3/20/09 Government
The United States Of Ponzi: A country that has, for over 25 years, spent more than its income and run an endless string of current account deficits - may eventually default on its foreign debt, Nouriel Roubini says.
Kelvin Throop: "If people behaved like governments, you'd call the cops. "
Peter Cooper: "Buying up your own debt is no more useful than swapping one credit card for another. It is nothing close to sound finance. It is the last act of desperation when there is nothing else left to do."
Louis Brandeis: "Our government... teaches the whole people by its example. If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy."
"Fiat Group intends to make it absolutely clear that the proposed alliance will not entail the assumption of any current or future indebtedness of Chrysler," the company said in a brief statement.
A “black hole” in the US commercial property market is set to put further pressure on troubled banks, the head of leading private equity firm Apollo Management has warned.
Leon Black, founder of the firm, said the extra costs of cleaning up the US banking industry could total as much as $2,000bn, putting further strain on the economy. He said the woes of the commercial property had not yet been reflected fully on bank balance sheets.
Mark Twain: "It could probably be shown by facts and figures that there is no distinctly native American criminal class except Congress. "
Industrial production in the euro zone continued to tumble in January, posting a 3.5% decline from December and dropping 17.3% from the level seen in January 2008, the statistical agency Eurostat reported Friday.
Robert Prechter: "If you're reading the newspapers, you know that companies have been cutting dividends. In fact, they've been cutting them at the fastest rate in half a century. So it is going to be difficult for values to get back to a normal valuation range. So the stock market has quite a bit lower to go in order to catch up with normal values, and this suggests that real estate may have the same sort of trend going on."
Hotel occupancy rates have fallen from 65.5% a year ago to 55.2% in early March, according to Smith Travel Research, a Tennessee firm that tracks the industry. Manufacturing plants ran in February at 67.4% of their capacity, the lowest utilization rate since the Fed began keeping records in 1948.
European steel makers said Friday that one in six workers have lost their jobs or are working shorter hours as demand for steel has collapsed.
Just to illustrate the volatility in various markets, on Wednesday natural gas closed at a 6 1/2 year low at $3.68 and on Thursday, in early trading, UNG, the ETF for natural gas traded at a new 52-week low. By the close, natural gas had risen 52 cents and USO was up over $2 per share.
The Federal Deposit Insurance Corp. said late Thursday that it has completed the sale of IndyMac Federal Bank FSB, the firm it took over last year, and that it took a $10.7 billion loss on the deal.
Fluor Corp. said Friday it received notification from the Kuwait National Petroleum Company to stop work on the al-Zour refinery. Fluor has approximately 300 employees performing engineering work on the project. The remaining contract value of approximately $2.1 billion will be removed from its backlog in the first quarter, the Irving, Texas company said.
A U.N. panel will next week recommend that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar.
Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.
Benjamin Lichtenberg: "Democracy: The state of affairs in which you consent to having your pocket picked, and elect the best man to do it."
Sony Ericsson said it would sell barely half of the phones it sold last quarter.
China, the world’s biggest gold producer, will seek to increase its underground gold reserves by 800 metric tons and raise production to 290 tons this year, the Ministry of Industry and Information Technology said. China has foreign exchange reserves of $2 trillion with 600 tons of gold. Last year China consumed 360 tons of gold with output at 280 tons.
The unemployment rate is 11.2% for Veterans.
Baker Hughes said its total North American rig count fell by 102 to 1,244 in the past week, down from 1,346 in the prior week and off by 868 from the year-ago level of 2,112.
U.S. congressional analysts are expected on Friday to forecast even more red ink than expected, a record $1.8 trillion deficit for fiscal 2009, which could complicate President Barack Obama's efforts to pass his $3.55 trillion budget plan for 2010.
The Congressional Budget Office is expected to project a $1.8 trillion deficit for the fiscal year that ends September 30 and then forecast a drop to $1.4 trillion for fiscal 2010, a source familiar with the numbers told Reuters.
$1 Trillion Deficit Seen for Next Ten Years. President Barack Obama's budget would generate deficits averaging almost $1 trillion a year over the next decade, according to the latest congressional estimates, significantly worse than predicted by the White House.
American Express Co shares tumbled 6.6 percent to $12.20 after analysts at Friedman, Billings, Ramsey said the company may post a loss in 2009 and 2010, hurt by growing unemployment levels and rising credit card defaults. They also said American Express may slash its dividend.
Brokers lowered their 2009 profit forecasts for GE.
Trucking company YRC Worldwide will close 11 service centers and this will impact 350 workers.
Gold for April delivery, the most active contract, fell $2.60, or 0.3%, to end at $956.20 an ounce on the Comex division of the New York Mercantile Exchange.
The Bank of Mexico surprised financial markets on Friday by cutting its overnight lending rate by a greater-than-expected 75 basis points, to 6.75% from 7.5%.
General Motors Corp. and Chrysler LLC, which have requested as much as $21.6 billion in additional government aid, may need “considerably” more than that, said Steven Rattner, the Treasury’s chief auto adviser.
The Postal Service is offering early retirement to 150,000 workers.
Banks in Colorado, Georgia and Kansas were closed by regulators, bringing the number of bank failures this year to 20, while the National Credit Union Administration Board seized corporate credit unions in California and Kansas that have a combined $57 billion in assets.
The Dow Jones Industrial Average fell 126.01 points to 7,274.79. The S&P 500 declined 16.96 points to 767.08. The Nasdaq Composite dropped 32.92 points to 1,450.56.
Gordon Ringoen: "The real problem is that the supply/ demand theory is just about totally wrong. This same theory that did not allow the experts to foresee the financial bubble developing is not going to show us the way out of our dilemma. "
Friday, March 20, 2009
Thursday, March 19, 2009
Commodities
3/19/09 Commodities
The number of people collecting state unemployment benefits jumped by 185,000 to a record seasonally adjusted 5.47 million in the week ending March 7, while new claims dipped by 12,000 to 646,000 in the week ending March 14, the Labor Department reported Thursday. The four-week average of new claims rose by 3,750 to 654,750, the highest level in 26 years. The insured unemployment rate - the proportion of covered workers who are receiving benefits - rose by two-tenths of a percentage to 4.1%, the highest in nearly 26 years.
The recession will continue in the near term, and a return to strong growth is unlikely until next year, the Conference Board said Thursday. The index of leading economic indicators fell 0.4% in February, following a downwardly revised gain of 0.1% in January. The interest rate spread was the largest positive contributor in February, while initial claims for unemployment insurance were the largest negative contributor. "Strengths and weaknesses were roughly balanced" in the index, said Ken Goldstein, economist at the Conference Board. "Financial market volatility remains strong, and the credit market freeze is relenting very slowly."
The Federal Reserve's balance sheet increased 8.7% to $2.041 trillion in the week ended March 18, the central bank said on Thursday. By comparison, the Fed's assets and liabilities were only $870 billion in December 2007.
The dollar index fell 1.4% to 83.04, down from 84.184 in late North American trade Wednesday. It was only days ago that the index was at 88+.It was the largest 2-day decline since 1971.
FedEx Corp.said Thursday that it earned $97 million, or 31 cents a share, in the third quarter. In the same period last year FedEx earned $393 million, or $1.26 a share. Revenue fell to $8.14 billion compared to $9.44 billion. Analysts polled by FactSet Research estimated, on average, earnings per share of 48 cents and sales of $9.01 billion. FedEx says it will continue to implement more cost-reduction initiatives and will take a charge of $100 million in the fourth quarter related to them. In the fourth quarter Fedex expects to earn between 45 cents and 70 cents a share.
MeadWestvaco Corp. said Thursday that its Louisa, Virginia, and Caguas, Puerto Rico, folding carton plants in 2009. Approximately 278 hourly and salaried employees from Louisa and Caguas will be impacted.
Pacific Capital Bancorp said late on Wednesday that it would cut 300, or 22%, of it jobs to cut costs.
Oil rose to $50 a barrel for the first time since January on Thursday after a move by the Federal Reserve to buy government bonds hit the dollar and revived expectations the U.S. economy could soon begin its recovery.
Gannett told analysts that sales at its flagship USA Today could be down as much as 35%
Ten-year yields fell 4 basis points to 2.48%.
Gold for April delivery surged $56.50, or 6.4%, to $945.60 an ounce in early North American electronic trading. Crude oil for April delivery rose $2.86, or 6%, to $51 a barrel in electronic trading on Globex. Earlier, the contract hit an intraday high of $51.65 a barrel. Silver popped 12% to 13.45.
Philly Fed's Business Outlook edges up to -35.0 from February's -41.3, better than consensus for -38.0. The index has been negative for 15 of the past 16 months, and all broad indicators show continued weakness.
BENCHMARK 30-YEAR MORTGAGE RATE AGAIN MOVES BELOW 5%.
John Browne: "In 2000, the published U.S. Treasury debt was a staggering $5 trillion. Today, it is approaching three times that number. If non-public debts and IOU's are included, the national debt amounts to some $55 trillion!...The American public is now in a mood of mounting anger. They know this so-called stimulus amounts to generational robbery. So yes, political will is essential, not to convince the people they are wrong, but to acknowledge that they're right."
The posh Greenbrier resort, which has gone from hosting presidents and royalty to posting losses, filed for Chapter 11 bankruptcy protection Thursday and unveiled a deal to sell itself to hotel giant Marriott International Inc. for up to $130 million. Monthly revenue plummeted approximately 63 percent to just over $1 million in February, from more than $2.7 million in January, according to a financial statement included in the bankruptcy filing. The document puts the resort's pretax loss at $3.74 million in January and $4.96 million last month.
- General Electric Co.'s real estate arm said Thursday its debt-default rate on loans in its portfolio could rise to 10% under adverse economic conditions.
The U.S. Energy Information Administration said natural gas supplies fell by 30 billion cubic feet, slightly above the target of 28 billion cubic feet, but enough to spark a rally in down- beaten natural gas prices and equities tied to that business.
China, the world’s largest iron ore consumer, will press mining companies to cut benchmark prices to below 2007 levels, following a decline in steel prices, said the China Iron and Steel Association.
Caroline Baum: "The hero of Ayn Rand’s “Atlas Shrugged” is smiling because he’s seen it all before: the government’s intervention in the private sector; the constraints placed on business in the name of the people; the desperation on the part of government bureaucrats when they realize their leverage is limited; and -- this part is still fiction -- the decision on the part of business leaders to walk away from the enterprises they built."
"American Express has seen its asset quality deteriorate at a pace that exceeds median levels for the industry," said S&P in a statement.
The head of the Federal Deposit Insurance Corporation said Thursday that the government's strategy in the financial crisis of bailing out huge institutions deemed "too big to fail" must be replaced by a new model.
FDIC Chairman Sheila Bair told Congress a new system of supervision that prevents institutions from taking on excessive risk and becoming so large their failure would threaten the financial system is needed.
Joseph A. Schumpeter: “Capitalism inevitably and by virtue of the very logic of its civilization creates, educates and subsidizes a vested interest in social unrest."
Benchmark crude for April delivery surged $3.47, or 7 percent, to settle at $51.61 a barrel on the New York Mercantile Exchange. Oil prices hit $52.25 earlier in the day, a price last seen on Dec. 1.
Gold for April delivery rose $69.70, or 7.8%, to end at $958.80 an ounce on the Comex division of the New York mercantile Exchange.
Natural gas rose 50 cents to end at $4.18.
Corn, soybeans, and wheat had major up moves on Thursday.
The Dow Jones industrial average fell 85.78, or 1.2 percent, to 7,400.80.
The Standard & Poor's 500 index fell 10.31, or 1.3 percent, to 784.04.
The Nasdaq composite index fell 7.74, or 0.5 percent, to 1,483.48.
Lam Research Corp. will cut 375 jobs, or about 10% of its workforce, by the end of the June quarter, according to a filing with the Securities and Exchange Commission. The chip maker said about 225 of the cuts will be in North America, with the remainder in Asia and Europe.
Copper jumped more than 6 percent, while nickel, lead and zinc also posted sharp moves to the upside.
A total of 5,032 new and resale houses and condominiums changed hands in the Bay Area last month, up 26.1 percent from February 2008, according to a MDA DataQuick report released Thursday. The Bay Area's median price of $295,000 was down a record 46.2 percent from February 2008.
Throughout the Bay Area, 52 percent of existing home sales were properties that had been foreclosed at some time in the last 12 months. That's up from a revised figure of 51.9 percent in January and 22.3 percent in February 2008.
In Alameda County, 46.2 percent of existing homes sales last month were foreclosures while in Contra Costa County that number was 65.1 percent. In San Mateo County, 31.3 percent of existing home sales were foreclosures.
According to AMG Data Services, in the week ending March 18, Equity Fund Inflows $2.2 Bil; Taxable Bond Fund Inflows $3.1 Bil
xETFs - Equity Fund Inflows $117 Mil; Taxable Bond Fund Inflows $947 Mil.
The number of people collecting state unemployment benefits jumped by 185,000 to a record seasonally adjusted 5.47 million in the week ending March 7, while new claims dipped by 12,000 to 646,000 in the week ending March 14, the Labor Department reported Thursday. The four-week average of new claims rose by 3,750 to 654,750, the highest level in 26 years. The insured unemployment rate - the proportion of covered workers who are receiving benefits - rose by two-tenths of a percentage to 4.1%, the highest in nearly 26 years.
The recession will continue in the near term, and a return to strong growth is unlikely until next year, the Conference Board said Thursday. The index of leading economic indicators fell 0.4% in February, following a downwardly revised gain of 0.1% in January. The interest rate spread was the largest positive contributor in February, while initial claims for unemployment insurance were the largest negative contributor. "Strengths and weaknesses were roughly balanced" in the index, said Ken Goldstein, economist at the Conference Board. "Financial market volatility remains strong, and the credit market freeze is relenting very slowly."
The Federal Reserve's balance sheet increased 8.7% to $2.041 trillion in the week ended March 18, the central bank said on Thursday. By comparison, the Fed's assets and liabilities were only $870 billion in December 2007.
The dollar index fell 1.4% to 83.04, down from 84.184 in late North American trade Wednesday. It was only days ago that the index was at 88+.It was the largest 2-day decline since 1971.
FedEx Corp.said Thursday that it earned $97 million, or 31 cents a share, in the third quarter. In the same period last year FedEx earned $393 million, or $1.26 a share. Revenue fell to $8.14 billion compared to $9.44 billion. Analysts polled by FactSet Research estimated, on average, earnings per share of 48 cents and sales of $9.01 billion. FedEx says it will continue to implement more cost-reduction initiatives and will take a charge of $100 million in the fourth quarter related to them. In the fourth quarter Fedex expects to earn between 45 cents and 70 cents a share.
MeadWestvaco Corp. said Thursday that its Louisa, Virginia, and Caguas, Puerto Rico, folding carton plants in 2009. Approximately 278 hourly and salaried employees from Louisa and Caguas will be impacted.
Pacific Capital Bancorp said late on Wednesday that it would cut 300, or 22%, of it jobs to cut costs.
Oil rose to $50 a barrel for the first time since January on Thursday after a move by the Federal Reserve to buy government bonds hit the dollar and revived expectations the U.S. economy could soon begin its recovery.
Gannett told analysts that sales at its flagship USA Today could be down as much as 35%
Ten-year yields fell 4 basis points to 2.48%.
Gold for April delivery surged $56.50, or 6.4%, to $945.60 an ounce in early North American electronic trading. Crude oil for April delivery rose $2.86, or 6%, to $51 a barrel in electronic trading on Globex. Earlier, the contract hit an intraday high of $51.65 a barrel. Silver popped 12% to 13.45.
Philly Fed's Business Outlook edges up to -35.0 from February's -41.3, better than consensus for -38.0. The index has been negative for 15 of the past 16 months, and all broad indicators show continued weakness.
BENCHMARK 30-YEAR MORTGAGE RATE AGAIN MOVES BELOW 5%.
John Browne: "In 2000, the published U.S. Treasury debt was a staggering $5 trillion. Today, it is approaching three times that number. If non-public debts and IOU's are included, the national debt amounts to some $55 trillion!...The American public is now in a mood of mounting anger. They know this so-called stimulus amounts to generational robbery. So yes, political will is essential, not to convince the people they are wrong, but to acknowledge that they're right."
The posh Greenbrier resort, which has gone from hosting presidents and royalty to posting losses, filed for Chapter 11 bankruptcy protection Thursday and unveiled a deal to sell itself to hotel giant Marriott International Inc. for up to $130 million. Monthly revenue plummeted approximately 63 percent to just over $1 million in February, from more than $2.7 million in January, according to a financial statement included in the bankruptcy filing. The document puts the resort's pretax loss at $3.74 million in January and $4.96 million last month.
- General Electric Co.'s real estate arm said Thursday its debt-default rate on loans in its portfolio could rise to 10% under adverse economic conditions.
The U.S. Energy Information Administration said natural gas supplies fell by 30 billion cubic feet, slightly above the target of 28 billion cubic feet, but enough to spark a rally in down- beaten natural gas prices and equities tied to that business.
China, the world’s largest iron ore consumer, will press mining companies to cut benchmark prices to below 2007 levels, following a decline in steel prices, said the China Iron and Steel Association.
Caroline Baum: "The hero of Ayn Rand’s “Atlas Shrugged” is smiling because he’s seen it all before: the government’s intervention in the private sector; the constraints placed on business in the name of the people; the desperation on the part of government bureaucrats when they realize their leverage is limited; and -- this part is still fiction -- the decision on the part of business leaders to walk away from the enterprises they built."
"American Express has seen its asset quality deteriorate at a pace that exceeds median levels for the industry," said S&P in a statement.
The head of the Federal Deposit Insurance Corporation said Thursday that the government's strategy in the financial crisis of bailing out huge institutions deemed "too big to fail" must be replaced by a new model.
FDIC Chairman Sheila Bair told Congress a new system of supervision that prevents institutions from taking on excessive risk and becoming so large their failure would threaten the financial system is needed.
Joseph A. Schumpeter: “Capitalism inevitably and by virtue of the very logic of its civilization creates, educates and subsidizes a vested interest in social unrest."
Benchmark crude for April delivery surged $3.47, or 7 percent, to settle at $51.61 a barrel on the New York Mercantile Exchange. Oil prices hit $52.25 earlier in the day, a price last seen on Dec. 1.
Gold for April delivery rose $69.70, or 7.8%, to end at $958.80 an ounce on the Comex division of the New York mercantile Exchange.
Natural gas rose 50 cents to end at $4.18.
Corn, soybeans, and wheat had major up moves on Thursday.
The Dow Jones industrial average fell 85.78, or 1.2 percent, to 7,400.80.
The Standard & Poor's 500 index fell 10.31, or 1.3 percent, to 784.04.
The Nasdaq composite index fell 7.74, or 0.5 percent, to 1,483.48.
Lam Research Corp. will cut 375 jobs, or about 10% of its workforce, by the end of the June quarter, according to a filing with the Securities and Exchange Commission. The chip maker said about 225 of the cuts will be in North America, with the remainder in Asia and Europe.
Copper jumped more than 6 percent, while nickel, lead and zinc also posted sharp moves to the upside.
A total of 5,032 new and resale houses and condominiums changed hands in the Bay Area last month, up 26.1 percent from February 2008, according to a MDA DataQuick report released Thursday. The Bay Area's median price of $295,000 was down a record 46.2 percent from February 2008.
Throughout the Bay Area, 52 percent of existing home sales were properties that had been foreclosed at some time in the last 12 months. That's up from a revised figure of 51.9 percent in January and 22.3 percent in February 2008.
