1/24/08 Another Huge Market Swing
Jeremy Grantham: "Well, the Minsky Meltdown has clearly arrived, and one shoe after another of the market centipede drops onto the floor, and we are waiting for many more. This is the most important U.S. financial crisis since World War II: it is of course far more global than previous crises, with tentacles reaching everywhere, and it coincides with broad overpricing of assets.
... Stocks meanwhile, relative bystanders last year, are overpriced, particularly at the risky end of the spectrum. And profit margins are spectacularly above average precisely for companies at the riskier end of the spectrum. Margins are declining now and the markets are finally getting the point that all risk is dangerous. Markets are well into a massive repricing of both risk and asset prices but it has far to go outside the original subprime area, where repricing may have already run its course.
Recommendations for 2008: I'm afraid cash is the ugly answer that no one ever wants to hear. For the first time, in many bear markets, traditional value stocks are unlikely to help much and may even hurt, as they entered the decline badly overpriced. And, once again, if you literally cannot resist buying some stocks, we recommend a mix of the highest quality U.S. blue chips and emerging markets. The bigger the fundamental problems, the more quality stocks are likely to outperform."
Robert McHugh: "The Dow Industrials crashed at the open, then recovered about two thirds of its loss, falling 128.11 points Tuesday, closing at 11,971.19. NYSE volume was higher on the decline, at 127 percent of its 10 day average, with downside volume leading at 56 percent, with declining issues at 58 percent, with downside points at 63 percent. A 90 percent up day soon would confirm a multi-week rally had started. Without one, we cannot be sure."
Coach said it expects to generate sales of at least $3.15 billion and earnings of $2.06 a share in fiscal 2008.
Goldman Sachs said it no longer recommends shorting gold, as it has since Dec. 11, which on paper resulted in a loss of $54 an ounce. After the Fed rate cut, "we believe that there is now greater pressure for continued U.S. dollar weakness. We have long held that the gold price trades inversely with the U.S. dollar; thus, with the increased uncertainty in global financial markets and a higher probability of continued U.S. dollar weakness, we believe that the risk/reward of our short gold trade has diminished," it said.
"We remain confident in our earnings per share target of $6.41 for 2008," said Wayne DeVeydt, Wellpoint's chief financial officer.
Merrill Lynch forecasts nationwide U.S. home prices could decline 25% to 30% over the next three years, as new supply and weak demand weigh on the market. "This sounds dire... but would only reverse part of the unprecedented 130% price surge from 2000 to 2006," wrote economist David Rosenberg in a research note released Wednesday. Rosenberg added the S&P 500 may decline an additional 20% to 25% to breach the 1,100-point level if the market follows historical precedents at times when the U.S. economy is in recession.
Motorola's net income fell sharply to $100 million as sales of mobile devices fell 38%.
In Seattle, Starbucks is test marketing an 8 ounce cup of coffee priced at $1 as well as free refills.
Richard Benson: "Inflation is raging now and even with hedonic adjustments and chain weighting tricks, the CPI is up 4.1 percent year-over-year. (Without the tricks used to distort the CPI down, the actual inflation rate is probably more like 6 percent). The American worker is also on life support because the cost of food and fuel is eating them alive and stagnant wages aren’t helping to pay the bills, now that home equity extraction is no longer an option.
So where do we go from here? Today’s prescribed cure (more like a band aid solution over a sword wound) will fuel even fatter federal deficits funded by new money printed up by the Federal Reserve. So the prognosis for the economy may not be death by heart attack, but it will remain in intensive care or in a comma for years. The citizens of our great country experienced an intense sugar rush over the last decade as their waistlines expanded and they ran up very fat personal deficits amounting to over $14 trillion dollars. (It is estimated that $500 billion dollars of that easy money created debt could be in default very soon). Too much sugar, too much fat, a collapsing dollar, and higher inflation can cause an economic heart attack. It happened this week, and you should watch for it to happen again and again."
An economic activity index calculated by the Federal Reserve Bank of Chicago showed its lowest level in more than four years in December, dragged down by a sharp contraction in employment-related indicators, the bank said Tuesday.
The three-month moving average of the Chicago Fed's national activity index was negative 0.67, as the single-month reading for December fell to negative 0.91 from negative 0.29 in November.
The three-month average, which the Chicago Fed says provides a more consistent picture of national economic growth than the volatile monthly readings, hit its lowest level since May 2003, when it was negative 0.74. The December three-month average surpassed the negative 0.66 reading at the end of October.
The Philadelphia Fed reported Tuesday that the economy shrunk in 23 states last month, including Ohio, Missouri and Arizona, and was stagnant in seven others. California and Florida, with their plunging home values, may soon join the recession list.
Richard Daughty: "The point is that the government's promises for future benefits payable under the Social Security and Medicare programs are now estimated to be at $53 trillion, in current dollars. This is up from about $20 trillion in 2000."
Swiss Reinsurance, the biggest reinsurer, said billionaire investor Warren Buffett’s Berkshire Hathaway took a 3 percent stake and will assume a share of its non-life business, giving Swiss Re’s shares their biggest spike in four years.
Berkshire will get 20 percent of Swiss Re’s property and casualty business over the next five years, Swiss Re said Wednesday in an e-mailed statement from Zurich. Swiss Re will use capital freed up by the transaction to finance an additional share buyback of up to 1.75 billion Swiss francs ($1.6 billion).
Tellabs Inc. reported sharply lower fourth-quarter earnings, and unveiled a new cost-cutting plan that will eliminate 225 jobs.
Brett Steenbarger: "My measure of Demand finished at 44, while Supply was 88. It surprised me to see twice as many stocks closing below their volatility envelopes compared to those closing above. Yesterday's bounce was strongest in the sectors that had been weakest: homebuilders and banks, a sign of short-covering more than fresh, sustained buying across the stock universe. We now see only 15% of SPX and NYSE stocks trading above their 200-day moving averages, a level seen near many bear market lows in the past 20 years."
According to one media report, BHP Billiton is preparing a hostile $127 billion bid for rival Rio Tinto Plc.
Cerberus Capital Management LP Chairman John Snow said banks need to ``purge'' about $200 billion of loans for which they haven't found buyers before leveraged buyout firms can resume last year's record pace.
Rob Hanna: "Today’s action put the market squarely into capitulation territory. The CBI broke 10 as expected. Price is now more stretched and some of the measures I use there (RSI, Bollinger Bands, etc.) are now giving extreme readings. Time was already stretched. I’m expecting a significant multi-day bounce to materialize within the next few days. If it materializes, I expect the most beaten down areas to bounce the most."
Freeport-McMoRan forecasts 2008 sales from mines of 4.3 billion pounds of copper, 1.3 million ounces of gold and 75 million pounds of molybdenum, including 885 million pounds of copper, 170 thousand ounces of gold and 19 million pounds of molybdenum for first-quarter.
The dollar fell 1.9% to 105.22 yen -- its worst level since May 2005.
ConocoPhillips net income rose to $4.37 billion, or $2.71 per share, compared with $3.2 billion, or $1.91 per share, during the same period a year earlier.
Crude oil for March delivery dropped $1.91, or nearly 2%, to $87.30 a barrel on the New York Mercantile Exchange in early trading, and gold for February delivery dropped $13.30 to $877 an ounce on the New York Mercantile Exchange.
Pfizer Inc.'s fourth-quarter net income sank 70%, absent a large year-earlier gain, and the drug company's top-seller, Lipitor, posted its first yearly sales decline.
However, Pfizer raised the bottom end of its 2008 earnings outlook and boosted its sales view.
The budget deficit for the current budget year will jump to about $250 billion, the Congressional Budget Office estimated Wednesday, citing the weakening economy. And that figure does not reflect at least $100 billion in additional red ink from an upcoming deficit-financed economic stimulus measure.
A study by two nonprofit journalism organizations found that President Bush and top administration officials issued hundreds of false statements about the national security threat from Iraq in the two years following the 2001 terrorist attacks. The study counted 935 false statements in the two-year period. It found that in speeches, briefings, interviews and other venues, Bush and administration officials stated unequivocally on at least 532 occasions that Iraq had weapons of mass destruction or was trying to produce or obtain them or had links to al-Qaida or both.
Todd Sullivan: Lost in all the wailing over Fed funds rate, a stimulus plan, the election, and bank right offs has been perhaps the most important news facing home owners with ARM's. The LIBOR rate, the interest rate that most adjustable rate mortgages are tied to has fallen from a multi year high of near 6% in early 2007 to a level of 3.9%, the lowest since Sept. 2005. What this means is that the $385 billion in mortgages tied to it that will reset in 2008 will do so at far lower levels than homeowners were looking at less than a year ago. Of all the news we have been assaulted with in the past three weeks, this news is what really matters most. While Bernanke has been constantly criticized by stock investors this month, his actions at the Fed ought to be cheered by homeowners. The stabilizing of this market will help all our home values and in turn our stock portfolios."
Excluding accounting treatments for securitizations and derivatives, SLM had a loss of $139 million, or 36 cents a share, from year-earlier earnings of $326 million or 74 cents a share. Sallie Mae last month had forecast earnings, excluding costs related to its collapsed buyout, of 52 cents to 57 cents a share. "While there were some bright spots, we are obviously disappointed by our fourth-quarter results overall," said Chief Executive Albert Lord. "Our cost of funds and loan loss expectations were impacted by weakening credit markets." The provision for loan losses increased more than sixfold to $574.2 million.
For the period ended Dec. 31, EBAY earned $530.9 million, or 39 cents a share, compared with earnings of $346.5 million or 25 cents a share for the same quarter the previous year. Excluding charges related to stock-option expenses and other items, the company said that it earned $611 million, or 45 cents a share, for the fourth quarter. Revenue grew nearly 27% to $2.18 billion. Analysts had been expecting revenue of $2.14 billion for the quarter. However, EBay Inc warned that 2008 results would fall below Wall Street expectations, sending its shares more than 5 percent lower.
The Dow Jones Industrial Average climbed 299 points to 12,270.2. The S&P 500 rose 28.10 points to 1,338.60, while the Nasdaq Composite gained 24.14 points to 2,316.41.
Crude oil for March delivery closed down $2.22, or 2.5%, at $86.99 a barrel on the New York Mercantile Exchange.
ConocoPhillips CEO Jim Mulva said he doesn't plan any major mergers or acquisitions by the oil giant in 2008 or 2009.
Japanese Proverb: “The reverse side also has a reverse side.”
Wednesday, January 23, 2008
Tuesday, January 22, 2008
Remain Calm In The Eye of The Storm
1/23/08 Remain Calm In The Eye of The Storm
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 3.5 percent. "The committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."
European Central Bank governing council member Vitor Constancio said Tuesday that the recent sell-off in equity markets wouldn't necessarily change ECB policy. "Monetary policy doesn't react to the stock market, but of course we assess what's going on in the real economy," he told Dow Jones Newswires on the sidelines of a conference. Some European share markets posted their heaviest losses since Sept. 11, 2001 on Monday amid growing worries about the strength of the U.S. economy.
About $490bn was wiped off the market value of Europe's FTSE Eurofirst 300 index and $148bn from the FTSE 100 index in London, which suffered its biggest points slide since it was formed in 1983. Germany's Xetra Dax slumped 7.2 per cent to 6,790.19 and France's CAC-40 fell 6.8 per cent to 4,744.45, its worst one-day percentage point fall since September 11 2001.
Hong Kong plunged 8.7% and Japan dropped 5.7%.
Chinese stocks plunged Tuesday, with the benchmark Shanghai Composite Index falling 7.2 percent to its lowest close since early August amid the second straight day of global declines.
Nouriel Roubini: "The Monday Massacre in global stock markets is – more than a case of financial contagion – a revenge of economic fundamentals as investors are waking up from the delusion that the US would avoid a hard landing and that the rest of the world could decouple from such hard landing. A reality check is now occurring after stock markets remained for too long in the delusional triple dream of a US soft landing, of a Fed being able to ease and avoid the hard landing, and of a world miraculously decoupling from the US hard landing. As predicted here at the beginning of the year 2008 will be ugly bearish for US and global equity markets."
Target Corp. sees January sales coming in at the low end of its previous expectations. Its updated forecast was based on Target's actual sales for the first two weeks of January and its prediction for the remainder of the month. Target had expected January same-store sales to come in within a range of a 1% decline and a 1% increase.
Bank of America Q4 EPS 5 cents vs $1.16 with $5.4 billion in trading losses.
National bank Wachovia Corp. said Tuesday its fourth-quarter earnings tumbled 98 percent due to a $1.7 billion reduction in the value of certain portfolios and $1.5 billion set aside to cover bad loans. Fourth-quarter net income fell to $51 million, or 3 cents per share, from $2.3 billion, or $1.20 per share, during the same period the previous year.
BJ Services: "During the second quarter of fiscal 2008, we expect relatively flat drilling activity with continued pricing pressures in the U.S. market. We expect improved results in Canada as we enter the winter drilling season, and we also anticipate increased revenue and improved margins in the International Pressure Pumping segment. Our Oilfield Services group is projected to be up slightly in the second quarter as we expect revenue growth from Completion Tools and Completion Fluids will be partially offset by continued seasonal decline in our Process and Pipeline Services business. We are projecting earnings per share for the second fiscal quarter to be in the range of $0.55 to $0.57." BJ's North American operations experienced a flat rig count, harsh weather and lower pricing during the first quarter, though its revenue improved.
Buffets Holdings said it's filed for Chapter 11 bankruptcy protection. All 626 restaurants are open for business.
Fifth Third Bancorp reported fourth-quarter net income of $38 million, or 7 cents a share, down from $66 million, or 12 cents, earned in the final three months of 2006. On an operating basis, the Cincinnati-based holding company said, quarterly earnings would have been $260 million, or 49 cents a share, down from $357 million, or 64 cents a share, in the year-earlier period. "The credit environment remains challenging, and we expect credit conditions and the performance of our loan portfolio to continue to deteriorate in the near term." In particular, higher loss reserves on loans and leases -- $284 million in the latest quarter, up 166% from a year earlier -- are to be expected in the short run, the CEO said.
March-dated light sweet crude futures fell $3.24 to $86.68 a barrel. Metals futures also were under heavy pressure, with the February gold contract losing $14.80 to $866.90 an ounce.
UnitedHealth Group said that it continues to expect 2008 earnings in a range of $3.95 to $4.00 a share. First quarter 2008 earnings are seen in a range of 82 cents to 84 cents a share.
DuPont expects 2008 earnings between $3.35 and $3.55 a share and first-quarter earnings of $1.12 to $1.17 a share. Analysts expected 2008 earnings of $3.43 a share and first-quarter earnings of $1.15.
The Bank of Japan voted unanimously to keep interest rates on hold at Tuesday, marking the second straight meeting the nine-member board has voted in one voice on the motion. The policy board opted to keep the unsecured overnight loan rate unchanged at 0.5%.
India's Sensitive Index tumbled 11.5% within the first two minutes of trading on Tuesday, forcing a trade halt for an hour. The index stumbled 2,029.05 points to 15,576.30, after slumping 7.4% in the previous session.
According to the WSJ, EBay CEO Meg Whitman is preparing to retire, and John Donahoe, president of eBay's auction business unit, has emerged as the leading candidate to succeed her.
According to the WSJ, Bank of China Ltd. appears increasingly likely to report a large write-down on its investments in U.S. mortgage securities, illustrating the broadening reach of the global financial downturn -- and how one of China's biggest lenders was less astute at avoiding the problem than it initially thought. Analysts estimate that the state-owned lender, traditionally the most international of the country's big banks, may have to write off a quarter of the nearly $8 billion it holds in securities backed by subprime mortgages.
We can count sub-prime mortgages and other pieces of over-valued paper as one of our country's exports during the past 24 months.
Roche raised its bid from $75 to $89.50 a share, valuing Arizona-based Ventana Medical Systems at $3.4bn, or $400m more than its repeatedly spurned initial offer.
Eaton's net income in the fourth quarter rose 6 percent $256 million, or $1.71 a share, from $241 million, or $1.59 a share, a year earlier.
