1/20/07 Cross Currents
With big drops in Apple, IBM, Symantec, and Motorola for example, and the increasing number of deaths in Iraq and Afghanistan, one would think the VIX would show some life. With twice as many bulls as bears, complacency rules.
Pulte Homes announced preliminary Q4 results late yesterday that were sharply lower than its previous guidance. Q4 EPS is now seen between -$0.05 to $0.05, from $0.30 to $0.70 previously. A poll by Thomson shows analysts had expected $0.37. Impairments and land-related charges are now estimated between $330 million to $350m, or $0.83 to $0.88/share, more than double prior guidance of $150m. Pulte Homes-Q4 home closings totaled 12,566, or a 20% decline year-over-year and new orders of 6,466 represent a 34% decline. Pulte's CEO commented, "... [we] continue(s) to navigate through a challenging operating environment, with demand for new homes during the fourth quarter still far below pre-2006 levels."
M/I Homes Inc. said it expects to book impairment charges between $65 million and $75 million for the fourth quarter, and anticipates writing off an additional $3 million in land-option deposits. The builder said it expects the charges will lower the company's fourth-quarter earnings by $2.80 to $3.50 a share. M/I Homes cut its full-year profit estimate to a range of $2.50 to $3 a share.
It will take many more months of economic data before the Federal Reserve could signal the 'all-clear' on inflation, said Jeffrey Lacker, the president of the Richmond Federal Reserve Bank.
ElkCorp. received a cash tender offer from an affiliate of Building Materials Corporation of America to purchase all the of the company's outstanding stock at $42 a share.
It's interesting that so many acquisitions are being met with multiple offers. Are stocks so undervalued in relation to their take out value or does cheap money rule the day? Maybe a combination of both.
Schlumberger Ltd. said fourth-quarter net income rose 71% to $1.13 billion, or 92 cents a share, from $661 million, or 54 cents a share, with revenue up 33% to $5.35 billion. Quarterly profit growth was driven by WesternGeco progress and its information solutions arm, the company said. It expects "significant" growth in 2007, particulary in the Eastern Hemisphere, the company said.
India's Tata Steel could raise its bid for Anglo-Dutch steel producer Corus Group, the Economic Times reported Friday.
The crude contract rolls over on Monday.
In an interview with Bloomberg, Jim Rogers, the author of ``Hot Commodities'' who predicted the start of the raw material rally in 1999, said the recent slide in oil is a ``correction'' before prices resume their march toward $100 a barrel.
``I'm just not smart enough to know how far down it will go and how long it will stay, but I do know that within the context of the bull market, oil will go over $100,'' Rogers said in a Tokyo interview. ``It will go over $150. Whether that is in 2009 or 2013, I don't have a clue, but I know it's going to happen.''
Rogers has said oil will keep rising because there hasn't been a major discovery for 30 years and economic growth in China and across Asia is driving demand higher.
``When you have big bull markets, 50 percent corrections, or retractions, are normal,'' he said in an interview yesterday. ``It has often happened throughout history in a bull market.''
Rigzone noted that last year Kazakhstan downgraded its long-term oil output forecast from 3 million to 2.6 million barrels a day by 2015 because of delays with development of Caspian Sea fields.
The start of production at the giant Kashagan oil field is not expected before 2009-2010 because of technological difficulties. The international consortium let by Italy's Eni SpA had originally planned to start production in 2005.
The Kashagan field in northern Caspian Sea, the world's last biggest oil discovery in the past 30 years, is expected to play a crucial role in filling a new pipeline completed in 2005 and designed to carry Kazakh oil to energy-hungry China.
Billionaires Ron Burkle and Eli Broad say their offer for the sagging media giant would give shareholders a private equity–style payout.
A fire sparked by a blast disrupted operations Thursday in several units at one of Kuwait's three oil refineries which produces 200,000 barrels per day (bpd), an oil official said.
A gauge of consumer sentiment improved in January to the highest level in three years, according to research at the University of Michigan on Friday, Reuters reported. The consumer sentiment index rose to 98.0 in January from 91.7 in December. The increase was well above the consensus forecast of Wall Street economists who had expected sentiment to rise to 92.0. The current conditions index rose to 112.5 in January from 108.1 in December. It's the highest since July 2005. The expectations index rose from 81.2 to 88.7, the highest since December 2004. Consumers' expectations about inflation over the next five years remained at 3%.
Parent company Royal Dutch Shell may boost a C$7.7 billion ($6.6 billion) offer to acquire its Canadian unit by at least 15 percent if it convinces minority shareholders to agree to the bid, the Globe and Mail said. Royal Dutch is promising to pay between C$46 and C$48 a share for Shell Canada stock if institutions agree to sell the shares, the Globe said.
