9/6/08 Non-Employment
The nation's unemployment rate jumped to 6.1% in August, the highest in almost five years, the Labor Department said Friday.This was the eight consecutive monthly decline. Emplyment is negative year over year. Nonfarm payrolls shrank by 84,000 in August. The labor market was also much weaker over the summer than previously estimated. Job losses totaled 160,000 in June and July, more than the previous estimate of 100,000. Average hourly earnings increased 7 cents, or 0.4% to $18.14. Earnings are up 3.6% in the past year. The average workweek remained steady at 33.7 hours. Unfortunately, inflation ate up the wage gains.
Barry Ritholtz provided that Merrill Lynch's David Rosenberg observes:
"Once the YoY trend in payrolls goes negative, it does not bounce back – it is the hallmark for a new trend that lasts more than a year; and at the trough reaches -1.5% to -2%. So, we have already seen 463,000 jobs cut so far this year, and the historical record would tell you that there is probably between another 1.5-2.0 million to go before the job market backdrop stabilizes."
Merrill Lynch & Co , battered by more than $40 billion of write-downs tied largely to mortgages, will likely incur fresh write-downs, in addition to those assumed after its recent sale of repackaged debt to Lone Star Funds, said an analyst at Goldman Sachs, who cut the stock to a "sell." Analyst William Tanona also widened his third-quarter loss forecast for the world's largest brokerage, while adding the stock to his Americas conviction sell list.
Samsung, one of the largest companies in South Korea, says it may want to buy US flash chip company Sandisk. The US firm's stock has dropped from a 52-week high of $56.46 to under $14.
It's been several years that I began urging you to consider cutting back on the U.S. dollar. Recently, we have witnessed a 10% rally in the dollar. In my view, this may be your last chance to cut back on dollar holdings. Waiting to cut your losses further is non-rational behavior.
George Ure: "On an inflation-adjusted basis, if you put in the Spring 2000 Dow Jones of 11,723 into the Federal Reserve's online inflation calculator, you'll see that in order to have just maintained purchasing power, the Dow would have to be at 14,677.58."
Total print ads in the U.S. were down 16 percent in the second quarter to $8.8 billion. That makes nine consecutive quarters in which “print revenues have declined at an almost continuously accelerating rate,” notes Alan Mutter at Reflections of a Newsosaur.
According to Bloomberg, global markets have lost $17 trillion since the market top in 2007, with global financial companies down 29%.
Bill Gross said during “Street Signs” Thursday that his firm would be staying out of any and all bank offerings for the foreseeable future. Banks the world over have raised $400 billion in capital, Gross said, and may need to raise much more.
The Bush administration has conducted an extensive spying operation on Prime Minister Nouri al-Maliki, his staff and others in the Iraqi government, according to a new book by Washington Post associate editor Bob Woodward.
"We know everything he says," according to one of multiple sources Woodward cites about the practice in "The War Within: A Secret White House History, 2006-2008," scheduled for release Monday.The book also says that the U.S. troop "surge" of 2007, in which President Bush sent nearly 30,000 additional U.S. combat forces and support troops to Iraq, was not the primary factor behind the steep drop in violence there during the past 16 months.
Rather, Woodward reports, "groundbreaking" new covert techniques enabled U.S. military and intelligence officials to locate, target and kill insurgent leaders and key individuals in extremist groups such as al-Qaeda in Iraq.
In a critical epilogue assessing the president's performance as commander-in-chief, Woodward concludes that Bush "rarely was the voice of realism on the Iraq war" and "too often failed to lead."
Interest-rate futures traders eliminated bets the Federal Reserve will increase its target interest rate by the end of the year as the Labor Department showed the U.S. unemployment rate jumped to 6.1% in August, the highest in above five years. As recently as Thursday, the December futures contract showed a 25% chance of a quarter-percentage point hike to 2.25%. Earlier this year, the futures market showed expectations of several increases from the current 2% target rate to combat inflation, but that is now seen as less likely in the face of a weakening job market.
At Thursday's close, the 50-day moving avaerage was below the 200-day moving average and the 50-week was approaching the 200-week moving average. This should be monitored
very diligently.
Chile's central bank raised its target interest rate to 8.25 percent, the highest in almost a decade, as policy makers step up the fight against inflation. Inflation reached a 13-year high of 9.5 percent in July.
Philippine inflation accelerated to the fastest pace in more than 16 years, adding pressure on the central bank to increase borrowing costs further in October. Consumer prices climbed 12.5 percent in August from a year earlier after rising a revised 12.3 percent in July.
It is important to note that Wal-Mart's reported same store sales are NOT adjusted for inflation. Hence, a gain of 3+% is simply no gain at all.
Russian Times: "The Russian Central Bank stepped into the market and sold up to $4 billion on Thursday to brake the ruble's fall, while shares went into free-fall despite a much-awaited shareholder peace deal on oil company TNK-BP.
The ruble fell as low as 30.41, its lowest since the current composition of the basket was set at 55 cents and 45 euro cents in February 2007.
The benchmark RTS Index closed 3.94 percent lower, at 1,526.57, less than a point above the intraday low that marked the index's weakest level this year. The RTS has not seen levels this low since October 2006.
Falling Western markets and fears that capital outflows could accelerate outweighed a long-awaited end to a conflict between BP and its local partners, which had played out in the international media and poisoned sentiment.
"It is easier to undermine investor trust than it is to revive it," said Alexander Orlov, head of research at Da Vinci Capital Management.
Over the past two years I have written many times about the decline in Mexico's Cantarell
oil field. Now Sean Broderick writes: "
Unlike a hurricane, this problem is not short-term, and in fact it will only get worse over time. I'm talking about the steep, sharp drop in production at Mexico's biggest oil field, Cantarell. I am getting increasingly frustrated by how little attention Americans are paying to this major crisis brewing in their backyard. So, I think maybe the mainstream news should start treating Cantarell the same way they do a hurricane. Maybe that would generate some attention! After all, Cantarell's decline has already cost us — 1.2 million barrels per day — the same amount we lost from Gustav.
The only difference: The Cantarell losses are permanent rather than temporary.
Mexico Is the World's #6 Oil Producing Nation;
Cantarell Provides Nearly 60% of Mexican Crude Oil Output
In July, output at Mexico's largest oil field, Cantarell, was off 37% from the year earlier period, dropping to 974,000 barrels per day (bpd). What's more, Cantarell's production has already been cut by more than half from its 2004 peak of 2.113 million barrels per day.
Since Cantarell is the biggest Mexican oil field by far, it is dragging down that country's production overall. Combined with Mexico's rising fuel consumption, the amount of oil that Mexico has to export to the U.S. is dropping like a stone.
I can't overstate the importance of Cantarell to global oil production and U.S. oil imports ...
Cantarell is a "supergiant" — as big as combining the four biggest oil fields ever found in the U.S. side of the Gulf.
As of June (the latest EIA statistics available), Mexico was the third-largest supplier of oil to the U.S. — behind Saudi Arabia and Canada — but that might not continue...
Mexico's crude oil production dropped 10% in the first seven months of 2008 to an average of 2.845 million bpd. Meanwhile, oil exports in the January-July period dropped 16.3% to an average of 1.443 million bpd.
In other words, Mexico's oil exports are dropping much faster than its production... A senior Pemex executive said in July that output at Cantarell would drop to just 600,000 bpd by 2012. At the current rate of decline (37%), Cantarell will probably hit that production level at the end of next year."
Those believing crude's drop is going to continue are fooling themselves. How much longer does Saudi Arabia want to get stuck with our drooping dollar? Are we going to take over Canada?
The rate of mortgages entering foreclosure hit another record high in the second quarter, as did the percentage of loans somewhere in the foreclosure process, the Mortgage Bankers Association reported on Friday. The delinquency rate, which measures mortgages that aren't in foreclosure but have at least one overdue payment, also was the highest ever recorded in the MBA's quarterly survey.
"While our cranes and materials processing and mining segments continue to perform better than our expectations, continued market softening and input costs in the aerial work platforms and construction segments in Western Europe and the United States are expected to more than offset those positive factors," said Ron DeFeo, Terex Chairman and Chief Executive Officer.
The FT reported National City, the US bank that has been among the hardest hit by the subprime crisis, is trying to reduce its exposure to the riskiest category of home loans by offering customers cash to close their untapped home equity lines.
Daniel Amerman: "Actual losses in the US real estate market are much higher than what you have been reading in the newspapers recently. Using a combination of official government statistics and the most widely used index of housing values, we will demonstrate that the US real estate market has lost a total of $6 trillion in value in the last two years. We will show that an average house that was worth about $226,000 in 2006 is, once you adjust for inflation, down to a real value of only about $160,000. To put what a $6 trillion loss is into perspective, we will show that when all factors are taken into account, the two year drop in US real estate values is equivalent to wiping out the entire retirement savings of all 78 million Baby Boomers, and annual housing losses are close to the annual GDP of China."
"You haven't heard a word about how we're going to deal with any aspect of the economy that is affecting you and your pocketbook day-to-day," Obama told reporters in York, Pennsylvania. "Haven't heard a word about it. I'm not exaggerating. Literally, two nights, they have not said a word about it."
The charge that McCain is ignoring the economy is also worrying some in the GOP. Republican strategists say that after a week of speeches focused largely on reform and national security, McCain's biggest hurdle remains the economy.
"I think it's the greatest challenge," former McCain adviser Mark McKinnon said, at a Thursday discussion looking ahead to the fall campaign, referring to economic and health care issues.
Republicans are trailing the Democrats in party identification and registration. Democrats have registered record numbers of new voters.
Boeing machinists will begin a strike at midnight after contract talks with a federal mediator failed, according to reports Friday.
October crude closed at a fresh five-month low of $106.23 per barrel on the New York Mercantile Exchange Friday, down $1.66 for the session to lose 8% for the week. Gold for December delivery closed down 40 cents at $802.80 an ounce on the New York Mercantile Exchange after trading as high as $823.10. Gold has lost $32.4, or 3.9%, in the week.
Friday, September 05, 2008
Another Big Down Day
9/5/08 Another Big Down Day
Dreamland news: For the last year, productivity increased to 3.4% from the previously reported 2.8%. This is the fastest annual increase in productivity in four years. Unit labor costs rose 0.6% year-over-year, compared with the previous estimate of 1.5%.
The Energy Information Administration estimates that heating oil prices are expected to reach $4.34 a gallon across the nation this year.
First-time claims for state unemployment benefits had their biggest jump in five weeks, the Labor Department reported Thursday. The number of initial claims in the week ending August 20 rose 15,000 to 444,000. It's the highest level since the week ended August 9. Claims in the previous week were revised to a decrease of 6,000 to 429,000 compared with the initial estimate of a fall of 10,000 to 425,000. The four-week average of initial claims fell 3,250 to 438,000. Meanwhile, the number of Americans receiving state jobless benefits held steady rose 6,000 to 3.44 million in the week ending August 23.This is the highest level since November 2003. The four-week moving average of continuing claims rose 33,250 to 3.4 million. This is also the highest level since November 2003.
U.S. private-sector employment fell 33,000 in August, according to a media report of the ADP employment index released Thursday. Analysts surveyed by MarketWatch were looking for a drop of 25,000. Adding in some 20,000 government workers typically hired in a given month, the ADP index suggests U.S. nonfarm payrolls fell about 13,000 in August.
Wal-Mart Stores Inc.said Thursday its August sales at U.S. stores open at least one year rose 3%, excluding fuel.
Korea Asset Management Corp's CEO Lee Chol Hwi told Bloomberg News in an interview that it may be "difficult" for the firm to buy assets from Merrill Lynch because of a difference in how the firms value the assets. ``We have been seeking to buy a significant amount, but a deal may be difficult at this rate," the CEO was quoted as saying. Lee also said Korea Asset may buy non-performing loans from Lehman Brothers and other companies, the report said. Korea Asset set up a 1 trillion won, or $871 million, fund to invest in bad debts in the U.S.
Toll's third-quarter net contracts -- after cancellations -- totaled 812 homes valued at $469.9 million. The figures are down 27% in units and 35% in dollars from the year-earlier period. Toll said that buyers canceled 195 contracts in the quarter, the lowest figure in nine quarters. At the end of the quarter, Toll had $1.5 billion of cash and more than $1.3 billion available under a bank-credit line maturing in March 2011. Debt at July 31 was 18% of total capital, the company's lowest historic level, Toll said.
Sweden's Riksbank on Thursday raised its repo rate by a quarter of a percentage point to 4.75% and said the lending rate is likely to remain unchanged for the rest of the year.
Boeing Co faces a walkout by 27,000 workers on Friday after members of its largest labor union rejected the planemaker's contract offer and voted to strike unless a compromise is reached in time.
The International Association of Machinists (IAM) said 87 percent of its members had voted to strike from midnight on Wednesday but would hold off for 48 hours to allow last-ditch talks to prevent an economically damaging strike.
Hurricane Gustav may be long gone, but more than a dozen Gulf Coast refineries remained shut down Wednesday, raising the specter of higher gasoline prices if the plants don't reopen soon.
Robert McHugh: "We are likely to see a large price move either Thursday or Friday, as we got an extremely small change in the McClellan Oscillator Tuesday and again Wednesday, and if wave 2 up is over, that move should be down. It is more and more likely that wave {c} of 2 up completed its Rising Bearish Wedge Tuesday, with the spike rally at the open, followed by the afternoon plunge. If so, it means the top of wave {c} is below wave {a}, a truncated rally. The 30 minute and 15 minute Full Stochastics argue there could be a decline in stock prices by the close on Thursday. The short-term EW labeling considers that a small degree wave 2 occurred Wednesday, meaning a bunch of waved 3's down could be next."
Brett Steenbarger: "News coming from the housing market has hardly been positive, but the homebuilder stocks seem to be looking beyond the current weakness. The rise in fixed income prices--the 10-year Treasury yield fell below 3.7% today--would seem to suggest economic weakness and a flight to safe yields. All the more interesting, then, that we're seeing relative strength among consumer discretionary and housing issues."
Between The Hedges: " I continue to see evidence of forced selling. I suspect the many hedge funds that had massively overweight commodities are seeing redemption notices right now, which is leading to pressure in many non-commodity stocks as they are forced to liquidate holdings to meet these redemptions. As well, margin calls are likely a factor. We should see the broad market lift when this forced selling subsides."
On Wednesday, Bloomberg reported Aluminum fell for an eighth day, the longest losing streak since 2001, on signs manufacturers are delaying purchases until economic growth improves. Nickel, copper and zinc advanced.
Stockpiles of aluminum climbed 2,650 metric tons, or 0.2 percent, to 1.17 million tons, the highest since April 2004, the London Metal Exchange said today. European company investment fell 1.2 percent in the second quarter, the first decline in five years, the European Union's statistics office said today.
George Ure: "Tomorrow morning we'll get the newest unemployment report. I expect it will be flat to maybe up a tenth. But, just between us, we know that one reason for the 'low unemployment rate is the multiple wars the West is waging. Drop those and I expect unemployment would be a full 2 percentage points higher and maybe 4. And remember, 'discouraged job seekers' (those who have run out of benefits) don't count. "
Through the Wednesday close, the S&P 500 has rebounded 4.9 percent from its 2008 low on July 15 as oil tumbled 21 percent. The index has still lost 13 percent this year as subprime-related losses at global banks climbed above $500 billion and the U.S. economy teetered on the brink of a recession.
Iran has invited Brazil to join the Organization of Petroleum Exporting Countries, Latin America News Digest reported Wednesday.
The New York Times reports:"Procter & Gamble, for example, has raised by 7 percent to 10 percent the prices it charges retailers for items made with ingredients derived from oil. The company is planning to maintain the increase 'to recover costs already incurred,' Paul Fox, a spokesman, said."
Nouriel Roubini: "
It is by now clear that the shopped-out, saving-less and debt-burdened US consumer is on the ropes and that there will be a significant and persistent contraction of real consumption for the next few quarters. About a dozen separate negative headwinds – to be described in detail in this note - are now hitting the US consumer while the positive effects on consumption of the tax rebates are already fading away.
That rebate boost was supposed to stimulate consumption until august of this year instead after a recovery of retail sales, real personal spending and consumption in April and May real retail sales and real personal consumption spending have fallen already in June and July. So consumers stopped consuming in spite of the tax rebates instead of spending such rebates (so far only 30% of them have been spent). This suggests that real consumption will certainly fall in Q3 and will continue to fall for a while into the middle of 2009. Real consumption did not fall in the 2001 recession and you have to go back to the 1990-91 recession to see a single quarter of negative consumption growth."
Natural-gas inventories rose by 90 billion cubic feet for the week ended August 29, the Energy Department said Thursday. That matched an estimate from analysts at Global Insight. Total stocks now stand at 2.847 trillion cubic feet, down 148 billion cubic feet from the year-ago level but 102 billion cubic feet above the five-year average, the government data said. October natural gas was down 16.2 cents, or 2.2%, at $7.102 per million British thermal units on Globex.
Steve Benen: "It started like a harmless joke, didn't it? Sarah Palin is from Alaska, Alaska is near Russia, and since Republican rhetoric has become breathtakingly ridiculous lately, some of us joked that Republicans might think the proximity between the state and the country counts as foreign policy experience. It was meant as satire. No one really expected Republicans to make the argument.
And yet, he we are. On ABC's "World News Tonight," none other than John McCain became the latest Republican to make the connection.
GIBSON: But as you know, the questions revolve really around foreign policy experience. Can you honestly say you feel confident having someone who hasn't traveled outside the United States until last year, dealing with an insurgent Russia, with an Iran with nuclear ambitions, with an unstable Pakistan, not to mention the war on terror?MCCAIN: Sure. And one of the key elements of America's national security requirements are energy. She understands the energy issues better than anybody I know in Washington, D.C., and she understands. Alaska is right next to Russia. She understands that."
Longtime Boca Raton homebuilder Oriole Homes Corp. filed an assignment for the benefit of creditors in Palm Beach County and plans to liquidate its assets.
A survey being released Thursday by the Mercer consulting firm found 59 percent of companies intend to keep down rising health care costs in 2009 by raising workers' deductibles, copays or out-of-pocket spending limits. On average, health care costs will go up by an estimated 5.7 percent next year for both workers and their employers, the study found. That repeats this year's 5.7 percent hike and a 6.1 percent jump in 2007.
The American Petroleum Institute reported Thursday a rise of 4.2 million barrels in crude supplies for the week ended August 29. The Energy Department had reported a decline of 1.9 million barrels for the latest week. Motor gasoline supplies were up 935,000 million barrels, the API said. The government had reported that supplies fell by 1 million barrels. Distillate supplies were down 157,000 barrels, the API said. They were down 400,000 barrels for the week, according to the Energy Department.
The Dow Jones Industrial Average dropped 344 points, or 3%, at 11,188, with 29 of its 30 components ending in the red. The Dow suffered its worst percentage drop since June 26. The S&P 500 index fell 38 points, or 3%, to 1,236, while the Nasdaq Composite slid 74 points, or 3.2%, to 2,259.
October crude fell $1.46, or 1.3%, to close at $107.89 per barrel on the New York Mercantile Exchange Thursday. Gold for December delivery slid $5, or 0.6%, to close at $803.20 an ounce on the New York Mercantile Exchange.
According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $4.732 billion in the week ended 9/3/08 with Domestic funds reporting net inflows of $5.621 billion and Non-domestic funds reporting net outflows of -$889 million;
Excluding ETF activity, Equity funds report net cash outflows totaling -$398 million with Domestic funds reporting net inflows of $170 million and Non-domestic funds reporting net outflows totaling -$567 million.
The People's Bank of China, China's central bank, has begun discussions with the finance ministry on ways to shore up its capital, The New York Times reported, citing three people familiar with the discussions. The move could makes it less likely that China will allow the yuan to continue rising against the dollar, and accepting an injection of capital from the finance ministry could reduce the independence of the central bank, the report said. The central bank is in need of capital because of its roughly $1 trillion purchase of U.S. Treasury bonds and Fannie Mae- and Freddie Mac-issued mortgage-backed debt, which have dropped in value in yuan terms.
