4/1/08 Weapons Of Mass Misinformation
The average diversified stock mutual fund has fallen 10.3 percent so far this year — the worst quarterly showing in five years, according to analysts at Morningstar in Chicago.
“A year ago, we were told the problems were in subprime, ” said David Rosenberg, chief North American economist at Merrill Lynch, “and what is becoming increasingly apparent is that the participation in the credit bubble was far greater than just that.”
Prashant A. Bhatia of Citigroup: “It’s tough to have a liquidity-driven meltdown when you’re being backed by government entities that have the ability to print money.”
Pernod Ricard, the French liquor company, announced Monday that it had agreed to acquire the parent of Absolut vodka for 5.63 billion euros ($8.87 billion).
The International Monetary Fund will pare its forecast for 2008 economic growth in the euro area to below 1.4% next month, citing Luc Everaert, who heads the IMF’s regional studies unit in Europe.
Brett Steenbarger: "If selling does not pick up early in the week, particularly in the NYSE TICK, I would expect the market to look for a short-term bottom and enter a range mode, with last week's highs as the upper end of the range. As long as Supply exceeds Demand and stocks making new lows continue to expand, however, I will be defensive on this market. Any pickup of selling would target an important test of the mid-March lows."
Yahoo! introduced Shine, a site for women.
The Financial Times reported that investors pulled almost $100 billion out of equity funds in the first quarter.
In mid-Monday trading, the dollar index traded at 71.387.
George Ure: "I've demonstrated that we're already in a Second Depression now; see the Aggregate Index chart here. The key thing is that unlike the Great Depression, which was marked with high unemployment and massive deflation, this Second Depression has been [human] capitalized, such that a single person working can no longer support a family at a 1950's standard of living. Husbands and wives both work just to make rent, and judging by foreclosures, even that's not enough lately...Today, the proposals which will be put forth by the Treasury Secretary will make it clear: Given the abuses, lying, cheating, misrepresentations, and other morally bankrupt practices that have accompanied the Housing Bubble's collapse, this administration, along with the political duopoly (republicorps/democorps), will attempt to prop up the financial system so that America can continue its 'business as usual' and pass on a continuously higher mountain of debt to future generations, and thus ensure servitude to holders of debt and government in perpetuity."
"The latest military intelligence data point to heightened U.S. military preparations for both an air and ground operation against Iran," the official said, adding that the Pentagon has probably not yet made a final decision as to when an attack will be launched. He said the Pentagon is looking for a way to deliver a strike against Iran "that would enable the Americans to bring the country to its knees at minimal cost." He also said the U.S. Naval presence in the Persian Gulf has for the first time in the past four years reached the level that existed shortly before the invasion of Iraq in March 2003. Col.-Gen. Leonid Ivashov, vice president of the Academy of Geopolitical Sciences, said last week that the Pentagon is planning to deliver a massive air strike on Iran's military infrastructure in the near future. A new U.S. carrier battle group has been dispatched to the Gulf. The USS John C. Stennis, with a crew of 3,200 and around 80 fixed-wing aircraft, including F/A-18 Hornet and Superhornet fighter-bombers, eight support ships and four nuclear submarines are heading for the Gulf, where a similar group led by the USS Dwight D. Eisenhower has been deployed since December 2006. The U.S. is also sending Patriot anti-missile systems to the region.
CIA Director Michael V. Hayden said Sunday that he believes Iran is still pursuing a nuclear bomb, even though the U.S. intelligence community, including his own agency, reached a consensus judgment last year that the Islamic Republic had halted its nuclear weapons work in 2003.
Dick Cheney alleged that Iran was "heavily involved in trying to develop nuclear weapons enrichment, the enrichment of uranium to weapons-grade levels." International inspectors have not found evidence of such an effort.
Philip Morris International Inc. begins trading Monday on the NYSE Euronext after its spin-off from Altria Group Inc., which remains listed on the New York Stock Exchange.
Farmers are expected to plant 86 million acres of corn this year, the government predicted Monday, down 8 percent from 2007, when the amount of corn planted was the highest since World War II.
U.S. farmers will plant 18 percent more acres with soybeans this year, more than expected, after price gains made the oilseed more profitable than corn, the Department of Agriculture said.
Growers will seed 74.793 million acres with soybeans, up from 63.631 million last year, after prices rose 67 percent in the past year, partly because of increased demand and reduced supplies, the USDA said today in a report. Acreage may also increase because soybeans are less expensive to grow than corn since they produce their own nitrogen fertilizer.
Palladium production will fall 65,000 ounces short of demand next year, the first deficit in at least five years, partly because jewelers and automakers will switch from more expensive platinum, Societe Generale SA said.
The Chicago Purchasing Managers Index showed the pace of contraction of the region's manufacturing business improved slightly in March, to 48.2 compared with 44.5 the previous month.
Production at Pemex, the world's third-largest oil producer began to fall in 2005 and in 2007 averaged 3.08 million barrels a day. Mexico may have to import light crude -- less viscous oil used to make gasoline -- for its refineries by 2011 if Pemex is left unchanged, Energy Minister Georgina Kessel said in a Dec. 11 report. Without new production, daily oil exports may plummet to 289,000 barrels in 2016 from 1.67 million last year, the report says.
India, Asia's third-largest consumer of oil, will focus on obtaining energy assets in Angola after failing to secure supplies closer to home.
Gulf central bank governors will hold the first of two meetings this year in Doha, Qatar, on April 6-7 to discuss monetary and currency policy.
"VMware Lifecycle Manager allows customers to fully automate the provisioning, charging back and decommissioning of virtual machines," said Raghu Raghuram, vice president of products and solutions at VMware. "VMware Lifecycle Manager is integral to the many new products VMware is bringing to market to offer unprecedented levels of automation and control across datacenters."
Aloha Airlines is ending passenger service after 60 years of operation.
The Dow Jones Industrial Average rose 46.49 points Monday, up 0.4%, at 12262.89, down 7.6% for the quarter, which ended at the closing bell. The Nasdaq Composite Index gained 0.8%, or 17.92 points, to 2279.10, down 14.1% for the quarter. And the Standard & Poor's 500 gained 0.6%, or 7.48 points, at 1322.70, helped by a 0.9% rise in its financial sector; however, the S&P 500 index finished down 0.6 percent for the month, and 9.9 percent for the quarter, the worst decline since the second quarter of 2003.
Monsanto Co. agreed to acquire the Netherlands' De Ruiter Seeds Group BV for €546 million, or $863 million, in a deal expected to build on the agriculture giant's vegetable-seed business. The deal is intended to enhance Monsanto's growth in the protected-culture segment, where seeds are germinated in controlled settings like greenhouses.
Lehman, the fourth-biggest U.S. securities firm, will offer 3 million convertible preferred shares, the New York-based firm said in a statement today.``We still maintain that we don't need capital, but we've realized that perception is the dominant issue in today's markets,'' Chief Financial Officer Erin Callan said in an interview. ``This is an endorsement of our balance sheet by investors.'' The convertible preferred shares are seen having a dividend of 7 percent to 7.5 percent and a conversion premium of 30 percent to 35 percent ... The deal is expected to be sold by Tuesday before market close.
Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Merrill Lynch & Co. will earn less and face higher borrowing costs because of increased regulation of investment banks, Pacific Investment Management Co.'s Bill Gross said.
Legg Mason Inc. said costs to bail out a money-market fund will cut profit by $195 million, or $1.38 a share, in the three months ending March 31.The company agreed to provide as much as $400 million to the fund.
Defaults on privately insured U.S. mortgages rose 38.1 percent in February, as a growing number of homeowners failed to keep up with their loan payments. The Mortgage Insurance Cos. of America Monday said 60,911 insured borrowers were at least 60 days late on payments in February.That is up from 44,111 a year earlier, but down 11.7 percent from January's record 68,950. Defaults have topped 60,000 for four straight months, a level not previously reached since data were first tabulated in 2001.
Earnings for financial companies are expected to have dropped 49 percent during the quarter, and forecasts point to another 30 percent drop in the second quarter.
Light, sweet crude for May delivery dropped $4.04 to settle at $101.58 a barrel on the New York Mercantile Exchange, adding to a decline of nearly $2 a barrel on Friday. Even so, prices finished the first three months of the year 5.8 percent higher than where they started; crude set a record of $111.80 in March before giving up ground. The price of gold, for instance, sank $14.40 to settle at $916.20 on the Nymex. Natural gas jumped 30.1 cents to settle at $10.101 per 1,000 cubic feet on the Nymex.
The Fed will stop cutting its target rate for overnight lending between banks once it reaches 1.5%, Paul McCulley, a portfolio manager at PIMCO, said.
Dell Inc. will close its desktop manufacturing plant in Austin, Texas , and consider selling its Dell Financial Services unit, valued at about $1 billion , all in an effort to save $3 billion a year.
Ansys announced it would buy Ansoft for $16.25 per share in cash and 0.431882 shares of Ansys.
ABC News: "The $8.7 million in debts owed by Sen. Hillary Clinton's campaign as of her last Federal Election Commission filing deadline are staggering for their breadth and range.The debts date back to last Fall, to states long ago decided...
The Politico reports that "word is getting around that Clinton’s campaign does not promptly pay those who labor to make her events look good, said an employee of the event production company Forty Two of Youngstown, Ohio. 'I feel insulted by the way that the campaign treated this company and treated us personally,' said the employee, who did not want to be named talking about a client. ...the employee said the campaign has stopped returning phone calls, e-mails and didn’t respond to a certified letter. 'We worked very hard to put together these events on a moment’s notice and do absolutely everything to a ‘t’ to make it look perfect on television for her and for her campaign,' said the employee. 'Sen. Clinton talks about helping working families, people in unions and small businesses. But when it comes down to actually doing something that shows that she can back up her words with action, she fails.'"
The ISM index inched higher to 48.6% in March from 48.3% in February.
Tuesday, April 01, 2008
Monday, March 31, 2008
The End Of The First Quarter
3/31/08 The End Of The First Quarter
Robert McHugh: "We got a new sell signal Friday in our 14 Day Stochastic indicator. Signals by this indicator have done a pretty good job in identifying several hundred point trend turns...While there are no guarantees, the fact we got a new "sell" signal Friday suggests we are likely to see a several hundred point move lower over the next week to 10 days. At least that is where the odds lie right now.
The same can pretty much be said for the Purchasing Power Indicator, which also has generated a new "sell" signal Friday. Correlation with new trends has been good for this indicator, also ignoring "noise" well. When it gives a new signal, we usually see a 2 percent or more trend from the S&P 500."
Shiite cleric Muqtada al-Sadr is offering to pull his fighters off the streets of Basra and other cities if the government halts raids against his followers and releases prisoners held without charge.
According to Business Week, BNSF Railway Co., the nation's top hauler of container rail freight, is parking miles of railcars in Montana and elsewhere because there isn't enough freight to keep them rolling. Cars that often carry 40-foot containers of goods shipped from Asia stand like an iron fence between the Missouri River and this Montana burg known for world-class fly fishing. They stretch as far as Sandee Cardinal can see when she stands outside her home on the river's west bank between Helena and Great Falls...The cars parked are the type that haul cargo from ships on the coast to points inland, mainly imported goods -- an area that's starting to slow down due to the weak economy. Analysts say transportation usually is among the first sectors to show signs of a downturn in the economy and with Americans feeling pinched -- employers eliminated 63,000 jobs last month amid declining consumer confidence -- it could be a while before the idle cars move. "If you take a look at transportation, both trucking and rail, you will see that things started softening last summer," said Arnold Maltz, associate professor of supply-chain management at Arizona State University. "The reason you are seeing all those cars parked is that the consumer economy translates into slower imports." Texas-based BNSF Railway, a division of Burlington Northern Santa Fe Corp., has parked upward of 1,000 cars in Montana alone, spokesman Gus Melonas said. More are parked in other parts of the company's 32,000-mile system, which operates in 28 states and two Canadian provinces.
One might ponder whether railroad shares and the Dow Jones Transportation Index truly reflect the weakness associated with imports.
Brett Steenbarger: "With Friday's weakness, we continue to see deterioration in the Technical Strength measure, which quantifies short-term trending behavior among individual stocks...We once again see Financials as the weakest sector, disappointing given the recent Fed attempts at stablization. The strongest sector by far is Consumer Staples, which suggests a flight to relatively recession-resistant, defensive names. The more growth-oriented technology issues are weak...Defensiveness appears to be the watchword of the day, with investors continuing to shun the Financials and preferring the safety of companies that sell Staples over those relying upon Discretionary spending."
"We're the underdog in Pennsylvania," Mr. Obama told a Johnstown audience yesterday. "It is a short window of time, so we've got to be realistic about whether it's possible to make up that gap," Sen. Bob Casey, his chief Pennsylvania ally, said. "I think we can cut into it, but that's about the most I'll say."
"My attitude is that Sen. Clinton can run as long as she wants," Obama said yesterday. "Her name's on the ballot, and she is a fierce and formidable competitor, and she obviously believes that she would make the best nominee and the best president, and I think that, you know, she should be able to compete and her supporters should be able to support her, for as long as they are willing or able." But he stopped short of the view of many Clinton supporters that their battle should be allowed to go all the way to the convention in Denver. After the completion of the final primary contests in June, he said, "I think it is important to pivot as completely as possible, for the superdelegates or others, to make a decision as quickly as possible so that we can settle on a nominee and give that nominee some time before the convention to select a vice president, or presidential nominee, to start thinking about how the convention should be conducted ... at that point I think people should have more than enough information to make a decision."
Sen. Amy Klobuchar of Minnesota is expected to endorse Sen. Obama Monday, according to a Democrat familiar with her plans. Meanwhile, North Carolina's seven Democratic House members are poised to endorse Sen. Obama as a group -- just one has so far -- before that state's May 6 primary, several Democrats say.
Research in Motion is expected to more than double its bottom line when it reports its quarterly results next week. The company said net subscriber additions are expected to be 15% to 20% higher than the 1.82 million it had originally forecast for the period.
Wednesday morning Best Buy reports their quarterly numbers. It will be interesting see how the numbers reflect weak consumer spending.
Schering-Plough dropped 17% in pre-open trade. A study published in the New England Journal of Medicine concluded that doctors should cut their use of cholesterol drugs Vytorin and Zetia. Vytroin is a combination of Merck's Zocor and Schering-Plough's Zetia. Merck shares dropped 10%.
Teva Pharmaceutical Industries Ltd., seeking to expand its operations in the fast-growing Spanish market, agreed to acquire Bentley Pharmaceuticals Inc. for $15.02 a share, or $360 million.
Consumer price inflation in the euro-zone rose at 3.5% annual pace in March, Eurostat reported Monday, accelerating from the 3.2% rate seen in February and exceeding market expectations for a reading of 3.3%.
Gilat Satellite Networks Ltd., the Petach Tikva, Israel, provider of products and services for satellite-based communications networks, agreed to be acquired for $11.40 a share, or $475 million, by a group of private-equity firms
Allan Sloan: "The problem is that vital markets that most people never see - the constant borrowing and lending and trading among huge institutions - have been paralyzed by losses, fear, and uncertainty. And you can't get rid of losses, fear, and uncertainty by cutting rates."
John Hussman: "The effect of the Fed's guarantee is not to protect the public, but to protect Bear Stearns' bondholders. During the upcoming hearings, Congress can improve public confidence about the U.S. financial system by clarifying the distinction between “failure” of a company's obligations to customers, and the “failure” of a company's own securities...Congress has the Constitutional right, by the representative will of the people, to commit public funds. The Bear Stearns deal is a dangerous precedent and a dilution of Congressional prerogative...In short, investors should have confidence in the ability of the capital markets to function without the need for government bailouts at public expense."
Robert McHugh: "We got a new sell signal Friday in our 14 Day Stochastic indicator. Signals by this indicator have done a pretty good job in identifying several hundred point trend turns...While there are no guarantees, the fact we got a new "sell" signal Friday suggests we are likely to see a several hundred point move lower over the next week to 10 days. At least that is where the odds lie right now.
The same can pretty much be said for the Purchasing Power Indicator, which also has generated a new "sell" signal Friday. Correlation with new trends has been good for this indicator, also ignoring "noise" well. When it gives a new signal, we usually see a 2 percent or more trend from the S&P 500."
Shiite cleric Muqtada al-Sadr is offering to pull his fighters off the streets of Basra and other cities if the government halts raids against his followers and releases prisoners held without charge.
According to Business Week, BNSF Railway Co., the nation's top hauler of container rail freight, is parking miles of railcars in Montana and elsewhere because there isn't enough freight to keep them rolling. Cars that often carry 40-foot containers of goods shipped from Asia stand like an iron fence between the Missouri River and this Montana burg known for world-class fly fishing. They stretch as far as Sandee Cardinal can see when she stands outside her home on the river's west bank between Helena and Great Falls...The cars parked are the type that haul cargo from ships on the coast to points inland, mainly imported goods -- an area that's starting to slow down due to the weak economy. Analysts say transportation usually is among the first sectors to show signs of a downturn in the economy and with Americans feeling pinched -- employers eliminated 63,000 jobs last month amid declining consumer confidence -- it could be a while before the idle cars move. "If you take a look at transportation, both trucking and rail, you will see that things started softening last summer," said Arnold Maltz, associate professor of supply-chain management at Arizona State University. "The reason you are seeing all those cars parked is that the consumer economy translates into slower imports." Texas-based BNSF Railway, a division of Burlington Northern Santa Fe Corp., has parked upward of 1,000 cars in Montana alone, spokesman Gus Melonas said. More are parked in other parts of the company's 32,000-mile system, which operates in 28 states and two Canadian provinces.
One might ponder whether railroad shares and the Dow Jones Transportation Index truly reflect the weakness associated with imports.
Brett Steenbarger: "With Friday's weakness, we continue to see deterioration in the Technical Strength measure, which quantifies short-term trending behavior among individual stocks...We once again see Financials as the weakest sector, disappointing given the recent Fed attempts at stablization. The strongest sector by far is Consumer Staples, which suggests a flight to relatively recession-resistant, defensive names. The more growth-oriented technology issues are weak...Defensiveness appears to be the watchword of the day, with investors continuing to shun the Financials and preferring the safety of companies that sell Staples over those relying upon Discretionary spending."
"We're the underdog in Pennsylvania," Mr. Obama told a Johnstown audience yesterday. "It is a short window of time, so we've got to be realistic about whether it's possible to make up that gap," Sen. Bob Casey, his chief Pennsylvania ally, said. "I think we can cut into it, but that's about the most I'll say."
"My attitude is that Sen. Clinton can run as long as she wants," Obama said yesterday. "Her name's on the ballot, and she is a fierce and formidable competitor, and she obviously believes that she would make the best nominee and the best president, and I think that, you know, she should be able to compete and her supporters should be able to support her, for as long as they are willing or able." But he stopped short of the view of many Clinton supporters that their battle should be allowed to go all the way to the convention in Denver. After the completion of the final primary contests in June, he said, "I think it is important to pivot as completely as possible, for the superdelegates or others, to make a decision as quickly as possible so that we can settle on a nominee and give that nominee some time before the convention to select a vice president, or presidential nominee, to start thinking about how the convention should be conducted ... at that point I think people should have more than enough information to make a decision."