China's stocks rose to a record, completing the biggest weekly jump in eight months.
The European Commission expects Europe's economy to ``remain strong'' in coming months and inflationary pressures to be eased by the drop in oil prices and the euro's strength, a confidential draft document shows.
Federal Reserve Governor Susan Bies said ``strong'' U.S. economic growth means there's a risk inflation may not slow as central bankers are forecasting.
Motorola Inc. CEO Ed Zander says the cell-phone maker will cut 3,500 jobs, saving about $400 million over two years.
With respect to Tribune Company, a possible scenario would be a tax-free exchange by the Chandlers and the purchase of the broadcasting unit by the Carlyle Group.
The number of rotary rigs drilling for oil and natural gas in North America rose by 48, or 2.1%, to 2,351, according to a weekly update by Baker Hughes Inc. on Friday.
Peter Grandich, editor of Grandich Publications -- had predicted that oil prices reached their top when they climbed to record highs last July. In the July 1 edition of his Grandich Letter, he wrote that starting in the autumn, "we can begin to see one of the sharpest falls in oil prices in several years -- back under $60 by spring of 2007." "This growling bear is about to grow horns and become a bull," said Grandich, who's now predicting that the oil market could see its 2007 low during the March quarter. "It's no longer prudent to be bearish," he says.
February gold closed at $636.40 an ounce Friday, up $8.30 for the session. March silver was up 23.5 cents to close at $12.92 an ounce. March copper climbed 2.5 cents Friday to close at $2.517 a pound.
Dow Chemical Co. shares jumped as much as 4% in trading Friday after the Financial Times said there had been talk Thursday that a consortium of private equity groups was working on a break-up bid for the world's largest chemical company.
Natural gas rose .592 to close at 6.920 and crude rallied about $1.50 to close at $51.99 a barrel.
Friday, January 19, 2007
Thursday, January 18, 2007
Changing Times
1/19/07 Changing Times
Apache Corp. agreed to acquire a controlling interest in 28 oil and gas fields in the Permian Basin of west Texas from Anadarko Petroleum Corp. for $1 billion. The fields are "a close fit" to Apache's current operations in the area, said G. Steven Farris, Apache's president and chief executive, in a statement.
Equity Office Properties Trust may accept a topping bid for the real estate investment trust from a consortium of investors including Vornado Realty Trust, which could put pressure on private-equity firm Blackstone Group to match the offer, Stifel Nicolas said Thursday. Vornado Realty Trust after Wednesday's closing bell said it has submitted a proposal with Starwood Capital and Walton Street to acquire Equity Office Properties Trust for $52 per share or unit -- a 2% premium to Wednesday's closing price. The bid is payable 60% in cash and 40% in Vornado shares.
Jobless claims in the latest week fell to an 11-month low.
Led by higher gasoline, clothing and tobacco prices, U.S. consumer prices rose a seasonally adjusted 0.5% in December, the first increase since August, the Labor Department reported Thursday. Excluding food and energy prices, the core CPI rose 0.2% in December, the biggest increase in three months. In 2006, the CPI rose 2.5% after a 3.4% gain in 2005. The core CPI rose 2.6% in 2006 after 2.2% in 2005. It was the highest core inflation since 2001's 2.7%.
The yen tumbled to a four-year low against the dollar, two-week low versus the euro and nine-year low against the British pound after the Bank of Japan voted to keep interest rates steady at 0.25% -- the lowest among major economies.
Housing starts rose 4.5% in December and permits rose 5.5%. The mild weather in December most probably was behind these gains.
The Chandler Trusts said they are offering $31.70 per share of Tribune Co. that they don't already own. The offer is comprised of $19.30 a share in cash, and the value of Tribune's broadcasting business which will be spun off, they said in a statement filed with the Securities and Exchange Commission. This offer expires Jan. 31. In addition, The Wall Street Journal reported Thursday morning that at least three groups submitted offers. It appears to me that the Chandler offer is the floor and that higher bids will be forthcoming.
J.P. Morgan downgraded Apple, Inc. to neutral from overweight, saying that while the company's first-quarter earnings exceeded expectations, Mac shipments of 1.6 million units missed its forecast of 1.9 million units. In addition, the broker warned that as the company enters the seasonally weaker period of the year, shipments of iPod digital music players may disappoint investors' heightened expectations. "We believe this risk is particularly pronounced given our concerns that some consumers may delay iPod purchases ahead of the iPhone launch," J.P. Morgan concluded.