Altria is in advanced talks to buy UST, the maker of the popular Skoal and Copenhagen smokeless tobacco brands, for more than $10 billion, The New York Times reported on its Web site, citing people with close knowledge of the negotiations.
Dreamland news: For the last year, productivity increased to 3.4% from the previously reported 2.8%. This is the fastest annual increase in productivity in four years. Unit labor costs rose 0.6% year-over-year, compared with the previous estimate of 1.5%.
The Energy Information Administration estimates that heating oil prices are expected to reach $4.34 a gallon across the nation this year.
First-time claims for state unemployment benefits had their biggest jump in five weeks, the Labor Department reported Thursday. The number of initial claims in the week ending August 20 rose 15,000 to 444,000. It's the highest level since the week ended August 9. Claims in the previous week were revised to a decrease of 6,000 to 429,000 compared with the initial estimate of a fall of 10,000 to 425,000. The four-week average of initial claims fell 3,250 to 438,000. Meanwhile, the number of Americans receiving state jobless benefits held steady rose 6,000 to 3.44 million in the week ending August 23.This is the highest level since November 2003. The four-week moving average of continuing claims rose 33,250 to 3.4 million. This is also the highest level since November 2003.
U.S. private-sector employment fell 33,000 in August, according to a media report of the ADP employment index released Thursday. Analysts surveyed by MarketWatch were looking for a drop of 25,000. Adding in some 20,000 government workers typically hired in a given month, the ADP index suggests U.S. nonfarm payrolls fell about 13,000 in August.
Wal-Mart Stores Inc.said Thursday its August sales at U.S. stores open at least one year rose 3%, excluding fuel.
Korea Asset Management Corp's CEO Lee Chol Hwi told Bloomberg News in an interview that it may be "difficult" for the firm to buy assets from Merrill Lynch because of a difference in how the firms value the assets. ``We have been seeking to buy a significant amount, but a deal may be difficult at this rate," the CEO was quoted as saying. Lee also said Korea Asset may buy non-performing loans from Lehman Brothers and other companies, the report said. Korea Asset set up a 1 trillion won, or $871 million, fund to invest in bad debts in the U.S.
Toll's third-quarter net contracts -- after cancellations -- totaled 812 homes valued at $469.9 million. The figures are down 27% in units and 35% in dollars from the year-earlier period. Toll said that buyers canceled 195 contracts in the quarter, the lowest figure in nine quarters. At the end of the quarter, Toll had $1.5 billion of cash and more than $1.3 billion available under a bank-credit line maturing in March 2011. Debt at July 31 was 18% of total capital, the company's lowest historic level, Toll said.
Sweden's Riksbank on Thursday raised its repo rate by a quarter of a percentage point to 4.75% and said the lending rate is likely to remain unchanged for the rest of the year.
Boeing Co faces a walkout by 27,000 workers on Friday after members of its largest labor union rejected the planemaker's contract offer and voted to strike unless a compromise is reached in time.
The International Association of Machinists (IAM) said 87 percent of its members had voted to strike from midnight on Wednesday but would hold off for 48 hours to allow last-ditch talks to prevent an economically damaging strike.
Hurricane Gustav may be long gone, but more than a dozen Gulf Coast refineries remained shut down Wednesday, raising the specter of higher gasoline prices if the plants don't reopen soon.
Robert McHugh: "We are likely to see a large price move either Thursday or Friday, as we got an extremely small change in the McClellan Oscillator Tuesday and again Wednesday, and if wave 2 up is over, that move should be down. It is more and more likely that wave {c} of 2 up completed its Rising Bearish Wedge Tuesday, with the spike rally at the open, followed by the afternoon plunge. If so, it means the top of wave {c} is below wave {a}, a truncated rally. The 30 minute and 15 minute Full Stochastics argue there could be a decline in stock prices by the close on Thursday. The short-term EW labeling considers that a small degree wave 2 occurred Wednesday, meaning a bunch of waved 3's down could be next."
Brett Steenbarger: "News coming from the housing market has hardly been positive, but the homebuilder stocks seem to be looking beyond the current weakness. The rise in fixed income prices--the 10-year Treasury yield fell below 3.7% today--would seem to suggest economic weakness and a flight to safe yields. All the more interesting, then, that we're seeing relative strength among consumer discretionary and housing issues."
Between The Hedges: " I continue to see evidence of forced selling. I suspect the many hedge funds that had massively overweight commodities are seeing redemption notices right now, which is leading to pressure in many non-commodity stocks as they are forced to liquidate holdings to meet these redemptions. As well, margin calls are likely a factor. We should see the broad market lift when this forced selling subsides."
On Wednesday, Bloomberg reported Aluminum fell for an eighth day, the longest losing streak since 2001, on signs manufacturers are delaying purchases until economic growth improves. Nickel, copper and zinc advanced.
Stockpiles of aluminum climbed 2,650 metric tons, or 0.2 percent, to 1.17 million tons, the highest since April 2004, the London Metal Exchange said today. European company investment fell 1.2 percent in the second quarter, the first decline in five years, the European Union's statistics office said today.
George Ure: "Tomorrow morning we'll get the newest unemployment report. I expect it will be flat to maybe up a tenth. But, just between us, we know that one reason for the 'low unemployment rate is the multiple wars the West is waging. Drop those and I expect unemployment would be a full 2 percentage points higher and maybe 4. And remember, 'discouraged job seekers' (those who have run out of benefits) don't count. "
Through the Wednesday close, the S&P 500 has rebounded 4.9 percent from its 2008 low on July 15 as oil tumbled 21 percent. The index has still lost 13 percent this year as subprime-related losses at global banks climbed above $500 billion and the U.S. economy teetered on the brink of a recession.
Iran has invited Brazil to join the Organization of Petroleum Exporting Countries, Latin America News Digest reported Wednesday.
The New York Times reports:"Procter & Gamble, for example, has raised by 7 percent to 10 percent the prices it charges retailers for items made with ingredients derived from oil. The company is planning to maintain the increase 'to recover costs already incurred,' Paul Fox, a spokesman, said."
Nouriel Roubini: "
It is by now clear that the shopped-out, saving-less and debt-burdened US consumer is on the ropes and that there will be a significant and persistent contraction of real consumption for the next few quarters. About a dozen separate negative headwinds – to be described in detail in this note - are now hitting the US consumer while the positive effects on consumption of the tax rebates are already fading away.
That rebate boost was supposed to stimulate consumption until august of this year instead after a recovery of retail sales, real personal spending and consumption in April and May real retail sales and real personal consumption spending have fallen already in June and July. So consumers stopped consuming in spite of the tax rebates instead of spending such rebates (so far only 30% of them have been spent). This suggests that real consumption will certainly fall in Q3 and will continue to fall for a while into the middle of 2009. Real consumption did not fall in the 2001 recession and you have to go back to the 1990-91 recession to see a single quarter of negative consumption growth."
Natural-gas inventories rose by 90 billion cubic feet for the week ended August 29, the Energy Department said Thursday. That matched an estimate from analysts at Global Insight. Total stocks now stand at 2.847 trillion cubic feet, down 148 billion cubic feet from the year-ago level but 102 billion cubic feet above the five-year average, the government data said. October natural gas was down 16.2 cents, or 2.2%, at $7.102 per million British thermal units on Globex.
Steve Benen: "It started like a harmless joke, didn't it? Sarah Palin is from Alaska, Alaska is near Russia, and since Republican rhetoric has become breathtakingly ridiculous lately, some of us joked that Republicans might think the proximity between the state and the country counts as foreign policy experience. It was meant as satire. No one really expected Republicans to make the argument.
And yet, he we are. On ABC's "World News Tonight," none other than John McCain became the latest Republican to make the connection.
GIBSON: But as you know, the questions revolve really around foreign policy experience. Can you honestly say you feel confident having someone who hasn't traveled outside the United States until last year, dealing with an insurgent Russia, with an Iran with nuclear ambitions, with an unstable Pakistan, not to mention the war on terror?MCCAIN: Sure. And one of the key elements of America's national security requirements are energy. She understands the energy issues better than anybody I know in Washington, D.C., and she understands. Alaska is right next to Russia. She understands that."
Longtime Boca Raton homebuilder Oriole Homes Corp. filed an assignment for the benefit of creditors in Palm Beach County and plans to liquidate its assets.
A survey being released Thursday by the Mercer consulting firm found 59 percent of companies intend to keep down rising health care costs in 2009 by raising workers' deductibles, copays or out-of-pocket spending limits. On average, health care costs will go up by an estimated 5.7 percent next year for both workers and their employers, the study found. That repeats this year's 5.7 percent hike and a 6.1 percent jump in 2007.
The American Petroleum Institute reported Thursday a rise of 4.2 million barrels in crude supplies for the week ended August 29. The Energy Department had reported a decline of 1.9 million barrels for the latest week. Motor gasoline supplies were up 935,000 million barrels, the API said. The government had reported that supplies fell by 1 million barrels. Distillate supplies were down 157,000 barrels, the API said. They were down 400,000 barrels for the week, according to the Energy Department.
The Dow Jones Industrial Average dropped 344 points, or 3%, at 11,188, with 29 of its 30 components ending in the red. The Dow suffered its worst percentage drop since June 26. The S&P 500 index fell 38 points, or 3%, to 1,236, while the Nasdaq Composite slid 74 points, or 3.2%, to 2,259.
October crude fell $1.46, or 1.3%, to close at $107.89 per barrel on the New York Mercantile Exchange Thursday. Gold for December delivery slid $5, or 0.6%, to close at $803.20 an ounce on the New York Mercantile Exchange.
According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $4.732 billion in the week ended 9/3/08 with Domestic funds reporting net inflows of $5.621 billion and Non-domestic funds reporting net outflows of -$889 million;
Excluding ETF activity, Equity funds report net cash outflows totaling -$398 million with Domestic funds reporting net inflows of $170 million and Non-domestic funds reporting net outflows totaling -$567 million.
The People's Bank of China, China's central bank, has begun discussions with the finance ministry on ways to shore up its capital, The New York Times reported, citing three people familiar with the discussions. The move could makes it less likely that China will allow the yuan to continue rising against the dollar, and accepting an injection of capital from the finance ministry could reduce the independence of the central bank, the report said. The central bank is in need of capital because of its roughly $1 trillion purchase of U.S. Treasury bonds and Fannie Mae- and Freddie Mac-issued mortgage-backed debt, which have dropped in value in yuan terms.
Altria is in advanced talks to buy UST, the maker of the popular Skoal and Copenhagen smokeless tobacco brands, for more than $10 billion, The New York Times reported on its Web site, citing people with close knowledge of the negotiations.
Thursday, September 04, 2008
20-Day Volume
9/4/08 20-Day Volume
Coca-Cola Co will pay $2.5 billion for Chinese juice maker Huiyuan (1886.HK), triple its value, strengthening the world's leading drinks maker's hold on a booming market in the biggest foreign takeover in China. The U.S. firm will pay HK$12.20 a share in cash -- 43 times Huiyuan's forecast 2008 earnings and nearly three times its Friday close of HK$4.14, sending the Chinese firm's shares up 170 percent.
China's big banks, having trimmed their holdings of U.S. mortgage-related debt, are facing increasingly difficult decisions about how to invest their sizable foreign-currency holdings.
Amid jitters about the future of Fannie Mae and Freddie Mac, China's four biggest listed banks have pared back their holdings in debt related to the two U.S. mortgage giants. At the end of June, the four banks held a combined $23.28 billion of debt issued or guaranteed by Fannie and Freddie. That's a small fraction of the trillions of dollars outstanding, but the reductions attracted interest as a possible gauge of broader sentiment toward such securities.
Barack Obama met the 50 percent threshold for the first time Tuesday in the Gallup daily tracking poll, a symbolic hurdle that until now had eluded the Democratic nominee.
The Gallup daily tracking poll has found that since the conclusion of the Democratic convention, Obama has risen 5 percentage points in the polls and now leads John McCain 50 percent to 42 percent.
Brett Steenbarger: "I see that Rennie Yang, author of the excellent Market Tells service, observes that 20-day volume in the stock market has made a seven-year low. "Once in 2004 and a couple of times in the 70's NYSE volume hit a three-year low," he observes, "but this is the first time in the last fifty years we've seen it hit a 5-year+ low. Volume is not just low, it's really low." Of course, it's not just that volume is low; it's that we are seeing reduced volume following a bounce from the mid-July lows. If you think in Market Profile terms, this means that higher prices are failing to attract participation--not something you'd expect to see if this were a fresh bull market leg."
U.S. companies' announced layoffs in August fell from July, but were running above the level set a year ago, suggesting persistent weakness in the labor market, a report released Wednesday showed.
Downsizing at U.S. companies last month totaled 88,736, 14 percent lower than in July, but 12 percent higher than August 2007, employment consulting firm Challenger, Gray & Christmas Inc. said.
"We have not seen this level of summer job cutting since 2002, when the country was still struggling to recover in the wake of the 2001 recession and September 11 (attacks)," said John Challenger, chief executive officer of Challenger, Gray & Christmas, in a statement.
Year-to-date, planned layoffs total 667,996, up 29 percent from 515,855 during the same eight-month period in 2007.
The Korean won is now at a near four-year low against even the dollar and has fallen almost 21 percent in the past year, and 11 percent in the past three months, including a 9 percent drop against an anemic yen. Those who forecast it would end 2008 below 900 to the dollar now talk about 1200. For sure, the US dollar has been experiencing a revival against most currencies (China’s excepted) but that does not explain why Korea’s has been so hard hit even compared with Asian ones with far worse political problems and no better economics.
Almost every statistic that comes out of Korea is now treated as a horror story by the analysts from houses with fine records of losing other people’s money while paying themselves huge amounts.
Falling exports and lower household spending caused the euro economy to shrink by 0.2 percent in the second quarter, EU statistics showed Wednesday.
Oil analysts doubted that Opec would agree to an output cut at its conference in Vienna on September 9, but unease over the price fall is being seen even in Saudi Arabia, the most moderate Opec member. Saudi Aramco has been cutting the discount at which it sells Arab heavy, a poor-quality crude which it uses to calm the oil price, off- ering large quantities at big discounts.
Leo Drollas, of the Centre for Global Energy Studies, said: “[The Saudis] . . . fear heavy oil price falls. They are trying to anticipate that by not putting much oil on the market.”
Chris Mayer: "The Economist ran a good piece recently highlighting industry's reliance on water and water's relationship in producing so many goods. In Silicon Valley, for instance, 25% of the water use is for making computer chips. Across the country, 40% of the water drawn from lakes and aquifers goes toward cooling power plants. The link between water and energy is strong and largely unappreciated, but not by industry insiders.
"According to a recent survey by the Marsh Center for Risk Insights, 40% of Fortune 100 companies recognize that the impact of a water shortage on their businesses would be 'severe' or 'catastrophic.' "
Frank Barbera: "Since mid-July, stocks have experienced a lot of short term volatility with the DJIA posting 13 sessions of the last 30 days with daily closes in excess of 150 points up or down. Today, was more evidence of this wild volatility with the market soaring higher at the opening and then giving back all of the gains. Since roughly mid-July 18th to present, the net gain thru last Friday's close was only a gain of 47.39 DJIA index points -- how ironic. Essentially, stocks have been riding the roller coaster up and down, but overall have really been going nowhere fast. Unfortunately, this is not a good sign in the larger outlook for stocks as very substantial oversold conditions, which had previously built up going into the lows in March and in mid-July, are beginning to unwind without the market averages having made enough progress to reverse the larger bearish tide. This type of failing price action is indicative of bear market rallies, rallies ultimately pre-disposed to roll over into even larger declines."
Sales of new imported vehicles in Japan plunged about 40% in August for the fourth straight monthly decline, affected by high gasoline prices and an economic slowdown in the country, industry sources said Tuesday.
Sales excluding Japanese-brand vehicles built overseas fell nearly 30%, the sources said.
Core capital equipment orders rose 2.5%, the government said. Overall new orders rose 1.3% in July, compared with 1% expected by economists surveyed by MarketWatch. Orders for durable goods rose 1.3% in July, while orders for nondurable goods rose 1.2%.
Ford Motor Co said on Wednesday that sales fell 26.6 percent in August amid steep declines in large pickup trucks and SUVs, and cut its second-half production plans.
GMAC LLC said on Wednesday it plans to cut 5,000 jobs at its Residential Capital LLC mortgage unit, or 60 percent of that work force, and shut its 200 GMAC Mortgage retail offices as it combats weak credit and housing markets.
GMAC also plans to stop offering home loans through its Homecomings wholesale brokerage channel, and is evaluating strategic alternatives for its GMAC Home Services and noncore mortgage servicing businesses.
The "headwinds" facing the economy are much stronger than those experienced during the last credit crunch in the early 1990s, said Eric Rosengren, the president of the Boston Federal Reserve Bank on Wednesday. This credit crunch is likely to hit consumers as well as businesses. The last crunch primarily impacted small businesses, he said. It may push the unemployment rate up to 6%, with more than 2 million people losing their jobs since the financial turmoil began last summer, Rosengren said in a speech in New Hampshire.
"As we continue to compete against record foreclosures, higher than normal levels of resale listings and poor consumer confidence, the housing market remains challenging," Ara Hovnanian, chief executive of the company, said in a statement.
October crude fell 36 cents to close at $109.35 per barrel on the New York Mercantile Exchange. Gold for December delivery fell $2.3, or 0.3%, to end at $808.20 an ounce on the New York Mercantile Exchange.
Coca-Cola Co will pay $2.5 billion for Chinese juice maker Huiyuan (1886.HK), triple its value, strengthening the world's leading drinks maker's hold on a booming market in the biggest foreign takeover in China. The U.S. firm will pay HK$12.20 a share in cash -- 43 times Huiyuan's forecast 2008 earnings and nearly three times its Friday close of HK$4.14, sending the Chinese firm's shares up 170 percent.
China's big banks, having trimmed their holdings of U.S. mortgage-related debt, are facing increasingly difficult decisions about how to invest their sizable foreign-currency holdings.
Amid jitters about the future of Fannie Mae and Freddie Mac, China's four biggest listed banks have pared back their holdings in debt related to the two U.S. mortgage giants. At the end of June, the four banks held a combined $23.28 billion of debt issued or guaranteed by Fannie and Freddie. That's a small fraction of the trillions of dollars outstanding, but the reductions attracted interest as a possible gauge of broader sentiment toward such securities.
Barack Obama met the 50 percent threshold for the first time Tuesday in the Gallup daily tracking poll, a symbolic hurdle that until now had eluded the Democratic nominee.
The Gallup daily tracking poll has found that since the conclusion of the Democratic convention, Obama has risen 5 percentage points in the polls and now leads John McCain 50 percent to 42 percent.
Brett Steenbarger: "I see that Rennie Yang, author of the excellent Market Tells service, observes that 20-day volume in the stock market has made a seven-year low. "Once in 2004 and a couple of times in the 70's NYSE volume hit a three-year low," he observes, "but this is the first time in the last fifty years we've seen it hit a 5-year+ low. Volume is not just low, it's really low." Of course, it's not just that volume is low; it's that we are seeing reduced volume following a bounce from the mid-July lows. If you think in Market Profile terms, this means that higher prices are failing to attract participation--not something you'd expect to see if this were a fresh bull market leg."
U.S. companies' announced layoffs in August fell from July, but were running above the level set a year ago, suggesting persistent weakness in the labor market, a report released Wednesday showed.
Downsizing at U.S. companies last month totaled 88,736, 14 percent lower than in July, but 12 percent higher than August 2007, employment consulting firm Challenger, Gray & Christmas Inc. said.
"We have not seen this level of summer job cutting since 2002, when the country was still struggling to recover in the wake of the 2001 recession and September 11 (attacks)," said John Challenger, chief executive officer of Challenger, Gray & Christmas, in a statement.
Year-to-date, planned layoffs total 667,996, up 29 percent from 515,855 during the same eight-month period in 2007.
