3/10/06 Happenings
The number of homes entering some stage of foreclosure -- from notice of default to bank ownership -- increased 45% in January from the same period a year earlier, according to Irvine, Calif.-based RealtyTrac. That was one new foreclosure for every 1,117 U.S. households.
The number of foreclosures is still low on a historical basis, but it has been rising steadily over the past year, RealtyTrac reported. Job 3/10/06 Happenings
Japan's central bank scrapped itssuper-loose monetary policy on Thursday but --reflecting concerns about fallout for world marketsand the domestic economy -- said it will keepshort-term interest rates around zero for now.
Fueled by mortgage borrowing, U.S. households' debt increased 11.7% to a record $11.5 trillion in 2005,the fastest growth since 1985, the Federal Reservereported Thursday. Total financial debt in the U.S.economy grew 9.5% to a record $26.4 trillion in 2005, the biggest increase since 1986, the Fed said in itsquarterly flow of funds report. Corporate borrowing increased 7.8% to $8.4 trillion, the biggest increase since 2000. Net worth of U.S. households - assets minus liabilities - increased 8% to a record $52.1 trillion at the end of 2005. It was the slowest growthin net worth since a 4% decline in 2002.
King Pharmaceuticals, Inc. and Palatin Technologies, Inc. announced yesterday that a scientific presentation will be given at the International Society for the Study of Women's Sexual Health (ISSWSH) annual meeting on Friday, March 10, 2006 at 7 A.M. at the Marriott Lisbon Hotel in Lisbon, Portugal.
The session, titled "Advances in the Development of Pharmacologic Treatment for Female Sexual Dysfunction", will be moderated by Dr. Cindy Meston, PhD, Associate Professor of Clinical Psychology at the University of Texas - Austin. Presentations will be made by James Pfaus, PhD, Professor in the Center for Studies in Behavioral Neurobiology, Department of Psychology at Concordia University in Montreal, Canada, and Michael A. Perelman, PhD, Co-Director of the Human Sexuality Program, Payne Whitney Clinic of New York Presbyterian Hospital in New York City, and Clinical Associate Professor of Psychology at Weill Medical College of Cornell University, with a joint appointment at New York Presbyterian Hospital.
This presentation to healthcare professionals dedicated to the effective treatment of female sexual dysfunction (FSD) will cover emerging therapies for the treatment of FSD and the previously disclosed data from a clinical trial evaluating the effects of bremelanotide on pre-menopausal women diagnosed with FSD. Additionally, Michael A. Perelman will present a poster at the meeting, detailing the same information presented at the scientific session, titled "The Potential Role of Bremelanotide (PT-141) as a Pharmacologic Intervention for FSD."
Apple Computer is setting up a technical support center in Bangalore, India, according to a report Thursday in The Times of India.
The paper said Cupertino-based Apple will hire 1,500 to staff the technical center by the end of this year, and have 3,000 staff at the end of next year.
The bids for both Knight Ridder and Univision are in the process of getting finalized.
Americans imported $68.5 billion more in goods and services than they exported at the start of the year, up 5.3 percent from December, the Commerce Department in Washington said; it was the largest deficit since October, when the gap swelled to $67.8 billion.
A 3.5 percent jump in imports in January appears to reflect the sharply higher consumer spending during the month and the rising prices of oil, gasoline and other energy products.
Imports of automobiles and car parts increased 5.3 percent during the month, and the country spent 4.3 percent more on petroleum-based imports.
Exports were up 2.5 percent from December, with soybean shipments doubling and airplane sales up 44 percent. But sales of most other American goods and services changed only modestly in January.
The closely-watched U.S. trade deficit with China jumped almost 10 percent in January, to $17.9 billion. As an aside, Chinese companies operate ports at Long Beach and the LA area. I guess the Chinese are not as toxic as the folks from Dubai. Listening to Sen. Shelby explain why
the heat was on Dubai, he explained that Bush didn't explain the situation well enough to satisfy his base. I suggest Shelby get over his nose being out of joint. Someone should take him over their shoulder and burp him.
According to the Detroit Free Press, in January, GM set aside at least $3.6 billion, or $2.3 billion after taxes, to pay for retirement benefits for Delphi workers.
GM and the UAW have been in discussions on an early-retirement package that would create job openings for Delphi workers, UAW local union leaders said. About 40,000 of GM's more than 100,000 U.S. hourly workers are eligible to retire, and many are eager for a buyout package.
Thursday, March 09, 2006
Changing Times
3/9/06 Changing Times
Bank of Japan Governor Toshihiko Fukui has proposed scrapping the central banks' loose monetary policy, according to Japanese media reports. The report circulated after the BoJ concluded its two-day policy board meeting in Tokyo.
According to the WSJ, Delphi and GM are nearing agreement on the broad points of a potential deal with the UAW that could encourage early retirement for thousands of workers and pave the way for Delphi to shrink its work force. This is a significant step towards the restructuring of GM and paves the way for avoiding labor strife as well as on-going cost-cutting for both GM and Delphi. The importance of this agreement cannot be stated strongly enough. It is a milestone for GM and Delphi.
According to the Financial Times, Dubai has received approaches to sell the 5 U.S. port terminals. Mohammed Sharaf, chief executive of Dubai Ports World, which bought the assets from Britain’s P&O in a deal that closed yesterday, continued to insist that the operations would not be sold. He said in an interview with the Financial Times: “We have not even thought of that yet. We have a business to run – the USA is part of it.”
Mr Sharaf acknowledged, however, that the US facilities were a small part of the deal and less profitable than other P&O container terminals.
Benjamin Franklin: "By failing to prepare, you are preparing to fail."
Bank of Japan Governor Toshihiko Fukui has proposed scrapping the central banks' loose monetary policy, according to Japanese media reports. The report circulated after the BoJ concluded its two-day policy board meeting in Tokyo.
According to the WSJ, Delphi and GM are nearing agreement on the broad points of a potential deal with the UAW that could encourage early retirement for thousands of workers and pave the way for Delphi to shrink its work force. This is a significant step towards the restructuring of GM and paves the way for avoiding labor strife as well as on-going cost-cutting for both GM and Delphi. The importance of this agreement cannot be stated strongly enough. It is a milestone for GM and Delphi.
According to the Financial Times, Dubai has received approaches to sell the 5 U.S. port terminals. Mohammed Sharaf, chief executive of Dubai Ports World, which bought the assets from Britain’s P&O in a deal that closed yesterday, continued to insist that the operations would not be sold. He said in an interview with the Financial Times: “We have not even thought of that yet. We have a business to run – the USA is part of it.”
Mr Sharaf acknowledged, however, that the US facilities were a small part of the deal and less profitable than other P&O container terminals.
Benjamin Franklin: "By failing to prepare, you are preparing to fail."
Wednesday, March 08, 2006
Workers
3/8/06 Workers
The Pew Center estimates that there are 11.5 million to 12 million illegal immigrants in the U.S. with about 500,000 arriving here each year since 2000. In addition, they figure that 1 in 20 workers in the U.S. is here illegally.
Since we invaded Iraq in March 2003, over 2,300 of our fighting men and women have been killed and over 20,000 wounded.
GM is shifting out of defined pension benefit plans to 401K plans for its 42,000 salried workers. GM will contribute 4% of annual base salary to a 401K plan. Between the savings from the reduction in health care benefits and the pension cost savings, GM will reduce its cost for salaried workers by $1 billion annually. In addition, by year-end 2006, its pension liability will be cut by $1.6 billion. Those hired after Jan. 1, 2001, or about 10% of GM's U.S. white-collar workforce, will shift to a 401(k) program from a more traditional pension plan. Salaried employees hired before Jan. 1, 2001, or about 90% of the U.S. workforce, will shift to a new pension that is based on a simpler formula. However, the number of workers in that plan will decline as years pass, and a greater percentage of the salaried workforce will be enrolled in the new 401(k) program. GM's revised plans do not affect the benefits of GM's current U.S. salaried retirees or the vested benefits of former employees working elsewhere. Pension benefits earned prior to the transition date to the new plan will be preserved.
I expect Norinchukin Bank will join Cerberus and Citigroup and invest at least $1 billion in the purchase of 51% of General Motors Acceptance Corp. As I stated previously, the addition of Norinchukin should materially improve the credit rating of GMAC and thereby lower its borrowing costs.
Yesterday, 2-year Treasury bond yields moved above 4.75%. It is not surprising to find market strategists looking for a more defensive posture in equities. Most investors are unnerved by the growing disparity between advancing and declining issues. As such, large cap stocks are in greater demand, such as, Microsoft, Cisco, and even GM.
The Pew Center estimates that there are 11.5 million to 12 million illegal immigrants in the U.S. with about 500,000 arriving here each year since 2000. In addition, they figure that 1 in 20 workers in the U.S. is here illegally.
