1/17/07 Outlook
Fixed-mortgage rates are expected to rise to about 6.5% by the end of 2007, and sales of both new and existing homes are expected to slide this year, the Mortgage Bankers Association said Tuesday. In an economic forecast, the trade group estimated declines in 2007 of 7% in existing-home sales and 8% in new-home sales.
But the group said sales of both types of home should bounce back by 3% in 2008 and by 1% in 2009. Total residential-mortgage production in 2007, meanwhile, will be $2.39 trillion, down 5% from 2006. Originations should fall 4% in 2008 and 6% in 2009, MBA said.
Talisman Energy said Tuesday its subsidiaries have agreed to sell its non-operated interests in the Brae assets in the U.K. North Sea to TAQA Bratani Ltd. for $550 million. The sale is expected to close later this year. TAQA is a subsidiary of the Abu Dhabi National Energy Co. Talisman's net production from the Brae assets for 2006 averaged 19,000 barrels of oil equivalent a day. Talisman's proved Brae reserves totalled 18.5 million boe, the Calgary, Alberta-based company said.
Wingstop announced 2006 year-end sales and growth figures. The chicken-wing-only chain's comp store sales increased 13.6 percent in 2006 with 14 consecutive quarters of comp store increases. Wingstop's system-wide sales increased 29.7 percent from $118.5 million in 2005 to $153.7 million in 2006. The company's new store openings
grew by 18 percent from 271 units that were opened by year end 2005 to 321
units opened by year end 2006. The rapidly-growing chain expects to open an
additional 70 stores in 2007.
Royal Dutch Shell evacuated staff from two oil installations in southern Nigeria and the military boosted troop levels in the volatile area Tuesday after community clashes left a dozen community chiefs dead, officials said.
Richard Daughty: "An estimated $300 billion of consumer spending has already disappeared in the United States, as that is roughly the reported drop in mortgage equity withdrawal lately. If you think that the American economy is so powerful and so dynamic that it can ignore a drop of $300 billion in final consumption, then I want to ask what kind of medicine your doctor has you on, because, brother, I need some of that kind of pharmaceutical "you'll believe any silly crap" horsepower right about now!"
February gold fell $1 to close at $625.90 an ounce Tuesday, while March silver ended the session at $12.625 an ounce, down 25.5 cents.
Feb. crude fell $1.78, or 3.4%, to end at $51.21/brl. Feb. natural gas gained 3.7 cents to end at $6.638/mln BTUs.
March corn closed up 6 1/2 cents, or 1.6%, at $4.03 a bushel in Chicago.
Three nights of freezing temperatures have destroyed up to three-quarters of California's $1 billion (€770 million) citrus crop, according to an estimate issued as forecasters warned the weather could continue.
Other crops, including avocados and strawberries, also have suffered damage, agricultural officials said Monday.
"This is one of those freezes that, unfortunately, we'll all remember," said A.G. Kawamura, secretary of the California Department of Food and Agriculture.
Bank of America Corp has begun a push to raise a regulatory cap that bars any US bank from an acquisition that would give it more than 10 percent of the nation's total bank deposits, The Wall Street Journal reported on Tuesday.
Tuesday, January 16, 2007
The Situation
1/16/07 The Situation
The Empire State Manufacturing index fell to 9.1 in January from a revised 22.2 in December. This is the lowest level since the summer of 2005. The drop was much greater than expected. Economists were expecting the index to slip to 20.0 from the initial estimate of 23.1 in December. The indexes for new orders, shipments and employment also fell sharply. The inventories index dropped to its lowest level in well over a year.
Insurance broker USI Holdings Corp. said Tuesday it agreed to be bought by Goldman Sachs & Co.'s private equity arm for $17 per share, representing a 9-percent premium over the stock's closing price Friday of $15.55. The offer is 21 percent higher than the stock's average price over the 30 days up to Oct. 24, when the company announced a private equity group indicated its willingness to buy.
Landry's Restaurants Inc. offered to acquire Smith & Wollensky Restaurant Group for $7.50 per share.
ElkCorp. disclosed an amendment to its previously disclosed merger agreement with private equity firm The Carlyle Group. The revised deal calls for Carlyle to commence a tender offer to acquire all outstanding ElkCorp common shares for $40.50 each in cash on or before Thursday, and represents an increase of $2.50 per share from the $38 offer called for in the parties' original Dec. 18 agreement. ElkCorp's board is recommending that shareholders tender their stock to the Carlyle offer and reject a $40 per share cash tender offer from Building Materials Corp. of America.
Home builder Centex Corp. expects to swing to a third-quarter loss from continuing operations of $2.00 per share, from a profit of $2.52 a share a year ago. The company said it will record land valuation adjustments of around $300 million due to the declining housing market. It has also decided not to exercise land option contracts on 37,000 lots, which will result in walk-away costs of around $150 million. Centex added it will increase its provision for taxes by around $60 million in connection with its previously disclosed ongoing federal tax audit. Excluding these costs, Centex said it expects adjusted earnings for the quarter to be 75 cents a share. Analysts polled by Thomson First Call were expecting earnings of 81 cents a share. For the quarter, Centex said home closings fell 12% to 8,360 and net orders fell 24% to 6,139.
Saudi Arabia's oil minister said "We took measures in October in Doha and measures in Abuja (in December) and I believe these measures are working well. Inventories in the fourth quarter have come down ... which puts the market closer to balance...There is no need to panic."
At a meeting this weekend between Hugo Chávez, Venezuela’s president, and Mahmoud Ahmadi-Nejad, president of Iran, Mr Chávez said: “We agreed this afternoon to increase our co-ordinated efforts in Opec and with the major oil producers outside Opec to safeguard the price of our main product.”
Outstanding euro-denominated debt accounts for 45 per cent of the global market, compared with 37 per cent for the dollar.
John Hussman: "Overvalued, overbought, and overbullish conditions have generally resulted in disappointing market returns, regardless of other features of market action. Yet the past several weeks have quietly added a new ingredient: Treasury bill yields are now higher than they were 6 months ago, and Treasury yields of all maturities have popped higher in recent weeks. While this might seem like a trivial and low-magnitude event, it actually contributes to a syndrome that has invariably been negative for near-term market outcomes (not to mention the negative long-term results that overvalued market conditions have historically produced).
We've got overvalued, overbought, overbullish conditions, coupled with upward pressure on yields. I'll just go ahead and give it a name: “Ovoboby.”
The Empire State Manufacturing index fell to 9.1 in January from a revised 22.2 in December. This is the lowest level since the summer of 2005. The drop was much greater than expected. Economists were expecting the index to slip to 20.0 from the initial estimate of 23.1 in December. The indexes for new orders, shipments and employment also fell sharply. The inventories index dropped to its lowest level in well over a year.
Insurance broker USI Holdings Corp. said Tuesday it agreed to be bought by Goldman Sachs & Co.'s private equity arm for $17 per share, representing a 9-percent premium over the stock's closing price Friday of $15.55. The offer is 21 percent higher than the stock's average price over the 30 days up to Oct. 24, when the company announced a private equity group indicated its willingness to buy.
Landry's Restaurants Inc. offered to acquire Smith & Wollensky Restaurant Group for $7.50 per share.
ElkCorp. disclosed an amendment to its previously disclosed merger agreement with private equity firm The Carlyle Group. The revised deal calls for Carlyle to commence a tender offer to acquire all outstanding ElkCorp common shares for $40.50 each in cash on or before Thursday, and represents an increase of $2.50 per share from the $38 offer called for in the parties' original Dec. 18 agreement. ElkCorp's board is recommending that shareholders tender their stock to the Carlyle offer and reject a $40 per share cash tender offer from Building Materials Corp. of America.
Home builder Centex Corp. expects to swing to a third-quarter loss from continuing operations of $2.00 per share, from a profit of $2.52 a share a year ago. The company said it will record land valuation adjustments of around $300 million due to the declining housing market. It has also decided not to exercise land option contracts on 37,000 lots, which will result in walk-away costs of around $150 million. Centex added it will increase its provision for taxes by around $60 million in connection with its previously disclosed ongoing federal tax audit. Excluding these costs, Centex said it expects adjusted earnings for the quarter to be 75 cents a share. Analysts polled by Thomson First Call were expecting earnings of 81 cents a share. For the quarter, Centex said home closings fell 12% to 8,360 and net orders fell 24% to 6,139.
Saudi Arabia's oil minister said "We took measures in October in Doha and measures in Abuja (in December) and I believe these measures are working well. Inventories in the fourth quarter have come down ... which puts the market closer to balance...There is no need to panic."
At a meeting this weekend between Hugo Chávez, Venezuela’s president, and Mahmoud Ahmadi-Nejad, president of Iran, Mr Chávez said: “We agreed this afternoon to increase our co-ordinated efforts in Opec and with the major oil producers outside Opec to safeguard the price of our main product.”
Outstanding euro-denominated debt accounts for 45 per cent of the global market, compared with 37 per cent for the dollar.
John Hussman: "Overvalued, overbought, and overbullish conditions have generally resulted in disappointing market returns, regardless of other features of market action. Yet the past several weeks have quietly added a new ingredient: Treasury bill yields are now higher than they were 6 months ago, and Treasury yields of all maturities have popped higher in recent weeks. While this might seem like a trivial and low-magnitude event, it actually contributes to a syndrome that has invariably been negative for near-term market outcomes (not to mention the negative long-term results that overvalued market conditions have historically produced).
We've got overvalued, overbought, overbullish conditions, coupled with upward pressure on yields. I'll just go ahead and give it a name: “Ovoboby.”
Sunday, January 14, 2007
China And Oil
1/15/07 China And Oil
China imported 145.18 million tons of crude oil in 2006, up 14.5 percent from a year ago, said the General Administration of Customs on Friday.
According to newly released customs statistics, China imported 36.38 million tons of refined oil in 2006, with a year-on-year growth of 15.7 percent.
China saw a sharp decline in crude oil exports in 2006, down 21.4 percent from 2005 to 6.34 million tons.
The exports of refined oil declined by 11.9 percent to 12.35 million tons last year.
China's net imports of crude oil in 2006 totaled 138.84 million tons, up 17 percent on the previous year and net imports of refined oil were up 38 percent to 24.03 million tons.
According to the data, China spent an additional 23.8 billion U.S. dollars on importing crude oil and oil products in 2006, up 41 percent from 2005.
"The rise in oil imports and decline in exports reflect the surge in China's oil consumption in 2006, driven by the booming economy," said Dong Xiucheng, Professor of the China University of Petroleum.
China's GDP continued to grow at around 10 percent last year.
China currently imports 48% of its crude oil. The IEA that said China would rely on imports for 80% of its oil and about 30% of its natural gas in 2030.
The central bank of Russia increased gold holdings by 2.2 percent to 394.1 metric tons in the third quarter. The share of currency deposits held in dollars by OPEC member-nations including Saudi Arabia fell to a two-year low of 65 percent in the second quarter. The dollar dropped 5 percent against an index of six major currencies in the past year.
China imported 145.18 million tons of crude oil in 2006, up 14.5 percent from a year ago, said the General Administration of Customs on Friday.
According to newly released customs statistics, China imported 36.38 million tons of refined oil in 2006, with a year-on-year growth of 15.7 percent.
China saw a sharp decline in crude oil exports in 2006, down 21.4 percent from 2005 to 6.34 million tons.
The exports of refined oil declined by 11.9 percent to 12.35 million tons last year.
China's net imports of crude oil in 2006 totaled 138.84 million tons, up 17 percent on the previous year and net imports of refined oil were up 38 percent to 24.03 million tons.
According to the data, China spent an additional 23.8 billion U.S. dollars on importing crude oil and oil products in 2006, up 41 percent from 2005.
"The rise in oil imports and decline in exports reflect the surge in China's oil consumption in 2006, driven by the booming economy," said Dong Xiucheng, Professor of the China University of Petroleum.
China's GDP continued to grow at around 10 percent last year.
China currently imports 48% of its crude oil. The IEA that said China would rely on imports for 80% of its oil and about 30% of its natural gas in 2030.
The central bank of Russia increased gold holdings by 2.2 percent to 394.1 metric tons in the third quarter. The share of currency deposits held in dollars by OPEC member-nations including Saudi Arabia fell to a two-year low of 65 percent in the second quarter. The dollar dropped 5 percent against an index of six major currencies in the past year.
Saturday, January 13, 2007
Stay Alert
1/14/07 Stay Alert
The weather has changed. That's true in California, Kansas, Oklahoma, Minnesota, and so on moving eastward. Japan was hit with a 8.2 earthquake. The weather changes will impact oil and gas prices, crop prices, and inflation expectations over the next 30 to 60 days.
Saudi Oil Minister Ali Al Naimi will attend the Petrotech conference in New Delhi - the Indian oil and gas industry's premium event - from January 15, together with Iranian Oil Minister Kazem Vaziri-Hamaneh and Nigeria's energy minister Edmund Daukoru. Ministers from Yemen and Sudan will also attend. India and China will continue to be larger and larger consumers of oil and gas. Look for more deals between Iran, Nigeria, Venezuela, Russia and China and India.
China's forex reserves stand at about $1.1 trillion and Japan's at roughly $900 billion. Both countries require growing amounts of oil and gas and other commodities, such as, iron ore. Those forex reserves will increasingly be recycled away from dollar denominated goods and services.
China has cut the retail price of petrol and aviation fuel for the first time in 19 months. Petrol prices have been cut by 3.8% but the prices in the much larger diesel market have been left unchanged.
There are close to three million private cars in China and parts of the country have been hit by petrol shortages.
The price of petrol was cut by 220 yuan ($28.22) a tonne, the energy policy-making National Development and Reform Commission said on its website.
The cut, only the second in five years, will also see the ex-refinery price of jet fuel cut by 90 yuan a tonne.
Meanwhile, regular unleaded gas remains around $2.75 a gallon in and around San Francisco and Seattle.
The weather has changed. That's true in California, Kansas, Oklahoma, Minnesota, and so on moving eastward. Japan was hit with a 8.2 earthquake. The weather changes will impact oil and gas prices, crop prices, and inflation expectations over the next 30 to 60 days.
Saudi Oil Minister Ali Al Naimi will attend the Petrotech conference in New Delhi - the Indian oil and gas industry's premium event - from January 15, together with Iranian Oil Minister Kazem Vaziri-Hamaneh and Nigeria's energy minister Edmund Daukoru. Ministers from Yemen and Sudan will also attend. India and China will continue to be larger and larger consumers of oil and gas. Look for more deals between Iran, Nigeria, Venezuela, Russia and China and India.
China's forex reserves stand at about $1.1 trillion and Japan's at roughly $900 billion. Both countries require growing amounts of oil and gas and other commodities, such as, iron ore. Those forex reserves will increasingly be recycled away from dollar denominated goods and services.
China has cut the retail price of petrol and aviation fuel for the first time in 19 months. Petrol prices have been cut by 3.8% but the prices in the much larger diesel market have been left unchanged.
There are close to three million private cars in China and parts of the country have been hit by petrol shortages.
The price of petrol was cut by 220 yuan ($28.22) a tonne, the energy policy-making National Development and Reform Commission said on its website.
The cut, only the second in five years, will also see the ex-refinery price of jet fuel cut by 90 yuan a tonne.
Meanwhile, regular unleaded gas remains around $2.75 a gallon in and around San Francisco and Seattle.
Friday, January 12, 2007
Looking Forward
1/13/07 Looking Forward
The ministers of the Organization of Petroleum Exporting Countries will consider the need for an emergency meeting to address halting the recent decrease in oil prices, according to a Thursday media report. OPEC will also consider asking other major oil producers to trim output, according to a story on The Wall Street Journal's Web site that cites a senior OPEC official. Doug McIntyre pointed out one source inside OPEC even went to far as to say that those betting on lower oil prices will "get their fingers burned".
Rep. Ron Paul has filed papers in Texas to create a presidential exploratory committee that will allow him to raise money, the Associated Press reported late Thursday. The nine-term congressman from southeast Texas was the Libertarian nominee for president in 1988.
Ford Motor Co. plans to close its Indianapolis steering systems plant by the end of 2008, according to a media report Thursday. The automaker was unable to find a buyer for the plant, which makes hydraulic steering systems that many industry players are replacing with electronic systems, the Associated Press reported, citing Ford spokeswoman Della DiPietro.
SAP said Thursday that it now expects growth of software sales for the year of 11%, compared to previous guidance of sales growth between 15% and 17%.
AMD expects its fourth-quarter results to be hampered by lower sales of it PC chips.
Cablevision Systems Corp.'s founding family has lifted its bid to take the cable operator private, the company said Friday. Charles and James Dolan, who say this is their final offer, are proposing to acquire the company's shares for $30 a share in cash.
U.S. retail sales rose a better-than-expected 0.9% in December, the best gain in five months, the Commerce Department estimated Friday. The sales gains were concentrated n electronics and gasoline stations. Excluding autos, sales rose 1.0%, the biggest gain since January.
Prices of goods imported into the United States climbed by 1.1% in December, led by big increases in the prices of imported petroleum and natural gas. Imported petroleum prices rose by 4.8%, their biggest increase in seven months. Imported natural gas prices climbed by 10.1% in December, following a gain of 43.2% in November. Year-over-year, import prices have climbed 2.5%.
Intel Corp. plans to invest in a major new plant in China to make leading-edge chips, its biggest investment in the country to date, two sources with knowledge of the plan said. The plant will make 65-nanometre multi-core processors, the sources, who asked not to be identified, told Reuters. This would make it Intel's first such manufacturing facility in Asia.
There is speculation that GE is close to making a big acquisition in healthcare or energy. GE has been making smaller acquisitions within the medical field for several years. and only the other day, GE made a buyout of an energy company, and I continue to believe that area will be of increased interest to GE. Most energy stocks are selling way below the p/e of GE shares and would add to their earnings and cash flow.
Financial Tines editorial: "George W.?Bush’s new direction in Iraq is certainly not a strategy for victory, whatever that word, which is used ever more desperately by the US president, now means. It may be one last heave. It may be a cover for US withdrawal. But two things are quite clear.
Right now, Mr Bush has the support of no more than one in four Americans for this so-called surge of an extra 20,000 or so troops. Very soon, as the already indecipherable ethnic and sectarian patchwork of Iraq is pulled further and even more bloodily to pieces, he will have none.
Second, this policy will not succeed in fixing an Iraq traumatised by tyranny and war and then broken by invasion and occupation. But it may end with the US “surging” into Iran – and taking the Middle East to a new level of mayhem that will spill into nearby regions and western capitals."
It was 4 1/2 years ago that I wrote Bush and company would invade Iraq, and that the ultimate goal was to invade Iran. Bush began that process by breaking into the Iranian Consulate in Iraq. He is attempting to bait Iran and have that country retaliate and then Bush will order the bombing of the Iranian nuclear facilities. I have predicted over the past 6+ years that he would be the worst president in our nation's history. In addition, he is endangering the lives and the well-being of all Americans. He and Cheney must go. Now!
Nationwide, supplies of corn are expected to drop to 752 (m) million bushels from last month's forecast of 935 (m) million bushels -- a steep decline from last year's supply of one-point-97 (b) billion bushels. Corn has moved up 60% in price since I discussed purchasing it. The plan for ethanol was doomed before it even got off the ground. What Bush understands about supply and demand you can put on a head of a pin.
Bernard Ber: "The current level of complacency has been reflected in the record low levels of stock market volatility indicators (such as the VIX). Some people such as economist Hyman Minsky have noted that it is precisely when people are most complacent that economic and financial market risk are at the most dangerous point. The current public complacency has been so great that some have made humour of this prevailing perception through the tombstone heading “RIP: The Death of Risk”.
Our financial markets have innovated products (such as asset-backed securities and derivatives) that essentially enable the sharing of risk among many parties, instead of the risk being concentrated with one party. While it may appear that risk is reduced for a single party as a result of these innovations, nonetheless the total level of risk across the entire system is completely unchanged (it is only redistributed). The perception of risk reduction encourages people to extend more and more credit, which results in the risk level for the entire system to keep escalating, even though this may not be evident to the single party engaging in one credit transaction. This risk redistribution mechanism is fatally flawed because of two key elements. The first flawed element pertains to derivatives in that they hinge on one party assuming the obligation to pay the counter-party in the event that the value of the underlying asset changes in value (counter-party default risk)...The second flawed element of our risk redistribution mechanism pertains to asset-backed securities in that they are dependent on credit rating agencies to measure the credit risk for the lender (investor) and assign a credit rating to the security. There is a division of labour implicit in the asset-backed security. The original lender is no longer assigned the task of assessing the credit-worthiness of the borrower (as was formerly the case when banks were the primary conduit of credit in the past). In the past, the fear of credit loss ensured that the bank was very diligent in assessing credit risk. This responsibility has now been delegated to a credit rating agency.
