3/21/08 The Coming Meltdown?
Borders, the nation's second-largest bookseller, said Thursday it may put itself up for sale and has lined up $42.5 million in financing to help the chain continue operations.
In early Thursday trading, light sweet crude recently was down $2.38 to $100.16 a barrel, and metals futures dropped further as well, with gold futures down $29 an ounce and platinum futures down $62.
Allianz Group, the German insurer and owner of Dresdner Bank, said in its 357-page 20-F filing that it expects further mark-downs in the first quarter of 2008, citing deterioration of observable market prices and credit indexes. During 2007, Dresdner registered mark-downs of 1.3 billion euros ($2 billion) on asset-backed securities.
Morgan Keegan says the home-improvement cycle is a long way from the bottom.
"I've been asked many times whether we will have another Great Depression," said David M. Kennedy, a Stanford University history professor and the author of "Freedom From Fear," a Pulitzer Prize-winning history of the Depression and World War II. "My standard answer is that we won't have that one again -- I'd be surprised to have one of that seriousness and duration. But that doesn't mean we wouldn't have a catastrophe we haven't seen before."
According to Bloomberg, Thornburg Mortgage Inc., the ``jumbo'' mortgage specialist struggling to meet margin calls, may declare bankruptcy if it can't raise $948 million by next week.
According to the NY Times, with 10 contests remaining, Mrs. Clinton trails Mr. Obama by about 150 delegates out of the 2,025 needed to secure the nomination...Mr. Obama’s edge over Mrs. Clinton is 700,000 votes out of 26 million cast, excluding caucuses and the disputed Florida and Michigan results. About 12 million people are eligible to vote in the remaining contests.
Credit Suisse warned it was unlikely to be profitable in the first quarter, partly because of this month’s tough markets and partly because of previously flagged pricing errors that it said Thursday stemmed from “intentional misconduct by a small number of traders.”
Dillard's Inc. said its fiscal fourth-quarter profit plunged 70 percent, hurt partly by one less week in the period and a smaller tax benefit. Late Wednesday the department store retailer reported earnings fell to $47.3 million, or 63 cents per share, compared with $155 million, or $1.90 per share, in the previous year.
FedEx sees next quarter estimates at $1.60 to $1.80 vs. $1.95 estimates.
The Wall Street Journal writes that the supply of oil may keep prices high.
According to Bloomberg, John McCain is bolstering his reputation as a maverick by encouraging Americans to buy lower- priced drugs from Canada, a plan that may cost Pfizer Inc. and the drug industry $40 billion over 10 years.
British billionaire Joseph Lewis plans to take action to protect the value of his 8.4 percent stake in Bear Stearns, which is being acquired in an emergency deal with JPMorgan Chase, according to regulatory filing Wednesday. In a Securities and Exchange Commission filing Wednesday, Lewis reported holding 12.1 million shares of the New York-based investment bank. He holds the stake through Aquarian Investments, Cambria Inc., Nivon Inc. and other entities.Lewis said the shareholder group will take "whatever action that they deem necessary and appropriate to protect the value of their investment in the shares," including encouraging Bear Stearns and third parties to consider an alternative transaction.
Nouriel Roubini: "It is now clear that the US and global financial markets are experiencing their worst financial crisis since the Great Depression. And in spite of desperate and radical actions by the Fed this crisis is getting worse. A brief equity rally after the rescue of Bear Stearns, the 75bps Fed Funds and the announcement of new radical and unorthodox lending facilities (allowing non bank primary dealers access to the Fed discount window) has already completely fizzled today with US equities plunging over 2% while the severe crunch in money markets and credit market is becoming much worse... the crisis is becoming more severe and increasing the risk of the mother of all financial meltdowns."
Wheat fell the maximum permitted by the Chicago Board of Trade as rains improved crop prospects in Australia and farmers worldwide prepared to sow more grain to take advantage of prices that reached a record high last month. Rainfall has eased drought conditions for four straight months in Australia, the fifth-largest exporter last year. Russia, the third-largest exporter, said today that its crop is in good condition. The International Grains Council estimates global output will rise 7 percent in the year through June 2009, after wheat prices doubled in the past year.
On Wednesday, corn and soybeans fell the exchange limit in Chicago on speculation a rebound in the dollar will reduce the appeal of commodities as an inflation hedge. The UBS Bloomberg Constant Maturity Commodity Index fell as much as 3.5 percent, led by declines in sugar, wheat and lead. The gauge is down 5.7 percent this week, heading for the biggest weekly drop since May 2006. The U.S. Dollar Index, down 14 percent in the past year, rose 0.6 percent.
Volatility in the Standard & Poor's 500 stock index .SPX, the most widely-used barometer of the U.S. stock market, is at a 70-year high, according to an analysis released on Wednesday by Standard & Poor's. Measured by daily changes of at least 1 percent in the index, volatility has soared since credit concerns became a critical issue in the summer of 2007, S&P said.
Deutsche Bank was in the running to buy Bear Stearns as late as Saturday, according to a report from the German daily Handelsblatt.
First-time claims for state unemployment benefits for the week ending March 15 hit 378,000, up 22,000 from the prior week's revised level of 356,000, the Labor Department reported Thursday. The four-week average of initial claims gained 6,000 to 365,250. For the week ended March 8, continuing claims for benefits rose 32,000 to 2.87 million - the highest since August 2004. The four-week average of continuing claims rose 19,750 to 2.83 million - the highest since September 2004.
Robert McHugh: "Stocks plunged Wednesday, destroying about two thirds of Tuesday's mega-rally. This lack of follow-through is Bearish. The upper boundary of the declining trend-channel from October 2007 through now has held once again. This trend-line is formidable resistance, and suggests we are going to new lows over the next few months. There have been numerous touches, or near touches that have failed. We saw heavy intervention Wednesday by deep pockets, buying the Blue Chip indices hard. Stocks were seeing the sort of selling pressure that could have led to a mini-crash. The PPT and its surrogates put a stop to that.
Commodities and precious metals - inflation assets - plunged Wednesday. If this is an indication of deflation, then a depression is coming. If so, raise cash. Three month Treasury Bill yields fell to less than 1 percent, to 0.61 percent Wednesday, the lowest level in fifty years, since May 1958. This means the Fed Funds interest rate is 165 basis points too high. This is a depression era level for interest rates. Rates can't go below zero, so with a floor imminent, the Master Planners' traditional open market operations and other tools for monetary stimulus are about to be neutered. They don't get it. The bailout has to include the American household for a recovery. If they merely throw dollars at money center banks, eating their bad assets, nothing will be accomplished of any substance, and a depression will occur, because more and more bad assets will keep coming, like storm waves."
During visits to the Middle East in December 2002, Senator Chuck Hagel said, Israel's top security officials asked, "Do you really understand what you are getting yourselves into?"
The U.S. economy may be "grinding to a halt," the Conference Board said Thursday, reporting that the index of leading economic indicators fell 0.3% in February, the fifth straight decline. The coincident indicators - the best overview of the current economy - have been flat for three straight months, the private research group said. "Growth will be weak this spring," said Ken Goldstein, labor economist for the Conference Board. "A small contraction in economic activity cannot be ruled out." Five of the 10 leading indicators fell in February. Over the past six months, the leading index is down 1.5%, with two indicators rising.
Jesse Livermore: "There's a time to go long…there's a time to go short…and there's a time to go fishing."
On what basis are U.S. Treasury notes a counter-balance for risk? Why are they a safe haven? Do you trust in a printing press? Do you have faith in a printing press?
John A. Hutchinson: "Unthinking faith is a curious offering to be made to the creator of the human mind."
The Philly Fed index rose to negative 17.4 in March from negative 24.0 in February.
The euro bought $1.5405, down from $1.5617 in late U.S. trading Wednesday. The British pound, which was trading above $2 Wednesday, was at $1.9814, down from $1.9842 in late U.S. trading. The dollar was back above parity against the Swiss franc, buying 1.0142 francs, compared with 0.9990 franc late Wednesday. The dollar was at 99.34 yen, up from 99.09 yen The dollar index, which measures the greenback against a basket of six major currencies, was at 72.902, up from 72.103 late Wednesday.
U.S. natural gas inventories fell by 85 billion cubic feet in the week ending March 14, the Energy Information Administration reported on Thursday. It's the 17th consecutive week marking the fall of natural gas stockpiles. Last week's natural gas stocks were 215 Bcf less than last year at this time and 29 Bcf above the five-year average of 1,284 Bcf, EIA said.
Chris Puplava: "Ignore the endless bottom calling in the press that is buzzing around with some financial pundits pointing to the Bear Stearns blow-up as a likely capitulation in the markets. One thing that should be abundantly clear is that Wall St. tends to err on the side of optimism. I recently watched a clip of Maria Bartiromo being interviewed while in the U.K. who said that the financial media was playing a role of talking ourselves into a recession. What struck me was nowhere in the interview did the other side of the coin come up, that we can talk ourselves into a euphoric bubble." Is that bubble in the Treasury market?
CIT Group Inc. dropped 26 percent to $8.66, the lowest since its initial public offering in July 2002. The largest independent commercial finance company in the U.S. may need to tap $7.3 billion in backup credit lines because its access to unsecured short-term debt has become ``materially constrained,'' Fitch Ratings said.
Bernanke lives in Washington's Capitol Hill area in a four- bedroom, 2,600-square-foot house he bought new in May 2004 for $839,000. Almost four years later, it may not be worth any more, according to real estate records and local agents.
3COM SHARES FALL AS TAKEOVER BY BAIN CAPITAL AFFILIATE IS SCRAPPED.
Citigroup Cuts 2,000 Banking, Trading Jobs.
Securities and Exchange Commission Chairman Christopher Cox said the collapse of Bear Stearns last week was due to a lack of confidence, not a lack of capital.
EBay Inc. is cutting 125 jobs this week, or less than 1% of its workforce, according to a report Thursday in the online edition of The Wall Street Journal.
Investment banks and broker dealers borrowed $28.8 billion from the Federal Reserve on Wednesday under the new lending program set up on Sunday, the Fed announced Thursday.
The Dow Jones Industrial Average gained 261.66 points, or nearly 2.2%, to end at 12,361.32, giving it a gain of 3.5% on the week. The S&P 500 advanced 31.09 points, or 2.4%, to 1,329.51, up 3.3% from last week's close. The Nasdaq Composite rose 48.15 points, or 2.2%, to 2,258.11, advancing 2.1% on the week.
Crude oil for May delivery, the new front-month contract, ended down 70 cents, or 0.7%, at $101.84 a barrel on the New York Mercantile Exchange.
The Federal Reserve will auction off $75 billion of Treasurys for 28-day loans to its 20 primary dealers on March 27 in the first auction in its Term Securities Lending Facility announced a week ago. The Fed will accept mortgage-backed securities, including collateralized mortgage obligations (or CMOs), as collateral in the first auction. The second auction will take place April 3.
New Mexico Gov. Bill Richardson is endorsing Obama for president, calling him a "once-in-a-lifetime leader" who can unite the nation and restore America's international leadership. “As a presidential candidate, I know full well Sen. Obama’s unique moral ability to inspire the American people to confront our urgent challenges at home and abroad in a spirit of bipartisanship and reconciliation.”
According to the Wall Street Journal’s DealJournal, the Office of the Comptroller of the Currency suggested Thursday that it would be willing to cap Blackstone’s exposure to Alliance Data's credit-card exposure at $400 million. That removes a big stumbling block to having Blackstone close the deal. The private equity firm had worried that it would have effectively unlimited exposure to Alliance’s credit-card banking liabilities. There’s still a question, as the DealJournal noted, of whether Blackstone is still willing to pony up the $81.75 a share value of the bid, because that still looks a little ripe.
Two State Department employees were fired and a third has been disciplined for improperly accessing Democratic presidential candidate Barack Obama's passport file, the State Department announced Thursday night. Senior Department officials said they learned of the incidents only when a reporter made an inquiry Thursday afternoon. They said an initial investigation indicated the employees - all of whom worked on contract - were motivated by "imprudent curiosity."
Curiosity took place in January, February, and March by contract employees and has a familiar ring to it, namely, the Watergate break in.
Friday, March 21, 2008
Wednesday, March 19, 2008
Desperation
3/20/08 Desperation
The regulator of Fannie Mae and Freddie Mac on Wednesday eased capital requirements for the two biggest housing finance agencies, allowing them to pump up to $200 billion into the distressed U.S. mortgage market.
Morgan Stanley posted a 42% drop in first-quarter net income as revenue fell 17%, and the bank said it sees challenging market conditions ahead. Morgan Stanley had net write-downs of roughly $1.2 billion from in-house mortgage trading. Other sales and trading results included net losses of about $1.1 billion mainly related to loans used to finance the acquisition of junk-rated companies and write-downs at the firm's subsidiary banks.
David Roskoph: " As J.M. Keynes might put it, we lack enough real money to support aggregate demand in a functioning economy and more debt just won’t do. Credit can be free but it will only further indenture a country already drowning in debt. Although the S&P estimate of 300 billion may in near the mark in terms of the actual failed debt, the cause of the binge remains - an absence of organic growth. Artificially inflating our entire residential real estate market and then financing the margin with bad debt is evidence of desperation, not creativity. Our capacity to foster organic growth has been waning as we lose share to more competitive nations or simply outsource our domestic capacity away. We accepted the economic growth from our past bubbles as organic, and we pledged that as collateral to borrow our standard of living. Now we find out that it was mostly financial engineering. Each bubble’s pop replaced lost money with debt and we agreed to the notion of more credit somehow equaling growth. Inflating our most precious asset class, however, was the swan song of the big bubbles and the buck has stopped."
The dollar extended its decline against the euro, the yen and the Swiss franc on speculation some European and U.K. banks were in difficulties. ``There are rumors doing the rounds on various financial institutions being in trouble,'' said Adam Cole, the London-based head of currency strategy at Royal Bank of Canada, the nation's biggest lender. ``European and U.K. banks are rumored to be in trouble.''
Futures on the Chicago Board of Trade indicate a 50 percent chance the U.S. central bank will cut its rate by another half point by its June meeting. The odds of a quarter-point cut in April were 38 percent.
The Oil Drum: "A recent article in the UK's Sunday Times warns that, although UK natural gas prices are already at historically high levels, they are set to increase by 25% by next winter. Part of the problem is that the UK is increasingly dependent on imports of liquefied natural gas (LNG), and this winter (2007/08) Japan has been paying twice as much for spot LNG cargoes as the UK has. The implications looking forward are that to secure spot LNG cargoes in future, residents of the UK should be prepared to pay much more for their gas. Meanwhile, in its latest weekly podcast, Platts explains why there are essentially three seperate markets for LNG supplies, and media reports suggest that Russia will be soon be hiking its gas prices for exports to Europe. In other words, barring economic meltdown, natural gas prices are set for double digit increases, annually."
Sony Ericsson said it would miss Q1 earnings because of lack of handset demand.
Rob Hanna: "Combining it with last weeks and taking into consideration such things as put/call ratios, VIX levels, etc and I’d say there is a good chance the next month or so will lead to higher prices. Will it turn into a strong bear-market rally that eventually rolls over? Don’t know. Don’t really care. What I see in front of me is quite bullish over the next several weeks. Buying pullbacks could work very well. As I discussed above, we’ll probably see lower prices at some point in the next week. Last night’s Fed study also suggested a pullback in the coming days is likely. Therefore, chasing this is likely not necessary. I’ll be ready to add to my positions if it does pull back."
Houston Chronicle: "The battle lines over the future of Mexico's oil industry hardened Tuesday — the 70th anniversary of its nationalization. At a ceremony in the oil state of Tabasco celebrating the takeover, President Felipe Calderon issued a call for more private investment in the national oil company, Pemex. He proclaimed the fate of the company the defining issue of his generation. Several hours later his leftist rival, Andres Manuel Lopez Obrador, led a huge protest march in the capital against any form of privatization. At stake is the viability of Mexico's oil company, which provides nearly 40 percent of the government's budget and sends 1.4 million barrels a day to the United States through the Houston area. After nearly two decades of free-market policies that have seen most government-owned industries privatized, communal farms dismantled and labor unions weakened, nationalized oil remains as one of the few economic touchstones of the Mexican Revolution. In 1938, President Lazaro Cardenas expropriated the oil fields, following months of turmoil involving strikes by Mexican workers. "The oil is ours!" became a rallying cry for generations of Mexicans. Oil revenue fueled decades of development and other sources of revenue were left untapped. High world oil prices have assured huge profits for Pemex. But the country's proven reserves and production have declined as the offshore Cantarell field plays out. The field has accounted for two-thirds of Pemex's production over the past three decades. "To transform Pemex is to strengthen Mexico," Calderon said Tuesday.
Applications filed for mortgages fell a seasonally adjusted 2.9% last week even as interest rates on fixed-rate mortgages declined.
The first deliveries for Boeing Co.'s 787 Dreamliner aren't likely to occur before the end of September, 2009, according to Steven Udvar-Hazy, chairman and founder of the aircraft maker's largest customer, International Lease Finance Corp
In early Wednesday trading, crude oil for April delivery was down $2.32, or 2.1%, at $107.10 a barrel on the New York Mercantile Exchange. Analysts surveyed by Platts, an energy information provider, expect crude stocks to show a 2.3 million barrel build.
Spartech cutting 350 jobs, or 10% of workforce.
U.S. crude inventories gained by 2.5 million barrels to 307.7 million barrels in the week ending March 14, the American Petroleum Institute reported on Wednesday. Distillate stocks fell by 1.5 million barrels to 112.7 million barrels in the same period, while gasoline stocks dropped by 768,000 barrels to 218.5 million barrels, the API said. At the same time, U.S. crude inventories rose less than expected, up 200,000 barrels to 311.8 million barrels in the week ending March 14, U.S. Energy Information Administration reported on Wednesday. Gasoline supplies fell by 3.5 million barrels in the latest week, while distillate stocks dropped by 2.9 million barrels, EIA reported.
Shares of Visa Inc opened Wednesday at $59.50, 35% ahead of their $44 a share IPO pricing.
The dollar index, which measures the greenback against a basket of six major currencies, was at 71.829 in early trading and then rallied to 72.50.
Wednesday was the day for some serious profit taking in commodities. If you believe inflation will abate, then cutting back makes sense. If you think the dollar will gain traction for more than a few days or a week, then cutting back makes sense. If you think the Fed will stop the printing presses, then cutting back makes sense. If you think the U.S. government will reduce spending, then cutting back makes sense. If none of this makes sense, then sit on your hands and relax. Make the trend your friend.
Starbucks CEO Schultz: "We're an affordable luxury, but there are forces of nature here that we can't control...You have an economy that is really in a tailspin."
The Dow Jones Industrial Average dropped 293.00 points to end at 12,099.66. The S&P 500 shed 32.22 points to 1,298.52, while the Nasdaq Composite declined 58.30 points to settle at 2,209.96.
Crude oil for April delivery fell $4.94, or 4.5%, to close at $104.48 a barrel on the New York Mercantile Exchange. Gold futures for April delivery fell $59, or 5.9 percent, to $945.30 an ounce on the Comex division of the New York Mercantile Exchange. That marked the biggest percentage drop for a most-active contract since June 13, 2006. The metal climbed in the previous six sessions, gaining 3.3 percent.
The regulator of Fannie Mae and Freddie Mac on Wednesday eased capital requirements for the two biggest housing finance agencies, allowing them to pump up to $200 billion into the distressed U.S. mortgage market.
Morgan Stanley posted a 42% drop in first-quarter net income as revenue fell 17%, and the bank said it sees challenging market conditions ahead. Morgan Stanley had net write-downs of roughly $1.2 billion from in-house mortgage trading. Other sales and trading results included net losses of about $1.1 billion mainly related to loans used to finance the acquisition of junk-rated companies and write-downs at the firm's subsidiary banks.
David Roskoph: " As J.M. Keynes might put it, we lack enough real money to support aggregate demand in a functioning economy and more debt just won’t do. Credit can be free but it will only further indenture a country already drowning in debt. Although the S&P estimate of 300 billion may in near the mark in terms of the actual failed debt, the cause of the binge remains - an absence of organic growth. Artificially inflating our entire residential real estate market and then financing the margin with bad debt is evidence of desperation, not creativity. Our capacity to foster organic growth has been waning as we lose share to more competitive nations or simply outsource our domestic capacity away. We accepted the economic growth from our past bubbles as organic, and we pledged that as collateral to borrow our standard of living. Now we find out that it was mostly financial engineering. Each bubble’s pop replaced lost money with debt and we agreed to the notion of more credit somehow equaling growth. Inflating our most precious asset class, however, was the swan song of the big bubbles and the buck has stopped."
The dollar extended its decline against the euro, the yen and the Swiss franc on speculation some European and U.K. banks were in difficulties. ``There are rumors doing the rounds on various financial institutions being in trouble,'' said Adam Cole, the London-based head of currency strategy at Royal Bank of Canada, the nation's biggest lender. ``European and U.K. banks are rumored to be in trouble.''
