7/9/08 Fannie Mae and Freddie Mac
Mortgage lenders Fannie Mae and Freddie Mac may not have to raise additional capital because of a new accounting law, an analyst for Keefe Bruyette said in a research note Tuesday. Speculation that changes to federal accounting laws could force the two companies to raise as much as $100 billion in capital sent the stock prices of both firms down more than 15% on Monday. "We believe this sell-off is unwarranted on this issue as the government-sponsored enterprise regulations already have capital requirements for off-balance-sheet exposures of the two companies," wrote analyst Frederick Cannon. "We believe that the government will stand behind the GSEs in this market, and when the market stabilizes that the GSEs will be able to increase earnings power significantly and thus the shares of both companies offer compelling upside at current prices."
Mortgage financiers Fannie Mae and Freddie Mac are adequately capitalized and continue to be active in the mortgage market, said James Lockhart, director of the Office of Federal Housing Enterprise, which regulates the two enterprises. Both of these companies are adequately capitalized, which is our highest criteria," Lockhart said in an interview with CNBC. "They have been very active in the mortgage market, and they are continuing to be. And, in fact, Congress has put on them the requirement to do jumbo mortgages and they have been doing those as well." Lockhart also said OFHEO is working with the Financial Accounting Standards Board, or FASB, on the revision of rule FAS 140, an accounting rule that raised concerns about Fannie and Freddie's capital needs and sparked a steep sell off of their shares on Monday.
After trading down to $11 in the morning, Freddie Mac traded up to $14 in the afternoon. Meanwhile, Fannie Mae traded down to $15 in the morning and rallied close to $18 in the afternoon.
Iraq's prime minister said Monday his country wants some type of timetable for a withdrawal of American troops included in the deal the two countries are negotiating.
Iran would strike Israel and the U.S. Navy in the Persian Gulf as a first response to any American attack on its nuclear program, an aide to Supreme Leader Ayataollah Ali Khamenei said.
Van Hoisington and Dr. Lacy Hunt: "Over the past fiscal year, holdings in the stock market, as measured by the Wilshire 5000 Stock Index, lost more than $2.1 trillion. Simultaneously, the 15.3% contraction in the Case Shiller Home Price Index suggests the wealth loss in value of household residences was a staggering $3.1 trillion. Without including the negative wealth impact for declining prices of automobiles and other durables the total wealth loss was approximately $5.2 trillion. Obviously, the sum of dollars being erased from our economic system has overwhelmed the amount of dollars being increased by inflation by a factor of more than 14 to one. Thus, once again, the bond market had it right--deflation is in ascendancy. Treasury bond yields fell, and they will continue to trend lower, creating an even more profitable environment over the next four quarters for long-term Treasury bond holders."
Siemens AG said Tuesday it would cut 16,750 jobs, or 4.2 percent of its global work force, to streamline operations and cut nearly $2 billion in costs in the face of a slowing economy.
Novartis AG said Tuesday it has completed the first stage of its $38 billion takeover of U.S. eye-care company Alcon Inc.The Swiss pharmaceuticals company paid current majority shareholder Nestle SA $10.4 billion cash for a 25 percent stake in Alcon. That is about $200 million less than when the deal was originally announced in April. Novartis still has the exclusive right to buy Nestle's remaining 52 percent stake in Alcon for about $28 billion between January 2010 and July 2011.
Jim Jubak: "Bear markets in stocks give investors two chances to lose their shirts. Get ready for your second shot at big losses.
First, you can take a huge hit in a bear market if you stay in stocks too long. If you sold out near the Oct. 9 high for the S&P 500, the past nine months have been a non-event. If you held on to what you owned then and maybe even bought more as the stock market rallied in September and October from its August slump, you may be down 20% or more.
Second, you can devastate what's left of your portfolio by getting back in too early. The S&P 500 started the bear market of 2000-02 with a gradual drop from its then-all-time high of 1,527 on March 24, 2000. By Sept. 1, the index was down just six points to 1,521. And then the carnage began, sending the S&P 500 down to 1,103 on April 4, 2001. That was a drop of 28%."
Federal Reserve Chairman Ben Bernanke said on Tuesday the U.S. central bank may keep an emergency lending facility for big Wall Street firms open past year-end while it seeks to restore financial market stability.
Office Depot said early on Tuesday that "pressure from weakening business conditions" pushed down second-quarter North American same-store retail sales nearly 10%. For the quarter ended June 28, total sales were "down slightly," the chain said. Office Depot's "sales trends worsened late in the quarter," shrinking its profit margin based on earnings before interest and taxes by 2 percentage points more than the narrowing of 2 to 2.5 percentage points it had previously estimated. ODP expects the economy to be "difficult" for the rest of 2008 but also expects profit margins to improve sequentially in the third and fourth quarters.
Pepsi Bottling Group Inc. posted a 7.4% increase in second-quarter net income amid solid revenue gains, particularly overseas, but the company trimmed back its sales outlook for the year.
Home values fell in 23 of 25 U.S. metropolitan areas in April, according to Radar Logic Inc., as sales of a record number of foreclosed homes pushed prices down.
The Sacramento, California, region saw the biggest drop, with prices falling 31.7 percent from April 2007. Sacramento was followed by the Las Vegas area (29.9 percent), San Diego (28.1 percent), Phoenix (25.5 percent) and Los Angeles (23.4 percent), Radar Logic said.
``Prices are going down so fast they can't go down much longer,'' said Christopher Thornberg, president of Beacon Economics LLC in Los Angeles, who predicts a total decline of 30 percent nationally in the housing recession. ``We've never seen prices fall like this.'' There's a first time for everything.
Mick P: "So here we are today, with Bankers wearing brown trousers to work to disguise the fear, the Primary Brokers looking directly into the regulatory future they dread and Hedge Funds hoping they have enough credit available to stay afloat. The actions taken by the Fed, Bank of England et al are now seen as "holding operations" allowing current practises to continue until the dawning of a new way, putting a line under the mess with a new paradigm that will define the next chapter in capitalism."
According to the Financial Times, nearly 80 per cent of senior executives at small and medium-size US manufacturing companies are pessimistic about the prospects for economic growth, according to a survey to be published on Wednesday. Attitudes within the sector towards the benefits of globalisation have also deteriorated markedly since last year .The report by RSM McGladrey, the consultancy, suggests the outlook for the US economy may be even gloomier than expected. Manufacturing has so far held up better than the service sector: US manufacturers defied bearish forecasts last month by boosting production for the first time since January, the Institute for Supply Management said last week.
U.S. oil refiners will be eligible for a 50 percent tax credit starting Wednesday if they agree to expand plant capacity, according to Sen. Kay Bailey Hutchison, R-Texas.
Rob Hanna: "One breadth indicator I like to watch is provided by Worden Bros. It measures the % of Stocks that are trading at least 2 standard deviations below their 40-day moving average (T2116). Rather than looking at stocks that are simply in a downtrend like the “% of stocks below the 40-day MA”, it looks for extreme readings. Of all the commercially available breadth indicators out there, this one most closely represents the spirit of the CBI. While the criteria are less stringent, it is still looking for somewhat extreme conditions to measure. Today T2116 hit a new high of 58.1%. The indicator dates back to 1986. I looked back to find all days that had readings higher than today’s. It was a short list: 7/23/02, 9/20 & 9/21/01, 8/31/98, and lastly 10/19/87 (Black Monday) through 10/28/87. That’s it. If you take a look at those dates you’ll find they were very opportune times to buy.
Of course breadth has been suggesting a reversal for a while now…"
The Associated Press: "U.S. exports to Iran grew more than tenfold during President Bush's years in office even as he accused Iran of nuclear ambitions and helping terrorists. America sent more cigarettes to Iran -- at least $158 million worth under Bush -- than any other products. Other surprising shipments to Iran during the Bush administration: brassieres, bull semen, cosmetics, fur clothing, sculptures, perfume, musical instruments and possibly even weapons. Top states shipping goods to Iran include California, Florida, Georgia, Louisiana, Michigan, Mississippi, New Jersey, North Carolina, Ohio and Wisconsin, according to an analysis by The Associated Press of seven years of U.S. government trade data.
Despite increasingly tough rhetoric toward Iran, which Bush has called part of an "axis of evil," U.S. trade in a range of goods survives on-again, off-again sanctions originally imposed nearly three decades ago. The rules allow sales of agricultural commodities, medicine and a few other categories of goods. The exemptions are designed to help Iranian families even as the United States pressures Iran's leaders.
"Our sanctions are targeted against the regime, not the people," said Adam Szubin, director of the Treasury Department's Office of Foreign Assets Control, which enforces the sanctions. The government tracks exports to Iran using details from shipping records, but in some cases it's unclear whether anyone pays attention."
"We're paying $700 billion a year for foreign oil. It's breaking us as a nation, and I want to elevate that question to the presidential debate, to make it the No. 1 issue of the campaign this year," T. Boone Pickens says.
Persimmon Plc, the U.K.'s second- biggest homebuilder, eliminated 1,100 jobs after the worst housing slump in 30 years dragged down first-half sales by 34 percent.
Crude-oil futures fell sharply for a second consecutive session Tuesday, trading as low as $135 a barrel.
VMWare Inc. announced that its revenue for the full 2008 fiscal year will come in "modestly below" its prior forecasts.
Britain's High Court ruled that Pringles aren't a potato snack, and thus aren't subject to value-added tax.
Bill Bonner: "Since '67, consumer prices are, officially, up seven times. Wages in America are up exactly the same amount. In other words, during your editor's entire adult lifetime Americans' per hour earnings have not increased a single penny."
Putting matters in perspective. In July 2003 Wal-Mart shares were trading at $59+. Five years later shareholders are trying to get even. This does not take into consideration the dividends or inflation.
At $35+ Valero is trading at a new 52-week low. If you believe crude is topping out, then VLO may prove a good investment for patient types.
Former secretaries of state James Baker III and Warren Christopher say the next time the president goes to war, Congress should be required to say whether it agrees. The co-chairmen of a bipartisan study group have proposed legislation that would require the president to consult lawmakers before initiating combat lasting longer than a week, except in cases of emergencies. In turn, Congress would have to act within 30 days, either approving or disapproving of the action.
In a sign that the U.S. housing market may weaken further, an index of sales contracts on previously owned U.S. homes fell 4.7% in May from the prior month, the National Association of Realtors reported Tuesday. The index, which is considered a leading indicator of existing home sales, was down 14% from the May 2007 level. By region, May's pending home sales index fell 7.1% in the South, 6% in the Midwest, 2.9% in the Northeast and 1.3% in the West. The April pending home sales index was revised to a gain of 7.1% from the prior estimate of a 6.3% increase.
The global carbon trading market rose to $59 billion worth of trades in the first half of 2008, nearly equal to the figure of $62 billion for all of 2007, according to Oslo-based research firm Point Carbon.
In the mid-morning Tuesday rally, Wal-Mart, GE, Pfizer, and Burlington Northern were standouts.
Inflation rates in the United States are "unacceptably high," and elevated inflation demands additional "vigilance" by the Federal Reserve, said Jeffrey Lacker, president of the Richmond Fed Bank, on Tuesday.
Spot prices for crude oil will likely average $127 per barrel in 2008 and $133 in 2009, the U.S. Energy Information Administration, the reporting arm of the Energy Department, said in a monthly report issued Tuesday. The EIA estimates are about $5 higher than last month's and compare to an average price of $72 in 2007.
There is unusually high volume in the Deere August 65 puts. The stock has gotten hammered recently and that includes Tuesday trading.
Alcoa Inc.reported a second-quarter profit of $546 million, or 66 cents a share, down from $715 million, or 81 cents a share, a year earlier. The quarter's results include a charge of $39 million, or 5 cents a share, relating to a gas pipeline explosion in Western Australia and power disruptions in Texas. Sales came in at $7.6 billion, compared with $8.1 billion, or $6.8 billion excluding divested business, a year ago.
The Dow Jones Industrial Average gained 152.25 points, or 1.4%, to end at 11,384.21. The S&P 500 rose 21.39 points, or 1.7%, to 1,273.70, and the Nasdaq Composite climbed 51.1 points, or 2.3%, to 2,294.42.
Robert McHugh: "We believe a one to two week rally into the July 22nd phi mate turn date has started. If our labeling is one degree too high, this rally will last two weeks. If it is the degree we are showing on the chart on page 8, then the rally will complete on the short-side of two weeks. In either case, we believe that a dangerous decline will begin after this rally completes, one that will scare folks. That is what the Elliott Wave patterns suggest at this time. It should last into the autumn. Then an election bounce of a thousand points wouldn't surprise us, but from levels much lower than we sit tonight. Prices should decline Wednesday in a wave {b} decline."
Hedge funds lost 0.68% in June, leaving them down 0.75% during the first half of 2008, according to early estimates released on Tuesday by industry performance tracker Hedge Fund Research.
Crude oil for August delivery closed at $136.04 a barrel on the New York Mercantile Exchange, down 3.8%, or $5.33, the biggest one-day loss in value since March 19. Gold for August delivery dropped $5.50 to end at $923.30 an ounce on the New York Mercantile Exchange.
U.S. consumers took on more debt in May, led by auto loans, the Federal Reserve reported Tuesday. Total seasonally adjusted consumer debt increased by $7.8 billion, or a 3.6% annual rate, in May to $2.57 trillion. This is about the same pace as April.
Russia said it will respond to a U.S. anti-missile shield near its border with military action, according to Agence France-Presse Tuesday, citing a statement from the Russian foreign ministry. "If a US strategic anti-missile shield is deployed near our borders, we will be forced to react not in a diplomatic fashion but with military resources," the statement said according to AFP.
Tuesday, July 08, 2008
Monday, July 07, 2008
Average Bear Market
7/8/08 Average Bear Market
Rob Hanna: "Downside persistence like we’re seeing has historically been bearish."
Since 1940, the average bear market has lasted 386 days and produced a peak-to-trough decline of 30.4% for the S&P 500, Barron's reports.
John Hussman: "Market internals deteriorated significantly last week, with major indices breaking below their March lows. Stocks are clearly oversold on a short-term basis, and that sort of price compression often invites a fast, furious, prone-to-failure rally to clear that condition.
One factor that's problematic here is that tradable bear market rallies tend to feature clearly falling interest rates, and are typically initiated by something of a selling capitulation. Now, the point isn't that we have to see a capitulation for the sake of capitulation. Rather, there remains a significant segment of analysts and investors who reject the premise that the U.S. economy is in recession. That segment creates downside risk, because if (and in my view, when) further evidence emerges to confirm a recession, their change in perspective could prompt some significant liquidation. Earnings disappointments (particularly second-half guidance) could feed into that risk as well...I would expect that deepening economic difficulties are likely to put commodity prices into a downtrend within a few months, and that will also tend to feed some speculative tendencies at some point, most likely benefiting consumer-related stocks and refiners... It should not be surprising if this speculative unwinding takes the price of crude below $60 a barrel by early next year."
APP Pharmaceuticals Inc., the Schaumburg, Ill., producer of hospital-based injectable pharmaceuticals for cancer, infections, anesthesia, pain and critical-care applications, definitively agreed to be acquired for as much as $29 a share, or $4.6 billion, by Fresenius SE.
U.K. home builder Persimmon will announce Tuesday that it has cut around 1,000 jobs, according to a report in the Telegraph newspaper.
China National Offshore Oil Corp., seeking to enter oil-field services, agreed to buy oil driller Awilco Offshore ASA of Norway for $2.5 billion, or 85 Norwegian kroner per share.
General Motors Corp.is preparing to cut thousands of additional white-collar jobs and is mulling whether to sell or close more brands, people familiar with the matter told The Wall Street Journal.
Brewer Inbev intends to file a preliminary consent solicitation statement with the U.S. Securities & Exchange Commission to remove the board of Anheuser-Busch.
According to Kiplinger, some 122,000 borrowers with Countrywide home-equity lines of credit, or HELOCs, received letters in January informing them that they could no longer withdraw funds from their lines. A few months later, thousands of customers of other major lenders -- including Bank of America, J.P. Morgan Chase, Citibank, SunTrust, USAA, Wachovia, Washington Mutual and Wells Fargo -- also received notice that their lines had been frozen or reduced.
Sirius Satellite Radio Inc.'s acquisition of rival XM Satellite Radio Holdings Inc. may be cleared by federal regulators this month.
Barry Ritholtz reports that Marc Faber Expects Industrial-Commodity Demand to Drop.
According to the International Herald Tribune, in the United States, the quarter just ended was probably the first period since the early 1980s in which a bigger proportion of consumer spending went to gasoline, oil and other energy products than was spent on motor vehicles.
But even as the price of gasoline has soared above $4 a gallon, or $1.06 a liter, Americans are spending a much smaller share of their budgets on fuel than they did at the time of the last spike in oil prices, in 1980.
Jon Markman: "The collapse of market value since autumn has actually wiped out years of progress, putting all but a few big companies' returns for the decade below zero -- an extraordinary development that has jeopardized thousands of families' financial plans and possibly soured an entire generation on the stock market.
Indeed, it's fair to conclude now that the bear market of 2000-02 never really ended and that the 2003-07 period of modestly higher returns will look from a historical perspective like a twitch of life in a moribund carcass."
Brett Steenbarger: "* For six consecutive sessions, we have had over 2500 stocks across the NYSE, ASE, and NASDAQ making fresh 20-day lows. The highest number of 20-day highs over that period was 410.
* We have had more stocks making 20-day lows than 20-day highs for 20 consecutive sessions.
I think it's fair to say that a strong stock market is one in which, over time, we see more stocks making fresh 20-day highs than lows. A weak market is one in which the number of stocks making fresh lows outnumbers the number making highs...One definition of a bear market is one in which lower prices fail to attract buyers, leading to still lower prices. If you peruse the indicator reviews from the past several weeks, that is what we have been seeing."
U.S. store closings and cutbacks turned the second quarter into the worst for strip mall owners in 30 years, as budget-conscious consumers flocked to low-cost warehouse-style grocery centers.
Iraq has proposed a short-term memorandum of understanding with the United States rather than trying to hammer through a formal agreement on the presence of U.S. forces, the country's prime minister said Monday.
Jack Keane, a retired Army vice chief of staff: "There will be significant reductions in 2009 (in Iraq) whoever becomes president."
Courtesy of George Ure:
"My friend Bob Bronson (Bob@Bronsons.com ), from back in the days of the Longwave group at the University of Colorado's Center for a Sustainable Future (circa mid 1990's) sent along this really worthwhile analysis with permission to share:
"Another permabull story is emerging, which alone should be enough to convince you that the bear market they’re trying to rationalize is not nearly over.
It goes something like this.
Yeah, well, the stock market decline may have crossed over 20%, which means (we missed) it’s a bear market, BUT since the average bear market decline has only been about 30% it’s time (again) to anticipate a bottom.
Well, there have been 28 declines getter than 20% since 1870, and their median has been 35.7%, which is about twice 20% on a compounded basis. (the log of 1-0.357 divided by the log of 1-0.200 equals 1.98)
That means the bear market decline so far is really has only been half of such average bear markets. Of course, the second half of those declines have much more negatively impacting fundamentals with many times more associated investor pessimism as does the first half.
But there’s more with this kind of “expect the average” reasoning.
When the stock market declines 35.7%, which our work shows it surely will, then this “expect the average” reasoning would suggest a 46.9% decline, since that is the median of the 14 greater than 35.7%-sized previous declines since 1870. A 35.7% decline is equivalent to 2.84 compounded 20% declines.
And when the stock market decline reaches 46.9%, which our work shows it likely will, then expectations should be for a 49.2% decline, which is the median of the six greater than 46.9%-sized previous declines since 1870. A 49.2% decline is equivalent to 3.04 compounded 20% declines.
And when the stock market decline reaches 49.2%, which our work also suggests it likely will, then expectations should be for a 50.5% decline, which is the median of the three greater than 49.2%-sized declines. A 50.5% decline is equivalent to 3.15 compounded 20% declines.
The final extension of such “expect the average” is that when the stock market decline reaches 50.5% , which not-so-coincidently was the previous bear market decline from 3/24/00 through 10/10/02, the expectation then should be for the only larger decline since 1870: the 86.0% second downleg in the Great Depression Supercycle Bear Market from 4/17/30 to 7/8/32. Surely the mood of “irrational complacency” will succumb before then.
