6/15/09 Foreign Capital Outflow
U.S. net international capital flows dropped to negative $58.4 billion in April, the Treasury Department reported Monday. Foreign central banks bought $5.2 billion in U.S. assets on net, while the foreign private sector sold $58.4 billion. China reduced its holdings of U.S. Treasurys by $4.4 billion to $763.5 billion. Japan reduced its holdings by $800 million to $685.0 billion, while holdings in the Caribbean banking centers fell by $8.9 billion to $204.7 billion.
James Picerno: "It wouldn't surprise us if, late this year, NBER looks back and declares that the recession ended midway in 2009, or thereabouts. But while the technical finale to this nightmare is certainly welcome, what worries us is what comes after. This time, there's more reason to wonder than usual. Yes, the end may be near, but the beginning is still further away than it appears."
World leaders need to be cautious in attempting to roll back economic stimulus measures because the worst of the global recession isn't over, International Monetary Fund Managing Director Dominique Strauss-Kahn said Monday in Kazakhstan, according to Reuters.
The US Postal System lost nearly $2 billion in its last fiscal year and is faced with cuts of up to 3,100 offices potentially eliminating thousand of jobs. Media reports say that first class mail volumes are plunging.
John Hussman: "Presently, the price-to-book ratio on the S&P 500 is about 1.9. If you think about the 1974 and 1982 lows, we observed price/book ratios at about 0.8, while price-to-normalized earnings multiples were at about 7. So the S&P 500 would have to drop by about 60% to match the best valuations that we've seen during the past 40 years. Investors shouldn't kid themselves that stocks are cheap – in the sense of being priced to deliver outstanding long-term returns – just because we've observed a wicked decline. We're not even close....At this point, however, stocks are priced to require an economic recovery. That is a difficult bet, in my view, because as I noted last week, economic expansions are emphatically not driven by a “consumer recovery.” They are invariably driven by swings in gross domestic investment – capital spending, autos, housing, factories, and other outlays that are heavily reliant on debt financing. That's why housing starts have such a strong correlation with GDP growth.
It is a very hard sell to expect a sustained recovery in debt-financed gross investment in an economy under strong deleveraging pressure. That's particularly true since the U.S. itself has not financed a penny of the growth in U.S. gross domestic investment in more than a decade – all of the growth has been financed by foreign capital inflows via a massive current account deficit. With government spending now drawing on those foreign savings to defend bank bondholders from losses, and a continuing need to shrink the current account deficit in the years ahead, gross domestic investment is likely to continue to be squeezed. We are in the midst of – and will continue to require – perhaps the largest adjustment in U.S. personal, corporate and government balance sheets that we will see in our lifetimes. This will be a very long slog. The outlook is not up, but very widely sideways. "
Europe’s economy lost a record 1.22 million jobs in the first quarter as companies cut spending to survive the worst global economic slump in more than six decades.
Natural gas producers have been idling rigs for six months, trying to reduce output and boost prices that fell sharply amid bloated inventories and recession-shrunken demand.
That sweet spot remains elusive, despite a 56 percent reduction in the number of rigs drilling for natural gas, to 700 from the September peak of more than 1,600.
“It’s a self-correcting mechanism,” said David Pursell, an analyst with Tudor, Pickering, Holt & Co. Securities in Houston. “Prices go low, the rig count follows, and voila, production falls and the market fixes itself.” The Energy Information Administration doesn’t expect natural gas prices to mimic crude’s recent uptick. Instead, the agency projects that natural gas prices will average $4.13 per million Btu this year and creep up to an average of $5.49 in 2010.Natural gas for July delivery closed at $3.86 per million Btu Friday on the New York Mercantile Exchange.
Port of Long Beach figures show May inbound cargo was down 22.8% YoY and outbound cargo was down 26.7%.
George Ure: " How is it that in an admittedly small sample (of more than a dozen people) I've heard reports about, NO ONE is getting the same serial number precious metal bars shown on their warehouse receipts when they go to take delivery! Why aren't bar numbers matching up? Little accounting problem going on, or something else?"
The New York Fed's "Empire State" general business conditions index fell to minus 9.41 in June from minus 4.55 in May.
Capital One Financial said in a filing to the Securities and Exchange Commission that its net charge-off in the U.S. were 9.41% at the end of May, up from 8.56% the prior month.
So far this year, Boeing -- which is cutting 10,000 jobs -- has taken orders for 73 planes, but with cancellations of 66, the net order intake is only 7 jets.
Airbus -- which hasn't announced extra job cuts but had already been cutting payroll in a restructuring program launched in 2007 -- has booked fewer orders at 32, but with fewer cancellations has a better net balance of 11 jets.
Still both plane makers are cushioned by order backlogs of around 3,500 planes.
Bloomberg reported John Yoo, a ex-Justice Department attorney who wrote memos justifying harsh interrogations of terrorism detainees, lost his bid to dismiss a lawsuit blaming him for alleged violations of a detainee’s rights.
Jose Padilla, convicted last year of supporting terrorists and conspiring to commit murder, was detained for three years as an enemy combatant in the U.S., where he claims he was subjected to physical abuse.
He sued Yoo, who wrote in advisory memos for the Bush administration that terrorism suspects weren’t protected by Geneva Convention bans on physical abuse. Padilla claimed Yoo created a system of torture. U.S. District Judge Jeffrey White denied most of Yoo’s motion to dismiss the case, saying even enemy combatants are protected by the U.S. Constitution.
Wal-Mart Stores Inc. was cut to neutral from buy by Goldman Sachs on Monday.
Data Domain said Monday morning that its board of directors is recommending against a $30-per-share, all-cash takeover offer from EMC Corp. In a statement, Data Domain cited the binding terms of its existing merger agreement with NetApp as well as the "conditional nature" of the bid from EMC. Data Domain says terminating its agreement with NetApp, which has also offered $30 per share in a cash-and-stock deal, would force it to pay a $57 termination fee to the latter.
The Federal Reserve should stop buying government debt and instead focus on kick-starting areas of the credit markets having to do with consumers, Steve Forbes, Forbes CEO, told CNBC Monday.
In the first 75 minutes of trading the Dow had dropped 212 points. During this time UNG had already traded over 18 million shares and was up about 4%. An average trading day is 21 million shares. Meanwhile, July crude down $2.13, or 3%, to $69.91 a barrel.
Mark Anthony: "From the energy point of view, 5.3 TCF of natural gas contains the same amount of energy as one barrel of oil, so $4 per TCF is equivalent to $21 per barrel oil. When crude oil price is already at $68, the low price in natural gas is unsustainable as industry energy consumers will try to use more natural gas and less oil.
How to play natural gas? Buying the United States Natural Gas fund (UNG) is the best way."
U.S. home builders grew more pessimistic in June about sales over the medium term, sending their monthly sentiment index down one point to 15, the National Association of Home Builders reported Monday. It was the first decline in the index since January, when it fell to an all-time low of 8. At 15, the index shows that about one in six home builders thinks the market is "good." The index peaked at 72 four years ago and was at 18 a year ago.
The European Central bank estimates that the impact of the global financial crisis on banks is not over yet and that those in the euro zone could face an additional $283 billion in losses by the end of 2010.
Extended Stay Hotels LLC filed for Chapter 11 bankruptcy protection on Monday, citing massive debt stemming from its 2007 acquisition by the Lightstone Group and a sharp drop in business travel due to the recession.
U.S. credit card defaults rose to record highs in May, with a steep deterioration of Bank of America Corp's lending portfolio, in another sign that consumers remain under severe stress.
With one hour left in the trading session UNG has risen 7% and the volume traded is a whopping 54 million shares. At the end of trading it rose 7% on 64 million shares.
Natural gas rose 31 cents to $4.17. July oil ends down $1.42 at $70.62 a barrel.
The Dow Jones Industrial Average fell 187 points, or 2.1%, to end at 8,612, with 28 of its 30 components ending lower. The S&P 500 index fell 22 points, or 2.4%, to 923, while the Nasdaq Composite lost 42 points, or 2.3%, to end at 1,816.
Monday, June 15, 2009
Sunday, June 14, 2009
The Tide
6/13/09 The Tide
The University of Michigan/Reuters consumer sentiment numbers conclude that expectations fell to 65.4 from 69.4. Consumers are becoming more worried about jobs, energy costs, and the general health of the economy as they look out over the next few months.
Brett Steenbarger: "On a day where we made a closing high in U.S. large caps, we had 796 NYSE, NASDAQ, and ASE stocks make fresh 20-day highs and 427 make new lows. That is the highest level of new lows since May 28th.
In short, we have a rising tide, but it's not lifting all boats. That often occurs when the tide is starting to come in."
Doug Noland: "Global reflation and international markets are – as inflation and market dynamics tend to do - taking on a life of their own. And just as Credit Bubble dynamics overwhelmed Greenspan rate tinkering back in 2004/05, there are now strong countervailing market forces working against the efficacy of Bernanke helicopter money. If global reflation takes hold simultaneous with a weakening dollar, inflation could easily emerge as a major threat here in the U.S. And if global markets begin determining longer-term U.S. Treasury and MBS yields – as opposed to the Bernanke Fed manipulating them artificially low – the U.S. recovery outlook becomes greatly more clouded....It is fundamental to my analysis that the unfolding reflation will be altogether different than previous ones. On a global basis - and contrary to the consensus view - I expect the U.S. economy to under-perform. Already, a scenario is unfolding where reflation hurts the U.S. consumer through higher energy and import costs, rising borrowing costs, and a greater tax burden. And in contrast to more recent inflations, U.S. securities will be anything but the focal point of global reflation dynamics. I expect global markets to increasingly determine U.S. market yields, with resulting higher borrowing costs and less liquidity generally stymieing recovery in our asset markets....The really problematic scenario unfolds when market yields spike higher, the Fed monetizes, dollar selling intensifies, and the world questions our capacity to service our federal and mortgage debts.
An economy can only inflate Credit, devalue its currency, flood the world with its debt obligations – all working to disburse financial and economic power out to the world – until at some point power dynamics reach a tipping point. There is No Conundrum, Again."
Mike Shedlock: "Ben Bernanke and the Fed have lost control of the mortgage market (not that the Fed was ever in control in the first place). They weren't. It was all an illusion.
For now, the stock market is shrugging this off. If rates stay above 5.5% for long, don't expect that to last. And it may not last anyway."
Adam Brochert: "So, when the Gold bugs say that rising bond yields indicate the coming hyperinflation and when the CNBC jag-offs say the rising bond yields are due to a recovery and/or concerns regarding inflation, ask them to explain bond yields between 1931-1932. I am not saying that there won't be a coming inflation - of course there will be, eventually. But the path we have started down is deflationary, not hyperinflationary.
Eventually, all fiat currencies depreciate until they are completely worthless and subsequently abandoned. That's as safe a bet as there is! But the death throes of a fiat currency in extremis are not as easy to game as you might think. A deflationary collapse can precede hyperinflation (or just regular aggressive inflation) and holding Gold is thus the easiest no-brainer investment for the typical retail investor in this environment.
Holders of Gold will do just fine in this deflationary environment. Those who understand Gold know that Gold is money. Gold is a currency. Holding "real" cash in a deflationary depression maintains wealth and enhances it relative to one's neighbors who stay invested in stocks, commodities, corporate bonds and real estate. If you hold onto your physical Gold, you will be able to buy your neighbors' stocks, commodities, corporate bonds and real estate at pennies on the dollar in a few short years."
U.S. foreclosure filings surpassed 300,000 for the third straight month in May and may hit a record 1.8 million by the first half of the year,
RealtyTrac Inc. said.
A total of 321,480 properties received a default or auction notice or were repossessed last month, up 18 percent from a year earlier, the Irvine, California-based seller of default data said today in a statement. One in 398 U.S. households received a filing last month.
Retailers aren’t likely to resume spending on their IT infrastructure again until at least 2010, according to NCR Chairman and CEO William Nuti.
Edward Harrison: "Each of the BRICs has amassed a large level of reserves. Brazil has the least at about $205 billion, just below India’s $251 billion. Russia has almost as much as both of them put together with almost $410 billion. China dwarfs all of them, individually and collectively, with nearly $2 trillion in reserves. Together they account for a third of the world’s currency reserves."
The amusement park company Six Flags is seeking Chapter 11 bankruptcy protection, saying it needs to reorganize and shed $1.8 billion of debt.
Brian Pretti: "As we add up the numbers, about 12 months back the US had national debt of roughly $12 trillion. The current stimulus/bailout spending will add near another $13 trillion to the money printing/debt accumulation hole if enacted fully. Add in maybe $50 trillion in unfunded NPV of SSI and Medicare promises and the US is looking at something like $75 trillion in forward liabilities to be covered over the decades ahead. There are only two ways this will be accomplished as is clear – default or with “cheaper” dollars. And you already know which choice politicians will make, so we can frame our investment decision making with this constantly in mind....But the fiscal issues facing the municipalities are severe. Declining property tax revenues and retail sales tax overrides are meeting up with increased benefit and general obligation costs for these folks. We need to add in the time bomb of pension costs escalating meaningfully at the exact time many a fund is seriously under funded due to financial market losses of the last few years....But as we look ahead, THE big question becomes, are we looking at a multi-decade buyer of US equities that is now set to go into more of a distributory mode as per the character of in place plans? You bet we are. Again, not Armageddon for equities immediately or looking forward by any means, but simply the lessened impact of what has been a meaningful buyer of equities for the last three decades. It’s a generic support to the equity market that will not be as forceful and as important a buyer ahead based solely on the demographics....It's estimated that public funds lost 30% of their value last year, a huge number in the world of actuarial pension accounting. Just huge....can public pension funds afford to shoulder more investment risk ahead now that their net funding status has deteriorated meaningfully? Do they go for broke in the hopes of regaining lost ground? Yes or no? And just what does this mean for what has been their multi-decade support of equity prices specifically?"
North Korea vowed to embark on a uranium enrichment program and "weaponize" all its plutonium, rejecting U.N. sanctions imposed hours earlier.
Nationwide foreclosures won't peak until 2011, according to one prominent economist.
