1/18/08 Forecasts
Robert McHugh: "There is a really good chance the decline from December 11th will end no later than Friday, perhaps tomorrow, right around our next scheduled phi mate turn date. The coming rally is likely a wave 2 bounce, which will last a few weeks, and set up perhaps the worst fall of this six month Bear market, the worst decline in six years. We have identified a Bullish Descending Wedge pattern, which is a termination pattern, for wave {5} of 1 down, and it looks to only need another 100 to 150 point decline to finish. We could see that over the next day or two, which would place wave 1's bottom within a day or so of our January 18th +/- phi mate turn date, which is essentially any time now. With a small change in the McClellan Oscillator Wednesday, that could mean one more strong decline over the next few days, one that could possibly be reversed intraday, so be nimble fellow traders. Thus this next phi mate date would be the bottom for the move from December 11th's wave ii top, a nearly 1,500 point decline. No guarantees, but this is how it looks to us Wednesday evening. The next rally should be tradable, six hundred or more DJIA points...Still, the VIX continues to bother us. It is calling for a stock market plunge, maybe as bad as a crash, starting over the next month or so. Before that event, the VIX symmetrical triangle is suggesting we should see a rally that takes the VIX to around the 20.00 level, probably a two week +/- affair. That would be where the next huge decline would begin."
Average weekly earnings rose by 3.4 percent, seasonally adjusted, from December 2006 to December 2007. After deflation by the CPI-W, average weekly earnings decreased by 0.9 percent.
BorgWarner Inc. expects 2008 earnings to be in a range of $2.85 to $3 a share, which implies earnings growth of 20% to 25% compared to 2007.
Delta Chief Executive Richard Anderson traveled to Paris after securing board permission to talk to Northwest Airlines and UAL Corp.'s United Airlines about a possible merger, and he may try to involve Air France-KLM in a deal, The Wall Street Journal reported, citing people familiar with the talks. Air France, which is a partner of Delta and Northwest in the SkyTeam alliance, could provide cash in return for a sizable stake in a combined Delta-Northwest, the report said.
According to the WSJ, global oil-field output is declining at a rate of about 4.5% a year, a new study concludes. But projects in the works could make up for the decline.
According to the WSJ, Rio Tinto plans to charge steelmakers higher market prices for some crucial raw materials, despite long-term price contracts.The move marks an effort by the mining company to capture higher spot-market prices for iron ore, a key steelmaking ingredient. It illustrates the clout mining companies have amassed during the four-year boom in commodities. Rio Tinto's move would affect 10% of the iron ore it supplies to long-term customers.
Former Federal Reserve Chairman Paul Volcker thinks the U.S. central bank is to blame for allowing bubbles to inflate asset markets, and says that current Fed chief Ben Bernanke is in a tough spot.
According to the FT, orders for new commercial aircraft are expected to fall by more than 50 per cent in 2008, warned John Leahy, Airbus commercial director, on Wednesday. While he claimed that the peak in the global ordering cycle passed last year, Mr Leahy said the peak in deliveries would probably be reached between 2010 and 2012. Airbus and its US rival Boeing are straining to increase output to cope with the record order backlogs of the last three years.
Henry To: " We made a very substantial change in our MarketThoughts.com DJIA Timing System last Wednesday morning, covering our 50% short position that we had initiated on October 4, 2007 at a DJIA print of 12,630 at a 1,326-point profit. At the same time, we initiated a 50% long position...There is now no doubt that the Federal Reserve is doing all it can - with the help of the private sector (the ones that still have cash, such as JPM and BAC) and sovereign wealth funds - to defend 1,375 on the S&P 500 and to actively remove as much "systematic risk" as it possibly can. For now, and assuming that the JP Morgan's acquisition of Washington Mutual goes through, it does look like that liquidity conditions are gradually loosening. This is being confirmed by the decline in the "TED spread," defined as the difference between the three-month LIBOR rate and the yield of the three-month Treasury bill, and is usually interpreted as the willingness of banks to lend to high-grade corporate borrowers or fellow banks...As of Friday at the close, the ratio between money market fund assets and the market cap of the S&P 500 rose to 23.41% - a level that has not been seen since the end of April 2003, and on par with the reading at the end of October 1990. While this ratio is not a great timing indicator, what it does show is the amount of "fuel" for a sustainable stock market rally going forward. Moreover, such a reading is very high on a historical basis and should be supportive for stock prices over the next 12 to 18 months. Even though the stock market can do anything over the short-run, my guess is that there is a maximum downside of only 5% from current levels - barring the failed acquisition of Washington Mutual or a less than 50 basis point rate cut from the Fed on January 30th. Moreover, the Fed will also need to address the dismal growth of the St. Louis Adjusted Monetary Base (the 10-week moving average of the St. Louis Adjusted Monetary Base is up a mere 1.6% over the last 12 months). However, unless we witness a collapse of the banking sector such as what we witnessed in the early 1980s (note that this ratio spiked quite dramatically from January 1981 to late 1982), chances are that stock prices will be higher 12 to 18 months from now...the Nikkei is now at its most oversold level since March 11, 2003. In addition, over the last 13 years, virtually all declines in the Nikkei (with the exception of the post-911 decline) have stopped when the Nikkei reached a level that is close to 20% below its 200-day moving average - recession or no recession. Given that more than 50% of stocks on the Tokyo Stock Exchange are now trading below book value, and given the severe Japanese under weighting of many international mutual funds here in the US, my guess is that the Nikkei is now in the midst of bottoming out. I continue to believe that Japanese small caps are approaching a significant buying point - and may come as early as this week."
Microsoft Corp. said hackers have found a way to use some older versions of its Excel spreadsheet program to take over control of people's computers.
According to the Washington Post, E-mail messages sent and received by White House personnel during the first three years of the Bush administration were routinely recorded on tapes that were "recycled," the White House's chief information officer said in a court filing this week.
Brett Steenbarger: "A number of market commentators have observed the relative lack of action of the VIX during the recent falling market. Normally, in a declining market, we see a rise in the VIX. That indicates higher options premiums and often is interpreted as a sign of fear in the marketplace. So what does it mean when we have a falling market, but the VIX actually declines during that time?
Over the past ten trading sessions, we've dropped nearly 6% in the NYSE Composite Index. During that same period, the VIX has declined a bit more than 1%. I went back to the start of 2000 (N = 2012 trading days) and could not find a single other instance of a VIX dropping during a ten-day period in which stocks were down more than 5%. That suggests that the current action of the VIX truly is unique (which, of course, makes it difficult to interpret)...declines accompanied by relatively little fear have been more likely to continue their downward course than declines accompanied by a large expansion in the VIX. Note also, per my recent post, that we're also not seeing extreme levels of bearishness in the equity put/call ratio during the selling this week. Is the market pricing in a Fed rescue? Is the market priced for perfection? These are the questions I'm mulling in light of the current action in the VIX."
Valero Energy Corp. plans to reduce its processing rate for low-sulfur crude oil by as much as 20% because of shrinking profitability. The move would follow a reduction by Tesoro Corp. which said Jan. 14 that it cut fuel production this month.
According to Rigzone, the International Energy Agency (IEA) has revised the 2007 world oil demand, increasing the estimate by 150 kb/d to 85.8 mb/d. The IEA states that demand forecasts for 2008 are slightly higher, yet the Organization of Petroleum Exporting Countries (OPEC) has refused to increase oil outputs despite pleas from IEA and world leaders. According to the IEA report issued Jan. 16, 2008, the hike in demand is based on stronger-than-expected deliveries in Asia and the Middle East, as well as poor developments in the globalization of the economy.
Merrill Lynch & Co. reported a record loss after writing down at least $15 billion of failed investments, ousting its chief executive officer and losing almost half of its market value in 2007.
Exxon Mobil Corp. plans to shut a naphtha-processing unit at France's third-largest refinery in October, curbing production of chemicals used for plastic bags and toys.
China's already record-high housing prices jumped 10.5 percent in December despite authorities' efforts to cool the boom, but the growth rate slowed slightly, the government said Thursday.
Marc Faber: "I must confess that I have no idea whether the US stock market will be higher or lower in a year's time. I sometimes recall these words of Lao Tzu, the sixth-century Chinese poet: "Those who have knowledge, don't predict. Those who predict, don't have knowledge." The problem that confronts investors was best summarized by Albert Einstein, who said: "Not everything that counts can be counted, and not everything that can be counted counts." We all know about the credit crisis, the Treasury's bailout plan, and the Fed's determination to cut interest rates in order to support asset markets and the economy, but it is extremely difficult - if not impossible - to quantify the problem and the effectiveness of the government's intervention in the market economy. At the same time, we have a number of relatively reliable statistics - such as railcar loadings, the trucking index, the number of inbound containers, etc. - which indicate, if not a recession, then little economic growth. However, although all these indicators have a weakening trend and point to considerable economic slowdown, or even to a recession, they may have little or no impact on the performance of the stock market... My advice is therefore, as mentioned in recent reports, to hold an above-average cash position in US dollars and to lighten up on high, and especially leveraged, asset positions during rallies...Nevertheless, I recognise that some investors feel they must have an exposure to financial assets, and so I should like to offer here three investment opportunities that, at least on a relative basis, would seem to have some appeal. In this letter on various occasions I have discussed agriculture as an investment theme. I believe that agricultural commodities will - albeit erratically and amidst high volatility - continue to increase in price...Ritesh Menon, of DBS Bank in Singapore, also reminded me that arable land per capita in China and India is only 18% and 26% of US levels, respectively: "Environmental degradation is further reducing available land supply; soil erosion occurs in 2/3 of China's agricultural land (largely due to heavy fertilizer use), which undermines the longterm sustainability of agricultural production. Furthermore, water scarcity will be increasingly problematic. First, water availability is relatively scarce in China (water resources per capita are 25% of the world average). Second, water pollution is widespread, with 44% of Chinese rivers classified as polluted. Third, the demand for water increases dramatically as meat consumption increases. The net result of the above two phenomena is dangerously low inventories of agricultural products".
VistaCare agrees to be acquired by Odyssey HealthCare for $8.60 per share.
The seasonally adjusted number of people filing for state unemployment benefits in the week ended Jan. 12 fell 21,000 to 301,000 -- the lowest level since Sept. 22, the Labor Department reported Thursday. The four-week average of new claims fell by 11,750 to 328,500 -- the lowest level since late October. Meanwhile, the number of people receiving state benefits in the week ended Jan. 5 rose 66,000 to 2.75 million. The four-week average of continuing claims rose 28,250 to 2.73 million, the highest since November 2005. Compared with the same time last year, initial claims are up about 5%, while continuing claims are up about 11%.
Construction on new homes fell 14% in December to a seasonally adjusted annual rate of 1.01 million, the slowest monthly building pace in more than 16 years, the Commerce Department reported Thursday. Housing starts for single-family homes in the West fell 16% to the lowest level since the data were first collected in 1959. National housing starts were lower than the 1.12 million pace expected by economists surveyed by MarketWatch. Building permits fell 8% in December to a seasonally adjusted annual rate of 1.07 million, the lowest since May 1993. For all of 2007, housing starts fell 25% to 1.35 million, the lowest annual total since 1993.
"I think on the CDOs specifically, it is not likely these things are going to recover," Thain said. "I think we are being conservative but I don't think that we are likely to get much back on these. I do not think it is like where you have an illiquid market and you recover a lot of it. I don't think that's the case here," Thain said on a conference call with analysts.
The Organization of Petroleum Exporting Countries shouldn't respond to a request by the U.S. President to raise output at its next meeting as oil markets remain adequately supplied, the Iranian oil minister said. OPEC's second largest oil producer sees no need for the exporting group to pump more, especially after the recent crude price decline, Gholamhossein Nozari was quoted as saying today by the Iranian oil ministry's official news service, Shana.
The Philly Fed diffusion index fell to -20.9 in January -- the lowest level since October 2001 -- from -1.6 in December.
Natural gas stockpiles declined 59 billion cubic feet to 2.691 trillion cubic feet in the week ended Jan. 11, an Energy Department report at 10:30 a.m. showed.
"I stand ready to take substantive action to support growth and provide insurance against downside risk, as long as inflation expectations remain contained," said Richard Fisher, president of the Dallas Fed in a speech in Philadelphia.
Cleveland Federal Reserve Bank President Sandra Pianalto: "The residential real estate market still appears to be in free fall...Although I expect that the restraining influences to growth will diminish over time, and that the economy will gain firmer traction later this year and into 2009, I am concerned about the downside risks to that outlook... We are also seeing a related slowing in consumer spending, perhaps in response to reduced household wealth. Tightened credit market conditions could also hinder economic growth this year for both businesses and consumers," she said. Pianalto is a voting member of the Federal Open Market Committee in 2008. Thursday's remarks were her first on the economy in three months.
Gold futures for February delivery closed down $1.5, or 0.2%, at $880.5 an ounce on the New York Mercantile Exchange.
Investment bank Lehman Brothers Holdings Inc on Thursday said it would stop U.S. wholesale mortgage lending because of a continued slump in credit and housing markets, a move that will cut 1,300 jobs and result in a $40 million charge. With these cuts, Lehman will have eliminated 3,750 mortgage jobs globally since June 2007.
Bespoke Investment Group: "Another volatility indicator that we track along with the VIX is the 50-day high/low spread of the S&P 500. This takes the difference (%) between the index's high and low each day and averages it over the last 50 days. Currently, the 50-day high/low spread is at 1.68% -- its highest level since early 2003."
As the decline in the Dow continued to mount on Thursday and reached 300+ points in the red column, the VIX finally woke up and traded up about 4 points to the 28+ level.
Standard & Poor's on Thursday said it expects losses by bond insurers to be 20 percent higher than it had thought last month, after increasing its assumptions for losses from mortgage-related securities. "The revised assumptions announced by the residential mortgage backed securities surveillance group reflect the growing economic consensus that U.S. home price declines will be larger than previously forecasted and that the U.S. housing market slump may last far longer than previously expected," S&P said in a statement.
Shares of bond insurers plummeted Thursday, after Moody's Investors Service said a major insurer's plan to raise cash may not be sufficient. Ambac Financial Group Inc. early Wednesday said it planned to sell $1 billion in stock to raise enough cash to shelter the company's vital "AAA" financial-strength ratings.
The Russell 2000 and the Dow Jones Transportation Index are both down more than 20% from the highs set in 2007.
IBM said it earned $3.95 billion from continuing operations, or $2.80 a share, on revenue of $28.9 billion, compared to $3.46 billion, or $2.26 a share on $26.26 billion in sales in the prior-year period.
Washington Mutual Inc., the country's biggest savings and loan, said Thursday it swung to a $1.87 billion loss in the fourth quarter, hurt badly by the sinking value of its mortgage portfolio. Results included a write-down of $1.6 billion as the value of home loans whithered.
Graphics chip maker ATI Technologies Inc. was purchased by AMD for $5.6 billion but recently AMD said the price was too high. AMD for the first time put a price tag on the error -- effectively saying it overspent by about 30 percent -- which dragged down results in the latest quarter. AMD incurred charges in the fourth quarter of $1.67 billion, or $2.89 per share, mostly related to writing down the value of ATI.
Alliance Data Systems, after the market closed, released a statement saying no changes to the buyout are under way, and affirming that both companies are working toward regulatory approval. ADS and Blackstone "are continuing to work together to close the deal as quickly as possible," the company said in the release. Alliance Data Systems Corp said on Thursday a $6.76 billion buyout by private equity firm Blackstone Group LP was not being renegotiated, and it believed deal financing remained fully committed.
Israel tested a missile on Thursday, prompting Iran to vow retaliation if the Jewish state carried out recent veiled threats to launch strikes, possibly atomic, against Tehran's nuclear facilities.
Dorothy Thompson: "Fear grows in darkness; if you think there's a bogeyman around, turn on the light."
Thursday, January 17, 2008
Wednesday, January 16, 2008
A Possible Reversal?
1/17/08 A Possible Reversal ?
Rob Hanna: "The 90% downside day on its own won’t necessarily wash out the market, but when combined with gap down open it typically has served to mark at least a short-term panic low. Although the sample size for this study is smaller than I typically like, should the gap down occur, the consistent and sizable gains in the study above indicate that traders should be aware of a potentially large intraday reversal."
Robert McHugh: "Tuesday is a clear example of how dangerous Bear Markets are. We believe we are inside a several month stock market crash. We are deeply oversold in several indicators, and have our eyes open for a corrective rebound. In the nastiest of Bear markets, crashes can occur under deep oversold conditions. It is amazing how slow Bernanke's Fed is to reduce interest rates. We know why, because he is fully aware of the hyperinflation going on, and the Princeton textbook says a Fed Chairman should tighten during hyperinflation periods. I wonder how much longer he can delay before Wall Street's money center banks demand his scalp. Whether he likes it or not, we are going to see more hyperinflation, or a depression. He'll eventually pull the trigger and accept hyperinflation. Tuesday was another 90 percent down day, which suggests this market is either seeing selling exhaustion, or Niagara falls is about to occur. Our belief is that markets are inside the final small degree wave of decline that will result in a temporary bottom around our phi mate turn date of January 18th +/- a few days. Our EW charts reflect this tonight. The coming rally is likely a wave 2 bounce, which will last a few weeks, and set up perhaps the worst fall of this six month Bear market."
JPMorgan Chase & Co. said Wednesday its fourth-quarter profit fell 34 percent after its exposure to subprime mortgages -- though much smaller than at banking peers like Citigroup Inc. -- devalued its portfolio by $1.3 billion. But the bank boosted its provisions for loan losses by $2.54 billion in anticipation of more problems with U.S. consumers' ability to make their loan payments.
Oracle said Wednesday it would buy BEA Systems for $19.375 per share in cash. Shares of the company closed at $15.58 a share on Tuesday.
The People's Bank of China Wednesday raised banks' reserve requirement by half a percentage point to make its first monetary policy tightening move in 2008. The hike, which takes banks' reserve requirement to 15%, will be effective from Jan. 25, according to reports, and is likely aimed at controlling liquidity. In the currency market, the U.S. dollar fell 0.1% to 7.23 yuan after the announcement.
In early Wednesday trading, gold futures were down $20.90 to $881.70 an ounce, the Nasdaq futures dropped 35 points to 1,877.00, S&P 500 futures fell 13 points to 1,375.00 and Dow industrial futures dropped 115 points to 12,449.
Sentiment in the U.K. housing market is at its weakest since 1992.
Japan's three big banks have assembled a $10 billion fund to purchases stakes in Wall Street and European banks that have been hard-hit in the credit crunch, according to a published report Wednesday.
The dollar sank to a 2 1/2- year low against the yen Wednesday in Asia as investors sold the greenback due to concerns over the U.S. economy and financial system.
The dollar was trading at ¥105.98 at midafternoon Wednesday, down from ¥107.07 late Tuesday in New York and hitting the lowest levels since May 2005. The euro rose to $1.4842 from $1.4833. If the yen carry trade is not dead, it certainly is in intensive care.