Since we invaded Iraq in March 2003, over 2,300 of our fighting men and women have been killed and over 20,000 wounded.
GM is shifting out of defined pension benefit plans to 401K plans for its 42,000 salried workers. GM will contribute 4% of annual base salary to a 401K plan. Between the savings from the reduction in health care benefits and the pension cost savings, GM will reduce its cost for salaried workers by $1 billion annually. In addition, by year-end 2006, its pension liability will be cut by $1.6 billion. Those hired after Jan. 1, 2001, or about 10% of GM's U.S. white-collar workforce, will shift to a 401(k) program from a more traditional pension plan. Salaried employees hired before Jan. 1, 2001, or about 90% of the U.S. workforce, will shift to a new pension that is based on a simpler formula. However, the number of workers in that plan will decline as years pass, and a greater percentage of the salaried workforce will be enrolled in the new 401(k) program. GM's revised plans do not affect the benefits of GM's current U.S. salaried retirees or the vested benefits of former employees working elsewhere. Pension benefits earned prior to the transition date to the new plan will be preserved.
I expect Norinchukin Bank will join Cerberus and Citigroup and invest at least $1 billion in the purchase of 51% of General Motors Acceptance Corp. As I stated previously, the addition of Norinchukin should materially improve the credit rating of GMAC and thereby lower its borrowing costs.
Yesterday, 2-year Treasury bond yields moved above 4.75%. It is not surprising to find market strategists looking for a more defensive posture in equities. Most investors are unnerved by the growing disparity between advancing and declining issues. As such, large cap stocks are in greater demand, such as, Microsoft, Cisco, and even GM.
Tuesday, March 07, 2006
The Yield Curve
3/7/06 The Yield Curve
Yesterday the world of money was flatter, more costly, and less inverted. The 2-year Treasury yield rose to 4.76%. At the same time, the 5-year closed the gap at 4.75%, the 10-year at 4.74%, and the 30-year at 4.72%. Another move like the one yesterday, and the inverted yield curve will be no more. On the other hand, a Treasury that requires an expansion in the debt limit
to function surely will have the $400-$500 billion deficit hit higher numbers with higher interest rates.
All the talk yesterday was on the AT&T - BellSouth deal and the announced 10,000 job cuts to take place in 2007 and 2008. No press was provided to the activities surrounding the proposed health care benefits for GM workers. A substantial change is in the works. U.S. District Judge Robert Cleland has already given preliminary approval to the deal, but he scheduled a hearing to listen to UAW retirees who oppose it. According to the Detroit Free Press, under the proposed settlement, GM hourly retirees would pay monthly contributions, annual deductibles and coinsurance costs for the first time. They would pay a maximum of $752 per family each year for health care, or $370 annually for an individual. About 74,000 of GM's hourly retirees who receive pensions of less than $8,000 a year would be exempt from the new costs. These changes will save GM billions of dollars on an on-going basis.
Henry To: "The only source of funding (with the European Central Bank tightening and being hawkish as well) left in the world today and that is holding the financial market together is the Yen - and given that the Yen carry trade is now in danger of ending, there is a good chance that liquidity will literally "fall off the cliff" within the next couple of months." Just a short comment. I believe Henry To is one of the most astute financial observers. In addition, he puts his money where his mouth is.
Yesterday's trading saw particularly heavy volume. By the end of the day, there were significantly less new high and many more new lows- not an auspicious start to the week.
Mike Shedlock: "Accu-Weather.com meteorologists have warned oceanic conditions similar to those that triggered the ruinous "Dust Bowl" drought again appear to be in place. Conditions similar to those that led to 1930s drought.The exceptionally warm Atlantic waters that played a major role in the record-breaking 2005 hurricane season, coupled with cooler-than-normal Pacific waters, are weakening and changing the course of a low-level jet stream that normally channels moisture into the Great Plains."
Yesterday the world of money was flatter, more costly, and less inverted. The 2-year Treasury yield rose to 4.76%. At the same time, the 5-year closed the gap at 4.75%, the 10-year at 4.74%, and the 30-year at 4.72%. Another move like the one yesterday, and the inverted yield curve will be no more. On the other hand, a Treasury that requires an expansion in the debt limit
to function surely will have the $400-$500 billion deficit hit higher numbers with higher interest rates.
All the talk yesterday was on the AT&T - BellSouth deal and the announced 10,000 job cuts to take place in 2007 and 2008. No press was provided to the activities surrounding the proposed health care benefits for GM workers. A substantial change is in the works. U.S. District Judge Robert Cleland has already given preliminary approval to the deal, but he scheduled a hearing to listen to UAW retirees who oppose it. According to the Detroit Free Press, under the proposed settlement, GM hourly retirees would pay monthly contributions, annual deductibles and coinsurance costs for the first time. They would pay a maximum of $752 per family each year for health care, or $370 annually for an individual. About 74,000 of GM's hourly retirees who receive pensions of less than $8,000 a year would be exempt from the new costs. These changes will save GM billions of dollars on an on-going basis.
Henry To: "The only source of funding (with the European Central Bank tightening and being hawkish as well) left in the world today and that is holding the financial market together is the Yen - and given that the Yen carry trade is now in danger of ending, there is a good chance that liquidity will literally "fall off the cliff" within the next couple of months." Just a short comment. I believe Henry To is one of the most astute financial observers. In addition, he puts his money where his mouth is.
Yesterday's trading saw particularly heavy volume. By the end of the day, there were significantly less new high and many more new lows- not an auspicious start to the week.
Mike Shedlock: "Accu-Weather.com meteorologists have warned oceanic conditions similar to those that triggered the ruinous "Dust Bowl" drought again appear to be in place. Conditions similar to those that led to 1930s drought.The exceptionally warm Atlantic waters that played a major role in the record-breaking 2005 hurricane season, coupled with cooler-than-normal Pacific waters, are weakening and changing the course of a low-level jet stream that normally channels moisture into the Great Plains."
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Monday, March 06, 2006
Pieces Falling Into Place
3/6/06 Pieces Falling Into Place
In 1984, AT&T was broken up into separate companies. One of those pieces, BellSouth, is being purchased for $67 billion or $37 per share. It will bring Cingular Wireless under one roof. The new combination will also create thousands of job cuts. When Cingular purchased AT&T wireless, 7,000 workers lost their jobs.
You won't hear it from Wall St. analysts but the pieces are falling into place at GM. Over the weekend, the company announced selling 17.4% of the 20.4% stake it has held in Suzuki for the past 25 years for $2 billion. Today is GM's board meeting. They will give preliminary approval to the Cerberus/Citigroup purchase of GMAC for $11 billion. In addition, the board will give preliminary approval to provide financial packages to 20,000 retirement-eligible workers eager to accept such an arrangement. This will make space available to Delphi workers to fill spots vacated by the retirees. It is important to note that, at the end of 2005, GM's pension fund was overfunded by $6 billion, a point rarely pointed out by the financial media or analysts.
A frequent trading strategy has been to short GM common stock and buy GMAC bonds. At their prresent prices, in my view, it makes more sense to buy both the bonds and the common. From here on out, the news on GM will turn much more positive-- as it has recently with AT&T. Important world-wide brands have a way of having many lives.
In 1984, AT&T was broken up into separate companies. One of those pieces, BellSouth, is being purchased for $67 billion or $37 per share. It will bring Cingular Wireless under one roof. The new combination will also create thousands of job cuts. When Cingular purchased AT&T wireless, 7,000 workers lost their jobs.
You won't hear it from Wall St. analysts but the pieces are falling into place at GM. Over the weekend, the company announced selling 17.4% of the 20.4% stake it has held in Suzuki for the past 25 years for $2 billion. Today is GM's board meeting. They will give preliminary approval to the Cerberus/Citigroup purchase of GMAC for $11 billion. In addition, the board will give preliminary approval to provide financial packages to 20,000 retirement-eligible workers eager to accept such an arrangement. This will make space available to Delphi workers to fill spots vacated by the retirees. It is important to note that, at the end of 2005, GM's pension fund was overfunded by $6 billion, a point rarely pointed out by the financial media or analysts.
A frequent trading strategy has been to short GM common stock and buy GMAC bonds. At their prresent prices, in my view, it makes more sense to buy both the bonds and the common. From here on out, the news on GM will turn much more positive-- as it has recently with AT&T. Important world-wide brands have a way of having many lives.
Sunday, March 05, 2006
Life In America
3/5/06 Life In America
The Washington Post relates that, according to the Federal Reserve's Board's Survey of Consumer Finances, "it has about $3,800 in the bank. No one has a retirement account, and the neighbors who do only have about $35,000 in theirs. Mutual funds? Stocks? Bonds? Nope. The house is worth $160,000, but the family owes $95,000 on it to the bank. The breadwinners make more than $43,000 a year but can't manage to pay off a $2,200 credit card balance." That's quite a picture. What does that tell you about the present and the future in this country? We're strapped and, in actuality, that does not tell the whole story. Each American family is on the hook for its share of the U.S. $8+ trillion national debt and the $40+ trillion in benefits for Social Security, Medicare, and Medicaid.