Futures on the Chicago Board of Trade indicate a 50 percent chance the U.S. central bank will cut its rate by another half point by its June meeting. The odds of a quarter-point cut in April were 38 percent.
The Oil Drum: "A recent article in the UK's Sunday Times warns that, although UK natural gas prices are already at historically high levels, they are set to increase by 25% by next winter. Part of the problem is that the UK is increasingly dependent on imports of liquefied natural gas (LNG), and this winter (2007/08) Japan has been paying twice as much for spot LNG cargoes as the UK has. The implications looking forward are that to secure spot LNG cargoes in future, residents of the UK should be prepared to pay much more for their gas. Meanwhile, in its latest weekly podcast, Platts explains why there are essentially three seperate markets for LNG supplies, and media reports suggest that Russia will be soon be hiking its gas prices for exports to Europe. In other words, barring economic meltdown, natural gas prices are set for double digit increases, annually."
Sony Ericsson said it would miss Q1 earnings because of lack of handset demand.
Rob Hanna: "Combining it with last weeks and taking into consideration such things as put/call ratios, VIX levels, etc and I’d say there is a good chance the next month or so will lead to higher prices. Will it turn into a strong bear-market rally that eventually rolls over? Don’t know. Don’t really care. What I see in front of me is quite bullish over the next several weeks. Buying pullbacks could work very well. As I discussed above, we’ll probably see lower prices at some point in the next week. Last night’s Fed study also suggested a pullback in the coming days is likely. Therefore, chasing this is likely not necessary. I’ll be ready to add to my positions if it does pull back."
Houston Chronicle: "The battle lines over the future of Mexico's oil industry hardened Tuesday — the 70th anniversary of its nationalization. At a ceremony in the oil state of Tabasco celebrating the takeover, President Felipe Calderon issued a call for more private investment in the national oil company, Pemex. He proclaimed the fate of the company the defining issue of his generation. Several hours later his leftist rival, Andres Manuel Lopez Obrador, led a huge protest march in the capital against any form of privatization. At stake is the viability of Mexico's oil company, which provides nearly 40 percent of the government's budget and sends 1.4 million barrels a day to the United States through the Houston area. After nearly two decades of free-market policies that have seen most government-owned industries privatized, communal farms dismantled and labor unions weakened, nationalized oil remains as one of the few economic touchstones of the Mexican Revolution. In 1938, President Lazaro Cardenas expropriated the oil fields, following months of turmoil involving strikes by Mexican workers. "The oil is ours!" became a rallying cry for generations of Mexicans. Oil revenue fueled decades of development and other sources of revenue were left untapped. High world oil prices have assured huge profits for Pemex. But the country's proven reserves and production have declined as the offshore Cantarell field plays out. The field has accounted for two-thirds of Pemex's production over the past three decades. "To transform Pemex is to strengthen Mexico," Calderon said Tuesday.
Applications filed for mortgages fell a seasonally adjusted 2.9% last week even as interest rates on fixed-rate mortgages declined.
The first deliveries for Boeing Co.'s 787 Dreamliner aren't likely to occur before the end of September, 2009, according to Steven Udvar-Hazy, chairman and founder of the aircraft maker's largest customer, International Lease Finance Corp
In early Wednesday trading, crude oil for April delivery was down $2.32, or 2.1%, at $107.10 a barrel on the New York Mercantile Exchange. Analysts surveyed by Platts, an energy information provider, expect crude stocks to show a 2.3 million barrel build.
Spartech cutting 350 jobs, or 10% of workforce.
U.S. crude inventories gained by 2.5 million barrels to 307.7 million barrels in the week ending March 14, the American Petroleum Institute reported on Wednesday. Distillate stocks fell by 1.5 million barrels to 112.7 million barrels in the same period, while gasoline stocks dropped by 768,000 barrels to 218.5 million barrels, the API said. At the same time, U.S. crude inventories rose less than expected, up 200,000 barrels to 311.8 million barrels in the week ending March 14, U.S. Energy Information Administration reported on Wednesday. Gasoline supplies fell by 3.5 million barrels in the latest week, while distillate stocks dropped by 2.9 million barrels, EIA reported.
Shares of Visa Inc opened Wednesday at $59.50, 35% ahead of their $44 a share IPO pricing.
The dollar index, which measures the greenback against a basket of six major currencies, was at 71.829 in early trading and then rallied to 72.50.
Wednesday was the day for some serious profit taking in commodities. If you believe inflation will abate, then cutting back makes sense. If you think the dollar will gain traction for more than a few days or a week, then cutting back makes sense. If you think the Fed will stop the printing presses, then cutting back makes sense. If you think the U.S. government will reduce spending, then cutting back makes sense. If none of this makes sense, then sit on your hands and relax. Make the trend your friend.
Starbucks CEO Schultz: "We're an affordable luxury, but there are forces of nature here that we can't control...You have an economy that is really in a tailspin."
The Dow Jones Industrial Average dropped 293.00 points to end at 12,099.66. The S&P 500 shed 32.22 points to 1,298.52, while the Nasdaq Composite declined 58.30 points to settle at 2,209.96.
Crude oil for April delivery fell $4.94, or 4.5%, to close at $104.48 a barrel on the New York Mercantile Exchange. Gold futures for April delivery fell $59, or 5.9 percent, to $945.30 an ounce on the Comex division of the New York Mercantile Exchange. That marked the biggest percentage drop for a most-active contract since June 13, 2006. The metal climbed in the previous six sessions, gaining 3.3 percent.
Tuesday, March 18, 2008
To Trust
3/19/08 To Trust
Chinese Premier Wen Jiabao said China would not revalue the yuan to ease inflationary pressures, while acknowledging meeting this year's target to contain inflation at 4.8% will be difficult.
China told banks to set aside more reserves for the second time this year, hours after Premier Wen Jiabao said the government will take ``forceful'' steps to damp inflation at an 11-year high. Lenders must place a record 15.5 percent of deposits with the central bank, up from 15 percent previously, the People's Bank of China said in a statement on its Web site today. The increase will take effect on March 25.
Alibaba.com Ltd said on Tuesday its full-year 2007 profit grew 340 percent, boosted by a buoyant Chinese economy, increasing Internet access in the country and healthy growth in the firm's number of paying members.
Agatha Christie: "Where large sums of money are concerned, it is advisable to trust nobody."
Reuven Brenner: "The destruction of wealth by debasing currencies occasionally "creates" employment (with people being forced to accept lower-paying second and third jobs) but it signals poverty, not prosperity."
``The Fed let JPMorgan steal Bear Stearns because it needed cover for the putative moral hazard in keeping the system afloat,'' said Paul DeRosa, a partner at Mt. Lucas Management Co. ``For macro reasons, the Fed had no alternative.''
Gillian Tett: " Credit takes its root from the Latin word credere (“to trust”) And as the current credit turmoil now mutates into ever-more virulent forms, it is faith – or, rather, the lack of it – that has turned a subprime squall into a what is arguably the worst financial crisis in seven decades."
Iomega said Monday it it is prepared to begin acquisition talks with EMC after EMC raised its proposed buyout offer for the storage technology company to $3.75 a share.Iomega said EMC has indicated a willingness to pay above its original offer of $3.25 a share that was rejected one week ago. The new offer puts a $205.5 million value on Iomega, based on its 54.8 million outstanding shares.
Mike Cavanagh, JPMorgan's chief financial officer, estimated the acquisition(Bear Stearns) would add about $1 billion a year to the bank's earnings.
Steven Pearlstein: "If shareholders lose their money, it's a shame for them, but their losses won't cause credit markets to collapse. Not so for creditors and counterparties.That is not to say that the losses of Bear Stearns shareholders won't matter. One of the major challenges for banks and investment houses is to attract more equity to give them better cushions against losses or protection against a sudden withdrawal of liquidity from the market. Given the experience of Bear Stearns, however, that equity capital will be more expensive, and shareholders in other firms may be unwilling to dilute their own shares to obtain it. No matter. Now that the government is in bailout mode, it has both the right and the obligation to require financial institutions that are undercapitalized for the current environment to find new investors."
Deutsche Bank analyst Michael Mayo cited Lehman's $2 billion working capital line with 40 banks as proof that counterparties haven't lost confidence in the broker-dealer and pointed to the fact that nearly half of Lehman's franchise is outside the U.S. and that its asset-management business is more than twice as large relative to its size as evidence of its diversified business model. Mayo predicted that Lehman will weather the credit storm and reaffirmed his estimate of a price-to-adjusted-book-value ratio of 83%. At the close of 2007, Lehman had $35 billion in excess liquidity, combined with $63 billion of free collateral, implying $98 billion available for liquidity, or $70 billion more than needed for $28 billion of unsecured short-term debt, including the current portion of long-term debt, Mayo wrote in his note.
Goldman Sachs Q1 earnings $3.23 per share vs $6.67. Assets under management increased 21% from a year ago to a record $873 billion, with net inflows of $29 billion during the quarter. "Market conditions are clearly very difficult," said Lloyd C. Blankfein, Chairman and Chief Executive Officer. "But we saw strong customer activity across many of our franchise businesses in the first quarter. Although market conditions present many challenges at the moment, they also offer considerable opportunities." Goldman Sachs Group Inc. Chief Financial Officer David Viniar said the company's liquidity position is "stronger than it has ever been before."
U.S. video game sales _ including hardware and software _ jumped 34 percent in February to hit $1.33 billion, even with two top-selling consoles in short supply, according to data from market researcher NPD Group.
Exxon Mobil Corp.'s freeze on $12 billion of assets belonging to Venezuela's state oil company was overturned by a U.K. court in a setback for the U.S. energy company in its dispute with President Hugo Chavez.
Lehman Brothers Holdings Inc.reported net income of $489 million, or $0.81 per common share (diluted), for the first quarter ended February 29, 2008, representing decreases of 57% and 59%, respectively, from net income of $1.15 billion, or $1.96 per common share (diluted), reported for the first quarter of fiscal 2007. Fourth quarter fiscal 2007 net income was $886 million, or $1.54 per common share (diluted). Chairman and Chief Executive Officer Richard S. Fuld, Jr. said, "In what remains a challenging operating environment, our results reflect the value of our continued commitment to building a diversified platform and our focus on managing risk and maintaining a strong capital and liquidity position. This strategy has allowed us to support our clients through these difficult and volatile markets, while continuing to build and strengthen our global franchise for our shareholders." As of February 29, 2008, Lehman Brothers' total stockholders' equity was $24.8 billion, and total long-term capital (stockholders' equity and long-term borrowings, excluding any borrowings with remaining maturities of less than twelve months) was $153.2 billion. Book value per common share was $39.45. The Holding Company had a robust liquidity pool of $34 billion at quarter end. In addition, the Holding Company had other unencumbered assets of $64 billion and our regulated entities had unencumbered assets of $99 billion at quarter end.
More than a month after an explosion killed 13 workers at its Georgia sugar refinery, the Imperial Sugar Co. has shut down a section of its Louisiana plant out of concern for combustible dust. Imperial said it closed down its powdered sugar operations at its Gramercy facility on Friday after inspectors with the Occupational Safety and Health Administration found potentially combustible dust there.
Rob Hanna: "Fed-day rallies have a tendency to be short-lived. Again looking back to 1982 I looked at buying at the close of any day there was a Fed meeting and the market finished up 1% or more...after two days there is a negative expected value. Going out two weeks it generally gets progressively worse...The market is oversold on a price basis. The VIX is spiking. The Put/Call ratios continue to put up overly bearish readings, and the Fed is meeting tomorrow. All these things suggest a bounce. Unfortunately, the last two days look rather ordinary on a chart. There was no washout or accelerated move lower. This calls into doubt the possibility that today could serve as a bottom should the Fed along with the positives mentioned above spark a rally over the next day or two. Right now a reasonable road map to keep in mind might be a short, oversold bounce followed by another leg lower. I’ll continue to re-evaluate as the next few days unfold, though."
Nouriel Roubini: "The Fed has no idea of which other primary dealers may be insolvent as it does not supervise and regulate those primary dealers that are not banks. But it is treating this crisis – the most severe financial crisis in the US since the Great Depression – as if it was purely a liquidity crisis. By lending massive amounts to potentially insolvent institutions that it does not supervise or regulate and that may be insolvent the Fed is taking serious financial risks and seriously exacerbate moral hazard distortions. Here you have highly leveraged non bank financial institutions that made reckless investments and lending, had extremely poor risk management and altogether disregarded liquidity risks; some may be insolvent but now the Fed is providing them with a blank check for unlimited amounts. This is a most radical action and a signal of how severe the crisis of the banking system and non-bank shadow financial system is. This is the worst US financial crisis since the Great Depression and the Fed is treating it as if it was only a liquidity crisis. But this is not just a liquidity crisis; it is rather a credit and insolvency crisis. And it is not the job of the Fed to bail out insolvent non bank financial institutions. If a bail out should occur this is a fiscal policy action that should be decided by Congress after the relevant equity holders have been wiped out and senior management fired without golden parachutes and huge severance packages."
"'The [US] dollar is melting,' Brazil's finance minister Guido Mantega, said. 'Our plan is to avert an abrupt impact on the foreign exchange rate and help mitigate, in a smooth way, the dollar's free fall.'"
Bill Bonner: "I don't get it…" said a French businessman over lunch on Friday. "In fact, I don't think any of us get it. You've got a guy - the governor of New York - who hires a prostitute. He gets caught and has to resign. But the President of the United States lied to the American people and started a war in which thousands have died…a war that is so expensive it threatens to bankrupt the entire nation. How come he doesn't have to resign? Strange system."
New construction on single-family homes dropped by 6.7% in February to a seasonally adjusted annual rate of 707,000, the lowest in 17 years, the Commerce Department reported Tuesday. Total housing starts, including multifamily units, dropped 0.6% to a seasonally adjusted annual rate of 1.065 million, better than the 990,000 pace expected by economists surveyed by MarketWatch. Building permits, a leading indicator of construction, fell 7.8% in February to a seasonally adjusted annual rate of 978,000, the lowest since the autumn of 1991. It was the biggest monthly decline in 13 years.
U.S. producer prices rose 0.3% in February, the Labor Department reported Tuesday, in line with expectations. Excluding food and energy, however, producer prices rose by 0.5% in February, more than expected. It was the biggest rise since November 2006.
Lehman Brothers Holdings Inc. took $1.8 billion in write-downs on mortgages and other loans during its first quarter. The negative mark-to-market adjustments totalled $4.7 billion, but "risk mitigation" strategies reduced that valuation hit to $1.8 billion, Lehman reported. The brokerage firm said it still holds $31.8 billion of residential mortgage-related securities, down from $32.1 billion at the end of its fourth quarter. Half of this inventory is tied to prime and so-called Alt-A home loans. Roughly $4 billion is subprime and second-lien mortgage securities, the firm disclosed. Lehman also said it holds $36.1 billion of commercial mortgage securities, down from $38.9 billion at the end of its fourth quarter. Lehman has cut 1,100 jobs in March.
The dollar index, which measures the greenback against a basket of six major currencies, was at 71.325, compared with 71.460 in late U.S. trading Monday.
Yahoo says it expects to roughly double operating cash flow over the next three years and generate $8.8 billion in revenue after costs in 2010. Yahoo says its three-year financial plan support the board's determination that Microsoft's Jan. 31 takeover bid undervalues the company. Sunnyvale, Calif.-based Yahoo Inc. continues to expect first-quarter revenue between $1.28 billion and $1.38 billion and full-year revenue of $5.35 billion to $5.95 billion.
According to the WSJ, the European Central Bank pumped an extra €25 billion ($39.42 billion) into euro-zone money markets. As expected amid continuing tension, the ECB padded its regular weekly refinancing operation with extra funds, doling out €202 billion, well above the €177 billion it believes banks need for routine weekly business. Demand for the funds was strong, with 336 financial institutions bidding over €295 billion.
OPEC has no need to pump additional oil supplies to soften near-record prices, which are propped up by the weak U.S. dollar, Qatar's energy minister said.``We are confident there is no shortage of supply,'' Abdullah bin Hamad al-Attiyah said in a phone interview from Qatar today. ``One of the reasons that the oil price is going up is because of dollar weakness. Every time the dollar goes down, oil goes up.''
Delta Air Lines wants to reduce its headcount by 2,000 employees, helping to cut costs by 10% in 2008 and offset some of its skyrocketing fuel expense, Chief Financial Officer Ed Bastian said Tuesday.
The initial public offering of credit card company Visa Inc. priced at $44 a share late Tuesday. The offering raised a record $17.86 billion with the issue of 406 million shares.
The Dow ended up 420.41 points at 12,392.66. The S&P 500 gained 54.10 points, or 4.2%, to 1,330.70, while the Nasdaq Composite gained 91.25 points, or 4.2%, to 2,268.26.
Crude oil for April delivery ended up $3.74, or 3.5%, at $109.42 a barrel on the New York Mercantile Exchange. In a widely expected move, the Fed cut its target for Fed fund rates, at which banks lend to each other overnight, by 0.75% to 2.25%. The dollar index, which measures the U.S. unit against a basket of major currencies, fell 0.2% to 71.31. Gold for April delivery rose $1.70, or 0.2%, to end at $1,002.60 an ounce.
J.P. Morgan retains the option to purchase Bear Stearns' valuable headquarters building in midtown Manhattan, even if Bear's board recommends a rival offer.
John Adams: "There is danger from all men. The only maxim of a free government ought to be to trust no man living with power to endanger the public liberty."
Chinese Premier Wen Jiabao said China would not revalue the yuan to ease inflationary pressures, while acknowledging meeting this year's target to contain inflation at 4.8% will be difficult.
China told banks to set aside more reserves for the second time this year, hours after Premier Wen Jiabao said the government will take ``forceful'' steps to damp inflation at an 11-year high. Lenders must place a record 15.5 percent of deposits with the central bank, up from 15 percent previously, the People's Bank of China said in a statement on its Web site today. The increase will take effect on March 25.
Alibaba.com Ltd said on Tuesday its full-year 2007 profit grew 340 percent, boosted by a buoyant Chinese economy, increasing Internet access in the country and healthy growth in the firm's number of paying members.
Agatha Christie: "Where large sums of money are concerned, it is advisable to trust nobody."
Reuven Brenner: "The destruction of wealth by debasing currencies occasionally "creates" employment (with people being forced to accept lower-paying second and third jobs) but it signals poverty, not prosperity."
``The Fed let JPMorgan steal Bear Stearns because it needed cover for the putative moral hazard in keeping the system afloat,'' said Paul DeRosa, a partner at Mt. Lucas Management Co. ``For macro reasons, the Fed had no alternative.''
Gillian Tett: " Credit takes its root from the Latin word credere (“to trust”) And as the current credit turmoil now mutates into ever-more virulent forms, it is faith – or, rather, the lack of it – that has turned a subprime squall into a what is arguably the worst financial crisis in seven decades."
Iomega said Monday it it is prepared to begin acquisition talks with EMC after EMC raised its proposed buyout offer for the storage technology company to $3.75 a share.Iomega said EMC has indicated a willingness to pay above its original offer of $3.25 a share that was rejected one week ago. The new offer puts a $205.5 million value on Iomega, based on its 54.8 million outstanding shares.
Mike Cavanagh, JPMorgan's chief financial officer, estimated the acquisition(Bear Stearns) would add about $1 billion a year to the bank's earnings.
Steven Pearlstein: "If shareholders lose their money, it's a shame for them, but their losses won't cause credit markets to collapse. Not so for creditors and counterparties.That is not to say that the losses of Bear Stearns shareholders won't matter. One of the major challenges for banks and investment houses is to attract more equity to give them better cushions against losses or protection against a sudden withdrawal of liquidity from the market. Given the experience of Bear Stearns, however, that equity capital will be more expensive, and shareholders in other firms may be unwilling to dilute their own shares to obtain it. No matter. Now that the government is in bailout mode, it has both the right and the obligation to require financial institutions that are undercapitalized for the current environment to find new investors."
Deutsche Bank analyst Michael Mayo cited Lehman's $2 billion working capital line with 40 banks as proof that counterparties haven't lost confidence in the broker-dealer and pointed to the fact that nearly half of Lehman's franchise is outside the U.S. and that its asset-management business is more than twice as large relative to its size as evidence of its diversified business model. Mayo predicted that Lehman will weather the credit storm and reaffirmed his estimate of a price-to-adjusted-book-value ratio of 83%. At the close of 2007, Lehman had $35 billion in excess liquidity, combined with $63 billion of free collateral, implying $98 billion available for liquidity, or $70 billion more than needed for $28 billion of unsecured short-term debt, including the current portion of long-term debt, Mayo wrote in his note.
Goldman Sachs Q1 earnings $3.23 per share vs $6.67. Assets under management increased 21% from a year ago to a record $873 billion, with net inflows of $29 billion during the quarter. "Market conditions are clearly very difficult," said Lloyd C. Blankfein, Chairman and Chief Executive Officer. "But we saw strong customer activity across many of our franchise businesses in the first quarter. Although market conditions present many challenges at the moment, they also offer considerable opportunities." Goldman Sachs Group Inc. Chief Financial Officer David Viniar said the company's liquidity position is "stronger than it has ever been before."