Serbia said Tuesday it had agreed to a multibillion dollar gas pipeline project as part of an energy deal with Russia that would boost Moscow's control over supplies to Europe. A majority stake of the Serbian oil monopoly NIS will be sold to Russian energy company Gazprom. Russia would route part of the gas pipeline through Serbia, as part of the deal announced in a short statement by the Serbian government. Financial terms were not revealed.
According to the Chicago Tribune, the option-ARM trouble stems from the loose lending practices that inundated the subprime business. Loans often were granted on the basis of stated income, not proof of a borrower's income, giving rise to their nickname, "liar's loans." "This is not a subprime crisis. This is a stated-income crisis," said Robert Simpson, chief executive of Investors Mortgage Asset Recovery Co. in Irvine, Calif., which works with lenders, insurers and investors to recover losses related to mortgage fraud.
Microsoft said Monday it plans to acquire Calista Technologies Inc., a San Jose, Calif.-based startup founded in 2006. Calista's technology makes logging on to a virtual desktop feel more like working on a physical Windows computer, Microsoft said. No financial details of the agreement were disclosed. Microsoft is changing how it prices and licenses its software to encourage virtualization; rolling out new tools for managing virtualization in different situations; and broadening its partnerships with other companies in the area.
Brett Steenbarger: "We're on pace this morning to be down over 10% on a five-day basis in the S&P 500 Index. I went all the way back to 1960 (N = 12,074 trading days) and examined what happened after historic five-day drops in $SPX. To give an idea of how rare it is for stocks to drop more than 10% in a five-day period, we've only had 11 such instances since 1960. Five of the greatest five-day declines were registered on October 19, 20, 21, 22, and 23 of 1987. Two of the instances occurred on July 22 and 23 of 2002. So, really, we've only had six periods of negative five-day returns exceeding 10%:
October, 1987
May, 1962
August, 1998
September, 2001
July, 2002
April, 2000
On 10 of those 11 occasions, the S&P 500 Index was higher 10 days later by a very large average of 5.62%. When I loosened the criteria and looked at all five-day drops in the average of over 6% (N = 83), we find that, ten days later, the market was up by an average of 2.8% (53 up, 30 down). By contrast, the average 10-day gain over the rest of the period was .29% (6870 up, 5121 down).
To be sure, a weak market can get weaker: Of the 83 occasions in which we had five-day drops of 6% or more, 14 drew down another 3% or more over the next five trading days. Five of those instances were drops of over 5%. By contrast, however, 40 of the 83 occasions were up over 3% over the next five trading days.
The takeaway is that periods of great short-term crisis have, on average, been periods of opportunity. If you look at those occasions of 10+% declines, all have occurred at times in which it would have paid handsomely to be a buyer for the long-term. That doesn't mean that there can't be further turbulence ahead, but--as a rule--selling into panic has lost investors money."
Qatar’s oil minister said there is no need for OPEC to raise output when it meets Feb.1 in Vienna.
Pemex awarded Halliburton Co. a three-year, U.S. $683 million contract for drilling management and completion of 58 land wells in southern Mexico.
The International Swaps and Derivatives Association said global losses on credit-default swaps will be nearer $15 billion than the $250 billion forecast by Pacific Investment Management Co.'s Bill Gross.
According to Bloomberg, President George W. Bush is poised to leave the federal government in worse financial shape than he found it, making it harder for whoever succeeds him to deliver on the promises of this year's election campaign. Bush may end his eight years in office with a larger-than- forecast budget deficit approaching 2004's record $413 billion, as an increasingly likely recession slashes tax receipts and raises spending. He'll also leave behind a host of thorny, longer-term problems -- from the expiration of his big tax cuts in 2010 to spiraling spending on senior citizens -- that will dog his successor's budgets for years.
In sum, in my view, Bush's presidency has undermined the well-being of all Americans.
OAO Gazprom, Russia's state- controlled natural-gas export monopoly, pumped 548.5 billion cubic meters of gas in 2007, 1.3 percent less than the previous year, as milder weather reduced demand for the fuel. Gazprom produced 556 billion cubic meters of gas in 2006, the Moscow-based company said in an e-mailed statement today. It raised reserves by more than 585 billion cubic meters, according to preliminary data.
Troubled bond insurer Ambac Financial said Tuesday its fourth quarter results swung to a loss of $3.26 billion, or $31.85 a share as the firm wrote off $5.2 billion of credit derivative exposures. The company earned $202.7 million or $1.88 a share a year ago.
John Hussman: "It's instructive that the total return of the S&P 500 over the past 4 years has now averaged just 5.7% annually, despite the fact that the recent decline is still well short of a minimal bear market. The return on the S&P is close enough to the return on risk-free Treasury bills that our hedging over this entire period has cost us close to nothing. Equally instructive is that the S&P 500 has now lagged Treasury bills since April 1998. Valuations do indeed drive long-term market returns. The recent bull market began at the highest valuations of any prior bull market in history. It has predictably achieved below-average overall returns, and the cycle isn't even over yet. Though every market cycle is different, an “average” bull market represents a span of about 3.75 years, with total returns averaging about 27% annually, followed by a bear market of about 1.25 years, with total returns averaging about -27% annually. That means that, on average, a typical bear market loss of just over 30% has shaved a typical bull market gain of 145% down to a cumulative return of about 65% (for a full cycle of about 5 years and overall annual total returns of about 10.6%)."
Wal-Mart Stores, Inc. announced today that the number of associates who now have health care coverage through its new associate-tailored plans for 2008 or another source has significantly increased from 90.4 percent to 92.7 percent, and the number of uninsured associates decreased by more than 20 percent, compared to one year ago.
Palatin Technologies, Inc.announced today that it entered into an agreement to settle all outstanding litigation and disputes with Competitive Technologies, Inc. related to a license agreement between the companies. Under the terms of the settlement, Palatin retains all rights to bremelanotide, its peptide in clinical development for male erectile dysfunction and female sexual dysfunction, with no obligations for any future payments to Competitive Technologies. Both the pending arbitration initiated by Competitive Technologies and the action in Connecticut Superior Court will be dismissed with prejudice. The existing license agreement between Palatin and Competitive Technologies has been terminated, with Competitive Technologies receiving all rights to a peptide developed at the University of Arizona and called MT-II or PT-14, which Palatin ceased developing in 2000. As part of the settlement, Palatin remitted a one-time payment to Competitive Technologies of $800,000.
J&J reported net income of $2.37 billion, or 82 cents per share, up from $2.17 billion, or 74 cents per share, a year earlier. Excluding one-time items, net income would have been 88 cents per share. Revenues totaled $15.96 billion, up 16.6 percent from $13.7 billion in the year-ago quarter.
"Flooding the market with liquidity is a disaster for the purchasing power of the dollar," says David Gitlitz, chief economist for Trend Macrolytics.
George Ure: "Collapse of Fractional Reserve Banking: I must be reading the Federal Reserve's H.3 "Aggregate Reserve of Depository Institutions and the Monetary Base" all wrong. If you scroll down to Table 2 and look at the not-seasonally adjusted figures for the "Reserves of depository institutions" you will see three columns on the left. Total (Reserves) "nonborrowed (reserves) and "required" (reserves). The shocker is that the preliminary January 16th number showed that the required reserve of banks was $39,989 million dollars. This means how much money the banks claim to have on hand as their portion of the 'fractional reserve' banking system is (ballpark) $40 billion.
OK, the third column says the amount of reserves they are required to have by the Federal Reserve is only $38,278 million. (*$32.3 billion, ballpark).
OK, I've saved the scariest for last: Column #2. It says the amount of nonborrowed money (*money that the banksters didn't have to borrow to meet their reserve requirements was negative. In other words, if I am reading this right, the whole fractional reserve banking system's reserves required is being held afloat strictly by borrowed money at this point!...As much as I regret writing this, we may end up with runs on financial and so-called 'investment' houses over the coming few weeks and months."
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
Sean Owen: "The U.S. economy is starting to show its soft underbelly, and the steps the Fed is taking to mitigate the problem will only serve to exacerbate its true source - overindulgence in cheap liquidity. So whichever way the wind blows, the best strategy will be the same - the same as it has been for some time now. Hold assets with real intrinsic value that is not linked to the value of any particular currency. There are plenty to choose from - infrastructure, precious metals, and commodities, just to name a few, but my personal favorite is also the most renewable - Timber."
Ignoring the fact that Blackstone has a deal to buy Alliance Data, one should note the company will earn $3.75 a share for 2007 and more in 2008. The Feb. 30 puts are selling for 45 cents and the Feb 35 puts are selling for $1. I sold both at those prices today. I like the risk/reward.
Apple Inc. on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company's shares tumbled in after-hours trading as the consumer-electronics maker gave an earnings outlook that fell short of Wall Street analysts' forecasts. Apple expects to earn 94 cents a share on $6.8 billion in sales for its second quarter. The forecast fell below analysts' consensus estimates for earnings of $1.09 a share on revenue of $6.99 billion. The outlook helped send Apple's shares down more than $17 a share, or 11%, to $138.49 in after-hours trading.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
"Despite the difficulties in the market, I don't expect you'll see banks defaulting on legally binding commitments and I expect most of these deals will close," said Gregory Gooding, a partner at law firm Debevoise & Plimpton LLP.
"There may be circumstances where buyers have terms on the contracts allowing them to get out of deals and I wouldn't be surprised if there are a couple more deals where those are taken advantage (of)," Gooding said. "But I expect that to be rare and it's a case-by-case analysis."
Benjamin Franklin: “If you can't pay for a thing, don't buy it. If you can't get paid for it, don't sell it. Do this, and you will have calm and drowsy nights, with all of the good business you have now and none of the bad. If you have time, don't wait for time.”
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 3.5 percent. "The committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."
European Central Bank governing council member Vitor Constancio said Tuesday that the recent sell-off in equity markets wouldn't necessarily change ECB policy. "Monetary policy doesn't react to the stock market, but of course we assess what's going on in the real economy," he told Dow Jones Newswires on the sidelines of a conference. Some European share markets posted their heaviest losses since Sept. 11, 2001 on Monday amid growing worries about the strength of the U.S. economy.
About $490bn was wiped off the market value of Europe's FTSE Eurofirst 300 index and $148bn from the FTSE 100 index in London, which suffered its biggest points slide since it was formed in 1983. Germany's Xetra Dax slumped 7.2 per cent to 6,790.19 and France's CAC-40 fell 6.8 per cent to 4,744.45, its worst one-day percentage point fall since September 11 2001.
Hong Kong plunged 8.7% and Japan dropped 5.7%.
Chinese stocks plunged Tuesday, with the benchmark Shanghai Composite Index falling 7.2 percent to its lowest close since early August amid the second straight day of global declines.
Nouriel Roubini: "The Monday Massacre in global stock markets is – more than a case of financial contagion – a revenge of economic fundamentals as investors are waking up from the delusion that the US would avoid a hard landing and that the rest of the world could decouple from such hard landing. A reality check is now occurring after stock markets remained for too long in the delusional triple dream of a US soft landing, of a Fed being able to ease and avoid the hard landing, and of a world miraculously decoupling from the US hard landing. As predicted here at the beginning of the year 2008 will be ugly bearish for US and global equity markets."
Target Corp. sees January sales coming in at the low end of its previous expectations. Its updated forecast was based on Target's actual sales for the first two weeks of January and its prediction for the remainder of the month. Target had expected January same-store sales to come in within a range of a 1% decline and a 1% increase.
Bank of America Q4 EPS 5 cents vs $1.16 with $5.4 billion in trading losses.
National bank Wachovia Corp. said Tuesday its fourth-quarter earnings tumbled 98 percent due to a $1.7 billion reduction in the value of certain portfolios and $1.5 billion set aside to cover bad loans. Fourth-quarter net income fell to $51 million, or 3 cents per share, from $2.3 billion, or $1.20 per share, during the same period the previous year.
BJ Services: "During the second quarter of fiscal 2008, we expect relatively flat drilling activity with continued pricing pressures in the U.S. market. We expect improved results in Canada as we enter the winter drilling season, and we also anticipate increased revenue and improved margins in the International Pressure Pumping segment. Our Oilfield Services group is projected to be up slightly in the second quarter as we expect revenue growth from Completion Tools and Completion Fluids will be partially offset by continued seasonal decline in our Process and Pipeline Services business. We are projecting earnings per share for the second fiscal quarter to be in the range of $0.55 to $0.57." BJ's North American operations experienced a flat rig count, harsh weather and lower pricing during the first quarter, though its revenue improved.
Buffets Holdings said it's filed for Chapter 11 bankruptcy protection. All 626 restaurants are open for business.
Fifth Third Bancorp reported fourth-quarter net income of $38 million, or 7 cents a share, down from $66 million, or 12 cents, earned in the final three months of 2006. On an operating basis, the Cincinnati-based holding company said, quarterly earnings would have been $260 million, or 49 cents a share, down from $357 million, or 64 cents a share, in the year-earlier period. "The credit environment remains challenging, and we expect credit conditions and the performance of our loan portfolio to continue to deteriorate in the near term." In particular, higher loss reserves on loans and leases -- $284 million in the latest quarter, up 166% from a year earlier -- are to be expected in the short run, the CEO said.
March-dated light sweet crude futures fell $3.24 to $86.68 a barrel. Metals futures also were under heavy pressure, with the February gold contract losing $14.80 to $866.90 an ounce.
UnitedHealth Group said that it continues to expect 2008 earnings in a range of $3.95 to $4.00 a share. First quarter 2008 earnings are seen in a range of 82 cents to 84 cents a share.
DuPont expects 2008 earnings between $3.35 and $3.55 a share and first-quarter earnings of $1.12 to $1.17 a share. Analysts expected 2008 earnings of $3.43 a share and first-quarter earnings of $1.15.
The Bank of Japan voted unanimously to keep interest rates on hold at Tuesday, marking the second straight meeting the nine-member board has voted in one voice on the motion. The policy board opted to keep the unsecured overnight loan rate unchanged at 0.5%.
India's Sensitive Index tumbled 11.5% within the first two minutes of trading on Tuesday, forcing a trade halt for an hour. The index stumbled 2,029.05 points to 15,576.30, after slumping 7.4% in the previous session.
According to the WSJ, EBay CEO Meg Whitman is preparing to retire, and John Donahoe, president of eBay's auction business unit, has emerged as the leading candidate to succeed her.
According to the WSJ, Bank of China Ltd. appears increasingly likely to report a large write-down on its investments in U.S. mortgage securities, illustrating the broadening reach of the global financial downturn -- and how one of China's biggest lenders was less astute at avoiding the problem than it initially thought. Analysts estimate that the state-owned lender, traditionally the most international of the country's big banks, may have to write off a quarter of the nearly $8 billion it holds in securities backed by subprime mortgages.
We can count sub-prime mortgages and other pieces of over-valued paper as one of our country's exports during the past 24 months.
Roche raised its bid from $75 to $89.50 a share, valuing Arizona-based Ventana Medical Systems at $3.4bn, or $400m more than its repeatedly spurned initial offer.
Eaton's net income in the fourth quarter rose 6 percent $256 million, or $1.71 a share, from $241 million, or $1.59 a share, a year earlier.
Serbia said Tuesday it had agreed to a multibillion dollar gas pipeline project as part of an energy deal with Russia that would boost Moscow's control over supplies to Europe. A majority stake of the Serbian oil monopoly NIS will be sold to Russian energy company Gazprom. Russia would route part of the gas pipeline through Serbia, as part of the deal announced in a short statement by the Serbian government. Financial terms were not revealed.
According to the Chicago Tribune, the option-ARM trouble stems from the loose lending practices that inundated the subprime business. Loans often were granted on the basis of stated income, not proof of a borrower's income, giving rise to their nickname, "liar's loans." "This is not a subprime crisis. This is a stated-income crisis," said Robert Simpson, chief executive of Investors Mortgage Asset Recovery Co. in Irvine, Calif., which works with lenders, insurers and investors to recover losses related to mortgage fraud.
Microsoft said Monday it plans to acquire Calista Technologies Inc., a San Jose, Calif.-based startup founded in 2006. Calista's technology makes logging on to a virtual desktop feel more like working on a physical Windows computer, Microsoft said. No financial details of the agreement were disclosed. Microsoft is changing how it prices and licenses its software to encourage virtualization; rolling out new tools for managing virtualization in different situations; and broadening its partnerships with other companies in the area.