David Crowe, chief economist of the
National Association of Home Builders, made that prediction in a BusinessWeek story about foreclosures spreading to high-end homes.
Crowe told BusinessWeek that foreclosures would not crest before unemployment tops out, which he expects to happen later this year, and upward resets on adjustable-rate mortgages would continue to cost people their homes after that. The story cited a Credit Suisse analysis that resets would peak in mid 2010 and stay high well into 2012.
Mike Burk: "The market got very dull last week. OTC NH continued to move upward (good) while the secondaries were a little weaker than the blue chips (not good).
I expect the major indices to be lower on Friday June 19 than they were on Friday June 12."
The University of Michigan/Reuters consumer sentiment numbers conclude that expectations fell to 65.4 from 69.4. Consumers are becoming more worried about jobs, energy costs, and the general health of the economy as they look out over the next few months.
Brett Steenbarger: "On a day where we made a closing high in U.S. large caps, we had 796 NYSE, NASDAQ, and ASE stocks make fresh 20-day highs and 427 make new lows. That is the highest level of new lows since May 28th.
In short, we have a rising tide, but it's not lifting all boats. That often occurs when the tide is starting to come in."
Doug Noland: "Global reflation and international markets are – as inflation and market dynamics tend to do - taking on a life of their own. And just as Credit Bubble dynamics overwhelmed Greenspan rate tinkering back in 2004/05, there are now strong countervailing market forces working against the efficacy of Bernanke helicopter money. If global reflation takes hold simultaneous with a weakening dollar, inflation could easily emerge as a major threat here in the U.S. And if global markets begin determining longer-term U.S. Treasury and MBS yields – as opposed to the Bernanke Fed manipulating them artificially low – the U.S. recovery outlook becomes greatly more clouded....It is fundamental to my analysis that the unfolding reflation will be altogether different than previous ones. On a global basis - and contrary to the consensus view - I expect the U.S. economy to under-perform. Already, a scenario is unfolding where reflation hurts the U.S. consumer through higher energy and import costs, rising borrowing costs, and a greater tax burden. And in contrast to more recent inflations, U.S. securities will be anything but the focal point of global reflation dynamics. I expect global markets to increasingly determine U.S. market yields, with resulting higher borrowing costs and less liquidity generally stymieing recovery in our asset markets....The really problematic scenario unfolds when market yields spike higher, the Fed monetizes, dollar selling intensifies, and the world questions our capacity to service our federal and mortgage debts.
An economy can only inflate Credit, devalue its currency, flood the world with its debt obligations – all working to disburse financial and economic power out to the world – until at some point power dynamics reach a tipping point. There is No Conundrum, Again."
Mike Shedlock: "Ben Bernanke and the Fed have lost control of the mortgage market (not that the Fed was ever in control in the first place). They weren't. It was all an illusion.
For now, the stock market is shrugging this off. If rates stay above 5.5% for long, don't expect that to last. And it may not last anyway."
Adam Brochert: "So, when the Gold bugs say that rising bond yields indicate the coming hyperinflation and when the CNBC jag-offs say the rising bond yields are due to a recovery and/or concerns regarding inflation, ask them to explain bond yields between 1931-1932. I am not saying that there won't be a coming inflation - of course there will be, eventually. But the path we have started down is deflationary, not hyperinflationary.
Eventually, all fiat currencies depreciate until they are completely worthless and subsequently abandoned. That's as safe a bet as there is! But the death throes of a fiat currency in extremis are not as easy to game as you might think. A deflationary collapse can precede hyperinflation (or just regular aggressive inflation) and holding Gold is thus the easiest no-brainer investment for the typical retail investor in this environment.
Holders of Gold will do just fine in this deflationary environment. Those who understand Gold know that Gold is money. Gold is a currency. Holding "real" cash in a deflationary depression maintains wealth and enhances it relative to one's neighbors who stay invested in stocks, commodities, corporate bonds and real estate. If you hold onto your physical Gold, you will be able to buy your neighbors' stocks, commodities, corporate bonds and real estate at pennies on the dollar in a few short years."
U.S. foreclosure filings surpassed 300,000 for the third straight month in May and may hit a record 1.8 million by the first half of the year,
RealtyTrac Inc. said.
A total of 321,480 properties received a default or auction notice or were repossessed last month, up 18 percent from a year earlier, the Irvine, California-based seller of default data said today in a statement. One in 398 U.S. households received a filing last month.
Retailers aren’t likely to resume spending on their IT infrastructure again until at least 2010, according to NCR Chairman and CEO William Nuti.
Edward Harrison: "Each of the BRICs has amassed a large level of reserves. Brazil has the least at about $205 billion, just below India’s $251 billion. Russia has almost as much as both of them put together with almost $410 billion. China dwarfs all of them, individually and collectively, with nearly $2 trillion in reserves. Together they account for a third of the world’s currency reserves."
The amusement park company Six Flags is seeking Chapter 11 bankruptcy protection, saying it needs to reorganize and shed $1.8 billion of debt.
Brian Pretti: "As we add up the numbers, about 12 months back the US had national debt of roughly $12 trillion. The current stimulus/bailout spending will add near another $13 trillion to the money printing/debt accumulation hole if enacted fully. Add in maybe $50 trillion in unfunded NPV of SSI and Medicare promises and the US is looking at something like $75 trillion in forward liabilities to be covered over the decades ahead. There are only two ways this will be accomplished as is clear – default or with “cheaper” dollars. And you already know which choice politicians will make, so we can frame our investment decision making with this constantly in mind....But the fiscal issues facing the municipalities are severe. Declining property tax revenues and retail sales tax overrides are meeting up with increased benefit and general obligation costs for these folks. We need to add in the time bomb of pension costs escalating meaningfully at the exact time many a fund is seriously under funded due to financial market losses of the last few years....But as we look ahead, THE big question becomes, are we looking at a multi-decade buyer of US equities that is now set to go into more of a distributory mode as per the character of in place plans? You bet we are. Again, not Armageddon for equities immediately or looking forward by any means, but simply the lessened impact of what has been a meaningful buyer of equities for the last three decades. It’s a generic support to the equity market that will not be as forceful and as important a buyer ahead based solely on the demographics....It's estimated that public funds lost 30% of their value last year, a huge number in the world of actuarial pension accounting. Just huge....can public pension funds afford to shoulder more investment risk ahead now that their net funding status has deteriorated meaningfully? Do they go for broke in the hopes of regaining lost ground? Yes or no? And just what does this mean for what has been their multi-decade support of equity prices specifically?"
North Korea vowed to embark on a uranium enrichment program and "weaponize" all its plutonium, rejecting U.N. sanctions imposed hours earlier.
Nationwide foreclosures won't peak until 2011, according to one prominent economist.
David Crowe, chief economist of the
National Association of Home Builders, made that prediction in a BusinessWeek story about foreclosures spreading to high-end homes.
Crowe told BusinessWeek that foreclosures would not crest before unemployment tops out, which he expects to happen later this year, and upward resets on adjustable-rate mortgages would continue to cost people their homes after that. The story cited a Credit Suisse analysis that resets would peak in mid 2010 and stay high well into 2012.
Mike Burk: "The market got very dull last week. OTC NH continued to move upward (good) while the secondaries were a little weaker than the blue chips (not good).
I expect the major indices to be lower on Friday June 19 than they were on Friday June 12."
Friday, June 12, 2009
OPEC
6/12/09 OPEC
According to Reuters, World Bank President Robert Zoellick said “I personally believe you might be able to see some aspects of recovery in 2009 and 2010, but from a policy point of view, that isn’t the core question because we have a large degree of uncertainty.”
The Organization of Petroleum Exporting Countries said oil production rose for a second month in May, weakening compliance with quotas, as the group lowered its forecast for global oil demand in 2009.
The 11 OPEC members bound by production quotas, which exclude Iraq, pumped 25.903 million barrels a day in May, an increase of 118,800 barrels a day from April, the Vienna-based organization said in its monthly oil report today, citing secondary sources that include estimates from analysts and news organizations.
According to AMG Data Services, May Equity Fund Inflows $21.4 Bil; Taxable Bond Fund Inflows $35.6 Bil
xETFs - Equity Fund Inflows $13.8 Bil; Taxable Bond Fund Inflows $29.9 Bil.
For the week ended June 10, Equity Fund Inflows $5.6 Bil; Taxable Bond Fund Inflows $3.5 Bil
xETFs - Equity Fund Inflows $978 Mil; Taxable Bond Fund Inflows $2.6 Bil
U.S. import prices rose 1.3 percent in May, the Labor Department said on Friday, but the gain was powered by petroleum prices and underlying import price pressures were more muted. Year-over-year, import prices declined by a record 17.6 percent.
Non-petroleum import prices rose 0.2 percent in May, the first increase since July 2008, and were down a record 5.8 percent over the year.
Export prices rose 0.6 percent in May compared with forecasts for a 0.4 percent gain. They rose 0.4 percent in April and are down 6.5 percent over the year.
Soros Says CDS are Destructive, Should be Outlawed.
Ecuador bought back 91 percent of its defaulted bonds via an international auction and renewed threats to take action against other "illegal" debt, the country's leftist government said on Thursday.
President Rafael Correa called the debt buyback a "resounding victory" and the start of a new era in international markets that he says are at fault for the global financial crisis hurting poor nations. Ecuador shocked investors by refusing to pay $3.2 billion in 2012 and 2030 global bonds last year, saying the debt was riddled with irregularities when issued in 2000 after the renegotiation of a previous default.
According to a report from market researchers NPD Group, May was the first time since August 2007 that the games industry made less than $1 billion from consoles and games, with revenues of just $863.3 million - a drop of 23 percent on last May's figure.
Industrial production in the 16 countries that use the euro dropped by a record 21.6 percent in the year to April, official figures showed Friday, stoking fears that the euro zone remains in the grip of recession despite signs elsewhere that a recovery of sorts may be underway.
The European Union's statistics office Eurostat said industrial output during the month fell by 1.9 percent in April -- the eighth consecutive monthly decline. That was more than the 1 percent markets expected and higher than the 1.4 percent recorded in March.
August gold fell $14.70, or 1.5%, to $947.30 an ounce in early North American electronic trading.
Medicare pays hospitals 71% and doctors 81% of what private insurers pay.
Arthur Laffer: "We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s."
The ratio of household net worth to personal disposable fell to 4.67 times, the lowest since the third quarter of 1992.
Leaders of Brazil, Russia, India and China will probably use their first summit next week to press the case that their 15 percent share of the world economy and 42 percent of global currency reserves should give them more clout.
As of June 11, 2009, W.H.O. lists seventy-four countries that have officially
reported 28,774 cases of swine flu A/H1N1, including 144 deaths.
On Feb 23, Moody's cut Fiat's debt rating to junk status. That made them a perfect candidate to take over Chrysler! It's a marriage made in hell.
VF Corp , owner of brands such as Wrangler, Lee, Vans and The North Face, has seen its markets in the United States "stabilize" but does not expect a return to growth in 2009, its chief executive said on Friday.
The University of Michigan and Reuters consumer sentiment index rose to 69 in mid-June from 68.7 in May.
About 3 months ago Microsoft traded at $15 and is now $23. The stock has barely had a downtick during this period.
The Dow Jones industrial average gained 28.34 points, or 0.32 percent, to 8,799.26. The Standard & Poor's 500 Index gained 1.32 points, or 0.14 percent, to 946.21. The Nasdaq Composite Index dropped 3.57 points, or 0.19 percent, to 1,858.80.
For the week, the Dow gained 0.4 percent, the S&P 500 added 0.7 percent and the Nasdaq rose 0.5 percent.
For the year, the blue-chip Dow average is up 0.26 percent.
According to Reuters, World Bank President Robert Zoellick said “I personally believe you might be able to see some aspects of recovery in 2009 and 2010, but from a policy point of view, that isn’t the core question because we have a large degree of uncertainty.”
The Organization of Petroleum Exporting Countries said oil production rose for a second month in May, weakening compliance with quotas, as the group lowered its forecast for global oil demand in 2009.
The 11 OPEC members bound by production quotas, which exclude Iraq, pumped 25.903 million barrels a day in May, an increase of 118,800 barrels a day from April, the Vienna-based organization said in its monthly oil report today, citing secondary sources that include estimates from analysts and news organizations.
According to AMG Data Services, May Equity Fund Inflows $21.4 Bil; Taxable Bond Fund Inflows $35.6 Bil
xETFs - Equity Fund Inflows $13.8 Bil; Taxable Bond Fund Inflows $29.9 Bil.
For the week ended June 10, Equity Fund Inflows $5.6 Bil; Taxable Bond Fund Inflows $3.5 Bil
xETFs - Equity Fund Inflows $978 Mil; Taxable Bond Fund Inflows $2.6 Bil
U.S. import prices rose 1.3 percent in May, the Labor Department said on Friday, but the gain was powered by petroleum prices and underlying import price pressures were more muted. Year-over-year, import prices declined by a record 17.6 percent.
Non-petroleum import prices rose 0.2 percent in May, the first increase since July 2008, and were down a record 5.8 percent over the year.
Export prices rose 0.6 percent in May compared with forecasts for a 0.4 percent gain. They rose 0.4 percent in April and are down 6.5 percent over the year.
Soros Says CDS are Destructive, Should be Outlawed.
Ecuador bought back 91 percent of its defaulted bonds via an international auction and renewed threats to take action against other "illegal" debt, the country's leftist government said on Thursday.
President Rafael Correa called the debt buyback a "resounding victory" and the start of a new era in international markets that he says are at fault for the global financial crisis hurting poor nations. Ecuador shocked investors by refusing to pay $3.2 billion in 2012 and 2030 global bonds last year, saying the debt was riddled with irregularities when issued in 2000 after the renegotiation of a previous default.
According to a report from market researchers NPD Group, May was the first time since August 2007 that the games industry made less than $1 billion from consoles and games, with revenues of just $863.3 million - a drop of 23 percent on last May's figure.
Industrial production in the 16 countries that use the euro dropped by a record 21.6 percent in the year to April, official figures showed Friday, stoking fears that the euro zone remains in the grip of recession despite signs elsewhere that a recovery of sorts may be underway.