So the question is at what point will the majority of permabulls stop extending this “expect the average” reasoning to continue rationalizing no panic selling and looking for a near-term bottom like they are today? Although inevitable time-extending rallies will prolong false hopes, we expect they will abandon it before the stock market declines a second compounded 20%, or a cumulative 36% decline (1 minus 0.8 times 0.8).
Our work suggests the current 20% decline is only about the first third of the second downleg in what we call the Supercycle Bear Market, the “irrationally exuberant” echo-mania bust, which we fundamentally and technically quantify as an eventually deflationary economic Supercycle Bear Market Period.
In order to technically “base” and accommodate fundamental aftershocks from the current recession becoming very long and thus ultimately severe, we expect the Supercycle Bear Market Period will probably persist several years longer than the Supercycle Bear Market itself –probably through about Oct 2014. During the interim we expect the Supercycle Bear Market will most likely eventually decline at least a 50%."
The global financial crisis could lead to losses of 1,600 billion dollars for financial institutes, according a report in the Swiss Sunday newspaper SonntagsZeitung. It quoted a confidential study by the hedge fund Bridgewater Associates as saying losses for banks holding risky assets could be four times greater than the 400 billion dollars previously estimated.
Microsoft Corp.said Monday morning that it is open to discussing a "major transaction" with a new board of directors at Yahoo Inc. In a statement, the software giant said it has held talks with billionaire activist Carl Icahn, who is mounting a proxy battle for control of Yahoo.
The International Council of Shopping Centers predicts 6,500 stores will close this year, the most since 2001.
In April, the number of new homes for sale stood at 456,000 according to the U.S. Commerce Department, still a big number, but 93,000 below the mountainous figure a year ago.
According to Richard Suttmeier, chief market strategist of RightSide.com, the top five problem loan sectors to watch now are:
* Credit card debt
* Home equity loans
* Commercial real estate loans
* Commercial and development loans
* Derivatives generally ($182 trillion notional value)
We did get a bounce. It took place at the opening and got to plus 110 for the Dow. It didn't last long and turned into a triple digit loss. Apple and Google were two bright spots along with Yahoo.
Crude for August delivery dropped $3.92, or 2.7%, to settle at $141.37 a barrel on the New York Mercantile Exchange. Gold for August delivery fell $4.80 to end at $928.80 an ounce on the New York Mercantile Exchange.
The fragility of the U.S. housing and bank system could further kink up financial markets before an anticipated recovery in 2009, said San Francisco Federal Reserve President Janet Yellen Monday, with commodities presenting their own set of troubles. "Things could get worse before they get better," Yellen said in remarks prepared for delivery in San Diego.
Shares of Fannie Mae and Freddie Mac, the largest providers of funding for U.S. home mortgages, plunged to the lowest since 1992 on Monday on concern the companies need to raise more capital amid larger-than-expected losses.
Corporate "federal agency" debt obligations and mortgage-backed securities guaranteed by the companies also plummeted relative to government debt as investors thinned positions, analysts said.
Freddie Mac stock tumbled more than 18 percent in early afternoon trading, to $11.83, while Fannie Mae shares also dropped more than 18 percent, to $15.30.
A pending accounting change could also force Freddie Mac and Fannie Mae to raise capital at a difficult time, according to Lehman Brothers. The rule aimed at forcing companies to account for securitized assets on their balance sheets could mandate Freddie Mac and Fannie Mae to boost capital by $29 billion and $46 billion, respectively, the analysts wrote in a client note on Monday.
But while the gravity of the rule change is great, the two companies are likely to get exemptions, the analysts said.
Iran started war games on Monday and its president rejected a demand by major powers that it stop enriching uranium as "illegitimate," showing no sign of backing down in a stand-off over Tehran's nuclear ambitions. Missile units of the elite Revolutionary Guards' naval and air forces began war games, Iranian news agencies said, hours after the U.S. Navy said it had begun exercises in the Gulf.
Mortgage lender IndyMac Bancorp Inc., struggling to raise capital to stay in business, said Monday it has stopped accepting new loan submissions in its main mortgage lending divisions and plans to slash 3,800 jobs, or more than half of its work force.
Frontier Airlines says it is cutting 456 jobs in Colorado, and United Airlines has told state officials it plans to eliminate 150 jobs in the state.
AirTran Airways, the discount airline operated by AirTran Holdings Inc., will cut 480 jobs, or more than 5% of its workforce, because of high fuel prices, The Wall Street Journal reported on its Web site late Monday, citing company sources.
Commodities plunged the most since March, led by tumbling grain futures, as rains from eastern Colorado to Pennsylvania improved prospects for U.S. crops. Energy prices also dropped. The Reuters/Jefferies CRB Index fell 2.8 percent to 460.23, the biggest drop since March 19. Corn, soybeans, wheat and cotton plummeted the maximum allowed by U.S. exchanges.
The Financial Times reported that "Abu Dhabi ponders end of dollar peg." In addition, the paper observed that "Syria is aiming to build closer ties with China and India."
Rob Hanna: "Downside persistence like we’re seeing has historically been bearish."
Since 1940, the average bear market has lasted 386 days and produced a peak-to-trough decline of 30.4% for the S&P 500, Barron's reports.
John Hussman: "Market internals deteriorated significantly last week, with major indices breaking below their March lows. Stocks are clearly oversold on a short-term basis, and that sort of price compression often invites a fast, furious, prone-to-failure rally to clear that condition.
One factor that's problematic here is that tradable bear market rallies tend to feature clearly falling interest rates, and are typically initiated by something of a selling capitulation. Now, the point isn't that we have to see a capitulation for the sake of capitulation. Rather, there remains a significant segment of analysts and investors who reject the premise that the U.S. economy is in recession. That segment creates downside risk, because if (and in my view, when) further evidence emerges to confirm a recession, their change in perspective could prompt some significant liquidation. Earnings disappointments (particularly second-half guidance) could feed into that risk as well...I would expect that deepening economic difficulties are likely to put commodity prices into a downtrend within a few months, and that will also tend to feed some speculative tendencies at some point, most likely benefiting consumer-related stocks and refiners... It should not be surprising if this speculative unwinding takes the price of crude below $60 a barrel by early next year."
APP Pharmaceuticals Inc., the Schaumburg, Ill., producer of hospital-based injectable pharmaceuticals for cancer, infections, anesthesia, pain and critical-care applications, definitively agreed to be acquired for as much as $29 a share, or $4.6 billion, by Fresenius SE.
U.K. home builder Persimmon will announce Tuesday that it has cut around 1,000 jobs, according to a report in the Telegraph newspaper.
China National Offshore Oil Corp., seeking to enter oil-field services, agreed to buy oil driller Awilco Offshore ASA of Norway for $2.5 billion, or 85 Norwegian kroner per share.
General Motors Corp.is preparing to cut thousands of additional white-collar jobs and is mulling whether to sell or close more brands, people familiar with the matter told The Wall Street Journal.
Brewer Inbev intends to file a preliminary consent solicitation statement with the U.S. Securities & Exchange Commission to remove the board of Anheuser-Busch.
According to Kiplinger, some 122,000 borrowers with Countrywide home-equity lines of credit, or HELOCs, received letters in January informing them that they could no longer withdraw funds from their lines. A few months later, thousands of customers of other major lenders -- including Bank of America, J.P. Morgan Chase, Citibank, SunTrust, USAA, Wachovia, Washington Mutual and Wells Fargo -- also received notice that their lines had been frozen or reduced.
Sirius Satellite Radio Inc.'s acquisition of rival XM Satellite Radio Holdings Inc. may be cleared by federal regulators this month.
Barry Ritholtz reports that Marc Faber Expects Industrial-Commodity Demand to Drop.
According to the International Herald Tribune, in the United States, the quarter just ended was probably the first period since the early 1980s in which a bigger proportion of consumer spending went to gasoline, oil and other energy products than was spent on motor vehicles.
But even as the price of gasoline has soared above $4 a gallon, or $1.06 a liter, Americans are spending a much smaller share of their budgets on fuel than they did at the time of the last spike in oil prices, in 1980.
Jon Markman: "The collapse of market value since autumn has actually wiped out years of progress, putting all but a few big companies' returns for the decade below zero -- an extraordinary development that has jeopardized thousands of families' financial plans and possibly soured an entire generation on the stock market.
Indeed, it's fair to conclude now that the bear market of 2000-02 never really ended and that the 2003-07 period of modestly higher returns will look from a historical perspective like a twitch of life in a moribund carcass."
Brett Steenbarger: "* For six consecutive sessions, we have had over 2500 stocks across the NYSE, ASE, and NASDAQ making fresh 20-day lows. The highest number of 20-day highs over that period was 410.
* We have had more stocks making 20-day lows than 20-day highs for 20 consecutive sessions.
I think it's fair to say that a strong stock market is one in which, over time, we see more stocks making fresh 20-day highs than lows. A weak market is one in which the number of stocks making fresh lows outnumbers the number making highs...One definition of a bear market is one in which lower prices fail to attract buyers, leading to still lower prices. If you peruse the indicator reviews from the past several weeks, that is what we have been seeing."
U.S. store closings and cutbacks turned the second quarter into the worst for strip mall owners in 30 years, as budget-conscious consumers flocked to low-cost warehouse-style grocery centers.
Iraq has proposed a short-term memorandum of understanding with the United States rather than trying to hammer through a formal agreement on the presence of U.S. forces, the country's prime minister said Monday.
Jack Keane, a retired Army vice chief of staff: "There will be significant reductions in 2009 (in Iraq) whoever becomes president."
Courtesy of George Ure:
"My friend Bob Bronson (Bob@Bronsons.com ), from back in the days of the Longwave group at the University of Colorado's Center for a Sustainable Future (circa mid 1990's) sent along this really worthwhile analysis with permission to share:
"Another permabull story is emerging, which alone should be enough to convince you that the bear market they’re trying to rationalize is not nearly over.
It goes something like this.
Yeah, well, the stock market decline may have crossed over 20%, which means (we missed) it’s a bear market, BUT since the average bear market decline has only been about 30% it’s time (again) to anticipate a bottom.
Well, there have been 28 declines getter than 20% since 1870, and their median has been 35.7%, which is about twice 20% on a compounded basis. (the log of 1-0.357 divided by the log of 1-0.200 equals 1.98)
That means the bear market decline so far is really has only been half of such average bear markets. Of course, the second half of those declines have much more negatively impacting fundamentals with many times more associated investor pessimism as does the first half.
But there’s more with this kind of “expect the average” reasoning.
When the stock market declines 35.7%, which our work shows it surely will, then this “expect the average” reasoning would suggest a 46.9% decline, since that is the median of the 14 greater than 35.7%-sized previous declines since 1870. A 35.7% decline is equivalent to 2.84 compounded 20% declines.
And when the stock market decline reaches 46.9%, which our work shows it likely will, then expectations should be for a 49.2% decline, which is the median of the six greater than 46.9%-sized previous declines since 1870. A 49.2% decline is equivalent to 3.04 compounded 20% declines.
And when the stock market decline reaches 49.2%, which our work also suggests it likely will, then expectations should be for a 50.5% decline, which is the median of the three greater than 49.2%-sized declines. A 50.5% decline is equivalent to 3.15 compounded 20% declines.
The final extension of such “expect the average” is that when the stock market decline reaches 50.5% , which not-so-coincidently was the previous bear market decline from 3/24/00 through 10/10/02, the expectation then should be for the only larger decline since 1870: the 86.0% second downleg in the Great Depression Supercycle Bear Market from 4/17/30 to 7/8/32. Surely the mood of “irrational complacency” will succumb before then.
So the question is at what point will the majority of permabulls stop extending this “expect the average” reasoning to continue rationalizing no panic selling and looking for a near-term bottom like they are today? Although inevitable time-extending rallies will prolong false hopes, we expect they will abandon it before the stock market declines a second compounded 20%, or a cumulative 36% decline (1 minus 0.8 times 0.8).
Our work suggests the current 20% decline is only about the first third of the second downleg in what we call the Supercycle Bear Market, the “irrationally exuberant” echo-mania bust, which we fundamentally and technically quantify as an eventually deflationary economic Supercycle Bear Market Period.
In order to technically “base” and accommodate fundamental aftershocks from the current recession becoming very long and thus ultimately severe, we expect the Supercycle Bear Market Period will probably persist several years longer than the Supercycle Bear Market itself –probably through about Oct 2014. During the interim we expect the Supercycle Bear Market will most likely eventually decline at least a 50%."
The global financial crisis could lead to losses of 1,600 billion dollars for financial institutes, according a report in the Swiss Sunday newspaper SonntagsZeitung. It quoted a confidential study by the hedge fund Bridgewater Associates as saying losses for banks holding risky assets could be four times greater than the 400 billion dollars previously estimated.
Microsoft Corp.said Monday morning that it is open to discussing a "major transaction" with a new board of directors at Yahoo Inc. In a statement, the software giant said it has held talks with billionaire activist Carl Icahn, who is mounting a proxy battle for control of Yahoo.
The International Council of Shopping Centers predicts 6,500 stores will close this year, the most since 2001.
In April, the number of new homes for sale stood at 456,000 according to the U.S. Commerce Department, still a big number, but 93,000 below the mountainous figure a year ago.
According to Richard Suttmeier, chief market strategist of RightSide.com, the top five problem loan sectors to watch now are:
* Credit card debt
* Home equity loans
* Commercial real estate loans
* Commercial and development loans
* Derivatives generally ($182 trillion notional value)
We did get a bounce. It took place at the opening and got to plus 110 for the Dow. It didn't last long and turned into a triple digit loss. Apple and Google were two bright spots along with Yahoo.
Crude for August delivery dropped $3.92, or 2.7%, to settle at $141.37 a barrel on the New York Mercantile Exchange. Gold for August delivery fell $4.80 to end at $928.80 an ounce on the New York Mercantile Exchange.
The fragility of the U.S. housing and bank system could further kink up financial markets before an anticipated recovery in 2009, said San Francisco Federal Reserve President Janet Yellen Monday, with commodities presenting their own set of troubles. "Things could get worse before they get better," Yellen said in remarks prepared for delivery in San Diego.
Shares of Fannie Mae and Freddie Mac, the largest providers of funding for U.S. home mortgages, plunged to the lowest since 1992 on Monday on concern the companies need to raise more capital amid larger-than-expected losses.
Corporate "federal agency" debt obligations and mortgage-backed securities guaranteed by the companies also plummeted relative to government debt as investors thinned positions, analysts said.
Freddie Mac stock tumbled more than 18 percent in early afternoon trading, to $11.83, while Fannie Mae shares also dropped more than 18 percent, to $15.30.
A pending accounting change could also force Freddie Mac and Fannie Mae to raise capital at a difficult time, according to Lehman Brothers. The rule aimed at forcing companies to account for securitized assets on their balance sheets could mandate Freddie Mac and Fannie Mae to boost capital by $29 billion and $46 billion, respectively, the analysts wrote in a client note on Monday.
But while the gravity of the rule change is great, the two companies are likely to get exemptions, the analysts said.
Iran started war games on Monday and its president rejected a demand by major powers that it stop enriching uranium as "illegitimate," showing no sign of backing down in a stand-off over Tehran's nuclear ambitions. Missile units of the elite Revolutionary Guards' naval and air forces began war games, Iranian news agencies said, hours after the U.S. Navy said it had begun exercises in the Gulf.
Mortgage lender IndyMac Bancorp Inc., struggling to raise capital to stay in business, said Monday it has stopped accepting new loan submissions in its main mortgage lending divisions and plans to slash 3,800 jobs, or more than half of its work force.
Frontier Airlines says it is cutting 456 jobs in Colorado, and United Airlines has told state officials it plans to eliminate 150 jobs in the state.
AirTran Airways, the discount airline operated by AirTran Holdings Inc., will cut 480 jobs, or more than 5% of its workforce, because of high fuel prices, The Wall Street Journal reported on its Web site late Monday, citing company sources.
Commodities plunged the most since March, led by tumbling grain futures, as rains from eastern Colorado to Pennsylvania improved prospects for U.S. crops. Energy prices also dropped. The Reuters/Jefferies CRB Index fell 2.8 percent to 460.23, the biggest drop since March 19. Corn, soybeans, wheat and cotton plummeted the maximum allowed by U.S. exchanges.
The Financial Times reported that "Abu Dhabi ponders end of dollar peg." In addition, the paper observed that "Syria is aiming to build closer ties with China and India."
Sunday, July 06, 2008
A Bounce In The Cards?
7/7/08 A Bounce In The Cards?
The dollar has lost roughly a quarter of its purchasing power against the currencies of major U.S. trading partners from its peak in 2002. Mark Zandi, chief economist at Moody's Economy.com, said expanding exports due to a weak dollar are "an important source of growth, but it doesn't add a lot to jobs, it doesn't mean very much for the average American household. For the average American, for the average consumer, these are pretty tough times."
Mike Burk: "The NY ADL is a running total of the number of NYSE declining issues subtracted from advancing issues.This indicator is at its lowest level since the July 2002 low several months ahead of the 2002 bottom. From the July 2002 low the SPX rallied 20.7% in a month before falling to its final low about 2 months later...The ambiguity over whether or not we should expect a retest was resolved last week when the NYSE recorded 652 new lows on Wednesday and the NASDAQ recorded 453...The extreme levels of new lows imply a high probability of a retest of the current low...By all measures the coming week has had, on average modest returns and the 4th year of the Presidential cycle has been weaker than the average...The market is as oversold as it has been at any time in the last 10 years. A bounce is likely and it could be of significant magnitude. Following the bounce a retest of the current low is likely.I expect the major indices to be higher on Friday July 10 than they were on Friday June 3."
The FTSE 100 index closed on Friday at its lowest level since November 2005 as it threatened to join counterparts in Asia, the US and Europe in bear market territory.
The UK benchmark has fallen 19.6 per cent from its peak in October, leaving it just short of the 20 per cent fall from a recent high that defines a bear market.
Lampedusa: “If we want things to stay as they are, things will have to change.”
Nearly 2,000 firefighters made a stand Saturday on Highway 1, near famous inns and spas bereft of tourists on this holiday weekend, as crews sought to beat back the out-of-control Basin Complex wildfire in Big Sur in advance of a heat wave expected to start rolling into the area Sunday.
According to the Houston Chronicle, even as low world prices and the weak U.S. dollar have hurt sugar exporters here, Colombia's biofuels industry is growing by leaps and bounds. Ahead-of-the-curve planning, technological breakthroughs and government incentives have helped Colombia emerge as the No. 2 producer of ethanol in Latin America, behind Brazil, and a leader in the manufacture of biodiesel.
"We took the initiative years ago and became a pioneer," Jorge Cardenas, president of the Colombian Biofuels Federation, said in an interview.
With just over 100 million gallons annually, Colombian ethanol production is dwarfed by the billions of gallons churned out yearly in the U.S. and Brazil.
Yet Colombia is a technological leader in the field and is experimenting with biofuel production using everything from sugar beets and palm oil to yucca.
Prieur du Plessis: "A tradeable rally is probably not too far off, but the primary trend of most global stock markets remains down. Trying to squeeze out a few basis points from a bounce could turn out to be a high-risk strategy, particularly as long as the oil spike persists, causing sentiment and other overbought/oversold indicators to become even more oversold before a meaningful rally manifests itself."
Brett Steenbarger: "This shift from an emerging markets growth story to a truly global recession theme has important implications for commodities markets as well as rates and equities. Inflation has been making the headlines, fanning concerns over central bank rate hikes, but falling materials shares may be foretelling a very different economic future."
Daily Reckoning: "This whole economic phase is about taking Americans down a notch," we told a friend over a glass of wine yesterday afternoon. It really is a classic case of imperial over-stretch…where Americans reached too far…spent too much…borrowed too much…and lived too high. Now, they're facing a major correction - with falling living standards, falling wealth, falling power, and falling prestige. There's no way out…the best they can do is to take their medicine as gracefully as possible. There are no magic levers Ben Bernanke can yank. No miracle knobs he can turn."
We should add that it's not only Americans who are being taken down. The British too are facing a correction of their own.
"British economy falling into an American-style slump," says the headline in the International Herald Tribune.
