Battle Lines

2/1/07 Battle Lines

Tata Steel of India won the battle to control Anglo-Dutch steelmaker Corus with a £6.2bn ($12.2bn) offer on Wednesday, after more than eight hours of head-to-head bidding against Companhia Siderúrgica Nacional of Brazil.

Total compensation costs for civilian workers increased 0.8 percent from September to December 2006, seasonally adjusted, moderating from the 1.0 percent gain from June to September, the Bureau of Labor Statistics of the U.S. Department of Labor reported. Wages and salaries increased 0.8 percent between September and December, compared with the 0.9 percent gain of the previous quarter. Benefit costs during the quarter rose 1.1 percent, unchanged from the gain of the previous quarter. For state and local government workers, compensation costs increased 1.0 percent from September to December, after increasing 1.4 percent for the quarter ended in September.

The Chicago Purchasing Managers Index fell to 48.8 in January from 51.6 in December, suggesting a contraction in the regional manufacturing sector. Among the components of the index, the prices paid index fell to 54.9 from 56.9 in December. New orders slumped to 46.3 from 56.3. The employment index fell to 42.8 from 48.2.

Spending on private residential construction projects fell for the ninth consecutive month in December, pushing total construction outlays down by 0.4%, the Commerce Department reported Wednesday. Compared with December 2005, outlays in December 2006 were down 1.4%. In December, spending on private projects fell 0.8%. Private housing outlays fell 1.6%. Private nonresidential outlays rose 0.9%. Public construction outlays rose 0.6%.

ElkCorp said Wednesday that Carlyle Group won't revise its takeover offer above the $43.50-a-share bid by Building Materials Corp of America.

The U.S. economy surged ahead at a greater-than-expected 3.5% annual growth rate in the fourth quarter, the Commerce Department estimated Wednesday. Consumer prices fell 0.8% annualized in the quarter, the first quarterly decline in 45 years. The core personal consumption expenditure price index, which excludes food and energy prices, rose 2.1%, slightly above the Federal Reserve's 1% to 2% comfort zone.

Nouriel Roubini: "Clearly the strongest driver of the rebound of growth in Q4 was private consumption that rose at an annualized rate of 4.4%; given that consumption is about 70% of GDP consumption contributed 3.05% to the Q4 growth of 3.5%. Net exports were also another significant contributor to Q4 growth; with export growth accelerating to 10% and imports falling 3.2% the contribution of net exports to growth was 1.64%. The third component that contributed to growth was government spending that grew at a 3.7% (mostly driven by the whopping 11.9% increase in defense spending) and that contributed 0.7% to Q4 growth."

Altria's distribution of about 89 percent of Kraft's shares will be made on March 30 to shareholders of record as of March 16, the company said in a statement.Altria will distribute about 0.7 of a share of Kraft for every one share of Altria. Fractional amounts will be paid in cash. The exact ratio will be determined on the record date.

The American Petroleum Institute reported a rise of 5.7 million barrels in crude supplies for the week ended Jan. 26. The Energy Department had reported a rise of 2.7 million barrels. Motor gasoline supplies were up 1.3 million barrels, the API said, vs. the government's reported rise of 3.8 million. Distillate supplies fell 1 million barrels, the API said, compared to the government's 2.6 million-barrel decline.

"Obesity is increasing at an alarming rate and is a primary factorbehind the growing prevalence of type 2 diabetes, cardiovascular disease, and certain cancers," said Dr. Trevor Hallam, Executive Vice President, Research and Development of Palatin. "We have made considerable progress with the pre- clinical development of our melanocortin receptor-based programmes, especially in the obesity area and we are quite excited to take this programme to the next level with a world-class organisation like AstraZeneca." "This collaboration with AstraZeneca points to the progress we have made with our melanocortin receptor obesity programme and the potential of melanocortin receptors as targets for obesity. It recognises the value Palatin has built and provides the necessary resources to advance the programme. AstraZeneca has a longstanding record of achievement in drug development and commercialisation and their global leadership in relevant therapeutic areas makes them the ideal party to maximise the potential ofour obesity programme," stated Carl Spana, Ph.D., Palatin's President & Chief Executive Officer. "This collaboration highlights the potential ofour internal research and development capabilities."

The Chinese stock market is developing into a "bubble" and investors may be behaving irrationally, a leading
Chinese legislator told the Financial Times.
Cheng Siwei, vice-chairman of the National People's Congress, warned the mainland
stock market could be overheating, after a rise of 130 pct last year.
"There is a bubble going on. Investors should be concerned about the
risks," Cheng said in an interview with the Financial Times.

US Air withdraws bid for Delta Air.

Dr. Kurt Richebacher: "Private households in the United States have embarked on their greatest borrowing binge of all time, fostered and facilitated by the rampant house price inflation and a most aggressive financial system. What has been developing in the balance sheets of private households, therefore, is a race between booming "wealth creation" through rising house prices and soaring indebtedness. It appears that indebtedness will
win this race and wealth creation will lose."

February gold climbed $7.80 to close at a two-month high of $652 an ounce in New York.
Additionally, under an accord known as the Washington Agreement, European central banks agreed to limit sales to 500 tons a year. The banks are falling behind schedule with weekly sales, said Dennis Gartman, trader, economist and editor of Suffolk, Virginia-based Gartman Letter.``Some enormous selling lies ahead, or, more plausibly, the banks have sold what they want and are reducing their efforts,'' Gartman said. ``The latter is enormously positive for gold.''          

Ford Motor Co. said its U.S. sales of cars and trucks fell about 20 percent this month from a year
earlier, mostly because of a planned reduction in purchases by
rental-car companies.

Former Time magazine reporter Matthew
Cooper testified today that top presidential aide Karl Rove was
the first person to tell him that an Iraq war critic's wife was a
CIA agent. Cooper, testifying in Lewis ``Scooter'' Libby's perjury
trial, also contradicted Libby's account of a conversation the
two had the following day, on July 12, 2003, about war critic
Joseph Wilson's wife, Valerie Plame.

 First-time applications for
state unemployment benefits fell by 20,000 to a seasonally adjusted,
two-week low of 307,000 in the week ending Jan. 27, the Labor
Department reported Thursday. The four-week average of initial claims,
considered a better gauge of underlying labor market strength because
it smoothes out often-volatile data, dropped by 4,500 to 304,750, an
11-month low. The number of people collecting unemployment checks rose
by 71,000 to a seasonally adjusted 2.55 million in the week ending Jan.
20. It's a two-week high. The four-week average of continuing claims
rose by 30,500 to 2.48 million, the highest since Dec. 23.

Higher
energy prices dragged down growth in real consumer spending and real
disposable incomes in December, the Commerce Department reported
Thursday. Core inflation, meanwhile, rose an unexpectedly low 0.1%, the
second straight month of relatively stable prices excluding food and
energy. Headline inflation rose 0.4% in December, backed by a 0.9% gain
in prices of nondurable goods, such as energy goods. Real, or
inflation-adjusted, consumer spending rose 0.3%. Real disposable
incomes rose 0.2%, the weakest growth since May.

