate was the recall of thousands of implantable defibrillators and pacemakers made by Guidant. Those items are now back in use. However, the question of safety made the $25 billion price tag even more questionable. For the first time, and that was yesterday, J&J’s vice chairman stated “we are continuing to consider the alternatives under our merger agreement.” Guidant’s stock tanked 11% to $64.10. There are some serious risk arb positions in this deal. The question is whether the product recalls have created a material advance change clause delineated in the December 2004 merger agreement. Cutting through the legalities, this deal will have its price reduced downward. Guidant management and shareholders need to assume the consequences for the recalls. They tarnish a company’s reputation, and it takes time to regain the public’s trust as well as the medical community’s. A price of $65 or below would not surprise me.
This is no laughing matter.
Yesterday over 99% of the votes cast by Petrokazakhstan shareholders were in favor of the sale to CNPC for $55 cash per share. However, it’s not over until the fat lady sings. The fat lady in this case was Alberta judge Neil Wittman. He heard a motion brought by Lukoil to reject or defer the $55 deal. Lukoil’s complaint revolves around a 50-50 joint venture with PKZ called Turgai Petroleum. I have written several times about this joint venture, and I know it well. Lukoil claims they have pre-emptive rights to acquire PKZ’s 50% interest under change-of –control provisions. Lukoil has asked to have the dispute decided by arbitration in Stockholm. That will not happen. The deal between PKZ and CNPC has an expiration date of Nov. 30. Lukoil will not win this case before Judge Wittman. Why? Lukoil is unable to trigger the pre-emptive rights clause because, when CNPC buys PKZ, there will be no change of control of Turgai Petroleum. It will remain a 50-50 ownership. Those rights are not triggered because PKZ is not separately selling its 50% Turgai interest to a third party. If I know that, and I am not a judge, I believe it is fair that Judge Whittman should know it too. After 4 hours of arguments, by PKZ, CNPC, certain PKZ shareholders, and Lukoil, the judge deferred his decision until October 26. This is no laughing matter.
David Brenner: “A vegetarian is a person who won’t eat anything that can have children.”
The Producer Price Index for Finished Goods rose 1.9 percent in
September, seasonally adjusted, the Bureau of Labor Statistics of the U.S.
Department of Labor reported today. This advance followed increases of 0.6
percent in August and 1.0 percent in July. At the earlier stages of
processing, prices received by manufacturers of intermediate goods climbed
2.5 percent in September, after moving up 0.7 percent in the preceding
month, while the crude goods index rose 10.2 percent, following a 2.3-
percent gain in August. The September PPI represented the largest surge in
about 15 years. It’s no laughing matter.
The August foreign investment flows into the U.S. amounted to $91.3 billion, and comfortably exceeded the $59 billion trade deficit for that month. However, when you consider our real budget deficit approached $500 billion for the government fiscal year ending Sept 30, 2005, then you realize the $91.3 billion still represents a shortfall and does not cover our monthly twin tower deficits. It’s no laughing matter.
Yesterday Goldman Sachs traded 24.5 million shares of ExxonMobil at $57 a share.
This amounts to about $1.4 billion. That kind of money is no laughing matter. The question one might ask is why an entity would want to sell that much stock in a company
that is well positioned for the long term and where the shares are not over valued? Maybe the answer is no laughing matter either.
Dick Cavett: “If your parents never had children, chances are you won’t either.”
It’s no laughing matter.
Hurricane Wilma is serious business. There is no telling where it’s landing destination will be on our shores. The current forecast is Florida. As a category 5 hurricane with 150-175 winds, the potential devastation could be enormous. It’s no laughing matter.
Ken Goldstein, Labor Economist at the Conference Board: “The September data indicate a general weakening in the job picture nationwide—a trend we were seeing before the recent hurricanes. That data was consistent with the Conference Board’s latest CEO Confidence Survey, which is also down.” This survey sagged to its lowest level in four years. In addition, their Consumer Confidence Survey revealed consumers stated jobs are “hard to get” and fewer claimed jobs are “plentiful.” The Conference Board also stated the number of new online job ads declined 4.4% in September from the level in August.
This general weakening is no laughing matter. Wages on Main Street already trail the inflation rate. Now jobs are getting harder to get and less plentiful. Hurricane Wilma can only make the situation worse.
Rodney Dangerfield: “I told my psychiatrist that everyone hates me. He said I was being ridiculous - everyone hasn't met me yet.”
Janet Yellen is president of the SF Fed. Yesterday she gave a speech in Salt Lake City. In sum, she stated that the current Fed funds rate of 3.75% is at the lower end of her estimate of a neutral rate policy, which she places in a range of 3.5% to 5.5%. Yellen observed “this suggests a presumption that the rate will need to be raised further.” In addition, she mentioned that core inflation is already near the top of her “comfort range.”
It appears that the Fed could raise rates at their next two meetings, and this would bring Fed funds to 4.25%, near the mid-point of the range provided by Yellen. This means mortgage rates will continue to increase and so will interest on credit cards. More importantly, the U.S. government will be paying more interest on the national debt and that will increase the yearly budget deficit. All in all, this is no laughing matter.
Approximately 10 months ago, J&J agreed to acquire Guidant for about $25 billion. Inasmuch as Guidant’s annual sales did not exceed $4 billion, I thought the purchase price was ridiculously high. Unfortunately, for many, my view was not shared. That’s not unusual. More unfortunate was the recall of thousands of implantable defibrillators and pacemakers made by Guidant. Those items are now back in use. However, the question of safety made the $25 billion price tag even more questionable. For the first time, and that was yesterday, J&J’s vice chairman stated “we are continuing to consider the alternatives under our merger agreement.” Guidant’s stock tanked 11% to $64.10. There are some serious risk arb positions in this deal. The question is whether the product recalls have created a material advance change clause delineated in the December 2004 merger agreement. Cutting through the legalities, this deal will have its price reduced downward. Guidant management and shareholders need to assume the consequences for the recalls. They tarnish a company’s reputation, and it takes time to regain the public’s trust as well as the medical community’s. A price of $65 or below would not surprise me.
This is no laughing matter.
Yesterday over 99% of the votes cast by Petrokazakhstan shareholders were in favor of the sale to CNPC for $55 cash per share. However, it’s not over until the fat lady sings. The fat lady in this case was Alberta judge Neil Wittman. He heard a motion brought by Lukoil to reject or defer the $55 deal. Lukoil’s complaint revolves around a 50-50 joint venture with PKZ called Turgai Petroleum. I have written several times about this joint venture, and I know it well. Lukoil claims they have pre-emptive rights to acquire PKZ’s 50% interest under change-of –control provisions. Lukoil has asked to have the dispute decided by arbitration in Stockholm. That will not happen. The deal between PKZ and CNPC has an expiration date of Nov. 30. Lukoil will not win this case before Judge Wittman. Why? Lukoil is unable to trigger the pre-emptive rights clause because, when CNPC buys PKZ, there will be no change of control of Turgai Petroleum. It will remain a 50-50 ownership. Those rights are not triggered because PKZ is not separately selling its 50% Turgai interest to a third party. If I know that, and I am not a judge, I believe it is fair that Judge Whittman should know it too. After 4 hours of arguments, by PKZ, CNPC, certain PKZ shareholders, and Lukoil, the judge deferred his decision until October 26. This is no laughing matter.