The Korean won is now at a near four-year low against even the dollar and has fallen almost 21 percent in the past year, and 11 percent in the past three months, including a 9 percent drop against an anemic yen. Those who forecast it would end 2008 below 900 to the dollar now talk about 1200. For sure, the US dollar has been experiencing a revival against most currencies (China’s excepted) but that does not explain why Korea’s has been so hard hit even compared with Asian ones with far worse political problems and no better economics.
Almost every statistic that comes out of Korea is now treated as a horror story by the analysts from houses with fine records of losing other people’s money while paying themselves huge amounts.
Falling exports and lower household spending caused the euro economy to shrink by 0.2 percent in the second quarter, EU statistics showed Wednesday.
Oil analysts doubted that Opec would agree to an output cut at its conference in Vienna on September 9, but unease over the price fall is being seen even in Saudi Arabia, the most moderate Opec member. Saudi Aramco has been cutting the discount at which it sells Arab heavy, a poor-quality crude which it uses to calm the oil price, off- ering large quantities at big discounts.
Leo Drollas, of the Centre for Global Energy Studies, said: “[The Saudis] . . . fear heavy oil price falls. They are trying to anticipate that by not putting much oil on the market.”
Chris Mayer: "The Economist ran a good piece recently highlighting industry's reliance on water and water's relationship in producing so many goods. In Silicon Valley, for instance, 25% of the water use is for making computer chips. Across the country, 40% of the water drawn from lakes and aquifers goes toward cooling power plants. The link between water and energy is strong and largely unappreciated, but not by industry insiders.
"According to a recent survey by the Marsh Center for Risk Insights, 40% of Fortune 100 companies recognize that the impact of a water shortage on their businesses would be 'severe' or 'catastrophic.' "
Frank Barbera: "Since mid-July, stocks have experienced a lot of short term volatility with the DJIA posting 13 sessions of the last 30 days with daily closes in excess of 150 points up or down. Today, was more evidence of this wild volatility with the market soaring higher at the opening and then giving back all of the gains. Since roughly mid-July 18th to present, the net gain thru last Friday's close was only a gain of 47.39 DJIA index points -- how ironic. Essentially, stocks have been riding the roller coaster up and down, but overall have really been going nowhere fast. Unfortunately, this is not a good sign in the larger outlook for stocks as very substantial oversold conditions, which had previously built up going into the lows in March and in mid-July, are beginning to unwind without the market averages having made enough progress to reverse the larger bearish tide. This type of failing price action is indicative of bear market rallies, rallies ultimately pre-disposed to roll over into even larger declines."
Sales of new imported vehicles in Japan plunged about 40% in August for the fourth straight monthly decline, affected by high gasoline prices and an economic slowdown in the country, industry sources said Tuesday.
Sales excluding Japanese-brand vehicles built overseas fell nearly 30%, the sources said.
Core capital equipment orders rose 2.5%, the government said. Overall new orders rose 1.3% in July, compared with 1% expected by economists surveyed by MarketWatch. Orders for durable goods rose 1.3% in July, while orders for nondurable goods rose 1.2%.
Ford Motor Co said on Wednesday that sales fell 26.6 percent in August amid steep declines in large pickup trucks and SUVs, and cut its second-half production plans.
GMAC LLC said on Wednesday it plans to cut 5,000 jobs at its Residential Capital LLC mortgage unit, or 60 percent of that work force, and shut its 200 GMAC Mortgage retail offices as it combats weak credit and housing markets.
GMAC also plans to stop offering home loans through its Homecomings wholesale brokerage channel, and is evaluating strategic alternatives for its GMAC Home Services and noncore mortgage servicing businesses.
The "headwinds" facing the economy are much stronger than those experienced during the last credit crunch in the early 1990s, said Eric Rosengren, the president of the Boston Federal Reserve Bank on Wednesday. This credit crunch is likely to hit consumers as well as businesses. The last crunch primarily impacted small businesses, he said. It may push the unemployment rate up to 6%, with more than 2 million people losing their jobs since the financial turmoil began last summer, Rosengren said in a speech in New Hampshire.
"As we continue to compete against record foreclosures, higher than normal levels of resale listings and poor consumer confidence, the housing market remains challenging," Ara Hovnanian, chief executive of the company, said in a statement.
October crude fell 36 cents to close at $109.35 per barrel on the New York Mercantile Exchange. Gold for December delivery fell $2.3, or 0.3%, to end at $808.20 an ounce on the New York Mercantile Exchange.
Wednesday, September 03, 2008
Volatility
9/3/08 Volatility
The Washington Post reported Alaska Gov. Sarah Palin employed a lobbying firm to secure almost $27 million in federal earmarks for a town of 6,700 residents while she was its mayor, according to an analysis by an independent government watchdog group...McCain's crusade against earmarks -- federal spending sought by members of Congress to benefit specific projects -- has been a hallmark of his campaign. He has said earmarks are wasteful and are often inserted into bills with little oversight, sometimes by a single powerful lawmaker...As mayor of Wasilla, however, Palin oversaw the hiring of Robertson, Monagle & Eastaugh, an Anchorage-based law firm with close ties to Alaska's most senior Republicans: Rep. Don Young and Sen. Ted Stevens, who was indicted in July on charges of accepting illegal gifts. The Wasilla account was handled by the former chief of staff to Stevens, Steven W. Silver, who is a partner in the firm.
Microsoft has released the second beta of Internet Explorer 8, the next version of its dominant Windows Web browser.
Liberty Shipping Group LLC on Tuesday offered $25.75 a share to buy International Shipholding Corp. The deal values International Shipholding at a 27% premium over its closing price of $20.25 a share on Aug. 29 for a total buyout offer worth about $308 million. Liberty Shipping Group currently owns and operates six U.S.-flag dry bulk vessels.
Gold futures Tuesday tumbled nearly $30 to below $810 an ounce as the U.S. dollar rallied, putting downward pressures on dollar-denominated gold prices. Gold futures for December delivery slumped $27.2, or 3.3%, to $808 an ounce in early electronic trading.
Brett Steenbarger: "With falling commodities and a strong U.S. dollar, stocks are finding some support; U.S. equities have been relatively strong compared with many global counterparts, particularly in Asia. Still, the weak money flow, lack of consistent trending across sectors, and modest new high/low strength have me questioning the upside, particularly if we make new price highs without meaningfully expanding those indicators."
Zman: " Computer models from Kinetic Analysis Corporation, a Silver Spring, Md.-based company, predict that 40% of Gulf of Mexico oil will be offline for 30 days and about 30% of natural gas will be offline for 30 days with marginal improvements after that. Estimate of 15% of U.S. refining capacity is off line due to the storm. Forecast is for rain, rain, and more rain through the end of the week. (VLO)’s 250,000 bopd St Charles refinery is relatively undamaged and has power. Valero plans further inspection work today before announcing a restart plan. (XOM) has shut its 503,000 bopd Baton Rouge refinery due to power loss. Refineries generally take several days to restart..Computer models developed by Kinetic Analysis Corporation, a Silver Spring, Md.-based company estimate that LOOP will be out of service for two or three weeks. ~ Forbes"
Hong Kong's purchasing managers index remained below the breakeven threshold of 50 for a second straight month in August, as output in the private sector fell at its fastest pace in more than five years, according to data released Monday by index compiler Markit Group Ltd.
Volatility: At the end of June the U.S. Natural Gas Fund (UNG) was $63. Two months later it is trading at $33+. During this time, natural gas dropped from $12+ to $7.40. The last time UNG traded at $33+ (Dec. 2007) natural gas was $6.50.
The ISM index inched lower to 49.9% in August from 50% in July. The new orders index rose to 48.3% in August from 45.0% in July. The price-paid index retreated in August.
Korea Development Bank is considering buying more than a 25% interest in Lehman Brothers with the Korean bank seeking enough of a stake to impact management, reported the Korean-language online news provider Edaily on Tuesday, citing a high-level financial industry official.
After a strong triple digit rally in the morning, the Dow Jones Industrial Average fell 26.38 points, or 0.2%, to 11,517.17. The S&P 500 declined 5.27 points, or 0.4%, to 1,277.56, while the Nasdaq Composite shed 18.28 points to end at 2,349.24.
October crude fell $5.75, or 5%, to close at $109.71 per barrel on the New York Mercantile Exchange Tuesday. Gold for December delivery slumped $24.7, or 3%, to $810.50 an ounce on the Chicago Board of Trade, the weakest closing level since Aug. 18.
Directors at three of the 12 Federal Reserve district banks voted in favor of hiking the central bank's benchmark interest rate by a quarter of one percentage point prior to the August meeting, according to documents released by the Fed on Monday.
Retail sales across the 15-nation euro zone fell more than expected in July, declining by 0.4% from June and decreasing by 2.8% from July 2007, according to data released Wednesday by the statistical agency Eurostat.
Rupert Murdoch is considering an acquisition of The New York Times, according to a report by Vanity Fair's Michael Wolff, who wrote a profile and interviewed the News Corp.chairman and chief executive.
The Washington Post reported Alaska Gov. Sarah Palin employed a lobbying firm to secure almost $27 million in federal earmarks for a town of 6,700 residents while she was its mayor, according to an analysis by an independent government watchdog group...McCain's crusade against earmarks -- federal spending sought by members of Congress to benefit specific projects -- has been a hallmark of his campaign. He has said earmarks are wasteful and are often inserted into bills with little oversight, sometimes by a single powerful lawmaker...As mayor of Wasilla, however, Palin oversaw the hiring of Robertson, Monagle & Eastaugh, an Anchorage-based law firm with close ties to Alaska's most senior Republicans: Rep. Don Young and Sen. Ted Stevens, who was indicted in July on charges of accepting illegal gifts. The Wasilla account was handled by the former chief of staff to Stevens, Steven W. Silver, who is a partner in the firm.
Microsoft has released the second beta of Internet Explorer 8, the next version of its dominant Windows Web browser.
Liberty Shipping Group LLC on Tuesday offered $25.75 a share to buy International Shipholding Corp. The deal values International Shipholding at a 27% premium over its closing price of $20.25 a share on Aug. 29 for a total buyout offer worth about $308 million. Liberty Shipping Group currently owns and operates six U.S.-flag dry bulk vessels.
Gold futures Tuesday tumbled nearly $30 to below $810 an ounce as the U.S. dollar rallied, putting downward pressures on dollar-denominated gold prices. Gold futures for December delivery slumped $27.2, or 3.3%, to $808 an ounce in early electronic trading.
Brett Steenbarger: "With falling commodities and a strong U.S. dollar, stocks are finding some support; U.S. equities have been relatively strong compared with many global counterparts, particularly in Asia. Still, the weak money flow, lack of consistent trending across sectors, and modest new high/low strength have me questioning the upside, particularly if we make new price highs without meaningfully expanding those indicators."
Zman: " Computer models from Kinetic Analysis Corporation, a Silver Spring, Md.-based company, predict that 40% of Gulf of Mexico oil will be offline for 30 days and about 30% of natural gas will be offline for 30 days with marginal improvements after that. Estimate of 15% of U.S. refining capacity is off line due to the storm. Forecast is for rain, rain, and more rain through the end of the week. (VLO)’s 250,000 bopd St Charles refinery is relatively undamaged and has power. Valero plans further inspection work today before announcing a restart plan. (XOM) has shut its 503,000 bopd Baton Rouge refinery due to power loss. Refineries generally take several days to restart..Computer models developed by Kinetic Analysis Corporation, a Silver Spring, Md.-based company estimate that LOOP will be out of service for two or three weeks. ~ Forbes"
Hong Kong's purchasing managers index remained below the breakeven threshold of 50 for a second straight month in August, as output in the private sector fell at its fastest pace in more than five years, according to data released Monday by index compiler Markit Group Ltd.
Volatility: At the end of June the U.S. Natural Gas Fund (UNG) was $63. Two months later it is trading at $33+. During this time, natural gas dropped from $12+ to $7.40. The last time UNG traded at $33+ (Dec. 2007) natural gas was $6.50.
The ISM index inched lower to 49.9% in August from 50% in July. The new orders index rose to 48.3% in August from 45.0% in July. The price-paid index retreated in August.
Korea Development Bank is considering buying more than a 25% interest in Lehman Brothers with the Korean bank seeking enough of a stake to impact management, reported the Korean-language online news provider Edaily on Tuesday, citing a high-level financial industry official.
After a strong triple digit rally in the morning, the Dow Jones Industrial Average fell 26.38 points, or 0.2%, to 11,517.17. The S&P 500 declined 5.27 points, or 0.4%, to 1,277.56, while the Nasdaq Composite shed 18.28 points to end at 2,349.24.
October crude fell $5.75, or 5%, to close at $109.71 per barrel on the New York Mercantile Exchange Tuesday. Gold for December delivery slumped $24.7, or 3%, to $810.50 an ounce on the Chicago Board of Trade, the weakest closing level since Aug. 18.
Directors at three of the 12 Federal Reserve district banks voted in favor of hiking the central bank's benchmark interest rate by a quarter of one percentage point prior to the August meeting, according to documents released by the Fed on Monday.
Retail sales across the 15-nation euro zone fell more than expected in July, declining by 0.4% from June and decreasing by 2.8% from July 2007, according to data released Wednesday by the statistical agency Eurostat.
Rupert Murdoch is considering an acquisition of The New York Times, according to a report by Vanity Fair's Michael Wolff, who wrote a profile and interviewed the News Corp.chairman and chief executive.
Tuesday, September 02, 2008
The LOOP
9/2/08 The LOOP
Gerard Jackson: "As the world's largest economy by far, American monetary policy has had a detrimental effect on the world economy. The first thing to consider is the effect of monetary expansion on a country's price structure. Money is not neutral. This means that by increasing the quantity of money the pattern of spending changes in response to the emergence of new monetary streams. The necessary adjustment to the price structure that the monetary expansion causes is not sustainable. As soon as the monetary brakes are applied the price distortions reveal themselves in the form of bankruptcies, 'excess' capital and rising unemployment...By running current account deficits fuelled by 'cheap money' policies the US has, in my opinion, badly distorted the pattern of international trade by causing its trading partners to direct more resources into producing exports to the US. Just how bad this situation is we cannot know until the Fed puts and end to its loose monetary policy...the Fed's monetary policy artificially raised the prices of home-produced goods relative to foreign goods. In effect, this inflationary policy was the equivalent of taxing domestic products while subsidising foreign goods*. What to do? The sensible thing is to implement a sound monetary policy. As that is highly unlikely to happen the next best thing is for the government not to make matters worse by imposing tariffs and more taxes."
The Louisiana Offshore Oil Port, or LOOP, and Port Fourchon, which has historically been a land base for offshore oil support services in the Gulf, was directly in the path of Gustav and is expected to be damaged.
Matthew Simmons: "LOOP is the only facility in the Gulf to unload VLCC tankers which carry over 2 million barrels of crude. They can in theory be "litered" by unloading onto smaller tankers that can make it into the Gulf Coast ports but this is very lengthy timewise and the spare capacity of these smaller tankers is slim. We get about 1.2 million b/d of crude imports through Loop. (+/- 10%)."
The punch of Hurricane Gustav appeared to fall softly Monday on the nation's vast energy complex along the U.S. Gulf Coast, and was overshadowed by growing anxiety over the state of the global economy.
Even as 110 mph winds raked refineries that line the coast and rushed over the deep-water rigs off the shores of Texas and Louisiana, the price for a barrel of oil plummeted by more than $4 a barrel amid a broad sell-off in European and Asian markets.
The storm's impact on production platforms, drilling rigs and other equipment will not likely be fully known for another day or so.
Assuming no damage, it typically takes two to four days to restart a refinery, depending on its size. It can take a day or two to get offshore oil and natural-gas production going again. In 2005, hurricanes Katrina and Rita knocked out the region's offshore energy infrastructure for several weeks.
Transocean Inc., the world's largest offshore drilling contractor, said Monday afternoon it appeared its three moored, semisubmersible rigs in the Gulf remained anchored in position during the storm.
The U.S. military handed over control of once brutally violent Anbar province to Iraqi forces Monday — marking a major milestone in America's plan to eventually send its troops home.
Twenty-nine percent of people in their late 60s were working in 2006, up from 18 percent in 1985, according to the Bureau of Labor Statistics. Nearly 6 million workers last year were 65 or over.
Over the next decade, the number of 55-and-up workers is expected to rise at more than five times the rate of the overall work force, the BLS reported.
A slowing economy and stock market, squeezing funds set aside for retirement, also are contributing.
In an April survey conducted for AARP, 27 percent of workers age 45 and over, and 32 percent of those 55-64 said they had pushed back their planned retirement date because of the economic downturn. The telephone poll by Woelfel Research interviewed 1,002 respondents and carried a sampling error margin of plus or minus 3.1 percentage points.
"We have people who are healthier, who are living longer and have more economic reasons to stay in the work force," said David Certner, AARP's legislative policy director. "On the employer side, you have greater demand for experienced (older) workers. That all adds up to longer work lives."
U.S. crude oil futures fell as much as $3.51 to a session low of $111.95 per barrel in electronic trading Monday as Hurricane Gustav weakened to a Category 2 storm before making landfall in Louisiana. U.S. natural gas futures fell more than 5 percent in electronic trading on Monday as Hurricane Gustav weakened to a Category 2 storm.
Many of the world's wealthiest people have moved their money out of stocks and bonds and into cash, the head of HSBC's Swiss private banking unit said on Monday.
"The first half of 2008 has seen a notable change in client expectations and investment choices," said Peter Braunwalder, chief executive of HSBC Private Bank (Suisse), the British-based bank's main affiliate catering to the ultra-rich.
"Faced with inflation worries, volatile asset prices and sudden changes in exchange rates, a majority of investors have reduced their transaction volumes in equities, bonds, and structured products," he told a news briefing in Geneva.
Total British mortgage approvals fell to 33,000 in July from a downwardly revised 35,000 in June, the Bank of England reported Monday, setting another all-time low since the start of the statistical series in 1993.
Google Inc is set to introduce on Tuesday a new Web browser designed to more quickly handle video-rich applications, posing a challenge to browsers designed originally to handle text and graphics.
Google officials confirmed news of long-rumored plans to offer its own Web browsing software, entitled Google Chrome, in a company blog post after it mistakenly mailed details of the project to a Google-watching blog, called Blogoscoped.com.
Key evangelical leaders rallied to Sarah Palin's support Monday amid news that her 17-year-old daughter, Bristol, was having a child.
According to the FT, the stricken US mortgage market is set to suffer further setbacks in the next two years as $96bn of risky home loans sold with initial flexible payment options switch to more stringent terms.These will raise borrowers’ monthly payments by about 60 per cent.
The amount of money Mexicans sent home suffered its sharpest drop on record in July as the U.S. economy slowed and the dollar fell, Mexico's central bank reported Monday.
Iran is considering lopping three to four zeros off its currency, a top official said Monday, in an apparent effort to fight out-of-control inflation that many critics blame on the country's hardline president.
The governor of the Central Bank of Iran, Tahmasb Mazaheri, told state-run radio that monetary experts are studying three options: Cutting three zeros off the rial, cutting four zeros, or boosting each rial's value to one-hundredth of a gram of gold, or about 2,500 rials at current rates.
"We are studying all these three options," Mazaheri said on state-run radio.
The Iranian rial is now traded at 9,600 rials to one U.S. dollar. That compares with 70 rials against the dollar in 1979, the year an Islamic revolution toppled the pro-Western Shah Mohammad Reza Pahlavi.
Chesapeake Energy Corp.of Oklahoma City, the No. 1 U.S. natural-gas producer, agreed to sell 25% of certain shale assets to BP America for $1.9 billion, the companies said on Tuesday.
Worldwide sales of semiconductors rose 7.6% to $22.2 billion in July, or up 2.8% from June levels, the Semiconductor Industry Association said.
Producer prices in the 15-nation euro-zone rose at a monthly pace of 1.1% in July, bringing the annual rise to 9%, Eurostat reported Tuesday.