Sen. Amy Klobuchar of Minnesota is expected to endorse Sen. Obama Monday, according to a Democrat familiar with her plans. Meanwhile, North Carolina's seven Democratic House members are poised to endorse Sen. Obama as a group -- just one has so far -- before that state's May 6 primary, several Democrats say.
Research in Motion is expected to more than double its bottom line when it reports its quarterly results next week. The company said net subscriber additions are expected to be 15% to 20% higher than the 1.82 million it had originally forecast for the period.
Wednesday morning Best Buy reports their quarterly numbers. It will be interesting see how the numbers reflect weak consumer spending.
Schering-Plough dropped 17% in pre-open trade. A study published in the New England Journal of Medicine concluded that doctors should cut their use of cholesterol drugs Vytorin and Zetia. Vytroin is a combination of Merck's Zocor and Schering-Plough's Zetia. Merck shares dropped 10%.
Teva Pharmaceutical Industries Ltd., seeking to expand its operations in the fast-growing Spanish market, agreed to acquire Bentley Pharmaceuticals Inc. for $15.02 a share, or $360 million.
Consumer price inflation in the euro-zone rose at 3.5% annual pace in March, Eurostat reported Monday, accelerating from the 3.2% rate seen in February and exceeding market expectations for a reading of 3.3%.
Gilat Satellite Networks Ltd., the Petach Tikva, Israel, provider of products and services for satellite-based communications networks, agreed to be acquired for $11.40 a share, or $475 million, by a group of private-equity firms
Allan Sloan: "The problem is that vital markets that most people never see - the constant borrowing and lending and trading among huge institutions - have been paralyzed by losses, fear, and uncertainty. And you can't get rid of losses, fear, and uncertainty by cutting rates."
John Hussman: "The effect of the Fed's guarantee is not to protect the public, but to protect Bear Stearns' bondholders. During the upcoming hearings, Congress can improve public confidence about the U.S. financial system by clarifying the distinction between “failure” of a company's obligations to customers, and the “failure” of a company's own securities...Congress has the Constitutional right, by the representative will of the people, to commit public funds. The Bear Stearns deal is a dangerous precedent and a dilution of Congressional prerogative...In short, investors should have confidence in the ability of the capital markets to function without the need for government bailouts at public expense."
Sunday, March 30, 2008
Leveraged Speculation
3/30/08 Leveraged Speculation
Doug Noland: "I would argue forcefully that the leveraged speculating community for some years now has assumed the key role of unappreciated marginal source of demand for risk assets – risky debt instruments financing asset inflation, in particular. Over time, Wall Street “alchemy” mastered the process of transforming virtually unlimited risky loans into perceived safe and liquid securities. A sizable – and growing - chunk of these securities were then purchased on leverage by the rapidly expanding speculator community, in the process fueling an increasingly maladjusted U.S. Bubble Economy. We’re now witnessing it all beginning to wind down. End of an Era...Debt problems are accelerating and expanding from mortgages to home equity, auto, Credit card, student loans, small business finance, munis and corporate Credits. At the same time, Wall Street has been significantly tightening lending requirements for the leveraging of all types of debt instruments. While the focus has been on mortgage Credit, recent deterioration in other types of loans – and, importantly, the leveraged holders of large amounts of this debt – have major consequences for Credit Availability throughout the Economic Sphere. Housing markets and foreclosures are obviously major issues. Not commonly recognized is the now virtually across the board tightening in Credit throughout the securitization markets (consumer, student, muni, corporate, etc.), exerting more expansive headwinds upon the U.S. economy than even the tightening in mortgages (that predominantly impacted transactions and home prices)...To be sure, our Credit system continues to provide sufficient Credit to finance massive Current Account Deficits. And it is this ongoing outflow of dollar liquidity that stokes both indomitable dollar devaluation and global Credit excess. Many contend that inflationary pressures are poised to wane as the U.S. economy weakens. I’ll suggest that inflation dynamics will prove much more complex and uncooperative. There is further confirmation of this view - that the bursting of the Wall Street finance Bubble will have a significantly greater impact on asset prices than on general consumer pricing pressures...When it comes to Ending of Eras, I am increasingly fearful that we are falling deeper into a precarious period devoid of a functioning global currency regime necessary to discipline Credit excess and restrain mounting inflationary pressures. And as long as dollar liquidity inundates the world economy, domestic Credit systems across the globe enjoy the extraordinary capacity to inflate domestic Credit and use this new purchasing power for the benefit of their citizens and economies. And, in particular because of their enormous populations, as long as the Chinese and Indian Credit system enjoy the freedom to inflate at will there will remain significant upside pricing pressure for energy, food, and various goods and commodities in limited supply – hedge fund speculative excess and/or bust notwithstanding...Similarly, I believe general inflationary pressures may likely prove more significantly influenced by runaway global Credit excesses than by the Wall Street and U.S. asset price busts. If this proves to be the case, perhaps the greater risk is a bursting of the Treasury Market Bubble. It may take some time, but an enormous supply of government debt is in the offing and – let’s face it – these instruments will become only less appealing over time. It also begs the question as to the advisability of aggressive Fed rate cuts. They are having little influence on the bursting Wall Street Bubbles but possibly huge effects on global inflationary forces. Little wonder the ECB is so hesitant to lower rates."
Doug Noland is, in my view, along with Nouriel Roubini, one of the most astute global financial observers. He raises the point of the possible Treasury Market Bubble. This is an area I have discussed in recent weeks with much less eloquence. It is a subject worth serious consideration, and the implication for our financial system has immense implications. In effect, it could mean a rupturing in any future debt build up and, ultimately, the U.S. cash flow.
One of Mr. Obama’s most prominent supporters, Senator Patrick J. Leahy of Vermont, said Mrs. Clinton should quit the race because she hurt Mr. Obama “more than anything John McCain has said.”
Venezuela is rerouting oil to China that had previously been sent to a U.S. refinery co-owned by its state oil company and Exxon Mobil Corp., Venezuela's oil minister said Friday. Rafael Ramirez said Exxon has stopped ordering crude for a refinery in the New Orleans suburb of Chalmette as legal wrangling between the Irving, Texas-based company and Petroleos de Venezuela S.A., or PDVSA, continues. "Everything went to China," Ramirez told reporters. In my view, this will prove to be commonplace in the months to come.
George Ure: "Having seized control of the currency in 1913, and having sold the notion that prices somehow mysteriously levitate in the general economy independent of the supply of goods, market demand, and supply of money, the bankers club - the not-really Federal Reserve will begin its push Monday to control much more than banking. It's about to seize Wall Street.
In doing so, the Treasury is expected to promote the merging of the Securities and Exchange Commission and the Commodities Futures Trading Commission that oversees the commodities markets.
Oh, and in dabbling their toes in owning (as securities pledge against loans) CMO's and such, the Fed may also have tipped its hat that it's getting into real estate ownership...So, Monday the Revolution begins. Bankers will promote their socialist / price fixing, total government control of markets under the guise of 'saving us' from misdeeds by people who have made what are called 'errors in investment judgments'. In an earlier time, it would have been called fraud or rampant speculations and people would be fired, bankrupted, jailed, or hung for such breach of the public trust.
"Market Stability" is like pregnancy: You're either price fixing, or your not."
Barry Ritholtz: "The data point we are always interested in are the year over year, NSA, sales. In 2006, 1.07 million vacation homes were sold -- a record number. In 2007, second home sales had fallen 31% to 740,000, according to NAR data. The median price of a vacation home was $195,000 in 2007, down 2.5% from $200,000 in 2006. 2007 also saw speculators exiting the housing market: Homes bought purely for investment dropped 18% to 1.35 million last year, compared with 1.65 million in 2006. That is versus a 10% decline in primary-residence sales, (2007 = 4.34 million, down from 2006 = 4.82 million)"
According to The Wall Street Journal, UBS "began on Friday to lower the values of so-called auction-rate securities held by its clients, a move that will be a jolt to customers who had been told they were investing in a "cash alternative."
Roger Ehrenberg: "The issue with today's financial meltdown is clearly one of liquidity and leverage. If the banks and investment banks thought the paper they held was good and felt the value was there, then ok. Except for one key point. By being leveraged to the eyeballs and practicing exceedingly poor gap management (the spread between the duration of assets and liabilities, where most money is made investing in long-term assets and funding them on a short-term basis), they've put themselves in the position of having to mark-to-market their troubled portfolios pursuant to the guidelines above. Because the magnitude of these portfolios are such that they can't assure the markets that they can be carried indefinitely. They can't. And it has put banks globally into a painful Catch-22. Sell the assets, lock-in their losses, substantially shrink their businesses and raise billions in new capital to reload. Or try and hold on to their assets, and play a game of chicken with governments and the financial markets. Neither picture is particularly pretty, but this is where we are."
Ester Faia: "Both phenomena we are looking at, financial crises and raising in inflation, can be seen as long term implications of expansionary monetary policies and, in particular, of the lack of a well defined nominal anchor in the policy strategies conducted by most central banks. How about the future orientation of monetary policies? Apart from the ECB, which is rightly keeping nominal interest rate stable, The Fed and the Bank of England attempt to contain the financial crises by providing credit to illiquid banks, and to this aim have expanded the range of collateral they are willing to accept. The classic theory of ‘’lender of last resort’’ tells us that monetary authorities should lend to illiquid banks to avoid panics, but against sound collateral. To avoid moral hazard, lending should be given to illiquid banks not to insolvent ones. Now, shall we consider a security containing dubious asset-backed components as sound collaterals? And, how can a bank in a world with so much liquidity be unable to obtain credit in the interbank market, unless the market judges it to be an insolvent bank? Overall recent interventions by the Fed and the Bank of England might amplify moral hazard problems. Most of all those same interventions are harming central bank credibility which is the main pillar of inflation targeting/price stability strategies."
This weekend's conventions in Texas will elect 7,298 delegates to the June 5-7 Texas Democratic Convention in Austin. Those delegates in turn will select the 67 at-large delegates who go to the national nominating convention in August in Denver. Clinton won the March 4 primaries and collected a 65-61 lead in delegates awarded based on popular vote. In Texas Democrats' two-tiered delegate selection system, the 67 at-large delegates are still at stake. After about a million people turned out for precinct caucuses, the state party estimated that Obama, a senator from Illinois, held a 37-30 lead among the at-large delegates. That would leave Obama with 98 delegates to 95 for Clinton. However, fine tuning of the delegates from the caucuses could provide an additional advantage for Obama because he led Clinton 59-41% in results reported from conventions held across the state before counting stopped for the night on Saturday.
Dubai International Capital and private-equity firm Bridgepoint plan to bid jointly for healthcare group Euromedic International for about 700 million pounds ($1.4 billion), the London Times said on Sunday.
Oil markets are well-supplied with inventories of crude oil and refined products over their five-year average, the OPEC governor of the United Arab Emirates said on Sunday.The weakness of the U.S. dollar has amplified the rise in oil prices, which was partly due to speculation, Ali al-Yabhouni told an energy conference in Dubai.
Markets may be stabilizing, but the news on the economy is getting worse. The coming week will see more dismal headlines on employment, construction and manufacturing, economists said. "The indicators on the economy will point in the direction of pronounced weakness in domestic demand," wrote Global Insight economists Nigel Gault and Brian Bethune.
Mike Burk: "The number of new lows declined sharply last week. For the week most of the indices went nowhere and Friday ended the week with 3 consecutive down days. New lows hit their high point for the week on Friday, but, even on Friday they were substantially lower than they were on any day of the previous week. Two weeks ago next Monday there were 477 new lows on the NASDAQ and 759 on the NYSE. Those numbers are large enough to imply a high likelihood of another retest of the recent lows in the next few months...The rapid decline in new lows suggest that risk is receding. I expect the major indices to be higher on Friday April 4 than they were on Friday March 28."
Doug Noland: "I would argue forcefully that the leveraged speculating community for some years now has assumed the key role of unappreciated marginal source of demand for risk assets – risky debt instruments financing asset inflation, in particular. Over time, Wall Street “alchemy” mastered the process of transforming virtually unlimited risky loans into perceived safe and liquid securities. A sizable – and growing - chunk of these securities were then purchased on leverage by the rapidly expanding speculator community, in the process fueling an increasingly maladjusted U.S. Bubble Economy. We’re now witnessing it all beginning to wind down. End of an Era...Debt problems are accelerating and expanding from mortgages to home equity, auto, Credit card, student loans, small business finance, munis and corporate Credits. At the same time, Wall Street has been significantly tightening lending requirements for the leveraging of all types of debt instruments. While the focus has been on mortgage Credit, recent deterioration in other types of loans – and, importantly, the leveraged holders of large amounts of this debt – have major consequences for Credit Availability throughout the Economic Sphere. Housing markets and foreclosures are obviously major issues. Not commonly recognized is the now virtually across the board tightening in Credit throughout the securitization markets (consumer, student, muni, corporate, etc.), exerting more expansive headwinds upon the U.S. economy than even the tightening in mortgages (that predominantly impacted transactions and home prices)...To be sure, our Credit system continues to provide sufficient Credit to finance massive Current Account Deficits. And it is this ongoing outflow of dollar liquidity that stokes both indomitable dollar devaluation and global Credit excess. Many contend that inflationary pressures are poised to wane as the U.S. economy weakens. I’ll suggest that inflation dynamics will prove much more complex and uncooperative. There is further confirmation of this view - that the bursting of the Wall Street finance Bubble will have a significantly greater impact on asset prices than on general consumer pricing pressures...When it comes to Ending of Eras, I am increasingly fearful that we are falling deeper into a precarious period devoid of a functioning global currency regime necessary to discipline Credit excess and restrain mounting inflationary pressures. And as long as dollar liquidity inundates the world economy, domestic Credit systems across the globe enjoy the extraordinary capacity to inflate domestic Credit and use this new purchasing power for the benefit of their citizens and economies. And, in particular because of their enormous populations, as long as the Chinese and Indian Credit system enjoy the freedom to inflate at will there will remain significant upside pricing pressure for energy, food, and various goods and commodities in limited supply – hedge fund speculative excess and/or bust notwithstanding...Similarly, I believe general inflationary pressures may likely prove more significantly influenced by runaway global Credit excesses than by the Wall Street and U.S. asset price busts. If this proves to be the case, perhaps the greater risk is a bursting of the Treasury Market Bubble. It may take some time, but an enormous supply of government debt is in the offing and – let’s face it – these instruments will become only less appealing over time. It also begs the question as to the advisability of aggressive Fed rate cuts. They are having little influence on the bursting Wall Street Bubbles but possibly huge effects on global inflationary forces. Little wonder the ECB is so hesitant to lower rates."
Doug Noland is, in my view, along with Nouriel Roubini, one of the most astute global financial observers. He raises the point of the possible Treasury Market Bubble. This is an area I have discussed in recent weeks with much less eloquence. It is a subject worth serious consideration, and the implication for our financial system has immense implications. In effect, it could mean a rupturing in any future debt build up and, ultimately, the U.S. cash flow.
One of Mr. Obama’s most prominent supporters, Senator Patrick J. Leahy of Vermont, said Mrs. Clinton should quit the race because she hurt Mr. Obama “more than anything John McCain has said.”
Venezuela is rerouting oil to China that had previously been sent to a U.S. refinery co-owned by its state oil company and Exxon Mobil Corp., Venezuela's oil minister said Friday. Rafael Ramirez said Exxon has stopped ordering crude for a refinery in the New Orleans suburb of Chalmette as legal wrangling between the Irving, Texas-based company and Petroleos de Venezuela S.A., or PDVSA, continues. "Everything went to China," Ramirez told reporters. In my view, this will prove to be commonplace in the months to come.
George Ure: "Having seized control of the currency in 1913, and having sold the notion that prices somehow mysteriously levitate in the general economy independent of the supply of goods, market demand, and supply of money, the bankers club - the not-really Federal Reserve will begin its push Monday to control much more than banking. It's about to seize Wall Street.
In doing so, the Treasury is expected to promote the merging of the Securities and Exchange Commission and the Commodities Futures Trading Commission that oversees the commodities markets.
Oh, and in dabbling their toes in owning (as securities pledge against loans) CMO's and such, the Fed may also have tipped its hat that it's getting into real estate ownership...So, Monday the Revolution begins. Bankers will promote their socialist / price fixing, total government control of markets under the guise of 'saving us' from misdeeds by people who have made what are called 'errors in investment judgments'. In an earlier time, it would have been called fraud or rampant speculations and people would be fired, bankrupted, jailed, or hung for such breach of the public trust.
"Market Stability" is like pregnancy: You're either price fixing, or your not."
Barry Ritholtz: "The data point we are always interested in are the year over year, NSA, sales. In 2006, 1.07 million vacation homes were sold -- a record number. In 2007, second home sales had fallen 31% to 740,000, according to NAR data. The median price of a vacation home was $195,000 in 2007, down 2.5% from $200,000 in 2006. 2007 also saw speculators exiting the housing market: Homes bought purely for investment dropped 18% to 1.35 million last year, compared with 1.65 million in 2006. That is versus a 10% decline in primary-residence sales, (2007 = 4.34 million, down from 2006 = 4.82 million)"
According to The Wall Street Journal, UBS "began on Friday to lower the values of so-called auction-rate securities held by its clients, a move that will be a jolt to customers who had been told they were investing in a "cash alternative."
Roger Ehrenberg: "The issue with today's financial meltdown is clearly one of liquidity and leverage. If the banks and investment banks thought the paper they held was good and felt the value was there, then ok. Except for one key point. By being leveraged to the eyeballs and practicing exceedingly poor gap management (the spread between the duration of assets and liabilities, where most money is made investing in long-term assets and funding them on a short-term basis), they've put themselves in the position of having to mark-to-market their troubled portfolios pursuant to the guidelines above. Because the magnitude of these portfolios are such that they can't assure the markets that they can be carried indefinitely. They can't. And it has put banks globally into a painful Catch-22. Sell the assets, lock-in their losses, substantially shrink their businesses and raise billions in new capital to reload. Or try and hold on to their assets, and play a game of chicken with governments and the financial markets. Neither picture is particularly pretty, but this is where we are."
Ester Faia: "Both phenomena we are looking at, financial crises and raising in inflation, can be seen as long term implications of expansionary monetary policies and, in particular, of the lack of a well defined nominal anchor in the policy strategies conducted by most central banks. How about the future orientation of monetary policies? Apart from the ECB, which is rightly keeping nominal interest rate stable, The Fed and the Bank of England attempt to contain the financial crises by providing credit to illiquid banks, and to this aim have expanded the range of collateral they are willing to accept. The classic theory of ‘’lender of last resort’’ tells us that monetary authorities should lend to illiquid banks to avoid panics, but against sound collateral. To avoid moral hazard, lending should be given to illiquid banks not to insolvent ones. Now, shall we consider a security containing dubious asset-backed components as sound collaterals? And, how can a bank in a world with so much liquidity be unable to obtain credit in the interbank market, unless the market judges it to be an insolvent bank? Overall recent interventions by the Fed and the Bank of England might amplify moral hazard problems. Most of all those same interventions are harming central bank credibility which is the main pillar of inflation targeting/price stability strategies."