Vornado Realty Trust raised its bid for office manager Equity Office Properties Trust to $56 a share.

Royal
Dutch Shell cut its 2007 oil and gas production forecast to a range of
3.3 million to 3.5 million barrels of oil equivalent a day. Shell had
previously predicted 2007 production between 3.5 million and 3.6
million barrels of oil a day.

Chandler
Trusts has extended the deadline on an offer for Tribune Co. that had
been scheduled to expire Wednesday, according to a media report. The
Associated Press, citing a person close to the Chandler family,
reported that the extension allows Tribune's board more time to
consider the highest-valued bid for its assets.

Google
Inc. late Wednesday reported fourth-quarter profit nearly tripled,
while sales rose 67%, as the No. 1 Internet search engine captured a
greater share of online ad spending. For the period ended Dec. 31,
Google said net income surged to $1.03 billion, or $3.29 a share, from
$372 million, or $1.22, a year earlier.


March crude closed at $58.14 a barrel, up $1.17 for the session, but
down 6.8% for the month of January. The Energy Department reported the
first fall in distillate supplies in seven week, but also said crude
supplies rose a third week. March natural gas fell 7.3 cents to close
at $7.667 per million British thermal units, though the recent
colder-than-normal temperatures in parts of the U.S. helped the
contract gain 17.9% for the month. 

Research

1/31/07 Research

I am providing a link for an update on the production, usage, and storage of natural gas. It is an excellent piece of research done by Bentek Energy. I urge the readers to spend some time on this data. Here is the link: http//www.bentekenergy.com/Document/BE

The Conference Board said Tuesday that the consumer confidence index rose to 110.3 in January from a revised 110.0 in December. It's the highest since May 2002. Consumers were more upbeat about the present situation, primarily because of a more favorable job market, said Lynn Franco, head of the consumer research center at the organization. Attitudes about the future declined. "All in all, the index suggests a moderate improvement in the pace of growth in early 2007," Franco said.

China's proven crude reserves dropped 12.33% last year to 2.19 billion tonnes from a year earlier while natural gas reserves surged more than 50% to 2.27 trillion cubic metres, far higher than the 1.15% average increase of world reserves, the National Development and Reform Commission (NDRC) said.
China is the only country that posted a significant dip in crude reserves while Kazakhstan in Central Asia and the African country Angola recorded soaring increases of almost 50%, according to the NDRC report.

On Sunday, Gholamhossein Nozari, head of the state-owned National Iranian Oil Company, told Iran's student news agency ISNA that Iran had signed an initial deal worth $10bn (£5bn) with Repsol and Shell to produce liquefied natural gas from the South Pars field.
The Shell spokeswoman said the upstream side of the project would be developed under a buyback agreement. Shell and Repsol would build the production facilities, which would be owned and operated by an Iranian company. Shell and Repsol would be paid back their costs plus a pre-agreed profit.

More than half the Americans, or 58 percent, say they wish the Bush presidency to be simply over, a sentiment that is almost unanimous among Democrats (86 percent), according to a latest Newsweek poll.

Standard & Poor's on Tuesday raised India's sovereign credit rating to investment grade, citing the country's strong economic outlook, its rising foreign exchange reserves and the improved regulation of its stock and bond markets.

From DailyReckoning: Al-Jazeera reports that Turkey's parliament is giving serious thought to sending troops to occupy Kurdish northern Iraq "for security purposes" — an act that could set off a free-for-all in the Middle East.
Onur Oymen, the deputy chairman of the Opposition Republican People?s Party (CHP), said: "Northern Iraq is the only place in the world where a terrorist group can operate without being pursued."
"If the Iraqis and the US are not prepared to take action over this, then we must."

February gold climbed $1 to close at $644.20 an ounce Tuesday. March silver gained 12.5 cents to close at $13.375 an ounce and March copper rose 1.95 cents to end at $2.5615 a pound.

March natural gas climbed 11.6%, or 80.3 cents, to close Tuesday at $7.74 per million British thermal units. March crude rose 5.5%, or $2.96, to close at $56.97 a barrel.

AstraZeneca and Palatin Technologies announced an exclusive global licensing and research collaboration agreement to discover, develop and commercialise small molecule compounds that target melanocortin receptors.
The collaboration is based on Palatin's melanocortin receptor Obesity programme and includes access to compound libraries, core technologies and expertise in melanocortin receptor drug discovery and development. A near- term objective of the collaboration is to finalise selection of a lead drug candidate for clinical evaluation. Data accumulated from genetic, pharmacological and physiological studies identify the central melanocortin system as a key regulator of energy homeostasis. This offers significant potential for the development of novel treatments for obesity, diabetes and metabolic syndrome.
Under the terms of the agreement, Palatin will receive an upfront payment of $10 million from AstraZeneca and is eligible for milestone payments totalling $300 million, with up to $180 million contingent upon development and regulatory milestones and the balance on achievement of sales targets, together with the payment of stepped royalties on product sales to double digit rates, dependent on sales achieved. AstraZeneca will assume responsibility for product commercialisation, product discovery and development costs, with both companies contributing scientific expertise in the research collaboration.

Warning

1/30/07 Warning

Conditions in global financial markets look potentially "unstable", suggesting investors need to prepare for a "repricing" of some assets, Jean-Claude Trichet, president of the European Central Bank, said over the weekend in Davos. The recent explosion of structured financial products and derivatives had made it more difficult for regulators and investors to judge current risks in the financial system, Mr Trichet said. "We are currently seeing elements in global financial markets which are not necessarily stable," Mr Trichet said, pointing to the "low level of rates, spreads and risk premiums" as factors that could trigger a repricing.

Robert Bryce: "Iraq's oil output has plummeted since Bush and the neocons rushed to invade the country in March 2003. But that falling output has been offset, at least partially, by higher prices. And given that Iraq will ­ for good or ill ­ be America's colonial possession in the Persian Gulf for the foreseeable future, higher oil prices are far better than lower prices."

Mexico's average daily production in December was the lowest since November 2000, and well below the 3.39 million barrels a day produced in December 2005. It was also the first time in six years that average daily production has fallen below 3 million barrels daily...After reaching a record 3.38 million barrels a day in 2004, Pemex crude production has been steadily slipping because of decline in heavy crude at its giant Cantarell oilfield...
With output at Cantarell expected to fall by an average of 14 percent a year between now and 2015, Pemex is hoping to replace that production with oil from other projects, including the offshore Ku-Maloob-Zaap and the onshore Chicontepec basin.