The European Union's statistics office Eurostat said industrial output during the month fell by 1.9 percent in April -- the eighth consecutive monthly decline. That was more than the 1 percent markets expected and higher than the 1.4 percent recorded in March.
August gold fell $14.70, or 1.5%, to $947.30 an ounce in early North American electronic trading.
Medicare pays hospitals 71% and doctors 81% of what private insurers pay.
Arthur Laffer: "We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s."
The ratio of household net worth to personal disposable fell to 4.67 times, the lowest since the third quarter of 1992.
Leaders of Brazil, Russia, India and China will probably use their first summit next week to press the case that their 15 percent share of the world economy and 42 percent of global currency reserves should give them more clout.
As of June 11, 2009, W.H.O. lists seventy-four countries that have officially
reported 28,774 cases of swine flu A/H1N1, including 144 deaths.
On Feb 23, Moody's cut Fiat's debt rating to junk status. That made them a perfect candidate to take over Chrysler! It's a marriage made in hell.
VF Corp , owner of brands such as Wrangler, Lee, Vans and The North Face, has seen its markets in the United States "stabilize" but does not expect a return to growth in 2009, its chief executive said on Friday.
The University of Michigan and Reuters consumer sentiment index rose to 69 in mid-June from 68.7 in May.
About 3 months ago Microsoft traded at $15 and is now $23. The stock has barely had a downtick during this period.
The Dow Jones industrial average gained 28.34 points, or 0.32 percent, to 8,799.26. The Standard & Poor's 500 Index gained 1.32 points, or 0.14 percent, to 946.21. The Nasdaq Composite Index dropped 3.57 points, or 0.19 percent, to 1,858.80.
For the week, the Dow gained 0.4 percent, the S&P 500 added 0.7 percent and the Nasdaq rose 0.5 percent.
For the year, the blue-chip Dow average is up 0.26 percent.
Thursday, June 11, 2009
Household Net Worth
6/11/09 Household Net Worth
The number of first-time claims for state unemployment benefits fell 24,000 to 601,000 in the week ended June 6, the Labor Department reported Thursday. The four-week average of initial claims fell 10,500 to 621,750. In the week ended May 30, continuing claims for benefits reached a new record high, rising 59,000 to 6.82 million from an upwardly revised level in the prior week. Continuing claims have set fresh record highs for 19 consecutive weeks. The four-week average of these continuing claims rose 57,250 to a record 6.75 million. The level of initial claims is up 55% from the same period in the prior year, and the level of ongoing claims is more than double last year's level. The insured unemployment rate - the proportion of insured workers who are collecting benefits - remained at 5.1%, the highest rate since December 1982.
The latest jobless claims show the economy may have a "jobless recovery" that could hurt stocks, Art Cashin told CNBC.
Foreclosure filings in May fell 6% from April, but rose 18% from May 2008, RealtyTrac reported on Thursday. Foreclosure filings -- default notices, scheduled auctions and bank repossessions -- were reported on nearly 321,500 properties in the month. May was the third straight month in which filings exceeded 300,000. One of every 398 U.S. housing units was the subject of a foreclosure filing in the month, the Irvine, Calif., consultant and marketplace reported. RealtyTrac reported fewer defaults and auctions but a 2% increase in bank repossessions. Nevada remained the state with the highest foreclosure rate, with 1 in 64 housing units the subject of a filing. California was second with 1 in every 144, and Florida was third with 1 in every 148.
Aerial Services of Livermore, is a frontline warrior in locating the backyard breeding sites. Last year, mosquito districts hired it to fly over almost every county in California. It covered 3,500 square miles - about one-third of the state's urban area - and "harvested" 27,000 algae-ridden pools, providing the districts with photographs, maps, street addresses, latitude/longitude and parcel data, including ownership.
"We find lots of mosquito sources at foreclosed homes," said John Rusmisel, district manager for Alameda County's Mosquito Abatement District. "It's an ongoing and big problem."
He hired Aerial Surveys to do surveillance over 75 square miles of the Tri-Valley area last week at a cost of $8,000 to $10,000. "Google Earth is great, but if you want to know real-time, an airplane is best," Rusmisel said.
Foreclosures and the economic downturn have ramped up the mosquito districts' work. In Contra Costa County, for instance, of 25,000 homes that were in the foreclosure process in 2008, more than 2,000 had swimming pools, according to the Contra Costa Mosquito & Vector Control District.
General Motors Corp. plans to cancel production of the hybrid-electric version of its Chevrolet Malibu sedan for the 2010 model year due to slow sales that has led to a backlog of inventory of the vehicles on dealer lots, The Wall Street Journal reported late Wednesday
The International Energy Agency increased its forecast of 2009 world oil demand by 120,000 barrels a day, citing stronger-than-forecast first quarter data from countries belonging to the Organization for Economic Cooperation and Development. Global oil demand is projected at 83.3 million barrels a day, down 2.9% compared to year earlier. "These revisions do not necessarily imply economic recovery but may reflect a slowing in previously sharp decline," the IEA said.
The World Health Organisation (WHO) was poised on Thursday to declare that the new H1N1 virus has caused the first influenza pandemic in more than 40 years, health sources said on Thursday.
China's investment surged in May as the government poured money into its economic stimulus, helping to offset an unexpectedly sharp drop in trade, and economists said the world's third-largest economy was improving.
Spending on factories and other fixed assets soared 32.9 percent in the first five months of the year, the National Bureau of Statistics said. Merrill Lynch said that translated into growth in May of up to 38 percent.
"Domestic activity has picked up, thanks to the government stimulus spending," said economist David Cohen of Action Economics in Singapore.
May exports fell by a record 26.4 percent from the same month of 2008, while imports contracted by 25.2 percent, the customs agency said Thursday. That exceeded most economists' forecasts.
The next test of the US Treasury’s issuance program looms on Thursday with the sale of $11bn in 30-year bonds. An auction of 30-year bonds last month went badly as investors signalled their concerns about the budget deficit.
“That did not go well last time, so there is also some additional concern,” said Dominic Konstam, head of interest rate strategy at Credit Suisse.
Traders said the good news of the day was that buyers entered the market when yields reached 4 per cent. “There should be natural support for the 10-year note around 4 per cent,” said Mr Konstam.
U.S. ad spending on media such as TV, print and online display ads fell 14% to $30.18 billion in the first quarter from a year earlier, according to TNS Media Intelligence.
Obama has now hired 21 czars with more on the way. That's what we need---more gov't
employees to add to the multi-trillion dollar budget deficit. Maybe if Obama cut down on his daily speeches and travel plans, he could actually perform some of this work himself. I guess 365 day campaigning is too time consuming.
July copper was last up 4.3 cents, or 1.8%, at $2.41 a pound on the Comex division of the New York Mercantile Exchange. August gold fell $8.40, or 0.9%, to $946.30 an ounce, and July silver lost 25 cents, or 1.6%, to $14.975 a pound. Oil futures extended their gains on Thursday after data showed a rise in U.S. May retail sales as well as a decline in weekly initial jobless claims. Crude oil for July delivery gained 70 cents, or 1%, to $72.06 a barrel in electronic trading on Globex.
The Clorox Co. said its board declared a quarterly dividend of 50 cents a share, payable Aug. 14 to stockholders of record on July 27. The amount represents an increase of 4 cents a share, or 9%, in the company's quarterly dividend. Clorox confirms 2010 earnings per share in the $4.00-to-$4.15 range and 1% to 2% sales growth.
Japan's economy shrank at a 14.2 percent annual pace in the first quarter -- better than first thought, but still the worst quarterly contraction ever for the world's second-largest economy.
On Wednesday, rates on 30-year fixed-rate mortgages climbed to 5.79%, up from 5% two weeks ago, according to HSH Associates. That jump will cut roughly in half the number of borrowers with an incentive to refinance, according to FTN Financial.
The White House has refused a request from Sen. Chuck Grassley for all the exemptions it’s granted to President Barack Obama’s ethics policy.
“The American people deserve a full accounting of all waivers and recusals to better understand who is running the government and whether the administration is adhering to its promise to be open, transparent and accountable,” Grassley wrote in a letter Wednesday to the director of the U.S. Office of Government Ethics.
Obama tasked that independent agency with implementing his ethics policy, and Grassley’s letter asks the office to explain every waiver and recusal granted under the policy and to post them on its website.
Brazil says it is to offer $10bn in financing to the IMF to help improve the availability of credit in developing countries.
It is the first time that South America's biggest economy has ever made a loan of this kind.
At least 35 states have introduced legislation this year asserting their power under the Tenth Amendment to regulate all matters not specifically delegated to the federal government by the Constitution.
"This has been boiling for years, and it's finally come to a head," said Utah State Rep. Carl Wimmer. "With TARP and No Child Left Behind, these things that continue to give the federal government more authority, our rights as states and individuals are being turned on their head."
Montana Gov. Brian Schweitzer recently signed into law a bill authorizing the state's gun manufacturers to produce "Made in Montana" firearms, without seeking licensing from the federal Bureau of Alcohol, Tobacco, Firearms and Explosives. Similar laws are being considered in Utah, Alaska, Texas and Tennessee.
The Montana law is expected to end up in the courts, where states' rights activists hope judges will uphold their constitutional right to regulate firearms.
That would reverse a longstanding trend, said Martin Flaherty, a professor of constitutional law at Fordham Law School.
Robert Natelson, a law professor at the University of Montana: "If the states are serious about returning the federal government to its historical origins, they're going to have to do more than pass resolutions. They're going to have to turn down money and litigate."
Ayn Rand: "The [U.S.] Constitution is a limitation on the government, not on private individuals ... it does not prescribe the conduct of private individuals, only the conduct of the government ... it is not a charter for government power, but a charter of the citizen's protection against the government."
Qualcomm now expects third-quarter operating profit of $830 million to $880 million, up sharply from its earlier estimate of $550 million to $650 million. "We are very pleased to raise our fiscal third quarter guidance, reflecting the strong worldwide demand for wireless broadband powered by 3G CDMA," the company said. However, they cautioned that it sees Q4 chipset units declining sequentially, putting a damper on the upbeat outlook for the current quarter.
500 jets have been sidelined since the start of 2008. Delta Air Lines said Thursday it will cut 10% from its system capacity this year as it wrestles with falling demand and rising oil prices. The Atlanta-based carrier and the world's largest airline said it would also reassess its staffing needs among its 70,000 employees. In a letter to employees, company executives said industry passenger revenue has fallen 20% in the first four months of the year compared to the same period in 2008, overtaking more than $6 billion in total benefits expected this year from lower jet fuel prices.
According to RGE Monitor, Russia, Brazil, India and South Korea have all expressed interest in buying the SDR denominated bonds issued by the IMF to meet its funding needs. Saudi Arabia might also be interested. these bonds would not only allow them to diversify their reserve assets but also provide limited duration funding for the IMF as it expands its mandate.
The IMF has raised global growth estimates for 2010 to 2.4 percent from 1.9 percent in April, a G8 source who has seen the latest figures said on condition of anonymity.
The yield on 30-year Treasury bonds rose to 4.84%. The 10-year Treasury yield was as high as 4.0038 percent, at 9:05 a.m. in New York, according to BGCantor Market Data. The yield last touched 4 percent on Oct. 16.
Investors in bonds that packaged $62 billion of debt for U.S. offices, hotels and shopping malls are bracing for more loan defaults through 2010 as Bank of America Merrill Lynch says landlords’ monthly payments may jump 20 percent or more.
Principal is coming due on the so-called partial interest- only loans as an 18-month-old recession saps demand for commercial real estate. About $179 billion of such loans were written between 2005 and 2007 and bundled into bonds, according to data from Bank of America Merrill Lynch.
My best indicators for the consumer remain Wal-Mart and Costco. There is nothing in their most recent sales to indicate the consumer is becoming looser with their dwindling available funds. As such, in my view, the economy remains headed for a one-way ticket to Palookaville.
U.S. businesses reduced their inventories for the eighth straight month in April. Business inventories fell 1.1%. Meanwhile, business sales fell 0.3% in April. With inventories falling faster than sales, the inventory-to-sales ratio fell to 1.43 from 1.44 in March. The ratio was 1.27 a year ago, an indication of just how far inventories have gotten out of line with sales. Retail inventories fell 1% and retail sales fell 0.3%. Auto dealers' inventories fell 2.4%.
The European Central Bank fears another banking crisis in 2010 if the recession drags on, said ECB financial stability expert Dejan Krusec on Wednesday, cited on the website of the Daily Telegraph.
"The problem is not 2009. Euro-area banks are well enough capitalized to cover losses. The problem is 2010. We are concerned about the length (of the recession)," said Krusec.
The newspaper added that the ECB forecast of a 4.6 percent contraction this year with no recovery until mid-2010 precluded any chance of a V-shaped rebound.
Copper imports by China, the world’s largest consumer of the metal, climbed for a fourth month to a record in May, beating analyst expectations.
Inbound shipments advanced by 6 percent from the previous month to 422,666 metric tons, the Beijing-based customs office said today, citing preliminary data. A decline to a level above 300,000 tons had been expected, Minmetals Starfutures Co. said.
China has become a net importer of lead. About 1.6 Mt of mined zinc production has been cut or closed and 1.4 Mt of refined zinc output in 2009. Importantly, some of the mine closures are likely to be permanent, while others will take time and require financing to restart.
Hitwise said 36% of the U.S. traffic to Bing came from other MSN web sites.
Natural gas inventories rose 106 bcf last week. After the data, July natural gas rose 11.7 cents, or 3.1%, to $3.825 per million British thermal units.
"A long slog, with continuing high levels of unemployment, seems to be in store," Volcker, a former chairman of the Federal Reserve, said.
"This is not an environment in which inflationary pressures are at all likely for some time to come," he added.
The yield advantage of 10-year Treasury notes over comparable- maturity German bunds increased to the widest level since October 2007. Relative return on assets is one thing.
Relative risk is something else. In my view, the Fed's toxic balance sheet and the nation's multi-trillion deficits project high levels of risk.
The Federal Reserve was served a subpoena from a Congressional committee Tuesday, as lawmakers demanded documents related to Bank of America' s acquisition of Merrill Lynch.