This weekend's conventions in Texas will elect 7,298 delegates to the June 5-7 Texas Democratic Convention in Austin. Those delegates in turn will select the 67 at-large delegates who go to the national nominating convention in August in Denver. Clinton won the March 4 primaries and collected a 65-61 lead in delegates awarded based on popular vote. In Texas Democrats' two-tiered delegate selection system, the 67 at-large delegates are still at stake. After about a million people turned out for precinct caucuses, the state party estimated that Obama, a senator from Illinois, held a 37-30 lead among the at-large delegates. That would leave Obama with 98 delegates to 95 for Clinton. However, fine tuning of the delegates from the caucuses could provide an additional advantage for Obama because he led Clinton 59-41% in results reported from conventions held across the state before counting stopped for the night on Saturday.
Dubai International Capital and private-equity firm Bridgepoint plan to bid jointly for healthcare group Euromedic International for about 700 million pounds ($1.4 billion), the London Times said on Sunday.
Oil markets are well-supplied with inventories of crude oil and refined products over their five-year average, the OPEC governor of the United Arab Emirates said on Sunday.The weakness of the U.S. dollar has amplified the rise in oil prices, which was partly due to speculation, Ali al-Yabhouni told an energy conference in Dubai.
Markets may be stabilizing, but the news on the economy is getting worse. The coming week will see more dismal headlines on employment, construction and manufacturing, economists said. "The indicators on the economy will point in the direction of pronounced weakness in domestic demand," wrote Global Insight economists Nigel Gault and Brian Bethune.
Mike Burk: "The number of new lows declined sharply last week. For the week most of the indices went nowhere and Friday ended the week with 3 consecutive down days. New lows hit their high point for the week on Friday, but, even on Friday they were substantially lower than they were on any day of the previous week. Two weeks ago next Monday there were 477 new lows on the NASDAQ and 759 on the NYSE. Those numbers are large enough to imply a high likelihood of another retest of the recent lows in the next few months...The rapid decline in new lows suggest that risk is receding. I expect the major indices to be higher on Friday April 4 than they were on Friday March 28."
Saturday, March 29, 2008
The Sixth Year In Iraq
3/29/08 The Sixth Year In Iraq
Fighters loyal to Shi'ite cleric Moqtada al-Sadr have seized the center of the southern Nassiriya city, a Reuters witness said on Friday.
A four-day-old Iraqi army crackdown on Shi'ite cleric Moqtada al-Sadr's Mehdi Army in Basra, Iraq's second city and its gateway to the Gulf, has sparked fighting across the south and in Baghdad.
In the capital, Iraqi lawmakers were due to hold an emergency session in a bid to end violence in the flashpoint oil city of Basra, where Prime Minister Nuri al-Maliki gave militants a new deadline to hand over their weapons.
As clashes continue, Maliki postponed the Saturday deadline to April 8. An Interior Ministry official says no one has handed in his weapons.
North Korea test-fired ``several'' short-range missiles into waters off its west coast as part of a regular military exercise, the South Korean president's office and Defense Ministry said.
According to a filing with the Securities and Exchange Commission, Electronic Arts' offer will require either that Take-Two's board redeem the preferred stock purchase rights issued as a result of the poison-pill adoption or that EA is satisfied that such rights have been invalidated or are otherwise inapplicable. EA has also extended its tender offer, which was set to expire April 11, to April 18. EA has offered to buy Take-Two for $26 a share, or about $2 billion in cash.
Henry To: "Given the lengths that the Federal Reserve has gone to "back stop" our financial system, and given its series of rate cuts since January 22nd (200 basis points in the Fed Funds and 225 basis points in the discount rate over the last two months alone), the old adage "Don't fight the Fed" certainly applies here. Moreover, given the stock market's historically oversold status over the last couple of months (in terms of relative valuations, technicals, and sentiment) - and given the many positive divergences we are now witnessing (such as the strength in the Dow Transports over the last few weeks, the higher lows in the NYSE McClellan Summation Index, and the higher lows in new highs vs. new lows on both the NYSE and the NASDAQ), the other important old adage, "Don't fight the tape" also applies. If you are still a U.S. stock market bear at this point, you are doing both - and it has NEVER paid to simultaneously "fight the Fed" and to "fight the tape."
Nokia Corp. may post low shipments of mobile phones in the first quarter, Societe Generale analysts said in a note to clients published Friday. It expects Nokia to ship just 107 million handsets compared to consensus forecasts for shipments of 115 million.
The woes of United States banks could mount, Boston Fed President Eric Rosengren said Friday, adding that the Federal Reserve, with its access to their confidential information, can use those data to make sound policy. “I would say that while to date the problem banks have been quite low, there clearly has been some deterioration since the beginning of this year, and should the economy continue to slow down, as many expect, it is likely that we will continue to see some growth in the problem institutions,” he told a seminar at the Bank of Korea, according to Reuters.
The home foreclosure rate will rise for at least another year and residential real estate prices won't improve until 2010, said Frank Nothaft, chief economist for Freddie Mac, a federally chartered mortgage finance company. "We're likely to have worse news" on foreclosures throughout 2008, Nothaft said Thursday in a speech to the National Economists Club. As a result, homeowners will see "huge increases in the average amount of time it takes to sell a house."
NY Times: "When he steps aboard a campaign bus in Pittsburgh on Friday, Senator Barack Obama begins a six-day journey across Pennsylvania and its complex political landscape, one that is largely favorable to his rival, Senator Hillary Rodham Clinton.Mr. Obama will travel from the gritty western part of the state to the more prosperous east, at times riding straight into unfriendly territory, like that in Johnstown, the hardscrabble, blue-collar base of John P. Murtha, the powerful congressman, who is one of Mrs. Clinton’s staunchest allies."
Pennsylvania Sen. Bob Casey plans to endorse Democrat Barack Obama Friday, a move that could help the presidential candidate make inroads with white working-class voters dubbed "Casey Democrats" in the Keystone State.
Part of a surge in global food costs, rice prices on world markets have jumped 50 percent in the past two months and at least doubled since 2004. Experts blame rising fuel and fertilizer expenses as well as crops curtailed by disease, pests and climate change. There are concerns prices could rise a further 40 percent in coming months.
KBHomes: "The Company’s cancellation rate improved to 53% in the first quarter of 2008 compared to 58% in the fourth quarter of 2007. The Company’s cancellation rate was 34% in the first quarter of 2007."
“Our first quarter financial results reflect the persistently challenging conditions in U.S. housing markets and the strategic measures we have taken over the past several months to streamline our land positions and reduce the number of communities where we operate,” said Jeffrey Mezger, president and chief executive officer. “Our industry continues to confront a growing oversupply of new and resale homes, tight mortgage lending conditions and a highly competitive pricing environment. These conditions drove down sale prices and further compressed margins in the first quarter of 2008, prompting us to recognize additional impairment charges and abandon certain land option contracts that no longer made financial sense. Until prices stabilize and consumer confidence returns, we believe inventory levels will remain significantly out of balance with demand. We do not anticipate meaningful improvement in these conditions in the near term, as it is likely to take some time for the market to absorb the current excess housing supply and for consumer confidence to improve.”
The economic-stimulus plan that speeds tax rebates to senior citizens and disabled veterans may also provide a 33 percent profit boost over the next two years for Bellevue-based truck maker Paccar. Small businesses will be able to double expense deductions under the stimulus bill, a spur for heavy-truck sales after an 18-month slump, said Jon Eide, who leads Wells Fargo's commercial-equipment lending unit in Minneapolis. Paccar stock stands to rise, too, after a 30 percent drop since July 18.
"You're going to need to buy these trucks sooner or later," said Peter Bates, a T. Rowe Price analyst in Baltimore who oversees about $1 billion in assets, including Paccar shares. "It seems that Paccar could certainly benefit."
European retail sales fell in March and consumer confidence dropped across the region as inflation, higher credit costs and declining house prices sapped spending. The Bloomberg purchasing managers index of retail sales growth in the euro area declined to a seasonally adjusted 48.2 from 52.4 in February.
A Pew Research survey released yesterday showed 30 percent of white Democrats -- a group Clinton needs in order to win the remaining primaries -- regard her as a ``phony,'' twice as many as those who perceive rival Barack Obama that way. In late February, just 7.8 percent of voters surveyed by Pew described her as ``untrustworthy.'' ``She's either fudged her positions or been downright disingenuous,'' said Dan Gerstein, a Democratic strategist who isn't working for any candidate. ``Any one'' episode ``wouldn't hurt her, but the accumulated weight has turned Democratic voters against her.''
Mitsubishi Heavy Industries is going ahead with its mid-sized regional jet — the first "made in Japan" passenger aircraft in three decades.
Citigroup, Wachovia, along with other U.S. banks are likely to announce dividend cuts in April, as banks' earnings will not support current dividend payouts in 2008, Oppenheimer & Co analyst Meredith Whitney said.
According to AMG Data Services, including ETF activity, Equity funds report net cash outflows totaling -$11.526 billion in the week ended 3/26/08 with Domestic funds reporting net outflows of -$10.880 billion and Non-domestic funds reporting net outflows of -$645 million; Excluding ETF activity, Equity funds report net cash outflows totaling -$1.537 billion with Domestic funds reporting net outflows of -$1.157 billion and Non-domestic funds reporting net outflows totaling -$381 million; Excluding ETF activity, Energy funds report the fourth week of inflows in the last five weeks($2Mil; 0.04% Assets), as Finanial/Banking funds report net inflows of $58 Mil (1.06% Assets); Excluding ETF activity, Gold & Natural Resource funds report the first week of outflows since January 23 (-$136 Mil; 0.40$ Assets), the largest outflows from the sector since 8/22/07 (-$157 Mil; 0.61% Assets).
"The unprecedented diversification process of investing away from equity funds that invest primarily in the U.S. in favor of those that invest globally remains well in place," wrote Stefane Marion, an assistant chief economist with National Bank Financial in Montreal, in a report Thursday.
Rob Hanna: "While the pullback may or may not have farther to fall I am not seeing evidence at this point that it will be anything more than a pullback."
J.C. Penney says it expects first-quarter earnings below its previous forecast as consumer demand wanes. The retailer also forecast a low-double-digit decline in same-store sales for March and a high-single-digit decline for the first quarter. Its prior expectation was for low-single-digit declines for both periods.
The Commerce Department reported that consumer spending was flat in February.
Rhodium usage is dominated by auto catalyst applications where it is used together with platinum and palladium to control exhaust emissions. In the first week of March, the price for Rhodium soared to $9,100 an ounce!
Reverend Otis Moss III will succeed Reverend Jeremiah A. Wright as senior pastor in June.
By disclosing his 2000-2006 returns earlier than is customary, Obama is forcing Clinton either to reveal details about investments by her husband, former President Bill Clinton, or to face more questions about what they aren't making public.
Federal Reserve Bank of Philadelphia President Charles Plosser said the Fed has cut interest rates too aggressively and risks losing its inflation-fighting reputation. ``A less aggressive cut would have been more appropriate,'' Plosser said of this month's 75 basis-point rate reduction. The Fed's reputation for keeping inflation low and stable ``can be lost if we do not continue to act in a way that is consistent with it,'' he said at a conference in Cape Town today.
The Reuters/University of Michigan Surveys of Consumers said its final index of confidence fell to 69.5 in March -- its lowest since February 1992, when it was at 68.8 -- from the previous month's reading of 70.8.
At year-end 2001, Marathon Oil had a resource base of 2.1 billion BOE and by year-end 2007, the Company had more than tripled this to 6.6 billion BOE, which includes liquid hydrocarbons, natural gas and bitumen.
"Resource growth drives future reserve additions," Cazalot said, "and we intend to further increase our resource base and convert barrels into proved reserves and production. A major contributor will be our oil sands mining business, which will be ramping up production significantly in the coming years. We're also making strategic investments in our downstream business that will lower feedstock costs as well as increase efficiency and flexibility, so we can continue providing competitive returns in an increasingly challenging market. And, importantly, we will continue to maintain financial discipline and flexibility to fund our profitable growth...For 2008, the Company said it expects worldwide net upstream production will be in the range of 380,000 - 420,000 BOE per day, excluding sales and acquisitions. Additionally, net bitumen production from the Canadian oil sands is expected to be about 30,000 barrels per day."
Deutsche Bank AG raised its forecasts for Brent crude oil in 2008 and 2009 by 12 percent and 28 percent, respectively, as credit market turmoil drives investors toward commodities. Germany's biggest bank lifted its 2008 average estimate for Brent crude futures traded on London's ICE Futures Europe exchange to $95.50 a barrel from $85, and its 2009 prediction to $102.50 from $80. It also increased forecasts for natural gas.
Nickel headed for the biggest weekly gain in six months in London after BHP Billiton Ltd. declared force majeure on deliveries from its nickel mine in Colombia. Copper and aluminum also gained.
U.S. farmers may plant 12 percent more soybeans this year after prices of the oilseed jumped 75 percent in the past 12 months in a rally to a record, analysts and traders said.
IAC/InterActiveCorp. Chairman Barry Diller does not need a green light from Liberty Media Corp. to split up IAC, a Delaware court has ruled, The Wall Street Journal reported late Friday on its Web site.
The Dow Jones Industrial Average fell 86.06 points to 12,216.40, off 1.2% for the week. The S&P 500 declines 10.54 points to 1,315.22, off 1.1% for the week, while the Nasdaq Composite was off 19.65 points to 2,261.18, giving it a modest weekly gain of 0.1%.
Crude for May delivery lost $1.96, or 1.8%, to settle at $105.62 a barrel on the New York Mercantile Exchange. Gold for April delivery dropped $18.20 to end at $930.60 an ounce on the New York Mercantile Exchange.
The Federal Reserve will auction $50 billion in short-term credits to banks at each of two special auctions in April, the Fed announced Friday.
Executives at Northwest Airlines Corp have proposed that Northwest and Delta Air Lines Inc go ahead with a planned merger, a source familiar with the talks said on Friday.
OPEC's crude-oil supply has probably increased by 100,000 barrels a day, or 0.3 percent, in March, according to preliminary estimates from PetroLogistics Ltd.
Gallup says Obama has a 50%-42% advantage over his rival for the Democratic presidential nomination. Yesterday, he held a 48%-44% lead.
Fighters loyal to Shi'ite cleric Moqtada al-Sadr have seized the center of the southern Nassiriya city, a Reuters witness said on Friday.
A four-day-old Iraqi army crackdown on Shi'ite cleric Moqtada al-Sadr's Mehdi Army in Basra, Iraq's second city and its gateway to the Gulf, has sparked fighting across the south and in Baghdad.
In the capital, Iraqi lawmakers were due to hold an emergency session in a bid to end violence in the flashpoint oil city of Basra, where Prime Minister Nuri al-Maliki gave militants a new deadline to hand over their weapons.
As clashes continue, Maliki postponed the Saturday deadline to April 8. An Interior Ministry official says no one has handed in his weapons.
North Korea test-fired ``several'' short-range missiles into waters off its west coast as part of a regular military exercise, the South Korean president's office and Defense Ministry said.
According to a filing with the Securities and Exchange Commission, Electronic Arts' offer will require either that Take-Two's board redeem the preferred stock purchase rights issued as a result of the poison-pill adoption or that EA is satisfied that such rights have been invalidated or are otherwise inapplicable. EA has also extended its tender offer, which was set to expire April 11, to April 18. EA has offered to buy Take-Two for $26 a share, or about $2 billion in cash.
Henry To: "Given the lengths that the Federal Reserve has gone to "back stop" our financial system, and given its series of rate cuts since January 22nd (200 basis points in the Fed Funds and 225 basis points in the discount rate over the last two months alone), the old adage "Don't fight the Fed" certainly applies here. Moreover, given the stock market's historically oversold status over the last couple of months (in terms of relative valuations, technicals, and sentiment) - and given the many positive divergences we are now witnessing (such as the strength in the Dow Transports over the last few weeks, the higher lows in the NYSE McClellan Summation Index, and the higher lows in new highs vs. new lows on both the NYSE and the NASDAQ), the other important old adage, "Don't fight the tape" also applies. If you are still a U.S. stock market bear at this point, you are doing both - and it has NEVER paid to simultaneously "fight the Fed" and to "fight the tape."
Nokia Corp. may post low shipments of mobile phones in the first quarter, Societe Generale analysts said in a note to clients published Friday. It expects Nokia to ship just 107 million handsets compared to consensus forecasts for shipments of 115 million.
The woes of United States banks could mount, Boston Fed President Eric Rosengren said Friday, adding that the Federal Reserve, with its access to their confidential information, can use those data to make sound policy. “I would say that while to date the problem banks have been quite low, there clearly has been some deterioration since the beginning of this year, and should the economy continue to slow down, as many expect, it is likely that we will continue to see some growth in the problem institutions,” he told a seminar at the Bank of Korea, according to Reuters.
The home foreclosure rate will rise for at least another year and residential real estate prices won't improve until 2010, said Frank Nothaft, chief economist for Freddie Mac, a federally chartered mortgage finance company. "We're likely to have worse news" on foreclosures throughout 2008, Nothaft said Thursday in a speech to the National Economists Club. As a result, homeowners will see "huge increases in the average amount of time it takes to sell a house."
NY Times: "When he steps aboard a campaign bus in Pittsburgh on Friday, Senator Barack Obama begins a six-day journey across Pennsylvania and its complex political landscape, one that is largely favorable to his rival, Senator Hillary Rodham Clinton.Mr. Obama will travel from the gritty western part of the state to the more prosperous east, at times riding straight into unfriendly territory, like that in Johnstown, the hardscrabble, blue-collar base of John P. Murtha, the powerful congressman, who is one of Mrs. Clinton’s staunchest allies."
Pennsylvania Sen. Bob Casey plans to endorse Democrat Barack Obama Friday, a move that could help the presidential candidate make inroads with white working-class voters dubbed "Casey Democrats" in the Keystone State.
Part of a surge in global food costs, rice prices on world markets have jumped 50 percent in the past two months and at least doubled since 2004. Experts blame rising fuel and fertilizer expenses as well as crops curtailed by disease, pests and climate change. There are concerns prices could rise a further 40 percent in coming months.
KBHomes: "The Company’s cancellation rate improved to 53% in the first quarter of 2008 compared to 58% in the fourth quarter of 2007. The Company’s cancellation rate was 34% in the first quarter of 2007."
“Our first quarter financial results reflect the persistently challenging conditions in U.S. housing markets and the strategic measures we have taken over the past several months to streamline our land positions and reduce the number of communities where we operate,” said Jeffrey Mezger, president and chief executive officer. “Our industry continues to confront a growing oversupply of new and resale homes, tight mortgage lending conditions and a highly competitive pricing environment. These conditions drove down sale prices and further compressed margins in the first quarter of 2008, prompting us to recognize additional impairment charges and abandon certain land option contracts that no longer made financial sense. Until prices stabilize and consumer confidence returns, we believe inventory levels will remain significantly out of balance with demand. We do not anticipate meaningful improvement in these conditions in the near term, as it is likely to take some time for the market to absorb the current excess housing supply and for consumer confidence to improve.”
The economic-stimulus plan that speeds tax rebates to senior citizens and disabled veterans may also provide a 33 percent profit boost over the next two years for Bellevue-based truck maker Paccar. Small businesses will be able to double expense deductions under the stimulus bill, a spur for heavy-truck sales after an 18-month slump, said Jon Eide, who leads Wells Fargo's commercial-equipment lending unit in Minneapolis. Paccar stock stands to rise, too, after a 30 percent drop since July 18.