The key point that I want to make is that the credit rating agency does not face any financial loss if the borrower defaults. As a result, they don't have the same incentive to be as diligent in assessing credit risk as the bank used to be when it was "on the hook" in the event of a loan default."
The 10-year Treasury note fell 10/32 to close at 98-27/32 with a yield of 4.774% and the yield on the 2-year rose to 4.89%.
February gold rose $13 to close at $626.90 an ounce Friday. March silver added 42 cents for the day to close at $12.88 an ounce -- up 5.3% for the week. March copper fell 5.6 cents to close at $2.603 a pound, but ended the week 2.7% higher.
The number of rigs drilling for oil and natural gas in North America rose by 191, or 9%, to 2,303, according to a weekly update by Baker Hughes Inc. on Friday.
The Organization of the Petroleum Exporting Countries saw 10 of its 11 members produce an average of 27 million barrels per day in December, down 70,000 b/d from November, Platts reported on Friday. Including Iraq, which doesn't participate in the cartel's output agreements, total OPEC production was 28.9 million b/d in December, compared with 29.06 million b/d in the prior month, Platts said. According to the survey, only three countries among the OPEC 10 reduced output in December: United Arab Emirates, Saudi Arabia and Libya. "After a significant 660,000 b/d drop in production in November, it is apparent OPEC's output in December largely leveled off," said John Kingston, global director of oil for Platts, in a statement.
February crude rose $1.11, or 2.1%, to close at $52.99 a barrel Friday. February natural gas added 30.9 cents, or 4.9%, to close at $6.601 per million British thermal units.
The ministers of the Organization of Petroleum Exporting Countries will consider the need for an emergency meeting to address halting the recent decrease in oil prices, according to a Thursday media report. OPEC will also consider asking other major oil producers to trim output, according to a story on The Wall Street Journal's Web site that cites a senior OPEC official. Doug McIntyre pointed out one source inside OPEC even went to far as to say that those betting on lower oil prices will "get their fingers burned".
Rep. Ron Paul has filed papers in Texas to create a presidential exploratory committee that will allow him to raise money, the Associated Press reported late Thursday. The nine-term congressman from southeast Texas was the Libertarian nominee for president in 1988.
Ford Motor Co. plans to close its Indianapolis steering systems plant by the end of 2008, according to a media report Thursday. The automaker was unable to find a buyer for the plant, which makes hydraulic steering systems that many industry players are replacing with electronic systems, the Associated Press reported, citing Ford spokeswoman Della DiPietro.
SAP said Thursday that it now expects growth of software sales for the year of 11%, compared to previous guidance of sales growth between 15% and 17%.
AMD expects its fourth-quarter results to be hampered by lower sales of it PC chips.
Cablevision Systems Corp.'s founding family has lifted its bid to take the cable operator private, the company said Friday. Charles and James Dolan, who say this is their final offer, are proposing to acquire the company's shares for $30 a share in cash.
U.S. retail sales rose a better-than-expected 0.9% in December, the best gain in five months, the Commerce Department estimated Friday. The sales gains were concentrated n electronics and gasoline stations. Excluding autos, sales rose 1.0%, the biggest gain since January.
Prices of goods imported into the United States climbed by 1.1% in December, led by big increases in the prices of imported petroleum and natural gas. Imported petroleum prices rose by 4.8%, their biggest increase in seven months. Imported natural gas prices climbed by 10.1% in December, following a gain of 43.2% in November. Year-over-year, import prices have climbed 2.5%.
Intel Corp. plans to invest in a major new plant in China to make leading-edge chips, its biggest investment in the country to date, two sources with knowledge of the plan said. The plant will make 65-nanometre multi-core processors, the sources, who asked not to be identified, told Reuters. This would make it Intel's first such manufacturing facility in Asia.
There is speculation that GE is close to making a big acquisition in healthcare or energy. GE has been making smaller acquisitions within the medical field for several years. and only the other day, GE made a buyout of an energy company, and I continue to believe that area will be of increased interest to GE. Most energy stocks are selling way below the p/e of GE shares and would add to their earnings and cash flow.
Financial Tines editorial: "George W.?Bush’s new direction in Iraq is certainly not a strategy for victory, whatever that word, which is used ever more desperately by the US president, now means. It may be one last heave. It may be a cover for US withdrawal. But two things are quite clear.
Right now, Mr Bush has the support of no more than one in four Americans for this so-called surge of an extra 20,000 or so troops. Very soon, as the already indecipherable ethnic and sectarian patchwork of Iraq is pulled further and even more bloodily to pieces, he will have none.
Second, this policy will not succeed in fixing an Iraq traumatised by tyranny and war and then broken by invasion and occupation. But it may end with the US “surging” into Iran – and taking the Middle East to a new level of mayhem that will spill into nearby regions and western capitals."
It was 4 1/2 years ago that I wrote Bush and company would invade Iraq, and that the ultimate goal was to invade Iran. Bush began that process by breaking into the Iranian Consulate in Iraq. He is attempting to bait Iran and have that country retaliate and then Bush will order the bombing of the Iranian nuclear facilities. I have predicted over the past 6+ years that he would be the worst president in our nation's history. In addition, he is endangering the lives and the well-being of all Americans. He and Cheney must go. Now!
Nationwide, supplies of corn are expected to drop to 752 (m) million bushels from last month's forecast of 935 (m) million bushels -- a steep decline from last year's supply of one-point-97 (b) billion bushels. Corn has moved up 60% in price since I discussed purchasing it. The plan for ethanol was doomed before it even got off the ground. What Bush understands about supply and demand you can put on a head of a pin.
Bernard Ber: "The current level of complacency has been reflected in the record low levels of stock market volatility indicators (such as the VIX). Some people such as economist Hyman Minsky have noted that it is precisely when people are most complacent that economic and financial market risk are at the most dangerous point. The current public complacency has been so great that some have made humour of this prevailing perception through the tombstone heading “RIP: The Death of Risk”.
Our financial markets have innovated products (such as asset-backed securities and derivatives) that essentially enable the sharing of risk among many parties, instead of the risk being concentrated with one party. While it may appear that risk is reduced for a single party as a result of these innovations, nonetheless the total level of risk across the entire system is completely unchanged (it is only redistributed). The perception of risk reduction encourages people to extend more and more credit, which results in the risk level for the entire system to keep escalating, even though this may not be evident to the single party engaging in one credit transaction. This risk redistribution mechanism is fatally flawed because of two key elements. The first flawed element pertains to derivatives in that they hinge on one party assuming the obligation to pay the counter-party in the event that the value of the underlying asset changes in value (counter-party default risk)...The second flawed element of our risk redistribution mechanism pertains to asset-backed securities in that they are dependent on credit rating agencies to measure the credit risk for the lender (investor) and assign a credit rating to the security. There is a division of labour implicit in the asset-backed security. The original lender is no longer assigned the task of assessing the credit-worthiness of the borrower (as was formerly the case when banks were the primary conduit of credit in the past). In the past, the fear of credit loss ensured that the bank was very diligent in assessing credit risk. This responsibility has now been delegated to a credit rating agency.
The key point that I want to make is that the credit rating agency does not face any financial loss if the borrower defaults. As a result, they don't have the same incentive to be as diligent in assessing credit risk as the bank used to be when it was "on the hook" in the event of a loan default."
The 10-year Treasury note fell 10/32 to close at 98-27/32 with a yield of 4.774% and the yield on the 2-year rose to 4.89%.
February gold rose $13 to close at $626.90 an ounce Friday. March silver added 42 cents for the day to close at $12.88 an ounce -- up 5.3% for the week. March copper fell 5.6 cents to close at $2.603 a pound, but ended the week 2.7% higher.
The number of rigs drilling for oil and natural gas in North America rose by 191, or 9%, to 2,303, according to a weekly update by Baker Hughes Inc. on Friday.
The Organization of the Petroleum Exporting Countries saw 10 of its 11 members produce an average of 27 million barrels per day in December, down 70,000 b/d from November, Platts reported on Friday. Including Iraq, which doesn't participate in the cartel's output agreements, total OPEC production was 28.9 million b/d in December, compared with 29.06 million b/d in the prior month, Platts said. According to the survey, only three countries among the OPEC 10 reduced output in December: United Arab Emirates, Saudi Arabia and Libya. "After a significant 660,000 b/d drop in production in November, it is apparent OPEC's output in December largely leveled off," said John Kingston, global director of oil for Platts, in a statement.
February crude rose $1.11, or 2.1%, to close at $52.99 a barrel Friday. February natural gas added 30.9 cents, or 4.9%, to close at $6.601 per million British thermal units.
Thursday, January 11, 2007
Surprises
1/12/07 Surprises
The number of initial claims in the week ending Jan. 6 fell 26,000 to 299,000, the lowest level since late July. The consensus forecast of economists was a reading of 320,000. Meanwhile, the benchmark 10-year Treasury traded to a 2 1/2-month high yield of 4.741%.
In a surprise move to many, the Bank of England raised rates by one quarter point to 5.25%. Meanwhile, the ECB chose to stand pat with their rates for the time being.
The Bush administration and Congress must work together to restore confidence in U.S. fiscal management by reducing the "unsustainably large" fiscal deficit, said Timothy Geithner, president of the New York Frederal Reserve on Thursday. The U.S.' large current account deficit will have to come down over time and how this process unfolds will depend on a number of factors, Geithner said. "Confidence that the U.S. political system will act to generate a sustainable fiscal trajectory is important to seeing that this process of adjustment unfolds with less risk." With spending for Iraq about to reach $500 billion, I see no fiscal improvement on the horizon.
Cerberus Capital Management is preparing an offer for real estate investment trust Equity Office Properties Trust, according to the WSJ. In November, Equity Office, the nation's largest public owner and manager of office properties, agreed to be acquired by the Blackstone Group for $36 billion including debt.
ConocoPhillips said it expects to end the year with about 11.1 billion BOE of proved reserves. Also, the initial reserve additions for the joint venture with EnCana Corp. (ECA) are expected to occur in 2007 and are not included in the 2006 reserves.
French optics company Essilor International might acquire U.S. contact lens maker Cooper Companies for 2.1 billion euros ($2.7 billion), brokerage Oddo Securities said in a research note this week.
M/I Homes Inc. said new contracts for the quarter ended Dec. 31 fell 61% from a year earlier to 353 homes. The Columbus, Ohio-based home builder said its cancellation rate rose to 63% in the fourth quarter from 27% in the year-ago period, and from 42% in the third quarter. "Conditions in most of our markets remained difficult throughout the fourth quarter," said Chief Executive Robert Schottenstein in a statement. "For the past six months, we have consistently stated that housing conditions are likely to remain challenging throughout 2007 and we see no reason to deviate from that belief."
Marc Faber points out that, according to the Financial Times, the concentration of wealth is extremely high in the United States, with 10% of the population currently holding 70% of the country's wealth, compared to 61% in France, 56% in the UK, 44% in Germany, and 39% in Japan. I believe this wealth disparity will play an important role in the 2008 elections.
The Energy Department said natural-gas inventories fell 49 billion cubic feet for the week ended Jan. 5. Total stocks now stand at 3.025 trillion cubic feet, up 401 billion cubic feet from the year-ago level. Let's check in 30 days from now. I expect natural gas inventories to plummet due to extremely cold weather across the U.S.
The S&P Energy index dipped into oversold territory as indicated by its 14-day relative strength index falling below 20 for the first time since the end of the summer driving season. In recent years, any time the 14-day GSPE RSI has dipped below 20, energy shares have rebounded.
Rigzone notes that, recent developments in Saudi Arabia's plans to boost production, and briefings by a former consultant to the Saudi ambassador to the U.S. have raised questions about whether the country is considering new strategic oil options to counter Iranian influence in the region. Some analysts say Saudi Arabia is preparing its massive crude oil reserves as its own "nuclear" weapon to undercut Iranian power.
The White House seeks to increase royalty rates on all new deepwater leases in the Gulf of Mexico by a third.
Goldman Sachs raised estimates by $0.09 for the current quarter on Google, raised estimates on Genentech, and Tiffany.
The dollar rose to a seven-week high against the euro and a 13-month high against the yen.
February natural gas sank 46.3 cents to close at a nearly one-week low of $6.292 per million British thermal units. Meanwhile, February crude dropped $2.14 to end at $51.88 a barrel, its lowest level since May 2005 and marks a decline of 15% since the beginning of 2007 as well as a 34% decline from its high of $78 a barrel.
In mid-July of last year I pointed out that the housing stocks had rallied for four consecutive days, and that despite the bad news coming out on the sector, the worst could be over for the stocks. I envision this type of action to occur within the oil sector- and that includes refining, marketing, drilling and exploration, and oil service. From a cash flow standpoint, most the companies in this group have dropped to such undervalued levels, that just about any could be a prime takeover target- with the possible exception of ExxonMobil or Chevron. The assets are so lucrative that the payback in a leveraged transaction could be swift and quite extraordinary. For example, look at BJ Services. Citigroup cut its price forecast from $58 to $38--the stock is selling at $26!
The number of initial claims in the week ending Jan. 6 fell 26,000 to 299,000, the lowest level since late July. The consensus forecast of economists was a reading of 320,000. Meanwhile, the benchmark 10-year Treasury traded to a 2 1/2-month high yield of 4.741%.
In a surprise move to many, the Bank of England raised rates by one quarter point to 5.25%. Meanwhile, the ECB chose to stand pat with their rates for the time being.
The Bush administration and Congress must work together to restore confidence in U.S. fiscal management by reducing the "unsustainably large" fiscal deficit, said Timothy Geithner, president of the New York Frederal Reserve on Thursday. The U.S.' large current account deficit will have to come down over time and how this process unfolds will depend on a number of factors, Geithner said. "Confidence that the U.S. political system will act to generate a sustainable fiscal trajectory is important to seeing that this process of adjustment unfolds with less risk." With spending for Iraq about to reach $500 billion, I see no fiscal improvement on the horizon.
Cerberus Capital Management is preparing an offer for real estate investment trust Equity Office Properties Trust, according to the WSJ. In November, Equity Office, the nation's largest public owner and manager of office properties, agreed to be acquired by the Blackstone Group for $36 billion including debt.
ConocoPhillips said it expects to end the year with about 11.1 billion BOE of proved reserves. Also, the initial reserve additions for the joint venture with EnCana Corp. (ECA) are expected to occur in 2007 and are not included in the 2006 reserves.
French optics company Essilor International might acquire U.S. contact lens maker Cooper Companies for 2.1 billion euros ($2.7 billion), brokerage Oddo Securities said in a research note this week.
M/I Homes Inc. said new contracts for the quarter ended Dec. 31 fell 61% from a year earlier to 353 homes. The Columbus, Ohio-based home builder said its cancellation rate rose to 63% in the fourth quarter from 27% in the year-ago period, and from 42% in the third quarter. "Conditions in most of our markets remained difficult throughout the fourth quarter," said Chief Executive Robert Schottenstein in a statement. "For the past six months, we have consistently stated that housing conditions are likely to remain challenging throughout 2007 and we see no reason to deviate from that belief."
Marc Faber points out that, according to the Financial Times, the concentration of wealth is extremely high in the United States, with 10% of the population currently holding 70% of the country's wealth, compared to 61% in France, 56% in the UK, 44% in Germany, and 39% in Japan. I believe this wealth disparity will play an important role in the 2008 elections.
The Energy Department said natural-gas inventories fell 49 billion cubic feet for the week ended Jan. 5. Total stocks now stand at 3.025 trillion cubic feet, up 401 billion cubic feet from the year-ago level. Let's check in 30 days from now. I expect natural gas inventories to plummet due to extremely cold weather across the U.S.
The S&P Energy index dipped into oversold territory as indicated by its 14-day relative strength index falling below 20 for the first time since the end of the summer driving season. In recent years, any time the 14-day GSPE RSI has dipped below 20, energy shares have rebounded.
Rigzone notes that, recent developments in Saudi Arabia's plans to boost production, and briefings by a former consultant to the Saudi ambassador to the U.S. have raised questions about whether the country is considering new strategic oil options to counter Iranian influence in the region. Some analysts say Saudi Arabia is preparing its massive crude oil reserves as its own "nuclear" weapon to undercut Iranian power.
The White House seeks to increase royalty rates on all new deepwater leases in the Gulf of Mexico by a third.
Goldman Sachs raised estimates by $0.09 for the current quarter on Google, raised estimates on Genentech, and Tiffany.
The dollar rose to a seven-week high against the euro and a 13-month high against the yen.
February natural gas sank 46.3 cents to close at a nearly one-week low of $6.292 per million British thermal units. Meanwhile, February crude dropped $2.14 to end at $51.88 a barrel, its lowest level since May 2005 and marks a decline of 15% since the beginning of 2007 as well as a 34% decline from its high of $78 a barrel.
In mid-July of last year I pointed out that the housing stocks had rallied for four consecutive days, and that despite the bad news coming out on the sector, the worst could be over for the stocks. I envision this type of action to occur within the oil sector- and that includes refining, marketing, drilling and exploration, and oil service. From a cash flow standpoint, most the companies in this group have dropped to such undervalued levels, that just about any could be a prime takeover target- with the possible exception of ExxonMobil or Chevron. The assets are so lucrative that the payback in a leveraged transaction could be swift and quite extraordinary. For example, look at BJ Services. Citigroup cut its price forecast from $58 to $38--the stock is selling at $26!
Wednesday, January 10, 2007
Developments
1/11/07 Developments
Gannett Co. Inc., McClatchy Co. and Tribune Co. plan to sell advertising jointly on their Web sites in a bid to capture more online revenue as circulation slips.
The companies plan to offer advertisers one-stop shopping for display ads on Internet sites, a spokeswoman for Gannett said on Wednesday.
The companies are likely to contribute 10 percent of their online advertising space to the network, The Wall Street Journal reported on Wednesday.
Bronco Drilling Company, Inc. acquired Eagle Well Service, Inc. and related subsidiaries for $2.5 million in cash, 1,070,390 shares of Bronco common stock and the assumption of debt, net of working capital, estimated at approximately $3.0million. The purchase will include 31 workover rigs, 24 of which are currently Theworking. The remaining 7 rigs will be deployed periodically over the coming monthswith all 31 expected to be active by the end of the second quarter of 2007. Eagle currently operates in Oklahoma, Texas, Kansas, and New Mexico...Frank Harrison, Bronco's Chief Executive Officer, said, "Historic levels of drilling activity have served as a catalyst for expanding demand for well services. We anticipate this acquisition will be immediately accretive and allows Bronco to capitalize on service demand that is not tied directly to the drill bit. This is the first step in executing our diversification strategy. We believe the well services business is a natural complement to ours and an entree into more mid-to-late cycle assets that could provide insulation from cyclicality. Eagle is a company that has been around for more than fifty years and has a terrific operational reputation and strong customer base. We are extremely pleased that Kim Snell, majority owner, will join the Bronco team and participate in the continued growth of our Company."
International Aluminum Corp. agreed to be acquired by Genstar Capital, a San Francisco-based private equity firm, for roughly $228 million. Genstar said the deal values International Aluminum at $53 per share, compared to Tuesday's close at $50.
Business confidence in the European Union has overtaken optimism in the US for the first time in five years, according to a survey published on Wednesday by the professional services firm Grant Thornton.
US Airways Group Inc. said on Wednesday it raised its takeover offer for larger bankrupt rival Delta Air Lines Inc. to $10.2 billion in cash and stock.
The new bid offers $5 billion in cash and 89.5 million US Airways shares. The original offer, made in November and rejected by Delta last month, was for $4 billion and 78.5 million US Airways shares.
US Airways said the offer would expire on February 1, unless it gets support from Delta creditors to perform due diligence and postpone a February 7 hearing that would start the voting on Delta's stand-alone plan.
Northwest Airlines Corp. and Delta Air Lines Inc. have held recurring talks regarding a potential link-up of the carriers after they emerge from bankruptcy-court protection, according to a media report on Wednesday.