No wonder. The Brits borrowed even more than Americans and now have more debt than we do."
Iran will close the Strait of Hormuz, through which the bulk of Middle East oil is shipped, if the country is attacked, state-run Fars news agency reported, citing a military commander.
``All countries should know that if Iran's interests in the region are ignored, it is natural that we will not allow others to use'' the waterway, Fars cited Armed Forces Chief of Staff Hassan Firouzabadi as saying late yesterday.
The Strait of Hormuz between Iran and Oman at the mouth of the Persian Gulf handles the shipment of about 20 percent of the world's daily supply of oil, according to figures from the U.S. government's Energy Information Administration. The oil's main destinations include the U.S., Western Europe and Japan.
The oil majors now control less than 10 per cent of world resources of gas and oil, against 70 per cent in the 1970s, according to figures released by the office of Ernst and Young at the World Petroleum Congress in Madrid.
South Korea said on Sunday it was implementing a multi-stage contingency plan aimed at reducing energy consumption before the skyrocketing oil prices push Asia's fourth-largest economy into a full-fledged crisis.
Prime Minister Han Seung-soo told a televised news conference the government would restrict driving of cars owned by public organizations as part of the measures, adding a tougher set of steps would be adopted if oil prices rose further.
The United Arab Emirates canceled all its Iraqi debt Sunday and moved to restore a full diplomatic mission in Baghdad by naming a new ambassador. The Emirates' official news agency quoted the country's president Sunday as saying the UAE was canceling all $4 billion in debt owed by Iraq.
Jordan named an ambassador last week, and Kuwait and Bahrain say appointments are imminent.
NBC Universal, Bain Capital and Blackstone Group LP said Sunday they had signed an agreement to buy the Weather Channel properties from Landmark Communications. Financial terms of the transaction were not disclosed, although an earlier Wall Street Journal report had estimated the deal at $3.5 billion.
The dollar has lost roughly a quarter of its purchasing power against the currencies of major U.S. trading partners from its peak in 2002. Mark Zandi, chief economist at Moody's Economy.com, said expanding exports due to a weak dollar are "an important source of growth, but it doesn't add a lot to jobs, it doesn't mean very much for the average American household. For the average American, for the average consumer, these are pretty tough times."
Mike Burk: "The NY ADL is a running total of the number of NYSE declining issues subtracted from advancing issues.This indicator is at its lowest level since the July 2002 low several months ahead of the 2002 bottom. From the July 2002 low the SPX rallied 20.7% in a month before falling to its final low about 2 months later...The ambiguity over whether or not we should expect a retest was resolved last week when the NYSE recorded 652 new lows on Wednesday and the NASDAQ recorded 453...The extreme levels of new lows imply a high probability of a retest of the current low...By all measures the coming week has had, on average modest returns and the 4th year of the Presidential cycle has been weaker than the average...The market is as oversold as it has been at any time in the last 10 years. A bounce is likely and it could be of significant magnitude. Following the bounce a retest of the current low is likely.I expect the major indices to be higher on Friday July 10 than they were on Friday June 3."
The FTSE 100 index closed on Friday at its lowest level since November 2005 as it threatened to join counterparts in Asia, the US and Europe in bear market territory.
The UK benchmark has fallen 19.6 per cent from its peak in October, leaving it just short of the 20 per cent fall from a recent high that defines a bear market.
Lampedusa: “If we want things to stay as they are, things will have to change.”
Nearly 2,000 firefighters made a stand Saturday on Highway 1, near famous inns and spas bereft of tourists on this holiday weekend, as crews sought to beat back the out-of-control Basin Complex wildfire in Big Sur in advance of a heat wave expected to start rolling into the area Sunday.
According to the Houston Chronicle, even as low world prices and the weak U.S. dollar have hurt sugar exporters here, Colombia's biofuels industry is growing by leaps and bounds. Ahead-of-the-curve planning, technological breakthroughs and government incentives have helped Colombia emerge as the No. 2 producer of ethanol in Latin America, behind Brazil, and a leader in the manufacture of biodiesel.
"We took the initiative years ago and became a pioneer," Jorge Cardenas, president of the Colombian Biofuels Federation, said in an interview.
With just over 100 million gallons annually, Colombian ethanol production is dwarfed by the billions of gallons churned out yearly in the U.S. and Brazil.
Yet Colombia is a technological leader in the field and is experimenting with biofuel production using everything from sugar beets and palm oil to yucca.
Prieur du Plessis: "A tradeable rally is probably not too far off, but the primary trend of most global stock markets remains down. Trying to squeeze out a few basis points from a bounce could turn out to be a high-risk strategy, particularly as long as the oil spike persists, causing sentiment and other overbought/oversold indicators to become even more oversold before a meaningful rally manifests itself."
Brett Steenbarger: "This shift from an emerging markets growth story to a truly global recession theme has important implications for commodities markets as well as rates and equities. Inflation has been making the headlines, fanning concerns over central bank rate hikes, but falling materials shares may be foretelling a very different economic future."
Daily Reckoning: "This whole economic phase is about taking Americans down a notch," we told a friend over a glass of wine yesterday afternoon. It really is a classic case of imperial over-stretch…where Americans reached too far…spent too much…borrowed too much…and lived too high. Now, they're facing a major correction - with falling living standards, falling wealth, falling power, and falling prestige. There's no way out…the best they can do is to take their medicine as gracefully as possible. There are no magic levers Ben Bernanke can yank. No miracle knobs he can turn."
We should add that it's not only Americans who are being taken down. The British too are facing a correction of their own.
"British economy falling into an American-style slump," says the headline in the International Herald Tribune.
No wonder. The Brits borrowed even more than Americans and now have more debt than we do."
Iran will close the Strait of Hormuz, through which the bulk of Middle East oil is shipped, if the country is attacked, state-run Fars news agency reported, citing a military commander.
``All countries should know that if Iran's interests in the region are ignored, it is natural that we will not allow others to use'' the waterway, Fars cited Armed Forces Chief of Staff Hassan Firouzabadi as saying late yesterday.
The Strait of Hormuz between Iran and Oman at the mouth of the Persian Gulf handles the shipment of about 20 percent of the world's daily supply of oil, according to figures from the U.S. government's Energy Information Administration. The oil's main destinations include the U.S., Western Europe and Japan.
The oil majors now control less than 10 per cent of world resources of gas and oil, against 70 per cent in the 1970s, according to figures released by the office of Ernst and Young at the World Petroleum Congress in Madrid.
South Korea said on Sunday it was implementing a multi-stage contingency plan aimed at reducing energy consumption before the skyrocketing oil prices push Asia's fourth-largest economy into a full-fledged crisis.
Prime Minister Han Seung-soo told a televised news conference the government would restrict driving of cars owned by public organizations as part of the measures, adding a tougher set of steps would be adopted if oil prices rose further.
The United Arab Emirates canceled all its Iraqi debt Sunday and moved to restore a full diplomatic mission in Baghdad by naming a new ambassador. The Emirates' official news agency quoted the country's president Sunday as saying the UAE was canceling all $4 billion in debt owed by Iraq.
Jordan named an ambassador last week, and Kuwait and Bahrain say appointments are imminent.
NBC Universal, Bain Capital and Blackstone Group LP said Sunday they had signed an agreement to buy the Weather Channel properties from Landmark Communications. Financial terms of the transaction were not disclosed, although an earlier Wall Street Journal report had estimated the deal at $3.5 billion.
Saturday, July 05, 2008
The D Word
7/6/08 The D Word
The Big Sur fire was still 5 percent contained and had consumed more than 107 square miles and 20 homes, while the Goleta fire was 14 percent contained and had destroyed about a half-dozen out buildings and more than 10 square miles.
The Los Padres blazes were two of 335 active wildfires burning in California, down from a peak of roughly 1,500 fires a few days ago, but they were commanding the greatest share of equipment and personnel because of their locations near populated areas, said Daniel Berlant, a spokesman for the California Department of Forestry and Fire Protection. Firefighting cost the state of California a record $392 million in the fiscal year ended June 30, the San Francisco Chronicle reported.
Iran's nuclear program remains unchanged, said a government spokesman Saturday, indicating that Tehran has no plans to meet the West's central demand that it stop enriching uranium.
One-month Treasury bill rates jumped 53 bps this week to 1.85%. Meanwhile, the 2-year is at 2.53%. Given the uncertainties in the economy, world trade, and the funding of our growing twin tower deficits, I would prefer a one-month Treasury bill investment to any other in the U.S. government or corporate bond markets. I am well aware that inflation will create a negative return.
According to Bloomberg, “China, the world’s most populous nation, will increase crop subsidies, boost rural spending and allow grain prices to rise to ensure farmers grow enough to feed its 1.3 billion people for at least the next 12 years. The country must continue to produce at least 95% of the grain it consumes, the State Council said."
Doug Noland: "And today - as symbolized by Starbucks - the required Credit stimulus is no longer forthcoming, leaving scores of enterprises throughout the economy attempting desperate measures to cut expenses and maintain viability.
The finance, automotive and airline industries are also notable for having come to rely on a very different inflationary environment than the one we face today. And today’s expanding retrenchment will place only further downward pressure on business profits, household incomes, asset prices, and government receipts - forcing additional spending restraint and further retrenchment. At the same time, this self-reinforcing retrenchment will create only greater financial strain on an already impaired Credit apparatus, ensuring even greater Credit troubles and tighter Financial Conditions, especially for the business sector.
And to attempt a response to the above question: What difference does it really make if the economy’s “output” were goods or services? It makes a huge difference. At the end of the day – at the conclusion of the Credit boom - a finance and consumption-based economy is left with enormous financial claims backed by woefully inadequate wealth creating assets. During the boom, Starbucks could earn seemingly endless profits by selling $4 lattes. The stock price went to the moon; financial wealth was abounding. Now, with discretionary spending being sharply reduced by the confluence of sinking asset prices, tightened Credit, and inflating energy and food prices, the enterprise value of Starbucks and scores of others has been greatly diminished. Worse yet, for the economy overall, there is little in the way of real economic value remaining for billions of “output” Starbucks and many other services providers created over the long boom. Only the financial obligations (the original asset-based borrowings) remain, while the market is increasingly suspect of the true state of underlying quality and value. And the harsh reality is that Starbucks is a microcosm of scores of enterprises that have come to comprise the core of the U.S. Bubble economy. The economic viability of so many businesses – and even industries – will be in jeopardy in the unfolding Credit and financial landscape. The stock market is still in the early stage of discounting the unfolding Credit and economic bust. And I’ll reiterate that we expect the unfolding economic adjustment to be of such a magnitude as to be classified as an economic depression." I agree with the use of the D word!
The number of people unemployed for at least 26 weeks has risen to 1.6 million -- up 37% in the past year. That is almost double the percentage increase for the overall unemployed, according to a Labor Department report released Thursday. More than 18% of the unemployed have been looking for work for more than half a year.
"We are in a credit crisis the likes of which I've never seen in my lifetime," Ted Forstmann warns. He adds: "The credit problems in this country are considerably worse than people have said or know. I didn't even know subprime mortgages existed and I was worried about the credit crisis...I don't know when money was ever this inexpensive in the history of this country. But not in modern times, that's for sure..."Buffett once told me there are three 'I's in every cycle. The 'innovator,' that's the first 'I.' After the innovator comes the 'imitator.' And after the imitator in the cycle comes the idiot. Which makes way for an innovator again." "We're in the third 'I' for sure," Forstmann stated.
Robert McHugh: "Confirmed Hindenburg Omens are very rare. There have been only 27 confirmed Hindenburg Omen signals over the past 22 years. June 16th's is the 27th. This is amazing when you consider that during that time span, there were roughly 5,900 trading days. Of those 5,900 trading days where it was possible to generate a Hindenburg Omen, only 191 (3.2 percent) generated one, clustering into 27 confirmed potential stock market crash signals.
If we define a crash as a 15% decline, of the previous 26 confirmed Hindenburg Omen signals, seven (27.0 percent ) were followed by financial system threatening, life-as-we-know-it threatening stock market crashes. Three (11.5 percent) more were followed by stock market selling panics (10% to 14.9% declines). Four more (15.4 percent) resulted in sharp declines (8% to 9.9% drops). Six (23.0 percent) were followed by meaningful declines (5% to 7.9%), four (15.4 percent) saw mild declines (2.0% to 4.9%), and two (7.7 percent) were failures, with subsequent declines of 2.0% or less. Put another way, there is a 27 percent probability that a stock market crash -- the big one -- will occur after we get a confirmed (more than one in a cluster) Hindenburg Omen. There is a 38.5 percent probability that at least a panic sell-off will occur. There is a 53.9 percent probability that a sharp decline greater than 8.0 % will occur, and there is a 76.9 percent probability that a stock market decline of at least 5 percent will occur. Only one out of roughly 13 times will this signal fail. And now we have another confirmed Hindenburg Omen signal, as of June 16th, 2008, the date the June 6th observation was confirmed with a second observation.. Since this signal was confirmed on June 16th, 2008, the Dow Industrials have fallen 1,112 points, or 9.0 percent, with more decline likely...A confirmed Hindenburg Omen is not a guarantee of a stock market crash. The odds of a crash based upon the history since 1985 is 27.0 percent. That means the odds we will not have a crash are quite high, at 73.0 percent... You now also have to factor that the Fed is pumping liquidity to prevent crashes once these signals occur. So you do not want to go short the farm...Still, it is interesting that even with the heavy liquidity the Fed has been pumping around the time of the past two signals, the odds of a 5 percent decline or more remain pretty high at 76.9 percent."
Bloomberg writes that LBO defaults may rise sharply as borrowing costs rise.
Brett Steenbarger: "Perhaps we'll yet successfully test the March lows in the S&P 500 Index and, technically we can be saved and pour the champagne. For now, however, I note the continued decline in the advance-decline line of NYSE common stocks to new bear lows and the continued decline in the cumulative NYSE TICK and I'll stick with poise and rationality: my door remains closed."
George Ure: "In other words, relative to Europe, the Dollar has lost more than 40% of its overseas purchasing power under Bush. Say, that's some "strong dollar policy" don'tcha think?... One U.S. dollar now buy 1.0156 Canadian, a loss of 32.9% when we're bidding against Canadian money for world market goods."
The Oil Drum: "Faced with soaring gasoline prices, agencies around the country that provide services to the elderly say they are having to cut back on programs like Meals on Wheels, transportation assistance and home care, especially in rural areas that depend on volunteers who provide their own gas. In a recent survey by the National Association of Area Agencies on Aging, more than half said they had already cut back on programs because of gas costs, and 90 percent said they expected to make cuts in the 2009 fiscal year."
Argentina's lower house of congress approved the government's plan to increase taxes on exports of grains and oilseeds, risking a resumption of three months of strikes by farmers.
The measure, passed by a vote of 128 to 122 after 17 hours of debate, requires Senate approval to become law. It ratifies a March 11 government decree that sparked protests among farmers in Argentina, the world's second-largest exporter of corn and third-largest of soybeans. President Cristina Fernandez de Kirchner imposed the variable levies for grains and oilseeds to keep domestic food prices from rising. She asked Congress to approve the increases reckoning that enacting them into law would quell protests that resulted in food shortages.
The U.S. will ban Mexican imports of ingredients commonly used in foods such as salsa as it seeks the source of a salmonella outbreak, Cable News Network said, citing former Health and Human Services Secretary Tommy Thompson.
Health inspectors will stop shipments of cilantro, jalapeno peppers, Serrano peppers, scallions and bulb onions from entering the U.S. on July 7, Thompson told CNN. The items will be tested for salmonella and E.coli.
Renault SA Chief Executive Officer Carlos Ghosn said he expects mergers among automakers because car companies' stocks are ``undervalued.''
``When you've got General Motors Inc., the world's biggest carmaker, worth $6 billion, or 3 percent of its revenue, that is about two weeks of revenue, you know very well that something is going to happen,'' Ghosn said today during the Economic Forum of Aix-en-Provence in southern France.
Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929: "There may be a recession in stock prices, but not anything in the nature of a crash."
Irving Fisher, Professor of Economics at Yale University, November 14, 1929: "The end of the decline of the Stock Market will probably not be long, only a few more days at most."
President F.D. Roosevelt, 1933: "All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."
The Big Sur fire was still 5 percent contained and had consumed more than 107 square miles and 20 homes, while the Goleta fire was 14 percent contained and had destroyed about a half-dozen out buildings and more than 10 square miles.
The Los Padres blazes were two of 335 active wildfires burning in California, down from a peak of roughly 1,500 fires a few days ago, but they were commanding the greatest share of equipment and personnel because of their locations near populated areas, said Daniel Berlant, a spokesman for the California Department of Forestry and Fire Protection. Firefighting cost the state of California a record $392 million in the fiscal year ended June 30, the San Francisco Chronicle reported.
Iran's nuclear program remains unchanged, said a government spokesman Saturday, indicating that Tehran has no plans to meet the West's central demand that it stop enriching uranium.
One-month Treasury bill rates jumped 53 bps this week to 1.85%. Meanwhile, the 2-year is at 2.53%. Given the uncertainties in the economy, world trade, and the funding of our growing twin tower deficits, I would prefer a one-month Treasury bill investment to any other in the U.S. government or corporate bond markets. I am well aware that inflation will create a negative return.
According to Bloomberg, “China, the world’s most populous nation, will increase crop subsidies, boost rural spending and allow grain prices to rise to ensure farmers grow enough to feed its 1.3 billion people for at least the next 12 years. The country must continue to produce at least 95% of the grain it consumes, the State Council said."
Doug Noland: "And today - as symbolized by Starbucks - the required Credit stimulus is no longer forthcoming, leaving scores of enterprises throughout the economy attempting desperate measures to cut expenses and maintain viability.
The finance, automotive and airline industries are also notable for having come to rely on a very different inflationary environment than the one we face today. And today’s expanding retrenchment will place only further downward pressure on business profits, household incomes, asset prices, and government receipts - forcing additional spending restraint and further retrenchment. At the same time, this self-reinforcing retrenchment will create only greater financial strain on an already impaired Credit apparatus, ensuring even greater Credit troubles and tighter Financial Conditions, especially for the business sector.
And to attempt a response to the above question: What difference does it really make if the economy’s “output” were goods or services? It makes a huge difference. At the end of the day – at the conclusion of the Credit boom - a finance and consumption-based economy is left with enormous financial claims backed by woefully inadequate wealth creating assets. During the boom, Starbucks could earn seemingly endless profits by selling $4 lattes. The stock price went to the moon; financial wealth was abounding. Now, with discretionary spending being sharply reduced by the confluence of sinking asset prices, tightened Credit, and inflating energy and food prices, the enterprise value of Starbucks and scores of others has been greatly diminished. Worse yet, for the economy overall, there is little in the way of real economic value remaining for billions of “output” Starbucks and many other services providers created over the long boom. Only the financial obligations (the original asset-based borrowings) remain, while the market is increasingly suspect of the true state of underlying quality and value. And the harsh reality is that Starbucks is a microcosm of scores of enterprises that have come to comprise the core of the U.S. Bubble economy. The economic viability of so many businesses – and even industries – will be in jeopardy in the unfolding Credit and financial landscape. The stock market is still in the early stage of discounting the unfolding Credit and economic bust. And I’ll reiterate that we expect the unfolding economic adjustment to be of such a magnitude as to be classified as an economic depression." I agree with the use of the D word!
The number of people unemployed for at least 26 weeks has risen to 1.6 million -- up 37% in the past year. That is almost double the percentage increase for the overall unemployed, according to a Labor Department report released Thursday. More than 18% of the unemployed have been looking for work for more than half a year.
"We are in a credit crisis the likes of which I've never seen in my lifetime," Ted Forstmann warns. He adds: "The credit problems in this country are considerably worse than people have said or know. I didn't even know subprime mortgages existed and I was worried about the credit crisis...I don't know when money was ever this inexpensive in the history of this country. But not in modern times, that's for sure..."Buffett once told me there are three 'I's in every cycle. The 'innovator,' that's the first 'I.' After the innovator comes the 'imitator.' And after the imitator in the cycle comes the idiot. Which makes way for an innovator again." "We're in the third 'I' for sure," Forstmann stated.