Neither the Fed nor the U.S. Treasury can master the business cycle. Printing trillions of dollars of debt will ensure a market crash. You can go to the bank on that-- as long as it is not a federal insured institution.
The net worth of U.S. households fell by $1.3 trillion in the first quarter, a seventh straight decline that has seen their wealth drop by nearly $14 trillion, the Federal Reserve reported Thursday. Household net worth fell at a 9.9% annual rate in the first three months of the year to $50.4 billion, the lowest in more than four years. U.S. families have lost 22% of their wealth since the peak. Households and businesses reduced their outstanding debt in the quarter. Total private-sector debt fell at a 0.4% annual pace, the first time that private-sector debt had declined since the Fed's records begin in 1952.
Karl Denniger: "That is, asset values have declined at a rate nearly ten times that of the debt in the system against those assets." As debt service gets more difficult, he says, the permanent drag on consumption remains."
With an hour and one half to go in the trading session, the Dow is up 100 points and the VIX has declined to 27+. Another 5% drop or so, and one might consider going long the VIX.
August gold finished at $962 an ounce, up $7.30, or 0.8%. Crude ends up $1.35, or 1.9%, at $72.68 a barrel.
The Treasury Department sold $11 billion in 30-year notes on Thursday to yield 4.72%. Bidders offered 2.68 times the amount of debt being sold.
According to Bloomberg, Brazil, Russia, India and China’s plan to shift some foreign reserves into International Monetary Fund bonds may be more a signal of their growing financial clout than a lack of demand for U.S. assets.
“They’re saying they are part of the big leagues,” Alberto Ramos, an economist at Goldman Sachs Group Inc., said in a telephone interview from New York. “They’re not buying IMF bonds to diversify reserves. They want to be seen as having a large voice” in global markets, he said.
The outstanding call options on the UNG October $20 strike price amounts to about 61,000 contracts. With UNG at $14.80 and the calls going for 90 cents, that's a big bet natural gas will have a large move in the next several months.
The U.S dollar index closed very weak at 79.40.
The Dow ends up 31 points, the Nasdaq up 9, and the S&P UP 5.
The number of first-time claims for state unemployment benefits fell 24,000 to 601,000 in the week ended June 6, the Labor Department reported Thursday. The four-week average of initial claims fell 10,500 to 621,750. In the week ended May 30, continuing claims for benefits reached a new record high, rising 59,000 to 6.82 million from an upwardly revised level in the prior week. Continuing claims have set fresh record highs for 19 consecutive weeks. The four-week average of these continuing claims rose 57,250 to a record 6.75 million. The level of initial claims is up 55% from the same period in the prior year, and the level of ongoing claims is more than double last year's level. The insured unemployment rate - the proportion of insured workers who are collecting benefits - remained at 5.1%, the highest rate since December 1982.
The latest jobless claims show the economy may have a "jobless recovery" that could hurt stocks, Art Cashin told CNBC.
Foreclosure filings in May fell 6% from April, but rose 18% from May 2008, RealtyTrac reported on Thursday. Foreclosure filings -- default notices, scheduled auctions and bank repossessions -- were reported on nearly 321,500 properties in the month. May was the third straight month in which filings exceeded 300,000. One of every 398 U.S. housing units was the subject of a foreclosure filing in the month, the Irvine, Calif., consultant and marketplace reported. RealtyTrac reported fewer defaults and auctions but a 2% increase in bank repossessions. Nevada remained the state with the highest foreclosure rate, with 1 in 64 housing units the subject of a filing. California was second with 1 in every 144, and Florida was third with 1 in every 148.
Aerial Services of Livermore, is a frontline warrior in locating the backyard breeding sites. Last year, mosquito districts hired it to fly over almost every county in California. It covered 3,500 square miles - about one-third of the state's urban area - and "harvested" 27,000 algae-ridden pools, providing the districts with photographs, maps, street addresses, latitude/longitude and parcel data, including ownership.
"We find lots of mosquito sources at foreclosed homes," said John Rusmisel, district manager for Alameda County's Mosquito Abatement District. "It's an ongoing and big problem."
He hired Aerial Surveys to do surveillance over 75 square miles of the Tri-Valley area last week at a cost of $8,000 to $10,000. "Google Earth is great, but if you want to know real-time, an airplane is best," Rusmisel said.
Foreclosures and the economic downturn have ramped up the mosquito districts' work. In Contra Costa County, for instance, of 25,000 homes that were in the foreclosure process in 2008, more than 2,000 had swimming pools, according to the Contra Costa Mosquito & Vector Control District.
General Motors Corp. plans to cancel production of the hybrid-electric version of its Chevrolet Malibu sedan for the 2010 model year due to slow sales that has led to a backlog of inventory of the vehicles on dealer lots, The Wall Street Journal reported late Wednesday
The International Energy Agency increased its forecast of 2009 world oil demand by 120,000 barrels a day, citing stronger-than-forecast first quarter data from countries belonging to the Organization for Economic Cooperation and Development. Global oil demand is projected at 83.3 million barrels a day, down 2.9% compared to year earlier. "These revisions do not necessarily imply economic recovery but may reflect a slowing in previously sharp decline," the IEA said.
The World Health Organisation (WHO) was poised on Thursday to declare that the new H1N1 virus has caused the first influenza pandemic in more than 40 years, health sources said on Thursday.
China's investment surged in May as the government poured money into its economic stimulus, helping to offset an unexpectedly sharp drop in trade, and economists said the world's third-largest economy was improving.
Spending on factories and other fixed assets soared 32.9 percent in the first five months of the year, the National Bureau of Statistics said. Merrill Lynch said that translated into growth in May of up to 38 percent.
"Domestic activity has picked up, thanks to the government stimulus spending," said economist David Cohen of Action Economics in Singapore.
May exports fell by a record 26.4 percent from the same month of 2008, while imports contracted by 25.2 percent, the customs agency said Thursday. That exceeded most economists' forecasts.
The next test of the US Treasury’s issuance program looms on Thursday with the sale of $11bn in 30-year bonds. An auction of 30-year bonds last month went badly as investors signalled their concerns about the budget deficit.
“That did not go well last time, so there is also some additional concern,” said Dominic Konstam, head of interest rate strategy at Credit Suisse.
Traders said the good news of the day was that buyers entered the market when yields reached 4 per cent. “There should be natural support for the 10-year note around 4 per cent,” said Mr Konstam.
U.S. ad spending on media such as TV, print and online display ads fell 14% to $30.18 billion in the first quarter from a year earlier, according to TNS Media Intelligence.
Obama has now hired 21 czars with more on the way. That's what we need---more gov't
employees to add to the multi-trillion dollar budget deficit. Maybe if Obama cut down on his daily speeches and travel plans, he could actually perform some of this work himself. I guess 365 day campaigning is too time consuming.
July copper was last up 4.3 cents, or 1.8%, at $2.41 a pound on the Comex division of the New York Mercantile Exchange. August gold fell $8.40, or 0.9%, to $946.30 an ounce, and July silver lost 25 cents, or 1.6%, to $14.975 a pound. Oil futures extended their gains on Thursday after data showed a rise in U.S. May retail sales as well as a decline in weekly initial jobless claims. Crude oil for July delivery gained 70 cents, or 1%, to $72.06 a barrel in electronic trading on Globex.
The Clorox Co. said its board declared a quarterly dividend of 50 cents a share, payable Aug. 14 to stockholders of record on July 27. The amount represents an increase of 4 cents a share, or 9%, in the company's quarterly dividend. Clorox confirms 2010 earnings per share in the $4.00-to-$4.15 range and 1% to 2% sales growth.
Japan's economy shrank at a 14.2 percent annual pace in the first quarter -- better than first thought, but still the worst quarterly contraction ever for the world's second-largest economy.
On Wednesday, rates on 30-year fixed-rate mortgages climbed to 5.79%, up from 5% two weeks ago, according to HSH Associates. That jump will cut roughly in half the number of borrowers with an incentive to refinance, according to FTN Financial.
The White House has refused a request from Sen. Chuck Grassley for all the exemptions it’s granted to President Barack Obama’s ethics policy.
“The American people deserve a full accounting of all waivers and recusals to better understand who is running the government and whether the administration is adhering to its promise to be open, transparent and accountable,” Grassley wrote in a letter Wednesday to the director of the U.S. Office of Government Ethics.
Obama tasked that independent agency with implementing his ethics policy, and Grassley’s letter asks the office to explain every waiver and recusal granted under the policy and to post them on its website.
Brazil says it is to offer $10bn in financing to the IMF to help improve the availability of credit in developing countries.
It is the first time that South America's biggest economy has ever made a loan of this kind.
At least 35 states have introduced legislation this year asserting their power under the Tenth Amendment to regulate all matters not specifically delegated to the federal government by the Constitution.
"This has been boiling for years, and it's finally come to a head," said Utah State Rep. Carl Wimmer. "With TARP and No Child Left Behind, these things that continue to give the federal government more authority, our rights as states and individuals are being turned on their head."
Montana Gov. Brian Schweitzer recently signed into law a bill authorizing the state's gun manufacturers to produce "Made in Montana" firearms, without seeking licensing from the federal Bureau of Alcohol, Tobacco, Firearms and Explosives. Similar laws are being considered in Utah, Alaska, Texas and Tennessee.
The Montana law is expected to end up in the courts, where states' rights activists hope judges will uphold their constitutional right to regulate firearms.
That would reverse a longstanding trend, said Martin Flaherty, a professor of constitutional law at Fordham Law School.
Robert Natelson, a law professor at the University of Montana: "If the states are serious about returning the federal government to its historical origins, they're going to have to do more than pass resolutions. They're going to have to turn down money and litigate."
Ayn Rand: "The [U.S.] Constitution is a limitation on the government, not on private individuals ... it does not prescribe the conduct of private individuals, only the conduct of the government ... it is not a charter for government power, but a charter of the citizen's protection against the government."
Qualcomm now expects third-quarter operating profit of $830 million to $880 million, up sharply from its earlier estimate of $550 million to $650 million. "We are very pleased to raise our fiscal third quarter guidance, reflecting the strong worldwide demand for wireless broadband powered by 3G CDMA," the company said. However, they cautioned that it sees Q4 chipset units declining sequentially, putting a damper on the upbeat outlook for the current quarter.
500 jets have been sidelined since the start of 2008. Delta Air Lines said Thursday it will cut 10% from its system capacity this year as it wrestles with falling demand and rising oil prices. The Atlanta-based carrier and the world's largest airline said it would also reassess its staffing needs among its 70,000 employees. In a letter to employees, company executives said industry passenger revenue has fallen 20% in the first four months of the year compared to the same period in 2008, overtaking more than $6 billion in total benefits expected this year from lower jet fuel prices.
According to RGE Monitor, Russia, Brazil, India and South Korea have all expressed interest in buying the SDR denominated bonds issued by the IMF to meet its funding needs. Saudi Arabia might also be interested. these bonds would not only allow them to diversify their reserve assets but also provide limited duration funding for the IMF as it expands its mandate.
The IMF has raised global growth estimates for 2010 to 2.4 percent from 1.9 percent in April, a G8 source who has seen the latest figures said on condition of anonymity.
The yield on 30-year Treasury bonds rose to 4.84%. The 10-year Treasury yield was as high as 4.0038 percent, at 9:05 a.m. in New York, according to BGCantor Market Data. The yield last touched 4 percent on Oct. 16.
Investors in bonds that packaged $62 billion of debt for U.S. offices, hotels and shopping malls are bracing for more loan defaults through 2010 as Bank of America Merrill Lynch says landlords’ monthly payments may jump 20 percent or more.
Principal is coming due on the so-called partial interest- only loans as an 18-month-old recession saps demand for commercial real estate. About $179 billion of such loans were written between 2005 and 2007 and bundled into bonds, according to data from Bank of America Merrill Lynch.
My best indicators for the consumer remain Wal-Mart and Costco. There is nothing in their most recent sales to indicate the consumer is becoming looser with their dwindling available funds. As such, in my view, the economy remains headed for a one-way ticket to Palookaville.
U.S. businesses reduced their inventories for the eighth straight month in April. Business inventories fell 1.1%. Meanwhile, business sales fell 0.3% in April. With inventories falling faster than sales, the inventory-to-sales ratio fell to 1.43 from 1.44 in March. The ratio was 1.27 a year ago, an indication of just how far inventories have gotten out of line with sales. Retail inventories fell 1% and retail sales fell 0.3%. Auto dealers' inventories fell 2.4%.
The European Central Bank fears another banking crisis in 2010 if the recession drags on, said ECB financial stability expert Dejan Krusec on Wednesday, cited on the website of the Daily Telegraph.
"The problem is not 2009. Euro-area banks are well enough capitalized to cover losses. The problem is 2010. We are concerned about the length (of the recession)," said Krusec.
The newspaper added that the ECB forecast of a 4.6 percent contraction this year with no recovery until mid-2010 precluded any chance of a V-shaped rebound.
Copper imports by China, the world’s largest consumer of the metal, climbed for a fourth month to a record in May, beating analyst expectations.
Inbound shipments advanced by 6 percent from the previous month to 422,666 metric tons, the Beijing-based customs office said today, citing preliminary data. A decline to a level above 300,000 tons had been expected, Minmetals Starfutures Co. said.
China has become a net importer of lead. About 1.6 Mt of mined zinc production has been cut or closed and 1.4 Mt of refined zinc output in 2009. Importantly, some of the mine closures are likely to be permanent, while others will take time and require financing to restart.
Hitwise said 36% of the U.S. traffic to Bing came from other MSN web sites.
Natural gas inventories rose 106 bcf last week. After the data, July natural gas rose 11.7 cents, or 3.1%, to $3.825 per million British thermal units.
"A long slog, with continuing high levels of unemployment, seems to be in store," Volcker, a former chairman of the Federal Reserve, said.
"This is not an environment in which inflationary pressures are at all likely for some time to come," he added.
The yield advantage of 10-year Treasury notes over comparable- maturity German bunds increased to the widest level since October 2007. Relative return on assets is one thing.