The U.S. trade deficit shrank 1 percent to $58.2 billion. Despite the slight monthly narrowing, the trade gap through the end of November totaled $701.6 billion, keeping it on track to set a new annual record for 2006.
AccuWeather.com Chief Long-Range Forecaster Joe Bastardi believes that if the weather pattern reaches its full potential, the dramatic change from warmth to cold could result in "one of the top-five coldest 30-day stretches in the past half century."
Belarus said a compromise had been found to resume exports of Russian crude to Europe via the Druzhba pipeline following a trade row. Belarus said it had scrapped transit tariffs on Russian crude. Moscow has yet to confirm the deal.
Inventories at U.S. wholesalers jumped 1.3% in November, the Commerce Department said Wednesday.
Kodak agreed to sell its health-imaging business, which sells X-ray films and medical printers, to Canada's Onex for up to $2.55 billion.
China's trade surplus in goods expanded 74% in 2006.
Venezuela's plan to nationalize four multibillion-dollar crude oil projects could impede investment in the OPEC member nation and hinder its ability to boost production, the chief economist of the International Energy Agency said Wednesday.
Venezuelan President Hugo Chavez said Monday that Orinoco heavy crude projects would become state property, just after ordering the nationalization of his country's biggest telephone company. Oil projects in the Orinoco Belt have so far attracted $17 billion in investment by foreign oil companies, more than any other part of the country. About 600,000 barrels a day are produced from its tar-like deposits, which are easy to find and expensive to extract. Companies with investments in the basin include Irving, Texas-based Exxon Mobil; BP Plc; Chevron Corp. of San Ramon, California; and Total SA of France. Other investors include ConocoPhillips, based in Houston, and Statoil ASA of Norway.
The American Petroleum Institute reported a drop of 7.7 million barrels in crude supplies for the week ended Jan. 5. The Energy Department had reported a decline of 5 million. Motor gasoline supplies were up 8.6 million barrels, the API said, vs. the government's reported rise of 3.8 million. Distillate supplies rose 4 million barrels, the API said, compared with the 5.4 million-barrel climb reported by the government.
Merrill Lynch & Co. analysts Francisco Blanch, Sabine Schels and Gustavo Soares said in a report Tuesday that mild temperatures in the Northeast reduced oil demand by 80,000 barrels a day in December and 90,000 this month.
The Northeast is the world's largest market for heating oil.
The U.S. trade gap with China reached $214bn in November, shattering the 2005 annual record of $202bn and putting the total on track to exceed $230bn.
Chevron Corp. warned that lower commodity prices and a decline in production and refining margins will hurt fourth-quarter earnings. The company sold crude oil at an average price of $52.26 a barrel in the December quarter, down from $63.98 in the third quarter and $52.87 in the final three months of 2005. During the fourth quarter, the average spot price for benchmark crude fell to $60.06 from $70.56 in the third quarter. Realized natural-gas prices fell to $5.42 per thousand cubic feet in the fourth quarter, a sequential decline from $5.92 and nearly half of the $10.22 that Chevron said it generated in the fourth quarter of 2005.
February crude fell $1.62, or 2.9%, to close at $54.02 a barrel Wednesday. February natural gas climbed 12.4 cents to close at $6.755 per million British thermal units.
February gold fell $1.60 to close at $613.40 an ounce in New York Wednesday. March silver lost 15 cents to end the day at $12.445 an ounce, but March copper added 10.8 cents, or 4.2%, to finish at $2.664 a pound.
10-year Treasury ended down 5/32 at 99-18/32 to yield 4.681%.
For the first time, an oil company wants to revive a Norwegian offshore oil field that had been closed as unprofitable, the Oil Ministry announced Tuesday.
The Yme oil field off southern Norway produced about 60 million barrels of oil during five years of production. However, in 2001, the state-controlled oil company Statoil ASA abandoned the field, due to low crude oil prices and high water content in the wells. Talisman Energy Inc. took over Yme's operatorship, and presented a plan to the government Tuesday for restarting the field, based on high crude prices and new technology. It hopes the 4 billion kroner ($635 million, euro487 million) project will produce another 60 million barrels of oil over 10 years starting in 2009.
Gannett Co. Inc., McClatchy Co. and Tribune Co. plan to sell advertising jointly on their Web sites in a bid to capture more online revenue as circulation slips.
The companies plan to offer advertisers one-stop shopping for display ads on Internet sites, a spokeswoman for Gannett said on Wednesday.
The companies are likely to contribute 10 percent of their online advertising space to the network, The Wall Street Journal reported on Wednesday.
Bronco Drilling Company, Inc. acquired Eagle Well Service, Inc. and related subsidiaries for $2.5 million in cash, 1,070,390 shares of Bronco common stock and the assumption of debt, net of working capital, estimated at approximately $3.0million. The purchase will include 31 workover rigs, 24 of which are currently Theworking. The remaining 7 rigs will be deployed periodically over the coming monthswith all 31 expected to be active by the end of the second quarter of 2007. Eagle currently operates in Oklahoma, Texas, Kansas, and New Mexico...Frank Harrison, Bronco's Chief Executive Officer, said, "Historic levels of drilling activity have served as a catalyst for expanding demand for well services. We anticipate this acquisition will be immediately accretive and allows Bronco to capitalize on service demand that is not tied directly to the drill bit. This is the first step in executing our diversification strategy. We believe the well services business is a natural complement to ours and an entree into more mid-to-late cycle assets that could provide insulation from cyclicality. Eagle is a company that has been around for more than fifty years and has a terrific operational reputation and strong customer base. We are extremely pleased that Kim Snell, majority owner, will join the Bronco team and participate in the continued growth of our Company."
International Aluminum Corp. agreed to be acquired by Genstar Capital, a San Francisco-based private equity firm, for roughly $228 million. Genstar said the deal values International Aluminum at $53 per share, compared to Tuesday's close at $50.
Business confidence in the European Union has overtaken optimism in the US for the first time in five years, according to a survey published on Wednesday by the professional services firm Grant Thornton.
US Airways Group Inc. said on Wednesday it raised its takeover offer for larger bankrupt rival Delta Air Lines Inc. to $10.2 billion in cash and stock.
The new bid offers $5 billion in cash and 89.5 million US Airways shares. The original offer, made in November and rejected by Delta last month, was for $4 billion and 78.5 million US Airways shares.
US Airways said the offer would expire on February 1, unless it gets support from Delta creditors to perform due diligence and postpone a February 7 hearing that would start the voting on Delta's stand-alone plan.
Northwest Airlines Corp. and Delta Air Lines Inc. have held recurring talks regarding a potential link-up of the carriers after they emerge from bankruptcy-court protection, according to a media report on Wednesday.
The U.S. trade deficit shrank 1 percent to $58.2 billion. Despite the slight monthly narrowing, the trade gap through the end of November totaled $701.6 billion, keeping it on track to set a new annual record for 2006.
AccuWeather.com Chief Long-Range Forecaster Joe Bastardi believes that if the weather pattern reaches its full potential, the dramatic change from warmth to cold could result in "one of the top-five coldest 30-day stretches in the past half century."
Belarus said a compromise had been found to resume exports of Russian crude to Europe via the Druzhba pipeline following a trade row. Belarus said it had scrapped transit tariffs on Russian crude. Moscow has yet to confirm the deal.
Inventories at U.S. wholesalers jumped 1.3% in November, the Commerce Department said Wednesday.
Kodak agreed to sell its health-imaging business, which sells X-ray films and medical printers, to Canada's Onex for up to $2.55 billion.
China's trade surplus in goods expanded 74% in 2006.
Venezuela's plan to nationalize four multibillion-dollar crude oil projects could impede investment in the OPEC member nation and hinder its ability to boost production, the chief economist of the International Energy Agency said Wednesday.
Venezuelan President Hugo Chavez said Monday that Orinoco heavy crude projects would become state property, just after ordering the nationalization of his country's biggest telephone company. Oil projects in the Orinoco Belt have so far attracted $17 billion in investment by foreign oil companies, more than any other part of the country. About 600,000 barrels a day are produced from its tar-like deposits, which are easy to find and expensive to extract. Companies with investments in the basin include Irving, Texas-based Exxon Mobil; BP Plc; Chevron Corp. of San Ramon, California; and Total SA of France. Other investors include ConocoPhillips, based in Houston, and Statoil ASA of Norway.
The American Petroleum Institute reported a drop of 7.7 million barrels in crude supplies for the week ended Jan. 5. The Energy Department had reported a decline of 5 million. Motor gasoline supplies were up 8.6 million barrels, the API said, vs. the government's reported rise of 3.8 million. Distillate supplies rose 4 million barrels, the API said, compared with the 5.4 million-barrel climb reported by the government.
Merrill Lynch & Co. analysts Francisco Blanch, Sabine Schels and Gustavo Soares said in a report Tuesday that mild temperatures in the Northeast reduced oil demand by 80,000 barrels a day in December and 90,000 this month.
The Northeast is the world's largest market for heating oil.
The U.S. trade gap with China reached $214bn in November, shattering the 2005 annual record of $202bn and putting the total on track to exceed $230bn.
Chevron Corp. warned that lower commodity prices and a decline in production and refining margins will hurt fourth-quarter earnings. The company sold crude oil at an average price of $52.26 a barrel in the December quarter, down from $63.98 in the third quarter and $52.87 in the final three months of 2005. During the fourth quarter, the average spot price for benchmark crude fell to $60.06 from $70.56 in the third quarter. Realized natural-gas prices fell to $5.42 per thousand cubic feet in the fourth quarter, a sequential decline from $5.92 and nearly half of the $10.22 that Chevron said it generated in the fourth quarter of 2005.
February crude fell $1.62, or 2.9%, to close at $54.02 a barrel Wednesday. February natural gas climbed 12.4 cents to close at $6.755 per million British thermal units.
February gold fell $1.60 to close at $613.40 an ounce in New York Wednesday. March silver lost 15 cents to end the day at $12.445 an ounce, but March copper added 10.8 cents, or 4.2%, to finish at $2.664 a pound.
10-year Treasury ended down 5/32 at 99-18/32 to yield 4.681%.
For the first time, an oil company wants to revive a Norwegian offshore oil field that had been closed as unprofitable, the Oil Ministry announced Tuesday.
The Yme oil field off southern Norway produced about 60 million barrels of oil during five years of production. However, in 2001, the state-controlled oil company Statoil ASA abandoned the field, due to low crude oil prices and high water content in the wells. Talisman Energy Inc. took over Yme's operatorship, and presented a plan to the government Tuesday for restarting the field, based on high crude prices and new technology. It hopes the 4 billion kroner ($635 million, euro487 million) project will produce another 60 million barrels of oil over 10 years starting in 2009.
Tuesday, January 09, 2007
Momentum
1/10/07 Momentum
The drop in the price of crude picked up in early Tuesday morning trading with the low below $54 a barrel. This caused selling by chartists and the bearish sentiment increased. As I looked at my positions, the losses grew, and even though natural gas was holding up, the portfolio took it on the chin. It's not the first time, and I'm patient.
James Neale at Citigroup said: "The weather is forecast to remain warm for now, but this is a temporary phenomenon, and in 2007, the key to the macro will lie in non-OPEC’s ability to deliver its 1.6m-1.8m barrels a day forecast for volume growth, and in OPEC’s resolve to defend prices."
NY Post: "Goldman cut the energy portion by as much as 50 percent in some of the sub-indexes that comprise the widely followed Goldman Sachs Commodity Index, tamping down moves to buy them by large investment funds who mimic Goldman's index.
The changes took effect this month and apply for all of 2007, a Goldman spokesman said... The GSCI is influential because large institutional investors like pension funds and endowments invest according to its allocation model."
Marc Faber said global assets are poised for a ``severe correction'' and it's time to sell. "In the next few months, we could get a severe correction in all asset markets,'' Faber said in an interview with Bloomberg Television in New York. ``In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate."
From Seeking Alpha comes this from J.D. Steinhilber (Agile Investing):"We are going to take advantage of the recent sell-off in the commodity sector to re-establish a position in a diversified commodities fund. We held a position in a diversified commodities fund in our model portfolios in 2005 and the first four months of 2006, but exited the asset class on April 30, 2006. At the time, the commodities sector, particularly the energy and metals areas, had experienced a very sharp run-up and appeared over-extended and vulnerable to a lengthy period of correction and consolidation.
After exiting, we said we would look for an opportunity to re-enter the asset class at more attractive prices. With diversified commodity indexes now 10-20% lower (depending on their level of exposure to energy and industrial metals commodities, which have experienced the sharpest corrections), and with sentiment now quite nervous about the outlook and prospects for the asset class, we believe we have reached a point in time where it makes sense to re-establish a position in diversified commodities in our portfolios.
We believe that commodities are in a secular bull market that began in 2001 and will extend for several more years, due to a variety of bullish catalysts, principally including favorable supply/demand dynamics and paper currency depreciation/devaluation. Moreover, commodities are an attractive component of a diversified portfolio, due to their history of positive returns, their historic negative correlation with stocks and bonds, and the hedge against inflation they provide."
Shares of Sprint Nextel Corp. sank as much as 9% Tuesday morning after the company issued a weak forecast for 2007.
Meritage Homes Corp. said quarterly net sales orders fell 42% to 1,201 homes from a fourth-quarter record of 2,072 in the year-ago period. As a percentage of quarterly gross sales orders, cancellations rose to a record 48%, the residential builder said.
Thai stocks tumbled Tuesday after the military government announced another set of restrictions of foreign investment in the country that would reduce foreign ownership in Thai companies to less than 50%.
D.R. Horton Inc. said first-quarter net sales orders fell $900 million to $2.3 billion from $3.2 billion in the year-ago period. First-quarter cancellation rate fell to 33% from 40% in the year-ago period.
The European Union sharply criticised Russia on Tuesday for closing a pipeline supplying oil to Europe in a price dispute with Belarus and said the move hurt Moscow's reputation as a reliable energy provider. Russia has stopped crude exports through the Druzhba pipeline, halting supplies to Poland, Germany and several central European countries.
The WSJ stated that the Gap was seeking various alternatives, and had hired Goldman Sachs in this effort.
February gold rose $5.60, or 0.9%, to close at $615 an ounce Tuesday. March silver gained 23.5 cents, or 1.9%, to close at $12.595 an ounce and March copper added 2.8 cents to finish the session at $2.556 a pound.
Steve Jobs: "Apple is going to reinvent the phone," Jobs said during his keynote speech at Macworld. The iPhone will have a 3.5-inch diagonal screen and be 11.6 millimeters thick. It will sync with iTunes and have a 2 megapixel camera. The phone will use new "multi-touch" technology."
February natural gas rose 25.3 cents, or 4%, to close at $6.631 per million British thermal units in New York Tuesday. That marked the contract's strongest closing level since Dec. 22, as U.S. weather forecasts called for the return of more winter-like weather. February crude fell 45 cents to close at $55.64 a barrel; however, that was about $1.75 a barrel higher than the worst levels of the day.
The Organization of Petroleum Exporting Countries should fully implement all 1.7 million barrels a day of crude oil the group has announced it plans to cut before embarking on additional reductions, Nigerian oil minister Edmund Daukoru said Tuesday.
"Let's implement the 1.7 million fully then we'll see if there's a need for additional cuts," Edmund Daukoru told Dow Jones Newswires.
Oil Daily reported Forest Oil has agreed to acquire Houston Exploration in a cash and stock deal worth $1.5 billion. The transaction was brokered by hedge fund Jana Partners which had been prodding Houston Exploration to buy back stock and put itself up for sale.
The drop in the price of crude picked up in early Tuesday morning trading with the low below $54 a barrel. This caused selling by chartists and the bearish sentiment increased. As I looked at my positions, the losses grew, and even though natural gas was holding up, the portfolio took it on the chin. It's not the first time, and I'm patient.
James Neale at Citigroup said: "The weather is forecast to remain warm for now, but this is a temporary phenomenon, and in 2007, the key to the macro will lie in non-OPEC’s ability to deliver its 1.6m-1.8m barrels a day forecast for volume growth, and in OPEC’s resolve to defend prices."
NY Post: "Goldman cut the energy portion by as much as 50 percent in some of the sub-indexes that comprise the widely followed Goldman Sachs Commodity Index, tamping down moves to buy them by large investment funds who mimic Goldman's index.
The changes took effect this month and apply for all of 2007, a Goldman spokesman said... The GSCI is influential because large institutional investors like pension funds and endowments invest according to its allocation model."
Marc Faber said global assets are poised for a ``severe correction'' and it's time to sell. "In the next few months, we could get a severe correction in all asset markets,'' Faber said in an interview with Bloomberg Television in New York. ``In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate."
From Seeking Alpha comes this from J.D. Steinhilber (Agile Investing):"We are going to take advantage of the recent sell-off in the commodity sector to re-establish a position in a diversified commodities fund. We held a position in a diversified commodities fund in our model portfolios in 2005 and the first four months of 2006, but exited the asset class on April 30, 2006. At the time, the commodities sector, particularly the energy and metals areas, had experienced a very sharp run-up and appeared over-extended and vulnerable to a lengthy period of correction and consolidation.
After exiting, we said we would look for an opportunity to re-enter the asset class at more attractive prices. With diversified commodity indexes now 10-20% lower (depending on their level of exposure to energy and industrial metals commodities, which have experienced the sharpest corrections), and with sentiment now quite nervous about the outlook and prospects for the asset class, we believe we have reached a point in time where it makes sense to re-establish a position in diversified commodities in our portfolios.
We believe that commodities are in a secular bull market that began in 2001 and will extend for several more years, due to a variety of bullish catalysts, principally including favorable supply/demand dynamics and paper currency depreciation/devaluation. Moreover, commodities are an attractive component of a diversified portfolio, due to their history of positive returns, their historic negative correlation with stocks and bonds, and the hedge against inflation they provide."
Shares of Sprint Nextel Corp. sank as much as 9% Tuesday morning after the company issued a weak forecast for 2007.
Meritage Homes Corp. said quarterly net sales orders fell 42% to 1,201 homes from a fourth-quarter record of 2,072 in the year-ago period. As a percentage of quarterly gross sales orders, cancellations rose to a record 48%, the residential builder said.
Thai stocks tumbled Tuesday after the military government announced another set of restrictions of foreign investment in the country that would reduce foreign ownership in Thai companies to less than 50%.
D.R. Horton Inc. said first-quarter net sales orders fell $900 million to $2.3 billion from $3.2 billion in the year-ago period. First-quarter cancellation rate fell to 33% from 40% in the year-ago period.
The European Union sharply criticised Russia on Tuesday for closing a pipeline supplying oil to Europe in a price dispute with Belarus and said the move hurt Moscow's reputation as a reliable energy provider. Russia has stopped crude exports through the Druzhba pipeline, halting supplies to Poland, Germany and several central European countries.
The WSJ stated that the Gap was seeking various alternatives, and had hired Goldman Sachs in this effort.
February gold rose $5.60, or 0.9%, to close at $615 an ounce Tuesday. March silver gained 23.5 cents, or 1.9%, to close at $12.595 an ounce and March copper added 2.8 cents to finish the session at $2.556 a pound.
Steve Jobs: "Apple is going to reinvent the phone," Jobs said during his keynote speech at Macworld. The iPhone will have a 3.5-inch diagonal screen and be 11.6 millimeters thick. It will sync with iTunes and have a 2 megapixel camera. The phone will use new "multi-touch" technology."
February natural gas rose 25.3 cents, or 4%, to close at $6.631 per million British thermal units in New York Tuesday. That marked the contract's strongest closing level since Dec. 22, as U.S. weather forecasts called for the return of more winter-like weather. February crude fell 45 cents to close at $55.64 a barrel; however, that was about $1.75 a barrel higher than the worst levels of the day.
The Organization of Petroleum Exporting Countries should fully implement all 1.7 million barrels a day of crude oil the group has announced it plans to cut before embarking on additional reductions, Nigerian oil minister Edmund Daukoru said Tuesday.
"Let's implement the 1.7 million fully then we'll see if there's a need for additional cuts," Edmund Daukoru told Dow Jones Newswires.
Oil Daily reported Forest Oil has agreed to acquire Houston Exploration in a cash and stock deal worth $1.5 billion. The transaction was brokered by hedge fund Jana Partners which had been prodding Houston Exploration to buy back stock and put itself up for sale.