Robert McHugh: "Confirmed Hindenburg Omens are very rare. There have been only 27 confirmed Hindenburg Omen signals over the past 22 years. June 16th's is the 27th. This is amazing when you consider that during that time span, there were roughly 5,900 trading days. Of those 5,900 trading days where it was possible to generate a Hindenburg Omen, only 191 (3.2 percent) generated one, clustering into 27 confirmed potential stock market crash signals.
If we define a crash as a 15% decline, of the previous 26 confirmed Hindenburg Omen signals, seven (27.0 percent ) were followed by financial system threatening, life-as-we-know-it threatening stock market crashes. Three (11.5 percent) more were followed by stock market selling panics (10% to 14.9% declines). Four more (15.4 percent) resulted in sharp declines (8% to 9.9% drops). Six (23.0 percent) were followed by meaningful declines (5% to 7.9%), four (15.4 percent) saw mild declines (2.0% to 4.9%), and two (7.7 percent) were failures, with subsequent declines of 2.0% or less. Put another way, there is a 27 percent probability that a stock market crash -- the big one -- will occur after we get a confirmed (more than one in a cluster) Hindenburg Omen. There is a 38.5 percent probability that at least a panic sell-off will occur. There is a 53.9 percent probability that a sharp decline greater than 8.0 % will occur, and there is a 76.9 percent probability that a stock market decline of at least 5 percent will occur. Only one out of roughly 13 times will this signal fail. And now we have another confirmed Hindenburg Omen signal, as of June 16th, 2008, the date the June 6th observation was confirmed with a second observation.. Since this signal was confirmed on June 16th, 2008, the Dow Industrials have fallen 1,112 points, or 9.0 percent, with more decline likely...A confirmed Hindenburg Omen is not a guarantee of a stock market crash. The odds of a crash based upon the history since 1985 is 27.0 percent. That means the odds we will not have a crash are quite high, at 73.0 percent... You now also have to factor that the Fed is pumping liquidity to prevent crashes once these signals occur. So you do not want to go short the farm...Still, it is interesting that even with the heavy liquidity the Fed has been pumping around the time of the past two signals, the odds of a 5 percent decline or more remain pretty high at 76.9 percent."
Bloomberg writes that LBO defaults may rise sharply as borrowing costs rise.
Brett Steenbarger: "Perhaps we'll yet successfully test the March lows in the S&P 500 Index and, technically we can be saved and pour the champagne. For now, however, I note the continued decline in the advance-decline line of NYSE common stocks to new bear lows and the continued decline in the cumulative NYSE TICK and I'll stick with poise and rationality: my door remains closed."
George Ure: "In other words, relative to Europe, the Dollar has lost more than 40% of its overseas purchasing power under Bush. Say, that's some "strong dollar policy" don'tcha think?... One U.S. dollar now buy 1.0156 Canadian, a loss of 32.9% when we're bidding against Canadian money for world market goods."
The Oil Drum: "Faced with soaring gasoline prices, agencies around the country that provide services to the elderly say they are having to cut back on programs like Meals on Wheels, transportation assistance and home care, especially in rural areas that depend on volunteers who provide their own gas. In a recent survey by the National Association of Area Agencies on Aging, more than half said they had already cut back on programs because of gas costs, and 90 percent said they expected to make cuts in the 2009 fiscal year."
Argentina's lower house of congress approved the government's plan to increase taxes on exports of grains and oilseeds, risking a resumption of three months of strikes by farmers.
The measure, passed by a vote of 128 to 122 after 17 hours of debate, requires Senate approval to become law. It ratifies a March 11 government decree that sparked protests among farmers in Argentina, the world's second-largest exporter of corn and third-largest of soybeans. President Cristina Fernandez de Kirchner imposed the variable levies for grains and oilseeds to keep domestic food prices from rising. She asked Congress to approve the increases reckoning that enacting them into law would quell protests that resulted in food shortages.
The U.S. will ban Mexican imports of ingredients commonly used in foods such as salsa as it seeks the source of a salmonella outbreak, Cable News Network said, citing former Health and Human Services Secretary Tommy Thompson.
Health inspectors will stop shipments of cilantro, jalapeno peppers, Serrano peppers, scallions and bulb onions from entering the U.S. on July 7, Thompson told CNN. The items will be tested for salmonella and E.coli.
Renault SA Chief Executive Officer Carlos Ghosn said he expects mergers among automakers because car companies' stocks are ``undervalued.''
``When you've got General Motors Inc., the world's biggest carmaker, worth $6 billion, or 3 percent of its revenue, that is about two weeks of revenue, you know very well that something is going to happen,'' Ghosn said today during the Economic Forum of Aix-en-Provence in southern France.
Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929: "There may be a recession in stock prices, but not anything in the nature of a crash."
Irving Fisher, Professor of Economics at Yale University, November 14, 1929: "The end of the decline of the Stock Market will probably not be long, only a few more days at most."
President F.D. Roosevelt, 1933: "All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."
Friday, July 04, 2008
Credit Card Debt
7/5/08 Credit Card Debt
Credit-card debt is becoming even more prominent in the struggling state of the economy. The average amount per consumer rose to $6,900 in the last year, a 21 percent increase, according to Experian, a global information services company. The average number of past-due accounts also increased to exceed more than one per consumer. Of approximately 7,000 readers who responded to the site's demographics survey, 77 percent answered "yes" to having a college degree or higher, and 41 percent declared an annual income of $75,000 or higher. Twenty-three percent of the respondents said their annual salary exceeds $100,000.
Robert McHugh: "The Industrials have fallen 1,112 points since a Hindenburg Omen Stock Market Crash Risk signal was confirmed on June 16th, 2008...Oil set another new all-time high Thursday. It is getting nuts. There will be a delayed response by the economy to exploding oil prices, commerce getting hit hard next year. That may be what the stock market sees ahead and is telling us now. We got another very small change in the McClellan Oscillator Thursday, a 1.28 decline, suggesting a very large price move is coming early next week. If it is down, it could represent selling capitulation. If it is up, it will signal a two to three week countertrend rally has started which should end around our July 22nd phi mate turn date. Once any countertrend rally is over, we should see a huge plunge into the autumn."
Goldman Sachs said Friday that European banks could need to raise around 60 billion euros ($94 billion) in additional capital, or withhold dividend payments for a year, if recent moves by several banks to strengthen their balance sheets set a new benchmark for capital levels. The broker added that figure could rise to over 90 billion euros if a turn in the European credit cycle triggered losses in line with those seen in the early 1990s.
Merrill Lynch is in talks to sell its stake in financial news service Bloomberg to a blind trust run by New York City Mayor Michael Bloomberg, according to a report in The New York Post, citing unnamed sources.
India's inflation reportedly soared to 11.63% in the week to June 21 from the same period a year-ago, strengthening chances of more policy measures by the country's central bank to control prices.
The European Union and Russia have started talks on a new cooperation deal on political and economic ties the EU hopes will redefine the way it imports much of its oil and gas from its key supplier.The EU wants Moscow to open its vast energy sector to European investors. Moscow has pushed for more opportunity for its companies to invest in oil and gas distribution networks in Europe.
The dollar's fall is a source of global concern and the European Union wants a better balance between the U.S. unit and other major currencies, European Commission President Jose Manuel Barroso said on Friday.
BHP Billiton Ltd. said Friday it has reached agreement with China's Baosteel on a rise in iron-ore prices, with the increase in line with price hikes already announced by rival Rio Tinto Ltd.
China has scrapped a 75 percent rebate on value-added taxes levied on crude-oil imports, Caijing magazine reported, citing an unidentified official from China National Petroleum Corp. The government had refunded VAT on imports since April to help narrow refiners' losses, the report said.
Eurozone interest rates hit a seven-year high on Thursday.
Phillip Swagel, assistant Treasury secretary for economic policy: "Overall inflation, uh, is going to fully offset and more those, uh, you know, those wage gains," he said. The unemployment rate remained at 5.5 percent, but "I don't . . . take any comfort from that."
The mandatory evacuation in Big Sur will probably remain in place for "days or longer," said Rudy Evenson, information officer for the agencies battling the fire. Currently, it extends for 35 miles along Highway 1, from the coastside hamlet of Lucia north within 10 miles of Carmel Highlands. There is no estimated time for when Highway 1 will be reopened, Caltrans said.
Although American Airlines has not given a total figure, the airline says it expects to shed 8 percent of its work force. With about 85,500 workers, including those at sister airline American Eagle, that would represent more than 6,800 jobs.
Origin Energy Ltd., Australia's second largest power retailer, rejected a $13 billion takeover bid Friday from British natural gas producer BG Group.
BG Group last month launched a hostile bid of 15.50 Australian dollars per Origin share, almost four weeks after Origin rejected an unsolicited proposal from BG Group at the same price. That was revised up from an initial offering of 14.70 Australian dollars a share in April.
Iran says it will give a positive and constructive response today to the G5+1 incentive package to suspend its uranium enrichment program.
The Economist: "But since the eruption of global financial turmoil last year and the dwindling appetite for risk, carry trades have started to unwind and it has become harder to finance deficits. As a result, current-account imbalances are once again exerting a powerful influence over currencies. The chart shows that the weakest currencies this year have been in countries with deficits, from Britain to South Africa. In contrast, the yen and the Swiss franc have perked up. The same chart a year or so ago would have shown virtually the opposite relationship."
7/5/08 Credit Card Debt
Credit-card debt is becoming even more prominent in the struggling state of the economy. The average amount per consumer rose to $6,900 in the last year, a 21 percent increase, according to Experian, a global information services company. The average number of past-due accounts also increased to exceed more than one per consumer. Of approximately 7,000 readers who responded to the site's demographics survey, 77 percent answered "yes" to having a college degree or higher, and 41 percent declared an annual income of $75,000 or higher. Twenty-three percent of the respondents said their annual salary exceeds $100,000.
Robert McHugh: "The Industrials have fallen 1,112 points since a Hindenburg Omen Stock Market Crash Risk signal was confirmed on June 16th, 2008...Oil set another new all-time high Thursday. It is getting nuts. There will be a delayed response by the economy to exploding oil prices, commerce getting hit hard next year. That may be what the stock market sees ahead and is telling us now. We got another very small change in the McClellan Oscillator Thursday, a 1.28 decline, suggesting a very large price move is coming early next week. If it is down, it could represent selling capitulation. If it is up, it will signal a two to three week countertrend rally has started which should end around our July 22nd phi mate turn date. Once any countertrend rally is over, we should see a huge plunge into the autumn."
Goldman Sachs said Friday that European banks could need to raise around 60 billion euros ($94 billion) in additional capital, or withhold dividend payments for a year, if recent moves by several banks to strengthen their balance sheets set a new benchmark for capital levels. The broker added that figure could rise to over 90 billion euros if a turn in the European credit cycle triggered losses in line with those seen in the early 1990s.
Merrill Lynch is in talks to sell its stake in financial news service Bloomberg to a blind trust run by New York City Mayor Michael Bloomberg, according to a report in The New York Post, citing unnamed sources.
India's inflation reportedly soared to 11.63% in the week to June 21 from the same period a year-ago, strengthening chances of more policy measures by the country's central bank to control prices.
The European Union and Russia have started talks on a new cooperation deal on political and economic ties the EU hopes will redefine the way it imports much of its oil and gas from its key supplier.The EU wants Moscow to open its vast energy sector to European investors. Moscow has pushed for more opportunity for its companies to invest in oil and gas distribution networks in Europe.
The dollar's fall is a source of global concern and the European Union wants a better balance between the U.S. unit and other major currencies, European Commission President Jose Manuel Barroso said on Friday.
BHP Billiton Ltd. said Friday it has reached agreement with China's Baosteel on a rise in iron-ore prices, with the increase in line with price hikes already announced by rival Rio Tinto Ltd.
China has scrapped a 75 percent rebate on value-added taxes levied on crude-oil imports, Caijing magazine reported, citing an unidentified official from China National Petroleum Corp. The government had refunded VAT on imports since April to help narrow refiners' losses, the report said.
Eurozone interest rates hit a seven-year high on Thursday.
Phillip Swagel, assistant Treasury secretary for economic policy: "Overall inflation, uh, is going to fully offset and more those, uh, you know, those wage gains," he said. The unemployment rate remained at 5.5 percent, but "I don't . . . take any comfort from that."
The mandatory evacuation in Big Sur will probably remain in place for "days or longer," said Rudy Evenson, information officer for the agencies battling the fire. Currently, it extends for 35 miles along Highway 1, from the coastside hamlet of Lucia north within 10 miles of Carmel Highlands. There is no estimated time for when Highway 1 will be reopened, Caltrans said.
Although American Airlines has not given a total figure, the airline says it expects to shed 8 percent of its work force. With about 85,500 workers, including those at sister airline American Eagle, that would represent more than 6,800 jobs.
Origin Energy Ltd., Australia's second largest power retailer, rejected a $13 billion takeover bid Friday from British natural gas producer BG Group.
BG Group last month launched a hostile bid of 15.50 Australian dollars per Origin share, almost four weeks after Origin rejected an unsolicited proposal from BG Group at the same price. That was revised up from an initial offering of 14.70 Australian dollars a share in April.
Iran says it will give a positive and constructive response today to the G5+1 incentive package to suspend its uranium enrichment program.
The Economist: "But since the eruption of global financial turmoil last year and the dwindling appetite for risk, carry trades have started to unwind and it has become harder to finance deficits. As a result, current-account imbalances are once again exerting a powerful influence over currencies. The chart shows that the weakest currencies this year have been in countries with deficits, from Britain to South Africa. In contrast, the yen and the Swiss franc have perked up. The same chart a year or so ago would have shown virtually the opposite relationship."
BCE Inc, Canada's largest telecommunications company, said Friday it has agreed on terms of a $35 billion sale to a group led by the Ontario Teachers' Pension Plan in the biggest leveraged buyout ever.
Credit-card debt is becoming even more prominent in the struggling state of the economy. The average amount per consumer rose to $6,900 in the last year, a 21 percent increase, according to Experian, a global information services company. The average number of past-due accounts also increased to exceed more than one per consumer. Of approximately 7,000 readers who responded to the site's demographics survey, 77 percent answered "yes" to having a college degree or higher, and 41 percent declared an annual income of $75,000 or higher. Twenty-three percent of the respondents said their annual salary exceeds $100,000.
Robert McHugh: "The Industrials have fallen 1,112 points since a Hindenburg Omen Stock Market Crash Risk signal was confirmed on June 16th, 2008...Oil set another new all-time high Thursday. It is getting nuts. There will be a delayed response by the economy to exploding oil prices, commerce getting hit hard next year. That may be what the stock market sees ahead and is telling us now. We got another very small change in the McClellan Oscillator Thursday, a 1.28 decline, suggesting a very large price move is coming early next week. If it is down, it could represent selling capitulation. If it is up, it will signal a two to three week countertrend rally has started which should end around our July 22nd phi mate turn date. Once any countertrend rally is over, we should see a huge plunge into the autumn."
Goldman Sachs said Friday that European banks could need to raise around 60 billion euros ($94 billion) in additional capital, or withhold dividend payments for a year, if recent moves by several banks to strengthen their balance sheets set a new benchmark for capital levels. The broker added that figure could rise to over 90 billion euros if a turn in the European credit cycle triggered losses in line with those seen in the early 1990s.
Merrill Lynch is in talks to sell its stake in financial news service Bloomberg to a blind trust run by New York City Mayor Michael Bloomberg, according to a report in The New York Post, citing unnamed sources.
India's inflation reportedly soared to 11.63% in the week to June 21 from the same period a year-ago, strengthening chances of more policy measures by the country's central bank to control prices.
The European Union and Russia have started talks on a new cooperation deal on political and economic ties the EU hopes will redefine the way it imports much of its oil and gas from its key supplier.The EU wants Moscow to open its vast energy sector to European investors. Moscow has pushed for more opportunity for its companies to invest in oil and gas distribution networks in Europe.
The dollar's fall is a source of global concern and the European Union wants a better balance between the U.S. unit and other major currencies, European Commission President Jose Manuel Barroso said on Friday.
BHP Billiton Ltd. said Friday it has reached agreement with China's Baosteel on a rise in iron-ore prices, with the increase in line with price hikes already announced by rival Rio Tinto Ltd.
China has scrapped a 75 percent rebate on value-added taxes levied on crude-oil imports, Caijing magazine reported, citing an unidentified official from China National Petroleum Corp. The government had refunded VAT on imports since April to help narrow refiners' losses, the report said.
Eurozone interest rates hit a seven-year high on Thursday.
Phillip Swagel, assistant Treasury secretary for economic policy: "Overall inflation, uh, is going to fully offset and more those, uh, you know, those wage gains," he said. The unemployment rate remained at 5.5 percent, but "I don't . . . take any comfort from that."
The mandatory evacuation in Big Sur will probably remain in place for "days or longer," said Rudy Evenson, information officer for the agencies battling the fire. Currently, it extends for 35 miles along Highway 1, from the coastside hamlet of Lucia north within 10 miles of Carmel Highlands. There is no estimated time for when Highway 1 will be reopened, Caltrans said.
Although American Airlines has not given a total figure, the airline says it expects to shed 8 percent of its work force. With about 85,500 workers, including those at sister airline American Eagle, that would represent more than 6,800 jobs.
Origin Energy Ltd., Australia's second largest power retailer, rejected a $13 billion takeover bid Friday from British natural gas producer BG Group.
BG Group last month launched a hostile bid of 15.50 Australian dollars per Origin share, almost four weeks after Origin rejected an unsolicited proposal from BG Group at the same price. That was revised up from an initial offering of 14.70 Australian dollars a share in April.
Iran says it will give a positive and constructive response today to the G5+1 incentive package to suspend its uranium enrichment program.
The Economist: "But since the eruption of global financial turmoil last year and the dwindling appetite for risk, carry trades have started to unwind and it has become harder to finance deficits. As a result, current-account imbalances are once again exerting a powerful influence over currencies. The chart shows that the weakest currencies this year have been in countries with deficits, from Britain to South Africa. In contrast, the yen and the Swiss franc have perked up. The same chart a year or so ago would have shown virtually the opposite relationship."
7/5/08 Credit Card Debt
Credit-card debt is becoming even more prominent in the struggling state of the economy. The average amount per consumer rose to $6,900 in the last year, a 21 percent increase, according to Experian, a global information services company. The average number of past-due accounts also increased to exceed more than one per consumer. Of approximately 7,000 readers who responded to the site's demographics survey, 77 percent answered "yes" to having a college degree or higher, and 41 percent declared an annual income of $75,000 or higher. Twenty-three percent of the respondents said their annual salary exceeds $100,000.
Robert McHugh: "The Industrials have fallen 1,112 points since a Hindenburg Omen Stock Market Crash Risk signal was confirmed on June 16th, 2008...Oil set another new all-time high Thursday. It is getting nuts. There will be a delayed response by the economy to exploding oil prices, commerce getting hit hard next year. That may be what the stock market sees ahead and is telling us now. We got another very small change in the McClellan Oscillator Thursday, a 1.28 decline, suggesting a very large price move is coming early next week. If it is down, it could represent selling capitulation. If it is up, it will signal a two to three week countertrend rally has started which should end around our July 22nd phi mate turn date. Once any countertrend rally is over, we should see a huge plunge into the autumn."
Goldman Sachs said Friday that European banks could need to raise around 60 billion euros ($94 billion) in additional capital, or withhold dividend payments for a year, if recent moves by several banks to strengthen their balance sheets set a new benchmark for capital levels. The broker added that figure could rise to over 90 billion euros if a turn in the European credit cycle triggered losses in line with those seen in the early 1990s.
Merrill Lynch is in talks to sell its stake in financial news service Bloomberg to a blind trust run by New York City Mayor Michael Bloomberg, according to a report in The New York Post, citing unnamed sources.
India's inflation reportedly soared to 11.63% in the week to June 21 from the same period a year-ago, strengthening chances of more policy measures by the country's central bank to control prices.
The European Union and Russia have started talks on a new cooperation deal on political and economic ties the EU hopes will redefine the way it imports much of its oil and gas from its key supplier.The EU wants Moscow to open its vast energy sector to European investors. Moscow has pushed for more opportunity for its companies to invest in oil and gas distribution networks in Europe.