David Brenner: “A vegetarian is a person who won’t eat anything that can have children.”
The Producer Price Index for Finished Goods rose 1.9 percent in
September, seasonally adjusted, the Bureau of Labor Statistics of the U.S.
Department of Labor reported today. This advance followed increases of 0.6
percent in August and 1.0 percent in July. At the earlier stages of
processing, prices received by manufacturers of intermediate goods climbed
2.5 percent in September, after moving up 0.7 percent in the preceding
month, while the crude goods index rose 10.2 percent, following a 2.3-
percent gain in August. The September PPI represented the largest surge in
about 15 years. It’s no laughing matter.
The August foreign investment flows into the U.S. amounted to $91.3 billion, and comfortably exceeded the $59 billion trade deficit for that month. However, when you consider our real budget deficit approached $500 billion for the government fiscal year ending Sept 30, 2005, then you realize the $91.3 billion still represents a shortfall and does not cover our monthly twin tower deficits. It’s no laughing matter.
Yesterday Goldman Sachs traded 24.5 million shares of ExxonMobil at $57 a share.
This amounts to about $1.4 billion. That kind of money is no laughing matter. The question one might ask is why an entity would want to sell that much stock in a company
that is well positioned for the long term and where the shares are not over valued? Maybe the answer is no laughing matter either.
Dick Cavett: “If your parents never had children, chances are you won’t either.”
It’s no laughing matter.
Tuesday, October 18, 2005
The Way It Is
10/18/05 The Way It Is
Soaring energy prices and the enormity of Hurricanes Katrina and Rita will have a significant impact on the U.S. economy, putting upcoming holiday retail sales at risk. But the economic havoc generated by the two deadly hurricanes in and of itself is unlikely to trigger a recession, The Conference Board reported yesterday..
"While the economic damage assessment is still underway, it is already
clear that the impact from Hurricanes Katrina and Rita will be the biggest
among natural disasters in recent U.S. history," says Ken Goldstein, Senior
Economist of the Conference Board. "But economic growth could slow down enough
to make it feel like a recession, even if one does not occur technically."
The fallout from the hurricanes will have a major impact on the
economy and the business cycle:
It has already produced energy-price shocks that will cut into consumer
spending.
The magnitude of damage to lives and property is still being measured.
Consumer confidence has fallen, a further danger sign for consumer
spending.
The labor market continues to cool off.
The October U.S. Empire State Index declined to 12.1 from 15.6 in September.
Henry To: “Real estate as a percentage of household assets made another record high
At 30.23% - - - surpassing the 30% level for the first time in history.”
Silver closed at $7.87 an ounce, a one-year high, while gold closed at $477.
Wil Rogers: “Ancient Rome declined because it had a Senate; now what's going to happen to us with both a Senate and a House?”
Gartner Inc.stated that, for U.S. PC shipments in the third quarter, Dell had a 30.7% market share and H-P had a 19.1% market share.
Refco filed for bankruptcy.
Rising fuel costs have drained consumers' purchasing power and ``will undoubtedly be a drag'' on global economic expansion, Alan Greenspan stated.
Nearly 70 percent of African Americans say they would have less than three months of available cash to pay for living expenses if faced with a life crisis today, according to a new survey by financial services company HSBC - North America. Additionally, nearly half of African Americans surveyed reported having no savings at all. The survey found that most consumers, regardless of race, are also worried about their level of savings.
Hedge funds were up an average of 1.73% in September, according to the HedgeFund.net-PerTrac Universes. The top 25% of hedge funds gained an average of 2.62%, while the bottom 25% of hedge funds was up an average of 0.34% for the month. Emerging Markets sector funds, the month's top performing strategy, were up an average of 3.71% in September. By comparison, the S&P 500 was up 0.70% during the month. Through September, the year-to-date average gain for hedge funds was 6.32%. The top 25% of hedge funds gained 9.73% for the year-to-date, while the bottom 25% was up 1.31% over the same period. The S&P 500 is up 1.39% since the beginning of 2005. Hedge funds included in these calculations were up 0.86% on average in August. The top 25% of hedge funds gained an average of 1.45% in August, while the bottom 25% was up an average of 0.05% during the same period.
Marc Faber: “Once the housing inflation comes to an end, and households can no longer refinance their homes at lower interest rates, consumer confidence will tumble and lead to a rising savings rate, and along with it, to a recession. This could happen sooner than expected, given the fact that the shares of the largest lender to the housing industry, Fannie Mae, just hit an eight years' low and that the shares of homebuilders now appear to have topped out! However, not to worry too much! The Fed, once it notices that the asset inflation, which supported consumption, has come to an end will once again turn on the money printing press. But will it help? I doubt since further money printing is likely to result in consumer price inflation exceeding personal income gains…Under this scenario long term bonds would be about the worst possible
Investment.”
GM’s annual expense for providing medical care for 750,000 employees, retirees and their family members will decrease by $3 billion before taxes. To partially offset those reductions in health care, GM said it would deposit $3 billion into a voluntary employee health benefit fund in 2006, 2007 and 2011. If GM meets certain financial goals, the company may put more money into the fund. I would not hold my breath though.
Provid Pharmaceuticals of North Brunswick, NJ is a world leader in peptide mimetics technology, In addition, the company offers capabilities in structure-based drug design, lead optimization, protein biochemistry and assay development. Provid and Palatin Technologies entered into a research services agreement for the optimization of leads emerging from PTN’s Proprietary MIDAS novel drug discovery technology. Dr. Trevor Hallam, EVP of R&D at Palatin, stated “Provid’s experience in all aspects of medicinal chemistry is going to be a key factor in the acceleration of our internal drug pipeline.”
It should be noted that yesterday afternoon MDB Capital Group initiated coverage on PTN with a buy rating. It’s a little like chicken soup. It can’t hurt.
In the say it isn’t so department, is it possible there was fraud at the voting polls in Iraq over the weekend? Could Cheney be part of the probe conducted by Fitzgerald? This is all too much for me to absorb on an early Tuesday morning.
In the BS department, India’s oil minister stated ''after PetroKazakhstan gets restructured and a legal framework worked out, perhaps we can start talking about how to acquire an Indian participation in assets run by PetroKazakhstan.”