Monday, January 08, 2007
Voices
1/9/07 Voices
John Williams (Shadow Government Statistics): "The U.S. economy and financial markets face significant peril in 2007, with the dollar sitting on the brink of a major collapse. The positive 2006 U.S equity markets and reasonably tranquil credit markets belie the pending turmoil that already has been set in motion by a rapidly deepening inflationary recession and exacerbated by the de facto long-term insolvency of the U.S. government."
NCR hired J.P.Morgan to separate into two independent publicly traded companies through the spin-off of the company's Teradata Data Warehousing business, via a 100% tax-free spin-off to NCR shareholders.
The U.S. dollar depreciated by 0.5% in December against a trade-weighted index of 15 currencies, the Federal Reserve Bank of Atlanta reported Monday. The dollar fell 2.4% against European currencies in December and is down 10.2% against them in the past year. Against Pacific currencies, the dollar fell 1% in December and is down 5% in the past year.
Jim Lentz, executive vice president for Toyota Motor Sales (TM), said in an interview Monday that while the Japanese automaker is forecasting industry vehicle sales in the U.S. of about 16.6 million in 2007, he believes that number could fall as low as 16.3 million.
Bloomberg reported Russian oil flows to Europe were cut off by a disagreement with Belarus, the third time in as many years that energy supplies have been disrupted because of a dispute between Moscow and nations that ship its crude and gas.
The cutoff comes after Belarus introduced a transit tax in retaliation for higher charges imposed by Moscow for crude supplied to the former Soviet state. Last year a disagreement between OAO Gazprom and Ukraine lowered deliveries to Europe from the Russian natural-gas producer.
Donald Kohn: "The economy appears to be weathering the downturn in housing with limited collateral effects and inflation appears to be easing with the aid of lower energy prices, well-anchored inflation expectations, and competitive labor and product markets." Yet, he said, it's "too early to relax our concerns" about price pressures.
An old adage is the market accomodates the fewest number of people at any one time. In light of that adage, it is not surprising that, the first rally after a sharp decline, does not hold. This can be very frustrating for many value investors. The smart ones know patience is required. On Monday we saw crude rally above $57 only to stall and that fall beneath $56. For those who bought early on Friday morning it might have led to some second guessing. Again, a smart investor knows what he or she is buying.
Marathon Oil Corp. estimated fourth-quarter production sold of 355,000 barrels of oil equivalent per day. Houston-based Marathon also estimated oil and gas production available for sale in the fourth quarter of 360,000 boepd, within the company's previously forecasted range. The company stated market indicators for refining margins (crack spreads) in the Midwest (Chicago) and Gulf Coast were weaker during the fourth quarter 2006, when compared with the fourth quarter 2005. In addition, crude oil prices decreased more significantly in the fourth quarter 2005 than they did during the fourth quarter 2006. Based on these indicators and other company specific information, the Company projects its refining and wholesale marketing gross margin per gallon during the fourth quarter of 2006 will be approximately 25 percent lower than the fourth quarter 2005. The Company continued its $2 billion share repurchase program during the quarter, reducing the quarterly average diluted share count to an estimated 354 million common shares outstanding for the period. The Company purchased approximately 6.3 million shares of its common stock during the fourth quarter, at a cost of approximately $550 million. At year-end 2006, the Company has repurchased almost 21 million shares at a total cost of approximately $1.7 billion.
According to Daily FX, average daily volume in the global foreign exchanges could rise above a much-hyped $3 trillion this year, more than 50 per cent up from three years ago and dwarfing volumes in other financial markets.
International air freight, a key indicator of world trade health, grew by 3.1 per cent in November after its poorest performance in a year in October, the airline industry body IATA said. Despite the improvement against the 2.3 per cent growth the previous month, the November figure -- calculated against the total for the same month in 2005 -- showed the air freight business was still sluggish, IATA said.
Growth for the January-November period was running at 4.8 per cent over the same period in 2005, it reported.
"In the next several decades, 2040 to 2050, it will be very difficult to lessen our addiction to oil, but we may lessen it a little," said Fatih Birol, chief economist at the International Energy Agency, adviser to industrialised countries.
The IEA's 2006 World Energy Outlook to 2030 foresees ever-rising oil demand led by Asia met by a dwindling band of major producers, mainly in the Middle East.
World consumption would hit 116 million barrels per day (bpd) by 2030 or 103 million bpd if governments adopt policies to curb use -- in either case, up from 84 million bpd in 2005.
Ed McCarthy: "We are perhaps in the 1st quarter of the residential downturn. That quarter usually sees the first signs of slippage give way to a market “FREEZE” where foreclosures are not yet hitting comparable with auction numbers, and sellers still have Kudlow type sugarplums rather than reality dancing in their heads. A wild prediction, the eventual residential downturn will approach the Texas 1980’s or the New York 1974-5’s. Maybe worse!"
The European Central Bank and the U.S. Federal Reserve may have to raise interest rates once more to keep inflation in check, International Monetary Fund Managing Director Rodrigo Rato was quoted on Monday as saying.
February gold rose $2.50 to close at $609.40 an ounce in New York Monday. March silver closed at $12.36 an ounce, up 13 cents, or 1.1%, for the session. March copper fell by 0.7 cent to close at $2.528 a pound.
Byron Wien: "Despite a world-wide economic slowdown, crude oil remains in short supply because of Asian demand and the price per barrel returns to $80. Development of alternative sources of energy and sales of hybrid cars remain disappointing. There is a movement in Congress to encourage the construction of nuclear powered electric utility plants and local resistance seems to be softening as the "green wave" starts to take hold."
John Williams (Shadow Government Statistics): "The U.S. economy and financial markets face significant peril in 2007, with the dollar sitting on the brink of a major collapse. The positive 2006 U.S equity markets and reasonably tranquil credit markets belie the pending turmoil that already has been set in motion by a rapidly deepening inflationary recession and exacerbated by the de facto long-term insolvency of the U.S. government."
NCR hired J.P.Morgan to separate into two independent publicly traded companies through the spin-off of the company's Teradata Data Warehousing business, via a 100% tax-free spin-off to NCR shareholders.
The U.S. dollar depreciated by 0.5% in December against a trade-weighted index of 15 currencies, the Federal Reserve Bank of Atlanta reported Monday. The dollar fell 2.4% against European currencies in December and is down 10.2% against them in the past year. Against Pacific currencies, the dollar fell 1% in December and is down 5% in the past year.
Jim Lentz, executive vice president for Toyota Motor Sales (TM), said in an interview Monday that while the Japanese automaker is forecasting industry vehicle sales in the U.S. of about 16.6 million in 2007, he believes that number could fall as low as 16.3 million.
Bloomberg reported Russian oil flows to Europe were cut off by a disagreement with Belarus, the third time in as many years that energy supplies have been disrupted because of a dispute between Moscow and nations that ship its crude and gas.
The cutoff comes after Belarus introduced a transit tax in retaliation for higher charges imposed by Moscow for crude supplied to the former Soviet state. Last year a disagreement between OAO Gazprom and Ukraine lowered deliveries to Europe from the Russian natural-gas producer.
Donald Kohn: "The economy appears to be weathering the downturn in housing with limited collateral effects and inflation appears to be easing with the aid of lower energy prices, well-anchored inflation expectations, and competitive labor and product markets." Yet, he said, it's "too early to relax our concerns" about price pressures.
An old adage is the market accomodates the fewest number of people at any one time. In light of that adage, it is not surprising that, the first rally after a sharp decline, does not hold. This can be very frustrating for many value investors. The smart ones know patience is required. On Monday we saw crude rally above $57 only to stall and that fall beneath $56. For those who bought early on Friday morning it might have led to some second guessing. Again, a smart investor knows what he or she is buying.
Marathon Oil Corp. estimated fourth-quarter production sold of 355,000 barrels of oil equivalent per day. Houston-based Marathon also estimated oil and gas production available for sale in the fourth quarter of 360,000 boepd, within the company's previously forecasted range. The company stated market indicators for refining margins (crack spreads) in the Midwest (Chicago) and Gulf Coast were weaker during the fourth quarter 2006, when compared with the fourth quarter 2005. In addition, crude oil prices decreased more significantly in the fourth quarter 2005 than they did during the fourth quarter 2006. Based on these indicators and other company specific information, the Company projects its refining and wholesale marketing gross margin per gallon during the fourth quarter of 2006 will be approximately 25 percent lower than the fourth quarter 2005. The Company continued its $2 billion share repurchase program during the quarter, reducing the quarterly average diluted share count to an estimated 354 million common shares outstanding for the period. The Company purchased approximately 6.3 million shares of its common stock during the fourth quarter, at a cost of approximately $550 million. At year-end 2006, the Company has repurchased almost 21 million shares at a total cost of approximately $1.7 billion.
According to Daily FX, average daily volume in the global foreign exchanges could rise above a much-hyped $3 trillion this year, more than 50 per cent up from three years ago and dwarfing volumes in other financial markets.
International air freight, a key indicator of world trade health, grew by 3.1 per cent in November after its poorest performance in a year in October, the airline industry body IATA said. Despite the improvement against the 2.3 per cent growth the previous month, the November figure -- calculated against the total for the same month in 2005 -- showed the air freight business was still sluggish, IATA said.
Growth for the January-November period was running at 4.8 per cent over the same period in 2005, it reported.
"In the next several decades, 2040 to 2050, it will be very difficult to lessen our addiction to oil, but we may lessen it a little," said Fatih Birol, chief economist at the International Energy Agency, adviser to industrialised countries.
The IEA's 2006 World Energy Outlook to 2030 foresees ever-rising oil demand led by Asia met by a dwindling band of major producers, mainly in the Middle East.
World consumption would hit 116 million barrels per day (bpd) by 2030 or 103 million bpd if governments adopt policies to curb use -- in either case, up from 84 million bpd in 2005.
Ed McCarthy: "We are perhaps in the 1st quarter of the residential downturn. That quarter usually sees the first signs of slippage give way to a market “FREEZE” where foreclosures are not yet hitting comparable with auction numbers, and sellers still have Kudlow type sugarplums rather than reality dancing in their heads. A wild prediction, the eventual residential downturn will approach the Texas 1980’s or the New York 1974-5’s. Maybe worse!"
The European Central Bank and the U.S. Federal Reserve may have to raise interest rates once more to keep inflation in check, International Monetary Fund Managing Director Rodrigo Rato was quoted on Monday as saying.
February gold rose $2.50 to close at $609.40 an ounce in New York Monday. March silver closed at $12.36 an ounce, up 13 cents, or 1.1%, for the session. March copper fell by 0.7 cent to close at $2.528 a pound.
Byron Wien: "Despite a world-wide economic slowdown, crude oil remains in short supply because of Asian demand and the price per barrel returns to $80. Development of alternative sources of energy and sales of hybrid cars remain disappointing. There is a movement in Congress to encourage the construction of nuclear powered electric utility plants and local resistance seems to be softening as the "green wave" starts to take hold."
Sunday, January 07, 2007
Happenings
1/8/07 Happenings
Israel has drawn up secret plans to destroy Iran's uranium-enrichment facilities with tactical nuclear weapons, London's Sunday Times newspaper reported, citing military sources. Two Israeli air force squadrons are training to blow up an Iranian facility using low-yield nuclear "bunker-busters," several Israeli military sources told the newspaper. Under the plans, conventional laser-guided bombs would open "tunnels" into the targets. "Mini-nukes" would then immediately be fired, exploding deep underground to reduce the risk of radioactive fallout, the paper reported. Israel denied the story.
The headlines focus on Iraq, but Afghanistan is a growing story. One of our generals stated that, the gains achieved by us over the last several years, are quickly evaporating as the Taliban grow in number and gain additional strongholds.
This morning crude rallied over the $57 a barrel level and natural gas gained as well. Possibly, just as important, was the action taken by GE, a savvy buyer.
General Electric Co. said on Monday that it will buy Vetco Gray, a Houston-based oil and gas fields equipment supplier, for roughly $1.9 billion as it expands its presence in the oil and gas industry.
Vetco is expected to generate more than $1.6 billion in sales in 2006, GE said. The company has 5,000 employees in more than 30 countries, with key centers in Houston in the U.S., Aberdeen in the UK, Stavanger and Oslo in Norway and Singapore, GE added. You might recall that I believe 2007 will mark an active period for oil and gas mergers.
Caremark Rx said late on Sunday it had rejected a roughly $26 billion takeover bid from rival Express Scripts, saying it favored an offer of about $22.2 billion from drugstore chain CVS Corp.
Global economic growth this year may well be close to that of 2006, European Central Bank President Jean-Claude Trichet said Monday.
United Surgical Partners said it was being acquired by Welsh, Carson, Anderson & Stowe affiliate UNCN Acquisition Corp. for $1.8 billion in cash and debt. UNCN will pay $31.05 a share for each United Surgical share outstanding.
A greater number of drilling rigs were in operation worldwide seeking oil and natural gas last month, Baker Hughes Inc. said. The global rig count for December was 3,125, up 48 from 3,077 counted in November and up 132 from 2,993 in December 2005.
Saudi Arabia will fully implement production cuts agreed in previous meetings of the Organization of Petroleum Exporting Countries. That would mean a cut of 158,000 barrels of oil a day starting in February, in addition to the 380,000 barrels a day cut the country agreed to in November.
Israel has drawn up secret plans to destroy Iran's uranium-enrichment facilities with tactical nuclear weapons, London's Sunday Times newspaper reported, citing military sources. Two Israeli air force squadrons are training to blow up an Iranian facility using low-yield nuclear "bunker-busters," several Israeli military sources told the newspaper. Under the plans, conventional laser-guided bombs would open "tunnels" into the targets. "Mini-nukes" would then immediately be fired, exploding deep underground to reduce the risk of radioactive fallout, the paper reported. Israel denied the story.
The headlines focus on Iraq, but Afghanistan is a growing story. One of our generals stated that, the gains achieved by us over the last several years, are quickly evaporating as the Taliban grow in number and gain additional strongholds.
This morning crude rallied over the $57 a barrel level and natural gas gained as well. Possibly, just as important, was the action taken by GE, a savvy buyer.
General Electric Co. said on Monday that it will buy Vetco Gray, a Houston-based oil and gas fields equipment supplier, for roughly $1.9 billion as it expands its presence in the oil and gas industry.
Vetco is expected to generate more than $1.6 billion in sales in 2006, GE said. The company has 5,000 employees in more than 30 countries, with key centers in Houston in the U.S., Aberdeen in the UK, Stavanger and Oslo in Norway and Singapore, GE added. You might recall that I believe 2007 will mark an active period for oil and gas mergers.
Caremark Rx said late on Sunday it had rejected a roughly $26 billion takeover bid from rival Express Scripts, saying it favored an offer of about $22.2 billion from drugstore chain CVS Corp.
Global economic growth this year may well be close to that of 2006, European Central Bank President Jean-Claude Trichet said Monday.
United Surgical Partners said it was being acquired by Welsh, Carson, Anderson & Stowe affiliate UNCN Acquisition Corp. for $1.8 billion in cash and debt. UNCN will pay $31.05 a share for each United Surgical share outstanding.
A greater number of drilling rigs were in operation worldwide seeking oil and natural gas last month, Baker Hughes Inc. said. The global rig count for December was 3,125, up 48 from 3,077 counted in November and up 132 from 2,993 in December 2005.
Saudi Arabia will fully implement production cuts agreed in previous meetings of the Organization of Petroleum Exporting Countries. That would mean a cut of 158,000 barrels of oil a day starting in February, in addition to the 380,000 barrels a day cut the country agreed to in November.
Saturday, January 06, 2007
The Horizon
1/7/08 The Horizon
John Mauldin: "If we do get a mild recession and a correction in the stock market back to lower than trend valuations, I expect to finally turn selectively bullish on stocks. I am really looking forward to that...That being said, for all the reasons I haven outlined in this letter over the past few months - the inverted yield curve, the leading economic indicators, a housing recession, pressure on the consumer and more - I think we see the Goldilocks Recession in 2007. We will see. Stay tuned."
Tom Au: "In essence, the Chinese are doing to the Americans what the barbarians did to Rome; absorbing their more advanced culture and diffusing it among their larger population to produce a nominally stronger entity."
Doug Noland: " It is the nature of Credit and Economic Bubble imbalances, disparities and asset price inflation to keep policymakers confused, unassured, hesitant, and, in the end, accommodative. I find it rather astounding that some are today calling for the Fed to soon initiate an easing cycle. This would be an enormous mistake, one I don’t expect the Fed to be in any hurry to make. Unrelenting Financial Sphere excesses today pose by far the greatest systemic risk. To what extent the Fed and global central bankers recognize this reality may very well be The Key Issue for 2007. The Fed and the markets are in an especially tenuous position if the Bernanke Fed actually attempts to wrest some control of “money,” Credit and the entire financial system back from Wall Street and the speculator community. Ditto if foreign central bankers dare enter the fray."
"Uncertainty surrounding telecom industry consolidation led to lower
than expected revenue in North America during the fourth quarter," said
Krish A. Prabhu, Tellabs president and chief executive officer. "We expect
the revenue impact to be temporary since, as 2007 begins, our customers
continue to see growing user demand for bandwidth. Tellabs remains
well-positioned to benefit from this."
Iran's state oil refining company is in talks with India's Essar Group to build a new refinery in southern Iran, officials said, part of Tehran's $18 bln-drive to meet soaring domestic fuel demand, Reuters reported.
The estimated $2 bln-plus investment in a new 300,000 barrel per day (bpd) plant to process Iran's heavy crude would give the OPEC member's stagnant refining sector a boost and give Essar a foothold in the oil-rich but politically sensitive country, where it is already in talks over a steel plant.
As I have often stated, sanctions do not work. By their very nature, they are doomed to failure.
The New York Mercantile Exchange Inc. announced margin changes for its crude oil and related futures contracts, beginning at the close of business on Monday, the exchange said on Friday.
Margins for the crude oil, crude oil calendar swap, and crude oil financial futures contracts will increase to $3,000 from $2,500 for clearing members, to $3,300 from $2,750 for members, and to $4,050 from $3,375 for customers, the NYMEX said in a release.
Margins for the NYMEX miNY crude oil futures contract will increase to $1,500 from $1,250 for clearing members, to $1,650 from $1,375 for members, and to $2,025 from $1,688 for customers.
Australian based research organisation Resource Capital Research, which specialises primarily in the uranium sector among other minerals resources, has predicted spot uranium oxide prices rising to $115 a pound during 2007.
According to RCR’s latest quarterly review of the market, analyst John Wilson states: “Forward indicators suggest the uranium price is heading to US$90/lb by mid 2007, an increase of 37% from the current spot price [of $65 an ounce when the report was written]; and US$115/lb by September 2008, an increase of 75% over the current spot price. These price levels are revised up from our September uranium quarterly which indicated a uranium price of US$60/lb (+ 50%) May 2007 and US$88/lb (+31%) by late 2008. The upward revisions are largely driven by the expected impact to the uranium market of delays at the Cigar Lake project (Cameco) in Canada.” The current price is about $72 a pound.
John Mauldin: "If we do get a mild recession and a correction in the stock market back to lower than trend valuations, I expect to finally turn selectively bullish on stocks. I am really looking forward to that...That being said, for all the reasons I haven outlined in this letter over the past few months - the inverted yield curve, the leading economic indicators, a housing recession, pressure on the consumer and more - I think we see the Goldilocks Recession in 2007. We will see. Stay tuned."
Tom Au: "In essence, the Chinese are doing to the Americans what the barbarians did to Rome; absorbing their more advanced culture and diffusing it among their larger population to produce a nominally stronger entity."
Doug Noland: " It is the nature of Credit and Economic Bubble imbalances, disparities and asset price inflation to keep policymakers confused, unassured, hesitant, and, in the end, accommodative. I find it rather astounding that some are today calling for the Fed to soon initiate an easing cycle. This would be an enormous mistake, one I don’t expect the Fed to be in any hurry to make. Unrelenting Financial Sphere excesses today pose by far the greatest systemic risk. To what extent the Fed and global central bankers recognize this reality may very well be The Key Issue for 2007. The Fed and the markets are in an especially tenuous position if the Bernanke Fed actually attempts to wrest some control of “money,” Credit and the entire financial system back from Wall Street and the speculator community. Ditto if foreign central bankers dare enter the fray."
