10/7/07 Proceed At Your Own Risk
For much of the past year, the hottest housing market has been in King County, Washington on the east side of Seattle. For the last two months, the selling price of homes has fallen two months in a row, and they are now back to where they were last spring. Every month since May, the year over year supply of homes for sale has increased 40% or more for the same month in 2006. The drop in the median price is the first since 2002.
Business Week: "Builders' balance sheets needed a boost, too. Even though the five-largest publicly held residential builders have cut the value of their land and unsold homes from $49.7 billion in 2006 to $41.9 billion today, that inventory as a percentage of sales has soared 33% during the past year, according to Banc of America Securities. Those idle assets have taken a toll on the industry's health. A year ago builders' debt payments were roughly the same as their cash flow. Now debt is 2.5 times cash flow. Profits are disappearing as well, with KB Home, D.R. Horton, and other big builders all reporting losses in the third quarter."
Gary Shilling: "Subprimes leaped to $1.3 trillion, or 73% of all Adjustable Rate Mortgages (ARMs), in the first quarter, a 17 times jump from 2001. And 57% of mortgage broker customers with ARMs were unable to refinance into new loans in August, given their low initial down payments and falling prices that have put their equity in negative territory. Estimates are that the cumulative loss on subprime mortgages will be $164 billion in home equity and cost financial institutions $300 billion."
I find it interesting that, when the homebuilders have taken write downs, their shares decline. When Merrill Lynch and Washington Mutual and other financials
take write downs, their shares rise. Aren't mortgages and debt at the core of the problems for both industries? When a criminal probe is brewing for Bear Stearns, its shares rise sharply. Is this disconnect rational? You believe all the bad news is out for the financials and they have realistically marked to the market or have they managed their earnings like GE did in past years?
Financial Times: "The toll of big bank losses from the credit squeeze topped $18bn after Merrill Lynch and Washington Mutual revealed heavy damage inflicted by financial market turmoil."
Reuters: "Jim O'Shaughnessy, author of the 2005 business bestseller "What works on Wall Street" and star money manager at Bear Stearns, is leaving the investment bank to set up his own asset-management shop -- but he won't leave empty handed. He'll take with him about $8 billion of Bear Stearns Asset Management's $44 billion in assets under management, as well as portfolio and sales staff. Another thing that will depart with him -- the investment strategy that guided him through his six-year run at the No. 5 brokerage."
Financial Times: "Banks have upwards of $200bn - some estimates say as much as $400bn - of unsold loans used to back leveraged buy-outs (LBOs) sitting on their balance sheets, and they are desperate to dump them. But the buyers also have a problem. Private equity and hedge fund groups typically borrow to invest, and the credit squeeze which caused the banks' LBO problems has also made it harder for the funds to secure finance. Now big banks are trying to solve both problems by offering to lend to the funds - as long as they use the money to buy the unwanted LBO loans from the banks. ‘The banks are saying, ‘If you buy my loan above market, we will give you more leverage,’ said one investment banker. ‘They are taking market risk and turning it into counterparty risk."
Greenspan: "People always say it’s the subprime market that created this crisis. It’s the subprime asset-backed market’ which did."
Doug Noland: "The Federal Home Loan Banks (FHLB) expanded assets about $170bn during the two-month period August through September. This was for them an unprecedented market intervention. For perspective, the FHLB expanded about $19bn during 2006 and $73bn in 2005. Even during tumultuous 1998, the FHLB limited asset growth to about $90bn. To my surprise, total GSE third-quarter Credit expansion will most likely approach $250bn. For the entire year 1998, Fannie, Freddie and the FHLB combined for $300bn of growth, at that time a record...Over the past 10 weeks, Money Market Fund assets have surged $308bn, a 60% growth rate. This pool of (of mostly Wall Street controlled) finance has expanded $510bn y-t-d, or 27.8% annualized, to almost $2.891 TN. Despite asset-backed commercial paper and special-purpose vehicle finance residing at the crisis' epicenter, confidence that “money” funds won’t “break the buck” has remained unshaken. “Moneyness” has been sustained, and Wall Street has retained great latitude in deploying readily available and now cheaper funds...Bank Assets have expanded an astounding $425bn over the past 10 weeks, or 21.9% annualized (bank Credit has inflated $280bn, or 16.8% annualized). Over this period, Commercial and Industrial Loans have expanded 36.2% annualized...The combined growth of Fannie and Freddie’s “Books of Business” will approach $500bn this year (nearing $5.0TN). The (also thinly capitalized) FHLB is on track for unprecedented expansion (assets surpassing $1.2TN). The money fund complex is in the midst of unparalleled growth (approaching $3TN). These key interrelated Financial Structures are at once sustaining marketplace liquidity, while laying the groundwork for a much more perilous financial crisis. They are all ballooning exposures today at double-digit rates specifically because the market risk environment has deteriorated markedly while their liabilities (and GSE guaranteed MBS) retain coveted “moneyness.”...today’s commanding Financial Structures virtually ensure a future meltdown. I write this not as some nut-ball but as a diligent analyst that is witnessing a system absolutely incapable of moderating excesses or self-correcting imbalances. Excess begets only and everywhere greater excess. It’s a system of Financial Structures that encourages and subsidizes leveraged speculation. Meanwhile, various contemporary Financial Structures work to embolden market participants to remain fully exposed to highly inflated asset prices, while incorporating derivative insurance and other hedging strategies for protection. The resulting enormity of the hedging programs further destabilizes the system, fostering melt-up and eventual breakdown dynamics. As we’ve witnessed of late (and recalling the last gasp of the NASDAQ Bubble), short covering and the unwind of bearish hedges provide a most powerful catalyst for a flurry of speculative excess – irrespective of unfolding fundamentals. Again, today's Financial Structures promote destabilizing excess...And there’s surely nothing like record global equities prices to embolden. Meanwhile, back in reality, the stage is being set for one or both of the following: an eventual run on today’s (ballooning) perceived “money-like” debt instruments and a run on our currency."
Peter Schiff: "So the dollar is not weak because inflation is under control as the consensus believes, but because the opposite is true. Inflation is completely out of control and the Fed, hiding behind phony government numbers that purport otherwise, has the green light to add additional fuel to inflation's fire. It's the ultimate irony that the lower the official preferred measures of inflation are (core CPI or the core Personal Consumption Expenditure Index,) the worse inflation actually gets." For my money, Doug Noland is the sharpest and most insightful economic analyst to be found.
Kraft Foods Inc. has recalled 288,000 packages of white chocolate baking squares on fears of salmonella contamination, the latest in a wave of U.S. food safety alerts and the third chocolate-related salmonella warning in the past year.
The Northfield-based food giant issued the recall late Wednesday for certain six-ounce packages of Baker's Premium White Chocolate Baking Squares.
When will the voters recall the do nothing Congress and an Administration that stomps and crushes our Constitution?
Barry Ritholtz: "Let's put these data points into some context average monthly job creation:
- In 2006 was 226,000 new jobs created per month
- In 2007, that number fell to 122,000;
- In Q3 2007, that number fell to 74,000.
Even more damning has been the Birth/Death adjustments. In the 1990s, these were relatively insignificant. In 2001-02, it was less than 10% of total NFP each year. After a 2001 change to the format and weighting (effective in 2003), the B/D contribution to NFP went up dramatically. From 2003-06, Birth Death adjustments contributed between 35-41% of the total non-farm payroll job creation.
Then there is 2007. If we take this year's B/D adjustment versus NFP, we get a B/D contribution that is in excess of 76%. (Trailing 12 months B/D versus 2007 NFP data annualized)." Good summary Barry.
Alcoa reports their earnings on Tuesday. I do not expect them to meet expectations.
Bill Bonner: "Americans are going to rediscover the quaint, almost forgotten art of making ends meet. Until recently, ends remained total strangers to each other. They didn't have to meet because there was so much credit available on such forgiving terms. Thanks largely to "Easy" Al Greenspan down at the Fed, they could always stretch one end of their budget - the spending end. "Just put it on the credit card, honey…we'll extend the equity line if we need to." But now the equity line is snapping back and hitting them in the face. The big hump in mortgage resets has just begun…September was a big one. October is even bigger. And then, right up through the spring of 2008, millions of people are going to have to face significantly larger mortgage payments.The effects of these ARM resets are going to be felt all up and down the street. We saw a chart of employment in the construction industry. Ten years ago, there were about 5.2 million people nailing 2 x 4's and installing granite countertops. At the peak, the number rose to about 7.7 million. Now the numbers are coming down again. In September, 20,000 more jobs were lost in construction - the 12th month of losses out of the last 13. And judging from the chart, there is a long way to go - because building permits have fallen to the same level they were 10 years ago. If construction jobs fall a similar amount - which they should - there will be 2.5 million jobs lost."
Meanwhile, the value of all the houses in America is about $21 trillion. Those houses are going down in price; even Easy Al says it wouldn't surprise him to see the average house lose more than 10% of its value. Let's say the average loss is 15%. That's still $3 trillion of "equity" that goes poof.
Ecuador's President Rafael Correa late Thursday signed an executive decree raising the state's share of oil revenues, while the country's top energy official said the government wants to take back full ownership of oil resources and production.
The North Slope accounts for about 14 percent of U.S. domestic output, but its production — which stands at about 740,000 barrels per day — is declining about 6 percent a year.