The net asset value of structured investment vehicles fell to 53 percent of capital, the lowest on record, as they sold assets to repay debt, Moody's Investors Service said.
The finance chief of Chipotle Mexican Grill Inc. on Tuesday reiterated fourth-quarter guidance for the fast-casual restaurant chain despite challenges posed by the sagging economy. The operating environment has been difficult for both the retail and restaurant industries, which Chipotle has seen reflected in business trends since mid-September, Chief Financial Officer Jack Hartung told analysts at a conference. Commodity costs have been challenging because Chipotle relies on natural and organic products for its burritos, tacos and salads, Hartung said. As the company forecast in October, fourth-quarter sales declined at stores open for at least a year, he said. The rate of growth was in the low double digits for the quarter ended Dec. 31, compared with a 12.4 percent growth rate in the third quarter.
Lorenzo Bini-Smaghi, a member of the European Central Bank's executive council, warned that the tumbling dollar may now start to foreclose the option of US rate cuts and force the Fed to keep monetary policy tighter than it would like.
The prices that California hospitals charge private insurers and patients vary dramatically - even after factors like the number of uninsured and the severity of illnesses are considered, according to a study released Tuesday. Sponsors of the study, which include the California Public Employees' Retirement System and the Pacific Business Group on Health, say hospital consolidation - or a lack of competition within a region - appears to be a major factor in determining how much a hospital will charge for its services. "We see what appears to be hospitals charging whatever the market will bear," said Peter Lee, chief executive officer of the Pacific Business Group on Health, which represents 50 large employers responsible for about $10 billion in health care expenses.
Brett Steenbarger: "Bottom line is that we're seeing some interesting divergences, but the indicators remain in negative territory, we're not yet at bear market extremes in my longer-term momentum indicators, and we're seeing continued weakness in the advance-decline lines. I am not inclined to chase lows this AM--a lack of downside follow-through could lead to sharp short covering--but neither am I stepping up to the plate on the long side for anything more than short-term trades at this juncture, given the indicator status."
According to December comScore data, Yahoo! sites drew 136.6 million unique visitors in the US. But, Google was close behind at 133 million. Microsoft was next at 120 million followed by Time Warner (TWX) sites at 119.5 million.
According to Rigzone, Venezuelan President Hugo Chavez said Tuesday during an official visit to Honduras that his country will leave oil exports to the U.S. untouched.
OPEC produced an average 32.03 million barrels per day (b/d) of crude oil in December, according to a Platts survey of OPEC and oil industry officials January 14. This is up from November's rate of 31.65 million b/d.
Wells Fargo & Co., the biggest bank on the U.S. West Coast, said fourth-quarter profit fell 38 percent as more borrowers missed payments on home loans. Net income declined to $1.36 billion, or 41 cents a share, from $2.18 billion, or 64 cents, a year earlier, the San Francisco-based company said today in a statement. Analysts were estimating Wells Fargo earned 40 cents, according to a survey by Bloomberg.
Nouriel Roubini:"The United States has now effectively entered into a serious and painful recession. The debate is not anymore on whether the economy will experience a soft landing or a hard landing; it is rather on how hard the hard landing recession will be. The factors that make the recession inevitable include the nation's worst-ever housing recession, which is still getting worse; a severe liquidity and credit crunch in financial markets that is getting worse than when it started last summer; high oil and gasoline prices; falling capital spending by the corporate sector; a slackening labor market where few jobs are being created and the unemployment rate is sharply up; and shopped-out, savings-less and debt-burdened American consumers who — thanks to falling home prices — can no longer use their homes as ATM machines to allow them to spend more than their income. Indeed holiday sales in the US were much lower in real terms than in 2006. As private consumption in the US is over 70% of GDP the US consumer now retrenching and cutting spending ensures that a recession is now underway. On top of this recession there are now serious risks of a systemic financial crisis in the US as the financial losses are spreading from subprime to near prime and prime mortgages, consumer debt (credit cards, auto loans, student loans), commercial real estate loans, leveraged loans and postponed/restructured/cancelled LBO and, soon enough, sharply rising default rates on corporate bonds that will lead to a second round of large losses in credit default swaps. The total of all of these financial losses could be above $1 trillion thus triggering a massive credit crunch and a systemic financial sector crisis.There is now some delusional hope in Europe and in the European Central Bank that this region can shelter itself – or decouple itself - from the effects of the US hard landing. But 2008 will be the year of re-coupling rather than decoupling for Europe. "
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Jan. 11 surged 28.4 percent to 906.4, its highest since the week ended April 2, 2004.
Earthfiles: "January 16, 2008 - Dozens of Eyewitnesses Report Huge Aerial Craft
Over Dublin and Stephenville, Texas. Report upcoming.
“The huge craft about 300 feet above me started shifting to the right
about 100 to 150 feet. And then I looked to the left to see if I could see the edge
of this thing, and I still could not see the edge of it!” - Ricky Sorrells, Dublin, Texas"
The Consumer Price Index, the most broadly used gauge of inflation, rose 4.1 percent in 2007, well ahead of the 2.5 percent increase posted in 2006 and the largest 12-month rise since a 6.1 percent increase in 1990. Yet, the raise for Social Security for 2008 is only 2.3% How does one explain this inequity?
The output of the nation's factories, mines and utilities was unchanged in December, with 0.0% growth, the Federal Reserve said Wednesday.
U.S. crude inventories rose by 4.3 million barrels to 287.1 million barrels in the week ending Jan. 11, U.S. Energy Information Administration reported on Wednesday. Analysts surveyed by Dow Jones Newswires were expecting a rise of 700,000 barrels. After the data, crude-oil futures for February delivery lost $2.2, or 2.4%, to $89.7 a barrel on the New York Mercantile Exchange. Gasoline supplies rose by 2.2 million barrels in the latest week, while distillate stocks grew by 1.1 million barrels, EIA reported.
WCI Communities Inc. said late Wednesday that its lenders agreed to relax some debt agreements, giving the luxury home builder more time to try to recover from the housing bust.
WCI shares jumped 16% to $2.83 during late trading on Wednesday.
WCI said it successfully changed credit and loan agreements with its senior lenders. The amendments, which last until the end of June 2009, modify, suspend or waive certain covenants and give the company greater operating and financial flexibility, the company explained.
WCI also said it reduced the total commitment available under its revolving credit agreement and lowered the outstanding amount on its term loan. It also agreed to increase pricing on the loans and converted a portion of the revolver to non-revolving status.
The Dow Jones Industrial Average fell 33.9 points to finish at 12,467.2. The S&P 500 shed 7.77 points to 1,373.18, while the Nasdaq Composite declined 23 points to 2,394.59. The S&P closed at a 14 month low.
Crude for February delivery fell $1.06, or 1.2%, to finish at $90.14 a barrel on the New York Mercantile Exchange in mid-afternoon trading. Gold futures for February delivery tumbled $20.6, or 2.3%, to close at $882.0 an ounce on the New York Mercantile Exchange.
"Clearly there is a high level of caution," said Ken Mayland, president of ClearView Economics. "Everyone's guard is up to protect and insulate one's businesses from the high degree of sluggishness that is expected to prevail in the months ahead."
George Bush: “We are enjoying sluggish times and not enjoying them very much." Are you enjoying George Bush?
Rob Hanna: "The 90% downside day on its own won’t necessarily wash out the market, but when combined with gap down open it typically has served to mark at least a short-term panic low. Although the sample size for this study is smaller than I typically like, should the gap down occur, the consistent and sizable gains in the study above indicate that traders should be aware of a potentially large intraday reversal."
Robert McHugh: "Tuesday is a clear example of how dangerous Bear Markets are. We believe we are inside a several month stock market crash. We are deeply oversold in several indicators, and have our eyes open for a corrective rebound. In the nastiest of Bear markets, crashes can occur under deep oversold conditions. It is amazing how slow Bernanke's Fed is to reduce interest rates. We know why, because he is fully aware of the hyperinflation going on, and the Princeton textbook says a Fed Chairman should tighten during hyperinflation periods. I wonder how much longer he can delay before Wall Street's money center banks demand his scalp. Whether he likes it or not, we are going to see more hyperinflation, or a depression. He'll eventually pull the trigger and accept hyperinflation. Tuesday was another 90 percent down day, which suggests this market is either seeing selling exhaustion, or Niagara falls is about to occur. Our belief is that markets are inside the final small degree wave of decline that will result in a temporary bottom around our phi mate turn date of January 18th +/- a few days. Our EW charts reflect this tonight. The coming rally is likely a wave 2 bounce, which will last a few weeks, and set up perhaps the worst fall of this six month Bear market."
JPMorgan Chase & Co. said Wednesday its fourth-quarter profit fell 34 percent after its exposure to subprime mortgages -- though much smaller than at banking peers like Citigroup Inc. -- devalued its portfolio by $1.3 billion. But the bank boosted its provisions for loan losses by $2.54 billion in anticipation of more problems with U.S. consumers' ability to make their loan payments.
Oracle said Wednesday it would buy BEA Systems for $19.375 per share in cash. Shares of the company closed at $15.58 a share on Tuesday.
The People's Bank of China Wednesday raised banks' reserve requirement by half a percentage point to make its first monetary policy tightening move in 2008. The hike, which takes banks' reserve requirement to 15%, will be effective from Jan. 25, according to reports, and is likely aimed at controlling liquidity. In the currency market, the U.S. dollar fell 0.1% to 7.23 yuan after the announcement.
In early Wednesday trading, gold futures were down $20.90 to $881.70 an ounce, the Nasdaq futures dropped 35 points to 1,877.00, S&P 500 futures fell 13 points to 1,375.00 and Dow industrial futures dropped 115 points to 12,449.
Sentiment in the U.K. housing market is at its weakest since 1992.
Japan's three big banks have assembled a $10 billion fund to purchases stakes in Wall Street and European banks that have been hard-hit in the credit crunch, according to a published report Wednesday.
The dollar sank to a 2 1/2- year low against the yen Wednesday in Asia as investors sold the greenback due to concerns over the U.S. economy and financial system.
The dollar was trading at ¥105.98 at midafternoon Wednesday, down from ¥107.07 late Tuesday in New York and hitting the lowest levels since May 2005. The euro rose to $1.4842 from $1.4833. If the yen carry trade is not dead, it certainly is in intensive care.
The net asset value of structured investment vehicles fell to 53 percent of capital, the lowest on record, as they sold assets to repay debt, Moody's Investors Service said.
The finance chief of Chipotle Mexican Grill Inc. on Tuesday reiterated fourth-quarter guidance for the fast-casual restaurant chain despite challenges posed by the sagging economy. The operating environment has been difficult for both the retail and restaurant industries, which Chipotle has seen reflected in business trends since mid-September, Chief Financial Officer Jack Hartung told analysts at a conference. Commodity costs have been challenging because Chipotle relies on natural and organic products for its burritos, tacos and salads, Hartung said. As the company forecast in October, fourth-quarter sales declined at stores open for at least a year, he said. The rate of growth was in the low double digits for the quarter ended Dec. 31, compared with a 12.4 percent growth rate in the third quarter.
Lorenzo Bini-Smaghi, a member of the European Central Bank's executive council, warned that the tumbling dollar may now start to foreclose the option of US rate cuts and force the Fed to keep monetary policy tighter than it would like.
The prices that California hospitals charge private insurers and patients vary dramatically - even after factors like the number of uninsured and the severity of illnesses are considered, according to a study released Tuesday. Sponsors of the study, which include the California Public Employees' Retirement System and the Pacific Business Group on Health, say hospital consolidation - or a lack of competition within a region - appears to be a major factor in determining how much a hospital will charge for its services. "We see what appears to be hospitals charging whatever the market will bear," said Peter Lee, chief executive officer of the Pacific Business Group on Health, which represents 50 large employers responsible for about $10 billion in health care expenses.
Brett Steenbarger: "Bottom line is that we're seeing some interesting divergences, but the indicators remain in negative territory, we're not yet at bear market extremes in my longer-term momentum indicators, and we're seeing continued weakness in the advance-decline lines. I am not inclined to chase lows this AM--a lack of downside follow-through could lead to sharp short covering--but neither am I stepping up to the plate on the long side for anything more than short-term trades at this juncture, given the indicator status."
According to December comScore data, Yahoo! sites drew 136.6 million unique visitors in the US. But, Google was close behind at 133 million. Microsoft was next at 120 million followed by Time Warner (TWX) sites at 119.5 million.
According to Rigzone, Venezuelan President Hugo Chavez said Tuesday during an official visit to Honduras that his country will leave oil exports to the U.S. untouched.
OPEC produced an average 32.03 million barrels per day (b/d) of crude oil in December, according to a Platts survey of OPEC and oil industry officials January 14. This is up from November's rate of 31.65 million b/d.
Wells Fargo & Co., the biggest bank on the U.S. West Coast, said fourth-quarter profit fell 38 percent as more borrowers missed payments on home loans. Net income declined to $1.36 billion, or 41 cents a share, from $2.18 billion, or 64 cents, a year earlier, the San Francisco-based company said today in a statement. Analysts were estimating Wells Fargo earned 40 cents, according to a survey by Bloomberg.
Nouriel Roubini:"The United States has now effectively entered into a serious and painful recession. The debate is not anymore on whether the economy will experience a soft landing or a hard landing; it is rather on how hard the hard landing recession will be. The factors that make the recession inevitable include the nation's worst-ever housing recession, which is still getting worse; a severe liquidity and credit crunch in financial markets that is getting worse than when it started last summer; high oil and gasoline prices; falling capital spending by the corporate sector; a slackening labor market where few jobs are being created and the unemployment rate is sharply up; and shopped-out, savings-less and debt-burdened American consumers who — thanks to falling home prices — can no longer use their homes as ATM machines to allow them to spend more than their income. Indeed holiday sales in the US were much lower in real terms than in 2006. As private consumption in the US is over 70% of GDP the US consumer now retrenching and cutting spending ensures that a recession is now underway. On top of this recession there are now serious risks of a systemic financial crisis in the US as the financial losses are spreading from subprime to near prime and prime mortgages, consumer debt (credit cards, auto loans, student loans), commercial real estate loans, leveraged loans and postponed/restructured/cancelled LBO and, soon enough, sharply rising default rates on corporate bonds that will lead to a second round of large losses in credit default swaps. The total of all of these financial losses could be above $1 trillion thus triggering a massive credit crunch and a systemic financial sector crisis.There is now some delusional hope in Europe and in the European Central Bank that this region can shelter itself – or decouple itself - from the effects of the US hard landing. But 2008 will be the year of re-coupling rather than decoupling for Europe. "
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Jan. 11 surged 28.4 percent to 906.4, its highest since the week ended April 2, 2004.
Earthfiles: "January 16, 2008 - Dozens of Eyewitnesses Report Huge Aerial Craft
Over Dublin and Stephenville, Texas. Report upcoming.
“The huge craft about 300 feet above me started shifting to the right
about 100 to 150 feet. And then I looked to the left to see if I could see the edge
of this thing, and I still could not see the edge of it!” - Ricky Sorrells, Dublin, Texas"
The Consumer Price Index, the most broadly used gauge of inflation, rose 4.1 percent in 2007, well ahead of the 2.5 percent increase posted in 2006 and the largest 12-month rise since a 6.1 percent increase in 1990. Yet, the raise for Social Security for 2008 is only 2.3% How does one explain this inequity?
The output of the nation's factories, mines and utilities was unchanged in December, with 0.0% growth, the Federal Reserve said Wednesday.
U.S. crude inventories rose by 4.3 million barrels to 287.1 million barrels in the week ending Jan. 11, U.S. Energy Information Administration reported on Wednesday. Analysts surveyed by Dow Jones Newswires were expecting a rise of 700,000 barrels. After the data, crude-oil futures for February delivery lost $2.2, or 2.4%, to $89.7 a barrel on the New York Mercantile Exchange. Gasoline supplies rose by 2.2 million barrels in the latest week, while distillate stocks grew by 1.1 million barrels, EIA reported.
WCI Communities Inc. said late Wednesday that its lenders agreed to relax some debt agreements, giving the luxury home builder more time to try to recover from the housing bust.
WCI shares jumped 16% to $2.83 during late trading on Wednesday.
WCI said it successfully changed credit and loan agreements with its senior lenders. The amendments, which last until the end of June 2009, modify, suspend or waive certain covenants and give the company greater operating and financial flexibility, the company explained.
WCI also said it reduced the total commitment available under its revolving credit agreement and lowered the outstanding amount on its term loan. It also agreed to increase pricing on the loans and converted a portion of the revolver to non-revolving status.
The Dow Jones Industrial Average fell 33.9 points to finish at 12,467.2. The S&P 500 shed 7.77 points to 1,373.18, while the Nasdaq Composite declined 23 points to 2,394.59. The S&P closed at a 14 month low.
Crude for February delivery fell $1.06, or 1.2%, to finish at $90.14 a barrel on the New York Mercantile Exchange in mid-afternoon trading. Gold futures for February delivery tumbled $20.6, or 2.3%, to close at $882.0 an ounce on the New York Mercantile Exchange.
"Clearly there is a high level of caution," said Ken Mayland, president of ClearView Economics. "Everyone's guard is up to protect and insulate one's businesses from the high degree of sluggishness that is expected to prevail in the months ahead."
George Bush: “We are enjoying sluggish times and not enjoying them very much." Are you enjoying George Bush?
Tuesday, January 15, 2008
New Capital
1/16/08 New Capital
Dendreon Corp.has been granted a broad European patent covering the company's lead product candidate Provenge, its investigational active cellular immunotherapy for the treatment of advanced prostate cancer.
Citigroup reported a $9.8 billion loss and cut its dividend 40%, and also said it took charges in the quarter related to 4,200 job cuts.Citigroup said Tuesday that it is raising $12.5 billion in new capital from a private placement and public offering of preferred shares.
Merrill Lynch & Co. said it has reached agreements with several investors, notably three foreign ones, to raise $6.6 billion. The Korean Investment Corp., Kuwait Investment Authority and Japan's Mizuho Corporate Bank will receive mandatory convertible preferred stock for their combined investment.
Lifecore Biomedical said it's going to be bought by private-equity house Warburg Pincus for $239 million, or $17 a share.
The German ZEW indicator of economic activity posted a sharper-than-expected decline in January, sinking to a 15-year low of -41.6. The indicator, which sums up a survey of 270 analysts and institutional investors, posted a -37.2 reading the previous month.
EMI Group said Tuesday that it will cut between 1,500 and 2,000 jobs in a bid to save up to 200 million pounds ($400 million) per year.
Nokia Corp. said it will stop manufacturing mobile devices in Germany and shut down its Bochum manufacturing site by mid-2008, citing the lack of competitiveness of the location. The firm, which plans to move manufacturing to more "cost-competitive" sites in Europe, said its decision would affect about 2,300 employees.