China's railway transportation volume accounted for a quarter of the world's total, though the country has only six per cent of global operational railway mileage, the Ministry of Railways has claimed.
China beat all other countries in passenger and cargo traffic last year, with its passenger turnover hitting 662.2 billion person-kilometres and freight turnover reaching 2.87 billion tonne-kilometres, Railway spokesperson Wang Yongping said. The general railway turnover also topped the world with a total of 2.86 trillion tonne-kilometres, 130 billion ton-kilometres more than that of the United States and one and a half times that of Russia.
Meanwhile, the country has only 76,600 kilometres of railways in operation, making the density of its railway transportation the largest in the world.

India has for the first time emerged as the 10th largest trading partner of China in 2006, according to latest Chinese foreign trade statistics.
While the European Union retained the status of China's top trading partner, bilateral trade between China and India hit an all-time record at $24.9 billion last year, exceeding the $20-billion goal two years ahead of target.
Detailed figures are yet to be released. China's total bilateral trade with the EU rose 25.3 per cent to hit $272.3 billion.

China's trade surplus with the European Union soared to 91.66 billion dollars at the end of last year, up 31 per cent from 2005, the commerce ministry said on Sunday.

Senate Intelligence Committee Chairman Jay Rockefeller said he may subpoena Bush administration documents on its controversial domestic surveillance program.

Two U.S. soldiers were killed when their helicopter crashed north of the Shi'ite holy city of Najaf on Sunday, the U.S. military said.

Iraq's deputy prime minister on Sunday said Iran and the United States were using Iraq as a "zone of conflict and competition" and jeopardizing efforts to stabilize the country.

An unsourced report in a French publication said drug titan Sanofi-Aventis -- with whom it sells the blockbuster blood-clot drug Plavix and blood pressure treatment Avapro -- could announce a merger deal with Bristol-Myers within the next few weeks.

Merrill Lynch & Co. Inc. said on Monday it will buy First Republic Bank for $1.8 billion. Merrill Lynch's cash-and-stock offer of $55 a share represents a 44-percent premium over First Republic's closing price on Friday.

Abitibi-Consolidated Inc. and Bowater Inc. announced that they have entered into a definitive agreement to combine in an all-stock merger of equals. The companies stated that the combination will create an operationally and financially stronger company better able to meet changing customer needs, compete more effectively in an increasingly global market, adapt to lower demand for newsprint in North America, and deliver increased value to shareholders. The combined company, which will be called AbitibiBowater Inc., will be the third-largest North American paper company and the eighth largest in the world, they said. It will have pro forma annual revenues of approximately US$7.9 billion or C$9.3 billion, Abitibi and Bowater said.

Kentucky Derby winner Barbaro was euthanized Monday after complications from his breakdown at the Preakness last May. "We just reached a point where it was going to be difficult for him to go on without pain," co-owner Roy Jackson said. "It was the right decision, it was the right thing to do. We said all along if there was a situation where it would become more difficult for him then it would be time."

John Hussman: "A few weeks ago, I noted that historically, we've observed relatively few instances when the S&P 500 traded at a 4-year high, at over 18 times record earnings, with advisory bullishness over 53% and with Treasury bills rising above their level of 6 months earlier. (In addition to the instances noted before, these conditions were also approximately met in December 1961, just prior to a sharp market decline in early 1962).
Of the many abrupt market declines we've observed since 1960, say, where the market dropped by 10% over a period of several weeks, only about half of those instances were preceded by the above conditions. But the outcomes have been unanimously unfavorable when these conditions have been observed...Bayes' Rule currently puts the likelihood of a 5% or deeper market correction beginning within the next few weeks at near certainty, the probability of a 10% correction starting during the next 13 weeks at about 65%, and the probability of a bear market beginning within the next 6 months at over 75%. There is, of course, no such thing as certainty in the financial markets. Suffice it to say that the probabilities aren't good." John Hussman points out that "Essentially, Bayes' Rule tells us that when we evaluate evidence, we should pay special attention to those pieces of evidence that are largely consistent with only one of the possible conclusions."

Rep. Ron Paul: "The Pentagon recently reported that it now spends roughly $8.4 billion per month waging the war in Iraq, while the additional cost of our engagement in Afghanistan brings the monthly total to a staggering $10 billion. Since 2001, Congress has spent more than $500 billion on specific appropriations for Iraq. This sum is not reflected in official budget and deficit figures. Congress has funded the war by passing a series of so-called "supplemental" spending bills, which are passed outside of the normal appropriations process and thus deemed off-budget.
This is fundamentally dishonest: if we're going to have a war, let's face the costs-- both human and economic-- squarely. Congress has no business hiding the costs of war through accounting tricks."

Shanghai has set its 2007 GDP growth target at above nine percent, the lowest target in 15 years, to aim for more balanced and sustainable economic and social development, Mayor Han Zheng said on Sunday.

Tehran, political analyst Hermidas Bavand said U.S. force increases were leading many Iranians to believe Washington is looking to pick a fight, perhaps one that would overshadow America's disastrous intervention in Iraq.
"It's an extremely dangerous situation. I don't think Tehran wants war under any circumstances. But there might be an accidental event that could escalate into a large confrontation," Bavand said. "It could be difficult to contain." As I stated back in 2002, Bush's real eye has been on Iran from the very beginning. Iraq was suppose to be simply an opening round.
Iran's military has more than 500,000 troops and an antiquated collection of ships, aircraft, ballistic missiles and other weapons. U.S. military analysts describe the Iranian military as large but ineffective.
Surrounding Iran are more than 200,000 U.S. troops in bases scattered across Iraq, Afghanistan, Bahrain, Kuwait, Kyrgyzstan, Turkey, Qatar and the United Arab Emirates. The U.S. Navy has a carrier battle group in the region and another on the way, and dozens of U.S. bombers and strike aircraft are arrayed on bases surrounding Iran.

The yen declined to the lowest against the dollar in more than four years after a Japanese government report showed a drop in retail sales last month.

February gold fell $1.50 to close at $643.20 an ounce. March silver was down 12.5 cents to end at $13.25 an ounce and March copper lost 9.5 cents to finish at $2.542 a pound.

Interest rates continue to move higher with the 2-year at 4.99%, the 10-year at 4.90%, and the 30-year at 5%.

According to the EIA, OPEC members’ crude oil production in the fourth quarter averaged 0.7 million barrels per day below third quarter levels, with Saudi Arabia accounting for half of this reduction. Preliminary data suggest commercial inventories in Organization for Economic Cooperation and Development [OECD] countries dropped by about 1 million barrels per day in the fourth quarter, about 0.45 million barrels greater than the normal seasonal decline, leaving inventories at near normal levels at year-end. On a days-of-supply basis, OECD inventories are projected to decline from close to the top of the normal range during the third quarter of 2006 to near the bottom of the normal range by the end of 2007.

Feb. natural gas falls 3.6% to close at $6.917/mln BTUs and this contract will now go off the board with the March contract the new spot month.