In Alameda County, 46.2 percent of existing homes sales last month were foreclosures while in Contra Costa County that number was 65.1 percent. In San Mateo County, 31.3 percent of existing home sales were foreclosures.
According to AMG Data Services, in the week ending March 18, Equity Fund Inflows $2.2 Bil; Taxable Bond Fund Inflows $3.1 Bil
xETFs - Equity Fund Inflows $117 Mil; Taxable Bond Fund Inflows $947 Mil.
Wednesday, March 18, 2009
FOMC
3/18/09 FOMC
The FOMC statement: "To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve's balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months." Who else would buy our long term Treasury securities? Just the Fed. Let's jump for joy as we monetize our debt! The dollar index , which tracks the greenback against a basket of six major currencies, was at 85.185, compared to 86.471 before the Fed announcement. The Fed stated "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." The Fed said that it would concentrate its purchases between two-year and 10-year Treasurys.
"We could be in for a heck of an inflation," says MarketWatch chief economist Dr. Irwin Kellner, who thinks the Federal Reserve's moves put the economy at long-term risk for short-term gain. Kellner does think there will be short-term gain, though. "The Federal Reserve has used up an awful lot of ammunition," says Kellner. "If there was any doubt the economy was going to recover this year, this should remove it."
A surge in borrower defaults and unemployment pressures will make 2009 an even uglier year for banks than last year, analyst Meredith Whitney said.
A large number of households say that even one missed paycheck would spell financial ruin. And even in households that remain well off, the surveys show a festering fear that financial problems are lurking.
"This is flashing so bright red," said Paul Ballew, senior vice president of Nationwide Insurance Co. "Roughly 60% of the population was ill-prepared (financially) before the meltdown."
A MetLife study released last week found that 50% of Americans said they have only a one-month cushion -- roughly two paychecks -- or less before they would be unable to fully meet their financial obligations if they were to lose their jobs. More disturbing is that 28% said they could not make ends meet for longer than two weeks without their jobs.
The World Bank has cut China's gross domestic product estimate for 2009 to 6.5%, a forecast that falls below the mainland's own projection of an 8% expansion this year.
Real average weekly earnings fell by 0.3 percent in February 2009.
The CPI-U increased 0.4 percent in February after rising 0.3 percent in January.
The Kremlin published its priorities Monday for an upcoming meeting of the G20, calling for the creation of a supranational reserve currency to be issued by international institutions as part of a reform of the global financial system.
The International Monetary Fund should investigate the possible creation of a new reserve currency, widening the list of reserve currencies or using its already existing Special Drawing Rights, or SDRs, as a "superreserve currency accepted by the whole of the international community," the Kremlin said in a statement issued on its web site.
U.S. mortgage applications surged in the latest week, driven by a spike in demand for refinancing as the average rate on 30-year fixed-rate home loans fell, the Mortgage Bankers Association said on Wednesday.
RGE Monitor: "Overview: U.S. credit card defaults rise to 20 year-high. Analysts estimate credit card chargeoffs could climb to between 9 and 10% this year from 6 to 7% at the end of 2008. In that scenario, such losses could total $70 billion to $75 billion in 2009 (Reuters). Meanwhile, the $5trillion in outstanding credit card lines (of which $800bn is currently drawn upon) are being trimmed even for credit worthy borrowers with Meredith Whitney estimating that over $2 trillion of credit-card lines will be cut in 2009 and $2.7 trillion by the end of 2010. Research shows that unemployment is one of the most important drivers of credit card and auto loan loss rates. RGE (Kruettli) estimates that credit card charge-off rate could reach 13% (or $146bn) in the worst case scenario."
The architects' billing index rose in February after hitting an all-time low in January, the American Insitute of Architects said Wednesday. A leading indicator of construction spending, the index rose to 35.3 in February from 33.3 in January. Readings over 50 would indicate more work at most architectural firms. "Despite a higher score than last month, we are likely to see light demand for new construction projects through much of the year," said AIA chief economist Kermit Baker. "There is hope that the stimulus bill will result in more project activity, but that is also dependent on banks easing lending standards in the months ahead."
The Commerce Department reported Wednesday that the current account deficit, which includes investment flows and other transfers as well as trade, dropped 7.9 percent to $673.3 billion in 2008 from $731.2 billion in 2007.
Gasoline inventories rose by 3.2 million barrels in the week ended March 13, the Energy Information Administration reported. Analysts surveyed by Platts had expected a decline of 2.1 million barrels. The EIA also reported a 2 million barrels increase in crude inventories and a 100,000 barrels gain in distillate stockpiles, which include heating oil and diesel.
"Among contacts surveyed at Sherwin-Williams stores, 60% reported lower year over year sales," Longbow analyst Dmitry Silversteyn said. "At Wal-Mart, 70% of survey respondents reported year-over-year declines." As the existing backlog of commercial construction projects come to an end, demand from contractors is likely to decline further, as there are few new projects being initiated, he said.
At $11.80, Cliffs Natural Resources made a new 52-week low. The high is about $122!
S&P 500 Index back above 800 for first time since Feb. 17.
Gold future rose more than 4% to above $920 an ounce after the Federal Reserve surprisingly committed to buy $300 billion in longer-term Treasurys to help the economy recover. Gold for April delivery rose 4.2% to $926 an ounce in electronic trading. Floor trading closed before the Fed's decision, with prices down 3% to close at $889.10.
Crude oil for April delivery fell $1.02 to finish at $48.14 a barrel on the New York Mercantile Exchange. However, in electronic trading the April contract was last up $1.28, or 2.7%, to $49.42 a barrel.
Specialty chemicals maker Chemtura says its U.S. operations have filed voluntary petitions for Chapter 11 bankruptcy protection after a recent drop in order volumes led to a sharp decline in its liquidity and cash flow.
Yields on the benchmark 10-year note declined 47 basis points to 2.54%, the biggest drop since the stock market crashed in October 1987.
The Dow Jones Industrial Average gained 90.88 points, or 1.2%, to finish at 7,486.58. The S&P 500 Index added 16.23 points, or 2.1%, to 794.35. The Nasdaq Composite gained 29.11 points, or 2%, to finish at 1,491.22.
The FOMC statement: "To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve's balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months." Who else would buy our long term Treasury securities? Just the Fed. Let's jump for joy as we monetize our debt! The dollar index , which tracks the greenback against a basket of six major currencies, was at 85.185, compared to 86.471 before the Fed announcement. The Fed stated "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." The Fed said that it would concentrate its purchases between two-year and 10-year Treasurys.
"We could be in for a heck of an inflation," says MarketWatch chief economist Dr. Irwin Kellner, who thinks the Federal Reserve's moves put the economy at long-term risk for short-term gain. Kellner does think there will be short-term gain, though. "The Federal Reserve has used up an awful lot of ammunition," says Kellner. "If there was any doubt the economy was going to recover this year, this should remove it."
A surge in borrower defaults and unemployment pressures will make 2009 an even uglier year for banks than last year, analyst Meredith Whitney said.
A large number of households say that even one missed paycheck would spell financial ruin. And even in households that remain well off, the surveys show a festering fear that financial problems are lurking.
"This is flashing so bright red," said Paul Ballew, senior vice president of Nationwide Insurance Co. "Roughly 60% of the population was ill-prepared (financially) before the meltdown."
A MetLife study released last week found that 50% of Americans said they have only a one-month cushion -- roughly two paychecks -- or less before they would be unable to fully meet their financial obligations if they were to lose their jobs. More disturbing is that 28% said they could not make ends meet for longer than two weeks without their jobs.
The World Bank has cut China's gross domestic product estimate for 2009 to 6.5%, a forecast that falls below the mainland's own projection of an 8% expansion this year.
Real average weekly earnings fell by 0.3 percent in February 2009.
The CPI-U increased 0.4 percent in February after rising 0.3 percent in January.
The Kremlin published its priorities Monday for an upcoming meeting of the G20, calling for the creation of a supranational reserve currency to be issued by international institutions as part of a reform of the global financial system.
The International Monetary Fund should investigate the possible creation of a new reserve currency, widening the list of reserve currencies or using its already existing Special Drawing Rights, or SDRs, as a "superreserve currency accepted by the whole of the international community," the Kremlin said in a statement issued on its web site.
U.S. mortgage applications surged in the latest week, driven by a spike in demand for refinancing as the average rate on 30-year fixed-rate home loans fell, the Mortgage Bankers Association said on Wednesday.
RGE Monitor: "Overview: U.S. credit card defaults rise to 20 year-high. Analysts estimate credit card chargeoffs could climb to between 9 and 10% this year from 6 to 7% at the end of 2008. In that scenario, such losses could total $70 billion to $75 billion in 2009 (Reuters). Meanwhile, the $5trillion in outstanding credit card lines (of which $800bn is currently drawn upon) are being trimmed even for credit worthy borrowers with Meredith Whitney estimating that over $2 trillion of credit-card lines will be cut in 2009 and $2.7 trillion by the end of 2010. Research shows that unemployment is one of the most important drivers of credit card and auto loan loss rates. RGE (Kruettli) estimates that credit card charge-off rate could reach 13% (or $146bn) in the worst case scenario."
The architects' billing index rose in February after hitting an all-time low in January, the American Insitute of Architects said Wednesday. A leading indicator of construction spending, the index rose to 35.3 in February from 33.3 in January. Readings over 50 would indicate more work at most architectural firms. "Despite a higher score than last month, we are likely to see light demand for new construction projects through much of the year," said AIA chief economist Kermit Baker. "There is hope that the stimulus bill will result in more project activity, but that is also dependent on banks easing lending standards in the months ahead."
The Commerce Department reported Wednesday that the current account deficit, which includes investment flows and other transfers as well as trade, dropped 7.9 percent to $673.3 billion in 2008 from $731.2 billion in 2007.
Gasoline inventories rose by 3.2 million barrels in the week ended March 13, the Energy Information Administration reported. Analysts surveyed by Platts had expected a decline of 2.1 million barrels. The EIA also reported a 2 million barrels increase in crude inventories and a 100,000 barrels gain in distillate stockpiles, which include heating oil and diesel.
"Among contacts surveyed at Sherwin-Williams stores, 60% reported lower year over year sales," Longbow analyst Dmitry Silversteyn said. "At Wal-Mart, 70% of survey respondents reported year-over-year declines." As the existing backlog of commercial construction projects come to an end, demand from contractors is likely to decline further, as there are few new projects being initiated, he said.
At $11.80, Cliffs Natural Resources made a new 52-week low. The high is about $122!
S&P 500 Index back above 800 for first time since Feb. 17.
Gold future rose more than 4% to above $920 an ounce after the Federal Reserve surprisingly committed to buy $300 billion in longer-term Treasurys to help the economy recover. Gold for April delivery rose 4.2% to $926 an ounce in electronic trading. Floor trading closed before the Fed's decision, with prices down 3% to close at $889.10.
Crude oil for April delivery fell $1.02 to finish at $48.14 a barrel on the New York Mercantile Exchange. However, in electronic trading the April contract was last up $1.28, or 2.7%, to $49.42 a barrel.
Specialty chemicals maker Chemtura says its U.S. operations have filed voluntary petitions for Chapter 11 bankruptcy protection after a recent drop in order volumes led to a sharp decline in its liquidity and cash flow.
Yields on the benchmark 10-year note declined 47 basis points to 2.54%, the biggest drop since the stock market crashed in October 1987.
The Dow Jones Industrial Average gained 90.88 points, or 1.2%, to finish at 7,486.58. The S&P 500 Index added 16.23 points, or 2.1%, to 794.35. The Nasdaq Composite gained 29.11 points, or 2%, to finish at 1,491.22.
Tuesday, March 17, 2009
St. Paddy's Day
3/17/09 St. Paddy's Day
The Federal Reserve has no option but to start buying Treasurys as the government's needs for financing are huge, but the government bond market is a disaster in the making, Marc Faber, editor and publisher of The Gloom, Boom & Doom Report, told CNBC.
The Financial Accounting Standards Board has proposed allowing companies to use 'significant judgment' in valuing assets in inactive markets or under distressed circumstances. The FASB has been under pressure from lawmakers who feel the fair-value rule, also known as mark-to-market accounting, has made the current financial crisis worse. The board will vote on the proposal April 2 and, if approved, companies will be able to apply the revised rule to their Q1 financial statements.
Mexico placed a tariff on $2.4B of U.S. goods after the U.S. restricted Mexican trucking. The tariff affects around 90 items from 40 states. Mexico's economic minister Gerardo Ruiz Mateos said the measure was taken "for the incompliance of the country in its agreements regarding transport under the North American Free Trade Agreement... That is what is commonly known as measures of retaliation."
At the earlier stages of processing, prices received by manufacturers of intermediate goods decreased 0.9 percent in February after falling 0.7 percent in the previous month, and the index for crude materials declined 4.5 percent following a 2.9-percent decrease in January.
Excluding volatile food and energy prices, wholesale prices increased 0.2%, more than expected.
Foreclosures and bad loans raced through the banking industry in 2008, with the more than 8,000 U.S. banks registering a 149 percent increase in troubled assets, according to a new analysis of bank financial reports to the federal government.
While a large majority of banks were still healthy, 163 ended the year with more troubled loans than capital, up from only 13 a year earlier, according to the analysis of data from the Federal Deposit Insurance Corp. by msnbc.com and the Investigative Reporting Workshop at American University in Washington, D.C.
Weyerhaeuser to close lumber mills and cut 307 jobs.
Nucor Corp. expects a first-quarter loss of 55 to 65 cents a share. Wall Street analysts expected the Charlotte, N.C. steel maker to report a profit of 41 cents a share, according to a survey by FactSet Research. The company cited continued deterioration in economic and market conditions. "The unprecedented speed and magnitude of the global economy's decline to depressed levels not seen in our lifetime have presented severe challenges in 2009," Nucor said. "The economy has fallen off a cliff -- and there is no visibility as to the timing of the recovery."
Boosted by an 82% increase in construction of condos and apartment buildings, U.S. housing starts surged 22% in February to a seasonally adjusted annual rate of 583,000, the Commerce Department estimated Tuesday. Much of the gain was due to better weather. It was the first increase in eight months. Construction of new housing units had plunged 38% in the previous three months before February's unexpected jump. Economists had forecast a further drop to 456,000, despite an expected surge in multifamily construction. Building permits, which are less volatile than the starts data, rose 3% in February to a 547,000 annual rate. Permits for single-family units rose 11% to a 373,000 rate, the largest percentage gain in 18 years.
Even with February's rare burst of activity, housing construction is down a whopping 47.3 percent from a year ago.
Nokia Corp. will cut 1,700 jobs globally as it adapts to reduced demand for its mobile phones.
“It takes massive balance-sheet expansion to generate significant easing in financial conditions,” said
Andrew Tilton, an economist at Goldman Sachs Group Inc. in New York who used to work at the Treasury. “More needs to be done.”
This week’s FOMC meeting could mark a shift toward more aggressive monetary expansion to fight deflation after demand waned for many of the Fed’s existing programs. One top consideration is an increase in the pace and size of a $600 billion program to buy bonds issued and backed by U.S. housing agencies such as Fannie Mae, analysts said.
Other measures could include everything from purchases of Treasuries to corporate bonds, Tilton said.
The number of Americans who think another Great Depression will occur within the next year is on the rise, a poll released Tuesday shows.
Forty-five percent of people questioned in a CNN/Opinion Research Corporation survey said another depression is likely.
As former British Governor of Hong Kong Chris Patten has noted, "China has been the world's largest economy for 18 of the past 20 centuries."
In January, credit card delinquencies and charge-offs breached all-time highs for the second consecutive month and Moody's predicted numbers to increase in later months.
The U.S. risks sending the world into a depression as its bailouts of failed companies rob healthy businesses of capital, investor
Jim Rogers said. “The U.S. is taking assets from competent people and giving them to incompetent people,” said Rogers, chairman of Singapore-based Rogers Holdings.
Caterpillar Inc. on Tuesday announced plans to lay off more than 2,400 employees at five plants in Illinois, Indiana and Georgia as the heavy equipment maker continues to cut costs amid the global economic downturn.
Gold for April delivery fell $5.20, or 0.6%, to end at $916.80 an ounce on the Comex division of the New York Mercantile Exchange. Crude gains 3.8% to end at $49.16, the highest since Dec. 1.
American International Group paid bonuses of $1 million or more to 73 employees, including 11 who no longer work for the company, according to New York Attorney General Andrew Cuomo.
The Dow Jones Industrial Average added 178.73 points, or 2.5%, to finish at 7,395.7, its highest close since Feb. 19. The S&P 500 Index climbed 24.23 points, or 3.2%, to 778.12. The Nasdaq Composite surged 58.09 points, or 4.1%, to 1,462.11. The VIX dropped almost 3 points to close at 40.80.
G. Allen Brooks: " So far, this rig market correction has lasted 26 weeks, but is continuing and we have lost 905 rigs, or 45% of the peak working rig fleet. At the moment, this rig downturn in terms of the number of working rigs lost is worse than either of the other two rig market corrections, and it has accomplished its damage in considerably less time than the earlier periods. This current rig downturn reminds us of the collapse of energy stocks last fall....However, the magnitude of the U.S. rig count fall has been dramatic. It fell by 788 active rigs, or 61%, from the peak to the end of February. In contrast, the international rig count has only dropped by 88 rigs, or 8%. One has to believe that there is risk of a further decline in the international rig count over the coming months if oil prices remain depressed - at least compared to their levels of the past two years - and show few signs of rising while the credit crisis continues to adversely impact capital availability for all segments of the global petroleum industry and thus their willingness and ability to fund drilling programs... If we assume the international rig count mirrors the U.S. count and retreats to that activity level, there is room for an additional approximately 275 rig drop from February's 1,020 working rig count. While we cannot rule out a decline of this magnitude, our intuition suggests that it is too severe a correction."
Stephen Gandel: "Last week, mortgage giant Freddie Mac said that it had lost $50 billion in 2008 alone. A look at the company's books suggests the government will have to spend at least triple that much to save the financial firm from collapse. If the housing market worsens, the tab could even be larger. "Freddie's portfolio of [mortgage] insurance is more risky than the market was led to believe," says Paul Miller, an analysts at FBR Capital Markets. Sister company Fannie Mae lost even more last year, with $58.7 billion of red ink."
The Federal Reserve has no option but to start buying Treasurys as the government's needs for financing are huge, but the government bond market is a disaster in the making, Marc Faber, editor and publisher of The Gloom, Boom & Doom Report, told CNBC.
The Financial Accounting Standards Board has proposed allowing companies to use 'significant judgment' in valuing assets in inactive markets or under distressed circumstances. The FASB has been under pressure from lawmakers who feel the fair-value rule, also known as mark-to-market accounting, has made the current financial crisis worse. The board will vote on the proposal April 2 and, if approved, companies will be able to apply the revised rule to their Q1 financial statements.
Mexico placed a tariff on $2.4B of U.S. goods after the U.S. restricted Mexican trucking. The tariff affects around 90 items from 40 states. Mexico's economic minister Gerardo Ruiz Mateos said the measure was taken "for the incompliance of the country in its agreements regarding transport under the North American Free Trade Agreement... That is what is commonly known as measures of retaliation."
At the earlier stages of processing, prices received by manufacturers of intermediate goods decreased 0.9 percent in February after falling 0.7 percent in the previous month, and the index for crude materials declined 4.5 percent following a 2.9-percent decrease in January.