Bank of Japan Governor Toshihiko Fukui said Tuesday the turmoil affecting the U.S. credit markets is having a bigger effect upon the Japanese economy than previously expected, according to reports. In a speech delivered at a quarterly meeting with BOJ officials, Fukui said the Japanese economy was slowing and sentiment had become more cautious, according to the Nikkei business daily.
Williams-Sonoma Inc.said same-store sales edged down 0.4 percent during the November and December holiday period due to weak traffic in an uncertain economy.
California, the biggest U.S. seller of municipal bonds, may have the credit ratings on $49 billion of its debt lowered by Fitch Ratings as a slowing economy leaves the state with a $14 billion budget shortfall.
According to Bloomberg, China has shut down more than 6 percent of the power generating capacity in its southern provinces because of a coal shortage, with the region bracing for the worst electricity shortage in at least five years.
The Organization of Petroleum Exporting Countries ``will raise production when the market justifies it'', Naimi told reporters in Riyadh today. Saudi Arabia has held back about 2 million barrels a day of oil that could be supplied to the market if needed, Naimi said.
Rather than pressing OPEC to produce and sell more oil, how about Bush releasing oil from the Strategic Oil Reserve.
Brad Setser: "It is almost impossible to overstate the scale of China's reserve growth. China just announced that its reserves increased by $461.9b in 2007. Its reserves "only" increased by $247.5b in 2006. Of course, some of the 2007 increase – a bit over $30b, according to my estimates – comes from the rising value of China’s existing holdings of euros. After adjusting for valuation gains, China added an estimated $427b to its reserves in 2007. That is still a big jump. It is well above the $216b valuation-adjusted increase in 2006, the $236b valuation-adjusted increase in 2005 and the $193b valuation-adjusted increase in 2004. And to top it off, reserve growth understates China’s total foreign asset growth. It leaves out the CIC, for one. It also leaves out the dollars held by the banks, whether from recapitalization, swaps with the central bank or plain old arm-twisting to force the big state banks to hold dollars to meet the recent hike in their reserves."
Michelle Leder: "On Friday, Bank of America (BAC) announced that it was acquiring Countrywide Financial (CFC) in what is either a fire-sale price of $4 billion, or still too much, based on the problems Countrywide faces. My bet is on the latter and that this will prove to be ADD — another dumb deal. As footnoted regulars know, I’ve been following Countrywide’s REO problems in Florida, a state that I know pretty well based on my past experience covering the S&L crisis there. Just before the deal was announced, Countrywide owned 999 properties in the Sunshine State, including the now-famous sex party house that we footnoted in November. (That house, by the way, which went into foreclosure at $1.1 million and was originally listed at $904K has come down a second time to $864.9K, so get your checkbooks ready). But sometime over the past few days, the number of properties owned in Florida according to the Countrywide REO site surged to 1,126. Just to put that into perspective, Bank of America, which has a fairly extensive branch network in Florida, only lists 76 properties on its REO site. Also interesting is that while Countrywide used to list the total number of properties owned in each state, that number is no longer available other than by counting them manually. Dimitris, who runs the Countrywide Foreclosure blog says it’s probably just a programming glitch. But it seems more than coincidental, at least to me, especially since the press release that Countrywide put out last week noted “a number of positive operational trends”, but failed to talk about the growing REO problem. It will be interesting to see what else comes out in the next few weeks and months as this deal moves forward."
Excluding autos, sales at U.S. retailers fell 0.4 percent in December and were less vigorous in November than previously thought, according to a government report on Tuesday that implied costlier energy and slumping housing prices were taking a toll on consumers. The Commerce Dep't revised down November's sales gains to show a 1 percent rise rather than the 1.2 percent gain it reported a month ago.
Separately, U.S. producer prices declined unexpectedly by 0.1 percent in December after a sharp drop in fuel prices, government data showed on Tuesday, but core inflation at the producers level rose by 0.2 percent as projected. Gasoline prices dropped by 4.8 percent in December, but are up 37.1 percent on a 12 month basis, the Labor Department said.
George Ure: "Now, the really shocking stuff is doesn't show up until you look at the "Seasonally adjust annual rate for the 3-months ended December 2007." This is where you find why Gold is going through the roof and the dollar collapsing to within a few pennies of its all time lows. Remember, these are 3-month annualize rates:
Finished Goods: +13.3%
Finished consumer foods +9.4%
Finished energy goods: +51.9%
---
Intermediate materials supplies & components: +15.0%
Intermediate food & feeds: +19.2%
Intermediate energy goods: +55.3%
Materials for non-durables: +20.3%
---
Think those are scary? Look at the head of the supply chain!
Crude materials for further processing: +59.6%
Foodstuffs and feedstuffs +19.2%
Crude energy materials +129.5%... Ask the folks scrimping by on a 2.3% hike in Social Security or military retirement benefits if we're not already in a recession/decline in the standard of living. Or, ask the million or so homeowners facing foreclosure. But don't ask economists. They focus on things like this morning's data - a month old - then pronounce through their rearview mirror something that is as obvious as sunrise to regular humans. And for this, they expect respect? Please!"
Applied Materials is cutting 1,000 employees or about 7% of its workforce.
The Empire state index fell to 9.0 from 9.8. The new-orders index fell to 0, the lowest reading since May 2005. Expectations for growth over the next six months deteriorated, as the expectations index fell to 19.4 from 34.7. The percentage of firms expecting conditions to worsen rose to 24% from 16%.
Oil use among the 30 members of the Organization for Economic Cooperation and Development fell slightly in 2007, according to data expected Wednesday from the International Energy Agency, The Wall Street Journal reported. Higher oil prices led to adjustments in consumption, plus mild weather trimmed demand for petroleum-based heating fuels.
Mike Shedlock: "LIBOR dropped 20 basis points yesterday and is now trading below the FF Rate for the first time since June 2003."
Bank of America to cut 650 investment banking, markets jobs.
Gold futures for February delivery closed down 80 cents, or 0.1%, at $902.6 an ounce on the New York Mercantile Exchange.
The US looks poised to lose its mantle as the world's dominant financial market because of a rapid rise in the depth and maturity of markets in Europe, a study suggests. The change may have occurred already, not least because US markets are beset by credit woes, according to research by McKinsey Global Institute, a think-tank affiliated to the consultancy.
Intel Corp.reported fourth-quarter income of $2.27 billion, or 38 cents per share, compared with $1.5 billion, or 26 cents for the year-ago period. Revenue for the quarter grew more than 10% to $10.7 billion. Analysts expected had expected Intel to report earnings of 40 cents per share on revenue of $10.84 billion, compared with 26 cents per share on revenue of $9.69 billion for the year-ago period, according to Thomson Financial.
Shares of Boeing Co.dropped 6.5% to $76.35 in afternoon trading following a report from The Wall Street Journal Tuesday that the aircraft maker would soon announce further delays to its 787 Dreamliner program.
Crude oil for February delivery closed down $2.3, or 2.4%, at $91.9 a barrel on the New York Mercantile Exchange.
Mortgage lender IndyMac Bancorp Inc. said Tuesday it will slash its work force by 24 percent, laying off 2,403 employees in a bid to cut costs as it tries to weather the worsening housing slump and problems selling home loans to investors.
The S&P 500 and the Nasdaq closed at their lowest levels in 10 months on Tuesday.
Dendreon Corp.has been granted a broad European patent covering the company's lead product candidate Provenge, its investigational active cellular immunotherapy for the treatment of advanced prostate cancer.
Citigroup reported a $9.8 billion loss and cut its dividend 40%, and also said it took charges in the quarter related to 4,200 job cuts.Citigroup said Tuesday that it is raising $12.5 billion in new capital from a private placement and public offering of preferred shares.
Merrill Lynch & Co. said it has reached agreements with several investors, notably three foreign ones, to raise $6.6 billion. The Korean Investment Corp., Kuwait Investment Authority and Japan's Mizuho Corporate Bank will receive mandatory convertible preferred stock for their combined investment.
Lifecore Biomedical said it's going to be bought by private-equity house Warburg Pincus for $239 million, or $17 a share.
The German ZEW indicator of economic activity posted a sharper-than-expected decline in January, sinking to a 15-year low of -41.6. The indicator, which sums up a survey of 270 analysts and institutional investors, posted a -37.2 reading the previous month.
EMI Group said Tuesday that it will cut between 1,500 and 2,000 jobs in a bid to save up to 200 million pounds ($400 million) per year.
Nokia Corp. said it will stop manufacturing mobile devices in Germany and shut down its Bochum manufacturing site by mid-2008, citing the lack of competitiveness of the location. The firm, which plans to move manufacturing to more "cost-competitive" sites in Europe, said its decision would affect about 2,300 employees.
Bank of Japan Governor Toshihiko Fukui said Tuesday the turmoil affecting the U.S. credit markets is having a bigger effect upon the Japanese economy than previously expected, according to reports. In a speech delivered at a quarterly meeting with BOJ officials, Fukui said the Japanese economy was slowing and sentiment had become more cautious, according to the Nikkei business daily.
Williams-Sonoma Inc.said same-store sales edged down 0.4 percent during the November and December holiday period due to weak traffic in an uncertain economy.
California, the biggest U.S. seller of municipal bonds, may have the credit ratings on $49 billion of its debt lowered by Fitch Ratings as a slowing economy leaves the state with a $14 billion budget shortfall.
According to Bloomberg, China has shut down more than 6 percent of the power generating capacity in its southern provinces because of a coal shortage, with the region bracing for the worst electricity shortage in at least five years.
The Organization of Petroleum Exporting Countries ``will raise production when the market justifies it'', Naimi told reporters in Riyadh today. Saudi Arabia has held back about 2 million barrels a day of oil that could be supplied to the market if needed, Naimi said.
Rather than pressing OPEC to produce and sell more oil, how about Bush releasing oil from the Strategic Oil Reserve.
Brad Setser: "It is almost impossible to overstate the scale of China's reserve growth. China just announced that its reserves increased by $461.9b in 2007. Its reserves "only" increased by $247.5b in 2006. Of course, some of the 2007 increase – a bit over $30b, according to my estimates – comes from the rising value of China’s existing holdings of euros. After adjusting for valuation gains, China added an estimated $427b to its reserves in 2007. That is still a big jump. It is well above the $216b valuation-adjusted increase in 2006, the $236b valuation-adjusted increase in 2005 and the $193b valuation-adjusted increase in 2004. And to top it off, reserve growth understates China’s total foreign asset growth. It leaves out the CIC, for one. It also leaves out the dollars held by the banks, whether from recapitalization, swaps with the central bank or plain old arm-twisting to force the big state banks to hold dollars to meet the recent hike in their reserves."
Michelle Leder: "On Friday, Bank of America (BAC) announced that it was acquiring Countrywide Financial (CFC) in what is either a fire-sale price of $4 billion, or still too much, based on the problems Countrywide faces. My bet is on the latter and that this will prove to be ADD — another dumb deal. As footnoted regulars know, I’ve been following Countrywide’s REO problems in Florida, a state that I know pretty well based on my past experience covering the S&L crisis there. Just before the deal was announced, Countrywide owned 999 properties in the Sunshine State, including the now-famous sex party house that we footnoted in November. (That house, by the way, which went into foreclosure at $1.1 million and was originally listed at $904K has come down a second time to $864.9K, so get your checkbooks ready). But sometime over the past few days, the number of properties owned in Florida according to the Countrywide REO site surged to 1,126. Just to put that into perspective, Bank of America, which has a fairly extensive branch network in Florida, only lists 76 properties on its REO site. Also interesting is that while Countrywide used to list the total number of properties owned in each state, that number is no longer available other than by counting them manually. Dimitris, who runs the Countrywide Foreclosure blog says it’s probably just a programming glitch. But it seems more than coincidental, at least to me, especially since the press release that Countrywide put out last week noted “a number of positive operational trends”, but failed to talk about the growing REO problem. It will be interesting to see what else comes out in the next few weeks and months as this deal moves forward."
Excluding autos, sales at U.S. retailers fell 0.4 percent in December and were less vigorous in November than previously thought, according to a government report on Tuesday that implied costlier energy and slumping housing prices were taking a toll on consumers. The Commerce Dep't revised down November's sales gains to show a 1 percent rise rather than the 1.2 percent gain it reported a month ago.
Separately, U.S. producer prices declined unexpectedly by 0.1 percent in December after a sharp drop in fuel prices, government data showed on Tuesday, but core inflation at the producers level rose by 0.2 percent as projected. Gasoline prices dropped by 4.8 percent in December, but are up 37.1 percent on a 12 month basis, the Labor Department said.
George Ure: "Now, the really shocking stuff is doesn't show up until you look at the "Seasonally adjust annual rate for the 3-months ended December 2007." This is where you find why Gold is going through the roof and the dollar collapsing to within a few pennies of its all time lows. Remember, these are 3-month annualize rates:
Finished Goods: +13.3%
Finished consumer foods +9.4%
Finished energy goods: +51.9%
---
Intermediate materials supplies & components: +15.0%
Intermediate food & feeds: +19.2%
Intermediate energy goods: +55.3%
Materials for non-durables: +20.3%
---
Think those are scary? Look at the head of the supply chain!
Crude materials for further processing: +59.6%
Foodstuffs and feedstuffs +19.2%
Crude energy materials +129.5%... Ask the folks scrimping by on a 2.3% hike in Social Security or military retirement benefits if we're not already in a recession/decline in the standard of living. Or, ask the million or so homeowners facing foreclosure. But don't ask economists. They focus on things like this morning's data - a month old - then pronounce through their rearview mirror something that is as obvious as sunrise to regular humans. And for this, they expect respect? Please!"
Applied Materials is cutting 1,000 employees or about 7% of its workforce.
The Empire state index fell to 9.0 from 9.8. The new-orders index fell to 0, the lowest reading since May 2005. Expectations for growth over the next six months deteriorated, as the expectations index fell to 19.4 from 34.7. The percentage of firms expecting conditions to worsen rose to 24% from 16%.
Oil use among the 30 members of the Organization for Economic Cooperation and Development fell slightly in 2007, according to data expected Wednesday from the International Energy Agency, The Wall Street Journal reported. Higher oil prices led to adjustments in consumption, plus mild weather trimmed demand for petroleum-based heating fuels.
Mike Shedlock: "LIBOR dropped 20 basis points yesterday and is now trading below the FF Rate for the first time since June 2003."
Bank of America to cut 650 investment banking, markets jobs.
Gold futures for February delivery closed down 80 cents, or 0.1%, at $902.6 an ounce on the New York Mercantile Exchange.
The US looks poised to lose its mantle as the world's dominant financial market because of a rapid rise in the depth and maturity of markets in Europe, a study suggests. The change may have occurred already, not least because US markets are beset by credit woes, according to research by McKinsey Global Institute, a think-tank affiliated to the consultancy.
Intel Corp.reported fourth-quarter income of $2.27 billion, or 38 cents per share, compared with $1.5 billion, or 26 cents for the year-ago period. Revenue for the quarter grew more than 10% to $10.7 billion. Analysts expected had expected Intel to report earnings of 40 cents per share on revenue of $10.84 billion, compared with 26 cents per share on revenue of $9.69 billion for the year-ago period, according to Thomson Financial.
Shares of Boeing Co.dropped 6.5% to $76.35 in afternoon trading following a report from The Wall Street Journal Tuesday that the aircraft maker would soon announce further delays to its 787 Dreamliner program.
Crude oil for February delivery closed down $2.3, or 2.4%, at $91.9 a barrel on the New York Mercantile Exchange.
Mortgage lender IndyMac Bancorp Inc. said Tuesday it will slash its work force by 24 percent, laying off 2,403 employees in a bid to cut costs as it tries to weather the worsening housing slump and problems selling home loans to investors.
The S&P 500 and the Nasdaq closed at their lowest levels in 10 months on Tuesday.
Monday, January 14, 2008
The Follow Through Day
1/15/08 The Follow Through Day
According to Bloomberg, the dollar fell to a seven-week low against the euro on speculation U.S. interest rates will drop below those of the 15 nations that share the euro for the first time in three years.
There are mounting anecdotal signs that beginning in December Americans cut back significantly on personal consumption, which accounts for 70 percent of the economy. This should come as no surprise. Americans are unable to utilize their homes as an ATM.
General Motors Corp.'s top finance executive said Sunday he doesn't see the subprime mortgage mess spreading into auto loans at the company's former credit arm, GMAC financial services.
Chief Financial Officer Fritz Henderson said that although GMAC auto loan delinquencies were up slightly in the third quarter compared with the same time in 2006, the problems are nowhere near the troubles due to real estate loans made to people with less-than-stellar credit.
GMAC's auto loan delinquencies rose from 2.4 percent in the third quarter of 2006 to 2.6 percent in the same period of 2007, Henderson said.
The jury is still out on this subject. In my view, when they raid the whorehouse, they take all the girls.
Goldman Sachs said Asia excluding Japan is likely to grow 8.3 per cent in 2008, compared with an earlier projection of 8.6 percent. The US investment bank in its latest regional forecast also trimmed its growth prediction for 2009, to 8.5 per cent from 8.6 per cent.
According to the WSJ, EMC Corp., the market-share leader in big computer storage systems, said it will start selling flash-memory drives -- similar to those in ultra-portable music players -- to replace some of the slower disk drives in its most powerful systems. The flash drives, to be available later this quarter, let computer programs retrieve information about 30 times faster than the input-output process in a traditional hard-disk drive and use less electricity, EMC said. But they cost about 30 times the price of a disk per megabyte of information stored.
Option ARM delinquencies are at double-digit levels in many areas of California, including the Inland Empire. I wonder whether any of these folks have auto loans.
Sovereign Bancorp said Monday it is taking a $1.4 billion charge for goodwill impairments and boosting loan loss provisions for the fourth quarter to $738 million from $650 million in the previous quarter. The firm also said it is shuttering its auto lending business in the southeast and southwest.
A United 757 jet backed into a small Sky West plane at San Francisco International Airport tonight, airport officials said. The tails of the two planes touched and no one was hurt, said Airport Duty Manager Lily Wang. The incident occurred at about 7:30 p.m. at Gate 80. The United airliner was not carrying passengers and was being taken out of service to the hangar for the night when the accident happened. The SkyWest jet was carrying 56 passengers and headed to Boise, Idaho.
Josh Chasin: "Engagement represents an attempt to capture the quality of a consumer's exposure to content. Not all exposures are engaged exposures, and we want our measurement of ad media to account for the difference. It goes beyond "how many?" and "how much?" to ask "how good?" These two developments -- the decline in the efficacy of the page view and the increased demand for engagement -- are arguments for a reconsideration of time and space. Specifically, I contend that we should move from page views to duration-based audience metrics. That, in turn, requires thinking about how consumers pay attention. Maybe we need to think about online media consumption in two flavors: "time spent" and "engaged time spent." What if we could track the time consumers spend with each Web property -- pages, audio, video, IM or widgets -- in a way that allows for capturing multitasking behavior?"