Tom Clancy: “The difference between fiction and reality? Fiction has to make sense.”
Regarding Novartis's offer to acquire the remaining 57.5 pct stake it does not already own in Chiron Corp, the company stated that there “can be no assurance that an agreement will be reached”after Chiron's directors said the offer was inadequate. In effect, that’s nothing new and a smart negotiating ploy.
According to the NHC, tropical Storm Wilma gained strength in the Caribbean Sea but shifted its expected path to the east toward Florida. With that forecast, crude has dipped to the $63 level.
Barry Ritholtz: “Before 1983, CPI measured housing inflation by looking at what it cost to own a home (house prices, mortgage, property taxes). After 83, BLS changed the housing component, using the concept of Owner’s Equivalent Rent. Revert back to the true cost of housing, and Core CPI spikes to a more realistic 5.3%.”
You still do not believe in global warming? According to earthfiles.com, the average global temperature anomaly for combined land and ocean surfaces for September (based on preliminary data) was 1.13 degrees F (0.63 degrees C) above the 1880-2004 long-term mean. This was the warmest September since 1880. The second warmest September was in 2003.
You still do not believe in UFOs? You might want to see the pictures taken at various times over the last few months. They can be seen at ufosnw.com.
We are in the midst of earnings season. It might be wise to focus on the guidance for future quarters as well as noting comparative tax rates, the number of shares repurchased (IBM and Citigroup, for example), the topline growth, and the trend in gross profit margins. The headlines frequently do not reflect the nitty gritty.
China imported 19.53 million tons of soya in the first nine months of 2005, up 39.9 percent year-on-year, China Securities Journal reported, citing the most recent data from the General Administration of Customs. In September alone, the country imported 1.87 million tons of soya, up 29.3 percent over the same month of last year, the report said.
In the 2004-2005 fiscal year, China imported a total of 25.8 million tons of soya, more than last year's import and higher than the figure estimated by the US Agricultural Department. For years I have written about soy as an excellent source of protein as well as the growing consumption of soy. In my view, that trend will continue well into the future.
Economic news for today: Sept. PPI, August net foreign securities purchases, and the Oct. NAHB Housing Market Index. In addition, Janet Yellen gives a talk on the economy.
Robin Williams: “When the media ask George W. Bush a question, he answers, ‘can I
use a lifeline.’”
Soaring energy prices and the enormity of Hurricanes Katrina and Rita will have a significant impact on the U.S. economy, putting upcoming holiday retail sales at risk. But the economic havoc generated by the two deadly hurricanes in and of itself is unlikely to trigger a recession, The Conference Board reported yesterday..
"While the economic damage assessment is still underway, it is already
clear that the impact from Hurricanes Katrina and Rita will be the biggest
among natural disasters in recent U.S. history," says Ken Goldstein, Senior
Economist of the Conference Board. "But economic growth could slow down enough
to make it feel like a recession, even if one does not occur technically."
The fallout from the hurricanes will have a major impact on the
economy and the business cycle:
It has already produced energy-price shocks that will cut into consumer
spending.
The magnitude of damage to lives and property is still being measured.
Consumer confidence has fallen, a further danger sign for consumer
spending.
The labor market continues to cool off.
The October U.S. Empire State Index declined to 12.1 from 15.6 in September.
Henry To: “Real estate as a percentage of household assets made another record high
At 30.23% - - - surpassing the 30% level for the first time in history.”
Silver closed at $7.87 an ounce, a one-year high, while gold closed at $477.
Wil Rogers: “Ancient Rome declined because it had a Senate; now what's going to happen to us with both a Senate and a House?”
Gartner Inc.stated that, for U.S. PC shipments in the third quarter, Dell had a 30.7% market share and H-P had a 19.1% market share.
Refco filed for bankruptcy.
Rising fuel costs have drained consumers' purchasing power and ``will undoubtedly be a drag'' on global economic expansion, Alan Greenspan stated.
Nearly 70 percent of African Americans say they would have less than three months of available cash to pay for living expenses if faced with a life crisis today, according to a new survey by financial services company HSBC - North America. Additionally, nearly half of African Americans surveyed reported having no savings at all. The survey found that most consumers, regardless of race, are also worried about their level of savings.
Hedge funds were up an average of 1.73% in September, according to the HedgeFund.net-PerTrac Universes. The top 25% of hedge funds gained an average of 2.62%, while the bottom 25% of hedge funds was up an average of 0.34% for the month. Emerging Markets sector funds, the month's top performing strategy, were up an average of 3.71% in September. By comparison, the S&P 500 was up 0.70% during the month. Through September, the year-to-date average gain for hedge funds was 6.32%. The top 25% of hedge funds gained 9.73% for the year-to-date, while the bottom 25% was up 1.31% over the same period. The S&P 500 is up 1.39% since the beginning of 2005. Hedge funds included in these calculations were up 0.86% on average in August. The top 25% of hedge funds gained an average of 1.45% in August, while the bottom 25% was up an average of 0.05% during the same period.
Marc Faber: “Once the housing inflation comes to an end, and households can no longer refinance their homes at lower interest rates, consumer confidence will tumble and lead to a rising savings rate, and along with it, to a recession. This could happen sooner than expected, given the fact that the shares of the largest lender to the housing industry, Fannie Mae, just hit an eight years' low and that the shares of homebuilders now appear to have topped out! However, not to worry too much! The Fed, once it notices that the asset inflation, which supported consumption, has come to an end will once again turn on the money printing press. But will it help? I doubt since further money printing is likely to result in consumer price inflation exceeding personal income gains…Under this scenario long term bonds would be about the worst possible
Investment.”
GM’s annual expense for providing medical care for 750,000 employees, retirees and their family members will decrease by $3 billion before taxes. To partially offset those reductions in health care, GM said it would deposit $3 billion into a voluntary employee health benefit fund in 2006, 2007 and 2011. If GM meets certain financial goals, the company may put more money into the fund. I would not hold my breath though.
Provid Pharmaceuticals of North Brunswick, NJ is a world leader in peptide mimetics technology, In addition, the company offers capabilities in structure-based drug design, lead optimization, protein biochemistry and assay development. Provid and Palatin Technologies entered into a research services agreement for the optimization of leads emerging from PTN’s Proprietary MIDAS novel drug discovery technology. Dr. Trevor Hallam, EVP of R&D at Palatin, stated “Provid’s experience in all aspects of medicinal chemistry is going to be a key factor in the acceleration of our internal drug pipeline.”
It should be noted that yesterday afternoon MDB Capital Group initiated coverage on PTN with a buy rating. It’s a little like chicken soup. It can’t hurt.
In the say it isn’t so department, is it possible there was fraud at the voting polls in Iraq over the weekend? Could Cheney be part of the probe conducted by Fitzgerald? This is all too much for me to absorb on an early Tuesday morning.
