8/14/08 Credit Crisis
Brett Steenbarger: "It's not stress and emotion that get in the way of trading; it's the stress and emotion that results when trading becomes personal: about you, rather than about supply and demand."
Mick P.:"The Georgian foreign ministry in Tbilisi said the Black Sea port of Poti, the site of a major oil shipment facility, had also been "devastated" by a Russian air raid."
The credit crisis is ``broad, deep, and global'' and ``far from over'' for financial companies even after they reported $500 billion in writedowns and credit losses, Merrill Lynch & Co.'s chief investment strategist said.
``Investors are significantly underestimating both the scope and the extent of the credit bubble and the consequences of its subsequent deflation,'' Richard Bernstein wrote in a note to clients. ``The problems are not confined to large institutions that are overexposed to U.S. subprime loans.''
The lingering effects of the crisis mean banks and brokerages need ``massive'' consolidation because of the glut of lending worldwide, Bernstein said.
Democratic presidential candidate Barack Obama has opened up clear lead over John McCain in New Jersey, though more Garden State voters agree with the Republican on energy, a new poll finds. The Quinnipiac University poll released Wednesday has Obama leading McCain 51 percent to 41 percent among likely voters here. The Illinois senator is favored by 94 percent of African-Americans and maintains a 15-point lead among women, the poll found.
A Quinnipiac poll in June found Obama leading by 6 percentage points.
A leading Republican moderate with a foreign policy background endorsed Democrat Barack Obama yesterday, aiding the candidate's efforts to demonstrate appeal to members of both political parties.
Former US representative Jim Leach of Iowa was among a group of Republicans, including former senator Lincoln Chafee of Rhode Island, who said they were crossing party lines to support Obama.
"I'm convinced that the national interest demands a new approach to our interaction with the world," Leach, a foreign service officer before being elected to Congress, said in a conference call with reporters.
Leach served 30 years in Congress before losing a reelection bid in 2006. As a moderate, he was often at odds with the conservative GOP leadership, and like Obama opposed the Iraq war.
Leach predicted many Republicans and Independents would be attracted by Obama's campaign but said his decision to endorse a Democratic presidential candidate for the first time wasn't easy.
Whole Foods Market's recent voluntary recall of fresh ground beef sold between June 2 and August 6 in certain states has led the retailer to tighten oversight of its food suppliers, the New York Times reports.
The Bank of England cut its forecast for U.K. economic growth and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.
Deere now projects construction sales may fall as much as 5 percent this year, compared with a May forecast of down as much as 3 percent. Higher prices for tractors and combines weren't enough to counter a $140 million increase in raw-material costs from a year earlier.
Soybeans rose for a third day, extending a rally from the lowest in more than four months, as a government report showed U.S. production and inventories will be reduced by the worst Midwest flooding in 15 years.
Farmers will harvest 2.973 billion bushels compared with 3 billion bushels forecast in July, the U.S. Department of Agriculture said yesterday. Yields are forecast to fall to 40.5 bushels an acre from a July estimate of 41.6 bushels. U.S. inventories before next year's harvest will total 135 million bushels, less than the 140 million forecast a month ago.
Two-thirds of firms doing business in the U.S. paid no federal income taxes from 1998-05.
Richard Daughty: " I will turn you over to Robert Ross, who provides an interesting lesson in going to a fiat currency from a gold money in an article posted at FinancialSense.com, where he reminds us that "in Rome, 277 BC, the denarius was born. It was a silver coin, and for the first 250 years, its silver content declined only modestly. The modest decline corresponded with Rome's rise to become an empire. From the original 66 grains of silver, the value had only declined 10% to 60 grains, by the time of Julius Caesar (49 BC). But soon afterwards monetary tumult commenced in earnest." This was 228 years, which is just a little more than the time since 1776.
I could tell by the look on his face that he was not interested in me interrupting with that little factoid about America or how I cleverly subtracted 1776 from 2008 to get 228, and continues, "In 54 AD Emperor Nero started to inflate and debase the value of Rome's money. Nero took 14.3% of the silver out of the denarius coin and 11% of the gold out of the aureus coin, replacing the precious metals with base metals."
Finally, "As Rome continued on its moral, political and monetary decline, by 193 AD, the denarius had only 26 grains of silver - a 61% devaluation from the original 66 grains. Shortly thereafter, Rome's denarius stopped being accepted in trade by the rest of the world. By 268, the denarius was nothing but base metal with a thin silver coating."
What's this got to do with anything we care about, which is ourselves? I thought you'd never ask! He says, "If we flash forward to the U.S. in the 1960s, we find that, in one fell swoop, all of the silver was taken out of our coins and replaced with base metals. Are we Rome on steroids???" Hahaha! Yes! Yes, we are!
But snide comments about what a bunch of corrupt, bloodthirsty, power-crazed, commie hedonists we have become aside, he doesn't mention what an ounce of gold was worth all along the way when valued in the local currency, so I will. It went up! The whole time!
And by 268 A.D., when the currency went to zero, gold was selling at a zillion denarii an ounce! Dollars. Denarius. Denarius. Dollar. Ponder and be instructed!"
The U.S. budget deficit widened to a record for July as tax rebates boosted government spending, a slower economy cut revenue and regulators covered insured deposits at failed banks.
The $102.8 billion deficit last month compares with a shortfall of $36.4 billion in July 2007, the Treasury said in a report issued in Washington. Spending last month rose 27.3 percent to a record $263.3 billion from a year earlier, and revenue decreased 5.8 percent to $160.5 billion.
Since the start of the fiscal year on Oct. 1, 2007, the government has accumulated a deficit of $371.4 billion compared with a shortfall of $157.4 billion at the same point a year earlier, according to the Treasury.
Year-to-date spending totaled $2.466 trillion, and revenue totaled $2.094 trillion, the Treasury said.
The Bush Legacy: A collapsing standard of living on Main Street, a war founded on lies, trampling of the Constitution, record and rising budget and trade deficits, spiraling inflation, a dollar shunned by foreigners, a bulging government workforce, a severe recession with no end in sight, bubblemania created by irresponsible lending practices, a debt limit approaching $10 trillion, torture, etc.
The Federal Deposit Insurance Corp. spent $15 billion last month to cover insured deposits at failed banks. The FDIC insures deposits of as much as $100,000 per depositor per bank and as much as $250,000 for some retirement accounts at 8,494 lenders with $13.4 trillion in assets.
To finance the excess of spending over revenue, the Treasury sells bonds, notes and bills. The department said July 28 that it would need to borrow $171 billion in the July- September quarter, $59 billion more than it predicted in April.
Macy's cut its full-year profit forecast to $1.70 to $1.85 a share from a previous projection of $1.85 to $2.15 a share, excluding restructuring costs.
Liz Claiborne lowered the top end of its fiscal 2008 forecast to as much as $1.50 from a previous projection of as much as $1.60 a share as it said the difficult macroeconomic environment leads it to be cautious in its outlook.
Russian steelmaker Novolipetsk Steel has signed an agreement to expand its presence in the U.S. by buying U.S. steel pipe and tube manufacturer John Maneely Company from a shareholder group including private equity firm Carlyle Group for $3.53 billion, Novolipetsk said in a statement today.
The Beechwood, Ohio-headquartered John Maneely Company, or JMC, is the largest independent maker of tubular steel in North America and has estimated 2008 sales of around $3 billion, Novolipetsk said.
India's economic growth is likely to slow to 7.7 percent for the fiscal year that started April 1, due to the drag of higher food and oil prices and tightening in credit and equity markets after the U.S. subprime crisis, a government report said Wednesday.
Growth in agriculture is likely to be at 2 percent, sharply lower than 4.5 percent growth in the last fiscal year, the report from the Economic Advisory Council to India's prime minister said. Growth in industry and services will also slow to 7.5 percent and 9.6 percent, respectively, compared with 8.5 percent and 10.8 percent a piece in the last year, it said.
India's economy grew 9 percent in the fiscal year through March. And it grew at an annual average of 8.8 percent over the past five years, the report said, but it added that "a number of factors inimical to growth have intensified in 2008."
The report specifically cited higher oil prices, tightening in credit and equity markets and a global slowdown in growth.
"Overall, economic growth will slow down," the report said.
U.S. import prices rose by 1.7% in July, mostly on prices for imported petroleum and natural gas, the Labor Department reported Wednesday. Prices were up 21.6% over the past 12 months, the largest 12-month increase in the history of the index. Petroleum import prices climbed by 4% in the month, while natural gas prices rose by 5.8%. Excluding all fuels, import prices rose by 0.7% in July.
The Oil Drum: "An Australian researcher has warned that the drive to put cleaner, hydrogen-fuelled cars on the road will stall unless new reserves of platinum are found. Platinum is one of the key components of catalytic converters, catalysing carbon monoxide from exhaust fumes. It is also a critical component of fuel cells for hydrogen-powered cars. However 80 per cent of the world's reserves come from just three mines. John Mavrogenes says a team of geochemists from the Australian National University has identified new methods to detect platinum deposits. They are simulating the intense heat and pressure of the Earth's magma to discover whether platinum can be extracted from other minerals. "This work may help geologists find new reserves around the world in places that haven't been searched before," he said. Professor Mavrogenes says if the platinum price remains at its current high, Australia could mine lower-grade deposits. ...The three major mines that produce platinum are in South Africa, Siberia and the United States. "If we go to more and more uses of platinum we're going to need more than they can produce," Professor Mavrogenes said. "Existing reserves would meet less than 20 per cent of the world's platinum demand if all cars went hydrogen."
EIA estimates that members of OPEC earned $671 billion in net oil export revenues in 2007, a 10 percent increase from 2006.
Footnoted.org: "The carrying value of Countrywide's loans held for investment at the time of the merger were $94.2 billion, which Bank of America paid $8.1 billion for."
Americans drove 53.2 billion fewer miles over the last 10 months than they did over the same period a year earlier, according to the U.S. Department of Transportation. The figure tops the 1970s' total decline of 49.3 billion miles. Americans drove 4.7% less, or 12.2 billion miles fewer, in June 2008 than June 2007. Meanwhile, average retail gasoline prices fell a penny to $3.79 a gallon in the last day, according to the Daily Fuel Gauge Report from AAA. A month ago, gasoline prices were near a record of $4.11 a gallon. A year ago, gasoline sold for $2.77 a gallon.
Total sales at U.S. retailers edged down 0.1 percent in July on another big drop in auto sales, as consumers strain to keep up spending amid rising prices.
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-hoarders has created a steadily growing and possibly unbridgeable gap between the rich and the mega-poor.
Genentech's board of directors said Wednesday that it has unanimously concluded that Roche Holdings Ltd.'s bid to buy Genentech for $89.00 per share substantially undervalues the company. However, it would consider a higher bid.
U.S. June inventory-to-sales ratio falls to record-low 1.23.
Mikhail Gorbachev: "What happened on the night of August 7 is beyond comprehension. The Georgian military attacked the South Ossetian capital of Tskhinvali with multiple rocket launchers designed to devastate large areas. Russia had to respond. To accuse it of aggression against "small, defenceless Georgia" is not just hypocritical but shows a lack of humanity.
The Georgian leadership could do this only with the perceived support and encouragement of a much more powerful force. Georgian armed forces were trained by hundreds of US instructors, and its sophisticated military equipment was bought in a number of countries. This, coupled with the promise of Nato membership, emboldened Georgian leaders.
Now that the military assault has been routed, both the Georgian government and its supporters should rethink their position. When the problems of South Ossetia and Abkhazia first flared up, I proposed that they be settled through a federation that would grant broad autonomy to the two republics. This idea was dismissed, particularly by the Georgians. Attitudes gradually shifted, but after last week it will be much more difficult to strike a deal even on such a basis...Of course, peace in the Caucasus is in everyone's interest. But it is simply common sense to recognise that Russia is rooted there by common geography and centuries of history. Russia is not seeking territorial expansion, but it has legitimate interests in this region... A lesson from recent events is that geopolitical games are dangerous anywhere, not just in the Caucasus."
The U.K. pound fell to a 22-month low against the dollar and government bonds advanced after the Bank of England cut its growth forecast and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.
Motor gasoline supplies fell by 6.4 million barrels to 202.8 million for the week ended August 8, according to the Energy Department Wednesday. Crude supplies fell 400,000 barrels to 296.5 million barrels. Distillate stocks were down 1.7 million barrels at 131.6 million barrels. Refinery utilization was at 85.9% compared with 87% of capacity a week earlier.
Skechers USA Inc.said late Wednesday it is offering to buy Heelys Inc. for about $142.8 million in cash, or for $5.25 a share.
September crude closed at $116 per barrel Wednesday, up $2.99, or 2.7%, for the session.
December gold closed at $831.50 an ounce Wednesday, up $16.90, or 2.1%, on the New York Mercantile Exchange.
Lehman Brothers Holdings Inc., seeking to restore investor confidence after a $2.8 billion second-quarter loss, is negotiating to sell commercial real estate assets to a group including BlackRock Inc., said three people briefed on the discussions.
Lehman is seeking to sell about $14 billion of its $40 billion in commercial property and related securities by the end of the year, according to two potential buyers approached by the New York- based firm.
Wednesday, August 13, 2008
U.S. Homeowners
8/13/08 U.S. Homeowners
The U.S. trade gap narrowed by 4.1% to $56.8 billion in June on record exports and a decline in non-oil imports, the Commerce Department estimated Tuesday. The non-petroleum trade deficit fell to the lowest level in five years, the government said. Exports jumped 4% in June to a record $164.4 billion, the biggest gain in four years. Imports rose 1.8% to a record $221.2 billion, largely because of the record $117 price for a barrel of crude oil. After adjusting for inflation, the real trade deficit fell by 10.3% to the lowest level in 6 1/2 years.
Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.
Second-quarter home prices fell 9.9 percent from a year earlier, giving 29 percent of owners negative equity, said Zillow, the Seattle-based service that offers values for more than 80 million homes. For those who bought at the 2006 peak of the housing market, 45 percent are now underwater, Zillow said.
Lehman Brothers Holdings Inc. may reap $7 billion by selling Neuberger Berman LLC, its asset-management unit, as mortgage-related assets further erode capital, said analyst Brad Hintz at Sanford C. Bernstein Co.
The U.S. corn crop will be 4.9 percent larger than forecast a month ago, the government said, after favorable weather helped Midwest crops recover from the worst flooding in 15 years.
Maurilio Biagi Filho, the world's second-biggest sugar-cane grower, will spend about $250 million to quadruple electricity generation at his mills to tap rising demand for energy in Latin America's biggest economy.
Wall Street's mortgage losses have grown so large that some firms may pay little or no taxes for years, widening New York City and state deficits and challenging their ability to provide services, Mayor Michael Bloomberg said.
Mitsubishi UFJ Group (MUFG) on Tuesday offered $3bn to buy the remaining 35 per cent in Union Bank of California it does not already own, in a move aimed at giving Japan’s largest lender a greater presence in the US.
MUFG is offering shareholders $63 per share, or an 8 per cent premium over UNBC’s closing price on Monday and a 24.5 per cent premium on the bank’s average closing price over the last four weeks. UNBC is a commercial bank with 300 branches across the state of California.
Consumer price inflation rate leapt to 4.4 percent in July, the government said Tuesday, making it difficult for the Bank of England to consider lowering interest rates to ward off the risk of recession.
The report from the Office for National Statistics showed inflation is now at more than double the government's target of 2 percent, after rising from 3.8 percent in June.
The 0.6 percentage-point jump was the biggest monthly rise since records began in January 1997 and outpaced the 4.2 percent predicted by many economists.
"This is a really disturbing set of data that will not go down at all well at the Bank of England," said Global Insight economist Howard Archer. "The rise in consumer price inflation to a series high ... was well above expectations."
World oil demand growth will rise by approximately 60,000 barrels per day to 930,000 bpd in 2009 as consumption in non-OECD countries increases, the International Energy Agency said on Tuesday.
China National Offshore Oil Corp., or Cnooc, and China National Petrochemical Corp., or Sinopec, are joining forces to bid for an Angolan oil and gas asset owned by U.S.-based Marathon Oil Corp. that is expected to fetch about US$1.5 billion, the South China Morning Post reported Monday, citing unnamed sources.
The report said India's Oil & Natural Gas Corp. and Brazil's Petroleo Brasileiro SA (PBR), or Petrobras. are among the rival bidders. Marathon Oil will select the winning bid over the next few days, the paper said.
Nouriel Roubini: "There is now an increasing probability that the global economy - not just the US - will experience a serious and protracted recession. Macro developments in the last few weeks suggest that now all of the G7 economies (the group of the major advanced economies including US, UK, Japan, Germany, France, Italy and Canada) are already in a recession or close to tipping into one. Other advanced economies or emerging markets (the rest of the Eurozone including Spain. Ireland the the other Euro members; New Zealand, Iceland, Estonia, Latvia and some other South-East Europe economies) are also on the tip of a recessionary hard landing.
And once this group of twenty plus economies enters into a recession there will be a sharp growth slowdown in the BRICs (Brazil, Russia, India and China) and other emerging market economies. The IMF defines a global recession as a global growth rate below 2.5% as emerging market economies usually grow much faster (6%) than advanced economies where growth averages about 2%. For example, a country like China - that even with a growth rate of 10% plus has officially thousands of riots and protests a year - needs to move 15 million poor rural farmers to the modern urban industrial sector with higher wages every year just to maintain the legitimacy of its regime; so for China a growth rate of 6% would be equivalent to a recessionary hard landing. It now looks like that, by the end of this year or early 2009, the global economy will enter a recession."
The Russians now supply about 25 percent of the European Union's crude oil needs and half of its natural gas.
The Oil Drum: "An analysis of recent crude oil production data for Saudi Arabia, in conjunction with data on recent projects which have added additional supply, indicates that the most recent production peak in 2006 will be surpassed with the additions of the Khurais and Manifa producing areas. Beyond these, however, more rapid decline of Ghawar and other older fields will overwhelm any potential additions from their remaining as yet undeveloped fields."
Crude oil prices are expected to average $119 a barrel this year, the Energy Information Administration said Tuesday in an August forecast. That was down from the EIA's July forecast of $127 a barrel. Next year's average price is expected to stand at $124 a barrel, down from the $133 a barrel the EIA expected in July.
CVS Caremark Corp. late Tuesday said it will buy Longs Drug Stores Corp. for $2.9 billion, or $71.50 a share. The deal, which also includes the assumption of debt, is a 32% premium over Longs Drug's closing stock price.
Applied Materials Inc. reported a 65% drop in net income for its third fiscal quarter amid a drop in sales for the company's semiconductor manufacturing tools. For the period ended July 27, Applied Materials said its net income was $164.5 million, or 12 cents a share, compared to earnings of $473.5 million, or 34 cents a share, for the same period last year. The company said earnings excluding charges for stock-option expenses and acquisition charges would have been $228 million, or 17 cents a share.
The U.S. economy faces a prolonged period of anemic growth, but that's no reason to get complacent on inflation, said Dallas Fed President Richard Fisher in an interview with the Dallas Morning News published Tuesday. "I expect that in the second half of this year we will broach zero growth," he said. Fisher, a voting member of the Federal Open Market Committee who's been on the losing side on the past five votes on interest rates, said the credit crunch is worse than the S&L crisis of the late 1980s. "We go through these periods of correction. It's not unhealthy. It's the way capitalism works." Fisher said everyone on the FOMC would be concerned if inflationary expectations became unanchored.
Japan's economy contracted last quarter, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less.
Gross domestic product shrank an annualized 2.4 percent in the three months ended June 30 after expanding a revised 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo. The median estimate of 29 economists surveyed by Bloomberg News was for a 2.3 percent contraction.
CSL Ltd., the world's second-largest maker of specialized blood transfusion products, agreed to buy Talecris Biotherapeutics Holding Corp. for $3.1 billion cash, boosting sales by more than a third with its biggest acquisition.
The purchase will be partly funded by a $1.5 billion share sale to shareholders, the Melbourne-based company said today in a statement. CSL today reported net income rose 30 percent to A$701.8 million ($610 million) in the 12 months to June 30, from A$539.3 million a year earlier.
Short-selling limits on financial stocks are lifted with Wednesday's open.
Shares of Deere & Co sank 6.1 percent to $65.10 in premarket trade on Wednesday after the world's largest maker of farm machinery posted its third-quarter results.
Deere & Co, the world's largest maker of farm machinery, said earnings in the latest quarter rose 7 percent as soaring crop prices boosted global demand for its agricultural equipment.
Net profit rose to $575.2 million, or $1.32 a share, in its fiscal third quarter, from $537.2 million, or $1.18 a share, a year earlier.
Revenue increased 17 percent to $7.74 billion.
