1/27/08 Home Prices Take A Dive
Home values in 20 major U.S. cities fell at a record 18.2% in the 12 months ending in November, Standard & Poor's reported Tuesday. The Case-Shiller 20-city home price index fell 2.2% in November, with home values in all 20 cities falling at least 1%. Prices fell 3.4% in Phoenix and 3.3% in Las Vegas in November. In the past year, prices were down 33% in Phoenix, 32% in Las Vegas, and 31% in San Francisco. The best performance over the past year came in Dallas, where prices fell just 3.3%. Falling home values have helped to plunge the global financial system into chaos because of mortgage-backed securities. Home owners have lost trillions of dollars of wealth.
George Ure: "One of my better insights into how life really works has been the realization that most of the time, people won't pay for what you know - they will pay you for what you can do for them."
The state of California has run out of money.Facing a $42 billion budget deficit, State Controller John Chiang told the Sacramento Bee he has already borrowed $21.5 billion to try to cover the state's checks, but by Feb. 1, there will be no more options left but to simply stop paying some of the bills – including tax refunds, welfare checks, student grants and other payments owned to California citizens.
"It pains me to pull this trigger," Chiang said at a news conference held in his office. "But it is an action that is critically necessary."
Federal law requires that many school and healthcare programs – a total of about $6.6 billion in California – must be paid, the Los Angeles Times reports, so Chiang has announced an expected payment freeze on $3.7 billion worth of the state's bills, most of it refunds owed to taxpayers.
Economies and stocks markets worldwide are becoming increasingly correlated and a global recession is likely, said Nouriel Roubini, the New York University professor who predicted the financial crisis.
Roubini said economic growth in China will slow to less than 5 percent in 2009. The U.S. will lose 6 million jobs this year and grow 1 percent at most in 2010 as private spending falls and unemployment reaches 9 percent, Roubini said.
“There is nowhere to hide right now,” Roubini, an economics professor at NYU’s Stern School of Business, said in an interview with Bloomberg Television. “Markets have become perfectly correlated and economies are also becoming perfectly correlated. This is not your kind of traditional minor recession.”
United States Steel Corp Chief Executive John Surma said, "We expect an operating loss in the first quarter as results continue to reflect the extremely difficult global economic environment. We do not know when conditions may improve, but we are well positioned to fully participate in a market recovery when it occurs."
DuPont lowered its view to 2009 to earnings per share between $2 and $2.50 a share, against earlier views between $2.25 and $2.75 a share.
Nucor Corp.said that fourth-quarter earnings were $106 million, or 34 cents a share, compared to $365 million, or $1.26 a share, in the same period last year. Sales fell 6% in the quarter to $4.15 billion.
Crude oil for March delivery fell $1.01, or 2.2%, to $44.73 a barrel in electronic trading on Globex. Gold for February delivery was last down $9.50, or 1.1%, at $899.30 an ounce in early North America electronic trading.
Peabody Energy said fourth-quarter net income rose eightfold to $293.3 million, or $1.10 a share, from $35.8 million, or 13 cents a share in the year-ago period. The year-ago period included a loss of $108 million related to income tax. Operating profit more than doubled to $386 million from $151 million. Revenue increased to $1.88 billion from $1.17 billion.
Valero cut its 2009 capital spending target to $2.7 billion from its previous estimate of $3.5 billion.
EMC said it is not giving a forecast for revenue or earnings at this time, citing "current macro-economic conditions and limited visibility."
On an adjusted basis, Verizon earned 61 cents a share compared to 62 cents a share a year ago. Sales were $24.6 billion compared to $23.8 billion a year ago.
Looking ahead, BJ Services said it'll reduce capital spending by 20% to 25% lower than fiscal year 2008.
Specialty glass maker Corning Inc said its quarterly profit fell sharply due to a significant decline in demand for glass for televisions and computer monitors, and said it would cut about 3,500 jobs.
Astellas Pharma Inc. submitted a $16.00 buyout offer to CV Therapeutics, Inc's board of directors. The buyout offer is an all cash transaction offer for all of the outstanding shares of common stock.
Congress has proposed setting aside $43 billion to assist the states and to provide for new and current recipients of unemployment checks. That money is intended to increase the weekly benefit amounts; to extend how long people can collect payments; to cover more types of workers, like part-timers; and to help states distribute benefits more quickly.
It is based largely on an estimate that the unemployment rate will rise to 8 to 9 percent this year even with a stimulus package, according to the proposal summary from the House Appropriations Committee.
“The economy is deteriorating at a faster clip than even the most dreary forecasts had expected,” said Joseph Brusuelas, an economist who, bucking the current job market trend, will soon start a new job at Moody’s Economy.com. “At the current trend, $43 billion will not be sufficient should we breach 9 percent unemployment and maybe reach into the double digits.”
Rep. Ron Paul: "This bill (stimulus) delivers an additional debt burden of $6,700 to every American man, woman and child.
There is a lot of stimulus and growth in this bill - that is, of government. Nothing in this bill stimulates the freedom and prosperity of the American people. Politician-directed spending is never as successful as market-driven investment. Instead of passing this bill, Congress should get out of the way by cutting taxes, cutting spending, and reining in the reckless monetary policy of the Federal Reserve."
Nouriel Roubini and Elisa Parisi-Capone:"We now expect that total loan losses for loans originated by U.S. financial institutions will peak at up to $1.6 trillion out of $12.37 trillion loans . Our estimates assume that national house prices will fall another 20% before they bottom out some time in 2010 and that the unemployment rate will peak at 9%. If we include then around $2 trillion mark-to-market losses of securitized assets based on market prices as of December 2008 (out of $10.84 trillion in securities), total losses on the loans and securities originated by the U.S. financial system amount to a figure close to $3.6 trillion."
The January consumer confidence index fell to 37.7 from an upwardly revised 38.6 in December, the Conference Board said. In January a year ago, consumer confidence was at 87.3. That is a huge drop.
Fluor and Jacobs Engineering, the infrastructure plays, both made a double bottom slightly below 30 and now trade around 40. Their near-term growth potential may be overstated and long-term investors may get a third opportunity to add to positions.
Sean Hannon: "With a strong rally on Friday, oil prices have violated the first of three major downtrends. Further, the shares are trading above the 10-day and 50-day moving averages [MA]. With the 10-day MA turning higher, I expect it to serve as support for a rally that should move toward the two remaining downtrends ($53 and $67). By using the 10-day MA as a stop loss order, a long position in oil offers tremendous upside with minimum downward risk.
For individual investors, the U.S. Oil Fund offers an excellent option for owning oil. Using oil’s 10-day MA as a stop loss (currently $39.41), I recommend USO as this week’s technical trade."
Faced with one of the worst droughts in decades, Argentina has declared an agricultural emergency, the BBC reported Tuesday. President Cristina Fernandez said the decree would defer tax payments for thousands of farmers for a year, according to the report. The drought, the worst since 1971, is estimated to have caused losses of at least $4 billion in Argentina, which is one of the world's largest producers of soya, grains and beef, according to the BBC.
Retailers are expected to record a 0.5 percent drop in revenue in 2009, the first annual decline in three decades and perhaps much longer, according to a National Retail Federation forecast released Tuesday.
That's well below the modest 1.4 percent gain they recorded for 2008.
Massive layoffs, slumping home prices and tight credit are keeping shoppers tightfisted.
The NRF estimated that retail sales for the first half of 2009 will fall 2.5 percent. Then, they'll show a 1.1 percent decline in the third quarter and rebound to a 3.6 percent increase in the fourth quarter, aided by an anticipated government economic stimulus.
Copper prices plunged, heading for the largest drop in almost eight weeks, as the slumping global economy slashed metal demand and led to surging warehouse inventories.
Copper stockpiles in storage facilities monitored by the London Metal Exchange jumped 2.8 percent today to 451,800 metric tons, the most in five years. Since June 30, supplies have more than tripled, helping to drive prices down by 61 percent.
Avery Dennison Corp., the world’s largest label maker, said it will eliminate about 10 percent of its workforce, or about 3,600 jobs, after reporting its first sales decline in 12 quarters.
As many as 2.4 million Latin Americans could lose their jobs this year because of the global economic crisis, the International Labor Organization warned on Tuesday.
Gold for February delivery ended down $9.30, or 1%, at $899.50 an ounce on the Comex division of the New York Mercantile Exchange. Crude oil for March delivery closed down $4.15, or 9.1%, at $41.58 a barrel on the New York Mercantile Exchange.
The cost of shipping a crude oil supertanker west across the Atlantic has climbed about 20 percent since the beginning of December to $2.25 a barrel today, according to Bloomberg data.
Wheat fell for the first time in three sessions as Japan, Asia’s largest importer of the grain, canceled its weekly tender after stockpiling enough for March.
The US has not had any diplomatic mission in Iran since the seizure of the American Embassy and hostage crisis during Iran's 1979 Islamic Revolution, and during the Bush administration, the two countries had an increasingly tense relationship. Teheran and Washington have been deeply at odds over Iran's nuclear program and what the US says is Iranian support for Shi'ite Muslim militiamen in neighboring Iraq - a charge Iran denies.
The VIX dropped 3 points to 42+.
Merrill Lynch analyst Kash Rangan cut his rating on VMware to Underperform from Neutral, slashing his price target to $15 from $31. Rangan writes that his new forecast is equal to about 7x enterprise/value to Q4 maintenance revenue run rate, a comparable multiple to Oracle. The new target is also 15x his new $1 a share EPS target for 2009, which actually would give the stock a 25% P/E premium over both Oracle and SAP. Rangan says economic headwinds could make it tougher for the company to win new enterprise business in 2009. Other analysts cut their 2009 forecasts to 98 cents or slightly lower.
Target said late Tuesday it will reduce workforce at its headquarters locations by about 9%, including about 600 employees and 400 open positions. The majority of the cuts are concentrated in the Twin Cities area and were effective Tuesday. The retailer will also close its distribution center in Little Rock, Ark. which employs 500 people later this year.
Moody's Investors Service on Tuesday placed General Electric Co.and General Electric Capital Corp.'s Aaa ratings on review for possible downgrade.
Medical products maker Stryker Corp.stuck by its previous full-year earnings outlook of $3.12 to $3.22 a share for 2009.
Gilead Sciences Inc.said late Tuesday that its fourth-quarter profit rose to $568.2 million, or 60 cents a share, from $401.6 million, or 41 cents a share, in the year-ago period.
The Dow Jones Industrial Average gained 58.7 points, or 0.7%, to finish at 8,174.73, with 25 of its 30 components rising. The S&P 500 added 9.13 points, or 1.1%, to 845.7, while the Nasdaq Composite rose 15.44 points, or 1%, to 1,504.9.
The Treasury Department announced distribution of $386 million to 23 troubled banks, the first awards from the federal bailout fund since Obama took office a week ago.
Crude for March delivery was up 66 cents to $42.24 a barrel in electronic trade, climbing back from its over 9% slide in New York that saw the energy contract close $4.15 lower at $41.58 on the New York Mercantile Exchange.
U.S. Steel and AK Steel said they expect operating losses in the first three months of 2009, while a third steel company, Nucor Corp., forecast "only marginally better" earnings compared with its fourth quarter.
India’s central bank lowered its growth forecast and signaled further cuts in interest rates from record lows to encourage lending and spur economic expansion.
Asia’s third-largest economy may expand 7 percent in the year to March 31, compared with a previous estimate of between 7.5 percent and 8 percent, the Reserve Bank of India said today. The growth forecast has a “downward bias,” said the bank, which maintained its reverse repurchase rate at 4 percent and the repurchase rate at 5.5 percent.
Worldwide, just 21 percent of CEOs said they were very confident of growing revenue in the next 12 months, down from 50 percent a year ago.
And hopes for a short "V"-shaped recession appear to have evaporated with most business leaders expecting no more than a slow and gradual recovery over the next three years.
"The three-year view is a bit better but the bad news is it is not that much better. Compared to the 21 percent confidence over the next 12 months, it's only 34 percent over three years," said Tony Poulter, global head of consulting at PwC.
"The message is: there is a long term but we are not going to see it dawning immediately."
Valero Energy Corp. says it is shutting down its entire Texas City refinery, rather than keep parts of it open while some units undergo maintenance, because refining margins are weak and demand for gasoline is down.
Bill Klesse, San Antonio-based Valero's chairman and CEO, says refiners "must continue to use discipline in matching production with demand" and the company is doing that in part by temporarily closing while parts of the plant undergo seasonal maintenance.
Spokesman Bill Day said workers would continue to be paid.
The Hershey Co. said today it plans to close Scharffen Berger's West Berkeley manufacturing plant as well as the San Francisco factory that makes Joseph Schmidt chocolates and consolidate production at other facilities. The plant closures will affect a total of about 150 employees from both facilities.
Tuesday, January 27, 2009
Monday, January 26, 2009
Job Cuts
1/26/08 Job Cuts
An "intense recession" is likely through the spring, the Conference Board said Monday. The index of leading economic indicators rose 0.3% in December, mainly due to the "continued and very large" contribution from the real money supply, while weakness in building permits and elsewhere persisted, according to the Conference Board. "Expect declines in output and employment over the next several quarters, with unemployment possibly rising to 9%," said Ken Goldstein, economist at the Conference Board. In November, the index fell 0.4%.
Sales of existing homes rose 6.5% in December to a seasonally adjusted annualized rate of 4.74 million as prices continued to plunge at a record pace, the National Association of Realtors reported Monday. Sales in December were down 3.5% from the previous December. For 2008 as a whole, sales fell 13.1% to 4.91 million, the industry trade group said. The median sales price fell to $175,400 in December, down a record 15.3% compared with a year earlier. For all of 2008, median prices dropped 9.3% to the lowest level since 2004. The inventory now sits at 9.3 months vs. 11.2 months of supply in November.
Dow Chemical Co. said Monday it will not close on its $15.4 billion acquisition of specialty chemicals maker Rohm & Haas Co. by a Tuesday deadline due to the economic malaise and recent collapse of a joint venture.
The Federal Trade Commission signed off on the deal last Friday, setting in motion a two-business day timetable for the close. The European Union had blessed the deal earlier this month.
Rohm & Haas has said both parties must agree to an extension of the deadline.
The Philadelphia-based company said Monday it "intends to pursue all available alternatives to protect its shareholders' interests," but did not indicate if it had agreed to an extension.
Pfizer said it's struck a deal to buy rival drugmaker Wyeth for $68 billion in cash and stock. The deal, valuing Wyeth at $50.19 a share, offers each holder of Wyeth $33 in cash and 0.985 of a Pfizer share. Pfizer will close 5 plants and the companies will cut 19,000 jobs.
Pfizer said it sees 2009 earnings per share, excluding one- time items, of $1.85 to $1.95, missing analysts’ estimates of $2.50. It expects to report revenue of between $44 billion and $46 billion, before the Wyeth acquisition, compared with analysts’ estimates of $48.8 billion.
CATERPILLAR LOWERS 2009 OUTLOOK; 20,000 WORKERS TARGETED FOR CUTS. Profit per share for the quarter was $1.08, down 28% from the fourth quarter of 2007.
Bret Swanson: "Treasury Secretary-designate Tim Geithner's charge that China "manipulates" its currency proves only one thing. Three decades after Deng Xiaoping's capitalist rise, America's misunderstanding of China remains a key source of our own crisis and socialist tilt.
The new consensus is that America failed to react to the building trade deficit with China and the global "savings glut," which fueled our housing boom. A "passive" America allowed China to steal jobs from the U.S. while Americans binged with undervalued Chinese funny money. This diagnosis is backwards. America did not underreact to the supposed Chinese threat. It overreacted. The problem wasn't "global imbalances" but a purposeful dollar imbalance. Our weak-dollar policy, intended to pump up U.S. manufacturing and close the trade gap, backfired. Currency chaos led to a $30 trillion global crash, an energy shock, bank and auto failures, and possibly a new big government era. For globalization and American innovation to survive, we must first understand the Chinese story and our own monetary mistakes." Mr. Swanson is a senior fellow and director of the Center for Global Innovation at the Progress & Freedom Foundation.
Gold futures were trading up $10.20 to $906 an ounce at 5:20 a.m. Eastern. Crude oil for March delivery fell 38 cents to $46.09 a barrel in electronic trading on Globex.
Kimberly-Clark reports 4th qtr net income fells 8.1%.The company said it expects adjusted earnings per share in 2009 will be similar to 2008, in a range of $4.00 to $4.20, "despite significant headwinds from pension expense and currency effects."The company said it expects adjusted earnings per share in 2009 will be similar to 2008, in a range of $4.00 to $4.20, "despite significant headwinds from pension expense and currency effects."
Weatherford International Ltd.said Monday that fourth-quarter income rose to $348.1 million, or 50 cents a share, from $331 million, or 47 cents a share, in the year-ago period. The Houston-based oil-services firm said its income from continuing operations rose to 53 cents a share, excluding an after-tax loss of 3 cents a share. Revenue increased to $2.63 billion from $2.19 billion.
Ross Perot: “War has rules, mud wrestling has rules -- politics has no rules.”
For 2009 as a whole Eaton is forecasting operating earnings of $4.20 to $5.20 a share.
Jim Rogers said on Monday the pound could fall near parity with the dollar in coming years given Britain's increasing debt and lack of economic growth drivers.
Jeremy Grantham: "This time in the U.S.,however, we must write down perceived wealth or capital by almost precisely one and a half times GDP, worse than the Depression but happily much less than Japan."
The Oil Drum: "Russian oil production decreased for the first time in 10 years according to Vedomosti, a Russian newspaper. The decrease was only 0.7%, while exports were reduced more dramatically year over year, down 6.2%.
The fall in Russian production may be a major turning point in worldwide crude oil production. While OPEC nations such as top producer Saudi Arabia get the attention of most speculators, it is important to note that Russia is the second largest crude oil producer and exporter in the world. In fact, by itself, Russia almost matches the total exports of the third, fourth and fifth top exporting nations combined (Norway, Iran and the United Arab Emirates).
If Russian oil production has indeed peaked, it leaves the world with only three major exporters that are still supposedly able to continue to increase production: Saudi Arabia, Kuwait and Iraq. Given the massive oil consumption needs of the United States, that leaves America in a particularly vulnerable position at a time when the United States is facing a financial crisis."
John Hussman: "Generally speaking, American consumers aren't slowing consumption because of falling labor income. Rather, they are slowing consumption because they are protecting themselves from uncertainty and attempting to offset the impact of investment losses. Adding to this is the difficulty of obtaining credit, because of risk aversion among lenders. To try to “stimulate” people to spend and consume more is to miss the point. What the economy needs most is to mitigate the impact of foreclosures and the credit stress in the financial system that triggered this risk aversion in the first place.
The key problems here are bank capital and mortgage foreclosures. Foreclosed mortgages are approaching about 10% of total mortgages, with an average recovery rate of only about 50% of the mortgage value when the foreclosed home is sold. The resulting loss of value, approaching 5% of the U.S. mortgage market, has thrown the economy into disarray, because the losses have been borne by highly leveraged institutions. For many institutions, each $1 of their own capital (equity contributed by the company's own shareholders) has often supported $10, $20, or even $40 of loans, security investments and other assets. As a result, wiping out a few percent of their assets completely wipes out their own capital, leaving customers and depositors without a “capital cushion” and triggering withdrawals. This process started with the most egregiously leveraged companies like Bear Stearns and Lehman, and continues to put stress on enormous but capital-thin institutions like Citibank."
In the latest wave of retrenchment by global banks, ING Group, the Dutch financial services company, said Monday that it would cut 7,000 jobs this year and that its chief executive would step down as it seeks government guarantees for toxic mortgage debt.
Halliburton Co., the world’s second- largest oilfield-services provider, said fourth-quarter profit fell 32 percent on a plunge in crude prices and costs to end U.S. investigations of alleged bribery by a former subsidiary.