The Washington Post relates that, according to the Federal Reserve's Board's Survey of Consumer Finances, "it has about $3,800 in the bank. No one has a retirement account, and the neighbors who do only have about $35,000 in theirs. Mutual funds? Stocks? Bonds? Nope. The house is worth $160,000, but the family owes $95,000 on it to the bank. The breadwinners make more than $43,000 a year but can't manage to pay off a $2,200 credit card balance." That's quite a picture. What does that tell you about the present and the future in this country? We're strapped and, in actuality, that does not tell the whole story. Each American family is on the hook for its share of the U.S. $8+ trillion national debt and the $40+ trillion in benefits for Social Security, Medicare, and Medicaid.
LNG imports tripled in the '90s, rising to 226 billion cubic feet per year by 2000.
They nearly tripled again by 2004, climbing to 652 billion cubic feet, or 3 percent of the country's total natural-gas consumption.
The following is a sign of the times. I have written about the tarsands in Canada. This week something quite remarkable took place. The Houston Chronicle aptly described the happenings.
Enbridge, a Calgary-based oil delivery and storage company, opened the taps to its Spearhead Pipeline, a 650-mile stretch of steel from Chicago to Cushing, and the first western Canada crude sloshed into the company's mammoth Cushing terminal early Thursday.
"The moment was more than two years in the making for Enbridge, which is rapidly expanding its Cushing terminal with new storage tanks that will add another 3.5 million barrels of oil space to the 10.3-million-barrel capacity it already has. Enbridge completed four new 575,000-barrel storage tanks in 2005.
While oil flowing through an underground pipeline may seem mundane, the $190 million Spearhead project has special significance.
That's because Enbridge reversed the flow of the Spearhead pipeline, which is also something of a reversal of fortunes.
For years the pipe, which used to be owned by BP, carried Gulf of Mexico crude to northern markets that needed the oil. But as the Gulf slowly but surely plays out, and Canada's oil sands production picks up steam, the crude is flowing in a different direction.
It's a sign of the times. Canada, which is already the biggest exporter of oil to the U.S., outranking Mexico, Venezuela and Saudi Arabia, will likely double its oil production in the next decade, thanks to production from the oil sands." Significantly, Cevron just announced five leases in the oilsands region of Canada. Is it wiser to buy EnCana and Enbridge? Time will tell. If I were running a U.S. major, I'd be considering EnCana for sure.
The wonderful thing about the stock market is the daily challenge. There is no room for carelessness. Tim Wood points out currently "that yes, the Secondary Trend is positive. But, with deteriorating internals this Secondary advance is obviously beginning to get just a bit tired." At the same time, last week, Mike Burk points out that the Dow Jones Transports, the Russell 2000, and the S&P midcap all made all-time highs. The market is ebbing and flowing, as it always does, and requires the nimble investor to pick the low-hanging fruits. It is not a time to be smug. You will be carried out.
The more things change the more they remain the same. Greenmail may have been buried but there are rumblings from the grave. We have Icahn at Warner Communications and Peltz at Wendy's and Heinz. What do they have to add to the mix? Any board of directors who gasps from this type of investor should be removed. In the whole of Wendy's, Baja Fresh isn't even a pimple on an elephant's ass. Tim Horton's is where the action is.
As for the Fed, they help to create inflation as M3 continues to expand by an 8% growth rate. Maybe more attention could be focused on unsound asset-based lending, which clearly will not be offset in the derivatives market. Anyone who thinks the derivatives market is akin to aspirin for a headache is mistaken. Derivatives create complacency, and the latter compounds a dysfunctional economy. Just look at the typical American family trying to make ends meet.
Saturday, March 04, 2006
Cash Flow
3/4/06 Cash Flow
Carl Swenlin points out that Rydex cash flow isbearish: "since November, bear plus money market fundscash flow has been flat to slightly rising,demonstrating clearly that the bears have beenrelatively patient. On the other hand, cash flow for bull plus sectorfunds has decreased dramatically. This means thatmoney has been moving out of bullish funds even thoughprices have moved higher. This is almost always a bad sign. "
Bloomberg News(R) today reported on theresults of the latest Bloomberg/Los Angeles Times national public opinionpoll, which shows that 54 percent of American's disapprove of President Bush'shandling of terrorism -- marking a significant reversal in public sentimentfrom a year ago. According to the Bloomberg/Los Angeles Times poll, support for Bush waneddue to the administration's defense of the Dubai port deal and Americanfrustration with the Iraq war. The Bloomberg/Los Angeles Times poll revealedthat 58 percent of respondents oppose allowing DP World, Dubai's state-ownedport operator, to acquire facilities at six U.S. ports. On Iraq, Bush has anapproval rating of 34 percent in the Bloomberg/Los Angeles Times poll, downseven points since last month. In addition, the Bloomberg/Los Angeles Times poll revealed that 64 percentof Americans think the country is headed in the wrong direction.
Carl Swenlin points out that Rydex cash flow isbearish: "since November, bear plus money market fundscash flow has been flat to slightly rising,demonstrating clearly that the bears have beenrelatively patient. On the other hand, cash flow for bull plus sectorfunds has decreased dramatically. This means thatmoney has been moving out of bullish funds even thoughprices have moved higher. This is almost always a bad sign. "
Bloomberg News(R) today reported on theresults of the latest Bloomberg/Los Angeles Times national public opinionpoll, which shows that 54 percent of American's disapprove of President Bush'shandling of terrorism -- marking a significant reversal in public sentimentfrom a year ago. According to the Bloomberg/Los Angeles Times poll, support for Bush waneddue to the administration's defense of the Dubai port deal and Americanfrustration with the Iraq war. The Bloomberg/Los Angeles Times poll revealedthat 58 percent of respondents oppose allowing DP World, Dubai's state-ownedport operator, to acquire facilities at six U.S. ports. On Iraq, Bush has anapproval rating of 34 percent in the Bloomberg/Los Angeles Times poll, downseven points since last month. In addition, the Bloomberg/Los Angeles Times poll revealed that 64 percentof Americans think the country is headed in the wrong direction.
Thursday, March 02, 2006
Stubborn, Stupid, Or Smart
3/3/06 Stubborn, Stupid, Smart Or A little Of All Three
It takes a certain mentality and a certain personality to buy into a falling knife, so to speak. When a stock is under tremendous selling pressure, why be a hero and stick one's neck out?
It depends on the situation. One needs to pick the spots. When the noise gets louder and louder, and I cannot hear myself think, then I start to take a serious look at a stock. There was Merck and Vioxx and the stock got creamed-- only to rally 50%. There was McDonald's and the unhealthy food. The stock has been a three bagger from the bottom. Pfizer did not have a friend in the world and has since rallied about 25%. So why choose GM at $20+? There are catalysts and it is in a lot of interests to get this puppy back on its feet. KK is out a bundle. Next week York goes on the board-- just in time to consider the Cerberus/Citi bid for 51% of GMAC. Despite what Goldman Sachs said, this sale will take place. The delay is a little negotiating. Then there is the commercial-mortgage business. That too will be sold. GM's CEO stated the company has $19 billion in liquidity outside of GMAC. The new SUVs are a hit. They carry good profit margins. Things are improving in Europe and at Saab. China's business is on the uptake and highly profitable. Sales are advancing nicely in India. Have you ever taken a look at GM's real estate portfolio? You can't buy at the bottom. Consequently, when buying against the grain, there will be a loss in the beginning. Buying at lower prices is not for everyone. Do you remember the scare with J&J's recall as well as the recall from Intel? What do all these prior examples have in common? The companies are leaders in their field.
You think the auto business is not important in the U.S? Think again. It's the domino theory and it invades many walks of life and many communities. When a worker in the industry nad/or dependent on the industry gets a paycheck, that money can turn over 7 times. You get my point? The auto industry has tenacles-- and large ones. GM, Ford, and Chrysler are not going away. They are in the process of reinventing themselves. That's a good thing.
Planned layoffs by U.S. corporations dropped 15.5% in February to 87,437, the lowest level since October, according to a monthly tally compiled by Challenger Gray & Christmas. Planned job cuts were down 19% from a year ago. Year-to-date layoff announcements are down 4.9%. Layoffs had increased in each of the four final months of 2005 before falling in January and February.
It takes a certain mentality and a certain personality to buy into a falling knife, so to speak. When a stock is under tremendous selling pressure, why be a hero and stick one's neck out?