Luxury home builder Toll Brothers said fiscal third quarter to July 31 home-building revenue fell 34% to $796.5 million, with its bakclog down 52% and contracts signed down 35% in dollar terms. Chairman and CEO Robert Toll said there's growing pent-up demand from those who have postponed buying during the last three years, and said total cancellations of 195 were the lowest quarterly total in over two years.
Chinese retail sales jumped 23.3% in July from the year-earlier period, boosted by strong demand for oil and oil products as well as cosmetics and jewelry, official data showed Wednesday, according to media reports. The increase was higher than the 23% growth registered in June, and improved retail sales in the first seven months of 2008 to 21.7% over the year-ago period.
The U.S. trade gap narrowed by 4.1% to $56.8 billion in June on record exports and a decline in non-oil imports, the Commerce Department estimated Tuesday. The non-petroleum trade deficit fell to the lowest level in five years, the government said. Exports jumped 4% in June to a record $164.4 billion, the biggest gain in four years. Imports rose 1.8% to a record $221.2 billion, largely because of the record $117 price for a barrel of crude oil. After adjusting for inflation, the real trade deficit fell by 10.3% to the lowest level in 6 1/2 years.
Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.
Second-quarter home prices fell 9.9 percent from a year earlier, giving 29 percent of owners negative equity, said Zillow, the Seattle-based service that offers values for more than 80 million homes. For those who bought at the 2006 peak of the housing market, 45 percent are now underwater, Zillow said.
Lehman Brothers Holdings Inc. may reap $7 billion by selling Neuberger Berman LLC, its asset-management unit, as mortgage-related assets further erode capital, said analyst Brad Hintz at Sanford C. Bernstein Co.
The U.S. corn crop will be 4.9 percent larger than forecast a month ago, the government said, after favorable weather helped Midwest crops recover from the worst flooding in 15 years.
Maurilio Biagi Filho, the world's second-biggest sugar-cane grower, will spend about $250 million to quadruple electricity generation at his mills to tap rising demand for energy in Latin America's biggest economy.
Wall Street's mortgage losses have grown so large that some firms may pay little or no taxes for years, widening New York City and state deficits and challenging their ability to provide services, Mayor Michael Bloomberg said.
Mitsubishi UFJ Group (MUFG) on Tuesday offered $3bn to buy the remaining 35 per cent in Union Bank of California it does not already own, in a move aimed at giving Japan’s largest lender a greater presence in the US.
MUFG is offering shareholders $63 per share, or an 8 per cent premium over UNBC’s closing price on Monday and a 24.5 per cent premium on the bank’s average closing price over the last four weeks. UNBC is a commercial bank with 300 branches across the state of California.
Consumer price inflation rate leapt to 4.4 percent in July, the government said Tuesday, making it difficult for the Bank of England to consider lowering interest rates to ward off the risk of recession.
The report from the Office for National Statistics showed inflation is now at more than double the government's target of 2 percent, after rising from 3.8 percent in June.
The 0.6 percentage-point jump was the biggest monthly rise since records began in January 1997 and outpaced the 4.2 percent predicted by many economists.
"This is a really disturbing set of data that will not go down at all well at the Bank of England," said Global Insight economist Howard Archer. "The rise in consumer price inflation to a series high ... was well above expectations."
World oil demand growth will rise by approximately 60,000 barrels per day to 930,000 bpd in 2009 as consumption in non-OECD countries increases, the International Energy Agency said on Tuesday.
China National Offshore Oil Corp., or Cnooc, and China National Petrochemical Corp., or Sinopec, are joining forces to bid for an Angolan oil and gas asset owned by U.S.-based Marathon Oil Corp. that is expected to fetch about US$1.5 billion, the South China Morning Post reported Monday, citing unnamed sources.
The report said India's Oil & Natural Gas Corp. and Brazil's Petroleo Brasileiro SA (PBR), or Petrobras. are among the rival bidders. Marathon Oil will select the winning bid over the next few days, the paper said.
Nouriel Roubini: "There is now an increasing probability that the global economy - not just the US - will experience a serious and protracted recession. Macro developments in the last few weeks suggest that now all of the G7 economies (the group of the major advanced economies including US, UK, Japan, Germany, France, Italy and Canada) are already in a recession or close to tipping into one. Other advanced economies or emerging markets (the rest of the Eurozone including Spain. Ireland the the other Euro members; New Zealand, Iceland, Estonia, Latvia and some other South-East Europe economies) are also on the tip of a recessionary hard landing.
And once this group of twenty plus economies enters into a recession there will be a sharp growth slowdown in the BRICs (Brazil, Russia, India and China) and other emerging market economies. The IMF defines a global recession as a global growth rate below 2.5% as emerging market economies usually grow much faster (6%) than advanced economies where growth averages about 2%. For example, a country like China - that even with a growth rate of 10% plus has officially thousands of riots and protests a year - needs to move 15 million poor rural farmers to the modern urban industrial sector with higher wages every year just to maintain the legitimacy of its regime; so for China a growth rate of 6% would be equivalent to a recessionary hard landing. It now looks like that, by the end of this year or early 2009, the global economy will enter a recession."
The Russians now supply about 25 percent of the European Union's crude oil needs and half of its natural gas.
The Oil Drum: "An analysis of recent crude oil production data for Saudi Arabia, in conjunction with data on recent projects which have added additional supply, indicates that the most recent production peak in 2006 will be surpassed with the additions of the Khurais and Manifa producing areas. Beyond these, however, more rapid decline of Ghawar and other older fields will overwhelm any potential additions from their remaining as yet undeveloped fields."
Crude oil prices are expected to average $119 a barrel this year, the Energy Information Administration said Tuesday in an August forecast. That was down from the EIA's July forecast of $127 a barrel. Next year's average price is expected to stand at $124 a barrel, down from the $133 a barrel the EIA expected in July.
CVS Caremark Corp. late Tuesday said it will buy Longs Drug Stores Corp. for $2.9 billion, or $71.50 a share. The deal, which also includes the assumption of debt, is a 32% premium over Longs Drug's closing stock price.
Applied Materials Inc. reported a 65% drop in net income for its third fiscal quarter amid a drop in sales for the company's semiconductor manufacturing tools. For the period ended July 27, Applied Materials said its net income was $164.5 million, or 12 cents a share, compared to earnings of $473.5 million, or 34 cents a share, for the same period last year. The company said earnings excluding charges for stock-option expenses and acquisition charges would have been $228 million, or 17 cents a share.
The U.S. economy faces a prolonged period of anemic growth, but that's no reason to get complacent on inflation, said Dallas Fed President Richard Fisher in an interview with the Dallas Morning News published Tuesday. "I expect that in the second half of this year we will broach zero growth," he said. Fisher, a voting member of the Federal Open Market Committee who's been on the losing side on the past five votes on interest rates, said the credit crunch is worse than the S&L crisis of the late 1980s. "We go through these periods of correction. It's not unhealthy. It's the way capitalism works." Fisher said everyone on the FOMC would be concerned if inflationary expectations became unanchored.
Japan's economy contracted last quarter, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less.
Gross domestic product shrank an annualized 2.4 percent in the three months ended June 30 after expanding a revised 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo. The median estimate of 29 economists surveyed by Bloomberg News was for a 2.3 percent contraction.
CSL Ltd., the world's second-largest maker of specialized blood transfusion products, agreed to buy Talecris Biotherapeutics Holding Corp. for $3.1 billion cash, boosting sales by more than a third with its biggest acquisition.
The purchase will be partly funded by a $1.5 billion share sale to shareholders, the Melbourne-based company said today in a statement. CSL today reported net income rose 30 percent to A$701.8 million ($610 million) in the 12 months to June 30, from A$539.3 million a year earlier.
Short-selling limits on financial stocks are lifted with Wednesday's open.
Shares of Deere & Co sank 6.1 percent to $65.10 in premarket trade on Wednesday after the world's largest maker of farm machinery posted its third-quarter results.
Deere & Co, the world's largest maker of farm machinery, said earnings in the latest quarter rose 7 percent as soaring crop prices boosted global demand for its agricultural equipment.
Net profit rose to $575.2 million, or $1.32 a share, in its fiscal third quarter, from $537.2 million, or $1.18 a share, a year earlier.
Revenue increased 17 percent to $7.74 billion.
Luxury home builder Toll Brothers said fiscal third quarter to July 31 home-building revenue fell 34% to $796.5 million, with its bakclog down 52% and contracts signed down 35% in dollar terms. Chairman and CEO Robert Toll said there's growing pent-up demand from those who have postponed buying during the last three years, and said total cancellations of 195 were the lowest quarterly total in over two years.
Chinese retail sales jumped 23.3% in July from the year-earlier period, boosted by strong demand for oil and oil products as well as cosmetics and jewelry, official data showed Wednesday, according to media reports. The increase was higher than the 23% growth registered in June, and improved retail sales in the first seven months of 2008 to 21.7% over the year-ago period.
Tuesday, August 12, 2008
Credit Squeeze
8/12/08 Credit Squeeze
Fed survey shows credit squeeze getting worse. The U.S. economy was squeezed further by the credit crunch in the past three months, and most banks expect to keep a lid on credit for the next year at least, the Federal Reserve reported Monday. A record percentage of banks were making it more difficult for borrowers in the three months ending in July, the Fed said in its quarterly senior loan officer survey of 52 major banks. A majority of banks tightened their rules for granting loans to businesses and consumers. The survey shows little appetite at banks to lend for home mortgages, credit cards, home equity loans, commercial real estate loans, or commercial and industrial loans.
Gold futures closed at their lowest level of the year Monday, with the December contract down $36.50, or 4.2%, at $828.30 an ounce.
Iran and Algeria, holders of the second and sixth-largest natural gas reserves, support the formation of a gas exporters group similar to OPEC, state-run Shana reported, citing the countries' oil ministers.
Chakib Khelil, Algeria's minister of energy and mines, said gas contract data should be shared among members of the Gas Exporting Countries Forum and producers should have more control over contract terms, the news agency reported. Khelil was in Tehran yesterday and met with his Iranian counterpart Gholamhossein Nozari.
China's trade surplus swelled in July to its highest level in eight months as its trade gaps with the United States and Europe grew despite concern about weaker global demand, according to data reported Monday.
Export growth rebounded in July, the customs agency said, after a June slowdown prompted Beijing to boost tax rebates for struggling textile exporters.
"Though we expect a continued deterioration as the year goes on, as American and European consumers stay at home, the resilience of demand for China's exports is still remarkable," said Standard Chartered economist Stephen Green in a report to clients.
China's global trade surplus in July was $25.3 billion, the agency said, up 4 percent from the same month in 2007.
Exports in July soared by 26.9 percent to $136.7 billion, the data showed. That came after export growth fell in June to 18.2 percent, down from May's 28 percent rate. Imports in July also grew strongly, rising by 33 percent to $111.4 billion
Brett Steenbarger: "In sum, I retain my doubts that a bull market has begun, but the market's late week resilience, expansion of 20-day highs, and rising NYSE TICK line all suggest that we could see further movement to the upside. Global weakness has pressured commodities and aided the U.S. dollar: these dynamics are worth following as we move forward, as they may be catalysts for further share gains."
Rob Hanna: "Even with the strong move to a new 30-day high on Friday new highs were unimpressive. In fact they were beneath new lows."
Pilgrim's Pride Corp. set plans to idle a chicken-processing plant in Clinton, Ark., and a further-processing facility in Bossier City, La., citing its ongoing struggle with high feed costs and an oversupply of chicken. The company said both moves, which will likely be completed within 60 days, will eliminate about 600 jobs.
Azerbaijan has stopped oil exports via the Georgian ports of Batumi and Kulevi because of the escalating military conflict between Georgia and Russia over the breakaway region of South Ossetia, AFP reported over the weekend, citing the head of the Azeri state oil company SOCAR. "Since last night the import and export of oil through the Georgian ports of Kulevi and Batumi have been halted," said Rovnag Abdullayev, the head of the Azeri state oil company SOCAR, in televised comments on Saturday, according to AFP. Abdullayev said that SOCAR was "looking into the possibility of exporting oil through the Baku-Novorossiysk pipeline, but the capacity of this pipeline is quite low," AFP reported.
Wachovia Corp , the fourth-largest U.S. bank, said on Monday it expected to eliminate 11,350 jobs, more than it previously disclosed, as conditions deteriorate in the housing market.
Fluor raised its earnings view to $3.65 to $3.80 a share for 2008, compared with a previous outlook of $3.30 to $3.45 a share.
Crude futures marked another three-month low Monday, with the September contract closing at $114.45 per barrel, down 75 cents on the New York Mercantile Exchange.
Petroleo Brasileiro SA, Brazil's state-controlled oil company, said second-quarter profit jumped 29 percent to a record on increased oil production and higher prices for crude and fuel.
Consolidated net income rose to 8.78 billion reais ($5.40 billion), or 1 real a share, from 6.80 billion reais, or 78 centavos, a year earlier, Petrobras, as the company is known, said today in a statement to Brazil's securities regulator. Net sales climbed 31 percent to 54.6 billion reais.
JA Solar reaffirmed its 2008 revenue forecast in a range of $1.05 billion to $1.17 billion, and said it foresees 2009 revenue coming in between $2.0 billion and $2.2 billion.
Russian President Dmitry Medvedev has ordered an end to Russia's military operations against Georgia, according to a report from Russian news agency Interfax.
J.P. Morgan Chase, in a filing to the Securities and Exchange Commission late on Monday, said it's had to take a $1.5 billion write-off on mortgage-backed securities and loans.
China's consumer price index rose 6.3% in July from a year earlier, the slowest pace of gains in 10 months, according to data released by the National Bureau of Statistics Tuesday.
Japan's wholesale inflation rate surged to its highest level in 27 years in July, as companies raised prices to offset higher fuel and commodity input costs. Wholesale prices climbed 7.1% from a year earlier, accelerating from a 5.7% rise in June, the Bank of Japan said Tuesday.
Fed survey shows credit squeeze getting worse. The U.S. economy was squeezed further by the credit crunch in the past three months, and most banks expect to keep a lid on credit for the next year at least, the Federal Reserve reported Monday. A record percentage of banks were making it more difficult for borrowers in the three months ending in July, the Fed said in its quarterly senior loan officer survey of 52 major banks. A majority of banks tightened their rules for granting loans to businesses and consumers. The survey shows little appetite at banks to lend for home mortgages, credit cards, home equity loans, commercial real estate loans, or commercial and industrial loans.
Gold futures closed at their lowest level of the year Monday, with the December contract down $36.50, or 4.2%, at $828.30 an ounce.
Iran and Algeria, holders of the second and sixth-largest natural gas reserves, support the formation of a gas exporters group similar to OPEC, state-run Shana reported, citing the countries' oil ministers.
Chakib Khelil, Algeria's minister of energy and mines, said gas contract data should be shared among members of the Gas Exporting Countries Forum and producers should have more control over contract terms, the news agency reported. Khelil was in Tehran yesterday and met with his Iranian counterpart Gholamhossein Nozari.
China's trade surplus swelled in July to its highest level in eight months as its trade gaps with the United States and Europe grew despite concern about weaker global demand, according to data reported Monday.
Export growth rebounded in July, the customs agency said, after a June slowdown prompted Beijing to boost tax rebates for struggling textile exporters.
"Though we expect a continued deterioration as the year goes on, as American and European consumers stay at home, the resilience of demand for China's exports is still remarkable," said Standard Chartered economist Stephen Green in a report to clients.
China's global trade surplus in July was $25.3 billion, the agency said, up 4 percent from the same month in 2007.
Exports in July soared by 26.9 percent to $136.7 billion, the data showed. That came after export growth fell in June to 18.2 percent, down from May's 28 percent rate. Imports in July also grew strongly, rising by 33 percent to $111.4 billion
Brett Steenbarger: "In sum, I retain my doubts that a bull market has begun, but the market's late week resilience, expansion of 20-day highs, and rising NYSE TICK line all suggest that we could see further movement to the upside. Global weakness has pressured commodities and aided the U.S. dollar: these dynamics are worth following as we move forward, as they may be catalysts for further share gains."
Rob Hanna: "Even with the strong move to a new 30-day high on Friday new highs were unimpressive. In fact they were beneath new lows."
Pilgrim's Pride Corp. set plans to idle a chicken-processing plant in Clinton, Ark., and a further-processing facility in Bossier City, La., citing its ongoing struggle with high feed costs and an oversupply of chicken. The company said both moves, which will likely be completed within 60 days, will eliminate about 600 jobs.
Azerbaijan has stopped oil exports via the Georgian ports of Batumi and Kulevi because of the escalating military conflict between Georgia and Russia over the breakaway region of South Ossetia, AFP reported over the weekend, citing the head of the Azeri state oil company SOCAR. "Since last night the import and export of oil through the Georgian ports of Kulevi and Batumi have been halted," said Rovnag Abdullayev, the head of the Azeri state oil company SOCAR, in televised comments on Saturday, according to AFP. Abdullayev said that SOCAR was "looking into the possibility of exporting oil through the Baku-Novorossiysk pipeline, but the capacity of this pipeline is quite low," AFP reported.
Wachovia Corp , the fourth-largest U.S. bank, said on Monday it expected to eliminate 11,350 jobs, more than it previously disclosed, as conditions deteriorate in the housing market.
Fluor raised its earnings view to $3.65 to $3.80 a share for 2008, compared with a previous outlook of $3.30 to $3.45 a share.
Crude futures marked another three-month low Monday, with the September contract closing at $114.45 per barrel, down 75 cents on the New York Mercantile Exchange.
Petroleo Brasileiro SA, Brazil's state-controlled oil company, said second-quarter profit jumped 29 percent to a record on increased oil production and higher prices for crude and fuel.
Consolidated net income rose to 8.78 billion reais ($5.40 billion), or 1 real a share, from 6.80 billion reais, or 78 centavos, a year earlier, Petrobras, as the company is known, said today in a statement to Brazil's securities regulator. Net sales climbed 31 percent to 54.6 billion reais.
JA Solar reaffirmed its 2008 revenue forecast in a range of $1.05 billion to $1.17 billion, and said it foresees 2009 revenue coming in between $2.0 billion and $2.2 billion.
Russian President Dmitry Medvedev has ordered an end to Russia's military operations against Georgia, according to a report from Russian news agency Interfax.
J.P. Morgan Chase, in a filing to the Securities and Exchange Commission late on Monday, said it's had to take a $1.5 billion write-off on mortgage-backed securities and loans.
China's consumer price index rose 6.3% in July from a year earlier, the slowest pace of gains in 10 months, according to data released by the National Bureau of Statistics Tuesday.
Japan's wholesale inflation rate surged to its highest level in 27 years in July, as companies raised prices to offset higher fuel and commodity input costs. Wholesale prices climbed 7.1% from a year earlier, accelerating from a 5.7% rise in June, the Bank of Japan said Tuesday.
Sunday, August 10, 2008
Bubbles
8/10/08 News
According to Bloomberg, “Yields on commercial real estate securities relative to benchmark rates rose to the highest since March on concern that retailers won’t be able to repay debt as consumers cut spending. Spreads on AAA rated commercial mortgage-backed bonds widened 10 bps during the week… to 250.5 bps more than 10-year swap rates… Demand for commercial real estate securities is waning as retailers are forced into bankruptcy during the economic slowdown.”
Florida homes, businesses and other real estate lost $153 billion in value between 2007 and 2008, the Miami Herald reported, citing state economists who appraise property for tax purposes.
Doug Noland: "I tend to believe rapidly retreating commodities markets should be viewed in the context of a Bursting Leveraged Speculating Community Bubble...Crude ended the first half at $140. Major commodities indices concluded June at record highs – sporting spectacular y-t-d gains. There’s no doubt that the speculator community had all crowded into the energy/commodities trade, one of a rapidly narrowing menu of speculations offering juicy (and desperately needed) returns. At the same time, the long energy/short financials “pairs trade” was also put on in great excess. The speculator community as well likely crowded further into dollar short positions, for years now an almost surefire winner. The more the crowded industry struggled for performance, the more they were forced to crowd into the same crowded trades. I would argue that the Bubble in the leveraged speculating community played a significant role in fueling energy/commodities prices inflation beyond what was justified by exceptionally bullish fundamentals. I wouldn’t, however, write off energy and commodities as burst Bubbles... The energy trade has unraveled badly. Commodities markets have been in near freefall. The dollar has mustered its most ferocious rally in quite some time. At the same time, agency debt and MBS spreads have widened, while global bond prices have offered little performance help. Corporate debt prices have performed poorly, while “private-label” MBS and various mortgage-related derivatives have traded dismally. Meanwhile, the financial stocks and other heavily shorted equities have rallied significantly. In short, a whole host of popular trades have gone wrong at the same time – a huge problem for the fragile industry...We’re now in the midst of another one of these precarious periods. I believe global markets – equities, debt, currencies, and commodities – are all in some stage of dislocation (perhaps not emerging debt, at least yet). Trading conditions across the spectrum of markets are as chaotic as I’ve ever witnessed, a dislocation chiefly related to the now forced unwinds of speculative positions. Recent extreme global market volatility is part and parcel to the Heightened Monetary Disorder I have been addressing for months now. The Massive Global Pool of Speculative Finance has Run Amuck. The bulls will celebrate the rally, yet markets this unstable are prone to “melt-ups” that lead to breakdowns...Enormous short positions have built up, the vast majority as part of “market neutral,” “quant” and myriad risk hedging strategies. If today’s dislocation develops into a significant unwind of these positions, the market immediately then becomes vulnerable to a disorderly “melt-up” followed almost inevitably by a sharp reversal and disorderly decline. The unwind of bearish speculations and hedges would be a most problematic market development, unleashing a final bout of speculative excess and disorder that would set the stage for a major market crisis...To be sure, the unfolding change of fortunes for the leveraged speculating community is one more key facet of tighter system Credit and faltering Marketplace Liquidity – extremely problematic Financial Conditions for the finance-driven U.S. Bubble Economy. And this makes the current market dislocations in the face of rapidly deteriorating fundamentals such a dangerous development."