March crude was down 2.5%, or $1.41, to close at $54.01/brl.

Less Americans Back Bush

1/28/07 Less Americans Back Bush

According to the latest Newsweek Poll, taken in the days following the
speech, the president's job approval rating hit an all-time low in the
Newsweek Poll at 30 percent. Sixty-one percent of all those polled says
they are dissatisfied with the way things are going in the United States at
this time; just 30 percent are satisfied. Sixty-seven percent of those polled believe Bush's decisions about policy in Iraq and other major areas are influenced more by his personal
beliefs regardless of the facts, while just 22 percent say his decisions
are influenced more by the facts. And 71 percent say Bush will not have
enough support over the next two years to make a difference in getting
things done in Washington; just 21 percent say he will.

Riki Ellison, President of the Missile Defense Advocacy Alliance, announced that the intercept test of the Terminal High Altitude Area Defense system (THAAD) was successful off of the coast of Hawaii at the Pacific Missile Range Facility near Kauai. "This intercept once again validates the United States technical and political will to defeat and
destroy ballistic missiles from rogue nations such as Iran and North
Korea." He informed his 9,000 membership that today's test was another
positive step in the development of the system.

Tank tracker Lloyds Marine Intelligence Unit said Friday that oil exports from the Organization of the Petroleum Exporting Countries fell to less than 23 million barrels a day in December from just under 24 million barrels a day in November, according to a Dow Jones newswire report.
Saudi Arabia, the world's largest crude oil producer and exporter, was the quickest to implement OPEC's production cuts; its exports in December were 1.1 million barrels a day lower than before the OPEC's October call for production cuts.

In a boost to India's prospects in picking up stakes in the coveted Sakhalin-III oil exploration project, Russian President Vladimir Putin Friday asked Indian oil companies to 'deal directly' with their Russian counterparts and assured his government's support for it.
'Indian - companies need to deal directly with Russian companies. We are ready to provide all administrative support for it,' Putin replied when he was asked about India's prospects in the Sakhalin-III.
India has already invested $2.7 billion in the Sakhalin I oil fields where it has 20 per cent stake. India will get an estimated 2.5 million barrels of crude oil annually from the oilfields. The first shipment of oil from this project came in December last year.

USDA Cattle on Feed Report released Friday was generally neutral to somewhat negative. The December placement effort turned out to be somewhat larger than the trade was anticipating. Also last month’s marketing was the smallest since the data series began in 1996. Finally, the January 1 on feed total also represents a new record high. The report showed January 1 on feed at 101 percent, December placements 91 percent, marketed in December 95 percent.

Mike Burk: "The good news is:
• Since 1887 (120 years) the Dow Jones Industrial Average (DJIA) has been up 70% of the time in the coming week (the last 3 trading days of January and the first 2 days of February) during the 3rd year of the Presidential Cycle (next week)...
Most of the technical indicators are direction free. Seasonally the period has been quite strong, but seasonal influences have not had much effect on the market recently. For example, last week the S&P was down for only the 2nd time since 1953 while the mid and small cap indices were up. Right now, there is little to go on but seasonality which has been positive.
I expect the major indices to be higher on Friday February 2 than they were on Friday January 26."

M.A. Nystrom: "It takes a full dollar today to buy what a nickel would have bought in 1913, according to the Fed's own CPI calculator!"

Motley Fool: "While it is easy see that BJ Services was hurt this quarter by a correction in energy prices, the long-term trend that Schlumberger's CEO Andrew Gould is so bullish about also holds true for BJ Services."

Laboring in a war with no discernible front line, more than 770 civilian contractors have died in Iraq since the U.S.-led invasion began in March 2003.
Statistics kept by the Labor Department indicate fatalities among civilian contractors working for American firms escalated rapidly late last year, with at least 301 dying in Iraq in 2006 — including 124 in the final three months.
U.S. military deaths totaled 818 during the year, the Defense Department has reported.

Economic Realities

1/27/07 Economic Realities

New-home sales rose 4.8 percent in December to an annual pace of 1.12 million units. The median sales price rose to $235,000 in December from $232,200 in November, as builders cut the number of homes on the market to avoid inventory buildups.
Over the full year 2006, new-home sales dropped 17.3 percent from 2005, the steepest fall in 16 years and the first year-over-year decline after a five-year rally.

Orders for U.S.-made durable goods rose 3.1 percent in December. While much of the gain came from strong demand for Boeing jetliners, other components like machinery and primary metals also posted sharp hikes.
Even excluding volatile transportation orders, which are heavily skewed by aircraft, durable goods orders rose 2.3 percent in December following two monthly declines -- a much stronger performance than Wall Street analysts expected.

In 2006, new durable goods orders rose 7 percent from 2005, marking the third straight annual gain. Shipments for the full year increased 5.6 percent, also the third straight gain.

For the week, gold gained 1.7% to $646.20 and silver 3.9% to $13.44. Copper rallied 4%. March crude gained $2.13 to $55.53. February Gasoline recovered 5.9%, and February Natural Gas gained 4.8%.

Bloomberg : “Surging demand for derivatives is making financial markets more vulnerable to any slowdown in the global economy, said economists and executives at the World Economic Forum. ‘You can easily get liquidity from the market every second for anything,’ said Bank of China Vice President Zhu Min at a panel discussion on the global economy in Davos, Switzerland. ‘We really don’t know what the risks are.’ The use of derivatives grew at the fastest pace in eight years during the first half of 2006 as a glut of cheap money allowed investors to bet more borrowed funds in financial markets.”

Data Quick: "Home-loan defaults in California rose to their highest level in eight years in the fourth quarter amid a slowdown in sales of houses and condominium that made it harder for owners to sell their homes and pay off mortgages. Banks and other lenders sent 37,273 default notices to California homeowners in the fourth quarter, more than double the 15,196 sent a year earlier and up by more than a third from the 27,218 sent in the previous three months."

Buyout firms announced a record $739 billion of leveraged buyouts last year, almost triple the 2005 total.

Doug Noland: "The increasing awareness by holders of inflating quantities of suspect (dollar) Credit instruments that they are being shortchanged should weigh on U.S. markets, and keep in mind that strong U.S. markets have provided major support for our faltering currency. And as the Bubble’s inequitable (re)distribution of wealth gains greater recognition, the strains between the “haves” and the “have nots” – between debtor and creditor – between the U.S. and its highly liquefied competitors for global resources - will surely intensify. The global grab for limited resources should be expected to at some point turn more hostile, providing greater incentive for the U.S. to inflate and for others to aggressively exchange dollar liquidity for more attractive stores of wealth/value."

European money supply growth is the fastest in 17 years. Liquidity liquidity liquidity.

Moving Forward

1/26/07 Moving Forward

China's economy grew by 10.7 percent, moving China closer to overtaking Germany as the world's third-largest economy, according to figures issued by the government. It was the fastest growth since 1995, when the economy expanded by 10.9 percent.