Excluding volatile food and energy prices, wholesale prices increased 0.2%, more than expected.
Foreclosures and bad loans raced through the banking industry in 2008, with the more than 8,000 U.S. banks registering a 149 percent increase in troubled assets, according to a new analysis of bank financial reports to the federal government.
While a large majority of banks were still healthy, 163 ended the year with more troubled loans than capital, up from only 13 a year earlier, according to the analysis of data from the Federal Deposit Insurance Corp. by msnbc.com and the Investigative Reporting Workshop at American University in Washington, D.C.
Weyerhaeuser to close lumber mills and cut 307 jobs.
Nucor Corp. expects a first-quarter loss of 55 to 65 cents a share. Wall Street analysts expected the Charlotte, N.C. steel maker to report a profit of 41 cents a share, according to a survey by FactSet Research. The company cited continued deterioration in economic and market conditions. "The unprecedented speed and magnitude of the global economy's decline to depressed levels not seen in our lifetime have presented severe challenges in 2009," Nucor said. "The economy has fallen off a cliff -- and there is no visibility as to the timing of the recovery."
Boosted by an 82% increase in construction of condos and apartment buildings, U.S. housing starts surged 22% in February to a seasonally adjusted annual rate of 583,000, the Commerce Department estimated Tuesday. Much of the gain was due to better weather. It was the first increase in eight months. Construction of new housing units had plunged 38% in the previous three months before February's unexpected jump. Economists had forecast a further drop to 456,000, despite an expected surge in multifamily construction. Building permits, which are less volatile than the starts data, rose 3% in February to a 547,000 annual rate. Permits for single-family units rose 11% to a 373,000 rate, the largest percentage gain in 18 years.
Even with February's rare burst of activity, housing construction is down a whopping 47.3 percent from a year ago.
Nokia Corp. will cut 1,700 jobs globally as it adapts to reduced demand for its mobile phones.
“It takes massive balance-sheet expansion to generate significant easing in financial conditions,” said
Andrew Tilton, an economist at Goldman Sachs Group Inc. in New York who used to work at the Treasury. “More needs to be done.”
This week’s FOMC meeting could mark a shift toward more aggressive monetary expansion to fight deflation after demand waned for many of the Fed’s existing programs. One top consideration is an increase in the pace and size of a $600 billion program to buy bonds issued and backed by U.S. housing agencies such as Fannie Mae, analysts said.
Other measures could include everything from purchases of Treasuries to corporate bonds, Tilton said.
The number of Americans who think another Great Depression will occur within the next year is on the rise, a poll released Tuesday shows.
Forty-five percent of people questioned in a CNN/Opinion Research Corporation survey said another depression is likely.
As former British Governor of Hong Kong Chris Patten has noted, "China has been the world's largest economy for 18 of the past 20 centuries."
In January, credit card delinquencies and charge-offs breached all-time highs for the second consecutive month and Moody's predicted numbers to increase in later months.
The U.S. risks sending the world into a depression as its bailouts of failed companies rob healthy businesses of capital, investor
Jim Rogers said. “The U.S. is taking assets from competent people and giving them to incompetent people,” said Rogers, chairman of Singapore-based Rogers Holdings.
Caterpillar Inc. on Tuesday announced plans to lay off more than 2,400 employees at five plants in Illinois, Indiana and Georgia as the heavy equipment maker continues to cut costs amid the global economic downturn.
Gold for April delivery fell $5.20, or 0.6%, to end at $916.80 an ounce on the Comex division of the New York Mercantile Exchange. Crude gains 3.8% to end at $49.16, the highest since Dec. 1.
American International Group paid bonuses of $1 million or more to 73 employees, including 11 who no longer work for the company, according to New York Attorney General Andrew Cuomo.
The Dow Jones Industrial Average added 178.73 points, or 2.5%, to finish at 7,395.7, its highest close since Feb. 19. The S&P 500 Index climbed 24.23 points, or 3.2%, to 778.12. The Nasdaq Composite surged 58.09 points, or 4.1%, to 1,462.11. The VIX dropped almost 3 points to close at 40.80.
G. Allen Brooks: " So far, this rig market correction has lasted 26 weeks, but is continuing and we have lost 905 rigs, or 45% of the peak working rig fleet. At the moment, this rig downturn in terms of the number of working rigs lost is worse than either of the other two rig market corrections, and it has accomplished its damage in considerably less time than the earlier periods. This current rig downturn reminds us of the collapse of energy stocks last fall....However, the magnitude of the U.S. rig count fall has been dramatic. It fell by 788 active rigs, or 61%, from the peak to the end of February. In contrast, the international rig count has only dropped by 88 rigs, or 8%. One has to believe that there is risk of a further decline in the international rig count over the coming months if oil prices remain depressed - at least compared to their levels of the past two years - and show few signs of rising while the credit crisis continues to adversely impact capital availability for all segments of the global petroleum industry and thus their willingness and ability to fund drilling programs... If we assume the international rig count mirrors the U.S. count and retreats to that activity level, there is room for an additional approximately 275 rig drop from February's 1,020 working rig count. While we cannot rule out a decline of this magnitude, our intuition suggests that it is too severe a correction."
Stephen Gandel: "Last week, mortgage giant Freddie Mac said that it had lost $50 billion in 2008 alone. A look at the company's books suggests the government will have to spend at least triple that much to save the financial firm from collapse. If the housing market worsens, the tab could even be larger. "Freddie's portfolio of [mortgage] insurance is more risky than the market was led to believe," says Paul Miller, an analysts at FBR Capital Markets. Sister company Fannie Mae lost even more last year, with $58.7 billion of red ink."
Monday, March 16, 2009
Oil
3/16/09 Oil
The Oil Drum: "The world's third-largest oil company [BP], behind Exxon Mobil and Royal Dutch Shell, has reduced its production forecast for the next several years and is reviewing its degree of investment in major projects around the world. spending and exploration costs, BP Chief Executive Tony Hayward has warned. Natural gas prices also have weakened. Hayward estimates oil prices must reach $50 a barrel to cover this year's dividend and $60 to cover the dividend and investment in projects.
BP will continue to pay a dividend, Hayward has said. Although the firm has a large cash cushion from years of profitability, some analysts question his decision."
John Hussman: "The defensive and structural (probably long-term) shift of consumers and businesses toward less borrowing and more saving, combined with aggressive competition to preserve market share, creates a situation where we can expect lower profit margins per unit of production for the foreseeable future."
Agrium Inc.said Monday that it has commenced an exchange offer for all of the outstanding shares of CF Industries Holdings Inc. Under the terms of the offer, CF stockholders would receive $31.70 in cash and 1.0 common share of Agrium for each CF share. Alternatively, CF stockholders have the option of electing to receive for each CF share either 1.7866 common shares of Agrium or $72.00 in cash, subject to proration. "CF's refusal to engage in discussions with Agrium left us with no choice but to take our offer directly to CF stockholders," said Agrium Chief Executive Mike Wilson.
OPEC will focus on completing cuts agreed upon last year, trimming an additional 800,000 barrels per day.
Rigzone: "The IEA, a think-tank for oil-consuming countries, predicts average production of around 600,000 barrels a day at Cantarell in 2009, compared with Pemex' target of 756,000 barrels a day, according to the IEA's monthly Oil Market Report.
Last year Cantarell output fell by one-third to an average of 1 million barrels a day, dragging down overall Mexican production by 9% to a 13-year low of 2.79 million barrels a day.
Pemex continues to shut in wells at Cantarell that produce too much natural gas or water. As the oil layer of the reservoir recedes after decades of exploitation, wells higher up start to pump natural gas, while wells lower down extract more water."
Mexico derives nearly 40% of its revenues from oil. Lower oil production will have a large impact on this country.
The Empire State Manufacturing Survey indicates that conditions for New York manufacturers deteriorated significantly in March. The general business conditions index fell to a fresh low of -38.2. The new orders and shipments indexes also dropped sharply to new record lows, and the inventories index declined to its lowest level since 2001. The indexes for both prices paid and prices received remained negative for a fourth consecutive month. Employment indexes remained close to their recent lows.
Cisco Systems plans to announce it will start building its own servers, placing the firm in direct competition with long-time partner Hewlett-Packard.
Illinois Tool Works Inc. reported an operating revenue decrease of 21% for the three months ended February 28. The revenue decline for the three months was due to a 20% decrease in base revenues and a 7% fall off in contributions from currency translation. As a result, the company is now forecasting first-quarter earnings per share from continuing operations to be in a range of 8 cents to 16 cents.
In a new CNN/Opinion Research Corp. survey released Monday morning, 36% of people questioned said unemployment is the most important economic issue facing the country today, almost three times higher than the 13% who felt the same way last April. Unemployment is the top economic concern in the new poll. Inflation is second at 20%, followed by the mortgage crisis at 16%, the stock market at 14% and taxes at 11%.
The Federal Reserve reported Monday that industrial output dropped by 1.4 percent last month, slightly worse than the 1.2 percent decline that economists had expected.
The weakness included a 0.7 percent fall in manufacturing output, which pushed the operating rate at the nation's factories down to 67.4 percent of capacity last month, the lowest level on records that go back to 1948.
While the recent surge is encouraging, it's still too soon to be talking about a market bottom, Pimco co-CEO Mohamed El-Erian said Monday.
"If you're intellectually honest, we simply don't know. There are so many moving pieces," the executive at the world's biggest bond fund told CNBC. "The reality is we were overdue for a technical bounce. We're getting it, but it's too early to call the bottom with any conviction."
In early Monday trading, the Dow rose 150 points. At the same time, the VIX moved up to the 43 level and the Nasdaq barely moved into the plus side. By the time the close came around, the Dow closed down 7 points. The S&P 500 index ended down 2 points, or 0.3%, at 753, off a high of 774. The tech-heavy Nasdaq Composite fell 27 points, or 1.9%, to 1,404.
U.S. home builders remained extremely discouraged about their business in early March, according to a monthly survey released Monday by an industry trade group. The housing market index stayed at 9 on a scale of 1 to 100 in March, the National Association of Home Builders said, just above the all-time low of 8 reached in January. The index has been either 8 or 9 in the five months since November. At the current level, the index shows that about one in 12 builders says business is good.
Crude for April delivery closed up $1.10, or 2.4%, at $47.35 a barrel on the New York Mercantile Exchange, the loftiest closing price for a front-month contract since Jan. 6. It was down more than 3% earlier. Gold for April delivery, the most active contract, fell $8.10, or 0.9%, to end at $922 an ounce on the Comex division of the New York Mercantile Exchange.
The Seattle Post-Intelligencer, owned by The Hearst Corp., will stop publishing its print edition and become a Web only news site, the newspaper said Monday. The last print edition of the paper will be published on Tuesday. Hearst said the P-I will become the nation's largest daily newspaper to shift entirely online.
Alcoa said it will lower its quarterly dividend to 3 cents a share from 17 cents, which is expected to save the company more than $400 million a year.
Alcoa also laid out plans to reduce $1 billion in capital expenditure in 2010, bolster working capital by $800 million in 2009 and secure about $1.1 billion in funds via public offering of common shares and convertible notes.
The Oil Drum: "The world's third-largest oil company [BP], behind Exxon Mobil and Royal Dutch Shell, has reduced its production forecast for the next several years and is reviewing its degree of investment in major projects around the world. spending and exploration costs, BP Chief Executive Tony Hayward has warned. Natural gas prices also have weakened. Hayward estimates oil prices must reach $50 a barrel to cover this year's dividend and $60 to cover the dividend and investment in projects.
BP will continue to pay a dividend, Hayward has said. Although the firm has a large cash cushion from years of profitability, some analysts question his decision."
John Hussman: "The defensive and structural (probably long-term) shift of consumers and businesses toward less borrowing and more saving, combined with aggressive competition to preserve market share, creates a situation where we can expect lower profit margins per unit of production for the foreseeable future."
Agrium Inc.said Monday that it has commenced an exchange offer for all of the outstanding shares of CF Industries Holdings Inc. Under the terms of the offer, CF stockholders would receive $31.70 in cash and 1.0 common share of Agrium for each CF share. Alternatively, CF stockholders have the option of electing to receive for each CF share either 1.7866 common shares of Agrium or $72.00 in cash, subject to proration. "CF's refusal to engage in discussions with Agrium left us with no choice but to take our offer directly to CF stockholders," said Agrium Chief Executive Mike Wilson.
OPEC will focus on completing cuts agreed upon last year, trimming an additional 800,000 barrels per day.
Rigzone: "The IEA, a think-tank for oil-consuming countries, predicts average production of around 600,000 barrels a day at Cantarell in 2009, compared with Pemex' target of 756,000 barrels a day, according to the IEA's monthly Oil Market Report.
Last year Cantarell output fell by one-third to an average of 1 million barrels a day, dragging down overall Mexican production by 9% to a 13-year low of 2.79 million barrels a day.
Pemex continues to shut in wells at Cantarell that produce too much natural gas or water. As the oil layer of the reservoir recedes after decades of exploitation, wells higher up start to pump natural gas, while wells lower down extract more water."
Mexico derives nearly 40% of its revenues from oil. Lower oil production will have a large impact on this country.
The Empire State Manufacturing Survey indicates that conditions for New York manufacturers deteriorated significantly in March. The general business conditions index fell to a fresh low of -38.2. The new orders and shipments indexes also dropped sharply to new record lows, and the inventories index declined to its lowest level since 2001. The indexes for both prices paid and prices received remained negative for a fourth consecutive month. Employment indexes remained close to their recent lows.
Cisco Systems plans to announce it will start building its own servers, placing the firm in direct competition with long-time partner Hewlett-Packard.
Illinois Tool Works Inc. reported an operating revenue decrease of 21% for the three months ended February 28. The revenue decline for the three months was due to a 20% decrease in base revenues and a 7% fall off in contributions from currency translation. As a result, the company is now forecasting first-quarter earnings per share from continuing operations to be in a range of 8 cents to 16 cents.
In a new CNN/Opinion Research Corp. survey released Monday morning, 36% of people questioned said unemployment is the most important economic issue facing the country today, almost three times higher than the 13% who felt the same way last April. Unemployment is the top economic concern in the new poll. Inflation is second at 20%, followed by the mortgage crisis at 16%, the stock market at 14% and taxes at 11%.
The Federal Reserve reported Monday that industrial output dropped by 1.4 percent last month, slightly worse than the 1.2 percent decline that economists had expected.
The weakness included a 0.7 percent fall in manufacturing output, which pushed the operating rate at the nation's factories down to 67.4 percent of capacity last month, the lowest level on records that go back to 1948.
While the recent surge is encouraging, it's still too soon to be talking about a market bottom, Pimco co-CEO Mohamed El-Erian said Monday.
"If you're intellectually honest, we simply don't know. There are so many moving pieces," the executive at the world's biggest bond fund told CNBC. "The reality is we were overdue for a technical bounce. We're getting it, but it's too early to call the bottom with any conviction."
In early Monday trading, the Dow rose 150 points. At the same time, the VIX moved up to the 43 level and the Nasdaq barely moved into the plus side. By the time the close came around, the Dow closed down 7 points. The S&P 500 index ended down 2 points, or 0.3%, at 753, off a high of 774. The tech-heavy Nasdaq Composite fell 27 points, or 1.9%, to 1,404.
U.S. home builders remained extremely discouraged about their business in early March, according to a monthly survey released Monday by an industry trade group. The housing market index stayed at 9 on a scale of 1 to 100 in March, the National Association of Home Builders said, just above the all-time low of 8 reached in January. The index has been either 8 or 9 in the five months since November. At the current level, the index shows that about one in 12 builders says business is good.
Crude for April delivery closed up $1.10, or 2.4%, at $47.35 a barrel on the New York Mercantile Exchange, the loftiest closing price for a front-month contract since Jan. 6. It was down more than 3% earlier. Gold for April delivery, the most active contract, fell $8.10, or 0.9%, to end at $922 an ounce on the Comex division of the New York Mercantile Exchange.
The Seattle Post-Intelligencer, owned by The Hearst Corp., will stop publishing its print edition and become a Web only news site, the newspaper said Monday. The last print edition of the paper will be published on Tuesday. Hearst said the P-I will become the nation's largest daily newspaper to shift entirely online.
Alcoa said it will lower its quarterly dividend to 3 cents a share from 17 cents, which is expected to save the company more than $400 million a year.
Alcoa also laid out plans to reduce $1 billion in capital expenditure in 2010, bolster working capital by $800 million in 2009 and secure about $1.1 billion in funds via public offering of common shares and convertible notes.
OPEC
3/15/09 OPEC
Russia says it is sending a permanent observer to OPEC.
The move signals closer ties between the largest non-OPEC producer of oil and the organization accounting for more than a third of world output.
OPEC is pumping more oil than the market can absorb, Iraqi Oil Minister Hussain al-Shahristani said on Saturday.
OPEC members need to fully comply with the group's existing oil production cuts, as the world oil market is oversupplied by between 1.5 million and 1.6 million barrels a day, Venezuelan Oil Minister Rafael Ramirez said Friday.
Bill Fleckenstein: "A bear market rally . . . will be captivating, causing people to believe the worst is over, but will almost certainly be a head fake....For now, investors should be patient and err on the side of not losing money. But it's always worthwhile to keep looking for names you might like to own -- window-shopping, as I described it last week -- and looking for an opportunity to get involved.
A lot of times, the hardest part of investing (or speculating) is doing nothing."
N. Gregory Mankiw: " According to the president’s budget, federal outlays will be 27.7 percent of
gross domestic product in 2009 and 24.1 percent in 2010 — levels not reached since World War II."
Richard Shaw: "Why we think this is a bear market rally:
Given that this is Friday the 13th, citing 13 reasons that the bear will continue in spite of this rally seems appropriate.
1.
Current P/E: the current 20+ P/E on trailing “as reported earnings” is too high for this set of negative sales, earnings and dividends growth conditions.
2.
Forward P/E: the projected 2010 S&P 500 earnings by Standard and Poor’s at about $40 would only support 800 at best (20 P/E), and more likely would support 600 (15 P/E), assuming there was a general recovery under way — before that time, the current market should sell for less than 800, and perhaps less than 600.
3.
Earnings: profits are still declining in the aggregate
4.
Dividend Yield: banks and other companies continue to cut dividends, reducing stock appeal and putting total return in question until dividends stabilize and begin to grow (historically dividends generated about 1/3 of total return for the S&P 500)
5.
Revenue: overall sales are down — declining sales, earnings and dividends are not reasons for bullish markets.
6.
World GDP Growth: credible parties (Goldman Sachs, IMF, and noteworthy individuals, such as Nouriel Roubini, predict worsening global economies) — until forecasts for improvements within 12 months or less for the US or world economies become prevalent, the market is unlikely to “anticipate” with a sustainable trend reversal to a bull
7.
Government Intervention: the US and global economies are currently highly government policy dependent, and while policies are becoming more clear, they are not all revealed, and there are suggestions more may be needed — the resulting uncertainty warrants low valuation until government policies to “save” and “stimulate” economies are no longer the centerpiece of investor hopes and earnings prospects
8.
Real Estate: the US and global real estate asset deflation continues with waves of negative impact on household and institutional wealth — until property prices stabilize, or are believed to be about to stabilize, a new bull market will have difficulty gaining traction.
9.
Other Bank Shoes to Drop: the major banks have not yet experienced likely future write-downs associated with non-mortgage asset types, such as credit cards and auto loans.
10.
Auto Industry: the fate of GM, Chrysler and the entire supply chain is uncertain with unknown government involvement.
11.
