9/30/07 You Be The Judge
The Office of Thrift Supervision has closed Alpharetta, Georgia-based NetBank Inc., and named the FDIC receiver of its assets. "The failed bank was an Internet bank and did not have any physical branches," the FDIC said in a statement posted online Friday, "Depositors of NetBank will automatically become depositors of ING Bank."
Overnight lending rates in Russia climbed to 10%, the highest since mid-2005. The Russian Standard Bank said last week it was suspending the issuance of cash loans and mortgages while tightening requirements for credit card and point-of-sale lending, though it denied any big cutback in overall lending.
The 19-commodity Reuters/Jefferies CRB Index was up 8.7% this month, the most since July 1975. The Goldman Sachs Commodity Index is up 25% in 2007.
The Chicago Tribune: In an atmosphere of price pressures, reminiscent of 1978, the seemingly riskiest move the Federal Reserve could make would be to further reduce interest rates. But numerous economists believe the central bank will do exactly that at its next scheduled meeting.
Fed funds futures now imply an 84% chance of a 25-basis-point fed funds rate cut at the October meeting.
Charter rates for tankers have more than doubled in the past year.
The Financial Times: Mr Gates said the Pentagon needed another $42bn for the conflicts on top of the $147bn outlined earlier this year. The request would bring total US military spending for fiscal 2008, which begins in October, to $671bn. If approved, the budget would equate to spending almost $21,300 a second and would rank the Pentagon ahead of the Dutch economy, the 16th largest in the world, in terms of size.
The California Association of Realtors reported that unsold Inventory Index for existing, single-family detached homes in August 2007 was 11.8 months, compared with 5.9 months (revised) for the same period a year ago." C.A.R.'s unsold inventory stood at 2.6 months in August 2005.
Defaults on privately insured U.S. mortgages climbed 30% last month from year-earlier levels.
David Tice and Doug Noland: "A classic real estate bust will feed on itself, ensuring further havoc throughout mortgage finance and imperiling the over-borrowed consumer sector...There are now literally trillions - and growing - of suspect debt instruments and many multiples more in problematic derivative instruments. We suspect that the proliferation of sophisticated leveraged strategies created considerable demand for high-yielding mortgage products, and now these vehicles are trapped with losses and illiquidity. Worse yet, Credit insurance and guarantees in the Trillions have been written and, as the downside of the Credit cycle gains momentum, we expect this exposure to become a major systemic issue. In short, we see Credit “insurance” as a bull market phenomenon that will not stand the test of the impending Credit and economic downturns. In too many cases, Credit guarantees, “insurance,” and myriad other exposures have been “written” by thinly-capitalized speculators and financial operators. They will have little wherewithal in the event of a serious Credit event. This is a major evolving issue. We fear the entire Wall Street risk intermediation mechanism is at considerable risk...Likely, liquidity issues and faltering asset markets will instigate problematic de-leveraging upon highly over-leveraged Credit and economic systems. We expect significant unfolding tumult in the securitization, derivatives, and risk “insurance” marketplaces. We view ballooning Credit insurance and derivatives markets as a bull market phenomenon that won’t withstand the test of the downside of the Credit Cycle. We believe the stock market has of late benefited from a combination of complacency, misperceptions with respect to Fed capabilities, and its newfound status, by default, as favored asset class. We see US equities, in particular, highly susceptible to unfolding detrimental financial and economic forces. We expect the economy to soon succumb to recession. California and other inflated real estate Bubble markets are now poised to suffer severe price declines – residential and commercial. And we expect contemporary “Wall Street Finance” to face a crisis of confidence – to suffer on all fronts – liquidity, Credit losses and regulatory. Our faltering currency is, as well, a major issue."
Michael Ball, a professor of property at Reading University, England, and an adviser to the UK government, said holiday homes in many parts of Europe were exposed to a correction.
The Cubs are back in the post season for the first time since 2003.
According to the LA Times, the federal government's border fencing effort has accelerated rapidly in recent weeks with barriers rising in towns from California to New Mexico and workers completing the longest stretch of continuous fencing on the U.S.-Mexico frontier. The Department of Homeland Security reached its goal of completing 70 miles of new fencing by the end of this month, nearly doubling the length of barriers on the border to about 145 miles.
Countrywide's CEO Mozilo initiated a stock selling plan Oct. 27, 2006 that called for selling 350,000 shares a month. That replaced a previous trading plan that had expired in May. The plan was filed three days after Countrywide reported that its earnings from mortgage banking had fallen 40% in the third quarter ended Sept. 30. On Dec. 12, Mozilo filed a new stock trading plan that allowed Mozilo to sell an additional 115,000 shares each month. On Feb. 2, Mozilo revised the trading plan he had adopted less than two months earlier, doubling the number of additional shares Mozilo was authorized to sell under his second plan to 230,000 a month. Between the two plans now in effect, Mozilo could sell 580,000 shares each month. The plan was filed the same day Countrywide shares closed at an all-time high of $45.03. I don't have to tell you where the stock is presently.
"The chances are we're going to have more snow than normal, but there's no guarantee," said Clifford Mass, a professor at the UW's Department of Atmospheric Sciences. "We do get significantly more snow in La Niña years."
Due to droughts and poor crop harvests, inflation is becoming a front page problem in China. It would not be surprising to see inflation numbers for September to exceed 5.5%.
With reduced volatility and volume, the equity market is getting more difficult to read. Is it the calm before the storm or is this new environment the current norm for the near term? It reminds me of an individual walking around on sedatives and as lively and clear thinking as a zombie.
Jesse Toprak, chief economist for the auto information site Edmunds.com, predicts Honda Motor Co. will be the only automaker to report an increase in sales for the month of September, helped by the arrival of the new 2008 Honda Accord. Automakers are scheduled to report September sales Tuesday.
"No one is immune to this general weakness we have in the marketplace," Toprak said.
ALMOST 200 Alcoa employees will lose their jobs when the US aluminium giant shuts down its foil operations under the weight of offshore competition and the high Australian dollar. In all, Alcoa will shed 194 jobs, the bulk of which will be lost when it shuts its aluminium foil and coil plant at its Yennora site in western Sydney. The knock-on affect will force Alcoa to cut back aluminium ingot production at its Point Henry metal-making operations in Geelong, with the loss of 56 jobs.
Stocks had their best September since 1997. At the same time, the dollar fell 5.1% against the Euro and 6.7% against the yen. In sum, foreign investors took it on the chin. The buying power for Americans continues to dwindle. That combined with inflation at the pump and at the food markets creates a cash flow nightmare on Main Street.
Peter Schiff: "Many economists acknowledge that a falling dollar will put upward pressure on import prices, but few consider its effects on domestically produced goods. For one thing, a weak dollar by definition raises the prices of globally traded, dollar-denominated commodities, such as oil, causing raw material costs for domestic manufacturers to rise. Also, as a weaker dollar causes foreigners to demand higher interest rates on the money they lend us, domestic capital cost will rise as well."
Saturday, September 29, 2007
Friday, September 28, 2007
The R Word
9/29/07 The R Word
Greenspan said Friday that the chances of a U.S. recession have increased as the housing market slump has hit consumer spending power, though he added the odds "are still less than 50-50."
His comments followed an increasingly bearish assessment of the global economy by Goldman Sachs, whose chief economist Jim O'Neill now puts the chances of a Japanese recession at nearly two-in-three.
This is irresponsible. The Senate voted 53-42 on Thursday to raise the federal debt limit by $850 billion, putting the ceiling at $9.815 trillion.The move marks the fifth increase in the debt limit since President Bush took office. Who is going to buy this $850 billion with the dollar plunging? Not China. Not India. Not the other Mideast countries. Not Russia. You market a product that is no longer a safe haven. You can't have a safe haven when the currency depreciation wipes out the interest. The dollar has fallen against all but two of the 16 most- active currencies this quarter.
Epictetus: “What concerns me is not the way things are, but rather the way people think things are.”
According to the WSJ, 3Com will announce a sale of itself to Bain Capital and Huawei for north of $2 billion, or more than $5 a share. 3Com says shareholders to get $5.30/share in cash.
In early Friday trading, gold sold at the highest price since 1980. This is one more result of the lower dollar and the Fed's reduction in interest rates. Why lower rates when your hand is out there begging for funds from foreigners to offset the nation's deficits? The New York Board of Trade's dollar index fell to 77.66, the weakest since the index began in 1973. The Fed's trade- weighted index comparing the dollar with major currencies fell on Sept. 25 to the lowest since its inception in 1971.
Cicero: “The enemy is within the gates; it is with our own luxury, our own folly, our own criminality that we have to contend."
The US economy faces a 40 to 45 per cent risk of recession induced by the housing market downturn, the chief executive of Freddie Mac warned on Thursday as data showed sales of new homes hit a seven-year low in August.
This year the prices of Illinois corn and soybeans are up 40% and 75%, respectively, from a year ago. Kansas wheat is up 70% or more. In U.S. cities last month, the average retail price of a pound loaf of whole-wheat bread was up 24% from a year ago, according to the Bureau of Labor Statistics. Whole milk hit $3.807 a gallon, up 26%. These are the fastest-rising food prices in 17 years. The average American family spends 10% of its annual income on food. With these huge price increases, that percentage is a good deal higher and squeezing the cash flow on Main Street.
TheOilDrum: "EIA data show a small decline in world net oil exports from 2005 to 2006, led by a 3.3% per year decline rate in net exports from the top three net oil exporters--Saudi Arabia, Russia and Norway. Furthermore, recent data suggest that the net export decline is continuing, and probably accelerating."
The London interbank offered rate that banks charge each other for overnight loans in pounds rose 20 basis points to 6 percent today, according to the British Bankers' Association. The corresponding rate for dollars rose 21 basis points to 5.30 percent, and the euro rate climbed 6 basis points to 4.23 percent.``Coming up to quarter-end you would expect to see a small spike in Libor, but with the market so short on cash it's particularly vulnerable at the moment,'' said Oliver Mangan, chief bond economist in Dublin at AIB Capital Markets, a unit of Ireland's second-biggest bank. ``People are reluctant to lend cash while banks are scrambling to hoard as much of it as possible. This is keeping rates elevated.''
On Friday, the European Union's statistical agency estimated that inflation in the euro zone would hit 2.1 percent in September — jumping from 1.7 percent in August, and putting inflation above the ECB's guideline of just under 2 percent.
Don't you love our gov't figures? Boosted by good deals on the auto lots and steady prices for consumer goods, U.S. real consumer spending increased 0.6% in August, the fastest growth in two years, the Commerce Department reported Friday. Inflation-adjusted spending on durable goods rose 2.8%, the biggest increase in two years. Consumer prices fell 0.1% on the month, the government said. Prices for durable goods fell 0.4%, while prices of nondurable goods fell 0.5%. Prices for services rose 0.2%.You want me to believe this stuff? When was the last time you bought something when the price declined? When was the last time your spending increased--other than paying more for gas and food and education and health care? To get a real laugh here are more gov't numbers on inflation: "Core consumer price inflation, which excludes food and energy prices, rose 0.1% in August, bringing core inflation over the past year down to 1.8%, the lowest since early 2004." Now for the crying:"Personal incomes increased 0.3% in August, the slowest growth since April, held back by weak employment and wage growth." In other words, your spending increased while your income barely rose and the value of your home crumbled?
George Ure: "You can tell with a half a second of thought, that a 20% collapse of home prices in many areas over the past two years makes an increase in personal savings impossible - falling home equity (most folks biggest savings account) ensures that. The statistical trick shot is this: You only count underlying change in house values when its convenient - you don't want a 20% decline in home equity showing up because that would 'color' reports of prosperity! See? I'm a gloomster for even mentioning it. I'm so ashamed.
Home equity really is savings, in that with a refi you can pull money out. But rather than admit to the decline in home equity, (which would make DPI more reflective of changes in personal net worth) seems the stats (at least as I read them) only look at home equity when a refi is done, and THAT was only changed when refi's dried up. How convenient!"
Bear Stearns sold $2.5 billion of 10-year global notes as the sole manager of the deal. The 6.40 percent notes, due Oct. 2, 2017, were priced to yield 1.875 percentage points more than U.S. Treasuries. Would you buy these notes? You can get a bigger yield on NZ gov't bonds with less risk.
Paccar of Canada Ltd. is poised to lay off 250 workers this fall, despite being offered more than $1 million in public funds last year to create new jobs at its Ste. Thérèse plant.The big-rig manufacturer, which assembles Peterbilt and Kenworth trucks, is letting half of its afternoon shift workers go on Oct. 12. The other half will join the company's morning shift, leaving the factory with a workforce of about 700.
In early Friday trading, the dollar index fell 0.4%, with the euro rising to 0.3% to a fresh record of $1.4207.
Chinese stocks surged to a record high close Friday.
It's hard to believe the VIX has dropped 20 points to 17. I guess contentment not volatility is king.
Wheat futures headed for the biggest two-month gain in 34 years after adverse weather in Australia, Canada and Ukraine crimped harvests. Prices have risen 59 percent since July 1, the biggest two- month gain since an 85 percent advance to Aug. 31, 1973, prompting Ukraine and Russia to consider export curbs. Global reserves are headed for a 26-year low as a drought in Australia, initially forecast by the U.S. to be the world's second-biggest wheat exporter, threatens the crop for a second year in a row.
The bottom of the housing market may not be reached until the second half of 2008, or later, said Dennis Lockhart, the new president of the Atlanta Federal Reserve Bank on Friday.
Robert McHugh: "Weighing heavy against this recent rally is a Bearish Divergence between the 10 day average Advance/Decline Line and prices in both the NASDAQ 100 and the S&P 500. Such divergences should not be taken lightly. They inevitably lead to declines as there are fewer and fewer stocks advancing, index prices being lifted by a narrowing breadth of stocks. In other words, the underlying strength of the market is weakening. The key point tonight is that volume is drying up on this rally - Bearish. We would not be surprised to see another Hindenburg Omen observation over the next week or two, perhaps several observations, as conditions are ripening for another signal. What is the big deal with Hindenburg Omens? It means underlying weakness is occurring in the market, to a severe degree, a forerunner to significant declines. The recent price strength in the NASDAQ 100, which exceeded its July highs this week, is not being confirmed by breadth. In other words, a few issues are doing the heavy lifting, AAPL in particular, along with GOOG, GRMN, RIMM, and WYNN doing the heavy lifting. Not much to brag about from the other 90 some stocks."
Spending on private nonresidential construction projects rose 2.3% in August, the biggest gain since February. Nonresidential outlays are up 15.2% in the past year.
Jim Shepherd, editor of the Shepherd Investment Strategist newsletter, says that the economy is "going into a significant recessionary period" and recommends that investors head for the safety of Treasury bonds now to avoid the pain.
“The housing market is just horrible, and it’s going to get worse,” said Stuart Hoffman, chief economist at PNC Financial Services.
Actual sales may be lower because the figures are based on contract signings, not closings.
Crude for November delivery dropped $1.22, or 1.5%, to end at $81.66 a barrel on the New York Mercantile Exchange. The contract gained 4 cents on the week from last Friday's closing level of $81.62.
Gold futures rallied to a 27-year high on Friday. Gold for December delivery surged $10.10, or 1.5%, to end at $750 an ounce on the New York Mercantile Exchange.
Marcus Aurelius: “The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane.”
Greenspan said Friday that the chances of a U.S. recession have increased as the housing market slump has hit consumer spending power, though he added the odds "are still less than 50-50."
His comments followed an increasingly bearish assessment of the global economy by Goldman Sachs, whose chief economist Jim O'Neill now puts the chances of a Japanese recession at nearly two-in-three.
This is irresponsible. The Senate voted 53-42 on Thursday to raise the federal debt limit by $850 billion, putting the ceiling at $9.815 trillion.The move marks the fifth increase in the debt limit since President Bush took office. Who is going to buy this $850 billion with the dollar plunging? Not China. Not India. Not the other Mideast countries. Not Russia. You market a product that is no longer a safe haven. You can't have a safe haven when the currency depreciation wipes out the interest. The dollar has fallen against all but two of the 16 most- active currencies this quarter.
Epictetus: “What concerns me is not the way things are, but rather the way people think things are.”
According to the WSJ, 3Com will announce a sale of itself to Bain Capital and Huawei for north of $2 billion, or more than $5 a share. 3Com says shareholders to get $5.30/share in cash.
In early Friday trading, gold sold at the highest price since 1980. This is one more result of the lower dollar and the Fed's reduction in interest rates. Why lower rates when your hand is out there begging for funds from foreigners to offset the nation's deficits? The New York Board of Trade's dollar index fell to 77.66, the weakest since the index began in 1973. The Fed's trade- weighted index comparing the dollar with major currencies fell on Sept. 25 to the lowest since its inception in 1971.
Cicero: “The enemy is within the gates; it is with our own luxury, our own folly, our own criminality that we have to contend."
The US economy faces a 40 to 45 per cent risk of recession induced by the housing market downturn, the chief executive of Freddie Mac warned on Thursday as data showed sales of new homes hit a seven-year low in August.
This year the prices of Illinois corn and soybeans are up 40% and 75%, respectively, from a year ago. Kansas wheat is up 70% or more. In U.S. cities last month, the average retail price of a pound loaf of whole-wheat bread was up 24% from a year ago, according to the Bureau of Labor Statistics. Whole milk hit $3.807 a gallon, up 26%. These are the fastest-rising food prices in 17 years. The average American family spends 10% of its annual income on food. With these huge price increases, that percentage is a good deal higher and squeezing the cash flow on Main Street.
TheOilDrum: "EIA data show a small decline in world net oil exports from 2005 to 2006, led by a 3.3% per year decline rate in net exports from the top three net oil exporters--Saudi Arabia, Russia and Norway. Furthermore, recent data suggest that the net export decline is continuing, and probably accelerating."
The London interbank offered rate that banks charge each other for overnight loans in pounds rose 20 basis points to 6 percent today, according to the British Bankers' Association. The corresponding rate for dollars rose 21 basis points to 5.30 percent, and the euro rate climbed 6 basis points to 4.23 percent.``Coming up to quarter-end you would expect to see a small spike in Libor, but with the market so short on cash it's particularly vulnerable at the moment,'' said Oliver Mangan, chief bond economist in Dublin at AIB Capital Markets, a unit of Ireland's second-biggest bank. ``People are reluctant to lend cash while banks are scrambling to hoard as much of it as possible. This is keeping rates elevated.''
On Friday, the European Union's statistical agency estimated that inflation in the euro zone would hit 2.1 percent in September — jumping from 1.7 percent in August, and putting inflation above the ECB's guideline of just under 2 percent.
Don't you love our gov't figures? Boosted by good deals on the auto lots and steady prices for consumer goods, U.S. real consumer spending increased 0.6% in August, the fastest growth in two years, the Commerce Department reported Friday. Inflation-adjusted spending on durable goods rose 2.8%, the biggest increase in two years. Consumer prices fell 0.1% on the month, the government said. Prices for durable goods fell 0.4%, while prices of nondurable goods fell 0.5%. Prices for services rose 0.2%.You want me to believe this stuff? When was the last time you bought something when the price declined? When was the last time your spending increased--other than paying more for gas and food and education and health care? To get a real laugh here are more gov't numbers on inflation: "Core consumer price inflation, which excludes food and energy prices, rose 0.1% in August, bringing core inflation over the past year down to 1.8%, the lowest since early 2004." Now for the crying:"Personal incomes increased 0.3% in August, the slowest growth since April, held back by weak employment and wage growth." In other words, your spending increased while your income barely rose and the value of your home crumbled?
George Ure: "You can tell with a half a second of thought, that a 20% collapse of home prices in many areas over the past two years makes an increase in personal savings impossible - falling home equity (most folks biggest savings account) ensures that. The statistical trick shot is this: You only count underlying change in house values when its convenient - you don't want a 20% decline in home equity showing up because that would 'color' reports of prosperity! See? I'm a gloomster for even mentioning it. I'm so ashamed.
Home equity really is savings, in that with a refi you can pull money out. But rather than admit to the decline in home equity, (which would make DPI more reflective of changes in personal net worth) seems the stats (at least as I read them) only look at home equity when a refi is done, and THAT was only changed when refi's dried up. How convenient!"
Bear Stearns sold $2.5 billion of 10-year global notes as the sole manager of the deal. The 6.40 percent notes, due Oct. 2, 2017, were priced to yield 1.875 percentage points more than U.S. Treasuries. Would you buy these notes? You can get a bigger yield on NZ gov't bonds with less risk.
Paccar of Canada Ltd. is poised to lay off 250 workers this fall, despite being offered more than $1 million in public funds last year to create new jobs at its Ste. Thérèse plant.The big-rig manufacturer, which assembles Peterbilt and Kenworth trucks, is letting half of its afternoon shift workers go on Oct. 12. The other half will join the company's morning shift, leaving the factory with a workforce of about 700.