It depends on the situation. One needs to pick the spots. When the noise gets louder and louder, and I cannot hear myself think, then I start to take a serious look at a stock. There was Merck and Vioxx and the stock got creamed-- only to rally 50%. There was McDonald's and the unhealthy food. The stock has been a three bagger from the bottom. Pfizer did not have a friend in the world and has since rallied about 25%. So why choose GM at $20+? There are catalysts and it is in a lot of interests to get this puppy back on its feet. KK is out a bundle. Next week York goes on the board-- just in time to consider the Cerberus/Citi bid for 51% of GMAC. Despite what Goldman Sachs said, this sale will take place. The delay is a little negotiating. Then there is the commercial-mortgage business. That too will be sold. GM's CEO stated the company has $19 billion in liquidity outside of GMAC. The new SUVs are a hit. They carry good profit margins. Things are improving in Europe and at Saab. China's business is on the uptake and highly profitable. Sales are advancing nicely in India. Have you ever taken a look at GM's real estate portfolio? You can't buy at the bottom. Consequently, when buying against the grain, there will be a loss in the beginning. Buying at lower prices is not for everyone. Do you remember the scare with J&J's recall as well as the recall from Intel? What do all these prior examples have in common? The companies are leaders in their field.
You think the auto business is not important in the U.S? Think again. It's the domino theory and it invades many walks of life and many communities. When a worker in the industry nad/or dependent on the industry gets a paycheck, that money can turn over 7 times. You get my point? The auto industry has tenacles-- and large ones. GM, Ford, and Chrysler are not going away. They are in the process of reinventing themselves. That's a good thing.
Estimates by Autodata Corp. of Woodcliff Lake, N.J., show that Chrysler has led the industry in incentive spending the past two months. Chrysler, it said, bested former incentives champ General Motors Corp. in February by nearly $800 per vehicle on average, spending about $3,881 in incentives for each new vehicle.
The consumer Web site Edmunds.com, meanwhile, said its data shows that Chrysler has been leading in incentive spending the past six months. And the site shows Chrysler leading GM by more than $1,000 per vehicle in incentives.
Planned layoffs by U.S. corporations dropped 15.5% in February to 87,437, the lowest level since October, according to a monthly tally compiled by Challenger Gray & Christmas. Planned job cuts were down 19% from a year ago. Year-to-date layoff announcements are down 4.9%. Layoffs had increased in each of the four final months of 2005 before falling in January and February.
Wednesday, March 01, 2006
Behind The Numbers
3/2/06 Behind The Numbers
When it comes to sales for GM, all revenue is not the same. Retail carries a bigger profit than a fleet sale and Tahoe revenue has higher profit margins than seen on a car. As such, the story is not simply that the company's Feb. sales were down 2.5%. Retail sales were 1% higher and light truck sales rose 5.3%. Overall, profit margins improved from one year ago. Emphasizing the changes, GM's sales of redesigned large sport-utility vehicles are doing ``very well'' this year and meeting the company's plans, Chief Executive Officer Rick Wagoner said in Geneva.
`All the new vehicles, especially the large SUVs, are doing what they are supposed to do,'' he said.
The average U.S. home increased 12.95% in value in 2005, the Office of Federal Housing Enterprise Oversight said Wednesday. The typical home's value increased 2.9% in the fourth quarter of 2005 from the third quarter. "Despite recent indications that a slowdown may be forthcoming, house price appreciation during 2005 continued to hover at near-record levels," said OFHEO Chief Economist Patrick Lawler.
The personal savings rate fell to negative 0.7%, the lowest since August. Savings have been negative for eight of the past 10 months.
Factory activity in the United States accelerated in February, the Institute for Supply Management reported Wednesday. The ISM index rose to 56.7% in February from 54.8% in January.
Richard Daughty: "In 1995 the banks' reserves were about $60 billion, insuring against $206 billion in loans and leases, and $87 billion in savings. M3 was $4.3 trillion.
Now, in 2006, notice the amazing difference! Today, required reserves are only a measly $41 billion (down almost 33%!) as a cushion against a whopping $5,540 billion in loans and leases (2,700 percent bigger than in 1995) and an astonishing $5,150 billion in savings (5,900 percent bigger)! M3 is now $10.3 trillion."
With GM closing below $20, the company's market cap now trails that of Fiat. Hard to believe!
When it comes to sales for GM, all revenue is not the same. Retail carries a bigger profit than a fleet sale and Tahoe revenue has higher profit margins than seen on a car. As such, the story is not simply that the company's Feb. sales were down 2.5%. Retail sales were 1% higher and light truck sales rose 5.3%. Overall, profit margins improved from one year ago. Emphasizing the changes, GM's sales of redesigned large sport-utility vehicles are doing ``very well'' this year and meeting the company's plans, Chief Executive Officer Rick Wagoner said in Geneva.
`All the new vehicles, especially the large SUVs, are doing what they are supposed to do,'' he said.
The average U.S. home increased 12.95% in value in 2005, the Office of Federal Housing Enterprise Oversight said Wednesday. The typical home's value increased 2.9% in the fourth quarter of 2005 from the third quarter. "Despite recent indications that a slowdown may be forthcoming, house price appreciation during 2005 continued to hover at near-record levels," said OFHEO Chief Economist Patrick Lawler.
The personal savings rate fell to negative 0.7%, the lowest since August. Savings have been negative for eight of the past 10 months.
Factory activity in the United States accelerated in February, the Institute for Supply Management reported Wednesday. The ISM index rose to 56.7% in February from 54.8% in January.
Richard Daughty: "In 1995 the banks' reserves were about $60 billion, insuring against $206 billion in loans and leases, and $87 billion in savings. M3 was $4.3 trillion.
Now, in 2006, notice the amazing difference! Today, required reserves are only a measly $41 billion (down almost 33%!) as a cushion against a whopping $5,540 billion in loans and leases (2,700 percent bigger than in 1995) and an astonishing $5,150 billion in savings (5,900 percent bigger)! M3 is now $10.3 trillion."
With GM closing below $20, the company's market cap now trails that of Fiat. Hard to believe!
Tuesday, February 28, 2006
February Results
3/1/06 February Results
GM's February incentives were 17 percent lower than in January and down 10 percent from February 2005, according to Autodata Corp.
U.S. February Chicago PMI came in at 54.9 vs. 58.5 for January.
Timothy Geithner, NY Fed President: ""We still face considerable uncertainty about how market liquidity will behave in the context of a major deterioration in credit conditions or a sharp increase in volatility in equity and credit spreads."
GM's February incentives were 17 percent lower than in January and down 10 percent from February 2005, according to Autodata Corp.
U.S. February Chicago PMI came in at 54.9 vs. 58.5 for January.
Timothy Geithner, NY Fed President: ""We still face considerable uncertainty about how market liquidity will behave in the context of a major deterioration in credit conditions or a sharp increase in volatility in equity and credit spreads."
The Conference Board Consumer Confidence Index for February dropped to 101.7 from the prior month's 106.8.
Henry To: "Total short interest on the NYSE for the month ending February 15, 2006 declined 423 million shares - a record monthly decrease. Over the last three months, NYSE short interest decreased 8.32% - the highest rate of decrease since September 2003. Given the maturity of this cyclical bull market, this does not bode well for the stock market going forward. Should there be a general market decline, there will be much less support than what we have previously experienced."
U.S. January existing home sales declined 2.89%, the lowest rate in 2 years. Importantly, inventory of unsold existing homes rose to 5.3 months.
Even though the price of gold declined in February, the metal still finished the month
above $563 per ounce, a pretty good showing.
Crude remains above $60 a barrel. Just consider the following: if Saudi Arabia pumps one barrel of water for each two barrels of oil, and their spare capacity is essentially sour crude, do you think this is a warning sign their reserves may be in question?
The U.S. claims that 4th quarter GDP rose 1.6%. Isn't it possible that the growth was due to price inflation and therefore there was truly negative growth?
Gneral Motors Vice Chairman Bob Lutz: "I would rather have 25 percent share with low incentives, lots of retail, low daily rental than 28 or 29 percent with heavy rebates, heavy daily rental and all that business that gets you market share numbers but no profitability." In January, the company's market share in the U.S was 25.6%. It should be about the same for February-- even with the 17% monthly decline in incentives. GM's inventory is under control and the profit margins are improving. That has not been reflected in the price of the stock. As the trends continue to improve, the share price will follow in a positive direction.
Yesterday, EnCana Corp completed the $1.42 billion sale of its oil and pipeline interests in Ecuador to Andes Petroleum Company, a joint venture of Chinese oil companies. EnCana announced the deal, which covers proved reserves that totaled 143 million barrels at the end of 2004, last September.