Satyajit Das: "2008 was the year of “shock and awe.” 2009 may well prove to be a year of grim and brutal trench warfare as the world adjusts to a new economic order and reduced expectations.
A lower growth future has political and social implications. China and India are deeply concerned about failing to provide jobs for the millions coming into the workforce each year..
We are, of course, in a “new paradigm.” Investors will need to adjust their expectations. The new investment mantras may well be:
1. Flat is the new up.
2. Debt is the new equity.
3. Interest and dividends are the only return.
4. If you’re looking for the bottom of the market there’s a special offer － buy one, you get the next one free."
As in Genesis, the “years of plenty” have ended. The improvident wasted the bounty of the years of prosperity and now find themselves in want in the “years of dearth.”
Sprint Nextel to cut 8,000 jobs.
McDonald's Corp.said fourth-quarter net income fell 23% to $985.3 million, or 87 cents a share, from $1.27 billion, or $1.06 a share in the year-ago period. Sales at the fast food giant dipped 3% to $5.67 billion.
Smurfit-Stone Container Corp., the largest producer of cardboard box materials in North America, said Monday that it has filed for Chapter 11 bankruptcy protection as it looks to restructure a heavy debt.
According to Business Week, a move by AT&T to eliminate 4% of its workforce may only be the beginning of a torrent of staff reductions and spending cutbacks in the $1 trillion telecom industry.
Qu Hongbing, China economist at HSBC, says China could see growth dip as low as 6%, dangerously short of the 8% widely regarded as the level needed to generate enough jobs to absorb new entrants into the labor force. "Export contraction will only be deeper when global demand continues to shrink, so we'll see more job losses. Consumers will become more cautious. And if this continues, there is a real risk of a downward spiral."
Seattle, home of Boeing and Microsoft, has seen its apartment rents fall as the economy falters. The unemployment rate climbed to 5.6% in November 2008 compared to 3.7% in November 2007. The apartment vacancy rate jumped to 6% in the fourth quarter last year from 5.1% in the same period in 2007. Landlords on average are giving rent concessions of 1.8 weeks.
California currently spends more than $10 billion a year on cash aid to the disabled and poor, on child care and other services related to the state welfare-to-work program, and on home care for low-income seniors and residents with disabilities.
» CalWORKs: The governor proposes reducing the amount of welfare assistance families receive each month and limiting the amount of child-care assistance available. The administration also would limit to five years the amount of time children can receive welfare payments if their parents don't meet work requirements. Currently, children continue receiving welfare benefits even if their parents lose them as part of a "safety-net" program. The Analyst's Office supports reduced welfare payments, suggesting that families' lost state aid would be partially offset by the federal food stamp program. But instead of halting all children's benefits after five years, the office suggests modifying the safety-net program so that parents who aren't working would be required to complete at least 20 hours of community service per week in their counties in order for their children to continue getting aid.
Supplemental Security Income/State Supplemental Program: The state and federal programs provide monthly cash payments to low-income seniors and people with disabilities. The governor proposes reducing those payments and eliminating altogether a similar program that offers cash aid to legal immigrants. The LAO suggests smaller reductions and lower payments to couples who are above the federal poverty line. With regard to immigrants, the LAO said many refugees may be able for a federally funded program that would provide similar help.
Philips Electronics plans to cut about 6,000 jobs in 2009, chief executive Gerard Kleisterlee told journalists on a conference call, and will accelerate restructuring measures to save about 400 million euros annually from the second half of 2009.
Home Depot Inc said it will cut 7,000 jobs, or about 2 percent of its workforce, as it shuts its Expo home design centers business and cuts down on corporate support staff.
Credit ratings agency Standard & Poor's said General Electric's top-notch investment grade ratings were not immediately affected by the company's fourth quarter results.
Crude for February delivery was last up 64 cents, or 1.4%, at $47.11 a barrel on the New York Mercantile Exchange. It fell to as low as $45.25 earlier.
"Job losses accelerated in the fourth quarter, and the employment outlook for the next six months has weakened further," said Sara Johnson, NABE's lead analyst on the survey and an economist at IHS Global Insight.
“The experience of previous deep recessions suggests (jobless) claims are nowhere near their peak, and we doubt that peak will be reached before the fall of this year,” said Ian Shepherdson, chief U.S. economist for consulting firm High Frequency Economics.
United Airlines will further reduce the number of salaried and management employees by about 1,000 positions by the end of 2009. This is in addition to the 1,500 positions the company announced in the second quarter. When completed, its salaried and management staff will be cut by about 2,500, or nearly 30%, since the beginning of 2008.
Deere says it will lay off almost 700 workers at factories in Brazil and Iowa.
GM to lay off 2,000 workers, cut production. About 800 workers will be laid off in Ohio and 1,200 in Michigan, according to the Journal. GM also plans to idle 14 of its 24 North American plants for a week or more in the second and third quarter, the newspaper reported.
Longer-dated U.S. Treasury debt prices fell Monday, weighed by persistent concerns about government issuance flooding the market this year and by a report that seemingly offered some hope for the sliding U.S. housing market.
Auctions this week will add about $135 billion of supply to the government bond market. That is just part of the $2 trillion of issuance analysts expect will flow into the $5.8 trillion Treasury market this year.
Gold for February delivery ended up $13, or 1.5%, at $908.80 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price for a front-month contract since Sept. 22. Crude for February delivery was last down 18 cents, or 0.4%, at $46.29 a barrel on the New York Mercantile Exchange. It rose to $48.59 earlier, the highest in nearly three weeks.
Texas Instruments Inc.reported a fourth-quarter net income of $107 million, or 8 cents a share, compared with a net income of $756 million, or 54 cents a share, for the year-earlier period. Revenue was $2.49 billion, down from $3.56 billion last year. The chip maker also announced a plan to cut 3,400 jobs, or 12% of its workforce.
American Express said late Monday that fourth-quarter net income came in at $172 million, or 15 cents a share, down 79% from a year earlier when the credit card company made $831 million, or 72 cents a share. Revenue, net of interest expenses, declined 11% to $6.51 billion, the company added. "We remain cautious about the economic outlook through 2009, and expect cardmember spending to remain soft with past-due loans and write-offs rising from current levels," Chief Executive Kenneth Chenault said in a statement.
Amgen reported earnings of $961 million, or 91 cents a share, compared to earnings of $835 million, or 76 cents a share, for the same period the previous year. Excluding charges related to stock options, the company said it would have earned $1.1 billion, or $1.06 a share, for the recent period.
The Dow Jones Industrial Average gained 38.47 points, or 0.5%, to 8,116.03. The S&P 500 climbed 4.62 points, or 0.6%, to 836.57. The Nasdaq Composite added 12.17 points, or 0.8%, to finish at 1,489.46.
IBM sent layoff notices to 2,800 workers.
Honda Motor Co. said Tuesday it is cutting production in Japan and North America by an additional 50,000 vehicles amid a severe slump in global sales.
Japan's No. 2 automaker said output in North America will fall by 29,000 units, affecting Honda's three plants in the region — Ontario, Canada; Marysville/East Liberty, Ohio; and Lincoln, Alabama. Due to the production cuts, Honda's overall output in North America will drop by 12 percent to 1.26 million units in the current fiscal year ending March 31.
So much for the infrastructure play. Jacobs Engineering cuts 2009 EPS forecast to $3.55 to $3.90.
Weyerhaeuser Co.is closing two mills in Washington state immediately, due to weak market conditions. The closure of the Aberdeen sawmill and Pacific Veneer mill will affect approximately 196 hourly and 25 salaried positions, the Federal Way, Wash.-based forest products company said.
Baker Hughes, the world’s third-largest oil field services company, began cutting nearly 4 percent of its global work force today as lower oil and gas prices dampen demand for drilling and other services it provides.
The Houston-based company started laying off 1,500 of its 40,000 employees in a process that will likely stretch over a couple of weeks, said Gary Flaharty, the company’s director of investor relations.
Rachel Beck: "Already this year, seven companies in the Standard & Poor's 500 index have decreased their dividends, removing some $12 billion from shareholders' pockets in the coming months. On Monday, Pfizer became the latest blue-chip company to do so.
These cuts serve up another hit to shareholders who have already been battered by the steep declines in the stock market. That is especially true of retirees, who tend to be attracted to so-called "widows and orphans" stocks that provide them with a steady cash flow.
If the trend continues, this will be the worst year for dividend cuts since 1958, when annual payments fell by 8.4 percent, according to new research from S&P.
"It is easy to say this is going to be the worst in 50 years, but the bigger question is whether it is going to be much worse than that," said Howard Silverblatt, senior index analyst at S&P."
An "intense recession" is likely through the spring, the Conference Board said Monday. The index of leading economic indicators rose 0.3% in December, mainly due to the "continued and very large" contribution from the real money supply, while weakness in building permits and elsewhere persisted, according to the Conference Board. "Expect declines in output and employment over the next several quarters, with unemployment possibly rising to 9%," said Ken Goldstein, economist at the Conference Board. In November, the index fell 0.4%.
Sales of existing homes rose 6.5% in December to a seasonally adjusted annualized rate of 4.74 million as prices continued to plunge at a record pace, the National Association of Realtors reported Monday. Sales in December were down 3.5% from the previous December. For 2008 as a whole, sales fell 13.1% to 4.91 million, the industry trade group said. The median sales price fell to $175,400 in December, down a record 15.3% compared with a year earlier. For all of 2008, median prices dropped 9.3% to the lowest level since 2004. The inventory now sits at 9.3 months vs. 11.2 months of supply in November.
Dow Chemical Co. said Monday it will not close on its $15.4 billion acquisition of specialty chemicals maker Rohm & Haas Co. by a Tuesday deadline due to the economic malaise and recent collapse of a joint venture.
The Federal Trade Commission signed off on the deal last Friday, setting in motion a two-business day timetable for the close. The European Union had blessed the deal earlier this month.
Rohm & Haas has said both parties must agree to an extension of the deadline.
The Philadelphia-based company said Monday it "intends to pursue all available alternatives to protect its shareholders' interests," but did not indicate if it had agreed to an extension.
Pfizer said it's struck a deal to buy rival drugmaker Wyeth for $68 billion in cash and stock. The deal, valuing Wyeth at $50.19 a share, offers each holder of Wyeth $33 in cash and 0.985 of a Pfizer share. Pfizer will close 5 plants and the companies will cut 19,000 jobs.
Pfizer said it sees 2009 earnings per share, excluding one- time items, of $1.85 to $1.95, missing analysts’ estimates of $2.50. It expects to report revenue of between $44 billion and $46 billion, before the Wyeth acquisition, compared with analysts’ estimates of $48.8 billion.
CATERPILLAR LOWERS 2009 OUTLOOK; 20,000 WORKERS TARGETED FOR CUTS. Profit per share for the quarter was $1.08, down 28% from the fourth quarter of 2007.
Bret Swanson: "Treasury Secretary-designate Tim Geithner's charge that China "manipulates" its currency proves only one thing. Three decades after Deng Xiaoping's capitalist rise, America's misunderstanding of China remains a key source of our own crisis and socialist tilt.
The new consensus is that America failed to react to the building trade deficit with China and the global "savings glut," which fueled our housing boom. A "passive" America allowed China to steal jobs from the U.S. while Americans binged with undervalued Chinese funny money. This diagnosis is backwards. America did not underreact to the supposed Chinese threat. It overreacted. The problem wasn't "global imbalances" but a purposeful dollar imbalance. Our weak-dollar policy, intended to pump up U.S. manufacturing and close the trade gap, backfired. Currency chaos led to a $30 trillion global crash, an energy shock, bank and auto failures, and possibly a new big government era. For globalization and American innovation to survive, we must first understand the Chinese story and our own monetary mistakes." Mr. Swanson is a senior fellow and director of the Center for Global Innovation at the Progress & Freedom Foundation.
Gold futures were trading up $10.20 to $906 an ounce at 5:20 a.m. Eastern. Crude oil for March delivery fell 38 cents to $46.09 a barrel in electronic trading on Globex.
Kimberly-Clark reports 4th qtr net income fells 8.1%.The company said it expects adjusted earnings per share in 2009 will be similar to 2008, in a range of $4.00 to $4.20, "despite significant headwinds from pension expense and currency effects."The company said it expects adjusted earnings per share in 2009 will be similar to 2008, in a range of $4.00 to $4.20, "despite significant headwinds from pension expense and currency effects."
Weatherford International Ltd.said Monday that fourth-quarter income rose to $348.1 million, or 50 cents a share, from $331 million, or 47 cents a share, in the year-ago period. The Houston-based oil-services firm said its income from continuing operations rose to 53 cents a share, excluding an after-tax loss of 3 cents a share. Revenue increased to $2.63 billion from $2.19 billion.
Ross Perot: “War has rules, mud wrestling has rules -- politics has no rules.”
For 2009 as a whole Eaton is forecasting operating earnings of $4.20 to $5.20 a share.
Jim Rogers said on Monday the pound could fall near parity with the dollar in coming years given Britain's increasing debt and lack of economic growth drivers.
Jeremy Grantham: "This time in the U.S.,however, we must write down perceived wealth or capital by almost precisely one and a half times GDP, worse than the Depression but happily much less than Japan."
The Oil Drum: "Russian oil production decreased for the first time in 10 years according to Vedomosti, a Russian newspaper. The decrease was only 0.7%, while exports were reduced more dramatically year over year, down 6.2%.
The fall in Russian production may be a major turning point in worldwide crude oil production. While OPEC nations such as top producer Saudi Arabia get the attention of most speculators, it is important to note that Russia is the second largest crude oil producer and exporter in the world. In fact, by itself, Russia almost matches the total exports of the third, fourth and fifth top exporting nations combined (Norway, Iran and the United Arab Emirates).
If Russian oil production has indeed peaked, it leaves the world with only three major exporters that are still supposedly able to continue to increase production: Saudi Arabia, Kuwait and Iraq. Given the massive oil consumption needs of the United States, that leaves America in a particularly vulnerable position at a time when the United States is facing a financial crisis."
John Hussman: "Generally speaking, American consumers aren't slowing consumption because of falling labor income. Rather, they are slowing consumption because they are protecting themselves from uncertainty and attempting to offset the impact of investment losses. Adding to this is the difficulty of obtaining credit, because of risk aversion among lenders. To try to “stimulate” people to spend and consume more is to miss the point. What the economy needs most is to mitigate the impact of foreclosures and the credit stress in the financial system that triggered this risk aversion in the first place.
The key problems here are bank capital and mortgage foreclosures. Foreclosed mortgages are approaching about 10% of total mortgages, with an average recovery rate of only about 50% of the mortgage value when the foreclosed home is sold. The resulting loss of value, approaching 5% of the U.S. mortgage market, has thrown the economy into disarray, because the losses have been borne by highly leveraged institutions. For many institutions, each $1 of their own capital (equity contributed by the company's own shareholders) has often supported $10, $20, or even $40 of loans, security investments and other assets. As a result, wiping out a few percent of their assets completely wipes out their own capital, leaving customers and depositors without a “capital cushion” and triggering withdrawals. This process started with the most egregiously leveraged companies like Bear Stearns and Lehman, and continues to put stress on enormous but capital-thin institutions like Citibank."
In the latest wave of retrenchment by global banks, ING Group, the Dutch financial services company, said Monday that it would cut 7,000 jobs this year and that its chief executive would step down as it seeks government guarantees for toxic mortgage debt.
Halliburton Co., the world’s second- largest oilfield-services provider, said fourth-quarter profit fell 32 percent on a plunge in crude prices and costs to end U.S. investigations of alleged bribery by a former subsidiary.
Satyajit Das: "2008 was the year of “shock and awe.” 2009 may well prove to be a year of grim and brutal trench warfare as the world adjusts to a new economic order and reduced expectations.
A lower growth future has political and social implications. China and India are deeply concerned about failing to provide jobs for the millions coming into the workforce each year..
We are, of course, in a “new paradigm.” Investors will need to adjust their expectations. The new investment mantras may well be:
1. Flat is the new up.
2. Debt is the new equity.
3. Interest and dividends are the only return.
4. If you’re looking for the bottom of the market there’s a special offer － buy one, you get the next one free."
As in Genesis, the “years of plenty” have ended. The improvident wasted the bounty of the years of prosperity and now find themselves in want in the “years of dearth.”
Sprint Nextel to cut 8,000 jobs.
McDonald's Corp.said fourth-quarter net income fell 23% to $985.3 million, or 87 cents a share, from $1.27 billion, or $1.06 a share in the year-ago period. Sales at the fast food giant dipped 3% to $5.67 billion.
Smurfit-Stone Container Corp., the largest producer of cardboard box materials in North America, said Monday that it has filed for Chapter 11 bankruptcy protection as it looks to restructure a heavy debt.
According to Business Week, a move by AT&T to eliminate 4% of its workforce may only be the beginning of a torrent of staff reductions and spending cutbacks in the $1 trillion telecom industry.
Qu Hongbing, China economist at HSBC, says China could see growth dip as low as 6%, dangerously short of the 8% widely regarded as the level needed to generate enough jobs to absorb new entrants into the labor force. "Export contraction will only be deeper when global demand continues to shrink, so we'll see more job losses. Consumers will become more cautious. And if this continues, there is a real risk of a downward spiral."
Seattle, home of Boeing and Microsoft, has seen its apartment rents fall as the economy falters. The unemployment rate climbed to 5.6% in November 2008 compared to 3.7% in November 2007. The apartment vacancy rate jumped to 6% in the fourth quarter last year from 5.1% in the same period in 2007. Landlords on average are giving rent concessions of 1.8 weeks.
California currently spends more than $10 billion a year on cash aid to the disabled and poor, on child care and other services related to the state welfare-to-work program, and on home care for low-income seniors and residents with disabilities.
» CalWORKs: The governor proposes reducing the amount of welfare assistance families receive each month and limiting the amount of child-care assistance available. The administration also would limit to five years the amount of time children can receive welfare payments if their parents don't meet work requirements. Currently, children continue receiving welfare benefits even if their parents lose them as part of a "safety-net" program. The Analyst's Office supports reduced welfare payments, suggesting that families' lost state aid would be partially offset by the federal food stamp program. But instead of halting all children's benefits after five years, the office suggests modifying the safety-net program so that parents who aren't working would be required to complete at least 20 hours of community service per week in their counties in order for their children to continue getting aid.
Supplemental Security Income/State Supplemental Program: The state and federal programs provide monthly cash payments to low-income seniors and people with disabilities. The governor proposes reducing those payments and eliminating altogether a similar program that offers cash aid to legal immigrants. The LAO suggests smaller reductions and lower payments to couples who are above the federal poverty line. With regard to immigrants, the LAO said many refugees may be able for a federally funded program that would provide similar help.
Philips Electronics plans to cut about 6,000 jobs in 2009, chief executive Gerard Kleisterlee told journalists on a conference call, and will accelerate restructuring measures to save about 400 million euros annually from the second half of 2009.
Home Depot Inc said it will cut 7,000 jobs, or about 2 percent of its workforce, as it shuts its Expo home design centers business and cuts down on corporate support staff.
Credit ratings agency Standard & Poor's said General Electric's top-notch investment grade ratings were not immediately affected by the company's fourth quarter results.
Crude for February delivery was last up 64 cents, or 1.4%, at $47.11 a barrel on the New York Mercantile Exchange. It fell to as low as $45.25 earlier.
"Job losses accelerated in the fourth quarter, and the employment outlook for the next six months has weakened further," said Sara Johnson, NABE's lead analyst on the survey and an economist at IHS Global Insight.
“The experience of previous deep recessions suggests (jobless) claims are nowhere near their peak, and we doubt that peak will be reached before the fall of this year,” said Ian Shepherdson, chief U.S. economist for consulting firm High Frequency Economics.