U.S. video game sales _ including hardware and software _ jumped 34 percent in February to hit $1.33 billion, even with two top-selling consoles in short supply, according to data from market researcher NPD Group.
Exxon Mobil Corp.'s freeze on $12 billion of assets belonging to Venezuela's state oil company was overturned by a U.K. court in a setback for the U.S. energy company in its dispute with President Hugo Chavez.
Lehman Brothers Holdings Inc.reported net income of $489 million, or $0.81 per common share (diluted), for the first quarter ended February 29, 2008, representing decreases of 57% and 59%, respectively, from net income of $1.15 billion, or $1.96 per common share (diluted), reported for the first quarter of fiscal 2007. Fourth quarter fiscal 2007 net income was $886 million, or $1.54 per common share (diluted). Chairman and Chief Executive Officer Richard S. Fuld, Jr. said, "In what remains a challenging operating environment, our results reflect the value of our continued commitment to building a diversified platform and our focus on managing risk and maintaining a strong capital and liquidity position. This strategy has allowed us to support our clients through these difficult and volatile markets, while continuing to build and strengthen our global franchise for our shareholders." As of February 29, 2008, Lehman Brothers' total stockholders' equity was $24.8 billion, and total long-term capital (stockholders' equity and long-term borrowings, excluding any borrowings with remaining maturities of less than twelve months) was $153.2 billion. Book value per common share was $39.45. The Holding Company had a robust liquidity pool of $34 billion at quarter end. In addition, the Holding Company had other unencumbered assets of $64 billion and our regulated entities had unencumbered assets of $99 billion at quarter end.
More than a month after an explosion killed 13 workers at its Georgia sugar refinery, the Imperial Sugar Co. has shut down a section of its Louisiana plant out of concern for combustible dust. Imperial said it closed down its powdered sugar operations at its Gramercy facility on Friday after inspectors with the Occupational Safety and Health Administration found potentially combustible dust there.
Rob Hanna: "Fed-day rallies have a tendency to be short-lived. Again looking back to 1982 I looked at buying at the close of any day there was a Fed meeting and the market finished up 1% or more...after two days there is a negative expected value. Going out two weeks it generally gets progressively worse...The market is oversold on a price basis. The VIX is spiking. The Put/Call ratios continue to put up overly bearish readings, and the Fed is meeting tomorrow. All these things suggest a bounce. Unfortunately, the last two days look rather ordinary on a chart. There was no washout or accelerated move lower. This calls into doubt the possibility that today could serve as a bottom should the Fed along with the positives mentioned above spark a rally over the next day or two. Right now a reasonable road map to keep in mind might be a short, oversold bounce followed by another leg lower. I’ll continue to re-evaluate as the next few days unfold, though."
Nouriel Roubini: "The Fed has no idea of which other primary dealers may be insolvent as it does not supervise and regulate those primary dealers that are not banks. But it is treating this crisis – the most severe financial crisis in the US since the Great Depression – as if it was purely a liquidity crisis. By lending massive amounts to potentially insolvent institutions that it does not supervise or regulate and that may be insolvent the Fed is taking serious financial risks and seriously exacerbate moral hazard distortions. Here you have highly leveraged non bank financial institutions that made reckless investments and lending, had extremely poor risk management and altogether disregarded liquidity risks; some may be insolvent but now the Fed is providing them with a blank check for unlimited amounts. This is a most radical action and a signal of how severe the crisis of the banking system and non-bank shadow financial system is. This is the worst US financial crisis since the Great Depression and the Fed is treating it as if it was only a liquidity crisis. But this is not just a liquidity crisis; it is rather a credit and insolvency crisis. And it is not the job of the Fed to bail out insolvent non bank financial institutions. If a bail out should occur this is a fiscal policy action that should be decided by Congress after the relevant equity holders have been wiped out and senior management fired without golden parachutes and huge severance packages."
"'The [US] dollar is melting,' Brazil's finance minister Guido Mantega, said. 'Our plan is to avert an abrupt impact on the foreign exchange rate and help mitigate, in a smooth way, the dollar's free fall.'"
Bill Bonner: "I don't get it…" said a French businessman over lunch on Friday. "In fact, I don't think any of us get it. You've got a guy - the governor of New York - who hires a prostitute. He gets caught and has to resign. But the President of the United States lied to the American people and started a war in which thousands have died…a war that is so expensive it threatens to bankrupt the entire nation. How come he doesn't have to resign? Strange system."
New construction on single-family homes dropped by 6.7% in February to a seasonally adjusted annual rate of 707,000, the lowest in 17 years, the Commerce Department reported Tuesday. Total housing starts, including multifamily units, dropped 0.6% to a seasonally adjusted annual rate of 1.065 million, better than the 990,000 pace expected by economists surveyed by MarketWatch. Building permits, a leading indicator of construction, fell 7.8% in February to a seasonally adjusted annual rate of 978,000, the lowest since the autumn of 1991. It was the biggest monthly decline in 13 years.
U.S. producer prices rose 0.3% in February, the Labor Department reported Tuesday, in line with expectations. Excluding food and energy, however, producer prices rose by 0.5% in February, more than expected. It was the biggest rise since November 2006.
Lehman Brothers Holdings Inc. took $1.8 billion in write-downs on mortgages and other loans during its first quarter. The negative mark-to-market adjustments totalled $4.7 billion, but "risk mitigation" strategies reduced that valuation hit to $1.8 billion, Lehman reported. The brokerage firm said it still holds $31.8 billion of residential mortgage-related securities, down from $32.1 billion at the end of its fourth quarter. Half of this inventory is tied to prime and so-called Alt-A home loans. Roughly $4 billion is subprime and second-lien mortgage securities, the firm disclosed. Lehman also said it holds $36.1 billion of commercial mortgage securities, down from $38.9 billion at the end of its fourth quarter. Lehman has cut 1,100 jobs in March.
The dollar index, which measures the greenback against a basket of six major currencies, was at 71.325, compared with 71.460 in late U.S. trading Monday.
Yahoo says it expects to roughly double operating cash flow over the next three years and generate $8.8 billion in revenue after costs in 2010. Yahoo says its three-year financial plan support the board's determination that Microsoft's Jan. 31 takeover bid undervalues the company. Sunnyvale, Calif.-based Yahoo Inc. continues to expect first-quarter revenue between $1.28 billion and $1.38 billion and full-year revenue of $5.35 billion to $5.95 billion.
According to the WSJ, the European Central Bank pumped an extra €25 billion ($39.42 billion) into euro-zone money markets. As expected amid continuing tension, the ECB padded its regular weekly refinancing operation with extra funds, doling out €202 billion, well above the €177 billion it believes banks need for routine weekly business. Demand for the funds was strong, with 336 financial institutions bidding over €295 billion.
OPEC has no need to pump additional oil supplies to soften near-record prices, which are propped up by the weak U.S. dollar, Qatar's energy minister said.``We are confident there is no shortage of supply,'' Abdullah bin Hamad al-Attiyah said in a phone interview from Qatar today. ``One of the reasons that the oil price is going up is because of dollar weakness. Every time the dollar goes down, oil goes up.''
Delta Air Lines wants to reduce its headcount by 2,000 employees, helping to cut costs by 10% in 2008 and offset some of its skyrocketing fuel expense, Chief Financial Officer Ed Bastian said Tuesday.
The initial public offering of credit card company Visa Inc. priced at $44 a share late Tuesday. The offering raised a record $17.86 billion with the issue of 406 million shares.
The Dow ended up 420.41 points at 12,392.66. The S&P 500 gained 54.10 points, or 4.2%, to 1,330.70, while the Nasdaq Composite gained 91.25 points, or 4.2%, to 2,268.26.
Crude oil for April delivery ended up $3.74, or 3.5%, at $109.42 a barrel on the New York Mercantile Exchange. In a widely expected move, the Fed cut its target for Fed fund rates, at which banks lend to each other overnight, by 0.75% to 2.25%. The dollar index, which measures the U.S. unit against a basket of major currencies, fell 0.2% to 71.31. Gold for April delivery rose $1.70, or 0.2%, to end at $1,002.60 an ounce.
J.P. Morgan retains the option to purchase Bear Stearns' valuable headquarters building in midtown Manhattan, even if Bear's board recommends a rival offer.
John Adams: "There is danger from all men. The only maxim of a free government ought to be to trust no man living with power to endanger the public liberty."
Monday, March 17, 2008
Crisis Hits
3/18/08 Crisis Hits
John Hussman: "The Fed Can Provide Liquidity, But Not Solvency "
The Fed will provide up to $30 billion to JPMorgan to help it buy Bear Stearns. JPMorgan is buying Bear, which has 14,000 employees, for a third the price at which the smaller firm went public in 1985.
"Modern monetary policymaking puts a lot of weight on rules, but there is no rule book for an economic crisis," said Douglas Elmendorf, a senior fellow at the Brookings Institution and a former Fed economist.
Paul Kedrosky: "To end up paying $0.25 on the dollar for the company's $1 in headquarters real estate, in effect, and to do it in equity, no less, is an embarrassment beyond embarrassment for people collectively incapable, at least until now, of being embarrassed."
Nouriel Roubini: "The Fed now can lend unlimited amounts to non bank highly leveraged institutions that it does not regulate. The Fed is treating this run on the shadow financial system as a liquidity run but the Fed has no idea of whether such institutions are insolvent. As JPMorgan paid only about $200 million for Bear Stearns – and only after the Fed promised a $30 billlion loan – this was a clear case where this non bank financial institution was insolvent. The Fed has no idea of which other primary dealers may be insolvent as it does not supervise and regulate those primary dealers that are not banks. But it is treating this crisis – the most severe financial crisis in the US since the Great Depression – as if it was purely a liquidity crisis. By lending massive amounts to potentially insolvent institutions that it does not supervise or regulate and that may be insolvent the Fed is taking serious financial risks and seriously exacerbate moral hazard distortions. Here you have highly leveraged non bank financial institutions that made reckless investments and lending, had extremely poor risk management and altogether disregarded liquidity risks; some may be insolvent but now the Fed is providing them with a blank check for unlimited amounts. This is a most radical action and a signal of how severe the crisis of the banking system and non-bank shadow financial system is. This is the worst US financial crisis since the Great Depression and the Fed is treating it as if it was only a liquidity crisis. But this is not just a liquidity crisis; it is rather a credit and insolvency crisis. And it is not the job of the Fed to bail out insolvent non bank financial institutions. If a bail out should occur this is a fiscal policy action that should be decided by Congress after the relevant equity holders have been wiped out and senior management fired without golden parachutes and huge severance packages.
Manufacturing activity in the New York area plunged for the second straight month in March, the New York Federal Reserve Bank said Monday. The bank's Empire State Manufacturing index fell to negative 22.2 in March, a record low reading. The index had fallen to negative 11.7 in February from 9.0 in January.
Responding to money-market conditions, the Bank of England on Monday held an "exceptional fine-tuning open market operation" that auctioned 5 billion pounds of extra reserves in a three-day repo that matures on Thursday. The auction was held at 7 a.m. Eastern and was conducted "in response to conditions in the short-term money markets this morning," the bank said in a statement. "The bank will take actions to ensure the overnight rate is close" to the bank's official lending rate of 5.25%. "Along with other central banks, the Bank of England is closely monitoring market conditions," the statement said.
US financial regulators should seek a suspension of mark-to-market accounting of “exotic securities,” and Bear Stearns “did not have to go out of business,” Forbes Inc. CEO Steve Forbes said. “Take a time out, don’t realize a loss until the loss actually happens,” Forbes told CNBC. “Right now, we’re just guessing, and when you’re guessing in a panic environment, disaster takes over,” he said.
The dollar hit a new 12-year low against the Japanese yen at 95.75 yen and remains 1.8% lower at 97.22 yen. The greenback was down 0.7% against the euro at $1.5774 after hitting an all-time low of $1.5903. The dollar was trading below parity with the Swiss franc, losing 1.4% to change hands at 0.9841 francs after hitting a low 0.9631.
The Federal Reserve on Sunday cut the rate on direct loans to commercial banks by a quarter-point and said it will allow primary dealers to borrow at the rate in exchange for a broad range of investment-grade collateral. In a statement, the central bank also extended the maximum term of discount-window loans to 90 days from 30 days.
Shares of Lehman Bros. fell 30% in pre-open trade Monday morning, leading a rout in financial stocks as concern about the repercussions of the Fed-backed bailout of Bear Stearns reverberated through the market. In addition to Lehman's drop, shares of Merrill Lynch fell 15%, Goldman Sachs shed 9%, Morgan Stanley fell 10% and Citigroup fell 7%.
The biggest threat to Lehman Bros. Holdings Inc. shares in the near future is speculation about the firm's liquidity, according to Bank of Montreal analyst George Lazarevski, in a research note to clients Monday. "Similar to Bear Stearns, the greatest risk for Lehman Brothers is the risk that once speculation begins, it becomes a self-fulfilling prophecy, and no level of liquidity will be sufficient," Lazarevski wrote. That said, the analyst added that the Federal Reserve's discount rate cut Sunday and its other recent actions, "should help alleviate investor concerns over potential liquidity shortfalls."
Deutsche Bank analyst Mike Mayo said Monday that fears of a Bear Stearns-like meltdown for brokerage Lehman Brothers are overblown. "Lehman is not Bear," Mayo said, pointing out that Lehman has more liquidity, more support from counterparties, a more diversified franchise and a "seasoned and experienced" CEO. Deutsche Bank maintained its "buy" rating on the stock. "While there is a chance that we have not factored in all the needed write-downs, we believe that this difference creates a reasonable margin of safety," Mayo wrote in a research note.
Moody's Investors Service said Monday that it affirmed its A1 rating on the senior long-term debt of Lehman Brothers Holdings Inc., but trimmed its outlook on Lehman ratings to stable from positive.
Lehman ended off $7.51, or 19%, but had fallen as much as 40% at one point in the session.
Abraham Lincoln: "I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts."
Coventry Health Care Inc. now expects 2008 earnings of $4.39 to $4.50 a share on $12.0 billion to $12.5 billion in revenue. When the company reported fourth-quarter results on Feb. 8, it provided guidance for 2008 earnings of $4.42 to $4.58 a share on sales of $12.4 billion to $12.9 billion. The company said that recent Federal Reserve actions to reduce the federal funds rate put more downward pressure on net investment income.
Bond insurer FGIC Corp. reported a $1.89 billion quarterly loss, mostly on loss and loss adjustment expense reserves and mark-to-market losses recorded for the quarter. The increase in loss reserves for the quarter stemmed from the rapid and substantial deterioration during the quarter in the performance of certain RMBS and ABS CDO transactions written primarily in 2006 and 2007.
April-dated fed fund futures contracts rose 11 cents to 97.98 -- implying a 90% chance that the Fed will slash its base rate to 2%.
Weyerhaeuser Co. agreed to sell its container board-packaging and -recycling business to International Paper Co.for $6 billion cash, the companies said.
Bristol-Myers Squibb is sounding out potential buyers for a possible sale of its Mead Johnson baby formula food business, which is valued at between $7 billion and $9 billion, the Financial Times said on Monday.
Gold for immediate delivery climbed $19.98, or 2 percent, to $1,022.92 an ounce as of 8:36 a.m. in London after gaining to $1,032.70, the all-time high. Prices have increased 23 percent this year as the dollar has dropped 7.7 percent against the euro and the U.K.'s benchmark FTSE 100 stock index fell 15 percent.
Crude oil for April delivery rose as much as $1.59, or 1.4 percent, to $111.80 a barrel in electronic trading on the New York Mercantile Exchange, the highest since trading began in 1983. It was at $110.50 at 11:03 a.m. London time. The April contract expires March 19. Crude-oil futures fell sharply to $107.54 after hitting a record high of $111.80 earlier.
Crude oil for April delivery dropped $5.7 to an intraday low of $104.51 a barrel in mid-afternoon trading. It earlier hit a record high of $111.80 a barrel as the dollar fell to a new low against the euro.
According to the Financial Times, Goldman Sachs and Morgan Stanley are forecast to write off at least an extra $1bn on their portfolios of loans for leveraged buy-outs, with Lehman Brothers, another provider of buy-out financing, also expected to suffer a big writedown.
According to 24/7WallSt, NYMEX shareholders will receive 0.1323 shares of CME Group Class A common stock and $36.00 in cash for each share of NYMEX common stock. This equates to approximately 12.5 million shares and cash of $3.4 billion, and NYMEX will ultimately hold approximately 18.6% of the combined company. This generates a purchase price of $100.30 before any dilution to CME shares. NYMEX shares closed at $95.34 Friday, and the 52-week trading range is $86.61 to $148.00.
UBS AG, Europe's biggest bank by assets, fell the most in more than nine years in Swiss trading after reports that the company may cut as many as 8,000 jobs, propose a new capital increase and sell businesses.
China's fuel demand may rise 8 percent this year as the nation's biggest manufacturing hub restarts oil-fueled power generators to ease shortages, said an official with state-owned China Petrochemical Corp.
John Hussman: "I remain concerned that the market hasn't even considered the potential losses in credit default swaps. The single largest trader in the CDS market is, perhaps ironically, J.P. Morgan."
Illinois Tool Works Inc. has lowered its 2008 first quarter and full year outlook due to two special charges with an estimated pretax effect of $127 million, or 22 cents a share. The total includes $90 million to $100 million related to the company's industrial software business and $32 million for European taxes. The company is now forecasting a full-year 2008 diluted income per share from continuing operations range of $3.25 to $3.39. The full-year forecast continues to assume a total company revenue growth range of 6% to 10%.
The Obama campaign Sunday called Sen. Hillary Rodham Clinton a "veteran of non-disclosure" and, opening a new front, challenged her to release information about her income taxes, Bill Clinton's foundation and library donors, earmark requests and first lady records. The Clinton team said raising questions about her integrity is a "personal attack."
U.S. industrial output dropped by 0.5% in February, the Federal Reserve reported Monday. The decline was largely a result of a weather-related 3.7% decline in utilities' output. Analysts surveyed by MarketWatch were looking for an overall decline of 0.2% in February. The capacity utilization rate, meanwhile, fell to 80.9% from 81.5%.
"Our financial institutions are strong," Bush said, adding that "capital markets are functioning efficiently." Spoken like a government economist turned comedian.
The dollar index, which measures the greenback against a basket of six major currencies, was at 71.412, down 0.4% but up from its overnight low of 70.698.
This is the Bush administration's strong dollar policy at work.
``The Federal Reserve's decision to create a lending facility for primary dealers and permit a broad range of investment grade securities to serve as collateral improves the liquidity picture and, from my perspective, takes the liquidity issue for the entire industry off the table,'' Lehman's CEO Richard Fuld said in a statement today
Shares of Lehman Brothers Holdings Inc. plunged in Monday after a news report that Southeast Asia's largest bank instructed traders in an e-mail not to do business with the bank. DBS Group Holdings Ltd. took back those instructions, but after the fall of the once storied Wall Street bank Bear Stearns on Sunday, skittish investors sold off quickly and Lehman fell 23 percent, or $9.16, to $30.10.
The Boston Globe takes a look at the sudden spike in GOP support for Clinton ever since McCain wrapped up the GOP nod. "Spurred by conservative talk radio, GOP voters who say they would never back Clinton in a general election are voting for her now for strategic reasons: Some want to prolong her bitter nomination battle with Barack Obama, others believe she would be easier to beat than Obama in the fall, or they simply want to register objections to Obama. ‘It's as simple as, I don't think McCain can beat Obama if Obama is the Democratic choice," said Kyle Britt, 49, a Republican-leaning independent from Huntsville, Texas, who voted for Clinton in the March 4 primary. ‘I do believe Hillary can mobilize enough [anti-Clinton] people to keep her out of office.’”
The International Energy Agency, an adviser to 27 industrialized nations, expects worldwide demand for oil products to increase an average 1.9 percent annually until 2012, driven mainly by expansion in Asia and the Middle East.``Demand is projected to grow to almost 94.3 million barrels a day by 2012,'' Eduardo Lopez, an analyst with the agency, said in a presentation to the Oil Africa 2008 conference in Cape Town today. ``By 2012, demand will be a third higher than in 1996.''
U.S. home builders remain discouraged about their industry, but their attitudes didn't get any worse in March, according to the monthly sentiment index released Monday by their trade group. The National Association of Home Builders/Wells Fargo housing market index remained at 20 in March as expected, close to the all-time low of 18 reached in December. The index shows that only about one-in-five home builders has a positive view of the industry. Sentiment among builders has been nearly unchanged for the past seven months at a very low level.
The Bank of England became the latest central bank to step in with extraordinary funds Monday. The bank said it would offer £5 billion, or more than $10 billion, of three-day funding to help bring down overnight interest rates -- the rates banks charge each other for overnight.