Henry To: "The Market Vane's Bullish Consensus for copper hit 95% on February 6th, and was at 90% as recently as February 9th - suggesting that virtually all shorts have been squeezed from the commodity (it is interesting to note that copper failed to rally despite the production stoppages at Freeport's Papua mines last Wednesday)."
According to the Detroit Free Press, GM also is close to finalizing the sale of a majority of its separate commercial-mortgage business to a consortium of buyers, Simonetti, a spokeman for GM, said. The company stated in August that it would sell a 60% stake in the business.
The GM division, which last made a profit in Europe in 1999, narrowed its loss in the region last year to $375 million from $742 million. GM's CEO hopes to break-even or do better than that in Europe this year.
Monday, February 27, 2006
Tides
2/28/06 Tides
In January, there was a 5.2 month supply of new homes on the market. The total was 528,000
homes for sale. Combine that with the affordability index at a 15-year low, and you have the makings of the tide turning.
Yesterday, during regular trading hours, the S&P 500 hit a 5-year high.
Interestingly, GM's vice chairman of global product development, Bob Lutz, stated
"Saab has really turned the corner. It is close to making money as a brand." This is but one more indication of GM turning the tide positively for stockholders. By the time analysts are on board, I believe the shares will trade 50% higher than present levels. It reminds me a great deal of McDonald's at $12+ when the latter did not have a friend in the world. GM and McDonald's are two of the world's most valuable brands. Sometimes the biggest bargains are right under your nose (no pun intended).
April natural gas closed at $6.789 per million British thermal units, down 52.4 cents, or 7.2%. The contract marked its lowest closing level since mid-March 2005.
Crude closed down $2 a barrel at $60+, still a lofty level heading into March.
According to today's Financial Times, GM is putting pressure on its negotiators and investment banks to reach an outline agreement to sell a majority stake in the carmaker's finance unit before a board meeting on Monday. According to people close to the company, a deal could be worth about $11.5 billion, exceeding the present market cap for GM shares.
General Motors Corp. expects an increase in its European market share this year, the automaker's Europe chief, Carl-Peter Forster, said today. "We are certainly (looking) for share growth in Cadillac. Saab could grow or at least maintain its share. Chevrolet most probably is up for another year of strong growth. Put it all together, most probably we will grow share," Forster said. The Opel brand, its largest in Europe, is looking for more profitable sales and will be moving away from some low-margin business, he said. The auto industry in Europe, overall, could see a slightly better year in 2006, Forster said. "Slightly better means 3 percent growth or so."
In March 2001, according to the BLS, employment in the real estate and mortgage industry stood at 283,000. The peak was 504,000 in October 2005. Since then, it has slowly trended downward.
In January, there was a 5.2 month supply of new homes on the market. The total was 528,000
homes for sale. Combine that with the affordability index at a 15-year low, and you have the makings of the tide turning.
Yesterday, during regular trading hours, the S&P 500 hit a 5-year high.
Interestingly, GM's vice chairman of global product development, Bob Lutz, stated
"Saab has really turned the corner. It is close to making money as a brand." This is but one more indication of GM turning the tide positively for stockholders. By the time analysts are on board, I believe the shares will trade 50% higher than present levels. It reminds me a great deal of McDonald's at $12+ when the latter did not have a friend in the world. GM and McDonald's are two of the world's most valuable brands. Sometimes the biggest bargains are right under your nose (no pun intended).
April natural gas closed at $6.789 per million British thermal units, down 52.4 cents, or 7.2%. The contract marked its lowest closing level since mid-March 2005.
Crude closed down $2 a barrel at $60+, still a lofty level heading into March.
According to today's Financial Times, GM is putting pressure on its negotiators and investment banks to reach an outline agreement to sell a majority stake in the carmaker's finance unit before a board meeting on Monday. According to people close to the company, a deal could be worth about $11.5 billion, exceeding the present market cap for GM shares.
General Motors Corp. expects an increase in its European market share this year, the automaker's Europe chief, Carl-Peter Forster, said today. "We are certainly (looking) for share growth in Cadillac. Saab could grow or at least maintain its share. Chevrolet most probably is up for another year of strong growth. Put it all together, most probably we will grow share," Forster said. The Opel brand, its largest in Europe, is looking for more profitable sales and will be moving away from some low-margin business, he said. The auto industry in Europe, overall, could see a slightly better year in 2006, Forster said. "Slightly better means 3 percent growth or so."
In March 2001, according to the BLS, employment in the real estate and mortgage industry stood at 283,000. The peak was 504,000 in October 2005. Since then, it has slowly trended downward.
GM And China
2/27/06 GM And China
GM's combined China sales rose 35% to a record in 2005. Importantly, the company finished the year with a market share in China of 11.2%, up almost a full two percentage points over 2004. It is significant to note the growth potential in China's automotive market. In the U.S., for every 1,000 drivers, there are 700 people who own a car. By comparison, in China it is a mere 20 that own a car.
Shanghai General Motors Co.'s sales will increase about 20 percent this year, down from a 29 percent gain in 2005, Chris Gubbey, executive vice president at Shanghai GM, said in a recent interview. China's passenger car market may grow by 16 percent this year after increasing by 23 percent last year, he said.
The General Motors-China relationship dates back more than eight decades. GM has approximately 13,000 employees in China and operates seven joint ventures and two wholly owned foreign enterprises. It has participated in investment of over $2 billion in China. GM, along with its joint ventures, offers one of the broadest lineups of vehicles among foreign automakers in China. Products are sold under the Buick, Chevrolet, Wuling, Cadillac, Opel and Saab nameplates. Shanghai General Motors Co. Ltd. (Shanghai GM) is a 50-50 joint venture with Shanghai Automotive Industry Corporation Group (SAIC), a leading passenger car manufacturer in China. Shanghai GM was formed in June 1997. GMAC-SAIC Automotive Finance Co., Ltd. is China's first automotive financing company. The joint venture between General Motors Acceptance Corporation (GMAC) and Shanghai Automotive Group Finance Co. Ltd. (SAICFC) provides retail financing for vehicles manufactured by GM's joint ventures with SAIC. It also supports Shanghai GM dealers by providing financing for their vehicle inventories.
With its growing market share in China, and the double digit growth prospects for GM's automotive operations, as a stand alone public entity, I feel confident that GM China would command a P/E ratio exceeding 20 and a market cap of at least $12+ billion. The current $20 price tage for GM stock surely ignores this potential.
General Motors has shifted its worldwide electronics purchasing unit from Warren, Mich., to Shanghai to place it at the hub of China's electronics industry.
The Chevrolet HHR has joined two much more expensive Hummer models as one of the three most accessorized vehicles in the General Motors lineup. A little over 50 percent of the HHRs sold last year were purchased with one or more accessories, GM says. The greater the accessories the greater the profit margins.
General Motors has shifted its worldwide electronics purchasing unit from Warren, Mich., to Shanghai to place it at the hub of China's electronics industry.
The Chevrolet HHR has joined two much more expensive Hummer models as one of the three most accessorized vehicles in the General Motors lineup. A little over 50 percent of the HHRs sold last year were purchased with one or more accessories, GM says. The greater the accessories the greater the profit margins.
John Hussman: "If we split year two of the Presidential Cycle into two periods – the first nine months of the year compared with the final quarter - the patterns become apparent. The average market performance during the period from January through September of each second year of the Presidential Cycle has been roughly flat since 1933. The market has been down during these periods nearly as much as it's been up.
Things have usually been more interesting in the fourth quarter, where the average gain has been 8.7 percent. This is the highest average fourth-quarter return of any of the four years of the cycle, including the last quarter of year three and year four. The fourth quarter of the second year is actually where many third-year rallies are born."
Sunday, February 26, 2006
Developments
2/26/06 Developments
Mike Burk: "In the 1970's, Norman Fosback researched end of month, beginning of month seasonality. He found the last day of the previous month and first four days of the new month had unusually high returns. He would add the second to the last day of the ending month and the fifth day of the new month if they were not Mondays. Monday is the second to the last day of the month so it is does not qualify as part of the trade, but the rest of the week does."
Robert McHugh: "When Iran starts accepting only Euros for oil(3/20), those who have been holding Dollars, or Dollar denominated U.S. financial instruments with the intent to exchange them for oil, will upset the global currency markets by suddenly exchanging them for Euros. Foreign demand for Euros will increase and demand for Dollars will decrease. 49 percent of the U.S. debt is owned by foreign interests. As that U.S. debt is exchanged for oil, via Euros, somebody is going to have to buy excess U.S. debt instruments. That someone will have to be the Fed. They will have to print a ton of Dollars to buy these U.S. debt instruments which will no doubt be unloaded by foreign interests to acquire Euros and Oil. Those excess Dollars will then be exchanged for Euros, driving the value of Dollars down and Euros up."