United Airlines will further reduce the number of salaried and management employees by about 1,000 positions by the end of 2009. This is in addition to the 1,500 positions the company announced in the second quarter. When completed, its salaried and management staff will be cut by about 2,500, or nearly 30%, since the beginning of 2008.
Deere says it will lay off almost 700 workers at factories in Brazil and Iowa.
GM to lay off 2,000 workers, cut production. About 800 workers will be laid off in Ohio and 1,200 in Michigan, according to the Journal. GM also plans to idle 14 of its 24 North American plants for a week or more in the second and third quarter, the newspaper reported.
Longer-dated U.S. Treasury debt prices fell Monday, weighed by persistent concerns about government issuance flooding the market this year and by a report that seemingly offered some hope for the sliding U.S. housing market.
Auctions this week will add about $135 billion of supply to the government bond market. That is just part of the $2 trillion of issuance analysts expect will flow into the $5.8 trillion Treasury market this year.
Gold for February delivery ended up $13, or 1.5%, at $908.80 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price for a front-month contract since Sept. 22. Crude for February delivery was last down 18 cents, or 0.4%, at $46.29 a barrel on the New York Mercantile Exchange. It rose to $48.59 earlier, the highest in nearly three weeks.
Texas Instruments Inc.reported a fourth-quarter net income of $107 million, or 8 cents a share, compared with a net income of $756 million, or 54 cents a share, for the year-earlier period. Revenue was $2.49 billion, down from $3.56 billion last year. The chip maker also announced a plan to cut 3,400 jobs, or 12% of its workforce.
American Express said late Monday that fourth-quarter net income came in at $172 million, or 15 cents a share, down 79% from a year earlier when the credit card company made $831 million, or 72 cents a share. Revenue, net of interest expenses, declined 11% to $6.51 billion, the company added. "We remain cautious about the economic outlook through 2009, and expect cardmember spending to remain soft with past-due loans and write-offs rising from current levels," Chief Executive Kenneth Chenault said in a statement.
Amgen reported earnings of $961 million, or 91 cents a share, compared to earnings of $835 million, or 76 cents a share, for the same period the previous year. Excluding charges related to stock options, the company said it would have earned $1.1 billion, or $1.06 a share, for the recent period.
The Dow Jones Industrial Average gained 38.47 points, or 0.5%, to 8,116.03. The S&P 500 climbed 4.62 points, or 0.6%, to 836.57. The Nasdaq Composite added 12.17 points, or 0.8%, to finish at 1,489.46.
IBM sent layoff notices to 2,800 workers.
Honda Motor Co. said Tuesday it is cutting production in Japan and North America by an additional 50,000 vehicles amid a severe slump in global sales.
Japan's No. 2 automaker said output in North America will fall by 29,000 units, affecting Honda's three plants in the region — Ontario, Canada; Marysville/East Liberty, Ohio; and Lincoln, Alabama. Due to the production cuts, Honda's overall output in North America will drop by 12 percent to 1.26 million units in the current fiscal year ending March 31.
So much for the infrastructure play. Jacobs Engineering cuts 2009 EPS forecast to $3.55 to $3.90.
Weyerhaeuser Co.is closing two mills in Washington state immediately, due to weak market conditions. The closure of the Aberdeen sawmill and Pacific Veneer mill will affect approximately 196 hourly and 25 salaried positions, the Federal Way, Wash.-based forest products company said.
Baker Hughes, the world’s third-largest oil field services company, began cutting nearly 4 percent of its global work force today as lower oil and gas prices dampen demand for drilling and other services it provides.
The Houston-based company started laying off 1,500 of its 40,000 employees in a process that will likely stretch over a couple of weeks, said Gary Flaharty, the company’s director of investor relations.
Rachel Beck: "Already this year, seven companies in the Standard & Poor's 500 index have decreased their dividends, removing some $12 billion from shareholders' pockets in the coming months. On Monday, Pfizer became the latest blue-chip company to do so.
These cuts serve up another hit to shareholders who have already been battered by the steep declines in the stock market. That is especially true of retirees, who tend to be attracted to so-called "widows and orphans" stocks that provide them with a steady cash flow.
If the trend continues, this will be the worst year for dividend cuts since 1958, when annual payments fell by 8.4 percent, according to new research from S&P.
"It is easy to say this is going to be the worst in 50 years, but the bigger question is whether it is going to be much worse than that," said Howard Silverblatt, senior index analyst at S&P."
Sunday, January 25, 2009
Falling Off The Cliff
1/25/08 Falling Off The Cliff
Corus, Europe's second-largest steel producer, is to cut 3,500 jobs at its British operations, a newspaper reported Sunday.
The company would not comment on the report in the Sunday Times.
According to AMG Data Services, "Including ETF activity, Equity funds report net cash outflows totaling -$4.711 billion in the week ended 1/21/09 with Domestic funds reporting net outflows of -$4.079 billion and Non-domestic funds reporting net outflows of -$631 million;
Excluding ETF activity, Equity funds report net cash inflows totaling $422 million with Domestic funds reporting net inflows of $140 million and Non-domestic funds reporting net inflows totaling $282 million;
Exchange Traded (Equity) funds report net outflows of -$5.133 billion with the largest flows:
-$3.751 Bil from the SPDR Tr Series I fund;
-$520 Mil from the DIAMONDS fund;
Excluding ETF activity International funds report net inflows ($343 Mil); for the 3rd consecutive week for the first time since 5/21/08;
Excluding ETF activity Taxable Bond funds report net outflows totaling -$74 million, as High Yield funds report net inflows ($95 Mil), the first time the sector has reported 5 consecutive weeks of inflows since 5/21/08;
Money Market funds report net cash outflows totaling -$19.185 billion;
Municipal Bond funds report net cash inflows of $471 million."
The Oil Drum: "Gone with the wind. When I first wrote about the Pickens Plan, as it is now known, he was putting his money where his mouth was, declaring that he was going to build a giant 2,700-turbine wind farm in West Texas costing upward of $10 billion. Nope, not anymore. The nation’s credit crunch has gutted the wind project’s financing, putting the whole project on hold. He’s also delayed work on a state permit to build 170 miles of transmission lines from West Texas that would carry enough wind energy to power 300,000 homes. “For now,” Boone told one reporter, “the wind stuff is deader than hell.”
In fact, the whole Pickens Plan seems to be going, well, nowhere. In November, California voters resoundingly defeated a ballot measure he supported to put $5 billion in bond money into promoting natural-gas vehicles in the Golden State. (Pickens’s own company, Clean Energy Fuels Corp., the country’s largest owner of natural-gas filling stations, sponsored the plan and put up $19 million to back it.) What’s more, automakers have simply refused to embrace the idea of natural gas-powered cars. They are focused on building cars that run on electric power. Meanwhile, more skeptics have emerged to blast away at Pickens’ wind energy proposal. They insist, for instance, that the cost of transmitting electricity from Boone’s proposed windmill farms in the Midwest to the current power grid would be ridiculously prohibitive."
The head of the Italian oil company Eni SpA said Sunday that the turbulence in oil prices is unprecedented and is "extremely bad news" for the industry.
Paolo Scaroni, CEO of Eni, told a panel at the Global Competitiveness Forum the time is ripe for the oil industry to look for ways to increase certainty and stability.
"Our sector is no stranger to cycles," said Scaroni. "But the turbulence we are currently experiencing — with oil doubling in the nine months to July 2008 and then losing two-thirds of its value in the following six months — is unprecedented."
"It is also extremely bad news for an industry like ours, where a five-year view counts as short term," he added.
Scaroni said that increasing stability requires several issues to be addressed. He said there should be a rapid, precise and transparent global reporting system for production, consumption and inventories.
"That will form the basis for authoritative forecasting and help prevent groundless alarmism from spooking the market," Scaroni said.
"We also need to cooperate, in the interest of a price stability, which will benefit producers and consumers alike," he added.
"Our economy could fall $1 trillion short of its full capacity, which translates into more than $12,000 in lost income for a family of four," Obama said yesterday. "And we could lose a generation of potential, as more young Americans are forced to forgo college dreams or the chance to train for the jobs of the future.
"In short, if we do not act boldly and swiftly, a bad situation could become dramatically worse."
Mike Burk: "After 3 consecutive down weeks the market is oversold...New lows increased again last week. Although the number of new lows at the November low was less than the October low there were still enough to imply a high likelihood of a retest of the November lows....I expect the major indices to be higher on Friday January 30 than they were on Friday January 23."
France’s AAA rating may be at risk as the deepening economic slump erodes tax revenue and forces the country to raise borrowing, according to ING Groep NV. Public debt will rise to as high as 70% of GDP this year, from 67% in 2008, Budget Minister Eric Woerth said.
Business Week: "India imports 75% of its oil to meet demand, which have grown exponentially as its economy expands. The government also subsidizes 60% of the price of such fuels as diesel. In 2007, when inflation was a low 3%, economists such as Standard & Poor's Subir Gokarn urged New Delhi to start cutting subsidies. Instead, the populist ruling Congress government spent $25 billion on waiving loans made to farmers and hiking bureaucrats' salaries.Now those expenditures, plus an additional $25 billion on upcoming fertilizer subsidies, is adding $100 billion a year—or 10% of India's gross domestic product, or equivalent to the country's entire collection of income taxes—to the national bill. This at a time when India needs urgently to spend $500 billion on new infrastructure and more on upgrading education and health-care facilities. The government's official debt, which dropped below 6% of gross domestic product last year, will now be closer to 10% this year. "Starting last year, the government missed key opportunities" to fix the economy, says Gokarn. In fact, he adds, "there has been no significant reform done at all in the past four years"—the time the Congress coalition has been in power."
"Real economic activity fell off a cliff during the fourth quarter, producing a sharp drop in employment, output and spending," wrote economists at Wachovia.
And the worst part is that it's not over. Economists expect another huge decline in the first quarter, with a smaller contraction in the second quarter.
GDP is expected to have fallen at a 5.5% annualized rate in the final three months of last year, according to the median forecast of economists surveyed by MarketWatch. That would be the biggest decline since the 6.4% drop in early 1982 and one of the worst quarters in the post-World War II era.
About 1000 General Motors Corp., Ford Motor Co. and Chrysler LLC auto dealers went out of business last year, a loss deeper than anticipated amid a crippling decline in auto sales.
California’s unemployment rate climbed to 9.3 percent in December from 8.4 percent in November and 5.9 percent in December 2007, the state Employment Development Department said Friday.
Paul Craig Roberts: "The 1,120,000 lost US retail jobs in 2008 are a signal that the second stage of the real estate bust is about to hit the economy. This time it will be commercial real estate—shopping malls, strip malls, warehouses, and office buildings. As businesses close and rents decline, the ability to service the mortgages on the over-built commercial real estate disappears....The unexamined question is: Who is going to finance the next wave of debt? The US budget deficit for fiscal year 2009 already appears to be on a path to $2 trillion, and that is before Obama’s stimulus program. What we are looking at is a $3 trillion budget deficit if Obama’s program is enacted in time to impact the economy this year. Foreign countries can finance a $500 billion US budget deficit out of their trade surpluses with the US. But foreigners do not have the funds to finance a US budget deficit in the trillions of dollars, and they would not finance such a deficit even if they had the funds. Foreigners are over-weighted in dollar holdings and prefer to lighten their holding than to add to them. America’s economic prospects are dim as are the dollar’s prospects as reserve currency. An annual budget deficit in the trillions of dollars makes the dollar’s prospects appear even dimmer.
The federal government’s likely solution to the debt problem will be to monetize the debt, that is, the government will finance its deficit by printing money. Debt will be inflated away. But for those Americans without jobs or whose incomes do not rise with inflation, life will be cruel."
HJ Heinz could become an acquisition target once credit markets come unstuck, financial newspaper Barron's said on Sunday.
Heinz shares, which currently trade at around $36, could ultimately fetch up to $60 or $70 each if the likes of Nestle , Kraft or Unilever are interested in the company, which has a market value of $11 billion, Barron's said in its January 26 edition.
Even without an acquisition bid, the paper said Pittsburgh-based Heinz's shares have the potential to rise around 30 percent to $45 this year as the stock has fallen about 27 percent in the last six months, compared with a 10 percent drop at other food companies.
Twitter Inc. has reportedly raised about $20 million in new investments based on a valuation of the company at up to $250 million.
The TechCrunch and the Wall Street Journal's All Things Digital blogs over the weekend both cited unnamed sources saying that the San Francisco-based micro-blogging company has followed up on its previous $20 million in funding with a similar sized round that has yet to be announced.
Alan Hess, a University of Washington finance professor, offered another scenario: Many of the supposedly healthy banks that got federal money may be holding onto it because they fear they'll need it to plug fresh holes in their existing loan portfolios. In a sense, the government may be shoveling cash into an ever-deepening hole.
This is Sarah Palin country. Residents in Tuluksak are paying $6.99 a gallon for heating fuel, up more than $2 from last year, and $6.58 for gasoline. In some villages, prices have climbed past $8 a gallon.
A typical home here is a small, primitive cabin without running water that may shelter more than a dozen people. Even a family with a modern, efficient stove will spend $185 a week for heating.
"The oil is drilled right here in Alaska, and yet we're paying $8 a gallon? Something is amiss here. The oil companies are making billions of dollars, and people here can't afford to eat," said Pat Samson, social services director for the Assn. of Village Council Presidents in Bethel, about 35 miles southwest of Tuluksak.
The price for heating fuel and gas is only the beginning of the story. Groceries must be flown in at ever-higher freight prices. A pound of hot dogs in the village store costs $7.39, and a two-pound loaf of domestic cheese runs $17.49. A loaf of Wonder Bread is $5.85.
You betcha!
The average national price of gasoline increased 7.6 cents in the past two weeks, according to a national survey released Sunday.
Oil industry analyst Trilby Lundberg says the average price of regular gasoline Friday was $1.85 a gallon. The price of mid-grade was $1.99 a gallon and the price of premium was $2.09 a gallon.
Of cities surveyed, the nation's lowest price was $1.44 in Billings, Mont. The highest price was $2.37 in Anchorage, Alaska.
According to Microsoft’s latest 10-Q, “Zune platform revenue decreased $100 million or 54 percent reflecting a decrease in device sales.”
Effexor was Wyeth’s top-selling drug in 2007 with $3.79 billion in sales. Prevnar generated $2.4 billion. Wyeth plans to seek U.S. approval this year for a new version of Prevnar that would cover six additional strains of pneumonia, continuing its dominance over competitors.
U.S. light crude for March delivery fell 74 cents to $45.73 a barrel by 0134 GMT (8:34 P.M. EST). The contract rose $2.80, or 6.41 percent, to $46.47 a barrel on Friday.
Cameron Hanover's Peter Beutel said we can expect to see a new oil squeeze, with emerging economies rebounding to compete with the U.S. for the same supplies.
The Economic Cycle Research Institute's Lakshman Achuthan said he cannot rule out a second-half recovery, but there is absolutely no sign pointing that way in the leading economic indicators.
"It's going to be an absolute economic disaster in Contra Costa County (CA) and surrounding areas," he said. "Everyone thinks this is like the last recession with values going down and that when they come back there will be a resurgence - but it's not going to be like that. It will be years before (the tax roll) recovers because all these people are selling (distressed) homes, banks are selling at deep discounts, values are going down from 50 percent to 75 percent. The people buying them will hold onto them for five, six, seven years. The tax base is not going to recover anytime soon."
Here's an example: A four-bedroom home in Antioch sold for $700,000 in 2005. Annual property taxes were $7,000, or 1 percent of the purchase price. If the home goes into foreclosure and sells for $400,000, a common scenario in a county where values have plummeted, the new tax would be $4,000 - or $3,000 less.
Consider that almost 250,000 homes in California were repossessed by lenders last year, according to ForeclosureRadar.com, and you get a sense of the mega dollars lost to the cities, counties, K-12 schools, community colleges and special districts that rely on property tax revenue.
Michael Zielinski: "
* Production was halted for all of the US Mint’s fractional gold bullion and 24 karat gold bullion offerings several months ago. There has been no indication when production might resume.
* The only 2009 gold bullion coin available from the US Mint is the one ounce American Gold Eagle. Sales of this single bullion coin offering remain subject to rationing.
* The US Mint’s gold numismatic offerings for 2009 have been significantly reduced from the prior year. The remaining product offerings will be priced at prohibitively high premiums under a newly established pricing policy.
Whether or not it was the US Mint’s intention, every significant action they have taken since August has either limited gold availability, eliminated gold product options, or increased the cost of acquiring gold. Has it all just been a consequence of surging global demand for gold, supply chain mismanagement, and bad timing for policy decisions? Or is there something else going on here?"
Sean Hyman: "Africa’s production of gold sank 14% which was the lowest levels since 1899. That’s serious! But it’s not just a South Africa story. U.S. gold production fell 2% last year. While China (which has now become the world’s biggest producer of gold) had their production rise 3% last year, the “net” result collectively among all countries is a net slowdown in gold production.
Central bank selling in gold was down a full 42% last year. And you’d be an idiot of a central banker to sell a bunch of gold in 2009 with the U.S. and global economy still hobbling along. Therefore, you can count on these guys not adding to the selling."
Corus, Europe's second-largest steel producer, is to cut 3,500 jobs at its British operations, a newspaper reported Sunday.
The company would not comment on the report in the Sunday Times.
According to AMG Data Services, "Including ETF activity, Equity funds report net cash outflows totaling -$4.711 billion in the week ended 1/21/09 with Domestic funds reporting net outflows of -$4.079 billion and Non-domestic funds reporting net outflows of -$631 million;
Excluding ETF activity, Equity funds report net cash inflows totaling $422 million with Domestic funds reporting net inflows of $140 million and Non-domestic funds reporting net inflows totaling $282 million;
Exchange Traded (Equity) funds report net outflows of -$5.133 billion with the largest flows:
-$3.751 Bil from the SPDR Tr Series I fund;
-$520 Mil from the DIAMONDS fund;
Excluding ETF activity International funds report net inflows ($343 Mil); for the 3rd consecutive week for the first time since 5/21/08;
Excluding ETF activity Taxable Bond funds report net outflows totaling -$74 million, as High Yield funds report net inflows ($95 Mil), the first time the sector has reported 5 consecutive weeks of inflows since 5/21/08;
Money Market funds report net cash outflows totaling -$19.185 billion;
Municipal Bond funds report net cash inflows of $471 million."
The Oil Drum: "Gone with the wind. When I first wrote about the Pickens Plan, as it is now known, he was putting his money where his mouth was, declaring that he was going to build a giant 2,700-turbine wind farm in West Texas costing upward of $10 billion. Nope, not anymore. The nation’s credit crunch has gutted the wind project’s financing, putting the whole project on hold. He’s also delayed work on a state permit to build 170 miles of transmission lines from West Texas that would carry enough wind energy to power 300,000 homes. “For now,” Boone told one reporter, “the wind stuff is deader than hell.”
In fact, the whole Pickens Plan seems to be going, well, nowhere. In November, California voters resoundingly defeated a ballot measure he supported to put $5 billion in bond money into promoting natural-gas vehicles in the Golden State. (Pickens’s own company, Clean Energy Fuels Corp., the country’s largest owner of natural-gas filling stations, sponsored the plan and put up $19 million to back it.) What’s more, automakers have simply refused to embrace the idea of natural gas-powered cars. They are focused on building cars that run on electric power. Meanwhile, more skeptics have emerged to blast away at Pickens’ wind energy proposal. They insist, for instance, that the cost of transmitting electricity from Boone’s proposed windmill farms in the Midwest to the current power grid would be ridiculously prohibitive."
The head of the Italian oil company Eni SpA said Sunday that the turbulence in oil prices is unprecedented and is "extremely bad news" for the industry.
Paolo Scaroni, CEO of Eni, told a panel at the Global Competitiveness Forum the time is ripe for the oil industry to look for ways to increase certainty and stability.