Saturday, October 06, 2007
Friday, October 05, 2007
More Government Numbers
10/6/07 More Government Numbers
Fed Vice Chairman Kohn says half-point cut may be enough. That's after the BLS unemployment numbers for September were released. With recent favorable inflation news, Kohn said he believes the Fed could reverse the recent rate cut if it turned out to be larger than needed. If you believe that, I'll tell you another one.
Plato: “Those who are too smart to engage in politics are punished by being governed by those who are dumber.”
The BLS now says 89,000 jobs were created in August, rather than the 4,000 that it reported last month were lost. It also said 93,000 jobs were created in July instead of 68,000 it previously reported -- a total of 118,000 more jobs in the July-August period than it had earlier estimated. The reason cited for the reversal in the department's August hiring estimate: After incorporating these revisions, average monthly job growth for June through September is 90,000, compared with an average of 147,000 for the first 5 months of the year. Nearly all of the August revision reflected an upward adjustment to government employment, particularly local education. The bulk of the gains in September hiring came in service industries, including an addition of 44,000 in education and health services and 37,000 in the government. In September, health care employment continued to grow, rising by 33,000. The food services industry also continued to add jobs, with a gain of 25,000 over the month.Together, these two industries have accounted for about one-half of all nonfarm employment growth in 2007. Over the month, employment rose by 37,000 in professional and technical services; notable job gains occurred in management consulting and in accounting services. Social assistance employment increased by 12,000. In the goods-producing sector, another 18,000 manufacturing jobs were shed and 14,000 construction jobs were lost. Had the Fed known these figures, would it have lowered by 25bps rather than 50? In addition, the Labor Department stated that employers boosted Sept. payrolls by 110,000, the most in one month since last May.The new unemployment rate of 4.7 percent was the highest since the summer of 2006.
Construction firms cut 14,000 jobs in September, Factories slashed 18,000. Retailers got rid of just over 5,000 jobs. Financial services companies eliminated 14,000 slots. The net birth/death model adjustment accounted for an increase of 13,000 jobs in September. Average hourly earnings rose to $17.57 in September, a 0.4 percent increase from August. Over the past 12 months, wages are up 4.1 percent. That was the highest annual gain since since February.
Nabors Industries Ltd warned it expects third-quarter profit to be lower than the consensus analyst forecast due to lower U.S. drilling activity and several cash and non-cash charges. The group said it expects profit for the quarter to be in the range of 73 cents to 76 cents a share, including previously-identified gains from the sale of certain properties. Analysts had forecast earnings of 81 cents a share, according to a survey by Thomson Financial. "Our outlook for the near term has been dampened by the increased potential for persistent weak market conditions throughout 2008 in our North American natural gas directed and U.S. Land Well Servicing businesses," Nabors said. It added it expects fourth-quarter results, however, to be in line with analyst expectations, which are currently for earnings of 89 cents a share.
Baker Hughes Inc. counted 3,166 drilling rigs worldwide in September, up 10 from the 3,156 counted in August 2007 and up 32 from the 3,134 counted last year.
The global credit squeeze will affect the British economy, U.K. Chancellor of the Exchequer Alistair Darling told the Financial Times in an interview published Friday.
Banks said the credit-market turmoil in August and September ``may hamper funding,'' the Frankfurt-based ECB said in its quarterly bank lending survey, which was published a month earlier than usual today. Banks also reported tightened credit standards in the third quarter, the report showed.
In the week ended Oct. 3, AMG Data reported Equity Fund Inflows $4.5 Bil; Taxable Bond Fund Inflows $1.8 Bil xETFs - Equity Fund Outflows -$915 Mil; Taxable Bond Fund Inflows $1.6 Bil.
Homebuilder profits depend on the cost of land, said John Burns, president of John Burns Real Estate Consulting in Irvine, California. Companies can still make money building on land purchased before the 2005 peak of the five-year U.S. housing boom, though price declines of as little as 10 percent might wipe out those profits, he said. ``They are all losing money,'' Burns said. ``They'll talk in terms of gross margin and it sounds like they made money, but they actually lost money because they didn't make their costs.''
Federal prosecutors have launched a criminal investigation into two mortgage-related hedge funds at Wall Street firm Bear Stearns Cos. that collapsed during the summer, according to people familiar with the matter. The U.S. attorney in Brooklyn made a request to Bear Stearns for information related to the hedge funds, whose failure cost investors $1.6 billion, said these people. The probe is in the early stages, the people added, and has not generated subpoenas.
The RBC Cash Index showed a recovery in U.S. consumer confidence in September, from multi-year lows the previous month. The rise in confidence is attributable to the Fed's mid-month 50 bps rate cut, a recovery on Wall Street and stabilizing gas prices. The index rose to 80.6 from 71.1 in August.
Washington Mutual Inc. expects a third-quarter earnings drop of about 75% because of factors related to the weakening housing market. The Seattle-based lender said its loan loss provision for the period will be approximately $975 million, which exceeds net charge-offs for the quarter by approximately $550 million. It'll also book downward adjustments of approximately $150 million related to approximately $17 billion in held-for-sale mortgage loans that were transferred to the company's investment portfolio due to secondary market conditions. It also reported impairment losses of $110 million and another $150 million in securities trading losses.
President Bush watches his approval-ratings tank. A record-low 34 percent approved of his handling of the economy in October, according to an Associated Press-Ipsos poll. The president's overall job-approval rating sank to 31 percent, the lowest ever, the poll said. I'd like to know what idiots comprise the 31%. Maybe they returned from the dead or maybe they are simply dead from the neck up.
Merrill Lynch expects Q3 50c per share mark-to-market loss. It will take almost $5 billion in writedowns. The bulk of the losses will come from marking down the value of complex instruments known as collateralized debt obligations and from declines in subprime mortgages -- loans given to customers with poor credit history. Moody's Investors Service on Friday lowered its outlook on Merrill Lynch and Co.'s Aa3 debt rating to negative from stable because of the investment firm's forecasted third-quarter loss. The outlook covers $200 billion in long-term Merrill Lynch debt.
At least three large shareholders of Sallie Mae are backing the student lender's efforts to block a group led by J.C. Flowers & Co. from reducing its takeover price, the New York Post reported Friday.
BHP Billiton marketing president Tom Schutte said his company would like to decouple the alumina price from the aluminium price given they were separate commodities. "Unfortunately, with our size being where it is in terms of the market, and given that much of that alumina is consumed internally by our own operations, we have not succeeded in pushing that forward," he said.
A CIBC World Markets analyst said late Thursday Bear Stearns Cos. will not be able to curtail expenses as quickly as it loses revenue.
November crude fell 22 cents to close at $81.22 a barrel Friday. November natural gas dropped 4.6% , or 33.9 cents, to end at $7.073 per million British thermal units. It still ended the week with a gain of 3%.
Outstanding U.S. consumer debt rose at an annual rate of 5.9%, or $12.2 billion, in August, pushed higher mostly by a hefty gain in credit-card debt, the Federal Reserve reported Friday. The overall increase was the highest since May, the Fed reported, pushing total outstanding consumer credit to $2.47 trillion in August. Revolving debt such as credit cards climbed by 8.1% in August, or by $6.1 billion. Auto, student, personal and other forms of non-revolving debt climbed at an annual rate of 4.7%, or $6.0 billion, in August. The Fed's data do not include mortgages or other loans backed by real estate.
The Dow industrials climbed 91.7 points to end at 14,066.0, up 1.2% on the week. The S&P 500 settled 14.75 points up, at 1,557.59, after hitting a new all-time high of 1,561.91 during the day. It gained 2% for the week. The Nasdaq Composite rose 46.75 points to close at 2,780.32, up 2.9% for the week.
JPMorgan Chase & Co. and Bank of America Corp., the biggest arrangers of U.S. leveraged loans, may write down the value of their holdings by a combined $3 billion in the third quarter after surging mortgage defaults halted credit markets, analysts at Sanford C. Bernstein & Co. said.
Gold futures for December delivery rose $3.40, or 0.5 percent, to $747.20 an ounce on the Comex division of the New York Mercantile Exchange. Silver futures for December delivery fell 1 cent to $13.49 an ounce on the Comex.
Sophocles: “How dreadful knowledge of the truth can be when there's no help in the truth.”
Fed Vice Chairman Kohn says half-point cut may be enough. That's after the BLS unemployment numbers for September were released. With recent favorable inflation news, Kohn said he believes the Fed could reverse the recent rate cut if it turned out to be larger than needed. If you believe that, I'll tell you another one.
Plato: “Those who are too smart to engage in politics are punished by being governed by those who are dumber.”
The BLS now says 89,000 jobs were created in August, rather than the 4,000 that it reported last month were lost. It also said 93,000 jobs were created in July instead of 68,000 it previously reported -- a total of 118,000 more jobs in the July-August period than it had earlier estimated. The reason cited for the reversal in the department's August hiring estimate: After incorporating these revisions, average monthly job growth for June through September is 90,000, compared with an average of 147,000 for the first 5 months of the year. Nearly all of the August revision reflected an upward adjustment to government employment, particularly local education. The bulk of the gains in September hiring came in service industries, including an addition of 44,000 in education and health services and 37,000 in the government. In September, health care employment continued to grow, rising by 33,000. The food services industry also continued to add jobs, with a gain of 25,000 over the month.Together, these two industries have accounted for about one-half of all nonfarm employment growth in 2007. Over the month, employment rose by 37,000 in professional and technical services; notable job gains occurred in management consulting and in accounting services. Social assistance employment increased by 12,000. In the goods-producing sector, another 18,000 manufacturing jobs were shed and 14,000 construction jobs were lost. Had the Fed known these figures, would it have lowered by 25bps rather than 50? In addition, the Labor Department stated that employers boosted Sept. payrolls by 110,000, the most in one month since last May.The new unemployment rate of 4.7 percent was the highest since the summer of 2006.