For the quarter ended Dec. 31 WCI Communities Company gross margin would have totaled $29.2 million ($-297.7 million as reported plus $268.9 million, $38.4 million, $12.6 million, and $7.0 million), or 12.0% of $243.0 million of revenue before effect of the recorded contract defaults ($191.6 million as reported plus $51.4 million cited...``During the fourth quarter we commenced closings at One Bal Harbour which is comprised of 185 luxury condominiums and 115 luxury hotel condominium suites. To date, we have closed 85% or 157 of the condominiums and 42% or 48 of the hotel condominium suites sold. The five star hotel operated by Regent opened on March 1st and we hope its opening will facilitate closings and stimulate new sales of any defaulted units,'' said Jerry Starkey, President and CEO of WCI Communities...Company gross margin would have totaled $29.2 million ($-297.7 million as reported plus $268.9 million, $38.4 million, $12.6 million, and $7.0 million), or 12.0% of $243.0 million of revenue before effect of the recorded contract defaults ($191.6 million as reported plus $51.4 million cited...Cash Flow/Financial Position: For the twelve months ended December 31, 2007, cash flow from operating activities and investing activities totaled $229.0 million ($197.9 million from operating activities and $31.1 million from investing activities), compared with cash used of $536.6 million ($489.6 million used in operations and $47.0 million used for investing activities) in the same period a year ago. Total liquidity, measured as the sum of cash plus available capacity under the Credit Facility, totaled approximately $342.8 million at December 31, 2007. In addition, letters of credit of $53.7 million were outstanding as of December 31, 2007.
Investor demand for the relative safety of short-term government debt sent the three-month bill rate down 16 basis points to 1 percent, according to Bloomberg's market average. It touched 0.652 percent, the lowest level since May 1958, when the U.S. was emerging from a recession. The yield on the benchmark 10-year note dropped 14 basis points to 3.32 percent.
According to Bloomberg, the gap between bids and offers for Treasuries has widened over the past few days, reflecting uncertainty on the part of traders and investors about the fate of financial markets.``There's absolutely no liquidity whatsoever,'' said Tom di Galoma, head of U.S. Treasury trading at Jefferies & Co., a brokerage for institutional investors in New York. ``If you don't act within a split second, you could lose the bid-offer.'' The last time spreads widened as much was in the aftermath of the terrorist attacks of September 11, 2001, he added.
WL Ross & Co. LLC Chairman Wilbur Ross told CNBC that his company is buying H&R Block’s mortgage loan servicing unit for $1.1 billion because it will be a “profitable and cash-generative business.” The purchase will create the second-largest US subprime servicing portfolio.
JP Morgan shares rose 11.5% and was the primary reason the Dow managed a small gain. The Nasdaq closed down 35 points and the S&P 500 finished down 11+ points.
A Wall Street Journal/NBC News poll released Thursday found that more Americans view Bill Clinton negatively than positively, 45 to 42 percent. It marked the first time since January 2002 that a plurality of Americans disapproved of the former president. One month earlier, The Gallup Poll found that nearly as many Americans had an unfavorable as favorable view of Bill Clinton-for the first time in nearly five years.
The Florida Democratic Party will not hold a mail-in vote to "redo" the presidential primary, The Associated Press reported late Monday.
Federal officials are in the process of putting together a potential deal that could allow Fannie Mae and Freddie Mac to increase their support for the mortgage market by buying and guaranteeing more home loans, the Wall Street Journal reported on its Web site late Monday.
Alliance Data Systems Corp. notified private-equity firm Blackstone Group LP that it has breached the agreement of its planned acquisition of Alliance Data for $81.75 a share. The notice also said Blackstone and its affiliates are "contractually obligated" to satisfy their respective obligations and complete the transaction. Alliance Data said Blackstone has developed a case of "buyer's remorse" is attempting to "run out the clock" on the transaction by prolonging negotiations with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.
Delta Air Lines' pilots union has told company executives it can't agree on seniority issues with its counterpart at Northwest Airlines, raising serious doubts about the prospect of a combination of the two companies as Delta prepares to overhaul its operations.
John F. Kennedy: " The Chinese use two brush strokes to write the word 'crisis'. One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger-but recognize the opportunity."
John Hussman: "The Fed Can Provide Liquidity, But Not Solvency "
The Fed will provide up to $30 billion to JPMorgan to help it buy Bear Stearns. JPMorgan is buying Bear, which has 14,000 employees, for a third the price at which the smaller firm went public in 1985.
"Modern monetary policymaking puts a lot of weight on rules, but there is no rule book for an economic crisis," said Douglas Elmendorf, a senior fellow at the Brookings Institution and a former Fed economist.
Paul Kedrosky: "To end up paying $0.25 on the dollar for the company's $1 in headquarters real estate, in effect, and to do it in equity, no less, is an embarrassment beyond embarrassment for people collectively incapable, at least until now, of being embarrassed."
Nouriel Roubini: "The Fed now can lend unlimited amounts to non bank highly leveraged institutions that it does not regulate. The Fed is treating this run on the shadow financial system as a liquidity run but the Fed has no idea of whether such institutions are insolvent. As JPMorgan paid only about $200 million for Bear Stearns – and only after the Fed promised a $30 billlion loan – this was a clear case where this non bank financial institution was insolvent. The Fed has no idea of which other primary dealers may be insolvent as it does not supervise and regulate those primary dealers that are not banks. But it is treating this crisis – the most severe financial crisis in the US since the Great Depression – as if it was purely a liquidity crisis. By lending massive amounts to potentially insolvent institutions that it does not supervise or regulate and that may be insolvent the Fed is taking serious financial risks and seriously exacerbate moral hazard distortions. Here you have highly leveraged non bank financial institutions that made reckless investments and lending, had extremely poor risk management and altogether disregarded liquidity risks; some may be insolvent but now the Fed is providing them with a blank check for unlimited amounts. This is a most radical action and a signal of how severe the crisis of the banking system and non-bank shadow financial system is. This is the worst US financial crisis since the Great Depression and the Fed is treating it as if it was only a liquidity crisis. But this is not just a liquidity crisis; it is rather a credit and insolvency crisis. And it is not the job of the Fed to bail out insolvent non bank financial institutions. If a bail out should occur this is a fiscal policy action that should be decided by Congress after the relevant equity holders have been wiped out and senior management fired without golden parachutes and huge severance packages.
Manufacturing activity in the New York area plunged for the second straight month in March, the New York Federal Reserve Bank said Monday. The bank's Empire State Manufacturing index fell to negative 22.2 in March, a record low reading. The index had fallen to negative 11.7 in February from 9.0 in January.
Responding to money-market conditions, the Bank of England on Monday held an "exceptional fine-tuning open market operation" that auctioned 5 billion pounds of extra reserves in a three-day repo that matures on Thursday. The auction was held at 7 a.m. Eastern and was conducted "in response to conditions in the short-term money markets this morning," the bank said in a statement. "The bank will take actions to ensure the overnight rate is close" to the bank's official lending rate of 5.25%. "Along with other central banks, the Bank of England is closely monitoring market conditions," the statement said.
US financial regulators should seek a suspension of mark-to-market accounting of “exotic securities,” and Bear Stearns “did not have to go out of business,” Forbes Inc. CEO Steve Forbes said. “Take a time out, don’t realize a loss until the loss actually happens,” Forbes told CNBC. “Right now, we’re just guessing, and when you’re guessing in a panic environment, disaster takes over,” he said.
The dollar hit a new 12-year low against the Japanese yen at 95.75 yen and remains 1.8% lower at 97.22 yen. The greenback was down 0.7% against the euro at $1.5774 after hitting an all-time low of $1.5903. The dollar was trading below parity with the Swiss franc, losing 1.4% to change hands at 0.9841 francs after hitting a low 0.9631.
The Federal Reserve on Sunday cut the rate on direct loans to commercial banks by a quarter-point and said it will allow primary dealers to borrow at the rate in exchange for a broad range of investment-grade collateral. In a statement, the central bank also extended the maximum term of discount-window loans to 90 days from 30 days.
Shares of Lehman Bros. fell 30% in pre-open trade Monday morning, leading a rout in financial stocks as concern about the repercussions of the Fed-backed bailout of Bear Stearns reverberated through the market. In addition to Lehman's drop, shares of Merrill Lynch fell 15%, Goldman Sachs shed 9%, Morgan Stanley fell 10% and Citigroup fell 7%.
The biggest threat to Lehman Bros. Holdings Inc. shares in the near future is speculation about the firm's liquidity, according to Bank of Montreal analyst George Lazarevski, in a research note to clients Monday. "Similar to Bear Stearns, the greatest risk for Lehman Brothers is the risk that once speculation begins, it becomes a self-fulfilling prophecy, and no level of liquidity will be sufficient," Lazarevski wrote. That said, the analyst added that the Federal Reserve's discount rate cut Sunday and its other recent actions, "should help alleviate investor concerns over potential liquidity shortfalls."
Deutsche Bank analyst Mike Mayo said Monday that fears of a Bear Stearns-like meltdown for brokerage Lehman Brothers are overblown. "Lehman is not Bear," Mayo said, pointing out that Lehman has more liquidity, more support from counterparties, a more diversified franchise and a "seasoned and experienced" CEO. Deutsche Bank maintained its "buy" rating on the stock. "While there is a chance that we have not factored in all the needed write-downs, we believe that this difference creates a reasonable margin of safety," Mayo wrote in a research note.
Moody's Investors Service said Monday that it affirmed its A1 rating on the senior long-term debt of Lehman Brothers Holdings Inc., but trimmed its outlook on Lehman ratings to stable from positive.
Lehman ended off $7.51, or 19%, but had fallen as much as 40% at one point in the session.
Abraham Lincoln: "I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts."
Coventry Health Care Inc. now expects 2008 earnings of $4.39 to $4.50 a share on $12.0 billion to $12.5 billion in revenue. When the company reported fourth-quarter results on Feb. 8, it provided guidance for 2008 earnings of $4.42 to $4.58 a share on sales of $12.4 billion to $12.9 billion. The company said that recent Federal Reserve actions to reduce the federal funds rate put more downward pressure on net investment income.
Bond insurer FGIC Corp. reported a $1.89 billion quarterly loss, mostly on loss and loss adjustment expense reserves and mark-to-market losses recorded for the quarter. The increase in loss reserves for the quarter stemmed from the rapid and substantial deterioration during the quarter in the performance of certain RMBS and ABS CDO transactions written primarily in 2006 and 2007.
April-dated fed fund futures contracts rose 11 cents to 97.98 -- implying a 90% chance that the Fed will slash its base rate to 2%.
Weyerhaeuser Co. agreed to sell its container board-packaging and -recycling business to International Paper Co.for $6 billion cash, the companies said.
Bristol-Myers Squibb is sounding out potential buyers for a possible sale of its Mead Johnson baby formula food business, which is valued at between $7 billion and $9 billion, the Financial Times said on Monday.
Gold for immediate delivery climbed $19.98, or 2 percent, to $1,022.92 an ounce as of 8:36 a.m. in London after gaining to $1,032.70, the all-time high. Prices have increased 23 percent this year as the dollar has dropped 7.7 percent against the euro and the U.K.'s benchmark FTSE 100 stock index fell 15 percent.
Crude oil for April delivery rose as much as $1.59, or 1.4 percent, to $111.80 a barrel in electronic trading on the New York Mercantile Exchange, the highest since trading began in 1983. It was at $110.50 at 11:03 a.m. London time. The April contract expires March 19. Crude-oil futures fell sharply to $107.54 after hitting a record high of $111.80 earlier.
Crude oil for April delivery dropped $5.7 to an intraday low of $104.51 a barrel in mid-afternoon trading. It earlier hit a record high of $111.80 a barrel as the dollar fell to a new low against the euro.
According to the Financial Times, Goldman Sachs and Morgan Stanley are forecast to write off at least an extra $1bn on their portfolios of loans for leveraged buy-outs, with Lehman Brothers, another provider of buy-out financing, also expected to suffer a big writedown.
According to 24/7WallSt, NYMEX shareholders will receive 0.1323 shares of CME Group Class A common stock and $36.00 in cash for each share of NYMEX common stock. This equates to approximately 12.5 million shares and cash of $3.4 billion, and NYMEX will ultimately hold approximately 18.6% of the combined company. This generates a purchase price of $100.30 before any dilution to CME shares. NYMEX shares closed at $95.34 Friday, and the 52-week trading range is $86.61 to $148.00.
UBS AG, Europe's biggest bank by assets, fell the most in more than nine years in Swiss trading after reports that the company may cut as many as 8,000 jobs, propose a new capital increase and sell businesses.
China's fuel demand may rise 8 percent this year as the nation's biggest manufacturing hub restarts oil-fueled power generators to ease shortages, said an official with state-owned China Petrochemical Corp.
John Hussman: "I remain concerned that the market hasn't even considered the potential losses in credit default swaps. The single largest trader in the CDS market is, perhaps ironically, J.P. Morgan."
Illinois Tool Works Inc. has lowered its 2008 first quarter and full year outlook due to two special charges with an estimated pretax effect of $127 million, or 22 cents a share. The total includes $90 million to $100 million related to the company's industrial software business and $32 million for European taxes. The company is now forecasting a full-year 2008 diluted income per share from continuing operations range of $3.25 to $3.39. The full-year forecast continues to assume a total company revenue growth range of 6% to 10%.
The Obama campaign Sunday called Sen. Hillary Rodham Clinton a "veteran of non-disclosure" and, opening a new front, challenged her to release information about her income taxes, Bill Clinton's foundation and library donors, earmark requests and first lady records. The Clinton team said raising questions about her integrity is a "personal attack."
U.S. industrial output dropped by 0.5% in February, the Federal Reserve reported Monday. The decline was largely a result of a weather-related 3.7% decline in utilities' output. Analysts surveyed by MarketWatch were looking for an overall decline of 0.2% in February. The capacity utilization rate, meanwhile, fell to 80.9% from 81.5%.
"Our financial institutions are strong," Bush said, adding that "capital markets are functioning efficiently." Spoken like a government economist turned comedian.
The dollar index, which measures the greenback against a basket of six major currencies, was at 71.412, down 0.4% but up from its overnight low of 70.698.
This is the Bush administration's strong dollar policy at work.
``The Federal Reserve's decision to create a lending facility for primary dealers and permit a broad range of investment grade securities to serve as collateral improves the liquidity picture and, from my perspective, takes the liquidity issue for the entire industry off the table,'' Lehman's CEO Richard Fuld said in a statement today
Shares of Lehman Brothers Holdings Inc. plunged in Monday after a news report that Southeast Asia's largest bank instructed traders in an e-mail not to do business with the bank. DBS Group Holdings Ltd. took back those instructions, but after the fall of the once storied Wall Street bank Bear Stearns on Sunday, skittish investors sold off quickly and Lehman fell 23 percent, or $9.16, to $30.10.
The Boston Globe takes a look at the sudden spike in GOP support for Clinton ever since McCain wrapped up the GOP nod. "Spurred by conservative talk radio, GOP voters who say they would never back Clinton in a general election are voting for her now for strategic reasons: Some want to prolong her bitter nomination battle with Barack Obama, others believe she would be easier to beat than Obama in the fall, or they simply want to register objections to Obama. ‘It's as simple as, I don't think McCain can beat Obama if Obama is the Democratic choice," said Kyle Britt, 49, a Republican-leaning independent from Huntsville, Texas, who voted for Clinton in the March 4 primary. ‘I do believe Hillary can mobilize enough [anti-Clinton] people to keep her out of office.’”
The International Energy Agency, an adviser to 27 industrialized nations, expects worldwide demand for oil products to increase an average 1.9 percent annually until 2012, driven mainly by expansion in Asia and the Middle East.``Demand is projected to grow to almost 94.3 million barrels a day by 2012,'' Eduardo Lopez, an analyst with the agency, said in a presentation to the Oil Africa 2008 conference in Cape Town today. ``By 2012, demand will be a third higher than in 1996.''
U.S. home builders remain discouraged about their industry, but their attitudes didn't get any worse in March, according to the monthly sentiment index released Monday by their trade group. The National Association of Home Builders/Wells Fargo housing market index remained at 20 in March as expected, close to the all-time low of 18 reached in December. The index shows that only about one-in-five home builders has a positive view of the industry. Sentiment among builders has been nearly unchanged for the past seven months at a very low level.
The Bank of England became the latest central bank to step in with extraordinary funds Monday. The bank said it would offer £5 billion, or more than $10 billion, of three-day funding to help bring down overnight interest rates -- the rates banks charge each other for overnight.
For the quarter ended Dec. 31 WCI Communities Company gross margin would have totaled $29.2 million ($-297.7 million as reported plus $268.9 million, $38.4 million, $12.6 million, and $7.0 million), or 12.0% of $243.0 million of revenue before effect of the recorded contract defaults ($191.6 million as reported plus $51.4 million cited...``During the fourth quarter we commenced closings at One Bal Harbour which is comprised of 185 luxury condominiums and 115 luxury hotel condominium suites. To date, we have closed 85% or 157 of the condominiums and 42% or 48 of the hotel condominium suites sold. The five star hotel operated by Regent opened on March 1st and we hope its opening will facilitate closings and stimulate new sales of any defaulted units,'' said Jerry Starkey, President and CEO of WCI Communities...Company gross margin would have totaled $29.2 million ($-297.7 million as reported plus $268.9 million, $38.4 million, $12.6 million, and $7.0 million), or 12.0% of $243.0 million of revenue before effect of the recorded contract defaults ($191.6 million as reported plus $51.4 million cited...Cash Flow/Financial Position: For the twelve months ended December 31, 2007, cash flow from operating activities and investing activities totaled $229.0 million ($197.9 million from operating activities and $31.1 million from investing activities), compared with cash used of $536.6 million ($489.6 million used in operations and $47.0 million used for investing activities) in the same period a year ago. Total liquidity, measured as the sum of cash plus available capacity under the Credit Facility, totaled approximately $342.8 million at December 31, 2007. In addition, letters of credit of $53.7 million were outstanding as of December 31, 2007.
Investor demand for the relative safety of short-term government debt sent the three-month bill rate down 16 basis points to 1 percent, according to Bloomberg's market average. It touched 0.652 percent, the lowest level since May 1958, when the U.S. was emerging from a recession. The yield on the benchmark 10-year note dropped 14 basis points to 3.32 percent.
According to Bloomberg, the gap between bids and offers for Treasuries has widened over the past few days, reflecting uncertainty on the part of traders and investors about the fate of financial markets.``There's absolutely no liquidity whatsoever,'' said Tom di Galoma, head of U.S. Treasury trading at Jefferies & Co., a brokerage for institutional investors in New York. ``If you don't act within a split second, you could lose the bid-offer.'' The last time spreads widened as much was in the aftermath of the terrorist attacks of September 11, 2001, he added.
WL Ross & Co. LLC Chairman Wilbur Ross told CNBC that his company is buying H&R Block’s mortgage loan servicing unit for $1.1 billion because it will be a “profitable and cash-generative business.” The purchase will create the second-largest US subprime servicing portfolio.
JP Morgan shares rose 11.5% and was the primary reason the Dow managed a small gain. The Nasdaq closed down 35 points and the S&P 500 finished down 11+ points.
A Wall Street Journal/NBC News poll released Thursday found that more Americans view Bill Clinton negatively than positively, 45 to 42 percent. It marked the first time since January 2002 that a plurality of Americans disapproved of the former president. One month earlier, The Gallup Poll found that nearly as many Americans had an unfavorable as favorable view of Bill Clinton-for the first time in nearly five years.
The Florida Democratic Party will not hold a mail-in vote to "redo" the presidential primary, The Associated Press reported late Monday.
Federal officials are in the process of putting together a potential deal that could allow Fannie Mae and Freddie Mac to increase their support for the mortgage market by buying and guaranteeing more home loans, the Wall Street Journal reported on its Web site late Monday.
Alliance Data Systems Corp. notified private-equity firm Blackstone Group LP that it has breached the agreement of its planned acquisition of Alliance Data for $81.75 a share. The notice also said Blackstone and its affiliates are "contractually obligated" to satisfy their respective obligations and complete the transaction. Alliance Data said Blackstone has developed a case of "buyer's remorse" is attempting to "run out the clock" on the transaction by prolonging negotiations with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.
Delta Air Lines' pilots union has told company executives it can't agree on seniority issues with its counterpart at Northwest Airlines, raising serious doubts about the prospect of a combination of the two companies as Delta prepares to overhaul its operations.
John F. Kennedy: " The Chinese use two brush strokes to write the word 'crisis'. One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger-but recognize the opportunity."
Sunday, March 16, 2008
What Is There To Say?
5/17/08 What Is There To Say?
According to the FT, one thing most agree on is that Bear fell victim not to a real liquidity crisis but to a crisis of confidence in which every rumour about the bank's position was assumed to be true and nothing its executives said could calm the fears. "This is not a capital issue - it's a confidence issue. The brokers are adequately capitalized," said Brad Hintz, analyst at Sanford Bernstein. "But the market is apprehensive about lending to the brokers and taking counter-party risk."
"Everyone is here," a Bear official said Saturday evening. "The dining room is open, the whole thing is open. It's just one big 10-hour meeting." Many executives have a good portion of their life savings tied up in the company's stock...Bear must get a deal done by Monday morning, short of which it may have to file for bankruptcy, executives say.