LBOs: private equity firms built on leverage may not be able to continue to service and rollover the debt they used to make recent optimistic acquisitions — those debts could be a further burden on the financial sector.
12.
Retirees and Pre-Retirees: the 55 and over crowd who control the largest portion of US private assets are not as likely to risk their life accumulations in stocks relative to bonds as they were in the boom times of the last couple of decades — that will delay the onset of a bull and subdue the extent of a bull when it occurs
13.
Credit Availability: the credit and leverage availability that helped the US stock market recover from the 2002-2003 bottom is not available at this time to increase household expenditures and corporate capital investment — even the US government may be put on credit rationing by China, which today said it is “worried” about the credit quality of their US Treasury holdings, which has implications about their willingness to support the borrowing our “stimulus” programs require and assume to be available."
Even if Chrysler LLC gets additional government loans, it could face another cash shortage in July when revenue dries up as the company shuts down its factories for two weeks to change from one model year to the next, its chief financial officer said.
Baker Hughes to cut 1500 jobs.
G-20 Finance officials pledged “whatever action is necessary” but failed to offer specifics about a coordinated approach.
OPEC says it will keep production levels unchanged. “We decided to leave this unchanged and now it is time to fully adhere to the cuts we agreed upon,” said Qatari Oil Minister Abdullah Bin Hamad Al-Attiyah.
Shareholders in Rio Tinto Ltd/Plc are trying to overturn a controversial $19.5 billion investment in the mining group planned by Chinese state-owned Chinalco, a report said on Sunday.
Switzerland's biggest bank UBS plans to cut up to 5,000 senior and management jobs in the next few weeks, Swiss weekly SonntagsZeitung said on Sunday.
Russia says it is sending a permanent observer to OPEC.
The move signals closer ties between the largest non-OPEC producer of oil and the organization accounting for more than a third of world output.
OPEC is pumping more oil than the market can absorb, Iraqi Oil Minister Hussain al-Shahristani said on Saturday.
OPEC members need to fully comply with the group's existing oil production cuts, as the world oil market is oversupplied by between 1.5 million and 1.6 million barrels a day, Venezuelan Oil Minister Rafael Ramirez said Friday.
Bill Fleckenstein: "A bear market rally . . . will be captivating, causing people to believe the worst is over, but will almost certainly be a head fake....For now, investors should be patient and err on the side of not losing money. But it's always worthwhile to keep looking for names you might like to own -- window-shopping, as I described it last week -- and looking for an opportunity to get involved.
A lot of times, the hardest part of investing (or speculating) is doing nothing."
N. Gregory Mankiw: " According to the president’s budget, federal outlays will be 27.7 percent of
gross domestic product in 2009 and 24.1 percent in 2010 — levels not reached since World War II."
Richard Shaw: "Why we think this is a bear market rally:
Given that this is Friday the 13th, citing 13 reasons that the bear will continue in spite of this rally seems appropriate.
1.
Current P/E: the current 20+ P/E on trailing “as reported earnings” is too high for this set of negative sales, earnings and dividends growth conditions.
2.
Forward P/E: the projected 2010 S&P 500 earnings by Standard and Poor’s at about $40 would only support 800 at best (20 P/E), and more likely would support 600 (15 P/E), assuming there was a general recovery under way — before that time, the current market should sell for less than 800, and perhaps less than 600.
3.
Earnings: profits are still declining in the aggregate
4.
Dividend Yield: banks and other companies continue to cut dividends, reducing stock appeal and putting total return in question until dividends stabilize and begin to grow (historically dividends generated about 1/3 of total return for the S&P 500)
5.
Revenue: overall sales are down — declining sales, earnings and dividends are not reasons for bullish markets.
6.
World GDP Growth: credible parties (Goldman Sachs, IMF, and noteworthy individuals, such as Nouriel Roubini, predict worsening global economies) — until forecasts for improvements within 12 months or less for the US or world economies become prevalent, the market is unlikely to “anticipate” with a sustainable trend reversal to a bull
7.
Government Intervention: the US and global economies are currently highly government policy dependent, and while policies are becoming more clear, they are not all revealed, and there are suggestions more may be needed — the resulting uncertainty warrants low valuation until government policies to “save” and “stimulate” economies are no longer the centerpiece of investor hopes and earnings prospects
8.
Real Estate: the US and global real estate asset deflation continues with waves of negative impact on household and institutional wealth — until property prices stabilize, or are believed to be about to stabilize, a new bull market will have difficulty gaining traction.
9.
Other Bank Shoes to Drop: the major banks have not yet experienced likely future write-downs associated with non-mortgage asset types, such as credit cards and auto loans.
10.
Auto Industry: the fate of GM, Chrysler and the entire supply chain is uncertain with unknown government involvement.
11.
LBOs: private equity firms built on leverage may not be able to continue to service and rollover the debt they used to make recent optimistic acquisitions — those debts could be a further burden on the financial sector.
12.
Retirees and Pre-Retirees: the 55 and over crowd who control the largest portion of US private assets are not as likely to risk their life accumulations in stocks relative to bonds as they were in the boom times of the last couple of decades — that will delay the onset of a bull and subdue the extent of a bull when it occurs
13.
Credit Availability: the credit and leverage availability that helped the US stock market recover from the 2002-2003 bottom is not available at this time to increase household expenditures and corporate capital investment — even the US government may be put on credit rationing by China, which today said it is “worried” about the credit quality of their US Treasury holdings, which has implications about their willingness to support the borrowing our “stimulus” programs require and assume to be available."
Even if Chrysler LLC gets additional government loans, it could face another cash shortage in July when revenue dries up as the company shuts down its factories for two weeks to change from one model year to the next, its chief financial officer said.
Baker Hughes to cut 1500 jobs.
G-20 Finance officials pledged “whatever action is necessary” but failed to offer specifics about a coordinated approach.
OPEC says it will keep production levels unchanged. “We decided to leave this unchanged and now it is time to fully adhere to the cuts we agreed upon,” said Qatari Oil Minister Abdullah Bin Hamad Al-Attiyah.
Shareholders in Rio Tinto Ltd/Plc are trying to overturn a controversial $19.5 billion investment in the mining group planned by Chinese state-owned Chinalco, a report said on Sunday.
Switzerland's biggest bank UBS plans to cut up to 5,000 senior and management jobs in the next few weeks, Swiss weekly SonntagsZeitung said on Sunday.
Saturday, March 14, 2009
Government Obligations
3/14/09 Government Obligations
Doug Noland: "The “Flow of Funds” illuminates why the collapse of the Greatest Credit Bubble in history has not yet translated into one of the greater economic collapses. Despite financial panic and the freezing up of Credit markets, Total Non-Financial Credit expanded at a 6.3% annualized rate during the fourth quarter. While down from Q3’s 8.1% pace, I would argue that 6% plus Credit expansion was about the minimum required to forestall systemic implosion. Importantly, this feat was achieved by the federal government expanding borrowings at a 37% annualized rate....For all of 2008, Treasury securities outstanding increased an unprecedented $1.239 TN, or 24.3%. Meanwhile, Agency securities (GSE debt and MBS) jumped $716bn, or 9.6%. Combined federal and quasi-federal securities outstanding ballooned an incredible $1.955 Trillion in just one year. For comparison, Treasury and the Agencies combined to increase debt securities $1.146 TN during 2006, $514bn in 2005 and $240bn in 2004. This ramping up of government Credit growth is outdoing even the historic surge in mortgage Credit during the Mortgage Finance Bubble years....Washington should feel quite fortunate that the markets continue to accommodate such alarming debt expansion at such meager little interest rates. There is little mystery why the Chinese and our other creditors are increasingly disturbed by our government’s borrowing habits.... I am firmly in the camp that believes that Washington is now trapped in a massive inflation of government obligations – the latest round of historic Credit inflation captured clearly throughout the Q4 2008 “Flow of Funds” data. The worst case scenario unfolds when our creditors and the marketplace turn against these government obligations. "
Daniel Aaronson and Lee Markowitz: "The take-home message is that the Federal Reserve can only do so much to instill confidence in markets. So far the Federal Reserve has been working overtime to stabilize fixed income markets. Now that long-term Treasury bonds are falling, the Federal Reserve will be forced to bail out another borrower - the US Government. As the Federal Reserve begins to buy Treasuries, the Federal Reserve will quickly become overwhelmed by its purchases, and all US fixed income prices will fall. At that point, the only option for the Federal Reserve would be to print new money at increasingly faster rates. Likely, it will be too late because the Dollar already will have resumed its decline. Only precious metals and certain foreign currencies will preserve purchasing power as a result of the Federal Reserve's troubled policies."
Iran's oil minister suggested Saturday that a weekend OPEC meeting should decide to cut back on crude output, adding his voice to those in the organization who think supply has outstripped demand.
"There is too much oil on the market," Gholam Hossein Nozari told reporters on the eve of a ministerial meeting of the 11-nation Organization of the Petroleum Exporting Countries.
Other influential OPEC members have also said the group should reduce production.
The EU's top antitrust official called Saturday on banks to show more leadership and come clean about potential losses in order to restore trust in the financial system.
Mike Burk: "During the 1st year of the Presidential Cycle, next week has had negative returns for over 20 years. The other years have not been much better....
The market is overbought from last week's rally going into a seasonally weak week. I expect the major indices to be lower on Friday March 20 than they were on Friday March 13."
Doug Noland: "The “Flow of Funds” illuminates why the collapse of the Greatest Credit Bubble in history has not yet translated into one of the greater economic collapses. Despite financial panic and the freezing up of Credit markets, Total Non-Financial Credit expanded at a 6.3% annualized rate during the fourth quarter. While down from Q3’s 8.1% pace, I would argue that 6% plus Credit expansion was about the minimum required to forestall systemic implosion. Importantly, this feat was achieved by the federal government expanding borrowings at a 37% annualized rate....For all of 2008, Treasury securities outstanding increased an unprecedented $1.239 TN, or 24.3%. Meanwhile, Agency securities (GSE debt and MBS) jumped $716bn, or 9.6%. Combined federal and quasi-federal securities outstanding ballooned an incredible $1.955 Trillion in just one year. For comparison, Treasury and the Agencies combined to increase debt securities $1.146 TN during 2006, $514bn in 2005 and $240bn in 2004. This ramping up of government Credit growth is outdoing even the historic surge in mortgage Credit during the Mortgage Finance Bubble years....Washington should feel quite fortunate that the markets continue to accommodate such alarming debt expansion at such meager little interest rates. There is little mystery why the Chinese and our other creditors are increasingly disturbed by our government’s borrowing habits.... I am firmly in the camp that believes that Washington is now trapped in a massive inflation of government obligations – the latest round of historic Credit inflation captured clearly throughout the Q4 2008 “Flow of Funds” data. The worst case scenario unfolds when our creditors and the marketplace turn against these government obligations. "
Daniel Aaronson and Lee Markowitz: "The take-home message is that the Federal Reserve can only do so much to instill confidence in markets. So far the Federal Reserve has been working overtime to stabilize fixed income markets. Now that long-term Treasury bonds are falling, the Federal Reserve will be forced to bail out another borrower - the US Government. As the Federal Reserve begins to buy Treasuries, the Federal Reserve will quickly become overwhelmed by its purchases, and all US fixed income prices will fall. At that point, the only option for the Federal Reserve would be to print new money at increasingly faster rates. Likely, it will be too late because the Dollar already will have resumed its decline. Only precious metals and certain foreign currencies will preserve purchasing power as a result of the Federal Reserve's troubled policies."
Iran's oil minister suggested Saturday that a weekend OPEC meeting should decide to cut back on crude output, adding his voice to those in the organization who think supply has outstripped demand.
"There is too much oil on the market," Gholam Hossein Nozari told reporters on the eve of a ministerial meeting of the 11-nation Organization of the Petroleum Exporting Countries.
Other influential OPEC members have also said the group should reduce production.
The EU's top antitrust official called Saturday on banks to show more leadership and come clean about potential losses in order to restore trust in the financial system.
Mike Burk: "During the 1st year of the Presidential Cycle, next week has had negative returns for over 20 years. The other years have not been much better....
The market is overbought from last week's rally going into a seasonally weak week. I expect the major indices to be lower on Friday March 20 than they were on Friday March 13."
Friday, March 13, 2009
Safety In Question
3/13/09 Safety In Question
The U.S. trade deficit narrowed by 9.7% in January to $36.0 billion, the lowest monthly gap since October 2002, the Commerce Department said Friday. This is the sixth consecutive decline in the trade balance, the first since the new data series was started in 1992. Both imports and exports declined in January. The petroleum deficit shrank to $14.7 billion in January, the lowest since September 2004. The U.S. trade deficit with China widened to $20.57 billion in compared with $20.31 billion in the same month last year.
Import prices are down 12.8% in the past year, the largest year-over-year decline in the 26-year history of the index. The 0.2% decline in February was the smallest decline since July, as imported petroleum prices increased 3.9%, the first increase in seven months. Prices received by U.S. exporters fell 0.1% in February, the sixth decline in the past seven months.
Sunoco Inc. said Friday that it will eliminate about 750 salaried positions in 2009.
The International Energy Agency on Friday revised down its forecast for 2009 global oil demand by around 300,000 barrels a day to 84.4 million barrels a day, or a roughly 1.5% fall year-on-year, on a reassessment of demand prospects. The IEA also cuts its forecast for non-OPEC supply growth by 380,000 barrels a day for 2009, following a reappraisal of ongoing problems at Azerbaijan's ACG fields.
China’s Premier Wen Jiabao said he’s concerned about the safety of U.S. government debt. China, the U.S. government’s largest creditor, is asking “the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets,” Wen said today in Beijing.
Credit Derivatives Research's counterparty risk index (CRI) broke through 300bp on 9 March, reaching an all-time high. Eleven index members traded wider (more risky) and none traded lower.
The Organization of the Petroleum Exporting Countries said global demand will fall by 1.01 million barrels per day (bpd) in 2009 to average 84.61 million bpd. Its previous forecast was for demand to contract by 580,000 bpd.
World oil demand is falling for the first time in a generation as the deep global downturn closes factories and brings unemployment to the world's largest economies.
Russian news agencies said Thursday that Vice Premier Igor Sechin would attend the OPEC meeting in Vienna and that his country supports the idea of trimming production.
According to Bloomberg,
the 2010 U.S. census may provide an extra kick to the U.S. economy, just as the effects of President Barack Obama’s $787 billion stimulus plan start to take hold.
The census will put more than 1.4 million people on the federal payroll over the next year, making it the largest peacetime government jobs program ever, according to the Census Bureau. The first 140,000 will start work in April. Most of the rest will be hired early in 2010.
The jobs, though temporary, may ease some of the pain in a labor market where almost 3 million have been put out of work in the last five months. The Census Bureau will spend about half its $14 billion budget for the 2010 headcount on personnel, including jobs that pay $10 to $25 an hour and last several weeks to several months. The workers being hired now will be sent out beginning April 6 to double-check addresses around the country.
Rep. Ron Paul: "Removing governmental power to manipulate money, removes the temptation for government to spend, print and cheat. Sound money ensures that our government’s spending priorities would be brought into sharp focus and reduced to only what we can afford.
Sound money also limits the ability to wage wars of aggression. Imagine how much more careful Washington would have to be about starting a war if they did not have this financial sleight of hand at their disposal! Fiat currency allows government do expensive things they should not be doing while paying the bills with cheap money. The Federal Reserve has lately been auctioning off large amounts of treasury bills as a way to finance the wars in Iraq and Afghanistan, and our crushing entitlement burden. The resulting devaluation of the dollar is quickly eroding our image as a good trading partner in the world. As a consequence, there is therefore more talk of economic isolation and war.
This vicious cycle of spending, fighting and inflating is not what Americans want. It is what the government wants, and it has had to deceive the citizens into allowing and supporting it. Sound money curbs the government’s ability to engage in these shenanigans and reduces the wars we fight to only truly defensive ones, for which Americans are more than willing to stand and fight. So in these ways, sound money is very conducive to peace."
According to AMG Data, for the week ended March 11,
Equity Fund Outflows -$8.4 Bil; Taxable Bond Fund Outflows -$347 Mil
xETFs - Equity Fund Outflows -$8.2 Bil; Taxable Bond Fund Outflows -$872 Mil
Exxon Mobil Corp.’s oil discovery off the coast of Brazil may hold enough crude to rival the nearby Tupi prospect as the Western Hemisphere’s largest find in three decades.
Exxon Mobil’s Azulao-1 well tapped a reservoir that could contain 8 billion barrels of recoverable oil, said Luiz Lemos, a partner at TozziniFreire Advogados, a Brazilian law firm that represents foreign energy companies with projects in the South American nation.
Over the Tues. thru Thurs. period we have had a big equity rally, but little or no participation with Wal-Mart or Costco. These companies reflect the consumer and small businesses.
The Institute of International Finance, a trade group for global banks, cast doubt Friday on a key plank of the Obama administration's plan to rescue the banking system.
President Barack Obama's auto task force has hired a bankruptcy lawyer to help evaluate options for the troubled U.S. auto industry, according to media reports late Friday. The task force reportedly hired Matthew Feldman of New York law firm Willkie Farr & Gallagher LLP.
On Friday, the Dow Jones Industrial Average gained 53 points, or 0.8%, to end at 7,223. For the week, the Dow advanced 9%. The S&P 500 index rose 5.8 points, or 0.8%, to end at 756 on Friday. The broad index jumped 10.7% for the week. The Nasdaq Composite gained 5 points, or 0.4%, to 1,431, ending 10.6% above last Friday's level.
Gold for April delivery, the most active contract, gained $6.10, or 0.7%, to end at $930.10 an ounce on the Comex division of the New York Mercantile Exchange. Crude oil for April delivery fell 78 cents, or 1.7 percent, to settle at $46.25 a barrel at 3:02 p.m. on the New York Mercantile Exchange. Prices have gained 1.6 percent this week and are 3.7 percent higher so far this year.
The 100-day moving average is $47.17. Oil hasn’t settled above the mean of its last 100 closing prices since Aug. 1, when it finished at $125.10. Futures jumped 11 percent yesterday, leaving crude poised for its fourth weekly gain.
“Technically, with a reversal that engulfed two days of losses, the picture is quite strong,” PetroMatrix GmbH said in its report today. “It is back to testing the resistance.”
The U.S. trade deficit narrowed by 9.7% in January to $36.0 billion, the lowest monthly gap since October 2002, the Commerce Department said Friday. This is the sixth consecutive decline in the trade balance, the first since the new data series was started in 1992. Both imports and exports declined in January. The petroleum deficit shrank to $14.7 billion in January, the lowest since September 2004. The U.S. trade deficit with China widened to $20.57 billion in compared with $20.31 billion in the same month last year.
Import prices are down 12.8% in the past year, the largest year-over-year decline in the 26-year history of the index. The 0.2% decline in February was the smallest decline since July, as imported petroleum prices increased 3.9%, the first increase in seven months. Prices received by U.S. exporters fell 0.1% in February, the sixth decline in the past seven months.
Sunoco Inc. said Friday that it will eliminate about 750 salaried positions in 2009.
The International Energy Agency on Friday revised down its forecast for 2009 global oil demand by around 300,000 barrels a day to 84.4 million barrels a day, or a roughly 1.5% fall year-on-year, on a reassessment of demand prospects. The IEA also cuts its forecast for non-OPEC supply growth by 380,000 barrels a day for 2009, following a reappraisal of ongoing problems at Azerbaijan's ACG fields.