October light sweet crude futures traded down $6.89 at $108.58 a barrel in electronic trading on Tuesday, extending losses from Monday. The contract hasn't traded traded below $109 a barrel since April.
Gerard Jackson: "As the world's largest economy by far, American monetary policy has had a detrimental effect on the world economy. The first thing to consider is the effect of monetary expansion on a country's price structure. Money is not neutral. This means that by increasing the quantity of money the pattern of spending changes in response to the emergence of new monetary streams. The necessary adjustment to the price structure that the monetary expansion causes is not sustainable. As soon as the monetary brakes are applied the price distortions reveal themselves in the form of bankruptcies, 'excess' capital and rising unemployment...By running current account deficits fuelled by 'cheap money' policies the US has, in my opinion, badly distorted the pattern of international trade by causing its trading partners to direct more resources into producing exports to the US. Just how bad this situation is we cannot know until the Fed puts and end to its loose monetary policy...the Fed's monetary policy artificially raised the prices of home-produced goods relative to foreign goods. In effect, this inflationary policy was the equivalent of taxing domestic products while subsidising foreign goods*. What to do? The sensible thing is to implement a sound monetary policy. As that is highly unlikely to happen the next best thing is for the government not to make matters worse by imposing tariffs and more taxes."
The Louisiana Offshore Oil Port, or LOOP, and Port Fourchon, which has historically been a land base for offshore oil support services in the Gulf, was directly in the path of Gustav and is expected to be damaged.
Matthew Simmons: "LOOP is the only facility in the Gulf to unload VLCC tankers which carry over 2 million barrels of crude. They can in theory be "litered" by unloading onto smaller tankers that can make it into the Gulf Coast ports but this is very lengthy timewise and the spare capacity of these smaller tankers is slim. We get about 1.2 million b/d of crude imports through Loop. (+/- 10%)."
The punch of Hurricane Gustav appeared to fall softly Monday on the nation's vast energy complex along the U.S. Gulf Coast, and was overshadowed by growing anxiety over the state of the global economy.
Even as 110 mph winds raked refineries that line the coast and rushed over the deep-water rigs off the shores of Texas and Louisiana, the price for a barrel of oil plummeted by more than $4 a barrel amid a broad sell-off in European and Asian markets.
The storm's impact on production platforms, drilling rigs and other equipment will not likely be fully known for another day or so.
Assuming no damage, it typically takes two to four days to restart a refinery, depending on its size. It can take a day or two to get offshore oil and natural-gas production going again. In 2005, hurricanes Katrina and Rita knocked out the region's offshore energy infrastructure for several weeks.
Transocean Inc., the world's largest offshore drilling contractor, said Monday afternoon it appeared its three moored, semisubmersible rigs in the Gulf remained anchored in position during the storm.
The U.S. military handed over control of once brutally violent Anbar province to Iraqi forces Monday — marking a major milestone in America's plan to eventually send its troops home.
Twenty-nine percent of people in their late 60s were working in 2006, up from 18 percent in 1985, according to the Bureau of Labor Statistics. Nearly 6 million workers last year were 65 or over.
Over the next decade, the number of 55-and-up workers is expected to rise at more than five times the rate of the overall work force, the BLS reported.
A slowing economy and stock market, squeezing funds set aside for retirement, also are contributing.
In an April survey conducted for AARP, 27 percent of workers age 45 and over, and 32 percent of those 55-64 said they had pushed back their planned retirement date because of the economic downturn. The telephone poll by Woelfel Research interviewed 1,002 respondents and carried a sampling error margin of plus or minus 3.1 percentage points.
"We have people who are healthier, who are living longer and have more economic reasons to stay in the work force," said David Certner, AARP's legislative policy director. "On the employer side, you have greater demand for experienced (older) workers. That all adds up to longer work lives."
U.S. crude oil futures fell as much as $3.51 to a session low of $111.95 per barrel in electronic trading Monday as Hurricane Gustav weakened to a Category 2 storm before making landfall in Louisiana. U.S. natural gas futures fell more than 5 percent in electronic trading on Monday as Hurricane Gustav weakened to a Category 2 storm.
Many of the world's wealthiest people have moved their money out of stocks and bonds and into cash, the head of HSBC's Swiss private banking unit said on Monday.
"The first half of 2008 has seen a notable change in client expectations and investment choices," said Peter Braunwalder, chief executive of HSBC Private Bank (Suisse), the British-based bank's main affiliate catering to the ultra-rich.
"Faced with inflation worries, volatile asset prices and sudden changes in exchange rates, a majority of investors have reduced their transaction volumes in equities, bonds, and structured products," he told a news briefing in Geneva.
Total British mortgage approvals fell to 33,000 in July from a downwardly revised 35,000 in June, the Bank of England reported Monday, setting another all-time low since the start of the statistical series in 1993.
Google Inc is set to introduce on Tuesday a new Web browser designed to more quickly handle video-rich applications, posing a challenge to browsers designed originally to handle text and graphics.
Google officials confirmed news of long-rumored plans to offer its own Web browsing software, entitled Google Chrome, in a company blog post after it mistakenly mailed details of the project to a Google-watching blog, called Blogoscoped.com.
Key evangelical leaders rallied to Sarah Palin's support Monday amid news that her 17-year-old daughter, Bristol, was having a child.
According to the FT, the stricken US mortgage market is set to suffer further setbacks in the next two years as $96bn of risky home loans sold with initial flexible payment options switch to more stringent terms.These will raise borrowers’ monthly payments by about 60 per cent.
The amount of money Mexicans sent home suffered its sharpest drop on record in July as the U.S. economy slowed and the dollar fell, Mexico's central bank reported Monday.
Iran is considering lopping three to four zeros off its currency, a top official said Monday, in an apparent effort to fight out-of-control inflation that many critics blame on the country's hardline president.
The governor of the Central Bank of Iran, Tahmasb Mazaheri, told state-run radio that monetary experts are studying three options: Cutting three zeros off the rial, cutting four zeros, or boosting each rial's value to one-hundredth of a gram of gold, or about 2,500 rials at current rates.
"We are studying all these three options," Mazaheri said on state-run radio.
The Iranian rial is now traded at 9,600 rials to one U.S. dollar. That compares with 70 rials against the dollar in 1979, the year an Islamic revolution toppled the pro-Western Shah Mohammad Reza Pahlavi.
Chesapeake Energy Corp.of Oklahoma City, the No. 1 U.S. natural-gas producer, agreed to sell 25% of certain shale assets to BP America for $1.9 billion, the companies said on Tuesday.
Worldwide sales of semiconductors rose 7.6% to $22.2 billion in July, or up 2.8% from June levels, the Semiconductor Industry Association said.
Producer prices in the 15-nation euro-zone rose at a monthly pace of 1.1% in July, bringing the annual rise to 9%, Eurostat reported Tuesday.
October light sweet crude futures traded down $6.89 at $108.58 a barrel in electronic trading on Tuesday, extending losses from Monday. The contract hasn't traded traded below $109 a barrel since April.
Monday, September 01, 2008
Labor Day
9/1/08 Labor Day
Rep. Ron Paul: " Removing governmental power to manipulate money, removes the temptation for government to spend, print and cheat. Sound money ensures that our government's spending priorities would be brought into sharp focus and reduced to only what we can afford.
Sound money also limits the ability to wage wars of aggression. Imagine how much more careful Washington would have to be about starting a war if they did not have this financial sleight of hand at their disposal! Fiat currency allows government do expensive things they should not be doing while paying the bills with cheap money. The Federal Reserve has lately been auctioning off large amounts of treasury bills as a way to finance the wars in Iraq and Afghanistan, and our crushing entitlement burden. The resulting devaluation of the dollar is quickly eroding our image as a good trading partner in the world. As a consequence, there is therefore more talk of economic isolation and war."
Obama leads McCain 49-41 percent in the most recent Gallup Poll daily tracking survey, which measured voter sentiment during a three-day period ending Aug. 28.
Brett Steenbarger: "Until we see greater evidence of sector strength and money flows, I will be viewing the recent market bounce as a countertrend rally in a broader bear market."
More than 75 percent of Gulf oil cut off for storm. The Gulf of Mexico area is home to a quarter of U.S. crude supplies and 40 percent of refining capacity.
Japanese Prime Minister Yasuo Fukuda announced his resignation in a news conference Monday night, news reports said. The surprise move comes as Fukuda wrestles with low approval ratings and an economy that's seen on the verge of recession. Fukuda didn't say when the resignation would take effect, the Associated Press reported.
Commerzbank said that it has agreed to buy Dresdner Bank from Allianz for 8.8 billion euros ($12.9 billion). Allianz will also receive a payment into a trust for specific ABS assets of Dresdner Bank of up to 975 million euros. 9000 jobs will be eliminated in the takeover.
The state-run Korea Development Bank of South Korea has not abandoned its efforts to buy a stake in Lehman Brothers, according to a report in the online edition of the Korea Economic Daily on Sunday, citing anonymous Korean government officials.
McCain canceled the first day of his Republican National Convention, and his campaign made plans to turn the gathering into a giant fundraiser as they braced for the fallout from Hurricane Gustav. Bush and Cheney both had earlier called off appearances.
Russia's Foreign Minister Sergei Lavrov warned the US and its allies that supporting Georgian President Mikhail Saakashvili would be a historic mistake, and called for an arms embargo "while a different government turns Georgia into a normal state".
Russia, the biggest market for American poultry exporters, will ban imports from 19 producers in the United States and warned on Friday that an additional 29 suppliers face a possible ban on health and safety grounds.
The ban will take effect Monday and includes three plants belonging to the meat giant Tyson Foods, Russia’s animal and plant health watchdog said, a day after Prime Minister Vladimir V. Putin first spoke of the measures.
“Joint Russian-U.S. inspections of U.S. poultry processing plants at the end of July and the beginning of August showed a number of inspected plants do not fully observe the agreed standards,” the watchdog, Rosselkhoznadzor, said in a statement.
“The inspection showed that many plants have not taken steps to eliminate faults discovered by previous inspections.”
Monday morning the National Hurricane Center downgraded Gustav to a Category 2 hurricane with top winds now at 110 mph.
Rep. Ron Paul: " Removing governmental power to manipulate money, removes the temptation for government to spend, print and cheat. Sound money ensures that our government's spending priorities would be brought into sharp focus and reduced to only what we can afford.
Sound money also limits the ability to wage wars of aggression. Imagine how much more careful Washington would have to be about starting a war if they did not have this financial sleight of hand at their disposal! Fiat currency allows government do expensive things they should not be doing while paying the bills with cheap money. The Federal Reserve has lately been auctioning off large amounts of treasury bills as a way to finance the wars in Iraq and Afghanistan, and our crushing entitlement burden. The resulting devaluation of the dollar is quickly eroding our image as a good trading partner in the world. As a consequence, there is therefore more talk of economic isolation and war."
Obama leads McCain 49-41 percent in the most recent Gallup Poll daily tracking survey, which measured voter sentiment during a three-day period ending Aug. 28.
Brett Steenbarger: "Until we see greater evidence of sector strength and money flows, I will be viewing the recent market bounce as a countertrend rally in a broader bear market."
More than 75 percent of Gulf oil cut off for storm. The Gulf of Mexico area is home to a quarter of U.S. crude supplies and 40 percent of refining capacity.
Japanese Prime Minister Yasuo Fukuda announced his resignation in a news conference Monday night, news reports said. The surprise move comes as Fukuda wrestles with low approval ratings and an economy that's seen on the verge of recession. Fukuda didn't say when the resignation would take effect, the Associated Press reported.
Commerzbank said that it has agreed to buy Dresdner Bank from Allianz for 8.8 billion euros ($12.9 billion). Allianz will also receive a payment into a trust for specific ABS assets of Dresdner Bank of up to 975 million euros. 9000 jobs will be eliminated in the takeover.
The state-run Korea Development Bank of South Korea has not abandoned its efforts to buy a stake in Lehman Brothers, according to a report in the online edition of the Korea Economic Daily on Sunday, citing anonymous Korean government officials.
McCain canceled the first day of his Republican National Convention, and his campaign made plans to turn the gathering into a giant fundraiser as they braced for the fallout from Hurricane Gustav. Bush and Cheney both had earlier called off appearances.
Russia's Foreign Minister Sergei Lavrov warned the US and its allies that supporting Georgian President Mikhail Saakashvili would be a historic mistake, and called for an arms embargo "while a different government turns Georgia into a normal state".
Russia, the biggest market for American poultry exporters, will ban imports from 19 producers in the United States and warned on Friday that an additional 29 suppliers face a possible ban on health and safety grounds.
The ban will take effect Monday and includes three plants belonging to the meat giant Tyson Foods, Russia’s animal and plant health watchdog said, a day after Prime Minister Vladimir V. Putin first spoke of the measures.
“Joint Russian-U.S. inspections of U.S. poultry processing plants at the end of July and the beginning of August showed a number of inspected plants do not fully observe the agreed standards,” the watchdog, Rosselkhoznadzor, said in a statement.
“The inspection showed that many plants have not taken steps to eliminate faults discovered by previous inspections.”
Monday morning the National Hurricane Center downgraded Gustav to a Category 2 hurricane with top winds now at 110 mph.
Sunday, August 31, 2008
Reject Government Numbers
8/31/08 Reject Phony Government Numbers
Leaders of Boeing Co.'s Machinists union called Friday for a strike after rejecting the aerospace giant's "best and final" contract offer. They urged union members to reject the offer in a vote set for Wednesday.
Doug Noland: "First of all, I am certainly of the view that the economy is much weaker than the headline 3.3% growth rate. At the minimum, I am skeptical that the 1.2% annualized increase in the GDP price index accurately captures what I believe is a significant inflationary component in current “output”. It is worth noting that the favored inflation gauge of Greenspan and the Fed, the PCE Deflator, was up 4.5% from a year earlier, the strongest year-over-year increase since 1991...the growth in Fannie and Freddie’s Combined Books of Business slowed sharply to a 3.7% rate during July, the slowest pace in two years. And while there is nothing really in the works to compare to the abrupt Credit tightening that emanated from collapsing subprime and Alt-A securitization markets, I’ll argue today’s tighter Credit is a more subtle dynamic resulting from various types of lending institutions restricting, on the margin, loans to even prime Credits...The private mortgage marketplace self-destructed, and now the entire “prime” mortgage/housing market is dependent upon ongoing cheap mortgage finance available only through American taxpayer backing and subsidies. The private sector simply cannot today – or at any time in the foreseeable future - provide the hundreds of billions of cheap ongoing new mortgage Credit necessary to forestall a systemic housing/economic/financial collapse. There will be no happy “recapitalize and privatize” ending to this saga. The bill to the taxpayer is now growing rapidly – along with GSE exposure – and will balloon into the trillions over the coming years and decades. And for how long the holders of GSE debt and MBS will be allowed such handsome returns at taxpayer expense is a quite intriguing question...there are some very dangerous “Ponzi Finance” Dynamics Still very much At Play. The most obvious resides with the GSEs. And there are closely related Bubbles throughout the agency and Treasury bond arena. Meanwhile, a view has gained adherents that the U.S. economy is actually in much better shape than Europe and elsewhere. The reality that Europe is not buoyed by their own government-sponsored mortgage behemoths and that their economies are more manufacturing based (and thus vulnerable to cyclical downturns) are only short-term relative disadvantages."
Commerzbank AG is close to buying Allianz SE's Dresdner Bank for about 9 billion euros ($13.3 billion) in a deal that would create Germany's largest bank by customers and branches, surpassing Deutsche Bank AG, two people with knowledge of the matter said.
John Mauldin: "Banks in the US are going to need to roll over almost $800 billion dollars in medium-term debt in the next 16 months. Banks borrowed heavily in 2006, a lot of it in 2-3 year floating-rate notes, and now they must refinance those notes. Say a bank borrowed at LIBOR plus 50bps. In today's environment, many banks are not going to be able to borrow at such low rates. Remember the two Ohio banks mentioned earlier? These regional banks will have to pay spreads of 7-9%, based on the price of their debt today. If you have to pay 12% to borrow money when prime is at 5% and you are lending at 6-8%, you clearly cannot make a profit. That means they will have to sell assets or raise very expensive equity capital.
There are a lot of small and regional banks that are in trouble. The FDIC has a list of 117. Out of (I think) 8500 banks that does not sound bad. But remember, Indy Mac, which failed a few months ago, was not on that list. Banks can get into trouble rather quickly if they cannot raise capital, sell assets, or borrow money due to perceived distress.
The problem is that these banks will have less money to lend and will be calling loans from otherwise good customers, which of course makes the economic situation even worse. It is a vicious cycle."
John Ing: "Market sentiment indicators showed commodities were simply overbought after reaching record highs. As a result, traders exited en masse when key chart support levels broke down. We also believe that the correction was due to commodity players who earlier drove up prices to record highs unwinding speculative positions as they sought to raise liquidity and pay for huge redemptions. In addition, the normal seasonal slowdown in the commodity markets made the moves much more exaggerated as over-leveraged hot money hedge players took profits to offset their dreary bets. We also believe the $7.5 billion bankruptcy of big oil player SemGroup LP depressed the oil markets as bankers unwound their positions. (SemGroup had hedged 21 million barrels of oil.)
But is this really the end of the boom? We think not. The super cycle in commodities is not even half over. This secular bull is intact. The fundamentals such as tightening supply/demand conditions remain. Indeed, the pullback has sparked such a run on physical gold supplies that the U.S. Mint suspended and then rationed American Eagle gold coin sales for the first time in two decades due to depleted stocks. Big gold banks such as HSBC and UBS also reported healthy demand for physical gold.
The laws of supply and demand have not been suspended. The lack of excess capacity, not speculation, is one of the major drivers, particularly since continued strong demand from fast growing Asia will support higher commodity prices. The demand destruction for oil in the U.S. is offset in part by growing Asian demand and by the fact that inventories, particularly in the U.S. have fallen to low levels. The other driver remains the U.S. dollar. And America's insatiable need to borrow to finance both consumption and Wall Street's bailouts will ensure the dollar rally is short-lived.
Our view is that a correction was needed, and provides a classic buying opportunity."
Giovanna Negretti: "I find it incredibly startling that McCain would choose a person he hardly knows for a job as important as the Vice Presidency of the United States. It is so obvious that he is doing this as a political tactic that it makes me question his judgment. Is that the way he will make decisions about our economy, our security, our well-being as a nation? If, God forbid, Senator McCain dies during his presidency then he will entrust this nation with a person with zero foreign affairs experience, whom he hardly knows to be the Commander in Chief? How irresponsible is that?
I can appreciate that this is a historic moment for women but what is insulting and shameful is that it comes as a result of political tactics and not merits. As a woman, I am insulted. I can't help but asking how does he dare insult the intelligence of millions of women who voted for Clinton with this tactic of trying to appeal to them by choosing a woman with no qualifications as a vice presidential candidate. What does he think, that women are stupid? Or is he implying that people supported Hillary just because she was a woman? People supported Hillary because they thought she was the best qualified person for the job. It just so happened that she was a woman, which made the decision to support her even more exciting."
According to the FT, Gordon Brown’s authority as British prime minister suffered a further setback when his own chancellor admitted on Saturday that Britain was facing its worst economic crisis in 60 years.
In an interview in Saturday’s Guardian newspaper, Alistair Darling admitted that he had been taken by surprise by the credit crunch, warning that the economic downturn would be more “profound and long-lasting” than most people had feared.
Dell warned that companies worldwide are cutting back on technology spending.
The mayor of New Orleans ordered a mandatory evacuation of the city as Hurricane Gustav neared. Gustav weakened slightly after slamming Cuba and entering the Gulf of Mexico, but forecasters warned the storm would regain strength. The Category 4 hurricane may slam into the Louisiana coast as early as Monday.