The IEA is now forecasting 0.9% growth for 2006 and 1.6% growth for 2007. That's a downgrade of 120,000 barrels a day for 2006 and 160,000 barrels for 2007.
Real average weekly earnings fell by 0.1 percent from November to December
after seasonal adjustment, according to preliminary data released today by the
Bureau of Labor Statistics of the U.S. Department of Labor. This decrease
stemmed from a 0.5 percent increase in average hourly earnings combined with a
0.6 percent increase in the Consumer Price Index for Urban Wage Earners and
Clerical Workers. Average weekly hours were unchanged.
Average weekly earnings rose by 4.5 percent, seasonally adjusted, from
December 2005 to December 2006. After deflation by the CPI-W, average weekly
earnings increased by 2.1 percent.
Federal Reserve Chairman Ben Bernanke warned the U.S. Congress on
Thursday that failure to take fiscal action soon to deal with America's
aging population could lead to serious economic harm.
Abbott Laboratories is preparing to sell most of its health diagnostics business for $8 billion to General Electric Co., the world's biggest maker of medical imaging machines, people familiar with the matter said.
Abbott, the third-largest U.S. drugmaker, would retain the fast-growing diabetes monitoring and genetics testing parts of its diagnostics unit, a person said. Fairfield, Connecticut-based GE would get in-hospital and point-of-care tools, augmenting an expansion into biotechnology and in-body testing for early detection of disease.
The American Petroleum Institute reported a rise of 7.6 million barrels in crude supplies for the week ended Jan. 12. The Energy Department had reported a climb of 6.8 million. Motor gasoline supplies were up 3.3 million barrels, the API said, vs. the government's reported rise of 3.5 million. Distillate supplies rose 395,000 barrels, the API said, compared with the 900,000-barrel climb reported by the government. U.S. natural-gas supply was down 89 bln cubic feet, according to the Energy Dept. The sharp rise in crude etc led to a decline in the price per barrel to below $51.
Justice Litle: "In the short run, a market can do most anything - especially one dominated by speculators with a quarterly, or even monthly, time horizon. But in the long run, as Jesse Livermore noted, the best and truest allies will always be underlying conditions. You'll see all kinds of numbers fly around in the coming weeks and months, feet stampeding this way and that… but through it all, the long-term energy picture won't shift much.
We're dealing with sweeping sea change here, not ephemeral seasonal stuff.
That's why I'm not inclined to worry too much about this recent crude oil slide. There's never any money in running around like a chicken with your head cut off. Traders rely on speed and reflex, investors on patience and fortitude; to the best of my knowledge, nervous panic is no help to either discipline. If anything, the short-term roller coaster gives an edge to those with a taste for the long-term view."
Saudi Arabia plans to increase its crude oil production capacity nearly 40 percent by 2009 and double its refining size over the next five years to keep pace with growing global demand, the country's oil minister said Thursday. It plans to expand crude production capacity to 12.5 million barrels a day by 2009 from 9 million barrels now.
More on the Tribune Company, which will have a board meeting this weekend. the team of Eli Broad and Ronald W. Burkle made a $500 million offer to help refinance the company while becoming its largest shareholder.
The Broad and Burkle offer is essentially a recapitalization of the company. It would give a $27 dividend payment for each share, according to people involved in their bid. In exchange, they would receive 31 percent of the company, leaving the remaining 69 percent to the current shareholders.
The deal, financed by a $500 million cash infusion from Mr. Burkle and Mr. Broad and $11 billion in debt, effectively values the company at $34 a share.
Chris Puplava: "For 2006 the number of people aged 60 years or more is estimated at 688 million and is projected to increase by 190% to nearly 2 billion by 2050. This corresponds to one out of every nine persons aged 60 or over currently, and one out of five by 2050. This will be an historic event where by 2050, the population of older persons (>60) will be larger than the population of children (0-14) for the first time in human history!"
February gold fell $5.20 to end Thursday's session at $628.10 an ounce. March silver followed gold lower, to close at $12.685 an ounce, down 20.5 cents. March copper fell 7.75 cents, or 3%, to close at $2.492 a pound.
The Philly Fed index of manufacturing sentiment rose to 8.3 from negative 2.3 in December, the bank said. The new orders index rose to 1.3 in January from negative 0.9%, while the shipments index rose to 23.9 from 14.0. The prices paid index fell to 11.9, indicating reduced price pressures. Economists expected an increase to about 2.5.
The Bank of Canada estimated fourth-quarter growth at 1.5 percent, down sharply from its previous forecast of 2.8 percent. However, it sees Canada's economy rebounding to grow 2.4 percent in the first quarter and 2.6 percent in the second, compared with estimates of 2.4 percent and 2.5 percent respectively.