Construction firms cut 14,000 jobs in September, Factories slashed 18,000. Retailers got rid of just over 5,000 jobs. Financial services companies eliminated 14,000 slots. The net birth/death model adjustment accounted for an increase of 13,000 jobs in September. Average hourly earnings rose to $17.57 in September, a 0.4 percent increase from August. Over the past 12 months, wages are up 4.1 percent. That was the highest annual gain since since February.
Nabors Industries Ltd warned it expects third-quarter profit to be lower than the consensus analyst forecast due to lower U.S. drilling activity and several cash and non-cash charges. The group said it expects profit for the quarter to be in the range of 73 cents to 76 cents a share, including previously-identified gains from the sale of certain properties. Analysts had forecast earnings of 81 cents a share, according to a survey by Thomson Financial. "Our outlook for the near term has been dampened by the increased potential for persistent weak market conditions throughout 2008 in our North American natural gas directed and U.S. Land Well Servicing businesses," Nabors said. It added it expects fourth-quarter results, however, to be in line with analyst expectations, which are currently for earnings of 89 cents a share.
Baker Hughes Inc. counted 3,166 drilling rigs worldwide in September, up 10 from the 3,156 counted in August 2007 and up 32 from the 3,134 counted last year.
The global credit squeeze will affect the British economy, U.K. Chancellor of the Exchequer Alistair Darling told the Financial Times in an interview published Friday.
Banks said the credit-market turmoil in August and September ``may hamper funding,'' the Frankfurt-based ECB said in its quarterly bank lending survey, which was published a month earlier than usual today. Banks also reported tightened credit standards in the third quarter, the report showed.
In the week ended Oct. 3, AMG Data reported Equity Fund Inflows $4.5 Bil; Taxable Bond Fund Inflows $1.8 Bil xETFs - Equity Fund Outflows -$915 Mil; Taxable Bond Fund Inflows $1.6 Bil.
Homebuilder profits depend on the cost of land, said John Burns, president of John Burns Real Estate Consulting in Irvine, California. Companies can still make money building on land purchased before the 2005 peak of the five-year U.S. housing boom, though price declines of as little as 10 percent might wipe out those profits, he said. ``They are all losing money,'' Burns said. ``They'll talk in terms of gross margin and it sounds like they made money, but they actually lost money because they didn't make their costs.''
Federal prosecutors have launched a criminal investigation into two mortgage-related hedge funds at Wall Street firm Bear Stearns Cos. that collapsed during the summer, according to people familiar with the matter. The U.S. attorney in Brooklyn made a request to Bear Stearns for information related to the hedge funds, whose failure cost investors $1.6 billion, said these people. The probe is in the early stages, the people added, and has not generated subpoenas.
The RBC Cash Index showed a recovery in U.S. consumer confidence in September, from multi-year lows the previous month. The rise in confidence is attributable to the Fed's mid-month 50 bps rate cut, a recovery on Wall Street and stabilizing gas prices. The index rose to 80.6 from 71.1 in August.
Washington Mutual Inc. expects a third-quarter earnings drop of about 75% because of factors related to the weakening housing market. The Seattle-based lender said its loan loss provision for the period will be approximately $975 million, which exceeds net charge-offs for the quarter by approximately $550 million. It'll also book downward adjustments of approximately $150 million related to approximately $17 billion in held-for-sale mortgage loans that were transferred to the company's investment portfolio due to secondary market conditions. It also reported impairment losses of $110 million and another $150 million in securities trading losses.
President Bush watches his approval-ratings tank. A record-low 34 percent approved of his handling of the economy in October, according to an Associated Press-Ipsos poll. The president's overall job-approval rating sank to 31 percent, the lowest ever, the poll said. I'd like to know what idiots comprise the 31%. Maybe they returned from the dead or maybe they are simply dead from the neck up.
Merrill Lynch expects Q3 50c per share mark-to-market loss. It will take almost $5 billion in writedowns. The bulk of the losses will come from marking down the value of complex instruments known as collateralized debt obligations and from declines in subprime mortgages -- loans given to customers with poor credit history. Moody's Investors Service on Friday lowered its outlook on Merrill Lynch and Co.'s Aa3 debt rating to negative from stable because of the investment firm's forecasted third-quarter loss. The outlook covers $200 billion in long-term Merrill Lynch debt.
At least three large shareholders of Sallie Mae are backing the student lender's efforts to block a group led by J.C. Flowers & Co. from reducing its takeover price, the New York Post reported Friday.
BHP Billiton marketing president Tom Schutte said his company would like to decouple the alumina price from the aluminium price given they were separate commodities. "Unfortunately, with our size being where it is in terms of the market, and given that much of that alumina is consumed internally by our own operations, we have not succeeded in pushing that forward," he said.
A CIBC World Markets analyst said late Thursday Bear Stearns Cos. will not be able to curtail expenses as quickly as it loses revenue.
November crude fell 22 cents to close at $81.22 a barrel Friday. November natural gas dropped 4.6% , or 33.9 cents, to end at $7.073 per million British thermal units. It still ended the week with a gain of 3%.
Outstanding U.S. consumer debt rose at an annual rate of 5.9%, or $12.2 billion, in August, pushed higher mostly by a hefty gain in credit-card debt, the Federal Reserve reported Friday. The overall increase was the highest since May, the Fed reported, pushing total outstanding consumer credit to $2.47 trillion in August. Revolving debt such as credit cards climbed by 8.1% in August, or by $6.1 billion. Auto, student, personal and other forms of non-revolving debt climbed at an annual rate of 4.7%, or $6.0 billion, in August. The Fed's data do not include mortgages or other loans backed by real estate.
The Dow industrials climbed 91.7 points to end at 14,066.0, up 1.2% on the week. The S&P 500 settled 14.75 points up, at 1,557.59, after hitting a new all-time high of 1,561.91 during the day. It gained 2% for the week. The Nasdaq Composite rose 46.75 points to close at 2,780.32, up 2.9% for the week.
JPMorgan Chase & Co. and Bank of America Corp., the biggest arrangers of U.S. leveraged loans, may write down the value of their holdings by a combined $3 billion in the third quarter after surging mortgage defaults halted credit markets, analysts at Sanford C. Bernstein & Co. said.
Gold futures for December delivery rose $3.40, or 0.5 percent, to $747.20 an ounce on the Comex division of the New York Mercantile Exchange. Silver futures for December delivery fell 1 cent to $13.49 an ounce on the Comex.
Sophocles: “How dreadful knowledge of the truth can be when there's no help in the truth.”
Thursday, October 04, 2007
More On Employment
10/5/07 More On Employment
Growth in the euro area economy is expected to remain robust in the second half of 2007, the European Commission said Thursday in its quarterly report on the euro area. The Commission said that economic fundamentals continue to look healthy in the area and, despite recent financial turmoil, growth projections for 2007 have been reduced only marginally. "Overall, tighter credit conditions can be expected to slow economic growth somewhat next year, but the impact is expected to be moderate," the commission said.
Authorities in Kazakhstan said they have slapped a $609 million fine on a Chevron Corp.-led consortium developing the huge Tengiz oil field, a further blow to investment confidence in the oil-rich Central Asian state.
"If homebuilding doesn't drop 25 percent from where it is now, the Texas home market could slow down for a longer period than we would like," said Dr. Mark Dotzour, an economist with Texas A&M's Real Estate Center. "The inventory of unsold homes is rising all over the state," he said in the report released Wednesday. At the end of August, almost a six-month supply of unsold new homes was on the market in Texas. That's about 12 percent more than a year ago. While inventories have risen, the number of new-home sales has been dropping.
Vietnam is planning to cut its purchases of US Treasuries and other dollar bonds, raising fears that Asian central banks with control over two thirds of the world's foreign reserves may soon join the flight from US assets. The Saigon Times said that the State Bank of Vietnam was abandoning the attempt to hold down the Vietnamese currency through heavy purchases of dollars. The policy is causing the economy to overheat, driving up inflation to 8.8pc. Separately, the gas-rich Gulf state of Qatar announced that it had cut the dollar holdings of its $50bn sovereign wealth fund from 99pc to 40pc, switching into investments in China, Japan, and emerging Asia
U.K. house prices fell in September for the first time in nine months as mortgage rates rose and lenders grew more cautious, a report from HBOS Plc showed.
Mike Shedlock: "Just as the housing problem spread from subprime to Alt-A to prime, job losses are highly likely to spread from housing, to commercial real estate, to retail."
Marriott said it expected fourth-quarter earnings, excluding its synthetic fuel business, which it plans to shut down at the end of 2007, to be between 61 cents and 63 cents per share. The fourth-quarter forecast means the company expects its 2007 earnings to be between $1.88 and $1.90 per share, which is lower than a July forecast of $1.88 to $1.96. For 2008, the company forecast earnings of $2.10 to $2.25 per share. Both fourth-quarter and 2008 forecasts were below Wall Street expectations. Analysts, on average, had been expecting Marriott to earn 68 cents per share in the fourth quarter and $2.30 per share in 2008, according to Reuters Estimates.