"Our sector is no stranger to cycles," said Scaroni. "But the turbulence we are currently experiencing — with oil doubling in the nine months to July 2008 and then losing two-thirds of its value in the following six months — is unprecedented."
"It is also extremely bad news for an industry like ours, where a five-year view counts as short term," he added.
Scaroni said that increasing stability requires several issues to be addressed. He said there should be a rapid, precise and transparent global reporting system for production, consumption and inventories.
"That will form the basis for authoritative forecasting and help prevent groundless alarmism from spooking the market," Scaroni said.
"We also need to cooperate, in the interest of a price stability, which will benefit producers and consumers alike," he added.
"Our economy could fall $1 trillion short of its full capacity, which translates into more than $12,000 in lost income for a family of four," Obama said yesterday. "And we could lose a generation of potential, as more young Americans are forced to forgo college dreams or the chance to train for the jobs of the future.
"In short, if we do not act boldly and swiftly, a bad situation could become dramatically worse."
Mike Burk: "After 3 consecutive down weeks the market is oversold...New lows increased again last week. Although the number of new lows at the November low was less than the October low there were still enough to imply a high likelihood of a retest of the November lows....I expect the major indices to be higher on Friday January 30 than they were on Friday January 23."
France’s AAA rating may be at risk as the deepening economic slump erodes tax revenue and forces the country to raise borrowing, according to ING Groep NV. Public debt will rise to as high as 70% of GDP this year, from 67% in 2008, Budget Minister Eric Woerth said.
Business Week: "India imports 75% of its oil to meet demand, which have grown exponentially as its economy expands. The government also subsidizes 60% of the price of such fuels as diesel. In 2007, when inflation was a low 3%, economists such as Standard & Poor's Subir Gokarn urged New Delhi to start cutting subsidies. Instead, the populist ruling Congress government spent $25 billion on waiving loans made to farmers and hiking bureaucrats' salaries.Now those expenditures, plus an additional $25 billion on upcoming fertilizer subsidies, is adding $100 billion a year—or 10% of India's gross domestic product, or equivalent to the country's entire collection of income taxes—to the national bill. This at a time when India needs urgently to spend $500 billion on new infrastructure and more on upgrading education and health-care facilities. The government's official debt, which dropped below 6% of gross domestic product last year, will now be closer to 10% this year. "Starting last year, the government missed key opportunities" to fix the economy, says Gokarn. In fact, he adds, "there has been no significant reform done at all in the past four years"—the time the Congress coalition has been in power."
"Real economic activity fell off a cliff during the fourth quarter, producing a sharp drop in employment, output and spending," wrote economists at Wachovia.
And the worst part is that it's not over. Economists expect another huge decline in the first quarter, with a smaller contraction in the second quarter.
GDP is expected to have fallen at a 5.5% annualized rate in the final three months of last year, according to the median forecast of economists surveyed by MarketWatch. That would be the biggest decline since the 6.4% drop in early 1982 and one of the worst quarters in the post-World War II era.
About 1000 General Motors Corp., Ford Motor Co. and Chrysler LLC auto dealers went out of business last year, a loss deeper than anticipated amid a crippling decline in auto sales.
California’s unemployment rate climbed to 9.3 percent in December from 8.4 percent in November and 5.9 percent in December 2007, the state Employment Development Department said Friday.
Paul Craig Roberts: "The 1,120,000 lost US retail jobs in 2008 are a signal that the second stage of the real estate bust is about to hit the economy. This time it will be commercial real estate—shopping malls, strip malls, warehouses, and office buildings. As businesses close and rents decline, the ability to service the mortgages on the over-built commercial real estate disappears....The unexamined question is: Who is going to finance the next wave of debt? The US budget deficit for fiscal year 2009 already appears to be on a path to $2 trillion, and that is before Obama’s stimulus program. What we are looking at is a $3 trillion budget deficit if Obama’s program is enacted in time to impact the economy this year. Foreign countries can finance a $500 billion US budget deficit out of their trade surpluses with the US. But foreigners do not have the funds to finance a US budget deficit in the trillions of dollars, and they would not finance such a deficit even if they had the funds. Foreigners are over-weighted in dollar holdings and prefer to lighten their holding than to add to them. America’s economic prospects are dim as are the dollar’s prospects as reserve currency. An annual budget deficit in the trillions of dollars makes the dollar’s prospects appear even dimmer.
The federal government’s likely solution to the debt problem will be to monetize the debt, that is, the government will finance its deficit by printing money. Debt will be inflated away. But for those Americans without jobs or whose incomes do not rise with inflation, life will be cruel."
HJ Heinz could become an acquisition target once credit markets come unstuck, financial newspaper Barron's said on Sunday.
Heinz shares, which currently trade at around $36, could ultimately fetch up to $60 or $70 each if the likes of Nestle , Kraft or Unilever are interested in the company, which has a market value of $11 billion, Barron's said in its January 26 edition.
Even without an acquisition bid, the paper said Pittsburgh-based Heinz's shares have the potential to rise around 30 percent to $45 this year as the stock has fallen about 27 percent in the last six months, compared with a 10 percent drop at other food companies.
Twitter Inc. has reportedly raised about $20 million in new investments based on a valuation of the company at up to $250 million.
The TechCrunch and the Wall Street Journal's All Things Digital blogs over the weekend both cited unnamed sources saying that the San Francisco-based micro-blogging company has followed up on its previous $20 million in funding with a similar sized round that has yet to be announced.
Alan Hess, a University of Washington finance professor, offered another scenario: Many of the supposedly healthy banks that got federal money may be holding onto it because they fear they'll need it to plug fresh holes in their existing loan portfolios. In a sense, the government may be shoveling cash into an ever-deepening hole.
This is Sarah Palin country. Residents in Tuluksak are paying $6.99 a gallon for heating fuel, up more than $2 from last year, and $6.58 for gasoline. In some villages, prices have climbed past $8 a gallon.
A typical home here is a small, primitive cabin without running water that may shelter more than a dozen people. Even a family with a modern, efficient stove will spend $185 a week for heating.
"The oil is drilled right here in Alaska, and yet we're paying $8 a gallon? Something is amiss here. The oil companies are making billions of dollars, and people here can't afford to eat," said Pat Samson, social services director for the Assn. of Village Council Presidents in Bethel, about 35 miles southwest of Tuluksak.
The price for heating fuel and gas is only the beginning of the story. Groceries must be flown in at ever-higher freight prices. A pound of hot dogs in the village store costs $7.39, and a two-pound loaf of domestic cheese runs $17.49. A loaf of Wonder Bread is $5.85.
You betcha!
The average national price of gasoline increased 7.6 cents in the past two weeks, according to a national survey released Sunday.
Oil industry analyst Trilby Lundberg says the average price of regular gasoline Friday was $1.85 a gallon. The price of mid-grade was $1.99 a gallon and the price of premium was $2.09 a gallon.
Of cities surveyed, the nation's lowest price was $1.44 in Billings, Mont. The highest price was $2.37 in Anchorage, Alaska.
According to Microsoft’s latest 10-Q, “Zune platform revenue decreased $100 million or 54 percent reflecting a decrease in device sales.”
Effexor was Wyeth’s top-selling drug in 2007 with $3.79 billion in sales. Prevnar generated $2.4 billion. Wyeth plans to seek U.S. approval this year for a new version of Prevnar that would cover six additional strains of pneumonia, continuing its dominance over competitors.
U.S. light crude for March delivery fell 74 cents to $45.73 a barrel by 0134 GMT (8:34 P.M. EST). The contract rose $2.80, or 6.41 percent, to $46.47 a barrel on Friday.
Cameron Hanover's Peter Beutel said we can expect to see a new oil squeeze, with emerging economies rebounding to compete with the U.S. for the same supplies.
The Economic Cycle Research Institute's Lakshman Achuthan said he cannot rule out a second-half recovery, but there is absolutely no sign pointing that way in the leading economic indicators.
"It's going to be an absolute economic disaster in Contra Costa County (CA) and surrounding areas," he said. "Everyone thinks this is like the last recession with values going down and that when they come back there will be a resurgence - but it's not going to be like that. It will be years before (the tax roll) recovers because all these people are selling (distressed) homes, banks are selling at deep discounts, values are going down from 50 percent to 75 percent. The people buying them will hold onto them for five, six, seven years. The tax base is not going to recover anytime soon."
Here's an example: A four-bedroom home in Antioch sold for $700,000 in 2005. Annual property taxes were $7,000, or 1 percent of the purchase price. If the home goes into foreclosure and sells for $400,000, a common scenario in a county where values have plummeted, the new tax would be $4,000 - or $3,000 less.
Consider that almost 250,000 homes in California were repossessed by lenders last year, according to ForeclosureRadar.com, and you get a sense of the mega dollars lost to the cities, counties, K-12 schools, community colleges and special districts that rely on property tax revenue.
Michael Zielinski: "
* Production was halted for all of the US Mint’s fractional gold bullion and 24 karat gold bullion offerings several months ago. There has been no indication when production might resume.
* The only 2009 gold bullion coin available from the US Mint is the one ounce American Gold Eagle. Sales of this single bullion coin offering remain subject to rationing.
* The US Mint’s gold numismatic offerings for 2009 have been significantly reduced from the prior year. The remaining product offerings will be priced at prohibitively high premiums under a newly established pricing policy.
Whether or not it was the US Mint’s intention, every significant action they have taken since August has either limited gold availability, eliminated gold product options, or increased the cost of acquiring gold. Has it all just been a consequence of surging global demand for gold, supply chain mismanagement, and bad timing for policy decisions? Or is there something else going on here?"
Sean Hyman: "Africa’s production of gold sank 14% which was the lowest levels since 1899. That’s serious! But it’s not just a South Africa story. U.S. gold production fell 2% last year. While China (which has now become the world’s biggest producer of gold) had their production rise 3% last year, the “net” result collectively among all countries is a net slowdown in gold production.
Central bank selling in gold was down a full 42% last year. And you’d be an idiot of a central banker to sell a bunch of gold in 2009 with the U.S. and global economy still hobbling along. Therefore, you can count on these guys not adding to the selling."
National Bankruptcy
1/24/08 National Bankruptcy
Jim Jubak: "Anyone who has seen this crisis take down what were once assumed to be rock-solid financial institutions, capable of surviving any crisis, has to ask whether the Federal Reserve really is too big to fail."
Doug Noland: "The pound today traded at the lowest level against the dollar since 1985. This currency has depreciated 30% against the dollar over the past 12 months. Against the yen, the pound has collapsed 42% during the past a year. There is little room left for conventional monetary policy. At 1.50%, the Bank of England’s (BofE) base lending rate is today at the lowest level since 1694."
1st Centennial Bank of Redlands, Calif. was seized by the Federal Deposit Insurance Corp. and state regulators on Friday. It was the third bank failure this year, and brings to 28 the number of banks that have closed since the beginning of the current credit crisis.
First California Bank, based in Westlake Village, Calif., will assume the bank's insured deposits, the FDIC said in a statement.
Bloomberg (Lynn Thomasson and Adam Haigh): “The S&P 500 Index is off to its second-worst start, shattering the biggest rally since World War II, as analysts cut earnings estimates by a record 83 percentage points and companies signal worse to come.”
Bloomberg (Courtney Dentch and Jeff Kearns): “U.S. companies are reducing dividends at the fastest rate in half a century… Five companies in the Standard & Poor’s 500 Index slashed $7.5 billion in outlays this month, more than all the cuts from 2003 to 2007, S&P said. The worst financial crisis since the Great Depression is forcing companies to hoard cash after earnings before one-time costs dropped 38 percent last year, the most since 2001…”
Doug Noland: "I fully expect our Post-Bubble Financial and Economic Predicament to parallel that of Britain. At some point, our problems will likely be of much greater scope due to, among other things, our system’s larger size. So far, the U.K. has suffered a more acute crisis due to its inability to stabilize its troubled financial sector. For one, it is suffering through a more destabilizing outflow of speculative finance (unwind of carry trades). Also, the U.K. financial structure has traditionally been less government-influenced – leaving it today more vulnerable to a crisis of confidence. Outside of government debt instruments, confidence has faltered for large cross-sections of U.K.’s financial claims (“moneyness” has been lost).
Our system has to this point proved relatively more stable due primarily, I believe, to the instrumental role played by government and quasi-government institutions such as the FHA, Fannie, Freddie and the Federal Home Loan Banks. The market’s perception of “moneyness” is retained for multi-Trillions of U.S. claims – a dynamic that bolsters the view that the U.S. dollar retains its “reserve currency” and safe-haven status. And as long as this confidence holds, faith in the government’s capacity for system “reflation” endures. But it all has the look of a fragile confidence game, and I fully expect the invaluable attribute of “moneyness” to be tested at some point.
There is absolutely no doubt that a massive inflation of U.S. financial claims is in the offing. One would suspect it is only a matter of when market perceptions of “moneyness” adjust. This week’s jump in gilt yields could portend a troubling new phase in the U.K. financial crisis. It could also be a harbinger of a more general crisis of confidence for global currencies and debt markets. The long-bond suffered its worst week since 1987 (according to Bloomberg). Gold was up $43 today and $56 for the week."
Based on a preliminary evaluation of its fourth-quarter operations, Freddie Mac's management believes that it will need $30 billion to $35 billion to offset the impact of operating losses as well as other items that could affect the company's net worth. Freddie Mac has already drawn $13.8 billion under the $100 billion agreement.
A top official at China s central bank has dismissed U.S. Treasury Secretary-designate Timothy Geithner s comment that President Barack Obama believes Beijing is manipulating its currency, state media said Saturday.
A few lucky people in the Indian Ocean will be treated to a rare event on Monday when an annular solar eclipse will transform the Sun into a dark disc with a blazing ring-shaped corona around its rim.
According to veteran NASA eclipse-watcher Fred Espenak, the total eclipse track will run from west to east on Monday from 0606 GMT to 0952 GMT.
Business Week: "Even after the government's seizure of top banks, Iceland may face bankruptcy, with dire effects for huge Icelandic investments overseas. Home to just 304,000 people, tiny Iceland is emerging as the biggest casualty of the global financial crisis...In a televised address to the nation, Prime Minister Geir Haarde conceded: "There is a very real danger, fellow citizens, that the Icelandic economy in the worst case could be sucked into the whirlpool, and the result could be national bankruptcy."
Do you really believe Iceland could be the only country to go bankrupt? Some months back I suggested investors might consider focusing on countries going under rather than simply banks, other financial institutions, and companies in general.
Brian Pretti:"In fact, one of the really neat character points here is that at each peak and trough cycle interval with the rate of change in payroll employment, the NAHB survey led the way. No exceptions. We see virtually the same thing with the historical consumer confidence data.
You don’t need me to go on and on. We need to watch what the homebuilders have to say about life. Don’t forget these folks as their “calls” on the economy that is essentially the directional rhythm of their ongoing monthly surveys make many a headline Wall Street economist look like amateurs. Historical directional correlation here is far too high to be ignored. THE important issue to our investment decision-making ahead is to look for a true and sustainable turn up in builder sentiment. In fact, when it ultimately arrives, I expect most folks will dismiss it as wishful thinking. As for me, I promise I will not."
Pfizer Inc. is close to an agreement to acquire rival drug maker Wyeth for between $65 billion and $70 billion in a cash-and-stock deal that could be announced as early as next week, the Wall Street Journal reported at about $50 per share, almost 30% more than Wyeth's closing price Thursday.
Starbucks could be considering another big round of layoffs, according to a published report.
According to a story in the Seattle Times citing a local investment firm,
Starbucks Corp.could lay off as many as 1,000 employees, including headquarters workers, district managers and field employees.
Jason Zweig: "History shows that the vast majority of the time, the stock market does next to nothing. Then, when no one expects it, the market delivers a giant gain or loss -- and promptly lapses back into its usual stupor. Javier Estrada, a finance professor at IESE Business School in Barcelona, Spain, has studied the daily returns of the Dow Jones Industrial Average back to 1900. I asked him to extend his research through the end of 2008. Prof. Estrada found that if you took away the 10 best days, two-thirds of the cumulative gains produced by the Dow over the past 109 years would disappear. Conversely, had you sidestepped the market's 10 worst days, you would have tripled the actual return of the Dow.
"Although we could make a bundle of money if we could accurately predict those good and bad days," says Prof. Estrada, "the sad truth is that we're very, very unlikely to do that." The moments that made all the difference were just 0.03% of history: 10 days out of 29,694."
Hartmarx Corp., the Chicago parent of prominent apparel brands like Hart Schaffner Marx, Hickey-Freeman and many others, said late on Friday that it filed to reorganize under Chapter 11 of federal bankruptcy law.
First Centennial Bank of Redlands, Calif., was seized by the Federal Deposit Insurance Corp. and state regulators on Friday.
It was the third bank failure this year, and brings to 28 the number of banks that have closed since the current credit crisis began.
Jim Jubak: "Anyone who has seen this crisis take down what were once assumed to be rock-solid financial institutions, capable of surviving any crisis, has to ask whether the Federal Reserve really is too big to fail."
Doug Noland: "The pound today traded at the lowest level against the dollar since 1985. This currency has depreciated 30% against the dollar over the past 12 months. Against the yen, the pound has collapsed 42% during the past a year. There is little room left for conventional monetary policy. At 1.50%, the Bank of England’s (BofE) base lending rate is today at the lowest level since 1694."
1st Centennial Bank of Redlands, Calif. was seized by the Federal Deposit Insurance Corp. and state regulators on Friday. It was the third bank failure this year, and brings to 28 the number of banks that have closed since the beginning of the current credit crisis.
First California Bank, based in Westlake Village, Calif., will assume the bank's insured deposits, the FDIC said in a statement.
Bloomberg (Lynn Thomasson and Adam Haigh): “The S&P 500 Index is off to its second-worst start, shattering the biggest rally since World War II, as analysts cut earnings estimates by a record 83 percentage points and companies signal worse to come.”
Bloomberg (Courtney Dentch and Jeff Kearns): “U.S. companies are reducing dividends at the fastest rate in half a century… Five companies in the Standard & Poor’s 500 Index slashed $7.5 billion in outlays this month, more than all the cuts from 2003 to 2007, S&P said. The worst financial crisis since the Great Depression is forcing companies to hoard cash after earnings before one-time costs dropped 38 percent last year, the most since 2001…”
Doug Noland: "I fully expect our Post-Bubble Financial and Economic Predicament to parallel that of Britain. At some point, our problems will likely be of much greater scope due to, among other things, our system’s larger size. So far, the U.K. has suffered a more acute crisis due to its inability to stabilize its troubled financial sector. For one, it is suffering through a more destabilizing outflow of speculative finance (unwind of carry trades). Also, the U.K. financial structure has traditionally been less government-influenced – leaving it today more vulnerable to a crisis of confidence. Outside of government debt instruments, confidence has faltered for large cross-sections of U.K.’s financial claims (“moneyness” has been lost).
Our system has to this point proved relatively more stable due primarily, I believe, to the instrumental role played by government and quasi-government institutions such as the FHA, Fannie, Freddie and the Federal Home Loan Banks. The market’s perception of “moneyness” is retained for multi-Trillions of U.S. claims – a dynamic that bolsters the view that the U.S. dollar retains its “reserve currency” and safe-haven status. And as long as this confidence holds, faith in the government’s capacity for system “reflation” endures. But it all has the look of a fragile confidence game, and I fully expect the invaluable attribute of “moneyness” to be tested at some point.
There is absolutely no doubt that a massive inflation of U.S. financial claims is in the offing. One would suspect it is only a matter of when market perceptions of “moneyness” adjust. This week’s jump in gilt yields could portend a troubling new phase in the U.K. financial crisis. It could also be a harbinger of a more general crisis of confidence for global currencies and debt markets. The long-bond suffered its worst week since 1987 (according to Bloomberg). Gold was up $43 today and $56 for the week."