The WSJ reported late Sunday that J.P. Morgan agreed to buy Bear Stearns for $2 a share in a stock-swap transaction, people familiar with the matter say. J.P. Morgan will exchange 0.05473 shares of its common stock per one share of Bear Stearns stock. Both boards have approved the transaction. Think about this. Here is an 85 year old company whose stock sold at $170+ in 2007, and closed at $30 on Friday, and they are selling out for less than chicken feed. I don't know what to say!
San Antonio-based Valero Energy is considering selling its refinery in southern Oklahoma. Valero purchased the Ardmore refinery in 2001. The plant employs about 250 workers and can produce 90,000 barrels per day.
According to the FT, one thing most agree on is that Bear fell victim not to a real liquidity crisis but to a crisis of confidence in which every rumour about the bank's position was assumed to be true and nothing its executives said could calm the fears. "This is not a capital issue - it's a confidence issue. The brokers are adequately capitalized," said Brad Hintz, analyst at Sanford Bernstein. "But the market is apprehensive about lending to the brokers and taking counter-party risk."
"Everyone is here," a Bear official said Saturday evening. "The dining room is open, the whole thing is open. It's just one big 10-hour meeting." Many executives have a good portion of their life savings tied up in the company's stock...Bear must get a deal done by Monday morning, short of which it may have to file for bankruptcy, executives say.
The WSJ reported late Sunday that J.P. Morgan agreed to buy Bear Stearns for $2 a share in a stock-swap transaction, people familiar with the matter say. J.P. Morgan will exchange 0.05473 shares of its common stock per one share of Bear Stearns stock. Both boards have approved the transaction. Think about this. Here is an 85 year old company whose stock sold at $170+ in 2007, and closed at $30 on Friday, and they are selling out for less than chicken feed. I don't know what to say!
San Antonio-based Valero Energy is considering selling its refinery in southern Oklahoma. Valero purchased the Ardmore refinery in 2001. The plant employs about 250 workers and can produce 90,000 barrels per day.
Saturday, March 15, 2008
Derivative and Counter-party Exposure
3/16/08 Derivative and Counter-party Exposures
Bloomberg noted the median price in Southern California dropped a record 18% from a year earlier to $408,000. The median price paid for a Bay Area home was $548,000, down from $620,000 in February of last year. More than a third of the existing homes that sold in February in Southern California had been foreclosed upon at some point since the beginning of last year… In some parts of Southern California, ‘there’s virtually no activity going on,’ DataQuick analyst John Karevoll said… ‘Right now the only activity we can really monitor is this noisy, distressed stuff.’”
According to AMG Data Services, for the week ended Mar 12, - Equity Fund Outflows -$1.4 Bil; Taxable Bond Fund Inflows $1.3 Bil
xETFs - Equity Fund Outflows -$2.7 Bil; Taxable Bond Fund Inflows $484 Mil
Mar 5 - Equity Fund Outflows -$1.8 Bil; Taxable Bond Fund Inflows $2.9 Bil
xETFs - Equity Fund Outflows -$1.1 Bil; Taxable Bond Fund Inflows $2.5 Bil.
Doug Noland: "I found the opening question from this afternoon’s Bear Stearns conference call quite telling: “What is your current gross notional non-exchange traded derivative exposure?” The executive’s response - “To be honest with you, I don’t know this number off the top of my head…” - was not comforting. But to be fair, the company’s derivative obligations are not today the most pressing issue facing management. It is, however, a deep concern for an increasingly panicked marketplace. The Bear Stearns funding crisis certainly brings somewhat to a head the market’s festering worries with regard to the daisy-chain of derivative and counter-party exposures, liquidity risk, and a complete lack of transparency. Bear Stearns’ management was quick to blame “false rumors and innuendo” for the funding crisis. Yet, how sound are the underpinnings for Bear Stearns, the U.S. Credit system, or the markets overall when market chatter can have such destabilizing effects?...The Fed is in a real quagmire here. Because of the “daisy-chain” nature of contemporary risk intermediation (specifically in the derivatives and securities financing marketplaces), a failure these days in one of any number of institutions would quickly reverberate throughout the entire (frail) system. As such, today virtually any player of significant presence in the derivatives and/or “repo” markets is likely to be perceived by the Fed as “too big to fail...At this point, it should be apparent that rate cuts are destabilizing the system. They not only damage Federal Reserve credibility, they are battering confidence in the dollar and U.S. financial assets more generally. With the financial crisis having reached the “core” of the U.S. Credit system and the currency markets having turned “disorderly,” we’re now on Dollar Crisis Watch. One of my greatest fears has always been an unwieldy dislocation in the currency derivatives market."
Peter Schiff: " The real estate bubble allowed borrowers to leverage themselves to the hilt using inflated home values as collateral. However, now that the bubble has burst, mortgage balances far exceed current property values. It is a trillion dollar time bomb that no one can possibly defuse."
Come Monday morning, we should see a deal for Bear Stearns. In my view, it is probable that 2 buyers will split the pie. My guess might be JP Morgan and Barclays.
You have to love the government. They send out letters saying you can expect your tax refund shortly. That tops the check is in the mail.
George Ure: "A simple reality check on gold's upper limit comes from a visit to the Minneapolis Fed site where you can plug in the momentary $850 high of gold in 1980 and see what the equivalent price today would be, thanks to the Fed's printing money faster than actual GDP growth: $2,224..
By the same token, there's a historical 16:1 relationship between silver and gold. With gold's close over $1000 this week, a quick punch of the calculator says that today silver prices at its historical 16:1 relationship would price silver at $62.50 - and if applied to gold at $2,224.03, then a case could be made for $140 silver."
In February, real earnings were down 0.8 percent from a year earlier.
The White House said on Saturday Bush would meet members of the President's Working Group on Financial Markets on Monday. The working group is led by U.S. Treasury Secretary Henry Paulson and also includes Federal Reserve Chairman Ben Bernanke as well as the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission.
Royal Bank of Scotland Group Plc and J.C. Flowers & Co. are interested in buying Bear Stearns Cos., the New York Times reported, citing unnamed people briefed on the talks.
CNN has confirmed that Barack Obama won the Texas caucuses with 38 convention delegates, compared to 29 for Clinton. The Texas primary is a complicated, two-step process. Clinton won more delegates than Obama in the popular-vote portion, 65 to 61. With his likely caucus-delegate haul, looks like Obama won the overall statewide delegate lead, 99 to 94 -- or once superdelegate endorsements are factored in, 109 to 106.
Democratic presidential hopeful Barack Obama built on his win in January’s Iowa caucuses with a strong showing Saturday at the state’s 99 county conventions, where thousands of Democrats gathered to take the next step in picking delegates to the party’s national convention in August.
With 2,132 of the 2,500 delegates to district and state conventions chosen, the state party said Obama had won 52.1 percent. He was followed by Hillary Clinton at 31.5 percent and John Edwards at 16 percent.
Obama’s campaign said Saturday the strong showing would be enough for him to claim an additional seven pledged delegates, boosting his estimated total in Iowa to 23, up from 16 the night of the caucuses.
According to the NY Times DealBook, the private equity firm Providence Equity Partners reached a settlement Friday with Wachovia, one of the banks financing its purchase of Clear Channel Communication’s television unit, helping clear the way for the radio broadcaster’s larger sale to two other buyout firms. Providence will now pay $1.1 billion for the 56-station unit, down from the original $1.225 billion price tag, Clear Channel said in a statement. But Clear Channel will add $80 million in working capital to the deal, effectively lowering the price to $1.02 billion, according to people briefed on the matter. In return, Wachovia will drop a lawsuit it had filed in a North Carolina state court against its client, Providence.
Bloomberg noted the median price in Southern California dropped a record 18% from a year earlier to $408,000. The median price paid for a Bay Area home was $548,000, down from $620,000 in February of last year. More than a third of the existing homes that sold in February in Southern California had been foreclosed upon at some point since the beginning of last year… In some parts of Southern California, ‘there’s virtually no activity going on,’ DataQuick analyst John Karevoll said… ‘Right now the only activity we can really monitor is this noisy, distressed stuff.’”
According to AMG Data Services, for the week ended Mar 12, - Equity Fund Outflows -$1.4 Bil; Taxable Bond Fund Inflows $1.3 Bil
xETFs - Equity Fund Outflows -$2.7 Bil; Taxable Bond Fund Inflows $484 Mil
Mar 5 - Equity Fund Outflows -$1.8 Bil; Taxable Bond Fund Inflows $2.9 Bil
xETFs - Equity Fund Outflows -$1.1 Bil; Taxable Bond Fund Inflows $2.5 Bil.
Doug Noland: "I found the opening question from this afternoon’s Bear Stearns conference call quite telling: “What is your current gross notional non-exchange traded derivative exposure?” The executive’s response - “To be honest with you, I don’t know this number off the top of my head…” - was not comforting. But to be fair, the company’s derivative obligations are not today the most pressing issue facing management. It is, however, a deep concern for an increasingly panicked marketplace. The Bear Stearns funding crisis certainly brings somewhat to a head the market’s festering worries with regard to the daisy-chain of derivative and counter-party exposures, liquidity risk, and a complete lack of transparency. Bear Stearns’ management was quick to blame “false rumors and innuendo” for the funding crisis. Yet, how sound are the underpinnings for Bear Stearns, the U.S. Credit system, or the markets overall when market chatter can have such destabilizing effects?...The Fed is in a real quagmire here. Because of the “daisy-chain” nature of contemporary risk intermediation (specifically in the derivatives and securities financing marketplaces), a failure these days in one of any number of institutions would quickly reverberate throughout the entire (frail) system. As such, today virtually any player of significant presence in the derivatives and/or “repo” markets is likely to be perceived by the Fed as “too big to fail...At this point, it should be apparent that rate cuts are destabilizing the system. They not only damage Federal Reserve credibility, they are battering confidence in the dollar and U.S. financial assets more generally. With the financial crisis having reached the “core” of the U.S. Credit system and the currency markets having turned “disorderly,” we’re now on Dollar Crisis Watch. One of my greatest fears has always been an unwieldy dislocation in the currency derivatives market."
Peter Schiff: " The real estate bubble allowed borrowers to leverage themselves to the hilt using inflated home values as collateral. However, now that the bubble has burst, mortgage balances far exceed current property values. It is a trillion dollar time bomb that no one can possibly defuse."
Come Monday morning, we should see a deal for Bear Stearns. In my view, it is probable that 2 buyers will split the pie. My guess might be JP Morgan and Barclays.
You have to love the government. They send out letters saying you can expect your tax refund shortly. That tops the check is in the mail.
George Ure: "A simple reality check on gold's upper limit comes from a visit to the Minneapolis Fed site where you can plug in the momentary $850 high of gold in 1980 and see what the equivalent price today would be, thanks to the Fed's printing money faster than actual GDP growth: $2,224..
By the same token, there's a historical 16:1 relationship between silver and gold. With gold's close over $1000 this week, a quick punch of the calculator says that today silver prices at its historical 16:1 relationship would price silver at $62.50 - and if applied to gold at $2,224.03, then a case could be made for $140 silver."
In February, real earnings were down 0.8 percent from a year earlier.
The White House said on Saturday Bush would meet members of the President's Working Group on Financial Markets on Monday. The working group is led by U.S. Treasury Secretary Henry Paulson and also includes Federal Reserve Chairman Ben Bernanke as well as the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission.
Royal Bank of Scotland Group Plc and J.C. Flowers & Co. are interested in buying Bear Stearns Cos., the New York Times reported, citing unnamed people briefed on the talks.
CNN has confirmed that Barack Obama won the Texas caucuses with 38 convention delegates, compared to 29 for Clinton. The Texas primary is a complicated, two-step process. Clinton won more delegates than Obama in the popular-vote portion, 65 to 61. With his likely caucus-delegate haul, looks like Obama won the overall statewide delegate lead, 99 to 94 -- or once superdelegate endorsements are factored in, 109 to 106.
Democratic presidential hopeful Barack Obama built on his win in January’s Iowa caucuses with a strong showing Saturday at the state’s 99 county conventions, where thousands of Democrats gathered to take the next step in picking delegates to the party’s national convention in August.
With 2,132 of the 2,500 delegates to district and state conventions chosen, the state party said Obama had won 52.1 percent. He was followed by Hillary Clinton at 31.5 percent and John Edwards at 16 percent.
Obama’s campaign said Saturday the strong showing would be enough for him to claim an additional seven pledged delegates, boosting his estimated total in Iowa to 23, up from 16 the night of the caucuses.
According to the NY Times DealBook, the private equity firm Providence Equity Partners reached a settlement Friday with Wachovia, one of the banks financing its purchase of Clear Channel Communication’s television unit, helping clear the way for the radio broadcaster’s larger sale to two other buyout firms. Providence will now pay $1.1 billion for the 56-station unit, down from the original $1.225 billion price tag, Clear Channel said in a statement. But Clear Channel will add $80 million in working capital to the deal, effectively lowering the price to $1.02 billion, according to people briefed on the matter. In return, Wachovia will drop a lawsuit it had filed in a North Carolina state court against its client, Providence.
Friday, March 14, 2008
Gold and the Dollar
3/15/08 Gold And The Dollar
Gold futures soared to a record high of $1,007.30 an ounce on the New York Mercantile Exchange Friday, as the dollar hit new all-time lows against the euro and the Swiss franc.
The dollar index was at 71.658, down from 72.047 in London earlier Friday. The euro was trading at $1.5672, up from $1.5566 and the pound was at $2.0375, up from $2.0292 in London earlier. The dollar bought 99.63 yen, down from 100.54 yen in London.
Citigroup Inc. plans to shed hundreds of billions of dollars worth of assets to reorganize the firm, The Wall Street Journal reported on its Web site Friday, citing an analyst meeting with Citi Chief Executive Vikram Pandit.
Bear Stearns said it is working with J.P. Morgan on permanent financing or "other alternatives."
Wal-Mart Stores Inc. said Friday that it has saved U.S. consumers more than $1 billion with its $4 prescription plan. Dr. John Agwunobi, senior vice president and president of health and wellness at the retailing giant, noted that the plan had further-reaching implications because many of Wal-Mart's competitors cut their prescription prices as well.
Consumer price inflation across the 15 nations that make up the European single currency rose at an annual pace of 3.3% in February, Eurostat reported Friday, revising the figure up from a preliminary February reading of 3.2% to an all-time high.
The United States is in a recession that could be "substantially more severe" than recent ones, National Bureau of Economic Research President Martin Feldstein said on Friday. "The situation is very bad, the situation is getting worse, and the risks are that it could get very bad," Feldstein said in a speech at the Futures Industry Association meeting in Boca Raton, Florida. "There's no doubt that this year and next year are going to be very difficult years."
Moody's Investors Service Friday downgraded Washington Mutual Inc.'s senior unsecured rating to Baa3 from Baa2 and its long-term deposit rating to Baa2 from Baa1. WaMu's bank financial strength rating of C- and short term rating of Prime-2 were affirmed. Moody's has a negative outlook on all Washington Mutual entities.
The March series of calls and puts expire March 21 or in 4 trading days after today. The market is closed for trading on Good Friday. For those willing to accept some risk, please note I sold some Lehman March 25 puts, and the stock was trading at the time at $41, and I sold some Bear Stearns March 25 puts with the stock trading at $33 at the time. This strategy is certainly not for everyone. I believe Bear Stearns will be purchased by
JP Morgan Chase and I believe the selling in Lehman is overblown.
The February CPI level of 211.693 (1982-84=100) was 4.0 percent higher than in February 2007.
Two-year note yields dropped 14 basis points, or 0.14 percentage point, to 1.48 percent at 10:38 a.m. in New York, according to bond broker Cantor Fitzgerald LP.
Futures markets are now pricing in a 38 percent chance that the Fed cuts benchmark interest rates next week by a full percentage point to 2 percent. Coming into the session, expectations were for a smaller cut to 2.25 percent.
Microsoft Corp. plans to buy Rapt Inc., plugging a hole in its suite of tools for Web publishers and advertisers, the software giant said Friday. Rapt's software and consulting services help Web site publishers tweak how they package and price display-ad space.
The Securities and Exchange Commission said Friday it will allow municipal bond issuers to submit bids in auctions of their own securities without incurring charges of market manipulation. The guidelines are designed to help municipal bond issuers get out of the auction-rate market, where several auctions have failed because of a lack of buyers, and rates have shot up.
Citigroup's U.S. economists said Friday they anticipate Federal Reserve policy makers will lower the fed funds rate by 100 basis points to 2% next week, from the current 3%, "and more cannot be ruled out."
The benchmark for U.S. stock option prices closed at the highest level since March 2003 after Bear Stearns Cos. got an emergency bailout from the Federal Reserve and JPMorgan Chase & Co. The Chicago Board Options Exchange Volatility Index rose 14 percent to 31.16 for the biggest advance since Jan. 17. The so- called VIX, which tends to increase when stocks fall, has gained 80 percent in the past year.
The decline in U.S. stocks is ``way overdone'' and the Dow Jones Industrial Average may rally 1,000 points, investor Barton Biggs said.``We're in a financial panic,'' Biggs said during a telephone interview with Bloomberg Television from New York. ``We're setting up for a really big rally. I don't mean three or four hundred points on the Dow, I mean 1,000 points on the Dow. I don't know if we're going to get it next week or the week after. But this thing has gotten crazy and is overdone.''
According to the WSJ, two massive housing developments in Las Vegas, involving several of the nation's largest home builders, have received default notices on about $765 million in debt, according to one of the partners in the projects. John Ritter, chief executive of Las Vegas-based Focus Property Group, says that two joint ventures -- involving Focus as well as builders Toll Brothers Inc., KB Home and Lennar Corp. among others -- have each missed an interest payment in recent weeks and are in negotiations with lenders.
According to Bloomberg, Lehman Brothers Holdings Inc. obtained a $2 billion credit line as the investment bank tried to blunt the stock's worst drop in almost eight years and assure investors the firm isn't short on cash. The unsecured, three-year facility from 40 banks replaces an existing credit line, New York-based Lehman said today in a statement. JPMorgan Chase & Co. and Citigroup Inc., also based in New York, led the effort, the firm said.
Gold futures soared to a record high of $1,007.30 an ounce on the New York Mercantile Exchange Friday, as the dollar hit new all-time lows against the euro and the Swiss franc.
The dollar index was at 71.658, down from 72.047 in London earlier Friday. The euro was trading at $1.5672, up from $1.5566 and the pound was at $2.0375, up from $2.0292 in London earlier. The dollar bought 99.63 yen, down from 100.54 yen in London.
Citigroup Inc. plans to shed hundreds of billions of dollars worth of assets to reorganize the firm, The Wall Street Journal reported on its Web site Friday, citing an analyst meeting with Citi Chief Executive Vikram Pandit.
Bear Stearns said it is working with J.P. Morgan on permanent financing or "other alternatives."
Wal-Mart Stores Inc. said Friday that it has saved U.S. consumers more than $1 billion with its $4 prescription plan. Dr. John Agwunobi, senior vice president and president of health and wellness at the retailing giant, noted that the plan had further-reaching implications because many of Wal-Mart's competitors cut their prescription prices as well.
Consumer price inflation across the 15 nations that make up the European single currency rose at an annual pace of 3.3% in February, Eurostat reported Friday, revising the figure up from a preliminary February reading of 3.2% to an all-time high.
The United States is in a recession that could be "substantially more severe" than recent ones, National Bureau of Economic Research President Martin Feldstein said on Friday. "The situation is very bad, the situation is getting worse, and the risks are that it could get very bad," Feldstein said in a speech at the Futures Industry Association meeting in Boca Raton, Florida. "There's no doubt that this year and next year are going to be very difficult years."
Moody's Investors Service Friday downgraded Washington Mutual Inc.'s senior unsecured rating to Baa3 from Baa2 and its long-term deposit rating to Baa2 from Baa1. WaMu's bank financial strength rating of C- and short term rating of Prime-2 were affirmed. Moody's has a negative outlook on all Washington Mutual entities.
The March series of calls and puts expire March 21 or in 4 trading days after today. The market is closed for trading on Good Friday. For those willing to accept some risk, please note I sold some Lehman March 25 puts, and the stock was trading at the time at $41, and I sold some Bear Stearns March 25 puts with the stock trading at $33 at the time. This strategy is certainly not for everyone. I believe Bear Stearns will be purchased by
JP Morgan Chase and I believe the selling in Lehman is overblown.
The February CPI level of 211.693 (1982-84=100) was 4.0 percent higher than in February 2007.
Two-year note yields dropped 14 basis points, or 0.14 percentage point, to 1.48 percent at 10:38 a.m. in New York, according to bond broker Cantor Fitzgerald LP.
Futures markets are now pricing in a 38 percent chance that the Fed cuts benchmark interest rates next week by a full percentage point to 2 percent. Coming into the session, expectations were for a smaller cut to 2.25 percent.