"You're going to need to buy these trucks sooner or later," said Peter Bates, a T. Rowe Price analyst in Baltimore who oversees about $1 billion in assets, including Paccar shares. "It seems that Paccar could certainly benefit."
European retail sales fell in March and consumer confidence dropped across the region as inflation, higher credit costs and declining house prices sapped spending. The Bloomberg purchasing managers index of retail sales growth in the euro area declined to a seasonally adjusted 48.2 from 52.4 in February.
A Pew Research survey released yesterday showed 30 percent of white Democrats -- a group Clinton needs in order to win the remaining primaries -- regard her as a ``phony,'' twice as many as those who perceive rival Barack Obama that way. In late February, just 7.8 percent of voters surveyed by Pew described her as ``untrustworthy.'' ``She's either fudged her positions or been downright disingenuous,'' said Dan Gerstein, a Democratic strategist who isn't working for any candidate. ``Any one'' episode ``wouldn't hurt her, but the accumulated weight has turned Democratic voters against her.''
Mitsubishi Heavy Industries is going ahead with its mid-sized regional jet — the first "made in Japan" passenger aircraft in three decades.
Citigroup, Wachovia, along with other U.S. banks are likely to announce dividend cuts in April, as banks' earnings will not support current dividend payouts in 2008, Oppenheimer & Co analyst Meredith Whitney said.
According to AMG Data Services, including ETF activity, Equity funds report net cash outflows totaling -$11.526 billion in the week ended 3/26/08 with Domestic funds reporting net outflows of -$10.880 billion and Non-domestic funds reporting net outflows of -$645 million; Excluding ETF activity, Equity funds report net cash outflows totaling -$1.537 billion with Domestic funds reporting net outflows of -$1.157 billion and Non-domestic funds reporting net outflows totaling -$381 million; Excluding ETF activity, Energy funds report the fourth week of inflows in the last five weeks($2Mil; 0.04% Assets), as Finanial/Banking funds report net inflows of $58 Mil (1.06% Assets); Excluding ETF activity, Gold & Natural Resource funds report the first week of outflows since January 23 (-$136 Mil; 0.40$ Assets), the largest outflows from the sector since 8/22/07 (-$157 Mil; 0.61% Assets).
"The unprecedented diversification process of investing away from equity funds that invest primarily in the U.S. in favor of those that invest globally remains well in place," wrote Stefane Marion, an assistant chief economist with National Bank Financial in Montreal, in a report Thursday.
Rob Hanna: "While the pullback may or may not have farther to fall I am not seeing evidence at this point that it will be anything more than a pullback."
J.C. Penney says it expects first-quarter earnings below its previous forecast as consumer demand wanes. The retailer also forecast a low-double-digit decline in same-store sales for March and a high-single-digit decline for the first quarter. Its prior expectation was for low-single-digit declines for both periods.
The Commerce Department reported that consumer spending was flat in February.
Rhodium usage is dominated by auto catalyst applications where it is used together with platinum and palladium to control exhaust emissions. In the first week of March, the price for Rhodium soared to $9,100 an ounce!
Reverend Otis Moss III will succeed Reverend Jeremiah A. Wright as senior pastor in June.
By disclosing his 2000-2006 returns earlier than is customary, Obama is forcing Clinton either to reveal details about investments by her husband, former President Bill Clinton, or to face more questions about what they aren't making public.
Federal Reserve Bank of Philadelphia President Charles Plosser said the Fed has cut interest rates too aggressively and risks losing its inflation-fighting reputation. ``A less aggressive cut would have been more appropriate,'' Plosser said of this month's 75 basis-point rate reduction. The Fed's reputation for keeping inflation low and stable ``can be lost if we do not continue to act in a way that is consistent with it,'' he said at a conference in Cape Town today.
The Reuters/University of Michigan Surveys of Consumers said its final index of confidence fell to 69.5 in March -- its lowest since February 1992, when it was at 68.8 -- from the previous month's reading of 70.8.
At year-end 2001, Marathon Oil had a resource base of 2.1 billion BOE and by year-end 2007, the Company had more than tripled this to 6.6 billion BOE, which includes liquid hydrocarbons, natural gas and bitumen.
"Resource growth drives future reserve additions," Cazalot said, "and we intend to further increase our resource base and convert barrels into proved reserves and production. A major contributor will be our oil sands mining business, which will be ramping up production significantly in the coming years. We're also making strategic investments in our downstream business that will lower feedstock costs as well as increase efficiency and flexibility, so we can continue providing competitive returns in an increasingly challenging market. And, importantly, we will continue to maintain financial discipline and flexibility to fund our profitable growth...For 2008, the Company said it expects worldwide net upstream production will be in the range of 380,000 - 420,000 BOE per day, excluding sales and acquisitions. Additionally, net bitumen production from the Canadian oil sands is expected to be about 30,000 barrels per day."
Deutsche Bank AG raised its forecasts for Brent crude oil in 2008 and 2009 by 12 percent and 28 percent, respectively, as credit market turmoil drives investors toward commodities. Germany's biggest bank lifted its 2008 average estimate for Brent crude futures traded on London's ICE Futures Europe exchange to $95.50 a barrel from $85, and its 2009 prediction to $102.50 from $80. It also increased forecasts for natural gas.
Nickel headed for the biggest weekly gain in six months in London after BHP Billiton Ltd. declared force majeure on deliveries from its nickel mine in Colombia. Copper and aluminum also gained.
U.S. farmers may plant 12 percent more soybeans this year after prices of the oilseed jumped 75 percent in the past 12 months in a rally to a record, analysts and traders said.
IAC/InterActiveCorp. Chairman Barry Diller does not need a green light from Liberty Media Corp. to split up IAC, a Delaware court has ruled, The Wall Street Journal reported late Friday on its Web site.
The Dow Jones Industrial Average fell 86.06 points to 12,216.40, off 1.2% for the week. The S&P 500 declines 10.54 points to 1,315.22, off 1.1% for the week, while the Nasdaq Composite was off 19.65 points to 2,261.18, giving it a modest weekly gain of 0.1%.
Crude for May delivery lost $1.96, or 1.8%, to settle at $105.62 a barrel on the New York Mercantile Exchange. Gold for April delivery dropped $18.20 to end at $930.60 an ounce on the New York Mercantile Exchange.
The Federal Reserve will auction $50 billion in short-term credits to banks at each of two special auctions in April, the Fed announced Friday.
Executives at Northwest Airlines Corp have proposed that Northwest and Delta Air Lines Inc go ahead with a planned merger, a source familiar with the talks said on Friday.
OPEC's crude-oil supply has probably increased by 100,000 barrels a day, or 0.3 percent, in March, according to preliminary estimates from PetroLogistics Ltd.
Gallup says Obama has a 50%-42% advantage over his rival for the Democratic presidential nomination. Yesterday, he held a 48%-44% lead.
Friday, March 28, 2008
Home Equity Loans
3/28/08 Home Equity Loans
According to the NY Times, Americans owe a staggering $1.1 trillion on home equity loans — and banks are increasingly worried they may not get some of that money back.To get it, many lenders are taking the extraordinary step of preventing some people from selling their homes or refinancing their mortgages unless they pay off all or part of their home equity loans first. In the past, when home prices were not falling, lenders did not resort to these measures.
South Korea's National Pension Service says it will no longer buy U.S. Treasurys; they cite falling yields and a desire to broaden their investments. They are the world's fifth largest pension fund, with $220 b in asets; they hold $14 b in U.S. government debt. It's not the size of their holdings (relatively small compared to the nearly $5 trillion in U.S. debt), the concern is that it may be the start of a trend.
In Iraq, Shiite cleric Muqtada al-Sadr ordered a nationwide strike, and there are fears that hospitals and schools could suffer greatly.
American Airlines canceled about 325 flights Wednesday so its crews could inspect some wire bundles aboard its MD-80 aircraft. The canceled flights represent about 14 percent of the estimated 2,300 flights that the nation's biggest airline had scheduled for the day.
Bloomberg writes that taxpayers may be liable for billions of dollars from Fed and Treasury efforts to help financial firms.
The U.S. economy grew at an annual pace of 0.6 percent from October though December, weakened by a deepening housing slump that may be bringing the six-year expansion to an end. The gain in gross domestic product followed a 4.9 percent third-quarter growth rate, the Commerce Department said. ``We're currently in a recession,'' Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York, said before the report. ``We started to see a slowdown in consumption and we expect that trend to continue in response to falling home prices, falling financial prices and the increase in energy prices which are weighing on spending.''
ConocoPhillips, the second-largest U.S. refiner, said it's shutting down one of its two refineries near San Francisco. The 46,500 barrel-a-day Santa Maria plant in Arroyo Grande, California, is releasing sulfur dioxide ``in the process of brining down the refinery,'' ConocoPhillips said in a filing to the California Office of Emergency Services. Flaring started at 6:51 p.m. local time yesterday and is continuing, according to the filing.
The central banks of Britain and Switzerland added extra funds to ease pressure on high interbank lending rates on Thursday, while the European Central Bank said it was ready to step in with extra cash as needed. The reassuring moves from Europe's three largest central banks helped boost European stocks, following a steady rise in money market lending rates as the end of the quarter nears.
Refinery Utilization dropped 1.6% this week and now stands at 82.2%, the lowest level seen since Hurricane Rita.
First-time claims for state unemployment benefits for the week ending March 22 fell 9,000 to 366,000, the Labor Department reported Thursday. The prior week's level was revised to 375,000 from the initial estimate of 378,000. The four-week average of initial claims gained 1,750 to 358,000. Puerto Rico's office was closed for Easter and took no initial claims. For the week ended March 15, continuing claims for benefits fell 5,000 to 2.85 million. The four-week average of continuing claims rose 25,250 to 2.82 million.
Capital Markets analyst Kurt Hallead upgraded six oil and gas services companies Thursday, saying strong natural gas prices will likely help them outperform their sector. He changed his ratings on BJ Services Co., Halliburton Co., Nabors Industries Ltd., Patterson-UTI Energy Inc. and Union Drilling Inc. to "Outperform" from "Sector Perform."
Clinton's personal approval rating has dipped significantly according to the latest Wall Street Journal/NBC poll, with 48 percent of Americans holding a negative view of her compared to the 37 percent who hold a positive view. For Sen. Barack Obama, D-Ill., the ratings are better: 49 percent positive, 32 percent negative.
The dollar index was at 71.597, up from 71.333 in late Wednesday's North American trading.
The Redman Housing Inc. factory in Silverton, Oregon will close by May 23, costing the town 160 jobs. Champion Enterprises Inc., Redman’s parent company, notified Silverton’s mayor and other local officials that the plant would close. The plant builds manufactured homes. Company officials indicated that the national slowdown in the housing market played a part in its decision to cease operations in Silverton. In a letter sent to Silverton Mayor Ken Hector, the company called the shutdown “a business decision driven by significant housing and general economic market factors.”
Chris Bowers of Open Left opines if Obama can win half of the delegates at stake in Pennsylvania, Indiana and North Carolina, he will simultaneously capture the majority of pledged delegates--an important symbolic victory--and erase Clinton's Pennsylvania gains, forcing the New York senator to contemplate a "final option" that involves "winning the support of more than 70% of the remaining superdelegates." That, he says, "would be game, set, match."
A March 10-16 survey by Quinnipiac University showed Clinton leading Obama in Pennsylvania, 53 percent to 41 percent. Even if Clintonwins the state, she will net just a handful of pledged delegates.
U.S. natural gas inventories fell for an 18th consecutive time, down 36 billion cubic feet in the week ending March 21, the Energy Information Administration reported on Thursday. At 1,277 Bcf, stocks were 240 Bcf less than last year at this time and 33 Bcf above the five-year average of 1,244 Bcf, EIA reported.
The three-month London interbank offered rate, or Libor, for euros increased 1 basis point to 4.73 percent, the highest level since Dec. 27, the British Bankers' Association said today. It was at 4.38 percent at the start of the month. The comparable pound rate climbed above 6 percent for the first time this year, up from 5.76 percent at the beginning of March. ``Money markets have seized up again and by some measures the funding crisis is more acute then ever before,'' Christoph Rieger, a fixed-income strategist in Frankfurt at Dresdner Kleinwort.
Nigeria, Africa's biggest oil producer, is scheduled to increase daily crude exports by 14 percent in May compared with April. Loading programs show Nigeria is scheduled to ship an average of about 2.02 million barrels a day in May, compared with a revised average of 1.78 million barrels a day in April. Total exports will increase 17.5 percent to 62.7 million barrels in May from 53.3 million barrels in April.
Richard Daughty: "In 1960 the average salary was $4,743, a teacher's salary was $5,174, the minimum wage was $1.00 per hour, a first-class postage stamp was 4 cents, a gallon of gasoline was 31 cents, popcorn at the movies was 20 cents and a soda was 10 cents, and a brand new Chevrolet cost $2,529. In short, things now cost roughly ten times or so what they did 48 years ago, which comes out to about 5% inflation per year. The funny part was, if you are the sort of person who thinks that monetary insanity and the economic calamities it creates is funny, that the National Debt was only $286.3 billion in 1960, and now it is $9,300 trillion, which is not a comparable 10 times higher, but 32 times higher! Hahaha! We're freaking doomed!"
Asia faces a sharp rise in food costs, due partly to surging demand for crops used in biofuels, and governments should do more to shield the region's poor from economic shocks, a U.N. commission said Thursday. In China, food costs in February were up 23.3 percent from the same month last year, driven by a 63.4 percent jump in the price of pork and a 46 percent rise for vegetables.
A Texas district court judge has ordered investment banks to fund the imperiled $19 billion buyout of Clear Channel Communications by two private-equity firms, the radio-broadcasting giant said Thursday.
Major investment banks and broker-dealers borrowed $37 billion from the Federal Reserve through the discount window on Wednesday, $8.2 billion more than the previous week. For the entire week, loans to the 20 primary dealers averaged $32.9 billion a day, up $19.5 billion from the previous week's average.
Gold for April delivery finished down 40 cents at $948.80 an ounce on the New York Mercantile Exchange. Crude rose by $1.29 to $107.19.
Atlanta Fed President Dennis Lockhart said he was less optimistic about an economy recovery in 2008. "The recovery in growth I had expected in the second half of this year may be delayed," Lockhart said.
On Tuesday, Bear Stearns Chairman Cayne reported selling $61.3 million of stock in the company, a move that came in the wake of J.P. Morgan Chase's recently revised deal to buy the Wall Street firm.
Robert McHugh: "We have been commenting that the quality of the recent rally left a lot to be desired, that a huge chunk of the buying has been from those who are most pessimistic about the market, shorts, covering their positions from fear of a rally caused by Master Planner intervention buying. Real buyers have sat on the sidelines. This sort of Demand Power and Supply Pressure analysis can prove valuable in determining the potential for a sustainable rally. Tonight the NASDAQ 100 shows us clearly that buyers are not interested in this market at this time, as it came within a whisker of generating a 90 percent down day, a panic selling day, and it did generate a new "sell" signal in our key trend-finder indicators. This should not be happening if the recent rally was the start of a new Bull market, and the demise of the Bear. Markets remain in a precarious state, looking for institutional buying in a big way, not finding it. Unless the Fed and the PPT make an intervention splash, markets sell off. This is like a patient on life support. Every time they try to pull the tubes, the patient's condition deteriorates. This doesn't mean we cannot get more intervention at any random moment, causing another one or two day super-rally, but persistent genuine buying is not happening, keeping us in a primary Bear market."
Wyeth plans to eliminate about 1,200 U.S. sales rep positions as part of its cost-cutting program, the Wall Street Journal reported on its Web site.
Fannie Mae's and Freddie Mac's regulator will allow the mortgage financiers to raise as much as $20 billion in capital as part of an agreement that lets them buy more debt securities, Bloomberg News said on Friday.
According to the Telegraph, John Meriwether, the man behind the most famous hedge fund collapse a decade ago, is under pressure again as he struggles to stem losses and keep investors in his latest fund from jumping ship.
The founder of Long-Term Capital Management, the hedge fund that crashed in 1998 precipitating a global financial crisis, has seen the value of his latest funds suffer in the recent financial market turmoil. New York and London based JWM Partners' bond fund has fallen 28pc this year, while the value of a macro fund run by the firm has dropped 6pc.
Samsung Electronics Co. trimmed its sales forecast for this year on global economic woes, but said profit will increase, helped by earnings growth in key areas such as memory chips, flat-panel displays and mobile handsets. "Global economic uncertainty will continue this year, affecting our management conditions," Chief Executive Yun Jong-yong said Friday at the annual shareholders' meeting. "We expect competition to become fiercer globally amid higher oil prices and the dollar's weakness."
According to the NY Times, Americans owe a staggering $1.1 trillion on home equity loans — and banks are increasingly worried they may not get some of that money back.To get it, many lenders are taking the extraordinary step of preventing some people from selling their homes or refinancing their mortgages unless they pay off all or part of their home equity loans first. In the past, when home prices were not falling, lenders did not resort to these measures.
South Korea's National Pension Service says it will no longer buy U.S. Treasurys; they cite falling yields and a desire to broaden their investments. They are the world's fifth largest pension fund, with $220 b in asets; they hold $14 b in U.S. government debt. It's not the size of their holdings (relatively small compared to the nearly $5 trillion in U.S. debt), the concern is that it may be the start of a trend.
In Iraq, Shiite cleric Muqtada al-Sadr ordered a nationwide strike, and there are fears that hospitals and schools could suffer greatly.
American Airlines canceled about 325 flights Wednesday so its crews could inspect some wire bundles aboard its MD-80 aircraft. The canceled flights represent about 14 percent of the estimated 2,300 flights that the nation's biggest airline had scheduled for the day.
Bloomberg writes that taxpayers may be liable for billions of dollars from Fed and Treasury efforts to help financial firms.
The U.S. economy grew at an annual pace of 0.6 percent from October though December, weakened by a deepening housing slump that may be bringing the six-year expansion to an end. The gain in gross domestic product followed a 4.9 percent third-quarter growth rate, the Commerce Department said. ``We're currently in a recession,'' Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York, said before the report. ``We started to see a slowdown in consumption and we expect that trend to continue in response to falling home prices, falling financial prices and the increase in energy prices which are weighing on spending.''
ConocoPhillips, the second-largest U.S. refiner, said it's shutting down one of its two refineries near San Francisco. The 46,500 barrel-a-day Santa Maria plant in Arroyo Grande, California, is releasing sulfur dioxide ``in the process of brining down the refinery,'' ConocoPhillips said in a filing to the California Office of Emergency Services. Flaring started at 6:51 p.m. local time yesterday and is continuing, according to the filing.
The central banks of Britain and Switzerland added extra funds to ease pressure on high interbank lending rates on Thursday, while the European Central Bank said it was ready to step in with extra cash as needed. The reassuring moves from Europe's three largest central banks helped boost European stocks, following a steady rise in money market lending rates as the end of the quarter nears.
Refinery Utilization dropped 1.6% this week and now stands at 82.2%, the lowest level seen since Hurricane Rita.