According to Bloomberg, The Baltic Dry Index, a measure of shipping costs for commodities, fell the most since 1989 on concern that economic growth in the U.S. and China is slowing. The index, which tracks transport costs on international trade routes, dropped 384 points, or 4.6 percent, to 7,949 points today, according to the London-based Baltic Exchange. Hire rates for every class of ship dropped. ``It could be that in 12 months' time, we look back and see this was the start'' of a recession, Andreas Vergottis, research director at Tufton Oceanic Ltd. in London, said by telephone today. The company's $1.2 billion hedge fund is the world's biggest dedicated to shipping.
Talks between China Mobile Ltd. and Apple Inc. over the launch of iPhone handsets in China have been called off, officials at the Chinese company said Monday.
India's prime minister called for expanding business opportunities with China in construction, education, financial services, and tourism in a speech Monday to business executives at the start of a state visit. Prime Minister Manmohan Singh's three-day visit to China, the first by an Indian prime minister in five years, seeks to inject new vitality into the sometimes strained relationship between the two nations, whose booming economies are increasingly driving world trade. Together, their population of nearly 2.4 billion accounts for one-third of humanity.
IBM raised guidance this morning on strong international orders, and put earnings at $2.80 EPS, and the First Call estimate was $2.60 EPS.
According to Bloomberg, the smartest money in natural gas may get its best trade this year by exploiting the difference between London, where prices are the highest in almost two years, and New York, where the market is cheapest. Investors should sell natural gas in London and buy contracts in New York for the summer, where prices are ``the lowest in the world,'' Goldman Sachs Group Inc. analysts wrote Jan. 11. I have mentioned this disparity several times in recent weeks.
Qatar's Energy Minister Abdullah al-Attiyah said OPEC is unable to temper near-record price.
Thomson Corp.'s proposed $17 billion acquisition of Reuters Group PLC should receive regulatory clearance early in the second quarter of 2008, both companies said in a statement on Monday.
John Hussman: "It may seem counterintuitive, but the sort of “blunt” selling we observed last week is generally a favorable development. It allows value-conscious investors to establish positions as stocks are sold indiscriminately, after which the market often sorts the wheat from the chaff more carefully." In my view, a couple of stocks to consider at these levels is Cisco and EMC.
Quantifiableedges.blogspot.com: "Do IBD Follow Through Days Provide A Quantifiable Edge? (Intro)
The S&P 500 currently stands about 11% below its October 11th highs. The rally attempt that began near the end of November officially failed last week as the November lows were undercut. Growth-oriented traders everywhere are now eagerly awaiting the next Investors Business Daily Follow Through Day so that they may more aggressively put their capital to work. The IBD Follow Through Day is a technical tool to help investors time market bottoms. My first introduction to the Follow Through Day was in William O’Neil’s book How To Make Money In Stocks. The Follow Through Day is both widely followed and widely accepted as an early signal of a market bottom – but does is really provide investors with a quantitative edge?
While their descriptions are sometimes inconsistent the basic concept and claims of the Follow Though Day may be summed up as follows:
1) After a significant market decline, rather than trying to pick a bottom, investors should wait for a signal from the major averages to let them know the market is likely to begin a new uptrend. This signal is the Follow Through Day.
2) A Follow Through Day is a day where one of the major averages makes a significant rise (currently defined as 1.7% - previously defined as 1%) on increased volume.
3) Follow Through Days may occur starting on day 4 of an attempted market rally. Follow Through Days occurring after day 10 are deemed less reliable.
4) There has never been a market bottom followed by a bull rally without one.
While at first glance the Follow Through Day seems straightforward, much of it is either vague or inconsistent. IBD says that the concept is backed by decades of research. Unfortunately, to my knowledge, details of this research have never been released to the public. It is difficult to duplicate this research because IBD is vague about important terms – such as what they consider a significant market decline to be and what would determine “success” after a Follow Through Day occurs. But just because vague terms and inconsistencies make the research difficult to duplicate doesn’t mean it isn’t worth doing. As you may be beginning to realize, I believe the subject deserves a significant amount of consideration. Rather than try and cover it all at once (and subject everyone to an incredibly long blog entry) I will be doing a series of reports over the next week or two to take an in-depth look at IBD Follow Through Days. In these reports I will attempt to answer such questions as:
1) Are Follow Through Days predictive of a new bull rally?
2) Has there ever been a bull rally without one?
3) Do they do a good job of picking a bottom (or do they frequently miss too much of the move)?
4) Do they work better after small or large market declines?
5) Do Follow Through Days occurring more than 10 days after a market bottom yield lower success rates?
6) Can I devise a successful trading system using Follow Through Days?
The market put in a strong reversal day last Wednesday. Monday is the first day that a Follow Through Day is possible. Will it provide investors with a quantitative edge? You’re going to find out…
...first installment tomorrow."
A.S.V. Inc., producer of rubber track loaders and accessories, undercarriages and traction products, definitively agreed to be acquired by Terex Corp. for $18 a share, or $488 million, the companies said.
Harman International Industries Inc. lowered its full-year outlook on Monday, just months after a buyout of the company broke up over concerns about its business.The audio and electronics product maker expects a per-share profit of $3 to $3.10, excluding after-tax costs related to that deal but including its buyback program. Analysts polled by Thomson Financial expect a full-year profit of $4.31 per share, on average.
Genentech said net income for the period ended in December rose to $632 million, or 59 cents a share, compared to $594 million, or 55 cents a share in the same period a year earlier. Meanwhile operating revenue rose to $2.97 billion from $2.71 billion. Excluding special charges, Genentech said earnings for the period would have been 69 cents a share. Analysts polled by Thomson Financial have been estimating Genentech would post earnings of 67 cents a share for the period, on $2.97 billion in revenue.
"Every single product relative to Street consensus was light," said Mike King, an analyst at Rodman and Renshaw. "When you've got the biggest products that are the biggest growth drivers, Avastin and Lucentis, light, that's disappointing."
The Dow Jones Industrial Average climbed 171.9 points to 1,2778.2. The S&P 500 added 15.23 points to end at 1,416.25, while the Nasdaq Composite gained 38.36 points to 2,478.30.
Crude futures for February delivery closed up $1.51, or 1.6%, at $94.20 a barrel on the New York Mercantile Exchange. Natural gas closed strongly at $8.36. Gold futures for February delivery ended up $5.7, or 0.6%, at $903.4 an ounce on the New York Mercantile Exchange. The U.S. dollar index fell to as low as 75.36 on Monday, the weakest in six weeks.
Sprint Nextel Corp plans to lay off several thousand employees to prove to investors it is serious about keeping down costs, the Wall Street Journal reported on Monday.
Citigroup Inc may eliminate 17,000 to 24,000 jobs and write off as much as $24 billion for subprime and other credit losses, as part of a plan to cut costs and add capital, CNBC television said on Monday.
At a board meeting on Monday, Citigroup directors were poised to sign off on a "sizable" dividend cut, the newspaper said. The bank is also getting a cash infusion of at least $10 billion and will write down as much as $20 billion in mortgage-related investments as part of its fourth-quarter earnings report, due on Tuesday, the Journal added.
According to Bloomberg, the dollar fell to a seven-week low against the euro on speculation U.S. interest rates will drop below those of the 15 nations that share the euro for the first time in three years.
There are mounting anecdotal signs that beginning in December Americans cut back significantly on personal consumption, which accounts for 70 percent of the economy. This should come as no surprise. Americans are unable to utilize their homes as an ATM.
General Motors Corp.'s top finance executive said Sunday he doesn't see the subprime mortgage mess spreading into auto loans at the company's former credit arm, GMAC financial services.
Chief Financial Officer Fritz Henderson said that although GMAC auto loan delinquencies were up slightly in the third quarter compared with the same time in 2006, the problems are nowhere near the troubles due to real estate loans made to people with less-than-stellar credit.
GMAC's auto loan delinquencies rose from 2.4 percent in the third quarter of 2006 to 2.6 percent in the same period of 2007, Henderson said.
The jury is still out on this subject. In my view, when they raid the whorehouse, they take all the girls.
Goldman Sachs said Asia excluding Japan is likely to grow 8.3 per cent in 2008, compared with an earlier projection of 8.6 percent. The US investment bank in its latest regional forecast also trimmed its growth prediction for 2009, to 8.5 per cent from 8.6 per cent.
According to the WSJ, EMC Corp., the market-share leader in big computer storage systems, said it will start selling flash-memory drives -- similar to those in ultra-portable music players -- to replace some of the slower disk drives in its most powerful systems. The flash drives, to be available later this quarter, let computer programs retrieve information about 30 times faster than the input-output process in a traditional hard-disk drive and use less electricity, EMC said. But they cost about 30 times the price of a disk per megabyte of information stored.
Option ARM delinquencies are at double-digit levels in many areas of California, including the Inland Empire. I wonder whether any of these folks have auto loans.
Sovereign Bancorp said Monday it is taking a $1.4 billion charge for goodwill impairments and boosting loan loss provisions for the fourth quarter to $738 million from $650 million in the previous quarter. The firm also said it is shuttering its auto lending business in the southeast and southwest.
A United 757 jet backed into a small Sky West plane at San Francisco International Airport tonight, airport officials said. The tails of the two planes touched and no one was hurt, said Airport Duty Manager Lily Wang. The incident occurred at about 7:30 p.m. at Gate 80. The United airliner was not carrying passengers and was being taken out of service to the hangar for the night when the accident happened. The SkyWest jet was carrying 56 passengers and headed to Boise, Idaho.
Josh Chasin: "Engagement represents an attempt to capture the quality of a consumer's exposure to content. Not all exposures are engaged exposures, and we want our measurement of ad media to account for the difference. It goes beyond "how many?" and "how much?" to ask "how good?" These two developments -- the decline in the efficacy of the page view and the increased demand for engagement -- are arguments for a reconsideration of time and space. Specifically, I contend that we should move from page views to duration-based audience metrics. That, in turn, requires thinking about how consumers pay attention. Maybe we need to think about online media consumption in two flavors: "time spent" and "engaged time spent." What if we could track the time consumers spend with each Web property -- pages, audio, video, IM or widgets -- in a way that allows for capturing multitasking behavior?"
According to Bloomberg, The Baltic Dry Index, a measure of shipping costs for commodities, fell the most since 1989 on concern that economic growth in the U.S. and China is slowing. The index, which tracks transport costs on international trade routes, dropped 384 points, or 4.6 percent, to 7,949 points today, according to the London-based Baltic Exchange. Hire rates for every class of ship dropped. ``It could be that in 12 months' time, we look back and see this was the start'' of a recession, Andreas Vergottis, research director at Tufton Oceanic Ltd. in London, said by telephone today. The company's $1.2 billion hedge fund is the world's biggest dedicated to shipping.
Talks between China Mobile Ltd. and Apple Inc. over the launch of iPhone handsets in China have been called off, officials at the Chinese company said Monday.
India's prime minister called for expanding business opportunities with China in construction, education, financial services, and tourism in a speech Monday to business executives at the start of a state visit. Prime Minister Manmohan Singh's three-day visit to China, the first by an Indian prime minister in five years, seeks to inject new vitality into the sometimes strained relationship between the two nations, whose booming economies are increasingly driving world trade. Together, their population of nearly 2.4 billion accounts for one-third of humanity.
IBM raised guidance this morning on strong international orders, and put earnings at $2.80 EPS, and the First Call estimate was $2.60 EPS.
According to Bloomberg, the smartest money in natural gas may get its best trade this year by exploiting the difference between London, where prices are the highest in almost two years, and New York, where the market is cheapest. Investors should sell natural gas in London and buy contracts in New York for the summer, where prices are ``the lowest in the world,'' Goldman Sachs Group Inc. analysts wrote Jan. 11. I have mentioned this disparity several times in recent weeks.
Qatar's Energy Minister Abdullah al-Attiyah said OPEC is unable to temper near-record price.
Thomson Corp.'s proposed $17 billion acquisition of Reuters Group PLC should receive regulatory clearance early in the second quarter of 2008, both companies said in a statement on Monday.
John Hussman: "It may seem counterintuitive, but the sort of “blunt” selling we observed last week is generally a favorable development. It allows value-conscious investors to establish positions as stocks are sold indiscriminately, after which the market often sorts the wheat from the chaff more carefully." In my view, a couple of stocks to consider at these levels is Cisco and EMC.
Quantifiableedges.blogspot.com: "Do IBD Follow Through Days Provide A Quantifiable Edge? (Intro)
The S&P 500 currently stands about 11% below its October 11th highs. The rally attempt that began near the end of November officially failed last week as the November lows were undercut. Growth-oriented traders everywhere are now eagerly awaiting the next Investors Business Daily Follow Through Day so that they may more aggressively put their capital to work. The IBD Follow Through Day is a technical tool to help investors time market bottoms. My first introduction to the Follow Through Day was in William O’Neil’s book How To Make Money In Stocks. The Follow Through Day is both widely followed and widely accepted as an early signal of a market bottom – but does is really provide investors with a quantitative edge?
While their descriptions are sometimes inconsistent the basic concept and claims of the Follow Though Day may be summed up as follows:
1) After a significant market decline, rather than trying to pick a bottom, investors should wait for a signal from the major averages to let them know the market is likely to begin a new uptrend. This signal is the Follow Through Day.
2) A Follow Through Day is a day where one of the major averages makes a significant rise (currently defined as 1.7% - previously defined as 1%) on increased volume.
3) Follow Through Days may occur starting on day 4 of an attempted market rally. Follow Through Days occurring after day 10 are deemed less reliable.
4) There has never been a market bottom followed by a bull rally without one.
While at first glance the Follow Through Day seems straightforward, much of it is either vague or inconsistent. IBD says that the concept is backed by decades of research. Unfortunately, to my knowledge, details of this research have never been released to the public. It is difficult to duplicate this research because IBD is vague about important terms – such as what they consider a significant market decline to be and what would determine “success” after a Follow Through Day occurs. But just because vague terms and inconsistencies make the research difficult to duplicate doesn’t mean it isn’t worth doing. As you may be beginning to realize, I believe the subject deserves a significant amount of consideration. Rather than try and cover it all at once (and subject everyone to an incredibly long blog entry) I will be doing a series of reports over the next week or two to take an in-depth look at IBD Follow Through Days. In these reports I will attempt to answer such questions as:
1) Are Follow Through Days predictive of a new bull rally?
2) Has there ever been a bull rally without one?
3) Do they do a good job of picking a bottom (or do they frequently miss too much of the move)?
4) Do they work better after small or large market declines?
5) Do Follow Through Days occurring more than 10 days after a market bottom yield lower success rates?
6) Can I devise a successful trading system using Follow Through Days?
The market put in a strong reversal day last Wednesday. Monday is the first day that a Follow Through Day is possible. Will it provide investors with a quantitative edge? You’re going to find out…
...first installment tomorrow."
A.S.V. Inc., producer of rubber track loaders and accessories, undercarriages and traction products, definitively agreed to be acquired by Terex Corp. for $18 a share, or $488 million, the companies said.
Harman International Industries Inc. lowered its full-year outlook on Monday, just months after a buyout of the company broke up over concerns about its business.The audio and electronics product maker expects a per-share profit of $3 to $3.10, excluding after-tax costs related to that deal but including its buyback program. Analysts polled by Thomson Financial expect a full-year profit of $4.31 per share, on average.
Genentech said net income for the period ended in December rose to $632 million, or 59 cents a share, compared to $594 million, or 55 cents a share in the same period a year earlier. Meanwhile operating revenue rose to $2.97 billion from $2.71 billion. Excluding special charges, Genentech said earnings for the period would have been 69 cents a share. Analysts polled by Thomson Financial have been estimating Genentech would post earnings of 67 cents a share for the period, on $2.97 billion in revenue.
"Every single product relative to Street consensus was light," said Mike King, an analyst at Rodman and Renshaw. "When you've got the biggest products that are the biggest growth drivers, Avastin and Lucentis, light, that's disappointing."
The Dow Jones Industrial Average climbed 171.9 points to 1,2778.2. The S&P 500 added 15.23 points to end at 1,416.25, while the Nasdaq Composite gained 38.36 points to 2,478.30.
Crude futures for February delivery closed up $1.51, or 1.6%, at $94.20 a barrel on the New York Mercantile Exchange. Natural gas closed strongly at $8.36. Gold futures for February delivery ended up $5.7, or 0.6%, at $903.4 an ounce on the New York Mercantile Exchange. The U.S. dollar index fell to as low as 75.36 on Monday, the weakest in six weeks.
Sprint Nextel Corp plans to lay off several thousand employees to prove to investors it is serious about keeping down costs, the Wall Street Journal reported on Monday.
Citigroup Inc may eliminate 17,000 to 24,000 jobs and write off as much as $24 billion for subprime and other credit losses, as part of a plan to cut costs and add capital, CNBC television said on Monday.
At a board meeting on Monday, Citigroup directors were poised to sign off on a "sizable" dividend cut, the newspaper said. The bank is also getting a cash infusion of at least $10 billion and will write down as much as $20 billion in mortgage-related investments as part of its fourth-quarter earnings report, due on Tuesday, the Journal added.
The Harrah's Deal
1/14/08 The Harrah's Deal
Mike Burk: "The good news is the market is likely to be at or near a short term bottom... The OTC hit a new low for the cycle on Friday as did OTC NL, however, there were less than half the number of new lows on the NASDAQ on Friday than there were on Wednesday. The comparison was even better on the NYSE...The market is very oversold and likely to be at or near a short term bottom. I expect the major indices to be higher on Friday January 18 than they were on Friday January 11."
President Bush said that “Iran is the world’s leading state sponsor of terror,” and that the U.S. and its Arab allies must confront the danger “before it’s too late.”
The Oil Drum: "Iraq's average oil output rose again in December, marking a roughly 30 percent increase since the start of 2007, the country's oil ministry said Saturday. The average output last month reached 2.475 million barrels per day, according to figures released by the State Oil Marketing Company. In January 2007, output was 1.9 million barrels."
Prime Minister Manmohan Singh of India arrived in Beijing today for a three-day visit to China, with each country eager to increase trade, promote mutual friendship and offer reassurances that Asia is big enough to accommodate the ambitions of both rising powers.
According to Bloomberg, China plans to better coordinate fiscal and monetary policies in 2008 to help reduce its trade surplus and mop up excessive liquidity, Vice Finance Minister Li Yong said today. China's money supply grew at the slowest pace in seven months in December, the central bank said yesterday, after it took measures to cool inflation and prevent the economy from overheating. China may face pressure from Europe and the U.S. to allow faster gains by its currency after the nation's trade surplus surged 48 percent to a record $262.2 billion last year. ``This year's fiscal policy will focus on structural adjustments and help essentially solve the problem of excess liquidity,'' Li said at a conference in Beijing. ``Monetary policies should focus on quantitative controls to win more time for structural reforms.'' China also needs to use administrative measures to tackle these issues, he said, without being specific.