Relative risk is something else. In my view, the Fed's toxic balance sheet and the nation's multi-trillion deficits project high levels of risk.
The Federal Reserve was served a subpoena from a Congressional committee Tuesday, as lawmakers demanded documents related to Bank of America' s acquisition of Merrill Lynch.
Neither the Fed nor the U.S. Treasury can master the business cycle. Printing trillions of dollars of debt will ensure a market crash. You can go to the bank on that-- as long as it is not a federal insured institution.
The net worth of U.S. households fell by $1.3 trillion in the first quarter, a seventh straight decline that has seen their wealth drop by nearly $14 trillion, the Federal Reserve reported Thursday. Household net worth fell at a 9.9% annual rate in the first three months of the year to $50.4 billion, the lowest in more than four years. U.S. families have lost 22% of their wealth since the peak. Households and businesses reduced their outstanding debt in the quarter. Total private-sector debt fell at a 0.4% annual pace, the first time that private-sector debt had declined since the Fed's records begin in 1952.
Karl Denniger: "That is, asset values have declined at a rate nearly ten times that of the debt in the system against those assets." As debt service gets more difficult, he says, the permanent drag on consumption remains."
With an hour and one half to go in the trading session, the Dow is up 100 points and the VIX has declined to 27+. Another 5% drop or so, and one might consider going long the VIX.
August gold finished at $962 an ounce, up $7.30, or 0.8%. Crude ends up $1.35, or 1.9%, at $72.68 a barrel.
The Treasury Department sold $11 billion in 30-year notes on Thursday to yield 4.72%. Bidders offered 2.68 times the amount of debt being sold.
According to Bloomberg, Brazil, Russia, India and China’s plan to shift some foreign reserves into International Monetary Fund bonds may be more a signal of their growing financial clout than a lack of demand for U.S. assets.
“They’re saying they are part of the big leagues,” Alberto Ramos, an economist at Goldman Sachs Group Inc., said in a telephone interview from New York. “They’re not buying IMF bonds to diversify reserves. They want to be seen as having a large voice” in global markets, he said.
The outstanding call options on the UNG October $20 strike price amounts to about 61,000 contracts. With UNG at $14.80 and the calls going for 90 cents, that's a big bet natural gas will have a large move in the next several months.
The U.S dollar index closed very weak at 79.40.
The Dow ends up 31 points, the Nasdaq up 9, and the S&P UP 5.
Wednesday, June 10, 2009
Audit The Fed
6/10/09 Audit The Fed
The Federal Reserve's balance sheet is so out of whack that the central bank would be shut down if subjected to a conventional audit, Jim Grant, editor of Grant's Interest Rate Observer, told CNBC.
The U.S. trade deficit widened by 2.2% in April to $29.2 billion, the Commerce Department said Wednesday. The deficit was in line with the consensus forecast of Wall Street economists. Exports fell faster than imports in January. Exports are now at their lowest level since July 2006 while imports have sunk to their lowest level since September 2004.
In April, the goods and services deficit decreased $33.0 billion from April 2008. Exports were down $33.7 billion, or 21.8 percent, and imports were down $66.7 billion, or 30.7 percent.
According to the WSJ, the tally of credit derivatives worldwide stood at $27.8 trillion in 2.2 million contracts in the week ended June 5.
The Obama administration's attempts to fight the financial crisis with more cash is like treating a bad tooth with Novocain instead of a root canal, Nassim Taleb, author of "The Black Swan," told CNBC Wednesday.
In Japan, orders for machinery slid 5.4 percent in April from a month earlier, much more than analysts had expected, official data showed Wednesday.
Brazilian mineral extractor Vale said that it has concluded iron ore and pellet price negotiations for 2009 with Nippon Steel Corporation and POSCO. The settlement was followed by the Japanese steelmakers Sumitomo Metal Industries, Kobe Steel and Nisshin Steel Co. Prices for iron ore fines decreased by 28.2% and for lumps by 44.47% compared to a year ago. The new reference prices per dry metric ton iron unit for 2009 are $0.8543 for Southeastern System fines, $0.8987 for Carajás sinter feed, $0.9942 for Southeastern System lump and $1.0094 for Southern System lump. The blast furnace pellet price decreased by 48.3% relatively to 2008 and the new reference price per dry metric ton iron unit for 2009 is $1.1043.
At the end of 2008, the world's proven oil reserves stood at 1.258 trillion barrels, excluding Canadian oil sands, down 0.2% from 1.261 trillion barrels in 2007, according to BP's statistical review of world energy released Wednesday. Over the year, global oil consumption fell by 0.6%, or 420,000 barrels a day; the first decline since 1993 and the largest drop for 27 years. World primary energy consumption - including oil, natural gas, coal, nuclear and hydro power - grew by 1.4% in 2008, the slowest growth since 2001.
Home Depot Inc. raised its profit forecasts for the year Wednesday. It estimated its per-share profit to be flat to down 7% with adjusted profit declining by 20% to 26%. That compared with its previous guidance of profit falling 7% and on an adjusted basis, dropping by 26%. Its sales are estimated to decline by about 9% with comparable store sales expected to fall in the high-single-digit percentage.
Hong Kong shares rallied Wednesday, led by China shares after mainland media indicated upside surprises in economic data due out later this week. The Hang Seng Index ended 4% higher at 18,785.66 and the China Enterprises Index, the local benchmark of China shares, jumped 5% to 11,033.55. Two Chinese newspapers reported industrial production data for May, due to be officially released Friday, rose by 8.9%. The newspapers both accurately reported PPI and CPI data ahead of the official release Wednesday.
Fontainebleau Las Vegas, a $3 billion resort project, filed under the bankruptcy laws, The Wall Street Journal reported.
The average 30-year fixed mortgage rate jumped 0.32 percentage point in the June 5 week to 5.57 percent. That was nearly a full point above the record low rate of 4.61 percent in March, the trade group said.
The vast majority of mortgage activity this year has been from homeowners cutting costs with new loans at rock-bottom rates.
The Mortgage Bankers Association's seasonally adjusted index of total applications dropped 7.2 percent to a four-month low of 611.0 in the latest week.
The U.S. Supreme Court on Tuesday cleared the way for Chrysler LLC to exit bankruptcy court, lifting a stay on its proposed sale to a group including Italy's Fiat SpA. The Supreme Court, in a brief order, said that the funds had not "carried the burden" of proving that their grievances merited the court's attention. Indiana Treasurer Richard Mourdock said he was "disappointed" by the decision. Thomas Lauria, a White & Case lawyer who led the legal challenge, said his experiences in the past month "cause me to...directly raise the question as to whether our judiciary is today able to fulfill its constitutional mission, that is, to ensure that the rule of law prevails -- particularly in the face of perceived crisis."
Russia may switch some of its reserves from U.S. Treasuries to International Monetary Fund bonds, the central bank said today. The comment drove Treasuries and the dollar lower. As of late May, Russia's international reserves stood at $401.1 billion, the third biggest in the world.
Crude inventories fell by 4.4 million barrels in the week ended June 5, the Energy Information Administration reported. Analysts surveyed by energy information provider Platts had expected an increase of 800,000 barrels. Imports fell 676,000 barrels a day from the previous week, while gasoline demand rose slightly from a week ago, the EIA report showed. The EIA also said gasoline inventories fell 1.6 million barrels and distillate stockpiles declined 300,000 barrels.
Bobcat announced last week that its plants in Bismarck and Gwinner will shutter for part of June and July due to the sluggish worldwide economy.
The company says its Bismarck plant will be closed Wednesday through Friday and again July 6 through July 10.
At the Gwinner plant, production workers will be off the job from June 10 through June 12, from June 24 through June 26 and June 29.
Rob Hanna: " On Tuesday the Nasdaq/NYSE volume 20-day average closed over 1.65. High levels of Nasdaq trading as opposed to NYSE suggest excessive speculation by investors. Once this level exceeds 1.4 (as Tradestation measures it), is has generally indicated a bearish bias."
The Federal Reserve said 5 of its 12 banks saw the economic downturn moderating, though none of the districts saw growth returning this year, and also said credit conditions remained tight while wages and prices were flat or falling.
The U.S. federal budget deficit widened to $189.7 billion in May as receipts dropped and outlays rose on further spending for bailouts and stimulus programs, the Treasury Department reported Wednesday. Outlays rose in May to $306.9 billion, up 6% compared with May 2008. Outlays included $18 billion in the Troubled Asset Relief Program, which is the bailout fund for banks and the automakers. Receipts fell to $117.2 billion in May, down 6% compared with last May. Through eight months of the fiscal year, the budget deficit has widened to $991.9 billion, more than three times higher than the $319.4 billion recorded at this time last year.
The Treasury Department sold $19 billion in 10-year notes on Wednesday to yield 3.99%, the most the government has had to pay since August.
July crude rose $1.32, or 1.9%, to end at $71.33 a barrel on the New York Mercantile Exchange, closing at the highest level for a front-month contract since Oct. 20.
Ten lenders that persuaded the U.S. yesterday to sell back preferred shares for $68 billion may need to spend another $5.1 billion on warrants held by the Treasury to free themselves from government curbs.
Two U.S. auto-parts supplier trade groups asked the Treasury to provide as much as $10 billion in new aid as the industry struggles with cuts in car production.
The Federal Reserve lost $5.25 billion in the first quarter on the securities it acquired with last year's bailouts of Bear Stearns and insurer American International Group, according to a report issued Wednesday.
Cadence Design to cut 225 jobs, or 5% of workforce.
Dow industrials off 24.26 points to 8,738. Nasdaq Composite sheds 7.05 points to 1,853. The S&P 500 Index shed 3.27 points, or 0.4%, to 939.16
Vulcan Materials Co. is cutting its third-quarter dividend to 25 cents from 49 cents. It will also offer 11.5 million common shares in a public offering.
Ron Paul's bill to audit the Federal Reserve (HR 1207) now has 207 co-sponsors, and the numbers keep growing!
Brazilian interest-rate policymakers late Wednesday cut the country's benchmark interest rate by more than expected, to 9.25%. The cut of the Selic rate by 100 basis points surpasses expectations for a cut of 75 basis points, according to a poll of analysts conducted by Dow Jones Newswires. The reduction marks the fourth time this year that the rate has been cut, and it now stands at its lowest level since the Selic was established in 1999.
"While GM does not control the market or its stock price, GM management strongly believes that any recovery for the common stockholders in the Chapter 11 bankruptcy process is highly unlikely, even under the most optimistic of scenarios," the company said in a statement.
The Federal Reserve's balance sheet is so out of whack that the central bank would be shut down if subjected to a conventional audit, Jim Grant, editor of Grant's Interest Rate Observer, told CNBC.
The U.S. trade deficit widened by 2.2% in April to $29.2 billion, the Commerce Department said Wednesday. The deficit was in line with the consensus forecast of Wall Street economists. Exports fell faster than imports in January. Exports are now at their lowest level since July 2006 while imports have sunk to their lowest level since September 2004.
In April, the goods and services deficit decreased $33.0 billion from April 2008. Exports were down $33.7 billion, or 21.8 percent, and imports were down $66.7 billion, or 30.7 percent.
According to the WSJ, the tally of credit derivatives worldwide stood at $27.8 trillion in 2.2 million contracts in the week ended June 5.
The Obama administration's attempts to fight the financial crisis with more cash is like treating a bad tooth with Novocain instead of a root canal, Nassim Taleb, author of "The Black Swan," told CNBC Wednesday.
In Japan, orders for machinery slid 5.4 percent in April from a month earlier, much more than analysts had expected, official data showed Wednesday.
Brazilian mineral extractor Vale said that it has concluded iron ore and pellet price negotiations for 2009 with Nippon Steel Corporation and POSCO. The settlement was followed by the Japanese steelmakers Sumitomo Metal Industries, Kobe Steel and Nisshin Steel Co. Prices for iron ore fines decreased by 28.2% and for lumps by 44.47% compared to a year ago. The new reference prices per dry metric ton iron unit for 2009 are $0.8543 for Southeastern System fines, $0.8987 for Carajás sinter feed, $0.9942 for Southeastern System lump and $1.0094 for Southern System lump. The blast furnace pellet price decreased by 48.3% relatively to 2008 and the new reference price per dry metric ton iron unit for 2009 is $1.1043.
At the end of 2008, the world's proven oil reserves stood at 1.258 trillion barrels, excluding Canadian oil sands, down 0.2% from 1.261 trillion barrels in 2007, according to BP's statistical review of world energy released Wednesday. Over the year, global oil consumption fell by 0.6%, or 420,000 barrels a day; the first decline since 1993 and the largest drop for 27 years. World primary energy consumption - including oil, natural gas, coal, nuclear and hydro power - grew by 1.4% in 2008, the slowest growth since 2001.
Home Depot Inc. raised its profit forecasts for the year Wednesday. It estimated its per-share profit to be flat to down 7% with adjusted profit declining by 20% to 26%. That compared with its previous guidance of profit falling 7% and on an adjusted basis, dropping by 26%. Its sales are estimated to decline by about 9% with comparable store sales expected to fall in the high-single-digit percentage.
Hong Kong shares rallied Wednesday, led by China shares after mainland media indicated upside surprises in economic data due out later this week. The Hang Seng Index ended 4% higher at 18,785.66 and the China Enterprises Index, the local benchmark of China shares, jumped 5% to 11,033.55. Two Chinese newspapers reported industrial production data for May, due to be officially released Friday, rose by 8.9%. The newspapers both accurately reported PPI and CPI data ahead of the official release Wednesday.
Fontainebleau Las Vegas, a $3 billion resort project, filed under the bankruptcy laws, The Wall Street Journal reported.
The average 30-year fixed mortgage rate jumped 0.32 percentage point in the June 5 week to 5.57 percent. That was nearly a full point above the record low rate of 4.61 percent in March, the trade group said.
The vast majority of mortgage activity this year has been from homeowners cutting costs with new loans at rock-bottom rates.
The Mortgage Bankers Association's seasonally adjusted index of total applications dropped 7.2 percent to a four-month low of 611.0 in the latest week.