In a statement issued Wednesday on its Web site, the Kurdistan Regional Government said it had approved four new production sharing contracts with international companies and had sanctioned the construction of two new refineries. If exploration leads to oil production, 85 percent of the profits would go to the government and the remainder would go to the companies. Kurdistan officials said the four contracts are worth about $500 million, while the new refineries are worth about $300 million.
Initial claims rose by 16,000 to 317,000 in the week ending Sept. 29, marking their highest level since Sept. 8. The four-week moving average of new claims for the week ended Sept. 29, meanwhile, rose by 500 to 312,750, the highest since Sept. 15. Continuing jobless claims fell in the week ending Sept. 22 by 10,000 to 2.54 million. The four-week average of continuing claims fell by 12,750 to 2.56 million, the lowest since Aug. 11, the Labor Department said.
Marsoft: "The dry bulk market just keeps on booming! From late August through the middle of September, new records were set in the Baltic Dry Index virtually every day. And following a brief pause in mid-September, the market returned to its record-setting path, with the BDI soaring above 9,000 by late September, up by 25% from its level a month earlier."
Driven by weakness in the transportation sector, orders for U.S.-made factory goods fell 3.3% in August, the Commerce Department estimated. It was the biggest drop in factory orders in seven months. Orders for core capital goods fell 0.5%. Shipments of factory goods fell 1.6% in August. Inventories slipped 0.1%, while unfilled orders rose 1.2%. Orders for durable goods decreased 4.9% in August while orders for nondurable goods fell 1.6%.
Stockpiles of natural gas rose 57 billion cubic feet to 3.263 trillion cubic feet in the week ended Sept. 28, the U.S. Energy Department report showed. Supplies were 3.327 trillion cubic feet in the same week a year earlier.
Jon Markman: "The stats vary by region, but the national inventory of homes is at an all-time high, with an eight-month supply. One in 7 1/2 houses is actually vacant. Prices are tumbling. And there is little relief on the horizon, even from the Federal Reserve."
The latest weekly figures from the Bank of England show the central bank may have lent a further 2.9 billion pounds ($5.9 billion) to Northern Rock. The "other assets" line of the central bank's weekly balance sheet rose to 23.81 billion pounds from 20.9 billion pounds. Economists have said loans to the troubled mortgage bank would likely appear in the other assets line, which normally holds relatively steady but had grown by close to 8 billion pounds over the previous two weeks.
Richard Fisher, the president of the Dallas Federal Reserve Bank: "We are subject to agri-inflation that may be more sustained than we would like."
Subprime mortgage bonds created in the first half of 2007 contain loans that are going delinquent at the fastest rate ever, according to Moody's Investors Service.
Crude for November delivery gained $1.50, or 1.9%, to close at $81.44 a barrel. November reformulated gasoline gained 5.64 cents to $2.0522 a gallon and November heating oil rose 5.26 cents to $2.2313 a gallon. Natural gas for November delivery rose 13.5 cents to $7.412.
The Citizens Banking Company of Sandusky, Ohio, got federal approval to take over the insured deposits of the failed Miami Valley Bank on Thursday, a U.S. banking regulator announced.
The Ohio Superintendent of Financial Institutions' closure of Miami Valley, which had $86.7 million in total assets and $76 million in total deposits, marks the third FDIC-insured bank to fail this year.
Banks took only minimal advantage of the Federal Reserve's discount-window lending facility in the week ending Wednesday, the Fed reported Thursday. Total outstanding loans of primary credit (also known as the discount window) were $26 million on Wednesday. Loans averaged $27 million a day for the week, down from $88 million the prior week.
According to the WSJ, Alcoa will take an $845 million charge as it moves closer to selling its consumer packaging and automotive-related divisions.
GE said the company will close seven of the 54 plants that serve its incandescent-bulb business by November 2008 and lay off 1,400 workers.
Growth in the euro area economy is expected to remain robust in the second half of 2007, the European Commission said Thursday in its quarterly report on the euro area. The Commission said that economic fundamentals continue to look healthy in the area and, despite recent financial turmoil, growth projections for 2007 have been reduced only marginally. "Overall, tighter credit conditions can be expected to slow economic growth somewhat next year, but the impact is expected to be moderate," the commission said.
Authorities in Kazakhstan said they have slapped a $609 million fine on a Chevron Corp.-led consortium developing the huge Tengiz oil field, a further blow to investment confidence in the oil-rich Central Asian state.
"If homebuilding doesn't drop 25 percent from where it is now, the Texas home market could slow down for a longer period than we would like," said Dr. Mark Dotzour, an economist with Texas A&M's Real Estate Center. "The inventory of unsold homes is rising all over the state," he said in the report released Wednesday. At the end of August, almost a six-month supply of unsold new homes was on the market in Texas. That's about 12 percent more than a year ago. While inventories have risen, the number of new-home sales has been dropping.
Vietnam is planning to cut its purchases of US Treasuries and other dollar bonds, raising fears that Asian central banks with control over two thirds of the world's foreign reserves may soon join the flight from US assets. The Saigon Times said that the State Bank of Vietnam was abandoning the attempt to hold down the Vietnamese currency through heavy purchases of dollars. The policy is causing the economy to overheat, driving up inflation to 8.8pc. Separately, the gas-rich Gulf state of Qatar announced that it had cut the dollar holdings of its $50bn sovereign wealth fund from 99pc to 40pc, switching into investments in China, Japan, and emerging Asia
U.K. house prices fell in September for the first time in nine months as mortgage rates rose and lenders grew more cautious, a report from HBOS Plc showed.
Mike Shedlock: "Just as the housing problem spread from subprime to Alt-A to prime, job losses are highly likely to spread from housing, to commercial real estate, to retail."
Marriott said it expected fourth-quarter earnings, excluding its synthetic fuel business, which it plans to shut down at the end of 2007, to be between 61 cents and 63 cents per share. The fourth-quarter forecast means the company expects its 2007 earnings to be between $1.88 and $1.90 per share, which is lower than a July forecast of $1.88 to $1.96. For 2008, the company forecast earnings of $2.10 to $2.25 per share. Both fourth-quarter and 2008 forecasts were below Wall Street expectations. Analysts, on average, had been expecting Marriott to earn 68 cents per share in the fourth quarter and $2.30 per share in 2008, according to Reuters Estimates.
In a statement issued Wednesday on its Web site, the Kurdistan Regional Government said it had approved four new production sharing contracts with international companies and had sanctioned the construction of two new refineries. If exploration leads to oil production, 85 percent of the profits would go to the government and the remainder would go to the companies. Kurdistan officials said the four contracts are worth about $500 million, while the new refineries are worth about $300 million.
Initial claims rose by 16,000 to 317,000 in the week ending Sept. 29, marking their highest level since Sept. 8. The four-week moving average of new claims for the week ended Sept. 29, meanwhile, rose by 500 to 312,750, the highest since Sept. 15. Continuing jobless claims fell in the week ending Sept. 22 by 10,000 to 2.54 million. The four-week average of continuing claims fell by 12,750 to 2.56 million, the lowest since Aug. 11, the Labor Department said.
Marsoft: "The dry bulk market just keeps on booming! From late August through the middle of September, new records were set in the Baltic Dry Index virtually every day. And following a brief pause in mid-September, the market returned to its record-setting path, with the BDI soaring above 9,000 by late September, up by 25% from its level a month earlier."
Driven by weakness in the transportation sector, orders for U.S.-made factory goods fell 3.3% in August, the Commerce Department estimated. It was the biggest drop in factory orders in seven months. Orders for core capital goods fell 0.5%. Shipments of factory goods fell 1.6% in August. Inventories slipped 0.1%, while unfilled orders rose 1.2%. Orders for durable goods decreased 4.9% in August while orders for nondurable goods fell 1.6%.
Stockpiles of natural gas rose 57 billion cubic feet to 3.263 trillion cubic feet in the week ended Sept. 28, the U.S. Energy Department report showed. Supplies were 3.327 trillion cubic feet in the same week a year earlier.
Jon Markman: "The stats vary by region, but the national inventory of homes is at an all-time high, with an eight-month supply. One in 7 1/2 houses is actually vacant. Prices are tumbling. And there is little relief on the horizon, even from the Federal Reserve."
The latest weekly figures from the Bank of England show the central bank may have lent a further 2.9 billion pounds ($5.9 billion) to Northern Rock. The "other assets" line of the central bank's weekly balance sheet rose to 23.81 billion pounds from 20.9 billion pounds. Economists have said loans to the troubled mortgage bank would likely appear in the other assets line, which normally holds relatively steady but had grown by close to 8 billion pounds over the previous two weeks.
Richard Fisher, the president of the Dallas Federal Reserve Bank: "We are subject to agri-inflation that may be more sustained than we would like."
Subprime mortgage bonds created in the first half of 2007 contain loans that are going delinquent at the fastest rate ever, according to Moody's Investors Service.
Crude for November delivery gained $1.50, or 1.9%, to close at $81.44 a barrel. November reformulated gasoline gained 5.64 cents to $2.0522 a gallon and November heating oil rose 5.26 cents to $2.2313 a gallon. Natural gas for November delivery rose 13.5 cents to $7.412.
The Citizens Banking Company of Sandusky, Ohio, got federal approval to take over the insured deposits of the failed Miami Valley Bank on Thursday, a U.S. banking regulator announced.
The Ohio Superintendent of Financial Institutions' closure of Miami Valley, which had $86.7 million in total assets and $76 million in total deposits, marks the third FDIC-insured bank to fail this year.