Based on a preliminary evaluation of its fourth-quarter operations, Freddie Mac's management believes that it will need $30 billion to $35 billion to offset the impact of operating losses as well as other items that could affect the company's net worth. Freddie Mac has already drawn $13.8 billion under the $100 billion agreement.
A top official at China s central bank has dismissed U.S. Treasury Secretary-designate Timothy Geithner s comment that President Barack Obama believes Beijing is manipulating its currency, state media said Saturday.
A few lucky people in the Indian Ocean will be treated to a rare event on Monday when an annular solar eclipse will transform the Sun into a dark disc with a blazing ring-shaped corona around its rim.
According to veteran NASA eclipse-watcher Fred Espenak, the total eclipse track will run from west to east on Monday from 0606 GMT to 0952 GMT.
Business Week: "Even after the government's seizure of top banks, Iceland may face bankruptcy, with dire effects for huge Icelandic investments overseas. Home to just 304,000 people, tiny Iceland is emerging as the biggest casualty of the global financial crisis...In a televised address to the nation, Prime Minister Geir Haarde conceded: "There is a very real danger, fellow citizens, that the Icelandic economy in the worst case could be sucked into the whirlpool, and the result could be national bankruptcy."
Do you really believe Iceland could be the only country to go bankrupt? Some months back I suggested investors might consider focusing on countries going under rather than simply banks, other financial institutions, and companies in general.
Brian Pretti:"In fact, one of the really neat character points here is that at each peak and trough cycle interval with the rate of change in payroll employment, the NAHB survey led the way. No exceptions. We see virtually the same thing with the historical consumer confidence data.
You don’t need me to go on and on. We need to watch what the homebuilders have to say about life. Don’t forget these folks as their “calls” on the economy that is essentially the directional rhythm of their ongoing monthly surveys make many a headline Wall Street economist look like amateurs. Historical directional correlation here is far too high to be ignored. THE important issue to our investment decision-making ahead is to look for a true and sustainable turn up in builder sentiment. In fact, when it ultimately arrives, I expect most folks will dismiss it as wishful thinking. As for me, I promise I will not."
Pfizer Inc. is close to an agreement to acquire rival drug maker Wyeth for between $65 billion and $70 billion in a cash-and-stock deal that could be announced as early as next week, the Wall Street Journal reported at about $50 per share, almost 30% more than Wyeth's closing price Thursday.
Starbucks could be considering another big round of layoffs, according to a published report.
According to a story in the Seattle Times citing a local investment firm,
Starbucks Corp.could lay off as many as 1,000 employees, including headquarters workers, district managers and field employees.
Jason Zweig: "History shows that the vast majority of the time, the stock market does next to nothing. Then, when no one expects it, the market delivers a giant gain or loss -- and promptly lapses back into its usual stupor. Javier Estrada, a finance professor at IESE Business School in Barcelona, Spain, has studied the daily returns of the Dow Jones Industrial Average back to 1900. I asked him to extend his research through the end of 2008. Prof. Estrada found that if you took away the 10 best days, two-thirds of the cumulative gains produced by the Dow over the past 109 years would disappear. Conversely, had you sidestepped the market's 10 worst days, you would have tripled the actual return of the Dow.
"Although we could make a bundle of money if we could accurately predict those good and bad days," says Prof. Estrada, "the sad truth is that we're very, very unlikely to do that." The moments that made all the difference were just 0.03% of history: 10 days out of 29,694."
Hartmarx Corp., the Chicago parent of prominent apparel brands like Hart Schaffner Marx, Hickey-Freeman and many others, said late on Friday that it filed to reorganize under Chapter 11 of federal bankruptcy law.
First Centennial Bank of Redlands, Calif., was seized by the Federal Deposit Insurance Corp. and state regulators on Friday.
It was the third bank failure this year, and brings to 28 the number of banks that have closed since the current credit crisis began.
Friday, January 23, 2009
Worsening Times
1/23/08 Worsening Times
Venezuela ships about 1.1 million barrels of oil a day to the United States, its No. 1 client.
Oil prices hit highs of around $147 over the summer. Prices settled at $43.67 a barrel on the New York Mercantile Exchange on Thursday.
J PMorgan Chase and the Seattle Art Museum announced today the bank will not be assuming Washington Mutual's lease for about 240,000 square feet of office space it rents from the museum in downtown Seattle.
That means the museum will have to find a new tenant to help it pay for the $5.8 million a year that it owes on the space. WaMu had been paying that amount in rent to SAM.
Randall Forsyth: "Thursday, CDS on U.S. Treasuries were quoted at 73 basis points, according to Tim Backshall, chief strategist at Credit Derivatives Research. (Note that means paying 73,000 euros to insure 10 million euros' worth of U.S. debt. Obviously, Uncle Sam can reel off all the greenbacks he needs to pay off his debt. So the CDS on U.S. Treasuries are quoted in euros, a currency the U.S. can't print.).
That's up sharply from 60 basis points a week ago and 40 basis points on Nov. 20, when the Standard & Poor's hit its recent low. The stock market's gain apparently has come at a cost to the U.S. government.
James F. Keegan, chief investment officer of Seix Investment Managers and a portfolio manager of the Ridgeworth Intermediate Bond Fund, is blunter: The massive efforts to bail out the banks "are putting the sovereign credit of the U.S. at risk."
As of November, Microsoft counted 95,664 employees globally. Chief Financial Officer Chris Liddell told Wall Street analysts he expects spending on contractors to decrease about 15 percent.
"External contractors, we think about more in terms of the dollars that we spend overall. That's on top of the numbers we're talking about, and that could be down up to 15 percent," he said.
Schlumberger said Friday its fourth-quarter earnings fell nearly 17 percent as the energy industry pulled back on spending, and the company warned of a rough year ahead.
Schlumberger Ltd., the world's largest oilfield services provider, said its net profit for the October-December period was $1.15 billion, or 95 cents a share, compared with a year-earlier profit of $1.38 billion, or $1.12 per share. Revenue rose to $6.87 billion from $6.25 billion a year earlier. Schlumberger said it expects activity to weaken across the board in 2009 with the most significant declines occurring in North American gas drilling, Russian oil production enhancement and in mature offshore basins.
Natural-gas supplies fell by 176 billion cubic feet to stand at 2,560 Bcf for the week ended Jan. 16, the Energy Information Administration reported Friday. Analysts at IHS Global Insight had expected a storage withdrawal of 149 billion cubic feet. After the data, February natural gas futures fell 13 cents, or 3%, at $4.56 per million British thermal units.
Fox-Pitt Kelton analyst Robert Stevenson on Friday said Centex Corp.'s preliminary quarterly results were much worse than he had expected after the home builder projected write-downs as high as $600 million and said its net new orders declined 80% year-over year. "The large hit to book value likely resulted in Centex bumping up against the tangible net worth covenant on its credit facility," Stevenson wrote in a note to clients. "While Centex's improving balance sheet and declining land position will eventually benefit the company, we expect the stock to underperform in the near term, as operating fundamentals continue to deteriorate." The analyst cut his target price on Centex shares to $9. The stock was down about 7% to $9.15 in recent trading.
GE warned of an extremely difficult year ahead, fueling worries.
It said it remains committed to its planned $1.24 dividend for the year.
Motorcylce manufacturer Harley-Davidson Inc. said Friday that it will cut around 1,100 jobs in 2009 and 2010 as it cuts production volumes and restructures.
Suntech Power Holdings Co. Ltd.said it would book an inventory provision in the range of $46 million to $58 million as a result of the rapid decline in silicon prices in the fourth quarter. Suntech sees fourth-quarter gross margin of -1% to +2%. The company said it reduced its workforce by approximately 800 employees and suspended hiring a further 2,000 new staff as part of its decision to maintain its current production capacity.
GE Capital is expected to earn about $5 billion in 2009, compared to $8.6 billion last year.
Gold for February delivery gained $14.40, or 1.7%, to $873.10 an ounce in electronic trading on Globex. Gold gained "on heavy safe-haven demand as sentiment deteriorated across global equity markets," said analysts at Action Economics.
Crude oil for March delivery dropped $1.06, or 2.4%, to $42.63 a barrel in electronic trading on Globex.
Pfizer Inc. is negotiating to acquire rival drug maker Wyeth in a blockbuster deal potentially worth more than $60 billion, the Wall Street Journal reported Friday. The Journal, citing unnamed sources, reported that the two companies have been in talks for months and a deal is not imminent, while the state of the economy makes the negotiations especially fragile. Pfizer, the world's largest drug maker by revenue, would likely use a combination of cash and stock for the acquisition, according to the report.
North Carolina’s unemployment rate in December hit 8.7 percent, nearly a full percentage point over the November rate, as the state economy continues its slide. This is a 25-year high.
Gold for February delivery rose $37 to end at $895.80 an ounce on the New York Mercantile Exchange. Earlier, gold soared to an intraday high of $903.80 an ounce on Globex, which is the metal's highest level since Oct. 8, 2008. For the week, gold posted a gain of $55.90, or 7%, from last Friday's closing level of $839.90 an ounce.
Crude oil for March delivery rose $2.44, or 5.6%, to $46.10 a barrel on Globex.
Goldman Sachs estimates the Treasury's cash borrowing needs may reach $2.5 trillion this year.
Compass Bank says it is cutting 1,200 workers, or about 10 percent of its staff, as part of an overall reorganization.
Capital One, one of the largest card issuers, reported a $1.4 billion fourth-quarter net loss late Thursday as it set aside another $1 billion to cover higher charge-offs this year.
The fourth-quarter charge-off rate in the U.S. card business was 7.08%, up from 6.13% during the third quarter. That's expected to jump to roughly 8.1% in the first quarter of 2009, up from the mid-7% range Capital One previously forecast.
The Dow Jones Industrial Average fell 45.24 points, or 0.6%, to 8,077.56, leaving the blue chips 2.5% down on the week. The S&P 500 gained 4.45 points, or 0.5%, to 831.95, translating into a 2.1% decline from last Friday's close. The technology-laden Nasdaq Composite gained 11.80 points, or 0.8%, to 1,477.29, off 3.4% on the week.
At $12, GE is back to where it was a dozen years ago.
Buffett now owns 74.5 million shares of Burlington Northern, or 22% of its shares outstanding.
Venezuela ships about 1.1 million barrels of oil a day to the United States, its No. 1 client.
Oil prices hit highs of around $147 over the summer. Prices settled at $43.67 a barrel on the New York Mercantile Exchange on Thursday.
J PMorgan Chase and the Seattle Art Museum announced today the bank will not be assuming Washington Mutual's lease for about 240,000 square feet of office space it rents from the museum in downtown Seattle.
That means the museum will have to find a new tenant to help it pay for the $5.8 million a year that it owes on the space. WaMu had been paying that amount in rent to SAM.
Randall Forsyth: "Thursday, CDS on U.S. Treasuries were quoted at 73 basis points, according to Tim Backshall, chief strategist at Credit Derivatives Research. (Note that means paying 73,000 euros to insure 10 million euros' worth of U.S. debt. Obviously, Uncle Sam can reel off all the greenbacks he needs to pay off his debt. So the CDS on U.S. Treasuries are quoted in euros, a currency the U.S. can't print.).
That's up sharply from 60 basis points a week ago and 40 basis points on Nov. 20, when the Standard & Poor's hit its recent low. The stock market's gain apparently has come at a cost to the U.S. government.
James F. Keegan, chief investment officer of Seix Investment Managers and a portfolio manager of the Ridgeworth Intermediate Bond Fund, is blunter: The massive efforts to bail out the banks "are putting the sovereign credit of the U.S. at risk."
As of November, Microsoft counted 95,664 employees globally. Chief Financial Officer Chris Liddell told Wall Street analysts he expects spending on contractors to decrease about 15 percent.
"External contractors, we think about more in terms of the dollars that we spend overall. That's on top of the numbers we're talking about, and that could be down up to 15 percent," he said.
Schlumberger said Friday its fourth-quarter earnings fell nearly 17 percent as the energy industry pulled back on spending, and the company warned of a rough year ahead.
Schlumberger Ltd., the world's largest oilfield services provider, said its net profit for the October-December period was $1.15 billion, or 95 cents a share, compared with a year-earlier profit of $1.38 billion, or $1.12 per share. Revenue rose to $6.87 billion from $6.25 billion a year earlier. Schlumberger said it expects activity to weaken across the board in 2009 with the most significant declines occurring in North American gas drilling, Russian oil production enhancement and in mature offshore basins.
Natural-gas supplies fell by 176 billion cubic feet to stand at 2,560 Bcf for the week ended Jan. 16, the Energy Information Administration reported Friday. Analysts at IHS Global Insight had expected a storage withdrawal of 149 billion cubic feet. After the data, February natural gas futures fell 13 cents, or 3%, at $4.56 per million British thermal units.
Fox-Pitt Kelton analyst Robert Stevenson on Friday said Centex Corp.'s preliminary quarterly results were much worse than he had expected after the home builder projected write-downs as high as $600 million and said its net new orders declined 80% year-over year. "The large hit to book value likely resulted in Centex bumping up against the tangible net worth covenant on its credit facility," Stevenson wrote in a note to clients. "While Centex's improving balance sheet and declining land position will eventually benefit the company, we expect the stock to underperform in the near term, as operating fundamentals continue to deteriorate." The analyst cut his target price on Centex shares to $9. The stock was down about 7% to $9.15 in recent trading.
GE warned of an extremely difficult year ahead, fueling worries.
It said it remains committed to its planned $1.24 dividend for the year.
Motorcylce manufacturer Harley-Davidson Inc. said Friday that it will cut around 1,100 jobs in 2009 and 2010 as it cuts production volumes and restructures.
Suntech Power Holdings Co. Ltd.said it would book an inventory provision in the range of $46 million to $58 million as a result of the rapid decline in silicon prices in the fourth quarter. Suntech sees fourth-quarter gross margin of -1% to +2%. The company said it reduced its workforce by approximately 800 employees and suspended hiring a further 2,000 new staff as part of its decision to maintain its current production capacity.
GE Capital is expected to earn about $5 billion in 2009, compared to $8.6 billion last year.
Gold for February delivery gained $14.40, or 1.7%, to $873.10 an ounce in electronic trading on Globex. Gold gained "on heavy safe-haven demand as sentiment deteriorated across global equity markets," said analysts at Action Economics.
Crude oil for March delivery dropped $1.06, or 2.4%, to $42.63 a barrel in electronic trading on Globex.
Pfizer Inc. is negotiating to acquire rival drug maker Wyeth in a blockbuster deal potentially worth more than $60 billion, the Wall Street Journal reported Friday. The Journal, citing unnamed sources, reported that the two companies have been in talks for months and a deal is not imminent, while the state of the economy makes the negotiations especially fragile. Pfizer, the world's largest drug maker by revenue, would likely use a combination of cash and stock for the acquisition, according to the report.
North Carolina’s unemployment rate in December hit 8.7 percent, nearly a full percentage point over the November rate, as the state economy continues its slide. This is a 25-year high.
Gold for February delivery rose $37 to end at $895.80 an ounce on the New York Mercantile Exchange. Earlier, gold soared to an intraday high of $903.80 an ounce on Globex, which is the metal's highest level since Oct. 8, 2008. For the week, gold posted a gain of $55.90, or 7%, from last Friday's closing level of $839.90 an ounce.
Crude oil for March delivery rose $2.44, or 5.6%, to $46.10 a barrel on Globex.
Goldman Sachs estimates the Treasury's cash borrowing needs may reach $2.5 trillion this year.
Compass Bank says it is cutting 1,200 workers, or about 10 percent of its staff, as part of an overall reorganization.
Capital One, one of the largest card issuers, reported a $1.4 billion fourth-quarter net loss late Thursday as it set aside another $1 billion to cover higher charge-offs this year.
The fourth-quarter charge-off rate in the U.S. card business was 7.08%, up from 6.13% during the third quarter. That's expected to jump to roughly 8.1% in the first quarter of 2009, up from the mid-7% range Capital One previously forecast.
The Dow Jones Industrial Average fell 45.24 points, or 0.6%, to 8,077.56, leaving the blue chips 2.5% down on the week. The S&P 500 gained 4.45 points, or 0.5%, to 831.95, translating into a 2.1% decline from last Friday's close. The technology-laden Nasdaq Composite gained 11.80 points, or 0.8%, to 1,477.29, off 3.4% on the week.
At $12, GE is back to where it was a dozen years ago.
Buffett now owns 74.5 million shares of Burlington Northern, or 22% of its shares outstanding.
Wednesday, January 21, 2009
The Day After
1/21/08 The Day After
Single-family-housing starts, which fell 40% to 617,000 in 2007, are expected to drop to about 441,000 this year -- the lowest since records have been kept -- according to the economic outlook of the National Association of Home Builders released Tuesday at the International Builders Show here. That would be a nearly 75% drop from the industry's highwater mark of 1.7 million single-family starts in 2005.
March crude up 78 cents, or 2%, to $41.62 a barrel on Globex. Gold for February delivery dropped $5.70 to $849.50 an ounce in electronic trading on Globex.
Abbott affirmed its forecast of 2009 earnings per share of $3.65 to $3.70. "2008 was another highly productive and successful year for Abbott," said Chief Executive Miles D. White.
Coach Inc. said Wednesday that its second-quarter profit fell to $216.9 million, or 67 cents a share, from $252.3 million, or 69 cents a share, in the year-earlier period.
United Technologies Corp. confirmed its prior expectation for 2009 earnings per share of $4.65 to $5.15, a range of plus or minus 5%.
CC Media Holdings, the parent firm of Clear Channel Communications and Clear Channel Outdoor Holdings, said it's cutting 1,850 jobs, or 9% of its workforce.
Jobless claims in the U.K. rose 77,900 in December, and the unemployment rate in the three months to November rose by 0.4 percentage points to 6.1%, the National Statistics Office said Wednesday.
The ruble strengthened for a second straight day on Wednesday, signaling a reprieve in the Russian currency's steady devaluation against the dollar and the euro.
As of late afternoon, the ruble had recovered slightly to 36.95 against a currency basket made up of dollars and euros. The Central Bank has pursued in recent months a gradual devaluation policy, which has seen the ruble lose around a fifth of its value since November. The ruble has tumbled nearly 30 percent against the dollar since August.
The ruble gained to 32.69 against the dollar, and 42.14 to the euro on Wednesday.
Yields on 10- and 30-year Treasuries rose for a third straight day as the Obama administration pushed to complete a bank-rescue plan that can be joined with an $825 billion stimulus package to ease the deepening recession. The gap between rates on 10-year notes and Treasury Inflation Protected Securities, reflecting expectations for the inflation rate, touched 0.67 percentage point, the widest in two months.
Hopefully this trend continues as my best trade for 2009 is to be short 10-year and 30-year Treasuries.
Ericsson. to cut 5,000 jobs.
Bloomberg: "U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis."
Samsung, the world's largest manufacturer of flat screen televisions, will likely announce a net loss of 92.93 billion won ($67.7 million) for the three months ended Dec. 31, according to the average forecast of 10 analysts surveyed by The Associated Press. Samsung earned 2.21 trillion won in the same period the year before.
Samsung is scheduled to announce results for the fourth quarter of 2008 on Friday.
General Motors Corp.said Wednesday its fourth-quarter unit sales fell 26% to 1.7 million. "Most of that decline was reflected in 379,000 fewer vehicles sold in North America as the market yielded to a crushing lack of consumer confidence, and tightened credit requirements, in the United States," the Detroit auto maker said. For all of 2008, GM sold 8.35 million vehicles, down 11% from 9.37 million in 2007. GM's nearly 3% growth in both Asia Pacific and Latin America, Africa and Middle East partially offset a 21% drop in North America sales and a dip of 7% in European sales.