China’s Premier Wen Jiabao said he’s concerned about the safety of U.S. government debt. China, the U.S. government’s largest creditor, is asking “the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets,” Wen said today in Beijing.
Credit Derivatives Research's counterparty risk index (CRI) broke through 300bp on 9 March, reaching an all-time high. Eleven index members traded wider (more risky) and none traded lower.
The Organization of the Petroleum Exporting Countries said global demand will fall by 1.01 million barrels per day (bpd) in 2009 to average 84.61 million bpd. Its previous forecast was for demand to contract by 580,000 bpd.
World oil demand is falling for the first time in a generation as the deep global downturn closes factories and brings unemployment to the world's largest economies.
Russian news agencies said Thursday that Vice Premier Igor Sechin would attend the OPEC meeting in Vienna and that his country supports the idea of trimming production.
According to Bloomberg,
the 2010 U.S. census may provide an extra kick to the U.S. economy, just as the effects of President Barack Obama’s $787 billion stimulus plan start to take hold.
The census will put more than 1.4 million people on the federal payroll over the next year, making it the largest peacetime government jobs program ever, according to the Census Bureau. The first 140,000 will start work in April. Most of the rest will be hired early in 2010.
The jobs, though temporary, may ease some of the pain in a labor market where almost 3 million have been put out of work in the last five months. The Census Bureau will spend about half its $14 billion budget for the 2010 headcount on personnel, including jobs that pay $10 to $25 an hour and last several weeks to several months. The workers being hired now will be sent out beginning April 6 to double-check addresses around the country.
Rep. Ron Paul: "Removing governmental power to manipulate money, removes the temptation for government to spend, print and cheat. Sound money ensures that our government’s spending priorities would be brought into sharp focus and reduced to only what we can afford.
Sound money also limits the ability to wage wars of aggression. Imagine how much more careful Washington would have to be about starting a war if they did not have this financial sleight of hand at their disposal! Fiat currency allows government do expensive things they should not be doing while paying the bills with cheap money. The Federal Reserve has lately been auctioning off large amounts of treasury bills as a way to finance the wars in Iraq and Afghanistan, and our crushing entitlement burden. The resulting devaluation of the dollar is quickly eroding our image as a good trading partner in the world. As a consequence, there is therefore more talk of economic isolation and war.
This vicious cycle of spending, fighting and inflating is not what Americans want. It is what the government wants, and it has had to deceive the citizens into allowing and supporting it. Sound money curbs the government’s ability to engage in these shenanigans and reduces the wars we fight to only truly defensive ones, for which Americans are more than willing to stand and fight. So in these ways, sound money is very conducive to peace."
According to AMG Data, for the week ended March 11,
Equity Fund Outflows -$8.4 Bil; Taxable Bond Fund Outflows -$347 Mil
xETFs - Equity Fund Outflows -$8.2 Bil; Taxable Bond Fund Outflows -$872 Mil
Exxon Mobil Corp.’s oil discovery off the coast of Brazil may hold enough crude to rival the nearby Tupi prospect as the Western Hemisphere’s largest find in three decades.
Exxon Mobil’s Azulao-1 well tapped a reservoir that could contain 8 billion barrels of recoverable oil, said Luiz Lemos, a partner at TozziniFreire Advogados, a Brazilian law firm that represents foreign energy companies with projects in the South American nation.
Over the Tues. thru Thurs. period we have had a big equity rally, but little or no participation with Wal-Mart or Costco. These companies reflect the consumer and small businesses.
The Institute of International Finance, a trade group for global banks, cast doubt Friday on a key plank of the Obama administration's plan to rescue the banking system.
President Barack Obama's auto task force has hired a bankruptcy lawyer to help evaluate options for the troubled U.S. auto industry, according to media reports late Friday. The task force reportedly hired Matthew Feldman of New York law firm Willkie Farr & Gallagher LLP.
On Friday, the Dow Jones Industrial Average gained 53 points, or 0.8%, to end at 7,223. For the week, the Dow advanced 9%. The S&P 500 index rose 5.8 points, or 0.8%, to end at 756 on Friday. The broad index jumped 10.7% for the week. The Nasdaq Composite gained 5 points, or 0.4%, to 1,431, ending 10.6% above last Friday's level.
Gold for April delivery, the most active contract, gained $6.10, or 0.7%, to end at $930.10 an ounce on the Comex division of the New York Mercantile Exchange. Crude oil for April delivery fell 78 cents, or 1.7 percent, to settle at $46.25 a barrel at 3:02 p.m. on the New York Mercantile Exchange. Prices have gained 1.6 percent this week and are 3.7 percent higher so far this year.
The 100-day moving average is $47.17. Oil hasn’t settled above the mean of its last 100 closing prices since Aug. 1, when it finished at $125.10. Futures jumped 11 percent yesterday, leaving crude poised for its fourth weekly gain.
“Technically, with a reversal that engulfed two days of losses, the picture is quite strong,” PetroMatrix GmbH said in its report today. “It is back to testing the resistance.”
Thursday, March 12, 2009
The Three Day Rally
3/12/09 The Three Day Rally
Roche Holding AG has struck a deal with Genentech Inc to acquire all outstanding shares in the U.S. biotech group for $46.8 billion, or $95 a share, the Swiss drugmaker said on Thursday.
Signaling persistent labor market weakness, the number of workers filing initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 654,000 last week, the Labor Department reported Thursday. The smoothed average of new claims over the past four weeks rose 6,750 to 650,000 -- the highest level since October 1982. The number of people receiving unemployment checks in the week ending Feb. 28 rose 193,000 to a record 5.32 million. The four-week average of these ongoing claims increased 124,250 to 5.14 million, also a record high level. Meanwhile, the insured unemployment rate, the proportion of covered workers receiving benefits, rose to 4% -- the highest since June 1983 -- from 3.8%. The data go back to 1967.
Retail sales dropped 0.1% in February, better than the 0.4% decline expected by economists surveyed by MarketWatch. January's sales gain was revised much higher, to a 1.8% gain from the 1% increase estimated a month ago. Sales are down 8.6% in the past year and had declined for a record six straight months before January's surprising gain. Auto sales sank 4.3% in February. Excluding autos, retail sales rose 0.7% in February after an upwardly revised 1.6% gain in January. Economists expected sales excluding autos to rise 0.2%.
Gilead Sciences Inc.said Thursday it offered to buy CV Therapeutics Inc.for $20 a share in a deal valued at $1.4 billion. The Foster City, Calif., pharmaceutical company said it expects the purchase to close in the second quarter and add to earnings no later than 2011, pending shareholder approval. Gilead will pay for CV with cash on hand.
Japan’s economy contracted at the fastest pace since 1974 last quarter as exports, output and business spending collapsed.
Gross domestic product shrank an annualized 12.1 percent in the three months ended Dec. 31, less than the 12.7 percent reported last month, the Cabinet Office said today in Tokyo.
U.S. home foreclosure activity resumed its upturn in February after a brief dip, despite numerous programs meant to quell the record pace of failing mortgages, RealtyTrac reported on Thursday.
Filings, which include notice of default, auction sale or bank repossession, rose 6 percent in February after slipping 10 percent in January, and leaped 30 percent from a year ago, the Irvine, California-based real estate data firm said.
One in every 440 households with loans drew a filing last month, RealtyTrac said. Nearly 291,000 properties in the U.S. got a foreclosure filing in February, the third highest monthly total since RealtyTrac began tracking the data in January 2005.
Chinese oil imports have dropped 13 percent in the first two months of the year while the country's exports plunged 25.7 percent year-on-year in February.
The lower crude oil imports are showing that China is building fewer stocks than a year ago as the capacity as been mostly filled," said Olivier Jakob of Petromatrix in Switzerland. "But the lower crude imports should not be fully extrapolated as an indicator of the state of Chinese petroleum consumption."
Standard & Poor's Ratings Services lowered its long-term rating for General Electric Co. on Thursday to AA+ from AAA, and reaffirmed its stable outlook. For GE Capital, the conglomerate's financial arm, the rating was dropped to A from A+.
Chris Puplava: "The size of existing homes for sale is nearly 4 times the size of new homes for sale. Thus, we can expect housing prices to continue to decline until the inventory of existing homes can be brought down, with the negative wealth effect of falling real estate prices to continue to weigh on the consumers psyche for the foreseeable future...I believe the retrenchment in consumption will take place well into the next decade as consumers learn they can’t count on stock and home appreciation as savings. It will take years to restore their balance sheets to more comfortable levels and actually begin to save. For this reason the U.S. economy faces major headwinds that will not likely abate until the next decade."
The nation's 100 largest corporate pension plans were underfunded by $217 billion at the end of 2008, holding only 79% of the assets needed to cover estimated long-term liabilities. That compares with an $86 billion surplus — 109% of estimated liabilities — at the end of 2007, according to Watson Wyatt, a human resources consulting firm.
U.S. natural gas inventories fall 112 bcf last week: EIA.
Freddie Mac reported yesterday that it lost $50.1 billion last year, almost half of it in the final three months of 2008, and would need an additional $30.8 billion in taxpayer assistance to stay solvent.
Family net worth had hit an all-time high of $64.36 trillion in the April-June quarter of 2007 but has fallen in every quarter since that time.
The record 9 percent drop in the fourth quarter pushed total net worth down to $51.48 trillion, a level that is 20 percent below the third quarter 2007 peak.
Benchmark crude for April delivery jumped $4.70 to settle at $47.03 a barrel on the New York Mercantile Exchange. In London, Brent prices gained $3.69 to settle at $44.88 on the ICE Futures exchange.
Billionaire Warren Buffett’s Berkshire Hathaway Inc. had its top-level AAA credit rating cut by Fitch Ratings, which cited concern about the potential for losses in the insurer’s equity and derivatives holdings.
Dow industrials gain 238 points, up 3.4%, at the closing bell. S&P 500 up 3.9%; Nasdaq up 3.9%.
From the Monday lows, the markets have now gained 12%. The S&P surged 11% since March 9.
Chile's central bank Tuesday evening slashed its key interest rate by 250 basis points to 2.25%.
PPG Industries Inc.said Thursday it will eliminate about 2,500 jobs, or about 6% of its workforce worldwide, to cut costs.
Gold for April delivery, the most active contract, rose $13.30, or 1.5%, to end at $924 an ounce on the Comex division of the New York Mercantile Exchange.
Roche Holding AG has struck a deal with Genentech Inc to acquire all outstanding shares in the U.S. biotech group for $46.8 billion, or $95 a share, the Swiss drugmaker said on Thursday.
Signaling persistent labor market weakness, the number of workers filing initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 654,000 last week, the Labor Department reported Thursday. The smoothed average of new claims over the past four weeks rose 6,750 to 650,000 -- the highest level since October 1982. The number of people receiving unemployment checks in the week ending Feb. 28 rose 193,000 to a record 5.32 million. The four-week average of these ongoing claims increased 124,250 to 5.14 million, also a record high level. Meanwhile, the insured unemployment rate, the proportion of covered workers receiving benefits, rose to 4% -- the highest since June 1983 -- from 3.8%. The data go back to 1967.
Retail sales dropped 0.1% in February, better than the 0.4% decline expected by economists surveyed by MarketWatch. January's sales gain was revised much higher, to a 1.8% gain from the 1% increase estimated a month ago. Sales are down 8.6% in the past year and had declined for a record six straight months before January's surprising gain. Auto sales sank 4.3% in February. Excluding autos, retail sales rose 0.7% in February after an upwardly revised 1.6% gain in January. Economists expected sales excluding autos to rise 0.2%.
Gilead Sciences Inc.said Thursday it offered to buy CV Therapeutics Inc.for $20 a share in a deal valued at $1.4 billion. The Foster City, Calif., pharmaceutical company said it expects the purchase to close in the second quarter and add to earnings no later than 2011, pending shareholder approval. Gilead will pay for CV with cash on hand.
Japan’s economy contracted at the fastest pace since 1974 last quarter as exports, output and business spending collapsed.
Gross domestic product shrank an annualized 12.1 percent in the three months ended Dec. 31, less than the 12.7 percent reported last month, the Cabinet Office said today in Tokyo.
U.S. home foreclosure activity resumed its upturn in February after a brief dip, despite numerous programs meant to quell the record pace of failing mortgages, RealtyTrac reported on Thursday.
Filings, which include notice of default, auction sale or bank repossession, rose 6 percent in February after slipping 10 percent in January, and leaped 30 percent from a year ago, the Irvine, California-based real estate data firm said.
One in every 440 households with loans drew a filing last month, RealtyTrac said. Nearly 291,000 properties in the U.S. got a foreclosure filing in February, the third highest monthly total since RealtyTrac began tracking the data in January 2005.
Chinese oil imports have dropped 13 percent in the first two months of the year while the country's exports plunged 25.7 percent year-on-year in February.
The lower crude oil imports are showing that China is building fewer stocks than a year ago as the capacity as been mostly filled," said Olivier Jakob of Petromatrix in Switzerland. "But the lower crude imports should not be fully extrapolated as an indicator of the state of Chinese petroleum consumption."
Standard & Poor's Ratings Services lowered its long-term rating for General Electric Co. on Thursday to AA+ from AAA, and reaffirmed its stable outlook. For GE Capital, the conglomerate's financial arm, the rating was dropped to A from A+.
Chris Puplava: "The size of existing homes for sale is nearly 4 times the size of new homes for sale. Thus, we can expect housing prices to continue to decline until the inventory of existing homes can be brought down, with the negative wealth effect of falling real estate prices to continue to weigh on the consumers psyche for the foreseeable future...I believe the retrenchment in consumption will take place well into the next decade as consumers learn they can’t count on stock and home appreciation as savings. It will take years to restore their balance sheets to more comfortable levels and actually begin to save. For this reason the U.S. economy faces major headwinds that will not likely abate until the next decade."
The nation's 100 largest corporate pension plans were underfunded by $217 billion at the end of 2008, holding only 79% of the assets needed to cover estimated long-term liabilities. That compares with an $86 billion surplus — 109% of estimated liabilities — at the end of 2007, according to Watson Wyatt, a human resources consulting firm.
U.S. natural gas inventories fall 112 bcf last week: EIA.
Freddie Mac reported yesterday that it lost $50.1 billion last year, almost half of it in the final three months of 2008, and would need an additional $30.8 billion in taxpayer assistance to stay solvent.
Family net worth had hit an all-time high of $64.36 trillion in the April-June quarter of 2007 but has fallen in every quarter since that time.
The record 9 percent drop in the fourth quarter pushed total net worth down to $51.48 trillion, a level that is 20 percent below the third quarter 2007 peak.
Benchmark crude for April delivery jumped $4.70 to settle at $47.03 a barrel on the New York Mercantile Exchange. In London, Brent prices gained $3.69 to settle at $44.88 on the ICE Futures exchange.
Billionaire Warren Buffett’s Berkshire Hathaway Inc. had its top-level AAA credit rating cut by Fitch Ratings, which cited concern about the potential for losses in the insurer’s equity and derivatives holdings.
Dow industrials gain 238 points, up 3.4%, at the closing bell. S&P 500 up 3.9%; Nasdaq up 3.9%.
From the Monday lows, the markets have now gained 12%. The S&P surged 11% since March 9.
Chile's central bank Tuesday evening slashed its key interest rate by 250 basis points to 2.25%.
PPG Industries Inc.said Thursday it will eliminate about 2,500 jobs, or about 6% of its workforce worldwide, to cut costs.
Gold for April delivery, the most active contract, rose $13.30, or 1.5%, to end at $924 an ounce on the Comex division of the New York Mercantile Exchange.
Wednesday, March 11, 2009
Bondholders Beware
3/11/09 Bondholders Beware
The number of completed U.S. foreclosures in February was 121,756, the highest monthly total since the crisis began, according to data from Foreclosures.com. The figure was a 67% increase from the 72,694 reported in January and was also well above the previous monthly high of 104,243 set last September. The number of pre-foreclosure filings also set a new monthly record, rising 24% to 207,703 in February from 166,860 in January.
National Semiconductor Corp.sees sales falling by 5% to 10% sequentially in the fourth quarter. In addition, it plans to cut 850 jobs worldwide and close its assembly and test plant in Suzhou, China and its wafer fabrication plant in Arlington, Texas. The closures will occur in phases over several quarters, eventually resulting in the elimination of an additional 875 positions. National Semiconductor will take a charge of $160 millon to $180 million in related expenses.
Weyerhaeuser Co said late on Tuesday it would indefinitely close four mills and permanently close five service centers, affecting about 480 jobs.
China's exports in February slid 25.7 percent from a year earlier, dwarfing forecasts of a 5.0 percent fall, while imports dropped 24.1 percent, close to projections of a 25.0 percent decline. The drop in exports was the steepest since bankers started keeping records in 1993. The resulting trade surplus was $4.84 billion, a three-year low, compared with $39.1 billion in January and a record $40.1 billion in November, the customs administration said on its website,
www.customs.gov.cn. The drop in the surplus to well below the forecast $27.3 billion figure, sparked broad dollar buying.
In LA, more than 8,800 teachers and other employees of the nation's second-largest school district will receive notices of impending layoffs for the next school year, the Board of Education decided Tuesday.
Rob Hanna: "A 90% day is a day where volume and points are 90% one directional. A 90% up day would occur when 90% of the volume traded and points traded on the NYSE are to the upside....I’ve found 90% days coming directly after a bottom tend to lead to market weakness....Both 1 and 8 days later all of the instances saw the S&P trading lower. Interestingly, while the test went back to 1970, 6 of the 8 instances found have occurred in the last 2 years. Prior to that it was unusual for a 90% day to occur directly following a low."
Neiman Marcus said its loss in the quarter was $32.6 million.
Neiman, which runs both its namesake and Bergdorf Goodman stores, faced a 21.4 percent drop in second quarter sales to $1.08 billion, while same-store sales fell 22.8 percent.
The company has also said that it will cut out or delay some projects to give itself additional liquidity.
Japan's equity market is currently 10.8% of the total global equity market capitalization, according to Standard & Poor's. That compares with the current U.S. equity market weight of 43.2%.
Mike Shedlock: The course of defending the bondholders of insolvent institutions is not sustainable. Do the math. The collateral behind private market debt is being marked down by easily 20-30%. That debt represents about 3.5 times GDP. That implies collateral losses on the order of 70-100% of GDP, which itself is $14 trillion. Unless Congress is actually willing to commit that amount of public funds to defend the bondholders of mismanaged financials so they can avoid any loss, this crisis simply cannot be addressed through bailouts. Bondholders have to take losses. Debt has to be restructured. There is no other option - but the markets are going to suffer interminably until our leaders figure that out.
Bailing out the bondholders is impossible."
The Oil Drum: "The United States consumes 25 barrels of oil per capita, Japan consumes 16, and Korea 15. Interestingly, they all followed a very similar pattern of development. As their economies grew, oil consumption per capita expanded until it found a plateau. Developed economies ultimately become more service-oriented, so it's natural for oil consumption per capita to stop growing with GDP.
How far are China and India from stopping to grow oil consumption per capita? China consumes roughly two barrels of oil per capita. India consumes 0.9.
This would be fine and dandy if China and India did not each contain more than a billion people. But their oil consumption will grow many times in the next 20 years, assuming the global economy does not sink into a black hole. (Let's hope not!) "
A senior Kuwaiti official says OPEC is likely to announce a production cut during its meeting Sunday in Vienna.
Supreme Petroleum Council member Emad al-Atiqi told Kuwait's Al-Seyassah daily in remarks published Wednesday the Organization of the Petroleum Exporting Countries' decision "is expected to be endorsed unanimously due to what is happening with prices."