Banks took only minimal advantage of the Federal Reserve's discount-window lending facility in the week ending Wednesday, the Fed reported Thursday. Total outstanding loans of primary credit (also known as the discount window) were $26 million on Wednesday. Loans averaged $27 million a day for the week, down from $88 million the prior week.
According to the WSJ, Alcoa will take an $845 million charge as it moves closer to selling its consumer packaging and automotive-related divisions.
GE said the company will close seven of the 54 plants that serve its incandescent-bulb business by November 2008 and lay off 1,400 workers.
Wednesday, October 03, 2007
Employment
10/4/07 Employment
Planned U.S. layoffs fell nearly 10 percent in September as the slump in housing continued to hurt payrolls, an independent report showed on Wednesday. More than a third of last month's 71,739 announced job cuts came from mortgage lenders, construction companies and real estate firms, according to employment consulting firm Challenger, Gray & Christmas Inc. So far this year, about one job cut in six is directly related to the struggling housing market, it said. Announced layoffs totaled 71,739 in September, down 9.7 percent from 79,459 in August, when it hit a six-month high. They were 28.5 percent lower than September 2006, when employers announced 100,315 job cuts, one of only two times last year when monthly job cuts exceeded 100,000.
Twenty-seven percent of hiring managers said they planned to increase their staffs in the last three months of the year, down from 32% who said they expanded their payrolls in the third quarter and 41% in the second quarter, according to an online survey for USA TODAY and CareerBuilder.com by Harris Interactive. "The job market has weakened measurably since the spring and will weaken further through the end of the year," says Mark Zandi of Moody's Economy.com.
U.S. private employers likely added 58,000 jobs in September a report by a private employment service said on Wednesday. ADP Employer Services, whose employment report was jointly developed with Macroeconomic Advisers LLC, said it revised down to 27,000 from 38,000 the number of jobs created in August.
Deutsche Bank will take up to $3.09 billion in charges on leveraged loans and other writedowns, although tax credits and capital gains will lead to a higher net profit than a year ago.
"I don't think the worst is over," said Robert Arnott, chairman of Research Affiliates LLC, a Pasadena, California-based investment management firm. "We are coming off the greatest lending bubble -- not housing bubble! -- in U.S. history. We will feel its impact for a very long time."
Credit Suisse Group Chief Executive Officer Brady Dougan said the market for mortgage credit will be ``problematic'' for as long as 18 months. Credit Suisse Group will cut 170 jobs in its investment banking division, or nearly 1% of the unit's employees.
Iran has slashed the use of the dollar in payment for its oil exports to 15 percent, an official said on Tuesday, amid growing pressure from arch-foe the United States on its financial system.
The vast majority of transactions for oil from OPEC's number two producer are now being carried out in euros, said Mohammad-Ali Khatibi, deputy head of the National Iranian Oil Company in charge of marketing.
"Iran is selling about 85 percent of its oil in the non-dollar currencies," Khatibi was quoted as saying by state television.
"Currently, about 65 percent of the oil sale income is in euros and 20 percent in yen," Khatibi added.
Morgan Stanley said it would cut 600 jobs as it restructured its mortgage business to reflect lower loan origination levels.
Bear Stearns Cos Inc is laying off 300 mortgage workers, cable news channel CNBC reported on Wednesday. In August, Bear cut 240 subprime jobs.
Dean Foods plans to cut 600 to 700 jobs.
U.S. mortgage applications fell for a second straight week, largely reflecting a drop in demand for home refinancing loans, an industry group said Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Sept. 28 decreased 2.7% to 636.7.
Brad Setser: " The central banks of the world's emerging economies accounted for $320 of the world's $340b in (valuation-adjusted) reserve growth in the second quarter, and $283 of the $303b (valuation-adjusted) increase in the first quarter...estimate that the world's emerging economies -- if those emerging economies that don't report detailed data on the currency composition of their reserves acted like those who do report -- are now adding about $200b to their dollar reserves a quarter. That is a pace sufficient to finance the entire US current account deficit."
ConocoPhillips said worldwide refining margins for the third quarter are expected to be "significantly lower" than the second quarter, the company said. ConocoPhillips said it anticipates third-quarter purchases under the share repurchase program to be approximately $2.5 billion.
The Institute for Supply Management's services index fell to 54.8 last month from 55.8 in August, the slowest pace in six months. The services sector represents about 80 percent of U.S. economic activity, including businesses such as restaurants, hotels, banks and airlines. The closely-watched employment index rose to 52.7% from 47.9%. New orders rose to 53.4% from 57.0%. Inflation pressures increased. The price index rose to 66.1% from 58.6%in the previous month.
Crude oil for November delivery finished down 8 cents at $79.97 a barrel on the New York Mercantile Exchange. In contrast, November reformulated gasoline gained 1.31 cents to end at $1.9959 a gallon and November heating oil gained 1.64 cents to end at $2.1787 a gallon.
Gold for December delivery ended down 60 cents at $735.70 an ounce on the New York Mercantile Exchange. Also on Nymex, December silver rose 2 cents at $13.470 an ounce, January platinum surged $13.90 to end at $1,368.90 an ounce and December palladium gained $8.05 at $361.65 an ounce. December copper rose 5.25 cents at $3.7635 a pound.
Planned U.S. layoffs fell nearly 10 percent in September as the slump in housing continued to hurt payrolls, an independent report showed on Wednesday. More than a third of last month's 71,739 announced job cuts came from mortgage lenders, construction companies and real estate firms, according to employment consulting firm Challenger, Gray & Christmas Inc. So far this year, about one job cut in six is directly related to the struggling housing market, it said. Announced layoffs totaled 71,739 in September, down 9.7 percent from 79,459 in August, when it hit a six-month high. They were 28.5 percent lower than September 2006, when employers announced 100,315 job cuts, one of only two times last year when monthly job cuts exceeded 100,000.
Twenty-seven percent of hiring managers said they planned to increase their staffs in the last three months of the year, down from 32% who said they expanded their payrolls in the third quarter and 41% in the second quarter, according to an online survey for USA TODAY and CareerBuilder.com by Harris Interactive. "The job market has weakened measurably since the spring and will weaken further through the end of the year," says Mark Zandi of Moody's Economy.com.
U.S. private employers likely added 58,000 jobs in September a report by a private employment service said on Wednesday. ADP Employer Services, whose employment report was jointly developed with Macroeconomic Advisers LLC, said it revised down to 27,000 from 38,000 the number of jobs created in August.
Deutsche Bank will take up to $3.09 billion in charges on leveraged loans and other writedowns, although tax credits and capital gains will lead to a higher net profit than a year ago.
"I don't think the worst is over," said Robert Arnott, chairman of Research Affiliates LLC, a Pasadena, California-based investment management firm. "We are coming off the greatest lending bubble -- not housing bubble! -- in U.S. history. We will feel its impact for a very long time."
Credit Suisse Group Chief Executive Officer Brady Dougan said the market for mortgage credit will be ``problematic'' for as long as 18 months. Credit Suisse Group will cut 170 jobs in its investment banking division, or nearly 1% of the unit's employees.
Iran has slashed the use of the dollar in payment for its oil exports to 15 percent, an official said on Tuesday, amid growing pressure from arch-foe the United States on its financial system.
The vast majority of transactions for oil from OPEC's number two producer are now being carried out in euros, said Mohammad-Ali Khatibi, deputy head of the National Iranian Oil Company in charge of marketing.
"Iran is selling about 85 percent of its oil in the non-dollar currencies," Khatibi was quoted as saying by state television.
"Currently, about 65 percent of the oil sale income is in euros and 20 percent in yen," Khatibi added.
Morgan Stanley said it would cut 600 jobs as it restructured its mortgage business to reflect lower loan origination levels.
Bear Stearns Cos Inc is laying off 300 mortgage workers, cable news channel CNBC reported on Wednesday. In August, Bear cut 240 subprime jobs.
Dean Foods plans to cut 600 to 700 jobs.
U.S. mortgage applications fell for a second straight week, largely reflecting a drop in demand for home refinancing loans, an industry group said Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Sept. 28 decreased 2.7% to 636.7.
Brad Setser: " The central banks of the world's emerging economies accounted for $320 of the world's $340b in (valuation-adjusted) reserve growth in the second quarter, and $283 of the $303b (valuation-adjusted) increase in the first quarter...estimate that the world's emerging economies -- if those emerging economies that don't report detailed data on the currency composition of their reserves acted like those who do report -- are now adding about $200b to their dollar reserves a quarter. That is a pace sufficient to finance the entire US current account deficit."
ConocoPhillips said worldwide refining margins for the third quarter are expected to be "significantly lower" than the second quarter, the company said. ConocoPhillips said it anticipates third-quarter purchases under the share repurchase program to be approximately $2.5 billion.
The Institute for Supply Management's services index fell to 54.8 last month from 55.8 in August, the slowest pace in six months. The services sector represents about 80 percent of U.S. economic activity, including businesses such as restaurants, hotels, banks and airlines. The closely-watched employment index rose to 52.7% from 47.9%. New orders rose to 53.4% from 57.0%. Inflation pressures increased. The price index rose to 66.1% from 58.6%in the previous month.
Crude oil for November delivery finished down 8 cents at $79.97 a barrel on the New York Mercantile Exchange. In contrast, November reformulated gasoline gained 1.31 cents to end at $1.9959 a gallon and November heating oil gained 1.64 cents to end at $2.1787 a gallon.