In early Friday trading, the dollar index fell 0.4%, with the euro rising to 0.3% to a fresh record of $1.4207.
Chinese stocks surged to a record high close Friday.
It's hard to believe the VIX has dropped 20 points to 17. I guess contentment not volatility is king.
Wheat futures headed for the biggest two-month gain in 34 years after adverse weather in Australia, Canada and Ukraine crimped harvests. Prices have risen 59 percent since July 1, the biggest two- month gain since an 85 percent advance to Aug. 31, 1973, prompting Ukraine and Russia to consider export curbs. Global reserves are headed for a 26-year low as a drought in Australia, initially forecast by the U.S. to be the world's second-biggest wheat exporter, threatens the crop for a second year in a row.
The bottom of the housing market may not be reached until the second half of 2008, or later, said Dennis Lockhart, the new president of the Atlanta Federal Reserve Bank on Friday.
Robert McHugh: "Weighing heavy against this recent rally is a Bearish Divergence between the 10 day average Advance/Decline Line and prices in both the NASDAQ 100 and the S&P 500. Such divergences should not be taken lightly. They inevitably lead to declines as there are fewer and fewer stocks advancing, index prices being lifted by a narrowing breadth of stocks. In other words, the underlying strength of the market is weakening. The key point tonight is that volume is drying up on this rally - Bearish. We would not be surprised to see another Hindenburg Omen observation over the next week or two, perhaps several observations, as conditions are ripening for another signal. What is the big deal with Hindenburg Omens? It means underlying weakness is occurring in the market, to a severe degree, a forerunner to significant declines. The recent price strength in the NASDAQ 100, which exceeded its July highs this week, is not being confirmed by breadth. In other words, a few issues are doing the heavy lifting, AAPL in particular, along with GOOG, GRMN, RIMM, and WYNN doing the heavy lifting. Not much to brag about from the other 90 some stocks."
Spending on private nonresidential construction projects rose 2.3% in August, the biggest gain since February. Nonresidential outlays are up 15.2% in the past year.
Jim Shepherd, editor of the Shepherd Investment Strategist newsletter, says that the economy is "going into a significant recessionary period" and recommends that investors head for the safety of Treasury bonds now to avoid the pain.
“The housing market is just horrible, and it’s going to get worse,” said Stuart Hoffman, chief economist at PNC Financial Services.
Actual sales may be lower because the figures are based on contract signings, not closings.
Crude for November delivery dropped $1.22, or 1.5%, to end at $81.66 a barrel on the New York Mercantile Exchange. The contract gained 4 cents on the week from last Friday's closing level of $81.62.
Gold futures rallied to a 27-year high on Friday. Gold for December delivery surged $10.10, or 1.5%, to end at $750 an ounce on the New York Mercantile Exchange.
Marcus Aurelius: “The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane.”
Thursday, September 27, 2007
Window Dressing
9/28/07 Window Dressing
Today is the last day of trading for the third quarter. That means window dressing. That means rumors, such as, Buffett and Bear Stearns. Who would pay a 33% premium over book value, and one that looks like a moving target? Not me.
The dollar fell to a new all-time low against the euro Thursday.
South Korean consumer confidence climbed to a five-year high in the third quarter, according to a survey released by the South Korean central bank Thursday. The Bank of Korea consumer survey index climbed to 112 in the third quarter, up from 108 in the preceding quarter, its highest level since the index recorded 119 in the third quarter of 2002, Dow Jones Newswires reported.
According to the WSJ, several bidding groups have expressed an interest in Wendy's.
The home building industry added 518,000 jobs from January 2003 to February 2006, when employment hit its peak, according to Moody's Economy.com, an economic consulting firm that is a unit of Moody's Corp. . Since the peak through the end of August, 142,500 have been lost, with the deepest layoffs occurring among construction workers.
According to Bloomberg, the European Central Bank lent the most money at its penalty rate in almost three years, suggesting at least one bank is still being shut out of credit markets.The ECB loaned 3.9 billion euros ($5.5 billion) at its marginal rate of 5 percent yesterday, the most since October 2004, the Frankfurt-based central bank said in a daily borrowing-requirement statement today. It didn't provide details of which bank or banks asked for the money.
Cia. Vale do Rio Doce, Rio Tinto Group and BHP Billiton Ltd., the world's three largest iron-ore exporters, may increase prices by 30 percent next year as demand driven by steelmakers in China outpaces growth in supply.
Prices for benchmark shipments from Australia will rise to a record $66.40 a ton next year from $51.47 in 2007, according to the median forecast of eight analysts surveyed by Bloomberg. Sales may climb 11 percent this year as supplies gain 8 percent, Merrill Lynch & Co. estimates. Mining companies and customers begin annual contract talks next month for shipments from April.
Private equity funds devoted to investing in the Middle East and North Africa grew to $5.2 billion in 2006, from $316 million in 2004, according to Zawya Private Equity Monitor.
Henry To: "Should the Dow Industrials make another all-time high - preferably in the 14,200 to 14,500 area, and should this be accompanied by weak breadth and divergences among many market indices, then there is a chance that we will establish an initial 50% short position in our DJIA Timing System."
U.S. District Judge Ann Aiken ruled that the Patriot Act violates the Constitution because it "permits the executive branch of government to conduct surveillance and searches of American citizens without satisfying the probable cause requirements of the Fourth Amendment."
With 6mo treasury bills yielding more than 2 & 3 yr notes, interbank rates continuing to rise, and uneven breath in equities, I would be an aggressive seller of large cap stocks as well as the few parabolic techs, such as RIMM, going into Friday's close.
KB Home said total quarterly revenue fell 32% from a year earlier to $1.54 billion. Including the French discontinued operations, KB Home said it posted a third-quarter net loss of $35.6 million, or 46 cents a share, compared with net income of $153.2 million, or $1.90 a share in the year-ago period. At this time, we see no signs that the housing market is stabilizing and believe it will be some time before a recovery begins," commented CEO Jeffrey Mezger.
The average rate on fixed-rate 30-year mortgages rose to 6.49% this week from 6.32% last week, reported Bankrate Inc., which operates personal-finance Web site Bankrate.com, on Thursday. The average 15-year fixed mortgage rose to 6.16% from 6.00%. The average rate on 30-year jumbo loans -- above $417,000 -- also rose to 7.31%
The number of initial claims in the week ending September 22 fell 15,000 to 298,000. It's the lowest level since the week ended May 12. The four-week average of initial claims fell 9,750 to 311,500. Meanwhile, the number of Americans receiving state jobless benefits rose 11,000 to 2.55 million in the week ending September 15. The four-week moving average of continuing claims fell 5,500 to 2.57 million.
Palatin announced positive results from an at-home Phase 2 trial evaluating bremelanotide for the treatment of female sexual arousal disorder (FSAD). The objective of this exploratory study was to identify potential efficacy endpoints for future studies and to evaluate the safety of intranasal (IN) bremelanotide, relative to placebo and under the conditions of home use, for the treatment of FSAD in pre- and postmenopausal women. "We are pleased with the overall data from this exploratory trial. The efficacy response was consistent and robust across all domains, particularly desire and arousal. We look forward to discussing the program's further development with the FDA, including future dose-ranging studies to improve the drug's benefit/risk profile," stated Dr. Trevor Hallam, Executive Vice President of Research & Development for Palatin. Based on these data, Palatin is encouraged about the use of bremelanotide for FSAD and believes that future studies in patients with FSAD are warranted. Future dose-ranging studies at 10 mg and lower will be necessary to improve the drug's benefit/risk ratio. Palatin plans to engage the FDA in discussions regarding future development later this calendar year. Dr. Eileen Palace, The Center for Sexual Health, Metairie, LA, stated, "With no approved medical therapies to treat patients with FSAD, I believe the results of the clinical trials with bremelanotide warrant further development." Dr. Palace is an investigator who enrolled patients in the study and a member of the Bremelanotide Scientific Advisory Board.
Sales of new homes dropped 8.3% in August to a seasonally adjusted annual rate of 795,000, the slowest sales since June 2000, the Commerce Department estimated Thursday. Sales are now down 21.2% in the past year. The median sales price fell 7.5% to $225,700 in August compared with a year earlier, the largest year-over-year decline in 37 years. The inventory of unsold homes fell by 1.5% to 529,000, the fifth straight decline as builders struggle to bring their inventories down. The inventory represents an 8.2-month supply at the August sales pace, the highest since March.
Brad Setser: "IF the US trade deficit really is declining sharply, and IF the recycling of the US trade deficit really was the industrial-strength punch that kept this party going for so long, who is most likely to be hurt when the punchbowl is taken away?"
Natural gas supplies rose by 74 billion cubic feet to 3,206 billion cubic feet during the week ending Sept. 21, the Energy Department said Thursday.
Oil supplies in Cushing, Oklahoma, the delivery point for the U.S. benchmark grade, fell to the lowest in 21 months. Crude has rebounded to $83 and natural gas is just under $7. October heating oil rose 6.95 cents, or 3.2%, to finish at $2.2521 a gallon. October reformulated gasoline surged 6.65 cents, or over 3%, at $2.0939 a gallon.
Gold for December delivery rose $4.40 to close at $739.90 an ounce on the New York Mercantile Exchange. December silver gained 10 cents at $13.645 an ounce. October platinum rose $13.20 to finish at $1,364.70 an ounce and December palladium gained $2.95 at $347.75 an ounce. December copper rose 3.40 cents at $3.6480 a pound.
More than 150 mortgage lenders have now quit the industry or declared bankruptcy due to rising delinquencies and tighter capital markets .
Borrowing at the Federal Reserve's discount window has completely dried up, Fed data released Thursday show. For the first time in a more than a month, there were no outstanding loans through the Fed's primary credit facility, also known as the discount window, as of Wednesday. A week ago, $1.1 billion was outstanding. The average daily balance of loans in the week ending Wednesday was $88 million, down from $2.2 billion in the prior week.
According to AMG Data Services, for the latest week, equity outflows $6.8 billion; taxable bond fund inflows $1.7 billion xETFs; equity bond outflows $1.2 billion; and taxable bond inflows $1.5 billion.
Today is the last day of trading for the third quarter. That means window dressing. That means rumors, such as, Buffett and Bear Stearns. Who would pay a 33% premium over book value, and one that looks like a moving target? Not me.
The dollar fell to a new all-time low against the euro Thursday.
South Korean consumer confidence climbed to a five-year high in the third quarter, according to a survey released by the South Korean central bank Thursday. The Bank of Korea consumer survey index climbed to 112 in the third quarter, up from 108 in the preceding quarter, its highest level since the index recorded 119 in the third quarter of 2002, Dow Jones Newswires reported.
According to the WSJ, several bidding groups have expressed an interest in Wendy's.
The home building industry added 518,000 jobs from January 2003 to February 2006, when employment hit its peak, according to Moody's Economy.com, an economic consulting firm that is a unit of Moody's Corp. . Since the peak through the end of August, 142,500 have been lost, with the deepest layoffs occurring among construction workers.
According to Bloomberg, the European Central Bank lent the most money at its penalty rate in almost three years, suggesting at least one bank is still being shut out of credit markets.The ECB loaned 3.9 billion euros ($5.5 billion) at its marginal rate of 5 percent yesterday, the most since October 2004, the Frankfurt-based central bank said in a daily borrowing-requirement statement today. It didn't provide details of which bank or banks asked for the money.
Cia. Vale do Rio Doce, Rio Tinto Group and BHP Billiton Ltd., the world's three largest iron-ore exporters, may increase prices by 30 percent next year as demand driven by steelmakers in China outpaces growth in supply.
Prices for benchmark shipments from Australia will rise to a record $66.40 a ton next year from $51.47 in 2007, according to the median forecast of eight analysts surveyed by Bloomberg. Sales may climb 11 percent this year as supplies gain 8 percent, Merrill Lynch & Co. estimates. Mining companies and customers begin annual contract talks next month for shipments from April.
Private equity funds devoted to investing in the Middle East and North Africa grew to $5.2 billion in 2006, from $316 million in 2004, according to Zawya Private Equity Monitor.
Henry To: "Should the Dow Industrials make another all-time high - preferably in the 14,200 to 14,500 area, and should this be accompanied by weak breadth and divergences among many market indices, then there is a chance that we will establish an initial 50% short position in our DJIA Timing System."
U.S. District Judge Ann Aiken ruled that the Patriot Act violates the Constitution because it "permits the executive branch of government to conduct surveillance and searches of American citizens without satisfying the probable cause requirements of the Fourth Amendment."
With 6mo treasury bills yielding more than 2 & 3 yr notes, interbank rates continuing to rise, and uneven breath in equities, I would be an aggressive seller of large cap stocks as well as the few parabolic techs, such as RIMM, going into Friday's close.
KB Home said total quarterly revenue fell 32% from a year earlier to $1.54 billion. Including the French discontinued operations, KB Home said it posted a third-quarter net loss of $35.6 million, or 46 cents a share, compared with net income of $153.2 million, or $1.90 a share in the year-ago period. At this time, we see no signs that the housing market is stabilizing and believe it will be some time before a recovery begins," commented CEO Jeffrey Mezger.
The average rate on fixed-rate 30-year mortgages rose to 6.49% this week from 6.32% last week, reported Bankrate Inc., which operates personal-finance Web site Bankrate.com, on Thursday. The average 15-year fixed mortgage rose to 6.16% from 6.00%. The average rate on 30-year jumbo loans -- above $417,000 -- also rose to 7.31%
The number of initial claims in the week ending September 22 fell 15,000 to 298,000. It's the lowest level since the week ended May 12. The four-week average of initial claims fell 9,750 to 311,500. Meanwhile, the number of Americans receiving state jobless benefits rose 11,000 to 2.55 million in the week ending September 15. The four-week moving average of continuing claims fell 5,500 to 2.57 million.
Palatin announced positive results from an at-home Phase 2 trial evaluating bremelanotide for the treatment of female sexual arousal disorder (FSAD). The objective of this exploratory study was to identify potential efficacy endpoints for future studies and to evaluate the safety of intranasal (IN) bremelanotide, relative to placebo and under the conditions of home use, for the treatment of FSAD in pre- and postmenopausal women. "We are pleased with the overall data from this exploratory trial. The efficacy response was consistent and robust across all domains, particularly desire and arousal. We look forward to discussing the program's further development with the FDA, including future dose-ranging studies to improve the drug's benefit/risk profile," stated Dr. Trevor Hallam, Executive Vice President of Research & Development for Palatin. Based on these data, Palatin is encouraged about the use of bremelanotide for FSAD and believes that future studies in patients with FSAD are warranted. Future dose-ranging studies at 10 mg and lower will be necessary to improve the drug's benefit/risk ratio. Palatin plans to engage the FDA in discussions regarding future development later this calendar year. Dr. Eileen Palace, The Center for Sexual Health, Metairie, LA, stated, "With no approved medical therapies to treat patients with FSAD, I believe the results of the clinical trials with bremelanotide warrant further development." Dr. Palace is an investigator who enrolled patients in the study and a member of the Bremelanotide Scientific Advisory Board.
Sales of new homes dropped 8.3% in August to a seasonally adjusted annual rate of 795,000, the slowest sales since June 2000, the Commerce Department estimated Thursday. Sales are now down 21.2% in the past year. The median sales price fell 7.5% to $225,700 in August compared with a year earlier, the largest year-over-year decline in 37 years. The inventory of unsold homes fell by 1.5% to 529,000, the fifth straight decline as builders struggle to bring their inventories down. The inventory represents an 8.2-month supply at the August sales pace, the highest since March.
Brad Setser: "IF the US trade deficit really is declining sharply, and IF the recycling of the US trade deficit really was the industrial-strength punch that kept this party going for so long, who is most likely to be hurt when the punchbowl is taken away?"
Natural gas supplies rose by 74 billion cubic feet to 3,206 billion cubic feet during the week ending Sept. 21, the Energy Department said Thursday.
Oil supplies in Cushing, Oklahoma, the delivery point for the U.S. benchmark grade, fell to the lowest in 21 months. Crude has rebounded to $83 and natural gas is just under $7. October heating oil rose 6.95 cents, or 3.2%, to finish at $2.2521 a gallon. October reformulated gasoline surged 6.65 cents, or over 3%, at $2.0939 a gallon.
Gold for December delivery rose $4.40 to close at $739.90 an ounce on the New York Mercantile Exchange. December silver gained 10 cents at $13.645 an ounce. October platinum rose $13.20 to finish at $1,364.70 an ounce and December palladium gained $2.95 at $347.75 an ounce. December copper rose 3.40 cents at $3.6480 a pound.
More than 150 mortgage lenders have now quit the industry or declared bankruptcy due to rising delinquencies and tighter capital markets .
Borrowing at the Federal Reserve's discount window has completely dried up, Fed data released Thursday show. For the first time in a more than a month, there were no outstanding loans through the Fed's primary credit facility, also known as the discount window, as of Wednesday. A week ago, $1.1 billion was outstanding. The average daily balance of loans in the week ending Wednesday was $88 million, down from $2.2 billion in the prior week.
According to AMG Data Services, for the latest week, equity outflows $6.8 billion; taxable bond fund inflows $1.7 billion xETFs; equity bond outflows $1.2 billion; and taxable bond inflows $1.5 billion.
Wednesday, September 26, 2007
GM Strike Settled
9/27/07 GM Strike Settled
In an historic move, there is a shifting of a $51 billion liability for retiree health care to a union-run trust fund.
The effect on the economy from financial disruptions is "highly uncertain," said former Treasury Secretary Robert Rubin on Wednesday. Rubin said it's possible the economy could achieve a soft landing, but "serious difficulty" is also a possible outcome.
A top executive at Toyota Motor Corp said on Wednesday that achieving a rise in U.S. sales in September might be tough because of a spike in sales in the same month a year earlier. "We had an especially strong month last September, with growth of around 25 percent, so it may be difficult for sales to rise," Executive Vice President Mitsuo Kinoshita told a small group of reporters.
Los Angeles County supervisors were warned Tuesday that the cooling housing market could cut into property tax revenue, which funds local services including public safety, health services and foster care. Expressing concern, board members requested that the county chief executive update them in January on the fiscal outlook for the county's $22.4-billion budget.
The Federal Reserve's interest rate cut was a mistake that will prompt ``skyrocketing'' agricultural prices worldwide, exacerbate a decline in the dollar and quicken inflation, investor Jim Rogers said. The ``clowns in Washington'' have ``signaled to the world they don't care about the U.S. dollar,'' Rogers said.
Carlyle Capital Corp., the publicly traded credit fund backed by private-equity firm Carlyle Group, fell 24 percent in August as it sold assets and global debt prices declined.
"Food is going to be like oil," a product that gets more expensive as China and India get richer, said Chris Williamson, chief economist at NTC Economics in London. "There is a growing population that is improving its standard of living and wants to eat more," Williamson said.
Bond insurers owned by Ambac Financial Group Inc. and FGIC Corp. may need to raise capital to maintain their top credit ratings if losses worsen on subprime mortgage securities, Moody's Investors Service said.
According to China Daily, China’s central bank may raise the interest rate on mortgage loans this week to curb rising home prices and property speculation. The People’s Bank of China may increase the rate to 1.1 times the nation’s 7.29% benchmark one-year lending rate. The rate for a five-year mortgage loan could reach as high as 8.61%.
Sandler O'Neill analyst Jeff Harte lowered his third-quarter earnings-per-share estimate for Merrill to $1.56 from $1.93. Analysts on average look for the world's largest brokerage to earn $1.82 a share, according to Reuters Estimates. Harte figures Merrill Lynch's subprime mortgage unit, First Franklin Financial, could cut about $100 million from the brokerage's third-quarter profit on an impairment charge.
Nouriel Roubini: "But it turned out that I was way too optimistic about housing, not too pessimistic. As recently reported housing starts have now fallen by 42% and now JP Morgan – one of the most respected research houses on Wall Street and a persistent proponent until recently of the view that the housing recession would bottom out – is predicting that housing starts will fall another 25% to a cumulative fall of 56% from peak and will bottom out at 999 thousand units some time in 2008. Compared to my initial March prediction of a bottom at 1.1 million I turn out to be an optimist. And indeed many other research firms (including Goldman Sachs, Citibank and others) are now predicting the bottom of housing starts at 1 million to 1.1 million units. So what in March was considered as borderline lunatic is now becoming conventional wisdom."
Timberland Co. cut its full-year revenue guidance Wednesday on some upcoming store closings, softer market trends and costs related to a voluntary product recall. The company, which makes footwear and apparel, said it now expects 2007 revenue to decline in the 5 percent range. It previously said sales were likely to decline by low single digits.Timberland said it will close about 40 specialty retail stores in the United States, Europe and Asia as well as several under performing U.S. outlet stores likely within the first several months of 2008. The company said the closures are consistent with its strategy to transition to smaller, footwear-focused stores in the United States and in certain international markets.