Mike Burk: "The market is playing a disappearing act. Volume and new highs are at their lowest levels in years. Identifying strength or weakness under these conditions is challenging...On July 15 there were 1304 new lows on the NYSE, a record. After every record or, with only one exception, after every time there were even half as many new lows as we saw on July 15 there has been a retest of the low by the blue chip indices. A retest of the July 15 low in the next several weeks is likely...On August 31, 1998 there were 1183 new lows on the NYSE, a record that held until last July. On October 10, 1998 there was a retest of the August 31 low on the retest there were 930 new lows and NY NL was considerably higher at the time. After the August 31 low the Fed opened the spigots and money supply was growing at a 24% annualized rate at the time of the October retest...By all measures the market has been up about 60% of the time during the coming week with modest gains."
Leaders of Boeing Co.'s Machinists union called Friday for a strike after rejecting the aerospace giant's "best and final" contract offer. They urged union members to reject the offer in a vote set for Wednesday.
Doug Noland: "First of all, I am certainly of the view that the economy is much weaker than the headline 3.3% growth rate. At the minimum, I am skeptical that the 1.2% annualized increase in the GDP price index accurately captures what I believe is a significant inflationary component in current “output”. It is worth noting that the favored inflation gauge of Greenspan and the Fed, the PCE Deflator, was up 4.5% from a year earlier, the strongest year-over-year increase since 1991...the growth in Fannie and Freddie’s Combined Books of Business slowed sharply to a 3.7% rate during July, the slowest pace in two years. And while there is nothing really in the works to compare to the abrupt Credit tightening that emanated from collapsing subprime and Alt-A securitization markets, I’ll argue today’s tighter Credit is a more subtle dynamic resulting from various types of lending institutions restricting, on the margin, loans to even prime Credits...The private mortgage marketplace self-destructed, and now the entire “prime” mortgage/housing market is dependent upon ongoing cheap mortgage finance available only through American taxpayer backing and subsidies. The private sector simply cannot today – or at any time in the foreseeable future - provide the hundreds of billions of cheap ongoing new mortgage Credit necessary to forestall a systemic housing/economic/financial collapse. There will be no happy “recapitalize and privatize” ending to this saga. The bill to the taxpayer is now growing rapidly – along with GSE exposure – and will balloon into the trillions over the coming years and decades. And for how long the holders of GSE debt and MBS will be allowed such handsome returns at taxpayer expense is a quite intriguing question...there are some very dangerous “Ponzi Finance” Dynamics Still very much At Play. The most obvious resides with the GSEs. And there are closely related Bubbles throughout the agency and Treasury bond arena. Meanwhile, a view has gained adherents that the U.S. economy is actually in much better shape than Europe and elsewhere. The reality that Europe is not buoyed by their own government-sponsored mortgage behemoths and that their economies are more manufacturing based (and thus vulnerable to cyclical downturns) are only short-term relative disadvantages."
Commerzbank AG is close to buying Allianz SE's Dresdner Bank for about 9 billion euros ($13.3 billion) in a deal that would create Germany's largest bank by customers and branches, surpassing Deutsche Bank AG, two people with knowledge of the matter said.
John Mauldin: "Banks in the US are going to need to roll over almost $800 billion dollars in medium-term debt in the next 16 months. Banks borrowed heavily in 2006, a lot of it in 2-3 year floating-rate notes, and now they must refinance those notes. Say a bank borrowed at LIBOR plus 50bps. In today's environment, many banks are not going to be able to borrow at such low rates. Remember the two Ohio banks mentioned earlier? These regional banks will have to pay spreads of 7-9%, based on the price of their debt today. If you have to pay 12% to borrow money when prime is at 5% and you are lending at 6-8%, you clearly cannot make a profit. That means they will have to sell assets or raise very expensive equity capital.
There are a lot of small and regional banks that are in trouble. The FDIC has a list of 117. Out of (I think) 8500 banks that does not sound bad. But remember, Indy Mac, which failed a few months ago, was not on that list. Banks can get into trouble rather quickly if they cannot raise capital, sell assets, or borrow money due to perceived distress.
The problem is that these banks will have less money to lend and will be calling loans from otherwise good customers, which of course makes the economic situation even worse. It is a vicious cycle."
John Ing: "Market sentiment indicators showed commodities were simply overbought after reaching record highs. As a result, traders exited en masse when key chart support levels broke down. We also believe that the correction was due to commodity players who earlier drove up prices to record highs unwinding speculative positions as they sought to raise liquidity and pay for huge redemptions. In addition, the normal seasonal slowdown in the commodity markets made the moves much more exaggerated as over-leveraged hot money hedge players took profits to offset their dreary bets. We also believe the $7.5 billion bankruptcy of big oil player SemGroup LP depressed the oil markets as bankers unwound their positions. (SemGroup had hedged 21 million barrels of oil.)
But is this really the end of the boom? We think not. The super cycle in commodities is not even half over. This secular bull is intact. The fundamentals such as tightening supply/demand conditions remain. Indeed, the pullback has sparked such a run on physical gold supplies that the U.S. Mint suspended and then rationed American Eagle gold coin sales for the first time in two decades due to depleted stocks. Big gold banks such as HSBC and UBS also reported healthy demand for physical gold.
The laws of supply and demand have not been suspended. The lack of excess capacity, not speculation, is one of the major drivers, particularly since continued strong demand from fast growing Asia will support higher commodity prices. The demand destruction for oil in the U.S. is offset in part by growing Asian demand and by the fact that inventories, particularly in the U.S. have fallen to low levels. The other driver remains the U.S. dollar. And America's insatiable need to borrow to finance both consumption and Wall Street's bailouts will ensure the dollar rally is short-lived.
Our view is that a correction was needed, and provides a classic buying opportunity."
Giovanna Negretti: "I find it incredibly startling that McCain would choose a person he hardly knows for a job as important as the Vice Presidency of the United States. It is so obvious that he is doing this as a political tactic that it makes me question his judgment. Is that the way he will make decisions about our economy, our security, our well-being as a nation? If, God forbid, Senator McCain dies during his presidency then he will entrust this nation with a person with zero foreign affairs experience, whom he hardly knows to be the Commander in Chief? How irresponsible is that?
I can appreciate that this is a historic moment for women but what is insulting and shameful is that it comes as a result of political tactics and not merits. As a woman, I am insulted. I can't help but asking how does he dare insult the intelligence of millions of women who voted for Clinton with this tactic of trying to appeal to them by choosing a woman with no qualifications as a vice presidential candidate. What does he think, that women are stupid? Or is he implying that people supported Hillary just because she was a woman? People supported Hillary because they thought she was the best qualified person for the job. It just so happened that she was a woman, which made the decision to support her even more exciting."
According to the FT, Gordon Brown’s authority as British prime minister suffered a further setback when his own chancellor admitted on Saturday that Britain was facing its worst economic crisis in 60 years.
In an interview in Saturday’s Guardian newspaper, Alistair Darling admitted that he had been taken by surprise by the credit crunch, warning that the economic downturn would be more “profound and long-lasting” than most people had feared.
Dell warned that companies worldwide are cutting back on technology spending.
The mayor of New Orleans ordered a mandatory evacuation of the city as Hurricane Gustav neared. Gustav weakened slightly after slamming Cuba and entering the Gulf of Mexico, but forecasters warned the storm would regain strength. The Category 4 hurricane may slam into the Louisiana coast as early as Monday.
Mike Burk: "The market is playing a disappearing act. Volume and new highs are at their lowest levels in years. Identifying strength or weakness under these conditions is challenging...On July 15 there were 1304 new lows on the NYSE, a record. After every record or, with only one exception, after every time there were even half as many new lows as we saw on July 15 there has been a retest of the low by the blue chip indices. A retest of the July 15 low in the next several weeks is likely...On August 31, 1998 there were 1183 new lows on the NYSE, a record that held until last July. On October 10, 1998 there was a retest of the August 31 low on the retest there were 930 new lows and NY NL was considerably higher at the time. After the August 31 low the Fed opened the spigots and money supply was growing at a 24% annualized rate at the time of the October retest...By all measures the market has been up about 60% of the time during the coming week with modest gains."
Saturday, August 30, 2008
Real Disposable Income Declines Again
8/30/08 Real Disposable Income Declines Again
Real consumer spending fell 0.4% in July, the Commerce Department reported Thursday. This is the biggest drop since June 2004. Nominal spending rose 0.2%. Personal income fell 0.7% in July, the biggest drop since August 2005. Real disposable incomes fell 1.7% in July. This is the second straight large monthly drop in the wake of the government stimulus payments. Inflation surged in the month. The core personal consumption expenditure price index rose 0.3% in July compared with June and is up 2.4% in the past year. This is the largest gain since September 2006. Wall Street economists had expected a 0.4% decline in incomes, a 0.2% gain in nominal spending and a 0.3% rise in the core PCE.
Here's more from the gov't: "Personal saving -- DPI less personal outlays -- was $133.8 billion in July, compared with $272.9 billion in June. Personal saving as a percentage of disposable personal income was 1.2 percent in July, compared with 2.5 percent in June. Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods."
As part of the economic stimulus packaged authorized by the White House, as of the end of August, Treasury has sent out more than $93.4 billion to 114.8 million households.
Europeans' confidence fell more than forecast this month as the economy teetered on the brink of a recession. An index of executive and consumer sentiment in the economic outlook dropped to 88.8 from 89.5 in July, the European Commission in Brussels said Friday. That is below the 89.3 median estimate of 26 economists surveyed by Bloomberg News. Inflation unexpectedly eased in August and a measure of consumer-price expectations declined.
Rob Hanna: "The market rose strongly on Thursday. NYSE advancers outpaced decliners by over 3 to 1 – the 2nd day in a row advancers accounted for over 70% of the total. I’ve noted a few times recently that rallies in the S&P 500 since the end of May have been quick to reverse. Most have not lasted more than 2 days before suffering a down day. There have been three 3-day rallies and none of four days or longer. The market has now closed up 3 days in a row. We are reaching the upper boundary of “normal”. Although I’m not betting on it, traders should be on alert for a change of character in the market.
The market may or may not pull back in the next day or two, but it appears likely to happen quite soon. Back to back days of 70% advancers are fairly rare. The fact that it happened without the S&P 500 posting a 10-day high is even more unusual. Since 1970 this has happened 20 times. Sixteen (80%) of the time the market closed below the close of the trigger day within the next four days. If you give it 10 days to work off the overbought breadth readings then 19 (95%) of the time you’d find a close lower than the trigger day. In other words, a pullback appears likely in the not-too distant future."
"Out of almost 2,100 diversified retail U.S. stock mutual funds that are open to new investors, just 17 have positive returns for both the past 12 months and year-to-date, according to investment researcher Morningstar Inc."
Russia’s prime minister said he thought the U.S. might have helped “stir up” the conflict to benefit one of the presidential candidates.
International Rectifier Corp.said Friday that its board unanimously rejected a $21.22-a-share unsolicited bid from Vishay Intertechnology Inc. Richard Dahl, chairman of International Rectifier, said in a statement that the deal, valued at about $1.6 billion, "significantly undervalues the company and its future prospects."
Business activity in the Chicago region picked up in August, according to a survey of corporate purchasing managers released Friday. The Chicago purchasing managers index rose slightly to 57.9 in August from 50.8 in July.
Integrity Bank of Alpharetta, Ga., with $1.1 billion in assets and $974 million in deposits, was closed Friday by the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corp. was named receiver. This marks the 10th U.S. bank failure so far this year.
Alitalia has filed for bankruptcy protection as the Italian government scrambled to put together a package to save the troubled airline, according to a statement posted on its corporate Web site Friday.
Real consumer spending fell 0.4% in July, the Commerce Department reported Thursday. This is the biggest drop since June 2004. Nominal spending rose 0.2%. Personal income fell 0.7% in July, the biggest drop since August 2005. Real disposable incomes fell 1.7% in July. This is the second straight large monthly drop in the wake of the government stimulus payments. Inflation surged in the month. The core personal consumption expenditure price index rose 0.3% in July compared with June and is up 2.4% in the past year. This is the largest gain since September 2006. Wall Street economists had expected a 0.4% decline in incomes, a 0.2% gain in nominal spending and a 0.3% rise in the core PCE.
Here's more from the gov't: "Personal saving -- DPI less personal outlays -- was $133.8 billion in July, compared with $272.9 billion in June. Personal saving as a percentage of disposable personal income was 1.2 percent in July, compared with 2.5 percent in June. Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods."
As part of the economic stimulus packaged authorized by the White House, as of the end of August, Treasury has sent out more than $93.4 billion to 114.8 million households.
Europeans' confidence fell more than forecast this month as the economy teetered on the brink of a recession. An index of executive and consumer sentiment in the economic outlook dropped to 88.8 from 89.5 in July, the European Commission in Brussels said Friday. That is below the 89.3 median estimate of 26 economists surveyed by Bloomberg News. Inflation unexpectedly eased in August and a measure of consumer-price expectations declined.
Rob Hanna: "The market rose strongly on Thursday. NYSE advancers outpaced decliners by over 3 to 1 – the 2nd day in a row advancers accounted for over 70% of the total. I’ve noted a few times recently that rallies in the S&P 500 since the end of May have been quick to reverse. Most have not lasted more than 2 days before suffering a down day. There have been three 3-day rallies and none of four days or longer. The market has now closed up 3 days in a row. We are reaching the upper boundary of “normal”. Although I’m not betting on it, traders should be on alert for a change of character in the market.
The market may or may not pull back in the next day or two, but it appears likely to happen quite soon. Back to back days of 70% advancers are fairly rare. The fact that it happened without the S&P 500 posting a 10-day high is even more unusual. Since 1970 this has happened 20 times. Sixteen (80%) of the time the market closed below the close of the trigger day within the next four days. If you give it 10 days to work off the overbought breadth readings then 19 (95%) of the time you’d find a close lower than the trigger day. In other words, a pullback appears likely in the not-too distant future."
"Out of almost 2,100 diversified retail U.S. stock mutual funds that are open to new investors, just 17 have positive returns for both the past 12 months and year-to-date, according to investment researcher Morningstar Inc."
Russia’s prime minister said he thought the U.S. might have helped “stir up” the conflict to benefit one of the presidential candidates.
International Rectifier Corp.said Friday that its board unanimously rejected a $21.22-a-share unsolicited bid from Vishay Intertechnology Inc. Richard Dahl, chairman of International Rectifier, said in a statement that the deal, valued at about $1.6 billion, "significantly undervalues the company and its future prospects."
Business activity in the Chicago region picked up in August, according to a survey of corporate purchasing managers released Friday. The Chicago purchasing managers index rose slightly to 57.9 in August from 50.8 in July.
Integrity Bank of Alpharetta, Ga., with $1.1 billion in assets and $974 million in deposits, was closed Friday by the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corp. was named receiver. This marks the 10th U.S. bank failure so far this year.
Alitalia has filed for bankruptcy protection as the Italian government scrambled to put together a package to save the troubled airline, according to a statement posted on its corporate Web site Friday.
Friday, August 29, 2008
California Homes
8/29/08 California Homes
American workers' confidence in the job market is as low as it was during the 2001 recession, according to a survey released Thursday.
When asked whether this is a bad time to find a quality job, 65 percent said it was, matching the level of the 2001 recession, according to the survey by Rutgers University's John J. Heldrich Center for Workforce Development.
With unemployment at 5.7 percent, the highest level since 2004, and weekly unemployment claims hitting a six-year high earlier this month, workers are worried about everything from their weekly hours to their total pay.
Almost three years to the day after Katrina devastated New Orleans, disaster-response officials are bracing for Tropical Storm Gustav's projected landfall nearby as forecasters predict it will strengthen into a major hurricane.
The Department of Homeland Security's Federal Emergency Management Agency, criticized in 2005 for its slow response to Katrina, is working with state officials to prepare for the storm. FEMA said it moved 2.4 million liters of water in 137 trucks, 4 million meals in 203 trucks, 478 electric generators and 267 truckloads of blankets and cots into position for distribution in the Gulf Coast states. Gustav is the first storm of the 2008 Atlantic hurricane season to pose a serious threat to the more than 4,000 oil and gas installations in the Gulf.
Forecasts that Gustav could regain hurricane strength and cut a swath through offshore oil and natural gas production areas in the Gulf of Mexico also portend a threat to onshore energy sites.
Fannie Mae's capital and reserves positions are better than market expectations, according to an analyst at Lehman Brothers, who also said the biggest U.S. mortgage finance company may not need any more externally raised capital.
Fannie Mae should get through this difficult housing cycle with core capital remaining at or above the 15 percent excess capital requirement, analyst Bruce Harting said in a research note to clients.
Rob Hanna: "The market has been especially choppy over the last 15 months. Once aware of this, traders should look to take advantage. Seeing the market move in one direction for even a couple of days should alert traders that they may want to take profits or consider a strategy to benefit from a swing in the opposite direction.
Lastly, this environment will certainly change. While the above system may not be a great “trading” system, it does appear to be a very useful “tracking” system. In other words, moves higher of 2 days or more have quickly reversed and provided the system a nice string of winning trades. Traders should be on alert for system failures, as they could be a sign that selling into up-moves may be falling out of favor and the market environment changing. Therefore they would need to adjust their approach to take advantage of the new, emerging environment."
The median sales price of California homes sold in July was 40.3% below year-ago levels as bargain-hunters snapped up distressed housing in large numbers, skewing the state's housing market toward cheaper houses, the California Association of Realtors reports.
Median sales prices in the state -- which peaked at just under $600,000 late last summer -- fell from $587,560 in July 2007 to $350,760 in July 2008, a staggering decline that translates into prices falling by $4,500 per week.
The credit crunch squeezing Detroit's Big Three auto makers is now spreading to some of their dealers, adding financial pressure to a group already strained by this year's big drop in auto sales.
Economists see signs that the economy is weakening. While growth is expected to rise around 2% in the third quarter, many analysts expect much weaker growth in the last quarter of the year.
Keefe, Bruyette & Woods analysts in a research note Thursday cut their profit estimates for large-cap brokers with quarters ending in August: Goldman Sachs, Lehman Brothers and Morgan Stanley. They cited expected write-downs on residential mortgages and other assets, and weaker revenue in investment banking and trading. "Given the uncertain recovery we have also lowered 2009 estimates and adjusted price targets," KBW said. "Caution is warranted if investing in these names as volatility remains intense."
Microsoft released a web browser on Wednesday that includes a feature that could affect the advertising model of internet rivals such as Google.
The Internet Explorer 8 browser’s InPrivate setting lets users access websites without disclosing their browsing habits, which websites need to be able to do to deliver targeted advertising. This is a business Google has just moved into through its acquisition of DoubleClick.
Sears Holdings Corp. said second-quarter profit fell 62 percent drop as the retailer continues to struggle to attract customers to its stores despite a high-stakes restructuring. The company also said that it expects that its sales and gross profit margins will continue to be pressured as it sees no near-term improvement in the economy.
Caterpillar Inc. expects record sales this year as booming demand for construction and mining equipment in China and other emerging economies offsets weakness in its home U.S. market, its chairman said Thursday.
"Our manufacturing operations in Asia have been running at capacity to satisfy demand in China," James Owens said.
In Asia, Caterpillar has so many orders for heavy mining and power generation equipment that it is sold out of most items through 2010, he said.
Moscow has issued an extraordinary warning to the West that military assistance to Georgia for use against South Ossetia or Abkhazia would be viewed as a "declaration of war" by Russia.
The United States, Europe and Japan had planned to intervene and rescue a weak U.S. dollar in March, business newspaper Nikkei reported on Wednesday.
Officials from the U.S. Treasury Department, Japan's Finance Ministry, and the European Central Bank reportedly drew up a currency contingency plan to be undertaken over the March 15-16 weekend, Nikkei reported, citing sources familiar with the situation.
The monetary officials also agreed on a framework for coordinating dollar-buying intervention, the report said.
The officials did not specify an exchange rate for initiating the dollar rescue plan, but in the event of a free-fall, they all agreed to aggressively buy the greenback and sell yen and euros, according to Nikkei.
Just remember. No one is bigger than the market.
The thrift industry posted a $5.4 billion loss for the second quarter of 2008, as institutions set aside record reserves for loan losses during the continued housing market downturn, the Office of Thrift Supervision (OTS) reported today.