First-time claims for state unemployment benefits for the week ending March 22 fell 9,000 to 366,000, the Labor Department reported Thursday. The prior week's level was revised to 375,000 from the initial estimate of 378,000. The four-week average of initial claims gained 1,750 to 358,000. Puerto Rico's office was closed for Easter and took no initial claims. For the week ended March 15, continuing claims for benefits fell 5,000 to 2.85 million. The four-week average of continuing claims rose 25,250 to 2.82 million.
Capital Markets analyst Kurt Hallead upgraded six oil and gas services companies Thursday, saying strong natural gas prices will likely help them outperform their sector. He changed his ratings on BJ Services Co., Halliburton Co., Nabors Industries Ltd., Patterson-UTI Energy Inc. and Union Drilling Inc. to "Outperform" from "Sector Perform."
Clinton's personal approval rating has dipped significantly according to the latest Wall Street Journal/NBC poll, with 48 percent of Americans holding a negative view of her compared to the 37 percent who hold a positive view. For Sen. Barack Obama, D-Ill., the ratings are better: 49 percent positive, 32 percent negative.
The dollar index was at 71.597, up from 71.333 in late Wednesday's North American trading.
The Redman Housing Inc. factory in Silverton, Oregon will close by May 23, costing the town 160 jobs. Champion Enterprises Inc., Redman’s parent company, notified Silverton’s mayor and other local officials that the plant would close. The plant builds manufactured homes. Company officials indicated that the national slowdown in the housing market played a part in its decision to cease operations in Silverton. In a letter sent to Silverton Mayor Ken Hector, the company called the shutdown “a business decision driven by significant housing and general economic market factors.”
Chris Bowers of Open Left opines if Obama can win half of the delegates at stake in Pennsylvania, Indiana and North Carolina, he will simultaneously capture the majority of pledged delegates--an important symbolic victory--and erase Clinton's Pennsylvania gains, forcing the New York senator to contemplate a "final option" that involves "winning the support of more than 70% of the remaining superdelegates." That, he says, "would be game, set, match."
A March 10-16 survey by Quinnipiac University showed Clinton leading Obama in Pennsylvania, 53 percent to 41 percent. Even if Clintonwins the state, she will net just a handful of pledged delegates.
U.S. natural gas inventories fell for an 18th consecutive time, down 36 billion cubic feet in the week ending March 21, the Energy Information Administration reported on Thursday. At 1,277 Bcf, stocks were 240 Bcf less than last year at this time and 33 Bcf above the five-year average of 1,244 Bcf, EIA reported.
The three-month London interbank offered rate, or Libor, for euros increased 1 basis point to 4.73 percent, the highest level since Dec. 27, the British Bankers' Association said today. It was at 4.38 percent at the start of the month. The comparable pound rate climbed above 6 percent for the first time this year, up from 5.76 percent at the beginning of March. ``Money markets have seized up again and by some measures the funding crisis is more acute then ever before,'' Christoph Rieger, a fixed-income strategist in Frankfurt at Dresdner Kleinwort.
Nigeria, Africa's biggest oil producer, is scheduled to increase daily crude exports by 14 percent in May compared with April. Loading programs show Nigeria is scheduled to ship an average of about 2.02 million barrels a day in May, compared with a revised average of 1.78 million barrels a day in April. Total exports will increase 17.5 percent to 62.7 million barrels in May from 53.3 million barrels in April.
Richard Daughty: "In 1960 the average salary was $4,743, a teacher's salary was $5,174, the minimum wage was $1.00 per hour, a first-class postage stamp was 4 cents, a gallon of gasoline was 31 cents, popcorn at the movies was 20 cents and a soda was 10 cents, and a brand new Chevrolet cost $2,529. In short, things now cost roughly ten times or so what they did 48 years ago, which comes out to about 5% inflation per year. The funny part was, if you are the sort of person who thinks that monetary insanity and the economic calamities it creates is funny, that the National Debt was only $286.3 billion in 1960, and now it is $9,300 trillion, which is not a comparable 10 times higher, but 32 times higher! Hahaha! We're freaking doomed!"
Asia faces a sharp rise in food costs, due partly to surging demand for crops used in biofuels, and governments should do more to shield the region's poor from economic shocks, a U.N. commission said Thursday. In China, food costs in February were up 23.3 percent from the same month last year, driven by a 63.4 percent jump in the price of pork and a 46 percent rise for vegetables.
A Texas district court judge has ordered investment banks to fund the imperiled $19 billion buyout of Clear Channel Communications by two private-equity firms, the radio-broadcasting giant said Thursday.
Major investment banks and broker-dealers borrowed $37 billion from the Federal Reserve through the discount window on Wednesday, $8.2 billion more than the previous week. For the entire week, loans to the 20 primary dealers averaged $32.9 billion a day, up $19.5 billion from the previous week's average.
Gold for April delivery finished down 40 cents at $948.80 an ounce on the New York Mercantile Exchange. Crude rose by $1.29 to $107.19.
Atlanta Fed President Dennis Lockhart said he was less optimistic about an economy recovery in 2008. "The recovery in growth I had expected in the second half of this year may be delayed," Lockhart said.
On Tuesday, Bear Stearns Chairman Cayne reported selling $61.3 million of stock in the company, a move that came in the wake of J.P. Morgan Chase's recently revised deal to buy the Wall Street firm.
Robert McHugh: "We have been commenting that the quality of the recent rally left a lot to be desired, that a huge chunk of the buying has been from those who are most pessimistic about the market, shorts, covering their positions from fear of a rally caused by Master Planner intervention buying. Real buyers have sat on the sidelines. This sort of Demand Power and Supply Pressure analysis can prove valuable in determining the potential for a sustainable rally. Tonight the NASDAQ 100 shows us clearly that buyers are not interested in this market at this time, as it came within a whisker of generating a 90 percent down day, a panic selling day, and it did generate a new "sell" signal in our key trend-finder indicators. This should not be happening if the recent rally was the start of a new Bull market, and the demise of the Bear. Markets remain in a precarious state, looking for institutional buying in a big way, not finding it. Unless the Fed and the PPT make an intervention splash, markets sell off. This is like a patient on life support. Every time they try to pull the tubes, the patient's condition deteriorates. This doesn't mean we cannot get more intervention at any random moment, causing another one or two day super-rally, but persistent genuine buying is not happening, keeping us in a primary Bear market."
Wyeth plans to eliminate about 1,200 U.S. sales rep positions as part of its cost-cutting program, the Wall Street Journal reported on its Web site.
Fannie Mae's and Freddie Mac's regulator will allow the mortgage financiers to raise as much as $20 billion in capital as part of an agreement that lets them buy more debt securities, Bloomberg News said on Friday.
According to the Telegraph, John Meriwether, the man behind the most famous hedge fund collapse a decade ago, is under pressure again as he struggles to stem losses and keep investors in his latest fund from jumping ship.
The founder of Long-Term Capital Management, the hedge fund that crashed in 1998 precipitating a global financial crisis, has seen the value of his latest funds suffer in the recent financial market turmoil. New York and London based JWM Partners' bond fund has fallen 28pc this year, while the value of a macro fund run by the firm has dropped 6pc.
Samsung Electronics Co. trimmed its sales forecast for this year on global economic woes, but said profit will increase, helped by earnings growth in key areas such as memory chips, flat-panel displays and mobile handsets. "Global economic uncertainty will continue this year, affecting our management conditions," Chief Executive Yun Jong-yong said Friday at the annual shareholders' meeting. "We expect competition to become fiercer globally amid higher oil prices and the dollar's weakness."
Thursday, March 27, 2008
Further Declines Ahead?
3/27/08 Further Declines Ahead?
Robert McHugh: "While about everyone I read has declared a multi-month rally underway, which is possible, we continue to see several Elliott Wave labelings that allow for a significant decline soon, or after another few hundred point rally. It is premature to believe the Bearish case has been destroyed. One big point at this time is that so far we have a pattern of lower highs in the Industrials. Same can be said for the S&P 500. Should that change, should the Industrials rise above 12,756, it could mean a multi-week rally is unfolding. But so far, nada. The Dow Industrials was flat Tuesday, falling 16.04 points to 12,532.60. NYSE volume was lower at 80 percent of its 10 day average, with upside volume leading at 61 percent, with advancing issues at 65 percent, with upside points at 70 percent."
Crude oil for May delivery rose as much as $1.63, or 1.6 percent, to $102.85 a barrel, and was at $102.49 at 11:34 a.m. London time in electronic trading on the New York Mercantile Exchange. Prices have fallen 9 percent from a record $111.80 a barrel reached on March 17.
According to the Financial Times, more people are reaching retirement age in debt, with borrowers in their late 50s and early 60s owing four times as much as a decade ago, a report warns on Wednesday. A quarter of all people approaching retirement age had outstanding consumer credit commitments with "mean amounts owed by credit users in their late 50s and early 60s higher than any other age group", according to the study by Help the Aged and Barclays. It warned that "levels of credit use may already be forcing people to delay the timing of retirement".
China's foreign exchange reserves rose by 118.9 billion dollars in the first two months of the year to 1.65 trillion dollars, state media reported Wednesday.
Paul Kasriel: "Households have been running deficits - i.e., spending more than their after-tax income - since just before the peak in the NASDAQ stock price index. There are only two ways to spend more than you earn - borrow and/or sell assets. Households have been doing both to fund their recent deficits. These two deficit-funding sources will dry up in the coming years, which will force households to, at least, attempt to begin running surpluses again. Regardless of whether they are successful in their attempt to run surpluses, growth in household spending on goods, services and tangible assets, such as houses, is bound to slow significantly in the coming years."
Meredith Whitney, the Oppenheimer analyst who correctly predicted that the firm would slash its dividend, on Tuesday raised her estimates of the losses that Citi will incur in its first quarter. Ms. Whitney cut her full-year estimate to a loss of 15 cents a share from a profit of 75 cents, citing more asset write-downs. “This will not be our last reduction in 2008,” Ms. Whitney wrote in a research note. “We anticipate further downside to both estimates and stock prices.”
The Standard & Poor's/Case-Shiller report found the average cost of a Bay Area home fell 13.2 percent from January 2007, the sharpest decline since the report began in 2006, when it tracked 18 years worth of data. More than half of the decrease in the region, defined as Alameda, Contra Costa, Marin, San Francisco and San Mateo counties, occurred since November.
In one of the more spectacular meltdowns in mutual fund history, Schwab YieldPlus - marketed as a higher-yielding alternative to money market funds - has plummeted to just $2.5 billion in assets from more than $13 billion in May.The shrinkage reflects both a decline in the fund's asset value and a mass exodus by investors. Year to date through Thursday, Schwab YieldPlus has lost 13.4 percent of its value, ranking dead last among ultra-short bond funds, according to Morningstar. The average fund in that category is down 1.5 percent this year.
Motorola Inc said on Wednesday it would split into two publicly traded entities to separate its loss-making handset division from its other businesses, sending its shares up more than 10 percent.
India's Tata Motors Ltd has agreed to buy luxury brands Jaguar and Land Rover from Ford Motor Co for about $2.3 billion. Ford would contribute up to about $600 million to Jaguar/Land Rover pension plans.
Brett Steenbarger: "My cumulative measure of Demand and Supply hit an overbought level Tues, which has led to avg under performance 20 days out."
Orders for U.S. durable goods unexpectedly fell in February, led by the biggest slump ever in demand for machinery that indicates companies are becoming more reluctant to invest as the economy heads into a recession. The 1.7 percent drop followed a 4.7 percent decrease in the prior month, the Commerce Department said today in Washington. Excluding orders for transportation equipment, which tend to be volatile, bookings fell 2.6 percent, the most since January 2007.
Sprint Nextel Corp. jumped 9.8 percent to $7.05. Comcast Corp. and Time Warner Cable Inc., the two largest U.S. cable providers, are discussing providing funding for a new wireless company run by Sprint Nextel Corp. and Clearwire Corp., the Wall Street Journal reported, citing people familiar with the talks.
Rob Hanna: "In short, a pullback now appears more likely than not. Should the market fail to pull back over the next few days that would suggest positive implications for the intermediate-term."
The dollar index was down 0.3% at 71.81.
Sales of new homes in the United States fell to a 13-year low in February, dropping 1.3% to a seasonally adjusted annual rate of 590,000, the Commerce Department estimated Wednesday. Sales have fallen four months in a row and are off about 30% in the past year. The number of homes on the market dropped by 2.1% to 471,000, the lowest since July 2005, an indication that builders are trying to work off their bloated inventories of unsold homes. The inventory represented a 9.8-month supply at the February sales rate, unchanged from January and the highest since 1981. The median sales price fell 2.7% in the past year to $244,100.
Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Chuck Grassley (R-Iowa) said that they are requesting "exact details of the sale agreement, how and by whom it was negotiated, and all parties to it," and called the acquisition a "taxpayer-backed" transaction. "With jurisdiction over federal debt, it's the Finance Committee's responsibility to pin down just how the government decided to front $30 billion in taxpayer dollars for the Bear Stearns deal, and to monitor the changing terms of the sale," Baucus said in a statement.
Treasury Secretary Henry Paulson said Wednesday that housing prices need to be allowed to continue to drop while every effort is made to ensure the adjustment does not cause excessive harm to the economy. "A correction was inevitable and the sooner we work through it, with a minimum of disorder, the sooner we will see home values stabilize, more buyers return to the housing market, and housing will again contribute to economic growth," he said on prepared remarks for delivery to the U.S. Chamber of Commerce.
Total motor gasoline inventories decreased by 3.3 million barrels, compared to the 800,000 barrel decrease expected by analysts. And distillate fuel inventories decreased by 2.2 million barrels, while analysts had expected a 1.6 million barrel decline. After the data, crude-oil futures for April delivery surged $3.28, or 3.2%, to $104.50 a barrel on the New York Mercantile Exchange. Meanwhile, U.S. crude inventories fell by 500,000 barrels to 307.2 million barrels in the week ending March 21, the American Petroleum Institute reported on Wednesday, according to Moody's Economy.com. Distillate stocks rose by 400,000 barrels to 113.1 million barrels in the same period, while gasoline stocks gained by 300,000 barrels to 218.9 million barrels, the API said.
Oracle Corp , the world's No. 3 software maker, posted quarterly revenue that missed Wall Street expectations on Wednesday, driving its shares down 8 percent and pushing down stocks of some other software makers. "Customers got a little more cautious toward the end of the quarter," Oracle Chief Financial Officer Safra Catz said.
Private equity firms Thomas H. Lee Partners LP and Bain Capital Partners LLC said late Wednesday they are suing a group of banks who were to finance their $19 billion acquisition of Clear Channel Communications Inc.
The April gold contract gained $14.20, or 1.5%, to settle at $949.20 an ounce on the New York Mercantile Exchange. Silver for May delivery ended up 3% at $18.38 an ounce. May copper futures climbed 1.4% to $3.73 a pound. Platinum for April rallied 1.3% to $2,012.60 an ounce. Crude for May delivery rallied $4.68, or 4.6%, to settle at $105.9 on the New York Mercantile Exchange.
Google's share of the search market rose to 58.7% in February from 56.9% the previous month, according to the data. Yahoo's share, meanwhile, fell to 17.6% from 19%, while Microsoft's share fell to 11.2% from 12.1%. However, Google Inc. has had its second straight month of disappointing growth in "paid clicks," a key metric that reflects the overall health of the company, according to data released Wednesday by research firm comScore Inc.
Data from comScore indicate that Google's paid clicks in February rose only 3% compared with the same month a year earlier, a note by Bank of America analyst Brian Pitz said.
Saboteurs are believed to have blown up one of Iraq's two main oil export pipelines from the southern port of Basra, cutting off a third of the exports from the city which provides 80% of the government's revenue, Reuters reported.
For fiscal 2009, a 52-week year, Williams-Sonoma estimates share earnings of $1.42 to $1.56, down 11% to 19% from $1.76 in fiscal 2008, which included 53 weeks. Total revenue could drop 1.7% to 3.9%, to a range of $3.79 billion to $3.88 billion. That compares with $3.95 billion in fiscal 2008. Chairman and Chief Executive Howard Lester said in a statement that fiscal 2009 presents "one of the most challenging macroeconomic environments we have seen in many years."
Miami homebuilder Lennar Corp. swung to a first-quarter ending Feb. 29 loss of $88.2 million, or 56 cents a share, with revenue dropping 62% to $1.06 billion. "Market conditions have remained challenged and continued to deteriorate throughout our first quarter of 2008," the firm said. Analysts polled by FactSet expected a loss of $1.27 a share on sales of $1.1 billion.
Merrill Lynch & Co and UBS AG may lose money this quarter and suffer write-downs of $6 billion and $11.1 billion, respectively, as credit problems worsen, according to Oppenheimer & Co analyst Meredith Whitney.
China's stock index fell to the lowest in more than eight months, led by Baoshan Iron & Steel Co. after its profit dropped because of higher raw-material costs.China Petroleum & Chemical Corp. and PetroChina Co. declined after a government report showed the country's oil refineries posted a loss in the first two months of 2008. China Shipping Container Lines Co. and China Coal Energy Co. fell below their initial public offering prices.``There's concern corporate profits may keep sliding in the first quarter, and that's hurting demand for shares,'' said Mo Fan , an analyst at Soochow Asset Management Co. in Shanghai.
According to the Telegraph, this spigot of easy credit has now been turned off. The spreads on Icelandic bank debt have risen above 800 basis points, near levels seen in Bear Stearns' debt before the Federal Reserve's rescue. Which raises a thorny question: Is the Icelandic government - which presides over an economy the size of Bristol - big enough to underpin its encephalitic banks if push ever comes to shove? "There are clearly limits to what the government can do," said Paul Rawkins, an Iceland expert at Fitch Ratings. "If the government tried to raise billions in the markets it would damage its own credit worthiness. In any case, these debts are in foreign currencies. The central bank has just $2bn (£1bn) in reserves," he said.
According to the Financial Times, the US is sending in the -cavalry to fight the crisis in the credit and housing markets - unleashing government-sponsored enterprises to buy and hold mortgage-backed securities (MBS) for which there is little private demand. The move marks a new stage in the policy response to the credit crisis, in which the US government is increasingly deploying all the tools at its disposal - short of an outright public purchase of mortgage securities - to prevent a full-blown credit crunch.
Robert McHugh: "While about everyone I read has declared a multi-month rally underway, which is possible, we continue to see several Elliott Wave labelings that allow for a significant decline soon, or after another few hundred point rally. It is premature to believe the Bearish case has been destroyed. One big point at this time is that so far we have a pattern of lower highs in the Industrials. Same can be said for the S&P 500. Should that change, should the Industrials rise above 12,756, it could mean a multi-week rally is unfolding. But so far, nada. The Dow Industrials was flat Tuesday, falling 16.04 points to 12,532.60. NYSE volume was lower at 80 percent of its 10 day average, with upside volume leading at 61 percent, with advancing issues at 65 percent, with upside points at 70 percent."
Crude oil for May delivery rose as much as $1.63, or 1.6 percent, to $102.85 a barrel, and was at $102.49 at 11:34 a.m. London time in electronic trading on the New York Mercantile Exchange. Prices have fallen 9 percent from a record $111.80 a barrel reached on March 17.