German
manufacturingorders collapsed in January as the global recession smothered exports.
Orders plunged 38 percent from a year earlier, the biggest drop since data for a reunified Germany started in 1991, the Economy Ministry in Berlin said today. From December they fell 8 percent, four times as much as economists expected and extending their worst decline on record.
U.S. soybean inventories before the 2009 harvest will be 12 percent smaller than forecast a month ago and the lowest in five years because of rising export demand, the government said.
Supplies on Aug. 31 will total 185 million bushels, down from 210 million projected in February and down from 205 million bushels a year earlier, the U.S. Department of Agriculture said today in a report. Stockpiles were a record 574 million bushels in 2007.
Citi analyst says, “Our revised energy price forecast calls for a barrel of WTI crude oil to average $47 in 2009, $55 in 2010, $60 in 2011, and $65 in 2012.
Gasoline inventories decreased by 3 million barrels in the week ended March 6, the Energy Information Administration reported. Analysts surveyed by Platts had expected a reduction of 1.2 million barrels. Meanwhile, crude inventories rose by 700,000 million barrels, while analysts had expected a decline of 1 million barrels.
Over the last few trading days, the VIX has declined from 50+ to 42+ and continues range-bound.
According to Bloomberg,
Citigroup Inc. and Bank of America Corp.’s bond prices are sliding on concern that owners of debt issued by U.S. financial firms will be forced to swallow losses if the industry needs another bailout.
U.S. bank debt has lost 7.8 percent and yields have jumped to record levels compared with benchmark rates in the past month, even after taxpayers committed more than $11.6 trillion to prop up financial firms. With shareholders almost wiped out at banks like
Citigroup and lawmakers resisting more rescues, holders may be asked to swap bonds for new debt that offers reduced interest rates or lower face values, analysts said.
“The bond market is getting more scared every day,” said
Gary Austin of PDR Advisors in Charlotte, North Carolina, who manages $450 million in fixed-income securities. “At some time, the government is going to say enough is enough, the only way we will give you more cash is if the bondholders have to be hit.”
Dow Chemical Co., the largest U.S. chemical maker, is in talks to revive the commodity-plastics joint venture with Kuwait that the country’s Petrochemicals Industries Co. abandoned last year.
“We are definitely in discussions,” Chief Executive Officer
Andrew Liveris said today in a telephone interview. “I want to downplay expectations because of what happened last time.”
Dow, based in Midland, Michigan, also is talking with two “very interested alternatives” about buying a stake in the basic-plastics unit, Liveris said.
Confidence in the world economy dropped in March as the slump proved deeper than forecast and the Obama administration launched new rescues of financial institutions, a survey of Bloomberg users on six continents showed.
The Bloomberg
Professional Global Confidence Index fell to 5.95 this month from 8.5 in February. A reading below 50 means pessimists outnumber optimists. Sentiment about Europe and the U.S. slid, while respondents in Asia were less pessimistic about their region, the survey showed.
The global economy may shrink for the first time since World War II, with trade collapsing by the most since the Great Depression, the World Bank said this month. The erosion of confidence is exacerbating the decline.
California, South Carolina, Michigan and Rhode Island — registered unemployment rates above 10 percent in January, and the national rate is expected to hit double digits by year-end.
“The country faces grave challenges, both in terms of its short-term economic health and its long-term fiscal future, and working our way out of these difficulties will not happen overnight,” Peter Orszag, director of the White House’s Office of Management and Budget, told Congress yesterday. “Our economy is in a deep recession, which threatens to be more severe than any since the Great Depression.” Corporate tax revenue in the past five months has plunged 45 percent from a year earlier. Individual income tax collections were down 13 percent so far this fiscal year. During the first five months of fiscal 2009, which began Oct. 1, the country’s deficit swelled to a record $764.5 billion for the period, compared with a $265 billion shortfall during the same period a year earlier.
Crude for April delivery ended down $3.38, or 7.4%, at $42.33 a barrel on the New York Mercantile Exchange. The EIA report also showed petroleum demand has been falling. Total petroleum products supplies over the past four weeks, including gasoline, jet fuel and diesel, averaged 19.3 million barrels a day, down by 2.1% from a year ago.
Geithner said the U.S. plan would be ready before President Obama goes to the G20 leaders meeting in early April.Geithner repeated the White House's call that G20 nations enact strong stimulus. Not all G20 nations are as eager as the U.S. to boost spending and take on more debt. Although Geithner did not specify what he had in mind, prior discussion of the IMF's balance sheet has usually focused on the sale of some portion of the international financial institution's substantial store of gold.
Brazil's central bank late Wednesday cut its key interest rate by 150 basis points, to 11.25%, as Latin America's largest economy faces possible recession. The rate now stands at its lowest level since the Selic rate was established in 1996.
The number of completed U.S. foreclosures in February was 121,756, the highest monthly total since the crisis began, according to data from Foreclosures.com. The figure was a 67% increase from the 72,694 reported in January and was also well above the previous monthly high of 104,243 set last September. The number of pre-foreclosure filings also set a new monthly record, rising 24% to 207,703 in February from 166,860 in January.
National Semiconductor Corp.sees sales falling by 5% to 10% sequentially in the fourth quarter. In addition, it plans to cut 850 jobs worldwide and close its assembly and test plant in Suzhou, China and its wafer fabrication plant in Arlington, Texas. The closures will occur in phases over several quarters, eventually resulting in the elimination of an additional 875 positions. National Semiconductor will take a charge of $160 millon to $180 million in related expenses.
Weyerhaeuser Co said late on Tuesday it would indefinitely close four mills and permanently close five service centers, affecting about 480 jobs.
China's exports in February slid 25.7 percent from a year earlier, dwarfing forecasts of a 5.0 percent fall, while imports dropped 24.1 percent, close to projections of a 25.0 percent decline. The drop in exports was the steepest since bankers started keeping records in 1993. The resulting trade surplus was $4.84 billion, a three-year low, compared with $39.1 billion in January and a record $40.1 billion in November, the customs administration said on its website,
www.customs.gov.cn. The drop in the surplus to well below the forecast $27.3 billion figure, sparked broad dollar buying.
In LA, more than 8,800 teachers and other employees of the nation's second-largest school district will receive notices of impending layoffs for the next school year, the Board of Education decided Tuesday.
Rob Hanna: "A 90% day is a day where volume and points are 90% one directional. A 90% up day would occur when 90% of the volume traded and points traded on the NYSE are to the upside....I’ve found 90% days coming directly after a bottom tend to lead to market weakness....Both 1 and 8 days later all of the instances saw the S&P trading lower. Interestingly, while the test went back to 1970, 6 of the 8 instances found have occurred in the last 2 years. Prior to that it was unusual for a 90% day to occur directly following a low."
Neiman Marcus said its loss in the quarter was $32.6 million.
Neiman, which runs both its namesake and Bergdorf Goodman stores, faced a 21.4 percent drop in second quarter sales to $1.08 billion, while same-store sales fell 22.8 percent.
The company has also said that it will cut out or delay some projects to give itself additional liquidity.
Japan's equity market is currently 10.8% of the total global equity market capitalization, according to Standard & Poor's. That compares with the current U.S. equity market weight of 43.2%.
Mike Shedlock: The course of defending the bondholders of insolvent institutions is not sustainable. Do the math. The collateral behind private market debt is being marked down by easily 20-30%. That debt represents about 3.5 times GDP. That implies collateral losses on the order of 70-100% of GDP, which itself is $14 trillion. Unless Congress is actually willing to commit that amount of public funds to defend the bondholders of mismanaged financials so they can avoid any loss, this crisis simply cannot be addressed through bailouts. Bondholders have to take losses. Debt has to be restructured. There is no other option - but the markets are going to suffer interminably until our leaders figure that out.
Bailing out the bondholders is impossible."
The Oil Drum: "The United States consumes 25 barrels of oil per capita, Japan consumes 16, and Korea 15. Interestingly, they all followed a very similar pattern of development. As their economies grew, oil consumption per capita expanded until it found a plateau. Developed economies ultimately become more service-oriented, so it's natural for oil consumption per capita to stop growing with GDP.
How far are China and India from stopping to grow oil consumption per capita? China consumes roughly two barrels of oil per capita. India consumes 0.9.
This would be fine and dandy if China and India did not each contain more than a billion people. But their oil consumption will grow many times in the next 20 years, assuming the global economy does not sink into a black hole. (Let's hope not!) "
A senior Kuwaiti official says OPEC is likely to announce a production cut during its meeting Sunday in Vienna.
Supreme Petroleum Council member Emad al-Atiqi told Kuwait's Al-Seyassah daily in remarks published Wednesday the Organization of the Petroleum Exporting Countries' decision "is expected to be endorsed unanimously due to what is happening with prices."
German
manufacturingorders collapsed in January as the global recession smothered exports.
Orders plunged 38 percent from a year earlier, the biggest drop since data for a reunified Germany started in 1991, the Economy Ministry in Berlin said today. From December they fell 8 percent, four times as much as economists expected and extending their worst decline on record.
U.S. soybean inventories before the 2009 harvest will be 12 percent smaller than forecast a month ago and the lowest in five years because of rising export demand, the government said.
Supplies on Aug. 31 will total 185 million bushels, down from 210 million projected in February and down from 205 million bushels a year earlier, the U.S. Department of Agriculture said today in a report. Stockpiles were a record 574 million bushels in 2007.
Citi analyst says, “Our revised energy price forecast calls for a barrel of WTI crude oil to average $47 in 2009, $55 in 2010, $60 in 2011, and $65 in 2012.
Gasoline inventories decreased by 3 million barrels in the week ended March 6, the Energy Information Administration reported. Analysts surveyed by Platts had expected a reduction of 1.2 million barrels. Meanwhile, crude inventories rose by 700,000 million barrels, while analysts had expected a decline of 1 million barrels.
Over the last few trading days, the VIX has declined from 50+ to 42+ and continues range-bound.
According to Bloomberg,
Citigroup Inc. and Bank of America Corp.’s bond prices are sliding on concern that owners of debt issued by U.S. financial firms will be forced to swallow losses if the industry needs another bailout.
U.S. bank debt has lost 7.8 percent and yields have jumped to record levels compared with benchmark rates in the past month, even after taxpayers committed more than $11.6 trillion to prop up financial firms. With shareholders almost wiped out at banks like
Citigroup and lawmakers resisting more rescues, holders may be asked to swap bonds for new debt that offers reduced interest rates or lower face values, analysts said.
“The bond market is getting more scared every day,” said
Gary Austin of PDR Advisors in Charlotte, North Carolina, who manages $450 million in fixed-income securities. “At some time, the government is going to say enough is enough, the only way we will give you more cash is if the bondholders have to be hit.”
Dow Chemical Co., the largest U.S. chemical maker, is in talks to revive the commodity-plastics joint venture with Kuwait that the country’s Petrochemicals Industries Co. abandoned last year.
“We are definitely in discussions,” Chief Executive Officer
Andrew Liveris said today in a telephone interview. “I want to downplay expectations because of what happened last time.”
Dow, based in Midland, Michigan, also is talking with two “very interested alternatives” about buying a stake in the basic-plastics unit, Liveris said.
Confidence in the world economy dropped in March as the slump proved deeper than forecast and the Obama administration launched new rescues of financial institutions, a survey of Bloomberg users on six continents showed.
The Bloomberg
Professional Global Confidence Index fell to 5.95 this month from 8.5 in February. A reading below 50 means pessimists outnumber optimists. Sentiment about Europe and the U.S. slid, while respondents in Asia were less pessimistic about their region, the survey showed.
The global economy may shrink for the first time since World War II, with trade collapsing by the most since the Great Depression, the World Bank said this month. The erosion of confidence is exacerbating the decline.
California, South Carolina, Michigan and Rhode Island — registered unemployment rates above 10 percent in January, and the national rate is expected to hit double digits by year-end.
“The country faces grave challenges, both in terms of its short-term economic health and its long-term fiscal future, and working our way out of these difficulties will not happen overnight,” Peter Orszag, director of the White House’s Office of Management and Budget, told Congress yesterday. “Our economy is in a deep recession, which threatens to be more severe than any since the Great Depression.” Corporate tax revenue in the past five months has plunged 45 percent from a year earlier. Individual income tax collections were down 13 percent so far this fiscal year. During the first five months of fiscal 2009, which began Oct. 1, the country’s deficit swelled to a record $764.5 billion for the period, compared with a $265 billion shortfall during the same period a year earlier.
Crude for April delivery ended down $3.38, or 7.4%, at $42.33 a barrel on the New York Mercantile Exchange. The EIA report also showed petroleum demand has been falling. Total petroleum products supplies over the past four weeks, including gasoline, jet fuel and diesel, averaged 19.3 million barrels a day, down by 2.1% from a year ago.
Geithner said the U.S. plan would be ready before President Obama goes to the G20 leaders meeting in early April.Geithner repeated the White House's call that G20 nations enact strong stimulus. Not all G20 nations are as eager as the U.S. to boost spending and take on more debt. Although Geithner did not specify what he had in mind, prior discussion of the IMF's balance sheet has usually focused on the sale of some portion of the international financial institution's substantial store of gold.
Brazil's central bank late Wednesday cut its key interest rate by 150 basis points, to 11.25%, as Latin America's largest economy faces possible recession. The rate now stands at its lowest level since the Selic rate was established in 1996.
Tuesday, March 10, 2009
Buying Protection
3/10/09 Buying Protection
The cost of buying protection against the risk that the United States will default on its mounting debt has surged in the past months, outpacing the rise in corporate-credit costs, now that the government has absorbed more private-sector debt.
The spreads on credit-default swaps for U.S. government debt jumped to 97 basis points Tuesday, nearly seven times higher than a year ago and 60% higher than the end of last year, to a level roughly in line with those of France, according to data supplied by Markit. The spreads also hit a record last week.
Prominent banking analyst Meredith Whitney warned that "credit cards are the next credit crunch," as contracting credit lines will lower consumer spending and hurt the U.S. economy.
Whitney said available lines were reduced by nearly $500 billion in the fourth quarter of 2008 alone, and she estimates over $2 trillion of credit-card lines will be cut within 2009, and $2.7 trillion by the end of 2010.
"Inevitably, credit lines will continue to be reduced across the system, but the velocity at which it is already occurring and will continue to occur will result in unintended consequences for consumer confidence, spending and the overall economy," Whitney said.
Currently, there is roughly $5 trillion in credit-card lines outstanding in the U.S., and a little more than $800 billion is currently drawn upon, she said.
Meredith Whitney said Citigroup will have to sell more of its assets to stay in business.
"Trillions of dollars of loans have been mispriced by Citi", said Whitney. "By my math, they don’t make money in any of their businesses."
Whitney says Citigroup will be forced to sell their "crown jewels" if they are going to get any more bailout money from the government. "They're going to have a 'yard sale.' They will be a smaller and less of an international business going forward," says Whitney.
German exports fell 4.4% in January on a calendar and seasonally adjusted basis, with imports falling 0.8%, the Federal Statistics Office reported Tuesday. Against the prior year, exports fell 20.7% to 66.6 billion euros ($84.6 billion) and imports fell 12.9% to 58.1 billion euros. The foreign trade balance showed a surplus of 8.5 billion euros in January 2009. The current account of the balance of payments showed a surplus of 4.2 billion euros in January 2009, according to provisional data from the agency.
China's consumer price index dropped 1.6% in February from the year-earlier period, taking the economy into a deflationary zone, according to official data released Tuesday, media reports said.
The current excessively low oil prices cannot guarantee its long-term stability in the crude market, Secretary-General of the Organization of Petroleum Exporting Countries (OPEC) Abdalla Salem El-Badri said on Friday.
“There has been a strong repricing of credit risk as there is a panic almost about the financial sector,” Brian Yelvington, strategist at Creditsights, says.
“So far, most of the pain of the problems at financial institutions is being taken by shareholders and taxpayers, but there are real concerns that the problems will be so large that the pain will shift to holders of bonds and other securities.”
"Some of these banks are walking dead and should be closed," said Sen. Richard C. Shelby of Alabama, a 20-year veteran of the Senate Banking Committee and its senior Republican. "We are propping up financial institutions that are insolvent and have already failed. The government has made a political decision to keep them going at the taxpayers' expense."
At the other end of the political spectrum, the AFL-CIO Executive Council voted unanimously last week to urge President Obama to nationalize problem banks as a way to stimulate and stabilize the financial system.
Want to restore confidence? FDIC chief Sheila Bair says. Then purge banks' toxic assets, no matter the cost. "This takes courage to do, but if we don't do it, history shows..."
ICSC Research expects same-store sales for March will be flat to down by one percent from the same month of the prior year.
Bill Bonner: "The Dow is down near 6,500. Only 1,500 points to go. At least, that was our guess a few years ago. We figured that the Dow would have to go to 5,000 in order to get down to real bottom prices.
Will the bear market finally be over then? Nope. That’s just where you can begin looking for a bottom. Remember, markets tend to overshoot.
So far, the Dow has wiped out 43 years of gains. Adjusted for inflation, it was at this level back when the Beach Boys and the Beatles were just starting out. Actually, we don’t remember when the Beach Boys and the Beatles began…but it must have been in the md-’60s."
Michael E. Lewitt: " Right now, the network is very sick. When a system is allowed to hide risk for so long, it is ill-equipped to manage that risk when it finally emerges from the shadows....Debt-financed government demand can't be sustained indefinitely, which is why this policy is doomed to fail in the long run. The U.S. balance sheet is not a bottomless pit, although it is increasingly coming to resemble a Black Hole. At some point, the economy will have to generate sufficient tax revenue to pay for this government spending or the country will lose its AAA rating and ultimately become a troubled credit. Economic demand will ultimately have to become savings-driven or it will again collapse."
The latest polling of the American Association of Individual Investors last week found 70% were bearish, the most in the survey's near-22-year history. Bulls totaled only 18%, making the sentiment the most lopsidedly negative since October 1990, a week before a bear-market low.
Richard Russell: "The Dow has lost 7,536 points in less than two years -- all thus without a major correction. Common sense, for what it's worth, tells us that a correction 'should be just around the corner.'
"But something bothers me about all the talk of an impending big, upward correction," Russell continues.
"First, too much is being written about the odds of a near-term, major upside correction. If the expected upward correction arrives, too many advisers are going to look 'smart.' Usually, corrections in bear markets arrive suddenly and when least expected."
A measure of U.S. employment expectations fell to its lowest level since 1982, amid fresh evidence the job market slowdown is rapidly becoming a global phenomenon, according to a quarterly survey by Manpower released on Tuesday.
The staffing services company said its seasonally adjusted net employment outlook for the second quarter of 2009 (April-June) fell to a level of minus-1, from 10 last quarter and 15 in the second quarter of 2008.
The index measures the difference between employers who plan to add jobs and those who plan to cut them.
United Technologies Corp cut its 2009 profit target by about 13 percent and said it would eliminate 11,600 jobs as it no longer anticipates an economic recovery this year.
The world's largest maker of elevators and air conditioners said on Tuesday it expects to earn $4 to $4.50 per share in 2009, lower than the $4.65 to $5.15 per share it previously forecast.
The Commerce Department said total January wholesale inventories dropped 0.7 percent compared to a revised 1.5 percent fall in December, previously reported as a 1.4 percent decline. Inventories were depressed by record drops of 4.8 percent in autos and 3.5 percent in furniture as companies sharply cut back output to deal with slackening demand.
Compared to the same period a year ago, inventories rose 1 percent.