In the BS department, India’s oil minister stated ''after PetroKazakhstan gets restructured and a legal framework worked out, perhaps we can start talking about how to acquire an Indian participation in assets run by PetroKazakhstan.”
Tom Clancy: “The difference between fiction and reality? Fiction has to make sense.”
Regarding Novartis's offer to acquire the remaining 57.5 pct stake it does not already own in Chiron Corp, the company stated that there “can be no assurance that an agreement will be reached”after Chiron's directors said the offer was inadequate. In effect, that’s nothing new and a smart negotiating ploy.
According to the NHC, tropical Storm Wilma gained strength in the Caribbean Sea but shifted its expected path to the east toward Florida. With that forecast, crude has dipped to the $63 level.
Barry Ritholtz: “Before 1983, CPI measured housing inflation by looking at what it cost to own a home (house prices, mortgage, property taxes). After 83, BLS changed the housing component, using the concept of Owner’s Equivalent Rent. Revert back to the true cost of housing, and Core CPI spikes to a more realistic 5.3%.”
You still do not believe in global warming? According to earthfiles.com, the average global temperature anomaly for combined land and ocean surfaces for September (based on preliminary data) was 1.13 degrees F (0.63 degrees C) above the 1880-2004 long-term mean. This was the warmest September since 1880. The second warmest September was in 2003.
You still do not believe in UFOs? You might want to see the pictures taken at various times over the last few months. They can be seen at ufosnw.com.
We are in the midst of earnings season. It might be wise to focus on the guidance for future quarters as well as noting comparative tax rates, the number of shares repurchased (IBM and Citigroup, for example), the topline growth, and the trend in gross profit margins. The headlines frequently do not reflect the nitty gritty.
China imported 19.53 million tons of soya in the first nine months of 2005, up 39.9 percent year-on-year, China Securities Journal reported, citing the most recent data from the General Administration of Customs. In September alone, the country imported 1.87 million tons of soya, up 29.3 percent over the same month of last year, the report said.
In the 2004-2005 fiscal year, China imported a total of 25.8 million tons of soya, more than last year's import and higher than the figure estimated by the US Agricultural Department. For years I have written about soy as an excellent source of protein as well as the growing consumption of soy. In my view, that trend will continue well into the future.
Economic news for today: Sept. PPI, August net foreign securities purchases, and the Oct. NAHB Housing Market Index. In addition, Janet Yellen gives a talk on the economy.
Robin Williams: “When the media ask George W. Bush a question, he answers, ‘can I
use a lifeline.’”
Monday, October 17, 2005
Business As Usual
10/17/05 Business As Usual
There are times when news outside of the financial world takes center stage over earnings season or mergers. This is one of those times. I am not a political analyst; however, I can think for myself. In my view, prior to October 28, Karl Rove and, possibly, Scooter Libby will be indicted for, at least, obstruction of justice and lying to a Grand Jury. Problems for the Administration do not end there. We still have the situation with Jack Abramoff and Michael Scanlon. The name of Susan Ralston may also be raised. She was the personal assistant to Rove, and before that, Abramoff’s secretary. How far did these tenacles reach? Do not be surprised if they went very very deep. Politics can be a nasty and unsavory profession. Richard Nixon is one example. He does not have a monopoly in this regard. It is going to be a very long winter going into springtime with respect to damaging political news.
Margaret Thatcher:“You don't tell deliberate lies, but sometimes you have to be evasive.”
As I frequently mentioned, there will be other hurricanes this season after Katrina and Rita. Wilma is looming in the Caribbean. The storm has spooked the oil market with the price jumping this morning to $64 a barrel. One should not forget that two-thirds of U.S. oil production in the Gulf of Mexico region is shut in, and 10% of U.S. refining capacity remains idle.
Which is more important to you—the weekend vote on the Iraq constitution or the fact that at least 1,976 members of our fighting forces have been killed in Iraq since we invaded this country in March 2003?
On Saturday, CNPC made peace with the Kazakh government over their planned purchase of PKZ. The purchase should be finalized on Oct. 19. China National Petroleum Corp. signed an agreement to sell a 33% stake in PetroKazakhstan Inc. to KazMunaiGaz. for $1.4 billion, and refine a determined amount of crude oil through the Shymkent oil refinery which it will jointly own with the Kazakh state-owned company, according to the Asian WSJ and Bloomberg.
China is expected to meet the 15 pct growth target of M2 money supply set earlier this year by the country's central bank, the Securities Times reported, citing a government official.
Li Yang, director of the Institute of Finance and Banking at the Chinese Academy of Social Sciences, said he expects M2, which rose 17.9 pct year-on-year to 28.7 trln yuan at the end of September, to continue to meet government expectations.
The OPEC oil cartel revised lower its 2005 and 2006 forecasts for the crude oil its members produce, by 200,000 barrels a day in 2005 and by 400,000 barrels a day in 2006.
Ayn Rand: “Thinking men cannot be ruled.”
There are times when news outside of the financial world takes center stage over earnings season or mergers. This is one of those times. I am not a political analyst; however, I can think for myself. In my view, prior to October 28, Karl Rove and, possibly, Scooter Libby will be indicted for, at least, obstruction of justice and lying to a Grand Jury. Problems for the Administration do not end there. We still have the situation with Jack Abramoff and Michael Scanlon. The name of Susan Ralston may also be raised. She was the personal assistant to Rove, and before that, Abramoff’s secretary. How far did these tenacles reach? Do not be surprised if they went very very deep. Politics can be a nasty and unsavory profession. Richard Nixon is one example. He does not have a monopoly in this regard. It is going to be a very long winter going into springtime with respect to damaging political news.
Margaret Thatcher:“You don't tell deliberate lies, but sometimes you have to be evasive.”
As I frequently mentioned, there will be other hurricanes this season after Katrina and Rita. Wilma is looming in the Caribbean. The storm has spooked the oil market with the price jumping this morning to $64 a barrel. One should not forget that two-thirds of U.S. oil production in the Gulf of Mexico region is shut in, and 10% of U.S. refining capacity remains idle.
Which is more important to you—the weekend vote on the Iraq constitution or the fact that at least 1,976 members of our fighting forces have been killed in Iraq since we invaded this country in March 2003?
On Saturday, CNPC made peace with the Kazakh government over their planned purchase of PKZ. The purchase should be finalized on Oct. 19. China National Petroleum Corp. signed an agreement to sell a 33% stake in PetroKazakhstan Inc. to KazMunaiGaz. for $1.4 billion, and refine a determined amount of crude oil through the Shymkent oil refinery which it will jointly own with the Kazakh state-owned company, according to the Asian WSJ and Bloomberg.
China is expected to meet the 15 pct growth target of M2 money supply set earlier this year by the country's central bank, the Securities Times reported, citing a government official.