Microsoft Corp. plans to buy Rapt Inc., plugging a hole in its suite of tools for Web publishers and advertisers, the software giant said Friday. Rapt's software and consulting services help Web site publishers tweak how they package and price display-ad space.
The Securities and Exchange Commission said Friday it will allow municipal bond issuers to submit bids in auctions of their own securities without incurring charges of market manipulation. The guidelines are designed to help municipal bond issuers get out of the auction-rate market, where several auctions have failed because of a lack of buyers, and rates have shot up.
Citigroup's U.S. economists said Friday they anticipate Federal Reserve policy makers will lower the fed funds rate by 100 basis points to 2% next week, from the current 3%, "and more cannot be ruled out."
The benchmark for U.S. stock option prices closed at the highest level since March 2003 after Bear Stearns Cos. got an emergency bailout from the Federal Reserve and JPMorgan Chase & Co. The Chicago Board Options Exchange Volatility Index rose 14 percent to 31.16 for the biggest advance since Jan. 17. The so- called VIX, which tends to increase when stocks fall, has gained 80 percent in the past year.
The decline in U.S. stocks is ``way overdone'' and the Dow Jones Industrial Average may rally 1,000 points, investor Barton Biggs said.``We're in a financial panic,'' Biggs said during a telephone interview with Bloomberg Television from New York. ``We're setting up for a really big rally. I don't mean three or four hundred points on the Dow, I mean 1,000 points on the Dow. I don't know if we're going to get it next week or the week after. But this thing has gotten crazy and is overdone.''
According to the WSJ, two massive housing developments in Las Vegas, involving several of the nation's largest home builders, have received default notices on about $765 million in debt, according to one of the partners in the projects. John Ritter, chief executive of Las Vegas-based Focus Property Group, says that two joint ventures -- involving Focus as well as builders Toll Brothers Inc., KB Home and Lennar Corp. among others -- have each missed an interest payment in recent weeks and are in negotiations with lenders.
According to Bloomberg, Lehman Brothers Holdings Inc. obtained a $2 billion credit line as the investment bank tried to blunt the stock's worst drop in almost eight years and assure investors the firm isn't short on cash. The unsecured, three-year facility from 40 banks replaces an existing credit line, New York-based Lehman said today in a statement. JPMorgan Chase & Co. and Citigroup Inc., also based in New York, led the effort, the firm said.
Municipal Debt and Another Rescue
3/14/08 Municipal Debt and Another Rescue
Acccording to Bloomberg, the risk of guaranteeing municipal debt is increasing because the economy is slowing and some insurers may cut prices to regain lost business, said Ajit Jain, head of Berkshire Hathaway Inc.'s new bond insurer. Fiscal stress in Vallejo, California, and Jefferson County, Alabama, may be the ``tip of the iceberg'' for municipal defaults, said Jain, who runs Warren Buffett's Berkshire Hathaway Assurance Corp. He said downgrades of some insurers hurt the industry's integrity and those firms may spark ``pricing wars'' if they regain their financial footing and seek to recoup lost business. ``While we are writing business at pricing levels that are economically attractive to us, I remain very concerned about the long-term viability of this product,'' Jain said in testimony submitted today to the House Financial Services Committee in Washington D.C.
``We are looking at the worst set of macroeconomic conditions since the Great Depression,'' Mort Zuckerman said in an interview with Bloomberg Television. ``I don't know where the bottom is. The federal government's going to have to do a lot more to contain what I think is the potential of a perfect storm.''
The latest in a spate of deals for virtualization start-ups is Microsoft’s acquisition of Kidaro, an Israeli developer of desktop virtualization software for enterprises. According to The Deal.com, Microsoft ponied up $100 million for the venture-capitalk-backed start-up.
UnitedHealth Group Inc. said its first-quarter and full-year results may be squeezed, but believes it is too early for negative conclusions.
Cigna still anticipates full-year adjusted income from operations between $4.05 and $4.25 per share.
CEO Immelt noted that GE has no exposure to losses to CDO's and SIV's.
Gold futures soared to the psychologically key level of $1,000 an ounce early Thursday, propelled by ongoing dollar weakness. Gold for April delivery was last up $17.30 at $997.80 an ounce on the New York Mercantile Exchange.
Pilgrim's Pride, the nation's largest chicken producer, is closing a chicken processing complex in North Carolina and six of its 13 distribution centers in the U.S., furloughing 1,100 workers, as a result of soaring feed costs. The moves were part of a plan to "curtail losses amid record-high costs for ... seed ingredients and an oversupply of chicken."
With the caucuses victory Obama ends up carrying more delegates from Texas than Clinton.The Illinois Senator leads in the overall race with 1597 delegates vs. 1470 for Clinton. So why is it that the media states Clinton won Texas and has momentum from March 4? It's one more instance of purposeful misinformation.
U.K. hedge fund Toscafund Asset Management has approached Washington Mutual, offering to participate in any consortium looking to recapitalize the bank, The Wall Street Journal reported on Wednesday.
In February, the prices of U.S. agricultural exports climbed 4.4% and are up 30.8% over the past year.
Retail sales down 0.6% in February.
Foreclosure rates continued to rise. Countrywide's foreclosure rate rose to 1.64 percent in February, compared with 1.48 percent in January and 0.80 percent in February 2007.
Are you better off now than you were four years ago? This has become a fundamental question in presidential elections. And for the first time since 1992, a plurality of voters heading into November’s election answer that question with a resounding no, according to the latest NBC News/Wall Street Journal poll.Forty-three percent say that they and their families are worse off, compared with 34 percent who say they’re better off; 21 percent respond that their status is the same.
The ranks of workers remaining on jobless aid is at a level not seen in nearly 2 1/2 years, according to the Labor Department.
Treasury Secretary Henry Paulson urged banks to consider cutting dividends.
AOL is buying social-networking site Bebo for $850 million.
AIG fell 4.7 percent to $41.60, the lowest in more than 10 years. Morgan Stanley predicted losses linked to credit-default swaps may total $3 billion for world's largest insurer by assets.
Bear Stearns is a creditor of Carlyle, which is near collapse and having its assets, primarily AAA rated mortgages from Fannie Mae and Freddie Mac, seized by creditors.
Thornburg Mortgage received a default notice from Morgan Stanley after failing to meet a $9 million margin call. Morgan Stanley had lent Thornburg $49 million and now says it "has exercised or will exercise its rights under the agreement."
Morgan Keegan & Co. downgraded shares of Lowe's from Market Perform to Underperform. They feel that Mooresville, N.C.-based Lowe's could be susceptible to deteriorating macroeconomic trends during fiscal 2008, which they believe are showing no signs of improvement.
U.S. natural gas inventories fell by 86 billion cubic feet in the week ending March 7 to 1,398 billion cubic feet, Energy Information Administration reported on Thursday. On the New York Mercantile Exchange, April natural gas gained 14.4 cents to $10.155 per million British thermal units. Natural gas inventories have been falling for 16 consecutive weeks.
Crude oil for April delivery rose more than $1 to $111 a barrel in mid-morning trading on the New York Mercantile Exchange.
GM shares fell as much as 9% to $19, their lowest level since January 2006. Ford fell as low as $5.12, a level not seen since 1991.
JPMorgan Chase & Co and the Federal Reserve Bank of New York agreed to provide financing to Bear Stearns, the fifth-largest U.S. investment bank for up to 28 days. Bear Stearns said the move would allow it to continue normal operations. "Another piece of mistrust. The CFO yesterday said fears of liquidity concerns are overblown," said Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey. "But what happened in 24 hours that they didn't know 24 hours ago? But overnight, the company needed a government bail out," he added.
Acccording to Bloomberg, the risk of guaranteeing municipal debt is increasing because the economy is slowing and some insurers may cut prices to regain lost business, said Ajit Jain, head of Berkshire Hathaway Inc.'s new bond insurer. Fiscal stress in Vallejo, California, and Jefferson County, Alabama, may be the ``tip of the iceberg'' for municipal defaults, said Jain, who runs Warren Buffett's Berkshire Hathaway Assurance Corp. He said downgrades of some insurers hurt the industry's integrity and those firms may spark ``pricing wars'' if they regain their financial footing and seek to recoup lost business. ``While we are writing business at pricing levels that are economically attractive to us, I remain very concerned about the long-term viability of this product,'' Jain said in testimony submitted today to the House Financial Services Committee in Washington D.C.
``We are looking at the worst set of macroeconomic conditions since the Great Depression,'' Mort Zuckerman said in an interview with Bloomberg Television. ``I don't know where the bottom is. The federal government's going to have to do a lot more to contain what I think is the potential of a perfect storm.''
The latest in a spate of deals for virtualization start-ups is Microsoft’s acquisition of Kidaro, an Israeli developer of desktop virtualization software for enterprises. According to The Deal.com, Microsoft ponied up $100 million for the venture-capitalk-backed start-up.
UnitedHealth Group Inc. said its first-quarter and full-year results may be squeezed, but believes it is too early for negative conclusions.
Cigna still anticipates full-year adjusted income from operations between $4.05 and $4.25 per share.
CEO Immelt noted that GE has no exposure to losses to CDO's and SIV's.
Gold futures soared to the psychologically key level of $1,000 an ounce early Thursday, propelled by ongoing dollar weakness. Gold for April delivery was last up $17.30 at $997.80 an ounce on the New York Mercantile Exchange.
Pilgrim's Pride, the nation's largest chicken producer, is closing a chicken processing complex in North Carolina and six of its 13 distribution centers in the U.S., furloughing 1,100 workers, as a result of soaring feed costs. The moves were part of a plan to "curtail losses amid record-high costs for ... seed ingredients and an oversupply of chicken."
With the caucuses victory Obama ends up carrying more delegates from Texas than Clinton.The Illinois Senator leads in the overall race with 1597 delegates vs. 1470 for Clinton. So why is it that the media states Clinton won Texas and has momentum from March 4? It's one more instance of purposeful misinformation.
U.K. hedge fund Toscafund Asset Management has approached Washington Mutual, offering to participate in any consortium looking to recapitalize the bank, The Wall Street Journal reported on Wednesday.
In February, the prices of U.S. agricultural exports climbed 4.4% and are up 30.8% over the past year.
Retail sales down 0.6% in February.
Foreclosure rates continued to rise. Countrywide's foreclosure rate rose to 1.64 percent in February, compared with 1.48 percent in January and 0.80 percent in February 2007.
Are you better off now than you were four years ago? This has become a fundamental question in presidential elections. And for the first time since 1992, a plurality of voters heading into November’s election answer that question with a resounding no, according to the latest NBC News/Wall Street Journal poll.Forty-three percent say that they and their families are worse off, compared with 34 percent who say they’re better off; 21 percent respond that their status is the same.
The ranks of workers remaining on jobless aid is at a level not seen in nearly 2 1/2 years, according to the Labor Department.
Treasury Secretary Henry Paulson urged banks to consider cutting dividends.
AOL is buying social-networking site Bebo for $850 million.
AIG fell 4.7 percent to $41.60, the lowest in more than 10 years. Morgan Stanley predicted losses linked to credit-default swaps may total $3 billion for world's largest insurer by assets.
Bear Stearns is a creditor of Carlyle, which is near collapse and having its assets, primarily AAA rated mortgages from Fannie Mae and Freddie Mac, seized by creditors.
Thornburg Mortgage received a default notice from Morgan Stanley after failing to meet a $9 million margin call. Morgan Stanley had lent Thornburg $49 million and now says it "has exercised or will exercise its rights under the agreement."
Morgan Keegan & Co. downgraded shares of Lowe's from Market Perform to Underperform. They feel that Mooresville, N.C.-based Lowe's could be susceptible to deteriorating macroeconomic trends during fiscal 2008, which they believe are showing no signs of improvement.
U.S. natural gas inventories fell by 86 billion cubic feet in the week ending March 7 to 1,398 billion cubic feet, Energy Information Administration reported on Thursday. On the New York Mercantile Exchange, April natural gas gained 14.4 cents to $10.155 per million British thermal units. Natural gas inventories have been falling for 16 consecutive weeks.
Crude oil for April delivery rose more than $1 to $111 a barrel in mid-morning trading on the New York Mercantile Exchange.
GM shares fell as much as 9% to $19, their lowest level since January 2006. Ford fell as low as $5.12, a level not seen since 1991.
JPMorgan Chase & Co and the Federal Reserve Bank of New York agreed to provide financing to Bear Stearns, the fifth-largest U.S. investment bank for up to 28 days. Bear Stearns said the move would allow it to continue normal operations. "Another piece of mistrust. The CFO yesterday said fears of liquidity concerns are overblown," said Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey. "But what happened in 24 hours that they didn't know 24 hours ago? But overnight, the company needed a government bail out," he added.
Thursday, March 13, 2008
Confidence?
3/13/08 Confidence?
``Congress needs to determine immediately whether Admiral Fallon's resignation is another example of truth tellers being forced to the sidelines in the Bush administration,'' said Senator John Kerry, the Massachusetts Democrat who lost to Bush in the 2004 election. ``His departure must not clear the way for a rush to war with Iran.'' Defense Secretary Robert Gates announced that Fallon, 63, was resigning over perceived differences on Iran policy with the Bush administration as Fallon was starting an Iraq visit yesterday. Fallon will retire from the Navy at the end of March. Fallon's resignation came after publication of an article in Esquire magazine, written by Thomas P.M. Barnett, a former professor at the Naval War College in Newport, Rhode Island, that portrayed the admiral as the bulwark against a U.S. offensive against Iran ``If, in the dying light of the Bush administration, we go to war with Iran, it'll come down to one man,'' Barnett wrote. ``If we do not go to war with Iran, it'll come down to the same man. He is that rarest of creatures in the Bush universe: the good cop on Iran, and a man of strategic brilliance.'' Barnett's article said Fallon might be ousted. Gates described as ``just ridiculous'' the idea raised in the article that if Fallon leaves, it may mean the U.S. is going to war with Iran.
The outlook for the global economy deteriorated for a fourth month in March amid declining faith in Asia's ability to dodge the U.S. slump, a survey of Bloomberg users on five continents showed. The Bloomberg Professional Global Confidence Index fell to 13.1 from 14.3 in February. Respondents in Asia were the most pessimistic about worldwide growth and a gauge of confidence in their own economy fell to 38.1 from 43.5. A reading below 50 indicates negative sentiment. The Bloomberg Professional Confidence Survey collated the responses of 5,430 Bloomberg users from Auckland to New York on economic conditions in their region and the world. The survey was conducted from March 3 to March 7. The investors, traders and analysts were also asked about the outlook for their currencies, bonds, stocks and interest rates in the next six months. Participants are in cities including Hong Kong, Zurich and London.
On Tuesday, Jeffrey L. Bewkes, the chief executive of Time Warner, AOL’s parent company, acknowledged weakness in the business and said he was open to combining AOL with another company — “whatever configuration makes it the strongest and the most valuable.”
Reuters reports that Valero is considering selling many of its US refineries because of poor profits.
Humana said earnings will range from $4 to $4.25 a share, rather than the $5.35 to $5.55 given on Feb. 4, according to a statement distributed today by Business Wire. Earnings for the first quarter will be 44 cents to 46 cents a share, down from a previous forecast of 80 cents to 85 cents, Humana said. The revised forecasts stem from ``stand-alone PDP financial performance,'' while Medicare Advantage, Commercial and Military services businesses aren't affected, according to the statement.
After a plan by the Federal Reserve and other central banks to swap mortgage-backed securities for Treasurys, inter-bank loan rates for three months in the euro-zone edged up to 4.61% from 4.6%, according to data from the European Banking Federation.
Global spot market trading of liquefied natural gas rose 31 percent last year as cold winter temperatures prompted increased purchases, according to London- based LNG Shipping Solutions.
Confidence among Australian consumers weakened sharply in March to its lowest level since 1993, according to data released Wednesday, sparking economists' predictions that the central bank is unlikely to continue a run of interest rate hikes. The index of consumer sentiment fell a seasonally adjusted 9.1 percent in March to 88.6 points, from 97.4 points in February, compilers Westpac Banking Corp. and the Melbourne Institute said. The index was down 23 percent from a year earlier. Westpac said the fall in the index over the last three months is the sharpest three-month decline since the index was first measured in January 1975.
Rob Hanna: "I looked at all instances where the S&P closed at a 100-day low and then exploded up 3.5% or more the next day. Looking back to 1962 I found 9 other instances...The stats are quite impressive with the average trade gaining 2% over the next week and 3% over the next two weeks. The average winning trade posted 3.4% over the next week and 5.4% over the next two weeks. There is a positive expectation going forward for the next month...there’s still some juice left in this rally. It also appears likely the market will look to digest these gains over the next 1-3 days and traders looking for short-term gains may be able to get a better entry point."
The euro rose to $1.5502 according to FactSet data, its highest level since the European unit began trading in January 1999.
U.S. crude inventories rose more than expected, up 6.2 million barrels to 311.6 million barrels in the week ending March 7, U.S. Energy Information Administration reported on Wednesday. Gasoline supplies rose by 1.7 million barrels in the latest week, while distillate stocks fell by 1.2 million barrels, EIA reported.
U.S. crude inventories fell by 500,000 barrels to 305.2 million barrels in the week ending March 7, the American Petroleum Institute reported on Wednesday, according to Moody's Economy.com. Distillate stocks fell by 2.7 million barrels to 114.3 million barrels in the same period, while gasoline stocks dropped by 3.7 million barrels to 219.3 million barrels, the API said.
UPS Inc. may not meet its first-quarter earnings guidance and plans to focus more on growth opportunities overseas because of the uncertain U.S. economy, executives of the world's largest shipping carrier said Wednesday.
Fifty-four percent of the CFOs said the United States is in recession, and another 24 percent said there is a high likelihood of one starting later this year, according to a Duke University/CFO Magazine survey completed on March 7.
Robert McHugh: "There is no real lending associated with this $200 billion of fresh fiat cash. And that is the problem. This Fed injection does nothing for households. And it is households that will determine if we avert depression or not. Consumer spending is 70 percent of GDP. Households need the money, and they can't get it. Credit card companies are cutting lines. Banks are raising lending standards. House values are dropping below outstanding mortgage and home equity debts. Incomes can't keep up. Jobs are shrinking. Trickle down won't work. We need trickle up this time. The Fed's announced plan today is to monetize bad debt from Wall Street banks, to accept their securities backed by bad loans in exchange for cash. This is in lieu of a drastic further drop in interest rates. Once again, save Wall Street and to blazes with households. Because they are not doing a thing here for households, this plan will fail. Households get more inflation and that is it. Wall Street gets a free ride. Somebody ought to be arrested. What a heist. Of course Spitzer can't do anything. He's preoccupied."
With the wins in Mississippi and Texas, Obama now leads Clinton 1,608 to 1,478 in the total delegate count, CNN estimates.
The New York Board of Trade's U.S. dollar index fell to 72.457 before recovering slightly to trade at 72.509. This is a new record low.
Crude-oil futures on Wednesday closed at a new high of $109.92 a barrel after earlier surpassing $110 a barrel for the first time. Gold for April delivery ended up $4.50 at $980.50 an ounce on the New York Mercantile Exchange.
The federal government budget deficit widened to a record $175.6 billion in February, in part because of the economic slowdown and in part because of the extra day in February this year that allowed the government to send out more tax refunds and more benefit checks, the Treasury Department reported Wednesday.
The Amex Securities Broker/Dealer index fell 3%, while the KBW Bank index shed 2.5% and the S&P Insurance index fell 2%.
The former VP candidate leaves the Clinton campaign after controversial remarks about Obama.
A U.S. military spokesman said three American soldiers were killed in a rocket attack on their combat outpost south of Baghdad on Wednesday. The deaths bring to 12 the number of U.S. troops killed in three days.
Target Corp. said it's in talks with an investment partner to sell about half of its credit-card loans for $4 billion.
Obama: “We were told that Michigan and Florida wouldn’t count, and so we said we wouldn’t campaign there,” Mr. Obama said. “Senator Clinton said the same thing, that they wouldn’t count. Now her campaign is suggesting that they should.”Mrs. Clinton said last October that the Michigan primary was meaningless, but she left her name on the ballot. Mr. Obama and the other major Democratic candidates removed their names from the ballot in a gesture of good faith to early-voting states whose primaries were officially allowed by the Democratic Party. Neither candidate campaigned in Michigan. Any plan to redo the Michigan and Florida primaries requires the state parties to submit a plan to the Democratic National Committee’s panel on rules and bylaws (which excommunicated the two states in the first place for jumping the primary queue by holding contests in January). Senator Bill Nelson, Democrat of Florida, has proposed a mail-in contest, but the entire Florida Democratic Congressional delegation rejected it, saying it was impractical to rerun the January primary.
Electronic Arts announced it's taking its fight for Take-Two Interactive directly to shareholders, commencing a tender offer for the maker of the Grand Theft Auto series of video games worth $26 a share in cash, or $2 billion.
U.S. foreclosure filings fell 4% in February compared to January, but rose nearly 60% from last year, according to RealtyTrac. "We have still not reached the peak of foreclosure activity in this cycle," said James J. Saccacio, chief executive officer of RealtyTrac.