It pegged annual growth this year at 2.3 percent, down slightly from its October forecast of 2.5 percent but kept its 2008 forecast unchanged at 2.8 percent.
February crude fell $1.76, or 3.4%, to close at $50.48 a barrel. February natural gas closed up 9 cents at $6.324 per million British thermal units following a slightly smaller-than-expected decline in last week's U.S. natural-gas supplies.
Apache Corp. agreed to acquire a controlling interest in 28 oil and gas fields in the Permian Basin of west Texas from Anadarko Petroleum Corp. for $1 billion. The fields are "a close fit" to Apache's current operations in the area, said G. Steven Farris, Apache's president and chief executive, in a statement.
Equity Office Properties Trust may accept a topping bid for the real estate investment trust from a consortium of investors including Vornado Realty Trust, which could put pressure on private-equity firm Blackstone Group to match the offer, Stifel Nicolas said Thursday. Vornado Realty Trust after Wednesday's closing bell said it has submitted a proposal with Starwood Capital and Walton Street to acquire Equity Office Properties Trust for $52 per share or unit -- a 2% premium to Wednesday's closing price. The bid is payable 60% in cash and 40% in Vornado shares.
Jobless claims in the latest week fell to an 11-month low.
Led by higher gasoline, clothing and tobacco prices, U.S. consumer prices rose a seasonally adjusted 0.5% in December, the first increase since August, the Labor Department reported Thursday. Excluding food and energy prices, the core CPI rose 0.2% in December, the biggest increase in three months. In 2006, the CPI rose 2.5% after a 3.4% gain in 2005. The core CPI rose 2.6% in 2006 after 2.2% in 2005. It was the highest core inflation since 2001's 2.7%.
The yen tumbled to a four-year low against the dollar, two-week low versus the euro and nine-year low against the British pound after the Bank of Japan voted to keep interest rates steady at 0.25% -- the lowest among major economies.
Housing starts rose 4.5% in December and permits rose 5.5%. The mild weather in December most probably was behind these gains.
The Chandler Trusts said they are offering $31.70 per share of Tribune Co. that they don't already own. The offer is comprised of $19.30 a share in cash, and the value of Tribune's broadcasting business which will be spun off, they said in a statement filed with the Securities and Exchange Commission. This offer expires Jan. 31. In addition, The Wall Street Journal reported Thursday morning that at least three groups submitted offers. It appears to me that the Chandler offer is the floor and that higher bids will be forthcoming.
J.P. Morgan downgraded Apple, Inc. to neutral from overweight, saying that while the company's first-quarter earnings exceeded expectations, Mac shipments of 1.6 million units missed its forecast of 1.9 million units. In addition, the broker warned that as the company enters the seasonally weaker period of the year, shipments of iPod digital music players may disappoint investors' heightened expectations. "We believe this risk is particularly pronounced given our concerns that some consumers may delay iPod purchases ahead of the iPhone launch," J.P. Morgan concluded.
The IEA is now forecasting 0.9% growth for 2006 and 1.6% growth for 2007. That's a downgrade of 120,000 barrels a day for 2006 and 160,000 barrels for 2007.
Real average weekly earnings fell by 0.1 percent from November to December
after seasonal adjustment, according to preliminary data released today by the
Bureau of Labor Statistics of the U.S. Department of Labor. This decrease
stemmed from a 0.5 percent increase in average hourly earnings combined with a
0.6 percent increase in the Consumer Price Index for Urban Wage Earners and
Clerical Workers. Average weekly hours were unchanged.
Average weekly earnings rose by 4.5 percent, seasonally adjusted, from
December 2005 to December 2006. After deflation by the CPI-W, average weekly
earnings increased by 2.1 percent.
Federal Reserve Chairman Ben Bernanke warned the U.S. Congress on
Thursday that failure to take fiscal action soon to deal with America's
aging population could lead to serious economic harm.
Abbott Laboratories is preparing to sell most of its health diagnostics business for $8 billion to General Electric Co., the world's biggest maker of medical imaging machines, people familiar with the matter said.
Abbott, the third-largest U.S. drugmaker, would retain the fast-growing diabetes monitoring and genetics testing parts of its diagnostics unit, a person said. Fairfield, Connecticut-based GE would get in-hospital and point-of-care tools, augmenting an expansion into biotechnology and in-body testing for early detection of disease.