Gold for December delivery ended down 60 cents at $735.70 an ounce on the New York Mercantile Exchange. Also on Nymex, December silver rose 2 cents at $13.470 an ounce, January platinum surged $13.90 to end at $1,368.90 an ounce and December palladium gained $8.05 at $361.65 an ounce. December copper rose 5.25 cents at $3.7635 a pound.
Tuesday, October 02, 2007
The New Reality
0/3/07 The New Reality
The International Council of Shopping Centers and UBS Securities said in a survey that, on a week-over-week basis, sales were flat. "Sales were unchanged over the last week with weather a potential help in the West, but a drag on sales in the rest of the nation," said Michael Niemira, chief economist for the ICSC. "Overall, the month is shaping up on the soft side of recent monthly sales trends." The ICSC expects the monthly sales performance to increase by 2% to 2.5%.
TD Bank Financial Group will acquire Commerce Bancorp Inc. in a stock-and-cash deal valued at $8.5 billion. Under terms of the agreement, Commerce shareholders will receive 0.4142 shares of a TD common share and $10.50 in cash in exchange for each share of Commerce Bancorp.
Hong Kong shares extended gains in the afternoon trading, with the 41-issue Hang Seng China Enterprises Index soaring 1,088.28 points, or 6.5%, to a record 18,161.40. The benchmark Hang Seng Index rose 3.9%, or 1,065.48 to a record 28,203.72.
Australia's S&P/ASX 200 rose to a record high while Japan's Nikkei 225 Average crossed the 17,000 level for the first time since Aug 9.
Medicare beneficiaries will pay 3.1 percent more in premiums for physician services next year, the smallest increase since 2001. Medicare officials said Monday that the lower-than-expected increase was partly a result of correcting an accounting error from previous years.
Mike Burk: "I think we are in a developing top that is in its final stages. In the next week or two there is likely to be an all time high in the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX), and a multi year high in the NASDAQ composite (OTC). If my interpretation is correct there will not be a new high in the Russell 2000 (R2K)...The first 5 trading days in October are fairly strong and, during the 3rd year of the Presidential cycle they are a little stronger than the average for all years."
Banks have once again shunned a £10bn Bank of England money auction. Analysts have suggested the 6.75% interest rates offered by the Bank were too high and as such turned off buyers.
As far as the world's biggest bond investors are concerned, the Federal Reserve is failing to restore confidence in the U.S. credit markets. Pacific Investment Management Co., TIAA-CREF and Insight Investment Management say the central bank's decision to lower the overnight lending rate between banks by half a percentage point last month won't prevent the economy from slowing or corporate defaults from increasing. Lehman Brothers Holdings Inc. strategists say last month's rally in high-yield corporate bonds, the biggest since 2003, may fizzle by year-end.
The pending home sales index fell 6.5% in August after dropping a revised 10.7% in July, the National Association of Realtors reported. The index is at its lowest level since its inception in 2001. Pending home sales are down 21.5% compared with a year ago and is down 22% compared with six months ago.
CIBC World Markets on Tuesday said Canada's oil sands represent "one of the last great deposits open to private investment" in a world in which six of the largest oil suppliers to the U.S. are poised to cut their global exports by nearly 2 million barrels a day by 2012. The projected cut, amounting to 7%, by Mexico, Saudi Arabia, Venezuela, Nigeria, Algeria and Russia, "reflect the growing struggle in these countries to grow production and manage their own soaring rates of oil consumption, CIBC chief economist Jeff Rubin said. Rubin says diminished global supplies and resulting higher prices will lead the markets to rely more on higher cost unconventional deposits, like the Canadian oil sands which he believes will surpass deep water wells as the single largest source of new oil exports by decade end.
Banks will likely be reluctant to make new business loans if tight credit conditions persist, hampering capital spending and the economy in the coming months, according to Goldman Sachs.
The Oil Drum: "International banks and analysts have hinted at the possibility that Opec will switch the pricing of oil from the dollar to a basket of currencies as the greenback sank to a record low against the euro yesterday."
Britain's prime minister announced plans to withdraw more than 1,000 troops from Iraq by year's end, and Iraq said it will take over security from British forces in the southern Basra province within two months.
Forecasters at Colorado State University on Tuesday reduced their hurricane forecast for October and November to four named storms from five, although the overall rating for big storms continues to be above normal. Of the four named storms predicted in October-November, two are expected to become hurricanes and one is expected to become a major hurricane with sustained winds of 111 miles per hour or greater.
November crude finished with a loss of 19 cents at $80.05 a barrel. But November natural gas rallied 5.4% to close at $7.427 per million British thermal units.
December gold fell $17.80, or 2.4%, to close at $736.30 an ounce. December silver dropped 2.9%, or 40.5 cents, to end at $13.45 an ounce.
The International Council of Shopping Centers and UBS Securities said in a survey that, on a week-over-week basis, sales were flat. "Sales were unchanged over the last week with weather a potential help in the West, but a drag on sales in the rest of the nation," said Michael Niemira, chief economist for the ICSC. "Overall, the month is shaping up on the soft side of recent monthly sales trends." The ICSC expects the monthly sales performance to increase by 2% to 2.5%.
TD Bank Financial Group will acquire Commerce Bancorp Inc. in a stock-and-cash deal valued at $8.5 billion. Under terms of the agreement, Commerce shareholders will receive 0.4142 shares of a TD common share and $10.50 in cash in exchange for each share of Commerce Bancorp.
Hong Kong shares extended gains in the afternoon trading, with the 41-issue Hang Seng China Enterprises Index soaring 1,088.28 points, or 6.5%, to a record 18,161.40. The benchmark Hang Seng Index rose 3.9%, or 1,065.48 to a record 28,203.72.
Australia's S&P/ASX 200 rose to a record high while Japan's Nikkei 225 Average crossed the 17,000 level for the first time since Aug 9.
Medicare beneficiaries will pay 3.1 percent more in premiums for physician services next year, the smallest increase since 2001. Medicare officials said Monday that the lower-than-expected increase was partly a result of correcting an accounting error from previous years.
Mike Burk: "I think we are in a developing top that is in its final stages. In the next week or two there is likely to be an all time high in the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX), and a multi year high in the NASDAQ composite (OTC). If my interpretation is correct there will not be a new high in the Russell 2000 (R2K)...The first 5 trading days in October are fairly strong and, during the 3rd year of the Presidential cycle they are a little stronger than the average for all years."
Banks have once again shunned a £10bn Bank of England money auction. Analysts have suggested the 6.75% interest rates offered by the Bank were too high and as such turned off buyers.
As far as the world's biggest bond investors are concerned, the Federal Reserve is failing to restore confidence in the U.S. credit markets. Pacific Investment Management Co., TIAA-CREF and Insight Investment Management say the central bank's decision to lower the overnight lending rate between banks by half a percentage point last month won't prevent the economy from slowing or corporate defaults from increasing. Lehman Brothers Holdings Inc. strategists say last month's rally in high-yield corporate bonds, the biggest since 2003, may fizzle by year-end.
The pending home sales index fell 6.5% in August after dropping a revised 10.7% in July, the National Association of Realtors reported. The index is at its lowest level since its inception in 2001. Pending home sales are down 21.5% compared with a year ago and is down 22% compared with six months ago.
CIBC World Markets on Tuesday said Canada's oil sands represent "one of the last great deposits open to private investment" in a world in which six of the largest oil suppliers to the U.S. are poised to cut their global exports by nearly 2 million barrels a day by 2012. The projected cut, amounting to 7%, by Mexico, Saudi Arabia, Venezuela, Nigeria, Algeria and Russia, "reflect the growing struggle in these countries to grow production and manage their own soaring rates of oil consumption, CIBC chief economist Jeff Rubin said. Rubin says diminished global supplies and resulting higher prices will lead the markets to rely more on higher cost unconventional deposits, like the Canadian oil sands which he believes will surpass deep water wells as the single largest source of new oil exports by decade end.
Banks will likely be reluctant to make new business loans if tight credit conditions persist, hampering capital spending and the economy in the coming months, according to Goldman Sachs.
The Oil Drum: "International banks and analysts have hinted at the possibility that Opec will switch the pricing of oil from the dollar to a basket of currencies as the greenback sank to a record low against the euro yesterday."
Britain's prime minister announced plans to withdraw more than 1,000 troops from Iraq by year's end, and Iraq said it will take over security from British forces in the southern Basra province within two months.
Forecasters at Colorado State University on Tuesday reduced their hurricane forecast for October and November to four named storms from five, although the overall rating for big storms continues to be above normal. Of the four named storms predicted in October-November, two are expected to become hurricanes and one is expected to become a major hurricane with sustained winds of 111 miles per hour or greater.
November crude finished with a loss of 19 cents at $80.05 a barrel. But November natural gas rallied 5.4% to close at $7.427 per million British thermal units.
December gold fell $17.80, or 2.4%, to close at $736.30 an ounce. December silver dropped 2.9%, or 40.5 cents, to end at $13.45 an ounce.
Monday, October 01, 2007
Fall Out
10/2/07 Fall Out
Citigroup Inc said Monday it expects third-quarter profit to fall 60% from last year after huge writedowns for unsold debt it issued to finance corporate takeovers and big losses on the value of subprime mortgage-backed securities.
The decline "was driven primarily by weak performance in fixed-income credit-market activities, writedowns in leveraged loan commitments, and increases in consumer-credit costs," Chairman and Chief Executive Charles Prince said in a statement.