Blackstone Group LP increased its offer for billionaire Sam Zell's Equity Office Properties Trust to $38.3 billion, exceeding a proposed bid from Vornado Realty Trust in the world's biggest leveraged buyout.
Blackstone's new offer is $54 a share in cash, 3.8 percent more than the $52-a-share cash and stock proposal from a group led by Vornado Realty Trust. It's also 11 percent more than Blackstone's earlier offer of $48.50 a share, Chicago-based Equity Office said today in a statement.

Cardinal Health Inc. will sell its contract manufacturing unit to Blackstone Group LP for about $3.3 billion in cash.

Ford Motor Co.'s fourth-quarter loss widened to $5.76 billion on plunging truck sales and production, pushing the 103-year-old U.S. automaker to its worst year ever.
The loss was $3.05 a share, compared with $74 million, or 4 cents, a year earlier, Ford said today. Excluding costs the second-biggest U.S. automaker considers one-time items, the loss was $2.08 billion, or $1.10 a share, wider than analysts' estimates.

The German government will next week raise its economic growth forecast for this year to just under 2 percent from 1.4 percent, a senior government official said today, speaking on condition of anonymity.

The number of Americans filing first-time claims for state unemployment benefits rose more than forecast last week from the lowest level in 11 months.
Initial jobless claims increased by 36,000 to 325,000 in the week ended Jan. 20, the Labor Department said today in Washington. The four-week moving average, a less volatile measure, rose to 309,250 from 307,750.

Sales of U.S. existing homes fell 0.8% in December to a seasonally adjusted annual rate of 6.22 million, a national real estate group reported Thursday. Sales in December were down 7.9% compared with December 2005. Inventories of unsold homes fell 7.9% to 3.51 million, representing a 6.8-month supply, the National Association of Realtors said in the report. The average median sales price was $222,000 in December, unchanged from December 2005.

Net income in the three months ended Dec. 31 for BJ Services rose to $207.1 million, or 70 cents per share, from $159.7 million, or 48 cents per share, in the year-ago period. Analysts polled by Thomson Financial looked for profit of 76 cents per share.
Revenue climbed 24 percent to $1.18 billion versus $956.2 million last year, but fell short of the Street forecast of $1.25 billion. Lower natural gas prices also slowed overall revenue growth and led to a decline in revenue at BJ's Canadian operations, where sales fell 8 percent from the same period in fiscal 2006. From my analysis, the Canadian operations account for about 15% of the company's revenues.
"The company's earnings for its first fiscal quarter were less than the earlier projected range mainly due to lower than forecast activity in North America caused by warmer than normal winter weather conditions and declining natural gas prices," Chairman and Chief Executive Bill Stewart said in a statement. For the second quarter, BJ Services expects profit to range from 73 cents to 75 cents per share, short of the 78 cents per share Wall Street analysts forecast, according to Thomson Financial. For the fiscal second quarter, the company projects Canadian operations will report revenue up 25 percent from the first quarter. Canadian consolidated revenue in the first quarter In that period, revenue fell 8 percent year-over-year as lower natural gas prices slowed demand for drilling. It should be noted that natural gas prices have recovered over the last three weeks as winter weather finally arrived. I believe Wall Street is missing the boat here and analysts are not keeping up on events. The stock dropped about $1.25 on the news. This is similar to the reaction to the Nabors quarterly report and then Nabors stock rose back to where it was prior to the release. It took a few days for that to take place. BJ Services is far and away the cheapest it has ever been on any evaluation metric. The prospects for the company are excellent and the icing on the cake is a possible takeover of the company.

Canadian energy stocks declined after earnings at Suncor Energy Inc. and Petro-Canada, two of Canada's biggest oil and gas companies, fell short of analyst estimates.

Treasury yields are on the rise with the 2-year at 4.97%, the 10-year at 4.87%, and the 30-year at 4.97%. In my view, rates are still a bargain. With our fiscal and trade deficits, these twin tower deficits should continue to encourage central bankers to trim their dollar holdings, thus pressuring rates.

The Energy Department said natural-gas inventories fell 179 billion cubic feet for the week ended Jan. 19. Total stocks now stand at 2.757 trillion cubic feet, up 251 billion cubic feet from the year-ago level, and 472 billion cubic feet above the five-year average, the government data said.

The money supply growth in Kuwait accelerated during the first 11 months of 2006 to an annualized 23 per cent compared with a growth of 12.3 per cent in 2005.
This was revealed in a report prepared by the National Bank of Kuwait outlining the performance of the Kuwait economy in 2006.

Wind power generation in the United States will grow 26 percent in 2007, after increasing by 27 percent in 2006, the American Wind Energy Association said on Tuesday.

February natural gas closed at $6.905 per million British thermal units Thursday, down 51.6 cents. March crude fell $1.14, or 2.1%, to close at $54.23 a barrel after briefly touching a fresh two-week high of $55.90 during the session.

February gold fell 10 cents to close at $648.10 an ounce Thursday. March silver continued higher, adding 21.7 cents to close at $13.49 an ounce. March copper rose 5.3 cents, or 2%, to end at $2.6545 a pound.

Bush plans to ask Congress for $7 billion to $8 billion in security and reconstruction aid for Afghanistan, White House Press Secretary Tony Snow said today.
Afghanistan has received a total of about $14 billion in U.S. aid since the 2001 U.S. invasion that ousted the radical Islamic Taliban militia, the State Department said. As I mentioned not so long ago, gains made over the last few years in Afghanistan are disappearing quickly.

Interest Rates And Inflation

1/25/07 Interest Rates And Inflation

Norway's central bank unexpectedly raised the benchmark deposit rate by a quarter point for a third consecutive month to 3.75 percent to cap inflation and prevent the economy overheating.

George Ure: "My friend Bart, over at www.Nowandfutures.com...points out that the annual rate of change on his M3B (which has a 99.99%+ correlation to M3 - before the Fed banksters went and played "hide the sausage" with that statistic a year ago, shows that the broadest measure of inflation is now running 12% annualized."

"The Financial Times reports Rupert Murdoch’s News Corp has joined the Chandler family in its bid for Tribune Company, with an eye to taking a stake in New York’s Newsday newspaper. Newsday, which is based in Long Island, is one of Tribune’s largest newspapers, along with the Los Angeles Times and Chicago Tribune. The media group, which put itself up for sale in September, also includes 23 television stations and the Chicago Cubs baseball team. A person familiar with the situation said Mr Murdoch wanted to combine back office and operational functions at Newsday with those of the New York Post, the News Corp tabloid that has made big circulation gains in recent years but continues to rack up losses.

The WSJ reports that Goldman Sachs and Morgan Stanley are combining forces to crack a huge deal in the energy sector: a private-equity play for the oil-and-gas assets of Dominion Resources that could reach $15 billion.