Li Yang, director of the Institute of Finance and Banking at the Chinese Academy of Social Sciences, said he expects M2, which rose 17.9 pct year-on-year to 28.7 trln yuan at the end of September, to continue to meet government expectations.
The OPEC oil cartel revised lower its 2005 and 2006 forecasts for the crude oil its members produce, by 200,000 barrels a day in 2005 and by 400,000 barrels a day in 2006.
Ayn Rand: “Thinking men cannot be ruled.”
Sunday, October 16, 2005
Barriers
10/16/05 Barriers
On Jan. 1, 2006, a new law goes into effect. The current law allows those owing monies on credit cards
to pay a minimum of 2% monthly on the outstanding balance. This will be increased. The average household credit-card balance is $9,205, according to credit research firm Cardweb.com, up from $8,940 in 2002. Nationally, outstanding credit-card debt has ballooned from $443.49 billion in 1995 to $797.97 billion currently. "In principal, raising minimum payments makes sense because it allows consumers to pay off their debts faster and save thousands of dollars in interest," said Joseph Ridout, who manages the consumer hot line at Consumer Action in San Francisco. With sharply higher home-heating bills, inflation continuing to outpace wage gains, and higher interest rates diminishing refinancing opportunities, the higher minimum credit card payments will further strangle the individual and/or families on Main Street.
According to the Detroit Free Press, as of Sept. 1, there were 40,110 Michigan families seriously delinquent on their mortgages or in foreclosure. In metro Detroit alone, nearly 26,000 homes were in foreclosure. The state's 2005 mortgage delinquency and foreclosure rates are 50% higher than the national average, a startling statistic that reveals a large number of metro Detroiters are being forced out of their homes and into financial ruin.
Over the years, I have often written that government economic figures are a barrier to reality. The unemployment rate is closer to 10% than it is to 5%. The CPI is closer to 5% than it is to 2%. The 2005 budget deficit is closer to $500 billion than it is to $300 billion. As the city of New Orleans discovered, you cannot ignore the ineffective levees forever.
In Washington, you cannot spin the country's way out of looming financial ruin. Turning blind eyes to reality is an act of desperation and ignorance, a combination that can leave you homeless and on a bread line. Don't turn to Washington for help. Mostly bankrupt souls reside along Pennsylvania Avenue and on Capitol Hill. You can blame yourself for that fact.You voted them into office. I know the alternatives weren't great, but maybe if you didn't demand the media to look up a candidate's rear end for every personal detail of one's life, more qualified candidates would run for public office. No one is perfect and no one gives you the right to practice as a proctologist without a medical degree.
The government of Kazakhstan has done its best to legislate aginst free enterprise. Yesterday "President Nazarbayev signed the law amending legislation on the subsoil and on conducting oil operations. The document aims to perfect
state regulation in this sphere." According to a letter seen by Reuters on Friday, CNPC stated that PKZ's Shymkent
refinery could be run on a parity basis with the Kaz government as long as CNPC purchased PKZ. It should be noted that CNPC signed the agreement to purchase PKZ back in August or two months prior to Nazarbayev signed the new law. As the Kaz energy minister stated in writing on Friday, "so we might be facing a legal collison, but I think it won't happen." If the Kazakhstan government wants to attract future investment, I strongly suggest barriers not be erected to free enterprise. Don't bite the hand that feeds you. The world can be a lonely place.
Ronald Reagan: "There are no constraints on the human mind, no walls around the human spirit, no barriers to our progress except those we ourselves erect."
On Jan. 1, 2006, a new law goes into effect. The current law allows those owing monies on credit cards
to pay a minimum of 2% monthly on the outstanding balance. This will be increased. The average household credit-card balance is $9,205, according to credit research firm Cardweb.com, up from $8,940 in 2002. Nationally, outstanding credit-card debt has ballooned from $443.49 billion in 1995 to $797.97 billion currently. "In principal, raising minimum payments makes sense because it allows consumers to pay off their debts faster and save thousands of dollars in interest," said Joseph Ridout, who manages the consumer hot line at Consumer Action in San Francisco. With sharply higher home-heating bills, inflation continuing to outpace wage gains, and higher interest rates diminishing refinancing opportunities, the higher minimum credit card payments will further strangle the individual and/or families on Main Street.
According to the Detroit Free Press, as of Sept. 1, there were 40,110 Michigan families seriously delinquent on their mortgages or in foreclosure. In metro Detroit alone, nearly 26,000 homes were in foreclosure. The state's 2005 mortgage delinquency and foreclosure rates are 50% higher than the national average, a startling statistic that reveals a large number of metro Detroiters are being forced out of their homes and into financial ruin.
Over the years, I have often written that government economic figures are a barrier to reality. The unemployment rate is closer to 10% than it is to 5%. The CPI is closer to 5% than it is to 2%. The 2005 budget deficit is closer to $500 billion than it is to $300 billion. As the city of New Orleans discovered, you cannot ignore the ineffective levees forever.
In Washington, you cannot spin the country's way out of looming financial ruin. Turning blind eyes to reality is an act of desperation and ignorance, a combination that can leave you homeless and on a bread line. Don't turn to Washington for help. Mostly bankrupt souls reside along Pennsylvania Avenue and on Capitol Hill. You can blame yourself for that fact.You voted them into office. I know the alternatives weren't great, but maybe if you didn't demand the media to look up a candidate's rear end for every personal detail of one's life, more qualified candidates would run for public office. No one is perfect and no one gives you the right to practice as a proctologist without a medical degree.
The government of Kazakhstan has done its best to legislate aginst free enterprise. Yesterday "President Nazarbayev signed the law amending legislation on the subsoil and on conducting oil operations. The document aims to perfect
state regulation in this sphere." According to a letter seen by Reuters on Friday, CNPC stated that PKZ's Shymkent
refinery could be run on a parity basis with the Kaz government as long as CNPC purchased PKZ. It should be noted that CNPC signed the agreement to purchase PKZ back in August or two months prior to Nazarbayev signed the new law. As the Kaz energy minister stated in writing on Friday, "so we might be facing a legal collison, but I think it won't happen." If the Kazakhstan government wants to attract future investment, I strongly suggest barriers not be erected to free enterprise. Don't bite the hand that feeds you. The world can be a lonely place.
Ronald Reagan: "There are no constraints on the human mind, no walls around the human spirit, no barriers to our progress except those we ourselves erect."