According to the Financial Times, more people are reaching retirement age in debt, with borrowers in their late 50s and early 60s owing four times as much as a decade ago, a report warns on Wednesday. A quarter of all people approaching retirement age had outstanding consumer credit commitments with "mean amounts owed by credit users in their late 50s and early 60s higher than any other age group", according to the study by Help the Aged and Barclays. It warned that "levels of credit use may already be forcing people to delay the timing of retirement".
China's foreign exchange reserves rose by 118.9 billion dollars in the first two months of the year to 1.65 trillion dollars, state media reported Wednesday.
Paul Kasriel: "Households have been running deficits - i.e., spending more than their after-tax income - since just before the peak in the NASDAQ stock price index. There are only two ways to spend more than you earn - borrow and/or sell assets. Households have been doing both to fund their recent deficits. These two deficit-funding sources will dry up in the coming years, which will force households to, at least, attempt to begin running surpluses again. Regardless of whether they are successful in their attempt to run surpluses, growth in household spending on goods, services and tangible assets, such as houses, is bound to slow significantly in the coming years."
Meredith Whitney, the Oppenheimer analyst who correctly predicted that the firm would slash its dividend, on Tuesday raised her estimates of the losses that Citi will incur in its first quarter. Ms. Whitney cut her full-year estimate to a loss of 15 cents a share from a profit of 75 cents, citing more asset write-downs. “This will not be our last reduction in 2008,” Ms. Whitney wrote in a research note. “We anticipate further downside to both estimates and stock prices.”
The Standard & Poor's/Case-Shiller report found the average cost of a Bay Area home fell 13.2 percent from January 2007, the sharpest decline since the report began in 2006, when it tracked 18 years worth of data. More than half of the decrease in the region, defined as Alameda, Contra Costa, Marin, San Francisco and San Mateo counties, occurred since November.
In one of the more spectacular meltdowns in mutual fund history, Schwab YieldPlus - marketed as a higher-yielding alternative to money market funds - has plummeted to just $2.5 billion in assets from more than $13 billion in May.The shrinkage reflects both a decline in the fund's asset value and a mass exodus by investors. Year to date through Thursday, Schwab YieldPlus has lost 13.4 percent of its value, ranking dead last among ultra-short bond funds, according to Morningstar. The average fund in that category is down 1.5 percent this year.
Motorola Inc said on Wednesday it would split into two publicly traded entities to separate its loss-making handset division from its other businesses, sending its shares up more than 10 percent.
India's Tata Motors Ltd has agreed to buy luxury brands Jaguar and Land Rover from Ford Motor Co for about $2.3 billion. Ford would contribute up to about $600 million to Jaguar/Land Rover pension plans.
Brett Steenbarger: "My cumulative measure of Demand and Supply hit an overbought level Tues, which has led to avg under performance 20 days out."
Orders for U.S. durable goods unexpectedly fell in February, led by the biggest slump ever in demand for machinery that indicates companies are becoming more reluctant to invest as the economy heads into a recession. The 1.7 percent drop followed a 4.7 percent decrease in the prior month, the Commerce Department said today in Washington. Excluding orders for transportation equipment, which tend to be volatile, bookings fell 2.6 percent, the most since January 2007.
Sprint Nextel Corp. jumped 9.8 percent to $7.05. Comcast Corp. and Time Warner Cable Inc., the two largest U.S. cable providers, are discussing providing funding for a new wireless company run by Sprint Nextel Corp. and Clearwire Corp., the Wall Street Journal reported, citing people familiar with the talks.
Rob Hanna: "In short, a pullback now appears more likely than not. Should the market fail to pull back over the next few days that would suggest positive implications for the intermediate-term."
The dollar index was down 0.3% at 71.81.
Sales of new homes in the United States fell to a 13-year low in February, dropping 1.3% to a seasonally adjusted annual rate of 590,000, the Commerce Department estimated Wednesday. Sales have fallen four months in a row and are off about 30% in the past year. The number of homes on the market dropped by 2.1% to 471,000, the lowest since July 2005, an indication that builders are trying to work off their bloated inventories of unsold homes. The inventory represented a 9.8-month supply at the February sales rate, unchanged from January and the highest since 1981. The median sales price fell 2.7% in the past year to $244,100.
Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Chuck Grassley (R-Iowa) said that they are requesting "exact details of the sale agreement, how and by whom it was negotiated, and all parties to it," and called the acquisition a "taxpayer-backed" transaction. "With jurisdiction over federal debt, it's the Finance Committee's responsibility to pin down just how the government decided to front $30 billion in taxpayer dollars for the Bear Stearns deal, and to monitor the changing terms of the sale," Baucus said in a statement.
Treasury Secretary Henry Paulson said Wednesday that housing prices need to be allowed to continue to drop while every effort is made to ensure the adjustment does not cause excessive harm to the economy. "A correction was inevitable and the sooner we work through it, with a minimum of disorder, the sooner we will see home values stabilize, more buyers return to the housing market, and housing will again contribute to economic growth," he said on prepared remarks for delivery to the U.S. Chamber of Commerce.
Total motor gasoline inventories decreased by 3.3 million barrels, compared to the 800,000 barrel decrease expected by analysts. And distillate fuel inventories decreased by 2.2 million barrels, while analysts had expected a 1.6 million barrel decline. After the data, crude-oil futures for April delivery surged $3.28, or 3.2%, to $104.50 a barrel on the New York Mercantile Exchange. Meanwhile, U.S. crude inventories fell by 500,000 barrels to 307.2 million barrels in the week ending March 21, the American Petroleum Institute reported on Wednesday, according to Moody's Economy.com. Distillate stocks rose by 400,000 barrels to 113.1 million barrels in the same period, while gasoline stocks gained by 300,000 barrels to 218.9 million barrels, the API said.
Oracle Corp , the world's No. 3 software maker, posted quarterly revenue that missed Wall Street expectations on Wednesday, driving its shares down 8 percent and pushing down stocks of some other software makers. "Customers got a little more cautious toward the end of the quarter," Oracle Chief Financial Officer Safra Catz said.
Private equity firms Thomas H. Lee Partners LP and Bain Capital Partners LLC said late Wednesday they are suing a group of banks who were to finance their $19 billion acquisition of Clear Channel Communications Inc.
The April gold contract gained $14.20, or 1.5%, to settle at $949.20 an ounce on the New York Mercantile Exchange. Silver for May delivery ended up 3% at $18.38 an ounce. May copper futures climbed 1.4% to $3.73 a pound. Platinum for April rallied 1.3% to $2,012.60 an ounce. Crude for May delivery rallied $4.68, or 4.6%, to settle at $105.9 on the New York Mercantile Exchange.
Google's share of the search market rose to 58.7% in February from 56.9% the previous month, according to the data. Yahoo's share, meanwhile, fell to 17.6% from 19%, while Microsoft's share fell to 11.2% from 12.1%. However, Google Inc. has had its second straight month of disappointing growth in "paid clicks," a key metric that reflects the overall health of the company, according to data released Wednesday by research firm comScore Inc.
Data from comScore indicate that Google's paid clicks in February rose only 3% compared with the same month a year earlier, a note by Bank of America analyst Brian Pitz said.
Saboteurs are believed to have blown up one of Iraq's two main oil export pipelines from the southern port of Basra, cutting off a third of the exports from the city which provides 80% of the government's revenue, Reuters reported.
For fiscal 2009, a 52-week year, Williams-Sonoma estimates share earnings of $1.42 to $1.56, down 11% to 19% from $1.76 in fiscal 2008, which included 53 weeks. Total revenue could drop 1.7% to 3.9%, to a range of $3.79 billion to $3.88 billion. That compares with $3.95 billion in fiscal 2008. Chairman and Chief Executive Howard Lester said in a statement that fiscal 2009 presents "one of the most challenging macroeconomic environments we have seen in many years."
Miami homebuilder Lennar Corp. swung to a first-quarter ending Feb. 29 loss of $88.2 million, or 56 cents a share, with revenue dropping 62% to $1.06 billion. "Market conditions have remained challenged and continued to deteriorate throughout our first quarter of 2008," the firm said. Analysts polled by FactSet expected a loss of $1.27 a share on sales of $1.1 billion.
Merrill Lynch & Co and UBS AG may lose money this quarter and suffer write-downs of $6 billion and $11.1 billion, respectively, as credit problems worsen, according to Oppenheimer & Co analyst Meredith Whitney.
China's stock index fell to the lowest in more than eight months, led by Baoshan Iron & Steel Co. after its profit dropped because of higher raw-material costs.China Petroleum & Chemical Corp. and PetroChina Co. declined after a government report showed the country's oil refineries posted a loss in the first two months of 2008. China Shipping Container Lines Co. and China Coal Energy Co. fell below their initial public offering prices.``There's concern corporate profits may keep sliding in the first quarter, and that's hurting demand for shares,'' said Mo Fan , an analyst at Soochow Asset Management Co. in Shanghai.
According to the Telegraph, this spigot of easy credit has now been turned off. The spreads on Icelandic bank debt have risen above 800 basis points, near levels seen in Bear Stearns' debt before the Federal Reserve's rescue. Which raises a thorny question: Is the Icelandic government - which presides over an economy the size of Bristol - big enough to underpin its encephalitic banks if push ever comes to shove? "There are clearly limits to what the government can do," said Paul Rawkins, an Iceland expert at Fitch Ratings. "If the government tried to raise billions in the markets it would damage its own credit worthiness. In any case, these debts are in foreign currencies. The central bank has just $2bn (£1bn) in reserves," he said.
According to the Financial Times, the US is sending in the -cavalry to fight the crisis in the credit and housing markets - unleashing government-sponsored enterprises to buy and hold mortgage-backed securities (MBS) for which there is little private demand. The move marks a new stage in the policy response to the credit crisis, in which the US government is increasingly deploying all the tools at its disposal - short of an outright public purchase of mortgage securities - to prevent a full-blown credit crunch.
Wednesday, March 26, 2008
Gold
3/26/08 Gold
``We're going to see new highs in gold above $1,030 within the next two or three months,'' said Robin Wilkin, London-based head of commodities and currency technical analysis at JPMorgan Chase & Co. ``I'd be surprised if we just race to new highs.'' Gold for immediate delivery gained $15.55, or 1.7 percent, to $930.85 an ounce as of 8:48 a.m. in London, the biggest gain since March 5. Prices dropped 8.3 percent last week, the most in 25 years. Gold will average $950 an ounce this year, Morgan Stanley New York-based analyst Hussein Allidina said in an e-mailed message yesterday. So far, the spot price average is $922.78 an ounce. ``Gold's price will be a function of the U.S. dollar'' and interest rates set by the Federal Reserve, he wrote.
Goldman Sachs forecasts global credit losses stemming from the current market turmoil will reach $1.2 trillion, with Wall Street accounting for nearly 40 percent of the losses.
Valero Energy Corp., the largest U.S. refiner, said it expects first-quarter net income to drop to as little as 10 cents a share as profit margins on gasoline and other fuels narrow.
The New York Times: "In the past decade, there has been an explosion in complex derivative instruments, such as collateralized debt obligations and credit default swaps, which were intended primarily to transfer risk. "These products are virtually hidden from investors, analysts and regulators, even though they have emerged as one of Wall Street's most outsized profit engines. They don't trade openly on public exchanges, and financial services firms disclose few details about them. "Bear Stearns's vast portfolio of these instruments was among the main reasons for the bank's collapse, but derivatives are buried in the accounts of just about every Wall Street firm, as well as major commercial banks like Citigroup and JPMorgan Chase. What's more, these exotic investments have been exported all over the globe, causing losses in places as distant from Wall Street as a small Norwegian town north of the Arctic Circle."
David Yu: " Both the volume and the money flow analyses indicate January 23 as the technical bottom. At least that's what the language of the market told us. While the rest of the world was waiting for the other shoe to drop, the market was quietly whispering to us that it had already hit the bottom. And, as the market shifted from distribution mode to accumulation, the sentiment too must also make positive changes."
Zman: "Chesapeake Energy believes the Haynesville Shale play could potentially have a larger impact on the company THAN ANY OTHER PLAY in which it has participated to date."
Commodities are posting their seventh year of gains on demand led by China and disrupted supplies of metals and crops. The UBS Bloomberg Constant Maturity Commodity Index of 26 commodities gained 30 percent in the past year even after an 8 percent plunge last week.
Nigeria, Africa's biggest oil producer, raised the official selling prices for its crude exports loading in April to records. Benchmark Bonny Light and Qua Iboe climbed by 45 cents to a premium of $3.55 a barrel over Dated Brent, according to the price list compiled by state-owned Nigerian National Petroleum Corp. The previous record of $3.10 was set for March exports. All other Nigerian crude prices rose by between 20 cents and 65 cents.
U.S. HOUSING PRICES DOWN A RECORD 10.7% IN PAST YEAR: CASE-SHILLER. Prices were down in all 20 cities compared with December, and prices were down in 19 of 20 cities compared with a yeare ago. Only Charlotte, N.C., has had any appreciation. U.S. home prices fell 11.4% in January, according to the latest Standard & Poor's/Case-Shiller report. Miami, Las Vegas and Phoenix were the weakest markets.
Monsanto boosted its forecast for 2008 ongoing earnings to $3.15-$3.25 a share, from its earlier view of $2.70-$2.80 a share. It expects as-reported 2008 earnings of $3.38-$3.48 a share. For the second-quarter, the company expects ongoing earnings of about $1.75 a share, or $1.98 a share as reported. Analysts surveyed by Thomson Financial forecast 2008 earnings of $2.87 a share and second-quarter profit of $1.35 a share, on average. "Leading corn market share positions, accelerated biotechnology trait penetration and new value generated by Roundup and other glyphosate-based herbicides have led Monsanto Company to well exceed its expectations," the St. Louis company said.
Rob Hanna: "Based on price and sentiment measures, a pullback beginning in the next few days seems to be a likely scenario."
J.P. Morgan Chase's increased bid of $10 a share for troubled brokerage Bear Stearns Co. works out to the bank paying about $65 a share after all costs and debt is absorbed, Punk Ziegel analyst Dick Bove wrote in a research note Tuesday. Bove said the total transaction cost of $3.44 billion added to the original Bear shares offered and the 12-month loss of $6 billion J.P Morgan will pay to combine the two companies, plus the purchase price, will have the bank paying around $65 per original Bear share. "This is approximately the same as Bear Stearns opening price on March 12," Bove said, making it no bargain for J.P. Morgan investors.
Citigroup said it is likely Microsoft Corp will raise its $31-per-share offer for Yahoo Inc and upgraded Yahoo shares to "buy" from "hold." The brokerage also raised its price target on Yahoo's stock to $34 from $31, saying it believed Microsoft remained committed to its offer and "is capable of and willing to" increase that bid to conclude the deal.
Bill Gross of PIMCO: "Bear Stearns has made it obvious that things have gone too far," he continues. "The investment community has morphed into something beyond banks and something beyond regulation. We call it the shadow banking system."
U.S. CONSUMER-CONFIDENCE DATA SHOW EXPECTATIONS MEASURE AT 35-YEAR LOW. The March consumer confidence index fell to 64.5 from a revised reading of 76.4 in February. "Looking ahead, consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon," said Lynn Franco, director of consumer research at the private Conference Board.
The Federal Reserve on Tuesday said it received 88 bidders for its Monday auction of $50 billion in 28-day credit.
European banks hungry for more cash received an additional $77.1 billion in short-term credit from the European Central Bank on Tuesday as part of its weekly refinancing operation.
Confidence among Japan's largest manufacturers will probably fall to its lowest level in four years, as a stronger yen eats away at exporters' profits and the faltering U.S. economy slows global growth.
The Bank of Israel cut its benchmark lending rate half a percentage point to the lowest ever as it seeks to limit the impact of the slowing global economy and curb the shekel's appreciation. The rate charged to commercial lenders was reduced to 3.25 percent, a spokeswoman for the Jerusalem-based bank said today.
The dollar index, which measures the U.S. currency against a basket of major counterparts, was at 72.222.
ABC News: "Video footage of Sen. Hillary Clinton's 1996 trip to Bosnia offers a contradictory description to the dramatic account the Democratic presidential candidate delivered in a recent speech. At an event last week in Washington, Clinton said she and her crew landed in an "evasive maneuver under sniper fire." She described her trip to Tuzla as if it were a scene from "Saving Private Ryan." "There was supposed to be some sort of greeting ceremony, but instead we just ran with our heads down to get into the vehicles," she said. Questions surrounding whether or not Clinton embellished a 1996 trip to Bosnia are particularly embarrassing for her because she has campaigned so hard on her "experience," arguing that she is ready to answer the 3 a.m. crisis call at the White House." Clinton says she "misspoke." What she meant to say was all Americans do not need another president occupying the White House who tells lies.
Jabil Circuit Inc. said that, exlcluding one-time items, its core earnings were $42 million, or 20 cents a share. Analysts surveyed by FactSet Research had forecast Jabil to earn 13 cents a share. Jabil shares fell 13% to $9.95 after the company said it expects its third-quarter revenue to be between $3.05 billion and $3.15 billion, down from analysts forecasts of $3.26 billion.
SAIC reported fiscal 2008 revenue of $8.94 billion and earnings a share of $1.
The $19 billion privatization of Clear Channel Communications Inc.is on the verge of collapse as the private equity firms and the banks financing the deal were unable to narrow differences over the terms of the credit agreement, the Wall Street Journal reported late Tuesday on its Web site, citing people familiar with the matter. Clear Channel Communications Inc and the private equity firms that want to buy it may go to court to force lenders to complete the leveraged buyout, the New York Times said, citing people briefed on the talks.
Crude oil for May delivery settled up 36 cents, or 0.4%, at $101.22 a barrel on the New York Mercantile Exchange. Gold for April delivery rose $16.30, or 1.8%, to end at $935 an ounce on the New York Mercantile Exchange.
The Federal Deposit Insurance Corp. plans to add about 140 workers to its bank failure division in coming months, an increase of 60%, to handle an anticipated rise of troubled banks, The Associated Press reported Tuesday, citing comments made by the FDIC's chief operating officer. "We want to make sure that we're prepared," FDIC COO John Bovenzi told the AP. There are about 76 banks on the FDIC's "problem institutions," the AP reported.
On Tuesday, BJ Services rose $1.70 on 4 times the normal volume. Not surprisingly, there was unusual activity in several call options.
Trustees for the government's two biggest benefit programs warned Tuesday that Social Security and Medicare are facing "enormous challenges," with the threat to Medicare's solvency far more severe.
The trustees, issuing a once-a-year analysis of the government's two biggest benefit programs, said the resources in the Social Security trust fund will be depleted by 2041. The reserves in the Medicare trust fund that pays hospital benefits were projected to be wiped out by 2019.
The ongoing credit crisis is likely to dent revenues at big banks across the 15 nations that use the euro currency, but strong profits in recent years should help cushion the blow, European Central Bank President Jean-Claude Trichet testified in a European Parliament hearing.
The Ifo Institute's closely-watched gauge of German business confidence posted an unexpected rise in March to 104.8 after a reading of 104.1 in February, news reports said.
Xstrata dropped 12% after takeover talks with Vale ended, while Deutsche Bank traded 2.6% lower after warning of likely write-offs in its leveraged loan book.