Brett Steenbarger: "We're on pace this morning to be down over 10% on a five-day basis in the S&P 500 Index. I went all the way back to 1960 (N = 12,074 trading days) and examined what happened after historic five-day drops in $SPX. To give an idea of how rare it is for stocks to drop more than 10% in a five-day period, we've only had 11 such instances since 1960. Five of the greatest five-day declines were registered on October 19, 20, 21, 22, and 23 of 1987. Two of the instances occurred on July 22 and 23 of 2002. So, really, we've only had six periods of negative five-day returns exceeding 10%:
October, 1987
May, 1962
August, 1998
September, 2001
July, 2002
April, 2000
On 10 of those 11 occasions, the S&P 500 Index was higher 10 days later by a very large average of 5.62%. When I loosened the criteria and looked at all five-day drops in the average of over 6% (N = 83), we find that, ten days later, the market was up by an average of 2.8% (53 up, 30 down). By contrast, the average 10-day gain over the rest of the period was .29% (6870 up, 5121 down).
To be sure, a weak market can get weaker: Of the 83 occasions in which we had five-day drops of 6% or more, 14 drew down another 3% or more over the next five trading days. Five of those instances were drops of over 5%. By contrast, however, 40 of the 83 occasions were up over 3% over the next five trading days.
The takeaway is that periods of great short-term crisis have, on average, been periods of opportunity. If you look at those occasions of 10+% declines, all have occurred at times in which it would have paid handsomely to be a buyer for the long-term. That doesn't mean that there can't be further turbulence ahead, but--as a rule--selling into panic has lost investors money."
Qatar’s oil minister said there is no need for OPEC to raise output when it meets Feb.1 in Vienna.
Pemex awarded Halliburton Co. a three-year, U.S. $683 million contract for drilling management and completion of 58 land wells in southern Mexico.
The International Swaps and Derivatives Association said global losses on credit-default swaps will be nearer $15 billion than the $250 billion forecast by Pacific Investment Management Co.'s Bill Gross.
According to Bloomberg, President George W. Bush is poised to leave the federal government in worse financial shape than he found it, making it harder for whoever succeeds him to deliver on the promises of this year's election campaign. Bush may end his eight years in office with a larger-than- forecast budget deficit approaching 2004's record $413 billion, as an increasingly likely recession slashes tax receipts and raises spending. He'll also leave behind a host of thorny, longer-term problems -- from the expiration of his big tax cuts in 2010 to spiraling spending on senior citizens -- that will dog his successor's budgets for years.
In sum, in my view, Bush's presidency has undermined the well-being of all Americans.
OAO Gazprom, Russia's state- controlled natural-gas export monopoly, pumped 548.5 billion cubic meters of gas in 2007, 1.3 percent less than the previous year, as milder weather reduced demand for the fuel. Gazprom produced 556 billion cubic meters of gas in 2006, the Moscow-based company said in an e-mailed statement today. It raised reserves by more than 585 billion cubic meters, according to preliminary data.
Troubled bond insurer Ambac Financial said Tuesday its fourth quarter results swung to a loss of $3.26 billion, or $31.85 a share as the firm wrote off $5.2 billion of credit derivative exposures. The company earned $202.7 million or $1.88 a share a year ago.
John Hussman: "It's instructive that the total return of the S&P 500 over the past 4 years has now averaged just 5.7% annually, despite the fact that the recent decline is still well short of a minimal bear market. The return on the S&P is close enough to the return on risk-free Treasury bills that our hedging over this entire period has cost us close to nothing. Equally instructive is that the S&P 500 has now lagged Treasury bills since April 1998. Valuations do indeed drive long-term market returns. The recent bull market began at the highest valuations of any prior bull market in history. It has predictably achieved below-average overall returns, and the cycle isn't even over yet. Though every market cycle is different, an “average” bull market represents a span of about 3.75 years, with total returns averaging about 27% annually, followed by a bear market of about 1.25 years, with total returns averaging about -27% annually. That means that, on average, a typical bear market loss of just over 30% has shaved a typical bull market gain of 145% down to a cumulative return of about 65% (for a full cycle of about 5 years and overall annual total returns of about 10.6%)."
Wal-Mart Stores, Inc. announced today that the number of associates who now have health care coverage through its new associate-tailored plans for 2008 or another source has significantly increased from 90.4 percent to 92.7 percent, and the number of uninsured associates decreased by more than 20 percent, compared to one year ago.
Palatin Technologies, Inc.announced today that it entered into an agreement to settle all outstanding litigation and disputes with Competitive Technologies, Inc. related to a license agreement between the companies. Under the terms of the settlement, Palatin retains all rights to bremelanotide, its peptide in clinical development for male erectile dysfunction and female sexual dysfunction, with no obligations for any future payments to Competitive Technologies. Both the pending arbitration initiated by Competitive Technologies and the action in Connecticut Superior Court will be dismissed with prejudice. The existing license agreement between Palatin and Competitive Technologies has been terminated, with Competitive Technologies receiving all rights to a peptide developed at the University of Arizona and called MT-II or PT-14, which Palatin ceased developing in 2000. As part of the settlement, Palatin remitted a one-time payment to Competitive Technologies of $800,000.
J&J reported net income of $2.37 billion, or 82 cents per share, up from $2.17 billion, or 74 cents per share, a year earlier. Excluding one-time items, net income would have been 88 cents per share. Revenues totaled $15.96 billion, up 16.6 percent from $13.7 billion in the year-ago quarter.
"Flooding the market with liquidity is a disaster for the purchasing power of the dollar," says David Gitlitz, chief economist for Trend Macrolytics.
George Ure: "Collapse of Fractional Reserve Banking: I must be reading the Federal Reserve's H.3 "Aggregate Reserve of Depository Institutions and the Monetary Base" all wrong. If you scroll down to Table 2 and look at the not-seasonally adjusted figures for the "Reserves of depository institutions" you will see three columns on the left. Total (Reserves) "nonborrowed (reserves) and "required" (reserves). The shocker is that the preliminary January 16th number showed that the required reserve of banks was $39,989 million dollars. This means how much money the banks claim to have on hand as their portion of the 'fractional reserve' banking system is (ballpark) $40 billion.
OK, the third column says the amount of reserves they are required to have by the Federal Reserve is only $38,278 million. (*$32.3 billion, ballpark).
OK, I've saved the scariest for last: Column #2. It says the amount of nonborrowed money (*money that the banksters didn't have to borrow to meet their reserve requirements was negative. In other words, if I am reading this right, the whole fractional reserve banking system's reserves required is being held afloat strictly by borrowed money at this point!...As much as I regret writing this, we may end up with runs on financial and so-called 'investment' houses over the coming few weeks and months."
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
Sean Owen: "The U.S. economy is starting to show its soft underbelly, and the steps the Fed is taking to mitigate the problem will only serve to exacerbate its true source - overindulgence in cheap liquidity. So whichever way the wind blows, the best strategy will be the same - the same as it has been for some time now. Hold assets with real intrinsic value that is not linked to the value of any particular currency. There are plenty to choose from - infrastructure, precious metals, and commodities, just to name a few, but my personal favorite is also the most renewable - Timber."
Ignoring the fact that Blackstone has a deal to buy Alliance Data, one should note the company will earn $3.75 a share for 2007 and more in 2008. The Feb. 30 puts are selling for 45 cents and the Feb 35 puts are selling for $1. I sold both at those prices today. I like the risk/reward.
Apple Inc. on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company's shares tumbled in after-hours trading as the consumer-electronics maker gave an earnings outlook that fell short of Wall Street analysts' forecasts. Apple expects to earn 94 cents a share on $6.8 billion in sales for its second quarter. The forecast fell below analysts' consensus estimates for earnings of $1.09 a share on revenue of $6.99 billion. The outlook helped send Apple's shares down more than $17 a share, or 11%, to $138.49 in after-hours trading.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
"Despite the difficulties in the market, I don't expect you'll see banks defaulting on legally binding commitments and I expect most of these deals will close," said Gregory Gooding, a partner at law firm Debevoise & Plimpton LLP.
"There may be circumstances where buyers have terms on the contracts allowing them to get out of deals and I wouldn't be surprised if there are a couple more deals where those are taken advantage (of)," Gooding said. "But I expect that to be rare and it's a case-by-case analysis."
Benjamin Franklin: “If you can't pay for a thing, don't buy it. If you can't get paid for it, don't sell it. Do this, and you will have calm and drowsy nights, with all of the good business you have now and none of the bad. If you have time, don't wait for time.”
Remain Calm In The Eye of The Storm
1/23/08 Remain Calm In The Eye of The Storm
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 3.5 percent. "The committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."
European Central Bank governing council member Vitor Constancio said Tuesday that the recent sell-off in equity markets wouldn't necessarily change ECB policy. "Monetary policy doesn't react to the stock market, but of course we assess what's going on in the real economy," he told Dow Jones Newswires on the sidelines of a conference. Some European share markets posted their heaviest losses since Sept. 11, 2001 on Monday amid growing worries about the strength of the U.S. economy.
About $490bn was wiped off the market value of Europe's FTSE Eurofirst 300 index and $148bn from the FTSE 100 index in London, which suffered its biggest points slide since it was formed in 1983. Germany's Xetra Dax slumped 7.2 per cent to 6,790.19 and France's CAC-40 fell 6.8 per cent to 4,744.45, its worst one-day percentage point fall since September 11 2001.
Hong Kong plunged 8.7% and Japan dropped 5.7%.
Chinese stocks plunged Tuesday, with the benchmark Shanghai Composite Index falling 7.2 percent to its lowest close since early August amid the second straight day of global declines.
Nouriel Roubini: "The Monday Massacre in global stock markets is – more than a case of financial contagion – a revenge of economic fundamentals as investors are waking up from the delusion that the US would avoid a hard landing and that the rest of the world could decouple from such hard landing. A reality check is now occurring after stock markets remained for too long in the delusional triple dream of a US soft landing, of a Fed being able to ease and avoid the hard landing, and of a world miraculously decoupling from the US hard landing. As predicted here at the beginning of the year 2008 will be ugly bearish for US and global equity markets."
Target Corp. sees January sales coming in at the low end of its previous expectations. Its updated forecast was based on Target's actual sales for the first two weeks of January and its prediction for the remainder of the month. Target had expected January same-store sales to come in within a range of a 1% decline and a 1% increase.
Bank of America Q4 EPS 5 cents vs $1.16 with $5.4 billion in trading losses.
National bank Wachovia Corp. said Tuesday its fourth-quarter earnings tumbled 98 percent due to a $1.7 billion reduction in the value of certain portfolios and $1.5 billion set aside to cover bad loans. Fourth-quarter net income fell to $51 million, or 3 cents per share, from $2.3 billion, or $1.20 per share, during the same period the previous year.
BJ Services: "During the second quarter of fiscal 2008, we expect relatively flat drilling activity with continued pricing pressures in the U.S. market. We expect improved results in Canada as we enter the winter drilling season, and we also anticipate increased revenue and improved margins in the International Pressure Pumping segment. Our Oilfield Services group is projected to be up slightly in the second quarter as we expect revenue growth from Completion Tools and Completion Fluids will be partially offset by continued seasonal decline in our Process and Pipeline Services business. We are projecting earnings per share for the second fiscal quarter to be in the range of $0.55 to $0.57." BJ's North American operations experienced a flat rig count, harsh weather and lower pricing during the first quarter, though its revenue improved.
Buffets Holdings said it's filed for Chapter 11 bankruptcy protection. All 626 restaurants are open for business.
Fifth Third Bancorp reported fourth-quarter net income of $38 million, or 7 cents a share, down from $66 million, or 12 cents, earned in the final three months of 2006. On an operating basis, the Cincinnati-based holding company said, quarterly earnings would have been $260 million, or 49 cents a share, down from $357 million, or 64 cents a share, in the year-earlier period. "The credit environment remains challenging, and we expect credit conditions and the performance of our loan portfolio to continue to deteriorate in the near term." In particular, higher loss reserves on loans and leases -- $284 million in the latest quarter, up 166% from a year earlier -- are to be expected in the short run, the CEO said.
March-dated light sweet crude futures fell $3.24 to $86.68 a barrel. Metals futures also were under heavy pressure, with the February gold contract losing $14.80 to $866.90 an ounce.
UnitedHealth Group said that it continues to expect 2008 earnings in a range of $3.95 to $4.00 a share. First quarter 2008 earnings are seen in a range of 82 cents to 84 cents a share.
DuPont expects 2008 earnings between $3.35 and $3.55 a share and first-quarter earnings of $1.12 to $1.17 a share. Analysts expected 2008 earnings of $3.43 a share and first-quarter earnings of $1.15.
The Bank of Japan voted unanimously to keep interest rates on hold at Tuesday, marking the second straight meeting the nine-member board has voted in one voice on the motion. The policy board opted to keep the unsecured overnight loan rate unchanged at 0.5%.
India's Sensitive Index tumbled 11.5% within the first two minutes of trading on Tuesday, forcing a trade halt for an hour. The index stumbled 2,029.05 points to 15,576.30, after slumping 7.4% in the previous session.
According to the WSJ, EBay CEO Meg Whitman is preparing to retire, and John Donahoe, president of eBay's auction business unit, has emerged as the leading candidate to succeed her.
According to the WSJ, Bank of China Ltd. appears increasingly likely to report a large write-down on its investments in U.S. mortgage securities, illustrating the broadening reach of the global financial downturn -- and how one of China's biggest lenders was less astute at avoiding the problem than it initially thought. Analysts estimate that the state-owned lender, traditionally the most international of the country's big banks, may have to write off a quarter of the nearly $8 billion it holds in securities backed by subprime mortgages.
We can count sub-prime mortgages and other pieces of over-valued paper as one of our country's exports during the past 24 months.
Roche raised its bid from $75 to $89.50 a share, valuing Arizona-based Ventana Medical Systems at $3.4bn, or $400m more than its repeatedly spurned initial offer.
Eaton's net income in the fourth quarter rose 6 percent $256 million, or $1.71 a share, from $241 million, or $1.59 a share, a year earlier.
Serbia said Tuesday it had agreed to a multibillion dollar gas pipeline project as part of an energy deal with Russia that would boost Moscow's control over supplies to Europe. A majority stake of the Serbian oil monopoly NIS will be sold to Russian energy company Gazprom. Russia would route part of the gas pipeline through Serbia, as part of the deal announced in a short statement by the Serbian government. Financial terms were not revealed.
According to the Chicago Tribune, the option-ARM trouble stems from the loose lending practices that inundated the subprime business. Loans often were granted on the basis of stated income, not proof of a borrower's income, giving rise to their nickname, "liar's loans." "This is not a subprime crisis. This is a stated-income crisis," said Robert Simpson, chief executive of Investors Mortgage Asset Recovery Co. in Irvine, Calif., which works with lenders, insurers and investors to recover losses related to mortgage fraud.
Microsoft said Monday it plans to acquire Calista Technologies Inc., a San Jose, Calif.-based startup founded in 2006. Calista's technology makes logging on to a virtual desktop feel more like working on a physical Windows computer, Microsoft said. No financial details of the agreement were disclosed. Microsoft is changing how it prices and licenses its software to encourage virtualization; rolling out new tools for managing virtualization in different situations; and broadening its partnerships with other companies in the area.
Brett Steenbarger: "We're on pace this morning to be down over 10% on a five-day basis in the S&P 500 Index. I went all the way back to 1960 (N = 12,074 trading days) and examined what happened after historic five-day drops in $SPX. To give an idea of how rare it is for stocks to drop more than 10% in a five-day period, we've only had 11 such instances since 1960. Five of the greatest five-day declines were registered on October 19, 20, 21, 22, and 23 of 1987. Two of the instances occurred on July 22 and 23 of 2002. So, really, we've only had six periods of negative five-day returns exceeding 10%:
October, 1987
May, 1962
August, 1998
September, 2001
July, 2002
April, 2000
On 10 of those 11 occasions, the S&P 500 Index was higher 10 days later by a very large average of 5.62%. When I loosened the criteria and looked at all five-day drops in the average of over 6% (N = 83), we find that, ten days later, the market was up by an average of 2.8% (53 up, 30 down). By contrast, the average 10-day gain over the rest of the period was .29% (6870 up, 5121 down).