Chinese carmakers like Chery and Geely captured a quarter of the Chinese market last year, up from less than 10 percent just two years earlier, said Michael Dunne, the president of Automotive Resources Asia, a consulting firm.
"Why the spurt? Small cars powered by gas-sipping engines that start at $4,000," Dunne said.
Raymond Bierzynski, the president of General Motors' Pan Asia Technical Automotive Center in Shanghai, said that gasoline costs were more important to consumers in China than elsewhere because these costs represent a higher share of the low household incomes in China. GM sells its Buick Excelle compact sedan with special, low-rolling-resistance tires in China, which it does not do in any other market and which increases gas mileage by up to 2 percent, he said
Wal-Mart's February same-store sales rose 3.2%.
Mike Burk: "In the 1970's, Norman Fosback researched end of month, beginning of month seasonality. He found the last day of the previous month and first four days of the new month had unusually high returns. He would add the second to the last day of the ending month and the fifth day of the new month if they were not Mondays. Monday is the second to the last day of the month so it is does not qualify as part of the trade, but the rest of the week does."
Robert McHugh: "When Iran starts accepting only Euros for oil(3/20), those who have been holding Dollars, or Dollar denominated U.S. financial instruments with the intent to exchange them for oil, will upset the global currency markets by suddenly exchanging them for Euros. Foreign demand for Euros will increase and demand for Dollars will decrease. 49 percent of the U.S. debt is owned by foreign interests. As that U.S. debt is exchanged for oil, via Euros, somebody is going to have to buy excess U.S. debt instruments. That someone will have to be the Fed. They will have to print a ton of Dollars to buy these U.S. debt instruments which will no doubt be unloaded by foreign interests to acquire Euros and Oil. Those excess Dollars will then be exchanged for Euros, driving the value of Dollars down and Euros up."
Chinese carmakers like Chery and Geely captured a quarter of the Chinese market last year, up from less than 10 percent just two years earlier, said Michael Dunne, the president of Automotive Resources Asia, a consulting firm.
"Why the spurt? Small cars powered by gas-sipping engines that start at $4,000," Dunne said.
Raymond Bierzynski, the president of General Motors' Pan Asia Technical Automotive Center in Shanghai, said that gasoline costs were more important to consumers in China than elsewhere because these costs represent a higher share of the low household incomes in China. GM sells its Buick Excelle compact sedan with special, low-rolling-resistance tires in China, which it does not do in any other market and which increases gas mileage by up to 2 percent, he said
Wal-Mart's February same-store sales rose 3.2%.
Saturday, February 25, 2006
GM
2/25/06 GM
Almost every analyst following GM has a sell recommendation on the shares, which closed at $20 on Friday. As is frequently the case, they are wrong in their assessment. The market capitalization of the stock has not fallen below the value that will achieved in the sale of GMAC, and that sale could be announced any day. The pending Delphi work stoppage will be settled prior to the March 31 deadline. GM is gaining market share with its new vehicles. February sales will be announced on Wednesday. I expect them to be stronger than the most optimistic forecast.The Chevy HHR, Buick Lucerne, Chevy Impala, and the new SUVs have been received extremely well.
When investing, it is vital to consider the risk/reward. In the case og GM shares, I believe they offer the best rewrad with the smallest downside risk of all the stocks in the Dow. In addition, there is always the possibility of another tender offer by Kirk Kerkorian. If I were he, that's what I would be doing on Monday morning. His upside far outweighs the downside.
Almost every analyst following GM has a sell recommendation on the shares, which closed at $20 on Friday. As is frequently the case, they are wrong in their assessment. The market capitalization of the stock has not fallen below the value that will achieved in the sale of GMAC, and that sale could be announced any day. The pending Delphi work stoppage will be settled prior to the March 31 deadline. GM is gaining market share with its new vehicles. February sales will be announced on Wednesday. I expect them to be stronger than the most optimistic forecast.The Chevy HHR, Buick Lucerne, Chevy Impala, and the new SUVs have been received extremely well.
When investing, it is vital to consider the risk/reward. In the case og GM shares, I believe they offer the best rewrad with the smallest downside risk of all the stocks in the Dow. In addition, there is always the possibility of another tender offer by Kirk Kerkorian. If I were he, that's what I would be doing on Monday morning. His upside far outweighs the downside.
Thursday, February 23, 2006
Employment
2/24/06 Employment
Wal-Mart will expand coverage for workers and build more than 50 health clinics in its stores.
The company will allow more workers to become eligible for the lowest cost health plan, cut the waiting period for part-timers and allow their children to be covered. Wal-Mart will more than quadruple the number of clinics after opening nine in Arkansas, Oklahoma, Florida and Indiana in a pilot program.
The Conference Board Help-Wanted Advertising Index
dipped one point in January. The Index now stands at 37. It was 42 one year ago.
Says Ken Goldstein, labor economist at The Conference Board: "Economic
growth may be picking up in the first quarter but the labor market indicators
aren't showing much improvement through January. The economy only generated
about 195,000 new jobs in January. Online ad volume did recover from a
seasonal-related downturn but was no higher in January than in August. Print
ad volume (which is seasonally adjusted) edged down in January. Initial
unemployment claims improved in January but there is a question about how much
of a role the warm weather played. The JOLTS data (Job Opening and Labor
Turnover) remained relatively flat through December. Finally, consumer
sentiment about job prospects over the next six months dipped in January.
Thus, not only are the indicators suggesting modest gains in hiring, but
consumers also do not think more new jobs will start opening up this spring.
All of these data are consistent with readings from the Coincident Economic
Index, which reflected moderate economic growth through January."
Online job ads rebounded sharply in January to 2,162,000 new unduplicated
online job ads posted for the calendar month, according to The Conference
Board Help-Wanted OnLine Data Series(TM). The January total was up 529,000,
an increase of one-third from the December low. January's total was only
slightly higher than the August 2005 monthly peak of 2,131,000. In January,
there were 1.44 online job ads per 100 persons in the U.S. labor force,
compared to 1.09 in December and 1.21 in November.
Initial jobless claims dropped by 20,000 last week to
278,000, the Labor Department said today in Washington.
Continuing claims, which measure how many people remain on
benefit rolls, rose to 2.495 million from 2.454 million, which
was the lowest since February 2001.
Wal-Mart will expand coverage for workers and build more than 50 health clinics in its stores.
The company will allow more workers to become eligible for the lowest cost health plan, cut the waiting period for part-timers and allow their children to be covered. Wal-Mart will more than quadruple the number of clinics after opening nine in Arkansas, Oklahoma, Florida and Indiana in a pilot program.
The Conference Board Help-Wanted Advertising Index
dipped one point in January. The Index now stands at 37. It was 42 one year ago.
Says Ken Goldstein, labor economist at The Conference Board: "Economic
growth may be picking up in the first quarter but the labor market indicators
aren't showing much improvement through January. The economy only generated
about 195,000 new jobs in January. Online ad volume did recover from a
seasonal-related downturn but was no higher in January than in August. Print
ad volume (which is seasonally adjusted) edged down in January. Initial
unemployment claims improved in January but there is a question about how much
of a role the warm weather played. The JOLTS data (Job Opening and Labor
Turnover) remained relatively flat through December. Finally, consumer
sentiment about job prospects over the next six months dipped in January.
Thus, not only are the indicators suggesting modest gains in hiring, but
consumers also do not think more new jobs will start opening up this spring.
All of these data are consistent with readings from the Coincident Economic
Index, which reflected moderate economic growth through January."
Online job ads rebounded sharply in January to 2,162,000 new unduplicated
online job ads posted for the calendar month, according to The Conference
Board Help-Wanted OnLine Data Series(TM). The January total was up 529,000,
an increase of one-third from the December low. January's total was only
slightly higher than the August 2005 monthly peak of 2,131,000. In January,
there were 1.44 online job ads per 100 persons in the U.S. labor force,
compared to 1.09 in December and 1.21 in November.
Initial jobless claims dropped by 20,000 last week to
278,000, the Labor Department said today in Washington.
Continuing claims, which measure how many people remain on
benefit rolls, rose to 2.495 million from 2.454 million, which
was the lowest since February 2001.
Average incomes after adjusting for inflation actually fell from 2001 to 2004, and the growth in net worth was the weakest in a decade, the Federal Reserve reported Thursday.
A senior Dubai Ports executive, Edward H. Bilkey, said the company will move forward with its $6.8 billion purchase of London-based Peninsular & Oriental Steam Navigation Co., which operates in 18 countries; however, Dubai Ports agreed to temporarily segregate the company's U.S. operations, Bilkey expressed bewilderment over the security concerns expressed in Congress.
"The reaction in the United States has occurred in no other country in the world," Bilkey said. "We need to understand the concerns of the people in the U.S. who are worried about this transaction and make sure that they are addressed to the benefit of all parties."