The American Petroleum Institute reported a rise of 7.6 million barrels in crude supplies for the week ended Jan. 12. The Energy Department had reported a climb of 6.8 million. Motor gasoline supplies were up 3.3 million barrels, the API said, vs. the government's reported rise of 3.5 million. Distillate supplies rose 395,000 barrels, the API said, compared with the 900,000-barrel climb reported by the government. U.S. natural-gas supply was down 89 bln cubic feet, according to the Energy Dept. The sharp rise in crude etc led to a decline in the price per barrel to below $51.
Justice Litle: "In the short run, a market can do most anything - especially one dominated by speculators with a quarterly, or even monthly, time horizon. But in the long run, as Jesse Livermore noted, the best and truest allies will always be underlying conditions. You'll see all kinds of numbers fly around in the coming weeks and months, feet stampeding this way and that… but through it all, the long-term energy picture won't shift much.
We're dealing with sweeping sea change here, not ephemeral seasonal stuff.
That's why I'm not inclined to worry too much about this recent crude oil slide. There's never any money in running around like a chicken with your head cut off. Traders rely on speed and reflex, investors on patience and fortitude; to the best of my knowledge, nervous panic is no help to either discipline. If anything, the short-term roller coaster gives an edge to those with a taste for the long-term view."
Saudi Arabia plans to increase its crude oil production capacity nearly 40 percent by 2009 and double its refining size over the next five years to keep pace with growing global demand, the country's oil minister said Thursday. It plans to expand crude production capacity to 12.5 million barrels a day by 2009 from 9 million barrels now.
More on the Tribune Company, which will have a board meeting this weekend. the team of Eli Broad and Ronald W. Burkle made a $500 million offer to help refinance the company while becoming its largest shareholder.
The Broad and Burkle offer is essentially a recapitalization of the company. It would give a $27 dividend payment for each share, according to people involved in their bid. In exchange, they would receive 31 percent of the company, leaving the remaining 69 percent to the current shareholders.
The deal, financed by a $500 million cash infusion from Mr. Burkle and Mr. Broad and $11 billion in debt, effectively values the company at $34 a share.
Chris Puplava: "For 2006 the number of people aged 60 years or more is estimated at 688 million and is projected to increase by 190% to nearly 2 billion by 2050. This corresponds to one out of every nine persons aged 60 or over currently, and one out of five by 2050. This will be an historic event where by 2050, the population of older persons (>60) will be larger than the population of children (0-14) for the first time in human history!"
February gold fell $5.20 to end Thursday's session at $628.10 an ounce. March silver followed gold lower, to close at $12.685 an ounce, down 20.5 cents. March copper fell 7.75 cents, or 3%, to close at $2.492 a pound.
The Philly Fed index of manufacturing sentiment rose to 8.3 from negative 2.3 in December, the bank said. The new orders index rose to 1.3 in January from negative 0.9%, while the shipments index rose to 23.9 from 14.0. The prices paid index fell to 11.9, indicating reduced price pressures. Economists expected an increase to about 2.5.
The Bank of Canada estimated fourth-quarter growth at 1.5 percent, down sharply from its previous forecast of 2.8 percent. However, it sees Canada's economy rebounding to grow 2.4 percent in the first quarter and 2.6 percent in the second, compared with estimates of 2.4 percent and 2.5 percent respectively.
It pegged annual growth this year at 2.3 percent, down slightly from its October forecast of 2.5 percent but kept its 2008 forecast unchanged at 2.8 percent.
February crude fell $1.76, or 3.4%, to close at $50.48 a barrel. February natural gas closed up 9 cents at $6.324 per million British thermal units following a slightly smaller-than-expected decline in last week's U.S. natural-gas supplies.
Wednesday, January 17, 2007
Internals
1/18/07 Internals
The Producer Price Index for Finished Goods increased 0.9 percent in
December, seasonally adjusted, the Bureau of Labor Statistics of the U.S.
Department of Labor reported today. This rise followed a 2.0-percent
advance in November and a 1.6-percent decline in October. At the earlier
stages of processing, prices received by manufacturers of intermediate
goods moved up 0.5 percent in December after climbing 0.7 percent a month
earlier, and the crude goods index increased 2.9 percent following a 15.7-
percent gain in November.
U.S. industrial production rose by an overall 0.4% in December, as the high-technology and motor vehicle industries posted strong output for the month, the Federal Reserve said Wednesday. Output in November was revised to drop by 0.1%, down from the initial estimate of a 0.2% gain.
Monthly capital flows rose to $74.9 billion in November, compared to $60.4 billion in October, the Treasury said. It includes short-term securities like Treasury bills. Of the total amount, $65.8 billion was purchased by private investors, and $9.1 billion was purchased by official institutions. Net long-term capital inflows, meanwhile, fell to $68.4 billion in November from $85.3 billion in October.