To be sure, a weak market can get weaker: Of the 83 occasions in which we had five-day drops of 6% or more, 14 drew down another 3% or more over the next five trading days. Five of those instances were drops of over 5%. By contrast, however, 40 of the 83 occasions were up over 3% over the next five trading days.
The takeaway is that periods of great short-term crisis have, on average, been periods of opportunity. If you look at those occasions of 10+% declines, all have occurred at times in which it would have paid handsomely to be a buyer for the long-term. That doesn't mean that there can't be further turbulence ahead, but--as a rule--selling into panic has lost investors money."
Qatar’s oil minister said there is no need for OPEC to raise output when it meets Feb.1 in Vienna.
Pemex awarded Halliburton Co. a three-year, U.S. $683 million contract for drilling management and completion of 58 land wells in southern Mexico.
The International Swaps and Derivatives Association said global losses on credit-default swaps will be nearer $15 billion than the $250 billion forecast by Pacific Investment Management Co.'s Bill Gross.
According to Bloomberg, President George W. Bush is poised to leave the federal government in worse financial shape than he found it, making it harder for whoever succeeds him to deliver on the promises of this year's election campaign. Bush may end his eight years in office with a larger-than- forecast budget deficit approaching 2004's record $413 billion, as an increasingly likely recession slashes tax receipts and raises spending. He'll also leave behind a host of thorny, longer-term problems -- from the expiration of his big tax cuts in 2010 to spiraling spending on senior citizens -- that will dog his successor's budgets for years.
In sum, in my view, Bush's presidency has undermined the well-being of all Americans.
OAO Gazprom, Russia's state- controlled natural-gas export monopoly, pumped 548.5 billion cubic meters of gas in 2007, 1.3 percent less than the previous year, as milder weather reduced demand for the fuel. Gazprom produced 556 billion cubic meters of gas in 2006, the Moscow-based company said in an e-mailed statement today. It raised reserves by more than 585 billion cubic meters, according to preliminary data.
Troubled bond insurer Ambac Financial said Tuesday its fourth quarter results swung to a loss of $3.26 billion, or $31.85 a share as the firm wrote off $5.2 billion of credit derivative exposures. The company earned $202.7 million or $1.88 a share a year ago.
John Hussman: "It's instructive that the total return of the S&P 500 over the past 4 years has now averaged just 5.7% annually, despite the fact that the recent decline is still well short of a minimal bear market. The return on the S&P is close enough to the return on risk-free Treasury bills that our hedging over this entire period has cost us close to nothing. Equally instructive is that the S&P 500 has now lagged Treasury bills since April 1998. Valuations do indeed drive long-term market returns. The recent bull market began at the highest valuations of any prior bull market in history. It has predictably achieved below-average overall returns, and the cycle isn't even over yet. Though every market cycle is different, an “average” bull market represents a span of about 3.75 years, with total returns averaging about 27% annually, followed by a bear market of about 1.25 years, with total returns averaging about -27% annually. That means that, on average, a typical bear market loss of just over 30% has shaved a typical bull market gain of 145% down to a cumulative return of about 65% (for a full cycle of about 5 years and overall annual total returns of about 10.6%)."
Wal-Mart Stores, Inc. announced today that the number of associates who now have health care coverage through its new associate-tailored plans for 2008 or another source has significantly increased from 90.4 percent to 92.7 percent, and the number of uninsured associates decreased by more than 20 percent, compared to one year ago.
Palatin Technologies, Inc.announced today that it entered into an agreement to settle all outstanding litigation and disputes with Competitive Technologies, Inc. related to a license agreement between the companies. Under the terms of the settlement, Palatin retains all rights to bremelanotide, its peptide in clinical development for male erectile dysfunction and female sexual dysfunction, with no obligations for any future payments to Competitive Technologies. Both the pending arbitration initiated by Competitive Technologies and the action in Connecticut Superior Court will be dismissed with prejudice. The existing license agreement between Palatin and Competitive Technologies has been terminated, with Competitive Technologies receiving all rights to a peptide developed at the University of Arizona and called MT-II or PT-14, which Palatin ceased developing in 2000. As part of the settlement, Palatin remitted a one-time payment to Competitive Technologies of $800,000.
J&J reported net income of $2.37 billion, or 82 cents per share, up from $2.17 billion, or 74 cents per share, a year earlier. Excluding one-time items, net income would have been 88 cents per share. Revenues totaled $15.96 billion, up 16.6 percent from $13.7 billion in the year-ago quarter.
"Flooding the market with liquidity is a disaster for the purchasing power of the dollar," says David Gitlitz, chief economist for Trend Macrolytics.
George Ure: "Collapse of Fractional Reserve Banking: I must be reading the Federal Reserve's H.3 "Aggregate Reserve of Depository Institutions and the Monetary Base" all wrong. If you scroll down to Table 2 and look at the not-seasonally adjusted figures for the "Reserves of depository institutions" you will see three columns on the left. Total (Reserves) "nonborrowed (reserves) and "required" (reserves). The shocker is that the preliminary January 16th number showed that the required reserve of banks was $39,989 million dollars. This means how much money the banks claim to have on hand as their portion of the 'fractional reserve' banking system is (ballpark) $40 billion.
OK, the third column says the amount of reserves they are required to have by the Federal Reserve is only $38,278 million. (*$32.3 billion, ballpark).
OK, I've saved the scariest for last: Column #2. It says the amount of nonborrowed money (*money that the banksters didn't have to borrow to meet their reserve requirements was negative. In other words, if I am reading this right, the whole fractional reserve banking system's reserves required is being held afloat strictly by borrowed money at this point!...As much as I regret writing this, we may end up with runs on financial and so-called 'investment' houses over the coming few weeks and months."
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
Sean Owen: "The U.S. economy is starting to show its soft underbelly, and the steps the Fed is taking to mitigate the problem will only serve to exacerbate its true source - overindulgence in cheap liquidity. So whichever way the wind blows, the best strategy will be the same - the same as it has been for some time now. Hold assets with real intrinsic value that is not linked to the value of any particular currency. There are plenty to choose from - infrastructure, precious metals, and commodities, just to name a few, but my personal favorite is also the most renewable - Timber."
Ignoring the fact that Blackstone has a deal to buy Alliance Data, one should note the company will earn $3.75 a share for 2007 and more in 2008. The Feb. 30 puts are selling for 45 cents and the Feb 35 puts are selling for $1. I sold both at those prices today. I like the risk/reward.
Apple Inc. on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company's shares tumbled in after-hours trading as the consumer-electronics maker gave an earnings outlook that fell short of Wall Street analysts' forecasts. Apple expects to earn 94 cents a share on $6.8 billion in sales for its second quarter. The forecast fell below analysts' consensus estimates for earnings of $1.09 a share on revenue of $6.99 billion. The outlook helped send Apple's shares down more than $17 a share, or 11%, to $138.49 in after-hours trading.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
Sean Owen: "The U.S. economy is starting to show its soft underbelly, and the steps the Fed is taking to mitigate the problem will only serve to exacerbate its true source - overindulgence in cheap liquidity. So whichever way the wind blows, the best strategy will be the same - the same as it has been for some time now. Hold assets with real intrinsic value that is not linked to the value of any particular currency. There are plenty to choose from - infrastructure, precious metals, and commodities, just to name a few, but my personal favorite is also the most renewable - Timber."
Ignoring the fact that Blackstone has a deal to buy Alliance Data, one should note the company will earn $3.75 a share for 2007 and more in 2008. The Feb. 30 puts are selling for 45 cents and the Feb 35 puts are selling for $1. I sold both at those prices today. I like the risk/reward.
Apple Inc. on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company's shares tumbled in after-hours trading as the consumer-electronics maker gave an earnings outlook that fell short of Wall Street analysts' forecasts. Apple expects to earn 94 cents a share on $6.8 billion in sales for its second quarter. The forecast fell below analysts' consensus estimates for earnings of $1.09 a share on revenue of $6.99 billion. The outlook helped send Apple's shares down more than $17 a share, or 11%, to $138.49 in after-hours trading.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
"Despite the difficulties in the market, I don't expect you'll see banks defaulting on legally binding commitments and I expect most of these deals will close," said Gregory Gooding, a partner at law firm Debevoise & Plimpton LLP.
"There may be circumstances where buyers have terms on the contracts allowing them to get out of deals and I wouldn't be surprised if there are a couple more deals where those are taken advantage (of)," Gooding said. "But I expect that to be rare and it's a case-by-case analysis."
Benjamin Franklin: “If you can't pay for a thing, don't buy it. If you can't get paid for it, don't sell it. Do this, and you will have calm and drowsy nights, with all of the good business you have now and none of the bad. If you have time, don't wait for time.”
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 3.5 percent. "The committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."
European Central Bank governing council member Vitor Constancio said Tuesday that the recent sell-off in equity markets wouldn't necessarily change ECB policy. "Monetary policy doesn't react to the stock market, but of course we assess what's going on in the real economy," he told Dow Jones Newswires on the sidelines of a conference. Some European share markets posted their heaviest losses since Sept. 11, 2001 on Monday amid growing worries about the strength of the U.S. economy.
About $490bn was wiped off the market value of Europe's FTSE Eurofirst 300 index and $148bn from the FTSE 100 index in London, which suffered its biggest points slide since it was formed in 1983. Germany's Xetra Dax slumped 7.2 per cent to 6,790.19 and France's CAC-40 fell 6.8 per cent to 4,744.45, its worst one-day percentage point fall since September 11 2001.
Hong Kong plunged 8.7% and Japan dropped 5.7%.
Chinese stocks plunged Tuesday, with the benchmark Shanghai Composite Index falling 7.2 percent to its lowest close since early August amid the second straight day of global declines.
Nouriel Roubini: "The Monday Massacre in global stock markets is – more than a case of financial contagion – a revenge of economic fundamentals as investors are waking up from the delusion that the US would avoid a hard landing and that the rest of the world could decouple from such hard landing. A reality check is now occurring after stock markets remained for too long in the delusional triple dream of a US soft landing, of a Fed being able to ease and avoid the hard landing, and of a world miraculously decoupling from the US hard landing. As predicted here at the beginning of the year 2008 will be ugly bearish for US and global equity markets."
Target Corp. sees January sales coming in at the low end of its previous expectations. Its updated forecast was based on Target's actual sales for the first two weeks of January and its prediction for the remainder of the month. Target had expected January same-store sales to come in within a range of a 1% decline and a 1% increase.
Bank of America Q4 EPS 5 cents vs $1.16 with $5.4 billion in trading losses.
National bank Wachovia Corp. said Tuesday its fourth-quarter earnings tumbled 98 percent due to a $1.7 billion reduction in the value of certain portfolios and $1.5 billion set aside to cover bad loans. Fourth-quarter net income fell to $51 million, or 3 cents per share, from $2.3 billion, or $1.20 per share, during the same period the previous year.
BJ Services: "During the second quarter of fiscal 2008, we expect relatively flat drilling activity with continued pricing pressures in the U.S. market. We expect improved results in Canada as we enter the winter drilling season, and we also anticipate increased revenue and improved margins in the International Pressure Pumping segment. Our Oilfield Services group is projected to be up slightly in the second quarter as we expect revenue growth from Completion Tools and Completion Fluids will be partially offset by continued seasonal decline in our Process and Pipeline Services business. We are projecting earnings per share for the second fiscal quarter to be in the range of $0.55 to $0.57." BJ's North American operations experienced a flat rig count, harsh weather and lower pricing during the first quarter, though its revenue improved.
Buffets Holdings said it's filed for Chapter 11 bankruptcy protection. All 626 restaurants are open for business.
Fifth Third Bancorp reported fourth-quarter net income of $38 million, or 7 cents a share, down from $66 million, or 12 cents, earned in the final three months of 2006. On an operating basis, the Cincinnati-based holding company said, quarterly earnings would have been $260 million, or 49 cents a share, down from $357 million, or 64 cents a share, in the year-earlier period. "The credit environment remains challenging, and we expect credit conditions and the performance of our loan portfolio to continue to deteriorate in the near term." In particular, higher loss reserves on loans and leases -- $284 million in the latest quarter, up 166% from a year earlier -- are to be expected in the short run, the CEO said.
March-dated light sweet crude futures fell $3.24 to $86.68 a barrel. Metals futures also were under heavy pressure, with the February gold contract losing $14.80 to $866.90 an ounce.
UnitedHealth Group said that it continues to expect 2008 earnings in a range of $3.95 to $4.00 a share. First quarter 2008 earnings are seen in a range of 82 cents to 84 cents a share.
DuPont expects 2008 earnings between $3.35 and $3.55 a share and first-quarter earnings of $1.12 to $1.17 a share. Analysts expected 2008 earnings of $3.43 a share and first-quarter earnings of $1.15.
The Bank of Japan voted unanimously to keep interest rates on hold at Tuesday, marking the second straight meeting the nine-member board has voted in one voice on the motion. The policy board opted to keep the unsecured overnight loan rate unchanged at 0.5%.
India's Sensitive Index tumbled 11.5% within the first two minutes of trading on Tuesday, forcing a trade halt for an hour. The index stumbled 2,029.05 points to 15,576.30, after slumping 7.4% in the previous session.
According to the WSJ, EBay CEO Meg Whitman is preparing to retire, and John Donahoe, president of eBay's auction business unit, has emerged as the leading candidate to succeed her.
According to the WSJ, Bank of China Ltd. appears increasingly likely to report a large write-down on its investments in U.S. mortgage securities, illustrating the broadening reach of the global financial downturn -- and how one of China's biggest lenders was less astute at avoiding the problem than it initially thought. Analysts estimate that the state-owned lender, traditionally the most international of the country's big banks, may have to write off a quarter of the nearly $8 billion it holds in securities backed by subprime mortgages.
We can count sub-prime mortgages and other pieces of over-valued paper as one of our country's exports during the past 24 months.
Roche raised its bid from $75 to $89.50 a share, valuing Arizona-based Ventana Medical Systems at $3.4bn, or $400m more than its repeatedly spurned initial offer.
Eaton's net income in the fourth quarter rose 6 percent $256 million, or $1.71 a share, from $241 million, or $1.59 a share, a year earlier.
Serbia said Tuesday it had agreed to a multibillion dollar gas pipeline project as part of an energy deal with Russia that would boost Moscow's control over supplies to Europe. A majority stake of the Serbian oil monopoly NIS will be sold to Russian energy company Gazprom. Russia would route part of the gas pipeline through Serbia, as part of the deal announced in a short statement by the Serbian government. Financial terms were not revealed.
According to the Chicago Tribune, the option-ARM trouble stems from the loose lending practices that inundated the subprime business. Loans often were granted on the basis of stated income, not proof of a borrower's income, giving rise to their nickname, "liar's loans." "This is not a subprime crisis. This is a stated-income crisis," said Robert Simpson, chief executive of Investors Mortgage Asset Recovery Co. in Irvine, Calif., which works with lenders, insurers and investors to recover losses related to mortgage fraud.
Microsoft said Monday it plans to acquire Calista Technologies Inc., a San Jose, Calif.-based startup founded in 2006. Calista's technology makes logging on to a virtual desktop feel more like working on a physical Windows computer, Microsoft said. No financial details of the agreement were disclosed. Microsoft is changing how it prices and licenses its software to encourage virtualization; rolling out new tools for managing virtualization in different situations; and broadening its partnerships with other companies in the area.
Brett Steenbarger: "We're on pace this morning to be down over 10% on a five-day basis in the S&P 500 Index. I went all the way back to 1960 (N = 12,074 trading days) and examined what happened after historic five-day drops in $SPX. To give an idea of how rare it is for stocks to drop more than 10% in a five-day period, we've only had 11 such instances since 1960. Five of the greatest five-day declines were registered on October 19, 20, 21, 22, and 23 of 1987. Two of the instances occurred on July 22 and 23 of 2002. So, really, we've only had six periods of negative five-day returns exceeding 10%:
October, 1987
May, 1962
August, 1998
September, 2001
July, 2002
April, 2000
On 10 of those 11 occasions, the S&P 500 Index was higher 10 days later by a very large average of 5.62%. When I loosened the criteria and looked at all five-day drops in the average of over 6% (N = 83), we find that, ten days later, the market was up by an average of 2.8% (53 up, 30 down). By contrast, the average 10-day gain over the rest of the period was .29% (6870 up, 5121 down).