New Orders New orders for manufactured durable goods in August decreased $11.3 billion or 4.9 percent to $219.5 billion, the U.S. Census Bureau announced today. This decrease followed two consecutive monthly increases, including a 6.1 percent July increase. Excluding transportation, new orders decreased 1.8 percent. Excluding defense, new orders decreased 5.9 percent. Shipments Shipments of manufactured durable goods in August, down two of the last three months, decreased $3.4 billion or 1.6 percent to $216.7 billion. This followed a 4.0 percent July increase. Businesses reduced their orders for capital equipment from U.S. factories in August by 0.7%.
The Financial Times: The European Central Bank faced a fresh surge in demand for liquidity on Tuesday when it allocated weekly refinancing funds at an average of 4.29 per cent, the highest spread over the minimum bid rate for almost five years. The unexpectedly strong appetite suggests the ECB is again facing difficulties bringing interest rates in line with its 4 per cent main rate. Tuesday’s auction bids totalled €369bn compared with its estimated “benchmark” requirement of €157bn.The pattern is likely to trigger unease among policy makers since it suggests the mood in the global money markets remains nervous, irrespective of the emergency actions taken by central banks in recent days.
The Bank of England said Wednesday that it hasn't received any bids for three-month loans under its new emergency facility, Dow Jones Newswires reported. Last week, the bank said that it would lend up to 10 billion pounds through the facility at a rate of at least 6.75%, which is one percentage point above its base rate. Three month sterling libor slipped to 6.31625% on Wednesday, from 6.34375% recorded on Tuesday.
Chevron Corp. set plans to buy back up to $15 billion in stock.
Kazakh lawmakers on Wednesday allowed their government to change or break contracts with foreign companies, in a move that will alarm already jittery investors in the Central Asian state. Under the law, the oil-rich state could force retrospective changes to any contracts or break their terms altogether with foreign and domestic companies, if it deemed a threat existed to the country's national security. "This draft law aims to strengthen the national interests of our country in the sphere of natural resources," said Yerlan Nigmatulin, a member of parliament who has spearheaded the law.
Palatin Technologies Inc said it will reduce its workforce by 30 percent, a month after U.S. health regulators raised concerns on the efficacy of the company's drug to treat male erectile dysfunction. The biopharmaceutical company expects to incur a charge of $500,000 for severance payments in the quarter ending Sept. 30. Palatin, which will be left with 64 employees after the layoff, said the reduction will result in annual savings of $4 million.
Newmont Mining: "The large-scale, mature and low grade nature of its gold deposits may limit its ability to replace, net of depletion, its proven and probable gold reserves in 2007."
Bank of America Corp. and its partners in the $25 billion buyout of student lender SLM Corp. are looking at whether the deal's agreed price needs to be adjusted in light of recent changes to lending laws, Chief Executive Ken Lewis said in an interview with the Charlotte Observer. Lewis, in an interview published Wednesday, said the two sides remain in talks about the deal, which was agreed to in April and which SLM expected to close by October. "We obviously have seen the change in the (education lending) laws," Lewis said, according to the newspaper. "We are trying to assess the impact that might have on the price." "We're still talking. That's about all I can say," he added. (Sallie Mae itself estimated Wednesday that the new law will cut between 1.8% and 2.1% of its net income over the next five years.)
The American Petroleum Institute reported a climb of 895,000 barrels in crude supplies for the week ended Sept. 21. The Energy Department had reported a climb of 1.8 million barrels for the latest week. Motor gasoline supplies were up 1 million barrels, the API said. The government had reported that supplies were up 600,000 barrels. Distillate supplies fell by 1.9 million barrels, the API said. But they were up 1.6 million barrels, according to the Energy Department.
Bear Stearns, which has been hit hard by the mortgage turmoil, is in "serious talks" with several investors, including billionaire Warren Buffett and B of A, about selling as much as 20% of the company, the New York Times reported on its Web site, citing people familiar with the matter. With BSC at $123, I'd be a seller. Buffett had his hands full with Salomon Bros. and B of A just made an investment in CFC, and that one I question too.
Crude oil for November delivery closed up 77 cents at $80.30 a barrel on the New York Mercantile Exchange.
Gold for December delivery dropped $3.30 to end at $735.50 an ounce on the New York Mercantile Exchange.
In an historic move, there is a shifting of a $51 billion liability for retiree health care to a union-run trust fund.
The effect on the economy from financial disruptions is "highly uncertain," said former Treasury Secretary Robert Rubin on Wednesday. Rubin said it's possible the economy could achieve a soft landing, but "serious difficulty" is also a possible outcome.
A top executive at Toyota Motor Corp said on Wednesday that achieving a rise in U.S. sales in September might be tough because of a spike in sales in the same month a year earlier. "We had an especially strong month last September, with growth of around 25 percent, so it may be difficult for sales to rise," Executive Vice President Mitsuo Kinoshita told a small group of reporters.
Los Angeles County supervisors were warned Tuesday that the cooling housing market could cut into property tax revenue, which funds local services including public safety, health services and foster care. Expressing concern, board members requested that the county chief executive update them in January on the fiscal outlook for the county's $22.4-billion budget.
The Federal Reserve's interest rate cut was a mistake that will prompt ``skyrocketing'' agricultural prices worldwide, exacerbate a decline in the dollar and quicken inflation, investor Jim Rogers said. The ``clowns in Washington'' have ``signaled to the world they don't care about the U.S. dollar,'' Rogers said.
Carlyle Capital Corp., the publicly traded credit fund backed by private-equity firm Carlyle Group, fell 24 percent in August as it sold assets and global debt prices declined.
"Food is going to be like oil," a product that gets more expensive as China and India get richer, said Chris Williamson, chief economist at NTC Economics in London. "There is a growing population that is improving its standard of living and wants to eat more," Williamson said.
Bond insurers owned by Ambac Financial Group Inc. and FGIC Corp. may need to raise capital to maintain their top credit ratings if losses worsen on subprime mortgage securities, Moody's Investors Service said.
According to China Daily, China’s central bank may raise the interest rate on mortgage loans this week to curb rising home prices and property speculation. The People’s Bank of China may increase the rate to 1.1 times the nation’s 7.29% benchmark one-year lending rate. The rate for a five-year mortgage loan could reach as high as 8.61%.
Sandler O'Neill analyst Jeff Harte lowered his third-quarter earnings-per-share estimate for Merrill to $1.56 from $1.93. Analysts on average look for the world's largest brokerage to earn $1.82 a share, according to Reuters Estimates. Harte figures Merrill Lynch's subprime mortgage unit, First Franklin Financial, could cut about $100 million from the brokerage's third-quarter profit on an impairment charge.
Nouriel Roubini: "But it turned out that I was way too optimistic about housing, not too pessimistic. As recently reported housing starts have now fallen by 42% and now JP Morgan – one of the most respected research houses on Wall Street and a persistent proponent until recently of the view that the housing recession would bottom out – is predicting that housing starts will fall another 25% to a cumulative fall of 56% from peak and will bottom out at 999 thousand units some time in 2008. Compared to my initial March prediction of a bottom at 1.1 million I turn out to be an optimist. And indeed many other research firms (including Goldman Sachs, Citibank and others) are now predicting the bottom of housing starts at 1 million to 1.1 million units. So what in March was considered as borderline lunatic is now becoming conventional wisdom."
Timberland Co. cut its full-year revenue guidance Wednesday on some upcoming store closings, softer market trends and costs related to a voluntary product recall. The company, which makes footwear and apparel, said it now expects 2007 revenue to decline in the 5 percent range. It previously said sales were likely to decline by low single digits.Timberland said it will close about 40 specialty retail stores in the United States, Europe and Asia as well as several under performing U.S. outlet stores likely within the first several months of 2008. The company said the closures are consistent with its strategy to transition to smaller, footwear-focused stores in the United States and in certain international markets.
New Orders New orders for manufactured durable goods in August decreased $11.3 billion or 4.9 percent to $219.5 billion, the U.S. Census Bureau announced today. This decrease followed two consecutive monthly increases, including a 6.1 percent July increase. Excluding transportation, new orders decreased 1.8 percent. Excluding defense, new orders decreased 5.9 percent. Shipments Shipments of manufactured durable goods in August, down two of the last three months, decreased $3.4 billion or 1.6 percent to $216.7 billion. This followed a 4.0 percent July increase. Businesses reduced their orders for capital equipment from U.S. factories in August by 0.7%.
The Financial Times: The European Central Bank faced a fresh surge in demand for liquidity on Tuesday when it allocated weekly refinancing funds at an average of 4.29 per cent, the highest spread over the minimum bid rate for almost five years. The unexpectedly strong appetite suggests the ECB is again facing difficulties bringing interest rates in line with its 4 per cent main rate. Tuesday’s auction bids totalled €369bn compared with its estimated “benchmark” requirement of €157bn.The pattern is likely to trigger unease among policy makers since it suggests the mood in the global money markets remains nervous, irrespective of the emergency actions taken by central banks in recent days.
The Bank of England said Wednesday that it hasn't received any bids for three-month loans under its new emergency facility, Dow Jones Newswires reported. Last week, the bank said that it would lend up to 10 billion pounds through the facility at a rate of at least 6.75%, which is one percentage point above its base rate. Three month sterling libor slipped to 6.31625% on Wednesday, from 6.34375% recorded on Tuesday.
Chevron Corp. set plans to buy back up to $15 billion in stock.
Kazakh lawmakers on Wednesday allowed their government to change or break contracts with foreign companies, in a move that will alarm already jittery investors in the Central Asian state. Under the law, the oil-rich state could force retrospective changes to any contracts or break their terms altogether with foreign and domestic companies, if it deemed a threat existed to the country's national security. "This draft law aims to strengthen the national interests of our country in the sphere of natural resources," said Yerlan Nigmatulin, a member of parliament who has spearheaded the law.
Palatin Technologies Inc said it will reduce its workforce by 30 percent, a month after U.S. health regulators raised concerns on the efficacy of the company's drug to treat male erectile dysfunction. The biopharmaceutical company expects to incur a charge of $500,000 for severance payments in the quarter ending Sept. 30. Palatin, which will be left with 64 employees after the layoff, said the reduction will result in annual savings of $4 million.
Newmont Mining: "The large-scale, mature and low grade nature of its gold deposits may limit its ability to replace, net of depletion, its proven and probable gold reserves in 2007."
Bank of America Corp. and its partners in the $25 billion buyout of student lender SLM Corp. are looking at whether the deal's agreed price needs to be adjusted in light of recent changes to lending laws, Chief Executive Ken Lewis said in an interview with the Charlotte Observer. Lewis, in an interview published Wednesday, said the two sides remain in talks about the deal, which was agreed to in April and which SLM expected to close by October. "We obviously have seen the change in the (education lending) laws," Lewis said, according to the newspaper. "We are trying to assess the impact that might have on the price." "We're still talking. That's about all I can say," he added. (Sallie Mae itself estimated Wednesday that the new law will cut between 1.8% and 2.1% of its net income over the next five years.)
The American Petroleum Institute reported a climb of 895,000 barrels in crude supplies for the week ended Sept. 21. The Energy Department had reported a climb of 1.8 million barrels for the latest week. Motor gasoline supplies were up 1 million barrels, the API said. The government had reported that supplies were up 600,000 barrels. Distillate supplies fell by 1.9 million barrels, the API said. But they were up 1.6 million barrels, according to the Energy Department.
Bear Stearns, which has been hit hard by the mortgage turmoil, is in "serious talks" with several investors, including billionaire Warren Buffett and B of A, about selling as much as 20% of the company, the New York Times reported on its Web site, citing people familiar with the matter. With BSC at $123, I'd be a seller. Buffett had his hands full with Salomon Bros. and B of A just made an investment in CFC, and that one I question too.
Crude oil for November delivery closed up 77 cents at $80.30 a barrel on the New York Mercantile Exchange.
Gold for December delivery dropped $3.30 to end at $735.50 an ounce on the New York Mercantile Exchange.
Tuesday, September 25, 2007
The Customers
9/26/07 The Customers
"The industry continues to struggle on a weekly basis as performance was uneven by retailer with some market share shifting between retailers," said Michael Niemira, chief economist for the ICSC. "With this recent softness, we have pared down our sales expectation for September to 2.0% to 2.5% from the previous estimate of 2.5%, on a year-over-year comparable-store basis."
Lennar's valuation adjustments and write-offs of option deposits and pre-acquisition costs, goodwill and financial-services notes receivable totaled $856.8 million in the latest quarter, equating to $3.33 a share, Lennar said. On an adjusted basis, gross margins on home sales narrowed to 14.0% from 19.5%, primarily reflecting higher incentives. Home deliveries dropped 41% in the latest quarter, with the average sales price of homes delivered off 6%. CEO Stuart Miller said Lennar's cut the size of its work force by 35% and expects to make further reductions during the fourth quarter.
Target Corp. cut its forecast for September sales at stores open more than a year to an increase of 1.5% to 2.5%, down from its previous forecast of 4% to 6%. In a recorded message, the Minneapolis-based discount retailer said there was weaker guest traffic in September than expected, and it said that sales in the northeast were particularly weak.
China will increase its government reserves of soybeans and vegetable oil and limit exports of oilseeds and edible vegetable oil, as part of a strategy to ensure stable supplies amid rising demand, according to media reports.
The average U.S. household will pay $992 in heating costs this winter, up $94, or 10.5%, from last winter, says the National Energy Assistance Directors' Association (NEADA), a group of state energy aid officials. Fortunately, inflation is not a problem!
Lowe's now projects fiscal-year earnings at the low end or slightly below its prior forecast, citing lower-than-expected sales trends. Lowe's said drought conditions in the mid-Atlantic, Southeastern and Western regions of the country have hurt performance in its outdoor segment. The company is concerned about the severe contraction of available credit and how it might impact consumers on a national scale.The company had predicted earnings between $1.97 and $2.01 per share. Analysts polled by Thomson Financial predict a profit of $1.99 per share.
BP's CEO delivered a blunt warning that third-quarter revenues would be “dreadful”.
Michael Swanson: "The problem is real estate is still overvalued just as tech stocks became overvalued in 2000. One would think that real estate will have to drop and return to a normal valuation before it can bottom out, so simply lowering interest rates may not have the wonderful effects that Mishkin and Bernanke hope they will."
The Chicago Fed National Activity Index dropped to -0.57 in August, from +0.03 in July, which was revised up from -0.10. The August figure is the lowest mark for the index since January.
Bank of America said it will lay off about 2,500 employees in Illinois over the next two years as part of its planned purchase of LaSalle Bank.
German business confidence fell more than economists forecast in September, reaching a 19-month low, on concern the strength of the euro and increasing cost of credit will sap economic growth.
Barron's writes that AmTech research indicates that headcount growth is slowing at Google.
The decline in U.S. home prices accelerated nationwide in July, with prices posting the steepest drop in 16 years, according to the S&P/Case-Shiller home price index released Tuesday. Home prices have fallen by more every month since the beginning of the year. An index of 10 U.S. cities fell 4.5 percent in July from a year ago. That was the biggest drop since July 1991.
McCormick & Schmick's Seafood Restaurants Inc. cut its third-quarter earnings view to about 16 cents a share from a prior earnings view of 21 cents to 23 cents a share, due in part to weakness in September traffic. The Portland seafood restaurant operator also decreased its revenue outlook to about $88 million from a previous forecast of $90 million to $91 million. In addition, the company now expects third-quarter same-store sales to be flat. McCormick & Schmick's had previously expected same-store sales to rise 1.5% to 2.5%.
Nationstar Mortgage, the subprime unit of Fortress Investment Group LLC, said it is no longer accepting new loan applications from brokers, a signal the lender is winding down operations.
U.S. sales of existing homes fell 4.3% to a seasonally adjusted annual rate of 5.50 million in August, the lowest since August 2002, the National Association of Realtors reported Tuesday. Sales in August were down 12.8% compared with August 2006. Inventories of unsold homes on the market rose by 0.4% to 4.58 million, representing a 10-month supply at the August sales rate. For single-family homes alone, the inventory represents a 9.8-month supply, the most since May 1989.
U.S. consumer confidence weakened in September, the Conference Board said Tuesday. The consumer confidence index fell to 99.8 in September from a revised 105.6 in August. This is the lowest level of the index since November 2005.The present situation index fell to 121.7 from 130.1, while the expectations index fell to 85.2 from 89.2.
Gold for December delivery finished down 50 cents at $738.80 an ounce on the New York Mercantile Exchange.
The U.S. dollar index now rests at 78.16, a new low.
Crude oil for November delivery closed down $1.42 at $79.53 a barrel on the New York Mercantile Exchange.
"The industry continues to struggle on a weekly basis as performance was uneven by retailer with some market share shifting between retailers," said Michael Niemira, chief economist for the ICSC. "With this recent softness, we have pared down our sales expectation for September to 2.0% to 2.5% from the previous estimate of 2.5%, on a year-over-year comparable-store basis."
Lennar's valuation adjustments and write-offs of option deposits and pre-acquisition costs, goodwill and financial-services notes receivable totaled $856.8 million in the latest quarter, equating to $3.33 a share, Lennar said. On an adjusted basis, gross margins on home sales narrowed to 14.0% from 19.5%, primarily reflecting higher incentives. Home deliveries dropped 41% in the latest quarter, with the average sales price of homes delivered off 6%. CEO Stuart Miller said Lennar's cut the size of its work force by 35% and expects to make further reductions during the fourth quarter.
Target Corp. cut its forecast for September sales at stores open more than a year to an increase of 1.5% to 2.5%, down from its previous forecast of 4% to 6%. In a recorded message, the Minneapolis-based discount retailer said there was weaker guest traffic in September than expected, and it said that sales in the northeast were particularly weak.
China will increase its government reserves of soybeans and vegetable oil and limit exports of oilseeds and edible vegetable oil, as part of a strategy to ensure stable supplies amid rising demand, according to media reports.
The average U.S. household will pay $992 in heating costs this winter, up $94, or 10.5%, from last winter, says the National Energy Assistance Directors' Association (NEADA), a group of state energy aid officials. Fortunately, inflation is not a problem!
Lowe's now projects fiscal-year earnings at the low end or slightly below its prior forecast, citing lower-than-expected sales trends. Lowe's said drought conditions in the mid-Atlantic, Southeastern and Western regions of the country have hurt performance in its outdoor segment. The company is concerned about the severe contraction of available credit and how it might impact consumers on a national scale.The company had predicted earnings between $1.97 and $2.01 per share. Analysts polled by Thomson Financial predict a profit of $1.99 per share.
BP's CEO delivered a blunt warning that third-quarter revenues would be “dreadful”.
Michael Swanson: "The problem is real estate is still overvalued just as tech stocks became overvalued in 2000. One would think that real estate will have to drop and return to a normal valuation before it can bottom out, so simply lowering interest rates may not have the wonderful effects that Mishkin and Bernanke hope they will."
The Chicago Fed National Activity Index dropped to -0.57 in August, from +0.03 in July, which was revised up from -0.10. The August figure is the lowest mark for the index since January.
Bank of America said it will lay off about 2,500 employees in Illinois over the next two years as part of its planned purchase of LaSalle Bank.
German business confidence fell more than economists forecast in September, reaching a 19-month low, on concern the strength of the euro and increasing cost of credit will sap economic growth.
Barron's writes that AmTech research indicates that headcount growth is slowing at Google.
The decline in U.S. home prices accelerated nationwide in July, with prices posting the steepest drop in 16 years, according to the S&P/Case-Shiller home price index released Tuesday. Home prices have fallen by more every month since the beginning of the year. An index of 10 U.S. cities fell 4.5 percent in July from a year ago. That was the biggest drop since July 1991.
McCormick & Schmick's Seafood Restaurants Inc. cut its third-quarter earnings view to about 16 cents a share from a prior earnings view of 21 cents to 23 cents a share, due in part to weakness in September traffic. The Portland seafood restaurant operator also decreased its revenue outlook to about $88 million from a previous forecast of $90 million to $91 million. In addition, the company now expects third-quarter same-store sales to be flat. McCormick & Schmick's had previously expected same-store sales to rise 1.5% to 2.5%.
Nationstar Mortgage, the subprime unit of Fortress Investment Group LLC, said it is no longer accepting new loan applications from brokers, a signal the lender is winding down operations.
U.S. sales of existing homes fell 4.3% to a seasonally adjusted annual rate of 5.50 million in August, the lowest since August 2002, the National Association of Realtors reported Tuesday. Sales in August were down 12.8% compared with August 2006. Inventories of unsold homes on the market rose by 0.4% to 4.58 million, representing a 10-month supply at the August sales rate. For single-family homes alone, the inventory represents a 9.8-month supply, the most since May 1989.
U.S. consumer confidence weakened in September, the Conference Board said Tuesday. The consumer confidence index fell to 99.8 in September from a revised 105.6 in August. This is the lowest level of the index since November 2005.The present situation index fell to 121.7 from 130.1, while the expectations index fell to 85.2 from 89.2.