Richard Daughty: "It's not for nothing that Thomas Jefferson said "I believe that banking institutions are more dangerous to our liberties than standing armies," and it is further not for nothing that he is being proved horribly, tragically correct."

The budget deficit for the current year will be $172 billion, according to new estimates by the Congressional Budget Office. Like all government statistics one needs to look further. In this case, the budget underestimates the cost of the Iraq war. Once another $100 billion is added to the tally for military operations in Iraq and Afghanistan, the budget deficit for the current year promises to at least match last year's $248 billion tally.

Unidentified assailants seized two foreign oil workers Tuesday in the latest kidnapping to hit restive southern Nigeria, police said.
The hostages included one American man, said Rivers State police spokeswoman Irejua Barasua. US Embassy officials were not immediately available for comment.
The other man was a Briton, said a colleague who asked not to be named because he was not authorized to speak to the media. The pair worked for a
Nigeria-registered oil services company, Pivot Engineering, he said.

Frank Barbera: "In reviewing several important Time Cycles, I note that Crude Oil has had a reasonably consistent 5.2 year cycle in place, the half cycle of which was due to bottom in 2006. I believe that cycle is bottoming now, a bit later than normal ,and will soon turn up producing a solid recovery in prices. The next major five year cycle low for Crude (the full cycle low) is due in late 2008 which should be the end of Cycle Wave 2 and the beginning of the Peak Oil surge to above $100."

Chris Mayer: "By some estimates, we'll need to produce about 136 million tons of grain in 2007 to prevent grain stocks from falling again (they fell in 2006). Yet annual increases in grain production have averaged only about 20 million tons since 2000. That gives you something of a snapshot of the hurdle in front of us.
"The investment conclusion from all this seems to be that we are in a long bull market for grains. Expect the prices of corn and wheat to keep rising. Expect the price of meat to rise. It also seems that fertilizer producers, such as Agrium, should continue to do well. Other ancillary ideas also come to mind - shippers of dry goods (i.e., grains) and manufacturers of farm equipment.
"The potential for another 1930s-style Dust Bowl only adds to the power and durability of these trends."

Rep. Ron Paul:"False trust placed in the dollar once was helpful to us, but panic and rejection of the dollar will develop into a real financial crisis. Then we will have no other option but to tighten our belts, go back to work, stop borrowing, start saving, and rebuild our industrial base, while adjusting to a lower standard of living for most Americans...Since 2001 the dollar has been devalued by 60%."

South Africa, the biggest corn producer in Africa, cut this season's corn-planting forecast by 3.1 percent from a Nov. 21 estimate after dry weather hampered sowing in the main corn regions.

The American Petroleum Institute reported a fall of 4.2 million barrels in distillate supplies for the week ended Jan. 19. The Energy Department had reported a rise of 700,000 barrels. Motor gasoline supplies were down 2 million barrels, the API said, contrary to the government's reported rise of 4 million. Crude supplies fell 832,000 barrels, the API said, but the government posted a 700,000-barrel climb.

The Oil Drum:"There is one other thing that I would like to note that may not get much attention. It is the line “I ask Congress to double the current capacity of the Strategic Petroleum Reserve.” Hmm, the drop in the price of oil must have grabbed someone’s attention.
Let’s see, if the size of the SPR is now authorized at one billion barrels and we are now going to double this, then the US will be on the market for a billion barrels of oil. Say we fill it over 5 years, then we would need to buy 200 million barrels a year or around 547,000 bd. Now, at a time when Cantarell may drop by 500,000 bd, that suggests that the US might be going to the rest of the world with an increased demand for 1 mbd before the end of the year. So I guess that even if the current prices have slowed demand, the powers that be will continue to up it."

The vast increase in the use of renewable and alternative fuels urged by President Bush could have the unintended effect of pushing up the cost of poultry and other foods of animal origin, according to the National Chicken Council.
This is because the most commonly used feedstock for renewable fuels is
corn, which is also the largest component of animal feed, NCC said. The
demand for corn from ethanol producers has already led to a doubling of the
price of corn, putting great pressure on the cost of producing chickens and
other food animals.
"We estimate that ethanol demand has already increased the price of
chicken by six cents per pound wholesale," said William P. Roenigk, senior
vice president and chief economist for NCC.

"In OPEC we have agreed to meet on March 15 and there is no action required before then," OPEC President Mohamed al-Hamli said today in an interview at the World Economic Forum in Davos, Switzerland. "At $55 WTI, there is no action required."
"The cuts we agreed to in Abuja we are implementing," he said, referring to a December accord in Abuja, Nigeria, for OPEC to lower supply by 500,000 barrels a day starting Feb. 1. That was on top of an earlier 1.2 million barrel a day cut agreed in October.

Kuwait's finance minister Bader al-Humaidhi said in Davos, Switzerland "The dollar fell a lot against the euro last year, but if we'd been linked to a basket we wouldn't have suffered."

Trading

1/24/07 Developments

The British pound hit a 14-year high against the dollar at $1.9857, compared to $1.9766 late Monday.

UBS has cut its forecast for light sweet crude oil for 2007 to $60 a barrel from $69 a barrel. "Although we expect fundamentals to drive the oil price up, current levels mean that the annual average will struggle to meet our old forecast," UBS said. We'll have to see how it all sorts out with crude currently at $53+.

Royal Dutch Shell has raised its offer for the minority shareholdings in its 78 per cent owned subsidiary Shell Canada. The new offer is C$45 a share, up from C$40 originally offered back in October last year. The new offer has been recommended by a special committee of independent directors of the Shell Canada board, appointed to advise on the bid.

In Southern Kentucky, Federal authorities began lowering the water level in Lake Cumberland yesterday, citing fears that a weakened Wolf Creek Dam could break, causing massive flooding and possibly deaths.
"A high level of risk does exist," Lt. Col. Steven J. Roemhildt, commander of the Nashville District of the Army Corps of Engineers, said in a statement.

The UAW are examining a plan that would shift to the union responsibility for billions of dollars in retiree health-care liabilities.


The US economy last year recorded its lowest rate of labor productivity growth in more than a decade, with growth in output per hour worked falling behind the EU and Japan. Research to be published on Tuesday by the Conference Board, the international business organization, shows that US labor productivity in the whole economy grew by 1.4 per cent in 2006 as slower economic growth was combined with a rapid rise in employment.

The U.S. index of leading economic indicators rose 0.3% in December, the fastest pace since September, the Conference Board said Tuesday. "The latest data...is pointing to continued moderate growth or even a little acceleration," said Ken Goldstein, an economist for the research group. Six of the 10 indicators increased in December, starting with building permits, jobless claims and money supply. The biggest drags were interest rate spreads and consumer expectations. There were slight downward revisions for the past two months. The leading index was cut to flat in November, compared with 0.1% originally reported. The leading index was revised down in October to a 0.1% drop from the previous estimate of a 0.1% gain. The coincident index rose 0.2% in December and the lagging index rose 0.9%.