Citi sees a writedown of $1.4 billion pretax, net of underwriting fees, on funded and unfunded highly leveraged finance commitments.
It also expects losses of $1.3 billion pretax, net of hedges, on the value of subprime mortgage-backed securities warehoused for certain securitizations, and $600 million pretax in fixed-income credit trading due to significant market volatility and the disruption of historical pricing relationships.
Fannie Mae to reinstate $79.6 million in loans to Tarragon.
The euro zone manufacturing purchasing managers index fell to 53.2 in September, down from from 54.3 in August.
Swiss banking group Credit Suisse remained profitable in the third quarter, though its investment banking result has been impacted by recent market turmoil. The bank said there is no indication that its net profit from continuing operations will be outside of a 20% range above or below 1.3 billion Swiss francs.
UBS said it will post a loss of between 600 million francs and 800 million francs mainly due to losses related to the subprime mortgage market. UBS said on Monday it would write down a net 4 billion Swiss francs ($3.42 billion) in its fixed-income portfolio and elsewhere. UBS will cut 1,500 jobs.
Nokia is in talks to buy Navteq Corp., the Chicago producer of electronic mapping solutions, people familiar with the matter told The Wall Street Journal. Nokia said on Monday it would offer $8.1 billion in cash for all shares in digital map supplier Navteq.
The private equity groups that agreed to buy data-management company Acxiom Corp. have reportedly developed cold feet and may be throwing a wrench into the works.
The housing market has a long way to go before stabilizing after the subprime crisis, spelling bad news for consumers in the world's biggest economy, former Federal Reserve chief Alan Greenspan said on Monday.
The U.S. currency fell to a low of $1.4283 versus the euro.
John Hussman: "As of last week, the total amount of Fed repurchases outstanding is $44.75 billion. This is close to the total quantity of reserves in the U.S. banking system (which includes these repo proceeds). Meanwhile, total borrowings of depository institutions from the Fed – the much vaunted “liquidity” lent by the Fed at the Discount Rate – dropped from $2.4 billion to just $306 million last week, which is about the norm of recent years. In short, next to nothing is actually lent through the discount window. Meanwhile, the Fed's open market operations are not injections of new liquidity, but a continuous rollover that finances a stable level of reserves, at a level that is negligible in relation to $6.3 trillion in total bank loans. If investors want to believe the superstition that Fed actions have anything but psychological effect, they should at least be prepared to demonstrate a specific mechanism by which observable FOMC operations exert that effect. It certainly is not through meaningful “injections of liquidity” into the banking system...The current price to forward operating earnings multiple is as high as it was at the 1987 peak, higher than it was before the 1990 bear market, and is in fact at the highest level that would have been observed in history except for the late 1990's. Most of the points prior to 1965 featured interest rates that were lower than they are presently. Again, current multiples also implicitly assume that profit margins will permanently remain at the highest levels in history. Current stock prices are at far higher multiples to normalized earnings."
Walgreen's Chairman Jeffrey Rein. "Our expenses weren't in line with the level of reimbursements we were receiving. Managing both expenses and lower reimbursements on some generic drugs is my top priority. We're going to fix this, and at the same time continue our aggressive growth plan."
The ISM index fell to 52.0% in September from 52.9% in August. This is the lowest level in six months. New orders fell to 53.4% in September from 55.3% in August. Production fell to 54.6% from 56.1% in the previous month. The price index fell to 59.0% from 63.0%. This is the lowest price level since February.
Despite the UBS, Citi, and ISM news, the Dow rallied 100 points in the first half hour of trading on Monday to the 14,000 level.
Crude oil for November delivery dropped $1.42, or 1.8%, to end at $80.24 a barrel on the New York Mercantile Exchange. November reformulated gasoline fell 5.98 cents, or 3%, at $1.9813 a gallon and November heating oil dropped 4.49 cents, or 2%, to end at $2.1807 a gallon. Bucking the trend in energy trading, November natural gas rose 18 cents at $7.05 per million British thermal units.
The Dow Jones Industrial Average gained 191 points, or 1.4%, to 14,087, a new record close. The S&P 500 index rose 1.3% to close at 1,547, while the Nasdaq Composite gained 1.5% to close at 2,741. Meanwhile, gold for December delivery rose $4.10 to finish at $754.10 an ounce on the New York Mercantile Exchange, and that was about a 28 year high.
Citigroup Inc said Monday it expects third-quarter profit to fall 60% from last year after huge writedowns for unsold debt it issued to finance corporate takeovers and big losses on the value of subprime mortgage-backed securities.
The decline "was driven primarily by weak performance in fixed-income credit-market activities, writedowns in leveraged loan commitments, and increases in consumer-credit costs," Chairman and Chief Executive Charles Prince said in a statement.
Citi sees a writedown of $1.4 billion pretax, net of underwriting fees, on funded and unfunded highly leveraged finance commitments.
It also expects losses of $1.3 billion pretax, net of hedges, on the value of subprime mortgage-backed securities warehoused for certain securitizations, and $600 million pretax in fixed-income credit trading due to significant market volatility and the disruption of historical pricing relationships.
Fannie Mae to reinstate $79.6 million in loans to Tarragon.
The euro zone manufacturing purchasing managers index fell to 53.2 in September, down from from 54.3 in August.
Swiss banking group Credit Suisse remained profitable in the third quarter, though its investment banking result has been impacted by recent market turmoil. The bank said there is no indication that its net profit from continuing operations will be outside of a 20% range above or below 1.3 billion Swiss francs.
UBS said it will post a loss of between 600 million francs and 800 million francs mainly due to losses related to the subprime mortgage market. UBS said on Monday it would write down a net 4 billion Swiss francs ($3.42 billion) in its fixed-income portfolio and elsewhere. UBS will cut 1,500 jobs.
Nokia is in talks to buy Navteq Corp., the Chicago producer of electronic mapping solutions, people familiar with the matter told The Wall Street Journal. Nokia said on Monday it would offer $8.1 billion in cash for all shares in digital map supplier Navteq.
The private equity groups that agreed to buy data-management company Acxiom Corp. have reportedly developed cold feet and may be throwing a wrench into the works.
The housing market has a long way to go before stabilizing after the subprime crisis, spelling bad news for consumers in the world's biggest economy, former Federal Reserve chief Alan Greenspan said on Monday.
The U.S. currency fell to a low of $1.4283 versus the euro.
John Hussman: "As of last week, the total amount of Fed repurchases outstanding is $44.75 billion. This is close to the total quantity of reserves in the U.S. banking system (which includes these repo proceeds). Meanwhile, total borrowings of depository institutions from the Fed – the much vaunted “liquidity” lent by the Fed at the Discount Rate – dropped from $2.4 billion to just $306 million last week, which is about the norm of recent years. In short, next to nothing is actually lent through the discount window. Meanwhile, the Fed's open market operations are not injections of new liquidity, but a continuous rollover that finances a stable level of reserves, at a level that is negligible in relation to $6.3 trillion in total bank loans. If investors want to believe the superstition that Fed actions have anything but psychological effect, they should at least be prepared to demonstrate a specific mechanism by which observable FOMC operations exert that effect. It certainly is not through meaningful “injections of liquidity” into the banking system...The current price to forward operating earnings multiple is as high as it was at the 1987 peak, higher than it was before the 1990 bear market, and is in fact at the highest level that would have been observed in history except for the late 1990's. Most of the points prior to 1965 featured interest rates that were lower than they are presently. Again, current multiples also implicitly assume that profit margins will permanently remain at the highest levels in history. Current stock prices are at far higher multiples to normalized earnings."
Walgreen's Chairman Jeffrey Rein. "Our expenses weren't in line with the level of reimbursements we were receiving. Managing both expenses and lower reimbursements on some generic drugs is my top priority. We're going to fix this, and at the same time continue our aggressive growth plan."
The ISM index fell to 52.0% in September from 52.9% in August. This is the lowest level in six months. New orders fell to 53.4% in September from 55.3% in August. Production fell to 54.6% from 56.1% in the previous month. The price index fell to 59.0% from 63.0%. This is the lowest price level since February.
Despite the UBS, Citi, and ISM news, the Dow rallied 100 points in the first half hour of trading on Monday to the 14,000 level.
Crude oil for November delivery dropped $1.42, or 1.8%, to end at $80.24 a barrel on the New York Mercantile Exchange. November reformulated gasoline fell 5.98 cents, or 3%, at $1.9813 a gallon and November heating oil dropped 4.49 cents, or 2%, to end at $2.1807 a gallon. Bucking the trend in energy trading, November natural gas rose 18 cents at $7.05 per million British thermal units.
The Dow Jones Industrial Average gained 191 points, or 1.4%, to 14,087, a new record close. The S&P 500 index rose 1.3% to close at 1,547, while the Nasdaq Composite gained 1.5% to close at 2,741. Meanwhile, gold for December delivery rose $4.10 to finish at $754.10 an ounce on the New York Mercantile Exchange, and that was about a 28 year high.
Sunday, September 30, 2007
The Fourth Quarter Begins
10/1/07 The Fourth Quarter Begins
The Financial Times said BHP Billiton may not be interested in bidding for Alcoa as it focuses on mining. Alcoa owns many so-called downstream assets including packaging plants, the newspaper said. Meanwhile, BHP Billiton Ltd., the world's largest mining company, said economic growth in China and India will support demand for commodities, keeping prices high. Oil, copper, iron ore and coal are ``very attractive'' because demand outstrips supplies, while aluminum and nickel ``are not quite as tight,'' said Kloppers, the company's CEO.