To be sure, a weak market can get weaker: Of the 83 occasions in which we had five-day drops of 6% or more, 14 drew down another 3% or more over the next five trading days. Five of those instances were drops of over 5%. By contrast, however, 40 of the 83 occasions were up over 3% over the next five trading days.
The takeaway is that periods of great short-term crisis have, on average, been periods of opportunity. If you look at those occasions of 10+% declines, all have occurred at times in which it would have paid handsomely to be a buyer for the long-term. That doesn't mean that there can't be further turbulence ahead, but--as a rule--selling into panic has lost investors money."
Qatar’s oil minister said there is no need for OPEC to raise output when it meets Feb.1 in Vienna.
Pemex awarded Halliburton Co. a three-year, U.S. $683 million contract for drilling management and completion of 58 land wells in southern Mexico.
The International Swaps and Derivatives Association said global losses on credit-default swaps will be nearer $15 billion than the $250 billion forecast by Pacific Investment Management Co.'s Bill Gross.
According to Bloomberg, President George W. Bush is poised to leave the federal government in worse financial shape than he found it, making it harder for whoever succeeds him to deliver on the promises of this year's election campaign. Bush may end his eight years in office with a larger-than- forecast budget deficit approaching 2004's record $413 billion, as an increasingly likely recession slashes tax receipts and raises spending. He'll also leave behind a host of thorny, longer-term problems -- from the expiration of his big tax cuts in 2010 to spiraling spending on senior citizens -- that will dog his successor's budgets for years.
In sum, in my view, Bush's presidency has undermined the well-being of all Americans.
OAO Gazprom, Russia's state- controlled natural-gas export monopoly, pumped 548.5 billion cubic meters of gas in 2007, 1.3 percent less than the previous year, as milder weather reduced demand for the fuel. Gazprom produced 556 billion cubic meters of gas in 2006, the Moscow-based company said in an e-mailed statement today. It raised reserves by more than 585 billion cubic meters, according to preliminary data.
Troubled bond insurer Ambac Financial said Tuesday its fourth quarter results swung to a loss of $3.26 billion, or $31.85 a share as the firm wrote off $5.2 billion of credit derivative exposures. The company earned $202.7 million or $1.88 a share a year ago.
John Hussman: "It's instructive that the total return of the S&P 500 over the past 4 years has now averaged just 5.7% annually, despite the fact that the recent decline is still well short of a minimal bear market. The return on the S&P is close enough to the return on risk-free Treasury bills that our hedging over this entire period has cost us close to nothing. Equally instructive is that the S&P 500 has now lagged Treasury bills since April 1998. Valuations do indeed drive long-term market returns. The recent bull market began at the highest valuations of any prior bull market in history. It has predictably achieved below-average overall returns, and the cycle isn't even over yet. Though every market cycle is different, an “average” bull market represents a span of about 3.75 years, with total returns averaging about 27% annually, followed by a bear market of about 1.25 years, with total returns averaging about -27% annually. That means that, on average, a typical bear market loss of just over 30% has shaved a typical bull market gain of 145% down to a cumulative return of about 65% (for a full cycle of about 5 years and overall annual total returns of about 10.6%)."
Wal-Mart Stores, Inc. announced today that the number of associates who now have health care coverage through its new associate-tailored plans for 2008 or another source has significantly increased from 90.4 percent to 92.7 percent, and the number of uninsured associates decreased by more than 20 percent, compared to one year ago.
Palatin Technologies, Inc.announced today that it entered into an agreement to settle all outstanding litigation and disputes with Competitive Technologies, Inc. related to a license agreement between the companies. Under the terms of the settlement, Palatin retains all rights to bremelanotide, its peptide in clinical development for male erectile dysfunction and female sexual dysfunction, with no obligations for any future payments to Competitive Technologies. Both the pending arbitration initiated by Competitive Technologies and the action in Connecticut Superior Court will be dismissed with prejudice. The existing license agreement between Palatin and Competitive Technologies has been terminated, with Competitive Technologies receiving all rights to a peptide developed at the University of Arizona and called MT-II or PT-14, which Palatin ceased developing in 2000. As part of the settlement, Palatin remitted a one-time payment to Competitive Technologies of $800,000.
J&J reported net income of $2.37 billion, or 82 cents per share, up from $2.17 billion, or 74 cents per share, a year earlier. Excluding one-time items, net income would have been 88 cents per share. Revenues totaled $15.96 billion, up 16.6 percent from $13.7 billion in the year-ago quarter.
"Flooding the market with liquidity is a disaster for the purchasing power of the dollar," says David Gitlitz, chief economist for Trend Macrolytics.
George Ure: "Collapse of Fractional Reserve Banking: I must be reading the Federal Reserve's H.3 "Aggregate Reserve of Depository Institutions and the Monetary Base" all wrong. If you scroll down to Table 2 and look at the not-seasonally adjusted figures for the "Reserves of depository institutions" you will see three columns on the left. Total (Reserves) "nonborrowed (reserves) and "required" (reserves). The shocker is that the preliminary January 16th number showed that the required reserve of banks was $39,989 million dollars. This means how much money the banks claim to have on hand as their portion of the 'fractional reserve' banking system is (ballpark) $40 billion.
OK, the third column says the amount of reserves they are required to have by the Federal Reserve is only $38,278 million. (*$32.3 billion, ballpark).
OK, I've saved the scariest for last: Column #2. It says the amount of nonborrowed money (*money that the banksters didn't have to borrow to meet their reserve requirements was negative. In other words, if I am reading this right, the whole fractional reserve banking system's reserves required is being held afloat strictly by borrowed money at this point!...As much as I regret writing this, we may end up with runs on financial and so-called 'investment' houses over the coming few weeks and months."
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
Sean Owen: "The U.S. economy is starting to show its soft underbelly, and the steps the Fed is taking to mitigate the problem will only serve to exacerbate its true source - overindulgence in cheap liquidity. So whichever way the wind blows, the best strategy will be the same - the same as it has been for some time now. Hold assets with real intrinsic value that is not linked to the value of any particular currency. There are plenty to choose from - infrastructure, precious metals, and commodities, just to name a few, but my personal favorite is also the most renewable - Timber."
Ignoring the fact that Blackstone has a deal to buy Alliance Data, one should note the company will earn $3.75 a share for 2007 and more in 2008. The Feb. 30 puts are selling for 45 cents and the Feb 35 puts are selling for $1. I sold both at those prices today. I like the risk/reward.
Apple Inc. on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company's shares tumbled in after-hours trading as the consumer-electronics maker gave an earnings outlook that fell short of Wall Street analysts' forecasts. Apple expects to earn 94 cents a share on $6.8 billion in sales for its second quarter. The forecast fell below analysts' consensus estimates for earnings of $1.09 a share on revenue of $6.99 billion. The outlook helped send Apple's shares down more than $17 a share, or 11%, to $138.49 in after-hours trading.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
Gold for February delivery surged $13.30, or 1.5%, at $895 an ounce on the New York Mercantile Exchange. Earlier in electronic trading, gold futures hit an intraday low of $849.50.
Sean Owen: "The U.S. economy is starting to show its soft underbelly, and the steps the Fed is taking to mitigate the problem will only serve to exacerbate its true source - overindulgence in cheap liquidity. So whichever way the wind blows, the best strategy will be the same - the same as it has been for some time now. Hold assets with real intrinsic value that is not linked to the value of any particular currency. There are plenty to choose from - infrastructure, precious metals, and commodities, just to name a few, but my personal favorite is also the most renewable - Timber."
Ignoring the fact that Blackstone has a deal to buy Alliance Data, one should note the company will earn $3.75 a share for 2007 and more in 2008. The Feb. 30 puts are selling for 45 cents and the Feb 35 puts are selling for $1. I sold both at those prices today. I like the risk/reward.
Apple Inc. on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company's shares tumbled in after-hours trading as the consumer-electronics maker gave an earnings outlook that fell short of Wall Street analysts' forecasts. Apple expects to earn 94 cents a share on $6.8 billion in sales for its second quarter. The forecast fell below analysts' consensus estimates for earnings of $1.09 a share on revenue of $6.99 billion. The outlook helped send Apple's shares down more than $17 a share, or 11%, to $138.49 in after-hours trading.
February crude, which is the front month contract but has smaller volume than the March contract, closed down 72 cents at $89.85 a barrel. Gold for February delivery rose $8.60 to end at $890.30 an ounce on the New York Mercantile Exchange.
Texas Instruments Inc posted a higher fourth-quarter profit and gave an outlook that reassured investors who were worried the weak U.S. economy would hurt demand for its wireless and analog chips.
Mortgage insurer MGIC Investment Corp said on Tuesday it expects insurance payouts to generate up to $2 billion of paid losses in 2008, as the performance of mortgages it insures deteriorates. MGIC also estimated incurred losses of $1.3 billion in the fourth quarter of 2007 from insurance payouts and boosting reserves.
"Despite the difficulties in the market, I don't expect you'll see banks defaulting on legally binding commitments and I expect most of these deals will close," said Gregory Gooding, a partner at law firm Debevoise & Plimpton LLP.
"There may be circumstances where buyers have terms on the contracts allowing them to get out of deals and I wouldn't be surprised if there are a couple more deals where those are taken advantage (of)," Gooding said. "But I expect that to be rare and it's a case-by-case analysis."
Benjamin Franklin: “If you can't pay for a thing, don't buy it. If you can't get paid for it, don't sell it. Do this, and you will have calm and drowsy nights, with all of the good business you have now and none of the bad. If you have time, don't wait for time.”
Monday, January 21, 2008
The Futures Are Down Huge
1/22/08 The Futures Are Down Huge
After the heavy losses nursed by Asian and European stock markets, U.S. stock futures are pointing to huge losses when markets re-open on Tuesday. Futures on the Dow Jones Industrial Average dropped 476 points, the S&P 500 futures contract fell 62 points and the Nasdaq 100 futures contract declined 81 points.
Shares in London tumbled Monday, briefly hitting their 18-month lows, as a sharp downturn in mining and banking shares pointed to growing investor fears of a slowdown in global economic growth and a U.S. recession.
Asian markets declined sharply on concerns the U.S. economy is sliding toward recession, with Japan dropping nearly 4% and Hong Kong plummeting 5.5%.
India's benchmark index plunged 7.4 percent Monday, its second-biggest percentage loss ever, amid a regional market rout sparked by worries that the U.S. economy may enter a recession.
A massive sell off in Asian and European stocks appeared to light a fire under the Japanese yen, fueling strong gains against major counterparts as markets unwound carry trades. Since suggesting going long th yen versus the dollar at 123, in Monday trading the yen rallied to 105.82. I continue to believe the demise of the yen carry trade will provide additional strength for the yen.
In Canada, the S&P/TSX index dropped 3.9% in early trade, with losers including Bombardier, down nearly 10%, and Talisman Energy, down nearly 9%.
Quebecor World, one of the world's biggest commercial printers, has filed for protection from creditors after failing to negotiate a rescue package from Quebecor, its Montreal-based media-group parent, and a Canadian private-equity fund.
247wallst.com: "For the Dow to drop 1,000 points it would have to sell of 8%. On October 19, 1987 the index sold off over 22% and it lost 7% of its value in one trading day on both September 21, 2001 and April 14, 2000. With the deep concerns with the market, it could happen again."
Production of crude oil by China National Offshore Oil Corp. fell 3.2% in 2007 from a year earlier, while pretax profit climbed 15%, according to reports. Cnooc, China's largest off-shore energy explorer and third largest by output produced 213.38 million barrels last year, according to wire reports citing an unnamed company executive. The falling crude oil output follows a 1.3% decline in 2006. Cnooc's 2007 pretax profit climbed 15% to 56.52 billion yuan ($7.8 billion). The big driver behind the profit growth were gains from securities trading, which totaled 3.33 billion yuan, an increase of more than four fold over the preceding year.
BHP Billiton has brought in more banks to help it find the $70 billion it needs to fund its planned takeover of Rio Tinto , Britain's Sunday Times newspaper reported. However, BHP Billiton is unlikely to increase its $130 billion unsolicited proposal to acquire mining rival Rio Tinto by a February 6 deadline, The Wall Street Journal reported on Monday. BHP could be trying to pressure Rio to negotiate by holding firm with its three-for-one share offer, which has yet to be formalized, the newspaper said, citing sources familiar with the company's plans.
Brazilian miner CVRD is preparing to offer as much as $90 billion to buy Swiss mining company Xstrata PLC, two leading Brazilian newspapers reported Monday. Companhia Vale do Rio Doce SA, the planet's biggest producer of the raw ingredient in steel, wants to pay as much as $60 billion of the amount in stock, the Valor Economico and O Estado de S. Paulo newspapers reported. Vale says talks have not yet produced material result.
I find press reports unusual. They stated Clinton won Nevada. In actuality, Obama picked up 13 delegates and 12 delegates went to Clinton. Could the press be biased?
German bank WestLB said it's going to post a loss of approximately 1 billion euros ($1.46 billion) in 2007 and may write down almost 1 billion euros. The German state of North Rhine-Westphalia, the regional associations and the savings banks associations will balance out the annual loss and up to 1 billion euros of write-downs in a planned capital increase, WestLB said.
According to the NY Times, Getty Images, the world’s biggest supplier of pictures and video to media and advertising companies, has put itself on the auction block and could fetch more than $1.5 billion, people briefed on the situation said Sunday. The firm hired Goldman Sachs to advise it on a potential sale, these people said. The company has attracted interest from several buyers, mostly private equity firms, including Kohlberg Kravis Roberts, Bain Capital and others.Final bids are due by the end of the month, but people briefed on the auction cautioned that it was unclear which firms would submit a final bid. Last year, Getty held takeover talks with the publicly held Jupitermedia Corporation, but the discussions ended quickly without a deal.Its main rivals, Jupitermedia, and the Corbis Corporation, a private company owned by the Microsoft founder Bill Gates, have also made a number of acquisitions, though they remain far smaller than Getty.
According to Bloomberg, ACA Capital Holdings Inc., the bond insurer being run by regulators after subprime-mortgage losses, won a month's grace to unwind $60 billion of credit-default swap contracts that it can't pay. ACA, under the control of the Maryland Insurance Administration, extended an agreement that waives collateral requirements, policy claims and termination rights until Feb. 19, the New York-based company said in a statement on Business Wire late yesterday.
Shares in China's banks fell sharply today after news reports said its No. 2 lender, Bank of China, might write down holdings of U.S. mortgage securities and two others increased reserves for possible losses.The reports were the first indication that Chinese lenders, which have so far avoided damage from the U.S. credit crisis, might face problems due to their holdings of subprime securities. Also today, China's banking regulator warned that lenders might face risks from fluctuations in fast-rising real estate prices.
Rob Hanna: "Mean reversion trades can be especially difficult in markets like this where price is in a freefall and there is no support nearby and no reasonable place to set a stop. Limiting exposure to control risk is therefore extremely important. And since exact timing is difficult and the market may still have a good amount left to fall, it is imperative that traders have additional capital they can put to work should the setup improve.
To sum up, the time stretch is indicating a bounce is likely coming soon and the rising CBI is indicating the bounce could be sharp. These two factors are providing a quantifiable edge. Aggressive traders could consider adding a small amount of long exposure in anticipation of this bounce."
Cisco Systems said on Monday it would invest about 5.8 billion dirhams ($1.58 billion) in the United Arab Emirates over five years. The company would spend part of the money through its Cisco Systems Capital Corp and could eventually set up a financial services unit in Dubai, it said in a statement.
According to the WSJ, Genentech Inc. discovered two new genes linked to lupus, raising hopes of earlier diagnosis and better targeted treatment of the auto-immune disease, which affects an estimated 1.5 million Americans. Discovery of the new genes, labeled BLK and ITGAM, was reported by Genentech scientist Timothy W. Behrens and his colleagues in the New England Journal of Medicine's online edition Sunday. The report coincided with that of a rival team from the International Consortium for Systemic Lupus Erythematosus Genetics in Nature Genetics.