During the second quarter, thrifts set aside $14.0 billion in loan loss provisions, the highest total on record. During the last four quarters, the industry has added more than $30 billion to loan loss reserves, driving down earnings but providing a cushion against the impact of rising loan delinquencies and other problem assets. The net loss during the second quarter was the second largest on record after the $8.8 billion loss in the fourth quarter of 2007. In the first quarter of 2008, the industry lost $627 million...Troubled assets (noncurrent loans and repossessed assets) rose to 2.68 percent of assets, up from 2.06 percent in the previous quarter and 0.95 percent a year ago.
First-time applications for state unemployment benefits fell 10,000 in the latest weekly data to 425,000, the Labor Department reported Thursday. The four-week average of new claims fell 6,000 to 440,250. Continuing claims rose 64,000 to 3.42 million -- the highest level since November 2003. The four-week average of continuing claims rose 36,250 to 3.37 million - also reaching the highest level since November 2003.
Natural-gas inventories rose by 102 billion cubic feet for the week ended August 22, the Energy Department said Thursday. Analysts at Global Insight expected a climb of 86 billion. Total stocks now stand at 2.757 trillion cubic feet, down 200 billion cubic feet from the year-ago level but 71 billion cubic feet above the five-year average, the government data said. October natural gas was down 33.1 cents, or 3.9%, at $8.277 per million British thermal units on Globex.
Dell Inc. reported a fiscal second-quarter profit of $616 million, or 31 cents a share, on $16.43 billion in revenue. Analysts surveyed by FactSet Research had forecast Dell to earn 36 cents a share on sales of $15.97 billion. During the same period a year ago, Dell earned 33 cents a share on revenue of $14.77 billion.
October crude closed at $115.59 per barrel in New York Thursday, down $2.56, or 2.2%. Gold for December delivery closed up $3.20, or 0.4%, at $837.20 an ounce on the New York Mercantile Exchange.
Lehman Brothers plans to lay off as many as 1,500 employees, or about 6% of its work force, before it announces its third-quarter results on Sept. 15, The New York Times reported Thursday on its Web site, citing a person familiar with the plans.
The central bank of the Philippines raised its key interest rate by 25 basis points to 6% on Thursday as expected.
Japan's inflation rate exceeded 2 percent for the first time in a decade as companies passed higher costs onto households, deterring spending and weakening the economy.
Core prices, which exclude fresh food, climbed 2.4 percent in July from a year earlier after rising 1.9 percent in June, the statistics bureau said today in Tokyo. The median estimate of 38 economists surveyed by Bloomberg News was for 2.3 percent.
According to AMG Data Services, Including ETF activity, Equity funds report net cash outflows totaling -$3.690 billion in the week ended 8/27/08 with Domestic funds reporting net outflows of -$2.141 billion and Non-domestic funds reporting net outflows of -$1.549 billion;
Excluding ETF activity, equity funds report net cash outflows totaling -$1.186 billion with Domestic funds reporting net outflows of -$245 million and Non-domestic funds reporting net outflows totaling -$941 million.
Euro-zone consumer inflation fell back to an annual pace of 3.8% in August from 4% in July.
Microsoft Corp. has agreed to acquire Web-based survey company Greenfield Online, Inc. for about $486 million in cash, or $17.50 a share.
Japan's Industrial output upended expectations to rise 0.9% in July, marking its first gain in two months, according to government data released Friday.
American workers' confidence in the job market is as low as it was during the 2001 recession, according to a survey released Thursday.
When asked whether this is a bad time to find a quality job, 65 percent said it was, matching the level of the 2001 recession, according to the survey by Rutgers University's John J. Heldrich Center for Workforce Development.
With unemployment at 5.7 percent, the highest level since 2004, and weekly unemployment claims hitting a six-year high earlier this month, workers are worried about everything from their weekly hours to their total pay.
Almost three years to the day after Katrina devastated New Orleans, disaster-response officials are bracing for Tropical Storm Gustav's projected landfall nearby as forecasters predict it will strengthen into a major hurricane.
The Department of Homeland Security's Federal Emergency Management Agency, criticized in 2005 for its slow response to Katrina, is working with state officials to prepare for the storm. FEMA said it moved 2.4 million liters of water in 137 trucks, 4 million meals in 203 trucks, 478 electric generators and 267 truckloads of blankets and cots into position for distribution in the Gulf Coast states. Gustav is the first storm of the 2008 Atlantic hurricane season to pose a serious threat to the more than 4,000 oil and gas installations in the Gulf.
Forecasts that Gustav could regain hurricane strength and cut a swath through offshore oil and natural gas production areas in the Gulf of Mexico also portend a threat to onshore energy sites.
Fannie Mae's capital and reserves positions are better than market expectations, according to an analyst at Lehman Brothers, who also said the biggest U.S. mortgage finance company may not need any more externally raised capital.
Fannie Mae should get through this difficult housing cycle with core capital remaining at or above the 15 percent excess capital requirement, analyst Bruce Harting said in a research note to clients.
Rob Hanna: "The market has been especially choppy over the last 15 months. Once aware of this, traders should look to take advantage. Seeing the market move in one direction for even a couple of days should alert traders that they may want to take profits or consider a strategy to benefit from a swing in the opposite direction.
Lastly, this environment will certainly change. While the above system may not be a great “trading” system, it does appear to be a very useful “tracking” system. In other words, moves higher of 2 days or more have quickly reversed and provided the system a nice string of winning trades. Traders should be on alert for system failures, as they could be a sign that selling into up-moves may be falling out of favor and the market environment changing. Therefore they would need to adjust their approach to take advantage of the new, emerging environment."
The median sales price of California homes sold in July was 40.3% below year-ago levels as bargain-hunters snapped up distressed housing in large numbers, skewing the state's housing market toward cheaper houses, the California Association of Realtors reports.
Median sales prices in the state -- which peaked at just under $600,000 late last summer -- fell from $587,560 in July 2007 to $350,760 in July 2008, a staggering decline that translates into prices falling by $4,500 per week.
The credit crunch squeezing Detroit's Big Three auto makers is now spreading to some of their dealers, adding financial pressure to a group already strained by this year's big drop in auto sales.
Economists see signs that the economy is weakening. While growth is expected to rise around 2% in the third quarter, many analysts expect much weaker growth in the last quarter of the year.
Keefe, Bruyette & Woods analysts in a research note Thursday cut their profit estimates for large-cap brokers with quarters ending in August: Goldman Sachs, Lehman Brothers and Morgan Stanley. They cited expected write-downs on residential mortgages and other assets, and weaker revenue in investment banking and trading. "Given the uncertain recovery we have also lowered 2009 estimates and adjusted price targets," KBW said. "Caution is warranted if investing in these names as volatility remains intense."
Microsoft released a web browser on Wednesday that includes a feature that could affect the advertising model of internet rivals such as Google.
The Internet Explorer 8 browser’s InPrivate setting lets users access websites without disclosing their browsing habits, which websites need to be able to do to deliver targeted advertising. This is a business Google has just moved into through its acquisition of DoubleClick.
Sears Holdings Corp. said second-quarter profit fell 62 percent drop as the retailer continues to struggle to attract customers to its stores despite a high-stakes restructuring. The company also said that it expects that its sales and gross profit margins will continue to be pressured as it sees no near-term improvement in the economy.
Caterpillar Inc. expects record sales this year as booming demand for construction and mining equipment in China and other emerging economies offsets weakness in its home U.S. market, its chairman said Thursday.
"Our manufacturing operations in Asia have been running at capacity to satisfy demand in China," James Owens said.
In Asia, Caterpillar has so many orders for heavy mining and power generation equipment that it is sold out of most items through 2010, he said.
Moscow has issued an extraordinary warning to the West that military assistance to Georgia for use against South Ossetia or Abkhazia would be viewed as a "declaration of war" by Russia.
The United States, Europe and Japan had planned to intervene and rescue a weak U.S. dollar in March, business newspaper Nikkei reported on Wednesday.
Officials from the U.S. Treasury Department, Japan's Finance Ministry, and the European Central Bank reportedly drew up a currency contingency plan to be undertaken over the March 15-16 weekend, Nikkei reported, citing sources familiar with the situation.
The monetary officials also agreed on a framework for coordinating dollar-buying intervention, the report said.
The officials did not specify an exchange rate for initiating the dollar rescue plan, but in the event of a free-fall, they all agreed to aggressively buy the greenback and sell yen and euros, according to Nikkei.
Just remember. No one is bigger than the market.
The thrift industry posted a $5.4 billion loss for the second quarter of 2008, as institutions set aside record reserves for loan losses during the continued housing market downturn, the Office of Thrift Supervision (OTS) reported today.
During the second quarter, thrifts set aside $14.0 billion in loan loss provisions, the highest total on record. During the last four quarters, the industry has added more than $30 billion to loan loss reserves, driving down earnings but providing a cushion against the impact of rising loan delinquencies and other problem assets. The net loss during the second quarter was the second largest on record after the $8.8 billion loss in the fourth quarter of 2007. In the first quarter of 2008, the industry lost $627 million...Troubled assets (noncurrent loans and repossessed assets) rose to 2.68 percent of assets, up from 2.06 percent in the previous quarter and 0.95 percent a year ago.
First-time applications for state unemployment benefits fell 10,000 in the latest weekly data to 425,000, the Labor Department reported Thursday. The four-week average of new claims fell 6,000 to 440,250. Continuing claims rose 64,000 to 3.42 million -- the highest level since November 2003. The four-week average of continuing claims rose 36,250 to 3.37 million - also reaching the highest level since November 2003.
Natural-gas inventories rose by 102 billion cubic feet for the week ended August 22, the Energy Department said Thursday. Analysts at Global Insight expected a climb of 86 billion. Total stocks now stand at 2.757 trillion cubic feet, down 200 billion cubic feet from the year-ago level but 71 billion cubic feet above the five-year average, the government data said. October natural gas was down 33.1 cents, or 3.9%, at $8.277 per million British thermal units on Globex.
Dell Inc. reported a fiscal second-quarter profit of $616 million, or 31 cents a share, on $16.43 billion in revenue. Analysts surveyed by FactSet Research had forecast Dell to earn 36 cents a share on sales of $15.97 billion. During the same period a year ago, Dell earned 33 cents a share on revenue of $14.77 billion.
October crude closed at $115.59 per barrel in New York Thursday, down $2.56, or 2.2%. Gold for December delivery closed up $3.20, or 0.4%, at $837.20 an ounce on the New York Mercantile Exchange.
Lehman Brothers plans to lay off as many as 1,500 employees, or about 6% of its work force, before it announces its third-quarter results on Sept. 15, The New York Times reported Thursday on its Web site, citing a person familiar with the plans.
The central bank of the Philippines raised its key interest rate by 25 basis points to 6% on Thursday as expected.
Japan's inflation rate exceeded 2 percent for the first time in a decade as companies passed higher costs onto households, deterring spending and weakening the economy.
Core prices, which exclude fresh food, climbed 2.4 percent in July from a year earlier after rising 1.9 percent in June, the statistics bureau said today in Tokyo. The median estimate of 38 economists surveyed by Bloomberg News was for 2.3 percent.
According to AMG Data Services, Including ETF activity, Equity funds report net cash outflows totaling -$3.690 billion in the week ended 8/27/08 with Domestic funds reporting net outflows of -$2.141 billion and Non-domestic funds reporting net outflows of -$1.549 billion;
Excluding ETF activity, equity funds report net cash outflows totaling -$1.186 billion with Domestic funds reporting net outflows of -$245 million and Non-domestic funds reporting net outflows totaling -$941 million.
Euro-zone consumer inflation fell back to an annual pace of 3.8% in August from 4% in July.
Microsoft Corp. has agreed to acquire Web-based survey company Greenfield Online, Inc. for about $486 million in cash, or $17.50 a share.
Japan's Industrial output upended expectations to rise 0.9% in July, marking its first gain in two months, according to government data released Friday.
Wednesday, August 27, 2008
Home Sales
8/27/08 Home Sales
U.S. June Case-Shiller home prices down 15.9% in past year.
U.S. home sales rose 2.4% in July, but large downward revisions to prior months showed a weaker home sales market than previously estimated. New-home sales rose to a seasonally adjusted annual rate of 503,000 in July, the Commerce Department estimated. This was well below the 521,000 pace expected by economists surveyed by MarketWatch. The department revised down June sales to a 503,000 level compared with the previous estimate of 530,000. This is the lowest level of the economic cycle. The last time sales were lower was in September 1991. New-home sales are down 35.3% compared with a year ago. The months' supply of homes on the market fell to 10.1 months in July from 10.7 months in June. Median sales prices fell 6.3% in the past year to $230,700.
U.S. consumer confidence rose in August - the second consecutive month of gains - but the level remained relatively low and job concerns persisted, the Conference Board reported Tuesday. The August consumer confidence index rose to 56.9 from a July reading of 51.9. The percentage of consumers saying jobs are "hard to get" rose to 32% in August from 30.2% in July. Meanwhile, the percentage of consumers expecting business conditions to worsen over the next six months fell to 25.8% from 32.4%.
General Motors Corp has received interest from two separate investors from the Gulf Arab region to buy its Hummer brand, the company's Middle East chief told Reuters on Tuesday.
North Korea said on Tuesday it will stop disabling its nuclear facilities and consider restoring the Yongbyon reactor that can make material for atomic bombs, accusing the United States of violating a disarmament deal.
"We have decided to immediately suspend disabling our nuclear facilities," the North's KCNA news agency quoted a foreign ministry official as saying.
"This measure has been effective on August 14 and related parties have been notified of it," the official said.
ONGC Videsh Ltd., a unit of India's biggest exploration company, agreed to buy Imperial Energy Plc for 1.4 billion pounds ($2.58 billion) to tap Siberian deposits and make up for dwindling output at home.
ONGC Videsh's cash offer of 1,250 pence a share is worth 61.9 percent more than Imperial Energy's share price on July 11, the company said in a statement distributed by Regulatory News Service.
Rob Hanna: "Extremely negative breadth and extremely low volume is an unusual combination. On Monday we saw this combination...t appears to suggest we should see a respite and a bounce sometime soon."
Reuters: "The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell to 125.9 in the week to Aug. 15 from 126.4 in the previous period. Its annualized growth fell to negative 11.4 percent from minus 10.7 percent, revised up from minus 10.8 percent. It hit its lowest mark since the week to June 13, 1980, when it was negative 11.8 percent.The index declined to its lowest since July 2003 due to lower stock prices and housing activity, and the fall was partly offset by lower interest rates and jobless claims, said in an instant message interview Lakshman Achuthan, managing director at ECRI."Last year WLI growth fell to its worst reading since the 2001 recession, and today it has plunged to a 28-year low, its worst reading since the 1980 recession," he wrote. "This makes it crystal clear that there is no business cycle upturn in sight."
Hyundai Heavy Industries Co., the world's largest shipbuilder, plans to bid for a 3.35 trillion won ($3.1 billion) controlling stake in Daewoo Shipbuilding & Marine Engineering Co. in what may be the industry's biggest acquisition.
A preliminary offer will be submitted Wednesday, Ulsan, South Korea-based Hyundai Heavy said today in an e-mailed statement, without providing more details. The value of the stake is based on today's closing price of 34,700 won a share in Seoul.
Hyundai Heavy will compete with Posco, GS Group and Hanwha Group for the 50.4 percent holding being sold by state-run Korea Development Bank and Korea Asset Management Corp. The successful bidder may end up paying more than double the value of the stake following Hyundai Heavy's offer, analyst Song Sang Hoon said.
Rigzone reported Iran's oil minister said on Monday he expects OPEC to work on preventing the falling trend in crude prices and also to study oversupply in the market when it meets in September, oil ministry news website SHANA said.
According to Bloomberg, the dollar's rally over the past month is ``close to unprecedented'' in the 35 years since the currency was decoupled from gold and will have room to rise on bets the European Central Bank will begin cutting borrowing costs, according to Lehman Brothers Holdings Inc.
The CHART OF THE DAY shows the four-week rate of change in the Federal Reserve's trade-weighted U.S. dollar index since 1973 and the 6.3 percent gain through Aug. 15, the second-largest increase.
``The ECB is going to start cutting early next year -- in January,'' said Steven Englander, a currency strategist at Lehman in New York. ``Right now, the first ECB cut isn't priced in to the market until July. We are significantly more aggressive in terms of thinking how the ECB is going to respond to weaker growth and lower inflation.''
The dollar will rise to $1.43 per euro by year-end and strengthen to $1.40 by the end of the first quarter, Englander said.
The New York Times Co.said Tuesday that its advertising revenue for July fell 16.2%. Total revenue from continuing operations decreased 10.1% compared to the year-earlier period, while circulation revenue slipped 0.5%. The newspaper publisher said ad revenue from About Group grew 14.6% during the month.
Rob Kirby: "Last week, widely regarded silver analyst Ted Butler, reported on recent developments during the July 1 – August 5, 2008 time period in the precious metals complex [specifically, open-interest data in COMEX futures].
Butler’s work shows, as of July 1, 2008, two U.S. banks were short 6,199 contracts of COMEX silver (30,995,000 ounces). As of August 5, 2008, two U.S. banks were short 33,805 contracts of COMEX silver (169,025,000 ounces), an increase of more than five-fold. This is the largest such position by U.S. banks I can find in the data, ever. Between July 14 and August 15th, the price of COMEX silver declined from a peak high of $19.55 (basis September) to a low of $12.22 for a decline of 38%.
For gold, 3 U.S. banks held a short position of 7,787 contracts (778,700 ounces) in July, and 3 U.S. banks held a short position of 86,398 contracts (8,639,800 ounces) in August, an eleven-fold increase and coinciding with a gold price decline of more than $150 per ounce. As was the case with silver, this is the largest short position ever by US banks in the data listed on the CFTC’s site. This position was put on and resulted in massive market price collapse...The current track is NOT SUSTAINABLE. This is evidenced by the recent “decoupling” or widening of spreads between the futures [COMEX] price of precious metals and the prices being paid to acquire physical metal. We see the same type of divergence in the interest rate complex where LIBOR is set [effectively by 3 month Eurodollar Interest Rate Contracts] at contrived rates where banks are UNWILLING to lend money.
Under our current monetary regime the distortions outlined above will continue to intensify.
This is why I believe it is so important that people consider having an appropriate amount of physical precious metal, which is getting harder to purchase despite recent price bashings."
Jim Jubak: "In the long term, though, almost nothing has changed. Growth in the demand for oil still threatens to outstrip growth in supply. In June, oil consumption in China topped 8 million barrels a day for the first time, and the International Energy Agency projects demand from China will grow 5.6% in 2008 and 5.7% in 2009. Demand will more than double, to 16.5 million barrels a day, by 2030, the agency says.
India is seeing an even bigger jump in its demand, which is projected to grow 8% to 10% in 2008. And because India imports 76% of its crude, at these rates of demand growth, India is projected to become the biggest oil importer in the world by 2025, according to the energy agency."
Fewer Americans went without health insurance in 2007 than in the prior year, while there was a gain in median household income adjusted for inflation, the Census Bureau reported Tuesday. The number of people without health insurance fell to 45.7 million in 2007 from 47 million in 2006, the government said in its annual snapshot. Median household income adjusted for inflation rose 1.3% to $50,233. The poverty rate hit 12.5% in 2007, compared with 12.3% in the prior year - not statistically different, according to Census.
The Federal Deposit Insurance Corp. is considering a plan to borrow funds from the U.S. Treasury Department, as its seeks to shore up its finances amid an expected wave of bank failures, according to a published report Tuesday.
Standard & Poor's Ratings Services on Tuesday lowered Freddie Mac's subordinated debt rating to BBB+, its risk-to-the-government stand-alone issuer credit rating to A- from A, and its preferred stock rating to BBB- from A-.
Banks had the second worst earnings in the since 1991, the Federal Deposit Insurance Corporation said Tuesday. Earnings for the quarter totaled just $5.0 billion compared to $36.8 billion a year ago, a decline of 86.5%, the FDIC said in its second-quarter banking profile. Higher loss provisions were the main reason for the drop.