Wednesday, February 22, 2006
Wages And Inflation
2/23/06 Wages And Inflation
The 0.7 percent increase in the January consumer price index followed a 0.1 percent decline in December, the Labor Department said. Excluding food and energy, so-called core prices rose 0.2 percent after a 0.1 percent December gain.
Economists expected a 0.5 percent increase in the consumer price index, based on the median of 68 forecasts in a Bloomberg News survey. Forecasts ranged from increases of 0.2 percent to 0.6 percent. Core prices were forecast to rise 0.2 percent.
Consumer prices were up 4 percent for the 12 months ended in January compared with a 3.4 percent year-over-year gain the previous month. Core prices were 2.1 percent higher compared with a 2.2 percent year-over-year increase in December.
Weekly earnings of workers, adjusted for inflation, fell 0.2 percent in January and were down 0.4 percent in the last 12 months, the Labor Department said. Energy prices rose 5 percent in January, the most since September, after falling 2.1 percent a month earlier. Fuel costs were up 25 percent in the last 12 months. Gasoline prices rose 6.4 percent in January and natural gas costs increased 1.7 percent. Electricity costs rose 5.5 percent, the most ever.
Food prices, which account for about a fifth of the index, rose 0.5 percent in January, the most since April, after rising 0.1 percent. Last month's gain was led by higher prices for fruits and vegetables.
The cost of all goods including cars, apparel and food rose 0.9 percent last month after falling 0.3 percent in December. Goods prices are 3.8 higher than in January 2005. New car prices rose 0.6 percent last month, the most in a year, and the cost of clothing increased 0.3 percent.
Service prices rose 0.5 percent last month and are up 4.1 percent over the last year.
The 0.7 percent increase in the January consumer price index followed a 0.1 percent decline in December, the Labor Department said. Excluding food and energy, so-called core prices rose 0.2 percent after a 0.1 percent December gain.
Economists expected a 0.5 percent increase in the consumer price index, based on the median of 68 forecasts in a Bloomberg News survey. Forecasts ranged from increases of 0.2 percent to 0.6 percent. Core prices were forecast to rise 0.2 percent.
Consumer prices were up 4 percent for the 12 months ended in January compared with a 3.4 percent year-over-year gain the previous month. Core prices were 2.1 percent higher compared with a 2.2 percent year-over-year increase in December.
Weekly earnings of workers, adjusted for inflation, fell 0.2 percent in January and were down 0.4 percent in the last 12 months, the Labor Department said. Energy prices rose 5 percent in January, the most since September, after falling 2.1 percent a month earlier. Fuel costs were up 25 percent in the last 12 months. Gasoline prices rose 6.4 percent in January and natural gas costs increased 1.7 percent. Electricity costs rose 5.5 percent, the most ever.
Food prices, which account for about a fifth of the index, rose 0.5 percent in January, the most since April, after rising 0.1 percent. Last month's gain was led by higher prices for fruits and vegetables.
The cost of all goods including cars, apparel and food rose 0.9 percent last month after falling 0.3 percent in December. Goods prices are 3.8 higher than in January 2005. New car prices rose 0.6 percent last month, the most in a year, and the cost of clothing increased 0.3 percent.
Service prices rose 0.5 percent last month and are up 4.1 percent over the last year.
Average weekly earnings rose by 3.6 percent, seasonally adjusted, from
January 2005 to January 2006. After deflation by the CPI-W, average weekly
earnings decreased by 0.4 percent. Month after month I continue to report that
wages trail inflation. How can the economy be considered healthy with this
ongoing trend?
Toll Brothers is looking for earnings per share between $4.77 and $5.26, and this
suggests only a mild slowdown in the housing market growth. The last few days some
of the homebuilders have seen their stocks rebound nicely. When everyone is
convinced there is a sharp downturn on the way, almost always the crowd is
mistaken in judgment.
Bush: "It's true that a number of Americans have lost jobs because companies
have shifted operations to India," he said in a speech previewing his
trip to India and Pakistan next week. "We must also recognize that
India's growth is creating new opportunities for our businesses and
farmers and workers."
Sprint Nextel cut 2,400 jobs.
Japan's trade deficit was the highest in 25 years.
Christopher Laird: "
The Japanese economy is strengthening enough to cause an unwinding of the massive YEN carry trade. The last time this happened, there was the LTCM collapse.
Japan has had enough economic growth these last quarters, in production growth and consumer spending, that the BOJ may well end the policy of zero interest rates in Japan.
That zero rate interest policy has lasted about ten years, and is the first source of the liquidity bubbles world wide, and is very much a part of the liquidity bubbles here in the US. Once the BOJ starts to raise interest rates in Japan, the Yen carry trade will start to unwind.
The Yen carry mechanism is to borrow Yen at virtually zero rates, and then to purchase US treasuries at about a 3% interest rate gain net. There are literally trillions USD of yen carry trade positions scattered amongst hedge funds, insurance companies, and mutual funds. The phenomena is so widespread and has gone on so long, that the BOJ and even the BIS does not have data on the known net amount of YEN carry trade floating out there in the world. The result is that the effects of an unwinding of the Yen carry trade are unknown, but are sure to be very negative."
Richard Daughty: "Of course, I could not let it pass without a snide and sneering comment that
the Treasury Department of the United States has now, illegally, put us $64
billion dollars farther in debt, in just a couple of weeks, than is authorized
by law! As aghast as that makes me, I can only imagine with horror what foreign
creditors make of this terrifying development, now that the damned Treasury
Department has proved to the world that laws mean nothing to it, nor to the
executive branch, nor to the legislative branch, who all sit there watching
and doing nothing."
What's New
2/22/06 What's New
General Motors Corp.'s U.S. retail sales fell 1% in the first 12 days of February, while vehicle sales by all automakers fell 8%, a study released Tuesday shows. GM increased its share of the U.S. retail market to 21.8% from 20.3% the year before, said the study by the Power Information Network, a unit of J.D. Power & Associates of Westlake Village, Ca.
A closely watched gauge of future economic activity rose sharply in January, suggesting the nation's economy could see robust growth in the spring. The Conference Board said its Index of Leading Economic Indicators, a measure of the economy's well-being in the near term, rose 1.1% last month, following a 0.3% increase in December.
Honda Motor Co. increased its U.S. retail sales 4% and was the only major automaker to have a sales gain during the first 12 days of Feb. Retail sales for Ford Motor Co. fell 23%, while sales by DaimlerChrysler AG's Chrysler Group fell 16%. Toyota Motor Corp.'s sales fell 1% and Nissan Motor Co.'s sales fell 7%.
Keith Myers, a fellow at London-based think tank Chatham House: "For oil-rich countries with few people, the benefits are enormous," pointing to rapidly modernizing Middle Eastern nations such as Qatar and the United Arab Emirates. "For those with less oil but a huge population, such as Nigeria, it is a very different story." Nigeria's oil wealth does not trickle down.
Record prices are being paid for oilsands leases in Alberta. Three auctions in 2006 have exceeded the total paid in all of 2005.
General Motors Corp.'s U.S. retail sales fell 1% in the first 12 days of February, while vehicle sales by all automakers fell 8%, a study released Tuesday shows. GM increased its share of the U.S. retail market to 21.8% from 20.3% the year before, said the study by the Power Information Network, a unit of J.D. Power & Associates of Westlake Village, Ca.
A closely watched gauge of future economic activity rose sharply in January, suggesting the nation's economy could see robust growth in the spring. The Conference Board said its Index of Leading Economic Indicators, a measure of the economy's well-being in the near term, rose 1.1% last month, following a 0.3% increase in December.
Honda Motor Co. increased its U.S. retail sales 4% and was the only major automaker to have a sales gain during the first 12 days of Feb. Retail sales for Ford Motor Co. fell 23%, while sales by DaimlerChrysler AG's Chrysler Group fell 16%. Toyota Motor Corp.'s sales fell 1% and Nissan Motor Co.'s sales fell 7%.
Keith Myers, a fellow at London-based think tank Chatham House: "For oil-rich countries with few people, the benefits are enormous," pointing to rapidly modernizing Middle Eastern nations such as Qatar and the United Arab Emirates. "For those with less oil but a huge population, such as Nigeria, it is a very different story." Nigeria's oil wealth does not trickle down.
Record prices are being paid for oilsands leases in Alberta. Three auctions in 2006 have exceeded the total paid in all of 2005.
Tuesday, February 21, 2006
Wal-Mart
2/21/06 Wal-Mart
Net sales for the fiscal year ended January 31, 2006, were $312.4 billion,
an increase of 9.5 percent over fiscal 2005. Net income for fiscal 2006
increased 9.4 percent to a record $11.2 billion, up from $10.3 billion in
fiscal 2005. Earnings per share for fiscal 2006 were $2.68, up from $2.41 in
fiscal 2005.