The World Gold Council has reported that demand for gold from the jewelery sector decreased in the fourth-quarter of 2007.
Citigroup cuts 2008 US GDP view to 1.2% from 2.4%. We'll see whether that is too optimistic.
Futures markets in Hong Kong were pointing to a 600-point decline in Hong Kong's Hang Seng Index in pre-market trading Tuesday, with the blue chip index expected to extend the slump seen in the previous session.
Japan's Nikkei 225 average tumbled 3.9% to 12,800.90, while the broader Topix index skidded 3.5% to 1,248.61. Earlier in the day, the Nikkei dropped as low as 12,674.57 -- its lowest level since September 2005.
Australia's S&P/ASX 200 extended losses into the 12th straight session, slumping 5% to 5,303.70 and New Zealand's NZX 50 index lost 2.6% at 3,553.20, while South Korea's Kospi shed 3.9% at 1,617.23.
According to Bloomberg, European finance ministers said a global stock-market slump and an economic slowdown in the U.S. threaten to slow growth in Europe more than forecast.``The economic situation and financial markets are highly volatile and uncertain, a good deal more uncertain than usual,'' Luxembourg Finance Minister Jean-Claude Juncker said yesterday in Brussels after presiding over a meeting of counterparts from the euro region. ``If there is a real slowdown in the U.S., obviously that would be felt in the euro zone.''
After the heavy losses nursed by Asian and European stock markets, U.S. stock futures are pointing to huge losses when markets re-open on Tuesday. Futures on the Dow Jones Industrial Average dropped 476 points, the S&P 500 futures contract fell 62 points and the Nasdaq 100 futures contract declined 81 points.
Shares in London tumbled Monday, briefly hitting their 18-month lows, as a sharp downturn in mining and banking shares pointed to growing investor fears of a slowdown in global economic growth and a U.S. recession.
Asian markets declined sharply on concerns the U.S. economy is sliding toward recession, with Japan dropping nearly 4% and Hong Kong plummeting 5.5%.
India's benchmark index plunged 7.4 percent Monday, its second-biggest percentage loss ever, amid a regional market rout sparked by worries that the U.S. economy may enter a recession.
A massive sell off in Asian and European stocks appeared to light a fire under the Japanese yen, fueling strong gains against major counterparts as markets unwound carry trades. Since suggesting going long th yen versus the dollar at 123, in Monday trading the yen rallied to 105.82. I continue to believe the demise of the yen carry trade will provide additional strength for the yen.
In Canada, the S&P/TSX index dropped 3.9% in early trade, with losers including Bombardier, down nearly 10%, and Talisman Energy, down nearly 9%.
Quebecor World, one of the world's biggest commercial printers, has filed for protection from creditors after failing to negotiate a rescue package from Quebecor, its Montreal-based media-group parent, and a Canadian private-equity fund.
247wallst.com: "For the Dow to drop 1,000 points it would have to sell of 8%. On October 19, 1987 the index sold off over 22% and it lost 7% of its value in one trading day on both September 21, 2001 and April 14, 2000. With the deep concerns with the market, it could happen again."
Production of crude oil by China National Offshore Oil Corp. fell 3.2% in 2007 from a year earlier, while pretax profit climbed 15%, according to reports. Cnooc, China's largest off-shore energy explorer and third largest by output produced 213.38 million barrels last year, according to wire reports citing an unnamed company executive. The falling crude oil output follows a 1.3% decline in 2006. Cnooc's 2007 pretax profit climbed 15% to 56.52 billion yuan ($7.8 billion). The big driver behind the profit growth were gains from securities trading, which totaled 3.33 billion yuan, an increase of more than four fold over the preceding year.
BHP Billiton has brought in more banks to help it find the $70 billion it needs to fund its planned takeover of Rio Tinto , Britain's Sunday Times newspaper reported. However, BHP Billiton is unlikely to increase its $130 billion unsolicited proposal to acquire mining rival Rio Tinto by a February 6 deadline, The Wall Street Journal reported on Monday. BHP could be trying to pressure Rio to negotiate by holding firm with its three-for-one share offer, which has yet to be formalized, the newspaper said, citing sources familiar with the company's plans.
Brazilian miner CVRD is preparing to offer as much as $90 billion to buy Swiss mining company Xstrata PLC, two leading Brazilian newspapers reported Monday. Companhia Vale do Rio Doce SA, the planet's biggest producer of the raw ingredient in steel, wants to pay as much as $60 billion of the amount in stock, the Valor Economico and O Estado de S. Paulo newspapers reported. Vale says talks have not yet produced material result.
I find press reports unusual. They stated Clinton won Nevada. In actuality, Obama picked up 13 delegates and 12 delegates went to Clinton. Could the press be biased?
German bank WestLB said it's going to post a loss of approximately 1 billion euros ($1.46 billion) in 2007 and may write down almost 1 billion euros. The German state of North Rhine-Westphalia, the regional associations and the savings banks associations will balance out the annual loss and up to 1 billion euros of write-downs in a planned capital increase, WestLB said.
According to the NY Times, Getty Images, the world’s biggest supplier of pictures and video to media and advertising companies, has put itself on the auction block and could fetch more than $1.5 billion, people briefed on the situation said Sunday. The firm hired Goldman Sachs to advise it on a potential sale, these people said. The company has attracted interest from several buyers, mostly private equity firms, including Kohlberg Kravis Roberts, Bain Capital and others.Final bids are due by the end of the month, but people briefed on the auction cautioned that it was unclear which firms would submit a final bid. Last year, Getty held takeover talks with the publicly held Jupitermedia Corporation, but the discussions ended quickly without a deal.Its main rivals, Jupitermedia, and the Corbis Corporation, a private company owned by the Microsoft founder Bill Gates, have also made a number of acquisitions, though they remain far smaller than Getty.
According to Bloomberg, ACA Capital Holdings Inc., the bond insurer being run by regulators after subprime-mortgage losses, won a month's grace to unwind $60 billion of credit-default swap contracts that it can't pay. ACA, under the control of the Maryland Insurance Administration, extended an agreement that waives collateral requirements, policy claims and termination rights until Feb. 19, the New York-based company said in a statement on Business Wire late yesterday.
Shares in China's banks fell sharply today after news reports said its No. 2 lender, Bank of China, might write down holdings of U.S. mortgage securities and two others increased reserves for possible losses.The reports were the first indication that Chinese lenders, which have so far avoided damage from the U.S. credit crisis, might face problems due to their holdings of subprime securities. Also today, China's banking regulator warned that lenders might face risks from fluctuations in fast-rising real estate prices.
Rob Hanna: "Mean reversion trades can be especially difficult in markets like this where price is in a freefall and there is no support nearby and no reasonable place to set a stop. Limiting exposure to control risk is therefore extremely important. And since exact timing is difficult and the market may still have a good amount left to fall, it is imperative that traders have additional capital they can put to work should the setup improve.
To sum up, the time stretch is indicating a bounce is likely coming soon and the rising CBI is indicating the bounce could be sharp. These two factors are providing a quantifiable edge. Aggressive traders could consider adding a small amount of long exposure in anticipation of this bounce."
Cisco Systems said on Monday it would invest about 5.8 billion dirhams ($1.58 billion) in the United Arab Emirates over five years. The company would spend part of the money through its Cisco Systems Capital Corp and could eventually set up a financial services unit in Dubai, it said in a statement.
According to the WSJ, Genentech Inc. discovered two new genes linked to lupus, raising hopes of earlier diagnosis and better targeted treatment of the auto-immune disease, which affects an estimated 1.5 million Americans. Discovery of the new genes, labeled BLK and ITGAM, was reported by Genentech scientist Timothy W. Behrens and his colleagues in the New England Journal of Medicine's online edition Sunday. The report coincided with that of a rival team from the International Consortium for Systemic Lupus Erythematosus Genetics in Nature Genetics.
The World Gold Council has reported that demand for gold from the jewelery sector decreased in the fourth-quarter of 2007.
Citigroup cuts 2008 US GDP view to 1.2% from 2.4%. We'll see whether that is too optimistic.
Futures markets in Hong Kong were pointing to a 600-point decline in Hong Kong's Hang Seng Index in pre-market trading Tuesday, with the blue chip index expected to extend the slump seen in the previous session.
Japan's Nikkei 225 average tumbled 3.9% to 12,800.90, while the broader Topix index skidded 3.5% to 1,248.61. Earlier in the day, the Nikkei dropped as low as 12,674.57 -- its lowest level since September 2005.
Australia's S&P/ASX 200 extended losses into the 12th straight session, slumping 5% to 5,303.70 and New Zealand's NZX 50 index lost 2.6% at 3,553.20, while South Korea's Kospi shed 3.9% at 1,617.23.
According to Bloomberg, European finance ministers said a global stock-market slump and an economic slowdown in the U.S. threaten to slow growth in Europe more than forecast.``The economic situation and financial markets are highly volatile and uncertain, a good deal more uncertain than usual,'' Luxembourg Finance Minister Jean-Claude Juncker said yesterday in Brussels after presiding over a meeting of counterparts from the euro region. ``If there is a real slowdown in the U.S., obviously that would be felt in the euro zone.''
Sunday, January 20, 2008
Our Declining Standard of Living
1/21/08 Our Declining Standard of Living
According to the BLS, median weekly earnings of the nation's 108.3 million full-time wage and salary workers were $700 in the fourth quarter of 2007.This was 2.6 percent higher than a year earlier compared with a gain of 4.0 percent in the Consumer Price Index for All Urban Consumers(CPI-U) over the same period.
California's jobless rate jumped to 6.1% in December, up from 4.8% a year earlier, prompting Gov. Arnold Schwarzenegger to move to expedite public works projects in an effort to stimulate the economy. The surge in unemployment, up from 5.6% in November, was the latest sign of the toll of the housing slump, the sub-prime mortgage debacle and production shutdowns during the Hollywood writers strike.
Petro Rabigh, a joint venture of the state-run oil company Saudi Aramco and Sumitomo Chemical of Japan, is Saudi Arabia’s boldest bet yet that this oil-rich kingdom can transform itself into an industrial powerhouse. The plant is part of a $500 billion investment program to build new cities, create millions of jobs and diversify the economy away from petroleum exports over the next two decades. The kingdom, which has a population of 24.5 million, including nearly 7 million foreigners, has what one analyst called a “human time bomb.” About 40 percent of Saudis are under 15, and because the country has one of the world’s highest birth rates, the population is expected to reach nearly 40 million by 2025. “It has been a social, and therefore a political, imperative of the Saudi government to develop the economy and to create employment opportunities,” said Timothy S. Gray, the chief executive of HSBC Saudi Arabia.
Mike Burk: "The market is nearly as oversold as it has ever been. As of Friday's close 8% of the component issues of the S&P 500 (SPX) are above their respective 50 day EMA's. There have been lower numbers, but not many...When the market hits a low with an extreme number of new lows it usually retests that low. Near the August low there were 480 new lows on the NASDAQ implying a retest of that low. Near the late November low there were 359 new lows, less than the August low, but still enough to suggest another retest. On Friday there were 485 new lows on the NASDAQ suggesting another retest...Historically the coming week has been the weakest week in January which is usually a strong month. Given the recent lack of conformity to seasonal patterns, it will probably be up."
U.S. stocks posted the steepest weekly drop since July 2002.
Billie Joe Armstrong: “A guy walks up to me and asks 'What's Punk?'. So I kick over a garbage can and say 'That's punk!'. So he kicks over the garbage can and says 'That's Punk?', and I say 'No, that's trend!'”
"If U.S. consumption really comes down, that's bad news for us. That will have a pretty severe impact on our exports," Zhang Tao, deputy head of the international department of the People's Bank of China told a group including Reuters.
The Nasdaq Composite index has fallen 17 percent from its 52-week closing high set in October.
Yahoo has 12,000 employees. There are rumors that the company may lay off 1,500 to 2,000 employees in its European operations. The stock has been making new 52-week lows.
According to the BLS, median weekly earnings of the nation's 108.3 million full-time wage and salary workers were $700 in the fourth quarter of 2007.This was 2.6 percent higher than a year earlier compared with a gain of 4.0 percent in the Consumer Price Index for All Urban Consumers(CPI-U) over the same period.
California's jobless rate jumped to 6.1% in December, up from 4.8% a year earlier, prompting Gov. Arnold Schwarzenegger to move to expedite public works projects in an effort to stimulate the economy. The surge in unemployment, up from 5.6% in November, was the latest sign of the toll of the housing slump, the sub-prime mortgage debacle and production shutdowns during the Hollywood writers strike.
Petro Rabigh, a joint venture of the state-run oil company Saudi Aramco and Sumitomo Chemical of Japan, is Saudi Arabia’s boldest bet yet that this oil-rich kingdom can transform itself into an industrial powerhouse. The plant is part of a $500 billion investment program to build new cities, create millions of jobs and diversify the economy away from petroleum exports over the next two decades. The kingdom, which has a population of 24.5 million, including nearly 7 million foreigners, has what one analyst called a “human time bomb.” About 40 percent of Saudis are under 15, and because the country has one of the world’s highest birth rates, the population is expected to reach nearly 40 million by 2025. “It has been a social, and therefore a political, imperative of the Saudi government to develop the economy and to create employment opportunities,” said Timothy S. Gray, the chief executive of HSBC Saudi Arabia.
Mike Burk: "The market is nearly as oversold as it has ever been. As of Friday's close 8% of the component issues of the S&P 500 (SPX) are above their respective 50 day EMA's. There have been lower numbers, but not many...When the market hits a low with an extreme number of new lows it usually retests that low. Near the August low there were 480 new lows on the NASDAQ implying a retest of that low. Near the late November low there were 359 new lows, less than the August low, but still enough to suggest another retest. On Friday there were 485 new lows on the NASDAQ suggesting another retest...Historically the coming week has been the weakest week in January which is usually a strong month. Given the recent lack of conformity to seasonal patterns, it will probably be up."
U.S. stocks posted the steepest weekly drop since July 2002.
Billie Joe Armstrong: “A guy walks up to me and asks 'What's Punk?'. So I kick over a garbage can and say 'That's punk!'. So he kicks over the garbage can and says 'That's Punk?', and I say 'No, that's trend!'”
"If U.S. consumption really comes down, that's bad news for us. That will have a pretty severe impact on our exports," Zhang Tao, deputy head of the international department of the People's Bank of China told a group including Reuters.
The Nasdaq Composite index has fallen 17 percent from its 52-week closing high set in October.
Yahoo has 12,000 employees. There are rumors that the company may lay off 1,500 to 2,000 employees in its European operations. The stock has been making new 52-week lows.
Saturday, January 19, 2008
Losses Mount
1/20/08 Losses Mount
Motley Fool: "A whopping 77% of all stocks traded in the U.S. are down over the past three months. That's 5,182 names in the red. Another 3,101 of those names (fully 46%) are down 15% or more."
Barron's: "As of Friday's close, the Dow Jones Industrial Average was down 8.8% for the year, putting it on course for the worst January since 1950. The sell off, punctuated by Thursday's 2.5% drop in the Dow, has shattered the optimism that prevailed on the Street at the start of the year."
Harrah's Entertainment, Inc. announced that it notified the New York Stock Exchange, the Philadelphia Stock Exchange and the Chicago Stock Exchange (collectively, the "Exchanges") of its intent to delist its common stock, par value $0.10 per share, from the Exchanges immediately following the consummation of the transactions contemplated by the agreement and plan of merger dated as of December 19, 2006 by and among Harrah's Entertainment, Hamlet Holdings LLC and Hamlet Merger Inc. As a result of the merger, Harrah's will cease to be a publicly-traded company. Subject to customary closing conditions, Harrah's expects to close the transaction on January 28, 2008.
Google Inc. saw its lead in the Internet search market slacken in December, according to data released Friday by Nielsen Online. Google garnered a 56.3% share of the U.S. search market in December, compared to a 57.7% share in the previous month, according to Nielsen. Yahoo Inc., meanwhile, saw its share in December fall slightly to 17.7%, compared to 17.9% in November. Microsoft Corp. was the only company among the three largest search providers to see an increase in December, as its share rose to 13.8% of the U.S. market from 12% the previous month, according to Nielsen.