Sandra Day O'Connor: "Statutes authorizing unreasonable searches were the core concern of the framers of the 4th Amendment."
General Motors Corp. said it sold 9.1 million cars and trucks worldwide in 2006, a drop of less than 1% from the 9.2 million vehicles it sold in 2005.
McDonald's Corp. said global same-store sales rose 7.2% in December, and fourth-quarter global same-store sales rose 6.3%.
Chain store sales for the week ended Jan. 13 rose 4.9% from the year-ago period, according to a survey released Wednesday by the International Council of Shopping Centers and UBS Securities LLC. This is the strongest gain since Sept. 16, 2006.
For the quarter ended Nov. 30, Lennar posted a loss of $195.6 million, or $1.24 a share, compared with net income of $581.2 million, or $3.54, in the year-earlier period. Revenue fell to $4.27 billion from $5.03 billion. Lennar said it will "continue to carefully match our starts to demand, and as a result we estimate deliveries will decline in excess of 20% in 2007" from 2006. Profitability will drop in the first half, but 'if the current environment of strong employment, low interest rates and a healthy economy continues, and the market for new homes demonstrates traditional seasonal improvement, we will meet or exceed our 2006 earnings of $3.69 per share."
Saudi Oil Minister Ali Naimi told reporters in India on Wednesday that the market is in a "very healthy" condition. Meanwhile, Boone Pickens said Saudi Arabia recently cut their production by 200,000 barrels, and that, in his view crude will average $70 a barrel this year.
Speaking of averages, unleaded gas averages $2.23 a gallon in the U.S. with Toledo at $1.87 and SF around $2.87. That's 180 degrees different from real estate prices in Toledo and SF.
With copper at $2.55 per pound, Dennis Gartman doesn't see copper dropping below $2 this year.
If both sides benefit, Toyota would consider a tie up with Ford.
USA Today reported that The Independent, a British newspaper, stated the Bush administration is heavily involved in writing a hydrocarbon law being considered by Iraq's parliament. The paper said it had obtained a draft of the law, which would allow Western oil companies contracts of up to 30 years to pump oil out of Iraq, and the profits would be tax free.
Intel is anticipating profit margins of about 50% in 2007.
The face of the Doomsday Clock will shift closer to midnight Wednesday, symbolizing the impending destruction of humanity in a "Second Nuclear Age."
Chicago's Bulletin of the Atomic Scientists, the group which has maintained the timepiece since 1947, is winding the minute hand closer to the grim hour for the first time since 2002, when it was frozen at seven minutes to midnight.
Now modern dangers such as global warming and the nuclear ambitions of Iran and North Korea are expected to inch the clock two minutes forward — to five minutes to midnight — though scientists have not confirmed the exact change.
India and Saudi Arabia today re-affirmed their mutual commitment to enhance cooperation in the oil and gas sector. In a meeting between Shri Murli Deora, Minister of Petroleum and Natural Gas and Mr. Engineer Ali bin Ibrahim Al-Naimi, Minister of Petroleum and Mineral Resources of Saudi Arabia here today, the two Ministers discussed investment opportunities for oil companies of the two countries in either Saudi Arabia or India. It was underlined that in view growing activities in the hydrocarbon sector, the oil companies of two countries would immensely benefit from criss-cross investment in areas of hydrocarbon sector. The Two Ministers reiterated the strategic partnership evolved during the visit of the King of Saudi Arabia in January 2006.
Saudi Arabia expressed deep concerns about whether the Shiite-led government in Baghdad had the capability and will to halt sectarian violence and protect Iraqi Sunnis.
Fighter jet parts and other sensitive U.S. military gear seized from front companies for Iran and brokers for China have been traced in criminal cases to a surprising source: the Pentagon.
The India-ASEAN free trade agreement is expected to be finalised mid 2007. This was stated by commerce minister Kamal Nath on the conclusion of talks with leaders of the ASEAN at the resort island Cebu in The Philipines.
The two sides have agreed to prepare a list of products that would not be exempt from tariff cuts till 2022. The traded value of these duty exempt products would not exceed 5 per cent of the total tradeable goods on which duties would be eliminated or reduced.
China signed an agreement on trade and services with ASEAN that will be effective from July, enabling greater flow of services such as telecom, banking and construction.
Mills agrees to be acquired by Brookfield Asset Management for $21 a share.
U.S. airlines employed 1.6% fewer workers in November 2006 than in the same month a year earlier, the Department of Transportation said Wednesday.