The dollar's fall is a source of global concern and the European Union wants a better balance between the U.S. unit and other major currencies, European Commission President Jose Manuel Barroso said on Friday.
BHP Billiton Ltd. said Friday it has reached agreement with China's Baosteel on a rise in iron-ore prices, with the increase in line with price hikes already announced by rival Rio Tinto Ltd.
China has scrapped a 75 percent rebate on value-added taxes levied on crude-oil imports, Caijing magazine reported, citing an unidentified official from China National Petroleum Corp. The government had refunded VAT on imports since April to help narrow refiners' losses, the report said.
Eurozone interest rates hit a seven-year high on Thursday.
Phillip Swagel, assistant Treasury secretary for economic policy: "Overall inflation, uh, is going to fully offset and more those, uh, you know, those wage gains," he said. The unemployment rate remained at 5.5 percent, but "I don't . . . take any comfort from that."
The mandatory evacuation in Big Sur will probably remain in place for "days or longer," said Rudy Evenson, information officer for the agencies battling the fire. Currently, it extends for 35 miles along Highway 1, from the coastside hamlet of Lucia north within 10 miles of Carmel Highlands. There is no estimated time for when Highway 1 will be reopened, Caltrans said.
Although American Airlines has not given a total figure, the airline says it expects to shed 8 percent of its work force. With about 85,500 workers, including those at sister airline American Eagle, that would represent more than 6,800 jobs.
Origin Energy Ltd., Australia's second largest power retailer, rejected a $13 billion takeover bid Friday from British natural gas producer BG Group.
BG Group last month launched a hostile bid of 15.50 Australian dollars per Origin share, almost four weeks after Origin rejected an unsolicited proposal from BG Group at the same price. That was revised up from an initial offering of 14.70 Australian dollars a share in April.
Iran says it will give a positive and constructive response today to the G5+1 incentive package to suspend its uranium enrichment program.
The Economist: "But since the eruption of global financial turmoil last year and the dwindling appetite for risk, carry trades have started to unwind and it has become harder to finance deficits. As a result, current-account imbalances are once again exerting a powerful influence over currencies. The chart shows that the weakest currencies this year have been in countries with deficits, from Britain to South Africa. In contrast, the yen and the Swiss franc have perked up. The same chart a year or so ago would have shown virtually the opposite relationship."
BCE Inc, Canada's largest telecommunications company, said Friday it has agreed on terms of a $35 billion sale to a group led by the Ontario Teachers' Pension Plan in the biggest leveraged buyout ever.
Thursday, July 03, 2008
Unemployment
7/4/08 Unemployment
Oil prices neared $146 a barrel Thursday for the first time ever on reports of declining U.S. stockpiles and the threat of conflict with Iran. Comments by Saudi Arabia's oil minister suggesting his country had no immediate plans to boost production also lifted prices.
The European Central Bank, in a widely-expected decision, hiked its key lending rate by a quarter of a percentage point Thursday to 4.25%.
Sweden's Riksbank on Thursday raised its repo rate by a quarter of a percentage point to 4.5%, and said further hikes will be necessary to hold down inflation.
Credit conditions in Great Britain tightened in the second quarter and will likely prove even tougher in the current quarter, according to the Bank of England's quarterly credit conditions survey released Thursday.
Yahoo Inc. has picked up its talks with Time Warner Inc. over a possible combination, as the Internet company faces pressure to boost shareholders returns, according to a published report on Thursday.
Citing people familiar with the situation, The Wall Street Journal said the companies are discussing an arrangement in which Time Warner would take a minority stake in the combined venture. This is a similar structure to a deal the companies talked about April.
The number of people filing for unemployment benefits rose by 16,000 last week to 404,000, only the second time in this cycle that initial claims have been above 400,000, the Labor Department reported Thursday. The four-week average of new claims rose to 10,250 to 390,500, the highest level since October 2005. Layoffs have breached levels typically associated with recessions. Meanwhile, the smoothed average of continuing claims rose to a fresh four-year high of 3.11 million, further evidence that jobs are increasingly hard to find. In the latest week, continuing claims fell by 19,000 to 3.12 million. The insured unemployment rate fell to 2.3% from 2.4%.
The U.S. economy shed 62,000 jobs in June while the unemployment rate unexpectedly remained at a four-year high of 5.5%, the Labor Department reported Thursday. Payrolls have now fallen in all six months this year for a total job loss of 438,000, the strongest evidence that the economy fell into a recession. Job losses in June were worse than the 40,000 expected by economists surveyed by MarketWatch. The unemployment rate was expected to fall to 5.4%. Average hourly earnings rose by 6 cents, or 0.3%, in June. Payroll losses in April and May were revised down to show 52,000 more jobs lost in those months.
Wage growth decelerated, as the average weekly paycheck of rank-and-file workers grew by 2.8 percent, down from 3.2 percent in May, compared to a year ago. That is below the rate of inflation, which is currently at 4.1 percent.
The national unemployment rate climbed a full percentage point over the last year to 5.5 percent in May, according to the Labor Department. That does not include people who are jobless and have given up looking for work, or people who have been bumped to part-time jobs from full-time. Add in those people and the so-called underemployment rate rises to 9.7 percent, up from 8.3 percent in May 2007, according to the Labor Department.
Barry Ritholtz: "And now, the Birth Death Adjustment:
Construction Gains +29k
Professional & Business Services +22k
Leisure and Hospitality +86k
The last is my favorite: Given the massive decrease in travel, an 86k gain in this sector is very hard to believe..."
Activity in the service sector across the 15-nation euro zone contracted in June. The purchasing managers index for the services sector declined to 49.1 in June, news reports said, down from 50.6 in May.
Toyota Motor Corp.is planning an overhaul of it U.S. operations following weaker sales in June, with the automaker likely to introduce additional production holidays at its Texas truck factory and two other U.S. facilities to trim output, according to a Japanese media report.
According to the FT, vital west coast ports in the US could face significant disruption after a key contract between workers and employers expired and unions refused to allow a temporary extension.The six-year contract for the 29 ports in California, Oregon and Washington states expired at 5pm Pacific Time on Tuesday without agreement on a new contract between employers and the International Longshore and Warehouse Union.
President Bush and the top US military commander warned Israel Wednesday against bombing Iran, suggesting the US doesn't want to get involved in a third war.
Rob Hanna: "The S&P 500 and Dow have both closed below their 10-day moving averages for 19 days in a row. Unless the S&P rises over 2.7% tomorrow and closes above 1295.57, then it will mark 20 days for that one. I looked back to 1960 to see all other times the S&P closed below its 10-day moving average for at least 20 days in a row...What we seem to be experiencing is a selloff similar to those that occurred in the 60’s and 70’s, but not since.
The selloff in financials has been more than twice as long. KBE and RKH, two bank ETF’s, have now closed below their 10-day moving averages for 40 days in a row. The last day they closed above it was May 6th. Since that time RKH has lost 29.9% and KBE 33.5%. I am unable to find any other ETF that has ever traded below its 10-day moving average for 40 days. EWW (Mexico) came close when it went 39 days in 1998. While the history for many ETF’s is limited, the persistency of this selloff is quite incredible."
The national average price for a gallon of regular gas rose to an all-time high of $4.098 from $4.092 the day before, a daily survey by motorist group AAA showed Thursday.
Bernard Baruch: "Every man has a right to his opinion, but no man has a right to be wrong in his facts."
The $6.1 billion acquisition of Penn National Gaming Inc. by Fortress Investment Group and Centerbridge Partners has been called off, Penn National said Thursday. As a result, Penn said it would receive $1.475 billion, which includes a $225 million cash termination fee and the purchase of $1.25 billion of Penn's redeemable preferred equity due 2015 by affiliates of Fortress, Centerbridge, Wachovia and Deutsche Bank.
A new poll shows registered Hispanic voters prefer Obama over McCain by 59 percent to 29 percent.
Non-manufacturing sectors of the U.S. economy contracted in June, the Institute for Supply Management reported Thursday. The ISM non-manufacturing index fell to 48.2% from 51.7% in May. Inflation pressures intensified. The price index rose to 84.5% from 77.0% in the previous month. The employment index fell to 43.8% from 48.7% in the previous month.
Natural-gas inventories rose by 85 billion cubic feet for the week ended June 27, the Energy Department said Thursday. Total stocks now stand at 2.118 trillion cubic feet, down 381 billion cubic feet from the year-ago level and 57 billion cubic feet below the five-year average, the government data said. August natural gas was last up 6.2 cents at $13.45 per million British thermal units on Globex.
The Oil Drum: "Pakistan State Oil (PSO) has tendered to buy up to 910,000 of high sulphur fuel oil for delivery during August to November amid a crippling power shortage in the country.PSO is seeking 650,000 tonnes of fuel oil in parcels of 65,000 tonnes to be delivered between August through October, the company's tender document showed on Thursday."
August crude closed at $145.29 a barrel Thursday in New York, up $1.72 for the session. August gold closed at $933.60 an ounce in New York Thursday. The contract lost $12.90 for the session, but gained 0.3% from Friday's closing level.
Oil prices neared $146 a barrel Thursday for the first time ever on reports of declining U.S. stockpiles and the threat of conflict with Iran. Comments by Saudi Arabia's oil minister suggesting his country had no immediate plans to boost production also lifted prices.
The European Central Bank, in a widely-expected decision, hiked its key lending rate by a quarter of a percentage point Thursday to 4.25%.
Sweden's Riksbank on Thursday raised its repo rate by a quarter of a percentage point to 4.5%, and said further hikes will be necessary to hold down inflation.
Credit conditions in Great Britain tightened in the second quarter and will likely prove even tougher in the current quarter, according to the Bank of England's quarterly credit conditions survey released Thursday.
Yahoo Inc. has picked up its talks with Time Warner Inc. over a possible combination, as the Internet company faces pressure to boost shareholders returns, according to a published report on Thursday.
Citing people familiar with the situation, The Wall Street Journal said the companies are discussing an arrangement in which Time Warner would take a minority stake in the combined venture. This is a similar structure to a deal the companies talked about April.
The number of people filing for unemployment benefits rose by 16,000 last week to 404,000, only the second time in this cycle that initial claims have been above 400,000, the Labor Department reported Thursday. The four-week average of new claims rose to 10,250 to 390,500, the highest level since October 2005. Layoffs have breached levels typically associated with recessions. Meanwhile, the smoothed average of continuing claims rose to a fresh four-year high of 3.11 million, further evidence that jobs are increasingly hard to find. In the latest week, continuing claims fell by 19,000 to 3.12 million. The insured unemployment rate fell to 2.3% from 2.4%.
The U.S. economy shed 62,000 jobs in June while the unemployment rate unexpectedly remained at a four-year high of 5.5%, the Labor Department reported Thursday. Payrolls have now fallen in all six months this year for a total job loss of 438,000, the strongest evidence that the economy fell into a recession. Job losses in June were worse than the 40,000 expected by economists surveyed by MarketWatch. The unemployment rate was expected to fall to 5.4%. Average hourly earnings rose by 6 cents, or 0.3%, in June. Payroll losses in April and May were revised down to show 52,000 more jobs lost in those months.
Wage growth decelerated, as the average weekly paycheck of rank-and-file workers grew by 2.8 percent, down from 3.2 percent in May, compared to a year ago. That is below the rate of inflation, which is currently at 4.1 percent.
The national unemployment rate climbed a full percentage point over the last year to 5.5 percent in May, according to the Labor Department. That does not include people who are jobless and have given up looking for work, or people who have been bumped to part-time jobs from full-time. Add in those people and the so-called underemployment rate rises to 9.7 percent, up from 8.3 percent in May 2007, according to the Labor Department.
Barry Ritholtz: "And now, the Birth Death Adjustment:
Construction Gains +29k
Professional & Business Services +22k
Leisure and Hospitality +86k
The last is my favorite: Given the massive decrease in travel, an 86k gain in this sector is very hard to believe..."
Activity in the service sector across the 15-nation euro zone contracted in June. The purchasing managers index for the services sector declined to 49.1 in June, news reports said, down from 50.6 in May.
Toyota Motor Corp.is planning an overhaul of it U.S. operations following weaker sales in June, with the automaker likely to introduce additional production holidays at its Texas truck factory and two other U.S. facilities to trim output, according to a Japanese media report.
According to the FT, vital west coast ports in the US could face significant disruption after a key contract between workers and employers expired and unions refused to allow a temporary extension.The six-year contract for the 29 ports in California, Oregon and Washington states expired at 5pm Pacific Time on Tuesday without agreement on a new contract between employers and the International Longshore and Warehouse Union.
President Bush and the top US military commander warned Israel Wednesday against bombing Iran, suggesting the US doesn't want to get involved in a third war.
Rob Hanna: "The S&P 500 and Dow have both closed below their 10-day moving averages for 19 days in a row. Unless the S&P rises over 2.7% tomorrow and closes above 1295.57, then it will mark 20 days for that one. I looked back to 1960 to see all other times the S&P closed below its 10-day moving average for at least 20 days in a row...What we seem to be experiencing is a selloff similar to those that occurred in the 60’s and 70’s, but not since.
The selloff in financials has been more than twice as long. KBE and RKH, two bank ETF’s, have now closed below their 10-day moving averages for 40 days in a row. The last day they closed above it was May 6th. Since that time RKH has lost 29.9% and KBE 33.5%. I am unable to find any other ETF that has ever traded below its 10-day moving average for 40 days. EWW (Mexico) came close when it went 39 days in 1998. While the history for many ETF’s is limited, the persistency of this selloff is quite incredible."
The national average price for a gallon of regular gas rose to an all-time high of $4.098 from $4.092 the day before, a daily survey by motorist group AAA showed Thursday.
Bernard Baruch: "Every man has a right to his opinion, but no man has a right to be wrong in his facts."
The $6.1 billion acquisition of Penn National Gaming Inc. by Fortress Investment Group and Centerbridge Partners has been called off, Penn National said Thursday. As a result, Penn said it would receive $1.475 billion, which includes a $225 million cash termination fee and the purchase of $1.25 billion of Penn's redeemable preferred equity due 2015 by affiliates of Fortress, Centerbridge, Wachovia and Deutsche Bank.
A new poll shows registered Hispanic voters prefer Obama over McCain by 59 percent to 29 percent.
Non-manufacturing sectors of the U.S. economy contracted in June, the Institute for Supply Management reported Thursday. The ISM non-manufacturing index fell to 48.2% from 51.7% in May. Inflation pressures intensified. The price index rose to 84.5% from 77.0% in the previous month. The employment index fell to 43.8% from 48.7% in the previous month.
Natural-gas inventories rose by 85 billion cubic feet for the week ended June 27, the Energy Department said Thursday. Total stocks now stand at 2.118 trillion cubic feet, down 381 billion cubic feet from the year-ago level and 57 billion cubic feet below the five-year average, the government data said. August natural gas was last up 6.2 cents at $13.45 per million British thermal units on Globex.
The Oil Drum: "Pakistan State Oil (PSO) has tendered to buy up to 910,000 of high sulphur fuel oil for delivery during August to November amid a crippling power shortage in the country.PSO is seeking 650,000 tonnes of fuel oil in parcels of 65,000 tonnes to be delivered between August through October, the company's tender document showed on Thursday."
August crude closed at $145.29 a barrel Thursday in New York, up $1.72 for the session. August gold closed at $933.60 an ounce in New York Thursday. The contract lost $12.90 for the session, but gained 0.3% from Friday's closing level.
Wednesday, July 02, 2008
Employment
7/3/08 Employment
The ADP employment index showed employers cut 79,000 jobs in June, from a revised 25,000 gain in May. It was the biggest loss since November 2002. Employment in the services sector fell by 3,000, the first decline since November 2002. Job gains in May were revised lower to 25,000 from 40,000 earlier. After adding in some 20,000 government jobs that are created in a typical month but not included in ADP's index, the ADP number suggests that about 60,000 nonfarm payroll jobs were lost in June.
Heavy cost-cutting in the financial services pushed corporate layoff announcements up 21% in the first half of the year compared with last year, according to a tally released Wednesday by outplacement firm Challenger Gray & Christmas. Announcedlayoffs totaled 81,755 in June, up 47% compared with the previous June. For the second quarter, layoffs rose to 275,292, the most since late 2005. So far this year, announced job cuts have risen to 475,948, compared with 393,499 in the first six months of 2007. Financial companies announced 19,227 layoffs in June, bringing the total for 2008 to 85,258, 91% of which are related to the collapse of the mortgage market, Challenger said.
The number of people out of work in the world’s leading economies is expected to rise by 9 per cent to 34.8m by the end of next year under the impact of the credit crunch, the Organisation for Economic Cooperation and Development reported on Wednesday.
Delinquency rates for home equity lines of credit and bank cards rose during the first quarter, the American Bankers Association reported Wednesday, citing ongoing housing market stress and general economic weakness. On a seasonally adjusted basis, the percentage of HELOC accounts more than 30 days past due rose 14 basis points to 1.1%, reaching the highest rate recorded since ABA started the series in 1987. Delinquencies for bank cards - credit cards provided by a bank -- rose 13 basis points to 4.51% in the first quarter, compared with the five-year average delinquency rate of 4.40%.
There is a risk inflation will "explode" if the European Central Bank does not act decisively to counter it, ECB President Jean-Claude Trichet was quoted on Wednesday as saying.
UnitedHealth Group cut its 2008 financial outlook after assessing its second-quarter results and taking into account recent business trends. The company now expects 2008 adjusted earnings per share in a range of $2.95 to $3.05 a share on revenues of around $81 billion. UnitedHealth Group had previously projected $3.55 to $3.60 per share in earnings. With the shares in the mid-20's, I believe the revised estimate is already reflected.
Industrial producer prices across the 15-nation euro zone posted a monthly rise of 1.2% in May, bringing the annual rise to an all-time high of 7.1%, the statistical agency Eurostat reported Wednesday. The rise exceeded consensus expectations for a 0.8% monthly increase and a 6.6% year-on-year rise. Excluding energy, prices rose 0.3% between April and May, for a 3.8% annual rise, Eurostat reported.
Microsoft is mulling another effort to acquire Yahoo's search business, and the Redmond, Wash., software giant has approached other media companies to take the rest of Yahoo, people familiar with the discussions told The Wall Street Journal. Microsoft has spoken with Time Warner, News Corp.and others, the paper reported on Wednesday.
Blockbuster Withdraws Plan to Acquire Circuit City.
According to Newsday, the rising value of the euro, the currency of European Union nations, and the falling dollar have made the U.S. a bargain for Europeans, who are traveling here in increasing numbers.
Local merchants have responded to the influx by accepting euros, something unheard of locally until the past year. Manhattan stores with global operations, like Tiffany & Co., have long accepted foreign currency, said Irwin Kellner, an economics scholar at Dowling College and chief economist for MarketWatch.com.
Rob Hanna: " The Capitulative Breadth Indicator (CBI) closed at “10” on Tuesday (July 1st). Historically, this has been a reliable indication that the market is nearing a bounce. Using backtested data from 1995-2005 and live data from 2005 forward, there have been 18 instances when the CBI reached at least 10. Buying the S&P when it hit 10 and selling on a return to 3 or lower would have been profitable all 18 times."
Berkshire Hathaway, which owns National Indemnity, General Re Corp. and Geico Corp., saw first-quarter earnings from underwriting insurance policies fall 70 percent to $181 million. Pretax underwriting profit at Berkshire Hathaway Reinsurance Group, which sells catastrophe coverage, dropped 95 percent.
Also damaging to Berkshire's earnings is the biggest housing slump since the Great Depression, which slowed the company's building-related businesses, including Acme Brick, wallboard maker Johns Manville and Shaw Industries, the world's largest carpet manufacturer.
Buffett says the U.S. is mired in ``stagflation,'' a period of slowing economic growth and accelerating inflation.
The American Petroleum Institute reported a fall Wednesday of 1.3 million barrels in crude supplies for the week ended June 27. The Energy Department had reported a decline of 2 million barrels for the latest week. Motor gasoline supplies were up 103,000 barrels, the API said. The government had reported that supplies rose by 2.1 million barrels. Distillate supplies were nearly flat, down 10,000 barrels, the API said. They were up 1.3 million barrels, according to the Energy Department.