"Uncertainty surrounding telecom industry consolidation led to lower
than expected revenue in North America during the fourth quarter," said
Krish A. Prabhu, Tellabs president and chief executive officer. "We expect
the revenue impact to be temporary since, as 2007 begins, our customers
continue to see growing user demand for bandwidth. Tellabs remains
well-positioned to benefit from this."
Iran's state oil refining company is in talks with India's Essar Group to build a new refinery in southern Iran, officials said, part of Tehran's $18 bln-drive to meet soaring domestic fuel demand, Reuters reported.
The estimated $2 bln-plus investment in a new 300,000 barrel per day (bpd) plant to process Iran's heavy crude would give the OPEC member's stagnant refining sector a boost and give Essar a foothold in the oil-rich but politically sensitive country, where it is already in talks over a steel plant.
As I have often stated, sanctions do not work. By their very nature, they are doomed to failure.
The New York Mercantile Exchange Inc. announced margin changes for its crude oil and related futures contracts, beginning at the close of business on Monday, the exchange said on Friday.
Margins for the crude oil, crude oil calendar swap, and crude oil financial futures contracts will increase to $3,000 from $2,500 for clearing members, to $3,300 from $2,750 for members, and to $4,050 from $3,375 for customers, the NYMEX said in a release.
Margins for the NYMEX miNY crude oil futures contract will increase to $1,500 from $1,250 for clearing members, to $1,650 from $1,375 for members, and to $2,025 from $1,688 for customers.
Australian based research organisation Resource Capital Research, which specialises primarily in the uranium sector among other minerals resources, has predicted spot uranium oxide prices rising to $115 a pound during 2007.
According to RCR’s latest quarterly review of the market, analyst John Wilson states: “Forward indicators suggest the uranium price is heading to US$90/lb by mid 2007, an increase of 37% from the current spot price [of $65 an ounce when the report was written]; and US$115/lb by September 2008, an increase of 75% over the current spot price. These price levels are revised up from our September uranium quarterly which indicated a uranium price of US$60/lb (+ 50%) May 2007 and US$88/lb (+31%) by late 2008. The upward revisions are largely driven by the expected impact to the uranium market of delays at the Cigar Lake project (Cameco) in Canada.” The current price is about $72 a pound.
Friday, January 05, 2007
The Good, The Bad, And The Ugly
1/6/06 The Good, The Bad, And The Ugly
Payroll employment rose by 167,000 in December, and the unemployment rate was unchanged at 4.5 percent. In 2006, payroll employment increased by 1.8 million, or an average of 153,000 per month. Average hourly earnings increased by 8 cents, or 0.5 percent or 4.2% for all of 2006.
Employment in professional and business services rose by 50,000 in December. Over the year, this industry has added 420,000 jobs.
Health care continued to add jobs, with a gain of 31,000 in December and 324,000 over the year.
In December, employment in food services and drinking places expanded by 23,000; job gains for 2006 totaled 304,000.
Over the year, transportation and warehousing employment increased by 106,000.
Mining employment trended up in December. Over the year, employment in mining has grown by 54,000, or 9 percent, mainly in support activities.
In sum, December service jobs rose by 178,000 and manufacturing fell by 12,000. November was revised upward to 154,000 jobs from 132,000. Good weather certainly helped the December job market because more construction workers were able to continue in their jobs.
On Friday, in very early morning hours trading, oil briefly broke the $55 level on the downside- to roughly the low hit in mid-December of 54.86. Crude was able to bounce off that level to close at $56.13.
February gold closed at an over two-month low of $606.90 an ounce Friday. It was down $19.30 for the session to tally a loss of $31.10, or 4.9%, for the holiday-shortened week. March silver closed at $12.23 an ounce, down 60.5 cents, or 4.7%, for the session and down 5.5% from last Friday's closing level. March copper fell 6.7 cents to end at $2.535 a pound, losing 11.7% for the week. In all, it was an ugly week for several commodities. Looking back, I think we'll discover heavy margin liquidation as well as pressure from shorting.
The Treasury market took it on chin from the strong employment report and we saw the yield on the 2-year rise to 4.79%, the 10-year to 4.68%, and the 30-year to 4.77%.
As is frequently the case in January, the U.S. dollar index found some support and it rose to 84.50+.
Motorola issued a warning for the quarter and the stock got hit by as much as 2 1/2 points to just above $18.
President Bush has quietly claimed sweeping new powers to open Americans' mail without a judge's warrant, the New York Daily News has learned.
The president asserted his new authority when he signed a postal reform bill into law on Dec. 20. Bush then issued a "signing statement" that declared his right to open people's mail under emergency conditions.
That claim is contrary to existing law and contradicted the bill he had just signed, say experts who have reviewed it.
Bush's move came during the winter congressional recess and a year after his secret domestic electronic eavesdropping program was first revealed. It caught Capitol Hill by surprise.
You may believe we live in a democracy. I prefer to state we have a democracy with a dictator and vice-dictator at the helm. It can only end badly.
Milton Friedman: "Inflation is the one form of taxation that can be imposed without legislation.”
Payroll employment rose by 167,000 in December, and the unemployment rate was unchanged at 4.5 percent. In 2006, payroll employment increased by 1.8 million, or an average of 153,000 per month. Average hourly earnings increased by 8 cents, or 0.5 percent or 4.2% for all of 2006.
Employment in professional and business services rose by 50,000 in December. Over the year, this industry has added 420,000 jobs.
Health care continued to add jobs, with a gain of 31,000 in December and 324,000 over the year.
In December, employment in food services and drinking places expanded by 23,000; job gains for 2006 totaled 304,000.
Over the year, transportation and warehousing employment increased by 106,000.
Mining employment trended up in December. Over the year, employment in mining has grown by 54,000, or 9 percent, mainly in support activities.
In sum, December service jobs rose by 178,000 and manufacturing fell by 12,000. November was revised upward to 154,000 jobs from 132,000. Good weather certainly helped the December job market because more construction workers were able to continue in their jobs.
On Friday, in very early morning hours trading, oil briefly broke the $55 level on the downside- to roughly the low hit in mid-December of 54.86. Crude was able to bounce off that level to close at $56.13.
February gold closed at an over two-month low of $606.90 an ounce Friday. It was down $19.30 for the session to tally a loss of $31.10, or 4.9%, for the holiday-shortened week. March silver closed at $12.23 an ounce, down 60.5 cents, or 4.7%, for the session and down 5.5% from last Friday's closing level. March copper fell 6.7 cents to end at $2.535 a pound, losing 11.7% for the week. In all, it was an ugly week for several commodities. Looking back, I think we'll discover heavy margin liquidation as well as pressure from shorting.
The Treasury market took it on chin from the strong employment report and we saw the yield on the 2-year rise to 4.79%, the 10-year to 4.68%, and the 30-year to 4.77%.
As is frequently the case in January, the U.S. dollar index found some support and it rose to 84.50+.
Motorola issued a warning for the quarter and the stock got hit by as much as 2 1/2 points to just above $18.
President Bush has quietly claimed sweeping new powers to open Americans' mail without a judge's warrant, the New York Daily News has learned.
The president asserted his new authority when he signed a postal reform bill into law on Dec. 20. Bush then issued a "signing statement" that declared his right to open people's mail under emergency conditions.
That claim is contrary to existing law and contradicted the bill he had just signed, say experts who have reviewed it.
Bush's move came during the winter congressional recess and a year after his secret domestic electronic eavesdropping program was first revealed. It caught Capitol Hill by surprise.
You may believe we live in a democracy. I prefer to state we have a democracy with a dictator and vice-dictator at the helm. It can only end badly.
Milton Friedman: "Inflation is the one form of taxation that can be imposed without legislation.”
Thursday, January 04, 2007
Volatility
1/5/06 Volatility
The ISM nonmanufacturing index fell to 57.1% from 58.9% in November. The new orders index dropped to 54.4% from 57.1%. The prices paid index rose to 59.1% from 55.6%.
The National Association of Realtors reported Thursday that the pending home sales index fell to 107.0 November from 107.5 in October. The index is based on sales contracts for existing homes signed in November. The pending sales index is down 11.4% from November 2005.
Excluding transportation, orders for U.S. goods fell by 0.5% in November. Orders for durable goods rose 1.6% in November, down from the 1.9% estimated by the government a week ago. Orders for nondurables, meanwhile, were flat.
The McCormick Tribune Foundation, which owns 11.7% of Tribune shares, and the Cantigny Foundation, which owns 1.4%, hired the Blackstone Group to help them consider various alternatives related to their stakes in Tribune, which is currently exploring a possible sale of some or all of its assets. The McCormick Tribune Foundation said in a regulatory filing Thursday that it has signed a non-disclosure agreement under which Tribune will provide it with certain financial information not available to the public. The information will be helpful to the foundation as it ponders its next move, it said. The foundations are considering a ``wide range of options'' that include a bid, said Joseph A. Hays, a spokesman for the McCormick foundation, which was set up in 1955 after the death of former Tribune chairman Robert McCormick. The foundation ``must look at its options to protect and enhance the holdings it has.''Meanwhile, the Financial Times stated the Tribune Company has a mid-January deadline for bids for the company.
ConocoPhillips said it experienced "significantly lower" worldwide refining and marketing margins in the fourth quarter compared to the third quarter. It also said its midstream and chemicals results are expected to be lower in the fourth quarter than in the third quarter.
The number of workers filing for state unemployment benefits for the first time rose by 10,000 to 329,000 in the week ended Dec. 30, the highest amount since Nov. 25. The number of former workers continuing to receive state unemployment checks fell 76,000 to 2.44 million in the week ending Dec. 23. This is the lowest level since the week ended Nov. 11. The four-week average of continuing claims fell 16,000 to 2.48 million, the lowest level since Dec. 2.
Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass., said retailers were forced to mark down heavily to bring in sales.
"Clearly, this was a promotional Christmas," he said. "Consumers clearly waited until the last minute."
Talking about the oil service sector, Cramer stated "We have way too many of these companies, and I have to believe that there could be major merger activity. Remember, that's what Halliburton's CEO told me as recently as last month." Cramer's #3 value buy for 2007 is Halliburton, which he owns for his charitable trust. My number one value play for 2007 is BJ Services. You probably want to commit me in that the stock made a new 52-week low and I look really stupid. We'll have to see how things sort out by year-end. Last January the stock sold at a new 52-week high of $42. In the interim, earnings and revenues are sharply higher.
The American Petroleum Institute reported a rise of 1.7 million barrels in crude supplies for the week ended Dec. 29. The Energy Department had reported a decline of 1.3 million. Motor gasoline supplies were up 6.7 million barrels, the API said, vs. the government's reported rise of 5.6 million. Distillate supplies rose 5.3 million barrels, the API said, compared with the 2 million-barrel climb reported by the government.
Recently, the VIX has moved from the just below the 10 level to a bit below the 12 level, and that historically remains very low.
Wal-Mart Stores Inc. said Thursday that strong sales of electronics, groceries and pharmacy items led to better-than-expected same-store sales in December.
February crude fell $2.73 to close at $55.59 a barrel -- the contract's weakest closing level in 19 months. The contract has lost more than 9% in two sessions. February natural gas closed nearly unchanged at $6.162 per million British thermal units.
February gold fell $3.60 to close at $626.20 an ounce in New York Thursday. March copper fell by 4.7 cents to end at $2.602 a pound, but March silver added 16.5 cents to close at $12.835 an ounce.
Lester Brown, founder of the Earth Policy Institute, a Washington-based environmental think tank, warned that nearly twice as much corn as the government has estimated will be needed from the 2008 harvest to feed the ethanol plants that will be online by then. He blamed the lag on the failure of industry trade groups to keep up with development of ethanol plants.
President Ford: "Our inflation, our public enemy number one, will, unless whipped, destroy our country, our homes, our liberties, our property and finally our national pride as surely as will an well-armed wartime enemy."
The ISM nonmanufacturing index fell to 57.1% from 58.9% in November. The new orders index dropped to 54.4% from 57.1%. The prices paid index rose to 59.1% from 55.6%.
The National Association of Realtors reported Thursday that the pending home sales index fell to 107.0 November from 107.5 in October. The index is based on sales contracts for existing homes signed in November. The pending sales index is down 11.4% from November 2005.
Excluding transportation, orders for U.S. goods fell by 0.5% in November. Orders for durable goods rose 1.6% in November, down from the 1.9% estimated by the government a week ago. Orders for nondurables, meanwhile, were flat.
The McCormick Tribune Foundation, which owns 11.7% of Tribune shares, and the Cantigny Foundation, which owns 1.4%, hired the Blackstone Group to help them consider various alternatives related to their stakes in Tribune, which is currently exploring a possible sale of some or all of its assets. The McCormick Tribune Foundation said in a regulatory filing Thursday that it has signed a non-disclosure agreement under which Tribune will provide it with certain financial information not available to the public. The information will be helpful to the foundation as it ponders its next move, it said. The foundations are considering a ``wide range of options'' that include a bid, said Joseph A. Hays, a spokesman for the McCormick foundation, which was set up in 1955 after the death of former Tribune chairman Robert McCormick. The foundation ``must look at its options to protect and enhance the holdings it has.''Meanwhile, the Financial Times stated the Tribune Company has a mid-January deadline for bids for the company.
ConocoPhillips said it experienced "significantly lower" worldwide refining and marketing margins in the fourth quarter compared to the third quarter. It also said its midstream and chemicals results are expected to be lower in the fourth quarter than in the third quarter.
The number of workers filing for state unemployment benefits for the first time rose by 10,000 to 329,000 in the week ended Dec. 30, the highest amount since Nov. 25. The number of former workers continuing to receive state unemployment checks fell 76,000 to 2.44 million in the week ending Dec. 23. This is the lowest level since the week ended Nov. 11. The four-week average of continuing claims fell 16,000 to 2.48 million, the lowest level since Dec. 2.
Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass., said retailers were forced to mark down heavily to bring in sales.
"Clearly, this was a promotional Christmas," he said. "Consumers clearly waited until the last minute."
Talking about the oil service sector, Cramer stated "We have way too many of these companies, and I have to believe that there could be major merger activity. Remember, that's what Halliburton's CEO told me as recently as last month." Cramer's #3 value buy for 2007 is Halliburton, which he owns for his charitable trust. My number one value play for 2007 is BJ Services. You probably want to commit me in that the stock made a new 52-week low and I look really stupid. We'll have to see how things sort out by year-end. Last January the stock sold at a new 52-week high of $42. In the interim, earnings and revenues are sharply higher.
The American Petroleum Institute reported a rise of 1.7 million barrels in crude supplies for the week ended Dec. 29. The Energy Department had reported a decline of 1.3 million. Motor gasoline supplies were up 6.7 million barrels, the API said, vs. the government's reported rise of 5.6 million. Distillate supplies rose 5.3 million barrels, the API said, compared with the 2 million-barrel climb reported by the government.
Recently, the VIX has moved from the just below the 10 level to a bit below the 12 level, and that historically remains very low.
Wal-Mart Stores Inc. said Thursday that strong sales of electronics, groceries and pharmacy items led to better-than-expected same-store sales in December.
February crude fell $2.73 to close at $55.59 a barrel -- the contract's weakest closing level in 19 months. The contract has lost more than 9% in two sessions. February natural gas closed nearly unchanged at $6.162 per million British thermal units.
February gold fell $3.60 to close at $626.20 an ounce in New York Thursday. March copper fell by 4.7 cents to end at $2.602 a pound, but March silver added 16.5 cents to close at $12.835 an ounce.
Lester Brown, founder of the Earth Policy Institute, a Washington-based environmental think tank, warned that nearly twice as much corn as the government has estimated will be needed from the 2008 harvest to feed the ethanol plants that will be online by then. He blamed the lag on the failure of industry trade groups to keep up with development of ethanol plants.
President Ford: "Our inflation, our public enemy number one, will, unless whipped, destroy our country, our homes, our liberties, our property and finally our national pride as surely as will an well-armed wartime enemy."
Wednesday, January 03, 2007
No Surprises
1/4/06 Few Surprises
Bob Nardelli resigned as Chmn and CEO of Home Depot. This should have come as no surprise.
Nabors Industries Ltd. said that it expects fourth quarter 2006 results to miss analyst forecasts due to a weaker-than-expected performance at its Lower 48 and Canadian operations. The rig operating company said that fourth quarter earnings are expected fall in a range of 95 cents a share to $1.00 a share, implying full year earnings per share of between $3.53 and $3.58. Analysts polled by Thomson First Call had been looking for fourth-quarter average earnings of $1.11 a share and full year earnings of $3.71 a share. With the stock at at $29+, this should have come as no surprise.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinance and purchase loans, for the week ended December 29 increased 3.6 percent to 575.6. The index stood at 555.8 in the previous week, which was its lowest level since early August.
U.S. private-sector employment fell by 40,000 in December, the first decline in nearly four years, according to the ADP employment report released Wednesday. "These findings suggest an abrupt slowing of employment," following relatively strong job growth averaging 121,1000 over the past three years," said Joel Prakken, chairman of Macroeconomics Advisers, the economic firm that computes the ADP index from anonymous payroll data provided by Automatic Data Processing Inc. Economists surveyed by MarketWatch are expecting nonfarm payrolls - both public- and private-sector - to grow by about 103,000 for December.
The ISM manufacturing sentiment index rose to 51.4% from 49.5% in November. The production index rose to 51.8%, the new orders index rose to 52.1%, and the prices paid index fell to 47.5%.
Staffers in the Los Angeles Times' business section made their annual predictions. The annual predictions are "based on interviews with analysts, investors and executives, along with some educated guesswork," the article related.
The Chandlers' comeback: Tribune Co. is bought by the Los Angeles newspaper dynasty that is its largest shareholder, which is intent on avoiding a huge tax bill had the company — owner of the Los Angeles Times, the Chicago Cubs, KTLA-TV Channel 5 and many other properties — been sold off piecemeal.
It should be noted the LA Times, once owned by the Chandler family, was sold to the Tribune Company.
Ford Motor Co. on Wednesday posted a 12.8% decline in December U.S. auto sales to 233,621 vehicles. Most of the weakness came from the truck side, which saw a 14% drop to 163,003 units. Meanwhile, GM's sales fell 13%.
Richard Daughy points out that Roger S. Renken of the Northwest Territorial Mint writes of "An interesting new development. I have had 2 separate clients be limited in the amount of money they are allowed to wire transfer to $100k in one day." I think one should ponder the ramifications of this action.
February gold fell $8.20, or 1.3%, to close at $629.80 an ounce Wednesday, the contract's lowest level since Dec. 26. March silver closed at $12.67 an ounce, down 26.5 cents. March copper dropped 22.2 cents, or 7.7%, to end at a nine-month low of $2.649 a pound. Those declines did not surprise me. The huge drop in crude did catch me by surprise. I was not prepared for this one-day decline to $58.32. Crude oil in New York has fallen 16 percent in the past year when measured in euros, 17 percent in British pounds and 4.9 percent in yen. When you are a foreign producer and receive dollars for your crude, foreign currencies and their value related to dollars really makes a difference.
George Ure: "While it seems to be falling, the fact is that oil has a sort of intrinsic value. When folks see the price of oil bouncing around, it's only the exceptional investor that looks at oil and says "Hmmm...the value of the money/medium of exchange may be flopping around a bit underlying it all..."
On January 4, people will demonstrate at the opening of Congress. Protesters from up and down the East Coast, some dressed in orange Guantanamo torture jumpsuits, will
demand that Congress investigate and hold accountable the Bush administration for criminal liability, and that the House of Representatives immediately initiate Articles of Impeachment against Bush for "high crimes and misdemeanors."
The Fed said several members argued that recent "subdued" economic data meant that "the downside risks to economic growth in the near term had increased a little and become a bit more broadly-based than previously thought." If the Fed is worried about growth, what implications might that be for the dollar?
Mortgage Lenders Network USA, a large U.S. subprime lender, said it has stopped funding loans and accepting applications for loans, citing deteriorating conditions in the mortgage market, and has temporarily laid off about 80% of its 1,800 employees.
Mike Shedlock: "Attitudes can only go so far before they reverse course. When consumers were camping out overnight to buy condos and knocking on strangers’ doors and getting into bidding wars to buy houses, that trend was bound to reverse. With negative savings rates for 18 consecutive months, that trend is bound to reverse. The belief that nothing can shatter U.S. consumer spending habits will be the next bubble to burst. Given that consumer spending is 75% of the economy, a massive reversal in consumer and lending psychology spells trouble for inflationists (and the economy), regardless of what the Fed does. That reversal is at hand."