Gold for December delivery finished down 50 cents at $738.80 an ounce on the New York Mercantile Exchange.
The U.S. dollar index now rests at 78.16, a new low.
Crude oil for November delivery closed down $1.42 at $79.53 a barrel on the New York Mercantile Exchange.
Monday, September 24, 2007
Liquidity?
9/25/07 Liquidity?
John Hussman: "Investors were cheered last week when the Federal Reserve lowered its target for the Federal Funds Rate by 50 basis points, and lowered the Discount Rate (the interest rate it charges on loans to the banking system) by 50 basis points as well. It's important to emphasize that the impact of these changes is mainly psychological, and outside of a pool of a few billion dollars, won't have any effective bearing on the “liquidity” of the banking system, nor on the solvency of $3.4 trillion in real estate loans, and $6.3 trillion in total bank lending...If you examine the data you'll find that the total level of “liquidity” that the FOMC deals with is minuscule in relation to a $13.8 trillion economy, and the variation is even smaller. The total reserves of the U.S. banking system are about $40-$45 billion, and are very stable. The Fed simply does not “inject” meaningful amounts of “liquidity” to the banking system. Indeed, the latest cuts in Fed controlled interest rates were effected without any injection of “liquidity” into the banking system at all. Total borrowings by depository institutions from the Federal Reserve (i.e. borrowings at the Discount Rate) actually fell last week to $2.421 billion, from $3.158 billion the preceding week. That couple of billion dollars is the sum total of all outstanding borrowings at the Discount Rate. Though these figures are still higher than the typical level of discount window borrowing (a few hundred million), they are minuscule. Yet these are the figures that investors are revved up about as if this “liquidity” will save the mortgage market...The simple fact is that while the Federal Reserve lowered the Fed Funds Rate and the Discount Rate last week, it did not do so by “injecting” any new funds at all into the banking system. Rather, the Fed lowered these rates strictly by announcing they were now lower."
SAIC unit gets SPAWAR Systems contract for up to $459 mln.
Yamana Gold Inc. boosted its offer to acquire Meridian Gold Inc. by C$0.50 a share to C$7, in addition to the previously agreed-on 2.235 shares for each share of Yamana. Yamana, based in Toronto, said the new offer represents a spot premium of 38% based on the closing prices of Yamana and Meridian shares June 27, the date of Yamana's original proposal. Yamana Gold Inc. and Meridian Gold Inc. said Monday that they have reached an agreement in which Yamana will sweeten its bid and Meridian's board will endorse the new offer.
Euro-zone industrial orders fell a worse-than-forecast 4% in July compared to June, the Eurostat statistics agency said Monday, following a 4.5% rise in June. Excluding ships, railway and aerospace equipment, industrial new orders fell by 0.1% in the euro area.
There is a report that miner BHP Billiton has has uncovered what is potentially the world’s largest gold resources at its Olympic Dam mine in South Australia.
Deutsche Bank's profit could be hurt by up to 1.7 billion euros ($2.4 billion) when it revalues loans that have declined during the credit crunch, Reuters reported Monday, citing sources familiar with the situation. These loans would normally be farmed out to other banks, but they're on the German bank's books because of the credit crunch.
C-Cor Inc. definitively agreed to be acquired by Arris Group for $13.75 a share, or $730 million, creating what the companies said would be the largest pure-play provider of equipment and solutions to the cable-TV industry.
China's imports of crude oil climbed 18.7% in August from the same month a year earlier, the Chinese government said Monday. Crude oil imports totaled 14.04 million metric tones in August, equivalent to 3.32 million barrels a day, according to Dow Jones Newswires, which cited data published Monday by the General Administration of Customs.
Iran closed major border crossings with northern Iraq on Monday to protest the U.S. detention of an Iranian official the military accused of weapons smuggling, a Kurdish official said. At least four border gates have been closed and one remains open, the governor of the Kurdish province of Sulaimaniyah, Dana Ahmed Majeed, told The Associated Press. The move threatens the economy of Iraq's northern region — one of the country's few success stories.
In a partial interview transcript released on Sunday by al-Jazeera, the television news service based in Qatar, Admiral William Fallon, head of US Central Command, gave one of the strongest indications yet that the US military is deeply reluctant to consider military action against Tehran. “This constant drum beat of conflict is what strikes me, which is not helpful and not useful,” he told al-Jazeera, according to the transcript. “I expect that there will be no war and that is what we ought to be working for.”
The dollar traded at $1.4130, the third day it has fallen to an all-time low against the European currency. In addition, the U.S. dollar weakened against 13 of the 16 most-active currencies.
Most of the impact of the global credit crunch will be felt in 2008 and the United States will be hardest hit, International Monetary Fund Managing Director Rodrigo Rato said on Monday.
Reuters reported that from October 2 to November 7 at more than 10,000 U.S. Starbucks locations, customers can receive "Song of the Day" cards redeemable on Apple's iTunes store for a complimentary song hand-selected by Starbucks Entertainment. At the standard iTunes rate of $.99 a song, the deal could cost Starbucks $50 million. And, it is giving away a WiFi connection that it usually charges for through T-Mobile.
Brett Steenbarger: "The 10 yr interest rate is up to 4.66%; we still have a bit of inversion in the yield curve, with 6mo bills > 2 yr notes."
U.K. natural gas rose on forecasts for lower supplies of the fuel, after Nederlandse Gasunie NV delayed the start of Dutch exports to the U.K. via the BBL pipeline and deliveries at British sub-terminals fell. Gas for same-day delivery rose as much as 6.8 percent to 43 pence a therm, according to prices on Bloomberg from the broker ICAP Plc. It traded at 42.5 pence a therm at 8:45 a.m. in London. That's equivalent to $8.61 a million British thermal units. A therm is 100,000 Btus.
First Data Corp. on Monday said it expects to close its acquisition by affiliates of Kohlberg Kravis Roberts & Co. later in the day.
"Mortgage rates won't stimulate demand,'' said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis. ``The Fed may be a little impotent here because what caused this housing crash was overpriced housing, not mortgages.''
The Movement for the Emancipation of the Niger Delta said it's ending a ceasefire.
John Hussman: "Investors will likely be reminded of how the market has historically performed following two consecutive cuts in the Discount Rate. We've observed 11 instances of this since 1950, with average total returns in the S&P 500 of 6.18% over the following 3 months, 12.48% over the following 6 months, and 21.05% over the following year. The difficulty with these averages is that the cuts almost invariably occurred well into bear markets, where valuations were already depressed. Specifically, the average P/E on the S&P 500 (based on trailing net earnings) was only 14 (with a median closer to 12), while the average dividend yield was 3.75% and the average price/revenue multiple was just 0.90. Presently, the trailing net P/E on the S&P 500 is 17.9, with a dividend yield of just 1.84 and a price/revenue multiple of 1.55. Indeed, only two of those “second Discount Rate cuts” occurred with the S&P 500 P/E above 15 and advisory bullishness running over 50%. Those instances were December 1971 and January 2001. The average subsequent performance of the S&P 500 following those cuts was -1.22 over 3 months, 0.92% over 6 months, and 3.17% over the following year."
The market cap for Petrochina is only slightly below the combined market caps for Chevron and ConocoPhillips. For those willing to assume the risk of the hedge, it sounds like an opportunity to me.
The UAW called a strike against General Motors today after UAW President Ron Gettelfinger said he was "shocked and disappointed" by GM's positions at the bargaining table.
An official at UAW Local 652 in Lansing, Mich., confirmed the walkout at 11:06 a.m. EDT. The UAW said it set the strike deadline over the "failure of GM to address job security and other mandatory issues of bargaining."
The strike against GM includes about 73,000 UAW-represented employees throughout the United States.
It is the first stoppage against GM since 1998 when a 54-day strike at parts-making operations in Flint, Mich., shut GM production nationally costing the company more than $3 billion.
Crude oil for November delivery fell by 67 cents, or 0.8%, to close at $80.95 a barrel on the New York Mercantile Exchange. October natural gas closed 28.7 cents, or 4.7%, higher at $6.367 per million British thermal units. It lost more than 3% last week.
Microsoft Corp. is in talks to make an investment in Facebook Inc. that would value the popular online social networking company at $10 billion or more, according to a story Monday in The Wall Street Journal's online edition. Microsoft's proposed investment in Facebook would grant it a stake of as much as 5%, worth between $300 million and $500 million, the report said, citing unnamed sources.
December gold closed at $739.30 an ounce Monday in New York, up 40 cents from the session. December silver climbed 2 cents to close at $13.64 an ounce and December copper ended at $3.645 a pound, up 1.5%.
Fitch Ratings in a special report Monday said limited access to capital is pressuring U.S. mortgage real estate investment trusts, "thus worsening funding profiles and growth prospects and leading to increased ratings pressure in the last several weeks." Problems in the mortgage and credit markets have triggered margin calls and reduced liquidity for mortgage REITs, the ratings agency said.
PrimeWest Energy Trust agreed to be acquired by Abu Dhabi's state-owned energy company for $2.4 billion plus the assumption of debt.
PrimeWest holders will get $26.75 for each unit they own.
Calgary-based PrimeWest is a conventional oil and gas royalty trust that acquires, develops, produces and sells natural gas, crude oil and natural gas liquids.
Metal Management Inc., a top U.S. metal recycler, said it agreed to be acquired by Australia's Sims Group Ltd. for $1.5 billion in stock.The transaction creates the world's largest publicly traded recycler, annually processing and trading more than 15 million tons of metal, the companies said. Under the agreement, Metal Management shareholders will receive 2.05 Sims American depositary shares for each of their shares.
John Hussman: "Investors were cheered last week when the Federal Reserve lowered its target for the Federal Funds Rate by 50 basis points, and lowered the Discount Rate (the interest rate it charges on loans to the banking system) by 50 basis points as well. It's important to emphasize that the impact of these changes is mainly psychological, and outside of a pool of a few billion dollars, won't have any effective bearing on the “liquidity” of the banking system, nor on the solvency of $3.4 trillion in real estate loans, and $6.3 trillion in total bank lending...If you examine the data you'll find that the total level of “liquidity” that the FOMC deals with is minuscule in relation to a $13.8 trillion economy, and the variation is even smaller. The total reserves of the U.S. banking system are about $40-$45 billion, and are very stable. The Fed simply does not “inject” meaningful amounts of “liquidity” to the banking system. Indeed, the latest cuts in Fed controlled interest rates were effected without any injection of “liquidity” into the banking system at all. Total borrowings by depository institutions from the Federal Reserve (i.e. borrowings at the Discount Rate) actually fell last week to $2.421 billion, from $3.158 billion the preceding week. That couple of billion dollars is the sum total of all outstanding borrowings at the Discount Rate. Though these figures are still higher than the typical level of discount window borrowing (a few hundred million), they are minuscule. Yet these are the figures that investors are revved up about as if this “liquidity” will save the mortgage market...The simple fact is that while the Federal Reserve lowered the Fed Funds Rate and the Discount Rate last week, it did not do so by “injecting” any new funds at all into the banking system. Rather, the Fed lowered these rates strictly by announcing they were now lower."
SAIC unit gets SPAWAR Systems contract for up to $459 mln.
Yamana Gold Inc. boosted its offer to acquire Meridian Gold Inc. by C$0.50 a share to C$7, in addition to the previously agreed-on 2.235 shares for each share of Yamana. Yamana, based in Toronto, said the new offer represents a spot premium of 38% based on the closing prices of Yamana and Meridian shares June 27, the date of Yamana's original proposal. Yamana Gold Inc. and Meridian Gold Inc. said Monday that they have reached an agreement in which Yamana will sweeten its bid and Meridian's board will endorse the new offer.
Euro-zone industrial orders fell a worse-than-forecast 4% in July compared to June, the Eurostat statistics agency said Monday, following a 4.5% rise in June. Excluding ships, railway and aerospace equipment, industrial new orders fell by 0.1% in the euro area.
There is a report that miner BHP Billiton has has uncovered what is potentially the world’s largest gold resources at its Olympic Dam mine in South Australia.
Deutsche Bank's profit could be hurt by up to 1.7 billion euros ($2.4 billion) when it revalues loans that have declined during the credit crunch, Reuters reported Monday, citing sources familiar with the situation. These loans would normally be farmed out to other banks, but they're on the German bank's books because of the credit crunch.
C-Cor Inc. definitively agreed to be acquired by Arris Group for $13.75 a share, or $730 million, creating what the companies said would be the largest pure-play provider of equipment and solutions to the cable-TV industry.
China's imports of crude oil climbed 18.7% in August from the same month a year earlier, the Chinese government said Monday. Crude oil imports totaled 14.04 million metric tones in August, equivalent to 3.32 million barrels a day, according to Dow Jones Newswires, which cited data published Monday by the General Administration of Customs.
Iran closed major border crossings with northern Iraq on Monday to protest the U.S. detention of an Iranian official the military accused of weapons smuggling, a Kurdish official said. At least four border gates have been closed and one remains open, the governor of the Kurdish province of Sulaimaniyah, Dana Ahmed Majeed, told The Associated Press. The move threatens the economy of Iraq's northern region — one of the country's few success stories.
In a partial interview transcript released on Sunday by al-Jazeera, the television news service based in Qatar, Admiral William Fallon, head of US Central Command, gave one of the strongest indications yet that the US military is deeply reluctant to consider military action against Tehran. “This constant drum beat of conflict is what strikes me, which is not helpful and not useful,” he told al-Jazeera, according to the transcript. “I expect that there will be no war and that is what we ought to be working for.”
The dollar traded at $1.4130, the third day it has fallen to an all-time low against the European currency. In addition, the U.S. dollar weakened against 13 of the 16 most-active currencies.
Most of the impact of the global credit crunch will be felt in 2008 and the United States will be hardest hit, International Monetary Fund Managing Director Rodrigo Rato said on Monday.
Reuters reported that from October 2 to November 7 at more than 10,000 U.S. Starbucks locations, customers can receive "Song of the Day" cards redeemable on Apple's iTunes store for a complimentary song hand-selected by Starbucks Entertainment. At the standard iTunes rate of $.99 a song, the deal could cost Starbucks $50 million. And, it is giving away a WiFi connection that it usually charges for through T-Mobile.
Brett Steenbarger: "The 10 yr interest rate is up to 4.66%; we still have a bit of inversion in the yield curve, with 6mo bills > 2 yr notes."
U.K. natural gas rose on forecasts for lower supplies of the fuel, after Nederlandse Gasunie NV delayed the start of Dutch exports to the U.K. via the BBL pipeline and deliveries at British sub-terminals fell. Gas for same-day delivery rose as much as 6.8 percent to 43 pence a therm, according to prices on Bloomberg from the broker ICAP Plc. It traded at 42.5 pence a therm at 8:45 a.m. in London. That's equivalent to $8.61 a million British thermal units. A therm is 100,000 Btus.
First Data Corp. on Monday said it expects to close its acquisition by affiliates of Kohlberg Kravis Roberts & Co. later in the day.
"Mortgage rates won't stimulate demand,'' said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis. ``The Fed may be a little impotent here because what caused this housing crash was overpriced housing, not mortgages.''
The Movement for the Emancipation of the Niger Delta said it's ending a ceasefire.
John Hussman: "Investors will likely be reminded of how the market has historically performed following two consecutive cuts in the Discount Rate. We've observed 11 instances of this since 1950, with average total returns in the S&P 500 of 6.18% over the following 3 months, 12.48% over the following 6 months, and 21.05% over the following year. The difficulty with these averages is that the cuts almost invariably occurred well into bear markets, where valuations were already depressed. Specifically, the average P/E on the S&P 500 (based on trailing net earnings) was only 14 (with a median closer to 12), while the average dividend yield was 3.75% and the average price/revenue multiple was just 0.90. Presently, the trailing net P/E on the S&P 500 is 17.9, with a dividend yield of just 1.84 and a price/revenue multiple of 1.55. Indeed, only two of those “second Discount Rate cuts” occurred with the S&P 500 P/E above 15 and advisory bullishness running over 50%. Those instances were December 1971 and January 2001. The average subsequent performance of the S&P 500 following those cuts was -1.22 over 3 months, 0.92% over 6 months, and 3.17% over the following year."
The market cap for Petrochina is only slightly below the combined market caps for Chevron and ConocoPhillips. For those willing to assume the risk of the hedge, it sounds like an opportunity to me.
The UAW called a strike against General Motors today after UAW President Ron Gettelfinger said he was "shocked and disappointed" by GM's positions at the bargaining table.
An official at UAW Local 652 in Lansing, Mich., confirmed the walkout at 11:06 a.m. EDT. The UAW said it set the strike deadline over the "failure of GM to address job security and other mandatory issues of bargaining."
The strike against GM includes about 73,000 UAW-represented employees throughout the United States.
It is the first stoppage against GM since 1998 when a 54-day strike at parts-making operations in Flint, Mich., shut GM production nationally costing the company more than $3 billion.
Crude oil for November delivery fell by 67 cents, or 0.8%, to close at $80.95 a barrel on the New York Mercantile Exchange. October natural gas closed 28.7 cents, or 4.7%, higher at $6.367 per million British thermal units. It lost more than 3% last week.
Microsoft Corp. is in talks to make an investment in Facebook Inc. that would value the popular online social networking company at $10 billion or more, according to a story Monday in The Wall Street Journal's online edition. Microsoft's proposed investment in Facebook would grant it a stake of as much as 5%, worth between $300 million and $500 million, the report said, citing unnamed sources.
December gold closed at $739.30 an ounce Monday in New York, up 40 cents from the session. December silver climbed 2 cents to close at $13.64 an ounce and December copper ended at $3.645 a pound, up 1.5%.
Fitch Ratings in a special report Monday said limited access to capital is pressuring U.S. mortgage real estate investment trusts, "thus worsening funding profiles and growth prospects and leading to increased ratings pressure in the last several weeks." Problems in the mortgage and credit markets have triggered margin calls and reduced liquidity for mortgage REITs, the ratings agency said.
PrimeWest Energy Trust agreed to be acquired by Abu Dhabi's state-owned energy company for $2.4 billion plus the assumption of debt.
PrimeWest holders will get $26.75 for each unit they own.
Calgary-based PrimeWest is a conventional oil and gas royalty trust that acquires, develops, produces and sells natural gas, crude oil and natural gas liquids.
Metal Management Inc., a top U.S. metal recycler, said it agreed to be acquired by Australia's Sims Group Ltd. for $1.5 billion in stock.The transaction creates the world's largest publicly traded recycler, annually processing and trading more than 15 million tons of metal, the companies said. Under the agreement, Metal Management shareholders will receive 2.05 Sims American depositary shares for each of their shares.
Sunday, September 23, 2007
A Possibility?
9/24/07 A Possibility?
The Houston Chronicle reported the abrupt departure of Noble Corp.'s chief executive, Mark Jackson, may leave the company ripe for an acquisition. Noble disclosed the resignation of Jackson, 51, in a short news release late Thursday. The company offered no additional information Friday.The sudden move triggered speculation by stock analysts Friday that Jackson may have disagreed with the board of directors regarding mergers or takeovers. "Clearly, Noble and other companies in offshore drilling have been subject to rumors of acquisition, and it is plausible the CEO and board could have seen different ways on different transactions," said Roger Read, an oil-field-services analyst for Netexis Bleichroeder. "Our general thought process on it is: Noble being without a CEO probably makes it easier, more likely, to effect a merger going forward."
On Friday, the currency of the 13 euro nations, which have more than 317 million residents and account for more than 15 percent of global gross domestic product, surged as high as $1.4119 before falling back to $1.4083 by late afternoon, above the $1.4076 it bought in New York on Thursday.
One Canadian dollar bought $1.0068 in U.S. currency at its highest point Friday before edging down to 99.95 U.S. cents in late New York trading, barely beating 99.93 U.S. cents late Thursday. Doug Porter, deputy chief economist at the Bank of Montreal, released a study Friday that indicates Canadians are paying roughly 24 percent more than Americans on identical goods despite parity in the U.S and Canadian dollars. Porter compared 17 goods sold in Canada and the U.S., finding that retail prices in Canada have not yet responded because most are set a year in advance. (That's hard to swallow)
Mike Burk: "All of the major indices were at multi year or all time highs in late July. Less than a month later we saw near record numbers of new lows. Last week we had an interest rate cut while the most of the major indices were less than 5% from their all time highs. These are unusual times. I expect the major indices to be lower on Friday September 28 than they were on Friday September 21."
Puget Sound Business Journal: "FAA testing may delay Boeing's 787."
The Houston Chronicle reported the abrupt departure of Noble Corp.'s chief executive, Mark Jackson, may leave the company ripe for an acquisition. Noble disclosed the resignation of Jackson, 51, in a short news release late Thursday. The company offered no additional information Friday.The sudden move triggered speculation by stock analysts Friday that Jackson may have disagreed with the board of directors regarding mergers or takeovers. "Clearly, Noble and other companies in offshore drilling have been subject to rumors of acquisition, and it is plausible the CEO and board could have seen different ways on different transactions," said Roger Read, an oil-field-services analyst for Netexis Bleichroeder. "Our general thought process on it is: Noble being without a CEO probably makes it easier, more likely, to effect a merger going forward."