The U.S. dollar on Thursday plunged below 100 Japanese yen for the first time since autumn 1995, pressured by ongoing worries about the U.S. economy and financial turmoil.
Carlyle Capital has been unable to agree a refinancing package with lenders and it expects lenders to take possession of substantially all its remaining assets.
``Congress needs to determine immediately whether Admiral Fallon's resignation is another example of truth tellers being forced to the sidelines in the Bush administration,'' said Senator John Kerry, the Massachusetts Democrat who lost to Bush in the 2004 election. ``His departure must not clear the way for a rush to war with Iran.'' Defense Secretary Robert Gates announced that Fallon, 63, was resigning over perceived differences on Iran policy with the Bush administration as Fallon was starting an Iraq visit yesterday. Fallon will retire from the Navy at the end of March. Fallon's resignation came after publication of an article in Esquire magazine, written by Thomas P.M. Barnett, a former professor at the Naval War College in Newport, Rhode Island, that portrayed the admiral as the bulwark against a U.S. offensive against Iran ``If, in the dying light of the Bush administration, we go to war with Iran, it'll come down to one man,'' Barnett wrote. ``If we do not go to war with Iran, it'll come down to the same man. He is that rarest of creatures in the Bush universe: the good cop on Iran, and a man of strategic brilliance.'' Barnett's article said Fallon might be ousted. Gates described as ``just ridiculous'' the idea raised in the article that if Fallon leaves, it may mean the U.S. is going to war with Iran.
The outlook for the global economy deteriorated for a fourth month in March amid declining faith in Asia's ability to dodge the U.S. slump, a survey of Bloomberg users on five continents showed. The Bloomberg Professional Global Confidence Index fell to 13.1 from 14.3 in February. Respondents in Asia were the most pessimistic about worldwide growth and a gauge of confidence in their own economy fell to 38.1 from 43.5. A reading below 50 indicates negative sentiment. The Bloomberg Professional Confidence Survey collated the responses of 5,430 Bloomberg users from Auckland to New York on economic conditions in their region and the world. The survey was conducted from March 3 to March 7. The investors, traders and analysts were also asked about the outlook for their currencies, bonds, stocks and interest rates in the next six months. Participants are in cities including Hong Kong, Zurich and London.
On Tuesday, Jeffrey L. Bewkes, the chief executive of Time Warner, AOL’s parent company, acknowledged weakness in the business and said he was open to combining AOL with another company — “whatever configuration makes it the strongest and the most valuable.”
Reuters reports that Valero is considering selling many of its US refineries because of poor profits.
Humana said earnings will range from $4 to $4.25 a share, rather than the $5.35 to $5.55 given on Feb. 4, according to a statement distributed today by Business Wire. Earnings for the first quarter will be 44 cents to 46 cents a share, down from a previous forecast of 80 cents to 85 cents, Humana said. The revised forecasts stem from ``stand-alone PDP financial performance,'' while Medicare Advantage, Commercial and Military services businesses aren't affected, according to the statement.
After a plan by the Federal Reserve and other central banks to swap mortgage-backed securities for Treasurys, inter-bank loan rates for three months in the euro-zone edged up to 4.61% from 4.6%, according to data from the European Banking Federation.
Global spot market trading of liquefied natural gas rose 31 percent last year as cold winter temperatures prompted increased purchases, according to London- based LNG Shipping Solutions.
Confidence among Australian consumers weakened sharply in March to its lowest level since 1993, according to data released Wednesday, sparking economists' predictions that the central bank is unlikely to continue a run of interest rate hikes. The index of consumer sentiment fell a seasonally adjusted 9.1 percent in March to 88.6 points, from 97.4 points in February, compilers Westpac Banking Corp. and the Melbourne Institute said. The index was down 23 percent from a year earlier. Westpac said the fall in the index over the last three months is the sharpest three-month decline since the index was first measured in January 1975.
Rob Hanna: "I looked at all instances where the S&P closed at a 100-day low and then exploded up 3.5% or more the next day. Looking back to 1962 I found 9 other instances...The stats are quite impressive with the average trade gaining 2% over the next week and 3% over the next two weeks. The average winning trade posted 3.4% over the next week and 5.4% over the next two weeks. There is a positive expectation going forward for the next month...there’s still some juice left in this rally. It also appears likely the market will look to digest these gains over the next 1-3 days and traders looking for short-term gains may be able to get a better entry point."
The euro rose to $1.5502 according to FactSet data, its highest level since the European unit began trading in January 1999.
U.S. crude inventories rose more than expected, up 6.2 million barrels to 311.6 million barrels in the week ending March 7, U.S. Energy Information Administration reported on Wednesday. Gasoline supplies rose by 1.7 million barrels in the latest week, while distillate stocks fell by 1.2 million barrels, EIA reported.
U.S. crude inventories fell by 500,000 barrels to 305.2 million barrels in the week ending March 7, the American Petroleum Institute reported on Wednesday, according to Moody's Economy.com. Distillate stocks fell by 2.7 million barrels to 114.3 million barrels in the same period, while gasoline stocks dropped by 3.7 million barrels to 219.3 million barrels, the API said.
UPS Inc. may not meet its first-quarter earnings guidance and plans to focus more on growth opportunities overseas because of the uncertain U.S. economy, executives of the world's largest shipping carrier said Wednesday.
Fifty-four percent of the CFOs said the United States is in recession, and another 24 percent said there is a high likelihood of one starting later this year, according to a Duke University/CFO Magazine survey completed on March 7.
Robert McHugh: "There is no real lending associated with this $200 billion of fresh fiat cash. And that is the problem. This Fed injection does nothing for households. And it is households that will determine if we avert depression or not. Consumer spending is 70 percent of GDP. Households need the money, and they can't get it. Credit card companies are cutting lines. Banks are raising lending standards. House values are dropping below outstanding mortgage and home equity debts. Incomes can't keep up. Jobs are shrinking. Trickle down won't work. We need trickle up this time. The Fed's announced plan today is to monetize bad debt from Wall Street banks, to accept their securities backed by bad loans in exchange for cash. This is in lieu of a drastic further drop in interest rates. Once again, save Wall Street and to blazes with households. Because they are not doing a thing here for households, this plan will fail. Households get more inflation and that is it. Wall Street gets a free ride. Somebody ought to be arrested. What a heist. Of course Spitzer can't do anything. He's preoccupied."
With the wins in Mississippi and Texas, Obama now leads Clinton 1,608 to 1,478 in the total delegate count, CNN estimates.
The New York Board of Trade's U.S. dollar index fell to 72.457 before recovering slightly to trade at 72.509. This is a new record low.
Crude-oil futures on Wednesday closed at a new high of $109.92 a barrel after earlier surpassing $110 a barrel for the first time. Gold for April delivery ended up $4.50 at $980.50 an ounce on the New York Mercantile Exchange.
The federal government budget deficit widened to a record $175.6 billion in February, in part because of the economic slowdown and in part because of the extra day in February this year that allowed the government to send out more tax refunds and more benefit checks, the Treasury Department reported Wednesday.
The Amex Securities Broker/Dealer index fell 3%, while the KBW Bank index shed 2.5% and the S&P Insurance index fell 2%.
The former VP candidate leaves the Clinton campaign after controversial remarks about Obama.
A U.S. military spokesman said three American soldiers were killed in a rocket attack on their combat outpost south of Baghdad on Wednesday. The deaths bring to 12 the number of U.S. troops killed in three days.
Target Corp. said it's in talks with an investment partner to sell about half of its credit-card loans for $4 billion.
Obama: “We were told that Michigan and Florida wouldn’t count, and so we said we wouldn’t campaign there,” Mr. Obama said. “Senator Clinton said the same thing, that they wouldn’t count. Now her campaign is suggesting that they should.”Mrs. Clinton said last October that the Michigan primary was meaningless, but she left her name on the ballot. Mr. Obama and the other major Democratic candidates removed their names from the ballot in a gesture of good faith to early-voting states whose primaries were officially allowed by the Democratic Party. Neither candidate campaigned in Michigan. Any plan to redo the Michigan and Florida primaries requires the state parties to submit a plan to the Democratic National Committee’s panel on rules and bylaws (which excommunicated the two states in the first place for jumping the primary queue by holding contests in January). Senator Bill Nelson, Democrat of Florida, has proposed a mail-in contest, but the entire Florida Democratic Congressional delegation rejected it, saying it was impractical to rerun the January primary.
Electronic Arts announced it's taking its fight for Take-Two Interactive directly to shareholders, commencing a tender offer for the maker of the Grand Theft Auto series of video games worth $26 a share in cash, or $2 billion.
U.S. foreclosure filings fell 4% in February compared to January, but rose nearly 60% from last year, according to RealtyTrac. "We have still not reached the peak of foreclosure activity in this cycle," said James J. Saccacio, chief executive officer of RealtyTrac.
The U.S. dollar on Thursday plunged below 100 Japanese yen for the first time since autumn 1995, pressured by ongoing worries about the U.S. economy and financial turmoil.
Carlyle Capital has been unable to agree a refinancing package with lenders and it expects lenders to take possession of substantially all its remaining assets.
Wednesday, March 12, 2008
Hiring?
3/12/08 Hiring?
Across the country, some 26 percent of companies expect to increase the size of their work force between April and June, according to the survey to be released Tuesday by Manpower Inc. Nine percent plan a decrease, while 60 percent predict no change and 5 percent are unsure, the Milwaukee-based global staffing company found.The numbers are slightly worse than those for the same quarter last year, when 28 percent of employers expected to hire and 7 percent planned to cut jobs. But they're better than the predictions for the current quarter, when hiring was expected to outpace job cuts by a margin of just 10 percentage points.
The International Energy Agency warned Tuesday that there is unlikely to be much relief from current high oil prices because of brisk demand in China and other emerging markets.
Home builder Toll Brothers Inc. warned that it could suffer "significant" losses if its joint-venture partners don't honor their obligations to certain development projects amid the housing downturn. "We have had a number of partners who have had visible financial stress," said Toll's chief financial officer, Joel Rassman. "But that's all I can disclose."
Municipal bonds now are yielding more than Treasuries of comparable maturities. One might consider going long munis and short Treasuries with comparable maturities.
FT's Laura Cohn: "Take the Hamptons on Long Island. Traditionally a bastion of strength powered by Wall Street bonuses, the market appears to be eroding. According to John Brady, sales associate at Coldwell Banker Prestigious Properties in the East Hampton area, nearly 70 homes at the lower end of the spectrum in East Hampton and Southampton are in pre-foreclosure. Two years ago, there were only 10. Perhaps even more telling, there has been a big jump in the number of homes on the market. In 2007, there was an eight-month supply for sale, Mr Brady says. This year, three year's worth is sitting around. "If we have three years of inventory, it's a bad sign," he says. "For people's homes to appreciate, there have to be more sales." For that to happen, he notes, prices will have to come down. A decline in prices would be quite a switch. Since 2003, the median price of a single-family home in the Hamptons has risen steadily year after year. Last year prices increased 12 per cent, to $740,000, according to Suffolk Research Service in Hampton Bays, New York. At the same time, however, the number of homes sold fell for the third year in a row, to 2,867 from 3,148 the previous year - a 9 per cent drop. So far this year, the market has deteriorated further. In the three months through January, for instance, the median price of a home in the area fell 9 per cent from the prior period to $680,000, Suffolk reports. At the same time, the number of sales fell 3 per cent to 620."
KB Home, one of the largest production home builders in New Mexico, is closing its Albuquerque office and will no longer build in the state, the company announced Friday.The company also plans to cease operations in Chicago and the mid-Atlantic.
According to Bloomberg, the cost of shipping Middle East crude to Asia may be steady, after falling the most in three months yesterday, because a backlog of cargoes is building up. Refineries still need to arrange for the shipment of about 30 more cargoes on board very large crude carriers, or VLCCs, this month, according to a report from Paris-based shipbroker Barry Rogliano Salles. That compares with about 60 vessels sailing toward the region for arrival in March.
According to statesman.com, unofficial and incomplete tallies posted online by Texas democrats suggest that Obama won the caucuses by enough of a margin, 56 percent to 44 percent, that he could reap up to 38 delegates from the caucuses compared with Clinton's 29. If that happens, he stands to take more pledged delegates from Texas than Clinton (though that arithmetic leaves out how 35 Texas superdelegates, consisting of U.S. House members and party dignitaries, eventually shake out).
Rob Hanna: "The Capitulative Breadth Indicator (CBI) spiked to 15 today. This is the highest reading it’s posted since I began tracking it live in 2005. Backtests to 1995 show only 3 other instances when the market was closing at new lows and the CBI was as high as 15. They occurred in August of 1998, September of 2001, and July of 2002. All three instances eventually shot up to mid-30’s or higher. The highest CBI reading was July 2002 at 52. Needles to say, we’re hitting some pretty elite levels here and those other selloffs were about as scary as they come...Time-wise I still believe we’re only days away from a multi-week bottom. I'm currently on the lookout for a washout day or a reversal day that could mark the low."
The Fed will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days, rather than overnight, as in the existing program. The Federal Reserve's new lending plan entails lending Treasury securities in exchange for debt including private mortgage-backed securities that have slumped in value as homeowners defaulted on their payments. The Federal Open Market Committee has also authorized increases in its temporary reciprocal currency arrangements with the European Central Bank and the Swiss National Bank.
In early Tuesday trading, crude for April delivery was last up $1.46 at $109.36 a barrel on the New York Mercantile Exchange and gold for April delivery was last up $9.20 at $981 an ounce on the New York Mercantile Exchange.
The latest snapshot of trade activity, reported by the Commerce Department on Tuesday, showed that the country's trade gap increased to $58.2 billion. That was up from a trade shortfall of $57.9 billion in December and was the highest since November.
Kroger sees full-year 2008 EPS of $1.83 to $1.90.
In the Persian Gulf, news agency Zawya Dow Jones reported yesterday that the United Arab Emirates is re-examining its currency's peg.
theStar.com Editorial: "The Bush administration has reinterpreted the Geneva Conventions to deny legal protection to detainees at the Guantanamo Bay prison camp and CIA-run holding tanks. It hauled Canadian Omar Khadr and others before military tribunals where normal standards of justice do not apply. It despatched Canadian Maher Arar and others via "extraordinary rendition" to torture in Syria and elsewhere. Bush's veto of the no-torture law is consistent with his efforts to affirm and expand presidential power, and to rationalize bad decisions. He ignored bipartisan advice to ban torture from scores of former members of Congress, generals and diplomatic and security officials. As a troubled presidency draws to a bleak close, American voters will get the chance to weigh this and other issues of character."
"We wish that the president had taken his opportunity to send the clear message to the people of the United States and of the world that we are serious about upholding our ban on torture," the Jewish Council for Public Affairs said in a statement Monday. "We continue to support legislative efforts to ensure the humane treatment of all detainees in U.S. custody."
Cadbury Schweppes PLC will complete the spinoff of its U.S. drinks business on May 7 and said Tuesday it had secured credit agreements for both new companies.
Investor's Business Daily and TechnoMetrica Market Intelligence said their IBD/TIPP economic optimism index fell to 42.5 from February's 44.5. A reading below 50 indicates pessimism. March's result was the lowest since a reading of 42.0 in October 2005 in the aftermath of Hurricane Katrina and was the 12th straight month the index has been in pessimistic territory.
Moody's Corp. Chief Executive Officer Raymond McDaniel said per-share profit will be $1.90 to $2, compared with a February forecast of $2.17 to $2.25. Revenue will decline in the mid-to-high teens, compared with a previous estimate of ``low double digits,'' McDaniel said.
Amgen's Aranesp and Epogen and J&J's Procrit showed greater risks for patients with cancers of the breast, head and neck, lung, and cervix in eight clinical trials, said staff of the U.S. Food and Drug Administration in briefing documents posted today on the agency's Web site. An FDA advisory panel will consider benefits and risks of the products March 13 in Gaithersburg, Maryland.
Caterpillar Inc.is estimating its earnings per share in 2008 to grow 5% to 15% with sales also forecast to rise at a similar pace, the company said late Tuesday, citing a presentation given by Chief Executive Jim Owens.
The S&P 500 and the Nasdaq Composite rose the most in more than five years. The Dow Jones Industrial gained 416.66 points to 12,156.81. The S&P 500 climbed 47.28 points to 1,320.65, while the Nasdaq Composite climbed 86.42 points to 2,255.76.
Crude for April delivery rose 85 cents, or 0.8%, to close at $108.75 a barrel on the New York Mercantile Exchange. Gold for April delivery rose $4.20 to end at $976 an ounce on the New York Mercantile Exchange.
China's foreign exchange reserves climbed at a monthly record in January, lifting total reserves to $1.6 trillion, according to statements by Commerce Ministry officials Wednesday. The pace of reserve accumulation amounted to $61.6 billion, the highest seen in a single month, according to calculations by Standard Chartered.
U.S. mortgage applications dipped last week, reflecting lower demand for home loan refinancing as interest rates surged to their highest since October, an industry group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended March 7 fell 1.9 percent to 671.7.
China's retail sales climbed 20.2 percent, matching the fastest pace in at least nine years, a sign that consumer spending may sustain the world's fastest- growing major economy as export demand weakens.
OPEC may earn $927 billion from oil exports this year, the U.S. government's Energy Information Administration said, raising its estimate 9 percent.
Data on the five-fold growth of derivatives to $516 trillion in five years comes from the most recent survey by the Bank of International Settlements, the world's clearinghouse for central banks in Basel, Switzerland...Also, keep in mind that while the $516 trillion "notional" value (maximum in case of a meltdown) of the deals is a good measure of the market's size, the 2007 BIS study notes that the $11 trillion "gross market values provides a more accurate measure of the scale of financial risk transfer taking place in derivatives markets."
Across the country, some 26 percent of companies expect to increase the size of their work force between April and June, according to the survey to be released Tuesday by Manpower Inc. Nine percent plan a decrease, while 60 percent predict no change and 5 percent are unsure, the Milwaukee-based global staffing company found.The numbers are slightly worse than those for the same quarter last year, when 28 percent of employers expected to hire and 7 percent planned to cut jobs. But they're better than the predictions for the current quarter, when hiring was expected to outpace job cuts by a margin of just 10 percentage points.
The International Energy Agency warned Tuesday that there is unlikely to be much relief from current high oil prices because of brisk demand in China and other emerging markets.
Home builder Toll Brothers Inc. warned that it could suffer "significant" losses if its joint-venture partners don't honor their obligations to certain development projects amid the housing downturn. "We have had a number of partners who have had visible financial stress," said Toll's chief financial officer, Joel Rassman. "But that's all I can disclose."
Municipal bonds now are yielding more than Treasuries of comparable maturities. One might consider going long munis and short Treasuries with comparable maturities.
FT's Laura Cohn: "Take the Hamptons on Long Island. Traditionally a bastion of strength powered by Wall Street bonuses, the market appears to be eroding. According to John Brady, sales associate at Coldwell Banker Prestigious Properties in the East Hampton area, nearly 70 homes at the lower end of the spectrum in East Hampton and Southampton are in pre-foreclosure. Two years ago, there were only 10. Perhaps even more telling, there has been a big jump in the number of homes on the market. In 2007, there was an eight-month supply for sale, Mr Brady says. This year, three year's worth is sitting around. "If we have three years of inventory, it's a bad sign," he says. "For people's homes to appreciate, there have to be more sales." For that to happen, he notes, prices will have to come down. A decline in prices would be quite a switch. Since 2003, the median price of a single-family home in the Hamptons has risen steadily year after year. Last year prices increased 12 per cent, to $740,000, according to Suffolk Research Service in Hampton Bays, New York. At the same time, however, the number of homes sold fell for the third year in a row, to 2,867 from 3,148 the previous year - a 9 per cent drop. So far this year, the market has deteriorated further. In the three months through January, for instance, the median price of a home in the area fell 9 per cent from the prior period to $680,000, Suffolk reports. At the same time, the number of sales fell 3 per cent to 620."
KB Home, one of the largest production home builders in New Mexico, is closing its Albuquerque office and will no longer build in the state, the company announced Friday.The company also plans to cease operations in Chicago and the mid-Atlantic.
According to Bloomberg, the cost of shipping Middle East crude to Asia may be steady, after falling the most in three months yesterday, because a backlog of cargoes is building up. Refineries still need to arrange for the shipment of about 30 more cargoes on board very large crude carriers, or VLCCs, this month, according to a report from Paris-based shipbroker Barry Rogliano Salles. That compares with about 60 vessels sailing toward the region for arrival in March.
According to statesman.com, unofficial and incomplete tallies posted online by Texas democrats suggest that Obama won the caucuses by enough of a margin, 56 percent to 44 percent, that he could reap up to 38 delegates from the caucuses compared with Clinton's 29. If that happens, he stands to take more pledged delegates from Texas than Clinton (though that arithmetic leaves out how 35 Texas superdelegates, consisting of U.S. House members and party dignitaries, eventually shake out).