Ronald Reagan: "We've gone astray from first principles. We've lost sight of the rule that individual freedom and ingenuity are at the very core of everything that we've accomplished. Government's first duty is to protect the people, not run their lives."
Fannie Mae said existing-home sales to fall 8.1% in 2007 and new-home sales to fall 7.1% in 2007.
February crude rose $1.03 to close at $52.24 a barrel. February natural gas dropped 40.4 cents to close at $6.234 per million British thermal units.
U.S. economic growth is only expanding at a modest pace, but there is no sign of any cooling in the hot labor market, the Federal Reserve's latest survey of current economic conditions found. The Fed's "beige book" found that reports from its 12 districts "generally described labor market conditions are tightening and cited examples of some businesses having difficulty finding qualified workers." Overall, wage gains for workers has been "relatively moderate" but certain business lines are experiencing wage increases and are worried about rising benefit costs, the survey found.
February gold climbed $7.40, or 1.2%, to close at $633.30 an ounce Wednesday. March silver closed up 26.5 cents at $12.89 an ounce.
The 10-year benchmark Treasury note fell 6/32 to close at 98-27/32 with a yield of 4.787%, up from 4.752% at Tuesday's close. The 30-year yield rose to 4.87% and the 2-year is now at 4.90%. In sum, yields are beginning to approach 5% and the yield curve remains inverted.
The Bush administration, backing off a disputed policy for fighting the war on terrorism, agreed to let a secret court supervise an eavesdropping program that targets suspected al Qaeda members in the U.S.
Attorney General Alberto Gonzales announced the change in the program, until now conducted without court warrants, in a letter today to leaders of the Senate Judiciary Committee. The Foreign Intelligence Surveillance Court, which already handles secret wiretapping cases involving foreign agents, will now approve ``any electronic surveillance'' that was occurring under the domestic program, Gonzales said.
The Producer Price Index for Finished Goods increased 0.9 percent in
December, seasonally adjusted, the Bureau of Labor Statistics of the U.S.
Department of Labor reported today. This rise followed a 2.0-percent
advance in November and a 1.6-percent decline in October. At the earlier
stages of processing, prices received by manufacturers of intermediate
goods moved up 0.5 percent in December after climbing 0.7 percent a month
earlier, and the crude goods index increased 2.9 percent following a 15.7-
percent gain in November.
U.S. industrial production rose by an overall 0.4% in December, as the high-technology and motor vehicle industries posted strong output for the month, the Federal Reserve said Wednesday. Output in November was revised to drop by 0.1%, down from the initial estimate of a 0.2% gain.
Monthly capital flows rose to $74.9 billion in November, compared to $60.4 billion in October, the Treasury said. It includes short-term securities like Treasury bills. Of the total amount, $65.8 billion was purchased by private investors, and $9.1 billion was purchased by official institutions. Net long-term capital inflows, meanwhile, fell to $68.4 billion in November from $85.3 billion in October.
Sandra Day O'Connor: "Statutes authorizing unreasonable searches were the core concern of the framers of the 4th Amendment."
General Motors Corp. said it sold 9.1 million cars and trucks worldwide in 2006, a drop of less than 1% from the 9.2 million vehicles it sold in 2005.
McDonald's Corp. said global same-store sales rose 7.2% in December, and fourth-quarter global same-store sales rose 6.3%.
Chain store sales for the week ended Jan. 13 rose 4.9% from the year-ago period, according to a survey released Wednesday by the International Council of Shopping Centers and UBS Securities LLC. This is the strongest gain since Sept. 16, 2006.
For the quarter ended Nov. 30, Lennar posted a loss of $195.6 million, or $1.24 a share, compared with net income of $581.2 million, or $3.54, in the year-earlier period. Revenue fell to $4.27 billion from $5.03 billion. Lennar said it will "continue to carefully match our starts to demand, and as a result we estimate deliveries will decline in excess of 20% in 2007" from 2006. Profitability will drop in the first half, but 'if the current environment of strong employment, low interest rates and a healthy economy continues, and the market for new homes demonstrates traditional seasonal improvement, we will meet or exceed our 2006 earnings of $3.69 per share."
Saudi Oil Minister Ali Naimi told reporters in India on Wednesday that the market is in a "very healthy" condition. Meanwhile, Boone Pickens said Saudi Arabia recently cut their production by 200,000 barrels, and that, in his view crude will average $70 a barrel this year.
Speaking of averages, unleaded gas averages $2.23 a gallon in the U.S. with Toledo at $1.87 and SF around $2.87. That's 180 degrees different from real estate prices in Toledo and SF.
With copper at $2.55 per pound, Dennis Gartman doesn't see copper dropping below $2 this year.