Falling sales lifted the inventory-to-sales ratio, a measure of how long it would take to sell stocks at the current sales pace, to 1.30 months' worth - the highest since a matching reading in January 2002 -- from December's 1.27 months.
The SEC is not planning to suspend the controversial mark-to-market accounting rule that has forced banks to report billions of dollars in asset write-downs, a source told Reuters.
The U.S. jobless rate will reach 9.4 percent this year and remain elevated through at least 2011, threatening the nation’s longer-term growth potential, a monthly Bloomberg News survey indicated.
Brazil’s economy shrank the most on record in the fourth quarter, increasing pressure on policy makers to slash the benchmark lending rate tomorrow for the second straight meeting.
Gross domestic product fell 3.6 percent in the fourth quarter from the previous three-month period as companies cut output and jobs in response to the global credit crisis, the national statistics agency said in Rio de Janeiro.
Fed chief Bernanke says the government will not allow big banks to fail. Citigroup says it has been profitable so far this year.
The Energy Information Administration Tuesday slightly lowered its forecasts for this year and next year's oil prices, citing the ongoing global economic contraction. Oil price will average $42 per barrel this year and $53 next year, the EIA said in a monthly report. The EIA had said a month ago that it expected prices to average $43 and $55 in this and next year. "The global economic contraction continues to depress energy demand," the EIA said in the report.
NEW Zealand central bank Governor Alan Bollard will probably cut the benchmark interest rate to a record low tomorrow in an attempt to steer the economy out of its worst recession in 22 years.
The Reserve Bank of New Zealand will cut the official cash rate by 50 basis points to 3 per cent, according to seven of 13 economists surveyed by Bloomberg.
Three say Mr Bollard will lower the rate by 75 basis points and three predict 100 points.
Iran does not yet have any highly enriched uranium, the fuel needed to make a nuclear warhead, two top U.S. intelligence officials told Congress Tuesday, disputing a claim by an Israeli official.
The Dow industrials added 379.44 points, or 5.8%, to finish at 6,926.49. The S&P 500 Index gained 43.07 points, or 6.4%, to 719.60, and the Nasdaq Composite climbed 89.64 points, or 7.1%, to 1,358.28.
On the New York Mercantile Exchange, crude for April delivery ended down $1.36, or 2.9%, at $45.71 a barrel. Gold for April delivery dropped $22.10 to end at $895.90 an ounce on the New York Mercantile Exchange.
Google captured 72.1% of U.S. searches in February, compared to 66.5% in the same period a year earlier. Meanwhile Yahoo captured 17% compared to 20.6% a year earlier, according to Hitwise. Microsoft captured 5.6% of searches compared 7% a year earlier, while Ask.com captured 3.7% compared to 4.1%.
The cost of borrowing in dollars for three months in London rose for an 11th day as banks sought cash to cover their commitments through the end of the first quarter.
The London interbank offered rate, or Libor, that banks say they charge each other for such loans climbed two basis points to 1.33 percent, the highest level since Jan. 8, the British Bankers’ Association said. The Libor-OIS spread, a gauge of bank reluctance to lend, increased to the most since Jan. 9.
Treasuries fell as stocks rallied and the Treasury held the first of three auctions this week that will raise $63 billion as concern over unprecedented levels of borrowing reduced demand for the relative safety of U.S. debt.
The record $34 billion sale of three-year notes drew a yield of 1.489 percent, the highest since monthly sales of the security resumed in November. The yield on the 10-year note rose the most in a month. Ten-year note yields increased 15 basis points, or 0.15 percentage point, to 3.00 percent at 5:26 p.m. in New York, according to BGCantor Market Data. That’s the largest increase in yield since Feb. 3.
The cost of buying protection against the risk that the United States will default on its mounting debt has surged in the past months, outpacing the rise in corporate-credit costs, now that the government has absorbed more private-sector debt.
The spreads on credit-default swaps for U.S. government debt jumped to 97 basis points Tuesday, nearly seven times higher than a year ago and 60% higher than the end of last year, to a level roughly in line with those of France, according to data supplied by Markit. The spreads also hit a record last week.
Prominent banking analyst Meredith Whitney warned that "credit cards are the next credit crunch," as contracting credit lines will lower consumer spending and hurt the U.S. economy.
Whitney said available lines were reduced by nearly $500 billion in the fourth quarter of 2008 alone, and she estimates over $2 trillion of credit-card lines will be cut within 2009, and $2.7 trillion by the end of 2010.
"Inevitably, credit lines will continue to be reduced across the system, but the velocity at which it is already occurring and will continue to occur will result in unintended consequences for consumer confidence, spending and the overall economy," Whitney said.
Currently, there is roughly $5 trillion in credit-card lines outstanding in the U.S., and a little more than $800 billion is currently drawn upon, she said.
Meredith Whitney said Citigroup will have to sell more of its assets to stay in business.
"Trillions of dollars of loans have been mispriced by Citi", said Whitney. "By my math, they don’t make money in any of their businesses."
Whitney says Citigroup will be forced to sell their "crown jewels" if they are going to get any more bailout money from the government. "They're going to have a 'yard sale.' They will be a smaller and less of an international business going forward," says Whitney.
German exports fell 4.4% in January on a calendar and seasonally adjusted basis, with imports falling 0.8%, the Federal Statistics Office reported Tuesday. Against the prior year, exports fell 20.7% to 66.6 billion euros ($84.6 billion) and imports fell 12.9% to 58.1 billion euros. The foreign trade balance showed a surplus of 8.5 billion euros in January 2009. The current account of the balance of payments showed a surplus of 4.2 billion euros in January 2009, according to provisional data from the agency.
China's consumer price index dropped 1.6% in February from the year-earlier period, taking the economy into a deflationary zone, according to official data released Tuesday, media reports said.
The current excessively low oil prices cannot guarantee its long-term stability in the crude market, Secretary-General of the Organization of Petroleum Exporting Countries (OPEC) Abdalla Salem El-Badri said on Friday.
“There has been a strong repricing of credit risk as there is a panic almost about the financial sector,” Brian Yelvington, strategist at Creditsights, says.
“So far, most of the pain of the problems at financial institutions is being taken by shareholders and taxpayers, but there are real concerns that the problems will be so large that the pain will shift to holders of bonds and other securities.”
"Some of these banks are walking dead and should be closed," said Sen. Richard C. Shelby of Alabama, a 20-year veteran of the Senate Banking Committee and its senior Republican. "We are propping up financial institutions that are insolvent and have already failed. The government has made a political decision to keep them going at the taxpayers' expense."
At the other end of the political spectrum, the AFL-CIO Executive Council voted unanimously last week to urge President Obama to nationalize problem banks as a way to stimulate and stabilize the financial system.
Want to restore confidence? FDIC chief Sheila Bair says. Then purge banks' toxic assets, no matter the cost. "This takes courage to do, but if we don't do it, history shows..."
ICSC Research expects same-store sales for March will be flat to down by one percent from the same month of the prior year.
Bill Bonner: "The Dow is down near 6,500. Only 1,500 points to go. At least, that was our guess a few years ago. We figured that the Dow would have to go to 5,000 in order to get down to real bottom prices.
Will the bear market finally be over then? Nope. That’s just where you can begin looking for a bottom. Remember, markets tend to overshoot.
So far, the Dow has wiped out 43 years of gains. Adjusted for inflation, it was at this level back when the Beach Boys and the Beatles were just starting out. Actually, we don’t remember when the Beach Boys and the Beatles began…but it must have been in the md-’60s."
Michael E. Lewitt: " Right now, the network is very sick. When a system is allowed to hide risk for so long, it is ill-equipped to manage that risk when it finally emerges from the shadows....Debt-financed government demand can't be sustained indefinitely, which is why this policy is doomed to fail in the long run. The U.S. balance sheet is not a bottomless pit, although it is increasingly coming to resemble a Black Hole. At some point, the economy will have to generate sufficient tax revenue to pay for this government spending or the country will lose its AAA rating and ultimately become a troubled credit. Economic demand will ultimately have to become savings-driven or it will again collapse."
The latest polling of the American Association of Individual Investors last week found 70% were bearish, the most in the survey's near-22-year history. Bulls totaled only 18%, making the sentiment the most lopsidedly negative since October 1990, a week before a bear-market low.
Richard Russell: "The Dow has lost 7,536 points in less than two years -- all thus without a major correction. Common sense, for what it's worth, tells us that a correction 'should be just around the corner.'
"But something bothers me about all the talk of an impending big, upward correction," Russell continues.
"First, too much is being written about the odds of a near-term, major upside correction. If the expected upward correction arrives, too many advisers are going to look 'smart.' Usually, corrections in bear markets arrive suddenly and when least expected."
A measure of U.S. employment expectations fell to its lowest level since 1982, amid fresh evidence the job market slowdown is rapidly becoming a global phenomenon, according to a quarterly survey by Manpower released on Tuesday.
The staffing services company said its seasonally adjusted net employment outlook for the second quarter of 2009 (April-June) fell to a level of minus-1, from 10 last quarter and 15 in the second quarter of 2008.
The index measures the difference between employers who plan to add jobs and those who plan to cut them.
United Technologies Corp cut its 2009 profit target by about 13 percent and said it would eliminate 11,600 jobs as it no longer anticipates an economic recovery this year.
The world's largest maker of elevators and air conditioners said on Tuesday it expects to earn $4 to $4.50 per share in 2009, lower than the $4.65 to $5.15 per share it previously forecast.
The Commerce Department said total January wholesale inventories dropped 0.7 percent compared to a revised 1.5 percent fall in December, previously reported as a 1.4 percent decline. Inventories were depressed by record drops of 4.8 percent in autos and 3.5 percent in furniture as companies sharply cut back output to deal with slackening demand.
Compared to the same period a year ago, inventories rose 1 percent.
Falling sales lifted the inventory-to-sales ratio, a measure of how long it would take to sell stocks at the current sales pace, to 1.30 months' worth - the highest since a matching reading in January 2002 -- from December's 1.27 months.
The SEC is not planning to suspend the controversial mark-to-market accounting rule that has forced banks to report billions of dollars in asset write-downs, a source told Reuters.
The U.S. jobless rate will reach 9.4 percent this year and remain elevated through at least 2011, threatening the nation’s longer-term growth potential, a monthly Bloomberg News survey indicated.
Brazil’s economy shrank the most on record in the fourth quarter, increasing pressure on policy makers to slash the benchmark lending rate tomorrow for the second straight meeting.
Gross domestic product fell 3.6 percent in the fourth quarter from the previous three-month period as companies cut output and jobs in response to the global credit crisis, the national statistics agency said in Rio de Janeiro.
Fed chief Bernanke says the government will not allow big banks to fail. Citigroup says it has been profitable so far this year.
The Energy Information Administration Tuesday slightly lowered its forecasts for this year and next year's oil prices, citing the ongoing global economic contraction. Oil price will average $42 per barrel this year and $53 next year, the EIA said in a monthly report. The EIA had said a month ago that it expected prices to average $43 and $55 in this and next year. "The global economic contraction continues to depress energy demand," the EIA said in the report.
NEW Zealand central bank Governor Alan Bollard will probably cut the benchmark interest rate to a record low tomorrow in an attempt to steer the economy out of its worst recession in 22 years.
The Reserve Bank of New Zealand will cut the official cash rate by 50 basis points to 3 per cent, according to seven of 13 economists surveyed by Bloomberg.
Three say Mr Bollard will lower the rate by 75 basis points and three predict 100 points.
Iran does not yet have any highly enriched uranium, the fuel needed to make a nuclear warhead, two top U.S. intelligence officials told Congress Tuesday, disputing a claim by an Israeli official.
The Dow industrials added 379.44 points, or 5.8%, to finish at 6,926.49. The S&P 500 Index gained 43.07 points, or 6.4%, to 719.60, and the Nasdaq Composite climbed 89.64 points, or 7.1%, to 1,358.28.
On the New York Mercantile Exchange, crude for April delivery ended down $1.36, or 2.9%, at $45.71 a barrel. Gold for April delivery dropped $22.10 to end at $895.90 an ounce on the New York Mercantile Exchange.
Google captured 72.1% of U.S. searches in February, compared to 66.5% in the same period a year earlier. Meanwhile Yahoo captured 17% compared to 20.6% a year earlier, according to Hitwise. Microsoft captured 5.6% of searches compared 7% a year earlier, while Ask.com captured 3.7% compared to 4.1%.
The cost of borrowing in dollars for three months in London rose for an 11th day as banks sought cash to cover their commitments through the end of the first quarter.
The London interbank offered rate, or Libor, that banks say they charge each other for such loans climbed two basis points to 1.33 percent, the highest level since Jan. 8, the British Bankers’ Association said. The Libor-OIS spread, a gauge of bank reluctance to lend, increased to the most since Jan. 9.
Treasuries fell as stocks rallied and the Treasury held the first of three auctions this week that will raise $63 billion as concern over unprecedented levels of borrowing reduced demand for the relative safety of U.S. debt.
The record $34 billion sale of three-year notes drew a yield of 1.489 percent, the highest since monthly sales of the security resumed in November. The yield on the 10-year note rose the most in a month. Ten-year note yields increased 15 basis points, or 0.15 percentage point, to 3.00 percent at 5:26 p.m. in New York, according to BGCantor Market Data. That’s the largest increase in yield since Feb. 3.
Monday, March 09, 2009
Mergers
3/9/09 Mergers
Merck buying Schering-Plough. Merck sees cost savings of about $3.5 billion annually beyond 2011 from the deal. The combined 2008 revenues of the two companies totaled $47 billion, and Merck believes it will maintain its current credit ratings.
"It seems somewhat inevitable," said Jeffrey Holford, analyst at Jefferies in London.
"The industry needs to shrink because there is just not the same market for branded pharmaceuticals going forward as there has been over the last 10 years," he said. "There is overcapacity, and (Merck and Schering-Plough) need to take each other's capacity out of the market."
Under the agreement, Schering-Plough shareholders will receive 0.5767 shares of Merck and $10.50 in cash for each of their shares. Each Merck share will automatically become a share of the combined company.
Senator Richard Shelby, top Republican on the banking committee, said the United States should not mimic Japan, which in the 1990s propped up failing banks and prolonged its economic downturn.
"Close them down, get them out of business. If they're dead, they ought to be buried," Shelby told ABC's "This Week" program. "We bury the small banks. We've got to bury some big ones and send a strong message to the market."
Sterlite Industries, India’s largest metals producer, has said it is to buy the operating assets of bankrupt US copper miner Asarco for $1.7bn, nearly $1bn less than the price it had agreed in November last year.
The deal was renegotiated following a 60 per cent drop in copper prices from the record high of $8,940 a tonne in July, and will catapult Sterlite into the top 10 of global copper producers.
The Indian group – a unit of UK-listed
Vedanta Resources, controlled by Indian businessman Anil Agarwal – agreed to pay $1.1bn in cash and $600m in a senior secured non-interest bearing promissory note over nine years. Payments made on the note could increase if the price of copper exceeds $6,000 a tonne.
According to Citi strategist Tobias Levkovich, 99% of NYSE stocks are trading at or below their 200-day moving averages. "Confidence in future earnings growth is near non-existent based on our analysis and is closing in to near the lows seen over the past 40 years. In this sense, credit conditions and disappointment with policies thus far are trumping the various fiscal and monetary stimuli," he said in a note to clients. Citi is upping the energy sector to overweight from market weight, but cutting pharma and biotech to underweight from market weight.
CF Industries Holdings Inc. said Monday its board of directors rejected a buyout proposal from Agrium Inc. as grossly inadequate. CF Industries also announced its board of directors reaffirmed its plan to buy Terra Industries Inc. Agrium offered about $3.6 billion for CF Industries on Feb. 25. CF Industries closed Friday with a market cap of $2.93 billion.
Capital One Financial Corp. said Monday its board of directors expects to reduce the company's quarterly dividend from 37.5 cents a share to 5 cents a share, beginning in the second quarter of 2009.
U.S. publisher McClatchy Newspapers Inc. said Monday that it will reduce its workforce by 15%, or around 1,600 full-time equivalent employees, and cut wages for remaining staff as part of its previously announced restructuring plans.
Japanese shares gave up early gains to end lower Monday, with the benchmark Nikkei 225 Average ending at its lowest level in at least 24 years. The Nikkei ended 1.2% lower at 7,086.03, the lowest finish in a data series dating back to 1985, according to FactSet. At its latest close, the Nikkei is less than a fifth of its all-time high of 38,915.87, which it touched nearly two decades ago.
Ronald Reagan: “The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help."
About 25 percent of the San Francisco region's approximately 16,000 building trades workers are out of work, compared with nearly full employment last year, said Michael Theriault, secretary and treasurer of the San Francisco Building and Construction Trades Council.
"I've received calls from people in other parts of the country about work here, and I tell them not to come," Theriault said.
The city received 5,600 building permit applications in July. In January, it received just over 4,000. More important, the monetary value of the permits, which often indicates the size and complexity of projects, dropped from about $240 million in July to $78 million in January. As a result, the city's Building Inspection Department laid off 48 employees earlier this month.
John Hussman: "I suspect that the markets are about to get volatile, possibly to an extent beyond what we observed in October and November.
The misguided policy response from Washington has focused almost exclusively on squandering public money and burdening our children with indebtedness in order to defend the bondholders of mismanaged financial institutions....The course of defending the bondholders of insolvent institutions is not sustainable. Do the math. The collateral behind private market debt is being marked down by easily 20-30%. That debt represents about 3.5 times GDP. That implies collateral losses on the order of 70-100% of GDP, which itself is $14 trillion. Unless Congress is actually willing to commit that amount of public funds to defend the bondholders of mismanaged financials so they can avoid any loss, this crisis simply cannot be addressed through bailouts. Bondholders have to take losses. Debt has to be restructured. There is no other option – but the markets are going to suffer interminably until our leaders figure that out. "
Barry Ritholtz: " Stocks have lost $11 trillion in market value since the October 2007 peak, according to Marketwatch.
This is based on the Dow Jones Wilshire 5000 index, which includes nearly every U.S.-listed stock. Losses since the start of 2009 are $2.6 trillion. Nearly half of all stocks in the index are now trading at less than $5, and 37% are under $3."
McDonald's cautioned Monday that the stronger dollar and commodity costs will likely squeeze its first-quarter revenue results and margins.
The fast-food chain said it anticipates quarterly sales to be off by at least $600 million and earnings to be hurt by 7 cents to 9 cents per share if foreign currency rates stay at current levels.
The World Bank predicted Sunday that the global economy would shrink in 2009 for the first time since World War II.
The Oil Drum: "Chevron, the second-biggest US oil company, will in the next few months begin large-scale testing of a production technique that could unlock tens of billions of barrels of reserves across the Middle East. The technique, for producing heavy oil that cannot be extracted using conventional methods, will be used in the partitioned neutral zone between Saudi Arabia and Kuwait. Chevron’s plans follow its success in extending its licence from the Saudi government to operate in the neutral zone for a further 30 years."
WTI crude is now trading above Brent crude. U.S. crude for April delivery rose $3.24 to $48.76 by 1414 GMT (10:14 a.m. EDT), a more than 7 percent gain after closing at $45.52 on Friday. Brent was up 75 cents at $45.60
The value of global financial assets including stocks, bonds and currencies probably fell by more than $50 trillion in 2008, equivalent to a year of world gross domestic product, according to an Asian Development Bank report.