Saturday, October 15, 2005
The Status
10/15/05 The Status
President Bush's overall job approval ratings continue to sag in Illinois -- down to 33 percent from 45 percent in October 2004, according to the latest Chicago Tribune/WGN-TV poll. Recent national polls show the presidents' approval rating among voters nationwide at 38 percent. Factors driving this pervasive decline in Illinois are even higher disapproval levels for how Bush is handling the economy (63 percent), how he is handling Iraq (64 percent) and a similar rebuke for his handling of Katrina (60 percent). Notably, Bush is losing support even among the most reliable segments of Illinois Republicans. The president now has a 77 percent approval rating among Republican voters versus 85 percent in May. For the first time in his presidency, half of the voters in Chicago's collar counties disapprove of Bush, and among voters Downstate, 54 percent say they disapprove of Bush's performance. Party officials fear this could complicate their efforts in next year's Congressional and gubernatorial races.
Social Security beneficiaries in 2006 will see a relatively large increase in their monthly checks, according to CCH INCORPORATED (CCH), a leading provider of tax and payroll law information and software. As a result of inflation, an increase of 4.1 percent will be applied to this coming year's benefits, starting with December 2005 benefits, which are paid in January 2006. This is the largest annual increase since 1991. The 4.1-percent cost-of-living adjustment, or COLA, will produce an estimated monthly benefit of $1,002 for all retired workers in 2006, $47 a month more than in 2005. However, $10.30, or 22 percent, of that increase will be eaten up by a rise in the premium paid by beneficiaries enrolled in Medicare Part B in 2006. With a total monthly Medicare Part B premium of $88.50 in 2006, Social Security beneficiaries enrolled in Medicare Part B will see that average $47 benefit increase reduced to $36 after rounding required by law.
Albert Einstein: "Not everything that can be counted counts, and not everything that counts can be counted."
President George W. Bush, in October 2005, received his lowest positive job performance rating recorded by the Sacred Heart University Polling Institute. According to the national poll, the President's favorable job performance rating is 42.0%. This is down from 52.3% in April 2005, 57.7% in April 2004, 53.2% in February 2004, 58.4% in October 2003, 77.9% in April 2003 and 65.1% in March 2003. "Although public approval ratings normally decline throughout a President's term of office, the severe decline in President Bush's ratings suggest an unusual degree of dissatisfaction among the American people with the President's policies as well as a loss of confidence in his leadership ability," said Dr. Gary Rose, professor and chair of the Department of Government and Politics at Sacred Heart University. Among Republican leaning voters, the President's rating was 78.6% positive while those who vote mostly Democrat provided a 14.8% positive rating. Among unaffiliated voters, the positive rating was 42.7%. Among Hispanics, President Bush received a 20.7% favorable rating while whites provided 46.7% and African-Americans provided a positive rating of 19.8%.
Seneca: "While we are postponing, life speeds by."
Wal-Mart customers found items they wanted in stock more often due to the retailer's use of electronic product codes (EPCs) powered by radio frequency identification (RFID) technology when compared to control stores. This is according to an independent University of Arkansas study's initial findings. Researchers at the University of Arkansas found a 16 percent reduction in out-of-stocks. Additionally, the study also showed that out-of-stock items with EPCs were replenished three times faster than comparable items using standard bar code technology. Equally important, Wal-Mart experienced a meaningful reduction in manual orders resulting in a reduction of excess inventory. "This is no longer a take-it-on-faith initiative," said Linda Dillman, executive vice president and CIO for Wal-Mart. "This study provides conclusive evidence that EPCs increase how often we put products in the hands of customers who want to buy them, making it a win for shoppers, suppliers and retailers."
President Bush's overall job approval ratings continue to sag in Illinois -- down to 33 percent from 45 percent in October 2004, according to the latest Chicago Tribune/WGN-TV poll. Recent national polls show the presidents' approval rating among voters nationwide at 38 percent. Factors driving this pervasive decline in Illinois are even higher disapproval levels for how Bush is handling the economy (63 percent), how he is handling Iraq (64 percent) and a similar rebuke for his handling of Katrina (60 percent). Notably, Bush is losing support even among the most reliable segments of Illinois Republicans. The president now has a 77 percent approval rating among Republican voters versus 85 percent in May. For the first time in his presidency, half of the voters in Chicago's collar counties disapprove of Bush, and among voters Downstate, 54 percent say they disapprove of Bush's performance. Party officials fear this could complicate their efforts in next year's Congressional and gubernatorial races.
Social Security beneficiaries in 2006 will see a relatively large increase in their monthly checks, according to CCH INCORPORATED (CCH), a leading provider of tax and payroll law information and software. As a result of inflation, an increase of 4.1 percent will be applied to this coming year's benefits, starting with December 2005 benefits, which are paid in January 2006. This is the largest annual increase since 1991. The 4.1-percent cost-of-living adjustment, or COLA, will produce an estimated monthly benefit of $1,002 for all retired workers in 2006, $47 a month more than in 2005. However, $10.30, or 22 percent, of that increase will be eaten up by a rise in the premium paid by beneficiaries enrolled in Medicare Part B in 2006. With a total monthly Medicare Part B premium of $88.50 in 2006, Social Security beneficiaries enrolled in Medicare Part B will see that average $47 benefit increase reduced to $36 after rounding required by law.
Albert Einstein: "Not everything that can be counted counts, and not everything that counts can be counted."
President George W. Bush, in October 2005, received his lowest positive job performance rating recorded by the Sacred Heart University Polling Institute. According to the national poll, the President's favorable job performance rating is 42.0%. This is down from 52.3% in April 2005, 57.7% in April 2004, 53.2% in February 2004, 58.4% in October 2003, 77.9% in April 2003 and 65.1% in March 2003. "Although public approval ratings normally decline throughout a President's term of office, the severe decline in President Bush's ratings suggest an unusual degree of dissatisfaction among the American people with the President's policies as well as a loss of confidence in his leadership ability," said Dr. Gary Rose, professor and chair of the Department of Government and Politics at Sacred Heart University. Among Republican leaning voters, the President's rating was 78.6% positive while those who vote mostly Democrat provided a 14.8% positive rating. Among unaffiliated voters, the positive rating was 42.7%. Among Hispanics, President Bush received a 20.7% favorable rating while whites provided 46.7% and African-Americans provided a positive rating of 19.8%.
Seneca: "While we are postponing, life speeds by."
Wal-Mart customers found items they wanted in stock more often due to the retailer's use of electronic product codes (EPCs) powered by radio frequency identification (RFID) technology when compared to control stores. This is according to an independent University of Arkansas study's initial findings. Researchers at the University of Arkansas found a 16 percent reduction in out-of-stocks. Additionally, the study also showed that out-of-stock items with EPCs were replenished three times faster than comparable items using standard bar code technology. Equally important, Wal-Mart experienced a meaningful reduction in manual orders resulting in a reduction of excess inventory. "This is no longer a take-it-on-faith initiative," said Linda Dillman, executive vice president and CIO for Wal-Mart. "This study provides conclusive evidence that EPCs increase how often we put products in the hands of customers who want to buy them, making it a win for shoppers, suppliers and retailers."