"We're pleased our trend of year-over-year increases in sales and net
income continues," said Wal-Mart Stores President and Chief Executive Officer
Lee Scott. "We added more than $7 billion in sales in the quarter and ended
the year strong."
Scott said he is optimistic about the year as he anticipates positive
results from the company's business strategies to improve the customer
experience.
"Our entire management team is dedicated to growing sales by making our
stores more relevant to today's customers," Scott explained. "We want our
merchandise to appeal to a broad range of customers who are already shopping
our stores. We want customers to shop Wal-Mart for all their needs, from
consumables to electronics, home decor and apparel."
Scott estimated that earnings for this year will be in the $2.88-$2.95 range.
Wall Street estimates are about 2 cents higher; however, it should be noted that,
over the past four quarters, the company exceeded estimates. In my view,
from a valuation standpoint, this is the cheapest the shares have been in years.
John Hussman: "
The key skill required for good investing, in my view, is the willingness to abandon the specific in favor of the average. That means abandoning the attempt to find one or two “special” and unique stocks, and instead applying a careful stock-selection discipline in order to create a whole portfolio with certain “average” characteristics of valuation, market action, financial strength, and so forth. It also means abandoning the attempt to forecast the market's direction over some specific period ahead, and instead aligning the investment position with the “average” return/risk profile that stocks have experienced when historical market conditions have matched prevailing ones.
So winning depends on a specific skill that might not be immediately obvious. That skill is the willingness to focus on average outcomes, and to ignore specific ones. It's a quality that's commonly called “patience,” and it's rewarding precisely because it is rare."
Sunday, February 19, 2006
Bird Flu
2/20/06 Bird Flu
Spreading bird flu will be a major topic of debate during a meeting of EU farm ministers in Brussels today. It is difficult at best to assess the current potential danger of bird flu. My instinct tells me the danger is greater than I had originally thought. It doesn’t keep me up at night; however, I am researching the problem a great deal more.
India began the slaughter of half a million chickens Sunday, as Health Ministry officials investigated the death of a poultry farm owner from the country's first suspected case of bird flu. Some 50,000 poultry are reported to have died from the infection in recent days in the western state of Maharashtra. Officials were also testing for the H5N1 strain in India's most populous state, Uttar Pradesh, after 1,400 birds died at a farm there.
McDonald's acknowledged that wheat and dairy ingredients are indeed used to flavor their french fries. The company had previously denied the claims.
Winter has finally arrived in most sectors of the nation. We'll get a look at the amount of natural gas used during this cold spell.
If intelligence is fabricated, does that mean the intelligence is faulty? Maybe the fabrication was professionally done.
Spreading bird flu will be a major topic of debate during a meeting of EU farm ministers in Brussels today. It is difficult at best to assess the current potential danger of bird flu. My instinct tells me the danger is greater than I had originally thought. It doesn’t keep me up at night; however, I am researching the problem a great deal more.
India began the slaughter of half a million chickens Sunday, as Health Ministry officials investigated the death of a poultry farm owner from the country's first suspected case of bird flu. Some 50,000 poultry are reported to have died from the infection in recent days in the western state of Maharashtra. Officials were also testing for the H5N1 strain in India's most populous state, Uttar Pradesh, after 1,400 birds died at a farm there.
McDonald's acknowledged that wheat and dairy ingredients are indeed used to flavor their french fries. The company had previously denied the claims.
Winter has finally arrived in most sectors of the nation. We'll get a look at the amount of natural gas used during this cold spell.
If intelligence is fabricated, does that mean the intelligence is faulty? Maybe the fabrication was professionally done.
Recurring Themes
2/19/06 Recurring Themes
Royal Dutch Shell suspended exports from the 380,000 barrel-a-day Forcados terminal on Saturday after militants bombed the tanker loading platform, a senior oil industry source said. Nigeria is the world's eighth largest oil exporter and normally pumps about 2.4 million barrels per day.
The median Bay Area home price crested at $225,000 in January 1990, then dipped as low as $205,000 -- almost 9 percent -- before climbing to $229,000 in the middle of May 1996, according to DataQuick. Job levels in the Bay Area have not returned to their lofty Nasdaq-era heights; however, the region is expected to add 40,000 new jobs this year and 55,000 in 2007. "Nothing leads to big declines in house prices except job destruction," said John Krainer, economist at the Federal Reserve Bank of San Francisco.
"We would have had a (housing) correction in 2001, 2002 and 2003 if interest rates hadn't been cut as they were," said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. Last year, about half of Bay Area home buyers took out interest-only loans, according to San Francisco's LoanPerformance.com.
According to the California Association of Realtors, only 12 percent of Bay Area households can afford the median-priced home.
According to DataQuick, the typical Bay Area home buyer committed to a monthly mortgage payment of $2,867 in December. Meanwhile, the average apartment rent in the region in the fourth quarter was just over $1,324, according to RealFacts. "There's a disconnect between the fundamental value of the asset and the value the market is producing," said Ed Leamer, director of the prestigious Anderson Forecast at UCLA. "It's just like the dot-com period."
According to Mike Burk, the last 6 trading days in February during the 2nd year of the Presidential Cycle years (NASDAQ composite (OTC) data runs from 1963 to the present and S&P 500 (SPX) data runs from 1928 to the present) has a positive bias to the period.
Each day one can find numerous articles on risk, reward, greed, hedging, investor psychology and the like. For me, it’s best to keep it simple: sell to the sleeping point.
In other words, if your positions are keeping you up at night, lighten the positions until you can sleep.
For Bentonville, Ark.-based Wal-Mart, its own Utah bank would save it about $30 million a year, according to Sen. Bennett. Wal-Mart has said only it would save "millions" annually by processing in-house some 140 million debit, credit and electronic transactions from its stores each month.
"It's about debit, credit and check processing only," said Wal-Mart Financial Services President Jane Thompson. "It's not a bank any consumer will see. It would be in an upstairs office in Utah and the money we save is money we'll use to lower prices."
Wal-Mart's ILC, however, would offer certificates of deposit to non-profits, its FDIC filing shows. The fact is Target already has an ILC. GM has an ILC. Why shouldn’t
Wal-Mart? What’s fair for the goose is fair for the gander.
Royal Dutch Shell suspended exports from the 380,000 barrel-a-day Forcados terminal on Saturday after militants bombed the tanker loading platform, a senior oil industry source said. Nigeria is the world's eighth largest oil exporter and normally pumps about 2.4 million barrels per day.
The median Bay Area home price crested at $225,000 in January 1990, then dipped as low as $205,000 -- almost 9 percent -- before climbing to $229,000 in the middle of May 1996, according to DataQuick. Job levels in the Bay Area have not returned to their lofty Nasdaq-era heights; however, the region is expected to add 40,000 new jobs this year and 55,000 in 2007. "Nothing leads to big declines in house prices except job destruction," said John Krainer, economist at the Federal Reserve Bank of San Francisco.
"We would have had a (housing) correction in 2001, 2002 and 2003 if interest rates hadn't been cut as they were," said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. Last year, about half of Bay Area home buyers took out interest-only loans, according to San Francisco's LoanPerformance.com.
According to the California Association of Realtors, only 12 percent of Bay Area households can afford the median-priced home.
According to DataQuick, the typical Bay Area home buyer committed to a monthly mortgage payment of $2,867 in December. Meanwhile, the average apartment rent in the region in the fourth quarter was just over $1,324, according to RealFacts. "There's a disconnect between the fundamental value of the asset and the value the market is producing," said Ed Leamer, director of the prestigious Anderson Forecast at UCLA. "It's just like the dot-com period."
According to Mike Burk, the last 6 trading days in February during the 2nd year of the Presidential Cycle years (NASDAQ composite (OTC) data runs from 1963 to the present and S&P 500 (SPX) data runs from 1928 to the present) has a positive bias to the period.
Each day one can find numerous articles on risk, reward, greed, hedging, investor psychology and the like. For me, it’s best to keep it simple: sell to the sleeping point.
In other words, if your positions are keeping you up at night, lighten the positions until you can sleep.
For Bentonville, Ark.-based Wal-Mart, its own Utah bank would save it about $30 million a year, according to Sen. Bennett. Wal-Mart has said only it would save "millions" annually by processing in-house some 140 million debit, credit and electronic transactions from its stores each month.
"It's about debit, credit and check processing only," said Wal-Mart Financial Services President Jane Thompson. "It's not a bank any consumer will see. It would be in an upstairs office in Utah and the money we save is money we'll use to lower prices."
Wal-Mart's ILC, however, would offer certificates of deposit to non-profits, its FDIC filing shows. The fact is Target already has an ILC. GM has an ILC. Why shouldn’t
Wal-Mart? What’s fair for the goose is fair for the gander.
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