On Friday, the currency of the 13 euro nations, which have more than 317 million residents and account for more than 15 percent of global gross domestic product, surged as high as $1.4119 before falling back to $1.4083 by late afternoon, above the $1.4076 it bought in New York on Thursday.
One Canadian dollar bought $1.0068 in U.S. currency at its highest point Friday before edging down to 99.95 U.S. cents in late New York trading, barely beating 99.93 U.S. cents late Thursday. Doug Porter, deputy chief economist at the Bank of Montreal, released a study Friday that indicates Canadians are paying roughly 24 percent more than Americans on identical goods despite parity in the U.S and Canadian dollars. Porter compared 17 goods sold in Canada and the U.S., finding that retail prices in Canada have not yet responded because most are set a year in advance. (That's hard to swallow)
Mike Burk: "All of the major indices were at multi year or all time highs in late July. Less than a month later we saw near record numbers of new lows. Last week we had an interest rate cut while the most of the major indices were less than 5% from their all time highs. These are unusual times. I expect the major indices to be lower on Friday September 28 than they were on Friday September 21."
Puget Sound Business Journal: "FAA testing may delay Boeing's 787."
Saturday, September 22, 2007
Confdence Crunch
9/23/07 Confidence Crunch
Sam Zell: "We're not really in a 'credit crunch. I think we're in a 'confidence crunch. I would argue the excess liquidity that existed eight weeks ago still exists today. It has a different risk premium on it, but the actual amount of liquidity has not changed. Over the last three years, people were flippant. They bought anything they wanted and were proud that they didn't do due diligence. I think they have all been chagrined and are scared out of their minds...Even when I buy newspapers in 2007, everybody says, 'If you didn't understand before, now you really don't understand."
We may have a confidence crunch but the fear crunch has disappeared. It was only a matter of weeks that the VIX was trading over 35, and now, it's dropped to 19. Is it destined to return to the 12 level or jump once again? I believe fear will return.
Not everyone believes we have a confidence crunch. The Rasmussen daily consumer confidence index rebounded to 110.7, and this is above the level seen for the entire month of June (before the shit hit the fan).
According to the LA Times, President Bush plans to ask lawmakers next week to approve another massive spending measure -- totaling nearly $200 billion -- to fund the war through next year, Pentagon officials said. If Bush's spending request is approved, 2008 will be the most expensive year of the Iraq war.
Our national debt ex- social security etc is $9 trillion. The Congress will approve an increase in the debt limit. Who will buy the new debt? China? India? Other ASEAN countries? Russia? Saudi Arabia? I don't think so. Just because you want to sell debt doesn't mean someone will buy it. Not with the dollar continuing to fall through the floor and creating negative returns for foreign bond buyers. Fear will return.
Robert Shiller: "The decline in house prices stands to create future dislocations, like the credit crisis we have just seen."
Jeffrey R. Nyquist: "The United States once held an international position of trust, and that trust has been abused. We say to ourselves that another drop in interest rates and we’ll avoid a recession. We’ll avoid the pain we’re due to suffer. Many decades ago the great economist, Ludwig von Mises, noted that a “drop in interest rates falsifies the businessman’s calculation.” The change in rates makes “some projects appear profitable and realizable which a correct calculation, based on an interest rate not manipulated by credit expansion, would have shown as unrealizable.” First there was a stock market boom, then came a real estate boom, and now we have to wonder what kind of boom we’ll see next. Perhaps it will be a “crack-up boom.” The United States has gotten away with financial abuses for a long time because the dollar is the international reserve currency. But the outside world is not stupid. They see that their investment in the dollar has resulted in a massive loss. The Chinese, Saudis, Japanese and British are losing trillions in buying power. The dollar’s decline is now accelerating, with massive consequences for all...We are on the brink. A once decent system, turned to dishonest practice, faces a day of judgment. Billions of lives are in danger. The flight into real values is about to begin. An age of blood and iron follows."
Peter Schiff: "To America's creditors around the world, whose mountains of dollar reserves will be debased by lower rates in the U.S., this action amounts to the monetary equivalent of "let them eat cake." My prediction is that rather than doing so, they will just throw it back in our faces, and refuse to continue funding our deficits...If Bernanke really had any guts he would have assured our creditors that they will be repaid with real purchasing power, and that the Fed was willing to put some teeth in our alleged "strong dollar policy". His capitulation proves that this phony policy was pure propaganda all along, merely designed to fool foreign creditors into holding our paper."
Doug Noland: "Continuing a trend that became quite pronounced last year, near double-digit financial sector growth far exceeds that of the real economy...Second quarter numbers suggests the scope of global dollar "recycling" requirements has inflated substantially. The Federal Reserve’s aggressive rate cuts earlier this week definitely only exacerbate what is becoming an untenable outward flow of dollar liquidity from the U.S. financial system to the Rest of World (that must, at a price, be “recycled” back into U.S. assets). We believe the current course of Fed policy is an attempt to Sustain the Unsustainable. The Q2 Flow of Funds report certainly confirms the enormity of ongoing Credit creation, intensive Risk Intermediation, and Financial Sector Ballooning – Classic Credit Bubble Dynamics. The bottom line is that only extreme levels of Credit expansion and intermediation now sustain bloated and maladjusted financial, economic and asset market structures. As we’ve witnessed, any interruption in the Credit creation process will almost immediately instigate financial dislocation. The Fed has chosen aggressive action in hopes of resuscitating Credit excess and Bubble Perpetuation. A less risky strategy for our system and currency would necessitate air flowing the other direction - out of Credit, asset and economic Bubbles. Postponing the adjustment process at this point ensures greater future financial tumult and economic hardship."
Inflation is under control? The Goldman Sachs Commodity Index is up 25% year to date.
Ethan Penner: ‘We’re probably at the closest point to a big meltdown, a depression-type meltdown than we have been in our lives."
Twenty-seven percent have already missed a payment, said First American LoanPerformance, which owns the largest database of U.S. mortgages.
Alibaba.com Corp confirmed that it will list unit Alibaba.com in the third quarter, raising 7.8 bln hkd.
Sam Zell: "We're not really in a 'credit crunch. I think we're in a 'confidence crunch. I would argue the excess liquidity that existed eight weeks ago still exists today. It has a different risk premium on it, but the actual amount of liquidity has not changed. Over the last three years, people were flippant. They bought anything they wanted and were proud that they didn't do due diligence. I think they have all been chagrined and are scared out of their minds...Even when I buy newspapers in 2007, everybody says, 'If you didn't understand before, now you really don't understand."
We may have a confidence crunch but the fear crunch has disappeared. It was only a matter of weeks that the VIX was trading over 35, and now, it's dropped to 19. Is it destined to return to the 12 level or jump once again? I believe fear will return.
Not everyone believes we have a confidence crunch. The Rasmussen daily consumer confidence index rebounded to 110.7, and this is above the level seen for the entire month of June (before the shit hit the fan).
According to the LA Times, President Bush plans to ask lawmakers next week to approve another massive spending measure -- totaling nearly $200 billion -- to fund the war through next year, Pentagon officials said. If Bush's spending request is approved, 2008 will be the most expensive year of the Iraq war.
Our national debt ex- social security etc is $9 trillion. The Congress will approve an increase in the debt limit. Who will buy the new debt? China? India? Other ASEAN countries? Russia? Saudi Arabia? I don't think so. Just because you want to sell debt doesn't mean someone will buy it. Not with the dollar continuing to fall through the floor and creating negative returns for foreign bond buyers. Fear will return.
Robert Shiller: "The decline in house prices stands to create future dislocations, like the credit crisis we have just seen."
Jeffrey R. Nyquist: "The United States once held an international position of trust, and that trust has been abused. We say to ourselves that another drop in interest rates and we’ll avoid a recession. We’ll avoid the pain we’re due to suffer. Many decades ago the great economist, Ludwig von Mises, noted that a “drop in interest rates falsifies the businessman’s calculation.” The change in rates makes “some projects appear profitable and realizable which a correct calculation, based on an interest rate not manipulated by credit expansion, would have shown as unrealizable.” First there was a stock market boom, then came a real estate boom, and now we have to wonder what kind of boom we’ll see next. Perhaps it will be a “crack-up boom.” The United States has gotten away with financial abuses for a long time because the dollar is the international reserve currency. But the outside world is not stupid. They see that their investment in the dollar has resulted in a massive loss. The Chinese, Saudis, Japanese and British are losing trillions in buying power. The dollar’s decline is now accelerating, with massive consequences for all...We are on the brink. A once decent system, turned to dishonest practice, faces a day of judgment. Billions of lives are in danger. The flight into real values is about to begin. An age of blood and iron follows."
Peter Schiff: "To America's creditors around the world, whose mountains of dollar reserves will be debased by lower rates in the U.S., this action amounts to the monetary equivalent of "let them eat cake." My prediction is that rather than doing so, they will just throw it back in our faces, and refuse to continue funding our deficits...If Bernanke really had any guts he would have assured our creditors that they will be repaid with real purchasing power, and that the Fed was willing to put some teeth in our alleged "strong dollar policy". His capitulation proves that this phony policy was pure propaganda all along, merely designed to fool foreign creditors into holding our paper."
Doug Noland: "Continuing a trend that became quite pronounced last year, near double-digit financial sector growth far exceeds that of the real economy...Second quarter numbers suggests the scope of global dollar "recycling" requirements has inflated substantially. The Federal Reserve’s aggressive rate cuts earlier this week definitely only exacerbate what is becoming an untenable outward flow of dollar liquidity from the U.S. financial system to the Rest of World (that must, at a price, be “recycled” back into U.S. assets). We believe the current course of Fed policy is an attempt to Sustain the Unsustainable. The Q2 Flow of Funds report certainly confirms the enormity of ongoing Credit creation, intensive Risk Intermediation, and Financial Sector Ballooning – Classic Credit Bubble Dynamics. The bottom line is that only extreme levels of Credit expansion and intermediation now sustain bloated and maladjusted financial, economic and asset market structures. As we’ve witnessed, any interruption in the Credit creation process will almost immediately instigate financial dislocation. The Fed has chosen aggressive action in hopes of resuscitating Credit excess and Bubble Perpetuation. A less risky strategy for our system and currency would necessitate air flowing the other direction - out of Credit, asset and economic Bubbles. Postponing the adjustment process at this point ensures greater future financial tumult and economic hardship."
Inflation is under control? The Goldman Sachs Commodity Index is up 25% year to date.
Ethan Penner: ‘We’re probably at the closest point to a big meltdown, a depression-type meltdown than we have been in our lives."
Twenty-seven percent have already missed a payment, said First American LoanPerformance, which owns the largest database of U.S. mortgages.
Alibaba.com Corp confirmed that it will list unit Alibaba.com in the third quarter, raising 7.8 bln hkd.
Friday, September 21, 2007
Evaluating Assets
9/22/07 Evaluating Assets
The Daily Reckoning: "The Center for Responsible Lending predicts that foreclosures on subprime loans will lead to a total loss of $164 billion worth of home equity. Financial institutions are said to be facing losses of more than $300 billion from mortgage financing. But the real losses will be suffered by ordinary homeowners. The total value of residential real estate, in the United States, is about $21 trillion. A 15% loss would be the equivalent of a $3 trillion loss in household wealth."
Federal Reserve Board governor Kevin Warsh: "How quickly markets normalize may depend on the speed with which investors and counterparties gain comfort in their abilities to value assets. Some may find they are not well-equipped to make these evaluations."
A big overhang of property will bring U.S. house prices down further, but it is too early to say if the economy will plunge into recession, former Federal Reserve chief Alan Greenspan was quoted as saying on Friday.
A Mattel executive apologized to China on Friday, taking full responsibility for the recent wave of recalls of toys made in the country, according to media reports.
The euro-zone manufacturing purchasing managers index dropped to 53.2 in September from 54.3 in August, its lowest reading since November 2005. The euro-zone services purchasing managers index dropped to 54.0 from 58.0, its lowest reading since August 2005.
The U.K. Treasury said Friday that renewals with Northern Rock of existing uncollateralized deposits and wholesale borrowing and retail bonds are covered under treasury guarantee arrangements. The Bank of England's lifeline to crisis-hit mortgage lender Northern Rock may have totalled around 2.9 billion pounds ($5.8 billion), according to New Star Asset Management economist Simon Ward.
Gani Kasymov, a veteran politician handpicked as senator by Kazakhstani President Nursultan Nazarbayev, called on the government to shut down Tengizchevroil, the Chevron-led consortium operating the Tengiz field. He said the consortium was inflicting "massive harm" on the environment by stockpiling millions of tons of sulfur and said work should be suspended until it disposes of the substance. Similar calls in the past have preceded official action. Chevron said it has done nothing wrong. "Tengizchevroil operates sulfur storage in an environmentally safe manner consistent with Kazakhstan's laws and regulations, as well as international industry practices," the company said.
The Fed said Thursday that average daily bank borrowing from its "discount window" for the week ended Wednesday was $2.18 billion.
That was down from a daily average of $2.93 billion for the week ended Sept. 12, which was the highest since banks borrowed an average of $11.7 billion the week ended Sept. 12, 2001, as the Fed flooded the financial system with money.
According to AMG Data Services, in the latest week, equity fund inflows were $23.4 billion; taxable bond inflows were $975 million; xETFs equity outflows were -$410 million; and taxable bond inflows were $220 million.
Gary Dorsch: "The Fed has pumped $320 billion of temporary cash into the banking system since mid-August."
China is to impose a quota on investments on the Hong Kong stock market – which will reduce capital outflows to a fraction of the $100bn-plus forecast when its outward investment scheme was announced last month. Liu Mingkang, chairman of the China Banking Regulatory Commission, said there would be no limit on individuals. But he said there would be tight controls on the total amount. Mr Liu said there would be a “quota in general” and when that was reached, the State Administration of Foreign Exchange would reassess market activity. “They can lift and readjust the quota if necessary and appropriate – it’s a flexible ceiling,” he told the Financial Times.
The Wall Street Journal writes that Goldman Sachs and KKR may back away from a deal to buy Harman International (HAR) for $8 billion.
The National Hurricane Center on Friday said a storm system in the Gulf of Mexico "is gradually becoming better organized" with gusty winds up to 35 miles per hour, centered about 100 miles south of Apalachicola, Fla. "Environmental conditions are favorable for this system to become a subtropical or tropical cyclone at any time during the next 24 hours," the National Hurricane Center said.
National Weather Service forecasters predict the first potential "widespread" snowfall of the season could occur across the higher terrain of the Continental Divide Saturday night.
Home improvement and building products manufacturer Masco Corp. on Friday reduced its 2007 earnings guidance because of slowing new housing starts and the general weakening of the housing market. Masco estimates full-year earnings to range between $1.55 and $1.65 per share. It had previously expected $1.60 to $1.70 per share.
BJ Tubular Services ( a unit of BJ Services) announced it has been awarded a contract to provide conductor installation services offshore New Zealand by OMV New Zealand Limited on behalf of the Maari Joint Venture, which is comprised of OMV New Zealand Limited, Todd Maari Limited, Horizon Oil International Limited and Cue Taranaki Pty Ltd. The contract provides for hydraulic hammer conductor-driving for 10 slots on the Maari Field development in Block PMP 38160, located to the south of New Zealand’s Taranaki Coast. The scope of work calls for 30” stovepipes to be driven into the seafloor from the Maari Gravity Base Structure using a recoverable driving string. “With our efforts to expand BJ hammer services worldwide, we are extremely pleased to be delivering hammer conductor driving services in New Zealand for OMV,” said Doug Bell, hammer services manager for BJ Tubular Services. “I attribute our success in New Zealand to the effectiveness and safety of the services delivered by our Hydrohammer fleet, and to the experience and the commitment of our hammer services personnel,” he added.
Columbia University said it does not plan to call off a speech by Iran's president despite pressure from critics including the City Council speaker, who said the Ivy League school was providing a forum for "hate-mongering vitriol.
Toronto's Pollitt & Co.: "Just because OPEC [the Organization of Petroleum Exporting Countries] raised output quotas doesn't mean oil wells will respond."
HSBC to close wholesale lending Decision One Mortgage, which will result in 750 job losses.
November crude fell 16 cents to close at $81.62 a barrel Friday, but still gained 4.5% for the week.
December gold fell $1 to close at $738.90 an ounce Friday, but still ended the week with a gain of $21.10, or 2.9%. December silver was up 15 cents to close at $13.62 an ounce, tacking on 7.2% for the week. December copper was down 0.2 cent to finish at $3.5925 a pound, up 6% from a week ago.
The Treasury Department will suspend issuing some securities on Sept. 27, because Congress has not raised the U.S. debt ceiling, the department said Friday. The suspension applies to state and local government series securities, Treasury said, which are purchased by state and local governments.
The Daily Reckoning: "The Center for Responsible Lending predicts that foreclosures on subprime loans will lead to a total loss of $164 billion worth of home equity. Financial institutions are said to be facing losses of more than $300 billion from mortgage financing. But the real losses will be suffered by ordinary homeowners. The total value of residential real estate, in the United States, is about $21 trillion. A 15% loss would be the equivalent of a $3 trillion loss in household wealth."
Federal Reserve Board governor Kevin Warsh: "How quickly markets normalize may depend on the speed with which investors and counterparties gain comfort in their abilities to value assets. Some may find they are not well-equipped to make these evaluations."
A big overhang of property will bring U.S. house prices down further, but it is too early to say if the economy will plunge into recession, former Federal Reserve chief Alan Greenspan was quoted as saying on Friday.
A Mattel executive apologized to China on Friday, taking full responsibility for the recent wave of recalls of toys made in the country, according to media reports.
The euro-zone manufacturing purchasing managers index dropped to 53.2 in September from 54.3 in August, its lowest reading since November 2005. The euro-zone services purchasing managers index dropped to 54.0 from 58.0, its lowest reading since August 2005.
The U.K. Treasury said Friday that renewals with Northern Rock of existing uncollateralized deposits and wholesale borrowing and retail bonds are covered under treasury guarantee arrangements. The Bank of England's lifeline to crisis-hit mortgage lender Northern Rock may have totalled around 2.9 billion pounds ($5.8 billion), according to New Star Asset Management economist Simon Ward.
Gani Kasymov, a veteran politician handpicked as senator by Kazakhstani President Nursultan Nazarbayev, called on the government to shut down Tengizchevroil, the Chevron-led consortium operating the Tengiz field. He said the consortium was inflicting "massive harm" on the environment by stockpiling millions of tons of sulfur and said work should be suspended until it disposes of the substance. Similar calls in the past have preceded official action. Chevron said it has done nothing wrong. "Tengizchevroil operates sulfur storage in an environmentally safe manner consistent with Kazakhstan's laws and regulations, as well as international industry practices," the company said.
The Fed said Thursday that average daily bank borrowing from its "discount window" for the week ended Wednesday was $2.18 billion.
That was down from a daily average of $2.93 billion for the week ended Sept. 12, which was the highest since banks borrowed an average of $11.7 billion the week ended Sept. 12, 2001, as the Fed flooded the financial system with money.
According to AMG Data Services, in the latest week, equity fund inflows were $23.4 billion; taxable bond inflows were $975 million; xETFs equity outflows were -$410 million; and taxable bond inflows were $220 million.
Gary Dorsch: "The Fed has pumped $320 billion of temporary cash into the banking system since mid-August."
China is to impose a quota on investments on the Hong Kong stock market – which will reduce capital outflows to a fraction of the $100bn-plus forecast when its outward investment scheme was announced last month. Liu Mingkang, chairman of the China Banking Regulatory Commission, said there would be no limit on individuals. But he said there would be tight controls on the total amount. Mr Liu said there would be a “quota in general” and when that was reached, the State Administration of Foreign Exchange would reassess market activity. “They can lift and readjust the quota if necessary and appropriate – it’s a flexible ceiling,” he told the Financial Times.
The Wall Street Journal writes that Goldman Sachs and KKR may back away from a deal to buy Harman International (HAR) for $8 billion.
The National Hurricane Center on Friday said a storm system in the Gulf of Mexico "is gradually becoming better organized" with gusty winds up to 35 miles per hour, centered about 100 miles south of Apalachicola, Fla. "Environmental conditions are favorable for this system to become a subtropical or tropical cyclone at any time during the next 24 hours," the National Hurricane Center said.
National Weather Service forecasters predict the first potential "widespread" snowfall of the season could occur across the higher terrain of the Continental Divide Saturday night.
Home improvement and building products manufacturer Masco Corp. on Friday reduced its 2007 earnings guidance because of slowing new housing starts and the general weakening of the housing market. Masco estimates full-year earnings to range between $1.55 and $1.65 per share. It had previously expected $1.60 to $1.70 per share.