If both sides benefit, Toyota would consider a tie up with Ford.
USA Today reported that The Independent, a British newspaper, stated the Bush administration is heavily involved in writing a hydrocarbon law being considered by Iraq's parliament. The paper said it had obtained a draft of the law, which would allow Western oil companies contracts of up to 30 years to pump oil out of Iraq, and the profits would be tax free.
Intel is anticipating profit margins of about 50% in 2007.
The face of the Doomsday Clock will shift closer to midnight Wednesday, symbolizing the impending destruction of humanity in a "Second Nuclear Age."
Chicago's Bulletin of the Atomic Scientists, the group which has maintained the timepiece since 1947, is winding the minute hand closer to the grim hour for the first time since 2002, when it was frozen at seven minutes to midnight.
Now modern dangers such as global warming and the nuclear ambitions of Iran and North Korea are expected to inch the clock two minutes forward — to five minutes to midnight — though scientists have not confirmed the exact change.
India and Saudi Arabia today re-affirmed their mutual commitment to enhance cooperation in the oil and gas sector. In a meeting between Shri Murli Deora, Minister of Petroleum and Natural Gas and Mr. Engineer Ali bin Ibrahim Al-Naimi, Minister of Petroleum and Mineral Resources of Saudi Arabia here today, the two Ministers discussed investment opportunities for oil companies of the two countries in either Saudi Arabia or India. It was underlined that in view growing activities in the hydrocarbon sector, the oil companies of two countries would immensely benefit from criss-cross investment in areas of hydrocarbon sector. The Two Ministers reiterated the strategic partnership evolved during the visit of the King of Saudi Arabia in January 2006.
Saudi Arabia expressed deep concerns about whether the Shiite-led government in Baghdad had the capability and will to halt sectarian violence and protect Iraqi Sunnis.
Fighter jet parts and other sensitive U.S. military gear seized from front companies for Iran and brokers for China have been traced in criminal cases to a surprising source: the Pentagon.
The India-ASEAN free trade agreement is expected to be finalised mid 2007. This was stated by commerce minister Kamal Nath on the conclusion of talks with leaders of the ASEAN at the resort island Cebu in The Philipines.
The two sides have agreed to prepare a list of products that would not be exempt from tariff cuts till 2022. The traded value of these duty exempt products would not exceed 5 per cent of the total tradeable goods on which duties would be eliminated or reduced.
China signed an agreement on trade and services with ASEAN that will be effective from July, enabling greater flow of services such as telecom, banking and construction.
Mills agrees to be acquired by Brookfield Asset Management for $21 a share.
U.S. airlines employed 1.6% fewer workers in November 2006 than in the same month a year earlier, the Department of Transportation said Wednesday.
Ronald Reagan: "We've gone astray from first principles. We've lost sight of the rule that individual freedom and ingenuity are at the very core of everything that we've accomplished. Government's first duty is to protect the people, not run their lives."
Fannie Mae said existing-home sales to fall 8.1% in 2007 and new-home sales to fall 7.1% in 2007.
February crude rose $1.03 to close at $52.24 a barrel. February natural gas dropped 40.4 cents to close at $6.234 per million British thermal units.
U.S. economic growth is only expanding at a modest pace, but there is no sign of any cooling in the hot labor market, the Federal Reserve's latest survey of current economic conditions found. The Fed's "beige book" found that reports from its 12 districts "generally described labor market conditions are tightening and cited examples of some businesses having difficulty finding qualified workers." Overall, wage gains for workers has been "relatively moderate" but certain business lines are experiencing wage increases and are worried about rising benefit costs, the survey found.
February gold climbed $7.40, or 1.2%, to close at $633.30 an ounce Wednesday. March silver closed up 26.5 cents at $12.89 an ounce.
The 10-year benchmark Treasury note fell 6/32 to close at 98-27/32 with a yield of 4.787%, up from 4.752% at Tuesday's close. The 30-year yield rose to 4.87% and the 2-year is now at 4.90%. In sum, yields are beginning to approach 5% and the yield curve remains inverted.
The Bush administration, backing off a disputed policy for fighting the war on terrorism, agreed to let a secret court supervise an eavesdropping program that targets suspected al Qaeda members in the U.S.
Attorney General Alberto Gonzales announced the change in the program, until now conducted without court warrants, in a letter today to leaders of the Senate Judiciary Committee. The Foreign Intelligence Surveillance Court, which already handles secret wiretapping cases involving foreign agents, will now approve ``any electronic surveillance'' that was occurring under the domestic program, Gonzales said.
Tuesday, January 16, 2007
Outlook
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.
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.
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.
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