Wachovia Corp , the fourth-largest U.S. bank, will stop making mortgage loans through its branch offices in 19 U.S. states, a published report said.
The bank will eliminate 125 jobs in connection with the cutback, but still plans to offer mortgages through branches in 18 other states, Bloomberg News reported on Friday.
"The downward pace still has a way to go," said Edward Meir, senior commodities analyst at MF Global in New York. "People are now coming around to the fact that growth is slowing, both in the U.S. and overseas, so demand for commodities will decline."
Highlighting the spiral, the Jefferies-Reuters CRB index, a global commodities benchmark, plunged 10 percent in July, its biggest monthly drop since 1980, when the U.S. was in a recession.
"There was a commodities bubble and it has burst," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
The Oil Drum: "The world has been discovering less for the last 40 years; for every barrel we discover we consume three; output is in terminal decline in 60 of the 98 oil-producing countries; and hundreds of billions of dollars in investment since the turn of the century have failed to stem declining production at many of the world's biggest oil companies.
As a result, it is widely agreed that oil production in the non-Opec world will "peak" - reach its maximum possible level - within two years, if it has not already done so. This means that the huge profits being made by multi-nationals such as Shell or ExxonMobil may turn out to be their last hurrah. "The days of the international oil companies are coming to a glorious end," said Fatih Birol, chief economist of the International Energy Agency, last month. "Their reserves are declining and they will have difficulty accessing new ones."
Unfortunately, this means that the global oil supply will soon depend on Opec as never before. Many analysts suspect that the Opec countries, which claim to hold three quarters of known reserves, have been exaggerating their size for decades - in other words, they too will soon reach the physical limits of production."
iShares Silver Trust (SLV) has plunged from $20 to $15. A year ago it began trading at $12 and mentioned it as a good way to participate in the potential rise of silver. One might consider taking a position from $14+ on and scale down.
A year ago I pounded the table for weeks to begin buying the United States Natural Gas Fund (UNG) at $35. Back in late June I suggested it was time to lock in the profits at $60+.
The recent decline has been vicious. UNG is back down to $38. I think this is a good spot to initiate a position and to scale down with the orders.
According to Bloomberg, “Yields on commercial real estate securities relative to benchmark rates rose to the highest since March on concern that retailers won’t be able to repay debt as consumers cut spending. Spreads on AAA rated commercial mortgage-backed bonds widened 10 bps during the week… to 250.5 bps more than 10-year swap rates… Demand for commercial real estate securities is waning as retailers are forced into bankruptcy during the economic slowdown.”
Florida homes, businesses and other real estate lost $153 billion in value between 2007 and 2008, the Miami Herald reported, citing state economists who appraise property for tax purposes.
Doug Noland: "I tend to believe rapidly retreating commodities markets should be viewed in the context of a Bursting Leveraged Speculating Community Bubble...Crude ended the first half at $140. Major commodities indices concluded June at record highs – sporting spectacular y-t-d gains. There’s no doubt that the speculator community had all crowded into the energy/commodities trade, one of a rapidly narrowing menu of speculations offering juicy (and desperately needed) returns. At the same time, the long energy/short financials “pairs trade” was also put on in great excess. The speculator community as well likely crowded further into dollar short positions, for years now an almost surefire winner. The more the crowded industry struggled for performance, the more they were forced to crowd into the same crowded trades. I would argue that the Bubble in the leveraged speculating community played a significant role in fueling energy/commodities prices inflation beyond what was justified by exceptionally bullish fundamentals. I wouldn’t, however, write off energy and commodities as burst Bubbles... The energy trade has unraveled badly. Commodities markets have been in near freefall. The dollar has mustered its most ferocious rally in quite some time. At the same time, agency debt and MBS spreads have widened, while global bond prices have offered little performance help. Corporate debt prices have performed poorly, while “private-label” MBS and various mortgage-related derivatives have traded dismally. Meanwhile, the financial stocks and other heavily shorted equities have rallied significantly. In short, a whole host of popular trades have gone wrong at the same time – a huge problem for the fragile industry...We’re now in the midst of another one of these precarious periods. I believe global markets – equities, debt, currencies, and commodities – are all in some stage of dislocation (perhaps not emerging debt, at least yet). Trading conditions across the spectrum of markets are as chaotic as I’ve ever witnessed, a dislocation chiefly related to the now forced unwinds of speculative positions. Recent extreme global market volatility is part and parcel to the Heightened Monetary Disorder I have been addressing for months now. The Massive Global Pool of Speculative Finance has Run Amuck. The bulls will celebrate the rally, yet markets this unstable are prone to “melt-ups” that lead to breakdowns...Enormous short positions have built up, the vast majority as part of “market neutral,” “quant” and myriad risk hedging strategies. If today’s dislocation develops into a significant unwind of these positions, the market immediately then becomes vulnerable to a disorderly “melt-up” followed almost inevitably by a sharp reversal and disorderly decline. The unwind of bearish speculations and hedges would be a most problematic market development, unleashing a final bout of speculative excess and disorder that would set the stage for a major market crisis...To be sure, the unfolding change of fortunes for the leveraged speculating community is one more key facet of tighter system Credit and faltering Marketplace Liquidity – extremely problematic Financial Conditions for the finance-driven U.S. Bubble Economy. And this makes the current market dislocations in the face of rapidly deteriorating fundamentals such a dangerous development."
Wachovia Corp , the fourth-largest U.S. bank, will stop making mortgage loans through its branch offices in 19 U.S. states, a published report said.
The bank will eliminate 125 jobs in connection with the cutback, but still plans to offer mortgages through branches in 18 other states, Bloomberg News reported on Friday.
"The downward pace still has a way to go," said Edward Meir, senior commodities analyst at MF Global in New York. "People are now coming around to the fact that growth is slowing, both in the U.S. and overseas, so demand for commodities will decline."
Highlighting the spiral, the Jefferies-Reuters CRB index, a global commodities benchmark, plunged 10 percent in July, its biggest monthly drop since 1980, when the U.S. was in a recession.
"There was a commodities bubble and it has burst," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
The Oil Drum: "The world has been discovering less for the last 40 years; for every barrel we discover we consume three; output is in terminal decline in 60 of the 98 oil-producing countries; and hundreds of billions of dollars in investment since the turn of the century have failed to stem declining production at many of the world's biggest oil companies.
As a result, it is widely agreed that oil production in the non-Opec world will "peak" - reach its maximum possible level - within two years, if it has not already done so. This means that the huge profits being made by multi-nationals such as Shell or ExxonMobil may turn out to be their last hurrah. "The days of the international oil companies are coming to a glorious end," said Fatih Birol, chief economist of the International Energy Agency, last month. "Their reserves are declining and they will have difficulty accessing new ones."
Unfortunately, this means that the global oil supply will soon depend on Opec as never before. Many analysts suspect that the Opec countries, which claim to hold three quarters of known reserves, have been exaggerating their size for decades - in other words, they too will soon reach the physical limits of production."
iShares Silver Trust (SLV) has plunged from $20 to $15. A year ago it began trading at $12 and mentioned it as a good way to participate in the potential rise of silver. One might consider taking a position from $14+ on and scale down.
A year ago I pounded the table for weeks to begin buying the United States Natural Gas Fund (UNG) at $35. Back in late June I suggested it was time to lock in the profits at $60+.
The recent decline has been vicious. UNG is back down to $38. I think this is a good spot to initiate a position and to scale down with the orders.
Saturday, August 09, 2008
The Huge Rally Week
8/9/08 The Huge Rally Week
Mick P: "Doomed? Good grief, get a grip, look about you, doomed would be good compared to what is coming!
Now, most readers know I'm a bearish type of blogger (track record ain't bad) but I have recently seen developments that make me sneer at my own reflection in the mirror for being a bit "bully". My dark side is erupting, my alter-ego awakens. No longer do I consider myself bearish, oh no, now I consider myself a wimp, a puppy in the face of a road crash, a mere sop.
Death and destruction stalk the land and even I, an ultra-bear, am wearing trousers that are brown so no one sees my fear.
Yes fear, true fear that an almighty encompassing of the acceptance of the US Govt willingness to bail out Fannie, Freddie, GM, Ford, et al, is an agreement to participate in the endgame that approaches at such a pace that even drug taking Chinese athletes will falter in the wake of US Govt incompetence.
Do I sound angry, am I ranting? Of course I am! I live in times unheralded by history. Even in the great depression (my favourite album) banks failed, Govt policy failed, liquidity was allowed to retract, growth was allowed to reverse and the mean was achieved to allow the US Govt to reinflate... Not this time my friends, this time you foot the bill, you cover the liabilities, you bear the costs. God forbid that we take it out of the corrupt banking machine that allowed this mess (that includes the FED) to ferment as they chased profits by securitising lending made to those that they KNEW couldn't repay. Lets forget about all those pension funds that bought the toxic wraps, those Municipals and States that invested in this shite expecting a return...Democracy is a personal right and obligation. Failure is your willingness to give up those rights and accept serfdom and slavery."
FANNIE MAE SLASHES DIVIDEND AS QUARTERLY LOSS WIDENS TO $2.3 BILLION.
MBIA said it hasn't altered its projection for its ultimate loss on mortgage-related exposure and as a result loss reserves had an insignificant impact on net income. The company also said its board of directors has authorized the resumption of its share repurchase program, which was suspended in the third quarter of 2007.
Google said in a Securities and Exchange Commission filing late Thursday that its 5% stake in the AOL unit of Time Warner "may be impaired." For now, Google believes the impairment is temporary and won't write it down. Google also holds $241.8 million in auction-rate securities; it hasn't yet recorded a charge on them but has classified the holdings as non-current assets.
Moody's may downgrade American Express.
Swiss bank UBS will buy back $19.4 billion worth of auction-rate securities to settle charges over misleading investors in the United States, the Boston Globe reported on its website on Friday.
Boeing Co and Airbus are facing a slowdown on their older model assembly lines because of a shortage of basic components such as seats, toilets and galleys, the Wall Street Journal reported Friday.
The production disruption was raising costs and delaying millions of dollars in payments from customers, the paper said.
The dollar surged higher on Friday, hitting the highest levels since February against the euro and a seventeen-month peak against sterling amid a growing conviction that the effects of the credit crisis were spreading across the globe.
From Friday's Barron's.com: "
[icon]
Marathon Oil Shares Ready to Sprint Ahead
by Naureen S. Malik
This often overlooked integrated energy stock is worth far more than its market value."
Sharp fighting in the disputed Caucasian enclave of South Ossetia threatened to draw Russia and the American-backed republic of Georgia into direct military conflict.
For the year, Hormel now sees adjusted earnings between $2.22 and $2.28 a share, below earlier guidance of $2.30 to $2.40 a share.
George Friedman: "If the Israelis were intending to strike Iran's nuclear facilities, they would want to be absolutely certain that as much of the equipment in the facilities was destroyed as possible. But the hard truth is that the heart of Iran's capability, such as it is, does not reside in its facilities but in its scientists, engineers and technicians who collectively constitute the knowledge base of Iran's nuclear program. Facilities can be replaced. It would take at least a generation to replace what we already regard as an insufficient cadre of expertise.
Therefore, if Israel wanted not simply to take out current facilities but to take Iran out of the nuclear game for a very long time, killing these people would have to be a major strategic goal. The Israelis would want to strike in the middle of the workday, without any warning whatever. If they strike Iran, they will be condemned widely for their actions. The additional criticism that would come from killing the workforce would not be a large price to pay for really destroying the Iranian capabilities. Unlike the Iraqi reactor strike in 1981, when the Israelis struck at night to minimize casualties, this strike against a more sophisticated program could not afford to be squeamish.
There are obviously parts of Iran's nuclear capability that cannot be moved. There is other equipment that can be, with enough warning and with more or less difficulty, moved to unknown locations. But nothing would be easier to disperse than the heart of the program — the people. They could be moved out of harm's way with only an hour's notice. Therefore, providing warning that an attack was coming makes very little sense. It runs counter to basic principles of warfare. The Israelis struck the Osirak reactor in Iraq in 1981 with not the slightest hint of the attack's imminence. That was one of the reasons it was successful. Telegraphing your punch is not very smart in these circumstances.
The Israelis have done more than raise the possibility that an attack might be launched in 2008. They have publicized how they plan to do it. Based on the number and type of aircraft involved in the exercise — more than 100 F-15 and F-16 fighter jets — one Israeli attack scenario could involve a third of Israel's inventory of fourth-generation strike aircraft, including most of its latest-model F-15I Ra'am and F-16I Sufa fighter bombers. If Greece were the target in this exercise, then the equivalent distance would mean that the Israelis are planning to cross Jordanian airspace, transit through Iraq and strike Iran from that direction. A strike through Turkey — and there is no indication that the Turks would permit it — would take much longer.
The most complex part of the operation's logistics would be the refueling of aircraft. They would have to be orbiting in Iraqi airspace. One of the points discussed about the Mediterranean exercise was the role of Israeli helicopters in rescuing downed flyers. Rescue helicopters would be involved, but we doubt very much they would be entering Iranian airspace from Israel. They are a lot slower than the jets, and they would have to be moving hours ahead of time. The Iranians might not spot them but the Russians would, and there is no guarantee that they wouldn't pass it on to the Iranians. That means that the Israeli helicopters would have to move quietly into Iraq and be based there...The point here is that, given the exercise the Israelis carried out and the distances involved, there is no way Israel could do this without the direct cooperation of the United States. From a political standpoint in the region, it is actually easier for the United States to take out Iran's facilities than for it to help the Israelis do so. There are many Sunni states that might formally protest but be quite pleased to see the United States do the job. But if the Israelis were to do it, Sunni states would have to be much more serious in their protestations. In having the United States play the role of handmaiden in the Israeli operation, it would appear that the basic charge against the United States — that it is the handmaiden of the Israelis — is quite true. If the Americans are going to be involved in a strike against Iran's nuclear program, they are far better off doing it themselves than playing a supporting role to Israel... In the end, we tend toward the view that this is psychological warfare for the simple reason that you don't launch a surprise attack of the kind necessary to take out Iran's nuclear program with a media blitz beforehand. It just doesn't work that way."
According to the Wwashington Post, thousands of unsuspecting renters who have been paying their rent on time are getting enmeshed in the foreclosure crisis that is plaguing the housing market.
In many cases, their landlords, often individual real estate investors, bought properties during the boom days, rented them out, then failed to keep up with their mortgages. The homes went into foreclosure, often unbeknownst to the tenants, who face disrupted lives and even homelessness.
Buffett has said insurance profits will slip as rates fall amid competition for market share and the pace of natural disasters returns to normal after two uneventful U.S. hurricane seasons.
On the U.S. EconoMonitor, Brad DeLong analyzes the recent unemployment report. According to him, the U-6 measure of unemployment--reported unemployed plus part-time for economic reasons plus marginally-attached workers all divided by the labor force plus marginally-attached workers is now telling us that we are in a recession. Read his: “Another Bad Employment Report: Brad DeLong Calls Recession”
Citigroup will buy back more than $7 billion in auction-rate securities and pay $100 million in fines as part of settlements with federal and state regulators.
According to Bloomberg, U.S. consumers borrowed more than twice as much as economists forecast in June as a decline in home equity forced Americans to fund purchases with credit cards and other loans.
Consumer credit rose by $14.3 billion, the most since November, to $2.59 trillion, the Federal Reserve said today in Washington. In May, credit rose by $8.1 billion, previously reported as an increase of $7.8 billion. The Fed's report doesn't cover borrowing secured by real estate. Consumers are using credit cards and loans to cover expenses as falling home values cause banks to restrict access to home- equity lines.
McDonald's Corp.'s same-store sales increased 8% in July. Comparable sales in the U.S. rose 6.7%, driven by advertising of the classic Big Mac sandwich and focus on breakfast, chicken and beverages. European sales climbed 7.6%, led by gains in France, U.K. and Russia. Sales in Asia Pacific, Middle East and Africa rose 7.2%, spurred by demand in Australia and China, McDonald's said.
According to rigzone, Petrobras announced that its new discovery well in the ultradeep Santos Basin waters proved the existence of yet another light oil field, with specific gravity around 30 degrees API in the pre-salt reservoirs.
Productivity increased 2.2 percent in the nonfarm business sector during the
second quarter of 2008 as unit labor costs rose 1.3 percent (seasonally
adjusted annual rates). In manufacturing, productivity fell 1.4 percent in
the second quarter of 2008; unit labor costs jumped 6.1 percent.
This year Minn. Governor Tim Pawlenty vetoed 34 bills passed
by a Democratic-dominated Legislature, more than any other
Minnesota governor had vetoed in a year since at least
World War II, leading his most fervent critics to
describe him as more of a goalie fending off pucks than a leader
rushing the net.
A fire on the Turkish section of the Baku-Tblisi-Ceyhan oil pipeline was under control, but still
ongoing Friday, more than two days after an apparent blast shut it down, Dow Jones
Newswires
reported
Friday, citing a spokesman for Botas International Ltd. It was still unclear if the incident, which shut
down 850,000 barrels of oil a day, had been caused by sabotage or a technical fault, according to the report.
Boeing is short on toilets for the planes.
Economist Martin Feldstein: "Recent government statistics show
that only between 10% and 20% of the rebate dollars were spent.
The rebates added nearly $80 billion to the permanent
national debt but less than $20 billion to consumer spending."
The dollar index stood at 75.62 from 73.357.
Diversified global miner Rio Tinto PLC Friday said it was considering
an initial public offering for its U.S. coal business instead of an
outright sale to another company.
Wal-Mart, the world’s largest retailer, says the new small Marketside grocery
stores it is to launch this autumn could expand to a chain of more than
1,000 stores, delivering $10bn-plus in annual sales. The retailer
plans to open 10 of the 15,000 sq ft Marketside stores initially,
including four in the Phoenix area, where they will be competing
directly with Tesco’s recently launched US Fresh & Easy store concept.
Gold futures closed with a loss of more than $13 an ounce Friday in New York, and silver futures fell almost 6% as strength in the U.S. dollar helped drive investors away from the commodities markets. December gold closed at $864.80 an ounce, down $13.10 for the session. It lost 5.7% for the week. September silver fell 92.7 cents for the session to close at $15.33, down 12.5% for the week.
Societe Generale SA closed a New York unit that traded shares of companies involved in takeovers, the latest firm to cut back or drop the strategy as mergers decline, said two people with knowledge of the decision.
Berkshire Hathaway late Friday reported its second-quarter net income fell to $2.88 billion, or $1,859 a class A share, from $3.12 billion, or $2,018 a class A share, a year earlier. Operating income, which excludes net realized investment gains and losses, was $2.27 billion, or $1,465 a class A share, down from $2.51 billion, or $1,625 a class A share, a year ago, the insurance-focused conglomerate run by Warren Buffett said.
The Dow Jones Industrial Average added 302.89 points to end at 11,734.32, a weekly gain of 3.6%. The S&P 500 rose 30.26 points to 1,296.32, up 2.8% from last Friday's close. The Nasdaq Composite advanced 58.37 points to 2,414.10, up 4.5% for the week.
Crude futures closed Friday with a loss of 7.9% for the week as strength in the U.S. dollar helped drive traders away from the commodities markets. September crude closed at a three-month low of $115.20 per barrel on the New York Mercantile Exchange, down $4.82, or 4%, for the session. September natural gas wasn't quite settled, trading 4% lower for the session at $8.23 per million British thermal units. It's down about 12% for the week.
Gold futures closed with a loss of more than $13 an ounce Friday in New York, and silver futures fell almost 6% as strength in the U.S. dollar helped drive investors away from the commodities markets. December gold closed at $864.80 an ounce, down $13.10 for the session. It lost 5.7% for the week. September silver fell 92.7 cents for the session to close at $15.33, down 12.5% for the week.