BJ Tubular Services ( a unit of BJ Services) announced it has been awarded a contract to provide conductor installation services offshore New Zealand by OMV New Zealand Limited on behalf of the Maari Joint Venture, which is comprised of OMV New Zealand Limited, Todd Maari Limited, Horizon Oil International Limited and Cue Taranaki Pty Ltd. The contract provides for hydraulic hammer conductor-driving for 10 slots on the Maari Field development in Block PMP 38160, located to the south of New Zealand’s Taranaki Coast. The scope of work calls for 30” stovepipes to be driven into the seafloor from the Maari Gravity Base Structure using a recoverable driving string. “With our efforts to expand BJ hammer services worldwide, we are extremely pleased to be delivering hammer conductor driving services in New Zealand for OMV,” said Doug Bell, hammer services manager for BJ Tubular Services. “I attribute our success in New Zealand to the effectiveness and safety of the services delivered by our Hydrohammer fleet, and to the experience and the commitment of our hammer services personnel,” he added.
Columbia University said it does not plan to call off a speech by Iran's president despite pressure from critics including the City Council speaker, who said the Ivy League school was providing a forum for "hate-mongering vitriol.
Toronto's Pollitt & Co.: "Just because OPEC [the Organization of Petroleum Exporting Countries] raised output quotas doesn't mean oil wells will respond."
HSBC to close wholesale lending Decision One Mortgage, which will result in 750 job losses.
November crude fell 16 cents to close at $81.62 a barrel Friday, but still gained 4.5% for the week.
December gold fell $1 to close at $738.90 an ounce Friday, but still ended the week with a gain of $21.10, or 2.9%. December silver was up 15 cents to close at $13.62 an ounce, tacking on 7.2% for the week. December copper was down 0.2 cent to finish at $3.5925 a pound, up 6% from a week ago.
The Treasury Department will suspend issuing some securities on Sept. 27, because Congress has not raised the U.S. debt ceiling, the department said Friday. The suspension applies to state and local government series securities, Treasury said, which are purchased by state and local governments.
Thursday, September 20, 2007
More Surprises
9/21/07 More Surprises
Kellwood, maker of midtier department-store clothing brands such as Sag Harbor, said it is considering an unsolicited buyout offer valued at about $544 million from Sun Capital Securities Group LLC. Sun Capital, an affiliate of Sun Capital Partners Inc., a Boca Raton, Fla.-based private investment firm, sent a letter Tuesday offering to buy Kellwood for $21 a share. That is a 38% premium to Tuesday's price of $15.17 a share in 4 p.m. New York Stock Exchange composite trading.
Herman Miller Inc. expects second-quarter profit of 51 cents to 57 cents a share, below the 59-cent average estimate of analysts surveyed by Bloomberg. The company also forecast sales of $475 million to $500 million, less than the $519.2 million average analyst estimate.
The spread between two- and 10-year Treasuries widened to the most since May 2005 on speculation that the tumbling dollar and Federal Reserve interest-rate cuts will fuel inflation.
According to the NY Times, the consortium that had agreed to buy Sallie Mae for $25 billion plans to return to the negotiating table and seek a lower price, people close to the group said. If the group fails, it may move to scuttle the deal.
The Dutch government says it could knock 0.75 of a percentage point off its economic output next year. And the governor of the Bank of Spain, Miguel Ángel Ordóñez, has had to reassure Parliament that the nation's financial system is "immensely solid," despite a drop in the share prices of banks and construction firms tied to a deflating property bubble.
"It might be fair to argue that Britain is in a worse position than the U.S.," says Adam Slater of Oxford Economics, a British consulting and forecasting firm.
Yen buying by Japanese individual investors reached a three-month high of $1.57 billion yesterday, figures from the Tokyo Financial Exchange indicate.
Bloomberg reports pensioners, businessmen and housewives, so-called mom and pop traders, accelerated purchases of Japan's currency a day after the Federal Reserve cut interest rates, eroding the yield advantage on dollar investments.
``Expectations of a narrowing gap in interest rates between the U.S. and Japan are prompting Japanese retail investors to buy the yen when it weakens,'' said Koji Fukaya, senior currency strategist in Tokyo at Deutsche Securities. ``They are increasingly having strong anxiety about the dollar's fate.''
Daniel Amerman: " The higher the inflation rate - the greater the percentage of your assets that belongs to the government. This applies not just to taxes on ongoing income, but after-tax assets as well."
"FedEx increased its revenue and earnings against the backdrop of a sluggish U.S. economy," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "Outside of the United States, the economy is generally solid, contributing to the growth in our international express shipments." FedEx expects second-quarter net income of $1.60 to $1.75 a share, below the Wall Street target of $1.97 a share.
According to Bankrate, the outlook for mortgage rates is not clear in the wake of the Federal Reserve's recent rate cut, with worries about economic weakness conflicting with potential inflation concerns.
Jon Markman: "According to (Satyajit)Das' figures, up to 53% of the $2.2 trillion commercial paper in the U.S. market is now asset-backed, with about 50% of that in mortgages. When you add it all up, according to Das' research, a single dollar of "real" capital supports $20 to $30 of loans. This spiral of borrowing on an increasingly thin base of real assets, writ large and in nearly infinite variety, ultimately created a world in which derivatives outstanding earlier this year stood at $485 trillion -- or eight times total global gross domestic product of $60 trillion. Without a central governmental authority keeping tabs on these cross-border flows and ensuring a standard of record-keeping and quality, investors increasingly didn't know what they were buying or what any given security was really worth...So to the extent that the structured finance market is coming undone, not only will those pillars of strength for equities be knocked away, but many recent deals that were predicated on the easy availability of money will likely also go bust, Das says. That is why he considers the current market volatility much more profound than a simple "correction" in prices. He sees it as a gigantic liquidity bubble unwinding -- a process that can take a long, long time. While you might think that the U.S. Federal Reserve can help prevent disaster by lowering interest rates dramatically, as they did Wednesday, the evidence is not at all clear. The problem, after all, is not the amount of money in the system but the fact that buyers are in the process of rejecting the entire new risk-transfer model and its associated leverage and counterparty risks. Lower rates will not help that. "At best," Das says, "they help smooth the transition."
Christopher Wood: “This is not a sub-prime crisis. Sub-prime has merely exposed the bigger scam of structured finance; a scam that is about pretending that bad credit is good credit.” (Thanks to Barry Ritholtz for providing the quote)
The number of U.S. workers filing for unemployment benefits fell by 9,000 last week to a seven-week low of 311,000, the Labor Department reported Thursday. The four-week average of new claims - considered a better gauge than the volatile weekly figure - fell by 3,500 to 320,750, the lowest in four weeks. Meanwhile, the number of former workers collecting unemployment checks fell by 53,000 to 2.54 million in the week ending Sept. 8, also the lowest in seven weeks. The insured unemployment rate - the portion of all workers covered by unemployment insurance who are collecting benefits - stayed at 2%.
Goldman Sachs said Thursday that its third quarter profit rose 79% from a year ago, driven by a one-time investment gain and significantly higher mortgage trading revenue. The company said it earned $2.85 billion, or $6.13 a share, compared to $1.59 billion, or $3.26 a share a year ago. Revenue for the quarter rose 49%, to $23.80 billion, from $15.98 billion last year. Its fiscal third-quarter operating expense totaled $8.08 billion, up 55% from a year earlier and 20% higher quarter-over-quarter. The company said compensation and benefits expenses rose 68% from the year-ago period, driven primarily by the impact of higher net revenue. Headcount increased 7% during the third quarter, Goldman Sachs said Thursday. Non-compensation expenses rose 27% from a year earlier to $2.16 billion.
Bear Stearns fiscal Q3 net $1.16 per share vs $3.02. The company stated "Market conditions in both the mortgage and credit businesses were extremely challenging this quarter," the company said in the earnings release. "A general repricing of risk in the market led to significant reductions in both mortgage and credit-related revenue as volumes decreased while asset values declined."
The latest US government data on foreign holdings released this week show a collapse in purchases of US bonds from $97bn to just $19bn in July, with outright net sales of US Treasuries.
From the Telegraph(UK): "Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signaling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East...Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress."
More delinquencies and foreclosures can be expected in the subprime, adjustable-rate mortgage market as borrowers face interest-rate resets, Federal Reserve Chairman Ben Bernanke said Thursday.
Carlyle Group, the buyout firm run by David Rubenstein, will sell a 7.5 percent stake to the government of Abu Dhabi for $1.35 billion.
The Dollar Index dropped to 78.50. The index hit a new 15-year low.
Natural-gas inventories rose by 63 billion cubic feet for the week ended Sept. 14, the Energy Department said Thursday.Total stocks now stand at 3.132 trillion cubic feet, down 32 billion cubic feet from the year-ago level, but 238 billion cubic feet above the five-year average, the government data said.
A gauge of future economic growth plunged 0.6% in August, pointing to slower economic growth ahead, the Conference Board reported Thursday. Just one of the 10 leading economic indicators was positive in August: the real money supply.
The Canadian dollar reached one-to-one parity with the U.S. dollar in early Thursday trade. It marked the first time the Canadian unit has seen that level since the 1970s.
October crude closed at another record level of $83.32 a barrel in New York, up $1.39, or 1.7%. The U.S. Minerals Management Service reported Thursday that about 27.7% of the oil production in the Gulf has been shut in or about 360,169 barrels of oil a day,
The Bombay Company Inc. filed for Chapter 11 in U.S. Bankruptcy Court for the Northern District of Texas "to address financial challenges and identify a strategic or financial investor."
Gold for December delivery closed up $10.40 at $739.90 an ounce on the New York Mercantile Exchange, and that is the highest price in at least 27 years. Other metals prices -- particularly silver which surged nearly 3% -- also posted strong gains.
Manufacturing activity accelerated in the Philadelphia region in September, the Federal Reserve Bank of Philadelphia said Thursday. The Philly Fed index rose to 10.9 from 0 in August.
Kellwood, maker of midtier department-store clothing brands such as Sag Harbor, said it is considering an unsolicited buyout offer valued at about $544 million from Sun Capital Securities Group LLC. Sun Capital, an affiliate of Sun Capital Partners Inc., a Boca Raton, Fla.-based private investment firm, sent a letter Tuesday offering to buy Kellwood for $21 a share. That is a 38% premium to Tuesday's price of $15.17 a share in 4 p.m. New York Stock Exchange composite trading.
Herman Miller Inc. expects second-quarter profit of 51 cents to 57 cents a share, below the 59-cent average estimate of analysts surveyed by Bloomberg. The company also forecast sales of $475 million to $500 million, less than the $519.2 million average analyst estimate.
The spread between two- and 10-year Treasuries widened to the most since May 2005 on speculation that the tumbling dollar and Federal Reserve interest-rate cuts will fuel inflation.
According to the NY Times, the consortium that had agreed to buy Sallie Mae for $25 billion plans to return to the negotiating table and seek a lower price, people close to the group said. If the group fails, it may move to scuttle the deal.
The Dutch government says it could knock 0.75 of a percentage point off its economic output next year. And the governor of the Bank of Spain, Miguel Ángel Ordóñez, has had to reassure Parliament that the nation's financial system is "immensely solid," despite a drop in the share prices of banks and construction firms tied to a deflating property bubble.
"It might be fair to argue that Britain is in a worse position than the U.S.," says Adam Slater of Oxford Economics, a British consulting and forecasting firm.
Yen buying by Japanese individual investors reached a three-month high of $1.57 billion yesterday, figures from the Tokyo Financial Exchange indicate.
Bloomberg reports pensioners, businessmen and housewives, so-called mom and pop traders, accelerated purchases of Japan's currency a day after the Federal Reserve cut interest rates, eroding the yield advantage on dollar investments.
``Expectations of a narrowing gap in interest rates between the U.S. and Japan are prompting Japanese retail investors to buy the yen when it weakens,'' said Koji Fukaya, senior currency strategist in Tokyo at Deutsche Securities. ``They are increasingly having strong anxiety about the dollar's fate.''
Daniel Amerman: " The higher the inflation rate - the greater the percentage of your assets that belongs to the government. This applies not just to taxes on ongoing income, but after-tax assets as well."
"FedEx increased its revenue and earnings against the backdrop of a sluggish U.S. economy," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "Outside of the United States, the economy is generally solid, contributing to the growth in our international express shipments." FedEx expects second-quarter net income of $1.60 to $1.75 a share, below the Wall Street target of $1.97 a share.
According to Bankrate, the outlook for mortgage rates is not clear in the wake of the Federal Reserve's recent rate cut, with worries about economic weakness conflicting with potential inflation concerns.
Jon Markman: "According to (Satyajit)Das' figures, up to 53% of the $2.2 trillion commercial paper in the U.S. market is now asset-backed, with about 50% of that in mortgages. When you add it all up, according to Das' research, a single dollar of "real" capital supports $20 to $30 of loans. This spiral of borrowing on an increasingly thin base of real assets, writ large and in nearly infinite variety, ultimately created a world in which derivatives outstanding earlier this year stood at $485 trillion -- or eight times total global gross domestic product of $60 trillion. Without a central governmental authority keeping tabs on these cross-border flows and ensuring a standard of record-keeping and quality, investors increasingly didn't know what they were buying or what any given security was really worth...So to the extent that the structured finance market is coming undone, not only will those pillars of strength for equities be knocked away, but many recent deals that were predicated on the easy availability of money will likely also go bust, Das says. That is why he considers the current market volatility much more profound than a simple "correction" in prices. He sees it as a gigantic liquidity bubble unwinding -- a process that can take a long, long time. While you might think that the U.S. Federal Reserve can help prevent disaster by lowering interest rates dramatically, as they did Wednesday, the evidence is not at all clear. The problem, after all, is not the amount of money in the system but the fact that buyers are in the process of rejecting the entire new risk-transfer model and its associated leverage and counterparty risks. Lower rates will not help that. "At best," Das says, "they help smooth the transition."
Christopher Wood: “This is not a sub-prime crisis. Sub-prime has merely exposed the bigger scam of structured finance; a scam that is about pretending that bad credit is good credit.” (Thanks to Barry Ritholtz for providing the quote)
The number of U.S. workers filing for unemployment benefits fell by 9,000 last week to a seven-week low of 311,000, the Labor Department reported Thursday. The four-week average of new claims - considered a better gauge than the volatile weekly figure - fell by 3,500 to 320,750, the lowest in four weeks. Meanwhile, the number of former workers collecting unemployment checks fell by 53,000 to 2.54 million in the week ending Sept. 8, also the lowest in seven weeks. The insured unemployment rate - the portion of all workers covered by unemployment insurance who are collecting benefits - stayed at 2%.
Goldman Sachs said Thursday that its third quarter profit rose 79% from a year ago, driven by a one-time investment gain and significantly higher mortgage trading revenue. The company said it earned $2.85 billion, or $6.13 a share, compared to $1.59 billion, or $3.26 a share a year ago. Revenue for the quarter rose 49%, to $23.80 billion, from $15.98 billion last year. Its fiscal third-quarter operating expense totaled $8.08 billion, up 55% from a year earlier and 20% higher quarter-over-quarter. The company said compensation and benefits expenses rose 68% from the year-ago period, driven primarily by the impact of higher net revenue. Headcount increased 7% during the third quarter, Goldman Sachs said Thursday. Non-compensation expenses rose 27% from a year earlier to $2.16 billion.
Bear Stearns fiscal Q3 net $1.16 per share vs $3.02. The company stated "Market conditions in both the mortgage and credit businesses were extremely challenging this quarter," the company said in the earnings release. "A general repricing of risk in the market led to significant reductions in both mortgage and credit-related revenue as volumes decreased while asset values declined."
The latest US government data on foreign holdings released this week show a collapse in purchases of US bonds from $97bn to just $19bn in July, with outright net sales of US Treasuries.
From the Telegraph(UK): "Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signaling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East...Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress."
More delinquencies and foreclosures can be expected in the subprime, adjustable-rate mortgage market as borrowers face interest-rate resets, Federal Reserve Chairman Ben Bernanke said Thursday.
Carlyle Group, the buyout firm run by David Rubenstein, will sell a 7.5 percent stake to the government of Abu Dhabi for $1.35 billion.
The Dollar Index dropped to 78.50. The index hit a new 15-year low.
Natural-gas inventories rose by 63 billion cubic feet for the week ended Sept. 14, the Energy Department said Thursday.Total stocks now stand at 3.132 trillion cubic feet, down 32 billion cubic feet from the year-ago level, but 238 billion cubic feet above the five-year average, the government data said.
A gauge of future economic growth plunged 0.6% in August, pointing to slower economic growth ahead, the Conference Board reported Thursday. Just one of the 10 leading economic indicators was positive in August: the real money supply.
The Canadian dollar reached one-to-one parity with the U.S. dollar in early Thursday trade. It marked the first time the Canadian unit has seen that level since the 1970s.
October crude closed at another record level of $83.32 a barrel in New York, up $1.39, or 1.7%. The U.S. Minerals Management Service reported Thursday that about 27.7% of the oil production in the Gulf has been shut in or about 360,169 barrels of oil a day,
The Bombay Company Inc. filed for Chapter 11 in U.S. Bankruptcy Court for the Northern District of Texas "to address financial challenges and identify a strategic or financial investor."
Gold for December delivery closed up $10.40 at $739.90 an ounce on the New York Mercantile Exchange, and that is the highest price in at least 27 years. Other metals prices -- particularly silver which surged nearly 3% -- also posted strong gains.
Manufacturing activity accelerated in the Philadelphia region in September, the Federal Reserve Bank of Philadelphia said Thursday. The Philly Fed index rose to 10.9 from 0 in August.
The Day After
9/20/07 The Day After
British Airways said it's going to suspend its route between Detroit and London next year because of the difficulties in the auto sector. "Despite the fact we have operated in the Detroit-London market for over 50 years, we see no possible upswing in the business and have, therefore, decided to utilize the aircraft on other routes where it can make a profitable contribution to the airline's bottom line," the airline said in a statement.
The Bank of England's Monetary Policy Committee voted 9-0 to keep its key interest rate on hold at 5.75% earlier in September as it judged the upside balance of risk to inflation had receded, according to the minutes of the meeting published Wednesday. The MPC concluded the outlook was more uncertain after disruption in global credit markets continued. The committee said recent news "from the real economy," such as indicators on GDP growth and the margin of spare capacity, had not significantly changed its outlook. However, re-pricing of risk in credit markets could lead to a tightening of credit conditions without any further rise in the central bank's key rate. Also, the associated impact on asset prices from the credit turmoil could reduce wealth and affect the value of collateral available to borrowers, it said.
Kongkong & Shanghai Banking Corp. will cut its prime lending rate and deposit rates by a quarter point, the bank said in a statement Wednesday. The rate cut will bring the bank's best lending rate to 7.5% from 7.75% effective Thursday. The rate reduction follows a similar move by the Hong Kong Monetary Authority, Hong Kong's de facto central bank, to cut its base lending rate by half a percentage point to 6.25% earlier in the day.
Nouriel Roubini: "Thus I fear that, while a Fed easing may put a floor to the size of the hard landing, it may not prevent it for the same reasons why it did not prevent a hard landing in 2001. Also, today we have a credit crunch – on top of a liquidity crunch – that is caused by the fundamental insolvencies and distress of many over-leveraged households, mortgage lenders, home builders, some financial institutions and even parts of the corporate sector. You cannot resolve fundamental insolvencies with monetary policy injections alone. Those insolvencies and financial distress will take time to work out and will imply tight financial and credit conditions regardless of what the Fed does. For example, with high yield junk bond spreads higher by 200bps relative to the pre-crisis period, lower Fed Funds rates and even lower riskless government bond yields still imply significantly tighter financial and credit conditions and much higher real borrowing rate for such corporations. The same is true of a variety of other credit spreads that are now much higher in real terms. The real cost of capital is now much higher for households, corporations and financial institutions and will remain higher if credit spreads remain high because of a fundamental repricing of risk...I thus remain of the view that 50bps is too little too late and that we will experience a hard landing."
October-dated crude rose 71 cents to $82.22 a barrel and overnight traded as high as $82.37, its highest level ever.
Accredited Home Lenders Holding Co. agreed to be acquired by private-equity group Lone Star for $11.75 a share cash, the companies said.
Kellwood Co., the St. Louis marketer of branded and private-label apparel and consumer soft goods, said late Tuesday that it received a non-binding takeover proposal at $21 a share from Sun Capital Securities Group.
The Chinese government on Wednesday froze prices that it controls for the rest of the year, in the latest sign of Beijing’s mounting concern over inflation.
Beijing also stressed the importance of holding down market-driven prices during the forthcoming holiday period, saying it would have a direct impact on the country’s ”development, reform and stability”.
The government still administers a vast array of prices, including those for land, transport, utilities and fuel.