Orders for U.S.-made factory goods rose by 0.6% in May, the Commerce Department reported Wednesday, with big orders for computers and defense equipment behind the gain.
Oppenheimer on Wednesday greatly reduced its second-quarter earnings estimate for Merrill Lynch & Co. to a loss of $4.21 a share from a previous estimate of a per share gain of 20 cents, and predicted the bank will see write-downs of $5.8 billion for the second quarter.
August crude climbed $2.60 to finish at an all-time closing high of $143.57 a barrel in New York. August gold closed at $946.50 an ounce in New York Wednesday, up $2 for the session to mark a fresh two-and-a-half-month high.
General Motors Corp., battered by the slowest U.S. sales market in 15 years, faces the possibility of bankruptcy and may need to raise as much as $15 billion, a Merrill Lynch & Co. analyst said.
The euro may be nearing an ``explosive breakout,'' reaching record levels against the U.S. dollar, according to a Citigroup Global Markets Inc. research note.
Iranian Foreign Minister Manouchehr Mottaki said his country does not expect to be attacked by either Israel or the U.S. this year.
Investors should ignore recent signs of strength and face up to the fact that we will face a prolonged bear market, John Carter, president of Trade The Markets, told CNBC Wednesday."Longer term we’re looking at a market that is a bear market," Carter told "Squawk Box Europe."While we can expect a rally over the next three to five weeks, this is a downward spiral that is not going away any time soon, he said.
"A trend is a trend until it ends, and we’re actually looking for the Dow to take out 10,000 by the end of the year," he added.
Check out the recent railroad sector decline:
Burlington Northern 114 to 92
CSX 70 to 57
Norfolk Southern 67 to 57
Union Pacific 82 to 70
Sanyo Electric Co, the world's largest producer of rechargeable batteries, will spend 20 billion yen ($188.8 million) to build a lithium-ion battery plant in Western Japan by mid 2009, according to media reports.
Nvidia Corp. expects its second-quarter revenue and gross margin to be lower than its previously announced forecast. The company now expects revenue from $875 million to $950 million. Nvidia also said it plans to take a $150 million to $200 million charge related to expenses stemming from "a weak die/packaging material" used in previous generation products for notebook systems.
GM closes below $10.
Lehman Brothers Holdings plans to give its employees additional stock–20% of their 2007 bonuses–as a retention tool to keep employees at the investment bank. Lehman already is 30% owned by employees.
The ADP employment index showed employers cut 79,000 jobs in June, from a revised 25,000 gain in May. It was the biggest loss since November 2002. Employment in the services sector fell by 3,000, the first decline since November 2002. Job gains in May were revised lower to 25,000 from 40,000 earlier. After adding in some 20,000 government jobs that are created in a typical month but not included in ADP's index, the ADP number suggests that about 60,000 nonfarm payroll jobs were lost in June.
Heavy cost-cutting in the financial services pushed corporate layoff announcements up 21% in the first half of the year compared with last year, according to a tally released Wednesday by outplacement firm Challenger Gray & Christmas. Announcedlayoffs totaled 81,755 in June, up 47% compared with the previous June. For the second quarter, layoffs rose to 275,292, the most since late 2005. So far this year, announced job cuts have risen to 475,948, compared with 393,499 in the first six months of 2007. Financial companies announced 19,227 layoffs in June, bringing the total for 2008 to 85,258, 91% of which are related to the collapse of the mortgage market, Challenger said.
The number of people out of work in the world’s leading economies is expected to rise by 9 per cent to 34.8m by the end of next year under the impact of the credit crunch, the Organisation for Economic Cooperation and Development reported on Wednesday.
Delinquency rates for home equity lines of credit and bank cards rose during the first quarter, the American Bankers Association reported Wednesday, citing ongoing housing market stress and general economic weakness. On a seasonally adjusted basis, the percentage of HELOC accounts more than 30 days past due rose 14 basis points to 1.1%, reaching the highest rate recorded since ABA started the series in 1987. Delinquencies for bank cards - credit cards provided by a bank -- rose 13 basis points to 4.51% in the first quarter, compared with the five-year average delinquency rate of 4.40%.
There is a risk inflation will "explode" if the European Central Bank does not act decisively to counter it, ECB President Jean-Claude Trichet was quoted on Wednesday as saying.
UnitedHealth Group cut its 2008 financial outlook after assessing its second-quarter results and taking into account recent business trends. The company now expects 2008 adjusted earnings per share in a range of $2.95 to $3.05 a share on revenues of around $81 billion. UnitedHealth Group had previously projected $3.55 to $3.60 per share in earnings. With the shares in the mid-20's, I believe the revised estimate is already reflected.
Industrial producer prices across the 15-nation euro zone posted a monthly rise of 1.2% in May, bringing the annual rise to an all-time high of 7.1%, the statistical agency Eurostat reported Wednesday. The rise exceeded consensus expectations for a 0.8% monthly increase and a 6.6% year-on-year rise. Excluding energy, prices rose 0.3% between April and May, for a 3.8% annual rise, Eurostat reported.
Microsoft is mulling another effort to acquire Yahoo's search business, and the Redmond, Wash., software giant has approached other media companies to take the rest of Yahoo, people familiar with the discussions told The Wall Street Journal. Microsoft has spoken with Time Warner, News Corp.and others, the paper reported on Wednesday.
Blockbuster Withdraws Plan to Acquire Circuit City.
According to Newsday, the rising value of the euro, the currency of European Union nations, and the falling dollar have made the U.S. a bargain for Europeans, who are traveling here in increasing numbers.
Local merchants have responded to the influx by accepting euros, something unheard of locally until the past year. Manhattan stores with global operations, like Tiffany & Co., have long accepted foreign currency, said Irwin Kellner, an economics scholar at Dowling College and chief economist for MarketWatch.com.
Rob Hanna: " The Capitulative Breadth Indicator (CBI) closed at “10” on Tuesday (July 1st). Historically, this has been a reliable indication that the market is nearing a bounce. Using backtested data from 1995-2005 and live data from 2005 forward, there have been 18 instances when the CBI reached at least 10. Buying the S&P when it hit 10 and selling on a return to 3 or lower would have been profitable all 18 times."
Berkshire Hathaway, which owns National Indemnity, General Re Corp. and Geico Corp., saw first-quarter earnings from underwriting insurance policies fall 70 percent to $181 million. Pretax underwriting profit at Berkshire Hathaway Reinsurance Group, which sells catastrophe coverage, dropped 95 percent.
Also damaging to Berkshire's earnings is the biggest housing slump since the Great Depression, which slowed the company's building-related businesses, including Acme Brick, wallboard maker Johns Manville and Shaw Industries, the world's largest carpet manufacturer.
Buffett says the U.S. is mired in ``stagflation,'' a period of slowing economic growth and accelerating inflation.
The American Petroleum Institute reported a fall Wednesday of 1.3 million barrels in crude supplies for the week ended June 27. The Energy Department had reported a decline of 2 million barrels for the latest week. Motor gasoline supplies were up 103,000 barrels, the API said. The government had reported that supplies rose by 2.1 million barrels. Distillate supplies were nearly flat, down 10,000 barrels, the API said. They were up 1.3 million barrels, according to the Energy Department.
Orders for U.S.-made factory goods rose by 0.6% in May, the Commerce Department reported Wednesday, with big orders for computers and defense equipment behind the gain.
Oppenheimer on Wednesday greatly reduced its second-quarter earnings estimate for Merrill Lynch & Co. to a loss of $4.21 a share from a previous estimate of a per share gain of 20 cents, and predicted the bank will see write-downs of $5.8 billion for the second quarter.
August crude climbed $2.60 to finish at an all-time closing high of $143.57 a barrel in New York. August gold closed at $946.50 an ounce in New York Wednesday, up $2 for the session to mark a fresh two-and-a-half-month high.
General Motors Corp., battered by the slowest U.S. sales market in 15 years, faces the possibility of bankruptcy and may need to raise as much as $15 billion, a Merrill Lynch & Co. analyst said.
The euro may be nearing an ``explosive breakout,'' reaching record levels against the U.S. dollar, according to a Citigroup Global Markets Inc. research note.
Iranian Foreign Minister Manouchehr Mottaki said his country does not expect to be attacked by either Israel or the U.S. this year.
Investors should ignore recent signs of strength and face up to the fact that we will face a prolonged bear market, John Carter, president of Trade The Markets, told CNBC Wednesday."Longer term we’re looking at a market that is a bear market," Carter told "Squawk Box Europe."While we can expect a rally over the next three to five weeks, this is a downward spiral that is not going away any time soon, he said.
"A trend is a trend until it ends, and we’re actually looking for the Dow to take out 10,000 by the end of the year," he added.
Check out the recent railroad sector decline:
Burlington Northern 114 to 92
CSX 70 to 57
Norfolk Southern 67 to 57
Union Pacific 82 to 70
Sanyo Electric Co, the world's largest producer of rechargeable batteries, will spend 20 billion yen ($188.8 million) to build a lithium-ion battery plant in Western Japan by mid 2009, according to media reports.
Nvidia Corp. expects its second-quarter revenue and gross margin to be lower than its previously announced forecast. The company now expects revenue from $875 million to $950 million. Nvidia also said it plans to take a $150 million to $200 million charge related to expenses stemming from "a weak die/packaging material" used in previous generation products for notebook systems.
GM closes below $10.
Lehman Brothers Holdings plans to give its employees additional stock–20% of their 2007 bonuses–as a retention tool to keep employees at the investment bank. Lehman already is 30% owned by employees.
Tuesday, July 01, 2008
Raw Material Costs Soar
7/2/08 Raw Material Costs Soar
Soaring commodity costs are seeping through Asian factories to the world's consumers, slicing into Japanese manufacturers' profit and stoking inflation in China and India, surveys showed on Tuesday. Business confidence is buckling in Asia's largest export markets.
"We used to get quotes good for six months," said Cooper, president of QED Inc., a lighting company based in Lexington, Ky. "Now you're lucky if you can get a quote good for 15 days."
Manufacturers of everything from wallpaper to cereal are feeling the same hit. The Institute for Supply Management said Tuesday that its index of prices manufacturers pay for raw materials hit 91.5 in June, up from 87 in May and the highest reading since 1979.
James Hamilton: "As noted by Calculated Risk, global warming or no, the spring selling season for new homes never seemed to arrive this year.
There is a strong seasonal component to new home sales. In a typical year, the number of homes sold each month in March through May would be 40% higher than in December. Nine years out of 10, the rate would be at least 20% higher. This year? Only 9%."
The Oil Drum: "Angola is one of the few oil producing countries with a bright future ahead. Decades of war prevented the country from developing it's energy resources properly, but is now becoming one of the largest world oil exporters in a period of rampant prices. Just as if Fortune decided to compensate Angola for its misfortunes during the XX century.
Becoming an OPEC member just recently, Angola is set to build one of the strongest economies in Africa, with its GDP growing over 30% annually, the highest rate in the world. Hopefully Oil will be just the trigger of a golden era in a country that possesses other important natural resources."
John Hussman: "The recent decline has improved prospective long-term returns, but the most likely 10-year return for the S&P 500 (standard method) is still only in the range of 3-6%."
China's main stock index sank more than 3 percent to a fresh 16-month closing low on Tuesday, led by financial and property shares, on worries about rising interest rates and heavy supplies of shares from IPOs.
The Shanghai Composite Index ended down 3.09 percent at 2,651.605 points, near an intra-day low of 2,644.776. That left it down 57 percent from last October's record peak.
Billionaire investor Eli Broad said the U.S. economy is in the ``worst period'' of his adult life as a housing market recovery remains ``several years'' away.
``This is worse than any recession we've had since World War II,'' Broad, 75, said in an interview yesterday. Broad, the founder of homebuilder KB Home, said the U.S. should avoid a depression on the scale of the 1930s because the country now has sufficient ``safety nets.''
Manufacturing activity in the euro zone contracted in June for the first time in three years. The Bank of Japan's tankan corporate index of big manufacturers' sentiment dropped to plus 5, from 11 in March, showing their mood has not been darker since 2003.
The European Central Bank is widely expected to hike rates this week, despite a rapidly cooling economy, as it battles record inflation, whereas the Federal Reserve has slashed U.S. rates as it tries to stave off a prolonged recession.
According to the NY Times, 3 million Americans cannot pay their mortgages.
The U.K. manufacturing index slumped to 45.8 in June, its lowest level since December 2001.
The Federal Reserve said Tuesday it received 77 bidders for its Monday auction of $75 billion in 28-day credit.
Spending on U.S. construction projects fell 0.4% in May as outlays on private residential construction took another tumble, the Commerce Department reported Tuesday. On a year-over-year basis, construction spending was down 6%. Spending on private residential construction declined 1.6% in May, following a decline of 1.7% in the prior month. Spending in May on overall private construction declined 0.7%. Spending on public construction rose 0.4%.
Commerzbank and the Dresdner Bank division of Allianz are in intensive merger talks though a final decision on a deal has not been taken, according to a Dow Jones Newswires report.
Big activity in the UnitedHealth July 25 puts.
Yahoo fell below $20 for first time since Microsoft bid.
Chrysler LLC's Jim Press didn't mince words when asked about June auto sales. "We're going to report much lower sales versus last year," Press told reporters Monday as he and fellow Vice Chairman Tom LaSorda announced that the company would close a St. Louis-area minivan plant and cut a shift at a pickup truck factory due to sagging demand.
The Institute for Supply Management's index of manufacturing activity unexpectedly rose to 50.2 in June from 49.6 in May. ``The U.S. manufacturing sector is split between the haves and have-nots, with autos in the have-nots, building materials in the have-nots, exports in the haves,'' Roger Kubarych, chief U.S. economist at Unicredit Global Research in New York, said in an interview with Bloomberg Radio.
"We expect that the weakening performance of consumer assets will challenge BofA's financial results," S&P said.
Based on the day's average share price of $66.15, employees who have been at Boeing four years can expect a payout at the end of July of about $1,760, paid in company stock.
Those who worked for part of the four-year qualifying period that ended Monday will get a prorated amount.
For the first time in five years, more workers are at companies that are laying people off than are at companies that are hiring, according to a monthly survey of worker attitudes released Tuesday by polling firm Rasmussen Reports.
The Rasmussen employment index fell by six points to a record low of 78.6 in June. A year ago, the employment index was at 101.5.
Palatin Technologies, Inc. (Amex: PTN) today announced that AstraZeneca and Palatin have amended their exclusive global licensing and research collaboration agreement to discover, develop and commercialize compounds that target melanocortin receptors. The original agreement was effective in January 2007.
Under the amendment, Palatin has agreed to license additional compounds and associated intellectual property to AstraZeneca. Palatin will receive development and regulatory milestone payments if any additional compound advances into human clinical trials, and sales target milestone payments and stepped royalties if any additional compound is commercialized.
Research scientists at AstraZeneca and Palatin are working to complete election of a lead drug candidate for initial clinical evaluation. Under the agreement, AstraZeneca is responsible for product commercialization, product discovery and development costs.
"The collaboration between AstraZeneca and Palatin is very productive and has resulted in valuable scientific and technical advances," stated Dr. Trevor Hallam, Palatin's Executive Vice President for Research and Development. "We look forward to initiating human clinical trials for obesity."
For the first time since 1978, not a single VC-backed company went public in the second quarter.
In early Tuesday trading, August gold gained $13.70, or 1.5%, to $942/oz on the Nymex.
After dropping about 100 points at Tuesday's opening, the Dow rallied to unchanged after 1 3/4 hours. My expectations for a Wednesday bounce arrived a day early. The Dow ended up 32 points.
Ford Motor Co said on Tuesday that U.S. sales fell 28 percent in June on an unadjusted basis, driven by steep declines in sales of trucks and SUVs. General Motors Corp.on Tuesday reported an 18.2% decline in June U.S. light vehicle sales to 262,329 cars and trucks from 320,668 in June 2007.
Starbucks Corp. said late Tuesday it will close about 600 underperforming U.S. company-owned stores, up from previous estimates of 100 earlier in the year.
August crude gained 97 cents to close at $140.97 a barrel on the New York Mercantile Exchange Tuesday. August gold climbed $16.20, or 1.8%, to close at $944.50 an ounce in New York Tuesday, the contract's highest level since mid-April.
Soaring commodity costs are seeping through Asian factories to the world's consumers, slicing into Japanese manufacturers' profit and stoking inflation in China and India, surveys showed on Tuesday. Business confidence is buckling in Asia's largest export markets.
"We used to get quotes good for six months," said Cooper, president of QED Inc., a lighting company based in Lexington, Ky. "Now you're lucky if you can get a quote good for 15 days."
Manufacturers of everything from wallpaper to cereal are feeling the same hit. The Institute for Supply Management said Tuesday that its index of prices manufacturers pay for raw materials hit 91.5 in June, up from 87 in May and the highest reading since 1979.
James Hamilton: "As noted by Calculated Risk, global warming or no, the spring selling season for new homes never seemed to arrive this year.
There is a strong seasonal component to new home sales. In a typical year, the number of homes sold each month in March through May would be 40% higher than in December. Nine years out of 10, the rate would be at least 20% higher. This year? Only 9%."
The Oil Drum: "Angola is one of the few oil producing countries with a bright future ahead. Decades of war prevented the country from developing it's energy resources properly, but is now becoming one of the largest world oil exporters in a period of rampant prices. Just as if Fortune decided to compensate Angola for its misfortunes during the XX century.
Becoming an OPEC member just recently, Angola is set to build one of the strongest economies in Africa, with its GDP growing over 30% annually, the highest rate in the world. Hopefully Oil will be just the trigger of a golden era in a country that possesses other important natural resources."
John Hussman: "The recent decline has improved prospective long-term returns, but the most likely 10-year return for the S&P 500 (standard method) is still only in the range of 3-6%."
China's main stock index sank more than 3 percent to a fresh 16-month closing low on Tuesday, led by financial and property shares, on worries about rising interest rates and heavy supplies of shares from IPOs.
The Shanghai Composite Index ended down 3.09 percent at 2,651.605 points, near an intra-day low of 2,644.776. That left it down 57 percent from last October's record peak.
Billionaire investor Eli Broad said the U.S. economy is in the ``worst period'' of his adult life as a housing market recovery remains ``several years'' away.
``This is worse than any recession we've had since World War II,'' Broad, 75, said in an interview yesterday. Broad, the founder of homebuilder KB Home, said the U.S. should avoid a depression on the scale of the 1930s because the country now has sufficient ``safety nets.''
Manufacturing activity in the euro zone contracted in June for the first time in three years. The Bank of Japan's tankan corporate index of big manufacturers' sentiment dropped to plus 5, from 11 in March, showing their mood has not been darker since 2003.
The European Central Bank is widely expected to hike rates this week, despite a rapidly cooling economy, as it battles record inflation, whereas the Federal Reserve has slashed U.S. rates as it tries to stave off a prolonged recession.
According to the NY Times, 3 million Americans cannot pay their mortgages.
The U.K. manufacturing index slumped to 45.8 in June, its lowest level since December 2001.
The Federal Reserve said Tuesday it received 77 bidders for its Monday auction of $75 billion in 28-day credit.
Spending on U.S. construction projects fell 0.4% in May as outlays on private residential construction took another tumble, the Commerce Department reported Tuesday. On a year-over-year basis, construction spending was down 6%. Spending on private residential construction declined 1.6% in May, following a decline of 1.7% in the prior month. Spending in May on overall private construction declined 0.7%. Spending on public construction rose 0.4%.
Commerzbank and the Dresdner Bank division of Allianz are in intensive merger talks though a final decision on a deal has not been taken, according to a Dow Jones Newswires report.
Big activity in the UnitedHealth July 25 puts.
Yahoo fell below $20 for first time since Microsoft bid.
Chrysler LLC's Jim Press didn't mince words when asked about June auto sales. "We're going to report much lower sales versus last year," Press told reporters Monday as he and fellow Vice Chairman Tom LaSorda announced that the company would close a St. Louis-area minivan plant and cut a shift at a pickup truck factory due to sagging demand.
The Institute for Supply Management's index of manufacturing activity unexpectedly rose to 50.2 in June from 49.6 in May. ``The U.S. manufacturing sector is split between the haves and have-nots, with autos in the have-nots, building materials in the have-nots, exports in the haves,'' Roger Kubarych, chief U.S. economist at Unicredit Global Research in New York, said in an interview with Bloomberg Radio.