Con-way Inc. after Wednesday's closing bell said it now expects fourth-quarter earnings from continuing operations of 72 cents to 76 cents a share. The company had previously forecast per-share earnings from continuing operations of 81 cents to 87 cents a share for the quarter.
Bob Nardelli resigned as Chmn and CEO of Home Depot. This should have come as no surprise.
Nabors Industries Ltd. said that it expects fourth quarter 2006 results to miss analyst forecasts due to a weaker-than-expected performance at its Lower 48 and Canadian operations. The rig operating company said that fourth quarter earnings are expected fall in a range of 95 cents a share to $1.00 a share, implying full year earnings per share of between $3.53 and $3.58. Analysts polled by Thomson First Call had been looking for fourth-quarter average earnings of $1.11 a share and full year earnings of $3.71 a share. With the stock at at $29+, this should have come as no surprise.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinance and purchase loans, for the week ended December 29 increased 3.6 percent to 575.6. The index stood at 555.8 in the previous week, which was its lowest level since early August.
U.S. private-sector employment fell by 40,000 in December, the first decline in nearly four years, according to the ADP employment report released Wednesday. "These findings suggest an abrupt slowing of employment," following relatively strong job growth averaging 121,1000 over the past three years," said Joel Prakken, chairman of Macroeconomics Advisers, the economic firm that computes the ADP index from anonymous payroll data provided by Automatic Data Processing Inc. Economists surveyed by MarketWatch are expecting nonfarm payrolls - both public- and private-sector - to grow by about 103,000 for December.
The ISM manufacturing sentiment index rose to 51.4% from 49.5% in November. The production index rose to 51.8%, the new orders index rose to 52.1%, and the prices paid index fell to 47.5%.
Staffers in the Los Angeles Times' business section made their annual predictions. The annual predictions are "based on interviews with analysts, investors and executives, along with some educated guesswork," the article related.
The Chandlers' comeback: Tribune Co. is bought by the Los Angeles newspaper dynasty that is its largest shareholder, which is intent on avoiding a huge tax bill had the company — owner of the Los Angeles Times, the Chicago Cubs, KTLA-TV Channel 5 and many other properties — been sold off piecemeal.
It should be noted the LA Times, once owned by the Chandler family, was sold to the Tribune Company.
Ford Motor Co. on Wednesday posted a 12.8% decline in December U.S. auto sales to 233,621 vehicles. Most of the weakness came from the truck side, which saw a 14% drop to 163,003 units. Meanwhile, GM's sales fell 13%.
Richard Daughy points out that Roger S. Renken of the Northwest Territorial Mint writes of "An interesting new development. I have had 2 separate clients be limited in the amount of money they are allowed to wire transfer to $100k in one day." I think one should ponder the ramifications of this action.
February gold fell $8.20, or 1.3%, to close at $629.80 an ounce Wednesday, the contract's lowest level since Dec. 26. March silver closed at $12.67 an ounce, down 26.5 cents. March copper dropped 22.2 cents, or 7.7%, to end at a nine-month low of $2.649 a pound. Those declines did not surprise me. The huge drop in crude did catch me by surprise. I was not prepared for this one-day decline to $58.32. Crude oil in New York has fallen 16 percent in the past year when measured in euros, 17 percent in British pounds and 4.9 percent in yen. When you are a foreign producer and receive dollars for your crude, foreign currencies and their value related to dollars really makes a difference.
George Ure: "While it seems to be falling, the fact is that oil has a sort of intrinsic value. When folks see the price of oil bouncing around, it's only the exceptional investor that looks at oil and says "Hmmm...the value of the money/medium of exchange may be flopping around a bit underlying it all..."
On January 4, people will demonstrate at the opening of Congress. Protesters from up and down the East Coast, some dressed in orange Guantanamo torture jumpsuits, will
demand that Congress investigate and hold accountable the Bush administration for criminal liability, and that the House of Representatives immediately initiate Articles of Impeachment against Bush for "high crimes and misdemeanors."
The Fed said several members argued that recent "subdued" economic data meant that "the downside risks to economic growth in the near term had increased a little and become a bit more broadly-based than previously thought." If the Fed is worried about growth, what implications might that be for the dollar?
Mortgage Lenders Network USA, a large U.S. subprime lender, said it has stopped funding loans and accepting applications for loans, citing deteriorating conditions in the mortgage market, and has temporarily laid off about 80% of its 1,800 employees.
Mike Shedlock: "Attitudes can only go so far before they reverse course. When consumers were camping out overnight to buy condos and knocking on strangers’ doors and getting into bidding wars to buy houses, that trend was bound to reverse. With negative savings rates for 18 consecutive months, that trend is bound to reverse. The belief that nothing can shatter U.S. consumer spending habits will be the next bubble to burst. Given that consumer spending is 75% of the economy, a massive reversal in consumer and lending psychology spells trouble for inflationists (and the economy), regardless of what the Fed does. That reversal is at hand."
Con-way Inc. after Wednesday's closing bell said it now expects fourth-quarter earnings from continuing operations of 72 cents to 76 cents a share. The company had previously forecast per-share earnings from continuing operations of 81 cents to 87 cents a share for the quarter.
Tuesday, January 02, 2007
More Data Points
1/3/06 More Data Points
The NTC Economics/Royal Bank of Scotland purchasing managers index for manufacturing in the euro zone unexpectedly slipped to 56.5 in December from 56.6 in November. A similar poll of U.K. manufacturing also fell, to 51.9 in December from 52.5 in November.
February gold climbed $3.80 to $641.80 an ounce in electronic trading on CME Globex. March silver was up 23 cents, or 1.8%, at $13.165 in electronic trading.
The dollar was weak against the euro, pound, and the yen.
Lennar slashed its fourth-quarter profit forecast by as much as 46 percent, citing lower profit margins amid the deteriorating U.S. housing market.
Lennar Chief Executive Stuart Miller said "Market conditions continued to weaken throughout the fourth quarter and we have not yet seen tangible evidence of a market recovery." So much for the turnaround in the housing market.
Steel products maker Nucor Corp. said Tuesday it has offered $1.07 billion for Canada's Harris Steel Group Inc. whose board is recommending that its shareholders accept the all-cash bid.
John Hussman: "Contrary to popular assertions, the recent advance is emphatically not the result of an ocean of “liquidity.” The rate of money growth has slowed considerably both domestically and abroad, particularly on an inflation-adjusted basis. Mortgage equity withdrawal is also slowing. Foreign central banks continue to tighten. What we're seeing is not liquidity, but risk-blindness. Corporate and junk yield spreads are very narrow, which has allowed private-equity investors to acquire capital for risky acquisitions at nearly risk-free rates. If you think about it from an overall equilibrium standpoint, what's really going on in a leveraged buyout is that certificates of stock ownership are retired, and certificates of debt are created (though the holders of those certificates may not be the same). Equity risk is thereby transformed into default risk, that's all. Presently, dangerously thin equity risk premiums are being transformed into dangerously thin default risk premiums. The bagholders here will ultimately be investors who purchased that debt, either directly or indirectly through hedge funds, but it may take a while." I recommend all readers study this observation from John Hussman. You do not want to ever be blind to risk.
According to the WSJ, a U.S. "troop surge" in Iraq could trigger a surge in oil prices, too, warns Bank of America chief market strategist of global wealth & investment management Joseph Quinlan, according to a Washington Wire report. Mr. Quinlan figures a troop surge could "push oil prices closer to $70 a barrel, in the near-term, knocking the wind out of the financial markets and global economy."
The NTC Economics/Royal Bank of Scotland purchasing managers index for manufacturing in the euro zone unexpectedly slipped to 56.5 in December from 56.6 in November. A similar poll of U.K. manufacturing also fell, to 51.9 in December from 52.5 in November.
February gold climbed $3.80 to $641.80 an ounce in electronic trading on CME Globex. March silver was up 23 cents, or 1.8%, at $13.165 in electronic trading.
The dollar was weak against the euro, pound, and the yen.
Lennar slashed its fourth-quarter profit forecast by as much as 46 percent, citing lower profit margins amid the deteriorating U.S. housing market.
Lennar Chief Executive Stuart Miller said "Market conditions continued to weaken throughout the fourth quarter and we have not yet seen tangible evidence of a market recovery." So much for the turnaround in the housing market.
Steel products maker Nucor Corp. said Tuesday it has offered $1.07 billion for Canada's Harris Steel Group Inc. whose board is recommending that its shareholders accept the all-cash bid.
John Hussman: "Contrary to popular assertions, the recent advance is emphatically not the result of an ocean of “liquidity.” The rate of money growth has slowed considerably both domestically and abroad, particularly on an inflation-adjusted basis. Mortgage equity withdrawal is also slowing. Foreign central banks continue to tighten. What we're seeing is not liquidity, but risk-blindness. Corporate and junk yield spreads are very narrow, which has allowed private-equity investors to acquire capital for risky acquisitions at nearly risk-free rates. If you think about it from an overall equilibrium standpoint, what's really going on in a leveraged buyout is that certificates of stock ownership are retired, and certificates of debt are created (though the holders of those certificates may not be the same). Equity risk is thereby transformed into default risk, that's all. Presently, dangerously thin equity risk premiums are being transformed into dangerously thin default risk premiums. The bagholders here will ultimately be investors who purchased that debt, either directly or indirectly through hedge funds, but it may take a while." I recommend all readers study this observation from John Hussman. You do not want to ever be blind to risk.
According to the WSJ, a U.S. "troop surge" in Iraq could trigger a surge in oil prices, too, warns Bank of America chief market strategist of global wealth & investment management Joseph Quinlan, according to a Washington Wire report. Mr. Quinlan figures a troop surge could "push oil prices closer to $70 a barrel, in the near-term, knocking the wind out of the financial markets and global economy."
Monday, January 01, 2007
News In The new Year
1/2/07 News In The New Year
Wal-Mart Stores Inc. estimated on Saturday that December sales rose 1.6 percent at its U.S. stores open at least a year, beating its forecast of flat to up 1 percent. We still don't know the full impact of gift cards, and I anticipate they will spur growth for the company in January and possibly February.
3,000 of our troops have now died in Iraq. That does not describe the horrors experienced by the tens of thousands physically wounded and the thousands returning home with psychological impairments. When will those responsible for this horrific decision to invade Iraq, when will they receive their final judgment?
Slovenians were able to pay for their morning bread rolls and coffee with euros today after the former Communist country switched to Europe's single currency.
Industrial and Commercial Bank of China overtook Bank of America late last week to become the second-biggest bank in the world by market value after a dramatic 31 per cent jump in its share price on the mainland during the last week.
The exchange rate of Renminbi, the Chinese currency, is expected to appreciate by some five percent to one US dollar for 7.44 yuan, according to Xinhua Economic Analysis Report released Monday.
Nissan Motor Co. will build a 200,000 unit-a-year car factory in India with an initial investment of 50 to 60 billion yen ($420 to $500 million), the Nikkei newspaper said on Monday.
Don Hays: "Corporations last year...made over $400 billion of cash take-overs of U.S. corporations. Besides that, they bought back $600 billion of their own stock. There has never been anything like this in the history of the U.S. stock market. We now have a 3% reduction of stock available for purchase today in relation to the supply one year ago."
Financial Times: "It was the year private equity turned into a record machine. In 2006, the value of US buy-outs hit $410bn according to Dealogic, more than twice last year’s level. Blackstone raised an all-time high for a fund of $20bn. And, you guessed it, the firm struck the biggest ever deal. Its $36bn buy-out of Equity Office Properties took the crown only months after KKR had beaten its own 16-year benchmark (dating back to the RJR Nabisco acquisition in 1989). Meanwhile, debt markets made the party possible as credit spreads for high-yield debt flirted with new lows amid minimal default rates. And hedge funds fuelled the party as they searched for yield by rushing to put money into the leveraged loan market."
Wal-Mart Stores Inc. estimated on Saturday that December sales rose 1.6 percent at its U.S. stores open at least a year, beating its forecast of flat to up 1 percent. We still don't know the full impact of gift cards, and I anticipate they will spur growth for the company in January and possibly February.
3,000 of our troops have now died in Iraq. That does not describe the horrors experienced by the tens of thousands physically wounded and the thousands returning home with psychological impairments. When will those responsible for this horrific decision to invade Iraq, when will they receive their final judgment?
Slovenians were able to pay for their morning bread rolls and coffee with euros today after the former Communist country switched to Europe's single currency.
Industrial and Commercial Bank of China overtook Bank of America late last week to become the second-biggest bank in the world by market value after a dramatic 31 per cent jump in its share price on the mainland during the last week.
The exchange rate of Renminbi, the Chinese currency, is expected to appreciate by some five percent to one US dollar for 7.44 yuan, according to Xinhua Economic Analysis Report released Monday.
Nissan Motor Co. will build a 200,000 unit-a-year car factory in India with an initial investment of 50 to 60 billion yen ($420 to $500 million), the Nikkei newspaper said on Monday.
Don Hays: "Corporations last year...made over $400 billion of cash take-overs of U.S. corporations. Besides that, they bought back $600 billion of their own stock. There has never been anything like this in the history of the U.S. stock market. We now have a 3% reduction of stock available for purchase today in relation to the supply one year ago."
Financial Times: "It was the year private equity turned into a record machine. In 2006, the value of US buy-outs hit $410bn according to Dealogic, more than twice last year’s level. Blackstone raised an all-time high for a fund of $20bn. And, you guessed it, the firm struck the biggest ever deal. Its $36bn buy-out of Equity Office Properties took the crown only months after KKR had beaten its own 16-year benchmark (dating back to the RJR Nabisco acquisition in 1989). Meanwhile, debt markets made the party possible as credit spreads for high-yield debt flirted with new lows amid minimal default rates. And hedge funds fuelled the party as they searched for yield by rushing to put money into the leveraged loan market."
Sunday, December 31, 2006
2007
1/1/07 2007
I would like to take this opportunity to wish you and your families a very happy and healthy New Year. I want to do something a bit different and will provide a forecast for 2007. In my view it will be highly volatile year-- in politics, in weather conditions, in the economy, and in the stock market. Let's get specific.
Please do not move to commit me. My initial prediction is that Bush and Cheney will not be president and vice president by the end of 2007, and that the country will have its first female as president, Nancy Pelosi.
I believe there will be a winter prior to Spring 2007 and would take advantage of natural gas prices as a trading vehicle. The range most likely will be between $5.50 and $9.50.
The drought in some areas of the country and outside our borders will come into play once again in 2007. That will make for increased demand for water and for several soft commodities.
The dollar will decrease in importance as an instrument of trade, and there will be a move towards trading bonds, equities,and commodities in both dollars and euros and possibly even yen.
A major focus will be on 2008- for China and the Olympics and for the U.S. presidential election. China's infrastructure demands will continue to increase and press supplies of various construction supplies. Thus, inflation will be alive and well.
As for interest rates, they will follow the path of inflation. The Fed will do their part, and will continue to print money at a 5-6% rate, and thus, depreciate the value of your dollar holdings by a similar rate.
As for the stock market, the VIX will no longer be forgotten. It will be alive and well. There will be large swings in the equity indices, and a range of 25% from the highs and lows would not be a surprise.
What stocks would I buy for 2007? I would buy Interactive Brokers when it goes public this year. In addition, I would buy the following: USO, BJ Services, Helmerich and Payne, Bronco Drilling, Nabors, and the Tribune Company.
Lastly, it is wise to remember that, in many instances, it is cheaper to buy a company than to build from scratch. As such, M&A activity will remain at a high level.
I would like to take this opportunity to wish you and your families a very happy and healthy New Year. I want to do something a bit different and will provide a forecast for 2007. In my view it will be highly volatile year-- in politics, in weather conditions, in the economy, and in the stock market. Let's get specific.
Please do not move to commit me. My initial prediction is that Bush and Cheney will not be president and vice president by the end of 2007, and that the country will have its first female as president, Nancy Pelosi.
I believe there will be a winter prior to Spring 2007 and would take advantage of natural gas prices as a trading vehicle. The range most likely will be between $5.50 and $9.50.
The drought in some areas of the country and outside our borders will come into play once again in 2007. That will make for increased demand for water and for several soft commodities.
The dollar will decrease in importance as an instrument of trade, and there will be a move towards trading bonds, equities,and commodities in both dollars and euros and possibly even yen.
A major focus will be on 2008- for China and the Olympics and for the U.S. presidential election. China's infrastructure demands will continue to increase and press supplies of various construction supplies. Thus, inflation will be alive and well.
As for interest rates, they will follow the path of inflation. The Fed will do their part, and will continue to print money at a 5-6% rate, and thus, depreciate the value of your dollar holdings by a similar rate.
As for the stock market, the VIX will no longer be forgotten. It will be alive and well. There will be large swings in the equity indices, and a range of 25% from the highs and lows would not be a surprise.
What stocks would I buy for 2007? I would buy Interactive Brokers when it goes public this year. In addition, I would buy the following: USO, BJ Services, Helmerich and Payne, Bronco Drilling, Nabors, and the Tribune Company.
Lastly, it is wise to remember that, in many instances, it is cheaper to buy a company than to build from scratch. As such, M&A activity will remain at a high level.
Saturday, December 30, 2006
The Dry Bulk Market
12/31/06 The Dry Bulk Market
Marsoft: "Although dry bulk freight rates for 2006 as a whole have been down somewhat relative to their average 2005 levels, the rally which began in the middle of this year has gained further momentum over the past month. By early December, the Baltic Dry Index had climbed above 4,400 for the first time since April 2005.
All segments of the dry bulk market have seen moderate gains over the past month. The Baltic Cape TC Index rose from $63,000 per day in mid-November to $66,000 per day by mid-December. On our benchmark Tubarao/Rotterdam iron ore route, Cape rates rosefrom $17 per tonne, or $60,000 per day, in mid-November to $18.5 per tonne, or $67,000 per day, by mid-December...Although dry bulk fleet growth has accelerated in recent months, due to a surge of deliveries, this has not been enough to keep pace with demand. However, ordering activity has also accelerated during the past couple of months, with the orderbook now representing 22% of the existing fleet. This is not likely to pose much of a problem in the near-term, as most of the recently placed orders are not due for delivery until 2009 or 2010."
The Independent: "A vast ice shelf in the Canadian Arctic has broken up, a further sign of the astonishing rate at which polar ice is now melting because of global warming.
The Ayles ice shelf, more than 40 square miles in extent - over five times the size of central London - has broken clear from the coast of Ellesmere Island, about 500 miles south of the North Pole in the Canadian Arctic, it emerged yesterday.
The broken shelf has formed an ice island, in what a leading scientist described as a "dramatic and disturbing event", citing climate change as the cause."
Bloomberg reported India's foreign-exchange reserves rose by $32.18 billion over the past year.
For the year, the dollar index dropped 8.3%. That makes the stock market gains in the U.S. a good deal less appealing for many foreign investors. By comparison, the Australian dollar rose 8% to a 20-month high.
Doug Noland:"The bottom line is that the largest economy in the world – custodian of the global system’s “reserve currency” – has reached the point where only enormous Credit growth and financial sector leveraging are capable of maintaining inflated asset markets and sustaining sufficiently moderate economic expansion. This historic predicament is fomenting Escalating Global Monetary Disorder. Disregard all the “soft-landing” talk as nonsense. While housing and auto sectors were in downturn, the expansive “services”/finance dominated U.S. economy remained firmly entrenched in Bubble Dynamics... Instead of beginning to brace for the inevitable downside of the Credit Cycle, ultra-loose “money” enticed the system into embarking on the greatest expansion of risky Credits and the most outrageous speculation in Credit-related instruments/derivatives the world has ever known. At what cost? Well, a nearly $900 billion Current Account Deficit along with unprecedented speculative flows (to play global markets) literally inundated the world with liquidity...The year comes to a close with a troubling dichotomy: On the one hand, there are today’s fervently bullish perceptions with regard to the underlying soundness and resiliency of the U.S. economy and prospects of another banner year for U.S stocks in 2007. On the other hand, there is ominous dollar weakness, with the worn greenback exhibiting the erosion from yet another year of Bubble-induced non-productive debt expansion."
On Friday, the temperature range in Tucson was a high of 49 and a low of 40. Who says the cold weather is behind us?