Caterpillar Inc. said the U.S. economy is probably in a recession and is unlikely to start recovering until late this year.
Take-Two Interactive Software Inc said it is recommending that shareholders reject a $26-per-share takeover offer from rival video-game publisher Electronic Arts Inc . But Take-Two, which publishes the popular "Grand Theft Auto" series of games, said it would explore strategic alternatives, including a combination with third parties or with EA, or remaining independent.
``We're going to see new highs in gold above $1,030 within the next two or three months,'' said Robin Wilkin, London-based head of commodities and currency technical analysis at JPMorgan Chase & Co. ``I'd be surprised if we just race to new highs.'' Gold for immediate delivery gained $15.55, or 1.7 percent, to $930.85 an ounce as of 8:48 a.m. in London, the biggest gain since March 5. Prices dropped 8.3 percent last week, the most in 25 years. Gold will average $950 an ounce this year, Morgan Stanley New York-based analyst Hussein Allidina said in an e-mailed message yesterday. So far, the spot price average is $922.78 an ounce. ``Gold's price will be a function of the U.S. dollar'' and interest rates set by the Federal Reserve, he wrote.
Goldman Sachs forecasts global credit losses stemming from the current market turmoil will reach $1.2 trillion, with Wall Street accounting for nearly 40 percent of the losses.
Valero Energy Corp., the largest U.S. refiner, said it expects first-quarter net income to drop to as little as 10 cents a share as profit margins on gasoline and other fuels narrow.
The New York Times: "In the past decade, there has been an explosion in complex derivative instruments, such as collateralized debt obligations and credit default swaps, which were intended primarily to transfer risk. "These products are virtually hidden from investors, analysts and regulators, even though they have emerged as one of Wall Street's most outsized profit engines. They don't trade openly on public exchanges, and financial services firms disclose few details about them. "Bear Stearns's vast portfolio of these instruments was among the main reasons for the bank's collapse, but derivatives are buried in the accounts of just about every Wall Street firm, as well as major commercial banks like Citigroup and JPMorgan Chase. What's more, these exotic investments have been exported all over the globe, causing losses in places as distant from Wall Street as a small Norwegian town north of the Arctic Circle."
David Yu: " Both the volume and the money flow analyses indicate January 23 as the technical bottom. At least that's what the language of the market told us. While the rest of the world was waiting for the other shoe to drop, the market was quietly whispering to us that it had already hit the bottom. And, as the market shifted from distribution mode to accumulation, the sentiment too must also make positive changes."
Zman: "Chesapeake Energy believes the Haynesville Shale play could potentially have a larger impact on the company THAN ANY OTHER PLAY in which it has participated to date."
Commodities are posting their seventh year of gains on demand led by China and disrupted supplies of metals and crops. The UBS Bloomberg Constant Maturity Commodity Index of 26 commodities gained 30 percent in the past year even after an 8 percent plunge last week.
Nigeria, Africa's biggest oil producer, raised the official selling prices for its crude exports loading in April to records. Benchmark Bonny Light and Qua Iboe climbed by 45 cents to a premium of $3.55 a barrel over Dated Brent, according to the price list compiled by state-owned Nigerian National Petroleum Corp. The previous record of $3.10 was set for March exports. All other Nigerian crude prices rose by between 20 cents and 65 cents.
U.S. HOUSING PRICES DOWN A RECORD 10.7% IN PAST YEAR: CASE-SHILLER. Prices were down in all 20 cities compared with December, and prices were down in 19 of 20 cities compared with a yeare ago. Only Charlotte, N.C., has had any appreciation. U.S. home prices fell 11.4% in January, according to the latest Standard & Poor's/Case-Shiller report. Miami, Las Vegas and Phoenix were the weakest markets.
Monsanto boosted its forecast for 2008 ongoing earnings to $3.15-$3.25 a share, from its earlier view of $2.70-$2.80 a share. It expects as-reported 2008 earnings of $3.38-$3.48 a share. For the second-quarter, the company expects ongoing earnings of about $1.75 a share, or $1.98 a share as reported. Analysts surveyed by Thomson Financial forecast 2008 earnings of $2.87 a share and second-quarter profit of $1.35 a share, on average. "Leading corn market share positions, accelerated biotechnology trait penetration and new value generated by Roundup and other glyphosate-based herbicides have led Monsanto Company to well exceed its expectations," the St. Louis company said.
Rob Hanna: "Based on price and sentiment measures, a pullback beginning in the next few days seems to be a likely scenario."
J.P. Morgan Chase's increased bid of $10 a share for troubled brokerage Bear Stearns Co. works out to the bank paying about $65 a share after all costs and debt is absorbed, Punk Ziegel analyst Dick Bove wrote in a research note Tuesday. Bove said the total transaction cost of $3.44 billion added to the original Bear shares offered and the 12-month loss of $6 billion J.P Morgan will pay to combine the two companies, plus the purchase price, will have the bank paying around $65 per original Bear share. "This is approximately the same as Bear Stearns opening price on March 12," Bove said, making it no bargain for J.P. Morgan investors.
Citigroup said it is likely Microsoft Corp will raise its $31-per-share offer for Yahoo Inc and upgraded Yahoo shares to "buy" from "hold." The brokerage also raised its price target on Yahoo's stock to $34 from $31, saying it believed Microsoft remained committed to its offer and "is capable of and willing to" increase that bid to conclude the deal.
Bill Gross of PIMCO: "Bear Stearns has made it obvious that things have gone too far," he continues. "The investment community has morphed into something beyond banks and something beyond regulation. We call it the shadow banking system."
U.S. CONSUMER-CONFIDENCE DATA SHOW EXPECTATIONS MEASURE AT 35-YEAR LOW. The March consumer confidence index fell to 64.5 from a revised reading of 76.4 in February. "Looking ahead, consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon," said Lynn Franco, director of consumer research at the private Conference Board.
The Federal Reserve on Tuesday said it received 88 bidders for its Monday auction of $50 billion in 28-day credit.
European banks hungry for more cash received an additional $77.1 billion in short-term credit from the European Central Bank on Tuesday as part of its weekly refinancing operation.
Confidence among Japan's largest manufacturers will probably fall to its lowest level in four years, as a stronger yen eats away at exporters' profits and the faltering U.S. economy slows global growth.
The Bank of Israel cut its benchmark lending rate half a percentage point to the lowest ever as it seeks to limit the impact of the slowing global economy and curb the shekel's appreciation. The rate charged to commercial lenders was reduced to 3.25 percent, a spokeswoman for the Jerusalem-based bank said today.
The dollar index, which measures the U.S. currency against a basket of major counterparts, was at 72.222.
ABC News: "Video footage of Sen. Hillary Clinton's 1996 trip to Bosnia offers a contradictory description to the dramatic account the Democratic presidential candidate delivered in a recent speech. At an event last week in Washington, Clinton said she and her crew landed in an "evasive maneuver under sniper fire." She described her trip to Tuzla as if it were a scene from "Saving Private Ryan." "There was supposed to be some sort of greeting ceremony, but instead we just ran with our heads down to get into the vehicles," she said. Questions surrounding whether or not Clinton embellished a 1996 trip to Bosnia are particularly embarrassing for her because she has campaigned so hard on her "experience," arguing that she is ready to answer the 3 a.m. crisis call at the White House." Clinton says she "misspoke." What she meant to say was all Americans do not need another president occupying the White House who tells lies.
Jabil Circuit Inc. said that, exlcluding one-time items, its core earnings were $42 million, or 20 cents a share. Analysts surveyed by FactSet Research had forecast Jabil to earn 13 cents a share. Jabil shares fell 13% to $9.95 after the company said it expects its third-quarter revenue to be between $3.05 billion and $3.15 billion, down from analysts forecasts of $3.26 billion.
SAIC reported fiscal 2008 revenue of $8.94 billion and earnings a share of $1.
The $19 billion privatization of Clear Channel Communications Inc.is on the verge of collapse as the private equity firms and the banks financing the deal were unable to narrow differences over the terms of the credit agreement, the Wall Street Journal reported late Tuesday on its Web site, citing people familiar with the matter. Clear Channel Communications Inc and the private equity firms that want to buy it may go to court to force lenders to complete the leveraged buyout, the New York Times said, citing people briefed on the talks.
Crude oil for May delivery settled up 36 cents, or 0.4%, at $101.22 a barrel on the New York Mercantile Exchange. Gold for April delivery rose $16.30, or 1.8%, to end at $935 an ounce on the New York Mercantile Exchange.
The Federal Deposit Insurance Corp. plans to add about 140 workers to its bank failure division in coming months, an increase of 60%, to handle an anticipated rise of troubled banks, The Associated Press reported Tuesday, citing comments made by the FDIC's chief operating officer. "We want to make sure that we're prepared," FDIC COO John Bovenzi told the AP. There are about 76 banks on the FDIC's "problem institutions," the AP reported.
On Tuesday, BJ Services rose $1.70 on 4 times the normal volume. Not surprisingly, there was unusual activity in several call options.
Trustees for the government's two biggest benefit programs warned Tuesday that Social Security and Medicare are facing "enormous challenges," with the threat to Medicare's solvency far more severe.
The trustees, issuing a once-a-year analysis of the government's two biggest benefit programs, said the resources in the Social Security trust fund will be depleted by 2041. The reserves in the Medicare trust fund that pays hospital benefits were projected to be wiped out by 2019.
The ongoing credit crisis is likely to dent revenues at big banks across the 15 nations that use the euro currency, but strong profits in recent years should help cushion the blow, European Central Bank President Jean-Claude Trichet testified in a European Parliament hearing.
The Ifo Institute's closely-watched gauge of German business confidence posted an unexpected rise in March to 104.8 after a reading of 104.1 in February, news reports said.
Xstrata dropped 12% after takeover talks with Vale ended, while Deutsche Bank traded 2.6% lower after warning of likely write-offs in its leveraged loan book.
Caterpillar Inc. said the U.S. economy is probably in a recession and is unlikely to start recovering until late this year.
Take-Two Interactive Software Inc said it is recommending that shareholders reject a $26-per-share takeover offer from rival video-game publisher Electronic Arts Inc . But Take-Two, which publishes the popular "Grand Theft Auto" series of games, said it would explore strategic alternatives, including a combination with third parties or with EA, or remaining independent.
Tuesday, March 25, 2008
Planted Seeds
3/15/08 Planted Seeds
According to Bloomberg, the U.S. may pay a steep price to free itself of its economic and financial travails: bigger government, faster inflation and a poorer country. That would mark a reversal from the course of much of the past two decades, when Washington has been dismantling regulations, the Federal Reserve has been largely successful in containing inflation, and many Americans have felt wealthier thanks to rising home prices and cheaper imports. ``We're going to have 4 to 5 percent inflation,'' says Kenneth Rogoff, former chief economist for the International Monetary Fund who's now at Harvard University. ``The dollar will continue to drop and stay down for years. And we're going to end up with more regulation.''
The Federal Reserve announced Monday will offer $50 billion in 28-day credit through its term auction facility. Bids can be submitted starting at 11:00 a.m. EDT, Results of the auction will be announced on Tuesday at 10:00 a.m. EDT. The maximum award per bidder is $5 billion, or 10% 0f the offering amount.
The Federal Home Loan Bank system will be permitted to expand their holdings of Fannie Mae and Freddie Mac securities by more than $100 billion under a plan endorsed by their regulator on Monday. The Federal Housing Finance Board voted to let the banks use their existing capital to increase their holdings of agency mortgage-backed securities for two years, effective immediately.
Central banks from 16 Asian nations may invest more of their $1 trillion of foreign reserves in the region's debt as Federal Reserve interest-rate cuts reduce returns on U.S. assets.
J.P. Morgan Chase & Co. has amended its buyout deal with Bear Stearns Cos. to pay shareholders $10 a share instead of the previously agreed $2 a share. J.P. Morgan Chase & Co. will bear the first $1 billion of any losses associated with the Bear Stearns Cos. assets being financed in its buyout of Bear, and the Fed will fund the remaining $29 billion on a non-recourse basis to J.P. Morgan. J.P. Morgan will purchase 95 million newly issued shares of Bear common stock, or 39.5% after the stock is issued. The shares would be based on the revised deal price of about $10 a share, up from $2 a share. The purchase of the 95 million shares is expected to be completed on or about April 8, the companies said in a press release.
The New York Fed will take control of a portfolio of assets valued at $30 billion as of March 14. The assets will be pledged as security for $29 billion in term financing from the New York Fed at its primary credit rate. J.P. Morgan will bear the first $1 billion of any losses associated with the portfolio, and any realized gains will accrue to the New York Fed. BlackRock Financial Management Inc. will manage a $30 billion portfolio of assets that will be pledged as security for JP Morgan Chase & Co.'s acquisition of Bear Stearns Cos.
For the first time in 13 years, people who trade currencies say confidence in the markets to determine exchange rates is dwindling. The crisis that may bring the so-called Group of Seven nations to coordinated intervention is the result of a sinking U.S. economy, the weakest dollar since 1971 and the biggest currency fluctuations this decade. ``The risks of coordinated intervention are going to increase in the second quarter for sure as the dollar weakens further,'' said Mitul Kotecha, head of foreign-exchange research in London at Calyon. The firm is the securities unit of Credit Agricole SA, France's second-biggest bank.
Brett Steenbarger: "As I write, the ES futures are knocking on the door of important three-week resistance around 1345 in the June contract. Are those financials leading the broad market higher?"
According to the Washington Post's Michael Fletcher, recent history has not been kind to working-class Americans, who were down on the economy long before the word recession was uttered. The main reason: spiraling health-care costs have been whacking away at their wages. Even though workers are producing more, inflation-adjusted median family income has dipped 2.6 percent -- or nearly $1,000 annually since 2000. Employees and employers are getting squeezed by the price of health care. The struggle to control health costs is viewed as crucial to improving wages and living standards for working Americans. Employers are paying more for health care and other benefits, leaving less money for pay increases. Benefits now devour 30.2 percent of employers' compensation costs, with the remaining money going to wages, the Labor Department reported this month. That is up from 27.4 percent in 2000. "The way health-care costs have soared is unbelievable," said Katherine Taylor, a vice president for Local 1199 of the Service Employees International Union. "There are people out here making decisions about whether to keep their lights on or buy a prescription." Since 2001, premiums for family health coverage have increased 78 percent, according to a 2007 report by the Kaiser Family Foundation. Premiums averaged $12,106, of which workers paid $3,281, according to the report.
Standard Pacific Corp. said Monday a group of creditors extended an agreement that allows the homebuilder to be out of compliance with the terms of its line of credit. In return, Standard Pacific had its credit line cut to $700 million from $900 million.The waiver was extended another 45 days past the March 30 deadline.
The average price of a gallon of regular gasoline rose 7 cents to $3.26 in the past two weeks, according to industry analyst Trilby Lundberg's survey of 7,000 filling stations nationwide. The highest average price for self-serve regular was $3.66 a gallon in San Francisco, the survey found.
Banc of America Securities analyst Michael Hecht on Monday said the collapse of Bear Stearns Cos. suggests structurally lower return on equity for the investment banks. "With the focus on liquidity issues around the collapse of Bear Stearns, we expect large investment banks will increasingly extend financing and lower reliance on repo financing, ultimately lowering leverage and increasing cost of funds which will ultimately lower return on equity structurally," he wrote in a note. Falling gross leverage and thinner return on assets will lower return on equity for the group by 10% to 25%, versus a return on equity in the 20% range the group averaged over the last 10 years, Hecht added.
"We're hearing from around the country that many folks are buried deep in pay day loan debts as well as struggling with their mortgage payments," said Uriah King, a policy associate at the Center for Responsible Lending (CRL).
Walgreen Co.'s fiscal second-quarter net income increased 5.2% to $685.9 million, or 69 cents a share, from $651.9 million, or 65 cents a share, a year earlier, due in part to increased prescription drug sales.
The dollar index, which measures the greenback against a basket of six currencies, was at 73.047.
Gasoline futures rose for a second day after the government said inventories and production declined.
Stockpiles fell 3.45 million barrels to 232.5 million barrels for the week ended March 14, the Energy Department said last week. Gasoline production fell 352,000 barrels, or 3.9 percent, to 8.68 million barrels per day. It was the largest decrease since September 2005.
U.S. Feb. existing-home sales up first time in 7 months. The pace of existing home sales in the United States rose in February to a 5.03 million-unit annual rate while prices took a record fall, the National Association of Realtors said in a report on Monday that painted a mixed picture for the housing market. While February broke a six-month streak of decreasing home sales, it also saw an 8.2 percent decline in median home prices from a year ago. That drop to $195,900 was the sharpest since the trade group began keeping records in 1968. The inventory of homes for sale fell 3 percent to 4.03 million units at the end of February, which represents a 9.6 months' supply at the current sales pace.
Mick P. : "Let there be no doubt, either the Fed has to raise rates to stop $/Y descending into the abyss or the Bank of Japan has to intervene and prop the dollar by selling Yen. What are the chances of Ben "chopper" Bernanke raising rates in the next 6 months?"
The Department of Justice on Monday said it closed its investigation into the proposed merger of XM Satellite Radio Holdings Inc.with Sirius Satellite Radio Inc. and concluded that the deal is not likely to reduce competition.
Crude oil for May delivery fell 98 cents, or 1%, to settle at $100.86 a barrel on the New York Mercantile Exchange. Gold for April delivery fell $1.30 to end at $918.70 an ounce on the New York Mercantile Exchange.
U.S. net coal exports are likely to rise 300% for the 2008/2009 shipping period as U.S. miners rush to fill demands on global supplies crimped by weather problems in South Africa and China, said Friedman Billings Ramsey analyst David Khani Monday in a research note.
Two-year notes extended their biggest weekly loss this year before the Treasury's $28 billion sale of the notes March 26, the largest since auctions began in 1972. Rates on three-month Treasury bills had their biggest jump since August.
The two-year note's yield rose 22 basis points to 1.81 percent, the highest since Feb. 28.
Rates on three-month Treasury bills rose 49 basis points to 1.06 percent, the biggest increase since Aug. 21. They touched 0.387 percent last week, the lowest since at least 1954, as investors' loss of confidence in credit markets deepened.
The Central Bank of Iceland raised its key interest rate by 1.25 percentage points to 15%, citing rising inflation and recent depreciation in the krona.
According to the WSJ, foreclosures are occurring at the highest rate in decades -- and as a result, lenders are acquiring homes faster than they can sell them off. Last year, sales of foreclosed homes rose just 4.4%, while the supply more than doubled, according to First American CoreLogic. As of the end of last year, about 2% of all home loans were in foreclosure.
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According to Bloomberg, the U.S. may pay a steep price to free itself of its economic and financial travails: bigger government, faster inflation and a poorer country. That would mark a reversal from the course of much of the past two decades, when Washington has been dismantling regulations, the Federal Reserve has been largely successful in containing inflation, and many Americans have felt wealthier thanks to rising home prices and cheaper imports. ``We're going to have 4 to 5 percent inflation,'' says Kenneth Rogoff, former chief economist for the International Monetary Fund who's now at Harvard University. ``The dollar will continue to drop and stay down for years. And we're going to end up with more regulation.''