EnCana Corp., Canada's largest natural-gas producer, said it will cut its 2008 investment in Alberta by about C$1 billion ($1 billion) if proposed increases in oil and gas royalties are adopted in full.
China Investment Corp., the nation's $200 billion sovereign wealth fund, started operations on Saturday.
China's central bank said it will maintain a ``moderately tight'' monetary policy in the last quarter of 2007 to curb inflation, limit asset prices and prevent the economy from overheating.
Japan's industrial output surged at the fastest pace in almost four years and household spending rebounded, signaling the economy may weather a U.S. slowdown.
The rupee gained 2.5 percent to 39.8425 per dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. The currency rose as high as 39.62, the strongest since April 1998, on Sept. 26. Its 11.2 percent gain this year is the second-highest among 18 Asia-Pacific currencies tracked by Bloomberg. The Australian dollar has climbed 11.6 percent.
Goldman Sachs: "Much has changed since mid-July, when we wrote that 'the global economy continues to enjoy one of the strongest sustained expansion in modern history'. The mood in financial markets is clearly darker, and the economic data in the developed world is showing signs of wear," it said. "Japan's recovery is tottering, with the chance of an outright recession having risen to nearly two in three," said the report, authored by chief economist Jim O'Neill.
John Mauldin: "Greg (Weldon)also spotted something which I suspected and hinted about in previous letters. The number of homes above $750,000 which are selling is down by over 35% from last year. Sales of home from $500,000 to $749,000 is down by 25%. Jumbo mortgages are just hard to find at rates that make sense. I think it is likely that Congress will allow Fannie and Freddie to take larger loans onto their books. I would not be shocked to see the number at $600,000, at least temporarily. Right now they are limited to taking $417,000 loans. With a 20% down payment that means about $525,000 for the sales price of the home."
Taiwan's central bank may raise its key interest rate further to contain increasing inflation risk, Governor Perng Fai-nan indicated.
Daniel Gross: "In the first eight months of 2007, the consumer price index—the main gauge of inflation—rose at a 3.7 percent annual rate. That's more than 50 percent higher than the mild 2.3 percent core rate. The prices of energy and food are soaring, at 12.7 percent and 5.6 percent annual rates, respectively, and have been doing so for years. As a result, the CPI—including food and energy—has risen 12.6 percent since July 2003, for a compound rate of about 3 percent."
Microsoft has bowed to pressure from customers and will allow large manufacturers to continue selling PCs with Windows XP preloaded until June 30, 2008. How much did they spend on developing and marketing Vista?
In a blog post, Microsoft employee David Gainer said that when computer users tried to get Excel 2007 to multiply some pairs of numbers and the result was 65,535, Excel would incorrectly display 100,000 as the answer. Gainer said Excel makes mistakes multiplying 77.1 by 850, 10.2 by 6,425 and 20.4 by 3,212.5, but the program appears to be able to handle 16,383.75 times 4. "Further testing showed a similar phenomenon with 65,536 as well," Gainer wrote Tuesday. He said Excel was actually performing the calculations correctly, but when it comes time to show the answer on the screen, it messes up. Gainer said the bug is limited to six numbers from 65,534.99999999995 to 65,535, and six numbers from 65,535.99999999995 to 65,536, and that Microsoft is working hard to fix the problem. This is but another example of destroying their brand value.
Google Inc. has acquired a mobile social networking start-up called Zingku Inc., the search company's latest move to provide more services through mobile phones. Zingku aims to make it easier for people to share photos, send invitations or conduct polls among friends via mobile phone. It also provides a way for businesses to send "mobile flyers" to customers advertising products and services. Zingku was started in 2005 and the service has been in testing with a limited number of users in the U.S.
The Oil Drum: "Ghawar is hence crucial to continued Saudi production and meeting the galloping global requirements. People like Matthew Simmons have been arguing for years now that Ghawar is on decline. That is a cause of major concern to the energy fraternity...And with water level rising by about 18.4 feet per year, (Stuart)Staniford extrapolates that the northern part of Ghawar by now is quite depleted."
The Baltic Exchange's dry freight Index, which gauges the strength of seaborne dry commodities trade, hit a new high on Thursday, continuing its record-breaking trend of recent months. The London Baltic Exchange's chief price index, which monitors major trade routes for coal, iron ore, cement and soft commodities like grains and sugar, climbed 111 points to 9,370 after breaking through the 9,000 barrier on Monday. It means the index has now risen almost 2,000 points in a month
The Financial Times said BHP Billiton may not be interested in bidding for Alcoa as it focuses on mining. Alcoa owns many so-called downstream assets including packaging plants, the newspaper said. Meanwhile, BHP Billiton Ltd., the world's largest mining company, said economic growth in China and India will support demand for commodities, keeping prices high. Oil, copper, iron ore and coal are ``very attractive'' because demand outstrips supplies, while aluminum and nickel ``are not quite as tight,'' said Kloppers, the company's CEO.
EnCana Corp., Canada's largest natural-gas producer, said it will cut its 2008 investment in Alberta by about C$1 billion ($1 billion) if proposed increases in oil and gas royalties are adopted in full.
China Investment Corp., the nation's $200 billion sovereign wealth fund, started operations on Saturday.
China's central bank said it will maintain a ``moderately tight'' monetary policy in the last quarter of 2007 to curb inflation, limit asset prices and prevent the economy from overheating.
Japan's industrial output surged at the fastest pace in almost four years and household spending rebounded, signaling the economy may weather a U.S. slowdown.
The rupee gained 2.5 percent to 39.8425 per dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. The currency rose as high as 39.62, the strongest since April 1998, on Sept. 26. Its 11.2 percent gain this year is the second-highest among 18 Asia-Pacific currencies tracked by Bloomberg. The Australian dollar has climbed 11.6 percent.
Goldman Sachs: "Much has changed since mid-July, when we wrote that 'the global economy continues to enjoy one of the strongest sustained expansion in modern history'. The mood in financial markets is clearly darker, and the economic data in the developed world is showing signs of wear," it said. "Japan's recovery is tottering, with the chance of an outright recession having risen to nearly two in three," said the report, authored by chief economist Jim O'Neill.
John Mauldin: "Greg (Weldon)also spotted something which I suspected and hinted about in previous letters. The number of homes above $750,000 which are selling is down by over 35% from last year. Sales of home from $500,000 to $749,000 is down by 25%. Jumbo mortgages are just hard to find at rates that make sense. I think it is likely that Congress will allow Fannie and Freddie to take larger loans onto their books. I would not be shocked to see the number at $600,000, at least temporarily. Right now they are limited to taking $417,000 loans. With a 20% down payment that means about $525,000 for the sales price of the home."
Taiwan's central bank may raise its key interest rate further to contain increasing inflation risk, Governor Perng Fai-nan indicated.
Daniel Gross: "In the first eight months of 2007, the consumer price index—the main gauge of inflation—rose at a 3.7 percent annual rate. That's more than 50 percent higher than the mild 2.3 percent core rate. The prices of energy and food are soaring, at 12.7 percent and 5.6 percent annual rates, respectively, and have been doing so for years. As a result, the CPI—including food and energy—has risen 12.6 percent since July 2003, for a compound rate of about 3 percent."
Microsoft has bowed to pressure from customers and will allow large manufacturers to continue selling PCs with Windows XP preloaded until June 30, 2008. How much did they spend on developing and marketing Vista?
In a blog post, Microsoft employee David Gainer said that when computer users tried to get Excel 2007 to multiply some pairs of numbers and the result was 65,535, Excel would incorrectly display 100,000 as the answer. Gainer said Excel makes mistakes multiplying 77.1 by 850, 10.2 by 6,425 and 20.4 by 3,212.5, but the program appears to be able to handle 16,383.75 times 4. "Further testing showed a similar phenomenon with 65,536 as well," Gainer wrote Tuesday. He said Excel was actually performing the calculations correctly, but when it comes time to show the answer on the screen, it messes up. Gainer said the bug is limited to six numbers from 65,534.99999999995 to 65,535, and six numbers from 65,535.99999999995 to 65,536, and that Microsoft is working hard to fix the problem. This is but another example of destroying their brand value.
Google Inc. has acquired a mobile social networking start-up called Zingku Inc., the search company's latest move to provide more services through mobile phones. Zingku aims to make it easier for people to share photos, send invitations or conduct polls among friends via mobile phone. It also provides a way for businesses to send "mobile flyers" to customers advertising products and services. Zingku was started in 2005 and the service has been in testing with a limited number of users in the U.S.
The Oil Drum: "Ghawar is hence crucial to continued Saudi production and meeting the galloping global requirements. People like Matthew Simmons have been arguing for years now that Ghawar is on decline. That is a cause of major concern to the energy fraternity...And with water level rising by about 18.4 feet per year, (Stuart)Staniford extrapolates that the northern part of Ghawar by now is quite depleted."
The Baltic Exchange's dry freight Index, which gauges the strength of seaborne dry commodities trade, hit a new high on Thursday, continuing its record-breaking trend of recent months. The London Baltic Exchange's chief price index, which monitors major trade routes for coal, iron ore, cement and soft commodities like grains and sugar, climbed 111 points to 9,370 after breaking through the 9,000 barrier on Monday. It means the index has now risen almost 2,000 points in a month
Saturday, September 29, 2007
You Be The Judge
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."
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."
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."
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