According to the Chicago Tribune, Tribune Co. has moved another step closer to getting the $290 million tax refund it said in June it expected on a $1 billion payment it made in 2005 after a U.S. Tax Court ruled against it.
At issue was a 1998 transaction for which Tribune acquired responsibility when it acquired Times Mirror Co. in 2000. The Joint Committee on Taxation has told the Justice Department that "it has no adverse criticism regarding the settlement," according to a court filing, and the Justice Department has initiated the formal refund process with the IRS, a precursor to Tribune dropping its appeal.
Douglas A. McIntyre: "Bernanke and his associates may have helped the stock market for a few days. But, they may have hurt the economy more than they know. Weathering tough times in mortgages, sour buy-out loans and hedge fund woes are one set of things. And, those are probably manageable. Hurting the consumer's daily costs has much greater consequences."
The euro rose as high $1.3987, a new high, in morning European trading before settling back to $1.3981, above the $1.3971 it bought in late New York trading the night before.
The Bank of England abandoned its opposition to emergency three-month money auctions and loosened lending standards, a week after Governor Mervyn King said such steps would encourage ``risky behavior.'' ``This measure is being taken to alleviate the strains in longer-maturity money markets,'' the bank said in a statement today. The Bank of England said it will accept ``mortgage collateral'' at the auction of 10 billion pounds ($20 billion) in loans next week. It will have a penalty rate of 6.75 percent.
The US home loan crisis could damage German growth by pushing up the euro and crimping exports from the biggest eurozone economy, Economy Minister Michael Glos warned Wednesday in an interview.
Interest rate cuts by Federal Reserve Chairman Ben S. Bernanke will spur inflation, cause the U.S. dollar to collapse and push the world's largest economy into recession, investors Jim Rogers and Marc Faber said. ``Every time the Fed turns around to save its friends on Wall Street, it makes the situation worse,'' Rogers said in an interview from Shanghai. ``If Bernanke starts running those printing presses even faster than he's doing already, yes we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems in the U.S.''
Marc Faber: ``It's suicidal to cut interest rates.''
The euro rose over $1.40 for the first time ever and sterling traded over $2 against the greenback on Thursday morning. A report in the Daily Telegraph newspaper noted that that Saudi Arabia has refused to cut interest rates in tandem with the U.S. Federal Reserve for the first time, which it said suggests the kingdom is preparing to break the dollar currency peg. This move "risks setting off a stampede out of the dollar across the Middle East" the report said.
Angelica Corp.said Wednesday that Morgan Joseph has been authorized to pursue a possible sale of the healthcare textile rental and linen management services provider, and will be soliciting indications of interest from both strategic and financial buyers.
October crude closed at $81.93 a barrel Wednesday, up 42 cents for the session after marking a fresh, all-time intraday high of $82.50. U.S. supplies of crude fell more than expected last week and refinery activity fell, but motor gasoline supplies climbed, according to the Energy Department. October natural gas dropped 5.9% to close at $6.18 per million British thermal units.
December gold climbed $5.80 to close at $729.50 an ounce Wednesday. December silver climbed 18 cents to close at $13.105 an ounce and December copper closed at $3.5755 a pound, up 3.7%.
Treasury Secretary Henry Paulson urged the Senate to pass a measure to increase the limit on the national debt, saying that updated forecasts show the U.S. would reach the current debt ceiling on Oct. 1.
The American Petroleum Institute reported a fall of 1.6 million barrels in crude supplies for the week ended Sept. 14. The Energy Department had reported a decline of 3.8 million barrels for the latest week. Motor gasoline supplies were down 2.1 million barrels, the API said. But the government reported that supplies were up 400,000 barrels. Distillate supplies climbed 241,000 barrels, the API said. They were up 1.5 million barrels, according to the Energy Department.
The problems in U.S. credit markets are beginning to affect nonresidential, commercial construction across the country, according to a survey released Wednesday by the American Institute of Architects. "The apprehension in the industry is based around reports that growing default rates among subprime borrowers in the residential market has made credit more difficult to secure for nonresidential construction projects," said AIA Chief Economist Kermit Baker in a statement.
British Airways said it's going to suspend its route between Detroit and London next year because of the difficulties in the auto sector. "Despite the fact we have operated in the Detroit-London market for over 50 years, we see no possible upswing in the business and have, therefore, decided to utilize the aircraft on other routes where it can make a profitable contribution to the airline's bottom line," the airline said in a statement.
The Bank of England's Monetary Policy Committee voted 9-0 to keep its key interest rate on hold at 5.75% earlier in September as it judged the upside balance of risk to inflation had receded, according to the minutes of the meeting published Wednesday. The MPC concluded the outlook was more uncertain after disruption in global credit markets continued. The committee said recent news "from the real economy," such as indicators on GDP growth and the margin of spare capacity, had not significantly changed its outlook. However, re-pricing of risk in credit markets could lead to a tightening of credit conditions without any further rise in the central bank's key rate. Also, the associated impact on asset prices from the credit turmoil could reduce wealth and affect the value of collateral available to borrowers, it said.
Kongkong & Shanghai Banking Corp. will cut its prime lending rate and deposit rates by a quarter point, the bank said in a statement Wednesday. The rate cut will bring the bank's best lending rate to 7.5% from 7.75% effective Thursday. The rate reduction follows a similar move by the Hong Kong Monetary Authority, Hong Kong's de facto central bank, to cut its base lending rate by half a percentage point to 6.25% earlier in the day.
Nouriel Roubini: "Thus I fear that, while a Fed easing may put a floor to the size of the hard landing, it may not prevent it for the same reasons why it did not prevent a hard landing in 2001. Also, today we have a credit crunch – on top of a liquidity crunch – that is caused by the fundamental insolvencies and distress of many over-leveraged households, mortgage lenders, home builders, some financial institutions and even parts of the corporate sector. You cannot resolve fundamental insolvencies with monetary policy injections alone. Those insolvencies and financial distress will take time to work out and will imply tight financial and credit conditions regardless of what the Fed does. For example, with high yield junk bond spreads higher by 200bps relative to the pre-crisis period, lower Fed Funds rates and even lower riskless government bond yields still imply significantly tighter financial and credit conditions and much higher real borrowing rate for such corporations. The same is true of a variety of other credit spreads that are now much higher in real terms. The real cost of capital is now much higher for households, corporations and financial institutions and will remain higher if credit spreads remain high because of a fundamental repricing of risk...I thus remain of the view that 50bps is too little too late and that we will experience a hard landing."
October-dated crude rose 71 cents to $82.22 a barrel and overnight traded as high as $82.37, its highest level ever.
Accredited Home Lenders Holding Co. agreed to be acquired by private-equity group Lone Star for $11.75 a share cash, the companies said.
Kellwood Co., the St. Louis marketer of branded and private-label apparel and consumer soft goods, said late Tuesday that it received a non-binding takeover proposal at $21 a share from Sun Capital Securities Group.
The Chinese government on Wednesday froze prices that it controls for the rest of the year, in the latest sign of Beijing’s mounting concern over inflation.
Beijing also stressed the importance of holding down market-driven prices during the forthcoming holiday period, saying it would have a direct impact on the country’s ”development, reform and stability”.
The government still administers a vast array of prices, including those for land, transport, utilities and fuel.
According to the Chicago Tribune, Tribune Co. has moved another step closer to getting the $290 million tax refund it said in June it expected on a $1 billion payment it made in 2005 after a U.S. Tax Court ruled against it.
At issue was a 1998 transaction for which Tribune acquired responsibility when it acquired Times Mirror Co. in 2000. The Joint Committee on Taxation has told the Justice Department that "it has no adverse criticism regarding the settlement," according to a court filing, and the Justice Department has initiated the formal refund process with the IRS, a precursor to Tribune dropping its appeal.
Douglas A. McIntyre: "Bernanke and his associates may have helped the stock market for a few days. But, they may have hurt the economy more than they know. Weathering tough times in mortgages, sour buy-out loans and hedge fund woes are one set of things. And, those are probably manageable. Hurting the consumer's daily costs has much greater consequences."
The euro rose as high $1.3987, a new high, in morning European trading before settling back to $1.3981, above the $1.3971 it bought in late New York trading the night before.
The Bank of England abandoned its opposition to emergency three-month money auctions and loosened lending standards, a week after Governor Mervyn King said such steps would encourage ``risky behavior.'' ``This measure is being taken to alleviate the strains in longer-maturity money markets,'' the bank said in a statement today. The Bank of England said it will accept ``mortgage collateral'' at the auction of 10 billion pounds ($20 billion) in loans next week. It will have a penalty rate of 6.75 percent.
The US home loan crisis could damage German growth by pushing up the euro and crimping exports from the biggest eurozone economy, Economy Minister Michael Glos warned Wednesday in an interview.
Interest rate cuts by Federal Reserve Chairman Ben S. Bernanke will spur inflation, cause the U.S. dollar to collapse and push the world's largest economy into recession, investors Jim Rogers and Marc Faber said. ``Every time the Fed turns around to save its friends on Wall Street, it makes the situation worse,'' Rogers said in an interview from Shanghai. ``If Bernanke starts running those printing presses even faster than he's doing already, yes we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems in the U.S.''
Marc Faber: ``It's suicidal to cut interest rates.''
The euro rose over $1.40 for the first time ever and sterling traded over $2 against the greenback on Thursday morning. A report in the Daily Telegraph newspaper noted that that Saudi Arabia has refused to cut interest rates in tandem with the U.S. Federal Reserve for the first time, which it said suggests the kingdom is preparing to break the dollar currency peg. This move "risks setting off a stampede out of the dollar across the Middle East" the report said.
Angelica Corp.said Wednesday that Morgan Joseph has been authorized to pursue a possible sale of the healthcare textile rental and linen management services provider, and will be soliciting indications of interest from both strategic and financial buyers.
October crude closed at $81.93 a barrel Wednesday, up 42 cents for the session after marking a fresh, all-time intraday high of $82.50. U.S. supplies of crude fell more than expected last week and refinery activity fell, but motor gasoline supplies climbed, according to the Energy Department. October natural gas dropped 5.9% to close at $6.18 per million British thermal units.
December gold climbed $5.80 to close at $729.50 an ounce Wednesday. December silver climbed 18 cents to close at $13.105 an ounce and December copper closed at $3.5755 a pound, up 3.7%.
Treasury Secretary Henry Paulson urged the Senate to pass a measure to increase the limit on the national debt, saying that updated forecasts show the U.S. would reach the current debt ceiling on Oct. 1.
The American Petroleum Institute reported a fall of 1.6 million barrels in crude supplies for the week ended Sept. 14. The Energy Department had reported a decline of 3.8 million barrels for the latest week. Motor gasoline supplies were down 2.1 million barrels, the API said. But the government reported that supplies were up 400,000 barrels. Distillate supplies climbed 241,000 barrels, the API said. They were up 1.5 million barrels, according to the Energy Department.
The problems in U.S. credit markets are beginning to affect nonresidential, commercial construction across the country, according to a survey released Wednesday by the American Institute of Architects. "The apprehension in the industry is based around reports that growing default rates among subprime borrowers in the residential market has made credit more difficult to secure for nonresidential construction projects," said AIA Chief Economist Kermit Baker in a statement.
Tuesday, September 18, 2007
Banking
9/19/07 Banking
The Bank of England said Tuesday that it will provide an additional 4.4 billion pounds ($8.9 billion) in reserves to U.K. commercial banks through a two-day repurchase agreement at its base rate of 5.75%. The central bank said the action is intended to offset the disturbance caused by its decision to act as a lender of last resort to mortgage bank Northern Rock. Overnight lending rates fell back immediately after the announcement to 5.75% from around 6.25%, according to a Reuters report.
The Federal Open Market Committee cut its benchmark federal funds rate by a half percentage point to 4.75%. In an effort to ease the credit crunch, the Federal Reserve also reduced its discount rate in lockstep to 5.25%. In a statement, the FOMC said the action "was necessary to forestall some of the adverse effects on the broad economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time."
Australia reduced its winter crop forecasts for grain production by 30% owing to unseasonably dry conditions.
Goldman Sachs forecast U.S. oil prices would surge to $85 a barrel by the end of the year, up $13 from its previous forecast, and said crude could climb as high as $90 due to tight supplies.
Paul Kasriel: "In sum, the U.S. economy has entered, at best, a growth recession – an environment in which excess capacity will begin to rise in the labor and product markets. In turn, this excess capacity will temper price increases of good and services, and most likely equity prices, too. At worst, the U.S. economy is on the cusp of entering a full-fledged recession. Either way, the Federal Open Market Committee (FOMC) will start cutting its target for the federal funds rate. We expect the first funds rate target cut of 25 basis points to occur at the FOMC meeting on September 18. This will just bring the fed funds rate target down to the 5% level the actual fed funds rate has been averaging over the several weeks...We anticipate that the target funds rate will have fallen to a level of 4.25% after the January 30, 2008, FOMC meeting – 100 basis points lower than where it is today. The risk case is that the fed-funds-rate target will be even lower than 4.25% on January 30 or in the immediate months thereafter."
Standard Chartered Plc said on Tuesday it had agreed to buy American Express Bank for around $860 million in cash to boost its private banking and correspondent banking services.
Brett Steenbarger: "So what do we have? A falling dollar, inflationary pressures, and fears of a weakening economy. Going into the Fed meeting, stagflation is on the radar."
October crude finished at $81.51 a barrel Tuesday, up 94 cents to mark a fresh record closing level on the New York Mercantile Exchange.
U.K. natural gas for same-day delivery rose to the highest in nine months as exports of the fuel to Belgium resumed and cooler temperatures boosted heating demand. Gas for delivery in the 24 hours through 6 a.m. tomorrow advanced as much as 13 percent to 39.5 pence a therm, according to prices on Bloomberg from the broker ICAP Plc. That's the highest since Dec. 20. It traded at 37.8 pence a therm at 8:48 a.m. local time, equivalent to $7.54 a million British thermal units. A therm is 100,000 Btus.
Meanwhile, ethanol has declined 35% this year, closing Monday on the Chicago Board of Trade at $1.61/gallon. Production of ethanol from corn will probably peak in 2008.
Lehman's Chairman and Chief Executive Officer Richard S. Fuld, Jr.: "Despite challenging conditions in the markets, our results once again demonstrate the diversity and financial strength of the Lehman Brothers franchise, as well as our ability to perform across cycles. For the quarter, we reported record net revenues in Investment Management, and our second highest net revenues in both Investment Banking and Equities Capital Markets. In addition, more than half of our net revenues for the quarter came from outside the U.S. We remain focused on delivering significant long term value for our clients and shareholders." Lehman's pretax margin in the fiscal third quarter fell to 28% from 32.7% in the year-ago period. The company recorded "very substantial" valuation reductions, most significantly on leveraged loan commitments and residential mortgage-related positions. What is the actual number of "very substantial" and do they fully reflect mark to the market valuations? Don't shareholders deserve transparency?
The number of foreclosure filings reported in the U.S. last month more than doubled versus August 2006 and jumped 36 percent from July, a trend that signals many homeowners are increasingly unable to make timely payments on their mortgages or sell their homes amid a national housing slump. A total of 243,947 foreclosure filings were reported in August, up 115 percent from 113,300 in the same month a year ago, Irvine, Calif.-based RealtyTrac Inc. said Tuesday. There were 179,599 foreclosure filings reported in July.
Mike Shedlock: " Shattered Confidence is starting to be a global thing. And confidence once lost is not easily regained."
German investor confidence fell more than economists forecast in September after rising defaults on U.S. subprime mortgages pushed up the cost of credit. The ZEW Center for European Economic Research in Mannheim today said its index of investor and analyst expectations dropped to minus 18.1, the lowest since December, from minus 6.9 in August. Economists expected a decline to minus 17, according to the median of 40 forecasts in a Bloomberg News survey.
E*Trade Financial Corp., this year's worst performer in the Amex Securities Broker-Dealer Index, cut its 2007 profit forecast by at least 25 percent because of bad home loans and said it will quit the wholesale mortgage business.
Excluding volatile food and energy, however, the core producer price index climbed a greater-than-expected 0.2% on higher drug and car prices. These gov't numbers are such crap.
Miguel Angel Fernandez Ordonez said the Bank of Spain won't be selling more gold this year. Under the central bank's gold agreement the Spanish central bank had been the largest seller of gold this year, according to reports.
Benchmark Equity Research late Monday trimmed its 2007 and 2008 profit forecasts for Exxon Mobil to reflect higher than expected upstream unit costs. For 2007, analysts said they now expect Exxon Mobil to earn $6.56 a share verses their earlier view of $6.82 a share. For 2008, Benchmark expects earnings of $5.94 a share, down from $6.06 a share.
Russian Foreign Minister Sergei Lavrov has expressed fears over the threat of war in Iran after talks with his French counterpart, Bernard Kouchner.
Yahoo announced Monday that it has agreed to buy Zimbra, a maker of Web-based e-mail software, for $350 million in cash.
Monthly capital flows to the U.S. including short-term securities shot up in July, to $103.8 billion from a revised $34.4 billion in June, with private foreign flows making up most of the gain, the Treasury Department reported Tuesday. The monthly number includes Treasury bills and other short-term securities. Net foreign private flows made up $65.4 billion of the monthly total, while net foreign official flows accounted for $38.4 billion. Meanwhile, net foreign purchases of long-term U.S. securities were $24.7 billion for the month, falling back from $119.1 billion a month earlier.
Adobe beat earnings estimates for the quarter and raised its forecast.
State Street Global Markets on Tuesday said its global investor confidence index fell by 7.5 points to 92.1 in September. The confidence of North American and European institutional investors declined, but the confidence of Asian institutions rose slightly.
The Dow industrials ended up 336.1 points, or 2.5%, at 13,739.5, its largest one-day point gain since October 2002, and its greatest percent gain since early April of 2003. The S&P 500 finished ahead 43.13 points, or 2.9%, at 1,519.78, while the Nasdaq Composite settled up 70 points, or 2.7%, at 2,651.66.
December gold climbed as high as $735.30 an ounce in electronic trading Tuesday afternoon in the wake of the Federal Reserve's decision to cut interest rates by a half percentage point to 4.75%. December gold had closed out the regular session at $723.70, down 10 cents. Gold futures in New York traded as high as $732 in electronic trading last year, and the lead-month contract hasn't traded higher than that since 1980, according to analysts.
The dollar dropped Tuesday after the Federal Reserve cut its key fed funds rate by 50 basis points, instead of the 25-basis point cut expected by many investors. The euro rose to $1.3953, compared to $1.3885 before the Fed decision, and the trade-weighted dollar index fell to 79.375, compared to 79.645.
Impac Mortgage Holdings announced Tuesday that it will close almost all mortgage lending operations and fire 144 employees. The company will stop making "Alt-A" loans, which constituted a majority of the company's business.
The Bank of England said Tuesday that it will provide an additional 4.4 billion pounds ($8.9 billion) in reserves to U.K. commercial banks through a two-day repurchase agreement at its base rate of 5.75%. The central bank said the action is intended to offset the disturbance caused by its decision to act as a lender of last resort to mortgage bank Northern Rock. Overnight lending rates fell back immediately after the announcement to 5.75% from around 6.25%, according to a Reuters report.
The Federal Open Market Committee cut its benchmark federal funds rate by a half percentage point to 4.75%. In an effort to ease the credit crunch, the Federal Reserve also reduced its discount rate in lockstep to 5.25%. In a statement, the FOMC said the action "was necessary to forestall some of the adverse effects on the broad economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time."
Australia reduced its winter crop forecasts for grain production by 30% owing to unseasonably dry conditions.
Goldman Sachs forecast U.S. oil prices would surge to $85 a barrel by the end of the year, up $13 from its previous forecast, and said crude could climb as high as $90 due to tight supplies.
Paul Kasriel: "In sum, the U.S. economy has entered, at best, a growth recession – an environment in which excess capacity will begin to rise in the labor and product markets. In turn, this excess capacity will temper price increases of good and services, and most likely equity prices, too. At worst, the U.S. economy is on the cusp of entering a full-fledged recession. Either way, the Federal Open Market Committee (FOMC) will start cutting its target for the federal funds rate. We expect the first funds rate target cut of 25 basis points to occur at the FOMC meeting on September 18. This will just bring the fed funds rate target down to the 5% level the actual fed funds rate has been averaging over the several weeks...We anticipate that the target funds rate will have fallen to a level of 4.25% after the January 30, 2008, FOMC meeting – 100 basis points lower than where it is today. The risk case is that the fed-funds-rate target will be even lower than 4.25% on January 30 or in the immediate months thereafter."
Standard Chartered Plc said on Tuesday it had agreed to buy American Express Bank for around $860 million in cash to boost its private banking and correspondent banking services.
Brett Steenbarger: "So what do we have? A falling dollar, inflationary pressures, and fears of a weakening economy. Going into the Fed meeting, stagflation is on the radar."
October crude finished at $81.51 a barrel Tuesday, up 94 cents to mark a fresh record closing level on the New York Mercantile Exchange.