"We expect that the weakening performance of consumer assets will challenge BofA's financial results," S&P said.
Based on the day's average share price of $66.15, employees who have been at Boeing four years can expect a payout at the end of July of about $1,760, paid in company stock.
Those who worked for part of the four-year qualifying period that ended Monday will get a prorated amount.
For the first time in five years, more workers are at companies that are laying people off than are at companies that are hiring, according to a monthly survey of worker attitudes released Tuesday by polling firm Rasmussen Reports.
The Rasmussen employment index fell by six points to a record low of 78.6 in June. A year ago, the employment index was at 101.5.
Palatin Technologies, Inc. (Amex: PTN) today announced that AstraZeneca and Palatin have amended their exclusive global licensing and research collaboration agreement to discover, develop and commercialize compounds that target melanocortin receptors. The original agreement was effective in January 2007.
Under the amendment, Palatin has agreed to license additional compounds and associated intellectual property to AstraZeneca. Palatin will receive development and regulatory milestone payments if any additional compound advances into human clinical trials, and sales target milestone payments and stepped royalties if any additional compound is commercialized.
Research scientists at AstraZeneca and Palatin are working to complete election of a lead drug candidate for initial clinical evaluation. Under the agreement, AstraZeneca is responsible for product commercialization, product discovery and development costs.
"The collaboration between AstraZeneca and Palatin is very productive and has resulted in valuable scientific and technical advances," stated Dr. Trevor Hallam, Palatin's Executive Vice President for Research and Development. "We look forward to initiating human clinical trials for obesity."
For the first time since 1978, not a single VC-backed company went public in the second quarter.
In early Tuesday trading, August gold gained $13.70, or 1.5%, to $942/oz on the Nymex.
After dropping about 100 points at Tuesday's opening, the Dow rallied to unchanged after 1 3/4 hours. My expectations for a Wednesday bounce arrived a day early. The Dow ended up 32 points.
Ford Motor Co said on Tuesday that U.S. sales fell 28 percent in June on an unadjusted basis, driven by steep declines in sales of trucks and SUVs. General Motors Corp.on Tuesday reported an 18.2% decline in June U.S. light vehicle sales to 262,329 cars and trucks from 320,668 in June 2007.
Starbucks Corp. said late Tuesday it will close about 600 underperforming U.S. company-owned stores, up from previous estimates of 100 earlier in the year.
August crude gained 97 cents to close at $140.97 a barrel on the New York Mercantile Exchange Tuesday. August gold climbed $16.20, or 1.8%, to close at $944.50 an ounce in New York Tuesday, the contract's highest level since mid-April.
Sixth Hindenburg Omen
7/1/08 Sixth Hindenburg Omen
Robert McHugh: "Amazing. We got yet another Hindenburg Omen Monday, June 30th, the last day of the quarter, the sixth observation of this cluster, and of this month. This warns that the stock market remains unhealthy. New Highs were 79, New Lows at 477, the lesser of the two 2.40 percent of total issues traded, which were 3,287. The McClellan Oscillator remained negative. Since the Hindenburg Omen was confirmed on June 16th, the Industrials have fallen nearly one thousand points, 981 to be exact, or 8.0 percent, and counting.
At the halfway mark of 2008, the Industrials are down 1,914.80 points, or 14.43 percent. We define a crash as a decline of 15 percent. From its all-time high on October 9th, of 14,164.53, the Industrials are down 2,814.52, or 19.87 percent. Clearly we have had a stock market crash over the past 8 months."
It looks like one more delay for Boeing's Dreamliner. No surprise here.
In the early trading hours, the equity markets are starting the second half of the year off on a very weak note.
The International Energy Agency said in its Medium-Term Oil Market Report Tuesday that structural demand growth in developing countries and ongoing supply constraints continue to paint a tight market picture, despite a cut in its global demand forecast due to weaker economic growth and high prices. The IEA said oil demand remains concentrated in developing economies, with 90% of the growth spread between Asia, South America and the Middle East. It also said poor supply-side performance and limited refinery capacity where largely responsible for rising prices.
Australia's central bank kept its short-term interest rate target at a decade-high 7.25% Tuesday, as expected.
A gauge of activity in the British manufacturing sector posted a large and unexpected fall in June, news reports said. A closely-watched purchasing managers index fell to 45.8, reports said, from a downwardly revised 49.5 in May. Consensus expectations were for a slight improvement to 49.8.
U.K. house prices fell 0.9% in June compared to 2.5%in May, the Nationwide Building Society said on Tuesday. Prices are now 6.3% lower than at the same point a year ago.
Bangladesh on Tuesday said it would raise the price of gasoline and othe fuels, becoming the latest Asian nation seeking to offset soaring crude-oil prices by passing along higher costs to consumers. Newswire reports cited government officials as saying the government would lift prices for diesel and kerosene by 37.5%, gasoline by 34%, liquefied petroleum by 67% and furnace oil by 50%.
Satyajit Das: "Banks require re-capitalisation. The capital required is in excess of US$ 300-500 billion (15-25% of total global bank capital) to cover losses. Capital is also needed for assets returning onto their balance sheet (as the vehicles of the “shadow banking system” are unwound). This capital is required to restore bank balance sheets. Additional capital will be needed to support future growth.
Banks have raised a significant amount of capital but face increasing competition. Insurers, including the monolines, and the government sponsored enterprises (Fannie Mae and Freddie Mac) also need re-capitalisation. This may limit availability and increase the already high cost of capital for banks.
Availability of capital, high cost of new capital and dilution of earnings will impinge upon future performance...As banks begin to adjust their business models (selling assets and reducing staff), significant restructuring costs will affect earnings in the short run. The benefits of the restructuring will yield benefits but they will take time to emerge. Accounting factors may also affect any earnings recovery. FAS157 allows the entity's own credit risk to be used in establishing the value of its liabilities. Changes in the entity's credit standing are therefore reflected as changes in fair value. This results in gains for credit downgrades and losses for credit upgrades. "
Rep. Ron Paul: "The most basic principle to being a free American is the notion that we as individuals are responsible for our own lives and decisions. We do not have the right to rob our neighbors to make up for our mistakes, neither does our neighbor have any right to tell us how to live, so long as we aren't infringing on their rights. Freedom to make bad decisions is inherent in the freedom to make good ones. If we are only free to make good decisions, we are not really free."
Paul Kasriel: "Not to belabor the point I have made in recent commentaries, but last Friday afternoon's report from the Fed of assets and liabilities of commercial banks in the U.S. showed the sharpest 13-week contraction in bank credit - loans and investments - in the history of the series, which dates back to January 3, 1973. In the 13 weeks ended June 18, bank credit contracted at an annualized rate of 9.14% (see Chart 1 below). Because of current or expected capital inadequacy, banks are reining in their earning assets and, therefore, are not availing themselves of the cheap credit the Fed is offering to fund them at. This suggests that the 2% fed funds rate in the current context does not represent as accommodative a monetary policy as it would if the banking system were willing and able to extend credit to the private sector."
The condition of Iowa's corn crop is rated 4% very poor, 11% poor, 32% fair, 43% good and 10% excellent. The condition of Iowa's soybean crop is 11% poor, 33% fair, 45% good and 11% excellent. That's the report from the weekly weather and crop conditions survey, released June 30 by Iowa Ag Statistics Service in Des Moines, the government agency that is the Iowa field office of USDA's National Ag Statistics Service.
"While some areas of Iowa received more unneeded rain, much of the state experienced sunny and warm weather this past week that allowed field work to continue. Hopefully, the challenging weather and terrible flooding of earlier this month are behind us and farmers are able to get back to growing crops and caring for their animals," says Iowa Secretary of Agriculture Bill Northey.
Oil prices climbed to $142 a barrel Tuesday amid concerns about tensions between Iran and Israel and a weakening dollar.
If Tuesday ends on a very weak note, will Wednesday be a bounce day?
Robert McHugh: "Amazing. We got yet another Hindenburg Omen Monday, June 30th, the last day of the quarter, the sixth observation of this cluster, and of this month. This warns that the stock market remains unhealthy. New Highs were 79, New Lows at 477, the lesser of the two 2.40 percent of total issues traded, which were 3,287. The McClellan Oscillator remained negative. Since the Hindenburg Omen was confirmed on June 16th, the Industrials have fallen nearly one thousand points, 981 to be exact, or 8.0 percent, and counting.
At the halfway mark of 2008, the Industrials are down 1,914.80 points, or 14.43 percent. We define a crash as a decline of 15 percent. From its all-time high on October 9th, of 14,164.53, the Industrials are down 2,814.52, or 19.87 percent. Clearly we have had a stock market crash over the past 8 months."
It looks like one more delay for Boeing's Dreamliner. No surprise here.
In the early trading hours, the equity markets are starting the second half of the year off on a very weak note.
The International Energy Agency said in its Medium-Term Oil Market Report Tuesday that structural demand growth in developing countries and ongoing supply constraints continue to paint a tight market picture, despite a cut in its global demand forecast due to weaker economic growth and high prices. The IEA said oil demand remains concentrated in developing economies, with 90% of the growth spread between Asia, South America and the Middle East. It also said poor supply-side performance and limited refinery capacity where largely responsible for rising prices.
Australia's central bank kept its short-term interest rate target at a decade-high 7.25% Tuesday, as expected.
A gauge of activity in the British manufacturing sector posted a large and unexpected fall in June, news reports said. A closely-watched purchasing managers index fell to 45.8, reports said, from a downwardly revised 49.5 in May. Consensus expectations were for a slight improvement to 49.8.
U.K. house prices fell 0.9% in June compared to 2.5%in May, the Nationwide Building Society said on Tuesday. Prices are now 6.3% lower than at the same point a year ago.
Bangladesh on Tuesday said it would raise the price of gasoline and othe fuels, becoming the latest Asian nation seeking to offset soaring crude-oil prices by passing along higher costs to consumers. Newswire reports cited government officials as saying the government would lift prices for diesel and kerosene by 37.5%, gasoline by 34%, liquefied petroleum by 67% and furnace oil by 50%.
Satyajit Das: "Banks require re-capitalisation. The capital required is in excess of US$ 300-500 billion (15-25% of total global bank capital) to cover losses. Capital is also needed for assets returning onto their balance sheet (as the vehicles of the “shadow banking system” are unwound). This capital is required to restore bank balance sheets. Additional capital will be needed to support future growth.
Banks have raised a significant amount of capital but face increasing competition. Insurers, including the monolines, and the government sponsored enterprises (Fannie Mae and Freddie Mac) also need re-capitalisation. This may limit availability and increase the already high cost of capital for banks.
Availability of capital, high cost of new capital and dilution of earnings will impinge upon future performance...As banks begin to adjust their business models (selling assets and reducing staff), significant restructuring costs will affect earnings in the short run. The benefits of the restructuring will yield benefits but they will take time to emerge. Accounting factors may also affect any earnings recovery. FAS157 allows the entity's own credit risk to be used in establishing the value of its liabilities. Changes in the entity's credit standing are therefore reflected as changes in fair value. This results in gains for credit downgrades and losses for credit upgrades. "
Rep. Ron Paul: "The most basic principle to being a free American is the notion that we as individuals are responsible for our own lives and decisions. We do not have the right to rob our neighbors to make up for our mistakes, neither does our neighbor have any right to tell us how to live, so long as we aren't infringing on their rights. Freedom to make bad decisions is inherent in the freedom to make good ones. If we are only free to make good decisions, we are not really free."
Paul Kasriel: "Not to belabor the point I have made in recent commentaries, but last Friday afternoon's report from the Fed of assets and liabilities of commercial banks in the U.S. showed the sharpest 13-week contraction in bank credit - loans and investments - in the history of the series, which dates back to January 3, 1973. In the 13 weeks ended June 18, bank credit contracted at an annualized rate of 9.14% (see Chart 1 below). Because of current or expected capital inadequacy, banks are reining in their earning assets and, therefore, are not availing themselves of the cheap credit the Fed is offering to fund them at. This suggests that the 2% fed funds rate in the current context does not represent as accommodative a monetary policy as it would if the banking system were willing and able to extend credit to the private sector."
The condition of Iowa's corn crop is rated 4% very poor, 11% poor, 32% fair, 43% good and 10% excellent. The condition of Iowa's soybean crop is 11% poor, 33% fair, 45% good and 11% excellent. That's the report from the weekly weather and crop conditions survey, released June 30 by Iowa Ag Statistics Service in Des Moines, the government agency that is the Iowa field office of USDA's National Ag Statistics Service.
"While some areas of Iowa received more unneeded rain, much of the state experienced sunny and warm weather this past week that allowed field work to continue. Hopefully, the challenging weather and terrible flooding of earlier this month are behind us and farmers are able to get back to growing crops and caring for their animals," says Iowa Secretary of Agriculture Bill Northey.
Oil prices climbed to $142 a barrel Tuesday amid concerns about tensions between Iran and Israel and a weakening dollar.
If Tuesday ends on a very weak note, will Wednesday be a bounce day?
Monday, June 30, 2008
End Of The First Half
6/30/08 End Of The First Half
The global economy may be close to a "tipping point" that could see it enter a slowdown so severe that it transforms the current period of rising inflation into a period of falling prices, the Bank for International Settlements said Monday.
In its annual report, the central bank for central banks said the impact of rising food and energy prices on consumers' incomes, combined with heavy household debts and a pullback in bank lending, may lead to a slowdown in global growth that "could prove to be much greater and longer-lasting than would be required to keep inflation under control."
"Over time, this could potentially even lead to deflation," it said.
President Bush is poised to sign a $162 billion war spending plan that will pay for fighting in Iraq and Afghanistan until the next president takes office.
The package approved by Congress includes a doubling of GI Bill college benefits for troops and veterans. It also provides a 13-week extension of unemployment benefits and $2.7 billion in emergency flood relief for the Midwest. Bush was to sign the bill Monday morning in the Oval Office.
The spending bill will bring to more than $650 billion the amount Congress has provided for the Iraq war since it started more than five years ago. For operations in Afghanistan, the total is nearly $200 billion, according to congressional officials.
The chief executive of Bank of New York Mellon Corp said on Monday he expected further losses from the banking sector and added that the U.S. housing market crisis could continue for some time.
"I think that in financial institutions, we're going to see more losses in a while," Chief Executive Robert P. Kelly told the European American Press Club in Paris.
Kelly said he expected more capital raising and dividend cuts from the banking sector and that banks may start to sell off assets and reduce leverage.
Commenting on the U.S. housing market, where losses have led to huge writedowns at some of the world's top banks, Kelly said: "It will take us a while to get out of it ... This could go on for a while."
"Intermediate and long-term yields on government bonds have already bottomed and will gradually rise" during the term of the next president, due to start in January, wrote Bill Gross, chief investment officer of Pacific Investment Management Co., or PIMCO, in his monthly "Investment Outlook" letter for July.
A report on growing disparities in the concentration of U.S. aluminum-can wealth, released Tuesday by the Department of Commerce, revealed that 66 percent of the nation's recyclable assets are now held by the poorest 1 percent of the population.
According to the sobering report, the disproportionate distribution of soda-can wealth is greater than ever before, and has become one of the worst instances of economic inequality in the nation's history. Data showed that over-salvaging of cans by a small and elite group of can-horders has created a steadily growing and possibly unbridgeable gap between the rich and the mega-poor.
Corn fell the maximum permitted by the Chicago Board of Trade and wheat dropped the most in 13 weeks after the government said U.S. farmers planted more of both crops than previously expected.
Corn was sowed on 87.3 million acres, up 1.9 percent from a March forecast, and spring-wheat planting jumped 6.8 percent to 14.197 million acres, the U.S. Department of Agriculture said in a report today. Corn prices doubled in the past year to a record on June 27, and wheat jumped 13 percent this month after reaching a record in February. The U.S. is the world's largest corn grower and wheat exporter.
``When prices get that high, you find every nook and cranny to plant on,'' said Darrell Holaday, the president of Advanced Market Concepts in Manhattan, Kansas. ``This report sets a negative tone for the week.''
Corn futures for December delivery fell the CBOT's 30-cent limit, or 3.8 percent, to $7.57 a bushel, the biggest percentage drop since Jan. 23. The most-active contract reached a record $7.9925 on June 27. Corn is still up 26 percent this month, the biggest monthly gain since June 1988.
Wheat futures for September delivery fell 53.25 cents, or 5.8 percent, to $8.5875 a bushel in Chicago, the biggest drop since March 31. Futures have tumbled 36 percent from a record $13.495 a bushel on Feb. 27. The price is up 48 percent in the past 12 months after adverse weather curbed harvests in 2007.
The corn planting exceeded the 85.2 million acres expected by 18 analysts surveyed by Bloomberg News. The acreage is the second-highest since 1944 after plantings last year surged to 93.6 million acres.
Rio Tinto Group, the world's third- largest mining company, won a price increase of as much as 97 percent for contract iron ore from all its Asian steelmaker customers, matching an agreement with Chinese mills.
The Dow Jones Industrial Average finished up 3.5 points at 11,350 on Monday, leaving the blue-chip index on a loss of 10.2% for June and of 7.4% for the second quarter. Year to date, the Dow has fallen 14.4% and it is off 19.8% from its October 2007 high, within just a hair of official bear-market territory. The S&P 500 index rose 1.6 points to 1,280 Monday. It fell 8.6% in June, 3.3% in the quarter, and 12.9% year to date. The Nasdaq Composite dipped 22 points to 2,292 Monday. The tech-heavy index fell 9.1% in June. It still rose 0.6% in the second quarter, but is down 13.6% year to date.
The global economy may be close to a "tipping point" that could see it enter a slowdown so severe that it transforms the current period of rising inflation into a period of falling prices, the Bank for International Settlements said Monday.
In its annual report, the central bank for central banks said the impact of rising food and energy prices on consumers' incomes, combined with heavy household debts and a pullback in bank lending, may lead to a slowdown in global growth that "could prove to be much greater and longer-lasting than would be required to keep inflation under control."
"Over time, this could potentially even lead to deflation," it said.
President Bush is poised to sign a $162 billion war spending plan that will pay for fighting in Iraq and Afghanistan until the next president takes office.
The package approved by Congress includes a doubling of GI Bill college benefits for troops and veterans. It also provides a 13-week extension of unemployment benefits and $2.7 billion in emergency flood relief for the Midwest. Bush was to sign the bill Monday morning in the Oval Office.
The spending bill will bring to more than $650 billion the amount Congress has provided for the Iraq war since it started more than five years ago. For operations in Afghanistan, the total is nearly $200 billion, according to congressional officials.
The chief executive of Bank of New York Mellon Corp said on Monday he expected further losses from the banking sector and added that the U.S. housing market crisis could continue for some time.
"I think that in financial institutions, we're going to see more losses in a while," Chief Executive Robert P. Kelly told the European American Press Club in Paris.
Kelly said he expected more capital raising and dividend cuts from the banking sector and that banks may start to sell off assets and reduce leverage.
Commenting on the U.S. housing market, where losses have led to huge writedowns at some of the world's top banks, Kelly said: "It will take us a while to get out of it ... This could go on for a while."
"Intermediate and long-term yields on government bonds have already bottomed and will gradually rise" during the term of the next president, due to start in January, wrote Bill Gross, chief investment officer of Pacific Investment Management Co., or PIMCO, in his monthly "Investment Outlook" letter for July.
A report on growing disparities in the concentration of U.S. aluminum-can wealth, released Tuesday by the Department of Commerce, revealed that 66 percent of the nation's recyclable assets are now held by the poorest 1 percent of the population.
According to the sobering report, the disproportionate distribution of soda-can wealth is greater than ever before, and has become one of the worst instances of economic inequality in the nation's history. Data showed that over-salvaging of cans by a small and elite group of can-horders has created a steadily growing and possibly unbridgeable gap between the rich and the mega-poor.
Corn fell the maximum permitted by the Chicago Board of Trade and wheat dropped the most in 13 weeks after the government said U.S. farmers planted more of both crops than previously expected.