Mick P: "Doomed? Good grief, get a grip, look about you, doomed would be good compared to what is coming!
Now, most readers know I'm a bearish type of blogger (track record ain't bad) but I have recently seen developments that make me sneer at my own reflection in the mirror for being a bit "bully". My dark side is erupting, my alter-ego awakens. No longer do I consider myself bearish, oh no, now I consider myself a wimp, a puppy in the face of a road crash, a mere sop.
Death and destruction stalk the land and even I, an ultra-bear, am wearing trousers that are brown so no one sees my fear.
Yes fear, true fear that an almighty encompassing of the acceptance of the US Govt willingness to bail out Fannie, Freddie, GM, Ford, et al, is an agreement to participate in the endgame that approaches at such a pace that even drug taking Chinese athletes will falter in the wake of US Govt incompetence.
Do I sound angry, am I ranting? Of course I am! I live in times unheralded by history. Even in the great depression (my favourite album) banks failed, Govt policy failed, liquidity was allowed to retract, growth was allowed to reverse and the mean was achieved to allow the US Govt to reinflate... Not this time my friends, this time you foot the bill, you cover the liabilities, you bear the costs. God forbid that we take it out of the corrupt banking machine that allowed this mess (that includes the FED) to ferment as they chased profits by securitising lending made to those that they KNEW couldn't repay. Lets forget about all those pension funds that bought the toxic wraps, those Municipals and States that invested in this shite expecting a return...Democracy is a personal right and obligation. Failure is your willingness to give up those rights and accept serfdom and slavery."
FANNIE MAE SLASHES DIVIDEND AS QUARTERLY LOSS WIDENS TO $2.3 BILLION.
MBIA said it hasn't altered its projection for its ultimate loss on mortgage-related exposure and as a result loss reserves had an insignificant impact on net income. The company also said its board of directors has authorized the resumption of its share repurchase program, which was suspended in the third quarter of 2007.
Google said in a Securities and Exchange Commission filing late Thursday that its 5% stake in the AOL unit of Time Warner "may be impaired." For now, Google believes the impairment is temporary and won't write it down. Google also holds $241.8 million in auction-rate securities; it hasn't yet recorded a charge on them but has classified the holdings as non-current assets.
Moody's may downgrade American Express.
Swiss bank UBS will buy back $19.4 billion worth of auction-rate securities to settle charges over misleading investors in the United States, the Boston Globe reported on its website on Friday.
Boeing Co and Airbus are facing a slowdown on their older model assembly lines because of a shortage of basic components such as seats, toilets and galleys, the Wall Street Journal reported Friday.
The production disruption was raising costs and delaying millions of dollars in payments from customers, the paper said.
The dollar surged higher on Friday, hitting the highest levels since February against the euro and a seventeen-month peak against sterling amid a growing conviction that the effects of the credit crisis were spreading across the globe.
From Friday's Barron's.com: "
[icon]
Marathon Oil Shares Ready to Sprint Ahead
by Naureen S. Malik
This often overlooked integrated energy stock is worth far more than its market value."
Sharp fighting in the disputed Caucasian enclave of South Ossetia threatened to draw Russia and the American-backed republic of Georgia into direct military conflict.
For the year, Hormel now sees adjusted earnings between $2.22 and $2.28 a share, below earlier guidance of $2.30 to $2.40 a share.
George Friedman: "If the Israelis were intending to strike Iran's nuclear facilities, they would want to be absolutely certain that as much of the equipment in the facilities was destroyed as possible. But the hard truth is that the heart of Iran's capability, such as it is, does not reside in its facilities but in its scientists, engineers and technicians who collectively constitute the knowledge base of Iran's nuclear program. Facilities can be replaced. It would take at least a generation to replace what we already regard as an insufficient cadre of expertise.
Therefore, if Israel wanted not simply to take out current facilities but to take Iran out of the nuclear game for a very long time, killing these people would have to be a major strategic goal. The Israelis would want to strike in the middle of the workday, without any warning whatever. If they strike Iran, they will be condemned widely for their actions. The additional criticism that would come from killing the workforce would not be a large price to pay for really destroying the Iranian capabilities. Unlike the Iraqi reactor strike in 1981, when the Israelis struck at night to minimize casualties, this strike against a more sophisticated program could not afford to be squeamish.
There are obviously parts of Iran's nuclear capability that cannot be moved. There is other equipment that can be, with enough warning and with more or less difficulty, moved to unknown locations. But nothing would be easier to disperse than the heart of the program — the people. They could be moved out of harm's way with only an hour's notice. Therefore, providing warning that an attack was coming makes very little sense. It runs counter to basic principles of warfare. The Israelis struck the Osirak reactor in Iraq in 1981 with not the slightest hint of the attack's imminence. That was one of the reasons it was successful. Telegraphing your punch is not very smart in these circumstances.
The Israelis have done more than raise the possibility that an attack might be launched in 2008. They have publicized how they plan to do it. Based on the number and type of aircraft involved in the exercise — more than 100 F-15 and F-16 fighter jets — one Israeli attack scenario could involve a third of Israel's inventory of fourth-generation strike aircraft, including most of its latest-model F-15I Ra'am and F-16I Sufa fighter bombers. If Greece were the target in this exercise, then the equivalent distance would mean that the Israelis are planning to cross Jordanian airspace, transit through Iraq and strike Iran from that direction. A strike through Turkey — and there is no indication that the Turks would permit it — would take much longer.
The most complex part of the operation's logistics would be the refueling of aircraft. They would have to be orbiting in Iraqi airspace. One of the points discussed about the Mediterranean exercise was the role of Israeli helicopters in rescuing downed flyers. Rescue helicopters would be involved, but we doubt very much they would be entering Iranian airspace from Israel. They are a lot slower than the jets, and they would have to be moving hours ahead of time. The Iranians might not spot them but the Russians would, and there is no guarantee that they wouldn't pass it on to the Iranians. That means that the Israeli helicopters would have to move quietly into Iraq and be based there...The point here is that, given the exercise the Israelis carried out and the distances involved, there is no way Israel could do this without the direct cooperation of the United States. From a political standpoint in the region, it is actually easier for the United States to take out Iran's facilities than for it to help the Israelis do so. There are many Sunni states that might formally protest but be quite pleased to see the United States do the job. But if the Israelis were to do it, Sunni states would have to be much more serious in their protestations. In having the United States play the role of handmaiden in the Israeli operation, it would appear that the basic charge against the United States — that it is the handmaiden of the Israelis — is quite true. If the Americans are going to be involved in a strike against Iran's nuclear program, they are far better off doing it themselves than playing a supporting role to Israel... In the end, we tend toward the view that this is psychological warfare for the simple reason that you don't launch a surprise attack of the kind necessary to take out Iran's nuclear program with a media blitz beforehand. It just doesn't work that way."
According to the Wwashington Post, thousands of unsuspecting renters who have been paying their rent on time are getting enmeshed in the foreclosure crisis that is plaguing the housing market.
In many cases, their landlords, often individual real estate investors, bought properties during the boom days, rented them out, then failed to keep up with their mortgages. The homes went into foreclosure, often unbeknownst to the tenants, who face disrupted lives and even homelessness.
Buffett has said insurance profits will slip as rates fall amid competition for market share and the pace of natural disasters returns to normal after two uneventful U.S. hurricane seasons.
On the U.S. EconoMonitor, Brad DeLong analyzes the recent unemployment report. According to him, the U-6 measure of unemployment--reported unemployed plus part-time for economic reasons plus marginally-attached workers all divided by the labor force plus marginally-attached workers is now telling us that we are in a recession. Read his: “Another Bad Employment Report: Brad DeLong Calls Recession”
Citigroup will buy back more than $7 billion in auction-rate securities and pay $100 million in fines as part of settlements with federal and state regulators.
According to Bloomberg, U.S. consumers borrowed more than twice as much as economists forecast in June as a decline in home equity forced Americans to fund purchases with credit cards and other loans.
Consumer credit rose by $14.3 billion, the most since November, to $2.59 trillion, the Federal Reserve said today in Washington. In May, credit rose by $8.1 billion, previously reported as an increase of $7.8 billion. The Fed's report doesn't cover borrowing secured by real estate. Consumers are using credit cards and loans to cover expenses as falling home values cause banks to restrict access to home- equity lines.
McDonald's Corp.'s same-store sales increased 8% in July. Comparable sales in the U.S. rose 6.7%, driven by advertising of the classic Big Mac sandwich and focus on breakfast, chicken and beverages. European sales climbed 7.6%, led by gains in France, U.K. and Russia. Sales in Asia Pacific, Middle East and Africa rose 7.2%, spurred by demand in Australia and China, McDonald's said.
According to rigzone, Petrobras announced that its new discovery well in the ultradeep Santos Basin waters proved the existence of yet another light oil field, with specific gravity around 30 degrees API in the pre-salt reservoirs.
Productivity increased 2.2 percent in the nonfarm business sector during the
second quarter of 2008 as unit labor costs rose 1.3 percent (seasonally
adjusted annual rates). In manufacturing, productivity fell 1.4 percent in
the second quarter of 2008; unit labor costs jumped 6.1 percent.
This year Minn. Governor Tim Pawlenty vetoed 34 bills passed
by a Democratic-dominated Legislature, more than any other
Minnesota governor had vetoed in a year since at least
World War II, leading his most fervent critics to
describe him as more of a goalie fending off pucks than a leader
rushing the net.
A fire on the Turkish section of the Baku-Tblisi-Ceyhan oil pipeline was under control, but still
ongoing Friday, more than two days after an apparent blast shut it down, Dow Jones
Newswires
reported
Friday, citing a spokesman for Botas International Ltd. It was still unclear if the incident, which shut
down 850,000 barrels of oil a day, had been caused by sabotage or a technical fault, according to the report.
Boeing is short on toilets for the planes.
Economist Martin Feldstein: "Recent government statistics show
that only between 10% and 20% of the rebate dollars were spent.
The rebates added nearly $80 billion to the permanent
national debt but less than $20 billion to consumer spending."
The dollar index stood at 75.62 from 73.357.
Diversified global miner Rio Tinto PLC Friday said it was considering
an initial public offering for its U.S. coal business instead of an
outright sale to another company.
Wal-Mart, the world’s largest retailer, says the new small Marketside grocery
stores it is to launch this autumn could expand to a chain of more than
1,000 stores, delivering $10bn-plus in annual sales. The retailer
plans to open 10 of the 15,000 sq ft Marketside stores initially,
including four in the Phoenix area, where they will be competing
directly with Tesco’s recently launched US Fresh & Easy store concept.
Gold futures closed with a loss of more than $13 an ounce Friday in New York, and silver futures fell almost 6% as strength in the U.S. dollar helped drive investors away from the commodities markets. December gold closed at $864.80 an ounce, down $13.10 for the session. It lost 5.7% for the week. September silver fell 92.7 cents for the session to close at $15.33, down 12.5% for the week.
Societe Generale SA closed a New York unit that traded shares of companies involved in takeovers, the latest firm to cut back or drop the strategy as mergers decline, said two people with knowledge of the decision.
Berkshire Hathaway late Friday reported its second-quarter net income fell to $2.88 billion, or $1,859 a class A share, from $3.12 billion, or $2,018 a class A share, a year earlier. Operating income, which excludes net realized investment gains and losses, was $2.27 billion, or $1,465 a class A share, down from $2.51 billion, or $1,625 a class A share, a year ago, the insurance-focused conglomerate run by Warren Buffett said.
The Dow Jones Industrial Average added 302.89 points to end at 11,734.32, a weekly gain of 3.6%. The S&P 500 rose 30.26 points to 1,296.32, up 2.8% from last Friday's close. The Nasdaq Composite advanced 58.37 points to 2,414.10, up 4.5% for the week.
Crude futures closed Friday with a loss of 7.9% for the week as strength in the U.S. dollar helped drive traders away from the commodities markets. September crude closed at a three-month low of $115.20 per barrel on the New York Mercantile Exchange, down $4.82, or 4%, for the session. September natural gas wasn't quite settled, trading 4% lower for the session at $8.23 per million British thermal units. It's down about 12% for the week.
Gold futures closed with a loss of more than $13 an ounce Friday in New York, and silver futures fell almost 6% as strength in the U.S. dollar helped drive investors away from the commodities markets. December gold closed at $864.80 an ounce, down $13.10 for the session. It lost 5.7% for the week. September silver fell 92.7 cents for the session to close at $15.33, down 12.5% for the week.
Friday, August 08, 2008
Global
8/8/08 Global
Toyota Motor Corp posted a 28 percent drop in quarterly net profit, dented by a strong yen and slumping U.S. sales, and kept its forecasts unchanged for what is set to be its most challenging year in recent memory.
Israel is building up its strike capabilities amid growing anxiety over Iran's nuclear ambitions and appears confident that a military attack would cripple Tehran's atomic program, even if it can't destroy it.
Such talk could be more threat than reality. However, Iran's refusal to accept Western conditions is worrying Israel as is the perception that Washington now prefers diplomacy over confrontation with Tehran.
The Jewish state has purchased 90 F-16I fighter planes that can carry enough fuel to reach Iran, and will receive 11 more by the end of next year. It has bought two new Dolphin submarines from Germany reportedly capable of firing nuclear-armed warheads — in addition to the three it already has.
Ayn Rand: "A government is the most dangerous threat to man's rights: it holds a legal monopoly on the use of physical force against legally disarmed victims. "
China announced changes to its foreign-exchange rules to address surging growth in its hard currency reserves, saying domestic companies can now keep their foreign-currency income overseas and pledging tougher penalties for illicit capital inflows. The new rules were announced late Wednesday and take effect immediately.
In early trading, oil prices rebounded on Thursday, regaining the $120 level on supply concerns, while gold firmed and base metals rose.
BP's announced Wednesday that it will invest $90 million in U.S. biofuels company Verenium Corp.
Turkey said a pipeline carrying crude to the country's Mediterranean coast from Azerbaijan may remain shut for two weeks following an explosion on Tuesday.
It may be as long as two weeks before the pipeline reopens, Ali Gungor, the governor of Erzincan province where the blast occurred, said in a phone interview today, citing information from a repair team that's studying the extent of the damage. The explosion prompted BP to cancel export obligations from the 1-million-barrel-a-day pipeline.
According to Bloomberg, a year after losses on U.S. subprime mortgages caused a seizure in credit markets worldwide, European companies are starting to default.
As many as 6 percent to 7 percent of corporate borrowers may fail to pay debts on time in the next year, a 10-fold increase from July, according to Dresdner Kleinwort, a unit of Germany's third-biggest bank. That would be the highest since July 2003, according to data compiled by Moody's Investors Service, straining an already faltering economy.
``Companies that would have refinanced a year ago find now that they can't,'' said Andy Stoneman, managing partner at MCR Corporate Restructuring in London, the administrator for General Trading Co., the store where Prince Charles and Princess Diana had their wedding list.
Target Corp. said Thursday that its July sales at stores open at least one year fell 1.2%.
First-time claims for state unemployment benefits remained unusually high in the latest week as more workers qualified for regular benefits under an unrelated extended federal benefits program, the Labor Department reported Thursday. Claims for the week ending Aug. 2 rose to 455,000, a gain of 7,000 from the 448,000 claims reported a week prior. The four-week average of new claims rose by 26,750 to 419,500, the highest since July 2003. Continuing unemployment claims rose by 31,000 to 3.3 million.
The average conforming 30-year fixed mortgage rate rose to 6.74% from 6.70% a week ago, while the average 15-year fixed mortgage rate increased to 6.27% from 6.22% a week earlier.
Nordstrom, Inc. reported preliminary sales of $840 million for the four-week period ended August 2, 2008, a decrease of 6.7 percent compared to sales of $901 million for the four-week period ended August 4, 2007. Same-store sales decreased 6.1 percent.
Preliminary second quarter sales of $2.29 billion decreased 4.3 percent compared to sales of $2.39 billion during the same period in 2007. Second quarter same-store sales decreased 6.0 percent.
Preliminary year-to-date sales of $4.17 billion decreased 4.1 percent compared to sales of $4.34 billion for the same period in 2007. Year-to-date same-store sales decreased 6.2 percent.
J. C. Penney Company, Inc.'s comparable store sales decreased 6.5 percent for the four-week period ended Aug. 2, 2008, compared with the Company’s guidance for sales to decrease mid-single digits. In last year’s July period, comparable store sales increased 12.0 percent, largely driven by a calendar shift that moved sales for an important Back-To-School selling week from August into the July reporting period. Total Company sales in the 2008 July period decreased 4.9 percent.
WCI Communities Inc, the luxury home builder led by Carl Icahn that recently filed Chapter 11 bankruptcy, said on Wednesday the bankruptcy court approved its use of $50 million in cash on hand. WCI said its access to funds will provide sufficient liquidity to run the business until it can finalize a deal for a new debtor-in-possession credit facility, which the company expects the court to approve on Aug. 27.
Japan painted a darker picture of its economic health Thursday, warning of deteriorating exports, output and corporate profits -- signals that may point toward a contraction of the world's second largest economy. "The economy is recently weakening," the Cabinet Office said in its monthly economic report for August.
Although it did not include the word "recession," the government notably left out any reference to an economic "recovery" for the first time in more than six years.
Sunoco's net income in the second quarter fell to $82 million, or 70 cents a share, from $509 million, or $4.20 a share, from last year.
Excluding one-time items, the company said on Wednesday it earned 52 cents a share. Analysts, on average, had expected 34 cents a share, according to Reuters Estimates.
Still, the company warned its refining margins for gasoline continue to be weak in the third quarter, despite recent declines in crude oil prices.
The Philadelphia-based company said it would reduce output at its refineries given the weaker demand for products. It also said it was looking to focus on buying cheaper types of light, sweet crude.
Nouriel Roubini: "It is now clear that all G7 economies are headed towards a recession; the US is in a recession; the UK is headed towards one with the bust of their housing; Japan - as recognized today by its government is entering a recession; Italy's economy is comatose and borderline in recession; Canada had negative growth in Q1 and its economy is tied to the US; while Germany and France (as well as Ireland and Spain and Portugal especially but also the rest of the Eurozone are headed towards a recession.
So all of the G7 economies are now in a recession or headed in the short run towards a recessionary hard landing. Add to these G7 the recession in the rest of the Eurozone (starting with Spain Ireland and Portugal but by now all of the Eurozone as industrial production, sales and business confidence are plunging in all of the Eurozone). Add also the recession in Estonia, Latvia, the risk of hard landing in South East Europe (Bulgaria Romania Hungary and Turkey) and the recession in New Zealand
These generalized recession in the advanced economies will soon lead to a sharp growth slowdown in the BRICs (Brazil Russia India and China) that is already evident in the data and a significant growth slowdown in the rest of emerging market economies.
A sharply slower global growth starting with the G7 recession, falling commodity prices, an increase in global investors' risk aversion, falling equity markets in emerging markets (EM), the weakness of the US dollar and the rise of EM currencies both in nominal and real terms, a tightening of monetary policies in emerging markets to control inflation, the effect of the global liquidity and credit crunch, the risk of a sudden stop and reversal of capital inflows in those EMs with large current account deficits) (the 20 countries in Europe from the Baltics to Turkey as well as India, South Africa and other capital importing EMs) are the factors that will lead to a sharp growth slowdown in the EMs as well as downward pressures on their equity and other financial markets."
Ben Levisohn: "How much is mortgage-finance giant Freddie Mac (FRE) worth? Judging by the stock market, $4.2 billion, its market capitalization at the close of trading on Aug. 6. But the company's update on its second-quarter earnings and financial condition, released Aug. 6, seems to tell a grimmer story.
Look past the devastating $821 million loss it reported for the quarter—nearly three times what Wall Street analysts had forecast. Ignore the $1 billion writedown the government-sponsored enterprise took on subprime and other risky mortgages, only the latest in a painful series. Disregard the rising rate of foreclosures, which grew 20% in the June quarter from the preceding quarter. Drill down to its fair value—a measure of the total worth of the assets on its balance sheet, minus its total liabilities. What do you see?
It looks an awful lot like a gaping hole. Freddie's fair value as of June 30 was a negative $5.6 billion. Based on this particular measure of its financial condition, if it had to sell its assets today, Freddie Mac would be worth less than nothing."
Hedge funds tracked by Hennessee Group LLC fell 1.95% on average in July, partly because a popular trade of betting against financial-services stocks and investing in energy-related securities backfired. "Hedge funds underperformed in July due to sharp reversals in the equity markets during the second half of the month," said E. Lee Hennessee, Managing Principal of Hennessee Group.
An index of sales contracts on previously owned U.S. homes rose 5.3% in June from the prior month, the National Association of Realtors reported Thursday. The index, which is considered a leading indicator of existing home sales, was down 12.3% from the June 2007 level. Pending home sales in June rose in all regions, with a gain of 9.3% in the South, 4.6% in the West, 3.4% in the Northeast and 1.3% in the Midwest. The May pending home sales index was revised to a decline of 4.9% from the prior estimate of a 4.7% drop.