Real average weekly earnings fell by 1.2 percent from August to September
after seasonal adjustment, according to preliminary data released today by the
Bureau of Labor Statistics of the U.S. Department of Labor. This decline
stemmed from a 1.4 percent increase in the Consumer Price Index for Urban Wage
Earners and Clerical Workers (CPI-W), which was partially offset by a 0.2
percent increase in average hourly earnings. Average weekly hours were
unchanged. Average weekly earnings rose by 2.3 percent, seasonally adjusted, from
September 2004 to September 2005. After deflation by the CPI-W, average weekly
earnings decreased by 2.7 percent. Before adjustment for seasonal change and
inflation, average weekly earnings were $548.24 in September 2005, compared with
$530.54 a year earlier.
Barry Riholtz: "The only real bright
spot in the inflation data is worker earnings relative to inflation.
They fell, as the the Labor Department reported 'real average weekly
earnings of U.S. workers, adjusted for inflation, fell 1.2% in
September.' That marks the third consecutive monthly decline of real
wages (average hourly earnings rose 0.2%). So the only place where there is no
inflation is in the pocketbooks of the consumer, whom I must remind you accounts
for 70% of the economy."
According to J.D. Power, in the first nine days of October, new-vehicle sales
plunged 57% at GM and 45% at Ford compared with the first nine days of September.
"The aftermath of the employee pricing programs is having a dramatic impact," stated
Jeff Schuster, executive director of global forecasting at J.D. Power. He remarked
that "at this pont, we're on track for an October like we haven't seen since the
early 1990s." Toyota overtook GM and Ford in U.S. retail market share in
in early October and gained 4 percentage points to 18.2 percent.
Comair to cut up to 1,000 jobs.
Socrates: "My advice to you is to get married. If you find a good wife you'll
be happy; if not, you'll become a philosopher."
September industrial production declined 1.3%, the largest monthly drop in 23
years. Capacity utilization slumped to 78.6 from 79.8 in August. The drop in
capacity utilization and industrial production pushed the BullandBearWise Index
to match the lowest level of the year.
In case anyone cares other than the Fed, core inflation is up 2% in the past year.
In the first part of October, the Univ. of Michigan Consumer Sentiment Index
dropped to 75.4 and the expectations index declined to 62.4, a 13-year low.
John Murphy: “The most dangerous time for the market is the autumn of 2005 to
the autumn of 2006."
According to GM, UAW workers pay 7% of their health care costs, while white-collar
workers pay 27% of these costs. The differential is about to narrow. There is no
alternative available at the bargaining table.
"All countries, major economies in particular, should keep
major currencies reasonably stable and prevent trade
protectionism," Hu said today in Beijing, in an opening speech
for the Group of 20 nations gathering of finance ministers and
central bankers being held near the Chinese capital.
In the first nine months of this year, actual foreign direct investment
in China dropped 2.11 percent from a year ago to US$43.25 billion, the
country's Ministry of Commerce stated.
Kierkegaard:"People demand freedom of speech to make up
for the freedom of thought which they avoid."
According to Marsoft, from mid-August to mid-September, the Baltic Dry Index
registered its largest monthly increase since the end of 2004. During this
period, the index gained 700 points or roughly 30%, as it climbed above 3000
for the first time since early June.
Techenguiz and 2 partners agreed to buy Sommerfield plc,U.K.'s 5th largest grocer,
for $1.9 billion.
The Tchenguiz group is paying 8.6 times cash flow from
operations for Somerfield, according to data compiled by Bloomberg.
William Morrison Supermarkets Plc paid 20.7 times cash flow for
Safeway Ltd. in 2004. When viewing the deal for Sommerfield and its
less than appealing operating history, one can see that Albertson's
is significantly undervalued at present price levels.
Store-bought swordfish contained mercury
levels above the legal limit in a study released Thursday by
environmental groups.
The printing presses are alive and well at the Fed. In the week of October 3,
M3 topped $10 trllion for the first time. Recently, M3 has been surging at
a double-digit annualized rate. Do you think that has contributed to the
spike in inflation?
Bayou Group, Wood River, and now Refco. How many more black holes will
soon rise to the surface? There are a million stories in the naked city.
But only the Shadow knows....
Kazakhstan's Energy Minister Vladimir Shkolnik claims that CNPC did not
consult with the Kazakh government prior to reaching an agreement to buy
PKZ. From my perspective, he has two choices-- to grow up and get over it
or learn to swim with sharks. Is there any doubt that Shkolnick would have told
his cronies and they would have rushed out to buy PKZ prior to the public
annuncement of the deal?
Gary Lammert: "The cash reserves in US equity mutual funds are at a historically low
level, lower than immediately before the peak of the Wilshire in March
2000, and equalling the low in 1972 before the 50 percent steady
decline in equity valuations into 1974. The difference between 1974
and now is the additional massive siphoning effect that a declining
housing market will soon have on the monies available to the equity
market and the impetus to liquidate equities in order to futilely
continue mortgage payments on houses with growing negative worth
during a rapidly developing economic and money contraction."
Rising spending by Chinese consumers will make China the second-largest
market in terms of household consumption in the world by 2014, next
only to the United States, said a study by Credit Suisse First Boston.
China's consumption is likely to grow 18 percent annually by 2014, against an
average growth of 11 percent globally and 2.1 percent in the United
States, CSFB estimates. The estimate is based on its
assumption that the Chinese economy will expand 7 percent annually and
the proportion of consumption in the gross domestic product will rise
5.5 percentage points a year in the runup to 2014.
Prime Minister Paul Martin told some New York executives last week that
Washington's refusal to adhere to NAFTA rulings on lumber tariffs was
threatening North American trade relations, and he reminded them that
China was thirsty for the Canadian oil and natural gas that pours into
the United States each year. You can thank Bush for reneging on lumber
agreements with Canada. You cannot spin reneging.
Gardenburger filed for bankruptcy in California. Having tasted one in
a weak moment, I am not surprised.
For those who eat salmon two or three times a week, you might consider
spicing up the fish by making a rub of the following:
1 tablespoon garlic powder and black pepper.
1 teaspoon ground cumin and sugar.
1/2 teaspoon paprika, cayenne pepper, dried oregano and dried thyme.
1/4 teaspoon salt.
Don't look now, but there have been increased sightings of UFOs. Please visit
earthfiles.com and ufosnw.com.
The Missouri Department of Transportation is finalizing a contract to
monitor thousands of cell phones, using their movements to map
real-time traffic conditions statewide on all 5,500 miles of major
roads. Of course, the information will be kept confidential and anonymous!
Mary Manin Morrissey: "Even though you may want to move forward in life, you may have
one foot on the brakes. In order to be free, we must learn how to let go. Release the
hurt. Release the fear. Refuse to entertain your old pain. The energy it takes to
hang onto the past is holding you back from a new life. What is it you would let
go of today?"