The market capitalization of the financial stocks in the Standard & Poor's 500 Index has fallen 77% from a June 2007 high of $2.92 trillion, to a current $671 billion, according to economist and market strategist Ed Yardeni.
Intel gave a hint that 2009 would be difficult when it said last week that it wasn't sure when demand would pick back up. The company estimated that 2009 sales would likely be around $7 billion, which translates to a decline of more than 25 percent from the first quarter of 2008. Gross profit margin should also sink sharply, falling from more than 50 percent of sales to the low-40 percent range, according to Intel.
After jumping 10 points on Tuesday, the VIX in early Wednesday trading has plunged 6 points to 50+.
Sony Corp. plans to close one of its two television factories in Japan and cut more than 2,000 full-time jobs.
The home builders' index fell to a record low 8 in January from 9 in December, the National Association of Home Builders said. At its current level, the index shows that approximately one of every twelve builders believes the market is good. Two of the three components in the home builders' index rose in January: The index measuring expected sales rose from a record-low 16 to 17, and the index measuring buyers' traffic improved to 8 from a record-low 7. The index for current sales fell to a record-low 6 from 8.
Gold for February delivery fell $5.10 to end at $850.10 an ounce on Nymex.
March crude up $2.65, or 6%, to $43.55 a barrel on Globex.
Burlington Northern Santa Fe Corp. reported a fourth-quarter profit of $615 million, or $1.79 a share, up from $517 million, or $1.46 a share, a year ago. Revenue for the Ft. Worth, Tex.-based railroad operator rose to $4.37 billion from $4.25 billion a year earlier. Analysts polled by FactSet Research were looking for a profit, on average, of $1.77 a share on sales of $4.45 billion. Burlington stock finished up 7.1% at $65.59 but is still down almost 15% in the past year.
The Dow Jones Industrial Average climbed 279.01 points, or 3.5%, to end at 8,228.1. The S&P 500 gained 35.02 points, or 4.4%, to 840.24, while the Nasdaq Composite added 66.21 points, or 4.6%, to 1,507.06.
Credit Suisse analyst Michael Exstein said in a note to investors that the December results show momentum slowing for Wal-Mart.
"The incremental benefit it realized from consumer trade-down in 2008 might not repeat itself in 2009," Exstein said. "Target is focusing on reducing prices to gain market share, which we believe presents an added competitive threat to Wal-Mart."
Bentonville, Ark.-based Wal-Mart's slowing store-footage growth and aging stores may also challenge sales-growth expectations, Exstein predicted.
He lowered his rating to "neutral" from "outperform" and cut his target price to $53 from $60.
EBay late-traded shares drop 6.9% to $12.39 after results.The online auctioneer reported a profit of 41 cents a share on sales of $2.04 billion in the fourth quarter, against earnings of 45 cents a share on revenue of $2.181 billion in the final quarter of 2007.
Williams-Sonoma Inc.said late Wednesday that it will trim about 1,400 jobs, or 18% of its work force worldwide, as a cost-cutting measure.
Apple targets Q2 rev of $7.6 bln-$8 bln.
GE hit a new 52-week low and managed to barely finish 10 cents in a market that had a strong day.
Intel Corp said on Wednesday it would close manufacturing plants in Malaysia and the Philippines and scale back U.S. operations as part of a restructuring that affects as many as 6,000 employees.
New York City home prices fell 10 percent in the fourth quarter as Wall Street cut jobs and the recession reduced demand.
The average price of all properties, including condominiums and one-to-three family houses, fell to $669,000 from a year earlier, the Real Estate Board of New York said in a report today. Apartment prices citywide fell 4 percent to an average $796,000.
Single-family-housing starts, which fell 40% to 617,000 in 2007, are expected to drop to about 441,000 this year -- the lowest since records have been kept -- according to the economic outlook of the National Association of Home Builders released Tuesday at the International Builders Show here. That would be a nearly 75% drop from the industry's highwater mark of 1.7 million single-family starts in 2005.
March crude up 78 cents, or 2%, to $41.62 a barrel on Globex. Gold for February delivery dropped $5.70 to $849.50 an ounce in electronic trading on Globex.
Abbott affirmed its forecast of 2009 earnings per share of $3.65 to $3.70. "2008 was another highly productive and successful year for Abbott," said Chief Executive Miles D. White.
Coach Inc. said Wednesday that its second-quarter profit fell to $216.9 million, or 67 cents a share, from $252.3 million, or 69 cents a share, in the year-earlier period.
United Technologies Corp. confirmed its prior expectation for 2009 earnings per share of $4.65 to $5.15, a range of plus or minus 5%.
CC Media Holdings, the parent firm of Clear Channel Communications and Clear Channel Outdoor Holdings, said it's cutting 1,850 jobs, or 9% of its workforce.
Jobless claims in the U.K. rose 77,900 in December, and the unemployment rate in the three months to November rose by 0.4 percentage points to 6.1%, the National Statistics Office said Wednesday.
The ruble strengthened for a second straight day on Wednesday, signaling a reprieve in the Russian currency's steady devaluation against the dollar and the euro.
As of late afternoon, the ruble had recovered slightly to 36.95 against a currency basket made up of dollars and euros. The Central Bank has pursued in recent months a gradual devaluation policy, which has seen the ruble lose around a fifth of its value since November. The ruble has tumbled nearly 30 percent against the dollar since August.
The ruble gained to 32.69 against the dollar, and 42.14 to the euro on Wednesday.
Yields on 10- and 30-year Treasuries rose for a third straight day as the Obama administration pushed to complete a bank-rescue plan that can be joined with an $825 billion stimulus package to ease the deepening recession. The gap between rates on 10-year notes and Treasury Inflation Protected Securities, reflecting expectations for the inflation rate, touched 0.67 percentage point, the widest in two months.
Hopefully this trend continues as my best trade for 2009 is to be short 10-year and 30-year Treasuries.
Ericsson. to cut 5,000 jobs.
Bloomberg: "U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis."
Samsung, the world's largest manufacturer of flat screen televisions, will likely announce a net loss of 92.93 billion won ($67.7 million) for the three months ended Dec. 31, according to the average forecast of 10 analysts surveyed by The Associated Press. Samsung earned 2.21 trillion won in the same period the year before.
Samsung is scheduled to announce results for the fourth quarter of 2008 on Friday.
General Motors Corp.said Wednesday its fourth-quarter unit sales fell 26% to 1.7 million. "Most of that decline was reflected in 379,000 fewer vehicles sold in North America as the market yielded to a crushing lack of consumer confidence, and tightened credit requirements, in the United States," the Detroit auto maker said. For all of 2008, GM sold 8.35 million vehicles, down 11% from 9.37 million in 2007. GM's nearly 3% growth in both Asia Pacific and Latin America, Africa and Middle East partially offset a 21% drop in North America sales and a dip of 7% in European sales.
The market capitalization of the financial stocks in the Standard & Poor's 500 Index has fallen 77% from a June 2007 high of $2.92 trillion, to a current $671 billion, according to economist and market strategist Ed Yardeni.
Intel gave a hint that 2009 would be difficult when it said last week that it wasn't sure when demand would pick back up. The company estimated that 2009 sales would likely be around $7 billion, which translates to a decline of more than 25 percent from the first quarter of 2008. Gross profit margin should also sink sharply, falling from more than 50 percent of sales to the low-40 percent range, according to Intel.
After jumping 10 points on Tuesday, the VIX in early Wednesday trading has plunged 6 points to 50+.
Sony Corp. plans to close one of its two television factories in Japan and cut more than 2,000 full-time jobs.
The home builders' index fell to a record low 8 in January from 9 in December, the National Association of Home Builders said. At its current level, the index shows that approximately one of every twelve builders believes the market is good. Two of the three components in the home builders' index rose in January: The index measuring expected sales rose from a record-low 16 to 17, and the index measuring buyers' traffic improved to 8 from a record-low 7. The index for current sales fell to a record-low 6 from 8.
Gold for February delivery fell $5.10 to end at $850.10 an ounce on Nymex.
March crude up $2.65, or 6%, to $43.55 a barrel on Globex.
Burlington Northern Santa Fe Corp. reported a fourth-quarter profit of $615 million, or $1.79 a share, up from $517 million, or $1.46 a share, a year ago. Revenue for the Ft. Worth, Tex.-based railroad operator rose to $4.37 billion from $4.25 billion a year earlier. Analysts polled by FactSet Research were looking for a profit, on average, of $1.77 a share on sales of $4.45 billion. Burlington stock finished up 7.1% at $65.59 but is still down almost 15% in the past year.
The Dow Jones Industrial Average climbed 279.01 points, or 3.5%, to end at 8,228.1. The S&P 500 gained 35.02 points, or 4.4%, to 840.24, while the Nasdaq Composite added 66.21 points, or 4.6%, to 1,507.06.
Credit Suisse analyst Michael Exstein said in a note to investors that the December results show momentum slowing for Wal-Mart.
"The incremental benefit it realized from consumer trade-down in 2008 might not repeat itself in 2009," Exstein said. "Target is focusing on reducing prices to gain market share, which we believe presents an added competitive threat to Wal-Mart."
Bentonville, Ark.-based Wal-Mart's slowing store-footage growth and aging stores may also challenge sales-growth expectations, Exstein predicted.
He lowered his rating to "neutral" from "outperform" and cut his target price to $53 from $60.
EBay late-traded shares drop 6.9% to $12.39 after results.The online auctioneer reported a profit of 41 cents a share on sales of $2.04 billion in the fourth quarter, against earnings of 45 cents a share on revenue of $2.181 billion in the final quarter of 2007.
Williams-Sonoma Inc.said late Wednesday that it will trim about 1,400 jobs, or 18% of its work force worldwide, as a cost-cutting measure.
Apple targets Q2 rev of $7.6 bln-$8 bln.
GE hit a new 52-week low and managed to barely finish 10 cents in a market that had a strong day.
Intel Corp said on Wednesday it would close manufacturing plants in Malaysia and the Philippines and scale back U.S. operations as part of a restructuring that affects as many as 6,000 employees.
New York City home prices fell 10 percent in the fourth quarter as Wall Street cut jobs and the recession reduced demand.
The average price of all properties, including condominiums and one-to-three family houses, fell to $669,000 from a year earlier, the Real Estate Board of New York said in a report today. Apartment prices citywide fell 4 percent to an average $796,000.
Tuesday, January 20, 2009
44th American President
1/20/08 44th American President
U.S. financial stocks fell sharply and matched their biggest percentage decline ever Tuesday as investors panicked at the likelihood that there is no end in sight for the sector's need for capital, and no easy way to raise it. For investors who might have thought the worst was over after the nation's big three banks aired some dirty laundry last week, Tuesday provided clear evidence that the horror show continues, as well over half of the financial stocks in the bellwether S&P 500 Index lost more than 10% of their value. Most of nation's top banks were trading at levels last seen in the mid-1990's, including Citigroup, Wells Fargo, and J.P. Morgan Chase. Bank of America shares traded at their lowest level since 1986.
Ending below 8,000 for the first time since Nov. 20, the Dow Jones Industrial Average shed 332.13 points, or 4%, to finish at 7,949.09. The S&P 500 dropped 44.9 points, 5.3%, to 805.22. The Nasdaq Composite shed 88.47 points, or 5.8%, to 1,440.86.
Italian carmaker Fiat SpA on Tuesday struck a deal to get an initial 35% stake in struggling US carmaker Chrysler in exchange for its technological expertise, distribution network and management.
Average U.S. gasoline prices rang up at $1.84 a gallon on Tuesday, up from $1.67 a gallon a month ago, according to the AAA Daily Fuel Gauge Report. A year ago, gasoline sold for $3.01 a gallon.
Light sweet crude oil futures fell $2.77 to $39.80 a barrel in electronic trading on Tuesday.
Toyota Motor Corp. said Tuesday worldwide sales were down about 5% in 2008 from a year earlier, marking the first decline in annual vehicle sales in a decade, with overall sales falling just shy of 8 million units.
New York Times Co. reached an agreement under which entities controlled by Carlos Slim will invest in the New York media company through issues of debt and equity. The companies controlled by the Mexican telecommunications investor agreed to buy $250 million of senior unsecured notes due 2015 with detachable warrants. "The notes will rank equally and ratably on a senior unsecured basis with all senior unsecured obligations of New York Times Co.," the company said in a statement late on Monday. The notes have a coupon of 14.053%, of which New York Times Co. may pay 3% in the same notes. The warrants reflect 15.9 million Class A shares of New York Times Co. at a strike price of $6.3572. The warrants expire in January 2015. Slim's companies currently control 6.9% of New York Times, and The Wall Street Journal reported that if the investor exercises the warrants, he'll control about 18% of the Class A shares.
Brent Steenbarger: "
In sum, the move to price highs early in January has been reversed, and we are back to seeing 20-day lows exceeding new highs. As long as the new highs/lows remain weak, I expect continued price weakness and tests of the bear market lows. A move above the January highs, particularly on strong breadth and with solid expansion of new highs, would be decidedly bullish. The first order of business for bulls is to sustain prices above the weekly pivot of 85.19 in SPY. Failure to do so targets the weekly S1 level a bit below 80. (Daily, weekly, and monthly price targets are sent out via Twitter, along with daily updates of indicators; subscription via RSS is free)."
Southern California home sales rose 51 percent in December as a surge in foreclosures pushed prices of single-family houses and condominiums down from a year earlier, MDA DataQuick said.
A total of 19,926 new and existing houses and condos sold last month in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties, up from 13,240 a year earlier, the San Diego-based research company said today in a statement. The median home price in the region fell 35 percent to $278,000…Foreclosed homes accounted for 56 percent of Southern California’s December sales, more than double the amount a year earlier, MDA DataQuick said. Such transactions made up almost 70 percent of sales in Riverside County, where the median price plummeted 41 percent to $209,000. Sales jumped 77 percent to 4,435, MDA DataQuick said.
Russia will likely become a member of OPEC soon, billionaire investor and alternative-energy advocate T. Boone Pickens said Monday.
That membership "will not be favourable to the United States," Mr. Pickens told a gathering of mayors.
Bl acklistednews.com: "By invitation, I recently visited a remote facility in northern Virginia to see a demonstration of NOX – a new Intelligent Perimeter Defense system deployed by the FBI that uses covert Radio-Frequency Identification (RFID) technology to track people and assets without their knowledge.
That’s right, using RFID to track people without their knowledge. This system is exactly what the privacy advocates have long feared: Big Brother tracking us with spy chips. As Orwellian as this sounds, the undisputed fact is that this system catches thieves and does so at a fraction of the cost of traditional security solutions.
NOX combines high-resolution video pictures and RFID for identification, tracking and tracing, overlaid in real time on a facility map to show the movement of people and assets. The system allows security officers to see theft as it happens, even if the stolen object is inside a briefcase, under a jacket, or stuffed inside a sock.
What makes the NOX system I saw different from traditional security systems is that it uses RFID for clandestine surveillance: RFID readers are hidden inside walls, floors, and ceilings; RFID tags are discretely placed; and only the security personnel know that the system is in place – until the thief gets caught. Then, all the thief knows is that he or she was caught in the act, on video."
Bank of America is expected to make several thousand employees in its capital markets businesses redundant, starting this week, according to executives familiar with the matter. The cuts could total 4,000.
The British pound is trading at a seven-year low versus the dollar.
A Santa Monica real estate company has purchased the Larkspur Landing shopping center for $65 million and plans to reposition the aging Marin County property as an open-air market with independent stores and public areas.
"We want to create wonderful public space, outdoors, unanchored, with independent boutique shops rather than a collection of the usual suspects, which is what I call the chain stores," said James Rosenfield, president of J.S. Rosenfield & Co., which purchased the 173,000-square-foot mall from Inland Western Retail Real Estate Trust Inc.
Rio Tinto Alcan curtails production and cuts costs in response to global economic conditions
Key measures
• A further six per cent reduction in aluminium production, bringing the total reduction to approximately 11 per cent, and close to six per cent reduction in alumina production
• Reduction in global workforce by approximately 1100 roles (300 contractors and 800 employee roles)
• Substantial cost reduction programmes in Rio Tinto Alcan facilities worldwide
• Permanent closure of Beauharnois smelter in Quebec, Canada
• Production at Vaudreuil alumina refinery in Canada to be temporarily curtailed by 400,000 tonnes
• Expected sale of interest in Alcan Ningxia joint venture in China
• As previously announced, the anticipated ending of smelting operations at Anglesey Aluminum joint venture in the United Kingdom in September 2009 when the current power contract expires. The impact on production and headcount is included in these figures.
Crude for February delivery, which registered low volume and expired at the end of trading Tuesday, finished up $2.23 at $38.74 a barrel on the New York Mercantile Exchange. March crude, the new front-month contract, fell $1.73 to end at $40.84 a barrel on Nymex.
CBOE's volatility index, VIX, is up 12.5% from Friday to 51.88.
Rohm and Haas said Tuesday it plans to cut 900 jobs, or 5.5 percent of its workforce, in a bid to tackle the slump in demand and widespread market weakness.
Canada's central bank cut its trendsetting interest rate by one-half point to 1 percent on Tuesday, the lowest in history.
ConocoPhillips could lay off about 1,300 people this year under a planned 4 percent reduction in its worldwide work force that was announced Friday.
John Hussman: "In recent sessions, we have observed a troublesome deterioration in credit default swap spreads among a number of major financials, which has prompted us to tighten our hedges in response. From a statistical perspective, what I've referred to as “early improvement” in our measures of market action has now been lost. The Strategic Growth Fund is fully hedged here, about half with pure long-put / short-call option combinations, and about half with what amounts to in-the-money put options (allowing the Fund to obtain a moderate positive exposure to market fluctuations in the event that the market recovers more than a few percent). Overall, I expect the Fund to experience only modest sensitivity to market fluctuations here, and the main driver of our returns is likely to be the difference in performance between the stocks that we hold in the Fund, and the indices we use to hedge (primarily the S&P 500 and Russell 2000).
On the hopeful side, the market appears generally oversold, and is near what could be considered reasonable support. Given the loss of favorable market action, we wouldn't invest on the expectation that this support will necessarily hold, but as noted above, about half the Fund's exposure is hedged with option combinations that amount to in-the-money put coverage. So a recovery in the market will put us in a more constructive position somewhat automatically, without having to rely on that outcome."
Movie studio Warner Brothers, a unit of media giant Time Warner Inc., will cut 800 jobs, or 10% of its work force, according to media reports Tuesday.
IBM Corp.reported a fiscal fourth-quarter profit of $4.4 billion, or $3.28 share, on revenue of $27 billion. During the same period a year ago, IBM earned $2.80 billion, or $2.80 a share, on $28.9 billion in sales. Analysts surveyed by FactSet Research had forecast IBM to earn $3.03 a share on revenue of $27.9 billion for the quarter ended in December. For 2009, IBM said it expects to earn at least $9.20 a share. How much of the increase will come from the repurchase of shares for their treasury?
Gold for February delivery rose $15.30, or 1.8%, to close at $855.20 an ounce on the Comex division of the New York Mercantile Exchange, ending above $850 for the first time since Jan. 9.
Wells Fargo & Co. will have to cut its dividend soon to rebuild capital, Friedman, Billings, Ramsay analyst Paul Miller wrote in a note to investors Tuesday. Including recently acquired Wachovia, Wells Fargo's tangible common equity represents 3.6% of tangible assets, while other measures of capital strength likely lagged those of rivals at the end of 2008, Miller estimated. Meanwhile, the bank pays out $5.65 billion in dividends each year and it probably won't earn that much in 2009, the analyst added. "Wells Fargo will have to cut its dividend (if not this quarter, then sometime in 1H09)," he wrote. "The current dividend reduces tangible common equity $5.65 billion annually, and Wells Fargo needs to rebuild its capital ratios." The stock closed down $4.50 at $14+.