Ayn Rand: "Government "help" to business is just as disastrous as government persecution... the only way a government can be of service to national prosperity is by keeping its hands off."
Natural-gas inventories rose by 56 billion cubic feet for the week ended August 1, the Energy Department said Thursday. The figure matched expectations from analysts at Global Insight. Total stocks now stand at 2.517 trillion cubic feet, down 353 billion cubic feet from the year-ago level and 6 billion cubic feet below the five-year average, the government data said. September natural gas was up 23.8 cents at $9.011 per million British thermal units on Globex.
September crude closed at $120.02 per barrel Thursday on the New York Mercantile Exchange, up $1.44, or 1.2%, for the session. December gold closed at $877.90 an ounce in New York Thursday, down $5.10 for the session.
Influential Iraqi Shi'ite cleric Moqtada al-Sadr would dissolve his Mehdi Army militia if the United States starts withdrawing troops according to a set timetable, a spokesman said.
According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $4.721 billion in the week ended 8/6/08 with Domestic funds reporting net inflows of $4.847 billion and Non-domestic funds reporting net outflows of -$126 million;
Excluding ETF activity, Equity funds report net cash outflows totaling -$1.148 billion with Domestic funds reporting net outflows of -$656 million and Non-domestic funds reporting net outflows totaling -$493 million.
Toyota Motor Corp posted a 28 percent drop in quarterly net profit, dented by a strong yen and slumping U.S. sales, and kept its forecasts unchanged for what is set to be its most challenging year in recent memory.
Israel is building up its strike capabilities amid growing anxiety over Iran's nuclear ambitions and appears confident that a military attack would cripple Tehran's atomic program, even if it can't destroy it.
Such talk could be more threat than reality. However, Iran's refusal to accept Western conditions is worrying Israel as is the perception that Washington now prefers diplomacy over confrontation with Tehran.
The Jewish state has purchased 90 F-16I fighter planes that can carry enough fuel to reach Iran, and will receive 11 more by the end of next year. It has bought two new Dolphin submarines from Germany reportedly capable of firing nuclear-armed warheads — in addition to the three it already has.
Ayn Rand: "A government is the most dangerous threat to man's rights: it holds a legal monopoly on the use of physical force against legally disarmed victims. "
China announced changes to its foreign-exchange rules to address surging growth in its hard currency reserves, saying domestic companies can now keep their foreign-currency income overseas and pledging tougher penalties for illicit capital inflows. The new rules were announced late Wednesday and take effect immediately.
In early trading, oil prices rebounded on Thursday, regaining the $120 level on supply concerns, while gold firmed and base metals rose.
BP's announced Wednesday that it will invest $90 million in U.S. biofuels company Verenium Corp.
Turkey said a pipeline carrying crude to the country's Mediterranean coast from Azerbaijan may remain shut for two weeks following an explosion on Tuesday.
It may be as long as two weeks before the pipeline reopens, Ali Gungor, the governor of Erzincan province where the blast occurred, said in a phone interview today, citing information from a repair team that's studying the extent of the damage. The explosion prompted BP to cancel export obligations from the 1-million-barrel-a-day pipeline.
According to Bloomberg, a year after losses on U.S. subprime mortgages caused a seizure in credit markets worldwide, European companies are starting to default.
As many as 6 percent to 7 percent of corporate borrowers may fail to pay debts on time in the next year, a 10-fold increase from July, according to Dresdner Kleinwort, a unit of Germany's third-biggest bank. That would be the highest since July 2003, according to data compiled by Moody's Investors Service, straining an already faltering economy.
``Companies that would have refinanced a year ago find now that they can't,'' said Andy Stoneman, managing partner at MCR Corporate Restructuring in London, the administrator for General Trading Co., the store where Prince Charles and Princess Diana had their wedding list.
Target Corp. said Thursday that its July sales at stores open at least one year fell 1.2%.
First-time claims for state unemployment benefits remained unusually high in the latest week as more workers qualified for regular benefits under an unrelated extended federal benefits program, the Labor Department reported Thursday. Claims for the week ending Aug. 2 rose to 455,000, a gain of 7,000 from the 448,000 claims reported a week prior. The four-week average of new claims rose by 26,750 to 419,500, the highest since July 2003. Continuing unemployment claims rose by 31,000 to 3.3 million.
The average conforming 30-year fixed mortgage rate rose to 6.74% from 6.70% a week ago, while the average 15-year fixed mortgage rate increased to 6.27% from 6.22% a week earlier.
Nordstrom, Inc. reported preliminary sales of $840 million for the four-week period ended August 2, 2008, a decrease of 6.7 percent compared to sales of $901 million for the four-week period ended August 4, 2007. Same-store sales decreased 6.1 percent.
Preliminary second quarter sales of $2.29 billion decreased 4.3 percent compared to sales of $2.39 billion during the same period in 2007. Second quarter same-store sales decreased 6.0 percent.
Preliminary year-to-date sales of $4.17 billion decreased 4.1 percent compared to sales of $4.34 billion for the same period in 2007. Year-to-date same-store sales decreased 6.2 percent.
J. C. Penney Company, Inc.'s comparable store sales decreased 6.5 percent for the four-week period ended Aug. 2, 2008, compared with the Company’s guidance for sales to decrease mid-single digits. In last year’s July period, comparable store sales increased 12.0 percent, largely driven by a calendar shift that moved sales for an important Back-To-School selling week from August into the July reporting period. Total Company sales in the 2008 July period decreased 4.9 percent.
WCI Communities Inc, the luxury home builder led by Carl Icahn that recently filed Chapter 11 bankruptcy, said on Wednesday the bankruptcy court approved its use of $50 million in cash on hand. WCI said its access to funds will provide sufficient liquidity to run the business until it can finalize a deal for a new debtor-in-possession credit facility, which the company expects the court to approve on Aug. 27.
Japan painted a darker picture of its economic health Thursday, warning of deteriorating exports, output and corporate profits -- signals that may point toward a contraction of the world's second largest economy. "The economy is recently weakening," the Cabinet Office said in its monthly economic report for August.
Although it did not include the word "recession," the government notably left out any reference to an economic "recovery" for the first time in more than six years.
Sunoco's net income in the second quarter fell to $82 million, or 70 cents a share, from $509 million, or $4.20 a share, from last year.
Excluding one-time items, the company said on Wednesday it earned 52 cents a share. Analysts, on average, had expected 34 cents a share, according to Reuters Estimates.
Still, the company warned its refining margins for gasoline continue to be weak in the third quarter, despite recent declines in crude oil prices.
The Philadelphia-based company said it would reduce output at its refineries given the weaker demand for products. It also said it was looking to focus on buying cheaper types of light, sweet crude.
Nouriel Roubini: "It is now clear that all G7 economies are headed towards a recession; the US is in a recession; the UK is headed towards one with the bust of their housing; Japan - as recognized today by its government is entering a recession; Italy's economy is comatose and borderline in recession; Canada had negative growth in Q1 and its economy is tied to the US; while Germany and France (as well as Ireland and Spain and Portugal especially but also the rest of the Eurozone are headed towards a recession.
So all of the G7 economies are now in a recession or headed in the short run towards a recessionary hard landing. Add to these G7 the recession in the rest of the Eurozone (starting with Spain Ireland and Portugal but by now all of the Eurozone as industrial production, sales and business confidence are plunging in all of the Eurozone). Add also the recession in Estonia, Latvia, the risk of hard landing in South East Europe (Bulgaria Romania Hungary and Turkey) and the recession in New Zealand
These generalized recession in the advanced economies will soon lead to a sharp growth slowdown in the BRICs (Brazil Russia India and China) that is already evident in the data and a significant growth slowdown in the rest of emerging market economies.
A sharply slower global growth starting with the G7 recession, falling commodity prices, an increase in global investors' risk aversion, falling equity markets in emerging markets (EM), the weakness of the US dollar and the rise of EM currencies both in nominal and real terms, a tightening of monetary policies in emerging markets to control inflation, the effect of the global liquidity and credit crunch, the risk of a sudden stop and reversal of capital inflows in those EMs with large current account deficits) (the 20 countries in Europe from the Baltics to Turkey as well as India, South Africa and other capital importing EMs) are the factors that will lead to a sharp growth slowdown in the EMs as well as downward pressures on their equity and other financial markets."
Ben Levisohn: "How much is mortgage-finance giant Freddie Mac (FRE) worth? Judging by the stock market, $4.2 billion, its market capitalization at the close of trading on Aug. 6. But the company's update on its second-quarter earnings and financial condition, released Aug. 6, seems to tell a grimmer story.
Look past the devastating $821 million loss it reported for the quarter—nearly three times what Wall Street analysts had forecast. Ignore the $1 billion writedown the government-sponsored enterprise took on subprime and other risky mortgages, only the latest in a painful series. Disregard the rising rate of foreclosures, which grew 20% in the June quarter from the preceding quarter. Drill down to its fair value—a measure of the total worth of the assets on its balance sheet, minus its total liabilities. What do you see?
It looks an awful lot like a gaping hole. Freddie's fair value as of June 30 was a negative $5.6 billion. Based on this particular measure of its financial condition, if it had to sell its assets today, Freddie Mac would be worth less than nothing."
Hedge funds tracked by Hennessee Group LLC fell 1.95% on average in July, partly because a popular trade of betting against financial-services stocks and investing in energy-related securities backfired. "Hedge funds underperformed in July due to sharp reversals in the equity markets during the second half of the month," said E. Lee Hennessee, Managing Principal of Hennessee Group.
An index of sales contracts on previously owned U.S. homes rose 5.3% in June from the prior month, the National Association of Realtors reported Thursday. The index, which is considered a leading indicator of existing home sales, was down 12.3% from the June 2007 level. Pending home sales in June rose in all regions, with a gain of 9.3% in the South, 4.6% in the West, 3.4% in the Northeast and 1.3% in the Midwest. The May pending home sales index was revised to a decline of 4.9% from the prior estimate of a 4.7% drop.
Ayn Rand: "Government "help" to business is just as disastrous as government persecution... the only way a government can be of service to national prosperity is by keeping its hands off."
Natural-gas inventories rose by 56 billion cubic feet for the week ended August 1, the Energy Department said Thursday. The figure matched expectations from analysts at Global Insight. Total stocks now stand at 2.517 trillion cubic feet, down 353 billion cubic feet from the year-ago level and 6 billion cubic feet below the five-year average, the government data said. September natural gas was up 23.8 cents at $9.011 per million British thermal units on Globex.
September crude closed at $120.02 per barrel Thursday on the New York Mercantile Exchange, up $1.44, or 1.2%, for the session. December gold closed at $877.90 an ounce in New York Thursday, down $5.10 for the session.
Influential Iraqi Shi'ite cleric Moqtada al-Sadr would dissolve his Mehdi Army militia if the United States starts withdrawing troops according to a set timetable, a spokesman said.
According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $4.721 billion in the week ended 8/6/08 with Domestic funds reporting net inflows of $4.847 billion and Non-domestic funds reporting net outflows of -$126 million;
Excluding ETF activity, Equity funds report net cash outflows totaling -$1.148 billion with Domestic funds reporting net outflows of -$656 million and Non-domestic funds reporting net outflows totaling -$493 million.
Thursday, August 07, 2008
China
8/7/08 China
Wal-Mart Stores Inc. said that its July sales at stores open at least a year rose 3%, missing the average estimate of a 3.4% gain of analysts surveyed by Thomson Reuters. Wal-Mart U.S. same-store sales rose 3% and Sam's Club's increased 3.5%, both missing estimates. The company expects its August sales to slow.
Costco Wholesale said July same-store sales rose 10%, with U.S. growth of 10% and international growth of 11%. Excluding gasoline price inflation, U.S. comparable sales would have climbed 6%, and excluding exchange rates, international comparable sales would have climbed 9%.
December gold closed at $883 an ounce in New York Wednesday, down $3.10 for the session, pressured by weaker oil prices as the U.S. dollar gained ground against other major currencies.
American International Group reported a $5.36 billion second-quarter net loss late Wednesday as the insurance giant was hit again by write-downs and impairments on mortgage-related exposures. The net loss was $2.06 per common share. A year ago, AIG reported net income of $4.28 billion, or $1.64 a share. The quarterly net loss included $5.57 billion of unrealized market valuation losses on AIG's super senior credit default swap portfolio. It also included $6.08 billion of net realized capital losses, the company disclosed.
The Bank of Korea lifted its base lending rate a quarter-point to 5.25% Thursday, noting surging inflation remains at the forefront of its concerns even though economic growth is decelerating.
China's central bank has loosened controls on lending to small- and medium-size companies hit hardest by credit limits and slowing exports, state media reports said Wednesday, the latest evidence of growing concern over an economic slowdown.
The People's Bank of China advised local commercial banks that their annual quota for loans to smaller companies was raised by 10 percent, while the quotas for national commercial banks were increased by 5 percent, China Daily and other state-run newspapers reported.
Smaller companies have long suffered from a lack of access to bank loans, and recent efforts to fight inflation by imposing stringent controls on lending have hit them hardest.
China's chief economic planning agency, the National Development and Reform Commission, estimates that 67,000 such companies went bankrupt in the first half of the year due to credit controls and the deteriorating business environment, the state-run Shanghai Securities News reported.
Higher costs for energy and other materials have left many low-cost exporters, especially makers of toys, shoes and other light industrial goods, struggling to survive at a time when demand is weakening. At the same time, the surging value of the Chinese currency, the yuan, against the U.S. dollar has sapped their competitiveness in overseas markets.
Sprint Nextel booked $1.1 billion in cash flow from operating activities and held $3.5 billion in cash at the end of the quarter. Looking ahead, Sprint Nextel expects to report higher post-paid subscriber losses in the third quarter, "due to a seasonal uptick in churn," the company said.
Barry Ritholtz: "Tuesday was the first 90% day we have seen June 26th. On the NYSE, there were 2526 advances and 862 declines. That means up volume was 91.4%. Paul Desmond of Lowry's notes that bottoms are usually accompanied by a series of 90% up and down days. The absence of 90% Days is very unusual, especially given the Uptick Rule has not been in place. Since this was the first 90% day in 2 months, that makes it noteworthy. Back on July 15, the Dow made a closing low of 10962.54 -- the lowest Dow close since July 2006. Yesterday, it closed at 11,615.77. So we have yet to run even 1,000 points. Hence, despite the turmoil, this is still early in the rally's lifespan.
On the other side of the ledger, we have Lowry's Selling Pressure Index at those highs. Normally, it declines well ahead of a market bottom. The new high in this Index does not equate with the thesis that we're near a market bottom.
Further, Paul Desmond tells me that since we did not have any 90% Down Days close to the mid-July low, we have not seen the required selling exhaustion for a major bottom.
Further, its been 3 weeks since the lows, and we did not have a 90% Upside Day quickly after the rally began. Paul's prior work on market bottoms suggests that almost always accompanies major market bottoms. He views the recent rallies as primarily short-covering by hedge funds rather than accumulation from investors. I agree.
Bottom line: A classic Bear Market rally, one that could run for a few more weeks. My best guess is to 12,250 - 12,500."
Brett Steenbarger: "The market rose sharply on Tuesday, but we only had 1027 stocks making fresh 20-day highs against 868 new 20-day lows across the NYSE, NASDAQ, and ASE. That is fewer new highs than we saw during the prior market bounces in July. I will be watching closely to see if the rally is gaining or losing traction, particularly among the small cap stocks, which have shown less relative strength of late."
Heather Bellini of UBS AG, ranked the best software analyst by Institutional Investor magazine in 2007, expects Microsoft to complete the repurchase -- at least five times larger than its average per quarter in the last fiscal year -- over the next three months.
``They won't announce it until it's done,'' Bellini said.
A buyback of between $15 billion and $20 billion would lift earnings per share by as much as 10 cents annually, Bellini said. She expects shares of the Redmond, Washington-based company to climb 53 percent to $40 in the next year.
Transocean Inc., the world's largest offshore oil driller, said profit rose for the eighth quarter in a row as record crude prices spurred demand for deepwater rigs, pushing rents to an all-time high. Net income doubled to $1.11 billion, or $3.45 a share, from $549 million, or $2.63, a year earlier, Houston-based Transocean said today in a public filing. The company was expected to earn $3.21 a share, the average of 34 analyst estimates compiled by Bloomberg.
Oil refiner Sunoco Inc. reported late Wednesday second-quarter net income fell to $82 million, or 70 cents a share, from $509 million, or $4.20, a year ago. Excluding one-time items, income for the quarter was $61 million, or 52 cents a share. There were no special items in the year-ago quarter. Revenue for the three months ended June 30 rose to $16.08 billion from $10.76 billion. Analysts surveyed by FactSet Research predicted the Philadelphia-based company would post earnings of 72 cents a share on $12.47 billion in revenue.
Xstrata Plc, the owner of mines on four continents, made a hostile 5 billion-pound ($9.8 billion) bid for Lonmin Plc to double revenue from Africa and become the world's third-largest platinum producer.
Xstrata, based in Zug, Switzerland, offered 3,300 pence a share for Lonmin, 42 percent more than the company's London closing price yesterday. Lonmin called the all-cash bid ``entirely unwelcome'' as its shares rose as much as 51 percent.
Gold and platinum advanced in London on speculation the $9.8 billion takeover offer of Lonmin Plc will spur consolidation of South African mines and limit supplies. Palladium rose the most in three months.
Xstrata Plc, the world's fourth-largest copper producer, bid for Lonmin to add mines in South Africa and diversify its metals output to include more platinum. South Africa is the world's second-biggest gold producer after China and largest miner of platinum used in jewelry and car parts.
Government defaults on both local-and foreign-currency debt have increased ``dramatically'' since the mid-1990s, according to a Moody's Investors Service report.
Forty-one percent of sovereign defaults since 1997 included halting payments on debt obligations denominated in local and foreign currencies, up from 5 percent from 1960 to 1996, Moody's analysts Elena Duggar and Guido Cipriani wrote.
Rob Hanna: "The CBOE hit it lowest level since December 20th on Tuesday...While the SPX was up over 2% Tuesday, I used a 1% spike to ensure a decent amount of instances. More often than not the market tended to pull back over the next couple of weeks. While the downside edge isn’t huge on a percentage basis, the risk is quite a bit higher than the reward. Overall not encouraging for the bullish case over the next 2 weeks."
The Oil Drum: "If the peak oil folks are correct -- and I'm not saying they are, but their predictions seem to be coming to pass, so they deserve a decent hearing in the world media -- it constitutes a story of immense importance.
The world runs on oil. The prosperity of the middle classes of the industrialized world was built on it. So was the green revolution that allowed world population to increase from two billion to six and a half billion. So was globalization, which allows the flow of goods from everywhere to everywhere on a magic carpet of cheap oil. So was air travel and mass tourism. The list goes on and on."
According to Bloomberg, China's soybean production, the world's fourth-biggest, may surge 36.7 percent from year ago after farmers boosted planting and favorable weather improved yields, a state-owned market forecaster said.
Output may rise to 17.5 million metric tons, the China National Grain and Oils Information Center said in an e-mailed monthly forecast report. Corn production may surge 2.7 percent to a record 156 million tons, it said.
The country's output of wheat, the world's biggest producer, may gain 2.4 percent to 112.5 million tons, while rice production may rise 0.5 percent to 186.5 million tons, the center said.
Production of rapeseed may also increase 8.5 percent to 11.5 million tons, it said.
The housing correction "has some distance to go" and prices will fall another 5% "if we're lucky," says Lawrence White, professor of economics at NYU's Stern School of Business.
And if we're "unlucky," White sees another 10%-15% downside in the national average for house prices, which would wipe out over $1 trillion in household wealth.
Either way, the economist does not see housing bottoming until the second half of 2009 at the earliest, and foresees no quick snapback for real estate after the bust.
George Ure: "If it's wrong for terrorists to attack our national borders, security and identity and steal our liberties, why should tax exempt groups with soft versions of the same objectives get a pass? Arguing for America's integration into a non-elected regional super-government doesn't square with the Constitution I read.
But then, come to think of it, it doesn't say anything about 'administrative law' and shadow governance, either."
Time Magazine: " Writing in the International Herald Tribune last week, Trita Parsi, President of the National Iranian American Council, and analyst Anatol Lieven, argued that insisting Iran give up its right to any uranium enrichment is untenable, and instead suggested that the Western powers base their demands on the rights and limitations of the Nuclear Non-Proliferation Treaty — which would allow the international community "to place a verifiable cap on Iranian enrichment and other nuclear capabilities well short of weaponization."