A few Bank of Japan policy makers said the central bank should raise interest rates in January should it become more confident about the economic outlook, according to minutes of the policy board's December meeting.

European Central Bank council member Mario Draghi said there are no signs of economic growth slowing and executive board member Lorenzo Bini Smaghi said further interest rate increases may be needed to guard against inflation in the euro region.

Singapore's inflation rate unexpectedly rose in December to a five-month high as increased housing and food prices offset a drop in transportation costs.

Devon Energy plans to divest all of its assets in West Africa. The assets include estimated proved reserves of approximately 90 million oil-equivalent barrels (Boe) at December 31, 2006.

Danny McNease, Rowan Chairman and Chief Executive Officer, commented, "The recent drop in oil and natural gas prices has extended the lull in Gulf of Mexico jack-up drilling activity and caused some day rate weakness for lower-end rigs, though we are still seeing solid demand for premium equipment worldwide. Our offshore fleet was approximately 81% utilized during the fourth quarter of 2006, as we lost 249 revenue-producing days during the period from rig relocations. By early April 2007, our current rig relocations should be complete "Preparing for and starting up overseas drilling assignments has also increased our drilling operations costs and expenses. These rigs had been running virtually full-time for about two years when they entered the shipyard, as have most of our other offshore rigs. Thus, more extensive maintenance has often been required than in previous periods. In addition, many consumable parts and supplies cost more today and are requiring longer lead times for delivery, especially in certain foreign areas. Thus, we are ordering more of such items, which we expense upon purchase, to ensure their availability and limit rig downtime. Further, our labor costs now include not only a significant increment for expatriates working abroad but also the cost of duplicative local personnel undergoing training. We are working to reduce the expatriate complement on our overseas rigs. Finally, returning to the Middle East market after a 25-year absence and then doubling the number of rigs operating there has required a significant expenditure for infrastructure. As a result of these and other factors, we expect that our drilling operations costs will be in the range of $146-148 million for the fourth quarter of 2006, or about 40% higher than the same period of 2005. Though certain cost pressures will remain with us in early 2007 and beyond, we expect that this trend in our overall drilling operating costs will begin to reverse in the second quarter of 2007."and our offshore fleet again fully utilized; however, we are pursuing additional long-term assignments overseas for many of our nine jack-ups that remain in the Gulf of Mexico."

Dan Denning: "The epic bull market in energy stocks is about to enter a second phase. As private equity funds battle the world's major oil companies for control for scarce energy assets, the prices of most oil stocks should move considerably higher, especially if crude oil itself, stages a modest rebound. It all adds up to a continuation of the epic bull market in energy stocks."

Blair Corp. has agreed to be acquired by Appleseed's Topco Inc., a portfolio company of Golden Gate Capital, for $42.50 a share, a 15% premium to the company's closing share price on Monday of $36.95. Under the terms of the merger, Warren, Pa.-based Blair, a marketer of women's and men's apparel and home products, may solicit additional proposals for 30 days, and the company said its board plans to do so.

"Given the shift to colder weather, escalating geopolitical tensions, and likely more OPEC compliance, the odds may be increasing for a rally above $55 rather than a break under $51," Michael Fitzpatrick, an analyst at Fimat USA, wrote in a note to clients. Meanwhile, militants took 26 hostages in Nigeria, threatening supplies from Africa's largest producer.

The February contract for gold futures on Tuesday marked its highest closing level since Dec. 5, up $11.80 at $645.90 an ounce. March silver rose 26 cents to end at $13.26 an ounce and March copper tacked on 5 cents to end the day at $2.5795 a pound.


March crude rallied $2.46, or 4.7%, to close at a two-week high of $55.04 a barrel. U.S. Energy Secretary Samuel Bodman announced that the government will boost the size of the nation's emergency oil reserve. It'll begin buying crude this Spring at a rate of about 100,000 barrels per day, according to Dow Jones Newswires. The acquisition is part of a new plan to double the capacity of the Strategic Petroleum Reserve to 1.5 billion by 2027, the report said.

Bank of England Governor Mervyn King, in his first comments since a surprise interest-rate increase this month, said inflation and economic growth may pick up more than the bank forecast.``The balance of risks to output growth and inflation has shifted towards the upside,'' King said today in a speech to the annual banquet of the Birmingham Chambers of Commerce in central England. ``The committee started to raise interest rates to deal with the changing balance of risks last August.''

ElkCorp says BMCA lifted buyout offer to $43.50 from $42. I clearly missed the upside potential here. Not one of my finest hours.

In yesterday's 13G filing on BJ Services, Barclay's Global Investors Japan Trust reported an ownership of about 30.5 million shares or 10.4% of the outstanding.

The benchmark 10-year Treasury note ended down 10/32 at 98 20/32; yielding 4.803%, up from 4.757% late Monday.

Natural gas ended at its highest level in over five weeks and rose 28 cents to $7.60 per million BTUs.

Government-owned holding company Dubai World says it plans to invest over $7.5 billion in setting up industrial parks in different parts of the world, including India. The company launched 'Economic Zones World', an enterprise aimed at consolidating its position in the development and management of economic zones and business hubs across the world. According to Sultan Ahmed Bin Sulayem, chairman, Dubai World, "Economic Zones World (EZW) has been created as a single commercial entity to look after Dubai World's worldwide operations of free zones, special economic zones and activity-specific business and industrial zones." "The company already has projects under discussion in India, Pakistan, Oman, South Korea and Morocco," said Salma Hareb, CEO, Economic Zones World.

Reality

1/23/07 Reality

John Williams' Shadow Government Statistics always does an excellent job of distinguishing bogus government numbers from the real deal. In John's latest report, he highlights the vast difference between the government's annual CPI estimate approximating 2.5% and alternate CPI measures with year-on-year change just below 6%.

On Sunday, the high temperature in Phoenix was 49 degrees. The high in Santa Fe was 32 degrees and the low was 14. Not surprisingly, the nation is getting a dose of weather reality, and, with it, the price of natural gas is on the rise.

Bruce Buchanan, a political scientist at the University of Texas in Austin, says Bush's effort to reverse the course of events in the war is ``his last chance to avoid the dustbin of history.''

Shares of CA Nacional Telefonos de Venezuela plunged 15 percent after President Hugo Chavez said the government won't pay investors the market value for their holdings as he moves to nationalize the nation's biggest phone company.

The U.S. will lose its place as the world's leading financial center in the next decade without legal and regulatory changes, a report commissioned by New York Mayor Michael Bloomberg and Senator Charles Schumer found.

The February crude contract went off the board after Monday's trading and the expiration helped to explain the volatility in the trading session.

Pfizer Inc. said Monday it plans to cut about 10,000 positions, or 10%, of its total worldwide workforce by the end of next year.