The U.S. Supreme Court on Tuesday cleared the way for Chrysler LLC to exit bankruptcy court, lifting a stay on its proposed sale to a group including Italy's Fiat SpA. The Supreme Court, in a brief order, said that the funds had not "carried the burden" of proving that their grievances merited the court's attention. Indiana Treasurer Richard Mourdock said he was "disappointed" by the decision. Thomas Lauria, a White & Case lawyer who led the legal challenge, said his experiences in the past month "cause me to...directly raise the question as to whether our judiciary is today able to fulfill its constitutional mission, that is, to ensure that the rule of law prevails -- particularly in the face of perceived crisis."
Russia may switch some of its reserves from U.S. Treasuries to International Monetary Fund bonds, the central bank said today. The comment drove Treasuries and the dollar lower. As of late May, Russia's international reserves stood at $401.1 billion, the third biggest in the world.
Crude inventories fell by 4.4 million barrels in the week ended June 5, the Energy Information Administration reported. Analysts surveyed by energy information provider Platts had expected an increase of 800,000 barrels. Imports fell 676,000 barrels a day from the previous week, while gasoline demand rose slightly from a week ago, the EIA report showed. The EIA also said gasoline inventories fell 1.6 million barrels and distillate stockpiles declined 300,000 barrels.
Bobcat announced last week that its plants in Bismarck and Gwinner will shutter for part of June and July due to the sluggish worldwide economy.
The company says its Bismarck plant will be closed Wednesday through Friday and again July 6 through July 10.
At the Gwinner plant, production workers will be off the job from June 10 through June 12, from June 24 through June 26 and June 29.
Rob Hanna: " On Tuesday the Nasdaq/NYSE volume 20-day average closed over 1.65. High levels of Nasdaq trading as opposed to NYSE suggest excessive speculation by investors. Once this level exceeds 1.4 (as Tradestation measures it), is has generally indicated a bearish bias."
The Federal Reserve said 5 of its 12 banks saw the economic downturn moderating, though none of the districts saw growth returning this year, and also said credit conditions remained tight while wages and prices were flat or falling.
The U.S. federal budget deficit widened to $189.7 billion in May as receipts dropped and outlays rose on further spending for bailouts and stimulus programs, the Treasury Department reported Wednesday. Outlays rose in May to $306.9 billion, up 6% compared with May 2008. Outlays included $18 billion in the Troubled Asset Relief Program, which is the bailout fund for banks and the automakers. Receipts fell to $117.2 billion in May, down 6% compared with last May. Through eight months of the fiscal year, the budget deficit has widened to $991.9 billion, more than three times higher than the $319.4 billion recorded at this time last year.
The Treasury Department sold $19 billion in 10-year notes on Wednesday to yield 3.99%, the most the government has had to pay since August.
July crude rose $1.32, or 1.9%, to end at $71.33 a barrel on the New York Mercantile Exchange, closing at the highest level for a front-month contract since Oct. 20.
Ten lenders that persuaded the U.S. yesterday to sell back preferred shares for $68 billion may need to spend another $5.1 billion on warrants held by the Treasury to free themselves from government curbs.
Two U.S. auto-parts supplier trade groups asked the Treasury to provide as much as $10 billion in new aid as the industry struggles with cuts in car production.
The Federal Reserve lost $5.25 billion in the first quarter on the securities it acquired with last year's bailouts of Bear Stearns and insurer American International Group, according to a report issued Wednesday.
Cadence Design to cut 225 jobs, or 5% of workforce.
Dow industrials off 24.26 points to 8,738. Nasdaq Composite sheds 7.05 points to 1,853. The S&P 500 Index shed 3.27 points, or 0.4%, to 939.16
Vulcan Materials Co. is cutting its third-quarter dividend to 25 cents from 49 cents. It will also offer 11.5 million common shares in a public offering.
Ron Paul's bill to audit the Federal Reserve (HR 1207) now has 207 co-sponsors, and the numbers keep growing!
Brazilian interest-rate policymakers late Wednesday cut the country's benchmark interest rate by more than expected, to 9.25%. The cut of the Selic rate by 100 basis points surpasses expectations for a cut of 75 basis points, according to a poll of analysts conducted by Dow Jones Newswires. The reduction marks the fourth time this year that the rate has been cut, and it now stands at its lowest level since the Selic was established in 1999.
"While GM does not control the market or its stock price, GM management strongly believes that any recovery for the common stockholders in the Chapter 11 bankruptcy process is highly unlikely, even under the most optimistic of scenarios," the company said in a statement.
Tuesday, June 09, 2009
Economic Fascism
6/9/09 Economic Facism
Senior Chinese leaders have privately voiced fear over the soaring US budget deficit and are increasingly looking to diversify from the dollar, a Republican congressman said.
"We heard across the board -- in private -- substantial, continuing and rising concern," Representative Mark Kirk said after a trip to China that included talks with government officials and central bank chief Zhou Xiaochuan. "It's clear that China would like to diversify from its dollar investments," the lawmaker said at the Center for Strategic and International Studies, a Washington think-tank. Kirk said that Chinese leaders were sharply critical in private of the US Federal Reserve's policy of "quantitative easing" -- a form of flooding the financial system with cash, which critics deride as printing imaginary money.
Martin Hutchinson: "Reported growth in productivity is likely to be far lower in the next few years than in the recent past. Like the downtrend of 1973-82, the new downtrend will be difficult to explain and may be prolonged. The likelihood of a prolonged period of sluggish productivity growth is thus yet another reason to expect the 2010s to be economically a miserable period."
Talbots to cut corporate headcount by about 20%.
Lloyds Banking Group will cut more than 1,500 jobs and close all the branches of its Cheltenham & Gloucester mortgages and savings arm, according to a Sky News report
Tuesday.
German retailer Arcandor AG says it has filed for bankruptcy protection, a day after the government rejected its bid for state-backed emergency credit.
Barry Ritholtz: "The bottom line remains: Two thirds of the economy is dependent upon consumer spending, Oil is now ~$70 a barrel (gasoline coming up on $3), and the consumer’s ability to borrow, tap equity, or otherwise live a profligate, unfunded lifestyle has been radically crimped. "
A new survey released last week shows the extent home prices are being reduced across the country. Nationwide, almost a quarter of homes on the market (23.6%) have experienced at least one price cut, totaling $27.4 billion in reductions. 28% of San Francisco listings are recording price chops with trimmings averaging 11% of the original price.
Ian Mathis: "According to Bloomberg, off-balance sheet assets just for the four biggest U.S. banks were about $5.2 trillion at the end of 2008. The rumor is that the new rule would force these banks to recognize only around $1 trillion of that. And though people say ‘off-balance sheet assets’ – what we are really talking about is more assets bought with very little equity.”
Gasoline prices remain well below those of last summer, when the national average for regular gasoline soared above $4, but economists say the recent gains are a growing economic problem and may presage a rise in the overall inflation rate.
“This hits everyone,” said Robert J. Shiller, an economist at Yale. “It has the potential to affect your confidence.” He said that the recent rise in gasoline prices could effectively offset the new $400 to $800 payroll tax cut most employees are receiving this year as part of the Obama administration’s effort to stimulate the economy.
William McGurn: "Of course, the inability to measure Mr. Obama's jobs formula is part of its attraction. Never mind that no one -- not the Labor Department, not the Treasury, not the Bureau of Labor Statistics -- actually measures "jobs saved." As the New York Times delicately reports, Mr. Obama's jobs claims are "based on macroeconomic estimates, not an actual counting of jobs." Nice work if you can get away with it."
Internet advertising in the United States dropped 5% in the first quarter, marking the marketing medium's first downturn since 2002 when the Web was still recovering from the dot-com bust.
The data released Friday by the Interactive Advertising Bureau and PricewaterhouseCoopers provided another reminder of the widespread pain wrought by the longest U.S. recession since World War II .
According to the WSJ, U.S. wholesalers reduced their inventories during April more than expected, and a gauge measuring undesired supply made a promising dip.
Wholesale inventories fell 1.4% to a seasonally adjusted $405.4 billion, after dropping a revised 1.8% during March, the Commerce Department said Tuesday. Originally, Commerce estimated inventories fell 1.6% in March.
Inventories at U.S. wholesalers fell in April for the eighth straight month as distributors tried to cut excess supply apace with decreasing sales.
The 1.4 percent decline in stockpiles was larger than forecast and followed a revised 1.8 percent decrease in March that was larger than previously estimated, the Commerce Department said today in Washington. Sales fell 0.4 percent to the lowest level since 2005.
Investor's Business Daily and TechnoMetrica Market Intelligence said their IBD/TIPP Economic Optimism Index climbed to 50.8 in June from 48.6 in May, marking its highest reading since November 2008.
Blyth said it still expects to earn $3 to $3.30 per share in fiscal 2010. Lane said that estimate seemed "optimistic given continued sluggish fundamentals."
President Obama and his economic team are preparing regulatory reform measures that will seek to limit risk-taking on Wall Street, Treasury Secretary Timothy Geithner said Tuesday. "A centerpiece of what the President will recommend in terms of financial reform will be a much more conservative set of constraints on risk-taking across the financial system more evenly enforced with more effective oversight," Geithner told a subcommittee of the Senate Appropriations Committee. The plan will seek more tools for the Securities and Exchange Commission and bank regulators to curb excessive compensation practices on Wall Street. Economic fascism's finest hour.
The Energy Information Administration on Tuesday raised its outlook for this year's crude-oil and gasoline prices. Crude prices are expected to average $58.70 a barrel this year, the EIA said in a monthly report. That's up from the $52 a barrel the EIA had forecast a month ago. It also raised the outlook for next year's crude price to $67.42 from $58. The EIA also said regular gasoline prices are expected to average close to $2.70 a gallon in July. The annual average regular gasoline price in 2009 is expected to be $2.33 per gallon.
The S&P 500 has sustained a break atop its 200-day across six straight sessions.
Intel Corp.lost share in worldwide total microprocessor revenue in the first quarter of 2009, ending a year of sequential market gains, iSuppli Corp. said Tuesday. Intel's share fell 2.5% to 79.1%. Meanwhile, Advanced Micro Devices Inc.'s market share rose about 2.3% to 12.8%. Both chip giants suffered lower sales as a result of the economic downturn, iSuppli said.
Shares of Eddie Bauer plummeted 44.8% to 26 cents in recent trading. Hilco Consumer Capital LLC and CCMP Capital Advisors LLC have expressed interest in bidding for the company's assets in private talks, according to Bloomberg, and that the final decision on a bankruptcy filing has yet to be made.
Crude oil for July delivery rallied $1.92, or 2.8%, to end at $70.01 a barrel on the New York Mercantile Exchange. That's the first time a front-month crude contract closes above $70 since Nov. 4 of last year.
DJIA down 1.51 (0.02%) to 8,763. S&P 500 up 3.29 (0.4%) to 942.43. Nasdaq up 17.7 (1%) to 1,860.
The Energy Dept said natural gas production would fall 1.1% this year.
SUPREME COURT LIFTS STAY ON CHRYSLER-FIAT DEAL, REPORTS SAY. That is most unfortnate but hardly surprising.
Senior Chinese leaders have privately voiced fear over the soaring US budget deficit and are increasingly looking to diversify from the dollar, a Republican congressman said.
"We heard across the board -- in private -- substantial, continuing and rising concern," Representative Mark Kirk said after a trip to China that included talks with government officials and central bank chief Zhou Xiaochuan. "It's clear that China would like to diversify from its dollar investments," the lawmaker said at the Center for Strategic and International Studies, a Washington think-tank. Kirk said that Chinese leaders were sharply critical in private of the US Federal Reserve's policy of "quantitative easing" -- a form of flooding the financial system with cash, which critics deride as printing imaginary money.
Martin Hutchinson: "Reported growth in productivity is likely to be far lower in the next few years than in the recent past. Like the downtrend of 1973-82, the new downtrend will be difficult to explain and may be prolonged. The likelihood of a prolonged period of sluggish productivity growth is thus yet another reason to expect the 2010s to be economically a miserable period."
Talbots to cut corporate headcount by about 20%.
Lloyds Banking Group will cut more than 1,500 jobs and close all the branches of its Cheltenham & Gloucester mortgages and savings arm, according to a Sky News report
Tuesday.
German retailer Arcandor AG says it has filed for bankruptcy protection, a day after the government rejected its bid for state-backed emergency credit.
Barry Ritholtz: "The bottom line remains: Two thirds of the economy is dependent upon consumer spending, Oil is now ~$70 a barrel (gasoline coming up on $3), and the consumer’s ability to borrow, tap equity, or otherwise live a profligate, unfunded lifestyle has been radically crimped. "
A new survey released last week shows the extent home prices are being reduced across the country. Nationwide, almost a quarter of homes on the market (23.6%) have experienced at least one price cut, totaling $27.4 billion in reductions. 28% of San Francisco listings are recording price chops with trimmings averaging 11% of the original price.
Ian Mathis: "According to Bloomberg, off-balance sheet assets just for the four biggest U.S. banks were about $5.2 trillion at the end of 2008. The rumor is that the new rule would force these banks to recognize only around $1 trillion of that. And though people say ‘off-balance sheet assets’ – what we are really talking about is more assets bought with very little equity.”
Gasoline prices remain well below those of last summer, when the national average for regular gasoline soared above $4, but economists say the recent gains are a growing economic problem and may presage a rise in the overall inflation rate.
“This hits everyone,” said Robert J. Shiller, an economist at Yale. “It has the potential to affect your confidence.” He said that the recent rise in gasoline prices could effectively offset the new $400 to $800 payroll tax cut most employees are receiving this year as part of the Obama administration’s effort to stimulate the economy.
William McGurn: "Of course, the inability to measure Mr. Obama's jobs formula is part of its attraction. Never mind that no one -- not the Labor Department, not the Treasury, not the Bureau of Labor Statistics -- actually measures "jobs saved." As the New York Times delicately reports, Mr. Obama's jobs claims are "based on macroeconomic estimates, not an actual counting of jobs." Nice work if you can get away with it."
Internet advertising in the United States dropped 5% in the first quarter, marking the marketing medium's first downturn since 2002 when the Web was still recovering from the dot-com bust.