Eaton Corp said on Tuesday it planned to cut 5,200 jobs in an effort to further slash costs in the face of a struggling economy.
Mining giant BHP Billiton announced plans Wednesday to slash its global work force by 6 percent — about 6,000 jobs — as it rushes to cope with plummeting demand because of the global financial crisis.
Warren Buffett's company has bought more than 4.3 million shares of Burlington Northern Santa Fe Corp. stock, increasing its stake to more than 74 million shares. The shares closed at $2.40 at $61.25.
U.S. financial stocks fell sharply and matched their biggest percentage decline ever Tuesday as investors panicked at the likelihood that there is no end in sight for the sector's need for capital, and no easy way to raise it. For investors who might have thought the worst was over after the nation's big three banks aired some dirty laundry last week, Tuesday provided clear evidence that the horror show continues, as well over half of the financial stocks in the bellwether S&P 500 Index lost more than 10% of their value. Most of nation's top banks were trading at levels last seen in the mid-1990's, including Citigroup, Wells Fargo, and J.P. Morgan Chase. Bank of America shares traded at their lowest level since 1986.
Ending below 8,000 for the first time since Nov. 20, the Dow Jones Industrial Average shed 332.13 points, or 4%, to finish at 7,949.09. The S&P 500 dropped 44.9 points, 5.3%, to 805.22. The Nasdaq Composite shed 88.47 points, or 5.8%, to 1,440.86.
Italian carmaker Fiat SpA on Tuesday struck a deal to get an initial 35% stake in struggling US carmaker Chrysler in exchange for its technological expertise, distribution network and management.
Average U.S. gasoline prices rang up at $1.84 a gallon on Tuesday, up from $1.67 a gallon a month ago, according to the AAA Daily Fuel Gauge Report. A year ago, gasoline sold for $3.01 a gallon.
Light sweet crude oil futures fell $2.77 to $39.80 a barrel in electronic trading on Tuesday.
Toyota Motor Corp. said Tuesday worldwide sales were down about 5% in 2008 from a year earlier, marking the first decline in annual vehicle sales in a decade, with overall sales falling just shy of 8 million units.
New York Times Co. reached an agreement under which entities controlled by Carlos Slim will invest in the New York media company through issues of debt and equity. The companies controlled by the Mexican telecommunications investor agreed to buy $250 million of senior unsecured notes due 2015 with detachable warrants. "The notes will rank equally and ratably on a senior unsecured basis with all senior unsecured obligations of New York Times Co.," the company said in a statement late on Monday. The notes have a coupon of 14.053%, of which New York Times Co. may pay 3% in the same notes. The warrants reflect 15.9 million Class A shares of New York Times Co. at a strike price of $6.3572. The warrants expire in January 2015. Slim's companies currently control 6.9% of New York Times, and The Wall Street Journal reported that if the investor exercises the warrants, he'll control about 18% of the Class A shares.
Brent Steenbarger: "
In sum, the move to price highs early in January has been reversed, and we are back to seeing 20-day lows exceeding new highs. As long as the new highs/lows remain weak, I expect continued price weakness and tests of the bear market lows. A move above the January highs, particularly on strong breadth and with solid expansion of new highs, would be decidedly bullish. The first order of business for bulls is to sustain prices above the weekly pivot of 85.19 in SPY. Failure to do so targets the weekly S1 level a bit below 80. (Daily, weekly, and monthly price targets are sent out via Twitter, along with daily updates of indicators; subscription via RSS is free)."
Southern California home sales rose 51 percent in December as a surge in foreclosures pushed prices of single-family houses and condominiums down from a year earlier, MDA DataQuick said.
A total of 19,926 new and existing houses and condos sold last month in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties, up from 13,240 a year earlier, the San Diego-based research company said today in a statement. The median home price in the region fell 35 percent to $278,000…Foreclosed homes accounted for 56 percent of Southern California’s December sales, more than double the amount a year earlier, MDA DataQuick said. Such transactions made up almost 70 percent of sales in Riverside County, where the median price plummeted 41 percent to $209,000. Sales jumped 77 percent to 4,435, MDA DataQuick said.
Russia will likely become a member of OPEC soon, billionaire investor and alternative-energy advocate T. Boone Pickens said Monday.
That membership "will not be favourable to the United States," Mr. Pickens told a gathering of mayors.
Bl acklistednews.com: "By invitation, I recently visited a remote facility in northern Virginia to see a demonstration of NOX – a new Intelligent Perimeter Defense system deployed by the FBI that uses covert Radio-Frequency Identification (RFID) technology to track people and assets without their knowledge.
That’s right, using RFID to track people without their knowledge. This system is exactly what the privacy advocates have long feared: Big Brother tracking us with spy chips. As Orwellian as this sounds, the undisputed fact is that this system catches thieves and does so at a fraction of the cost of traditional security solutions.
NOX combines high-resolution video pictures and RFID for identification, tracking and tracing, overlaid in real time on a facility map to show the movement of people and assets. The system allows security officers to see theft as it happens, even if the stolen object is inside a briefcase, under a jacket, or stuffed inside a sock.
What makes the NOX system I saw different from traditional security systems is that it uses RFID for clandestine surveillance: RFID readers are hidden inside walls, floors, and ceilings; RFID tags are discretely placed; and only the security personnel know that the system is in place – until the thief gets caught. Then, all the thief knows is that he or she was caught in the act, on video."
Bank of America is expected to make several thousand employees in its capital markets businesses redundant, starting this week, according to executives familiar with the matter. The cuts could total 4,000.
The British pound is trading at a seven-year low versus the dollar.
A Santa Monica real estate company has purchased the Larkspur Landing shopping center for $65 million and plans to reposition the aging Marin County property as an open-air market with independent stores and public areas.
"We want to create wonderful public space, outdoors, unanchored, with independent boutique shops rather than a collection of the usual suspects, which is what I call the chain stores," said James Rosenfield, president of J.S. Rosenfield & Co., which purchased the 173,000-square-foot mall from Inland Western Retail Real Estate Trust Inc.
Rio Tinto Alcan curtails production and cuts costs in response to global economic conditions
Key measures
• A further six per cent reduction in aluminium production, bringing the total reduction to approximately 11 per cent, and close to six per cent reduction in alumina production
• Reduction in global workforce by approximately 1100 roles (300 contractors and 800 employee roles)
• Substantial cost reduction programmes in Rio Tinto Alcan facilities worldwide
• Permanent closure of Beauharnois smelter in Quebec, Canada
• Production at Vaudreuil alumina refinery in Canada to be temporarily curtailed by 400,000 tonnes
• Expected sale of interest in Alcan Ningxia joint venture in China
• As previously announced, the anticipated ending of smelting operations at Anglesey Aluminum joint venture in the United Kingdom in September 2009 when the current power contract expires. The impact on production and headcount is included in these figures.
Crude for February delivery, which registered low volume and expired at the end of trading Tuesday, finished up $2.23 at $38.74 a barrel on the New York Mercantile Exchange. March crude, the new front-month contract, fell $1.73 to end at $40.84 a barrel on Nymex.
CBOE's volatility index, VIX, is up 12.5% from Friday to 51.88.
Rohm and Haas said Tuesday it plans to cut 900 jobs, or 5.5 percent of its workforce, in a bid to tackle the slump in demand and widespread market weakness.
Canada's central bank cut its trendsetting interest rate by one-half point to 1 percent on Tuesday, the lowest in history.
ConocoPhillips could lay off about 1,300 people this year under a planned 4 percent reduction in its worldwide work force that was announced Friday.
John Hussman: "In recent sessions, we have observed a troublesome deterioration in credit default swap spreads among a number of major financials, which has prompted us to tighten our hedges in response. From a statistical perspective, what I've referred to as “early improvement” in our measures of market action has now been lost. The Strategic Growth Fund is fully hedged here, about half with pure long-put / short-call option combinations, and about half with what amounts to in-the-money put options (allowing the Fund to obtain a moderate positive exposure to market fluctuations in the event that the market recovers more than a few percent). Overall, I expect the Fund to experience only modest sensitivity to market fluctuations here, and the main driver of our returns is likely to be the difference in performance between the stocks that we hold in the Fund, and the indices we use to hedge (primarily the S&P 500 and Russell 2000).
On the hopeful side, the market appears generally oversold, and is near what could be considered reasonable support. Given the loss of favorable market action, we wouldn't invest on the expectation that this support will necessarily hold, but as noted above, about half the Fund's exposure is hedged with option combinations that amount to in-the-money put coverage. So a recovery in the market will put us in a more constructive position somewhat automatically, without having to rely on that outcome."
Movie studio Warner Brothers, a unit of media giant Time Warner Inc., will cut 800 jobs, or 10% of its work force, according to media reports Tuesday.
IBM Corp.reported a fiscal fourth-quarter profit of $4.4 billion, or $3.28 share, on revenue of $27 billion. During the same period a year ago, IBM earned $2.80 billion, or $2.80 a share, on $28.9 billion in sales. Analysts surveyed by FactSet Research had forecast IBM to earn $3.03 a share on revenue of $27.9 billion for the quarter ended in December. For 2009, IBM said it expects to earn at least $9.20 a share. How much of the increase will come from the repurchase of shares for their treasury?
Gold for February delivery rose $15.30, or 1.8%, to close at $855.20 an ounce on the Comex division of the New York Mercantile Exchange, ending above $850 for the first time since Jan. 9.
Wells Fargo & Co. will have to cut its dividend soon to rebuild capital, Friedman, Billings, Ramsay analyst Paul Miller wrote in a note to investors Tuesday. Including recently acquired Wachovia, Wells Fargo's tangible common equity represents 3.6% of tangible assets, while other measures of capital strength likely lagged those of rivals at the end of 2008, Miller estimated. Meanwhile, the bank pays out $5.65 billion in dividends each year and it probably won't earn that much in 2009, the analyst added. "Wells Fargo will have to cut its dividend (if not this quarter, then sometime in 1H09)," he wrote. "The current dividend reduces tangible common equity $5.65 billion annually, and Wells Fargo needs to rebuild its capital ratios." The stock closed down $4.50 at $14+.
Eaton Corp said on Tuesday it planned to cut 5,200 jobs in an effort to further slash costs in the face of a struggling economy.
Mining giant BHP Billiton announced plans Wednesday to slash its global work force by 6 percent — about 6,000 jobs — as it rushes to cope with plummeting demand because of the global financial crisis.
Warren Buffett's company has bought more than 4.3 million shares of Burlington Northern Santa Fe Corp. stock, increasing its stake to more than 74 million shares. The shares closed at $2.40 at $61.25.
Monday, January 19, 2009
Country Rescue
1/19/08 Country Rescue
The ruble fell below the weakest level seen in the 1998 Russian crisis after the central bank devalued for the sixth time in seven days to protect reserves.
The currency slid to as little as 33.0455 per dollar today, the lowest since early 1998, before the government defaulted on $40 billion of debt. The ruble has lost 7.3 percent since official trading resumed this year, extending the decline to 29 percent since August.
It is one thing to bailout a bank, a brokerage company, a re-insurance outfit, or a mortgage company, it is quite something else to rescue a country, such as, Iceland or Russia or possibly dozens of others on the horizon. This could be the year of the country rescue.
This year alone, more than $700 billion in corporate loans will come due, according to
Standard & Poor’s. That is the size of the federal bailout of the financial sector. Many companies were counting on being able to borrow more money to meet those obligations and kick their debt farther down the road.
But with the credit markets still tight, corporations are being forced to pay much higher interest rates than they did a few years ago, putting more strain on balance sheets already hammered by falling profits and a grinding recession.
Can countries be far behind corporations?
Francis Bussiere: "Last week I expected to close the week lower with the worst late in the week and the low was Thursday. This week I expect a negative week as well with a possible deep sell-off to the November lows by Friday January 23rd for the Cardinal New Moon of January 26th. The less likely alternative is for the SPX to hold above 800 on Tuesday's expected low and rally Wednesday and Friday into SPX 880 to 900 for a New Moon high near January 26th."
Goldman Sachs Group Inc. commodity analyst Jeffrey Currie said he expects a “swift and violent rebound” in energy prices in the second half of the year.
Oil prices may have reached their lowest point already, after falling to $32.40 in mid-December, and are expected to rise to $65 by the end of this year, the analyst said. There is scope for a “new bull market” in oil, Currie said.
In several steps, 10 OPEC members have pledged to reduce production to 24.845 million barrels a day, a cut of 4.2 million barrels a day from September’s level.
The new bank bailouts are not likely to work because they are run by the same people who prolonged the economic agony by throwing money at weak companies rather than allowing them to fail and encouraging the strong ones, Marc Faber, the publisher of the Gloom, Doom and Boom Report, told CNBC Monday.
According to Business Week, after two years of delays caused in part by a far-flung supply chain, Boeing plans to do more work on its new 787 in-house
OPEC has said there is a possibility of more cuts in crude oil production to stabilize oil price in the world market, Angola's official news agency ANGOP reported.
Google maintained a 63.5% share of the U.S. search market in December, unchanged from November,
according to ComScore. Yahoo’s market share inched up to 20.5%, from 20.4%, while Ask.com slipped to 3.9% from 4%. Microsoft’s share was unchanged at 8.3%, and AOL stayed at 3.8%.
Overall, Americans conducted 12.7 billion searches in December, up 3% from November.
February crude oil futures were down as much as $1.92 at $34.59 a barrel in electronic trading.
Toyota Motor Corp. is slashing its temporary workers in Japan to zero later this year to cut costs and production amid a global slump, the Yomiuri newspaper reported Tuesday.
The ruble fell below the weakest level seen in the 1998 Russian crisis after the central bank devalued for the sixth time in seven days to protect reserves.
The currency slid to as little as 33.0455 per dollar today, the lowest since early 1998, before the government defaulted on $40 billion of debt. The ruble has lost 7.3 percent since official trading resumed this year, extending the decline to 29 percent since August.
It is one thing to bailout a bank, a brokerage company, a re-insurance outfit, or a mortgage company, it is quite something else to rescue a country, such as, Iceland or Russia or possibly dozens of others on the horizon. This could be the year of the country rescue.
This year alone, more than $700 billion in corporate loans will come due, according to
Standard & Poor’s. That is the size of the federal bailout of the financial sector. Many companies were counting on being able to borrow more money to meet those obligations and kick their debt farther down the road.
But with the credit markets still tight, corporations are being forced to pay much higher interest rates than they did a few years ago, putting more strain on balance sheets already hammered by falling profits and a grinding recession.
Can countries be far behind corporations?
Francis Bussiere: "Last week I expected to close the week lower with the worst late in the week and the low was Thursday. This week I expect a negative week as well with a possible deep sell-off to the November lows by Friday January 23rd for the Cardinal New Moon of January 26th. The less likely alternative is for the SPX to hold above 800 on Tuesday's expected low and rally Wednesday and Friday into SPX 880 to 900 for a New Moon high near January 26th."
Goldman Sachs Group Inc. commodity analyst Jeffrey Currie said he expects a “swift and violent rebound” in energy prices in the second half of the year.
Oil prices may have reached their lowest point already, after falling to $32.40 in mid-December, and are expected to rise to $65 by the end of this year, the analyst said. There is scope for a “new bull market” in oil, Currie said.
In several steps, 10 OPEC members have pledged to reduce production to 24.845 million barrels a day, a cut of 4.2 million barrels a day from September’s level.
The new bank bailouts are not likely to work because they are run by the same people who prolonged the economic agony by throwing money at weak companies rather than allowing them to fail and encouraging the strong ones, Marc Faber, the publisher of the Gloom, Doom and Boom Report, told CNBC Monday.
According to Business Week, after two years of delays caused in part by a far-flung supply chain, Boeing plans to do more work on its new 787 in-house
OPEC has said there is a possibility of more cuts in crude oil production to stabilize oil price in the world market, Angola's official news agency ANGOP reported.
Google maintained a 63.5% share of the U.S. search market in December, unchanged from November,
according to ComScore. Yahoo’s market share inched up to 20.5%, from 20.4%, while Ask.com slipped to 3.9% from 4%. Microsoft’s share was unchanged at 8.3%, and AOL stayed at 3.8%.
Overall, Americans conducted 12.7 billion searches in December, up 3% from November.
February crude oil futures were down as much as $1.92 at $34.59 a barrel in electronic trading.
Toyota Motor Corp. is slashing its temporary workers in Japan to zero later this year to cut costs and production amid a global slump, the Yomiuri newspaper reported Tuesday.
Oil Storage
1/18/08 Oil Storage
Morgan Stanley hired a supertanker to store crude oil in the Gulf of Mexico, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from higher prices later in the year, two shipbrokers said.
The ship is the Argenta, capable of carrying more than 2 million barrels, Paris-based Barry Rogliano Salles and Athens- based Optima Shipbrokers said in reports today. Morgan Stanley officials in London didn’t immediately reply to three phone messages seeking comment.
Danish pharmaceutical firm Lundbeck is understood to be interested in acquiring €4bn Irish drug group Elan. Last week, Elan revealed that it had appointed Citigroup to advise it on "strategic review" of the company's options. These include the sale of the company, a merger or the sale of a stake in the business. Pfizer had been strongly linked with an approach for Elan, although last week the Sunday Independent revealed that the existence of a "poison pill" arrangement could deter Pfizer from making a bid. Both companies subsequently denied that they were in talks.
Cullen Hightower: "There's always somebody who is paid too much, and taxed too little - and it's always somebody else. "
In yet another sign of Japanese automakers' deepening distress, Toyota Motor Corp. between February and April plans to make just half the number of vehicles it produced the previous year, a major newspaper reported Saturday.
Japan's top carmaker will slash production during the period to about 9,000 vehicles a day and may need to trim its full-time work force as a result, the Asahi Shimbun said without citing sources.
Dan Castellaneta: “All right, let's not panic. I'll make the money by selling one of my livers. I can get by with one.”
On Friday, the VIX tumbled close to 5 points to close just above 46.
Eric Savitz:" As CEO Intel's Paul Otellini noted in a conference call Thursday, this was just the second time in 20 years that Intel's Q4 revenue was below Q3's. The first time, in 2000, it fell by less than 1%. This time, it plunged 19%."
Apple Inc. Chief Executive Officer Steve Jobs could be facing surgery to remove his pancreas, doctors say.
American builders probably broke ground in December on the fewest houses on record as sales and credit dried up, economists said before reports this week.
Haynes International Inc. will cut 12 percent of is global work force and freeze the salaries of remaining employees, the Kokomo-based manufacturer said today.Haynes, which makes high-performance alloys, employs about 1,085, including 825 in Indiana.
Blue Cross Blue Shield of Michigan announced plans to eliminate up to 1,000 jobs this year and request rate increases for some of its health insurance customers.
The Detroit-based nonprofit said the moves are necessary to preserve its financial health.
New measures to help Britain's ailing banks weather the global financial storm will be announced Monday, British Prime Minister Gordon Brown was quoted as saying Sunday.
The New York area is expected to lose 181,000 jobs in 2009, the report said. Consulting company IHS Global Insight produced the report for the group.
The Los Angeles area is expected to see 164,000 lost jobs, in part because of the huge drop in home prices that has punctured the California economy.
After New York and Los Angeles, the Miami area is expected to see the greatest loss, with a decline of 85,000 jobs. Chicago and the surrounding area are next, with losses projected at 80,000.
Unemployment is expected to top 10 percent in 70 areas, from already hard-hit cities like Detroit and Cleveland to places that had until recently been prosperous like the Riverside-San Bernardino area in California. Other big cities like Denver and St. Louis are expected to see unemployment rise above 9 percent.
Nearly 9.5 million households, or nearly one out of every five of the nearly 52 million homeowners with a mortgage, spend 38 percent or more of their pretax income on their mortgage payment, property taxes and insurance, the AP's analysis found. That's the new threshold to qualify for the
loan assistance program launched last month by Fannie Mae and Freddie Mac, the mortgage finance companies now under government control.