Friedman, Billings, Ramsey Group Inc.'s mortgage-origination subsidiary filed a voluntary petition for bankruptcy protection, the company said Friday. First NLC Financial Services LLC filed a Chapter 11 petition for bankruptcy protection so it can begin an "orderly liquidation" of its assets.
According to the WSJ, Ambac Financial Group Inc.'s loss of its treasured AAA rating from Fitch Ratings will result in downgrades of 4,991 bond issues that Ambac has insured.
The Markit CDX North America Investment-Grade Index, a benchmark gauge of default risk tied to the bonds of 125 companies, rose 3.25 bps to a near-record 110.5 bps, according to Deutsche Bank.
Doug Noland: "The Credit system is today an incredible mess. Literally Trillions of securities, previously valued in the marketplace based upon confidence in the underlying financial guarantees, are now suspect. This has severely impacted marketplace liquidity. And perhaps tens of Trillions of Credit and other derivative contracts are now subject to very serious counterparty issues. Many players throughout the Credit market are now severely impaired and have lost the capacity to hedge against/mitigate further losses...The leveraged speculating community is in turmoil. The “quants” are in a quandary. Basically, the entire market today desires, at least to some extent, to reduce/mitigate/transfer Credit and market risk. Inevitably, however, when “the market” is keen to hedge there’ll be no one with the necessary wherewithal to take the other side of The Trade. I have so many fears I don’t even know where to begin...First, correlations between various instruments have broken down (i.e. junk bond spreads widen while “dollar swap spreads” narrow). Second, the liquidity profile (hence pricing) of various sectors has diverged radically (i.e. agency MBS vs. “private-label” MBS/ABS) - with the Treasury market melt-up causing further destabilization. Third, with the breakdown in Wall Street’s “private-label” MBS market and the collapse in confidence in the “monoline” Credit insurers, liquidity has all but evaporated throughout huge cross-sections of the debt securities and related derivatives markets. This dynamic is fomenting dangerous counter-party risks and uncertainties. The capacity of a rapidly rising number of market participants to fulfill their obligations in various types of derivative and “insurance” contracts is in question...Today, market illiquidity increases the likelihood that many funds will be forced to halt redemptions. This dynamic has commenced and it holds the potential to batter industry trust and confidence...The “hedge funds” have, after all, sold themselves as capable of minting money in any kind of market environment. This could prove a major systemic risk...Limited liquidity in the Credit market has also created a backdrop where those seeking to hedge (or profit from) heightened systemic risks have few places to go for relatively liquid trading outside selling stocks and equity index products. And sinking stock prices further aggravates the unfolding Corporate Credit Crisis, fostering only greater systemic stress and greater selling pressure. “Contemporary finance” is being exposed as a daisy-chain of interrelated weak underlying structures, unrecognized risks and acute fragilities."
There is a total of about $2 trillion in roughly 9000 hedge funds. They are not immune to the daisy-chain described by Doug Noland. In fact, in their desire to minimize risk, they will, in my view, exacerbate the lack of liquidity in the marketplace. The ability to depart from many hedge funds will be impaired. The unraveling has just begun.
China discovered 860 billion yuan ($119 billion) in banking ``irregularities'' last year, almost triple the profits by Industrial & Commercial Bank of China Ltd. and other ``major'' Chinese commercial banks, the regulator said.
The Oil Drum: "On January 15, Terry Moran interviewed President Bush in Saudi Arabia on ABC's Nightline. When asked what he might say to the King of Saudi Arabia to lower oil prices, George Bush responded, "If they don't have a lot of additional oil to put on the market, it is hard to ask somebody to do something they may not be able to do." Nightline Presidential Interview.
According to Gail Tverberg, writing as Gail the Actuary of TheOilDrum.com, "If Saudi Arabia doesn't have that much additional oil to put on the market, the veracity of what Saudi Arabia has been saying about extra capacity is brought into question." More importantly, it starts raising questions about Saudi Arabia's true long-term oil production capability. Can Saudi Arabia really ramp up oil production in the future? Are the high reserves posted by Saudi Arabia and other Middle-Eastern countries really indicative of high future production capability? The Oil Drum Article
Schlumberger: "In the longer term however, current levels of drilling are insufficient to meaningfully slow decline rates, improve reservoir recovery or add sufficient new production capacity. The explosion in exploration licenses awarded in the last three years, the continual expansion of the number of new offshore rigs being ordered for delivery through and beyond the end of the decade, and the industry-wide, as well as our own plans to increase both capex and research and development spend are clear indicators of future growth. It is our view that only a global economic recession that lowers demand can flatten this trend."
Brad Setser: "In 2007, the BRICs added just a bit under $800b ($760b) to their formal foreign exchange reserves (the total would top $800b if I counted China, Russia and India’s valuation gains) even without counting the Chinese banks. Counting the state banks and the CIC, the total is more like $900b.
The Saudi Monetary Agency’s foreign assets likely increased by $75b in 2007 -- they were up over $60b through November (Table 8a, in Saudi riyal). Saudi pension funds added another $5b.
The Gulf's other central banks likely added close to $50b to their reserves – though we are still waiting for data from the Emirates for the second half of the year.
The big existing Gulf investment funds – the Abu Dhabi Investment Authority (which, incidentally is likely to be bit smaller than the $875b to $1 trillion total that is commonly cited; see Mohsin Khan’s statements in the FT), the Kuwait Investment Authority, the Qatar Investment Authority and the confusing jumble of Dubai investment funds (some belonging to Dubai, run by Sheik Mohamed, and some belong to Sheik Mohamed, ruler of Dubai) – likely added around $100b to their assets. The $100b total doesn’t count any additional funds that they borrowed to finance some of their more aggressive strategies, or the capital gains on their existing holdings. $100b is what the funds got from their countries surplus oil revenues and the interest on their existing holdings.
Gulf central banks and sovereign funds collectively added about $225b to their foreign assets, and maybe $150b to their dollar assets. The rapid growth in central bank reserves (still mostly in dollars) likely offset the diversification done by various wealth funds."
Robert McHugh: "We are in an official stock market crash from October 11th, 2007, a 15 percent decline over three months. If prices do not immediately rally, it means stocks are hitting the sweet spot of the ongoing crash...The Wilshire 5000 is essentially the entire U.S. stock market. Guess what? It has lost $2.6 trillion over the past 3 months, since October 2007 (which by the way was when the last Hindenburg Omen occurred). $2.6 trillion of wealth wiped out in three months, 25 percent of GDP, a 16 percent stock market collapse that looks to have much further to go...Stocks opened Friday nicely, the first advance in quite a while, what looked like a plunge-stopper start to the day. Up 1.5 percent at the open. Bush had announced his pathetic $150 billion fiscal plan (more on that later), and I kept waiting for step two, a surprise announcement that the Fed was on the job, was cutting interest rates half a point, maybe even 75 basis points. It was what the market needed to hear, that the reinflation medicine was being applied before the patient dies. Never happened. Nope. There is a scheduled open market operations meeting on the 29th, and that is when he will address interest rates. By the book. I'll bet Bernanke was the sort of professor who never curved a test, never gave extra credit, never considered class participation, never dropped the lowest quiz in the final grade. Wall Street's reaction? That 1.5 percent rally was reversed and we fell sharply the rest of the day. Confidence Ben. Learn what to say, learn what to do, or give up the job and let someone else with a clue do the heavy lifting."
Motley Fool: "A whopping 77% of all stocks traded in the U.S. are down over the past three months. That's 5,182 names in the red. Another 3,101 of those names (fully 46%) are down 15% or more."
Barron's: "As of Friday's close, the Dow Jones Industrial Average was down 8.8% for the year, putting it on course for the worst January since 1950. The sell off, punctuated by Thursday's 2.5% drop in the Dow, has shattered the optimism that prevailed on the Street at the start of the year."
Harrah's Entertainment, Inc. announced that it notified the New York Stock Exchange, the Philadelphia Stock Exchange and the Chicago Stock Exchange (collectively, the "Exchanges") of its intent to delist its common stock, par value $0.10 per share, from the Exchanges immediately following the consummation of the transactions contemplated by the agreement and plan of merger dated as of December 19, 2006 by and among Harrah's Entertainment, Hamlet Holdings LLC and Hamlet Merger Inc. As a result of the merger, Harrah's will cease to be a publicly-traded company. Subject to customary closing conditions, Harrah's expects to close the transaction on January 28, 2008.
Google Inc. saw its lead in the Internet search market slacken in December, according to data released Friday by Nielsen Online. Google garnered a 56.3% share of the U.S. search market in December, compared to a 57.7% share in the previous month, according to Nielsen. Yahoo Inc., meanwhile, saw its share in December fall slightly to 17.7%, compared to 17.9% in November. Microsoft Corp. was the only company among the three largest search providers to see an increase in December, as its share rose to 13.8% of the U.S. market from 12% the previous month, according to Nielsen.
Friedman, Billings, Ramsey Group Inc.'s mortgage-origination subsidiary filed a voluntary petition for bankruptcy protection, the company said Friday. First NLC Financial Services LLC filed a Chapter 11 petition for bankruptcy protection so it can begin an "orderly liquidation" of its assets.
According to the WSJ, Ambac Financial Group Inc.'s loss of its treasured AAA rating from Fitch Ratings will result in downgrades of 4,991 bond issues that Ambac has insured.
The Markit CDX North America Investment-Grade Index, a benchmark gauge of default risk tied to the bonds of 125 companies, rose 3.25 bps to a near-record 110.5 bps, according to Deutsche Bank.
Doug Noland: "The Credit system is today an incredible mess. Literally Trillions of securities, previously valued in the marketplace based upon confidence in the underlying financial guarantees, are now suspect. This has severely impacted marketplace liquidity. And perhaps tens of Trillions of Credit and other derivative contracts are now subject to very serious counterparty issues. Many players throughout the Credit market are now severely impaired and have lost the capacity to hedge against/mitigate further losses...The leveraged speculating community is in turmoil. The “quants” are in a quandary. Basically, the entire market today desires, at least to some extent, to reduce/mitigate/transfer Credit and market risk. Inevitably, however, when “the market” is keen to hedge there’ll be no one with the necessary wherewithal to take the other side of The Trade. I have so many fears I don’t even know where to begin...First, correlations between various instruments have broken down (i.e. junk bond spreads widen while “dollar swap spreads” narrow). Second, the liquidity profile (hence pricing) of various sectors has diverged radically (i.e. agency MBS vs. “private-label” MBS/ABS) - with the Treasury market melt-up causing further destabilization. Third, with the breakdown in Wall Street’s “private-label” MBS market and the collapse in confidence in the “monoline” Credit insurers, liquidity has all but evaporated throughout huge cross-sections of the debt securities and related derivatives markets. This dynamic is fomenting dangerous counter-party risks and uncertainties. The capacity of a rapidly rising number of market participants to fulfill their obligations in various types of derivative and “insurance” contracts is in question...Today, market illiquidity increases the likelihood that many funds will be forced to halt redemptions. This dynamic has commenced and it holds the potential to batter industry trust and confidence...The “hedge funds” have, after all, sold themselves as capable of minting money in any kind of market environment. This could prove a major systemic risk...Limited liquidity in the Credit market has also created a backdrop where those seeking to hedge (or profit from) heightened systemic risks have few places to go for relatively liquid trading outside selling stocks and equity index products. And sinking stock prices further aggravates the unfolding Corporate Credit Crisis, fostering only greater systemic stress and greater selling pressure. “Contemporary finance” is being exposed as a daisy-chain of interrelated weak underlying structures, unrecognized risks and acute fragilities."
There is a total of about $2 trillion in roughly 9000 hedge funds. They are not immune to the daisy-chain described by Doug Noland. In fact, in their desire to minimize risk, they will, in my view, exacerbate the lack of liquidity in the marketplace. The ability to depart from many hedge funds will be impaired. The unraveling has just begun.
China discovered 860 billion yuan ($119 billion) in banking ``irregularities'' last year, almost triple the profits by Industrial & Commercial Bank of China Ltd. and other ``major'' Chinese commercial banks, the regulator said.
The Oil Drum: "On January 15, Terry Moran interviewed President Bush in Saudi Arabia on ABC's Nightline. When asked what he might say to the King of Saudi Arabia to lower oil prices, George Bush responded, "If they don't have a lot of additional oil to put on the market, it is hard to ask somebody to do something they may not be able to do." Nightline Presidential Interview.
According to Gail Tverberg, writing as Gail the Actuary of TheOilDrum.com, "If Saudi Arabia doesn't have that much additional oil to put on the market, the veracity of what Saudi Arabia has been saying about extra capacity is brought into question." More importantly, it starts raising questions about Saudi Arabia's true long-term oil production capability. Can Saudi Arabia really ramp up oil production in the future? Are the high reserves posted by Saudi Arabia and other Middle-Eastern countries really indicative of high future production capability? The Oil Drum Article
Schlumberger: "In the longer term however, current levels of drilling are insufficient to meaningfully slow decline rates, improve reservoir recovery or add sufficient new production capacity. The explosion in exploration licenses awarded in the last three years, the continual expansion of the number of new offshore rigs being ordered for delivery through and beyond the end of the decade, and the industry-wide, as well as our own plans to increase both capex and research and development spend are clear indicators of future growth. It is our view that only a global economic recession that lowers demand can flatten this trend."
Brad Setser: "In 2007, the BRICs added just a bit under $800b ($760b) to their formal foreign exchange reserves (the total would top $800b if I counted China, Russia and India’s valuation gains) even without counting the Chinese banks. Counting the state banks and the CIC, the total is more like $900b.
The Saudi Monetary Agency’s foreign assets likely increased by $75b in 2007 -- they were up over $60b through November (Table 8a, in Saudi riyal). Saudi pension funds added another $5b.
The Gulf's other central banks likely added close to $50b to their reserves – though we are still waiting for data from the Emirates for the second half of the year.
The big existing Gulf investment funds – the Abu Dhabi Investment Authority (which, incidentally is likely to be bit smaller than the $875b to $1 trillion total that is commonly cited; see Mohsin Khan’s statements in the FT), the Kuwait Investment Authority, the Qatar Investment Authority and the confusing jumble of Dubai investment funds (some belonging to Dubai, run by Sheik Mohamed, and some belong to Sheik Mohamed, ruler of Dubai) – likely added around $100b to their assets. The $100b total doesn’t count any additional funds that they borrowed to finance some of their more aggressive strategies, or the capital gains on their existing holdings. $100b is what the funds got from their countries surplus oil revenues and the interest on their existing holdings.
Gulf central banks and sovereign funds collectively added about $225b to their foreign assets, and maybe $150b to their dollar assets. The rapid growth in central bank reserves (still mostly in dollars) likely offset the diversification done by various wealth funds."
Robert McHugh: "We are in an official stock market crash from October 11th, 2007, a 15 percent decline over three months. If prices do not immediately rally, it means stocks are hitting the sweet spot of the ongoing crash...The Wilshire 5000 is essentially the entire U.S. stock market. Guess what? It has lost $2.6 trillion over the past 3 months, since October 2007 (which by the way was when the last Hindenburg Omen occurred). $2.6 trillion of wealth wiped out in three months, 25 percent of GDP, a 16 percent stock market collapse that looks to have much further to go...Stocks opened Friday nicely, the first advance in quite a while, what looked like a plunge-stopper start to the day. Up 1.5 percent at the open. Bush had announced his pathetic $150 billion fiscal plan (more on that later), and I kept waiting for step two, a surprise announcement that the Fed was on the job, was cutting interest rates half a point, maybe even 75 basis points. It was what the market needed to hear, that the reinflation medicine was being applied before the patient dies. Never happened. Nope. There is a scheduled open market operations meeting on the 29th, and that is when he will address interest rates. By the book. I'll bet Bernanke was the sort of professor who never curved a test, never gave extra credit, never considered class participation, never dropped the lowest quiz in the final grade. Wall Street's reaction? That 1.5 percent rally was reversed and we fell sharply the rest of the day. Confidence Ben. Learn what to say, learn what to do, or give up the job and let someone else with a clue do the heavy lifting."
Friday, January 18, 2008
What A Market!
1/19/08 What A Market!