On Saturday, a winter storm was expected to produce blizzard conditions and could dump up to 16 inches of snow across eastern Colorado, Kansas and New Mexico as far south as Albuquerque, forecasters said.
Interstate 70 and several other major east-west highways were closed Saturday from the Rockies east into Kansas. Interstate 25 heading south into New Mexico was closed at the border.
Marsoft: "Although dry bulk freight rates for 2006 as a whole have been down somewhat relative to their average 2005 levels, the rally which began in the middle of this year has gained further momentum over the past month. By early December, the Baltic Dry Index had climbed above 4,400 for the first time since April 2005.
All segments of the dry bulk market have seen moderate gains over the past month. The Baltic Cape TC Index rose from $63,000 per day in mid-November to $66,000 per day by mid-December. On our benchmark Tubarao/Rotterdam iron ore route, Cape rates rosefrom $17 per tonne, or $60,000 per day, in mid-November to $18.5 per tonne, or $67,000 per day, by mid-December...Although dry bulk fleet growth has accelerated in recent months, due to a surge of deliveries, this has not been enough to keep pace with demand. However, ordering activity has also accelerated during the past couple of months, with the orderbook now representing 22% of the existing fleet. This is not likely to pose much of a problem in the near-term, as most of the recently placed orders are not due for delivery until 2009 or 2010."
The Independent: "A vast ice shelf in the Canadian Arctic has broken up, a further sign of the astonishing rate at which polar ice is now melting because of global warming.
The Ayles ice shelf, more than 40 square miles in extent - over five times the size of central London - has broken clear from the coast of Ellesmere Island, about 500 miles south of the North Pole in the Canadian Arctic, it emerged yesterday.
The broken shelf has formed an ice island, in what a leading scientist described as a "dramatic and disturbing event", citing climate change as the cause."
Bloomberg reported India's foreign-exchange reserves rose by $32.18 billion over the past year.
For the year, the dollar index dropped 8.3%. That makes the stock market gains in the U.S. a good deal less appealing for many foreign investors. By comparison, the Australian dollar rose 8% to a 20-month high.
Doug Noland:"The bottom line is that the largest economy in the world – custodian of the global system’s “reserve currency” – has reached the point where only enormous Credit growth and financial sector leveraging are capable of maintaining inflated asset markets and sustaining sufficiently moderate economic expansion. This historic predicament is fomenting Escalating Global Monetary Disorder. Disregard all the “soft-landing” talk as nonsense. While housing and auto sectors were in downturn, the expansive “services”/finance dominated U.S. economy remained firmly entrenched in Bubble Dynamics... Instead of beginning to brace for the inevitable downside of the Credit Cycle, ultra-loose “money” enticed the system into embarking on the greatest expansion of risky Credits and the most outrageous speculation in Credit-related instruments/derivatives the world has ever known. At what cost? Well, a nearly $900 billion Current Account Deficit along with unprecedented speculative flows (to play global markets) literally inundated the world with liquidity...The year comes to a close with a troubling dichotomy: On the one hand, there are today’s fervently bullish perceptions with regard to the underlying soundness and resiliency of the U.S. economy and prospects of another banner year for U.S stocks in 2007. On the other hand, there is ominous dollar weakness, with the worn greenback exhibiting the erosion from yet another year of Bubble-induced non-productive debt expansion."
On Friday, the temperature range in Tucson was a high of 49 and a low of 40. Who says the cold weather is behind us?
On Saturday, a winter storm was expected to produce blizzard conditions and could dump up to 16 inches of snow across eastern Colorado, Kansas and New Mexico as far south as Albuquerque, forecasters said.
Interstate 70 and several other major east-west highways were closed Saturday from the Rockies east into Kansas. Interstate 25 heading south into New Mexico was closed at the border.
Friday, December 29, 2006
Liquidity
12/30/06 Liquidity
The European Central Bank announced an M3 money supply growth rate of 9.3 pct year-on-year, up from October's 8.5 pct and well ahead of economists' forecasts for 8.7 pct. Loans to the private sector grew 11.2 pct year-on-year in November, unchanged from October. What do you think of the chances of the ECB raising interest rates in February? Will increased rates accelerate the shift from dollars to euros?
Online retailers rang up $23.11 billion in holiday sales so far this year, a 26percent increase over 2005, according to data released Thursday by comScore Networks.
U.S. Web spending during the work week before Christmas grew 38 percent to $2.25 billion from last year.
The volume of help-wanted advertising in major U.S. newspapers was unchanged in November, the Conference Board said Friday. The research group's help-wanted index remained at 30 in November. A year ago, it was 38. Total online job ads declined by 119,800 or 3 percent to 3,711,300 in November, according to The Conference Board Help-Wanted OnLine Data Series(TM). There were 2.4 advertised vacancies online for every 100 persons in the labor force in November.
China's population of Internet users has risen by 30 percent over the past year to 132 million, a state news agency said Friday.
The figure was up from 123 million at the end of June, the Xinhua News Agency said, citing the government's China Internet Network Information Center.
The kidnappings and armed attacks plaguing oil companies operating in Nigeria's oil-rich Niger Delta are among the top security challenges U.S. businesses are likely to face in 2007, a State Department official said Thursday.
US oil demand in October was a whopping 560,000 barrels per day lower than initially thought, data from the Energy Information Administration (EIA) shows, with all key fuels coming in below earlier weekly estimates. Hence, the cutback in February scheduled by OPEC.
Natural gas bills in January are expected to drop 10.0% from last year. PG&E's residential customers can expect to pay $12.37 less for natural gas in January of 2007, compared to January of 2006.
France's unemployment rate fell to 8.7 per cent in November, the lowest level since July 2001.
The Financial Times: "The dollar interest rate swap market, which you probably do not spend much time thinking about, had, as of June, about $65,000bn in notional outstanding value, or something like five times the US gross domestic product. It is big, invisible plumbing and, like water mains, it is of little interest most of the time. Until, of course, there is a gurgling and nothing comes out of the pipe. To use analogies from the more visible markets, a five standard deviation move in the Dow Jones Industrial Average would be a decline of 350 basis points, or a 40-point drop in the S&P?500. That would have got your attention...“The key question,” says a banker, “is at what price the residual risk is held on the dealers’ books. The 5 per cent residual piece of a sub-prime mortgage securitisation might be written down to zero. That would be the conservative approach.”
However, the income from that written down asset is still counted when rating agencies, and swaps market counterparties, assess the creditworthiness of a bank or dealer. In other words, it may have disappeared from the asset side of the balance sheet but it remains on the profit and loss statement."
For the year, the Dow was up 16%, the S&P 500 14%, and the Nasdaq 10%. Gold finished at $638, crude at $61.05.
The Energy Department said Friday that supplies of natural gas held in storage in underground facilities fell by 46 billion cubic feet in the week ended Dec. 22. The draw was smaller than the 70 billion-cubic-feet decline analysts were expecting, according to Fimat USA. Stocks are now 458 billion cubic feet higher than they were a year ago and are 355 billion cubic feet above the 5-year average.
The European Central Bank announced an M3 money supply growth rate of 9.3 pct year-on-year, up from October's 8.5 pct and well ahead of economists' forecasts for 8.7 pct. Loans to the private sector grew 11.2 pct year-on-year in November, unchanged from October. What do you think of the chances of the ECB raising interest rates in February? Will increased rates accelerate the shift from dollars to euros?
Online retailers rang up $23.11 billion in holiday sales so far this year, a 26percent increase over 2005, according to data released Thursday by comScore Networks.
U.S. Web spending during the work week before Christmas grew 38 percent to $2.25 billion from last year.
The volume of help-wanted advertising in major U.S. newspapers was unchanged in November, the Conference Board said Friday. The research group's help-wanted index remained at 30 in November. A year ago, it was 38. Total online job ads declined by 119,800 or 3 percent to 3,711,300 in November, according to The Conference Board Help-Wanted OnLine Data Series(TM). There were 2.4 advertised vacancies online for every 100 persons in the labor force in November.
China's population of Internet users has risen by 30 percent over the past year to 132 million, a state news agency said Friday.
The figure was up from 123 million at the end of June, the Xinhua News Agency said, citing the government's China Internet Network Information Center.
The kidnappings and armed attacks plaguing oil companies operating in Nigeria's oil-rich Niger Delta are among the top security challenges U.S. businesses are likely to face in 2007, a State Department official said Thursday.
US oil demand in October was a whopping 560,000 barrels per day lower than initially thought, data from the Energy Information Administration (EIA) shows, with all key fuels coming in below earlier weekly estimates. Hence, the cutback in February scheduled by OPEC.
Natural gas bills in January are expected to drop 10.0% from last year. PG&E's residential customers can expect to pay $12.37 less for natural gas in January of 2007, compared to January of 2006.
France's unemployment rate fell to 8.7 per cent in November, the lowest level since July 2001.
The Financial Times: "The dollar interest rate swap market, which you probably do not spend much time thinking about, had, as of June, about $65,000bn in notional outstanding value, or something like five times the US gross domestic product. It is big, invisible plumbing and, like water mains, it is of little interest most of the time. Until, of course, there is a gurgling and nothing comes out of the pipe. To use analogies from the more visible markets, a five standard deviation move in the Dow Jones Industrial Average would be a decline of 350 basis points, or a 40-point drop in the S&P?500. That would have got your attention...“The key question,” says a banker, “is at what price the residual risk is held on the dealers’ books. The 5 per cent residual piece of a sub-prime mortgage securitisation might be written down to zero. That would be the conservative approach.”
However, the income from that written down asset is still counted when rating agencies, and swaps market counterparties, assess the creditworthiness of a bank or dealer. In other words, it may have disappeared from the asset side of the balance sheet but it remains on the profit and loss statement."
For the year, the Dow was up 16%, the S&P 500 14%, and the Nasdaq 10%. Gold finished at $638, crude at $61.05.
The Energy Department said Friday that supplies of natural gas held in storage in underground facilities fell by 46 billion cubic feet in the week ended Dec. 22. The draw was smaller than the 70 billion-cubic-feet decline analysts were expecting, according to Fimat USA. Stocks are now 458 billion cubic feet higher than they were a year ago and are 355 billion cubic feet above the 5-year average.
Thursday, December 28, 2006
Data Points
12/29/06 Data Points
The chief executive of Iceland's FL Group, which on Wednesday disclosed it has a 6% stake in American Airlines parent AMR Corp. (AMR), told The Times (of London) newspaper in an interview that he's seeking a meeting with the carrier's board to discuss his views that the company must be a part of airline consolidation. "I think enough has changed in the industry since then that American should be seen as a candidate," Hannes Smarason told the newspaper. "For the most part, as any big investor, we would like to sit down and have a chat." FL Group is AMR's third-largest shareholder.
Sales of U.S. existing homes rose 0.6% in November, to a seasonally adjusted annual rate of 6.28 million, the National Association of Realtors said. Inventories of unsold homes fell 1%, to 3.82 million, representing a 7.3-month supply. The national median existing-home price (2) for all housing types was $218,000 in November, which is 3.1 percent lower than November 2005 when the median price was $225,000.
The Conference Board said U.S. consumer confidence index climbed to 109.0 in December from a revised 105.3 in November. Economists were expecting a decline to about 101.9 from the previously reported 102.9. The Present Situation Index increased to 129.9 from 125.4. The Expectations Index improved to 95.1 from 91.9 last month.
The Chicago PMI rose to 52.4 in December from 49.9 in November. Within the index, the new orders subindex rose to 57.8 from 52 in November. The prices paid index was flat at 60.2.
Crude inventories fell by 8.1 million barrels in the latest week, the Department of Energy said Thursday. Gasoline inventories rose by 3 million barrels, and distillates supplies, which include heating oil and jet fuel, rose by 500,000 barrels.
Iron ore prices are set to increase by 9.5% in 2007. This will impact the price for steel products and ultimately the cost of construction.
"Yields leapt higher after the trifecta of firm data, which all came in higher than expected," wrote analysts at research firm Action Economics. "The gains in existing home sales and Chicago-PMI (after rumors of a sub-50 print) were especially unfriendly to bonds." In intraday trading, the 10-year yield touched 4.709%, the highest level since Nov. 6.
Doug Noland: "Financial historians will reflect back on this period’s prevailing complacency, especially with respect to the massive U.S. Trade and Current Account Deficits, with astonishment and disbelief. Yet for now years of Credit and asset inflation – parceling out unimaginable financial rewards along the way - have Wall Street reassured that There’s Simply Not an Imbalance Not to Love. The Street now appreciates that massive and intractable Trade Deficits provide the fountainhead of global liquidity overabundance. Moreover, the markets keenly recognize that the Bernanke Fed (like Greenspan’s) is content to acquiesce to deficit and liquidity excesses. There is today no constituency for reining in the Bubble(s).
This week’s release of a record quarterly Current Account Deficit ($225.6bn in Q3) garnered little attention from the media and even less in the markets. This despite the Deficit having now reached $900 billion annualized, or 6.8% of GDP. For perspective, the deficit for all of 1998 was $229 billion. At $877 billion, the Current Account Deficit over the previous four quarters compares to 2005’s $812 billion, 2004’s $664 billion, 2003’s $537 billion, and 2002’s $506 billion. And it is worth noting that the third quarter’s deficit was up 36% from Q2 2004’s $166 billion, back when the Fed commenced its fateful “tightening” cycle."
Ronald R. Cooke: "The Algerian Parliament has decided to increase Algeria’s share of oil production revenues by placing an “excess” profits tax on oil shipments whenever oil prices exceed $30.00 per barrel. Algeria, one of Africa’s largest oil and natural gas exporters, will levy the new tax starting in 2007. Depending on total output, the excess profits tax will range from 5% to 50% on the Algerian profits of foreign companies, including Shell, BP, Anadarko Petroleum and Hess Corporation.
The Parliament also signed into law a provision that the country’s oil monopoly, Sonatrach, must take a 51 percent controlling interest in all future production and refining contracts. This, despite the fact that most of the financing and technical expertise for oil and natural gas exploration, production and refining has been furnished by foreign corporations and financial institutions."
Ford Motor Co. likely will see a large sales drop in December, while Toyota Motor Corp. could gain enough to take over Ford's traditional role as the No. 2 auto company in the U.S. for the month, according to some industry analysts.
The chief executive of Iceland's FL Group, which on Wednesday disclosed it has a 6% stake in American Airlines parent AMR Corp. (AMR), told The Times (of London) newspaper in an interview that he's seeking a meeting with the carrier's board to discuss his views that the company must be a part of airline consolidation. "I think enough has changed in the industry since then that American should be seen as a candidate," Hannes Smarason told the newspaper. "For the most part, as any big investor, we would like to sit down and have a chat." FL Group is AMR's third-largest shareholder.
Sales of U.S. existing homes rose 0.6% in November, to a seasonally adjusted annual rate of 6.28 million, the National Association of Realtors said. Inventories of unsold homes fell 1%, to 3.82 million, representing a 7.3-month supply. The national median existing-home price (2) for all housing types was $218,000 in November, which is 3.1 percent lower than November 2005 when the median price was $225,000.
The Conference Board said U.S. consumer confidence index climbed to 109.0 in December from a revised 105.3 in November. Economists were expecting a decline to about 101.9 from the previously reported 102.9. The Present Situation Index increased to 129.9 from 125.4. The Expectations Index improved to 95.1 from 91.9 last month.
The Chicago PMI rose to 52.4 in December from 49.9 in November. Within the index, the new orders subindex rose to 57.8 from 52 in November. The prices paid index was flat at 60.2.
Crude inventories fell by 8.1 million barrels in the latest week, the Department of Energy said Thursday. Gasoline inventories rose by 3 million barrels, and distillates supplies, which include heating oil and jet fuel, rose by 500,000 barrels.
Iron ore prices are set to increase by 9.5% in 2007. This will impact the price for steel products and ultimately the cost of construction.
"Yields leapt higher after the trifecta of firm data, which all came in higher than expected," wrote analysts at research firm Action Economics. "The gains in existing home sales and Chicago-PMI (after rumors of a sub-50 print) were especially unfriendly to bonds." In intraday trading, the 10-year yield touched 4.709%, the highest level since Nov. 6.
Doug Noland: "Financial historians will reflect back on this period’s prevailing complacency, especially with respect to the massive U.S. Trade and Current Account Deficits, with astonishment and disbelief. Yet for now years of Credit and asset inflation – parceling out unimaginable financial rewards along the way - have Wall Street reassured that There’s Simply Not an Imbalance Not to Love. The Street now appreciates that massive and intractable Trade Deficits provide the fountainhead of global liquidity overabundance. Moreover, the markets keenly recognize that the Bernanke Fed (like Greenspan’s) is content to acquiesce to deficit and liquidity excesses. There is today no constituency for reining in the Bubble(s).
This week’s release of a record quarterly Current Account Deficit ($225.6bn in Q3) garnered little attention from the media and even less in the markets. This despite the Deficit having now reached $900 billion annualized, or 6.8% of GDP. For perspective, the deficit for all of 1998 was $229 billion. At $877 billion, the Current Account Deficit over the previous four quarters compares to 2005’s $812 billion, 2004’s $664 billion, 2003’s $537 billion, and 2002’s $506 billion. And it is worth noting that the third quarter’s deficit was up 36% from Q2 2004’s $166 billion, back when the Fed commenced its fateful “tightening” cycle."
Ronald R. Cooke: "The Algerian Parliament has decided to increase Algeria’s share of oil production revenues by placing an “excess” profits tax on oil shipments whenever oil prices exceed $30.00 per barrel. Algeria, one of Africa’s largest oil and natural gas exporters, will levy the new tax starting in 2007. Depending on total output, the excess profits tax will range from 5% to 50% on the Algerian profits of foreign companies, including Shell, BP, Anadarko Petroleum and Hess Corporation.
The Parliament also signed into law a provision that the country’s oil monopoly, Sonatrach, must take a 51 percent controlling interest in all future production and refining contracts. This, despite the fact that most of the financing and technical expertise for oil and natural gas exploration, production and refining has been furnished by foreign corporations and financial institutions."
Ford Motor Co. likely will see a large sales drop in December, while Toyota Motor Corp. could gain enough to take over Ford's traditional role as the No. 2 auto company in the U.S. for the month, according to some industry analysts.
Tuesday, December 26, 2006
Insider Buying
12/28/06 Insider Buying
John Hussman: "Meanwhile, the "smart money" shows a distinctly different pattern. The latest figures from Vickers show heavy insider selling at 8.4 shares sold for every 1 share purchased. The 8-week average is running at a ratio of 6.9 to 1. As Paul Macrae Montgomery asks, " We keep reading about how the share buy-backs, cash takeovers, and leveraged buyouts are proof positive that stock prices are a great 'value'. Well if stock prices are such great values, why is it that all this buying is being down with 'other peoples money,' and why are the savvy insiders simultaneously selling their own stock?"
Thomson Financial's stats for the first two weeks of December reveals a ratio of 55.5 to 1. That's 55 times as many shares sold as buys!
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, for the week ended December 22 decreased 14.2 percent to 555.8, its lowest level since early August. The index stood at 647.6 in the previous week.
According to Bloomberg, The United Arab Emirates will convert 8 percent of its foreign-exchange reserves to euros from dollars before September after the U.S. currency slumped this year, the country's central bank governor said.
The U.A.E. has started ``in a limited way'' to sell part of its dollar reserves, Sultan Bin Nasser al-Suwaidi said in an interview in Abu Dhabi on Dec. 24. ``We will accumulate euros each time the market appears to dip,'' as part of a plan to expand the country's holding of euros to 10 percent of the total from 2 percent today, he said. The total value of the U.A.E.'s current reserves is $24.9 billion, 98 percent in dollars and 2 percent in euros, al-Suwaidi said.
Sales of new homes rose 3.5% in November to a seasonally adjusted annual rate of 1.047 million, the Commerce Department reported Wednesday. Sales are now down 15.3% in the past year. October's sales pace was revised to 1.013 million, from an earlier-estimated 1.004 million. The median sales price of a new home rose to $251,700 from $243,800.
India's Essar group has made an offer to buy Hutchison Whampoa's 67 percent stake in mobile phone operator Hutchison Essar at an estimated enterprise value of $17-$18 billion, the Economic Times said.