Bill Bonner (Daily Reckoning): "And millions of Americans are facing "retirement poverty," continued the salmon-colored paper. Why? They haven't saved enough…and their houses - on which they had counted to finance their golden years - suddenly seem to be made of base metal.
Fannie Mae faces a "glut of unsold homes," reports the Chicago Tribune. (What the paper means is that it faces a glut of houses, not homes. A home is what people make of a house. But if it is unsold, it is a house, not a home. And many of the houses built in America in the last 10 years will probably never be homes. They are too expensive. Too far out. And too many.)
"Ghost towns across America," is how the Wall Street Journal describes them."
Republican presidential candidate John McCain opposes the $300 billion farm bill and subsidies for ethanol, positions that both supporters and opponents say might cost him votes he needs in the upper Midwest this November.
The International Monetary Fund on Wednesday said it expects Britain's gross domestic product to grow by only 1.4% in 2008 and 1.1% in 2009, down from its earlier projections of 1.8% for this year and 1.7% in 2009.
Whole Foods also sharply cut its outlook for 2009, saying it now expects sales growth of 6 percent to 10 percent for the year — rather than the previously stated 25 percent to 30 percent growth. And it said its comparable-store sales are expected to grow 1 percent to 5 percent, down from the previously anticipated growth of 7.5 percent to 9.5 percent.
Ladenburg Thalmann & Co. analyst Richard Bove in a research note Wednesday cut his profit estimates on Lehman Brothers and reduced the price target on the stock to $23 from $27. The analyst predicted the company, which has been pressured by the credit tumult, will sell assets, raise capital and cut the dividend payout. "My sense is that Lehman feels a need to take action now to stop, for once and, hopefully, for all, the constant stories and rumors swirling around the company," Bove wrote.
U.S. house prices will fall by as much as 20% nationally and the current mortgage finance crisis is about half-way through, Freddie Mac's CEO said.
The worldwide count of rotary drilling rigs in operation compiled by Baker Hughes stood at 3,436 last month, up 167 from the count for June and up 292 from July 2007, said the provider of drilling and production services for oil and natural gas. Offshore rigs in operation totaled 380, off from 388 in June but up from 376 in July 2007. U.S. offshore rigs held steady on a month-to-month basis at 67 but were down from 78 in operation in July 2007, Baker Hughes' data showed. Land-based drilling rigs in operation in the U.S. jumped to 1,865 in July, up from 1,699 a year earlier and compared to 1,834 in June 2008.
September crude fell further late Wednesday morning to trade at $117.46 a barrel on Globex, down $1.71. The American Petroleum Institute accidentally released its report on supplies 5 minutes early -- ahead of the Energy Department's data. The API had reported a fall of 2.6 million barrels in crude supplies, but the Energy Dept. said they rose by 1.7 million. When the API figures came out, "people bought -- and later had to sell" when the government data were released, said Phil Flynn, a vice president at Alaron Trading.
Motor gasoline supplies were down 1.8 million barrels, the API said. The government had reported that supplies fell by 4.4 million barrels. Distillate supplies were up 3.1 million barrels, the API said. They were up 2.8 million barrels, according to the Energy Department.
Wal-Mart Stores Inc. said that its July sales at stores open at least a year rose 3%, missing the average estimate of a 3.4% gain of analysts surveyed by Thomson Reuters. Wal-Mart U.S. same-store sales rose 3% and Sam's Club's increased 3.5%, both missing estimates. The company expects its August sales to slow.
Costco Wholesale said July same-store sales rose 10%, with U.S. growth of 10% and international growth of 11%. Excluding gasoline price inflation, U.S. comparable sales would have climbed 6%, and excluding exchange rates, international comparable sales would have climbed 9%.
December gold closed at $883 an ounce in New York Wednesday, down $3.10 for the session, pressured by weaker oil prices as the U.S. dollar gained ground against other major currencies.
American International Group reported a $5.36 billion second-quarter net loss late Wednesday as the insurance giant was hit again by write-downs and impairments on mortgage-related exposures. The net loss was $2.06 per common share. A year ago, AIG reported net income of $4.28 billion, or $1.64 a share. The quarterly net loss included $5.57 billion of unrealized market valuation losses on AIG's super senior credit default swap portfolio. It also included $6.08 billion of net realized capital losses, the company disclosed.
The Bank of Korea lifted its base lending rate a quarter-point to 5.25% Thursday, noting surging inflation remains at the forefront of its concerns even though economic growth is decelerating.
China's central bank has loosened controls on lending to small- and medium-size companies hit hardest by credit limits and slowing exports, state media reports said Wednesday, the latest evidence of growing concern over an economic slowdown.
The People's Bank of China advised local commercial banks that their annual quota for loans to smaller companies was raised by 10 percent, while the quotas for national commercial banks were increased by 5 percent, China Daily and other state-run newspapers reported.
Smaller companies have long suffered from a lack of access to bank loans, and recent efforts to fight inflation by imposing stringent controls on lending have hit them hardest.
China's chief economic planning agency, the National Development and Reform Commission, estimates that 67,000 such companies went bankrupt in the first half of the year due to credit controls and the deteriorating business environment, the state-run Shanghai Securities News reported.
Higher costs for energy and other materials have left many low-cost exporters, especially makers of toys, shoes and other light industrial goods, struggling to survive at a time when demand is weakening. At the same time, the surging value of the Chinese currency, the yuan, against the U.S. dollar has sapped their competitiveness in overseas markets.
Sprint Nextel booked $1.1 billion in cash flow from operating activities and held $3.5 billion in cash at the end of the quarter. Looking ahead, Sprint Nextel expects to report higher post-paid subscriber losses in the third quarter, "due to a seasonal uptick in churn," the company said.
Barry Ritholtz: "Tuesday was the first 90% day we have seen June 26th. On the NYSE, there were 2526 advances and 862 declines. That means up volume was 91.4%. Paul Desmond of Lowry's notes that bottoms are usually accompanied by a series of 90% up and down days. The absence of 90% Days is very unusual, especially given the Uptick Rule has not been in place. Since this was the first 90% day in 2 months, that makes it noteworthy. Back on July 15, the Dow made a closing low of 10962.54 -- the lowest Dow close since July 2006. Yesterday, it closed at 11,615.77. So we have yet to run even 1,000 points. Hence, despite the turmoil, this is still early in the rally's lifespan.
On the other side of the ledger, we have Lowry's Selling Pressure Index at those highs. Normally, it declines well ahead of a market bottom. The new high in this Index does not equate with the thesis that we're near a market bottom.
Further, Paul Desmond tells me that since we did not have any 90% Down Days close to the mid-July low, we have not seen the required selling exhaustion for a major bottom.
Further, its been 3 weeks since the lows, and we did not have a 90% Upside Day quickly after the rally began. Paul's prior work on market bottoms suggests that almost always accompanies major market bottoms. He views the recent rallies as primarily short-covering by hedge funds rather than accumulation from investors. I agree.
Bottom line: A classic Bear Market rally, one that could run for a few more weeks. My best guess is to 12,250 - 12,500."
Brett Steenbarger: "The market rose sharply on Tuesday, but we only had 1027 stocks making fresh 20-day highs against 868 new 20-day lows across the NYSE, NASDAQ, and ASE. That is fewer new highs than we saw during the prior market bounces in July. I will be watching closely to see if the rally is gaining or losing traction, particularly among the small cap stocks, which have shown less relative strength of late."
Heather Bellini of UBS AG, ranked the best software analyst by Institutional Investor magazine in 2007, expects Microsoft to complete the repurchase -- at least five times larger than its average per quarter in the last fiscal year -- over the next three months.
``They won't announce it until it's done,'' Bellini said.
A buyback of between $15 billion and $20 billion would lift earnings per share by as much as 10 cents annually, Bellini said. She expects shares of the Redmond, Washington-based company to climb 53 percent to $40 in the next year.
Transocean Inc., the world's largest offshore oil driller, said profit rose for the eighth quarter in a row as record crude prices spurred demand for deepwater rigs, pushing rents to an all-time high. Net income doubled to $1.11 billion, or $3.45 a share, from $549 million, or $2.63, a year earlier, Houston-based Transocean said today in a public filing. The company was expected to earn $3.21 a share, the average of 34 analyst estimates compiled by Bloomberg.
Oil refiner Sunoco Inc. reported late Wednesday second-quarter net income fell to $82 million, or 70 cents a share, from $509 million, or $4.20, a year ago. Excluding one-time items, income for the quarter was $61 million, or 52 cents a share. There were no special items in the year-ago quarter. Revenue for the three months ended June 30 rose to $16.08 billion from $10.76 billion. Analysts surveyed by FactSet Research predicted the Philadelphia-based company would post earnings of 72 cents a share on $12.47 billion in revenue.
Xstrata Plc, the owner of mines on four continents, made a hostile 5 billion-pound ($9.8 billion) bid for Lonmin Plc to double revenue from Africa and become the world's third-largest platinum producer.
Xstrata, based in Zug, Switzerland, offered 3,300 pence a share for Lonmin, 42 percent more than the company's London closing price yesterday. Lonmin called the all-cash bid ``entirely unwelcome'' as its shares rose as much as 51 percent.
Gold and platinum advanced in London on speculation the $9.8 billion takeover offer of Lonmin Plc will spur consolidation of South African mines and limit supplies. Palladium rose the most in three months.
Xstrata Plc, the world's fourth-largest copper producer, bid for Lonmin to add mines in South Africa and diversify its metals output to include more platinum. South Africa is the world's second-biggest gold producer after China and largest miner of platinum used in jewelry and car parts.
Government defaults on both local-and foreign-currency debt have increased ``dramatically'' since the mid-1990s, according to a Moody's Investors Service report.
Forty-one percent of sovereign defaults since 1997 included halting payments on debt obligations denominated in local and foreign currencies, up from 5 percent from 1960 to 1996, Moody's analysts Elena Duggar and Guido Cipriani wrote.
Rob Hanna: "The CBOE hit it lowest level since December 20th on Tuesday...While the SPX was up over 2% Tuesday, I used a 1% spike to ensure a decent amount of instances. More often than not the market tended to pull back over the next couple of weeks. While the downside edge isn’t huge on a percentage basis, the risk is quite a bit higher than the reward. Overall not encouraging for the bullish case over the next 2 weeks."
The Oil Drum: "If the peak oil folks are correct -- and I'm not saying they are, but their predictions seem to be coming to pass, so they deserve a decent hearing in the world media -- it constitutes a story of immense importance.
The world runs on oil. The prosperity of the middle classes of the industrialized world was built on it. So was the green revolution that allowed world population to increase from two billion to six and a half billion. So was globalization, which allows the flow of goods from everywhere to everywhere on a magic carpet of cheap oil. So was air travel and mass tourism. The list goes on and on."
According to Bloomberg, China's soybean production, the world's fourth-biggest, may surge 36.7 percent from year ago after farmers boosted planting and favorable weather improved yields, a state-owned market forecaster said.
Output may rise to 17.5 million metric tons, the China National Grain and Oils Information Center said in an e-mailed monthly forecast report. Corn production may surge 2.7 percent to a record 156 million tons, it said.
The country's output of wheat, the world's biggest producer, may gain 2.4 percent to 112.5 million tons, while rice production may rise 0.5 percent to 186.5 million tons, the center said.
Production of rapeseed may also increase 8.5 percent to 11.5 million tons, it said.
The housing correction "has some distance to go" and prices will fall another 5% "if we're lucky," says Lawrence White, professor of economics at NYU's Stern School of Business.
And if we're "unlucky," White sees another 10%-15% downside in the national average for house prices, which would wipe out over $1 trillion in household wealth.
Either way, the economist does not see housing bottoming until the second half of 2009 at the earliest, and foresees no quick snapback for real estate after the bust.
George Ure: "If it's wrong for terrorists to attack our national borders, security and identity and steal our liberties, why should tax exempt groups with soft versions of the same objectives get a pass? Arguing for America's integration into a non-elected regional super-government doesn't square with the Constitution I read.
But then, come to think of it, it doesn't say anything about 'administrative law' and shadow governance, either."
Time Magazine: " Writing in the International Herald Tribune last week, Trita Parsi, President of the National Iranian American Council, and analyst Anatol Lieven, argued that insisting Iran give up its right to any uranium enrichment is untenable, and instead suggested that the Western powers base their demands on the rights and limitations of the Nuclear Non-Proliferation Treaty — which would allow the international community "to place a verifiable cap on Iranian enrichment and other nuclear capabilities well short of weaponization."
Bill Bonner (Daily Reckoning): "And millions of Americans are facing "retirement poverty," continued the salmon-colored paper. Why? They haven't saved enough…and their houses - on which they had counted to finance their golden years - suddenly seem to be made of base metal.
Fannie Mae faces a "glut of unsold homes," reports the Chicago Tribune. (What the paper means is that it faces a glut of houses, not homes. A home is what people make of a house. But if it is unsold, it is a house, not a home. And many of the houses built in America in the last 10 years will probably never be homes. They are too expensive. Too far out. And too many.)
"Ghost towns across America," is how the Wall Street Journal describes them."
Republican presidential candidate John McCain opposes the $300 billion farm bill and subsidies for ethanol, positions that both supporters and opponents say might cost him votes he needs in the upper Midwest this November.
The International Monetary Fund on Wednesday said it expects Britain's gross domestic product to grow by only 1.4% in 2008 and 1.1% in 2009, down from its earlier projections of 1.8% for this year and 1.7% in 2009.
Whole Foods also sharply cut its outlook for 2009, saying it now expects sales growth of 6 percent to 10 percent for the year — rather than the previously stated 25 percent to 30 percent growth. And it said its comparable-store sales are expected to grow 1 percent to 5 percent, down from the previously anticipated growth of 7.5 percent to 9.5 percent.
Ladenburg Thalmann & Co. analyst Richard Bove in a research note Wednesday cut his profit estimates on Lehman Brothers and reduced the price target on the stock to $23 from $27. The analyst predicted the company, which has been pressured by the credit tumult, will sell assets, raise capital and cut the dividend payout. "My sense is that Lehman feels a need to take action now to stop, for once and, hopefully, for all, the constant stories and rumors swirling around the company," Bove wrote.
U.S. house prices will fall by as much as 20% nationally and the current mortgage finance crisis is about half-way through, Freddie Mac's CEO said.
The worldwide count of rotary drilling rigs in operation compiled by Baker Hughes stood at 3,436 last month, up 167 from the count for June and up 292 from July 2007, said the provider of drilling and production services for oil and natural gas. Offshore rigs in operation totaled 380, off from 388 in June but up from 376 in July 2007. U.S. offshore rigs held steady on a month-to-month basis at 67 but were down from 78 in operation in July 2007, Baker Hughes' data showed. Land-based drilling rigs in operation in the U.S. jumped to 1,865 in July, up from 1,699 a year earlier and compared to 1,834 in June 2008.
September crude fell further late Wednesday morning to trade at $117.46 a barrel on Globex, down $1.71. The American Petroleum Institute accidentally released its report on supplies 5 minutes early -- ahead of the Energy Department's data. The API had reported a fall of 2.6 million barrels in crude supplies, but the Energy Dept. said they rose by 1.7 million. When the API figures came out, "people bought -- and later had to sell" when the government data were released, said Phil Flynn, a vice president at Alaron Trading.
Motor gasoline supplies were down 1.8 million barrels, the API said. The government had reported that supplies fell by 4.4 million barrels. Distillate supplies were up 3.1 million barrels, the API said. They were up 2.8 million barrels, according to the Energy Department.
Wednesday, August 06, 2008
Another Volatile Market Day
8/6/08 Another Volatile Market Day
"Operating margin was up due to overhead productivity improvements and increased pricing, which combined, more than offset a significant increase in commodity and energy costs," P&G said. The Cincinnati household products giant expects first-quarter earnings 98 cents to $1 a share vs. the forecast of $1 a share. Adjusted 2009 earnings are seen at $3.80 to $3.87 a share, compared to the analyst expectation of $3.83 a share.
D.R. Horton said it closed on 6,167 homes in the latest quarter, compared with 9,643 in the year-ago quarter.
Retail sales volume across the 15-nation euro zone saw a 0.6% monthly fall in June and declined 3.1% from the same month a year ago, the statistical agency Eurostat reported Tuesday.
The purchasing managers index for the euro-zone's services sector fell to 48.3 in July from 49.1 in June, news reports said Tuesday.
LONDON (MarketWatch) -- More financial institutions could see government bailouts before the credit crisis runs its course, former U.S. Federal Reserve chairman Alan Greenspan wrote in Tuesday's Financial Times. "There may be numbers of banks and other financial institutions that, at the edge of defaulting, will end up being bailed out by governments," Greenspan said. The crisis will end only when U.S. home prices begin to stabilize, clarifying equity levels, which serve as collateral support for mortgage-backed securities. Greenspan warned against governments seeking to "reassert their grip" on economic affairs. "If that becomes widespread, globalization could reverse -- at awesome cost," he wrote.
International dairy prices are likely to decline next year from record peaks as demand falls and production increases, New Zealand's Ministry of Agriculture said Tuesday.
"During 2008 and 2009, weaker world economic growth is likely to mean lower demand for dairy products," the ministry said in its annual situation and outlook report.
According to the NY Times, for more than three years starting in 2005, there has been a reduction in the number of voters who register with the Republican Party and a rise among voters who affiliate with Democrats and, almost as often, with no party at all.
Bloomberg reported supertanker owners are slowing down their vessels in response to higher fuel costs and plunging rental rates, three shipbrokers said.
Benchmark hire rates for very large crude carriers, ships bigger than the Chrysler Building designed to ship 2 million barrels of crude, plunged 65 percent last week. Bunker, or fuel, costs have advanced 47 percent this year.
"Most owners say they have ordered the ships to slow down to economical speed," Halvor Ellefsen, a broker at SeaLeague AS in Oslo, said in an e-mail today.
The five-member Bloomberg Tanker Index has dropped 15 percent since the start of last month, on concern that lower rental rates and higher fuel costs will curb earnings for shipowners including Frontline Ltd. Slower sailing speeds reduce vessel availability and may bolster hire rates.
Japanese automaker Toyota has laid off 800 people at a plant in southwestern Japan, or about 10 percent of the plant's work force, in response to declining sales in North America, a company official said Tuesday.
Mike Allen: "A new book by the author Ron Suskind claims that the White House ordered the CIA to forge a back-dated, handwritten letter from the head of Iraqi intelligence to Saddam Hussein.
Suskind writes in “The Way of the World,” to be published Tuesday, that the alleged forgery – adamantly denied by the White House – was designed to portray a false link between Hussein’s regime and al Qaeda as a justification for the Iraq war.
The author also claims that the Bush administration had information from a top Iraqi intelligence official “that there were no weapons of mass destruction in Iraq – intelligence they received in plenty of time to stop an invasion.”
The letter’s existence has been reported before, and it had been written about as if it were genuine. It was passed in Baghdad to a reporter for The (London) Sunday Telegraph who wrote about it on the front page of Dec. 14, 2003, under the headline, “Terrorist behind September 11 strike ‘was trained by Saddam.’”
The Telegraph story by Con Coughlin (which, coincidentally, ran the day Hussein was captured in his “spider hole”) was touted in the U.S. media by supporters of the war, and he was interviewed on NBC's "Meet the Press."
The 10 percent of households with the highest incomes account for nearly a quarter of all spending, according to data compiled by research firm Moody's Economy.com from a 2006 federal survey.
"That does suggest those folks are important for the spending outlook, and the overall economic outlook," said Scott Hoyt, Moody's director of consumer economics.
Other government data show households in the top one-fifth of the U.S. population ranked by income earn about half of all total personal income before taxes — an imbalance that gives the wealthy immense economic clout, said Sara Johnson, an economist at the research firm Global Insight.
"Consumer spending makes up 70 percent of gross domestic product, and when one group accounts for a very substantial share of consumer spending, they also account for a large share of the economic activity that creates jobs," Johnson said.
EMarketer Inc. expects spending on such ads to grow to $25.9 billion this year, from $21.1 billion last year, and hit $30 billion in 2009.
Online advertising is "not going to grow as much as expected, but it's still going to be growing more than other media," Hallerman said.
Chinese factories reported a plunge in new orders last month. Exports are barely growing. The real estate market is weakening, with apartment prices sinking in southeastern China, the region hardest hit by economic troubles.
Weyerhaeuser said it expects challenging market conditions to continue into the third quarter, with operating losses "slightly less than second quarter." The company also said it closed the sale of its containerboard packaging assets unit on Tuesday.
Rep. Ron Paul: "Some mistakenly identify the falling home prices as the disease instead of merely a symptom - which they plan to fix with more easy credit and more liquidity to push more unqualified buyers back into the market for homes they still cannot afford. This is akin to the drug addict identifying withdrawal symptoms as his problem and searching for another fix as his solution. The cycle continues and the problems compound themselves. The addiction deepens.