According to two people familiar with the situation, Delta's board was expected to be asked to allow formal talks between Delta and Northwest and UAL Corp.'s United Airlines, with the idea that Delta would ultimately choose to combine with one of the two. The people spoke on condition of anonymity because of the sensitivity of the talks.
Bill Gross: "While banks reserve 15% against deposits, the current credit crunch will have to deal with the collapse of SIVs [structured investment vehicles] and financial conduits that have no reserves. "This isn't going to be a normal cyclical downturn in which inventories are addressed, paving the way for the economy to be rebuilt," he says. "It is a unique situation the world hasn't faced in modern times." It's unlikely the government will come to the rescue, Gross notes, due to election-year rigidity. "This is a very poor year to have a recession," he remarks wryly. In contrast to a year ago, corporate bonds now hold value, with spreads 5.5 points or more above Treasuries. While peak spreads have hit 10 percentage points, Gross doesn't think the spread will widen to that extent. He will be looking at high-yield bonds in the second half of 2008.
Robert McHugh: "There was a new Dow Theory development this week. We got a Dow Theory Primary Trend Bear Market signal in November. Both averages hit new all-time highs in the summer, we got an upside non-confirmation of the Industrials new higher high in October, then both averages fell below the preceding secondary closing lows, generating the signal in November. Neither average busted out to new highs since, then on Friday, January 4th, 2008 Trannies dropped and closed below their November closing lows (green line on charts on next page), and the Industrials confirmed by dropping and closing below their November 12,724 low this week, on Tuesday January 8th, a Dow Theory Bear market confirmation. It suggests downside risk is high."
"We remain concerned that the amount of losses generated due to writing of insurance on mortgage-backed securities in the form of credit default swaps is relatively unknown, which could test the solvency of a major bank," says Charles Gradante, managing principal of Hennessee Group, a hedge-fund investment firm.
Boeing Co won an order for 16 of its 787 "Dreamliner" aircraft and options for eight more from Bahrain-based Gulf Air, in a contract worth as much as $6 billion, Gulf Air said on Sunday.
U.S. brewer Anheuser-Busch has approached British peer Scottish & Newcastle Plc about helping it in any bid for full control of Baltic Beverages Holding, The Sunday Times newspaper reported. The paper also said S&N, which has rejected a 7.6 billion pounds ($14.9 billion) takeover approach from Carlsberg and Heineken , had received approaches from private equity firms Blackstone and Texas Pacific Group.
Satyajit Das: "There are also emerging concerns in the $915 bln credit card debt markets. Credit card providers are all boosting loan loss provisions. There is anecdotal evidence that cash strapped mortgagors are using credit cards to make mortgage payments. Analysts expect credit card delinquencies to increase if consumers unable to use home-equity lines of credit to pay off their credit card debt start running up higher card debt."
“Housing is down; it’s going to come back,” said Hovnanian. “There has been a major correction already. We’re certainly near the bottom, that would be my guess.”
The city of Cleveland, an epicenter of the nation's home foreclosure crisis, has sued 21 banks, claiming their subprime lending practices have created a public nuisance that hurt property values and city tax collections. The lawsuit, filed Thursday in Cuyahoga County Common Pleas Court, seeks to recover hundreds of millions of dollars in damages, including lost taxes from devalued property and money spent demolishing and boarding up thousands of abandoned houses.
Authorities in New York and Connecticut are investigating whether Wall Street banks hid crucial information about high-risk loans bundled into securities that were sold to investors, Connecticut's Attorney General said Saturday.
The investigations, first reported Saturday by The New York Times , center around "no-doc" or "exception" loans, that did not even meet subprime standards, Attorney General Richard Blumenthal said.
Harrah's said on Monday it expects its acquisition by private equity firms Apollo Global Management LLC and TPG Capital LP to close on Jan. 28.
Sears Holdings warned Monday that fourth-quarter earnings per share may fall as much as 51% from last year, as nine-week Sears Domestic same-store sales fell by 2.8% and Kmart same-store sales fell by 4.2%.
Citigroup's plan to raise around $2 billion of capital by selling a stake to China Development Bank could be in jeopardy because of opposition from the Chinese government, according to a Wall Street Journal report Monday.
Gold futures on Monday surged to a new record, climbing as high as $915.90 an ounce and recently up $15.40 to $913.10 an ounce. Concerns that the U.S. may be cutting interest rates while Europe is raising them, as well as a report that Citigroup may need to write off $24 billion, drove a wave of dollar selling against the euro, the yen and other major currencies.
The Kuwait Investment Authority is expected to become a significant investor in Merrill Lynch as the U.S. investment house seeks around $4 billion in a second capital raising, according to a report in the Financial Times on Monday. Kuwait may also invest as much as $3 billion in Citigroup, the newspaper reported.
Severe winter weather conditions forecast Monday for the northeast U.S. may force some flight delays and cancellations at airports in the region, Continental Airlines Inc. and Delta Air Lines Inc. have warned.
According to the WSJ, a long-running dispute over one of the world's biggest oil-development projects was finally resolved last night with an agreement to let the Kazakhstan state oil and gas company double its stake in the multibillion-dollar venture. But the amount JSC NC KazMunaiGaz will pay for its increased share shows how little leverage Western companies have these days when faced with oil-rich countries emboldened by soaring crude prices and determined to regain control of their natural resources.
Mike Burk: "The good news is the market is likely to be at or near a short term bottom... The OTC hit a new low for the cycle on Friday as did OTC NL, however, there were less than half the number of new lows on the NASDAQ on Friday than there were on Wednesday. The comparison was even better on the NYSE...The market is very oversold and likely to be at or near a short term bottom. I expect the major indices to be higher on Friday January 18 than they were on Friday January 11."
President Bush said that “Iran is the world’s leading state sponsor of terror,” and that the U.S. and its Arab allies must confront the danger “before it’s too late.”
The Oil Drum: "Iraq's average oil output rose again in December, marking a roughly 30 percent increase since the start of 2007, the country's oil ministry said Saturday. The average output last month reached 2.475 million barrels per day, according to figures released by the State Oil Marketing Company. In January 2007, output was 1.9 million barrels."
Prime Minister Manmohan Singh of India arrived in Beijing today for a three-day visit to China, with each country eager to increase trade, promote mutual friendship and offer reassurances that Asia is big enough to accommodate the ambitions of both rising powers.
According to Bloomberg, China plans to better coordinate fiscal and monetary policies in 2008 to help reduce its trade surplus and mop up excessive liquidity, Vice Finance Minister Li Yong said today. China's money supply grew at the slowest pace in seven months in December, the central bank said yesterday, after it took measures to cool inflation and prevent the economy from overheating. China may face pressure from Europe and the U.S. to allow faster gains by its currency after the nation's trade surplus surged 48 percent to a record $262.2 billion last year. ``This year's fiscal policy will focus on structural adjustments and help essentially solve the problem of excess liquidity,'' Li said at a conference in Beijing. ``Monetary policies should focus on quantitative controls to win more time for structural reforms.'' China also needs to use administrative measures to tackle these issues, he said, without being specific.
According to two people familiar with the situation, Delta's board was expected to be asked to allow formal talks between Delta and Northwest and UAL Corp.'s United Airlines, with the idea that Delta would ultimately choose to combine with one of the two. The people spoke on condition of anonymity because of the sensitivity of the talks.
Bill Gross: "While banks reserve 15% against deposits, the current credit crunch will have to deal with the collapse of SIVs [structured investment vehicles] and financial conduits that have no reserves. "This isn't going to be a normal cyclical downturn in which inventories are addressed, paving the way for the economy to be rebuilt," he says. "It is a unique situation the world hasn't faced in modern times." It's unlikely the government will come to the rescue, Gross notes, due to election-year rigidity. "This is a very poor year to have a recession," he remarks wryly. In contrast to a year ago, corporate bonds now hold value, with spreads 5.5 points or more above Treasuries. While peak spreads have hit 10 percentage points, Gross doesn't think the spread will widen to that extent. He will be looking at high-yield bonds in the second half of 2008.
Robert McHugh: "There was a new Dow Theory development this week. We got a Dow Theory Primary Trend Bear Market signal in November. Both averages hit new all-time highs in the summer, we got an upside non-confirmation of the Industrials new higher high in October, then both averages fell below the preceding secondary closing lows, generating the signal in November. Neither average busted out to new highs since, then on Friday, January 4th, 2008 Trannies dropped and closed below their November closing lows (green line on charts on next page), and the Industrials confirmed by dropping and closing below their November 12,724 low this week, on Tuesday January 8th, a Dow Theory Bear market confirmation. It suggests downside risk is high."
"We remain concerned that the amount of losses generated due to writing of insurance on mortgage-backed securities in the form of credit default swaps is relatively unknown, which could test the solvency of a major bank," says Charles Gradante, managing principal of Hennessee Group, a hedge-fund investment firm.
Boeing Co won an order for 16 of its 787 "Dreamliner" aircraft and options for eight more from Bahrain-based Gulf Air, in a contract worth as much as $6 billion, Gulf Air said on Sunday.
U.S. brewer Anheuser-Busch has approached British peer Scottish & Newcastle Plc about helping it in any bid for full control of Baltic Beverages Holding, The Sunday Times newspaper reported. The paper also said S&N, which has rejected a 7.6 billion pounds ($14.9 billion) takeover approach from Carlsberg and Heineken , had received approaches from private equity firms Blackstone and Texas Pacific Group.
Satyajit Das: "There are also emerging concerns in the $915 bln credit card debt markets. Credit card providers are all boosting loan loss provisions. There is anecdotal evidence that cash strapped mortgagors are using credit cards to make mortgage payments. Analysts expect credit card delinquencies to increase if consumers unable to use home-equity lines of credit to pay off their credit card debt start running up higher card debt."
“Housing is down; it’s going to come back,” said Hovnanian. “There has been a major correction already. We’re certainly near the bottom, that would be my guess.”
The city of Cleveland, an epicenter of the nation's home foreclosure crisis, has sued 21 banks, claiming their subprime lending practices have created a public nuisance that hurt property values and city tax collections. The lawsuit, filed Thursday in Cuyahoga County Common Pleas Court, seeks to recover hundreds of millions of dollars in damages, including lost taxes from devalued property and money spent demolishing and boarding up thousands of abandoned houses.
Authorities in New York and Connecticut are investigating whether Wall Street banks hid crucial information about high-risk loans bundled into securities that were sold to investors, Connecticut's Attorney General said Saturday.
The investigations, first reported Saturday by The New York Times , center around "no-doc" or "exception" loans, that did not even meet subprime standards, Attorney General Richard Blumenthal said.
Harrah's said on Monday it expects its acquisition by private equity firms Apollo Global Management LLC and TPG Capital LP to close on Jan. 28.
Sears Holdings warned Monday that fourth-quarter earnings per share may fall as much as 51% from last year, as nine-week Sears Domestic same-store sales fell by 2.8% and Kmart same-store sales fell by 4.2%.
Citigroup's plan to raise around $2 billion of capital by selling a stake to China Development Bank could be in jeopardy because of opposition from the Chinese government, according to a Wall Street Journal report Monday.
Gold futures on Monday surged to a new record, climbing as high as $915.90 an ounce and recently up $15.40 to $913.10 an ounce. Concerns that the U.S. may be cutting interest rates while Europe is raising them, as well as a report that Citigroup may need to write off $24 billion, drove a wave of dollar selling against the euro, the yen and other major currencies.
The Kuwait Investment Authority is expected to become a significant investor in Merrill Lynch as the U.S. investment house seeks around $4 billion in a second capital raising, according to a report in the Financial Times on Monday. Kuwait may also invest as much as $3 billion in Citigroup, the newspaper reported.
Severe winter weather conditions forecast Monday for the northeast U.S. may force some flight delays and cancellations at airports in the region, Continental Airlines Inc. and Delta Air Lines Inc. have warned.
According to the WSJ, a long-running dispute over one of the world's biggest oil-development projects was finally resolved last night with an agreement to let the Kazakhstan state oil and gas company double its stake in the multibillion-dollar venture. But the amount JSC NC KazMunaiGaz will pay for its increased share shows how little leverage Western companies have these days when faced with oil-rich countries emboldened by soaring crude prices and determined to regain control of their natural resources.
Saturday, January 12, 2008
The Presses Are Working Overtime
1/14/08 The Presses Are Working Overtime
Doug Noland: "Bank Credit expanded $23.3bn during the most recent data week (1/2) to a record $9.280 TN (3-wk gain of $115bn). Bank Credit posted a 24-week surge of $636bn (15.9% annualized) and a 52-week rise of $987bn, or 11.9%. For the week, Securities Credit surged $48.1bn. Loans & Leases dropped $24.7bn to $6.806 TN (24-wk gain of $481bn). C&I loans added $3.6bn, with one-year growth of 21.6%. Real Estate loans increased $0.5bn (up 7.9% y-o-y). Consumer loans fell $5.0bn. Securities loans declined $9.3bn, and Other loans dropped $14.4bn. On the liability side, (previous M3) Large Time Deposits rose $12.6bn. M2 (narrow) "money" supply increased $4.3bn to a record $7.472 TN (week of 12/31). Narrow "money" expanded $411bn during 2007, or 5.8%. For the week, Currency added $0.8bn, and Demand & Checkable Deposits increased $8.2bn. Savings Deposits fell $13.1bn, and Small Denominated Deposits dipped $0.3bn. Retail Money Fund assets rose $8.7bn...The downgrade of the $6bn Victoria SIV by Standard & Poor's takes its rating deep into 'junk' territory, to B minus. Just three months ago it was rated AAA. Analysts yesterday warned that Victoria's fate was being echoed across the SIV sector as this corner of finance suffers a barrage of downgrades. SIVs issue cheap, short-term debt to fund investments in longer-term and higher-yielding securities...An index of Junk bond spreads to Treasuries actually widened an additional 4 basis points today to 603 bps, this week above 600 for the first time since - not coincidently - the 2002 Debt Crisis...The world is a much different place today. The Mortgage Finance Bubble is a bust, Wall Street finance is imploding, and foreign financial institutions are keen to cut and run from the business of providing U.S. Credit. Countrywide's mortgage problems will be absorbed - along with so many other risks - by our domestic banking system. Worse yet, the economy is quickly succumbing to recessionary forces. With a high degree of confidence we can proclaim that the Mortgage Crisis has now evolved into a Corporate Debt Crisis - and this crisis will not be resolved anytime soon - by rates, by helicopters, or by bailouts. Unlike 2002, today's Credit crisis is systemic. Consumer and financial sector fragilities - the heart of our Credit system - are now impaired to the point of imperiling the capacity of the Credit system to finance business spending and intermediate corporate lending risk. To be sure, prospects for a faltering U.S. consumer sector, massive financial sector Credit losses, and an imminent economic downturn have quite negative ramifications for business lending and valuations. In particular, unfolding dislocation in the CDS and Credit "insurance" markets will severely restrict Credit Availability for small, medium and large firms - especially those less than top-tier borrowers. I'll go further and suggest that a severe tightening of Financial Conditions has abruptly made many business borrowing plans unviable; many a balance sheet and debt load untenable; and vast numbers of business strategies - crafted in altogether different financial and economic times - much less viable. Some companies will make the necessary adjustments and many will not. The unfolding backdrop definitely makes a lot of stock buyback plans imprudent and growth strategies highly risky. The aggressive risk-taking business manager - having previously capitalized on the protracted boom - will now be at a similar handicap to that which afflicted the zealous home buyer and lender banker."
Peter Schiff: "Given Ben Bernanke's promise yesterday to supply substantive interest rate reductions, despite his belief that the U.S. economy is not headed toward recession (a claim that even the Fed Chairman obviously does not believe), inflation has been given much more room to run. Of course, the Fed's free money fest will not be sidetracked by today's data that showed the November trade deficit surging to $63.1 Billion (some export boom), limit-up moves in commodity prices (beans in the teens!), and 2007 import prices rising by 10.9%, the largest calendar-year increase since 1987. Basically the Fed is sending the message that inflation is going to get a whole lot worse and that it couldn't care less. As the price of gold continues to climb as a result, look for more excuses to minimize the significance of the move."
Despite the growing threat from Islamic extremists, President Pervez Musharraf said U.S. troops are not welcome to join the fight against al-Qaida on Pakistani soil. Musharraf warned in an interview published Friday that Pakistan would resist any unilateral military action by the United States against militants sheltering in its lawless, tribal regions close to the Afghan border. "I challenge anybody coming into our mountains," he told Singapore's The Straits Times in the interview, notable for its unusually strident language. "They would regret that day."
Gary Ryan Blair: "Creative risk taking is essential to success in any goal where the stakes are high. Thoughtless risks are destructive, of course, but perhaps even more wasteful is thoughtless caution which prompts inaction and promotes failure to seize opportunity."
American Express was the worst Dow stock on Friday, falling 10% to $44 after warning late Thursday that it was seeing more delinquencies and less activity from consumers and was reserving $400 million to cover potential losses.
According to the FT, Citigroup is putting the final touches on its second major capital-raising effort in as many months, seeking up to $14bn from Chinese, Kuwaiti and public market investors, people familiar with the negotiations say.
UBS on Friday tried to rally support for its plans to raise SFr19bn ($17.2bn) in fresh capital following the US subprime crisis and warned that 2008 was “likely to be another generally difficult year. In a letter to shareholders, the Swiss group, one of the biggest casualties of the US subprime turmoil, sought to head off criticism of its handling of the crisis and its recourse to sovereign wealth funds for much of its new capital.
Young Broadcasting Inc. said Thursday that it is putting its San Francisco-based TV station, KRON, on the block. The company, which has retained financial advisers Moelis & Co., said that its goal is to conclude an agreement for the sale of KRON, a MyNetworkTV affiliate, before the end of the first quarter.
"Our decision to sell is based on the high level of interest in the property that we have received," Young Broadcasting chairman Vincent Young said. "It is purely a strategic economic decision, allowing us to benefit from the proceeds of the sale to further our future corporate initiatives."
Maya Lin: "To fly, we have to have resistance."
Even though equities have had a sharp decline over the past two weeks, the VIX is still only 23+.