The data released Friday by the Interactive Advertising Bureau and PricewaterhouseCoopers provided another reminder of the widespread pain wrought by the longest U.S. recession since World War II .
According to the WSJ, U.S. wholesalers reduced their inventories during April more than expected, and a gauge measuring undesired supply made a promising dip.
Wholesale inventories fell 1.4% to a seasonally adjusted $405.4 billion, after dropping a revised 1.8% during March, the Commerce Department said Tuesday. Originally, Commerce estimated inventories fell 1.6% in March.
Inventories at U.S. wholesalers fell in April for the eighth straight month as distributors tried to cut excess supply apace with decreasing sales.
The 1.4 percent decline in stockpiles was larger than forecast and followed a revised 1.8 percent decrease in March that was larger than previously estimated, the Commerce Department said today in Washington. Sales fell 0.4 percent to the lowest level since 2005.
Investor's Business Daily and TechnoMetrica Market Intelligence said their IBD/TIPP Economic Optimism Index climbed to 50.8 in June from 48.6 in May, marking its highest reading since November 2008.
Blyth said it still expects to earn $3 to $3.30 per share in fiscal 2010. Lane said that estimate seemed "optimistic given continued sluggish fundamentals."
President Obama and his economic team are preparing regulatory reform measures that will seek to limit risk-taking on Wall Street, Treasury Secretary Timothy Geithner said Tuesday. "A centerpiece of what the President will recommend in terms of financial reform will be a much more conservative set of constraints on risk-taking across the financial system more evenly enforced with more effective oversight," Geithner told a subcommittee of the Senate Appropriations Committee. The plan will seek more tools for the Securities and Exchange Commission and bank regulators to curb excessive compensation practices on Wall Street. Economic fascism's finest hour.
The Energy Information Administration on Tuesday raised its outlook for this year's crude-oil and gasoline prices. Crude prices are expected to average $58.70 a barrel this year, the EIA said in a monthly report. That's up from the $52 a barrel the EIA had forecast a month ago. It also raised the outlook for next year's crude price to $67.42 from $58. The EIA also said regular gasoline prices are expected to average close to $2.70 a gallon in July. The annual average regular gasoline price in 2009 is expected to be $2.33 per gallon.
The S&P 500 has sustained a break atop its 200-day across six straight sessions.
Intel Corp.lost share in worldwide total microprocessor revenue in the first quarter of 2009, ending a year of sequential market gains, iSuppli Corp. said Tuesday. Intel's share fell 2.5% to 79.1%. Meanwhile, Advanced Micro Devices Inc.'s market share rose about 2.3% to 12.8%. Both chip giants suffered lower sales as a result of the economic downturn, iSuppli said.
Shares of Eddie Bauer plummeted 44.8% to 26 cents in recent trading. Hilco Consumer Capital LLC and CCMP Capital Advisors LLC have expressed interest in bidding for the company's assets in private talks, according to Bloomberg, and that the final decision on a bankruptcy filing has yet to be made.
Crude oil for July delivery rallied $1.92, or 2.8%, to end at $70.01 a barrel on the New York Mercantile Exchange. That's the first time a front-month crude contract closes above $70 since Nov. 4 of last year.
DJIA down 1.51 (0.02%) to 8,763. S&P 500 up 3.29 (0.4%) to 942.43. Nasdaq up 17.7 (1%) to 1,860.
The Energy Dept said natural gas production would fall 1.1% this year.
SUPREME COURT LIFTS STAY ON CHRYSLER-FIAT DEAL, REPORTS SAY. That is most unfortnate but hardly surprising.
Monday, June 08, 2009
Transportation
6/8/09 Transportation
247wallst.com: "Microsoft may price Windows 7 as low as $100 to offset the effects of the recession on PC operating system sales and the public’s rejection of Vista, the current version of Windows.
The price cut would be unprecedented. It could drive up sales of Microsoft’s software and PCs in general. It could also put intense pressure on Redmond’s margins and sales.
According to ComputerWorld, Microsoft has already slashed the licensing prices for Vista in an attempt to revive anemic sales. Window 7 is viewed as a better product, so a $100 price point could get customers back into the habit of updating their operating systems with each new version of the Microsoft’s system."
The IATA expects global airline losses to reach as high as $9B in 2009, nearly double a previous forecast.
The government has shelved a plan to finance the investor purchases of mortgage loans.
A top Chinese banker on Sunday called on the U.S. government and the World Bank to sell yuan-denominated bonds in Hong Kong and Shanghai to encourage the development of debt markets in those centers and to promote the yuan as a major international currency.
In an interview with Reuters, Guo said it was in American interests to see the yuan, also known as the renminbi, become a currency that is traded across the globe. He said that is largely because of the symbiotic relationship between U.S. purchases of Chinese goods and China's purchases of U.S. assets with the proceeds.
Guo, who is a former head of China's foreign exchange administration, said there should be "mutual cooperation" between the U.S. and China to promote China's financial sector and markets.
The difference in yield, or spread, between two- and 10- year notes narrowed to 252 basis points, the least since May 21. The so-called flattening yield curve indicated investors bet economic recovery will result in policy makers having to increase borrowing costs in the future.
McDonald's Corp. said Monday that global comparable sales rose 5.1% in May. In the U.S., same-store sales rose 2.8% and in Europe comparable sales rose 7.5%. Australia was the catalyst for 6.4% growth in the Asia/Pacific region. The company warned its profit in the second quarter could be cut due to fluctuating exchange rates.
Gold is up nearly 8% this year, and silver is up more than 30%. The Standard & Poor's 500 index has surged 39 percent from a 12-year low on March 9.
The delinquency rate for bank-issued credit cards rose 11 percent in the first three months of the year, according to credit reporting agency TransUnion.
The delinquency rate jumped to 1.32 percent this year, from 1.19 percent in the first three months of 2008, TransUnion said. The statistic measures the percentage of card holders who are three months or more past due on their payments for cards bearing MasterCard and Visa logos, along with American Express and Discover cards.
The average total debt on bank cards also rose, jumping to $5,776 from $5,548 last year.
John Hussman: "We have an economy that is likely to produce a very stagnant recovery even if one has begun – of which I am also skeptical.... Last week, we abandoned the last of our index call options on strength, and are now back to a fully hedged position....
What about the March low? Given the recent advance, shouldn't investors treat that as an “absolute” buy level now? While it may sound absurd, it is not at all clear to me that the March low was the final low of the current cycle. Yes, it might have been (and we are willing to accept some amount of market exposure if our measures of internals improve), but I believe that investors should not rule out even the 500 level on the S&P 500 as a plausible outcome over the coming 18 months. If you study the fundamentals of this economy – particularly the debt burdens, the narrow margin by which many debtors are above water, and the adjustable rate reset schedule – there is far more to be concerned about than might be gleaned from sentiment surveys like consumer confidence or even the ISM numbers. Moreover, there is a far weaker prospect for a return to 2007-like profit margins than investors seem to recognize."
U.S. corn and wheat inventories before the 2010 harvests will be smaller than the government estimated in May as wet weather cut planted acreage and trimmed yields, analysts said. Soybean supplies on Aug. 31 may fall to the smallest in five years on record export demand.
Liz Pulliam Weston: "Of households that earn $20,600 or less, more than one in four devote at least 40 cents of every dollar earned to debt payments, according to the Federal Reserve's latest Survey of Consumer Finances. Among the top 10% of earners, by contrast, fewer than one in 25 households has debt service that large.
Among households earning $59,601 to $98,200, the percentage rose from 9.8% to 12.7%, or nearly 30%.
For those earning $98,201 to $140,900, the percentage more than doubled, from 3.5% to 8.1%."
General Mills said it expects fiscal 2009 earnings to exceed its prior profit outlook by several cents, due to a good operating performance and a lower quarterly tax rate.
Chinese vaccine maker Sinovac Biotech Ltd. said it has begun production of a vaccine to prevent the H1N1 virus, also known as the swine flu. The company said it is currently able to produce up to 30 million doses of pandemic vaccine per year, and hopes to combine the H1N1 virus into a broader pandemic vaccine known as Panflu. Sinovac added that the number of doses it is able to manufacture will depend on how the H1N1 virus batches perform.
Gerard Jackson: "The Obama administration is the most financially irresponsible one in US history. His outrageous spending and borrowing will lead to ever rising taxes (John Taylor estimates that balancing the budget, even in 10 years time, would require a permanent 60 per cent tax increase) the ramifications of which must inevitable bear down on economic recovery....What we need to consider is whether the point has now been reached where the size of the monetary injection needed to stimulate recovery is now so large that it results in stagflation....People do not seem to realise that the other term for economic growth is capital accumulation. There is absolutely nothing in Obama's economic program that will cause the capital structure to expand. On the contrary, everything points to a contraction. This means that real wages and living standards would have to fall."
S&P lowers Ireland long-term credit to AA.
Wells Fargo & Co., ProLogis and more than 150 other companies raised $82.2 billion this quarter, beating the record pace at the height of the technology bubble in 2000, according to data compiled by Bloomberg. The combination of adding shares and restricting dividends will reduce annual equity returns as much as 4.1 percent, the data show.
“The math is inescapable,” said Alan Gayle, the Richmond, Virginia-based director of asset allocation at Ridgeworth Investments, which manages $60 billion. “You’ve got weak earnings, the share price goes down and then, ‘What? They want to raise equity?’ Clearly that isn’t a good thing.”
Rob Hanna: "I noted in Thursday night’s Subscriber Letter that AAPL and GOOG had both risen for 8 days in a row. Additionally, those two along with MSFT and ORCL all had 2-day RSI’s of over 98. That’s an extremely overbought level. These 4 stocks are among the top 7 and make up about 26% of the Nasdaq 100. Using the list of current Nasdaq 100 stocks I studied action among the current 8 highest weighted. In addition to the 4 above this includes RIMM, QCOM, CSCO and GILD. I looked at other times since 2007 that at least 4 of these 8 stocks closed with a 2-day RSI in excess of 94. It’s not exactly a layup that a pullback should immediately begin. Still, risk appears to greatly outweigh reward when several of the top components are strongly overbought short-term. A brief look at the W/L Ratio suggests this. A pullback does normally come at some point in the next few days though. In fact of the 21 instances where the conditions were met, only one did not experience a close below the trigger day’s close within the next 4 days."
Julian Robertson: "I ask anyone to give me an example of an economy beefed up by huge amounts of quantitative easing that did not inflate tremendously when or if the economy improved. I think what we're doing now will either fail, or it will result in unbelievably high inflation - and tragically, maybe both. That would mean a depression and explosive inflation, which is frightening."
Texas Instruments Inc. raised and narrowed its second-quarter revenue and earnings per share estimates. The Dallas-based chip maker said it now expects revenue in the range of $2.3 billion and $2.5 billion, compared to a previous range of $1.95 billion and $2.4 billion. TI also said it now expects earnings per share in the range of 14 cents a share to 22 cents a share, compared with a prior range of 1 cent a share to 15 cents a share.
The U.S. Supreme Court blocked the sale of Chrysler's assets after a group of Indiana pension funds appealed the sale. The funds argued that the sale of Chrysler to Italian automaker Fiat is unconstitutional. A court spokesman said that the sale is stayed "pending further order of the court."
Down more than 100 points during the day, the Dow Jones Industrial Average rose 1.36 points to 8,764.4. The S&P 500 Index fell nearly 1 point to 939.14, while the Nasdaq Composite ended at 1,842.4, off 7.02 points.
The ATA Tonnage Index declined a seasonally adjusted 2.2% in April. This is better than the 4.5% contraction in March, but still negative. U.S. rail carload traffic in May 2009 fell 24.7 percent”, the worst y/y % decline of the recession. See the green shoots?
247wallst.com: "Microsoft may price Windows 7 as low as $100 to offset the effects of the recession on PC operating system sales and the public’s rejection of Vista, the current version of Windows.
The price cut would be unprecedented. It could drive up sales of Microsoft’s software and PCs in general. It could also put intense pressure on Redmond’s margins and sales.
According to ComputerWorld, Microsoft has already slashed the licensing prices for Vista in an attempt to revive anemic sales. Window 7 is viewed as a better product, so a $100 price point could get customers back into the habit of updating their operating systems with each new version of the Microsoft’s system."
The IATA expects global airline losses to reach as high as $9B in 2009, nearly double a previous forecast.
The government has shelved a plan to finance the investor purchases of mortgage loans.
A top Chinese banker on Sunday called on the U.S. government and the World Bank to sell yuan-denominated bonds in Hong Kong and Shanghai to encourage the development of debt markets in those centers and to promote the yuan as a major international currency.
In an interview with Reuters, Guo said it was in American interests to see the yuan, also known as the renminbi, become a currency that is traded across the globe. He said that is largely because of the symbiotic relationship between U.S. purchases of Chinese goods and China's purchases of U.S. assets with the proceeds.
Guo, who is a former head of China's foreign exchange administration, said there should be "mutual cooperation" between the U.S. and China to promote China's financial sector and markets.
The difference in yield, or spread, between two- and 10- year notes narrowed to 252 basis points, the least since May 21. The so-called flattening yield curve indicated investors bet economic recovery will result in policy makers having to increase borrowing costs in the future.
McDonald's Corp. said Monday that global comparable sales rose 5.1% in May. In the U.S., same-store sales rose 2.8% and in Europe comparable sales rose 7.5%. Australia was the catalyst for 6.4% growth in the Asia/Pacific region. The company warned its profit in the second quarter could be cut due to fluctuating exchange rates.
Gold is up nearly 8% this year, and silver is up more than 30%. The Standard & Poor's 500 index has surged 39 percent from a 12-year low on March 9.
The delinquency rate for bank-issued credit cards rose 11 percent in the first three months of the year, according to credit reporting agency TransUnion.
The delinquency rate jumped to 1.32 percent this year, from 1.19 percent in the first three months of 2008, TransUnion said. The statistic measures the percentage of card holders who are three months or more past due on their payments for cards bearing MasterCard and Visa logos, along with American Express and Discover cards.
The average total debt on bank cards also rose, jumping to $5,776 from $5,548 last year.