Addicts are told the first step to recovery is to admit their problem. To cure this addiction to intervention we have to honestly admit the problem and once and for all, kick the habit. That will involve some pain, without a doubt. There is no easy, painless solution to the mess the disastrous economic interventions of the past have wrought. The question is - do we allow some lending institutions to collapse, or do we allow the dollar to collapse? To extend the metaphor, do we endure the temporary discomfort of withdrawal, or do we continue on until there is a fatal overdose? We can delay the agony, but only for a little while, and then we will all end up paying the price for the mistakes of a few.
With the final passage of the Housing Bailout Bill quietly on a Saturday in the Senate, and the President's signature, our government has unfortunately chosen the latter."
Rob Hanna: "The S&P fell on Monday for the third consecutive day. There are some short-term price indicators reaching oversold levels at this point. More often than not, when the market goes into a Fed meeting and is short-term oversold, the result is a bounce."
OPEC production reached its highest level so far this year in July on increased barrels from Saudi Arabia and Iraq and a recovery in Nigerian output, a Dow Jones Newswires survey released Friday said.
The 13 members of the Organization of Petroleum Exporting Countries pumped 32.675 million barrels a day on average last month, up 1.1%, or 366,000 barrels, from 32.309 million barrels a day in June.
The ISM nonmanufacturing index rose to 49.5% in July from 48.2% in June. The new-orders index fell to 47.9% from 48.6%, while employment rose to 47.1% from 43.8%. The production index slipped to 49.6% from 49.9%. Nine of 18 industries were growing in July.
Australia's central bank signaled it may cut borrowing costs for the first time in almost seven years as slowing economic growth cools inflation.
The Federal Reserve held interest rates steady on Tuesday, expressing concerns about both economic growth and inflation and indicating it is in no rush to push borrowing costs higher. Policymakers said "downside risks to growth remain" and "the inflation outlook remains highly uncertain."
Cisco's
earnings excluding items rose to 40 cents per share from 36 cents and exceeded the average analyst forecast by a penny, according to Reuters Estimates.
Quarterly revenue rose 9.9 percent to $10.4 billion, the first quarter in the company's history to surpass $10 billion, it said. Analysts on average expected revenue of $10.3 billion.
The Treasury Department announced Tuesday that it has hired Morgan Stanley to analyze Fannie Mae and Freddie Mac.
The Dow Jones Industrial Average gained 331 points, or 3%, to end at 11,615. This marked the blue chip index's biggest one-day point gain since April 1. The S&P 500 index gained 35 points, or 2.9%, to 1,284, while the Nasdaq Composite rose 64 points, or 2.8%, to 2,349.
September crude closed at $119.17 per barrel in New York Tuesday, down $2.24, or 1.2%, as concerns over oil demand continued.
December gold was up $1.80 at $887.90 an ounce in Globex electronic trading after the Federal Open Market Committee on Tuesday kept its benchmark federal funds rate unchanged at 2.0%. December gold had closed earlier on New York Mercantile Exchange at $886.10 with a loss of $21.80.
Weyerhaeuser Co.seeks to trim 1,500 jobs, or about 6% of its workforce, over the next 18 months, according to a conference call transcript from FactSet Research.
Hurricane forecasters Philip Klotzbach and William Gray at Colorado State University raised their forecasts for the Atlantic Hurricane season in a report issued Tuesday. The report pegs the total seasonal forecast at 17 named storms for the region, up from 15 predicted in June. The forecasters also raised the number of expected Altantic hurricanes to nine for the seasson, compared to eight in the June forecast.
Morgan Stanley told several thousand clients this week that they won't be allowed to withdraw money on their home- equity credit lines, said a person familiar with the situation.
The action mostly affected clients with properties that have lost value, according to the person, who declined to be identified because the information isn't public. The New York- based investment bank will review home equity lines of credit, or HELOCS, monthly from now on, the person said.
Foster Wheeler's consolidated backlog in terms of future revenue jumped, but new orders booked came in below levels seen in the year-earlier second quarter.
Freddie Mac said it swung to a second-quarter loss of $821 million, or $1.63 a share, after taking $2.5 billion in provisions for credit losses. Revenue fell to $1.69 billion from $2.34 billion. Analysts polled by FactSet Research had expected a loss of 38 cents a share. The mortgage giant is going to cut its third-quarter dividend to 5 cents a share or less from 25 cents a share and pay the full preferred dividend.
News Corp."isn't talking to anybody right now," said Chief Operating Officer Peter Chernin when asked if the commpany is talking to AOL, Yahoo or Microsoft about a possible deal or alliance.
"Operating margin was up due to overhead productivity improvements and increased pricing, which combined, more than offset a significant increase in commodity and energy costs," P&G said. The Cincinnati household products giant expects first-quarter earnings 98 cents to $1 a share vs. the forecast of $1 a share. Adjusted 2009 earnings are seen at $3.80 to $3.87 a share, compared to the analyst expectation of $3.83 a share.
D.R. Horton said it closed on 6,167 homes in the latest quarter, compared with 9,643 in the year-ago quarter.
Retail sales volume across the 15-nation euro zone saw a 0.6% monthly fall in June and declined 3.1% from the same month a year ago, the statistical agency Eurostat reported Tuesday.
The purchasing managers index for the euro-zone's services sector fell to 48.3 in July from 49.1 in June, news reports said Tuesday.
LONDON (MarketWatch) -- More financial institutions could see government bailouts before the credit crisis runs its course, former U.S. Federal Reserve chairman Alan Greenspan wrote in Tuesday's Financial Times. "There may be numbers of banks and other financial institutions that, at the edge of defaulting, will end up being bailed out by governments," Greenspan said. The crisis will end only when U.S. home prices begin to stabilize, clarifying equity levels, which serve as collateral support for mortgage-backed securities. Greenspan warned against governments seeking to "reassert their grip" on economic affairs. "If that becomes widespread, globalization could reverse -- at awesome cost," he wrote.
International dairy prices are likely to decline next year from record peaks as demand falls and production increases, New Zealand's Ministry of Agriculture said Tuesday.
"During 2008 and 2009, weaker world economic growth is likely to mean lower demand for dairy products," the ministry said in its annual situation and outlook report.
According to the NY Times, for more than three years starting in 2005, there has been a reduction in the number of voters who register with the Republican Party and a rise among voters who affiliate with Democrats and, almost as often, with no party at all.
Bloomberg reported supertanker owners are slowing down their vessels in response to higher fuel costs and plunging rental rates, three shipbrokers said.
Benchmark hire rates for very large crude carriers, ships bigger than the Chrysler Building designed to ship 2 million barrels of crude, plunged 65 percent last week. Bunker, or fuel, costs have advanced 47 percent this year.
"Most owners say they have ordered the ships to slow down to economical speed," Halvor Ellefsen, a broker at SeaLeague AS in Oslo, said in an e-mail today.
The five-member Bloomberg Tanker Index has dropped 15 percent since the start of last month, on concern that lower rental rates and higher fuel costs will curb earnings for shipowners including Frontline Ltd. Slower sailing speeds reduce vessel availability and may bolster hire rates.
Japanese automaker Toyota has laid off 800 people at a plant in southwestern Japan, or about 10 percent of the plant's work force, in response to declining sales in North America, a company official said Tuesday.
Mike Allen: "A new book by the author Ron Suskind claims that the White House ordered the CIA to forge a back-dated, handwritten letter from the head of Iraqi intelligence to Saddam Hussein.
Suskind writes in “The Way of the World,” to be published Tuesday, that the alleged forgery – adamantly denied by the White House – was designed to portray a false link between Hussein’s regime and al Qaeda as a justification for the Iraq war.
The author also claims that the Bush administration had information from a top Iraqi intelligence official “that there were no weapons of mass destruction in Iraq – intelligence they received in plenty of time to stop an invasion.”
The letter’s existence has been reported before, and it had been written about as if it were genuine. It was passed in Baghdad to a reporter for The (London) Sunday Telegraph who wrote about it on the front page of Dec. 14, 2003, under the headline, “Terrorist behind September 11 strike ‘was trained by Saddam.’”
The Telegraph story by Con Coughlin (which, coincidentally, ran the day Hussein was captured in his “spider hole”) was touted in the U.S. media by supporters of the war, and he was interviewed on NBC's "Meet the Press."
The 10 percent of households with the highest incomes account for nearly a quarter of all spending, according to data compiled by research firm Moody's Economy.com from a 2006 federal survey.
"That does suggest those folks are important for the spending outlook, and the overall economic outlook," said Scott Hoyt, Moody's director of consumer economics.
Other government data show households in the top one-fifth of the U.S. population ranked by income earn about half of all total personal income before taxes — an imbalance that gives the wealthy immense economic clout, said Sara Johnson, an economist at the research firm Global Insight.
"Consumer spending makes up 70 percent of gross domestic product, and when one group accounts for a very substantial share of consumer spending, they also account for a large share of the economic activity that creates jobs," Johnson said.
EMarketer Inc. expects spending on such ads to grow to $25.9 billion this year, from $21.1 billion last year, and hit $30 billion in 2009.
Online advertising is "not going to grow as much as expected, but it's still going to be growing more than other media," Hallerman said.
Chinese factories reported a plunge in new orders last month. Exports are barely growing. The real estate market is weakening, with apartment prices sinking in southeastern China, the region hardest hit by economic troubles.
Weyerhaeuser said it expects challenging market conditions to continue into the third quarter, with operating losses "slightly less than second quarter." The company also said it closed the sale of its containerboard packaging assets unit on Tuesday.
Rep. Ron Paul: "Some mistakenly identify the falling home prices as the disease instead of merely a symptom - which they plan to fix with more easy credit and more liquidity to push more unqualified buyers back into the market for homes they still cannot afford. This is akin to the drug addict identifying withdrawal symptoms as his problem and searching for another fix as his solution. The cycle continues and the problems compound themselves. The addiction deepens.
Addicts are told the first step to recovery is to admit their problem. To cure this addiction to intervention we have to honestly admit the problem and once and for all, kick the habit. That will involve some pain, without a doubt. There is no easy, painless solution to the mess the disastrous economic interventions of the past have wrought. The question is - do we allow some lending institutions to collapse, or do we allow the dollar to collapse? To extend the metaphor, do we endure the temporary discomfort of withdrawal, or do we continue on until there is a fatal overdose? We can delay the agony, but only for a little while, and then we will all end up paying the price for the mistakes of a few.
With the final passage of the Housing Bailout Bill quietly on a Saturday in the Senate, and the President's signature, our government has unfortunately chosen the latter."
Rob Hanna: "The S&P fell on Monday for the third consecutive day. There are some short-term price indicators reaching oversold levels at this point. More often than not, when the market goes into a Fed meeting and is short-term oversold, the result is a bounce."
OPEC production reached its highest level so far this year in July on increased barrels from Saudi Arabia and Iraq and a recovery in Nigerian output, a Dow Jones Newswires survey released Friday said.
The 13 members of the Organization of Petroleum Exporting Countries pumped 32.675 million barrels a day on average last month, up 1.1%, or 366,000 barrels, from 32.309 million barrels a day in June.
The ISM nonmanufacturing index rose to 49.5% in July from 48.2% in June. The new-orders index fell to 47.9% from 48.6%, while employment rose to 47.1% from 43.8%. The production index slipped to 49.6% from 49.9%. Nine of 18 industries were growing in July.
Australia's central bank signaled it may cut borrowing costs for the first time in almost seven years as slowing economic growth cools inflation.
The Federal Reserve held interest rates steady on Tuesday, expressing concerns about both economic growth and inflation and indicating it is in no rush to push borrowing costs higher. Policymakers said "downside risks to growth remain" and "the inflation outlook remains highly uncertain."
Cisco's
earnings excluding items rose to 40 cents per share from 36 cents and exceeded the average analyst forecast by a penny, according to Reuters Estimates.
Quarterly revenue rose 9.9 percent to $10.4 billion, the first quarter in the company's history to surpass $10 billion, it said. Analysts on average expected revenue of $10.3 billion.
The Treasury Department announced Tuesday that it has hired Morgan Stanley to analyze Fannie Mae and Freddie Mac.
The Dow Jones Industrial Average gained 331 points, or 3%, to end at 11,615. This marked the blue chip index's biggest one-day point gain since April 1. The S&P 500 index gained 35 points, or 2.9%, to 1,284, while the Nasdaq Composite rose 64 points, or 2.8%, to 2,349.
September crude closed at $119.17 per barrel in New York Tuesday, down $2.24, or 1.2%, as concerns over oil demand continued.
December gold was up $1.80 at $887.90 an ounce in Globex electronic trading after the Federal Open Market Committee on Tuesday kept its benchmark federal funds rate unchanged at 2.0%. December gold had closed earlier on New York Mercantile Exchange at $886.10 with a loss of $21.80.
Weyerhaeuser Co.seeks to trim 1,500 jobs, or about 6% of its workforce, over the next 18 months, according to a conference call transcript from FactSet Research.
Hurricane forecasters Philip Klotzbach and William Gray at Colorado State University raised their forecasts for the Atlantic Hurricane season in a report issued Tuesday. The report pegs the total seasonal forecast at 17 named storms for the region, up from 15 predicted in June. The forecasters also raised the number of expected Altantic hurricanes to nine for the seasson, compared to eight in the June forecast.
Morgan Stanley told several thousand clients this week that they won't be allowed to withdraw money on their home- equity credit lines, said a person familiar with the situation.
The action mostly affected clients with properties that have lost value, according to the person, who declined to be identified because the information isn't public. The New York- based investment bank will review home equity lines of credit, or HELOCS, monthly from now on, the person said.
Foster Wheeler's consolidated backlog in terms of future revenue jumped, but new orders booked came in below levels seen in the year-earlier second quarter.
Freddie Mac said it swung to a second-quarter loss of $821 million, or $1.63 a share, after taking $2.5 billion in provisions for credit losses. Revenue fell to $1.69 billion from $2.34 billion. Analysts polled by FactSet Research had expected a loss of 38 cents a share. The mortgage giant is going to cut its third-quarter dividend to 5 cents a share or less from 25 cents a share and pay the full preferred dividend.
News Corp."isn't talking to anybody right now," said Chief Operating Officer Peter Chernin when asked if the commpany is talking to AOL, Yahoo or Microsoft about a possible deal or alliance.
Monday, August 04, 2008
Expensive Insurance
8/5/08 Expensive Insurance
John Hussman: " Once an ongoing (and in my view, probably deepening) recession becomes broadly recognized, we may observe abrupt losses as the likelihood of more sustained earnings disappointments and much broader default risk becomes reflected in one fell swoop...Having worked in the financial markets in one capacity or another for nearly three decades, I've observed that market declines typically don't hit bottom until sometime after the phrase “free fall” begins emerging with regularity. We haven't seen that yet. To the contrary, there appears to be a general consensus that the lows set a few weeks ago were, if not the final lows, quite close to the ultimate bottom."
Humana now sees annual earnings between $4.30 and $4.40 a share, up from a prior range of $4.10 to $4.35.
Industrial producer prices across the 15-nation euro zone rose at a monthly pace of 0.9% in June for an annual rise of 8%, Eurostat reported Monday.
The Kuwait Investment Authority plans to triple its investments in Japan to 48 billion dollars, the country's finance minister Mustafa al-Shimali said, according to a Nikkei business daily report Monday.
Vikas Bajaj: "Homeowners with good credit are falling behind on their payments in growing numbers, just as the problems with subprime mortgages have begun to level off."
Washington Post: "Democratic Sen. Barack Obama holds a 2 to 1 edge over Republican Sen. John McCain among the nation's low-wage workers, but many are unconvinced that either presidential candidate would be better than the other at fixing the ailing economy or improving the health-care system, according to a new national poll.
Obama's advantage is attributable largely to overwhelming support from two traditional Democratic constituencies: African Americans and Hispanics. But even among white workers -- a group of voters that has been targeted by both parties as a key to victory in November -- Obama leads McCain by 10 percentage points, 47 percent to 37 percent, and has the advantage as the more empathetic candidate.
Still, one in six of the white workers polled remains uncommitted to either candidate. And a majority of those polled, both white and minority, are ambivalent about the impact of the election, saying that no matter who wins, their personal finances are unlikely to change."
Real consumer spending fell in June for the first time since February as the windfall of cash from Washington was eaten up by the worst inflation in 27 years, the Commerce Department reported Monday. Nominal spending rose 0.6%, but the increase was all due to higher prices, which rose 0.8% during the month, the most in 27 years. Real spending (which is adjusted for inflation) fell 0.2% in June. Real disposable incomes fell 2.6% in June after a 5.2% gain in May. Inflation surged in June. The personal consumption expenditure price index rose 0.8% in June compared with May and is up 4.1% in the past year, the largest year-over-year inflation in 17 years.
The latest GDP rise comes from consumer spending, which rose 1.5% in Q2. Adjusted for inflation do you really believe that GDP rose in the quarter? If you do, then check your brain into life support.
Family-held department store chain Boscov's has filed for Chapter 11 bankruptcy protection, Reuters reported Monday, citing a Delaware court filing. The Reading, Pa. chain with 49 stores had $538 million of assets and $479 million of liabilities as of May 3, the report said. The company was hurt by a promotion where it gave customers who cashed their IRS rebate check at their stores an additional 10% payout.
Brett Steenbarger: "I continue to view the recent market bounce more in terms of sector rotation and short-covering than in terms of fresh longer-term capital being put to work to take advantage of attractive valuations. We need to see increased money flows and an expansion in the number of stocks registering fresh new highs for this rebound to have legs."
Iran's military tested a new naval weapon with a range of more than 300 kilometers (185 miles), the commander of the Islamic Revolutionary Guards Corps said.
The technology in the anti-ship weapon hasn't been used by other nations, Brigadier General Mohammad-Ali Ja'fari said today in comments carried by state-run news agencies including Press TV and the Islamic Republic News Agency. Details of the weapon weren't given.
Planned layoffs at U.S. companies totaled 103,312 in July, compared with June's 81,755, employment consulting firm Challenger, Gray & Christmas Inc said.
Announced job cuts at U.S. companies last month were the second highest total so far in 2008, more than double the 42,897 a year earlier, the report said.
George Ure: "Not only are the nation's banking reserves gone, but they are now funding their day-to-day operations on....tax dollars and printer's ink!...We lose how many umpteen billions in 401(k) and real estate equity, and see banks falling left and right, and yet as a national we still claim a positive savings rate? LOl, OMG who are we kidding? Maybe I can get some nitrous from that whipping cream can, too... "Special accounting rules' no doubt - sort of like banks borrowing all their assets and then some?"
Residential builder WCI Communities Inc. on Monday said it and about 130 subsidiaries have filed for Chapter 11 to restructure debt and capital. Billionaire investor Carl Icahn, the company's chairman, said the company had tried to avoid a bankruptcy filing, but it became necessary "because of the recent failed effort to obtain financing and the recognition that the company's entire $1.8 billion of debt may soon be in default."
Global airline passenger growth has slowed to 3.8%, its lowest since the industry was rocked by a SARS panic in 2003, the International Air Transport Association said Monday. Passenger load factors, which measures how many seats airlines are able to fill on the average flight, fell 1.2 points to 77.6%.
Bill Bonner: " Net corporate tax receipts are expected to fall by $100 billion in 2009. Net individual tax receipts should fall by $100 billion too. Hey, a billion here…a billion there…pretty soon, the government is running a trillion-dollar deficit…"
"GM credit spreads continue to be priced on the basis that just about everything will keep going wrong," Glenn Reynolds, senior analyst at fixed-income research service CreditSights, said in a report on Monday.
"The price action has now blown past the Chrysler meltdown of the second half of 1990" and is reminiscent of the bursting of the tech and telecommunications bubble, he said.
GM's five-year credit default swaps rose to 47.5 percent of the sum insured as an upfront payment from 46.5 percent at Friday's close, plus 500 basis points in annual payments, according to Phoenix Partners Group. This means it would cost $4.75 million to insure $10 million in debt for five years, plus $500,000 a year.
HSBC Holdings Plc said its first-half pretax loss in North America was $2.9 billion, compared with profit of $2.4 billion in the year-earlier period. U.S. consumer bad loan charges and other provisions rose 85 percent to $6.8 billion as the bank reduced its number of branches by 10 percent to 900 and said it would ``run off'' its $13 billion vehicle finance operation. The shares dropped 2 percent in London.
Second-quarter profits at the 355 companies in the S&P 500 that reported results so far dropped 20 percent on average, dragged down by losses at financial companies including Merrill Lynch & Co.
Mexican cement maker Cemex SAB de CV said Monday it will raise U.S. concrete prices $25 per cubic yard, effective Oct. 1, in response to escalating fuel prices.
"We have put forth this new, transparent pricing structure that will allow our customers to count on a firm price through January 2010," Gilberto Perez, president of Cemex USA, said in a statement.
"We are effectively removing all fuel surcharges and taking on fuel price risk through this time."