Friday, October 14, 2005
Thinking For Yourself
10/14/05 Thinking For Yourself
The August trade deficit rose 1.8% to $59 billion, the third highest monthly ever.
Import prices rose 2.3% in September, the biggest one month rise in 15 years. The Treasury market reacted negatively and the the yield on 10-year government bonds rose during the day to 4.50%. This yield is still ridicously low, in my view, given our twin tower deficits and the direction of spending in the Congress and by the nation as a whole. Thirty-year mortgages rates topped 6%, and it is only a matter of time until the home owners with ARMs are feeling the pinch of higher interest rates. What goes down can also go up.
U.S. consumer inflation surged at the fastest pace in more than 25 years in September, rising a bigger-than-expected 1.2%, the Labor Department said Friday.
The number of lost jobs resulting from Katrina jumped to 438,000 last week. The amount of flooding in the Northeast is rising to devastating proportions, ad has impacted many families in several states.
According to briefing.com, Bear Stearns downgraded Albertsons from Peer Perform to Underperform. The downgrade is based on Bear's increasing skepticism that a single strategic buyer or private equity participant acquires the co, and the risk that the current deal premium embedded in the stock evaporates accordingly. They continue to assign a low probability that a buyer (or group of buyers) emerges to purchase the entire co. Removing the deal halo, firm believes that the stock would trade down to roughly $18. This is a more negative view than Lehman took a week or so ago, but the basis premise is the same. At 23, the stock already reflects a low probability of one buyer or group of buyers. Before the news that they were seeking alternatives, ABS shares were selling at about $20.50. In my view, the risk at this level is minimal compared to the upside worth imbedded in the company. This situation is very different from that of Saks.
The August trade deficit rose 1.8% to $59 billion, the third highest monthly ever.
Import prices rose 2.3% in September, the biggest one month rise in 15 years. The Treasury market reacted negatively and the the yield on 10-year government bonds rose during the day to 4.50%. This yield is still ridicously low, in my view, given our twin tower deficits and the direction of spending in the Congress and by the nation as a whole. Thirty-year mortgages rates topped 6%, and it is only a matter of time until the home owners with ARMs are feeling the pinch of higher interest rates. What goes down can also go up.
U.S. consumer inflation surged at the fastest pace in more than 25 years in September, rising a bigger-than-expected 1.2%, the Labor Department said Friday.
The number of lost jobs resulting from Katrina jumped to 438,000 last week. The amount of flooding in the Northeast is rising to devastating proportions, ad has impacted many families in several states.
According to briefing.com, Bear Stearns downgraded Albertsons from Peer Perform to Underperform. The downgrade is based on Bear's increasing skepticism that a single strategic buyer or private equity participant acquires the co, and the risk that the current deal premium embedded in the stock evaporates accordingly. They continue to assign a low probability that a buyer (or group of buyers) emerges to purchase the entire co. Removing the deal halo, firm believes that the stock would trade down to roughly $18. This is a more negative view than Lehman took a week or so ago, but the basis premise is the same. At 23, the stock already reflects a low probability of one buyer or group of buyers. Before the news that they were seeking alternatives, ABS shares were selling at about $20.50. In my view, the risk at this level is minimal compared to the upside worth imbedded in the company. This situation is very different from that of Saks.
An international team led by a dermatologist at The University of Manchester has found that the treatment with
the emerging drug infliximab, marketed as Remicade, can quickly and
significantly improve psoriasis symptoms.
The European Infliximab for Psoriasis Efficacy and Safety Study (EXPRESS)
was a placebo-controlled trial on 378 patients with moderate to severe
psoriasis, to test the efficacy and safety of the drug. The findings,
published in the 15 October issue of The Lancet, show that 80% of patients
achieved at least a 75% improvement in symptoms after ten weeks treatment with
the drug, as opposed to just 3% of those receiving a placebo.
Palatin Technologies today announced that it will present at the 2005 BIO
Investor Forum in San Francisco at 10:40 a.m. local time (1:40 p.m. eastern) on
Wednesday, October 19, 2005. This conference is being organized by the
Biotechnology Industry Organization.
Carl Spana, Ph.D., President and Chief Executive Officer of Palatin
Technologies, will provide an update on the Company's commercial and
development programs. To access the live audio broadcast or the subsequent
archived recording, log onto http://www.palatin.com.
Frequently, I write that, as an investor, one must think for oneself and know
what you own. You don't listen to rumor or garner information from message
boards. Investors in PetroKazakhstan entered the world of risk arbitrage
after the deal to sell to CNPC was struck. This is a very different environment
and PKZ already operates in a hostile part of the world. There were some basic
backgroud facts that needed to be at the forefront. China looked like an
amateur with the botched deal between CNOOC and Unocal. They did not want to
lose face twice in a matter of months. Losing face is a no no. Then there
is the new 1,000-km pipeline pumping crude from the Caspian region to China.
In a matter of months it goes on stream. In addition, CNPC is building a
refinery in NW China to process the Kazakh crude and then transport it thru the
pipeline. This means CNPC could afford to sell PKZ's refinery to the Kazakh
government and make peace with the acquisition. Another important piece to
the analysis is one of the advisors to PKZ. He is former Prime Minister
Jean Chretian. He will help guide the company through the rough and tumble world
of Kazakh and Rusian politics. I expected a bumpy ride until deal completion on Oct.
18 but yesterday was out of the ordinary. For the everyday investor it must
have been quite unnerving for the stock dropped from 50 to 46.50 in a matter of
minutes. This is not watching paint dry. If you were prepared with the facts,
the sharp intraday decline was an unexpected opportunity. It requires self-
confidence built on experience and quick thinking of the facts. It is but for
a handful of investors. After the close, the Asian WSJ stated China's CNPC
is poised to sell a 33 percent stake in PKZ to Kazakh state oil firm KazMunaiGaz
for $1.4 billion. "China National Petroleum Corp. (CNPC) is close to agreeing to a side deal that is likely to help it seal the controversial acquisition," it said, citing people familiar with the situation. One should have remembered that
well over a month ago there was discussion between CNPC and the Kazakh government
to sell a piece of the company. One should always keep in mind that, when various
parties sit down at the table, each one needs to get a piece of the pie,
so to speak. CNPC knew that in the beginning before they sealed the deal with
PKZ. (It is a point that Bush has not learned and has no interest in learning.
It is his way or no way. That's not the way the world works. That's why the
U.S. has few if any friends left.) In sum, don't invest scared. Invest smart. Know
your stuff. Knowledge really can be power. It can make you money while others
are running for the hills.
Wednesday, October 12, 2005
Consequences And Circumstances
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."
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."
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."
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