Doug Noland: "Bank Credit expanded $23.3bn during the most recent data week (1/2) to a record $9.280 TN (3-wk gain of $115bn). Bank Credit posted a 24-week surge of $636bn (15.9% annualized) and a 52-week rise of $987bn, or 11.9%. For the week, Securities Credit surged $48.1bn. Loans & Leases dropped $24.7bn to $6.806 TN (24-wk gain of $481bn). C&I loans added $3.6bn, with one-year growth of 21.6%. Real Estate loans increased $0.5bn (up 7.9% y-o-y). Consumer loans fell $5.0bn. Securities loans declined $9.3bn, and Other loans dropped $14.4bn. On the liability side, (previous M3) Large Time Deposits rose $12.6bn. M2 (narrow) "money" supply increased $4.3bn to a record $7.472 TN (week of 12/31). Narrow "money" expanded $411bn during 2007, or 5.8%. For the week, Currency added $0.8bn, and Demand & Checkable Deposits increased $8.2bn. Savings Deposits fell $13.1bn, and Small Denominated Deposits dipped $0.3bn. Retail Money Fund assets rose $8.7bn...The downgrade of the $6bn Victoria SIV by Standard & Poor's takes its rating deep into 'junk' territory, to B minus. Just three months ago it was rated AAA. Analysts yesterday warned that Victoria's fate was being echoed across the SIV sector as this corner of finance suffers a barrage of downgrades. SIVs issue cheap, short-term debt to fund investments in longer-term and higher-yielding securities...An index of Junk bond spreads to Treasuries actually widened an additional 4 basis points today to 603 bps, this week above 600 for the first time since - not coincidently - the 2002 Debt Crisis...The world is a much different place today. The Mortgage Finance Bubble is a bust, Wall Street finance is imploding, and foreign financial institutions are keen to cut and run from the business of providing U.S. Credit. Countrywide's mortgage problems will be absorbed - along with so many other risks - by our domestic banking system. Worse yet, the economy is quickly succumbing to recessionary forces. With a high degree of confidence we can proclaim that the Mortgage Crisis has now evolved into a Corporate Debt Crisis - and this crisis will not be resolved anytime soon - by rates, by helicopters, or by bailouts. Unlike 2002, today's Credit crisis is systemic. Consumer and financial sector fragilities - the heart of our Credit system - are now impaired to the point of imperiling the capacity of the Credit system to finance business spending and intermediate corporate lending risk. To be sure, prospects for a faltering U.S. consumer sector, massive financial sector Credit losses, and an imminent economic downturn have quite negative ramifications for business lending and valuations. In particular, unfolding dislocation in the CDS and Credit "insurance" markets will severely restrict Credit Availability for small, medium and large firms - especially those less than top-tier borrowers. I'll go further and suggest that a severe tightening of Financial Conditions has abruptly made many business borrowing plans unviable; many a balance sheet and debt load untenable; and vast numbers of business strategies - crafted in altogether different financial and economic times - much less viable. Some companies will make the necessary adjustments and many will not. The unfolding backdrop definitely makes a lot of stock buyback plans imprudent and growth strategies highly risky. The aggressive risk-taking business manager - having previously capitalized on the protracted boom - will now be at a similar handicap to that which afflicted the zealous home buyer and lender banker."
Peter Schiff: "Given Ben Bernanke's promise yesterday to supply substantive interest rate reductions, despite his belief that the U.S. economy is not headed toward recession (a claim that even the Fed Chairman obviously does not believe), inflation has been given much more room to run. Of course, the Fed's free money fest will not be sidetracked by today's data that showed the November trade deficit surging to $63.1 Billion (some export boom), limit-up moves in commodity prices (beans in the teens!), and 2007 import prices rising by 10.9%, the largest calendar-year increase since 1987. Basically the Fed is sending the message that inflation is going to get a whole lot worse and that it couldn't care less. As the price of gold continues to climb as a result, look for more excuses to minimize the significance of the move."
Despite the growing threat from Islamic extremists, President Pervez Musharraf said U.S. troops are not welcome to join the fight against al-Qaida on Pakistani soil. Musharraf warned in an interview published Friday that Pakistan would resist any unilateral military action by the United States against militants sheltering in its lawless, tribal regions close to the Afghan border. "I challenge anybody coming into our mountains," he told Singapore's The Straits Times in the interview, notable for its unusually strident language. "They would regret that day."
Gary Ryan Blair: "Creative risk taking is essential to success in any goal where the stakes are high. Thoughtless risks are destructive, of course, but perhaps even more wasteful is thoughtless caution which prompts inaction and promotes failure to seize opportunity."
American Express was the worst Dow stock on Friday, falling 10% to $44 after warning late Thursday that it was seeing more delinquencies and less activity from consumers and was reserving $400 million to cover potential losses.
According to the FT, Citigroup is putting the final touches on its second major capital-raising effort in as many months, seeking up to $14bn from Chinese, Kuwaiti and public market investors, people familiar with the negotiations say.
UBS on Friday tried to rally support for its plans to raise SFr19bn ($17.2bn) in fresh capital following the US subprime crisis and warned that 2008 was “likely to be another generally difficult year. In a letter to shareholders, the Swiss group, one of the biggest casualties of the US subprime turmoil, sought to head off criticism of its handling of the crisis and its recourse to sovereign wealth funds for much of its new capital.
Young Broadcasting Inc. said Thursday that it is putting its San Francisco-based TV station, KRON, on the block. The company, which has retained financial advisers Moelis & Co., said that its goal is to conclude an agreement for the sale of KRON, a MyNetworkTV affiliate, before the end of the first quarter.
"Our decision to sell is based on the high level of interest in the property that we have received," Young Broadcasting chairman Vincent Young said. "It is purely a strategic economic decision, allowing us to benefit from the proceeds of the sale to further our future corporate initiatives."
Maya Lin: "To fly, we have to have resistance."
Even though equities have had a sharp decline over the past two weeks, the VIX is still only 23+.
More Writedowns
1/12/08 More Writedowns
Countrywide shareholders would receive 0.1822 of a Bank of America share in exchange for each of their shares. The transaction values Countrywide at $7.16 per share, a 7.6 percent discount to the Thursday closing price of the company's stock.
They are looking at a closing in the third quarter of 2008.
Merrill Lynch is expected to suffer $15 billion in losses stemming from soured mortgage investments, almost twice the company's original estimate, the New York Times reported on Friday. The losses were prompting the company to raise additional capital from an outside investor, the newspaper said in a report on its Web site.
American Express Co and Capital One Financial Corp , the largest independent U.S. credit card companies, projected profits below analyst forecasts on Thursday, citing mounting consumer loan losses as the U.S. economy slows.The forecasts show how the housing slump, tighter credit, high oil prices and rising unemployment have made it harder for many consumers to pay their bills. This has caused credit problems to widen beyond mortgages and affect other forms of debt, including credit cards and auto loans.
U.K. mortgage bank Northern Rock agreed to sell its portfolio of lifetime home equity release mortgages to J.P. Morgan. The portfolio has a balance sheet value of 2.2 billion pounds ($4.3 billion) and is being sold at a premium of 2.25%, the bank said. Northern Rock added the portfolio represents around 2% of its total assets as at June 30 and generated net interest income of 34 million pounds in the 12 months to the end of June. It will use the proceeds to reduce its borrowing from the Bank of England.
A tanker with a capacity of 65,000 barrels of oil struck a bridge on San Francisco Bay on Thursday evening, the San Francisco Chronicle reported. No oil was spilled, the ship's crew told the U.S. Coast Guard.
China's trade surplus climbed 48% to a record in 2007, according to reports. The nation's trade gap rose to $262.2 billion during the 12-month period, compared to $177.47 billion in 2006, newswires reported, citing figures released Friday by the General Administration of Customs. China's trade gap for December totaled $22.69 billion, compared to November's $26.28 billion and October's $27.05 billion. Chinese exports in December climbed 21.7% from the year-earlier period to $114.42 billion, while imports rose 25.7% on year to $91.73 billion.
Infosys Technologies reported a higher-than-expected 25.2% increase in third-quarter net profit on strong growth in revenue from outsourced contracts. Net profit during the October-December period rose to 12.31 billion rupees ($314 million), or 21.54 rupees a share, from a year-ago. Revenue increased 16.9% to 42.71 billion rupees, helped by the addition of 47 new clients. The company raised its full-year earnings forecast to 81.07 rupees, from at least 79.49 rupees previously and increased its revenue projection to a minimum of 166.27 billion rupees, from at least 165.88 billion rupees earlier.
Gold futures nudged the $900 per ounce level for the first time in electronic trading in Asia early Friday.
Japanese tax receipts on individuals are expected to climb 420 billion yen ($3.83 billion) once a repeal of tax cuts on stock dividends and real estate transactions come into effect during the next few years as part of a package of reforms, the Nikkei business daily reported Friday.
Ten weeks into the screenwriters' strike, Weinstein Co. has reached an interim agreement with the Writers Guild of America that will allow the independent studio to restart work on new films, according to Harvey Weinstein, co-chairman.
The US is at risk of losing its top-notch triple-A credit rating within a decade unless it takes radical action to curb soaring healthcare and social security spending, Moody’s, the credit rating agency, said on Thursday. As I have noted in the last few years, a rating cut is warranted and long over due.
UBS wrote down the value of debt securities and leveraged loans by $14.7 billion last year, adding to more than $100 billion in markdowns and loan losses announced by the world's largest banks and securities firms. In my view, those write downs will mount higher in 2008.
India's industrial production grew in November at the slowest pace in 13 months, making it more likely the central bank may soon end more than three years of interest rate increases. Production at factories, utilities and mines rose 5.3 percent from a year earlier after gaining a revised 12 percent in October, the statistics office said By comparison, the U.S. is in reverse.
Richard Daughty: "The impact of tighter food supply is already evident in raw food prices, which have risen 22% in the past year."
According to the NY Times, the new oil, along with refining projects under way by Petrobras, the national oil company, could eventually make Brazil a larger exporter of gasoline as well, adding to supplies in the United States and other countries where it is all but impossible to build new refineries. The subsalt basin that contains Tupi, the new deepwater field estimated to hold the equivalent of five billion to eight billion barrels of light crude oil, is creating a buzz among the world’s largest oil companies. They have struggled lately to find global-scale projects worth investing in, even with oil touching $100 a barrel. Tupi is the world’s biggest oil find since a 12-billion-barrel field discovered in 2000 in Kazakhstan.
Judith Warner on Hillary Clinton: "I don’t for a moment begrudge Hillary her victory on Tuesday. But if victory came for the reasons we’ve been led to believe – because women voters ultimately saw in her, exhausted and near defeat, a countenance that mirrored their own – then I hate what that victory says about the state of their lives and the nature of the emotions they carry forward into this race. I hate the thought that women feel beaten down, backed into a corner, overwhelmed and near to breaking point, as Hillary appeared to be in the debate Saturday night. And I hate even more that they’ve got to see a strong, smart and savvy woman cut down to size before they can embrace her as one of their own."
Zman: "You have to go all the way back to 2005 to find a surplus to the five year average this small. Again, while I think(natural) gas is due a pull back, this recent draw down towards more "average" levels should prevent gas from taking a drastic turn lower over the next couple of months…probably now lower than mid 7s barring a heat wave."
Between the Hedges: "The number of individual investors who are bearish on US equities exceeds those who are bullish by the most since November 1990, a signal to some investors that stocks may be poised to rebound. The percentage of AAII respondents who are bearish has exceeded those who are bullish by more than 33 percentage points only three other times since 1990 – in October 1992, February 2003 and July 2006. In the 12 months that followed those periods, the S&P 500 rose 14%, 35% and 24%, respectively. Assets in US money-market funds increased by $61.3 billion during the week ended Jan. 8, the sixth-largest increase on record, to an all-time high of $3.15 trillion, according to iMoneyNet."
Robert McHugh: "The VIX continues to follow the path annotated earlier this week, finishing a nasty multi-month Symmetrical Triangle pattern, with horrid prospects for the stock market over the next 4 to 6 months. The direction that an index traveled prior to this particular triangle pattern occurring is almost always the direction that the index will travel leaving the pattern. Because the pattern is large, we believe the VIX is headed much higher, perhaps into the 40's. It currently sits around 23.00. The VIX moves inversely to stocks. A sharply rising VIX means sharply diving stocks. Short-term, the VIX pattern needs to drop to about the 19.00 to 20.00 area, which should reporesent the end of the current rally. This could likely occur late next week, around our coming phi mate turn date. Two enjoyable rally days are over, and every second of the next week's move must be appreciated."
Deutsche Bank AG raised its forecast for crude oil prices this year because of global political tensions and a ``tight'' balance between demand and supply. West Texas Intermediate and Brent crude oil will average $85 a barrel this year, 6.3 percent more than a previous forecast of $80 a barrel, Deutsche Bank analysts including Pavel Kushnir wrote in a report today. Oil prices will average $80 a barrel in 2009 and $75 a barrel in 2010.
"We're facing the worst housing recession in U.S. history," according to Nouriel Roubini, an economics professor at New York University and co-founder of RGE Monitor, an economic research and analysis firm. He predicted peak-to-bottom national home price losses of 30 percent. Roubini joined a group of three other real estate experts at the Real Estate Connect NYC 2008 conference in New York Wednesday for a discussion titled, "The Housing Debate: Bull vs. Bear." "There will be 10 million houses with negative equity," he said, where the owners will owe more on their mortgages than the properties are worth, giving them less incentive to keep making payments. Many will walk away, he said, depressing markets further. The housing turndown, according to Roubini, was the initial trigger for a broad economic decline. "We're in an economy-wide recession already, one that will be much more severe than those of 1991 or 2001," he said. Although housing only accounts for 5 percent of the economy, he noted, the slump has already reduced consumption, which makes up two-thirds of it. Consumers are no longer tapping home equity, and they're cutting back on spending. And credit problems are no longer confined to subprime loans, according to Roubini. They've spread to near-prime mortgages, prime, auto loans and junk bonds, with losses that could reach trillions of dollars.
According to the RBC Cash Index, consumer confidence tumbled to a mark of 56.3 in early January. That compares with a reading of 65.9 in December — and a benchmark of 100 — and was the worst since the index began in 2002.
"People are anxious because everything sounds pretty awful these days," said Bill Cheney, chief economist at John Hancock Financial Services Group.
Matt Simmons: "My opinion is that it’s increasingly likely that we actually set an all-time record in May 2005 of 74,252,000 barrels per day. And for the first three months of 2007, we’re almost a million barrels per day behind that, and we’re dropping fast. If that record still holds a year from now, I’ll bet someone ten-to-one that we set peak oil in May 2005 and it’s now past tense."
Bill Bonner: " The feds can't stop a slump. All they can do is react to it. And their reactions are likely to lead to higher inflation levels."
According to AMG Data Services, including ETF activity, Equity funds report net cash outflows totaling -$8.427 billion in the week ended 1/9/08 with Domestic funds reporting net outflows of -$6.974 billion and Non-domestic funds reporting net outflows of -$1.453 billion; Excluding ETF activity, Equity funds report net cash inflows totaling $533 million with Domestic funds reporting net inflows of $264 million and Non-domestic funds reporting net inflows totaling $269 million.
The decline in leveraged buyouts is slashing fees for investment banks, including Deutsche Bank and JPMorgan Chase, by about 50 percent, Bloomberg News reported. Buyout firms paid $5.4 billion to securities firms in the U.S. and Europe in the second half of 2007, 38 percent less than the first six months, data compiled by New York-based research firm Freeman & Company and Thomson Financial show. The drop was steepest in Europe where fees fell 54 percent.
CNBC reported Friday morning that the bank was in preliminary talks with Washington Mutual. The talks are at a very early stage, people briefed on them told DealBook. These people suggested that J.P. Morgan has been holding early talks with several rivals, including SunTrust, and is weighing its options.
Record imports and surging oil prices helped widen the U.S. trade deficit much more than expected in November to $63.1 billion, despite a ninth consecutive month of record exports, a U.S. Commerce Department report on Friday showed. The trade gap jumped 9.3 percent to its highest level since September 2006 from a slightly revised estimate of $57.8 billion in October.
Ingersoll-Rand Co Ltd said on Friday it has taken a noncash pretax charge of $449 million for pending and estimated future asbestos claims through 2053. The charge, which will be $277 million after tax, results from a $538 million increase in recorded liability for asbestos claims to $755 million.
Tiffany lowers outlook, sees 'pullback' in U.S. spending.
CIT Group Inc. indicated it would post a fourth-quarter loss amid boosting loan-loss provisions by $300 million and writing off the remaining goodwill from getting into the student-loan business.
Up to 1,000 employees on the Warner Bros. lot in Burbank could be laid off anytime after Friday as a result of the Hollywood writers strike.
"Democratic Presidential candidate Dennis Kucinich, the most outspoken advocate in the Presidential field and in Congress for election integrity, paper-ballot elections, and campaign finance reform, has sent a letter to the New Hampshire Secretary of State asking for a recount of Tuesday’s election because of “unexplained disparities between hand-counted ballots and machine-counted ballots.”
AllianceBernstein Holding LP tumbled in Friday morning trading after the investment management firm said Thursday evening 2007 earnings per share would fall 30 cents short of previous estimates. The investment management company earnings estimates were revised lower because of worse-than-expected hedge performance fees and larger-than-expected loses on investment write downs.
From the BLS: "Due to budget constraints, beginning with the January 2008 release scheduled to be published on February 15, the price series for export postsecondary education services, export travel and tourism services, inbound ocean liner freight, and inbound tanker freight will no longer be published."
Citigroup Inc. is expected to get an investment from Saudi Prince Alwaleed bin Talal and other investors including China Development Bank, The Wall Street Journal reported on its Web site late Friday, citing people familiar with the matter.
The Dow Jones Industrial Average fell 246.8 points to close at 12,606.3. The S&P 500 shed 19.31 points to 1,401.02, while the Nasdaq Composite declined 48.58 points to 2,439.94.
Crude for February delivery closed down 81 cents, or 0.9%, at $92.90 a barrel on the New York Mercantile Exchange. Crude ended the week down $5.
Year to date, the U.S. is running a budget deficit of $105.5 billion.
Gold for February delivery ended up $4.1, or 0.5%, at $897.7 an ounce on the New York Mercantile Exchange.
MBIA Inc., the largest bond insurer, paid a yield of 14 percent on the sale of $1 billion of AA rated notes, a rate usually charged to the lowest-ranked borrowers. The yield is 3.125 percent higher than what Greenwood Village, Colorado-based First Data Corp. paid in October when it sold $2.2 billion of bonds to finance its leveraged buyout by Kohlberg, Kravis Roberts & Co., according to Merrill Lynch & Co. index data. ``It was expensive but they needed to get it done,'' said Kevin Murphy, who oversees investment-grade and emerging-market bonds at Boston-based Putnam Investments, which has $65 billion in fixed-income assets under management. ``It's good news for the company, good news for the bond insurance sector and good news for the credit markets.'' Since when is it good news to pay interest at a 14% rate?
Floyd Norris: "AMERICAN credit card debt is growing at the fastest rate in years, a fact that may signal coming trouble for the banks that issue them."
The terror card never sleeps under Bush. Attacks against U.S. troops in Iraq with bombs believed linked to Iran -- known as explosively formed penetrators (EFPs) -- have risen sharply in January after several months of decline, according to the top U.S. commander in Iraq.
Countrywide shareholders would receive 0.1822 of a Bank of America share in exchange for each of their shares. The transaction values Countrywide at $7.16 per share, a 7.6 percent discount to the Thursday closing price of the company's stock.
They are looking at a closing in the third quarter of 2008.