Corn was sowed on 87.3 million acres, up 1.9 percent from a March forecast, and spring-wheat planting jumped 6.8 percent to 14.197 million acres, the U.S. Department of Agriculture said in a report today. Corn prices doubled in the past year to a record on June 27, and wheat jumped 13 percent this month after reaching a record in February. The U.S. is the world's largest corn grower and wheat exporter.
``When prices get that high, you find every nook and cranny to plant on,'' said Darrell Holaday, the president of Advanced Market Concepts in Manhattan, Kansas. ``This report sets a negative tone for the week.''
Corn futures for December delivery fell the CBOT's 30-cent limit, or 3.8 percent, to $7.57 a bushel, the biggest percentage drop since Jan. 23. The most-active contract reached a record $7.9925 on June 27. Corn is still up 26 percent this month, the biggest monthly gain since June 1988.
Wheat futures for September delivery fell 53.25 cents, or 5.8 percent, to $8.5875 a bushel in Chicago, the biggest drop since March 31. Futures have tumbled 36 percent from a record $13.495 a bushel on Feb. 27. The price is up 48 percent in the past 12 months after adverse weather curbed harvests in 2007.
The corn planting exceeded the 85.2 million acres expected by 18 analysts surveyed by Bloomberg News. The acreage is the second-highest since 1944 after plantings last year surged to 93.6 million acres.
Rio Tinto Group, the world's third- largest mining company, won a price increase of as much as 97 percent for contract iron ore from all its Asian steelmaker customers, matching an agreement with Chinese mills.
The Dow Jones Industrial Average finished up 3.5 points at 11,350 on Monday, leaving the blue-chip index on a loss of 10.2% for June and of 7.4% for the second quarter. Year to date, the Dow has fallen 14.4% and it is off 19.8% from its October 2007 high, within just a hair of official bear-market territory. The S&P 500 index rose 1.6 points to 1,280 Monday. It fell 8.6% in June, 3.3% in the quarter, and 12.9% year to date. The Nasdaq Composite dipped 22 points to 2,292 Monday. The tech-heavy index fell 9.1% in June. It still rose 0.6% in the second quarter, but is down 13.6% year to date.
Sunday, June 29, 2008
Robert McHugh On The Money
6/29/08 Robert McHugh On The Money
Stocks plunged early Thursday morning, and unless we see a mid-day reversal to the upside, this is a dangerous development for stocks. At 10:30 am EST, the Industrials are down 160 points to 11,650, Trannies are down 34 at 5,014, the S&P 500 is off 18 at 1,303, the NASDAQ Composite is down 44 at 2,356, the NDX is down 45 at 1,888, the RUT is off 9 at 707. The HUI is up big, up 16 at 430.
This looks like our first scenario playing out, as stocks are so oversold we should be seeing a bounce for a couple of weeks. That may still happen, but apparently not until selling capitulation occurs first. The Hindenburg Omen stock market crash warning is proving prescient, as the Industrials are now down 609 points since it was officially confirmed on June16th, with more downside likely over the next several weeks and months. Thursday's decline looks like a wave three down, which if so, could lead to much lower prices. If we close here, we will have a decisive close below the 34 year rising trend-channel from 1974, which has catastrophic implications, suggesting a multi-year Bear Market is underway, or a Bear market that would be short time-wise, but deep price-wise, or both.
The Industrials have broken intraday below the March 2008 low, and if we close below 11,740.15, we will have a new closing low for the decline that started back in October 2007, when new all-time highs were reached. A drop below 11,634, January's intraday low and the low for the decline from October 2007 would have Bearish implications for the short-term as well as intermediate-term. It will be interesting to watch if these support areas hold or are breached.
Stocks plunged early Thursday morning, and unless we see a mid-day reversal to the upside, this is a dangerous development for stocks. At 10:30 am EST, the Industrials are down 160 points to 11,650, Trannies are down 34 at 5,014, the S&P 500 is off 18 at 1,303, the NASDAQ Composite is down 44 at 2,356, the NDX is down 45 at 1,888, the RUT is off 9 at 707. The HUI is up big, up 16 at 430.
This looks like our first scenario playing out, as stocks are so oversold we should be seeing a bounce for a couple of weeks. That may still happen, but apparently not until selling capitulation occurs first. The Hindenburg Omen stock market crash warning is proving prescient, as the Industrials are now down 609 points since it was officially confirmed on June16th, with more downside likely over the next several weeks and months. Thursday's decline looks like a wave three down, which if so, could lead to much lower prices. If we close here, we will have a decisive close below the 34 year rising trend-channel from 1974, which has catastrophic implications, suggesting a multi-year Bear Market is underway, or a Bear market that would be short time-wise, but deep price-wise, or both.
The Industrials have broken intraday below the March 2008 low, and if we close below 11,740.15, we will have a new closing low for the decline that started back in October 2007, when new all-time highs were reached. A drop below 11,634, January's intraday low and the low for the decline from October 2007 would have Bearish implications for the short-term as well as intermediate-term. It will be interesting to watch if these support areas hold or are breached.
Bear Market Blues
6/28/08 Bear Market Blues
August crude closed at $140.21 a barrel, up 57 cents on the New York Mercantile Exchange after reaching a high of $142.60. It climbed as high as $142.99 in electronic trading on Globex.
Gold for August delivery rallied $16.20 to end at $931.30 an ounce on the New York Mercantile Exchange. The precious metal posted a weekly gain of $27.60 from last Friday's closing level of $903.70.
Siemens AG plans to cut about 6,450 jobs in Germany to cut costs and more than 17,000 worldwide, according to media reports Friday.
Oil prices will climb to $170 a barrel this year because of increased demand, political tension and decisions made by monetary policymakers in the U.S. and Europe that have devalued the U.S. dollar, OPEC President Chakib Khelil told Bloomberg News on Saturday.
China's foreign exchange reserves, by far the largest in the world, hit 1.80 trillion dollars at the end of May, state media reported Friday.
According to AMG Data Services, Equity Fund Outflows -$13.5 Bil; Taxable Bond Fund Outflows -$1.3 Bil
xETFs - Equity Fund Outflows -$3.1 Bil; Taxable Bond Fund Outflows -$885 Mil.
The Dow industrials fell 106.91 points to 11346.51, leaving the index down 19.9% from its October record and on the threshold of a bear market.
Anheuser-Busch Cos., trumpeting a new business plan after rebuffing an unsolicited takeover bid by rival InBev NV, said Friday it planned to slash about 1,000 jobs, raise beer prices and buy back more of its shares.
The Dow this week tumbled to its lowest level in two years.
August crude closed at $140.21 a barrel, up 57 cents on the New York Mercantile Exchange after reaching a high of $142.60. It climbed as high as $142.99 in electronic trading on Globex.
Gold for August delivery rallied $16.20 to end at $931.30 an ounce on the New York Mercantile Exchange. The precious metal posted a weekly gain of $27.60 from last Friday's closing level of $903.70.
Siemens AG plans to cut about 6,450 jobs in Germany to cut costs and more than 17,000 worldwide, according to media reports Friday.
Oil prices will climb to $170 a barrel this year because of increased demand, political tension and decisions made by monetary policymakers in the U.S. and Europe that have devalued the U.S. dollar, OPEC President Chakib Khelil told Bloomberg News on Saturday.
China's foreign exchange reserves, by far the largest in the world, hit 1.80 trillion dollars at the end of May, state media reported Friday.
According to AMG Data Services, Equity Fund Outflows -$13.5 Bil; Taxable Bond Fund Outflows -$1.3 Bil
xETFs - Equity Fund Outflows -$3.1 Bil; Taxable Bond Fund Outflows -$885 Mil.
The Dow industrials fell 106.91 points to 11346.51, leaving the index down 19.9% from its October record and on the threshold of a bear market.
Anheuser-Busch Cos., trumpeting a new business plan after rebuffing an unsolicited takeover bid by rival InBev NV, said Friday it planned to slash about 1,000 jobs, raise beer prices and buy back more of its shares.
The Dow this week tumbled to its lowest level in two years.
Thursday, June 26, 2008
The Market Tanks
6/26/08 The Market Tanks
Anheuser-Busch Cos.formally rejected the $65-a-share bid from InBev to acquire the company, calling the offer "financially inadequate."
Bank of America Corp. expects to make about 7,500 job cuts after acquiring Countrywide Financial Corp.
Crude at $140.
Gold up $37 and silver tops $17.
The panic button is not pushed with the VIX around 24.
Natural Gas at $13.
All 30 Dow stocks down on the day.
AIG at 11 year low. Citigroup at 10 year low. GM at 53 years low!
Nasdaq down 80 and breaks 2400 on the downside.
The S&P 500 down 39 and breaks 1300 on the downside.
The Dow tanks 358 and breaks 11,700 on the downside.
GE down about $1.50 to a news 52-week low.
There are few places to hide.
Anheuser-Busch Cos.formally rejected the $65-a-share bid from InBev to acquire the company, calling the offer "financially inadequate."
Bank of America Corp. expects to make about 7,500 job cuts after acquiring Countrywide Financial Corp.
Crude at $140.
Gold up $37 and silver tops $17.
The panic button is not pushed with the VIX around 24.
Natural Gas at $13.
All 30 Dow stocks down on the day.
AIG at 11 year low. Citigroup at 10 year low. GM at 53 years low!
Nasdaq down 80 and breaks 2400 on the downside.
The S&P 500 down 39 and breaks 1300 on the downside.
The Dow tanks 358 and breaks 11,700 on the downside.
GE down about $1.50 to a news 52-week low.
There are few places to hide.
The Fed
6/25/08 The Fed
The Fed: "although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased."
Sales of new U.S. homes tumbled 2.5% in May to a seasonally adjusted annual rate of 512,000 as sales in the West fell to a 26-year low, the government said Wednesday. The decline nearly matched economists' expectations. It was the lowest since the 501,000 rate in March. New-home sales were down 40.3% compared with a year earlier. The median sales price in May was $231,000, down 5.7% from a year earlier. The number of homes on the market fell to a three-year low of 453,000, representing a 10.9-month supply.
Poland's central bank raised its key interest rate Wednesday by 25 basis points to 6.0%.
Grey Wolf Inc.received a third unsolicited takeover bid from Precision Drilling Trust. Grey Wolf said the proposal, indicated as its final offer, was for $10 a share, consisting of Trust units and no more than 50% in cash.
The Commerce Department said orders for durable goods were unchanged last month, after a revised 1% decline in April. Excluding demand for transportation equipment, which tends to be volatile, orders declined 0.9 percent, the first drop in three months.
Monsanto also raised its full-year profit guidance to $3.63 a share.
Williams Companies Inc. upped its 2008 profit estimate to a range of $2.30 to $2.80 a share, from its earlier view of $1.70 to $2.10 a share. For 2009, Williams increased its profit view to $2.05 to $2.90 a share, from $1.80 to $2.30 a share earlier.
Florida, which is seeking to restore the Everglades, has offered $1.75 billion for 300 acres on which closely held U.S. Sugar Corp. farms sugar cane, The Wall Street Journal reported. The deal would see the Clewiston, Fla., company, which is the largest U.S. grower of the crop, continue to produce sugar cane for six years.
In its weekly inventory report, the department's Energy Information Administration said crude oil supplies rose slightly last week. Analysts surveyed by research firm Platts had expected a 1.7 million barrel decline.
Gasoline supplies fell less than expected. And inventories of distillates -- which include diesel fuel and heating oil -- rose much more than expected.
Demand for gas, meanwhile, fell 2.1 percent.
"At some point, that's going to bring (gas) prices down," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Boeing Co shares fell to a two-year low on Wednesday after Goldman Sachs cut its rating on the plane maker and defense company to "sell" from "neutral," reflecting falling orders, problems facing airlines and high fuel prices.
Inflation is "exploding" and the Federal Reserve should stress that fighting rising prices is a primary goal, Berkshire Hathaway Chairman Warren Buffett told CNBC on Wednesday. The Fed should be concerned about both inflation and economic growth, a tough thing to do, he explained. But inflation should be the Fed's main concern right now, Buffett added. "Inflation is really picking up," he said. "Whether it's steel or oil... we see it every place. It's exploding." The Fed has to be very careful not to signal that inflation is a secondary concern and something that can be dealt with later, Buffett explained.
Warren Buffett says he's concerned about ``stagflation,'' or slowing in the U.S. economy while inflation accelerates.
``We're right in the middle of it right now,'' said Buffett, chairman of Omaha, Nebraska-based Berkshire Hathaway Inc., in an interview on Bloomberg Television today. ``I think the `flation' part will heat up and I think the `stag' part will get worse.''
Research In Motion saw both revenue and earnings more than
> double in its first fiscal quarter. For the quarter ended
> May 31, Research In Motion (RIMM) reported earnings of
> $482.5 million, or 84 cents a share, compared to earnings
> of $223.2 million, or 39 cents a share, for the same period
> last year. Revenue grew more than 100% to $2.24 billion.
> Analysts were expecting earnings of 85 cents a share on
> revenue of $2.27 billion, according to consensus estimates
> from FactSet Research. The company said it expects revenue
> of $2.55 billion to $2.65 billion with earnings-per-share
> between 84-89 cents for the second fiscal quarter. Analysts
> were expecting revenue of $2.44 billion and earnings of 90
> cents a share for the period.
>
> Excluding special items, Oracle said net income for the
> quarter was 47 cents a share.
>
> Standard & Poor's said Wednesday that it has
> elevated its count for potential bond-rating downgrades
> this month to an all-time high of 749 due to a material
> slowdown in housing and consumer-related activity. The
> number is 132 more than the group reported at the same time
> a year ago, and 11 more than it reported last month.
>
> Two activist hedge funds said on Wednesday that
> they've won seats on the board of CSX Corp. A
> spokesperson for The Children's Investment Fund and 3G
> Capital Partners said that, based on preliminary results
> from the proxy voting at CSX's annual meeting, the
> funds expect to have won at least two seats.
August crude fell $2.45, or 1.8%, to close at $134.55 a barrel in New York Wednesday.
August gold fell $9.30 to close at $882.30 an ounce in New York Wednesday.
The South African rand rose 1.6% against the U.S. dollar Wednesday after a report showed that annual CPIX inflation rose by 10.9% in May, up from 10.4% in April. South Africa's headline CPI annual inflation jumped to 11.7% year-on-year in May compared with 11.1% in April, according to the country's statistics agency. Persistent inflationary pressures will likely force South Africa's central bank to continue to raise interest rates. On June 12, the South African Reserve Bank hiked its key interest rate by 50 basis points to 12%.
Anheuser-Busch will reject InBev's unsolicited $46.35 billion offer as early as this week, setting the stage for a hostile takeover battle, The Wall Street Journal reported late Wednesday. Anheuser is likely to argue that InBev's offer undervalues the maker of Budweiser and that it will present its own strategic plan which could include sale of non-core assets such as its theme parks, according to the newspaper. However, InBev is not expected to retreat without a fight, the Journal said.
The Fed: "although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased."
Sales of new U.S. homes tumbled 2.5% in May to a seasonally adjusted annual rate of 512,000 as sales in the West fell to a 26-year low, the government said Wednesday. The decline nearly matched economists' expectations. It was the lowest since the 501,000 rate in March. New-home sales were down 40.3% compared with a year earlier. The median sales price in May was $231,000, down 5.7% from a year earlier. The number of homes on the market fell to a three-year low of 453,000, representing a 10.9-month supply.
Poland's central bank raised its key interest rate Wednesday by 25 basis points to 6.0%.
Grey Wolf Inc.received a third unsolicited takeover bid from Precision Drilling Trust. Grey Wolf said the proposal, indicated as its final offer, was for $10 a share, consisting of Trust units and no more than 50% in cash.
The Commerce Department said orders for durable goods were unchanged last month, after a revised 1% decline in April. Excluding demand for transportation equipment, which tends to be volatile, orders declined 0.9 percent, the first drop in three months.
Monsanto also raised its full-year profit guidance to $3.63 a share.
Williams Companies Inc. upped its 2008 profit estimate to a range of $2.30 to $2.80 a share, from its earlier view of $1.70 to $2.10 a share. For 2009, Williams increased its profit view to $2.05 to $2.90 a share, from $1.80 to $2.30 a share earlier.
Florida, which is seeking to restore the Everglades, has offered $1.75 billion for 300 acres on which closely held U.S. Sugar Corp. farms sugar cane, The Wall Street Journal reported. The deal would see the Clewiston, Fla., company, which is the largest U.S. grower of the crop, continue to produce sugar cane for six years.
In its weekly inventory report, the department's Energy Information Administration said crude oil supplies rose slightly last week. Analysts surveyed by research firm Platts had expected a 1.7 million barrel decline.
Gasoline supplies fell less than expected. And inventories of distillates -- which include diesel fuel and heating oil -- rose much more than expected.
Demand for gas, meanwhile, fell 2.1 percent.
"At some point, that's going to bring (gas) prices down," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Boeing Co shares fell to a two-year low on Wednesday after Goldman Sachs cut its rating on the plane maker and defense company to "sell" from "neutral," reflecting falling orders, problems facing airlines and high fuel prices.
Inflation is "exploding" and the Federal Reserve should stress that fighting rising prices is a primary goal, Berkshire Hathaway Chairman Warren Buffett told CNBC on Wednesday. The Fed should be concerned about both inflation and economic growth, a tough thing to do, he explained. But inflation should be the Fed's main concern right now, Buffett added. "Inflation is really picking up," he said. "Whether it's steel or oil... we see it every place. It's exploding." The Fed has to be very careful not to signal that inflation is a secondary concern and something that can be dealt with later, Buffett explained.
Warren Buffett says he's concerned about ``stagflation,'' or slowing in the U.S. economy while inflation accelerates.
``We're right in the middle of it right now,'' said Buffett, chairman of Omaha, Nebraska-based Berkshire Hathaway Inc., in an interview on Bloomberg Television today. ``I think the `flation' part will heat up and I think the `stag' part will get worse.''
Research In Motion saw both revenue and earnings more than
> double in its first fiscal quarter. For the quarter ended
> May 31, Research In Motion (RIMM) reported earnings of
> $482.5 million, or 84 cents a share, compared to earnings
> of $223.2 million, or 39 cents a share, for the same period
> last year. Revenue grew more than 100% to $2.24 billion.
> Analysts were expecting earnings of 85 cents a share on
> revenue of $2.27 billion, according to consensus estimates
> from FactSet Research. The company said it expects revenue
> of $2.55 billion to $2.65 billion with earnings-per-share
> between 84-89 cents for the second fiscal quarter. Analysts
> were expecting revenue of $2.44 billion and earnings of 90
> cents a share for the period.
>
> Excluding special items, Oracle said net income for the
> quarter was 47 cents a share.
>
> Standard & Poor's said Wednesday that it has
> elevated its count for potential bond-rating downgrades
> this month to an all-time high of 749 due to a material
> slowdown in housing and consumer-related activity. The
> number is 132 more than the group reported at the same time
> a year ago, and 11 more than it reported last month.
>
> Two activist hedge funds said on Wednesday that
> they've won seats on the board of CSX Corp. A
> spokesperson for The Children's Investment Fund and 3G
> Capital Partners said that, based on preliminary results
> from the proxy voting at CSX's annual meeting, the
> funds expect to have won at least two seats.
August crude fell $2.45, or 1.8%, to close at $134.55 a barrel in New York Wednesday.
August gold fell $9.30 to close at $882.30 an ounce in New York Wednesday.
The South African rand rose 1.6% against the U.S. dollar Wednesday after a report showed that annual CPIX inflation rose by 10.9% in May, up from 10.4% in April. South Africa's headline CPI annual inflation jumped to 11.7% year-on-year in May compared with 11.1% in April, according to the country's statistics agency. Persistent inflationary pressures will likely force South Africa's central bank to continue to raise interest rates. On June 12, the South African Reserve Bank hiked its key interest rate by 50 basis points to 12%.
Anheuser-Busch will reject InBev's unsolicited $46.35 billion offer as early as this week, setting the stage for a hostile takeover battle, The Wall Street Journal reported late Wednesday. Anheuser is likely to argue that InBev's offer undervalues the maker of Budweiser and that it will present its own strategic plan which could include sale of non-core assets such as its theme parks, according to the newspaper. However, InBev is not expected to retreat without a fight, the Journal said.
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