U.K. natural gas for same-day delivery rose to the highest in nine months as exports of the fuel to Belgium resumed and cooler temperatures boosted heating demand. Gas for delivery in the 24 hours through 6 a.m. tomorrow advanced as much as 13 percent to 39.5 pence a therm, according to prices on Bloomberg from the broker ICAP Plc. That's the highest since Dec. 20. It traded at 37.8 pence a therm at 8:48 a.m. local time, equivalent to $7.54 a million British thermal units. A therm is 100,000 Btus.
Meanwhile, ethanol has declined 35% this year, closing Monday on the Chicago Board of Trade at $1.61/gallon. Production of ethanol from corn will probably peak in 2008.
Lehman's Chairman and Chief Executive Officer Richard S. Fuld, Jr.: "Despite challenging conditions in the markets, our results once again demonstrate the diversity and financial strength of the Lehman Brothers franchise, as well as our ability to perform across cycles. For the quarter, we reported record net revenues in Investment Management, and our second highest net revenues in both Investment Banking and Equities Capital Markets. In addition, more than half of our net revenues for the quarter came from outside the U.S. We remain focused on delivering significant long term value for our clients and shareholders." Lehman's pretax margin in the fiscal third quarter fell to 28% from 32.7% in the year-ago period. The company recorded "very substantial" valuation reductions, most significantly on leveraged loan commitments and residential mortgage-related positions. What is the actual number of "very substantial" and do they fully reflect mark to the market valuations? Don't shareholders deserve transparency?
The number of foreclosure filings reported in the U.S. last month more than doubled versus August 2006 and jumped 36 percent from July, a trend that signals many homeowners are increasingly unable to make timely payments on their mortgages or sell their homes amid a national housing slump. A total of 243,947 foreclosure filings were reported in August, up 115 percent from 113,300 in the same month a year ago, Irvine, Calif.-based RealtyTrac Inc. said Tuesday. There were 179,599 foreclosure filings reported in July.
Mike Shedlock: " Shattered Confidence is starting to be a global thing. And confidence once lost is not easily regained."
German investor confidence fell more than economists forecast in September after rising defaults on U.S. subprime mortgages pushed up the cost of credit. The ZEW Center for European Economic Research in Mannheim today said its index of investor and analyst expectations dropped to minus 18.1, the lowest since December, from minus 6.9 in August. Economists expected a decline to minus 17, according to the median of 40 forecasts in a Bloomberg News survey.
E*Trade Financial Corp., this year's worst performer in the Amex Securities Broker-Dealer Index, cut its 2007 profit forecast by at least 25 percent because of bad home loans and said it will quit the wholesale mortgage business.
Excluding volatile food and energy, however, the core producer price index climbed a greater-than-expected 0.2% on higher drug and car prices. These gov't numbers are such crap.
Miguel Angel Fernandez Ordonez said the Bank of Spain won't be selling more gold this year. Under the central bank's gold agreement the Spanish central bank had been the largest seller of gold this year, according to reports.
Benchmark Equity Research late Monday trimmed its 2007 and 2008 profit forecasts for Exxon Mobil to reflect higher than expected upstream unit costs. For 2007, analysts said they now expect Exxon Mobil to earn $6.56 a share verses their earlier view of $6.82 a share. For 2008, Benchmark expects earnings of $5.94 a share, down from $6.06 a share.
Russian Foreign Minister Sergei Lavrov has expressed fears over the threat of war in Iran after talks with his French counterpart, Bernard Kouchner.
Yahoo announced Monday that it has agreed to buy Zimbra, a maker of Web-based e-mail software, for $350 million in cash.
Monthly capital flows to the U.S. including short-term securities shot up in July, to $103.8 billion from a revised $34.4 billion in June, with private foreign flows making up most of the gain, the Treasury Department reported Tuesday. The monthly number includes Treasury bills and other short-term securities. Net foreign private flows made up $65.4 billion of the monthly total, while net foreign official flows accounted for $38.4 billion. Meanwhile, net foreign purchases of long-term U.S. securities were $24.7 billion for the month, falling back from $119.1 billion a month earlier.
Adobe beat earnings estimates for the quarter and raised its forecast.
State Street Global Markets on Tuesday said its global investor confidence index fell by 7.5 points to 92.1 in September. The confidence of North American and European institutional investors declined, but the confidence of Asian institutions rose slightly.
The Dow industrials ended up 336.1 points, or 2.5%, at 13,739.5, its largest one-day point gain since October 2002, and its greatest percent gain since early April of 2003. The S&P 500 finished ahead 43.13 points, or 2.9%, at 1,519.78, while the Nasdaq Composite settled up 70 points, or 2.7%, at 2,651.66.
December gold climbed as high as $735.30 an ounce in electronic trading Tuesday afternoon in the wake of the Federal Reserve's decision to cut interest rates by a half percentage point to 4.75%. December gold had closed out the regular session at $723.70, down 10 cents. Gold futures in New York traded as high as $732 in electronic trading last year, and the lead-month contract hasn't traded higher than that since 1980, according to analysts.
The dollar dropped Tuesday after the Federal Reserve cut its key fed funds rate by 50 basis points, instead of the 25-basis point cut expected by many investors. The euro rose to $1.3953, compared to $1.3885 before the Fed decision, and the trade-weighted dollar index fell to 79.375, compared to 79.645.
Impac Mortgage Holdings announced Tuesday that it will close almost all mortgage lending operations and fire 144 employees. The company will stop making "Alt-A" loans, which constituted a majority of the company's business.
Monday, September 17, 2007
Running On Volatility
9/18/07 Running On Volatility
An estimated $4 billion (2 billion pounds) has been withdrawn by customers of Northern Rock, the U.K. bank that on Friday went to the Bank of England for emergency funding, BBC News reported.
Deutsche Telekom unit, T-Mobile USA, said Monday that it has agreed to buy SunCom Wireless Holdings for $2.4 billion in cash and debt. Under the agreed deal, SunCom shareholders will receive $27 per share in cash, bringing the total cash element of the deal to approximately $1.6 billion.
Leap Wireless International Inc. rejected a takeover proposal from MetroPCS Communications Inc., the providers of wireless-communications services said. Leap's board said MetroPCS's proposal was inadequate financially, not taking into account Leap's growth prospects.
Nokia agreed to buy Enpocket, a privately held mobile advertising firm, for an undisclosed amount.
Mitchells & Butlers said Monday that the post tax impact of marking-to-market the company's share of hedges entered into over the summer is a deficit of approximately 140 million pounds, as at September 13. At July 31, the post-tax deficit was 60 million pounds.
Shares of Oil Search Ltd. climbed 10.9% in Sydney after a Hong Kong-based newspaper reported China's state-owned China National Petroleum Corp. and its Hong Kong-listed subsidiary PetroChina Co. were considering a bid for the company, which is incorporated in Papua New Guinea. Oil Search has oil and gas operations in Libya, Egypt, Yemen and Papua New Guinea.
ITT Corp.definitively agreed to pay $56 a share for EDO Corp. Subject to conditions including a vote of EDO's holders, the companies hope to close the deal early in 2008. Lazard and UBS are advising ITT while Citigroup is advisisng EDO.
Howard Marks of Oaktree Management: "Risk cannot be eliminated; it just gets transferred and spread. And developments that make the world look less risky usually are illusory, and thus in presenting a rosy picture they tend to make the world more risky. These are among the important lessons of 2007."
Bob Woodward: "Alan Greenspan, the former Federal Reserve chairman, said in an interview that the removal of Saddam Hussein was "essential" to secure world oil supplies, a point he emphasized to the White House in private conversations before the 2003 invasion of Iraq."
Alan Greenspan: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."
Greenspan said he would expect “as a minimum, large single-digit” percentage declines in US house prices from peak to trough and added that he would not be surprised if the fall was “in double digits”.
"It would not take much to tip the economy into recession," says Martin N. Baily of the Brookings Institution and former head of the Council of Economic Advisers under Bill Clinton. "The collapse of the boom in nonresidential construction, for example."
A European Union court dismissed Microsoft Corp.'s appeal against an EU antitrust order to share communications code with rivals and sell a copy of Windows without Media Player. The order also upheld a $613 million fine for the company.
The Dow is just 4 percent below its all-time high of 14,000.41, reached in July. With all the fixed income and risk problems still very much alive and well, the strength in the Dow is puzzling at best.
John Hussman: "The total amount of U.S. bank reserves affected by FOMC operations is less than $45 billion, and only the “excess” portion of that – typically about $2 billion dollars – is what determines the overnight Federal Funds Rate. Meanwhile, the total amount of borrowings through the “discount window” – though higher than in recent years – still amounts to only about $3 billion...To believe that the Fed operations matter, you have to believe that a $13 trillion economy is controlled by a few billion dollars of reserves and discount window borrowings, none of which vary materially from year to year...Total U.S. bank reserves have grown by only $3.1 billion since 1990, to a total of $44.9 billion. Again, it is the day-to-day trading between banks of this amount (and actually, only of “excess reserves” – typically about $2 billion dollars) that determines the Federal Funds rate...In contrast to about $2 billion in excess reserves that is the basis for the Federal Funds Rate, and about $3 billion that is currently being lent at the Discount Rate, the U.S. banking system presently carries about $3.4 trillion in real estate loans, and $6.3 trillion in total loans. Gross domestic product is currently about $13.8 trillion."
The WSJ on Boeing: "According to people familiar with the program, suppliers at factories in Italy, Japan and the U.S. continue to experience chronic parts shortages."
"Wolfgang Munchau: "Act II begins with a sharp slowdown in US economic growth. The two obvious questions that arise from this scenario are: how bad will the US downturn be and how contagious will it be? It looks as though it will be bad. Some optimists had hoped that the rest of the world could easily withstand a US recession and invented the infamous de-coupling theory. What they did not count on was the rapid decline of the US currency as expectations of a US recession were rising. A weak dollar is going to be the main global transmission mechanism...Add to this the more direct effects of the credit crisis plus the global cyclical slowdown that has already started and you have the ingredients for a sharp downturn. If the US economy tanks, the rest of the world will follow with some delay. Act II of the crisis is therefore the transmission from the US to the global economy."
Friday is a Quadruple Witching option expiration. There are many earnings reports and much economic data this week, and that on top of the Fed meeting, which I believe will be a non-event ( for many of the same reasons John Hussman pointed out above). These markets are fueled by volatility, and beneath the surface, there is substantial uncertainty with respect to risk and the credibility surrounding risk levels.
Illinois Tool Works reaffirmed guidance of earnings between 85 cents and 89 cents per share for the third quarter and $3.31 and $3.41 per share for the year.
Manufacturing activity in the New York area slowed in September, the New York Federal Reserve Bank said Monday. The bank's Empire State Manufacturing index fell to 14.7 in September from 25.1 in August. New orders fell to 13.6 in September from 22.2 in August. Shipments dropped to 5.1 in September from 28.8 in the previous month. This is the lowest level of shipments since June 2005. However, the employment index rose to 18.2 from 11.6 in August.
Former Shell chairman sees future oil at $150 a barrel
VMware's second-quarter earnings surged to $34.2 million, or 10 cents per share, from $15.2 million, or 5 cents per share, a year ago. Revenue jumped nearly 90 percent to $296.8 million, from $156.4 million in the prior year. Licensing revenue rose 80 percent to $204.4 million and services revenue more than doubled to $92.8 million.
October crude closed at $80.57 a barrel, up $1.47, or 1.9%. October natural gas climbed 6% to finish at a one-month high of $6.653 per million British thermal units.
December gold climbed $6 to close at $723.80 an ounce Monday on the New York Mercantile Exchange. December silver gained 19.5 cents, or 1.5%, to end at $12.90 an ounce and December copper closed at $3.42 a pound, up 2.75 cents.
An estimated $4 billion (2 billion pounds) has been withdrawn by customers of Northern Rock, the U.K. bank that on Friday went to the Bank of England for emergency funding, BBC News reported.
Deutsche Telekom unit, T-Mobile USA, said Monday that it has agreed to buy SunCom Wireless Holdings for $2.4 billion in cash and debt. Under the agreed deal, SunCom shareholders will receive $27 per share in cash, bringing the total cash element of the deal to approximately $1.6 billion.
Leap Wireless International Inc. rejected a takeover proposal from MetroPCS Communications Inc., the providers of wireless-communications services said. Leap's board said MetroPCS's proposal was inadequate financially, not taking into account Leap's growth prospects.
Nokia agreed to buy Enpocket, a privately held mobile advertising firm, for an undisclosed amount.
Mitchells & Butlers said Monday that the post tax impact of marking-to-market the company's share of hedges entered into over the summer is a deficit of approximately 140 million pounds, as at September 13. At July 31, the post-tax deficit was 60 million pounds.
Shares of Oil Search Ltd. climbed 10.9% in Sydney after a Hong Kong-based newspaper reported China's state-owned China National Petroleum Corp. and its Hong Kong-listed subsidiary PetroChina Co. were considering a bid for the company, which is incorporated in Papua New Guinea. Oil Search has oil and gas operations in Libya, Egypt, Yemen and Papua New Guinea.
ITT Corp.definitively agreed to pay $56 a share for EDO Corp. Subject to conditions including a vote of EDO's holders, the companies hope to close the deal early in 2008. Lazard and UBS are advising ITT while Citigroup is advisisng EDO.
Howard Marks of Oaktree Management: "Risk cannot be eliminated; it just gets transferred and spread. And developments that make the world look less risky usually are illusory, and thus in presenting a rosy picture they tend to make the world more risky. These are among the important lessons of 2007."
Bob Woodward: "Alan Greenspan, the former Federal Reserve chairman, said in an interview that the removal of Saddam Hussein was "essential" to secure world oil supplies, a point he emphasized to the White House in private conversations before the 2003 invasion of Iraq."
Alan Greenspan: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."
Greenspan said he would expect “as a minimum, large single-digit” percentage declines in US house prices from peak to trough and added that he would not be surprised if the fall was “in double digits”.
"It would not take much to tip the economy into recession," says Martin N. Baily of the Brookings Institution and former head of the Council of Economic Advisers under Bill Clinton. "The collapse of the boom in nonresidential construction, for example."
A European Union court dismissed Microsoft Corp.'s appeal against an EU antitrust order to share communications code with rivals and sell a copy of Windows without Media Player. The order also upheld a $613 million fine for the company.
The Dow is just 4 percent below its all-time high of 14,000.41, reached in July. With all the fixed income and risk problems still very much alive and well, the strength in the Dow is puzzling at best.
John Hussman: "The total amount of U.S. bank reserves affected by FOMC operations is less than $45 billion, and only the “excess” portion of that – typically about $2 billion dollars – is what determines the overnight Federal Funds Rate. Meanwhile, the total amount of borrowings through the “discount window” – though higher than in recent years – still amounts to only about $3 billion...To believe that the Fed operations matter, you have to believe that a $13 trillion economy is controlled by a few billion dollars of reserves and discount window borrowings, none of which vary materially from year to year...Total U.S. bank reserves have grown by only $3.1 billion since 1990, to a total of $44.9 billion. Again, it is the day-to-day trading between banks of this amount (and actually, only of “excess reserves” – typically about $2 billion dollars) that determines the Federal Funds rate...In contrast to about $2 billion in excess reserves that is the basis for the Federal Funds Rate, and about $3 billion that is currently being lent at the Discount Rate, the U.S. banking system presently carries about $3.4 trillion in real estate loans, and $6.3 trillion in total loans. Gross domestic product is currently about $13.8 trillion."
The WSJ on Boeing: "According to people familiar with the program, suppliers at factories in Italy, Japan and the U.S. continue to experience chronic parts shortages."
"Wolfgang Munchau: "Act II begins with a sharp slowdown in US economic growth. The two obvious questions that arise from this scenario are: how bad will the US downturn be and how contagious will it be? It looks as though it will be bad. Some optimists had hoped that the rest of the world could easily withstand a US recession and invented the infamous de-coupling theory. What they did not count on was the rapid decline of the US currency as expectations of a US recession were rising. A weak dollar is going to be the main global transmission mechanism...Add to this the more direct effects of the credit crisis plus the global cyclical slowdown that has already started and you have the ingredients for a sharp downturn. If the US economy tanks, the rest of the world will follow with some delay. Act II of the crisis is therefore the transmission from the US to the global economy."
Friday is a Quadruple Witching option expiration. There are many earnings reports and much economic data this week, and that on top of the Fed meeting, which I believe will be a non-event ( for many of the same reasons John Hussman pointed out above). These markets are fueled by volatility, and beneath the surface, there is substantial uncertainty with respect to risk and the credibility surrounding risk levels.
Illinois Tool Works reaffirmed guidance of earnings between 85 cents and 89 cents per share for the third quarter and $3.31 and $3.41 per share for the year.
Manufacturing activity in the New York area slowed in September, the New York Federal Reserve Bank said Monday. The bank's Empire State Manufacturing index fell to 14.7 in September from 25.1 in August. New orders fell to 13.6 in September from 22.2 in August. Shipments dropped to 5.1 in September from 28.8 in the previous month. This is the lowest level of shipments since June 2005. However, the employment index rose to 18.2 from 11.6 in August.
Former Shell chairman sees future oil at $150 a barrel
VMware's second-quarter earnings surged to $34.2 million, or 10 cents per share, from $15.2 million, or 5 cents per share, a year ago. Revenue jumped nearly 90 percent to $296.8 million, from $156.4 million in the prior year. Licensing revenue rose 80 percent to $204.4 million and services revenue more than doubled to $92.8 million.
October crude closed at $80.57 a barrel, up $1.47, or 1.9%. October natural gas climbed 6% to finish at a one-month high of $6.653 per million British thermal units.
December gold climbed $6 to close at $723.80 an ounce Monday on the New York Mercantile Exchange. December silver gained 19.5 cents, or 1.5%, to end at $12.90 an ounce and December copper closed at $3.42 a pound, up 2.75 cents.
Sunday, September 16, 2007
Next Week
9/17/07 New Week
According to the WSJ, ABN's board won't recommend either of the two rival takeover bids the Dutch bank has received, it told shareholders Sunday.
Business Objects , a French-American business intelligence software maker, is looking for a buyer and has appointed Goldman Sachs to find an investor, Le Figaro newspaper said. Le Figaro said there were five interested parties, including business software maker SAP of Germany. The paper did not name its source, and said neither Business Objects nor SAP would comment. Oracle and IBM have in the past also been mentioned as possible bidders.
John Mauldin: "As humans, that is what we do. We push the limits of greed, especially when accompanied by the illusion of stability, until the bubble bursts...As home prices drop 10% and then 15% and then 20%, boomers are going to realize that a large part of what they thought they had for retirement in the equity of their homes is not there. That means they need to spend less and save more. While that is good as an individual policy, it is rough on the economy at large. I still think this process ends in a recession...The problem, as I repeat, is not the availability of liquidity. It is the lack of credibility. No one is buying paper they are not absolutely 100% sure about. And until a new mechanism is developed that will allow for transparency in the mortgage markets which will then allow for the securitization process to being again, it is going to be tough to get a mortgage for someone who does not fall with the confines of conforming loans (for foreign readers, those are agency loans made by quasi government agencies like Fannie Mae which have the implicit backing of the US government.)"
Mike Burk: "The rise from the August lows has been led by the blue chips on declining volume this suggests a retest of the August lows is still likely. I expect the major indices to be lower on Friday September 21 than they were on Friday September 14."
According to the WSJ, ABN's board won't recommend either of the two rival takeover bids the Dutch bank has received, it told shareholders Sunday.
Business Objects , a French-American business intelligence software maker, is looking for a buyer and has appointed Goldman Sachs to find an investor, Le Figaro newspaper said. Le Figaro said there were five interested parties, including business software maker SAP of Germany. The paper did not name its source, and said neither Business Objects nor SAP would comment. Oracle and IBM have in the past also been mentioned as possible bidders.
John Mauldin: "As humans, that is what we do. We push the limits of greed, especially when accompanied by the illusion of stability, until the bubble bursts...As home prices drop 10% and then 15% and then 20%, boomers are going to realize that a large part of what they thought they had for retirement in the equity of their homes is not there. That means they need to spend less and save more. While that is good as an individual policy, it is rough on the economy at large. I still think this process ends in a recession...The problem, as I repeat, is not the availability of liquidity. It is the lack of credibility. No one is buying paper they are not absolutely 100% sure about. And until a new mechanism is developed that will allow for transparency in the mortgage markets which will then allow for the securitization process to being again, it is going to be tough to get a mortgage for someone who does not fall with the confines of conforming loans (for foreign readers, those are agency loans made by quasi government agencies like Fannie Mae which have the implicit backing of the US government.)"
Mike Burk: "The rise from the August lows has been led by the blue chips on declining volume this suggests a retest of the August lows is still likely. I expect the major indices to be lower on Friday September 21 than they were on Friday September 14."
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