Merrill Lynch is expected to suffer $15 billion in losses stemming from soured mortgage investments, almost twice the company's original estimate, the New York Times reported on Friday. The losses were prompting the company to raise additional capital from an outside investor, the newspaper said in a report on its Web site.
American Express Co and Capital One Financial Corp , the largest independent U.S. credit card companies, projected profits below analyst forecasts on Thursday, citing mounting consumer loan losses as the U.S. economy slows.The forecasts show how the housing slump, tighter credit, high oil prices and rising unemployment have made it harder for many consumers to pay their bills. This has caused credit problems to widen beyond mortgages and affect other forms of debt, including credit cards and auto loans.
U.K. mortgage bank Northern Rock agreed to sell its portfolio of lifetime home equity release mortgages to J.P. Morgan. The portfolio has a balance sheet value of 2.2 billion pounds ($4.3 billion) and is being sold at a premium of 2.25%, the bank said. Northern Rock added the portfolio represents around 2% of its total assets as at June 30 and generated net interest income of 34 million pounds in the 12 months to the end of June. It will use the proceeds to reduce its borrowing from the Bank of England.
A tanker with a capacity of 65,000 barrels of oil struck a bridge on San Francisco Bay on Thursday evening, the San Francisco Chronicle reported. No oil was spilled, the ship's crew told the U.S. Coast Guard.
China's trade surplus climbed 48% to a record in 2007, according to reports. The nation's trade gap rose to $262.2 billion during the 12-month period, compared to $177.47 billion in 2006, newswires reported, citing figures released Friday by the General Administration of Customs. China's trade gap for December totaled $22.69 billion, compared to November's $26.28 billion and October's $27.05 billion. Chinese exports in December climbed 21.7% from the year-earlier period to $114.42 billion, while imports rose 25.7% on year to $91.73 billion.
Infosys Technologies reported a higher-than-expected 25.2% increase in third-quarter net profit on strong growth in revenue from outsourced contracts. Net profit during the October-December period rose to 12.31 billion rupees ($314 million), or 21.54 rupees a share, from a year-ago. Revenue increased 16.9% to 42.71 billion rupees, helped by the addition of 47 new clients. The company raised its full-year earnings forecast to 81.07 rupees, from at least 79.49 rupees previously and increased its revenue projection to a minimum of 166.27 billion rupees, from at least 165.88 billion rupees earlier.
Gold futures nudged the $900 per ounce level for the first time in electronic trading in Asia early Friday.
Japanese tax receipts on individuals are expected to climb 420 billion yen ($3.83 billion) once a repeal of tax cuts on stock dividends and real estate transactions come into effect during the next few years as part of a package of reforms, the Nikkei business daily reported Friday.
Ten weeks into the screenwriters' strike, Weinstein Co. has reached an interim agreement with the Writers Guild of America that will allow the independent studio to restart work on new films, according to Harvey Weinstein, co-chairman.
The US is at risk of losing its top-notch triple-A credit rating within a decade unless it takes radical action to curb soaring healthcare and social security spending, Moody’s, the credit rating agency, said on Thursday. As I have noted in the last few years, a rating cut is warranted and long over due.
UBS wrote down the value of debt securities and leveraged loans by $14.7 billion last year, adding to more than $100 billion in markdowns and loan losses announced by the world's largest banks and securities firms. In my view, those write downs will mount higher in 2008.
India's industrial production grew in November at the slowest pace in 13 months, making it more likely the central bank may soon end more than three years of interest rate increases. Production at factories, utilities and mines rose 5.3 percent from a year earlier after gaining a revised 12 percent in October, the statistics office said By comparison, the U.S. is in reverse.
Richard Daughty: "The impact of tighter food supply is already evident in raw food prices, which have risen 22% in the past year."
According to the NY Times, the new oil, along with refining projects under way by Petrobras, the national oil company, could eventually make Brazil a larger exporter of gasoline as well, adding to supplies in the United States and other countries where it is all but impossible to build new refineries. The subsalt basin that contains Tupi, the new deepwater field estimated to hold the equivalent of five billion to eight billion barrels of light crude oil, is creating a buzz among the world’s largest oil companies. They have struggled lately to find global-scale projects worth investing in, even with oil touching $100 a barrel. Tupi is the world’s biggest oil find since a 12-billion-barrel field discovered in 2000 in Kazakhstan.
Judith Warner on Hillary Clinton: "I don’t for a moment begrudge Hillary her victory on Tuesday. But if victory came for the reasons we’ve been led to believe – because women voters ultimately saw in her, exhausted and near defeat, a countenance that mirrored their own – then I hate what that victory says about the state of their lives and the nature of the emotions they carry forward into this race. I hate the thought that women feel beaten down, backed into a corner, overwhelmed and near to breaking point, as Hillary appeared to be in the debate Saturday night. And I hate even more that they’ve got to see a strong, smart and savvy woman cut down to size before they can embrace her as one of their own."
Zman: "You have to go all the way back to 2005 to find a surplus to the five year average this small. Again, while I think(natural) gas is due a pull back, this recent draw down towards more "average" levels should prevent gas from taking a drastic turn lower over the next couple of months…probably now lower than mid 7s barring a heat wave."
Between the Hedges: "The number of individual investors who are bearish on US equities exceeds those who are bullish by the most since November 1990, a signal to some investors that stocks may be poised to rebound. The percentage of AAII respondents who are bearish has exceeded those who are bullish by more than 33 percentage points only three other times since 1990 – in October 1992, February 2003 and July 2006. In the 12 months that followed those periods, the S&P 500 rose 14%, 35% and 24%, respectively. Assets in US money-market funds increased by $61.3 billion during the week ended Jan. 8, the sixth-largest increase on record, to an all-time high of $3.15 trillion, according to iMoneyNet."
Robert McHugh: "The VIX continues to follow the path annotated earlier this week, finishing a nasty multi-month Symmetrical Triangle pattern, with horrid prospects for the stock market over the next 4 to 6 months. The direction that an index traveled prior to this particular triangle pattern occurring is almost always the direction that the index will travel leaving the pattern. Because the pattern is large, we believe the VIX is headed much higher, perhaps into the 40's. It currently sits around 23.00. The VIX moves inversely to stocks. A sharply rising VIX means sharply diving stocks. Short-term, the VIX pattern needs to drop to about the 19.00 to 20.00 area, which should reporesent the end of the current rally. This could likely occur late next week, around our coming phi mate turn date. Two enjoyable rally days are over, and every second of the next week's move must be appreciated."
Deutsche Bank AG raised its forecast for crude oil prices this year because of global political tensions and a ``tight'' balance between demand and supply. West Texas Intermediate and Brent crude oil will average $85 a barrel this year, 6.3 percent more than a previous forecast of $80 a barrel, Deutsche Bank analysts including Pavel Kushnir wrote in a report today. Oil prices will average $80 a barrel in 2009 and $75 a barrel in 2010.
"We're facing the worst housing recession in U.S. history," according to Nouriel Roubini, an economics professor at New York University and co-founder of RGE Monitor, an economic research and analysis firm. He predicted peak-to-bottom national home price losses of 30 percent. Roubini joined a group of three other real estate experts at the Real Estate Connect NYC 2008 conference in New York Wednesday for a discussion titled, "The Housing Debate: Bull vs. Bear." "There will be 10 million houses with negative equity," he said, where the owners will owe more on their mortgages than the properties are worth, giving them less incentive to keep making payments. Many will walk away, he said, depressing markets further. The housing turndown, according to Roubini, was the initial trigger for a broad economic decline. "We're in an economy-wide recession already, one that will be much more severe than those of 1991 or 2001," he said. Although housing only accounts for 5 percent of the economy, he noted, the slump has already reduced consumption, which makes up two-thirds of it. Consumers are no longer tapping home equity, and they're cutting back on spending. And credit problems are no longer confined to subprime loans, according to Roubini. They've spread to near-prime mortgages, prime, auto loans and junk bonds, with losses that could reach trillions of dollars.
According to the RBC Cash Index, consumer confidence tumbled to a mark of 56.3 in early January. That compares with a reading of 65.9 in December — and a benchmark of 100 — and was the worst since the index began in 2002.
"People are anxious because everything sounds pretty awful these days," said Bill Cheney, chief economist at John Hancock Financial Services Group.
Matt Simmons: "My opinion is that it’s increasingly likely that we actually set an all-time record in May 2005 of 74,252,000 barrels per day. And for the first three months of 2007, we’re almost a million barrels per day behind that, and we’re dropping fast. If that record still holds a year from now, I’ll bet someone ten-to-one that we set peak oil in May 2005 and it’s now past tense."
Bill Bonner: " The feds can't stop a slump. All they can do is react to it. And their reactions are likely to lead to higher inflation levels."
According to AMG Data Services, including ETF activity, Equity funds report net cash outflows totaling -$8.427 billion in the week ended 1/9/08 with Domestic funds reporting net outflows of -$6.974 billion and Non-domestic funds reporting net outflows of -$1.453 billion; Excluding ETF activity, Equity funds report net cash inflows totaling $533 million with Domestic funds reporting net inflows of $264 million and Non-domestic funds reporting net inflows totaling $269 million.
The decline in leveraged buyouts is slashing fees for investment banks, including Deutsche Bank and JPMorgan Chase, by about 50 percent, Bloomberg News reported. Buyout firms paid $5.4 billion to securities firms in the U.S. and Europe in the second half of 2007, 38 percent less than the first six months, data compiled by New York-based research firm Freeman & Company and Thomson Financial show. The drop was steepest in Europe where fees fell 54 percent.
CNBC reported Friday morning that the bank was in preliminary talks with Washington Mutual. The talks are at a very early stage, people briefed on them told DealBook. These people suggested that J.P. Morgan has been holding early talks with several rivals, including SunTrust, and is weighing its options.
Record imports and surging oil prices helped widen the U.S. trade deficit much more than expected in November to $63.1 billion, despite a ninth consecutive month of record exports, a U.S. Commerce Department report on Friday showed. The trade gap jumped 9.3 percent to its highest level since September 2006 from a slightly revised estimate of $57.8 billion in October.
Ingersoll-Rand Co Ltd said on Friday it has taken a noncash pretax charge of $449 million for pending and estimated future asbestos claims through 2053. The charge, which will be $277 million after tax, results from a $538 million increase in recorded liability for asbestos claims to $755 million.
Tiffany lowers outlook, sees 'pullback' in U.S. spending.
CIT Group Inc. indicated it would post a fourth-quarter loss amid boosting loan-loss provisions by $300 million and writing off the remaining goodwill from getting into the student-loan business.
Up to 1,000 employees on the Warner Bros. lot in Burbank could be laid off anytime after Friday as a result of the Hollywood writers strike.
"Democratic Presidential candidate Dennis Kucinich, the most outspoken advocate in the Presidential field and in Congress for election integrity, paper-ballot elections, and campaign finance reform, has sent a letter to the New Hampshire Secretary of State asking for a recount of Tuesday’s election because of “unexplained disparities between hand-counted ballots and machine-counted ballots.”
AllianceBernstein Holding LP tumbled in Friday morning trading after the investment management firm said Thursday evening 2007 earnings per share would fall 30 cents short of previous estimates. The investment management company earnings estimates were revised lower because of worse-than-expected hedge performance fees and larger-than-expected loses on investment write downs.
From the BLS: "Due to budget constraints, beginning with the January 2008 release scheduled to be published on February 15, the price series for export postsecondary education services, export travel and tourism services, inbound ocean liner freight, and inbound tanker freight will no longer be published."
Citigroup Inc. is expected to get an investment from Saudi Prince Alwaleed bin Talal and other investors including China Development Bank, The Wall Street Journal reported on its Web site late Friday, citing people familiar with the matter.
The Dow Jones Industrial Average fell 246.8 points to close at 12,606.3. The S&P 500 shed 19.31 points to 1,401.02, while the Nasdaq Composite declined 48.58 points to 2,439.94.
Crude for February delivery closed down 81 cents, or 0.9%, at $92.90 a barrel on the New York Mercantile Exchange. Crude ended the week down $5.
Year to date, the U.S. is running a budget deficit of $105.5 billion.
Gold for February delivery ended up $4.1, or 0.5%, at $897.7 an ounce on the New York Mercantile Exchange.
MBIA Inc., the largest bond insurer, paid a yield of 14 percent on the sale of $1 billion of AA rated notes, a rate usually charged to the lowest-ranked borrowers. The yield is 3.125 percent higher than what Greenwood Village, Colorado-based First Data Corp. paid in October when it sold $2.2 billion of bonds to finance its leveraged buyout by Kohlberg, Kravis Roberts & Co., according to Merrill Lynch & Co. index data. ``It was expensive but they needed to get it done,'' said Kevin Murphy, who oversees investment-grade and emerging-market bonds at Boston-based Putnam Investments, which has $65 billion in fixed-income assets under management. ``It's good news for the company, good news for the bond insurance sector and good news for the credit markets.'' Since when is it good news to pay interest at a 14% rate?
Floyd Norris: "AMERICAN credit card debt is growing at the fastest rate in years, a fact that may signal coming trouble for the banks that issue them."
The terror card never sleeps under Bush. Attacks against U.S. troops in Iraq with bombs believed linked to Iran -- known as explosively formed penetrators (EFPs) -- have risen sharply in January after several months of decline, according to the top U.S. commander in Iraq.
Thursday, January 10, 2008
Cross Currents
1/11/08 Cross Currents
Capital One Financial Corp. said early Thursday that its 2007 earnings will fall short of the company's previous expectations because of increased loan delinquencies and additional legal reserves in the fourth quarter.
The Bank of England held interest rates steady at 5.5 percent on Thursday, resisting calls for a cut amid mounting signs of a slowing domestic economy.
Blackstone Group said it's going to pay as much as $930 million to buy GSO Capital Partners, a fund manager specializing in leveraged finance, and said it would buy back up to $500 million in shares. Blackstone said the acquisition would be "non-dilutive."
Global prices for nickel, a key ingredient in stainless steel, have fallen to $29,100 per ton, about 43% below record highs in May.
Costco Wholesale Corp's December sales at stores open at least one year rose 7%.
Scottish & Newcastle rejected a new 7.6 billion pound ($15 billion), 780 pence a share takeover offer, suitors Carlsberg and Heineken said Thursday. The brewers said the offer is conditional on a recommendation from S&N's board, and added that the majority of the increase is being funded by Carlsberg, implying a very full price for BBH, the Russian brewer that Carlsberg and S&N currently jointly own.
Tata Motors unveiled its much-anticipated compact car model, Nano, with a price tag starting at 100,000 rupees ($2,550). The car, which will be available for sale in the second half of 2008, is a four-door vehicle that can seat five and sports a 624 cubic centimeter engine at the rear, according to reports.
Citigroup Inc.and Merrill Lynch are in talks to get further capital injections from investors including foreign governments, according to a report in the Wall Street Journal.
Limited Brands Inc said on Thursday sales at stores open at least a year fell 8 percent in December.
Ed McCarthy: "As I watch the daily unfolding of new ramifications of the Monstrous Greenspan Fed-created global credit bubble now stirred, similar to a witch’s brew, by the Bernanke acolyte and Hank Paulson from Guvmint Sach’s, I am moved to use my former colleagues outburst as the best available description. It has been my contention for quite some time (voiced not only to senior officials in banks and other financial institutions but also to senior regulatory officials) that, it was my opinion, financially engineered “structured finance” credit instruments were similar to the front end of a powerhouse 18 wheeler truck, missing any factual load in the rear compartment. The credit thus created was all acceleration and speed with no thought given to how to handle deceleration. Since tremendous amounts of this now dis-proven “safely diversified risk intermediation” is now in the type of trouble envisioned, I repeat my warning: There is no, repeat, no infrastructure in place to handle the ongoing train wreck that the alchemists have created!"
Steve Moyer on real estate: "Alas, my January, 2008 answer is this: Values have a long way to go (down), both in terms of price and timeframe, and the longer you keep your investment capital safe and secure, the more purchasing power that cash will have when the time is right. We're likely just 15 or 20% of the way there, so patience remains paramount. Just know that with each passing year, the buying power of your safe cash will surely grow."
Countrywide Financial Corp.'s future was called into question again Wednesday after it reported another rise in loan delinquencies and foreclosures, fueling fresh speculation that the company was headed toward bankruptcy.
The nation's biggest mortgage lender was "withering" and "might falter if it does not receive an infusion of at least $4 billion within the next couple of weeks," said Egan-Jones Ratings Co., an advisor to pension funds and other big investors. Weiss Research, which rates the condition of lenders, said the Calabasas company "is on a collision course with bankruptcy," adding that it "exhausted many of its extraordinary financing options last year and is ill-prepared for the rising mortgage defaults and home foreclosures that are widely expected this year."
Goldman Sachs Group cut its economic growth estimate for Japan and said there's a 50 percent chance of a recession in the world's second-largest economy. ``The probability of a recession in Japan has risen to the danger level,'' Tetsufumi Yamakawa, chief Japan economist at Goldman, said in a report to clients today. ``We project weaker- than-expected growth in Japan.''
The pace of Japan's economic growth is slowing due to a big drop in housing investment and the slowdown is likely to persist for some time, a senior central bank official said in a speech Thursday."The nation's economic cycle is weakening now but the cycle itself remains intact," said Toshiro Muto, one of the Bank of Japan's two deputy governors."However, looking ahead, the economy wi
According to the FT, Bear Stearns held preliminary talks with Fortress Investments, a listed alternative asset management firm, regarding a possible combination in the weeks before Jimmy Cayne stepped down as chief executive of the investment bank, people familiar with the matter said.
Escalating fears of a recession drove the cost of protecting corporate debt against default to a record high in the US on Wednesday.
Citing pressures from the "challenging and uncertain" economic environment as well a delays in certain scheduled restaurant openings, Morton's Restaurant Group, the steakhouse operator, said earnings for the final quarter will be in the range of 36 cents to 39 cents a share, well below the company's earlier 46- to-48 cent-a-share guidance. Analysts surveyed by Reuters Estimates had been anticipating per-share earnings of 44 cents, compared with the 33 cents Morton's reported in the last quarter of 2006. The stock sold down to a new low at $6+. The company went public in 2006 at $17.
The Internal Revenue Service should issue "apology payments" of up to $1,000 to taxpayers whose cases are mishandled, the National Taxpayer Advocate told Congress yesterday.Nina E. Olson, a federal official appointed by the Treasury secretary, said Congress should also enact a Taxpayer Bill of Rights.
How about reducing taxes, cutting government spending and government pork? How about eliminating dozens of unnecessary government agencies?
Brett Steenbarger: "Across every major index--S&P 500 large caps; S&P 400 mid caps; S&P 600 small caps--new 52-week lows have expanded relative to August. Until we see a pattern of price lows with fewer stocks making new lows, I'm not jumping into this market for the long haul."
Wal-Mart's same-store sales rose 2.4% for the five weeks ending on January 4.
Logitech International rose over 12% in Europe on rumors that Microsoft might buy the company, according to Reuters.