October crude closed at $116.27 a barrel in New York Tuesday, up $1.16, or 1%, for the session. Gold for December delivery rose $2.4, or 0.3%, to $828.10 an ounce on the New York Mercantile Exchange.
U.S. June Case-Shiller home prices down 15.9% in past year.
U.S. home sales rose 2.4% in July, but large downward revisions to prior months showed a weaker home sales market than previously estimated. New-home sales rose to a seasonally adjusted annual rate of 503,000 in July, the Commerce Department estimated. This was well below the 521,000 pace expected by economists surveyed by MarketWatch. The department revised down June sales to a 503,000 level compared with the previous estimate of 530,000. This is the lowest level of the economic cycle. The last time sales were lower was in September 1991. New-home sales are down 35.3% compared with a year ago. The months' supply of homes on the market fell to 10.1 months in July from 10.7 months in June. Median sales prices fell 6.3% in the past year to $230,700.
U.S. consumer confidence rose in August - the second consecutive month of gains - but the level remained relatively low and job concerns persisted, the Conference Board reported Tuesday. The August consumer confidence index rose to 56.9 from a July reading of 51.9. The percentage of consumers saying jobs are "hard to get" rose to 32% in August from 30.2% in July. Meanwhile, the percentage of consumers expecting business conditions to worsen over the next six months fell to 25.8% from 32.4%.
General Motors Corp has received interest from two separate investors from the Gulf Arab region to buy its Hummer brand, the company's Middle East chief told Reuters on Tuesday.
North Korea said on Tuesday it will stop disabling its nuclear facilities and consider restoring the Yongbyon reactor that can make material for atomic bombs, accusing the United States of violating a disarmament deal.
"We have decided to immediately suspend disabling our nuclear facilities," the North's KCNA news agency quoted a foreign ministry official as saying.
"This measure has been effective on August 14 and related parties have been notified of it," the official said.
ONGC Videsh Ltd., a unit of India's biggest exploration company, agreed to buy Imperial Energy Plc for 1.4 billion pounds ($2.58 billion) to tap Siberian deposits and make up for dwindling output at home.
ONGC Videsh's cash offer of 1,250 pence a share is worth 61.9 percent more than Imperial Energy's share price on July 11, the company said in a statement distributed by Regulatory News Service.
Rob Hanna: "Extremely negative breadth and extremely low volume is an unusual combination. On Monday we saw this combination...t appears to suggest we should see a respite and a bounce sometime soon."
Reuters: "The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell to 125.9 in the week to Aug. 15 from 126.4 in the previous period. Its annualized growth fell to negative 11.4 percent from minus 10.7 percent, revised up from minus 10.8 percent. It hit its lowest mark since the week to June 13, 1980, when it was negative 11.8 percent.The index declined to its lowest since July 2003 due to lower stock prices and housing activity, and the fall was partly offset by lower interest rates and jobless claims, said in an instant message interview Lakshman Achuthan, managing director at ECRI."Last year WLI growth fell to its worst reading since the 2001 recession, and today it has plunged to a 28-year low, its worst reading since the 1980 recession," he wrote. "This makes it crystal clear that there is no business cycle upturn in sight."
Hyundai Heavy Industries Co., the world's largest shipbuilder, plans to bid for a 3.35 trillion won ($3.1 billion) controlling stake in Daewoo Shipbuilding & Marine Engineering Co. in what may be the industry's biggest acquisition.
A preliminary offer will be submitted Wednesday, Ulsan, South Korea-based Hyundai Heavy said today in an e-mailed statement, without providing more details. The value of the stake is based on today's closing price of 34,700 won a share in Seoul.
Hyundai Heavy will compete with Posco, GS Group and Hanwha Group for the 50.4 percent holding being sold by state-run Korea Development Bank and Korea Asset Management Corp. The successful bidder may end up paying more than double the value of the stake following Hyundai Heavy's offer, analyst Song Sang Hoon said.
Rigzone reported Iran's oil minister said on Monday he expects OPEC to work on preventing the falling trend in crude prices and also to study oversupply in the market when it meets in September, oil ministry news website SHANA said.
According to Bloomberg, the dollar's rally over the past month is ``close to unprecedented'' in the 35 years since the currency was decoupled from gold and will have room to rise on bets the European Central Bank will begin cutting borrowing costs, according to Lehman Brothers Holdings Inc.
The CHART OF THE DAY shows the four-week rate of change in the Federal Reserve's trade-weighted U.S. dollar index since 1973 and the 6.3 percent gain through Aug. 15, the second-largest increase.
``The ECB is going to start cutting early next year -- in January,'' said Steven Englander, a currency strategist at Lehman in New York. ``Right now, the first ECB cut isn't priced in to the market until July. We are significantly more aggressive in terms of thinking how the ECB is going to respond to weaker growth and lower inflation.''
The dollar will rise to $1.43 per euro by year-end and strengthen to $1.40 by the end of the first quarter, Englander said.
The New York Times Co.said Tuesday that its advertising revenue for July fell 16.2%. Total revenue from continuing operations decreased 10.1% compared to the year-earlier period, while circulation revenue slipped 0.5%. The newspaper publisher said ad revenue from About Group grew 14.6% during the month.
Rob Kirby: "Last week, widely regarded silver analyst Ted Butler, reported on recent developments during the July 1 – August 5, 2008 time period in the precious metals complex [specifically, open-interest data in COMEX futures].
Butler’s work shows, as of July 1, 2008, two U.S. banks were short 6,199 contracts of COMEX silver (30,995,000 ounces). As of August 5, 2008, two U.S. banks were short 33,805 contracts of COMEX silver (169,025,000 ounces), an increase of more than five-fold. This is the largest such position by U.S. banks I can find in the data, ever. Between July 14 and August 15th, the price of COMEX silver declined from a peak high of $19.55 (basis September) to a low of $12.22 for a decline of 38%.
For gold, 3 U.S. banks held a short position of 7,787 contracts (778,700 ounces) in July, and 3 U.S. banks held a short position of 86,398 contracts (8,639,800 ounces) in August, an eleven-fold increase and coinciding with a gold price decline of more than $150 per ounce. As was the case with silver, this is the largest short position ever by US banks in the data listed on the CFTC’s site. This position was put on and resulted in massive market price collapse...The current track is NOT SUSTAINABLE. This is evidenced by the recent “decoupling” or widening of spreads between the futures [COMEX] price of precious metals and the prices being paid to acquire physical metal. We see the same type of divergence in the interest rate complex where LIBOR is set [effectively by 3 month Eurodollar Interest Rate Contracts] at contrived rates where banks are UNWILLING to lend money.
Under our current monetary regime the distortions outlined above will continue to intensify.
This is why I believe it is so important that people consider having an appropriate amount of physical precious metal, which is getting harder to purchase despite recent price bashings."
Jim Jubak: "In the long term, though, almost nothing has changed. Growth in the demand for oil still threatens to outstrip growth in supply. In June, oil consumption in China topped 8 million barrels a day for the first time, and the International Energy Agency projects demand from China will grow 5.6% in 2008 and 5.7% in 2009. Demand will more than double, to 16.5 million barrels a day, by 2030, the agency says.
India is seeing an even bigger jump in its demand, which is projected to grow 8% to 10% in 2008. And because India imports 76% of its crude, at these rates of demand growth, India is projected to become the biggest oil importer in the world by 2025, according to the energy agency."
Fewer Americans went without health insurance in 2007 than in the prior year, while there was a gain in median household income adjusted for inflation, the Census Bureau reported Tuesday. The number of people without health insurance fell to 45.7 million in 2007 from 47 million in 2006, the government said in its annual snapshot. Median household income adjusted for inflation rose 1.3% to $50,233. The poverty rate hit 12.5% in 2007, compared with 12.3% in the prior year - not statistically different, according to Census.
The Federal Deposit Insurance Corp. is considering a plan to borrow funds from the U.S. Treasury Department, as its seeks to shore up its finances amid an expected wave of bank failures, according to a published report Tuesday.
Standard & Poor's Ratings Services on Tuesday lowered Freddie Mac's subordinated debt rating to BBB+, its risk-to-the-government stand-alone issuer credit rating to A- from A, and its preferred stock rating to BBB- from A-.
Banks had the second worst earnings in the since 1991, the Federal Deposit Insurance Corporation said Tuesday. Earnings for the quarter totaled just $5.0 billion compared to $36.8 billion a year ago, a decline of 86.5%, the FDIC said in its second-quarter banking profile. Higher loss provisions were the main reason for the drop.
October crude closed at $116.27 a barrel in New York Tuesday, up $1.16, or 1%, for the session. Gold for December delivery rose $2.4, or 0.3%, to $828.10 an ounce on the New York Mercantile Exchange.
Tuesday, August 26, 2008
Housing
8/26/08 Housing
According to the FT, South Korea’s top financial regulator on Monday warned that Korea Development Bank should take a “cautious” approach to buying an overseas bank, following the state-run group’s expression of interest in Lehman Brothers .
Jun Kwang-woo, chairman of the Financial Services Commission, said he was “aware” that KDB was considering the possibility of buying a global investment bank, but he stressed that such a deal should be led by private lenders.
June Euro-zone factory orders fell at the fastest rate since December 2001, hammered by weakened domestic demand. New industrial orders were down 7.4% vs. an expected 6.7% drop.
James Conrad: "According to the Mint website, in the first two weeks of August, before the suspension of sales, the Mint sold 65,000 ounces worth of gold eagle bullion coins. These were sold at per ounce rates far exceeding the COMEX fantasy price...According to the U.S. Mint, in 2007, 198,500 ounces of gold were sold in the form of gold eagles. That amounts to about 6.2 tons of gold for the entire year. In contrast, in the first two weeks of August, the Mint had already sold 65,000 ounces worth of gold eagles. That is an annual rate of 1,690,000 ounces of gold. It works out to about 52.6 metric tons. In other words, demand for gold, in the form of eagle coins, increased by a factor of about 8.5. During all of 2007, total demand in the US based physical gold investment market was only about 16.6 tons, according to the World Gold Council. This year, if the pace set in the first two weeks of August continues, and the ratio of American Eagle sales to total sales stays about the same, real market investment gold sales, in America , will total 141.1 tons. But, that assumes the increases will stop. There is no likelihood that this will happen."
If government predictions come true, homeowners will spend $22 billion more to heat their homes this winter than they did last year, estimates Mark Zandi, chief economist at Moody's Economy.com.
That could cut gross domestic product by 0.3 percentage points at the end of 2008 and into 2009 at a time when "the economy will be struggling to remain in positive territory," Zandi says.
Resales of U.S. single-family homes and condos rose 3.1% in July to a seasonally adjusted annual rate of 5.0 million, the National Association of Realtors reported Monday. Resales have sunk 13.2% in the past year. The gain was stronger than expected. Economists surveyed by MarketWatch expected sales to rise to 4.91 million. Despite the increase in sales, the inventory of unsold homes on the market rose 3.9% to 4.67 million, an 11.2 month supply at the current sales pace. The median sales prices fell 7.1% in the past year to $212,400.
American International Group Inc., the largest U.S. insurer, fell 5.1 percent in New York trading after Credit Suisse Group said the company may post a third- quarter loss of $2.41 billion on mortgage-related writedowns.
AIG's estimate was trimmed to an 86 cents-a-share loss from a gain of 13 cents after ``recent deterioration'' in debt holdings that may cause credit-default swap losses, analyst Thomas Gallagher wrote today in a research note. The average estimate of 15 analysts surveyed by Bloomberg is for profit of 65 cents a share.
Standard & Poor's said Monday early results show that second-quarter earnings for companies in the S&P 500 index fell 29% from a year ago, the fourth consecutive declining quarter for the index. The figures are based on 96% of the data in, S&P said. "The shift in earnings continues with Energy contributing 25.1% of the S&P 500's operating earnings during the second quarter, up from 16.4% a year ago," said Howard Silverblatt, S&P senior index analyst, in a statement. "Conversely, Financials have now posted their third consecutive quarter of negative earnings after accounting for 28.4% of operating earnings this time last year."
The Chicago Fed said Monday that its National Activity Index fell slightly in July to 0.67 from 0.59 in June. This is the eighth straight month the index has been near the 0.7 threshold that indicates "an increasing likelihood that a recession has begun," the bank said in a statement. The index is a weighted average of 85 indicators of national economic activity and is designed to highlight turning points. The decline in July was driven primarily by labor market indicators, the Chicago Fed said. The three month average for the index was -0.80. "The index signals that the economy is in recession and has been since the end of last year," wrote the economist team at Dresdner Kleinwort in a note to clients.
Israel's central bank decided to raise its interest rate by 25 basis points to 4.25% on Monday to curb inflationary pressures. "Inflation in the last twelve months stands at 4.8%, and since the beginning of 2008 has been above the upper limit of the price stability target range of 1% to 3%," the Bank of Israel said in its monetary policy statement.
October crude closed at $115.11 a barrel, up 52 cents, in New York. Sept. natural gas cut its losses to close at $7.825 per million British thermal units, down 1.8 cents. Gold futures for December delivery fell $7.80, or 0.9%, to close at $825.70 an ounce on the New York Mercantile Exchange.
As Democrats put the final touches on opening night, Obama's campaign released the ad featuring images of Sen. McCain hugging Mr. Bush and the two smiling in spite of national economic woes. It features a parody of the Sam Cooke classic "Wonderful World," which starts off with the line "Don't know much about history." For the ad it's "I'm not up on the economy," playing on Sen. McCain's earlier admission that economics wasn't his best subject.
Ending with a photo of Mr. Bush patting Sen. McCain's back, the spot asks, "Do we really want four more years of the same old tune?"
the Dow Jones Industrial Average fell 241.81 points, or 2.1%, to end at 11,386.25. The S&P 500 declined 25.36 points, or 2%, to rest at 1,266.84, while the Nasdaq Composite dropped 49.12 points, or 2%, to finish at 2,365.59.
Kohlberg Kravis Roberts is showing a high level of interest in buying the Neuberger Berman asset management unit of Lehman Brothers, while Blackstone Group is showing almost no interest, CNBC reported, citing people close to the negotations.
The Ifo Institute's closely-watched gauge of German business sentiment tumbled more than expected to 94.8 in August from a reading of 97.5 in July, news reports said. Consensus expectations were for a fall to 97.1, according to a Dow Jones Newswires survey of analysts.
According to the FT, South Korea’s top financial regulator on Monday warned that Korea Development Bank should take a “cautious” approach to buying an overseas bank, following the state-run group’s expression of interest in Lehman Brothers .
Jun Kwang-woo, chairman of the Financial Services Commission, said he was “aware” that KDB was considering the possibility of buying a global investment bank, but he stressed that such a deal should be led by private lenders.
June Euro-zone factory orders fell at the fastest rate since December 2001, hammered by weakened domestic demand. New industrial orders were down 7.4% vs. an expected 6.7% drop.
James Conrad: "According to the Mint website, in the first two weeks of August, before the suspension of sales, the Mint sold 65,000 ounces worth of gold eagle bullion coins. These were sold at per ounce rates far exceeding the COMEX fantasy price...According to the U.S. Mint, in 2007, 198,500 ounces of gold were sold in the form of gold eagles. That amounts to about 6.2 tons of gold for the entire year. In contrast, in the first two weeks of August, the Mint had already sold 65,000 ounces worth of gold eagles. That is an annual rate of 1,690,000 ounces of gold. It works out to about 52.6 metric tons. In other words, demand for gold, in the form of eagle coins, increased by a factor of about 8.5. During all of 2007, total demand in the US based physical gold investment market was only about 16.6 tons, according to the World Gold Council. This year, if the pace set in the first two weeks of August continues, and the ratio of American Eagle sales to total sales stays about the same, real market investment gold sales, in America , will total 141.1 tons. But, that assumes the increases will stop. There is no likelihood that this will happen."
If government predictions come true, homeowners will spend $22 billion more to heat their homes this winter than they did last year, estimates Mark Zandi, chief economist at Moody's Economy.com.
That could cut gross domestic product by 0.3 percentage points at the end of 2008 and into 2009 at a time when "the economy will be struggling to remain in positive territory," Zandi says.
Resales of U.S. single-family homes and condos rose 3.1% in July to a seasonally adjusted annual rate of 5.0 million, the National Association of Realtors reported Monday. Resales have sunk 13.2% in the past year. The gain was stronger than expected. Economists surveyed by MarketWatch expected sales to rise to 4.91 million. Despite the increase in sales, the inventory of unsold homes on the market rose 3.9% to 4.67 million, an 11.2 month supply at the current sales pace. The median sales prices fell 7.1% in the past year to $212,400.
American International Group Inc., the largest U.S. insurer, fell 5.1 percent in New York trading after Credit Suisse Group said the company may post a third- quarter loss of $2.41 billion on mortgage-related writedowns.
AIG's estimate was trimmed to an 86 cents-a-share loss from a gain of 13 cents after ``recent deterioration'' in debt holdings that may cause credit-default swap losses, analyst Thomas Gallagher wrote today in a research note. The average estimate of 15 analysts surveyed by Bloomberg is for profit of 65 cents a share.
Standard & Poor's said Monday early results show that second-quarter earnings for companies in the S&P 500 index fell 29% from a year ago, the fourth consecutive declining quarter for the index. The figures are based on 96% of the data in, S&P said. "The shift in earnings continues with Energy contributing 25.1% of the S&P 500's operating earnings during the second quarter, up from 16.4% a year ago," said Howard Silverblatt, S&P senior index analyst, in a statement. "Conversely, Financials have now posted their third consecutive quarter of negative earnings after accounting for 28.4% of operating earnings this time last year."
The Chicago Fed said Monday that its National Activity Index fell slightly in July to 0.67 from 0.59 in June. This is the eighth straight month the index has been near the 0.7 threshold that indicates "an increasing likelihood that a recession has begun," the bank said in a statement. The index is a weighted average of 85 indicators of national economic activity and is designed to highlight turning points. The decline in July was driven primarily by labor market indicators, the Chicago Fed said. The three month average for the index was -0.80. "The index signals that the economy is in recession and has been since the end of last year," wrote the economist team at Dresdner Kleinwort in a note to clients.
Israel's central bank decided to raise its interest rate by 25 basis points to 4.25% on Monday to curb inflationary pressures. "Inflation in the last twelve months stands at 4.8%, and since the beginning of 2008 has been above the upper limit of the price stability target range of 1% to 3%," the Bank of Israel said in its monetary policy statement.
October crude closed at $115.11 a barrel, up 52 cents, in New York. Sept. natural gas cut its losses to close at $7.825 per million British thermal units, down 1.8 cents. Gold futures for December delivery fell $7.80, or 0.9%, to close at $825.70 an ounce on the New York Mercantile Exchange.
As Democrats put the final touches on opening night, Obama's campaign released the ad featuring images of Sen. McCain hugging Mr. Bush and the two smiling in spite of national economic woes. It features a parody of the Sam Cooke classic "Wonderful World," which starts off with the line "Don't know much about history." For the ad it's "I'm not up on the economy," playing on Sen. McCain's earlier admission that economics wasn't his best subject.
Ending with a photo of Mr. Bush patting Sen. McCain's back, the spot asks, "Do we really want four more years of the same old tune?"
the Dow Jones Industrial Average fell 241.81 points, or 2.1%, to end at 11,386.25. The S&P 500 declined 25.36 points, or 2%, to rest at 1,266.84, while the Nasdaq Composite dropped 49.12 points, or 2%, to finish at 2,365.59.
Kohlberg Kravis Roberts is showing a high level of interest in buying the Neuberger Berman asset management unit of Lehman Brothers, while Blackstone Group is showing almost no interest, CNBC reported, citing people close to the negotations.
The Ifo Institute's closely-watched gauge of German business sentiment tumbled more than expected to 94.8 in August from a reading of 97.5 in July, news reports said. Consensus expectations were for a fall to 97.1, according to a Dow Jones Newswires survey of analysts.