Rob Hanna: "The Capitulative Breadth Indicator (CBI) spiked to 15 today. This is the highest reading it’s posted since I began tracking it live in 2005. Backtests to 1995 show only 3 other instances when the market was closing at new lows and the CBI was as high as 15. They occurred in August of 1998, September of 2001, and July of 2002. All three instances eventually shot up to mid-30’s or higher. The highest CBI reading was July 2002 at 52. Needles to say, we’re hitting some pretty elite levels here and those other selloffs were about as scary as they come...Time-wise I still believe we’re only days away from a multi-week bottom. I'm currently on the lookout for a washout day or a reversal day that could mark the low."
The Fed will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days, rather than overnight, as in the existing program. The Federal Reserve's new lending plan entails lending Treasury securities in exchange for debt including private mortgage-backed securities that have slumped in value as homeowners defaulted on their payments. The Federal Open Market Committee has also authorized increases in its temporary reciprocal currency arrangements with the European Central Bank and the Swiss National Bank.
In early Tuesday trading, crude for April delivery was last up $1.46 at $109.36 a barrel on the New York Mercantile Exchange and gold for April delivery was last up $9.20 at $981 an ounce on the New York Mercantile Exchange.
The latest snapshot of trade activity, reported by the Commerce Department on Tuesday, showed that the country's trade gap increased to $58.2 billion. That was up from a trade shortfall of $57.9 billion in December and was the highest since November.
Kroger sees full-year 2008 EPS of $1.83 to $1.90.
In the Persian Gulf, news agency Zawya Dow Jones reported yesterday that the United Arab Emirates is re-examining its currency's peg.
theStar.com Editorial: "The Bush administration has reinterpreted the Geneva Conventions to deny legal protection to detainees at the Guantanamo Bay prison camp and CIA-run holding tanks. It hauled Canadian Omar Khadr and others before military tribunals where normal standards of justice do not apply. It despatched Canadian Maher Arar and others via "extraordinary rendition" to torture in Syria and elsewhere. Bush's veto of the no-torture law is consistent with his efforts to affirm and expand presidential power, and to rationalize bad decisions. He ignored bipartisan advice to ban torture from scores of former members of Congress, generals and diplomatic and security officials. As a troubled presidency draws to a bleak close, American voters will get the chance to weigh this and other issues of character."
"We wish that the president had taken his opportunity to send the clear message to the people of the United States and of the world that we are serious about upholding our ban on torture," the Jewish Council for Public Affairs said in a statement Monday. "We continue to support legislative efforts to ensure the humane treatment of all detainees in U.S. custody."
Cadbury Schweppes PLC will complete the spinoff of its U.S. drinks business on May 7 and said Tuesday it had secured credit agreements for both new companies.
Investor's Business Daily and TechnoMetrica Market Intelligence said their IBD/TIPP economic optimism index fell to 42.5 from February's 44.5. A reading below 50 indicates pessimism. March's result was the lowest since a reading of 42.0 in October 2005 in the aftermath of Hurricane Katrina and was the 12th straight month the index has been in pessimistic territory.
Moody's Corp. Chief Executive Officer Raymond McDaniel said per-share profit will be $1.90 to $2, compared with a February forecast of $2.17 to $2.25. Revenue will decline in the mid-to-high teens, compared with a previous estimate of ``low double digits,'' McDaniel said.
Amgen's Aranesp and Epogen and J&J's Procrit showed greater risks for patients with cancers of the breast, head and neck, lung, and cervix in eight clinical trials, said staff of the U.S. Food and Drug Administration in briefing documents posted today on the agency's Web site. An FDA advisory panel will consider benefits and risks of the products March 13 in Gaithersburg, Maryland.
Caterpillar Inc.is estimating its earnings per share in 2008 to grow 5% to 15% with sales also forecast to rise at a similar pace, the company said late Tuesday, citing a presentation given by Chief Executive Jim Owens.
The S&P 500 and the Nasdaq Composite rose the most in more than five years. The Dow Jones Industrial gained 416.66 points to 12,156.81. The S&P 500 climbed 47.28 points to 1,320.65, while the Nasdaq Composite climbed 86.42 points to 2,255.76.
Crude for April delivery rose 85 cents, or 0.8%, to close at $108.75 a barrel on the New York Mercantile Exchange. Gold for April delivery rose $4.20 to end at $976 an ounce on the New York Mercantile Exchange.
China's foreign exchange reserves climbed at a monthly record in January, lifting total reserves to $1.6 trillion, according to statements by Commerce Ministry officials Wednesday. The pace of reserve accumulation amounted to $61.6 billion, the highest seen in a single month, according to calculations by Standard Chartered.
U.S. mortgage applications dipped last week, reflecting lower demand for home loan refinancing as interest rates surged to their highest since October, an industry group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended March 7 fell 1.9 percent to 671.7.
China's retail sales climbed 20.2 percent, matching the fastest pace in at least nine years, a sign that consumer spending may sustain the world's fastest- growing major economy as export demand weakens.
OPEC may earn $927 billion from oil exports this year, the U.S. government's Energy Information Administration said, raising its estimate 9 percent.
Data on the five-fold growth of derivatives to $516 trillion in five years comes from the most recent survey by the Bank of International Settlements, the world's clearinghouse for central banks in Basel, Switzerland...Also, keep in mind that while the $516 trillion "notional" value (maximum in case of a meltdown) of the deals is a good measure of the market's size, the 2007 BIS study notes that the $11 trillion "gross market values provides a more accurate measure of the scale of financial risk transfer taking place in derivatives markets."
Tuesday, March 11, 2008
A Short Term Bounce?
3/11/08 A Short Term Bounce?
Robert McHugh: "There was a lot of technical damage done to stock averages Friday. We got confirmation of 18 month, very Bearish Head & Shoulders tops patterns in several indices, as prices completed their right shoulders and fell decisively below necklines. These patterns are huge, and the downside targets are 20 percent below where we stand now in several averages. In other words, these patterns are calling for a stock market crash. These patterns are saying that the Bear Market is nowhere near over. We also got half of a Dow Theory re-confirmation of the Bear Market, as the Dow Industrials closed below their January lows. We now await the same action from the Trannies for downside confirmation. If we do not get the confirmation, that means there is hope for Bulls, but no Bull market signal. Further, prices fell decisively below the bottom boundary of a 26 year rising trend-channel from 1982, which could be suggesting that the current Bear market is the big one, one of major Supercycle degree, the fulfillment of the Kondratieff winter cycle technical folks have been watching for, for a decade. It suggests we may be headed for a depression, not just a recession."
Brett Steenbarger: "Rises in the relative equity put/call ratio (which I operationalize as the 10-day equity put/call volume ratio divided by the 200-day ratio) have been reliably associated with market bottoms since 2004. On Friday, we saw the 10-day ratio exceed the 200-day ratio by over 20%.
Since 2004 (N = 1033 trading days), we've had 129 occasions in which the relative put/call ratio has met or exceeded the 20% threshold. Twenty days later, the S&P 500 Index (SPY) has been up by an average of 2.22% (103 up, 26 down), much stronger than the average 20-day gain of .11% (537 up, 367 down) for the remainder of the sample.
More broadly, when the relative equity put/call ratio has been above 1.0 (meaning that we're seeing more puts traded relative to calls over the past 10 days compared to the past 200 days), the next 20 trading days in SPY have averaged a gain of .84%. When the relative ratio has been below 1.0, the next 20 days in SPY have averaged a loss of -.31%.
While it is certainly possible for the market to get weaker in the short run even when the ratio has exceeded 1.20 (50 of the 129 occasions were down after five trading days), it's generally paid to fade extremes in the relative equity put/call ratio."
A survey says the national average price for gasoline rose 9 cents over the last two weeks. The average price of self-serve regular gasoline on Friday was $3.19 a gallon, mid-grade was $3.31 and premium was $3.42, according to the Lundberg Survey of 7,000 stations nationwide released Sunday.
According to Bloomberg, the hedge-fund industry is reeling from its worst crisis in a decade as banks are now demanding more money pledged to support outstanding loans even when the investment is backed by the full faith and credit of the United States.
According to the Houston Chronicle, Russia is forcing Exxon Mobil to abandon plans to export natural gas to China. Nigeria is requiring explorers to share output with its citizens. Indonesia will cut sales to Japan. Countries holding almost half the world's gas are curbing shipments to meet growing domestic use, hurting importers from the U.S. to Japan. Prices for the heating fuel may rise 50 percent within five years on the New York Mercantile Exchange as a result, said Chris Jarvis, president of Caprock Risk Management in Hampton Falls, N.H. He anticipated the rally in gas prices during the past month. While raising energy costs, the policies will limit opportunities for Exxon Mobil and Royal Dutch Shell Plc, who are struggling to reverse a five-year production decline of 23 percent in the U.K. North Sea and 42 percent in the U.S. Gulf of Mexico. Natural-gas use is rising 2.5 percent a year, three times the rate for oil, according to BP Plc statistics.
Declassified documents and interviews on the ground in Bolivia prove that the Bush Administration is using U.S. taxpayers' money to undermine the Morales government and coopt the country's dynamic social movements--just as it has tried to do recently in Venezuela and traditionally throughout Latin America.
Rob Hanna: "My Capitulative Breadth Indicator (CBI) moved up to 11 on Friday. In the past, readings above 10 have signified broad capitulative action in individual large-cap components. It has been a reliable indicator of exhaustive movement and has frequently been followed by a substantial short-term bounce in the S&P 500. Readings above 10 have been a fairly rare occurrence with only 16 instances in 13 years between 1995 and 2007. They’ve become more frequent recently, though. This is the third time the indicator has moved to 10 or higher in the last 5 months. As I’ve written in the past, buying the S&P 500 on a close in the CBI of 10 or higher and then selling when the indicator closes back at 3 or lower would have been profitable 100% of the time. The indicator is currently 17 for 17. This does not mean it will work this time. It also does not mean there won’t be significant downside before the expected bounce ensues."
Palatin Technologies, Inc. announced today the completion of a Phase I clinical trial of PL-3994, a novel, long-acting natriuretic peptide receptor A (NPRA) agonist under development for treatment of acute decompensated congestive heart failure (CHF). The Phase I trial was a randomized, double-blind, placebo- controlled, single ascending dose study in 26 healthy volunteers who received the medication or placebo subcutaneously. The evaluations included safety, tolerability, pharmacokinetics and several pharmacodynamic endpoints, including levels of cyclic guanosine monophosphate (cGMP), a natural messenger nucleotide. Dosing concluded with the successful achievement of the primary endpoint of the study, a prespecified reduction in systemic blood pressure. No volunteer experienced a serious or severe adverse event. Elevations in plasma cGMP levels, increased diuresis (urine excretion) and increased natriuresis (sodium excretion) were all observed for several hours after single sub- cutaneous doses. Data analysis is ongoing and will be submitted for presentation when the analysis is complete.
MBIA expects $200 million in mark-to-market losses from its credit derivative business, and said that Fitch Ratings' insurer financial strength ratings can cause serious volatility in how the company is viewed in the equity markets.
McDonald's Corp said on Monday sales at restaurants open at least 13 months rose 11.7 percent globally in February, well above Wall Street expectations, helped by U.S. coffee sales and strength overseas. Same-store sales, a key gauge of retail health, rose 8.3 percent in the United States and 15.4 percent in Europe. The Asia/Pacific, Middle East and Africa division posted comparable sales growth of 10.9 percent.
Blackstone: "Economic Net Income for the quarter ended December 31, 2007 totaled $128.2 million as compared to Pro Forma Adjusted Economic Net Income of $894.9 million for the quarter ended December 31, 2006."
"You can almost draw (the credit unwind) out in a diagram," said a managing director at the Economic Outlook Group in Princeton, N.J. "With home prices going down, consumers cut back on spending. If consumers cut back on spending, the economy weakens further. If the economy weakens further, fewer people are able to afford mortgages, so home foreclosures increase."
In 2008, its sixth year, the war will cost approximately $12 billion a month, triple the "burn" rate of its earliest years, Nobel Prize-winning economist Joseph E. Stiglitz and co-author Linda J. Bilmes report in a new book.
Crude surges to surpass $108 a barrel for first time. Natural gas traded up to $10.04. Gold for April delivery fell $2.40 to end at $971.80 an ounce on the New York Mercantile Exchange.
Lehman Bros. will cut 5% of its staff worldwide as turmoil in the financial markets tamps down business prospects, CNBC television reported Monday morning.
WellPoint Inc. cut its full-year earnings forecast to the range of $5.76 to $6.01 a share, including investment gains of 6 cents, from its previous forecast of $6.41 a share, citing higher-than-expected medical costs, lower-than-expected fully insured enrollment and the overall economic environment. Shares of WellPoint fell 17% to $54.70 in recent after-hours trading after closing down $1.20, or 1.8%, at $67.12.
German Bundesbank President Axel Weber said a high CPI leaves no leeway for rate cuts at the European Central Bank.
The White House said Vice President Dick Cheney will discuss concerns about record oil prices when he visits Saudi Arabia next week during a trip to the Middle East.
China's consumer prices rose at their fastest pace in almost 12 years in February as prices for meat, vegetables and energy surged, raising the likelihood the central bank will lift interest rates. China's consumer prices climbed 8.7% in February, accelerating from a 7.1% rise in January, the Statistics Bureau said.
Texas Instruments Inc. announced a lower mid-point for its first-quarter revenue estimate.
Robert McHugh: "There was a lot of technical damage done to stock averages Friday. We got confirmation of 18 month, very Bearish Head & Shoulders tops patterns in several indices, as prices completed their right shoulders and fell decisively below necklines. These patterns are huge, and the downside targets are 20 percent below where we stand now in several averages. In other words, these patterns are calling for a stock market crash. These patterns are saying that the Bear Market is nowhere near over. We also got half of a Dow Theory re-confirmation of the Bear Market, as the Dow Industrials closed below their January lows. We now await the same action from the Trannies for downside confirmation. If we do not get the confirmation, that means there is hope for Bulls, but no Bull market signal. Further, prices fell decisively below the bottom boundary of a 26 year rising trend-channel from 1982, which could be suggesting that the current Bear market is the big one, one of major Supercycle degree, the fulfillment of the Kondratieff winter cycle technical folks have been watching for, for a decade. It suggests we may be headed for a depression, not just a recession."
Brett Steenbarger: "Rises in the relative equity put/call ratio (which I operationalize as the 10-day equity put/call volume ratio divided by the 200-day ratio) have been reliably associated with market bottoms since 2004. On Friday, we saw the 10-day ratio exceed the 200-day ratio by over 20%.
Since 2004 (N = 1033 trading days), we've had 129 occasions in which the relative put/call ratio has met or exceeded the 20% threshold. Twenty days later, the S&P 500 Index (SPY) has been up by an average of 2.22% (103 up, 26 down), much stronger than the average 20-day gain of .11% (537 up, 367 down) for the remainder of the sample.
More broadly, when the relative equity put/call ratio has been above 1.0 (meaning that we're seeing more puts traded relative to calls over the past 10 days compared to the past 200 days), the next 20 trading days in SPY have averaged a gain of .84%. When the relative ratio has been below 1.0, the next 20 days in SPY have averaged a loss of -.31%.
While it is certainly possible for the market to get weaker in the short run even when the ratio has exceeded 1.20 (50 of the 129 occasions were down after five trading days), it's generally paid to fade extremes in the relative equity put/call ratio."
A survey says the national average price for gasoline rose 9 cents over the last two weeks. The average price of self-serve regular gasoline on Friday was $3.19 a gallon, mid-grade was $3.31 and premium was $3.42, according to the Lundberg Survey of 7,000 stations nationwide released Sunday.
According to Bloomberg, the hedge-fund industry is reeling from its worst crisis in a decade as banks are now demanding more money pledged to support outstanding loans even when the investment is backed by the full faith and credit of the United States.
According to the Houston Chronicle, Russia is forcing Exxon Mobil to abandon plans to export natural gas to China. Nigeria is requiring explorers to share output with its citizens. Indonesia will cut sales to Japan. Countries holding almost half the world's gas are curbing shipments to meet growing domestic use, hurting importers from the U.S. to Japan. Prices for the heating fuel may rise 50 percent within five years on the New York Mercantile Exchange as a result, said Chris Jarvis, president of Caprock Risk Management in Hampton Falls, N.H. He anticipated the rally in gas prices during the past month. While raising energy costs, the policies will limit opportunities for Exxon Mobil and Royal Dutch Shell Plc, who are struggling to reverse a five-year production decline of 23 percent in the U.K. North Sea and 42 percent in the U.S. Gulf of Mexico. Natural-gas use is rising 2.5 percent a year, three times the rate for oil, according to BP Plc statistics.
Declassified documents and interviews on the ground in Bolivia prove that the Bush Administration is using U.S. taxpayers' money to undermine the Morales government and coopt the country's dynamic social movements--just as it has tried to do recently in Venezuela and traditionally throughout Latin America.
Rob Hanna: "My Capitulative Breadth Indicator (CBI) moved up to 11 on Friday. In the past, readings above 10 have signified broad capitulative action in individual large-cap components. It has been a reliable indicator of exhaustive movement and has frequently been followed by a substantial short-term bounce in the S&P 500. Readings above 10 have been a fairly rare occurrence with only 16 instances in 13 years between 1995 and 2007. They’ve become more frequent recently, though. This is the third time the indicator has moved to 10 or higher in the last 5 months. As I’ve written in the past, buying the S&P 500 on a close in the CBI of 10 or higher and then selling when the indicator closes back at 3 or lower would have been profitable 100% of the time. The indicator is currently 17 for 17. This does not mean it will work this time. It also does not mean there won’t be significant downside before the expected bounce ensues."
Palatin Technologies, Inc. announced today the completion of a Phase I clinical trial of PL-3994, a novel, long-acting natriuretic peptide receptor A (NPRA) agonist under development for treatment of acute decompensated congestive heart failure (CHF). The Phase I trial was a randomized, double-blind, placebo- controlled, single ascending dose study in 26 healthy volunteers who received the medication or placebo subcutaneously. The evaluations included safety, tolerability, pharmacokinetics and several pharmacodynamic endpoints, including levels of cyclic guanosine monophosphate (cGMP), a natural messenger nucleotide. Dosing concluded with the successful achievement of the primary endpoint of the study, a prespecified reduction in systemic blood pressure. No volunteer experienced a serious or severe adverse event. Elevations in plasma cGMP levels, increased diuresis (urine excretion) and increased natriuresis (sodium excretion) were all observed for several hours after single sub- cutaneous doses. Data analysis is ongoing and will be submitted for presentation when the analysis is complete.
MBIA expects $200 million in mark-to-market losses from its credit derivative business, and said that Fitch Ratings' insurer financial strength ratings can cause serious volatility in how the company is viewed in the equity markets.
McDonald's Corp said on Monday sales at restaurants open at least 13 months rose 11.7 percent globally in February, well above Wall Street expectations, helped by U.S. coffee sales and strength overseas. Same-store sales, a key gauge of retail health, rose 8.3 percent in the United States and 15.4 percent in Europe. The Asia/Pacific, Middle East and Africa division posted comparable sales growth of 10.9 percent.
Blackstone: "Economic Net Income for the quarter ended December 31, 2007 totaled $128.2 million as compared to Pro Forma Adjusted Economic Net Income of $894.9 million for the quarter ended December 31, 2006."
"You can almost draw (the credit unwind) out in a diagram," said a managing director at the Economic Outlook Group in Princeton, N.J. "With home prices going down, consumers cut back on spending. If consumers cut back on spending, the economy weakens further. If the economy weakens further, fewer people are able to afford mortgages, so home foreclosures increase."
In 2008, its sixth year, the war will cost approximately $12 billion a month, triple the "burn" rate of its earliest years, Nobel Prize-winning economist Joseph E. Stiglitz and co-author Linda J. Bilmes report in a new book.
Crude surges to surpass $108 a barrel for first time. Natural gas traded up to $10.04. Gold for April delivery fell $2.40 to end at $971.80 an ounce on the New York Mercantile Exchange.
Lehman Bros. will cut 5% of its staff worldwide as turmoil in the financial markets tamps down business prospects, CNBC television reported Monday morning.
WellPoint Inc. cut its full-year earnings forecast to the range of $5.76 to $6.01 a share, including investment gains of 6 cents, from its previous forecast of $6.41 a share, citing higher-than-expected medical costs, lower-than-expected fully insured enrollment and the overall economic environment. Shares of WellPoint fell 17% to $54.70 in recent after-hours trading after closing down $1.20, or 1.8%, at $67.12.
German Bundesbank President Axel Weber said a high CPI leaves no leeway for rate cuts at the European Central Bank.
The White House said Vice President Dick Cheney will discuss concerns about record oil prices when he visits Saudi Arabia next week during a trip to the Middle East.
China's consumer prices rose at their fastest pace in almost 12 years in February as prices for meat, vegetables and energy surged, raising the likelihood the central bank will lift interest rates. China's consumer prices climbed 8.7% in February, accelerating from a 7.1% rise in January, the Statistics Bureau said.
Texas Instruments Inc. announced a lower mid-point for its first-quarter revenue estimate.
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