Hedge funds in the U.S. are the most leveraged since 1998, the year that Long-Term Capital Management collapsed, according to Bridgewater Associates Inc., a Westport, Connecticut-based fund manager.

U.K. house prices rose 0.5 percent for the month ended Jan. 13, and 13.5 percent in the year, according to Rightmove, the U.K.'s biggest property Web site. Chelsea home values rose 62 percent last year, the biggest annual gain for any London district since Rightmove started compiling its data in 2002.

February gold fell from a nearly three-week high of $640.20 to end the day at $634.10 an ounce, down $2.30. March silver held onto its gains to close up 8 cents at $13 an ounce. March copper rose 1.25 cents to close at $2.5295 a pound.

The U.S. military reported the deaths of two Marines, raising the two-day death toll to 27 in a particularly bloody weekend for American forces in Iraq.. It appears that we are witnessing a surge in the number of deaths in our fighting forces.

Mexico hiked its production of natural gas last year by 11 percent, setting a national record for that energy source, the state oil company Pemex said.
Mexico produced a daily average of 1.63 billion cubic meters of gas last year.

According to an AP-AOL News poll, only 44 percent think Bush is honest, down from 53 percent two years ago. It is amazing that 44% of Americans are brain dead.

American Express Chief Financial Officer Gary Crittenden said late Monday that the credit card giant faces near-term growth challenges and plans a more stringent approach to discretionary spending during the first half of 2007. The interest-rate environment will be more difficult in early 2007 as a number of hedges the company set up finished at the end of 2006, he explained during a conference call with analysts.

Natural gas for February delivery closed up 43.3 cents, or 6.3%, at $7.319 per million British thermal units on the New York Mercantile Exchange.

Texas Instruments will close a small digital chip fabrication plant in Dallas and eliminate 500 jobs over the coming year as part of a cost-cutting measure designed to save some $200 million annually.

Surge

1/22/07 Surge

At least 19 American service members were killed in military operations Saturday in the deadliest day for U.S. forces in two years, including 12 who died in a helicopter crash and five slain in an attack by militia fighters in the holy city of Karbala, military officials said.
Saturday's toll was the third-highest of any single day since the war began in March 2003, eclipsed only by 37 U.S. deaths on Jan. 26, 2005, and 28 on the third day of the U.S. invasion. U.S. authorities also announced two American combat deaths from Friday.

NEWSWEEK POLL: Sixty-Eight Percent of Americans Oppose Bush's 'Surge'.
Approval for Bush's Handling of Iraq at Historic Low of 24 Percent.

Nouriel Roubini: "Gillian Tett, the sharp Financial Times editor that covers derivative instruments, structured finance and the explosion of credit in financial markets reports on a senior banker telling her how leverage ratios of 50 or more are currently easily reached in financial markets:
"He then relates the case of a typical hedge fund, two times levered. That looks modest until you realise it is partly backed by fund of funds' money (which is three times levered) and investing in deeply subordinated tranches of collateralised debt obligations, which are nine times levered. "Thus every €1m of CDO bonds [acquired] is effectively supported by less than €20,000 of end investors' capital - a 2% price decline in the CDO paper wipes out the capital supporting it. "

Here is an interesting article about PT-141 and Palatin from the UK Observer:
http://observer.guardian.co.uk/magazine/

ElkCorp. said the Carlyle Group has lifted its tender offer to acquire the company to $42 per share in cash from a prior proposal of $40.50 per share.

John Hussman: "Given the very low level of labor compensation as a fraction of GDP, coupled with a relatively low unemployment rate, it's likely that we'll continue to observe upward pressure on unit labor costs. This is a threat to profit margins."

Data Points

1/21/07 Data Points

Median weekly earnings of the nation’s 106.9 million full-time wage and
salary workers were $682 in the fourth quarter of 2006, the Bureau of Labor
Statistics of the U.S. Department of Labor reported today. This was 3.5
percent higher than a year earlier, compared with a gain of 1.9 percent in
the Consumer Price Index for All Urban Consumers over the same period.
Women who usually worked full-time had median earnings of $609 per
week, or 81.3 percent of the $749 median for men. This ratio has
trended up gradually since the data were first collected in 1979; at
that time, it was 62.5 percent.

Randall Forsyth: "In a development that combines two historically important trends, Malaysia is becoming a center for Asian finance that conforms to Islamic laws that forbid the payment of interest. Not surprisingly, it has attracted the attention of Middle Eastern oil exporting nations."

On Tuesday, Bush delivers the annual State of the Union address. The chief focal point should be the state of the presidency. Bush is an embarrassment to the citizens of the U.S. and it is long overdue for Congress to topple this despot and his vice despot.

Swift Transportation Co., the third- largest U.S. trucking company by sales, accepted an offer of $2.4 billion in cash yesterday from Jerry Moyes, who founded the company with a single truck more than 40 years ago. A group led by Moyes will pay $31.55 a share for the shares it doesn't already own and will assume $332 million of debt.

Mike Burk: "Next week is the week following January options expiration during the 3rd year of the Presidential Cycle.
Next week has been a strong week. The OTC has been up 73% of the time since 1963 and the SPX has only been down once since 1953 (up 92% of the time). The 3rd year is stronger than the averages for all years which are also very positive. Over all years the OTC has been up 73% of the time and the SPX 69% of the time."

Bloomberg: "Money supply in India expanded at the fastest pace in more than eight years... The M3 measure of money supply increased 20.4 percent in the period from a year earlier..."

Doug Noland: "Regrettably, the Fed's asymmetric strategy with respect to ignoring asset Bubble while they are inflating and then reflating aggressively when they falter is tantamount to flagrant market manipulation.
A Hippocratic Oath is in order: First of all, Federal Reserve monetary policy must do no severe harm. To live up to such an oath, monetary policy would strive to avoid fostering Credit and speculative excess, while being prepared to take all necessary measures to ensure that protracted booms - with their deleterious effects on the financial and economic structure - not be tolerated. To minimize the risk of cumulative excesses and imbalances, the policy tool kit should avoid aggressive rate cuts, marketplace assurances and commitments to respond to faltering asset markets. Monetary policy should not be used to stimulate the economy or asset prices - it should not be "activist." Absolutely never should the Fed use the leveraged speculating community as a reflationary and liquidity-creating policy mechanism. And never should the Fed pre-commit to inflationary policies in the event of bursting speculative Bubbles. Drs. Bernanke and Mishkin's views on asset Bubbles and monetary policy are so dangerously ludicrous I find it difficult to believe they don't provoke heated debate, some consternation, and at least a little outrage."

"Assisted by our outside legal and financial advisors, we are carefully considering all alternatives for creating additional shareholder value," William Osborn, Tribune's lead independent director and chairman of the special committee, said in an e-mailed statement. "These alternatives include potential transactions involving third parties as well as actions the company may take alone."

Cross Currents

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.

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.

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.

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.

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.”

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.