Beth Ann Bovino, senior economist at Standard & Poor's, says the Fed can't do much more than talk tough about inflation now.
Bovino believes the central bank will tighten as soon as there's evidence the economy is stabilizing, most likely in the second or third quarter of 2009. But the Fed's need to address inflation could stifle any recovery before it gets a chance to flourish; that's one big reason why Bovino thinks the recession will be "long" and admits the downturn could ultimately be a lot worse than "mild."
December gold closed at $907.60 an ounce in New York Monday, down $9.60, or 1%, for the session after trading as low as $903. September crude closed at $121.41 per barrel on the New York Mercantile Exchange Monday, down $3.69, or 3%, for the session. The contract marked its lowest closing level since May 6.
The iShares DJ U.S. Home Construction Index (ITB) was off nearly 4% at last check. The ETF is down almost 30% the past three months.
Corn futures slumped more than 3% Monday on concerns that cooler weather will help the crop's pollination. Soybeans and wheat also tumbled. Corn futures for December delivery slumped 20.25 cents, or 3.5%, to $5.65 a bushel on the Chicago Board of Trade. Soybeans for November delivery dropped 56 cents, or 4.1%, to $13.09 a bushel, and September wheat fell 29 cents, or 3.7%, to $7.65 a bushel. "A forecast for relatively cooler weather this week will be beneficial for" corn's pollination, said Elaine Kub, a grain analyst at commodities research firm DTN.
Pulte Homes Inc.'s CEO says a new, temporary tax credit for first-time homebuyers signed into law last week is a "shot in the arm" to the housing industry and the builder will help promote it by offering a matching discount.
The Energy Intelligence Group reported that global oil production remained at a record high of 87.8 million barrels per day in June, with global demand at 86.8 million barrels per day.
Merrill Lynch & Co Inc Chief Executive John Thain said Monday if the company loses more money, it may have to raise more capital, leaving the door open to further capital raises if markets deteriorate.
John Hussman: " Once an ongoing (and in my view, probably deepening) recession becomes broadly recognized, we may observe abrupt losses as the likelihood of more sustained earnings disappointments and much broader default risk becomes reflected in one fell swoop...Having worked in the financial markets in one capacity or another for nearly three decades, I've observed that market declines typically don't hit bottom until sometime after the phrase “free fall” begins emerging with regularity. We haven't seen that yet. To the contrary, there appears to be a general consensus that the lows set a few weeks ago were, if not the final lows, quite close to the ultimate bottom."
Humana now sees annual earnings between $4.30 and $4.40 a share, up from a prior range of $4.10 to $4.35.
Industrial producer prices across the 15-nation euro zone rose at a monthly pace of 0.9% in June for an annual rise of 8%, Eurostat reported Monday.
The Kuwait Investment Authority plans to triple its investments in Japan to 48 billion dollars, the country's finance minister Mustafa al-Shimali said, according to a Nikkei business daily report Monday.
Vikas Bajaj: "Homeowners with good credit are falling behind on their payments in growing numbers, just as the problems with subprime mortgages have begun to level off."
Washington Post: "Democratic Sen. Barack Obama holds a 2 to 1 edge over Republican Sen. John McCain among the nation's low-wage workers, but many are unconvinced that either presidential candidate would be better than the other at fixing the ailing economy or improving the health-care system, according to a new national poll.
Obama's advantage is attributable largely to overwhelming support from two traditional Democratic constituencies: African Americans and Hispanics. But even among white workers -- a group of voters that has been targeted by both parties as a key to victory in November -- Obama leads McCain by 10 percentage points, 47 percent to 37 percent, and has the advantage as the more empathetic candidate.
Still, one in six of the white workers polled remains uncommitted to either candidate. And a majority of those polled, both white and minority, are ambivalent about the impact of the election, saying that no matter who wins, their personal finances are unlikely to change."
Real consumer spending fell in June for the first time since February as the windfall of cash from Washington was eaten up by the worst inflation in 27 years, the Commerce Department reported Monday. Nominal spending rose 0.6%, but the increase was all due to higher prices, which rose 0.8% during the month, the most in 27 years. Real spending (which is adjusted for inflation) fell 0.2% in June. Real disposable incomes fell 2.6% in June after a 5.2% gain in May. Inflation surged in June. The personal consumption expenditure price index rose 0.8% in June compared with May and is up 4.1% in the past year, the largest year-over-year inflation in 17 years.
The latest GDP rise comes from consumer spending, which rose 1.5% in Q2. Adjusted for inflation do you really believe that GDP rose in the quarter? If you do, then check your brain into life support.
Family-held department store chain Boscov's has filed for Chapter 11 bankruptcy protection, Reuters reported Monday, citing a Delaware court filing. The Reading, Pa. chain with 49 stores had $538 million of assets and $479 million of liabilities as of May 3, the report said. The company was hurt by a promotion where it gave customers who cashed their IRS rebate check at their stores an additional 10% payout.
Brett Steenbarger: "I continue to view the recent market bounce more in terms of sector rotation and short-covering than in terms of fresh longer-term capital being put to work to take advantage of attractive valuations. We need to see increased money flows and an expansion in the number of stocks registering fresh new highs for this rebound to have legs."
Iran's military tested a new naval weapon with a range of more than 300 kilometers (185 miles), the commander of the Islamic Revolutionary Guards Corps said.
The technology in the anti-ship weapon hasn't been used by other nations, Brigadier General Mohammad-Ali Ja'fari said today in comments carried by state-run news agencies including Press TV and the Islamic Republic News Agency. Details of the weapon weren't given.
Planned layoffs at U.S. companies totaled 103,312 in July, compared with June's 81,755, employment consulting firm Challenger, Gray & Christmas Inc said.
Announced job cuts at U.S. companies last month were the second highest total so far in 2008, more than double the 42,897 a year earlier, the report said.
George Ure: "Not only are the nation's banking reserves gone, but they are now funding their day-to-day operations on....tax dollars and printer's ink!...We lose how many umpteen billions in 401(k) and real estate equity, and see banks falling left and right, and yet as a national we still claim a positive savings rate? LOl, OMG who are we kidding? Maybe I can get some nitrous from that whipping cream can, too... "Special accounting rules' no doubt - sort of like banks borrowing all their assets and then some?"
Residential builder WCI Communities Inc. on Monday said it and about 130 subsidiaries have filed for Chapter 11 to restructure debt and capital. Billionaire investor Carl Icahn, the company's chairman, said the company had tried to avoid a bankruptcy filing, but it became necessary "because of the recent failed effort to obtain financing and the recognition that the company's entire $1.8 billion of debt may soon be in default."
Global airline passenger growth has slowed to 3.8%, its lowest since the industry was rocked by a SARS panic in 2003, the International Air Transport Association said Monday. Passenger load factors, which measures how many seats airlines are able to fill on the average flight, fell 1.2 points to 77.6%.
Bill Bonner: " Net corporate tax receipts are expected to fall by $100 billion in 2009. Net individual tax receipts should fall by $100 billion too. Hey, a billion here…a billion there…pretty soon, the government is running a trillion-dollar deficit…"
"GM credit spreads continue to be priced on the basis that just about everything will keep going wrong," Glenn Reynolds, senior analyst at fixed-income research service CreditSights, said in a report on Monday.
"The price action has now blown past the Chrysler meltdown of the second half of 1990" and is reminiscent of the bursting of the tech and telecommunications bubble, he said.
GM's five-year credit default swaps rose to 47.5 percent of the sum insured as an upfront payment from 46.5 percent at Friday's close, plus 500 basis points in annual payments, according to Phoenix Partners Group. This means it would cost $4.75 million to insure $10 million in debt for five years, plus $500,000 a year.
HSBC Holdings Plc said its first-half pretax loss in North America was $2.9 billion, compared with profit of $2.4 billion in the year-earlier period. U.S. consumer bad loan charges and other provisions rose 85 percent to $6.8 billion as the bank reduced its number of branches by 10 percent to 900 and said it would ``run off'' its $13 billion vehicle finance operation. The shares dropped 2 percent in London.
Second-quarter profits at the 355 companies in the S&P 500 that reported results so far dropped 20 percent on average, dragged down by losses at financial companies including Merrill Lynch & Co.
Mexican cement maker Cemex SAB de CV said Monday it will raise U.S. concrete prices $25 per cubic yard, effective Oct. 1, in response to escalating fuel prices.
"We have put forth this new, transparent pricing structure that will allow our customers to count on a firm price through January 2010," Gilberto Perez, president of Cemex USA, said in a statement.
"We are effectively removing all fuel surcharges and taking on fuel price risk through this time."
Beth Ann Bovino, senior economist at Standard & Poor's, says the Fed can't do much more than talk tough about inflation now.
Bovino believes the central bank will tighten as soon as there's evidence the economy is stabilizing, most likely in the second or third quarter of 2009. But the Fed's need to address inflation could stifle any recovery before it gets a chance to flourish; that's one big reason why Bovino thinks the recession will be "long" and admits the downturn could ultimately be a lot worse than "mild."
December gold closed at $907.60 an ounce in New York Monday, down $9.60, or 1%, for the session after trading as low as $903. September crude closed at $121.41 per barrel on the New York Mercantile Exchange Monday, down $3.69, or 3%, for the session. The contract marked its lowest closing level since May 6.
The iShares DJ U.S. Home Construction Index (ITB) was off nearly 4% at last check. The ETF is down almost 30% the past three months.
Corn futures slumped more than 3% Monday on concerns that cooler weather will help the crop's pollination. Soybeans and wheat also tumbled. Corn futures for December delivery slumped 20.25 cents, or 3.5%, to $5.65 a bushel on the Chicago Board of Trade. Soybeans for November delivery dropped 56 cents, or 4.1%, to $13.09 a bushel, and September wheat fell 29 cents, or 3.7%, to $7.65 a bushel. "A forecast for relatively cooler weather this week will be beneficial for" corn's pollination, said Elaine Kub, a grain analyst at commodities research firm DTN.
Pulte Homes Inc.'s CEO says a new, temporary tax credit for first-time homebuyers signed into law last week is a "shot in the arm" to the housing industry and the builder will help promote it by offering a matching discount.
The Energy Intelligence Group reported that global oil production remained at a record high of 87.8 million barrels per day in June, with global demand at 86.8 million barrels per day.
Merrill Lynch & Co Inc Chief Executive John Thain said Monday if the company loses more money, it may have to raise more capital, leaving the door open to further capital raises if markets deteriorate.
Sunday, August 03, 2008
Storm Clouds
8/4/08 Storm Clouds
Prices at the gas pump continued their downward trend over the weekend, with the national average price for a gallon of self-serve regular hitting $3.892, a fraction of a penny lower than Friday, according to AAA's Daily Fuel Gauge Report. The average for midgrade gasoline was $4.059 and diesel was $4.674. While lower than the month-ago averages, when regular was $4.098, fuel prices are substantially higher than they were a year ago. On Aug. 2, 2007, the national average for a gallon of regular gasoline was $2.858.
Iran rebuffed an informal U.N Security Council deadline to stop expanding uranium enrichment or face more sanctions. Mahmoud Ahmadinejad reasserted his country's right to nuclear technology during discussions with Syria's president.
Obama campaign manager David Plouffe said “Due to the late date of the two parties’ nominating conventions, and the relatively short period between the end of the conventions and the first proposed debate, it is likely that the four Commission debates will be the sole series of debates in the fall campaign.”
The Federal Deposit Insurance Corporation revealed on Friday that it had issued warnings to four small US banks that lacked sufficient reserves to cover potential loan losses.
The cease-and-desist orders issued in June said the four banks needed to raise more capital, expand their loss allowances and better oversee and diversify their loan portfolios. A fifth bank was cited for violating consumer protection laws.
Larry Rohter: "Many see evidence that companies looking to keep prices low will have to move some production closer to consumers. Globe-spanning supply chains — Brazilian iron ore turned into Chinese steel used to make washing machines shipped to Long Beach, Calif., and then trucked to appliance stores in Chicago — make less sense today than they did a few years ago.
To avoid having to ship all its products from abroad, the Swedish furniture manufacturer Ikea opened its first factory in the United States in May. Some electronics companies that left Mexico in recent years for the lower wages in China are now returning to Mexico, because they can lower costs by trucking their output overland to American consumers."
Citywide in NYC, 2,216 residents have lost their homes to foreclosure already this year. The figure was 338 last month alone - compared to 203 in July 2007.
Mike Burk: "For the past week or so the market has been consolidating without any major glitches. There should be another leg up, soon. I expect the major indices to be higher on Friday August 8 than they were on Friday August 1."
“If we think about the Wal-Mart model, it is incredibly fuel-intensive at every stage, and at every one of those stages we are now seeing an inflation of the costs for boats, trucks, cars,” said Naomi Klein, the author of “The Shock Doctrine: The Rise of Disaster Capitalism.”
“That is necessarily leading to a rethinking of this emissions-intensive model, whether the increased interest in growing foods locally, producing locally or shopping locally, and I think that’s great.”
Nouriel Roubini: “Yes, That's $2 Trillion of Debt-Related Losses”
Brian Fabbri: "Business continues to layoff temporary workers and cut back hours
worked. Another 29k temporary workers were eliminated in July
raising the total of temporary jobs lost in the past 7 months to 189k;
this represents 29% of all private payroll jobs lost this year.
Temporary workers account for only 2.2% of all private workers on
establishment payrolls. Businesses, however, sensed that domestic
demand growth was beginning to cool last year and began reducing
its temporary work force starting in January 2007. Thus total
temporary jobs lost in the past 19 months cumulate to 268k.
Nevertheless, as the economic downturn deepens business will soon
have to begin cutting more core workers than they have."
Mike Shedlock: "Perhaps the boldest move by Freddie Mac on Thursday — and one that won’t get much press attention — was its decision to eliminate foreclosure timeline compensation altogether for servicers, effective immediately. In other words, servicers will no longer earn a bonus based on how quickly they can foreclose.
If that doesn’t scream “modify more loans,” then the GSE’s decision to double compensation for servicers in completing workouts certainly will. Freddie said it will now pay servicers $800 for a loan modification, $2,200 for a short payoff or make-whole preforeclosure sale, and $500 per repayment plan. Deeds-in-lieu of foreclosure didn’t get Freddie’s same endorsement, however, and will remain at the current incentive level of $250, the GSE said."
According to the WSJ, hedge funds appear set to post their worst monthly performance in six years as strategies run into trouble. Some previously highflying funds are sustaining declines in the double digits, and several managers are down more than 20% for the year.
The WSJ reported Chrysler Financial was unable to renew all of $30 billion in short-term debt it was trying to refinance in a month, coming up $5 billion to $6 billion short.
The FT said the Federal Reserve, European Central Bank and the Bank of England are likely to keep interest rates on hold this week, amid deteriorating global growth and high inflation.
Crude oil rose for a second day as a storm threatened U.S. output in the Gulf of Mexico and Israel and U.S. officials sought extra sanctions against Iran.
Tropical storm Edouard lies about 95 miles (155 kilometers) southeast of the Mississippi River mouth and may strengthen to a hurricane as it heads west toward Texas, the National Hurricane Center said. Oil rose from an 11-week low last week as U.S. fuel stockpiles fell and Iran ignored a deadline in its dispute with the United Nations over its nuclear research.
``Those wildcat factors'' are holding up prices today, Gavin Wendt, senior resources analyst at Fat Prophets in Sydney, said in a Bloomberg Television interview. ``Prices should be a lot stronger than they were a week ago,'' given the risks from the storm and Iran, he said.
The U.S. said on Sunday that Iran has left the United Nations Security Council no choice but to increase sanctions against it for ignoring demands that it halt sensitive nuclear activities.
Prices at the gas pump continued their downward trend over the weekend, with the national average price for a gallon of self-serve regular hitting $3.892, a fraction of a penny lower than Friday, according to AAA's Daily Fuel Gauge Report. The average for midgrade gasoline was $4.059 and diesel was $4.674. While lower than the month-ago averages, when regular was $4.098, fuel prices are substantially higher than they were a year ago. On Aug. 2, 2007, the national average for a gallon of regular gasoline was $2.858.
Iran rebuffed an informal U.N Security Council deadline to stop expanding uranium enrichment or face more sanctions. Mahmoud Ahmadinejad reasserted his country's right to nuclear technology during discussions with Syria's president.
Obama campaign manager David Plouffe said “Due to the late date of the two parties’ nominating conventions, and the relatively short period between the end of the conventions and the first proposed debate, it is likely that the four Commission debates will be the sole series of debates in the fall campaign.”
The Federal Deposit Insurance Corporation revealed on Friday that it had issued warnings to four small US banks that lacked sufficient reserves to cover potential loan losses.
The cease-and-desist orders issued in June said the four banks needed to raise more capital, expand their loss allowances and better oversee and diversify their loan portfolios. A fifth bank was cited for violating consumer protection laws.
Larry Rohter: "Many see evidence that companies looking to keep prices low will have to move some production closer to consumers. Globe-spanning supply chains — Brazilian iron ore turned into Chinese steel used to make washing machines shipped to Long Beach, Calif., and then trucked to appliance stores in Chicago — make less sense today than they did a few years ago.
To avoid having to ship all its products from abroad, the Swedish furniture manufacturer Ikea opened its first factory in the United States in May. Some electronics companies that left Mexico in recent years for the lower wages in China are now returning to Mexico, because they can lower costs by trucking their output overland to American consumers."
Citywide in NYC, 2,216 residents have lost their homes to foreclosure already this year. The figure was 338 last month alone - compared to 203 in July 2007.
Mike Burk: "For the past week or so the market has been consolidating without any major glitches. There should be another leg up, soon. I expect the major indices to be higher on Friday August 8 than they were on Friday August 1."
“If we think about the Wal-Mart model, it is incredibly fuel-intensive at every stage, and at every one of those stages we are now seeing an inflation of the costs for boats, trucks, cars,” said Naomi Klein, the author of “The Shock Doctrine: The Rise of Disaster Capitalism.”
“That is necessarily leading to a rethinking of this emissions-intensive model, whether the increased interest in growing foods locally, producing locally or shopping locally, and I think that’s great.”
Nouriel Roubini: “Yes, That's $2 Trillion of Debt-Related Losses”
Brian Fabbri: "Business continues to layoff temporary workers and cut back hours
worked. Another 29k temporary workers were eliminated in July
raising the total of temporary jobs lost in the past 7 months to 189k;
this represents 29% of all private payroll jobs lost this year.
Temporary workers account for only 2.2% of all private workers on
establishment payrolls. Businesses, however, sensed that domestic
demand growth was beginning to cool last year and began reducing
its temporary work force starting in January 2007. Thus total
temporary jobs lost in the past 19 months cumulate to 268k.
Nevertheless, as the economic downturn deepens business will soon
have to begin cutting more core workers than they have."
Mike Shedlock: "Perhaps the boldest move by Freddie Mac on Thursday — and one that won’t get much press attention — was its decision to eliminate foreclosure timeline compensation altogether for servicers, effective immediately. In other words, servicers will no longer earn a bonus based on how quickly they can foreclose.
If that doesn’t scream “modify more loans,” then the GSE’s decision to double compensation for servicers in completing workouts certainly will. Freddie said it will now pay servicers $800 for a loan modification, $2,200 for a short payoff or make-whole preforeclosure sale, and $500 per repayment plan. Deeds-in-lieu of foreclosure didn’t get Freddie’s same endorsement, however, and will remain at the current incentive level of $250, the GSE said."
According to the WSJ, hedge funds appear set to post their worst monthly performance in six years as strategies run into trouble. Some previously highflying funds are sustaining declines in the double digits, and several managers are down more than 20% for the year.
The WSJ reported Chrysler Financial was unable to renew all of $30 billion in short-term debt it was trying to refinance in a month, coming up $5 billion to $6 billion short.
The FT said the Federal Reserve, European Central Bank and the Bank of England are likely to keep interest rates on hold this week, amid deteriorating global growth and high inflation.
Crude oil rose for a second day as a storm threatened U.S. output in the Gulf of Mexico and Israel and U.S. officials sought extra sanctions against Iran.
Tropical storm Edouard lies about 95 miles (155 kilometers) southeast of the Mississippi River mouth and may strengthen to a hurricane as it heads west toward Texas, the National Hurricane Center said. Oil rose from an 11-week low last week as U.S. fuel stockpiles fell and Iran ignored a deadline in its dispute with the United Nations over its nuclear research.
``Those wildcat factors'' are holding up prices today, Gavin Wendt, senior resources analyst at Fat Prophets in Sydney, said in a Bloomberg Television interview. ``Prices should be a lot stronger than they were a week ago,'' given the risks from the storm and Iran, he said.
The U.S. said on Sunday that Iran has left the United Nations Security Council no choice but to increase sanctions against it for ignoring demands that it halt sensitive nuclear activities.
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