Monday, August 25, 2008
Credit Spreads
8/25/08 Credit Spreads
According to the NY Times, in the three years since housing peaked in Merced, California, the median sales price has fallen by 50 percent. There are thousands of foreclosures on the market. The asking prices on those properties are so low that competitive bidding, a hallmark of the boom, is back.
But almost no homeowner can afford to sell. If you cannot go as low as “the foreclosure price” — the cost of a comparable bank-owned house — real estate agents say you might as well not even bother listing your home.
And so most people do not: three out of four existing-home sales in Merced County are now foreclosures, the highest percentage in the state, according to DataQuick Information Systems. The only group for whom selling makes sense, real estate agents here say, are the elderly entering assisted-living facilities, who often have decades of appreciation built into their home’s value.
As Merced goes, so might go much of the nation. With as many as 2.5 million homes in the United States entering foreclosure this year and, at best, sales of only five million existing houses, the foreclosure price is becoming the rule in many areas. In Los Angeles County, whose 10 million people make it the most populous county in the United States, a third of the sales are foreclosures.
John Maynard Keyes: “There is nothing so disastrous as a rational investment policy in an irrational world."
The Oil Drum: "The poll of 1,089 likely voters found that just under 13 percent thought gasoline prices would rise a lot between now and the end of the year. About one quarter thought prices would rise a little, while one in three thought they would drop a little and 18 percent said they would stay about the same.
...Pollster John Zogby said the swift rise in fuel prices earlier this year had fundamentally changed U.S. consumer behavior, and a pullback below $115 per barrel was not sufficient to alter that.
"The lines are not forming to buy Hummers," he said, referring to the big luxury trucks that are notorious for their poor fuel mileage."
Christian Menegatti has an excellent article on Nouriel Roubini's RGE Monitor and it is entitled Life Without Home Equity (Withdrawal)--Down to $24B in QTR 1. Here are a few excerpts: "We found that a 10% fall in home prices could have an impact that goes from 0.99 to 1.97% of GDP. Cleary, the outcome would get much worse in the case of a sharp 20% drop in home prices. In this case, the heavy toll on GDP coming from the negative wealth effect would range from 1.6 to 3.3%.
Now, prices have fallen about 20% since July 2006 when they peaked and looking at indicators like price/income ratio or price/rent ratio a further 15% fall in home prices should not come as a surprise; especially since inventories are still at a record high and foreclosures are mounting adding to the glut of supply that puts downward pressure on prices.
But the wealth effect, though present and significant might be only part of the story that links the housing boom to personal consumption (which went from an average of 67% of GDP in the 1990s to 71% of GDP now – and about one fourth of world GDP).
In the 1990s HEW averaged about 14bn. It started to increase sharply at the end of the 1990s and peaked in Q3 2005 when it reached an annualized $714.5bn per year. It has been declining ever since, falling all the way to $157bn in Q4 2006 which was the last data point we had available. Again, to analyze the possible effect of a fall in HEW we depicted different scenarios.
Estimates of marginal propensity to consume out of an additional dollar in HEW vary between 10 and 50%
HEW drops to $140b
image006_32.gif
HEW drops to $60b
image008_22.gif
HEW drops to $0b
image010_10.gif
Now, according to our estimates HEW is down to $24bn (annualized) in Q1 2008, the lowest reading since the 1990s. And most likely it will not rebound very soon as home prices keep falling pressured by mounting inventories.
And whether HEW is the driver or not, the slump in demand is evident not only from the slowdown of the growth rate of personal consumption (from 3.9% in Q1 2007 to 0.9% in Q1 2007 and then 1.5% in Q2 2008) but also from the fact that the (negative) growth rate of imports was the largest contributor to GDP in Q2 2008 (import fell 6.6% and their contribution to GDP was 1.3% - over two-thirds of the GDP growth in the Q2 was due to the decline in imports)."
Bloomberg reported the Federal Deposit Insurance Corp.'s plan to have IndyMac Federal Bank FSB rework mortgages for troubled homeowners is ``dangerous'' for bondholders, according to Barclays Capital.
Investors in mortgage-backed securities may be worse off if enough loans default after they're modified because recoveries may be lower as home prices decline, analyst Sharon Greenberg wrote yesterday in a report. Loan changes also cost bondholders by reducing borrower payments, their collateral or both.
John Maynard Keyes: “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”
Canada's Precision Drilling Trust said Monday it plans to buy Amex-listed Grey Wolf Inc. for an estimated $1.12 billion cash and 42 million shares of Precision. Investors in the purchased firm will be allowed to choose either $5 cash or 0.1883 Precision shares for each share of Grey Wolf they own, according to a joint statement on the deal. The stock side of the price marks a 4.5% increase over Precision's previous offer for the oil services firm. Precision said the deal will be "highly accretive" to its cash flow, and that Grey Wolf shareholders will receive their proxy statements by the end of the third quarter.
Iran has chosen the site for and started designing a new, 360-megawatt nuclear power plant in the country, a senior atomic-energy official said Sunday, according to reports. "We are involved in the design phase of this power station," said Mohammad Saeedi, deputy head of Iran's Atomic Energy Organization, according to a Reuters report. "Gradually, the complementary design phase and its building will begin," Saeedi said. Iran's first nuclear power plant, with a capacity of 1,000 MW, is currently being built by Russia in the port city of Bushehr. The country has said it wants to build nuclear power plants with a total capacity of 20,000 MW by 2020, the report added.
According to Bloomberg, banks are charging each other a premium of 77 basis points over what traders predict the Federal Reserve's daily effective federal funds rate will average over the next three months to lend cash. The spread is up from about 24 basis points in January, and may widen to 85 basis points, or 0.85 percentage point, by mid-December, prices in the forwards market show.
Americans who lack health insurance will spend about $30 billion out of pocket on medical care this year, but others -- mainly the government -- will end up covering another $56 billion in costs, according to a new study.
The tab to cover all the uninsured would be $208.6 billion -- $122.6 billion more than this year's projected total -- mainly because people with insurance tend to use more health-care services, the study found.
The report from researchers at George Mason University in Fairfax, Va., and the Urban Institute think tank in Washington, D.C., is to be published Monday in the journal Health Affairs online.
John Hussman: "I'll emphasize again that at the point we do observe sufficient evidence for investors to concede recession, the potential downside could be abrupt, leaving little opportunity to make defensive changes after the fact. As I've often said, the best time to panic is before everybody else does.
Among the factors that concern me here is the continued widening of credit spreads, which increasingly suggests that default risk may be starting to spread beyond the financial sector into the broader economy. Meanwhile, there is a relative complacency in the stock market because investors are still convinced that the extreme “tail risk” in the markets has been removed by the Federal Reserve and the U.S. Treasury."
According to the NY Times, in the three years since housing peaked in Merced, California, the median sales price has fallen by 50 percent. There are thousands of foreclosures on the market. The asking prices on those properties are so low that competitive bidding, a hallmark of the boom, is back.
But almost no homeowner can afford to sell. If you cannot go as low as “the foreclosure price” — the cost of a comparable bank-owned house — real estate agents say you might as well not even bother listing your home.
And so most people do not: three out of four existing-home sales in Merced County are now foreclosures, the highest percentage in the state, according to DataQuick Information Systems. The only group for whom selling makes sense, real estate agents here say, are the elderly entering assisted-living facilities, who often have decades of appreciation built into their home’s value.
As Merced goes, so might go much of the nation. With as many as 2.5 million homes in the United States entering foreclosure this year and, at best, sales of only five million existing houses, the foreclosure price is becoming the rule in many areas. In Los Angeles County, whose 10 million people make it the most populous county in the United States, a third of the sales are foreclosures.
John Maynard Keyes: “There is nothing so disastrous as a rational investment policy in an irrational world."
The Oil Drum: "The poll of 1,089 likely voters found that just under 13 percent thought gasoline prices would rise a lot between now and the end of the year. About one quarter thought prices would rise a little, while one in three thought they would drop a little and 18 percent said they would stay about the same.
...Pollster John Zogby said the swift rise in fuel prices earlier this year had fundamentally changed U.S. consumer behavior, and a pullback below $115 per barrel was not sufficient to alter that.
"The lines are not forming to buy Hummers," he said, referring to the big luxury trucks that are notorious for their poor fuel mileage."
Christian Menegatti has an excellent article on Nouriel Roubini's RGE Monitor and it is entitled Life Without Home Equity (Withdrawal)--Down to $24B in QTR 1. Here are a few excerpts: "We found that a 10% fall in home prices could have an impact that goes from 0.99 to 1.97% of GDP. Cleary, the outcome would get much worse in the case of a sharp 20% drop in home prices. In this case, the heavy toll on GDP coming from the negative wealth effect would range from 1.6 to 3.3%.
Now, prices have fallen about 20% since July 2006 when they peaked and looking at indicators like price/income ratio or price/rent ratio a further 15% fall in home prices should not come as a surprise; especially since inventories are still at a record high and foreclosures are mounting adding to the glut of supply that puts downward pressure on prices.
But the wealth effect, though present and significant might be only part of the story that links the housing boom to personal consumption (which went from an average of 67% of GDP in the 1990s to 71% of GDP now – and about one fourth of world GDP).
In the 1990s HEW averaged about 14bn. It started to increase sharply at the end of the 1990s and peaked in Q3 2005 when it reached an annualized $714.5bn per year. It has been declining ever since, falling all the way to $157bn in Q4 2006 which was the last data point we had available. Again, to analyze the possible effect of a fall in HEW we depicted different scenarios.
Estimates of marginal propensity to consume out of an additional dollar in HEW vary between 10 and 50%
HEW drops to $140b
image006_32.gif
HEW drops to $60b
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HEW drops to $0b
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Now, according to our estimates HEW is down to $24bn (annualized) in Q1 2008, the lowest reading since the 1990s. And most likely it will not rebound very soon as home prices keep falling pressured by mounting inventories.
And whether HEW is the driver or not, the slump in demand is evident not only from the slowdown of the growth rate of personal consumption (from 3.9% in Q1 2007 to 0.9% in Q1 2007 and then 1.5% in Q2 2008) but also from the fact that the (negative) growth rate of imports was the largest contributor to GDP in Q2 2008 (import fell 6.6% and their contribution to GDP was 1.3% - over two-thirds of the GDP growth in the Q2 was due to the decline in imports)."
Bloomberg reported the Federal Deposit Insurance Corp.'s plan to have IndyMac Federal Bank FSB rework mortgages for troubled homeowners is ``dangerous'' for bondholders, according to Barclays Capital.
Investors in mortgage-backed securities may be worse off if enough loans default after they're modified because recoveries may be lower as home prices decline, analyst Sharon Greenberg wrote yesterday in a report. Loan changes also cost bondholders by reducing borrower payments, their collateral or both.
John Maynard Keyes: “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”
Canada's Precision Drilling Trust said Monday it plans to buy Amex-listed Grey Wolf Inc. for an estimated $1.12 billion cash and 42 million shares of Precision. Investors in the purchased firm will be allowed to choose either $5 cash or 0.1883 Precision shares for each share of Grey Wolf they own, according to a joint statement on the deal. The stock side of the price marks a 4.5% increase over Precision's previous offer for the oil services firm. Precision said the deal will be "highly accretive" to its cash flow, and that Grey Wolf shareholders will receive their proxy statements by the end of the third quarter.
Iran has chosen the site for and started designing a new, 360-megawatt nuclear power plant in the country, a senior atomic-energy official said Sunday, according to reports. "We are involved in the design phase of this power station," said Mohammad Saeedi, deputy head of Iran's Atomic Energy Organization, according to a Reuters report. "Gradually, the complementary design phase and its building will begin," Saeedi said. Iran's first nuclear power plant, with a capacity of 1,000 MW, is currently being built by Russia in the port city of Bushehr. The country has said it wants to build nuclear power plants with a total capacity of 20,000 MW by 2020, the report added.
According to Bloomberg, banks are charging each other a premium of 77 basis points over what traders predict the Federal Reserve's daily effective federal funds rate will average over the next three months to lend cash. The spread is up from about 24 basis points in January, and may widen to 85 basis points, or 0.85 percentage point, by mid-December, prices in the forwards market show.
Americans who lack health insurance will spend about $30 billion out of pocket on medical care this year, but others -- mainly the government -- will end up covering another $56 billion in costs, according to a new study.
The tab to cover all the uninsured would be $208.6 billion -- $122.6 billion more than this year's projected total -- mainly because people with insurance tend to use more health-care services, the study found.
The report from researchers at George Mason University in Fairfax, Va., and the Urban Institute think tank in Washington, D.C., is to be published Monday in the journal Health Affairs online.
John Hussman: "I'll emphasize again that at the point we do observe sufficient evidence for investors to concede recession, the potential downside could be abrupt, leaving little opportunity to make defensive changes after the fact. As I've often said, the best time to panic is before everybody else does.
Among the factors that concern me here is the continued widening of credit spreads, which increasingly suggests that default risk may be starting to spread beyond the financial sector into the broader economy. Meanwhile, there is a relative complacency in the stock market because investors are still convinced that the extreme “tail risk” in the markets has been removed by the Federal Reserve and the U.S. Treasury."
Sunday, August 24, 2008
Money Flows
8/24/08 Money Flows
Accroding to Bloomberg, General Motors Corp., Ford Motor Co., Chrysler LLC and U.S. auto-parts makers are seeking $50 billion in government-backed loans, double their initial request, to develop and build more fuel-efficient vehicles.
The U.S. automakers and the suppliers want Congress to appropriate $3.75 billion needed to back $25 billion in U.S. loans approved in last year's energy bill and add $25 billion in new loans over subsequent years, according to people familiar with the strategy. The industry is also seeking fewer restrictions on how the funding is used, the people said today.
Boeing, aiming to avoid a possible strike when machinists vote on the outcome of negotiations Sept. 3, offered yesterday to raise wages 2.5 percent the first year and 2 percent the following two years. The union had said it was seeking a gain of 9 percent to 13 percent, spread out over the contract, for the machinists, who make an average of about $56,000 a year.
The offer is ``well below expectations and very inadequate in all areas,'' said Connie Kelliher, a spokeswoman in Seattle for the International Association of Machinists and Aerospace Workers. ``The wage package is below industry standards, and it's doubling or tripling health-care costs in some cases.''
The union says workers haven't had raises, except for cost- of-living increases, since 2004 and deserve to share in Boeing's $10.7 billion in profit since then. Boeing has said it needs to make sure the contract is sustainable. The Chicago-based planemaker faces the possibility of deferred or canceled orders as airlines cope with record oil prices.
Jim Rogers, who in April 2006 correctly forecast the oil price would reach $100 a barrel and gold $1,000 an ounce, said he expects oil to continue to increase over the next decade.
``Over the course of time, it's a bull market,'' the chairman of Rogers Holdings said today after an investor conference in Kuala Lumpur. While the oil price could fall to $75 or rise to $175, the market will continue to increase over the next 10 years, he said.
Peter Schiff: "The fact is that the outlook for the dollar has never been bleaker and the prospects for gold and other commodities have never been brighter. The rationale for a new dollar bull market, or bear markets in commodities, is just as flawed as those used to justify investments in internet stocks and subprime mortgages. Interestingly enough, it's mostly the same suspects advancing the arguments."
Brett Steenbarger: "Note how money flows have been quite weak since the market's pullback from its highs earlier this month. Observe also how flows have remained mostly negative throughout 2008; forays into positive territory have been brief. There is little indication from money flow that investors are aggressively putting fresh funds to work in the stock market. Much of what we're seeing in the market's choppiness appears to be sector rotation and a covering of existing positions."
A recent survey conducted by PEW Internet & American Life Project (PIP) reveals that "almost half of all Internet users now use search engines on a typical day," an increase of 69% from 2002 when Pew Internet & American Life Project first tracked search activity. The PIP survey also finds that those who use broadband connections at home are "significantly more likely" to use search than those with a dialup connection.
Mike Wendland: "This is huge: A new speech-to-text technology from Google in which you type in a word or a phrase and it searches through YouTube videos to find all the instances where someone said it."
Australia has approved Chinese aluminum giant Chinalco's recent purchase of a minority stake in Anglo-Australian miner Rio Tinto , but warned the Chinese firm against buying more shares without prior approval. State-owned Aluminum Corp of China (Chinalco), backed by U.S. peer Alcoa Inc , began amassing shares this year with the aim of taking up to 14.9 percent of Rio, the target of a $127 billion takeover bid from rival BHP Billiton.
Mike Burk: "The sell off early last week relieved the overbought condition. Even if we are headed for a cycle top, it should be a few weeks off.
I expect the major indices to be higher on Friday August 29 than they were on Friday August 22."
Accroding to Bloomberg, General Motors Corp., Ford Motor Co., Chrysler LLC and U.S. auto-parts makers are seeking $50 billion in government-backed loans, double their initial request, to develop and build more fuel-efficient vehicles.
The U.S. automakers and the suppliers want Congress to appropriate $3.75 billion needed to back $25 billion in U.S. loans approved in last year's energy bill and add $25 billion in new loans over subsequent years, according to people familiar with the strategy. The industry is also seeking fewer restrictions on how the funding is used, the people said today.
Boeing, aiming to avoid a possible strike when machinists vote on the outcome of negotiations Sept. 3, offered yesterday to raise wages 2.5 percent the first year and 2 percent the following two years. The union had said it was seeking a gain of 9 percent to 13 percent, spread out over the contract, for the machinists, who make an average of about $56,000 a year.
The offer is ``well below expectations and very inadequate in all areas,'' said Connie Kelliher, a spokeswoman in Seattle for the International Association of Machinists and Aerospace Workers. ``The wage package is below industry standards, and it's doubling or tripling health-care costs in some cases.''
The union says workers haven't had raises, except for cost- of-living increases, since 2004 and deserve to share in Boeing's $10.7 billion in profit since then. Boeing has said it needs to make sure the contract is sustainable. The Chicago-based planemaker faces the possibility of deferred or canceled orders as airlines cope with record oil prices.
Jim Rogers, who in April 2006 correctly forecast the oil price would reach $100 a barrel and gold $1,000 an ounce, said he expects oil to continue to increase over the next decade.
``Over the course of time, it's a bull market,'' the chairman of Rogers Holdings said today after an investor conference in Kuala Lumpur. While the oil price could fall to $75 or rise to $175, the market will continue to increase over the next 10 years, he said.
Peter Schiff: "The fact is that the outlook for the dollar has never been bleaker and the prospects for gold and other commodities have never been brighter. The rationale for a new dollar bull market, or bear markets in commodities, is just as flawed as those used to justify investments in internet stocks and subprime mortgages. Interestingly enough, it's mostly the same suspects advancing the arguments."
Brett Steenbarger: "Note how money flows have been quite weak since the market's pullback from its highs earlier this month. Observe also how flows have remained mostly negative throughout 2008; forays into positive territory have been brief. There is little indication from money flow that investors are aggressively putting fresh funds to work in the stock market. Much of what we're seeing in the market's choppiness appears to be sector rotation and a covering of existing positions."
A recent survey conducted by PEW Internet & American Life Project (PIP) reveals that "almost half of all Internet users now use search engines on a typical day," an increase of 69% from 2002 when Pew Internet & American Life Project first tracked search activity. The PIP survey also finds that those who use broadband connections at home are "significantly more likely" to use search than those with a dialup connection.
Mike Wendland: "This is huge: A new speech-to-text technology from Google in which you type in a word or a phrase and it searches through YouTube videos to find all the instances where someone said it."
Australia has approved Chinese aluminum giant Chinalco's recent purchase of a minority stake in Anglo-Australian miner Rio Tinto , but warned the Chinese firm against buying more shares without prior approval. State-owned Aluminum Corp of China (Chinalco), backed by U.S. peer Alcoa Inc , began amassing shares this year with the aim of taking up to 14.9 percent of Rio, the target of a $127 billion takeover bid from rival BHP Billiton.
Mike Burk: "The sell off early last week relieved the overbought condition. Even if we are headed for a cycle top, it should be a few weeks off.
I expect the major indices to be higher on Friday August 29 than they were on Friday August 22."
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