Morgan Stanley analyst Heidi Wood said the first Boeing Dreamliner still had no avionics or wiring in the cockpit in mid-December and that the speculation of further delay is "likely true." She wrote that the jet's first flight, supposed to happen in March, "might occur closer to late April/May."
U.K. natural gas for delivery this summer and the following winter climbed to records today as the price of spot gas rose. Gas for delivery in the six months through September 2008 climbed as much as 1.5 percent to 53 pence a therm at 8:02 a.m. local time, according to broker ICAP Plc. That's $10.37 a million British thermal units. A therm is 100,000 Btus.
The seasonally adjusted number of people filing for state unemployment benefits fell 15,000 to 322,000 last week, the Labor Department reported Thursday. It's the lowest figure since Nov. 3. The four-week average of new claims fell by 3,000 to 341,000, the lowest in a month. Meanwhile, the number of people receiving state benefits fell by 52,000 to 2.7 million. Despite the decline, the four-week average of continuing claims rose by 17,000 to 2.7 million, the most since November 2005. Compared with the same time last year, initial claims are up about 7%, while continuing claims are up about 10%.
Abercrombie & Fitch's December sales at stores open at least one year fell 2%.
JCPenney December same-department-store sales down 7.5%.
Kohl's December reported same-store sales down 11.4%.
T. ROWE PRICE ASSOCIATES, INC. filed a 13G report
with a 10% ownership of BJ Services.
Yahoo! Real Estate today launched its new online property listings
program, allowing franchisors and brokers nationwide to post their
complete set of home listings on the site for free on the Internet’s
#1 real estate website. Prudential Real Estate Affiliates and Realogy
Corporation, two of the industry’s largest franchisors, are among the first to participate in the service, enabling
their teams of real estate professionals to market their full catalog of
property listings on Yahoo! Real Estate. Realogy’s
franchise brand networks include CENTURY 21, Coldwell Banker, ERA and Sotheby’s International Realty.
European Central Bank President Jean-Claude Trichet said there are upside risks to price stability, and said it remains prepared to act pre-emptively. But he also noted downside risk to the economy from the "re-appraisal of risk in financial markets." The ECB earlier announced it was holding its key interest rate at 4%.
Shares of Yahoo rose 2.9% in pre-market trade, following a report in The New York Post that sources close to Microsoft say the company is still debating if it should make last year's informal offer to buy the search firm official by going public with its bid. The Post last year reported on Microsoft-Yahoo talks, though other outlets reported the discussions were more on a partnership and not a takeover.
According to Bloomberg, Lennar Corp.'s November sale of 11,000 properties in eight states set a price that may mark the bottom for the U.S. housing market: 40 cents on the dollar. That's how much Morgan Stanley Real Estate paid for an 80 percent stake in the 32 communities, 60 percent less than the price at which the properties were valued just two months earlier. That's also what some investors say they would pay for distressed land, condominiums, homes and whole developments, whether it's now or later this year.
Australia's trade deficit narrowed in November for the first time in four months as mining companies shipped more iron, copper, lead and uranium. The trade gap shrank to A$2.25 billion ($1.98 billion) from a revised A$2.86 billion in October, the Bureau of Statistics said in Sydney today.
U.S. natural gas inventories fell 171 billion cubic feet in the week ending Jan. 4, the Energy Information Administration reported on Thursday. After the data, natural gas futures for February delivery rose 3.1 cents, or 0.4%, to $8.14 per million British thermal units.
ABBAS: "The settlement for us is considered an obstacle for negotiations, and we have spoke more than once with Mr. Prime Minister Olmert, very frankly. And we also spoke in this meeting with President George Bush, and consequently, the President understood this issue."
According to MarcoNews, it appears that a mega deal to sell the luxury, Italian-inspired Tuscany Reserve community off Livingston Road near the Lee-Collier line is off. On Monday, a prospective buyer received an e-mail from a community sales agent saying the developer, Bonita Springs-based WCI Communities Inc., “is no longer looking to sell it” and that marketing is gearing up again. The sales agent gave two reasons why cash-strapped WCI has taken the community off the market: The tax advantage that it would have gotten in 2007 doesn’t exist anymore and the company had more closings than expected last month at several other projects, which has improved its cash flow. Jerry Starkey, WCI’s CEO, wouldn’t comment, saying the company doesn’t discuss transactions.
Ben Bernanke: "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks."
After a clear signal from Fed Chairman Ben Bernanke on Thursday, traders are almost certain that the Federal Reserve will cut its key overnight lending rate by a half-point from 4.25% to 3.75% at the Jan. 30 meeting, according to prices in the Chicago Board of Trade's federal funds futures market. The odds of a half-point cut rose to 88% from 76% earlier.
The board of Delta Air Lines Inc. will be asked Friday to begin formal talks with Northwest Airlines Corp.and UAL Corp. with the aim of consummating a merger with one of the companies, The Wall Street Journal reported on its Web site Thursday, citing people familiar with the matter.
The yen strengthened considerably against the dollar and the U.S. dollar index again weakened to the 95.96 level.
Commissioners of the Federal Communications Commission have signed off on the $19.5 billion acquisition of Clear Channel Communications Inc. by Bain Capital and Thomas H. Lee Partners, indicating a possible formal agency approval within the next several weeks, The Wall Street Journal reported on its Web site Thursday, citing a person close to the issue.
Natural gas prices have risen 9 percent since Dec. 31 and are 21 percent higher than a year ago. Gas for February delivery rose 14.7 cents, or 1.8 percent, to $8.246 per million British thermal units at 1:26 p.m. on the New York Mercantile Exchange. A close at that price would be the highest since Nov. 2 when it settled at $8.418 per million Btu.
Chevron Corp. expects fourth-quarter net income to exceed third-quarter results, helped by higher prices for crude oil and natural gas that boosted its upstream segment. The San Ramon, Calif.-based energy company predicts its downstream segment will be lower than the previous quarter, as refined-product margins continued to be weak. Chevron earned $3.72 billion, or $1.75 a share, in the third quarter. For the fourth quarter, analysts polled by Thomson Financial, on average, are expecting earnings of $2.31 a share.
Crude for February delivery ended down $1.96, or 2.1%, at $93.71 a barrel on the New York Mercantile Exchange.
Bank of America Corp.is in advanced talks to buy Countrywide Financial Corp., The Wall Street Journal reported Thursday on its Web site, citing people familiar with the situation. The first time around the B of A bought $2 billion in preferred stock and saw Countrywide shares decline to $5. I guess B of A is a glutton for punishment. The Street was so excited that the Dow took off on a triple digit ride and the shorts hurried to cover.
African proverb: “Only a fool tests the depth of the water with both feet.”
February gold finished up $11.90 at $893.60 an ounce on Nymex.
Capital One Financial Corp. said early Thursday that its 2007 earnings will fall short of the company's previous expectations because of increased loan delinquencies and additional legal reserves in the fourth quarter.
The Bank of England held interest rates steady at 5.5 percent on Thursday, resisting calls for a cut amid mounting signs of a slowing domestic economy.
Blackstone Group said it's going to pay as much as $930 million to buy GSO Capital Partners, a fund manager specializing in leveraged finance, and said it would buy back up to $500 million in shares. Blackstone said the acquisition would be "non-dilutive."
Global prices for nickel, a key ingredient in stainless steel, have fallen to $29,100 per ton, about 43% below record highs in May.
Costco Wholesale Corp's December sales at stores open at least one year rose 7%.
Scottish & Newcastle rejected a new 7.6 billion pound ($15 billion), 780 pence a share takeover offer, suitors Carlsberg and Heineken said Thursday. The brewers said the offer is conditional on a recommendation from S&N's board, and added that the majority of the increase is being funded by Carlsberg, implying a very full price for BBH, the Russian brewer that Carlsberg and S&N currently jointly own.
Tata Motors unveiled its much-anticipated compact car model, Nano, with a price tag starting at 100,000 rupees ($2,550). The car, which will be available for sale in the second half of 2008, is a four-door vehicle that can seat five and sports a 624 cubic centimeter engine at the rear, according to reports.
Citigroup Inc.and Merrill Lynch are in talks to get further capital injections from investors including foreign governments, according to a report in the Wall Street Journal.
Limited Brands Inc said on Thursday sales at stores open at least a year fell 8 percent in December.
Ed McCarthy: "As I watch the daily unfolding of new ramifications of the Monstrous Greenspan Fed-created global credit bubble now stirred, similar to a witch’s brew, by the Bernanke acolyte and Hank Paulson from Guvmint Sach’s, I am moved to use my former colleagues outburst as the best available description. It has been my contention for quite some time (voiced not only to senior officials in banks and other financial institutions but also to senior regulatory officials) that, it was my opinion, financially engineered “structured finance” credit instruments were similar to the front end of a powerhouse 18 wheeler truck, missing any factual load in the rear compartment. The credit thus created was all acceleration and speed with no thought given to how to handle deceleration. Since tremendous amounts of this now dis-proven “safely diversified risk intermediation” is now in the type of trouble envisioned, I repeat my warning: There is no, repeat, no infrastructure in place to handle the ongoing train wreck that the alchemists have created!"
Steve Moyer on real estate: "Alas, my January, 2008 answer is this: Values have a long way to go (down), both in terms of price and timeframe, and the longer you keep your investment capital safe and secure, the more purchasing power that cash will have when the time is right. We're likely just 15 or 20% of the way there, so patience remains paramount. Just know that with each passing year, the buying power of your safe cash will surely grow."
Countrywide Financial Corp.'s future was called into question again Wednesday after it reported another rise in loan delinquencies and foreclosures, fueling fresh speculation that the company was headed toward bankruptcy.
The nation's biggest mortgage lender was "withering" and "might falter if it does not receive an infusion of at least $4 billion within the next couple of weeks," said Egan-Jones Ratings Co., an advisor to pension funds and other big investors. Weiss Research, which rates the condition of lenders, said the Calabasas company "is on a collision course with bankruptcy," adding that it "exhausted many of its extraordinary financing options last year and is ill-prepared for the rising mortgage defaults and home foreclosures that are widely expected this year."
Goldman Sachs Group cut its economic growth estimate for Japan and said there's a 50 percent chance of a recession in the world's second-largest economy. ``The probability of a recession in Japan has risen to the danger level,'' Tetsufumi Yamakawa, chief Japan economist at Goldman, said in a report to clients today. ``We project weaker- than-expected growth in Japan.''
The pace of Japan's economic growth is slowing due to a big drop in housing investment and the slowdown is likely to persist for some time, a senior central bank official said in a speech Thursday."The nation's economic cycle is weakening now but the cycle itself remains intact," said Toshiro Muto, one of the Bank of Japan's two deputy governors."However, looking ahead, the economy wi
According to the FT, Bear Stearns held preliminary talks with Fortress Investments, a listed alternative asset management firm, regarding a possible combination in the weeks before Jimmy Cayne stepped down as chief executive of the investment bank, people familiar with the matter said.
Escalating fears of a recession drove the cost of protecting corporate debt against default to a record high in the US on Wednesday.
Citing pressures from the "challenging and uncertain" economic environment as well a delays in certain scheduled restaurant openings, Morton's Restaurant Group, the steakhouse operator, said earnings for the final quarter will be in the range of 36 cents to 39 cents a share, well below the company's earlier 46- to-48 cent-a-share guidance. Analysts surveyed by Reuters Estimates had been anticipating per-share earnings of 44 cents, compared with the 33 cents Morton's reported in the last quarter of 2006. The stock sold down to a new low at $6+. The company went public in 2006 at $17.
The Internal Revenue Service should issue "apology payments" of up to $1,000 to taxpayers whose cases are mishandled, the National Taxpayer Advocate told Congress yesterday.Nina E. Olson, a federal official appointed by the Treasury secretary, said Congress should also enact a Taxpayer Bill of Rights.
How about reducing taxes, cutting government spending and government pork? How about eliminating dozens of unnecessary government agencies?
Brett Steenbarger: "Across every major index--S&P 500 large caps; S&P 400 mid caps; S&P 600 small caps--new 52-week lows have expanded relative to August. Until we see a pattern of price lows with fewer stocks making new lows, I'm not jumping into this market for the long haul."
Wal-Mart's same-store sales rose 2.4% for the five weeks ending on January 4.
Logitech International rose over 12% in Europe on rumors that Microsoft might buy the company, according to Reuters.
Morgan Stanley analyst Heidi Wood said the first Boeing Dreamliner still had no avionics or wiring in the cockpit in mid-December and that the speculation of further delay is "likely true." She wrote that the jet's first flight, supposed to happen in March, "might occur closer to late April/May."
U.K. natural gas for delivery this summer and the following winter climbed to records today as the price of spot gas rose. Gas for delivery in the six months through September 2008 climbed as much as 1.5 percent to 53 pence a therm at 8:02 a.m. local time, according to broker ICAP Plc. That's $10.37 a million British thermal units. A therm is 100,000 Btus.
The seasonally adjusted number of people filing for state unemployment benefits fell 15,000 to 322,000 last week, the Labor Department reported Thursday. It's the lowest figure since Nov. 3. The four-week average of new claims fell by 3,000 to 341,000, the lowest in a month. Meanwhile, the number of people receiving state benefits fell by 52,000 to 2.7 million. Despite the decline, the four-week average of continuing claims rose by 17,000 to 2.7 million, the most since November 2005. Compared with the same time last year, initial claims are up about 7%, while continuing claims are up about 10%.
Abercrombie & Fitch's December sales at stores open at least one year fell 2%.
JCPenney December same-department-store sales down 7.5%.
Kohl's December reported same-store sales down 11.4%.
T. ROWE PRICE ASSOCIATES, INC. filed a 13G report
with a 10% ownership of BJ Services.
Yahoo! Real Estate today launched its new online property listings
program, allowing franchisors and brokers nationwide to post their
complete set of home listings on the site for free on the Internet’s
#1 real estate website. Prudential Real Estate Affiliates and Realogy
Corporation, two of the industry’s largest franchisors, are among the first to participate in the service, enabling
their teams of real estate professionals to market their full catalog of
property listings on Yahoo! Real Estate. Realogy’s
franchise brand networks include CENTURY 21, Coldwell Banker, ERA and Sotheby’s International Realty.
European Central Bank President Jean-Claude Trichet said there are upside risks to price stability, and said it remains prepared to act pre-emptively. But he also noted downside risk to the economy from the "re-appraisal of risk in financial markets." The ECB earlier announced it was holding its key interest rate at 4%.
Shares of Yahoo rose 2.9% in pre-market trade, following a report in The New York Post that sources close to Microsoft say the company is still debating if it should make last year's informal offer to buy the search firm official by going public with its bid. The Post last year reported on Microsoft-Yahoo talks, though other outlets reported the discussions were more on a partnership and not a takeover.
According to Bloomberg, Lennar Corp.'s November sale of 11,000 properties in eight states set a price that may mark the bottom for the U.S. housing market: 40 cents on the dollar. That's how much Morgan Stanley Real Estate paid for an 80 percent stake in the 32 communities, 60 percent less than the price at which the properties were valued just two months earlier. That's also what some investors say they would pay for distressed land, condominiums, homes and whole developments, whether it's now or later this year.
Australia's trade deficit narrowed in November for the first time in four months as mining companies shipped more iron, copper, lead and uranium. The trade gap shrank to A$2.25 billion ($1.98 billion) from a revised A$2.86 billion in October, the Bureau of Statistics said in Sydney today.
U.S. natural gas inventories fell 171 billion cubic feet in the week ending Jan. 4, the Energy Information Administration reported on Thursday. After the data, natural gas futures for February delivery rose 3.1 cents, or 0.4%, to $8.14 per million British thermal units.
ABBAS: "The settlement for us is considered an obstacle for negotiations, and we have spoke more than once with Mr. Prime Minister Olmert, very frankly. And we also spoke in this meeting with President George Bush, and consequently, the President understood this issue."
According to MarcoNews, it appears that a mega deal to sell the luxury, Italian-inspired Tuscany Reserve community off Livingston Road near the Lee-Collier line is off. On Monday, a prospective buyer received an e-mail from a community sales agent saying the developer, Bonita Springs-based WCI Communities Inc., “is no longer looking to sell it” and that marketing is gearing up again. The sales agent gave two reasons why cash-strapped WCI has taken the community off the market: The tax advantage that it would have gotten in 2007 doesn’t exist anymore and the company had more closings than expected last month at several other projects, which has improved its cash flow. Jerry Starkey, WCI’s CEO, wouldn’t comment, saying the company doesn’t discuss transactions.
Ben Bernanke: "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks."
After a clear signal from Fed Chairman Ben Bernanke on Thursday, traders are almost certain that the Federal Reserve will cut its key overnight lending rate by a half-point from 4.25% to 3.75% at the Jan. 30 meeting, according to prices in the Chicago Board of Trade's federal funds futures market. The odds of a half-point cut rose to 88% from 76% earlier.
The board of Delta Air Lines Inc. will be asked Friday to begin formal talks with Northwest Airlines Corp.and UAL Corp. with the aim of consummating a merger with one of the companies, The Wall Street Journal reported on its Web site Thursday, citing people familiar with the matter.
The yen strengthened considerably against the dollar and the U.S. dollar index again weakened to the 95.96 level.
Commissioners of the Federal Communications Commission have signed off on the $19.5 billion acquisition of Clear Channel Communications Inc. by Bain Capital and Thomas H. Lee Partners, indicating a possible formal agency approval within the next several weeks, The Wall Street Journal reported on its Web site Thursday, citing a person close to the issue.
Natural gas prices have risen 9 percent since Dec. 31 and are 21 percent higher than a year ago. Gas for February delivery rose 14.7 cents, or 1.8 percent, to $8.246 per million British thermal units at 1:26 p.m. on the New York Mercantile Exchange. A close at that price would be the highest since Nov. 2 when it settled at $8.418 per million Btu.
Chevron Corp. expects fourth-quarter net income to exceed third-quarter results, helped by higher prices for crude oil and natural gas that boosted its upstream segment. The San Ramon, Calif.-based energy company predicts its downstream segment will be lower than the previous quarter, as refined-product margins continued to be weak. Chevron earned $3.72 billion, or $1.75 a share, in the third quarter. For the fourth quarter, analysts polled by Thomson Financial, on average, are expecting earnings of $2.31 a share.
Crude for February delivery ended down $1.96, or 2.1%, at $93.71 a barrel on the New York Mercantile Exchange.
Bank of America Corp.is in advanced talks to buy Countrywide Financial Corp., The Wall Street Journal reported Thursday on its Web site, citing people familiar with the situation. The first time around the B of A bought $2 billion in preferred stock and saw Countrywide shares decline to $5. I guess B of A is a glutton for punishment. The Street was so excited that the Dow took off on a triple digit ride and the shorts hurried to cover.
African proverb: “Only a fool tests the depth of the water with both feet.”
February gold finished up $11.90 at $893.60 an ounce on Nymex.
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