Richard Daughty: "The government budgeted $2.6 trillion, and they spent another $600 billion on top of that, to the tune of $3.2 trillion in cash outlays last year! The GDP of the United States is only $13 trillion, for crying out loud! And the actual, real-life deficit last fiscal year, as reported by the Treasury itself, was $4.6 trillion! 35% of GDP! In one year!...the President estimates that 2006 government income (taxes, fees, tariffs, etc) to be about $2.3 trillion. In 2011, four years from now, he is projecting government income to rise steadily, linearly, to over $3 trillion!...A 30% increase in government income in four years? My God!"...we go over and try to Google up a single time in history, anybody's history, ever, where taxes going up 30% in four years is associated with a healthy, growing economy. No hits so far! Now we try to Google up a period in time where taxes increasing by 30% in four years is associated with recessions, depressions, doom, destruction, bankruptcy, misery, suffering and the stench of "hell on earth" permeating almost everything. We get so many hits that a small curl of blue smoke rises from the back of the computer."
An afternoon auction of $20 billion in 2-year Treasury notes met with weak demand. The 10-year note ended down 14/32 at 99 24/32, yielding 4.657%, up from 4.603% late Tuesday.
Irene Haas, an analyst with Canaccord Adams in Houston: "No one has really slowed down drilling in the U.S."
John Hussman: "Meanwhile, the "smart money" shows a distinctly different pattern. The latest figures from Vickers show heavy insider selling at 8.4 shares sold for every 1 share purchased. The 8-week average is running at a ratio of 6.9 to 1. As Paul Macrae Montgomery asks, " We keep reading about how the share buy-backs, cash takeovers, and leveraged buyouts are proof positive that stock prices are a great 'value'. Well if stock prices are such great values, why is it that all this buying is being down with 'other peoples money,' and why are the savvy insiders simultaneously selling their own stock?"
Thomson Financial's stats for the first two weeks of December reveals a ratio of 55.5 to 1. That's 55 times as many shares sold as buys!
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, for the week ended December 22 decreased 14.2 percent to 555.8, its lowest level since early August. The index stood at 647.6 in the previous week.
According to Bloomberg, The United Arab Emirates will convert 8 percent of its foreign-exchange reserves to euros from dollars before September after the U.S. currency slumped this year, the country's central bank governor said.
The U.A.E. has started ``in a limited way'' to sell part of its dollar reserves, Sultan Bin Nasser al-Suwaidi said in an interview in Abu Dhabi on Dec. 24. ``We will accumulate euros each time the market appears to dip,'' as part of a plan to expand the country's holding of euros to 10 percent of the total from 2 percent today, he said. The total value of the U.A.E.'s current reserves is $24.9 billion, 98 percent in dollars and 2 percent in euros, al-Suwaidi said.
Sales of new homes rose 3.5% in November to a seasonally adjusted annual rate of 1.047 million, the Commerce Department reported Wednesday. Sales are now down 15.3% in the past year. October's sales pace was revised to 1.013 million, from an earlier-estimated 1.004 million. The median sales price of a new home rose to $251,700 from $243,800.
India's Essar group has made an offer to buy Hutchison Whampoa's 67 percent stake in mobile phone operator Hutchison Essar at an estimated enterprise value of $17-$18 billion, the Economic Times said.
Richard Daughty: "The government budgeted $2.6 trillion, and they spent another $600 billion on top of that, to the tune of $3.2 trillion in cash outlays last year! The GDP of the United States is only $13 trillion, for crying out loud! And the actual, real-life deficit last fiscal year, as reported by the Treasury itself, was $4.6 trillion! 35% of GDP! In one year!...the President estimates that 2006 government income (taxes, fees, tariffs, etc) to be about $2.3 trillion. In 2011, four years from now, he is projecting government income to rise steadily, linearly, to over $3 trillion!...A 30% increase in government income in four years? My God!"...we go over and try to Google up a single time in history, anybody's history, ever, where taxes going up 30% in four years is associated with a healthy, growing economy. No hits so far! Now we try to Google up a period in time where taxes increasing by 30% in four years is associated with recessions, depressions, doom, destruction, bankruptcy, misery, suffering and the stench of "hell on earth" permeating almost everything. We get so many hits that a small curl of blue smoke rises from the back of the computer."
An afternoon auction of $20 billion in 2-year Treasury notes met with weak demand. The 10-year note ended down 14/32 at 99 24/32, yielding 4.657%, up from 4.603% late Tuesday.
Irene Haas, an analyst with Canaccord Adams in Houston: "No one has really slowed down drilling in the U.S."
Sanctions Don't Work
12/27/06 Sanctions Don't Work
Gholanhossein Nozari, the managing director of National Iranian Oil Company, said that 57 per cent of Iran’s income from oil exports was now received in euros.
"If necessary, Iran will use any weapon to defend itself," Oil Minister Kazem Vaziri-Hamaneh was quoted as saying by the semi-official Fars news agency on Tuesday.
Omar Bongo: "Economic sanctions rarely achieve the desired results."
Brett Steenbarger: "As long as we expand fresh 20-day lows and see new price lows day over day, the short-term trend will remain down."
"We knew spending would be slower than last year,” said Wayne Best, senior vice president of economic analysis at Visa USA. “But it seems to be even slower than we predicted."
John Hussman: "The Russell Investment Group just published their quarterly money managers poll, which shows a fairly stunning 85% of advisors bullish for the coming year. Another roughly 4% expect a flat market, about 9% expect a decline of less than 10%, and just 2% expect a decline of 10% or more. That's amazing given that this is already the second-longest span on record for which the market has not experienced even a 10% correction."
According to new numbers from the Leading Indicator of National Employment [LINE(TM)]
report, there will be more job growth in January 2007 than in January 2006,
and employers from both the manufacturing and the service sectors revealed
no evidence of increasing wage inflation. The findings are reported in the
January report of the LINE(TM) index, a collaborative effort between the
Society for Human Resource Management (SHRM) and the Rutgers University
School of Management and Labor Relations.
Despite the major decline in overall job vacancies, firms continue to
face considerable difficulty in finding highly qualified applicants to fill
key positions. Within both the manufacturing and service sectors,
recruiting difficulty continues to be a major concern, due to a drop in the
large pool of qualified job seekers eager to take open positions. The
recruiting difficulty indexes for the manufacturing and service sectors
remain at nearly the same level (19.5 percent and 22.3 percent). The LINE
"net increasing index" is calculated by taking the percentage increasing
minus the percentage decreasing.
MarketWatch.com: "For the first time since mid-August, the Nasdaq has violated its five-month uptrend."
U.S. antitrust authorities said on Tuesday they have approved Freeport McMoRan Copper & Gold Inc.'s bid to buy Phelps Dodge Corp.
"Based on our channel checks, shoppers were out and they were buying, but not at the level we had expected, especially at many of the apparel driven retailers," Roth Capital Partners analyst Elizabeth Pierce wrote in a note to clients.
"Although results were softer than we expected over the weekend, we believe it is premature to 'call' the holiday season given the increasing popularity of gift cards," she added.
Abu Dhabi's state oil firm, the main producer in the United Arab Emirates, said it would cut exports of nearly half its crude grades by 3-5 percent in February.
Caspar Weinberger: "Sanctions and negotiations can be very ineffective, and indeed foolish, unless the people you are talking with and negotiating with and trying to reach agreements with are people who can be trusted to keep their word."
Crude for February delivery fell $1.31 to $61.10 a barrel. Natural gas prices dropped 7.9% to $6.11 per million British thermal units on forecasts for continuing mild weather throughout much of the nation.
Gold for February delivery closed up $4.60 at $626.90 an ounce. Silver futures added 9 cents to $12.725 an ounce, platinum rose $1.50 to $1,123 an ounce and palladium rose $3 to $329.20 an ounce. Copper futures rose 2.4 cents to $2.878 a pound.
TransCanada and its TC Pipelines affiliate have agreed to buy US gas pipeline and storage assets from El Paso in a move that will greatly extend the Canadian company's reach into US markets. The deal is valued at more than $4 billion, including assumed debt.
The 2006 holiday season was Amazon.com Inc.'s "best ever," peaking with more than 4 million orders placed on Dec. 11, the Web retailer said Tuesday.
The S&P/Case-Shiller composite index showed a 2.4 percent year-over-year increase in the price of a single-family home based on prices of existing homes tracked over time in 10 metropolitan markets. For its 20-city composite index, prices grew 2.9 percent, the slowest rate ever for that data, according to the S&P index committee chairman, David Blitzer.
"Home price gains are continuing their steep deceleration," said Chief Economist Robert Shiller of MacroMarkets LLC. "We can clearly see that the monthly price declines are wide spread nationally."
The growth rate of the 10-city composite index is sharply below the 3.7 percent rise posted in September and the slowest since a 2 percent growth rate in February 1997, according to S&P.
Ludwig von Mises: "There can be neither effective political cooperation nor solidarity and collective security among nations fighting each other in the economic sphere."
Gholanhossein Nozari, the managing director of National Iranian Oil Company, said that 57 per cent of Iran’s income from oil exports was now received in euros.
"If necessary, Iran will use any weapon to defend itself," Oil Minister Kazem Vaziri-Hamaneh was quoted as saying by the semi-official Fars news agency on Tuesday.
Omar Bongo: "Economic sanctions rarely achieve the desired results."
Brett Steenbarger: "As long as we expand fresh 20-day lows and see new price lows day over day, the short-term trend will remain down."
"We knew spending would be slower than last year,” said Wayne Best, senior vice president of economic analysis at Visa USA. “But it seems to be even slower than we predicted."
John Hussman: "The Russell Investment Group just published their quarterly money managers poll, which shows a fairly stunning 85% of advisors bullish for the coming year. Another roughly 4% expect a flat market, about 9% expect a decline of less than 10%, and just 2% expect a decline of 10% or more. That's amazing given that this is already the second-longest span on record for which the market has not experienced even a 10% correction."
According to new numbers from the Leading Indicator of National Employment [LINE(TM)]
report, there will be more job growth in January 2007 than in January 2006,
and employers from both the manufacturing and the service sectors revealed
no evidence of increasing wage inflation. The findings are reported in the
January report of the LINE(TM) index, a collaborative effort between the
Society for Human Resource Management (SHRM) and the Rutgers University
School of Management and Labor Relations.
Despite the major decline in overall job vacancies, firms continue to
face considerable difficulty in finding highly qualified applicants to fill
key positions. Within both the manufacturing and service sectors,
recruiting difficulty continues to be a major concern, due to a drop in the
large pool of qualified job seekers eager to take open positions. The
recruiting difficulty indexes for the manufacturing and service sectors
remain at nearly the same level (19.5 percent and 22.3 percent). The LINE
"net increasing index" is calculated by taking the percentage increasing
minus the percentage decreasing.
MarketWatch.com: "For the first time since mid-August, the Nasdaq has violated its five-month uptrend."
U.S. antitrust authorities said on Tuesday they have approved Freeport McMoRan Copper & Gold Inc.'s bid to buy Phelps Dodge Corp.
"Based on our channel checks, shoppers were out and they were buying, but not at the level we had expected, especially at many of the apparel driven retailers," Roth Capital Partners analyst Elizabeth Pierce wrote in a note to clients.
"Although results were softer than we expected over the weekend, we believe it is premature to 'call' the holiday season given the increasing popularity of gift cards," she added.
Abu Dhabi's state oil firm, the main producer in the United Arab Emirates, said it would cut exports of nearly half its crude grades by 3-5 percent in February.
Caspar Weinberger: "Sanctions and negotiations can be very ineffective, and indeed foolish, unless the people you are talking with and negotiating with and trying to reach agreements with are people who can be trusted to keep their word."
Crude for February delivery fell $1.31 to $61.10 a barrel. Natural gas prices dropped 7.9% to $6.11 per million British thermal units on forecasts for continuing mild weather throughout much of the nation.
Gold for February delivery closed up $4.60 at $626.90 an ounce. Silver futures added 9 cents to $12.725 an ounce, platinum rose $1.50 to $1,123 an ounce and palladium rose $3 to $329.20 an ounce. Copper futures rose 2.4 cents to $2.878 a pound.
TransCanada and its TC Pipelines affiliate have agreed to buy US gas pipeline and storage assets from El Paso in a move that will greatly extend the Canadian company's reach into US markets. The deal is valued at more than $4 billion, including assumed debt.
The 2006 holiday season was Amazon.com Inc.'s "best ever," peaking with more than 4 million orders placed on Dec. 11, the Web retailer said Tuesday.
The S&P/Case-Shiller composite index showed a 2.4 percent year-over-year increase in the price of a single-family home based on prices of existing homes tracked over time in 10 metropolitan markets. For its 20-city composite index, prices grew 2.9 percent, the slowest rate ever for that data, according to the S&P index committee chairman, David Blitzer.
"Home price gains are continuing their steep deceleration," said Chief Economist Robert Shiller of MacroMarkets LLC. "We can clearly see that the monthly price declines are wide spread nationally."
The growth rate of the 10-city composite index is sharply below the 3.7 percent rise posted in September and the slowest since a 2 percent growth rate in February 1997, according to S&P.
Ludwig von Mises: "There can be neither effective political cooperation nor solidarity and collective security among nations fighting each other in the economic sphere."
Sharing The Wealth
12/26/07 Sharing The Wealth
"We've had nine years of great productivity growth, and most workers see no gain for it," said Dean Baker, co-director of the liberal Center for Economic and Policy Research.
The Houston Chronicle points out corporate earnings generated in the U.S. totaled $1.42 trillion at an annualized rate in the third quarter, or 10.7 percent of the economy's gross domestic income, government data show. That was the highest share of income that companies claimed since the 1960s and was up from 6.2 percent in 2000.
By contrast, total labor compensation accounted for 56.4 percent of gross domestic income in the period. That percentage has fallen from 58.4 percent in the fourth quarter of 2000 and has been in general decline since the early 1980s.
Singapore's manufacturing output for November jumped 14.7% year-on-year, to reach a five-month high.
Best Buy is opening its first outlet in China.
The Nikkei hit a 7-month high.
Forty Percent of Employers to Add Jobs in 2007, CareerBuilder.com Survey Finds.
The question remains at what pay and at what benefits?
Anadarko Petroleum Corp. agreed to sell its Vernon and Ansley fields to Exco Resources Inc. for $1.6 billion. Both fields are located in in Jackson Parish, La.
"We've had nine years of great productivity growth, and most workers see no gain for it," said Dean Baker, co-director of the liberal Center for Economic and Policy Research.
The Houston Chronicle points out corporate earnings generated in the U.S. totaled $1.42 trillion at an annualized rate in the third quarter, or 10.7 percent of the economy's gross domestic income, government data show. That was the highest share of income that companies claimed since the 1960s and was up from 6.2 percent in 2000.
By contrast, total labor compensation accounted for 56.4 percent of gross domestic income in the period. That percentage has fallen from 58.4 percent in the fourth quarter of 2000 and has been in general decline since the early 1980s.
Singapore's manufacturing output for November jumped 14.7% year-on-year, to reach a five-month high.
Best Buy is opening its first outlet in China.
The Nikkei hit a 7-month high.
Forty Percent of Employers to Add Jobs in 2007, CareerBuilder.com Survey Finds.
The question remains at what pay and at what benefits?
Anadarko Petroleum Corp. agreed to sell its Vernon and Ansley fields to Exco Resources Inc. for $1.6 billion. Both fields are located in in Jackson Parish, La.
Sunday, December 24, 2006
Happy Holidays
12/25/06 Happy Holidays
Mike Burk: " Next year is the 3rd year in the 4 year Presidential Cycle and, on average, the strongest by a wide margin.
Since 1963 the OTC has been up every 3rd year except 1987. The average gain for the 3rd year has been 36.5%, nearly 3 times the average gain of all years combined.
Since 1928 the SPX has been up every 3rd year except 1931 and 1939. The average gain has been 15.5%, a little over double its average gain of all years combined."
Tim Wood: "Things are not as rosy as they appear. All the while the public is numb.Personally, I have my doubts about the "powers that be" being able to pump the economy enough to save it again. After all, we are still seeing the deflating of the bubbles in housing and commodities from the last, or really the ongoing, reinflation effort. All the while, stock market is still hanging on from these reinflation efforts but is increasingly moving onto thinner and thinner ice. I believe that the housing and commodity markets were the first dominos to topple and that the stock market will likely be the next. We are certainly seeing indications of this anyway. Also, the sentiment data tells me that the public is fearlessly complacent and obliviously numb to the real danger here. So, in light of these warnings and in spite of the fact that the stock market is at all time highs I don't like what I see and the overall picture here makes me nervous."
Motley Fool: "In the world of energy, expectations of a status quo in demand and production still provide lots of work for service companies such as Schlumberger (NYSE: SLB), Baker Hughes (NYSE: BHI), and BJ Services (NYSE: BJS), along with exploration and production companies ExxonMobil, ConocoPhillips (NYSE: COP), and others. That's simply because both oil and gas wells lose pressure over time and the ability to produce at prior levels, which necessitates remedial steps to revitalize production, along with the drilling of additional wells to compensate for the declines."
Rigzone reported State-run Petroleos de Venezuela S.A. is teaming up with an Iranian shipbuilding firm to make offshore platforms, said PdVSA on Friday. PdVSA
signed the initial paperwork to form a jointly-owned company with Sadra America Latina, a division of Sadra, an Iranian marine construction firm that has been expanding into the offshore oil and natural gas business. PdVSA said the new venture, Venezirian Oil Company, will give Venezuela access to new offshore technology.
Vodafone and a consortium of private equity funds led by the Texas Pacific Group have forged ahead in talks for acquiring Hutchison Telecom International Ltd’s 67% stake in India’s fourth largest mobile operator.
Bloomberg reported Japan's consumer price gains probably accelerated in November, giving the central bank room to increase the lowest interest rates among major economies.
Marcel Pagnol: "The reason people find it so hard to be happy is that they always see the past better than it was, the present worse than it is, and the future less resolved than it will be."
Mike Burk: " Next year is the 3rd year in the 4 year Presidential Cycle and, on average, the strongest by a wide margin.
Since 1963 the OTC has been up every 3rd year except 1987. The average gain for the 3rd year has been 36.5%, nearly 3 times the average gain of all years combined.
Since 1928 the SPX has been up every 3rd year except 1931 and 1939. The average gain has been 15.5%, a little over double its average gain of all years combined."
Tim Wood: "Things are not as rosy as they appear. All the while the public is numb.Personally, I have my doubts about the "powers that be" being able to pump the economy enough to save it again. After all, we are still seeing the deflating of the bubbles in housing and commodities from the last, or really the ongoing, reinflation effort. All the while, stock market is still hanging on from these reinflation efforts but is increasingly moving onto thinner and thinner ice. I believe that the housing and commodity markets were the first dominos to topple and that the stock market will likely be the next. We are certainly seeing indications of this anyway. Also, the sentiment data tells me that the public is fearlessly complacent and obliviously numb to the real danger here. So, in light of these warnings and in spite of the fact that the stock market is at all time highs I don't like what I see and the overall picture here makes me nervous."
Motley Fool: "In the world of energy, expectations of a status quo in demand and production still provide lots of work for service companies such as Schlumberger (NYSE: SLB), Baker Hughes (NYSE: BHI), and BJ Services (NYSE: BJS), along with exploration and production companies ExxonMobil, ConocoPhillips (NYSE: COP), and others. That's simply because both oil and gas wells lose pressure over time and the ability to produce at prior levels, which necessitates remedial steps to revitalize production, along with the drilling of additional wells to compensate for the declines."
Rigzone reported State-run Petroleos de Venezuela S.A. is teaming up with an Iranian shipbuilding firm to make offshore platforms, said PdVSA on Friday. PdVSA
signed the initial paperwork to form a jointly-owned company with Sadra America Latina, a division of Sadra, an Iranian marine construction firm that has been expanding into the offshore oil and natural gas business. PdVSA said the new venture, Venezirian Oil Company, will give Venezuela access to new offshore technology.
Vodafone and a consortium of private equity funds led by the Texas Pacific Group have forged ahead in talks for acquiring Hutchison Telecom International Ltd’s 67% stake in India’s fourth largest mobile operator.
Bloomberg reported Japan's consumer price gains probably accelerated in November, giving the central bank room to increase the lowest interest rates among major economies.
Marcel Pagnol: "The reason people find it so hard to be happy is that they always see the past better than it was, the present worse than it is, and the future less resolved than it will be."
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