The Federal Reserve announced Monday will offer $50 billion in 28-day credit through its term auction facility. Bids can be submitted starting at 11:00 a.m. EDT, Results of the auction will be announced on Tuesday at 10:00 a.m. EDT. The maximum award per bidder is $5 billion, or 10% 0f the offering amount.
The Federal Home Loan Bank system will be permitted to expand their holdings of Fannie Mae and Freddie Mac securities by more than $100 billion under a plan endorsed by their regulator on Monday. The Federal Housing Finance Board voted to let the banks use their existing capital to increase their holdings of agency mortgage-backed securities for two years, effective immediately.
Central banks from 16 Asian nations may invest more of their $1 trillion of foreign reserves in the region's debt as Federal Reserve interest-rate cuts reduce returns on U.S. assets.
J.P. Morgan Chase & Co. has amended its buyout deal with Bear Stearns Cos. to pay shareholders $10 a share instead of the previously agreed $2 a share. J.P. Morgan Chase & Co. will bear the first $1 billion of any losses associated with the Bear Stearns Cos. assets being financed in its buyout of Bear, and the Fed will fund the remaining $29 billion on a non-recourse basis to J.P. Morgan. J.P. Morgan will purchase 95 million newly issued shares of Bear common stock, or 39.5% after the stock is issued. The shares would be based on the revised deal price of about $10 a share, up from $2 a share. The purchase of the 95 million shares is expected to be completed on or about April 8, the companies said in a press release.
The New York Fed will take control of a portfolio of assets valued at $30 billion as of March 14. The assets will be pledged as security for $29 billion in term financing from the New York Fed at its primary credit rate. J.P. Morgan will bear the first $1 billion of any losses associated with the portfolio, and any realized gains will accrue to the New York Fed. BlackRock Financial Management Inc. will manage a $30 billion portfolio of assets that will be pledged as security for JP Morgan Chase & Co.'s acquisition of Bear Stearns Cos.
For the first time in 13 years, people who trade currencies say confidence in the markets to determine exchange rates is dwindling. The crisis that may bring the so-called Group of Seven nations to coordinated intervention is the result of a sinking U.S. economy, the weakest dollar since 1971 and the biggest currency fluctuations this decade. ``The risks of coordinated intervention are going to increase in the second quarter for sure as the dollar weakens further,'' said Mitul Kotecha, head of foreign-exchange research in London at Calyon. The firm is the securities unit of Credit Agricole SA, France's second-biggest bank.
Brett Steenbarger: "As I write, the ES futures are knocking on the door of important three-week resistance around 1345 in the June contract. Are those financials leading the broad market higher?"
According to the Washington Post's Michael Fletcher, recent history has not been kind to working-class Americans, who were down on the economy long before the word recession was uttered. The main reason: spiraling health-care costs have been whacking away at their wages. Even though workers are producing more, inflation-adjusted median family income has dipped 2.6 percent -- or nearly $1,000 annually since 2000. Employees and employers are getting squeezed by the price of health care. The struggle to control health costs is viewed as crucial to improving wages and living standards for working Americans. Employers are paying more for health care and other benefits, leaving less money for pay increases. Benefits now devour 30.2 percent of employers' compensation costs, with the remaining money going to wages, the Labor Department reported this month. That is up from 27.4 percent in 2000. "The way health-care costs have soared is unbelievable," said Katherine Taylor, a vice president for Local 1199 of the Service Employees International Union. "There are people out here making decisions about whether to keep their lights on or buy a prescription." Since 2001, premiums for family health coverage have increased 78 percent, according to a 2007 report by the Kaiser Family Foundation. Premiums averaged $12,106, of which workers paid $3,281, according to the report.
Standard Pacific Corp. said Monday a group of creditors extended an agreement that allows the homebuilder to be out of compliance with the terms of its line of credit. In return, Standard Pacific had its credit line cut to $700 million from $900 million.The waiver was extended another 45 days past the March 30 deadline.
The average price of a gallon of regular gasoline rose 7 cents to $3.26 in the past two weeks, according to industry analyst Trilby Lundberg's survey of 7,000 filling stations nationwide. The highest average price for self-serve regular was $3.66 a gallon in San Francisco, the survey found.
Banc of America Securities analyst Michael Hecht on Monday said the collapse of Bear Stearns Cos. suggests structurally lower return on equity for the investment banks. "With the focus on liquidity issues around the collapse of Bear Stearns, we expect large investment banks will increasingly extend financing and lower reliance on repo financing, ultimately lowering leverage and increasing cost of funds which will ultimately lower return on equity structurally," he wrote in a note. Falling gross leverage and thinner return on assets will lower return on equity for the group by 10% to 25%, versus a return on equity in the 20% range the group averaged over the last 10 years, Hecht added.
"We're hearing from around the country that many folks are buried deep in pay day loan debts as well as struggling with their mortgage payments," said Uriah King, a policy associate at the Center for Responsible Lending (CRL).
Walgreen Co.'s fiscal second-quarter net income increased 5.2% to $685.9 million, or 69 cents a share, from $651.9 million, or 65 cents a share, a year earlier, due in part to increased prescription drug sales.
The dollar index, which measures the greenback against a basket of six currencies, was at 73.047.
Gasoline futures rose for a second day after the government said inventories and production declined.
Stockpiles fell 3.45 million barrels to 232.5 million barrels for the week ended March 14, the Energy Department said last week. Gasoline production fell 352,000 barrels, or 3.9 percent, to 8.68 million barrels per day. It was the largest decrease since September 2005.
U.S. Feb. existing-home sales up first time in 7 months. The pace of existing home sales in the United States rose in February to a 5.03 million-unit annual rate while prices took a record fall, the National Association of Realtors said in a report on Monday that painted a mixed picture for the housing market. While February broke a six-month streak of decreasing home sales, it also saw an 8.2 percent decline in median home prices from a year ago. That drop to $195,900 was the sharpest since the trade group began keeping records in 1968. The inventory of homes for sale fell 3 percent to 4.03 million units at the end of February, which represents a 9.6 months' supply at the current sales pace.
Mick P. : "Let there be no doubt, either the Fed has to raise rates to stop $/Y descending into the abyss or the Bank of Japan has to intervene and prop the dollar by selling Yen. What are the chances of Ben "chopper" Bernanke raising rates in the next 6 months?"
The Department of Justice on Monday said it closed its investigation into the proposed merger of XM Satellite Radio Holdings Inc.with Sirius Satellite Radio Inc. and concluded that the deal is not likely to reduce competition.
Crude oil for May delivery fell 98 cents, or 1%, to settle at $100.86 a barrel on the New York Mercantile Exchange. Gold for April delivery fell $1.30 to end at $918.70 an ounce on the New York Mercantile Exchange.
U.S. net coal exports are likely to rise 300% for the 2008/2009 shipping period as U.S. miners rush to fill demands on global supplies crimped by weather problems in South Africa and China, said Friedman Billings Ramsey analyst David Khani Monday in a research note.
Two-year notes extended their biggest weekly loss this year before the Treasury's $28 billion sale of the notes March 26, the largest since auctions began in 1972. Rates on three-month Treasury bills had their biggest jump since August.
The two-year note's yield rose 22 basis points to 1.81 percent, the highest since Feb. 28.
Rates on three-month Treasury bills rose 49 basis points to 1.06 percent, the biggest increase since Aug. 21. They touched 0.387 percent last week, the lowest since at least 1954, as investors' loss of confidence in credit markets deepened.
The Central Bank of Iceland raised its key interest rate by 1.25 percentage points to 15%, citing rising inflation and recent depreciation in the krona.
According to the WSJ, foreclosures are occurring at the highest rate in decades -- and as a result, lenders are acquiring homes faster than they can sell them off. Last year, sales of foreclosed homes rose just 4.4%, while the supply more than doubled, according to First American CoreLogic. As of the end of last year, about 2% of all home loans were in foreclosure.
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Monday, March 24, 2008
The Shot Heard Round The World
3/24/08 The Shot Heard Round The World
Jeremy Grantham, chairman and chief investment strategist at GMO, a Boston investment firm, said: “When we had the shot across the bow and people realized something was going wrong with subprime, I said: ‘Treat this as a dress rehearsal. Stress-test your portfolios because the next time or the time after, the shot won’t be across the bow.’ ”...“It was like watching a slow-motion train wreck,” Mr. Grantham says. “After all of the write-downs at the banks in June, July and August, we were in a full-fledged credit crisis with C.E.O.’s of top banks running around like headless chickens. And the U.S. equity market’s peak in October? What sort of denial were they in?"...“There is just a terrible risk created when you can underwrite a piece of junk and simply pass it along to someone else,” he says.
According to the NY Times, today, the outstanding value of the swaps stands at more than $45.5 trillion, up from $900 billion in 2001. The contracts act like insurance policies designed to cover losses to banks and bondholders when companies fail to pay their debts. It’s a market that also remains largely untested.
“The rescue was absolutely all about counterparty risk. If Bear went under, everyone’s solvency was going to be thrown into question. There could have been a systematic run on counterparties in general,” said Meredith Whitney, a bank analyst at Oppenheimer. “It was 100 percent related to credit default swaps.”
The Washington Post reports in the months leading up to the U.S.-led invasion of Iraq, the Bush administration threatened trade reprisals against friendly countries who withheld their support, spied on its allies, and pressed for the recall of U.N. envoys that resisted U.S. pressure to endorse the war, according to an upcoming book by a top Chilean diplomat.
The London Observer, March 23, 2008: "The current financial crisis is the most serious since the second world war, and perhaps since the Great Depression."
David Lazarus: "The economy is tanking, banks are scrambling for cover, the Fed is repeatedly cutting interest rates . . . and business is booming at pawn shop Crown City Loan & Jewelry in Old Pasadena.
Standing behind a display case brimming with hocked watches and jewelry, owner Doug Robinson can only smile when asked how things are going.
"Business is very good," he said. "The loan business is very good."
These aren't just any loans, of course. Robinson said the money he hands out -- no questions asked -- in return for people's collateral typically comes with an annual interest rate of about 60%.
He declined to say how much his loan balance was. But Robinson said it's risen about 40% in the last year and he expected to do even better this year.
"We've been on a continuous uphill run for a number of months," he said. "I don't see anything that will stop it."
Tim Wood: "From a cyclical perspective, which has absolutely nothing to do with Dow theory, the move into the extended 4-year cycle low remains on track, at least so far anyway. Anything is possible and perhaps the Fed has engineered a bottom that could last a while. In the end it won't hold and they continue to only make matters worse. From my seat, the key guide is my intermediate-term Cycle Turn Indicator. This indicator is designed to identify important intermediate-term trend changes. This indicator identified the 1929 top and the crash that followed as well as the top of the 1930 rebound and the beginning of the decline into the 1932 low. It also called the 1987 top beautifully. In the last article reported here I stated that the market was holding on by the skin of its teeth and that has indeed proven to be the case. As the markets approached the January 22nd lows this past week the Cycle Turn Indicators suggested that the low would hold. This has since proven correct. The question now is for how long. If the Cycle Turn Indicator called these other major declines, then odds are it will signal any major decline in the present. Until such time we are operating in an environment with many cross currents. The existing Dow theory primary trend is bearish, yet the Fed is fighting the situation tooth and nail. We also have a Dow theory non-confirmation and the backdrop surrounding the unwinding of this extended 4-year cycle. The best key I have found to navigate this financial minefield is the intermediate-term Cycle Turn Indicator, which has proven itself time and time again."
JPMorgan Chase & Co. was discussing a deal that would increase fivefold its offer for Bear Stearns Cos. to $10 a share, The New York Times reported Monday.
India is set to overtake the U.S. and become the world's No. 2 cellular-phone market after China, Reuters reported.
Wall Street strategists and industry analysts now expect first-quarter earnings at Standard & Poor's 500 companies to decline 5.5 percent from a year earlier, twice the 2.7 percent decline they had forecast just one week ago, according to Reuters Estimates.
According to the WSJ, Vice President Dick Cheney suggested there is little more Saudi Arabia can do to increase oil production and relieve price pressures in global markets.
According to the Quad City Times, Dan Little, the owner/operator of a livestock hauling company in Carrollton, Mo., estimated Tuesday that at least 1,000 other truckers from across the United States have committed so far to joining him in a strike on April 1. “The fuel is too high, and there’s no reason for it. I don’t listen to the CB (radio) that much, but I guess I’ll start now.”
At issue is the rising cost of diesel fuel, which has reached or exceeded $4 per gallon in at least 17 states. But Little does not expect his strike to bring down the per-gallon price of gas, nor does he expect to have any effect on the oil companies.
“What I would personally like to see is our federal and state governments, until our economy recovers, suspend federal and state fuel taxes,” the 49-year-old said. “The second thing I’d like to see is an oversight committee for truck insurance, which is part of what’s taking us down.
“The average owner/operator is paying $600 to $800 a month for truck insurance. It’s based on personal credit, which means the monthly cost is going up for a lot of truckers because their credit is going down.
“Everything in the world is going up (in price), except for what we do. I lose money if I start my truck, and that truck is paid for — free and clear.”
China's leaders are facing renewed pressure over shortfalls in diesel and gasoline, with lines growing at filling stations in major cities Monday as the gap widens between international crude oil values and centrally controlled fuel prices.
The number of U.S. soldiers to die in Iraq has reached 4,000, the U.S. military said on Monday.
According to the Financial Times, "some subprime mortgage-linked securities issued by groups such as UBS have lost almost 95 per cent of their value."
John Hussman: "We remain defensive, but we recognize the potential for a “bear market rally” despite conditions that, as yet, do not provide enough evidence to warrant removing a significant portion of our hedges."
Jeremy Grantham, chairman and chief investment strategist at GMO, a Boston investment firm, said: “When we had the shot across the bow and people realized something was going wrong with subprime, I said: ‘Treat this as a dress rehearsal. Stress-test your portfolios because the next time or the time after, the shot won’t be across the bow.’ ”...“It was like watching a slow-motion train wreck,” Mr. Grantham says. “After all of the write-downs at the banks in June, July and August, we were in a full-fledged credit crisis with C.E.O.’s of top banks running around like headless chickens. And the U.S. equity market’s peak in October? What sort of denial were they in?"...“There is just a terrible risk created when you can underwrite a piece of junk and simply pass it along to someone else,” he says.
According to the NY Times, today, the outstanding value of the swaps stands at more than $45.5 trillion, up from $900 billion in 2001. The contracts act like insurance policies designed to cover losses to banks and bondholders when companies fail to pay their debts. It’s a market that also remains largely untested.
“The rescue was absolutely all about counterparty risk. If Bear went under, everyone’s solvency was going to be thrown into question. There could have been a systematic run on counterparties in general,” said Meredith Whitney, a bank analyst at Oppenheimer. “It was 100 percent related to credit default swaps.”
The Washington Post reports in the months leading up to the U.S.-led invasion of Iraq, the Bush administration threatened trade reprisals against friendly countries who withheld their support, spied on its allies, and pressed for the recall of U.N. envoys that resisted U.S. pressure to endorse the war, according to an upcoming book by a top Chilean diplomat.
The London Observer, March 23, 2008: "The current financial crisis is the most serious since the second world war, and perhaps since the Great Depression."
David Lazarus: "The economy is tanking, banks are scrambling for cover, the Fed is repeatedly cutting interest rates . . . and business is booming at pawn shop Crown City Loan & Jewelry in Old Pasadena.
Standing behind a display case brimming with hocked watches and jewelry, owner Doug Robinson can only smile when asked how things are going.
"Business is very good," he said. "The loan business is very good."
These aren't just any loans, of course. Robinson said the money he hands out -- no questions asked -- in return for people's collateral typically comes with an annual interest rate of about 60%.
He declined to say how much his loan balance was. But Robinson said it's risen about 40% in the last year and he expected to do even better this year.
"We've been on a continuous uphill run for a number of months," he said. "I don't see anything that will stop it."
Tim Wood: "From a cyclical perspective, which has absolutely nothing to do with Dow theory, the move into the extended 4-year cycle low remains on track, at least so far anyway. Anything is possible and perhaps the Fed has engineered a bottom that could last a while. In the end it won't hold and they continue to only make matters worse. From my seat, the key guide is my intermediate-term Cycle Turn Indicator. This indicator is designed to identify important intermediate-term trend changes. This indicator identified the 1929 top and the crash that followed as well as the top of the 1930 rebound and the beginning of the decline into the 1932 low. It also called the 1987 top beautifully. In the last article reported here I stated that the market was holding on by the skin of its teeth and that has indeed proven to be the case. As the markets approached the January 22nd lows this past week the Cycle Turn Indicators suggested that the low would hold. This has since proven correct. The question now is for how long. If the Cycle Turn Indicator called these other major declines, then odds are it will signal any major decline in the present. Until such time we are operating in an environment with many cross currents. The existing Dow theory primary trend is bearish, yet the Fed is fighting the situation tooth and nail. We also have a Dow theory non-confirmation and the backdrop surrounding the unwinding of this extended 4-year cycle. The best key I have found to navigate this financial minefield is the intermediate-term Cycle Turn Indicator, which has proven itself time and time again."
JPMorgan Chase & Co. was discussing a deal that would increase fivefold its offer for Bear Stearns Cos. to $10 a share, The New York Times reported Monday.
India is set to overtake the U.S. and become the world's No. 2 cellular-phone market after China, Reuters reported.
Wall Street strategists and industry analysts now expect first-quarter earnings at Standard & Poor's 500 companies to decline 5.5 percent from a year earlier, twice the 2.7 percent decline they had forecast just one week ago, according to Reuters Estimates.
According to the WSJ, Vice President Dick Cheney suggested there is little more Saudi Arabia can do to increase oil production and relieve price pressures in global markets.
According to the Quad City Times, Dan Little, the owner/operator of a livestock hauling company in Carrollton, Mo., estimated Tuesday that at least 1,000 other truckers from across the United States have committed so far to joining him in a strike on April 1. “The fuel is too high, and there’s no reason for it. I don’t listen to the CB (radio) that much, but I guess I’ll start now.”
At issue is the rising cost of diesel fuel, which has reached or exceeded $4 per gallon in at least 17 states. But Little does not expect his strike to bring down the per-gallon price of gas, nor does he expect to have any effect on the oil companies.
“What I would personally like to see is our federal and state governments, until our economy recovers, suspend federal and state fuel taxes,” the 49-year-old said. “The second thing I’d like to see is an oversight committee for truck insurance, which is part of what’s taking us down.
“The average owner/operator is paying $600 to $800 a month for truck insurance. It’s based on personal credit, which means the monthly cost is going up for a lot of truckers because their credit is going down.
“Everything in the world is going up (in price), except for what we do. I lose money if I start my truck, and that truck is paid for — free and clear.”
China's leaders are facing renewed pressure over shortfalls in diesel and gasoline, with lines growing at filling stations in major cities Monday as the gap widens between international crude oil values and centrally controlled fuel prices.
The number of U.S. soldiers to die in Iraq has reached 4,000, the U.S. military said on Monday.
According to the Financial Times, "some subprime mortgage-linked securities issued by groups such as UBS have lost almost 95 per cent of their value."
John Hussman: "We remain defensive, but we recognize the potential for a “bear market rally” despite conditions that, as yet, do not provide enough evidence to warrant removing a significant portion of our hedges."
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