Johnson Controls, Inc's fiscal first-quarter profit totaled $235 million, or 39 cents per share, from $162 million, or 27 cents per share, in the same quarter a year before. The Milwaukee-based company said its net sales for the quarter totaled $9.48 billion, up from $8.21 billion in the year-earlier period. A Thomson Financial poll of analysts predicted earnings for the first quarter at 37 cents per share. Johnson Controls also repeated its revenue forecast for the full fiscal year 2008 of about $38 billion, which would mark a 10% on-year rise.
European banks tightened lending standards in the final quarter of 2007 and aim to keep a lid on new loans over the next three months as well, according to a European Central Bank survey of lenders in the countries that make up the euro zone.
From continuing operations, GE earned 68 cents a share, meeting Thomson Financial-compiled analyst estimates, and its revenue surpassed estimates of $47.28 billion. The company drew more than half its annual revenue from overseas for the first time as the U.S. economy slowed.
Schlumberger said fourth-quarter net income rose 22% to $1.38 billion, or $1.12 a share. Adjusted for a gain from selling certain rigs, the company said it earned $1.11 a share, and revenue rose 17% to $6.25 billion. Analysts polled by Thomson Financial expected earnings of $1.13 a share on revenue of $6.14 billion. A less favorable Oilfield Services revenue mix, lower pricing in US land operations, and a number of exceptional and seasonal weather effects led to less than satisfactory margins, the company said.
Analyst Stephen Gengaro of Jefferies & Co. said analysts had already expected some weakness in North American pricing, but the company disclosed margin pressure across the board, particularly on temporary weakness in its seismic survey business and rig start-up costs in South America.
Gengaro reiterated his buy rating on the stock and said he still expects the company to generate 20% earnings growth for 2008 and faster growth next year.
Bay Area median home prices and sales volumes experienced significant declines in December, according to a report released Thursday. For the nine-county area, the median home price fell 4.9 percent and sales volume plummeted 43.2 percent to a record low in December - the 35th consecutive month of decreasing sales, said DataQuick Information Systems, a La Jolla (San Diego County) research firm.-- Price. The median price for an existing, single-family home in the region was $620,000 in December, down 4.9 percent from $652,000 a year ago, DataQuick said. The resale median dropped in every county except Santa Clara, where it was up 4.6 percent. Including condos and new homes, the median was $587,500, also a 4.9 percent drop from a year ago, when it stood at $618,000. It has now fallen 11.7 percent from the peak of $665,000 reached in July. For all Bay Area home sales, the price drop was the largest year-over-year decline since February 1993, when the median fell 5.5 percent, according to DataQuick analyst Andrew LePage.-- Sales. Even more striking was the plunge in sales volume. The end of the year is traditionally a slow time for real estate transactions, but last month stood out as the worst December since DataQuick started keeping records in 1988. Just 3,049 existing homes changed hands in the nine-county area in December, down 43.2 percent from 5,366 last year. Including new homes and condos, a total of 5,065 properties were sold, down 39.5 percent from 8,372 in December 2006.
Average asking rents for apartments in the nine-county Bay Area reached $1,562 during the fourth quarter, up 9.4 percent from a year ago, according to a report released Thursday by Novato research firm RealFacts. Rents are up 16.3 percent from four years ago. San Franciscans continue to endure the region's highest average rent: $2,285, up 14.5 percent from the end of 2006, the company said.
The median price of a home in California tumbled nearly 15 percent amid a steep drop in sales in December, a real estate research firm said Thursday.The median home price hit $402,000 last month, down 14.8 percent from $472,000 in the year-ago period, according to DataQuick Information Systems.
It was announced on Thursday that China’s output for 2007 reached 276 metric tons of gold, or about 9.7 million ounces, a 12% increase over 2006 and slightly ahead of South Africa’s 272 metric tons. The GFMS figure came in slightly higher than an earlier estimate of 260 metric tons for 2007 by the China Gold Association, enabling China, which had been the No. 3 producer behind the United States, to end South Africa’s more than century-long rein at the top of the gold heap.
Brett Steenbarger: "I've mentioned before that, over the last 20 years, bear market bottoms have not occurred until we have 20% of fewer NYSE stocks closing above their 200-day moving average. For the first time in this downward move, that occurred on Thursday, with 19% of NYSE issues hitting the criterion. That number can go lower to be sure--and the majority of lows have occurred with an even lower figure--but it's an indication that the downside has been significant historically and has me watching for evidence of bottoming going forward."
According to Business Week, personal information on about 650,000 customers of J.C. Penney and up to 100 other retailers could be compromised after a computer tape went missing. GE Money, which handles credit card operations for Penney and many other retailers, said Thursday night that the missing information includes Social Security numbers for about 150,000 people.
Barron's writes that Microsoft was added to the Goldman Sacks "Conviction List."
Pat Buchanan: "This self-indulgent generation has borrowed itself into unpayable debt. Now the folks from whom we borrowed to buy all that oil and all those cars, electronics and clothes are coming to buy the country we inherited. We are prodigal sons, and the day of reckoning approaches."
According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $7.331 billion in the week ended 1/16/08 with Domestic funds reporting net inflows of $7.127 billion and Non-domestic funds reporting net inflows of $204 million; Excluding ETF activity, Equity funds report net cash outflows totaling -$3.989 billion with Domestic funds reporting net outflows of -$3.020 billion and Non-domestic funds reporting net outflows totaling -$969 million.
Jim Jubak: "Write-downs for high-risk, high-yield corporate debt, known as 'junk,' could dwarf losses in the mortgage mess. And that's when this financial crisis will finally hit bottom."
Sprint Nextel to cut 4000 jobs.
Troubled bond insurer Ambac Financial on Friday cancelled plans to raise about $1 billion, citing current market conditions and uncertainty that the new capital would secure its AAA credit rating. It said it would continue to evaluate its alternatives. On Thursday, Ambac shares lost more than half their value Moody's Investors Service warned that it may cut the AAA ratings of Ambac and rival MBIA Inc.
Robert McHugh: "We are only 100 points from an official stock market crash from October 11th, 2007, a 15 percent decline over a few months. The small cap Russell 200 index is down 20 percent over the past few months, already a crash. If prices do not immediately rally, it means stocks are hitting the sweet spot of the ongoing crash."
Food distributor Performance Food Group Co said Friday it agreed to be bought by an affiliate of Blackstone Group and Wellspring Capital Management for about $1.3 billion.
Shareholders will receive $34.50 for each share of company common stock they hold, the Richmond, Va.-based company said. That represented a 43% premium over Performance Food's closing price of $24.19 Thursday, the company said.
U.S. consumer sentiment improved in January, according to the University of Michigan consumer sentiment survey released Friday by UMich and Reuters. The index rose to 80.5 in mid-January from 75.5 in December, the first increase since July. Economists expected a decline to 74.3. The current conditions index rose to 98.1 from 91.0, while the expectations index rose to 69.1 from 65.6. Inflation expectations over the next year remained steady at 3.4%.
Growth could slow and further weaken in the first half of the year, the Conference Board said Friday, reporting that a gauge of future economic growth fell 0.2% in December - its third consecutive decline. Analysts had expected a decline of 0.1% for the index of leading economic indicators. The index declined 0.4% in November. Only four of the 10 leading economic indicators rose in December, with the largest positive contribution from vendor performance, while building permits were the largest negative contributor. "Taken together, the recent behavior of the composite indexes highlights increasing risks for further economic weakness, and suggest that economic activity is likely to be sluggish in the near term," according to the report.
U.K. retail sales unexpectedly dropped by the most in 11 months in December as higher borrowing costs and falling house prices curbed consumer spending. Sales declined 0.4 percent from November, when they rose by the same amount, the Office for National Statistics said today in London.
Temperatures of as much as 8 degrees Fahrenheit below normal will cover the Midwest and Northeast through Jan. 27, forecaster MDA Federal Inc.'s EarthSat Energy Weather of Rockville, Maryland, said in an outlook today. The two areas are the biggest consumers of natural gas.``The deep dive in temperatures moving through the upper Midwest currently and covering more of the East into next week'' is significant for the gas market, George Hopley, an analyst at Barclay's Capital in New York said today in a note.
Johnson Controls, Inc's fiscal first-quarter profit totaled $235 million, or 39 cents per share, from $162 million, or 27 cents per share, in the same quarter a year before. The Milwaukee-based company said its net sales for the quarter totaled $9.48 billion, up from $8.21 billion in the year-earlier period. A Thomson Financial poll of analysts predicted earnings for the first quarter at 37 cents per share. Johnson Controls also repeated its revenue forecast for the full fiscal year 2008 of about $38 billion, which would mark a 10% on-year rise.
European banks tightened lending standards in the final quarter of 2007 and aim to keep a lid on new loans over the next three months as well, according to a European Central Bank survey of lenders in the countries that make up the euro zone.
From continuing operations, GE earned 68 cents a share, meeting Thomson Financial-compiled analyst estimates, and its revenue surpassed estimates of $47.28 billion. The company drew more than half its annual revenue from overseas for the first time as the U.S. economy slowed.
Schlumberger said fourth-quarter net income rose 22% to $1.38 billion, or $1.12 a share. Adjusted for a gain from selling certain rigs, the company said it earned $1.11 a share, and revenue rose 17% to $6.25 billion. Analysts polled by Thomson Financial expected earnings of $1.13 a share on revenue of $6.14 billion. A less favorable Oilfield Services revenue mix, lower pricing in US land operations, and a number of exceptional and seasonal weather effects led to less than satisfactory margins, the company said.
Analyst Stephen Gengaro of Jefferies & Co. said analysts had already expected some weakness in North American pricing, but the company disclosed margin pressure across the board, particularly on temporary weakness in its seismic survey business and rig start-up costs in South America.
Gengaro reiterated his buy rating on the stock and said he still expects the company to generate 20% earnings growth for 2008 and faster growth next year.
Bay Area median home prices and sales volumes experienced significant declines in December, according to a report released Thursday. For the nine-county area, the median home price fell 4.9 percent and sales volume plummeted 43.2 percent to a record low in December - the 35th consecutive month of decreasing sales, said DataQuick Information Systems, a La Jolla (San Diego County) research firm.-- Price. The median price for an existing, single-family home in the region was $620,000 in December, down 4.9 percent from $652,000 a year ago, DataQuick said. The resale median dropped in every county except Santa Clara, where it was up 4.6 percent. Including condos and new homes, the median was $587,500, also a 4.9 percent drop from a year ago, when it stood at $618,000. It has now fallen 11.7 percent from the peak of $665,000 reached in July. For all Bay Area home sales, the price drop was the largest year-over-year decline since February 1993, when the median fell 5.5 percent, according to DataQuick analyst Andrew LePage.-- Sales. Even more striking was the plunge in sales volume. The end of the year is traditionally a slow time for real estate transactions, but last month stood out as the worst December since DataQuick started keeping records in 1988. Just 3,049 existing homes changed hands in the nine-county area in December, down 43.2 percent from 5,366 last year. Including new homes and condos, a total of 5,065 properties were sold, down 39.5 percent from 8,372 in December 2006.
Average asking rents for apartments in the nine-county Bay Area reached $1,562 during the fourth quarter, up 9.4 percent from a year ago, according to a report released Thursday by Novato research firm RealFacts. Rents are up 16.3 percent from four years ago. San Franciscans continue to endure the region's highest average rent: $2,285, up 14.5 percent from the end of 2006, the company said.
The median price of a home in California tumbled nearly 15 percent amid a steep drop in sales in December, a real estate research firm said Thursday.The median home price hit $402,000 last month, down 14.8 percent from $472,000 in the year-ago period, according to DataQuick Information Systems.
It was announced on Thursday that China’s output for 2007 reached 276 metric tons of gold, or about 9.7 million ounces, a 12% increase over 2006 and slightly ahead of South Africa’s 272 metric tons. The GFMS figure came in slightly higher than an earlier estimate of 260 metric tons for 2007 by the China Gold Association, enabling China, which had been the No. 3 producer behind the United States, to end South Africa’s more than century-long rein at the top of the gold heap.
Brett Steenbarger: "I've mentioned before that, over the last 20 years, bear market bottoms have not occurred until we have 20% of fewer NYSE stocks closing above their 200-day moving average. For the first time in this downward move, that occurred on Thursday, with 19% of NYSE issues hitting the criterion. That number can go lower to be sure--and the majority of lows have occurred with an even lower figure--but it's an indication that the downside has been significant historically and has me watching for evidence of bottoming going forward."
According to Business Week, personal information on about 650,000 customers of J.C. Penney and up to 100 other retailers could be compromised after a computer tape went missing. GE Money, which handles credit card operations for Penney and many other retailers, said Thursday night that the missing information includes Social Security numbers for about 150,000 people.
Barron's writes that Microsoft was added to the Goldman Sacks "Conviction List."
Pat Buchanan: "This self-indulgent generation has borrowed itself into unpayable debt. Now the folks from whom we borrowed to buy all that oil and all those cars, electronics and clothes are coming to buy the country we inherited. We are prodigal sons, and the day of reckoning approaches."
According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $7.331 billion in the week ended 1/16/08 with Domestic funds reporting net inflows of $7.127 billion and Non-domestic funds reporting net inflows of $204 million; Excluding ETF activity, Equity funds report net cash outflows totaling -$3.989 billion with Domestic funds reporting net outflows of -$3.020 billion and Non-domestic funds reporting net outflows totaling -$969 million.
Jim Jubak: "Write-downs for high-risk, high-yield corporate debt, known as 'junk,' could dwarf losses in the mortgage mess. And that's when this financial crisis will finally hit bottom."
Sprint Nextel to cut 4000 jobs.
Troubled bond insurer Ambac Financial on Friday cancelled plans to raise about $1 billion, citing current market conditions and uncertainty that the new capital would secure its AAA credit rating. It said it would continue to evaluate its alternatives. On Thursday, Ambac shares lost more than half their value Moody's Investors Service warned that it may cut the AAA ratings of Ambac and rival MBIA Inc.
Robert McHugh: "We are only 100 points from an official stock market crash from October 11th, 2007, a 15 percent decline over a few months. The small cap Russell 200 index is down 20 percent over the past few months, already a crash. If prices do not immediately rally, it means stocks are hitting the sweet spot of the ongoing crash."
Food distributor Performance Food Group Co said Friday it agreed to be bought by an affiliate of Blackstone Group and Wellspring Capital Management for about $1.3 billion.
Shareholders will receive $34.50 for each share of company common stock they hold, the Richmond, Va.-based company said. That represented a 43% premium over Performance Food's closing price of $24.19 Thursday, the company said.
U.S. consumer sentiment improved in January, according to the University of Michigan consumer sentiment survey released Friday by UMich and Reuters. The index rose to 80.5 in mid-January from 75.5 in December, the first increase since July. Economists expected a decline to 74.3. The current conditions index rose to 98.1 from 91.0, while the expectations index rose to 69.1 from 65.6. Inflation expectations over the next year remained steady at 3.4%.
Growth could slow and further weaken in the first half of the year, the Conference Board said Friday, reporting that a gauge of future economic growth fell 0.2% in December - its third consecutive decline. Analysts had expected a decline of 0.1% for the index of leading economic indicators. The index declined 0.4% in November. Only four of the 10 leading economic indicators rose in December, with the largest positive contribution from vendor performance, while building permits were the largest negative contributor. "Taken together, the recent behavior of the composite indexes highlights increasing risks for further economic weakness, and suggest that economic activity is likely to be sluggish in the near term," according to the report.
U.K. retail sales unexpectedly dropped by the most in 11 months in December as higher borrowing costs and falling house prices curbed consumer spending. Sales declined 0.4 percent from November, when they rose by the same amount, the Office for National Statistics said today in London.
Temperatures of as much as 8 degrees Fahrenheit below normal will cover the Midwest and Northeast through Jan. 27, forecaster MDA Federal Inc.'s EarthSat Energy Weather of Rockville, Maryland, said in an outlook today. The two areas are the biggest consumers of natural gas.``The deep dive in temperatures moving through the upper Midwest currently and covering more of the East into next week'' is significant for the gas market, George Hopley, an analyst at Barclay's Capital in New York said today in a note.
Thursday, January 17, 2008
Forecasts
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."
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."
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