The U.K. FTSE 100 index fell 0.2% to 4,137.44, the German DAX 30 index lost 0.3% to 4,351.05 and the French CAC-40 index declined 0.3% to 3,008.08.
“The point is to get credit flowing again to businesses and families across the country -- that hasn’t happened with the expenditure of the first $350 billion,” Axelrod said.
House Speaker Nancy Pelosi is receptive to the idea of prosecuting some Bush administration officials, while letting others who are accused of misdeeds leave office without prosecution, she told Chris Wallace in an interview on "FOX News Sunday."
Morgan Stanley hired a supertanker to store crude oil in the Gulf of Mexico, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from higher prices later in the year, two shipbrokers said.
The ship is the Argenta, capable of carrying more than 2 million barrels, Paris-based Barry Rogliano Salles and Athens- based Optima Shipbrokers said in reports today. Morgan Stanley officials in London didn’t immediately reply to three phone messages seeking comment.
Danish pharmaceutical firm Lundbeck is understood to be interested in acquiring €4bn Irish drug group Elan. Last week, Elan revealed that it had appointed Citigroup to advise it on "strategic review" of the company's options. These include the sale of the company, a merger or the sale of a stake in the business. Pfizer had been strongly linked with an approach for Elan, although last week the Sunday Independent revealed that the existence of a "poison pill" arrangement could deter Pfizer from making a bid. Both companies subsequently denied that they were in talks.
Cullen Hightower: "There's always somebody who is paid too much, and taxed too little - and it's always somebody else. "
In yet another sign of Japanese automakers' deepening distress, Toyota Motor Corp. between February and April plans to make just half the number of vehicles it produced the previous year, a major newspaper reported Saturday.
Japan's top carmaker will slash production during the period to about 9,000 vehicles a day and may need to trim its full-time work force as a result, the Asahi Shimbun said without citing sources.
Dan Castellaneta: “All right, let's not panic. I'll make the money by selling one of my livers. I can get by with one.”
On Friday, the VIX tumbled close to 5 points to close just above 46.
Eric Savitz:" As CEO Intel's Paul Otellini noted in a conference call Thursday, this was just the second time in 20 years that Intel's Q4 revenue was below Q3's. The first time, in 2000, it fell by less than 1%. This time, it plunged 19%."
Apple Inc. Chief Executive Officer Steve Jobs could be facing surgery to remove his pancreas, doctors say.
American builders probably broke ground in December on the fewest houses on record as sales and credit dried up, economists said before reports this week.
Haynes International Inc. will cut 12 percent of is global work force and freeze the salaries of remaining employees, the Kokomo-based manufacturer said today.Haynes, which makes high-performance alloys, employs about 1,085, including 825 in Indiana.
Blue Cross Blue Shield of Michigan announced plans to eliminate up to 1,000 jobs this year and request rate increases for some of its health insurance customers.
The Detroit-based nonprofit said the moves are necessary to preserve its financial health.
New measures to help Britain's ailing banks weather the global financial storm will be announced Monday, British Prime Minister Gordon Brown was quoted as saying Sunday.
The New York area is expected to lose 181,000 jobs in 2009, the report said. Consulting company IHS Global Insight produced the report for the group.
The Los Angeles area is expected to see 164,000 lost jobs, in part because of the huge drop in home prices that has punctured the California economy.
After New York and Los Angeles, the Miami area is expected to see the greatest loss, with a decline of 85,000 jobs. Chicago and the surrounding area are next, with losses projected at 80,000.
Unemployment is expected to top 10 percent in 70 areas, from already hard-hit cities like Detroit and Cleveland to places that had until recently been prosperous like the Riverside-San Bernardino area in California. Other big cities like Denver and St. Louis are expected to see unemployment rise above 9 percent.
Nearly 9.5 million households, or nearly one out of every five of the nearly 52 million homeowners with a mortgage, spend 38 percent or more of their pretax income on their mortgage payment, property taxes and insurance, the AP's analysis found. That's the new threshold to qualify for the
loan assistance program launched last month by Fannie Mae and Freddie Mac, the mortgage finance companies now under government control.
The U.K. FTSE 100 index fell 0.2% to 4,137.44, the German DAX 30 index lost 0.3% to 4,351.05 and the French CAC-40 index declined 0.3% to 3,008.08.
“The point is to get credit flowing again to businesses and families across the country -- that hasn’t happened with the expenditure of the first $350 billion,” Axelrod said.
House Speaker Nancy Pelosi is receptive to the idea of prosecuting some Bush administration officials, while letting others who are accused of misdeeds leave office without prosecution, she told Chris Wallace in an interview on "FOX News Sunday."
Sunday, January 18, 2009
IOUs
1/17/08 IOUs
Eighty-three of the nation's 100 largest corporations, including Citigroup, Bank of America and News Corp., had subsidiaries in offshore tax havens in 2007, and some of the companies received federal bailout funding, a government watchdog said Friday.
The Government Accountability Office released a report that said Bank of America Inc., Citigroup Inc. and Morgan Stanley all had more than 100 units in countries that maintain low or no taxes. The three financial institutions were included in the $700 billion financial bailout approved by Congress.
Insurance giant American International Group Inc., which has received about $150 billion in bailout money, had 18 subsidiaries. JPMorgan Chase & Co. had 50 units and Wells Fargo & Co. had 18; both financial institutions received government bailout money.
Sens.Carl Levin, D-Mich., and Byron Dorgan, D-N.D., who requested the report, have pushed for tougher laws to fight offshore tax havens around the globe. Levin, who leads the Senate Permanent Subcommittee on Investigations, has estimated abusive tax havens and offshore accounts cost the U.S. government at least $100 billion a year in lost taxes.
New York state raised its forecast for next year’s deficit by $128 million to $13.8 billion.
Doug Noland: "It remains my view that our maladjusted economy is in the earliest stage of what will prove a grueling and protracted adjustment period. And with Wall Street finance incapacitated, there will be no alternative than for the banking system to aggressively expand Credit. In rough terms, Bank Credit will need to expand in the Trillion dollar range (10% growth) this year if there is any hope of stemming depressionary forces and stabilizing the system. The way I see it, system-wide Credit expansion of $2.0 TN or so will likely be required, of which about half will be forthcoming from federal borrowings....Candidly, the current environment presents the most difficult macro analysis of my career. The collapse of Lehman was a seminal event in U.S. and global finance. Overnight, Trillions of Wall Street’s financial claims lost their “moneyness.” Trust in history’s most powerful mechanism of Credit expansion was shattered – and for years to come will remain shuttered. Near- and long-term ramifications are momentous, especially when it comes to the performance of asset markets. But, at the same time, the collapse of the historic Credit Bubble has also granted global policymakers an unprecedented mandate to inflate governmental debt and obligations. The promise of basically unlimited deficits and Credit guarantees is required to shore up the “moneyness” of the core of monetary systems both at home and abroad....In short, it is not so easy to discern an area of acute systemic crisis commensurate with the pounding taken this past week or so by the banks and financials. I’ll this evening label this dynamic “A Divergence.” It is possible that there is acute stress out there not visible to the naked eye. Perhaps the major banks are in worse shape than they appear. And housing and the economy could be taking additional legs down, although this would be a surprising development considering the current financing environment. The international backdrop remains problematic. And one should assume there are more hedge fund shoes to drop. Reasonable analysis would see speculator de-leveraging and liquidation overhanging the markets for some time to come. So, it’s an especially tough call - and A Divergence that beckons for analytical focus."
Peter Schiff: "The unpleasant reality is that years of bad monetary and fiscal policy have over encumbered our economy with debt and undermined our industrial capacity. The sooner we can begin to repair the damages, the sooner we can right the ship. If instead we merely administer more of the same, the ship will sink in a sea of inflation."
Hertz to cut 4,000 jobs, Delta Airlines to cut 2,000 jobs, Marshall and Ilsley cut 830 jobs, and Ecolab cut 1,000 jobs. In December, Dow Chemical said it would cut 11 percent of its global work force, or about 5,000 employees, and a third of its 6,000 contractors, as well as slash output at 180 plants and close another 20 plants worldwide.
Brett Steenbarger: "Until we see some moderation in the decline in margin debt numbers, as occurred late in 2002 and early in 2003, it is probably premature to assume that bear market bounces are fresh bull markets."
San Jose Mercury News: "Poverty experts say one in three California children on the state's welfare rolls could be cut under Gov. Arnold Schwarzenegger's budget plan, which calls for restricting eligibility in the program designed to serve working-poor families.
And those who continue to receive grants would be hit as well: despite soaring food prices and burgeoning unemployment, maximum payments for a family of three would equal $43 less than what a similar-sized family received in 1989.
As budget battles continue raging in Sacramento, parent protesters took to the capitol steps last week, demanding resolutions for the state's $40 billion deficit that will not pummel the poor. But so far, deep cuts to the welfare-to-work program known as CalWORKS appear inevitable, even Democratic leaders agree."
The Oil Drum: "Iran's Oil Ministry anticipates a crude oil price of about $40 a barrel in 2009, Oil Minister Gholamhossein Nozari was quoted as saying on Saturday, suggesting Tehran does not expect the market to rebound soon.
Nozari also said crude producers outside the Organization of the Petroleum Exporting Countries (OPEC) were not cooperating with the group in reducing output to restore stability, the official IRNA news agency reported."
Estimates for tax revenues, released Friday by the Nelson A. Rockefeller Institute of Government at the State University of New York system, cover the 36 states that have released fourth-quarter tax data.
The states suffered declines in most sources of revenue. Personal-income taxes eked out a 0.1% gain, based largely on income earned before the recession deepened. Sales taxes were down 6.5% in the quarter compared with a year earlier as consumers cut back. Corporate income taxes fell 22.1%, reflecting falling profits.
"It's just astoundingly bad," said Don Boyd, senior fellow at the Rockefeller Institute. "I suspect [revenue] is going to be worse than many states were thinking."
Budget problems have become the chief priority for governors and legislatures in many states. California Gov. Arnold Schwarzenegger discussed the state's $42 billion budget gap for much of his annual address to legislators Thursday, calling budget woes a "rock upon our chests."
Regulators on Friday shut down two small banks, National Bank of Commerce in Illinois and Bank of Clark County in Washington state.
The U.S. Interior Department, acting in President Bush's final days in office, proposed on Friday opening up 130 million acres off of California's coast to drilling for oil and natural gas, including areas off Humboldt and Mendocino counties and from San Luis Obispo south to San Diego.
State Controller John Chiang warned Friday that he will delay nearly $3.7 billion in state payments in February - including income tax refunds and help for low-income and disabled residents - unless Gov. Arnold Schwarzenegger and lawmakers strike a budget deal for the cash-strapped state by end of this month. The 30-day delay will likely keep the state from running out of money next month, avoiding the use of IOUs in February and likely in March, Chiang said. But his office, which manages the state's cash flow, would resort to IOUs if the state can't meet its financial obligations, he said.
Seattle's University of Washington has taken the drastic measure of closing its doors to new students who want to start in the spring. The move is in response to budget cuts and overenrollment.
The European economy is sliding deeper into recession and the fourth quarter of last year was "catastrophic," European Union Industry Commissioner Guenter Verheugen said on Sunday.
"The figures the European Commission will present next week will, unfortunately, show that we have slipped deeper into recession," Verheugen told German radio DeutschlandFunk.
"The last quarter of 2008 was catastrophic in every respect."
The New York Times Co. is in discussions with Mexican billionaire Carlos Slim about investing in the newspaper publisher to help ease its financial problems, according to people familiar with the matter.
General Motors has signalled it might be unable to meet a key condition of the $13.4bn lifeline extended by the US Treasury requiring a two-thirds reduction in the carmaker’s unsecured debt.
Ray Young, GM’s chief financial officer, said the company might not be able to secure the agreement of all bondholders for the proposed debt-for-equity swap, which aims to reduce public unsecured debt from $27.5bn to $9.2bn.
The number of business bankruptcy filings rose sharply in 2008, with 31 percent more companies looking to liquidate -- instead of just restructure their debt -- in the third quarter than in the first.
Mike Burk: "The two consecutive up days Thursday and Friday relieved some of the oversold condition of the market without moving the indicators upward very much.
I expect the major indices to be lower on Friday January 23 than they were on Friday January 16."
Eighty-three of the nation's 100 largest corporations, including Citigroup, Bank of America and News Corp., had subsidiaries in offshore tax havens in 2007, and some of the companies received federal bailout funding, a government watchdog said Friday.
The Government Accountability Office released a report that said Bank of America Inc., Citigroup Inc. and Morgan Stanley all had more than 100 units in countries that maintain low or no taxes. The three financial institutions were included in the $700 billion financial bailout approved by Congress.
Insurance giant American International Group Inc., which has received about $150 billion in bailout money, had 18 subsidiaries. JPMorgan Chase & Co. had 50 units and Wells Fargo & Co. had 18; both financial institutions received government bailout money.
Sens.Carl Levin, D-Mich., and Byron Dorgan, D-N.D., who requested the report, have pushed for tougher laws to fight offshore tax havens around the globe. Levin, who leads the Senate Permanent Subcommittee on Investigations, has estimated abusive tax havens and offshore accounts cost the U.S. government at least $100 billion a year in lost taxes.
New York state raised its forecast for next year’s deficit by $128 million to $13.8 billion.
Doug Noland: "It remains my view that our maladjusted economy is in the earliest stage of what will prove a grueling and protracted adjustment period. And with Wall Street finance incapacitated, there will be no alternative than for the banking system to aggressively expand Credit. In rough terms, Bank Credit will need to expand in the Trillion dollar range (10% growth) this year if there is any hope of stemming depressionary forces and stabilizing the system. The way I see it, system-wide Credit expansion of $2.0 TN or so will likely be required, of which about half will be forthcoming from federal borrowings....Candidly, the current environment presents the most difficult macro analysis of my career. The collapse of Lehman was a seminal event in U.S. and global finance. Overnight, Trillions of Wall Street’s financial claims lost their “moneyness.” Trust in history’s most powerful mechanism of Credit expansion was shattered – and for years to come will remain shuttered. Near- and long-term ramifications are momentous, especially when it comes to the performance of asset markets. But, at the same time, the collapse of the historic Credit Bubble has also granted global policymakers an unprecedented mandate to inflate governmental debt and obligations. The promise of basically unlimited deficits and Credit guarantees is required to shore up the “moneyness” of the core of monetary systems both at home and abroad....In short, it is not so easy to discern an area of acute systemic crisis commensurate with the pounding taken this past week or so by the banks and financials. I’ll this evening label this dynamic “A Divergence.” It is possible that there is acute stress out there not visible to the naked eye. Perhaps the major banks are in worse shape than they appear. And housing and the economy could be taking additional legs down, although this would be a surprising development considering the current financing environment. The international backdrop remains problematic. And one should assume there are more hedge fund shoes to drop. Reasonable analysis would see speculator de-leveraging and liquidation overhanging the markets for some time to come. So, it’s an especially tough call - and A Divergence that beckons for analytical focus."
Peter Schiff: "The unpleasant reality is that years of bad monetary and fiscal policy have over encumbered our economy with debt and undermined our industrial capacity. The sooner we can begin to repair the damages, the sooner we can right the ship. If instead we merely administer more of the same, the ship will sink in a sea of inflation."
Hertz to cut 4,000 jobs, Delta Airlines to cut 2,000 jobs, Marshall and Ilsley cut 830 jobs, and Ecolab cut 1,000 jobs. In December, Dow Chemical said it would cut 11 percent of its global work force, or about 5,000 employees, and a third of its 6,000 contractors, as well as slash output at 180 plants and close another 20 plants worldwide.
Brett Steenbarger: "Until we see some moderation in the decline in margin debt numbers, as occurred late in 2002 and early in 2003, it is probably premature to assume that bear market bounces are fresh bull markets."
San Jose Mercury News: "Poverty experts say one in three California children on the state's welfare rolls could be cut under Gov. Arnold Schwarzenegger's budget plan, which calls for restricting eligibility in the program designed to serve working-poor families.
And those who continue to receive grants would be hit as well: despite soaring food prices and burgeoning unemployment, maximum payments for a family of three would equal $43 less than what a similar-sized family received in 1989.
As budget battles continue raging in Sacramento, parent protesters took to the capitol steps last week, demanding resolutions for the state's $40 billion deficit that will not pummel the poor. But so far, deep cuts to the welfare-to-work program known as CalWORKS appear inevitable, even Democratic leaders agree."
The Oil Drum: "Iran's Oil Ministry anticipates a crude oil price of about $40 a barrel in 2009, Oil Minister Gholamhossein Nozari was quoted as saying on Saturday, suggesting Tehran does not expect the market to rebound soon.
Nozari also said crude producers outside the Organization of the Petroleum Exporting Countries (OPEC) were not cooperating with the group in reducing output to restore stability, the official IRNA news agency reported."
Estimates for tax revenues, released Friday by the Nelson A. Rockefeller Institute of Government at the State University of New York system, cover the 36 states that have released fourth-quarter tax data.
The states suffered declines in most sources of revenue. Personal-income taxes eked out a 0.1% gain, based largely on income earned before the recession deepened. Sales taxes were down 6.5% in the quarter compared with a year earlier as consumers cut back. Corporate income taxes fell 22.1%, reflecting falling profits.
"It's just astoundingly bad," said Don Boyd, senior fellow at the Rockefeller Institute. "I suspect [revenue] is going to be worse than many states were thinking."
Budget problems have become the chief priority for governors and legislatures in many states. California Gov. Arnold Schwarzenegger discussed the state's $42 billion budget gap for much of his annual address to legislators Thursday, calling budget woes a "rock upon our chests."
Regulators on Friday shut down two small banks, National Bank of Commerce in Illinois and Bank of Clark County in Washington state.
The U.S. Interior Department, acting in President Bush's final days in office, proposed on Friday opening up 130 million acres off of California's coast to drilling for oil and natural gas, including areas off Humboldt and Mendocino counties and from San Luis Obispo south to San Diego.
State Controller John Chiang warned Friday that he will delay nearly $3.7 billion in state payments in February - including income tax refunds and help for low-income and disabled residents - unless Gov. Arnold Schwarzenegger and lawmakers strike a budget deal for the cash-strapped state by end of this month. The 30-day delay will likely keep the state from running out of money next month, avoiding the use of IOUs in February and likely in March, Chiang said. But his office, which manages the state's cash flow, would resort to IOUs if the state can't meet its financial obligations, he said.
Seattle's University of Washington has taken the drastic measure of closing its doors to new students who want to start in the spring. The move is in response to budget cuts and overenrollment.
The European economy is sliding deeper into recession and the fourth quarter of last year was "catastrophic," European Union Industry Commissioner Guenter Verheugen said on Sunday.
"The figures the European Commission will present next week will, unfortunately, show that we have slipped deeper into recession," Verheugen told German radio DeutschlandFunk.
"The last quarter of 2008 was catastrophic in every respect."
The New York Times Co. is in discussions with Mexican billionaire Carlos Slim about investing in the newspaper publisher to help ease its financial problems, according to people familiar with the matter.
General Motors has signalled it might be unable to meet a key condition of the $13.4bn lifeline extended by the US Treasury requiring a two-thirds reduction in the carmaker’s unsecured debt.
Ray Young, GM’s chief financial officer, said the company might not be able to secure the agreement of all bondholders for the proposed debt-for-equity swap, which aims to reduce public unsecured debt from $27.5bn to $9.2bn.
The number of business bankruptcy filings rose sharply in 2008, with 31 percent more companies looking to liquidate -- instead of just restructure their debt -- in the third quarter than in the first.
Mike Burk: "The two consecutive up days Thursday and Friday relieved some of the oversold condition of the market without moving the indicators upward very much.
I expect the major indices to be lower on Friday January 23 than they were on Friday January 16."
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