Capital spending in the chip industry will fall 45% in 2009, as the semiconductor industry reels from a downturn, Gartner Inc. said Monday. The tech research group forecast semiconductor capital spending of $16.9 billion this year, down from $30.8 billion in 2008.
French oil major Total will reduce runs at its refineries operating in France by about 20 percent due to poor margins as demand for fuel falls, trade sources said on Monday.
Simon Johnson: "Derivatives have the potential to create a
rent-seeking structure that is unparalleled in human history. No society can afford to allow that kind of financial system to operate. Either we figure out how to make it much more transparent - and amenable to outside review - or the re-regulation process currently in the hands of Senator Dodd and Congressman Frank needs to consider more radical alternatives."
Merck traded at a 15-year low. P&G, Oracle, and Cisco made a new 52-month low.
New Zealand house prices fell 8.9 percent in February from a year earlier as a deepening recession deterred buyers.
President Barack Obama’s administration has halted free-trade talks with the New Zealand government, Stuff.co.nz said, citing Prime Minister John Key.
So-called Trans Pacific Partnership talks have been suspended while the U.S. government assesses its priorities, reported the New Zealand-based Web site operated by Fairfax Media Ltd.
According to the WSJ, the board of Genentech Inc. is near a deal to sell the biotechnology company for $95 per share to suitor Roche Holding AG, according to people familiar with the matter.
The two sides were in discussions over the weekend and were close to announcing the transaction on Monday.
The Dow Jones Industrial Average fell 79.89 points, or 1.2%, to 6,547.05. The S&P 500 dropped 6.85 points, or 1%, to 676.53, and the Nasdaq Composite declined 25.21 points, or 2%, to 1,268.64, its lowest close since October 2002.
Crude for April delivery closed up $1.55, or 3.4%, at $47.07 a barrel on the New York Mercantile Exchange, the loftiest closing level for a front-month contract since Jan. 6.
Gold for April delivery fell $24.70, or 2.6%, to end at $918 an ounce on the Comex division of the New York Mercantile Exchange.
White & Case LLP, the New York-based law firm with more than 2,400 lawyers, announced plans to fire about 200 junior attorneys and 200 staffers in response to the decreasing market for legal services.
White & Case also will defer the start date of about 60 percent of this year’s incoming class of first-year attorneys in the U.S. until 2010, the firm said in a statement today. An undetermined number of partners will be laid off in the future, according to the statement.
The Standard & Poor’s 500 Index is likely to drop to 600 or lower this year as the global recession intensifies, said Nouriel Roubini, the New York University professor who predicted the financial crisis.
Merck buying Schering-Plough. Merck sees cost savings of about $3.5 billion annually beyond 2011 from the deal. The combined 2008 revenues of the two companies totaled $47 billion, and Merck believes it will maintain its current credit ratings.
"It seems somewhat inevitable," said Jeffrey Holford, analyst at Jefferies in London.
"The industry needs to shrink because there is just not the same market for branded pharmaceuticals going forward as there has been over the last 10 years," he said. "There is overcapacity, and (Merck and Schering-Plough) need to take each other's capacity out of the market."
Under the agreement, Schering-Plough shareholders will receive 0.5767 shares of Merck and $10.50 in cash for each of their shares. Each Merck share will automatically become a share of the combined company.
Senator Richard Shelby, top Republican on the banking committee, said the United States should not mimic Japan, which in the 1990s propped up failing banks and prolonged its economic downturn.
"Close them down, get them out of business. If they're dead, they ought to be buried," Shelby told ABC's "This Week" program. "We bury the small banks. We've got to bury some big ones and send a strong message to the market."
Sterlite Industries, India’s largest metals producer, has said it is to buy the operating assets of bankrupt US copper miner Asarco for $1.7bn, nearly $1bn less than the price it had agreed in November last year.
The deal was renegotiated following a 60 per cent drop in copper prices from the record high of $8,940 a tonne in July, and will catapult Sterlite into the top 10 of global copper producers.
The Indian group – a unit of UK-listed
Vedanta Resources, controlled by Indian businessman Anil Agarwal – agreed to pay $1.1bn in cash and $600m in a senior secured non-interest bearing promissory note over nine years. Payments made on the note could increase if the price of copper exceeds $6,000 a tonne.
According to Citi strategist Tobias Levkovich, 99% of NYSE stocks are trading at or below their 200-day moving averages. "Confidence in future earnings growth is near non-existent based on our analysis and is closing in to near the lows seen over the past 40 years. In this sense, credit conditions and disappointment with policies thus far are trumping the various fiscal and monetary stimuli," he said in a note to clients. Citi is upping the energy sector to overweight from market weight, but cutting pharma and biotech to underweight from market weight.
CF Industries Holdings Inc. said Monday its board of directors rejected a buyout proposal from Agrium Inc. as grossly inadequate. CF Industries also announced its board of directors reaffirmed its plan to buy Terra Industries Inc. Agrium offered about $3.6 billion for CF Industries on Feb. 25. CF Industries closed Friday with a market cap of $2.93 billion.
Capital One Financial Corp. said Monday its board of directors expects to reduce the company's quarterly dividend from 37.5 cents a share to 5 cents a share, beginning in the second quarter of 2009.
U.S. publisher McClatchy Newspapers Inc. said Monday that it will reduce its workforce by 15%, or around 1,600 full-time equivalent employees, and cut wages for remaining staff as part of its previously announced restructuring plans.
Japanese shares gave up early gains to end lower Monday, with the benchmark Nikkei 225 Average ending at its lowest level in at least 24 years. The Nikkei ended 1.2% lower at 7,086.03, the lowest finish in a data series dating back to 1985, according to FactSet. At its latest close, the Nikkei is less than a fifth of its all-time high of 38,915.87, which it touched nearly two decades ago.
Ronald Reagan: “The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help."
About 25 percent of the San Francisco region's approximately 16,000 building trades workers are out of work, compared with nearly full employment last year, said Michael Theriault, secretary and treasurer of the San Francisco Building and Construction Trades Council.
"I've received calls from people in other parts of the country about work here, and I tell them not to come," Theriault said.
The city received 5,600 building permit applications in July. In January, it received just over 4,000. More important, the monetary value of the permits, which often indicates the size and complexity of projects, dropped from about $240 million in July to $78 million in January. As a result, the city's Building Inspection Department laid off 48 employees earlier this month.
John Hussman: "I suspect that the markets are about to get volatile, possibly to an extent beyond what we observed in October and November.
The misguided policy response from Washington has focused almost exclusively on squandering public money and burdening our children with indebtedness in order to defend the bondholders of mismanaged financial institutions....The course of defending the bondholders of insolvent institutions is not sustainable. Do the math. The collateral behind private market debt is being marked down by easily 20-30%. That debt represents about 3.5 times GDP. That implies collateral losses on the order of 70-100% of GDP, which itself is $14 trillion. Unless Congress is actually willing to commit that amount of public funds to defend the bondholders of mismanaged financials so they can avoid any loss, this crisis simply cannot be addressed through bailouts. Bondholders have to take losses. Debt has to be restructured. There is no other option – but the markets are going to suffer interminably until our leaders figure that out. "
Barry Ritholtz: " Stocks have lost $11 trillion in market value since the October 2007 peak, according to Marketwatch.
This is based on the Dow Jones Wilshire 5000 index, which includes nearly every U.S.-listed stock. Losses since the start of 2009 are $2.6 trillion. Nearly half of all stocks in the index are now trading at less than $5, and 37% are under $3."
McDonald's cautioned Monday that the stronger dollar and commodity costs will likely squeeze its first-quarter revenue results and margins.
The fast-food chain said it anticipates quarterly sales to be off by at least $600 million and earnings to be hurt by 7 cents to 9 cents per share if foreign currency rates stay at current levels.
The World Bank predicted Sunday that the global economy would shrink in 2009 for the first time since World War II.
The Oil Drum: "Chevron, the second-biggest US oil company, will in the next few months begin large-scale testing of a production technique that could unlock tens of billions of barrels of reserves across the Middle East. The technique, for producing heavy oil that cannot be extracted using conventional methods, will be used in the partitioned neutral zone between Saudi Arabia and Kuwait. Chevron’s plans follow its success in extending its licence from the Saudi government to operate in the neutral zone for a further 30 years."
WTI crude is now trading above Brent crude. U.S. crude for April delivery rose $3.24 to $48.76 by 1414 GMT (10:14 a.m. EDT), a more than 7 percent gain after closing at $45.52 on Friday. Brent was up 75 cents at $45.60
The value of global financial assets including stocks, bonds and currencies probably fell by more than $50 trillion in 2008, equivalent to a year of world gross domestic product, according to an Asian Development Bank report.
Capital spending in the chip industry will fall 45% in 2009, as the semiconductor industry reels from a downturn, Gartner Inc. said Monday. The tech research group forecast semiconductor capital spending of $16.9 billion this year, down from $30.8 billion in 2008.
French oil major Total will reduce runs at its refineries operating in France by about 20 percent due to poor margins as demand for fuel falls, trade sources said on Monday.
Simon Johnson: "Derivatives have the potential to create a
rent-seeking structure that is unparalleled in human history. No society can afford to allow that kind of financial system to operate. Either we figure out how to make it much more transparent - and amenable to outside review - or the re-regulation process currently in the hands of Senator Dodd and Congressman Frank needs to consider more radical alternatives."
Merck traded at a 15-year low. P&G, Oracle, and Cisco made a new 52-month low.
New Zealand house prices fell 8.9 percent in February from a year earlier as a deepening recession deterred buyers.
President Barack Obama’s administration has halted free-trade talks with the New Zealand government, Stuff.co.nz said, citing Prime Minister John Key.
So-called Trans Pacific Partnership talks have been suspended while the U.S. government assesses its priorities, reported the New Zealand-based Web site operated by Fairfax Media Ltd.
According to the WSJ, the board of Genentech Inc. is near a deal to sell the biotechnology company for $95 per share to suitor Roche Holding AG, according to people familiar with the matter.
The two sides were in discussions over the weekend and were close to announcing the transaction on Monday.
The Dow Jones Industrial Average fell 79.89 points, or 1.2%, to 6,547.05. The S&P 500 dropped 6.85 points, or 1%, to 676.53, and the Nasdaq Composite declined 25.21 points, or 2%, to 1,268.64, its lowest close since October 2002.
Crude for April delivery closed up $1.55, or 3.4%, at $47.07 a barrel on the New York Mercantile Exchange, the loftiest closing level for a front-month contract since Jan. 6.
Gold for April delivery fell $24.70, or 2.6%, to end at $918 an ounce on the Comex division of the New York Mercantile Exchange.
White & Case LLP, the New York-based law firm with more than 2,400 lawyers, announced plans to fire about 200 junior attorneys and 200 staffers in response to the decreasing market for legal services.
White & Case also will defer the start date of about 60 percent of this year’s incoming class of first-year attorneys in the U.S. until 2010, the firm said in a statement today. An undetermined number of partners will be laid off in the future, according to the statement.
The Standard & Poor’s 500 Index is likely to drop to 600 or lower this year as the global recession intensifies, said Nouriel Roubini, the New York University professor who predicted the financial crisis.
Sunday, March 08, 2009
Energy
3/8/09 Energy
Tony Erikson: "Non OPEC-12 oil production peaked in 2004 at 46.8 million barrels/day (mbd) shown in the chart below. This oil definition includes crude oil, lease condensate, oil sands and natural gas plant liquids. If natural gas plant liquids are excluded, then the production peak remains in 2004 but decreases to 42.1 mbd.
The US Energy Information Administration (EIA) and the International Energy Agency (IEA) should make official statements about declining non OPEC-12 oil production to renew the focus on oil conservation and alternative energy sources.
Annual averages of non-OPEC Production in Mb/day
2002 Average 39,520
2003 Average 40,299
2004 Average 40,989
2005 Average 40,799
2006 Average 40,850
2007 Average 40,838
2008 Average 40,319"
Colin Campbell: "Non-OPEC production fell in 2008 and is likely to decline in 2009. Russia, which accounted for the majority of the increase in non-OPEC production in the past decade contracted in 2008 and will likely do so again in 2009."
Brent Steenbarger: "It's clear that the market patterns since mid-2007 have shifted from those that preceded. Weekly weakness has not been followed by a strong bullish edge and weekly strength has been followed by substantial weakness."
The Oil Drum: "Beneath the frozen plains of eastern Montana and Wyoming lie the largest coal deposits in the world — enough to last the United States more than a century at the nation's current burn rate.
The fuel literally spills from the ground where streambanks cut into the earth, hinting at reserves estimated at 180 billion tons. But even here lawsuits over global warming and the changing political landscape in Washington are pummeling an industry that has long been the backbone of America's power supply.
In recent weeks, a group of rural Montana electric co-ops abandoned a partially built 250-megawatt coal plant, ending a four-year legal campaign by environmentalists to stop the project. The co-ops plan to instead get their electricity from a natural gas plant — more expensive for customers but also more likely to get built.
A few miles away, the U.S. Air Force dropped plans for a major coal-to-jet fuel plant once touted as the harbinger of a new market for coal. There are no signs it will be revived."
I keep thinking back to when Citigroup was trading at $45. Over and over again you could read about the smartest investors owning the stock and how cheap the shares were. Do you remember Bear Stearns trading at $170? Are the smart guys going to bail you out of your losses?
The fight for Genentech has been going on since July. Would you have held on to your shares for this long a period with equities collapsing around you?
Mike Burk: "The market is as oversold as it has been at any time since June 1932. There have been three 20+% rallies since the early October low and another is long overdue, but, the extreme number of new lows suggest a retest so whatever we get will be a bear market rally.
I expect the major indices to be higher on Friday March 13 than they were on Friday March 6."
“The best thing that could probably happen to General Motors, in my view, is they go into Chapter 11,” Senator John McCain said on the “Fox News Sunday” program today.
The automaker could reorganize and renegotiate its labor contracts to come out “stronger, better, leaner,” McCain, from Arizona, said.
Japan's current account balance swung to a deficit of 172.8 billion yen ($1.76 billion) in January as the decline in exports accelerated in the face of a global economic downturn, according to data released by the ministry of finance Monday. The figure is much lower than economists' estimate of a 15 billion yen deficit and comes on the back of a 125 billion yen surplus in the previous month. The deficit is Japan's first in 13 years, according to reports. January exports plunged 46.3% year-on-year, more than the 35.1% decline registered in December, while imports tumbled 31.7%, compared with a 21.2% fall in the previous month.
The Nikkei 225 Average rose 0.5% to 7,209.99, while the broader Topix index slipped 0.1% to 720.88. Other Asian markets also rebounded after falling last week, with Australia's S&P/ASX 200 up 0.7%, South Korea's Kospi up 1.9%, led by shipbuilders and real estate stocks. New Zealand's NZX 50 added 0.2%.
OPEC will limit exports again when the group meets March 15, according to a survey by Bloomberg News.
OPEC states have more of an incentive than ever to restrict output because the combination of declining prices and the global recession will reduce earnings 59 percent this year to $402 billion, according to the U.S. Energy Department. Crude demand will drop for a second year, the first back-to-back decline since 1983, the International Energy Agency said.
OPEC’s cutbacks are “enough to address the surplus,” said Harry Tchilinguirian, the senior oil analyst at BNP Paribas SA in London. “If they do more and try to pursue a price target too aggressively, there’s a risk of over-tightening the market when the economy is weakening, stalling the recovery.”
Tony Erikson: "Non OPEC-12 oil production peaked in 2004 at 46.8 million barrels/day (mbd) shown in the chart below. This oil definition includes crude oil, lease condensate, oil sands and natural gas plant liquids. If natural gas plant liquids are excluded, then the production peak remains in 2004 but decreases to 42.1 mbd.
The US Energy Information Administration (EIA) and the International Energy Agency (IEA) should make official statements about declining non OPEC-12 oil production to renew the focus on oil conservation and alternative energy sources.
Annual averages of non-OPEC Production in Mb/day
2002 Average 39,520
2003 Average 40,299
2004 Average 40,989
2005 Average 40,799
2006 Average 40,850
2007 Average 40,838
2008 Average 40,319"
Colin Campbell: "Non-OPEC production fell in 2008 and is likely to decline in 2009. Russia, which accounted for the majority of the increase in non-OPEC production in the past decade contracted in 2008 and will likely do so again in 2009."
Brent Steenbarger: "It's clear that the market patterns since mid-2007 have shifted from those that preceded. Weekly weakness has not been followed by a strong bullish edge and weekly strength has been followed by substantial weakness."
The Oil Drum: "Beneath the frozen plains of eastern Montana and Wyoming lie the largest coal deposits in the world — enough to last the United States more than a century at the nation's current burn rate.
The fuel literally spills from the ground where streambanks cut into the earth, hinting at reserves estimated at 180 billion tons. But even here lawsuits over global warming and the changing political landscape in Washington are pummeling an industry that has long been the backbone of America's power supply.
In recent weeks, a group of rural Montana electric co-ops abandoned a partially built 250-megawatt coal plant, ending a four-year legal campaign by environmentalists to stop the project. The co-ops plan to instead get their electricity from a natural gas plant — more expensive for customers but also more likely to get built.
A few miles away, the U.S. Air Force dropped plans for a major coal-to-jet fuel plant once touted as the harbinger of a new market for coal. There are no signs it will be revived."
I keep thinking back to when Citigroup was trading at $45. Over and over again you could read about the smartest investors owning the stock and how cheap the shares were. Do you remember Bear Stearns trading at $170? Are the smart guys going to bail you out of your losses?
The fight for Genentech has been going on since July. Would you have held on to your shares for this long a period with equities collapsing around you?
Mike Burk: "The market is as oversold as it has been at any time since June 1932. There have been three 20+% rallies since the early October low and another is long overdue, but, the extreme number of new lows suggest a retest so whatever we get will be a bear market rally.
I expect the major indices to be higher on Friday March 13 than they were on Friday March 6."
“The best thing that could probably happen to General Motors, in my view, is they go into Chapter 11,” Senator John McCain said on the “Fox News Sunday” program today.
The automaker could reorganize and renegotiate its labor contracts to come out “stronger, better, leaner,” McCain, from Arizona, said.
Japan's current account balance swung to a deficit of 172.8 billion yen ($1.76 billion) in January as the decline in exports accelerated in the face of a global economic downturn, according to data released by the ministry of finance Monday. The figure is much lower than economists' estimate of a 15 billion yen deficit and comes on the back of a 125 billion yen surplus in the previous month. The deficit is Japan's first in 13 years, according to reports. January exports plunged 46.3% year-on-year, more than the 35.1% decline registered in December, while imports tumbled 31.7%, compared with a 21.2% fall in the previous month.
The Nikkei 225 Average rose 0.5% to 7,209.99, while the broader Topix index slipped 0.1% to 720.88. Other Asian markets also rebounded after falling last week, with Australia's S&P/ASX 200 up 0.7%, South Korea's Kospi up 1.9%, led by shipbuilders and real estate stocks. New Zealand's NZX 50 added 0.2%.
OPEC will limit exports again when the group meets March 15, according to a survey by Bloomberg News.
OPEC states have more of an incentive than ever to restrict output because the combination of declining prices and the global recession will reduce earnings 59 percent this year to $402 billion, according to the U.S. Energy Department. Crude demand will drop for a second year, the first back-to-back decline since 1983, the International Energy Agency said.
OPEC’s cutbacks are “enough to address the surplus,” said Harry Tchilinguirian, the senior oil analyst at BNP Paribas SA in London. “If they do more and try to pursue a price target too aggressively, there’s a risk of over-tightening the market when the economy is weakening, stalling the recovery.”
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