John Hussman: "We have an economy that is likely to produce a very stagnant recovery even if one has begun – of which I am also skeptical.... Last week, we abandoned the last of our index call options on strength, and are now back to a fully hedged position....
What about the March low? Given the recent advance, shouldn't investors treat that as an “absolute” buy level now? While it may sound absurd, it is not at all clear to me that the March low was the final low of the current cycle. Yes, it might have been (and we are willing to accept some amount of market exposure if our measures of internals improve), but I believe that investors should not rule out even the 500 level on the S&P 500 as a plausible outcome over the coming 18 months. If you study the fundamentals of this economy – particularly the debt burdens, the narrow margin by which many debtors are above water, and the adjustable rate reset schedule – there is far more to be concerned about than might be gleaned from sentiment surveys like consumer confidence or even the ISM numbers. Moreover, there is a far weaker prospect for a return to 2007-like profit margins than investors seem to recognize."
U.S. corn and wheat inventories before the 2010 harvests will be smaller than the government estimated in May as wet weather cut planted acreage and trimmed yields, analysts said. Soybean supplies on Aug. 31 may fall to the smallest in five years on record export demand.
Liz Pulliam Weston: "Of households that earn $20,600 or less, more than one in four devote at least 40 cents of every dollar earned to debt payments, according to the Federal Reserve's latest Survey of Consumer Finances. Among the top 10% of earners, by contrast, fewer than one in 25 households has debt service that large.
Among households earning $59,601 to $98,200, the percentage rose from 9.8% to 12.7%, or nearly 30%.
For those earning $98,201 to $140,900, the percentage more than doubled, from 3.5% to 8.1%."
General Mills said it expects fiscal 2009 earnings to exceed its prior profit outlook by several cents, due to a good operating performance and a lower quarterly tax rate.
Chinese vaccine maker Sinovac Biotech Ltd. said it has begun production of a vaccine to prevent the H1N1 virus, also known as the swine flu. The company said it is currently able to produce up to 30 million doses of pandemic vaccine per year, and hopes to combine the H1N1 virus into a broader pandemic vaccine known as Panflu. Sinovac added that the number of doses it is able to manufacture will depend on how the H1N1 virus batches perform.
Gerard Jackson: "The Obama administration is the most financially irresponsible one in US history. His outrageous spending and borrowing will lead to ever rising taxes (John Taylor estimates that balancing the budget, even in 10 years time, would require a permanent 60 per cent tax increase) the ramifications of which must inevitable bear down on economic recovery....What we need to consider is whether the point has now been reached where the size of the monetary injection needed to stimulate recovery is now so large that it results in stagflation....People do not seem to realise that the other term for economic growth is capital accumulation. There is absolutely nothing in Obama's economic program that will cause the capital structure to expand. On the contrary, everything points to a contraction. This means that real wages and living standards would have to fall."
S&P lowers Ireland long-term credit to AA.
Wells Fargo & Co., ProLogis and more than 150 other companies raised $82.2 billion this quarter, beating the record pace at the height of the technology bubble in 2000, according to data compiled by Bloomberg. The combination of adding shares and restricting dividends will reduce annual equity returns as much as 4.1 percent, the data show.
“The math is inescapable,” said Alan Gayle, the Richmond, Virginia-based director of asset allocation at Ridgeworth Investments, which manages $60 billion. “You’ve got weak earnings, the share price goes down and then, ‘What? They want to raise equity?’ Clearly that isn’t a good thing.”
Rob Hanna: "I noted in Thursday night’s Subscriber Letter that AAPL and GOOG had both risen for 8 days in a row. Additionally, those two along with MSFT and ORCL all had 2-day RSI’s of over 98. That’s an extremely overbought level. These 4 stocks are among the top 7 and make up about 26% of the Nasdaq 100. Using the list of current Nasdaq 100 stocks I studied action among the current 8 highest weighted. In addition to the 4 above this includes RIMM, QCOM, CSCO and GILD. I looked at other times since 2007 that at least 4 of these 8 stocks closed with a 2-day RSI in excess of 94. It’s not exactly a layup that a pullback should immediately begin. Still, risk appears to greatly outweigh reward when several of the top components are strongly overbought short-term. A brief look at the W/L Ratio suggests this. A pullback does normally come at some point in the next few days though. In fact of the 21 instances where the conditions were met, only one did not experience a close below the trigger day’s close within the next 4 days."
Julian Robertson: "I ask anyone to give me an example of an economy beefed up by huge amounts of quantitative easing that did not inflate tremendously when or if the economy improved. I think what we're doing now will either fail, or it will result in unbelievably high inflation - and tragically, maybe both. That would mean a depression and explosive inflation, which is frightening."
Texas Instruments Inc. raised and narrowed its second-quarter revenue and earnings per share estimates. The Dallas-based chip maker said it now expects revenue in the range of $2.3 billion and $2.5 billion, compared to a previous range of $1.95 billion and $2.4 billion. TI also said it now expects earnings per share in the range of 14 cents a share to 22 cents a share, compared with a prior range of 1 cent a share to 15 cents a share.
The U.S. Supreme Court blocked the sale of Chrysler's assets after a group of Indiana pension funds appealed the sale. The funds argued that the sale of Chrysler to Italian automaker Fiat is unconstitutional. A court spokesman said that the sale is stayed "pending further order of the court."
Down more than 100 points during the day, the Dow Jones Industrial Average rose 1.36 points to 8,764.4. The S&P 500 Index fell nearly 1 point to 939.14, while the Nasdaq Composite ended at 1,842.4, off 7.02 points.
The ATA Tonnage Index declined a seasonally adjusted 2.2% in April. This is better than the 4.5% contraction in March, but still negative. U.S. rail carload traffic in May 2009 fell 24.7 percent”, the worst y/y % decline of the recession. See the green shoots?
Sunday, June 07, 2009
Wages And Benefits
6/7/09 Wages And Benefits
Benjamin Franklin: “Let honesty and industry be thy constant companions, and spend one penny less than thy clear gains; then shall thy pocket begin to thrive; creditors will not insult, nor want oppress, nor hungerness bite, nor nakedness freeze thee”
Brian Pretti: "Very quickly, the history of the two components of the ECI (wages and benefits) is seen below. The year over year change in wages has never been this low in the records of the data. And in terms of growth in benefit costs, we’re pushing historical lows as we speak. What does all of this mean? It tells us labor is under serious total compensation pressure. And since benefit costs to employers are falling rapidly, this tells us one of two things is correct. Either employees are simply losing employer sponsored benefits they will need to make up on their own out of wages or total household resources, or their personal participatory costs in employer sponsored benefits are climbing rapidly (think co-pays, etc.). Either way, labor is under serious wage and benefit pressure, really unlike anything seen over the prior three decades at least.....The financial markets are trying their best to discount a typical consumer and/or corporate demand led economic recovery of the type seen over the past half century. Yet when looking at things like the credit markets, personal income circumstances and the complexion of household balance sheets crying out for deleveraging, current conditions are quite different than any recession of the prior half-century, with the government acting as Atlas holding up the world of "demand," per se, for now. Just what type of a valuation multiple do we put on a financial market under these character circumstances? This is a very important question the financial markets will be facing head on during the second half of this year and early next. For now, the key recovery fingerprints of every single economic recovery of the last half century are missing from the current puzzle (housing demand, auto demand and reacceleration in consumer credit growth). Standing in for these classic drivers is the US government. For how long will this be the case and what should investors be paying for this stand in role? Yes, the old market saw is hokey, but I can’t get this one out of my mind. First price, then optimism…then earnings. There can be no break in the chain in cyclical bull market character, and the first two have already gone a long way in terms of playing out. Absent household balance sheet reacceleration in leverage it sure seems a good bet forward corporate earnings are now as dependent on household wages, salaries and broader personal income as at any time in recent memory. And corporations to protect margins and nominal profits are pressuring wages and salaries downward. Time to place your wagers as we look ahead?"
"What we're seeing here is a bear market rally," Jim Lacamp, portfolio manager at RBC Wealth Management, told CNBC. "It could go higher, it could go substantially higher, but it is usually not the stuff that bull markets are made out of."
The federal government is seeing a surge in hiring -- including about 1.4 million workers for the 2010 Census. This is the employment stimulus package. What would nonfarm payrolls look like without census workers and the birth/death bogus job bullshit? Look at job sites and see how many jobs are offered. It should take you 5 minutes to go down the list.
The credit report is becoming the latest hurdle for unemployed workers in a dismal U.S. job market. Up to half of employers use credit screening to weed out potentially troublesome hires, though estimates vary, and the practice is on the rise. Mary M. Massad, managing director of screening services for personnel management company Administaff Inc., said credit checks help companies hire "the highest-quality individuals."
"China is going to be a positive force in the world and the market, and as a consequence, its power and influence are likely to grow. Personally, I believe it's going to grow faster than most people currently expect," Soros said.
Benjamin Franklin: “Let honesty and industry be thy constant companions, and spend one penny less than thy clear gains; then shall thy pocket begin to thrive; creditors will not insult, nor want oppress, nor hungerness bite, nor nakedness freeze thee”
Brian Pretti: "Very quickly, the history of the two components of the ECI (wages and benefits) is seen below. The year over year change in wages has never been this low in the records of the data. And in terms of growth in benefit costs, we’re pushing historical lows as we speak. What does all of this mean? It tells us labor is under serious total compensation pressure. And since benefit costs to employers are falling rapidly, this tells us one of two things is correct. Either employees are simply losing employer sponsored benefits they will need to make up on their own out of wages or total household resources, or their personal participatory costs in employer sponsored benefits are climbing rapidly (think co-pays, etc.). Either way, labor is under serious wage and benefit pressure, really unlike anything seen over the prior three decades at least.....The financial markets are trying their best to discount a typical consumer and/or corporate demand led economic recovery of the type seen over the past half century. Yet when looking at things like the credit markets, personal income circumstances and the complexion of household balance sheets crying out for deleveraging, current conditions are quite different than any recession of the prior half-century, with the government acting as Atlas holding up the world of "demand," per se, for now. Just what type of a valuation multiple do we put on a financial market under these character circumstances? This is a very important question the financial markets will be facing head on during the second half of this year and early next. For now, the key recovery fingerprints of every single economic recovery of the last half century are missing from the current puzzle (housing demand, auto demand and reacceleration in consumer credit growth). Standing in for these classic drivers is the US government. For how long will this be the case and what should investors be paying for this stand in role? Yes, the old market saw is hokey, but I can’t get this one out of my mind. First price, then optimism…then earnings. There can be no break in the chain in cyclical bull market character, and the first two have already gone a long way in terms of playing out. Absent household balance sheet reacceleration in leverage it sure seems a good bet forward corporate earnings are now as dependent on household wages, salaries and broader personal income as at any time in recent memory. And corporations to protect margins and nominal profits are pressuring wages and salaries downward. Time to place your wagers as we look ahead?"
"What we're seeing here is a bear market rally," Jim Lacamp, portfolio manager at RBC Wealth Management, told CNBC. "It could go higher, it could go substantially higher, but it is usually not the stuff that bull markets are made out of."
The federal government is seeing a surge in hiring -- including about 1.4 million workers for the 2010 Census. This is the employment stimulus package. What would nonfarm payrolls look like without census workers and the birth/death bogus job bullshit? Look at job sites and see how many jobs are offered. It should take you 5 minutes to go down the list.
The credit report is becoming the latest hurdle for unemployed workers in a dismal U.S. job market. Up to half of employers use credit screening to weed out potentially troublesome hires, though estimates vary, and the practice is on the rise. Mary M. Massad, managing director of screening services for personnel management company Administaff Inc., said credit checks help companies hire "the highest-quality individuals."
"China is going to be a positive force in the world and the market, and as a consequence, its power and influence are likely to grow. Personally, I believe it's going to grow faster than most people currently expect," Soros said.
Fools Rush In
6/6/09 Fools Rush In
Alan Abelson: "While payrolls slid by 345,000, much below the consensus guess, it was the usual hokey number, getting a lift from the wonderful birth/death model, which somehow summoned up 220,000 jobs and did so, magically, out of thin air."
Bill Gross: "Staying rich in this future world will require strategies that reflect this altered vision of global economic growth and delevered financial markets. Bond investors should therefore confine maturities to the front end of yield curves where continuing low yields and downside price protection is more probable. Holders of dollars should diversify their own baskets before central banks and sovereign wealth funds ultimately do the same. All investors should expect considerably lower rates of return than what they grew accustomed to only a few years ago. Staying rich in the "new normal" may not require investors to resemble Balzac as much as Will Rogers, who opined in the early 30s that he wasn't as much concerned about the return on his money as the return of his money."
President Dmitri A. Medvedev, who rarely misses a chance to accuse the United States of causing the global financial crisis, told an economic forum on Friday that wobbly American financial policy had made the dollar an undesirable currency for reserves held by central banks. A new world currency may be on the agenda when Medvedev meets counterparts from Brazil, India and China on June 16 at a summit in the Ural Mountains city of Yekaterinburg, the Kremlin said.
Doug Noland: "We’re witnessing the same analytical errors today that were made in the post-tech Bubble analysis: the willingness to inflate an even greater Bubble for the cause of mitigating the pain from the so-called deflationary risks associated with a bursting of THE Bubble. And with each reflation comes a heightened governmental role in both the markets and real economy – to the point where Washington is essentially backstopping the financial and economic systems.....An activist central bank pegging interest rates and manipulating the cost (hence, the flow) of finance creates wonderful opportunities for the savviest traders playing the money game most adeptly. The expansion of Bubbles creates great opportunities and then, for the enlightened, the bursting of these Bubbles provides only greater profits. Mr. McCulley is fond of blaming the “shadow banking system” for our acute financial and economic fragility. Yet the responsibility lies more generally with a deeply flawed monetary policy regime – a regime hopelessly locked in interest-rate manipulation and inflationism....I see no reason to back away from the view that the fundamental dilemma today lies not so much in finance but with our deeply impaired economic structure. This structure is a manifestation of years of mispriced finance, Credit and speculative excess, and resource misallocation. From this perspective, it should be obvious that greater Fed-induced market price distortions and Treasury/Fed-induced Credit expansion will only exacerbate structural impairment and delay readjustment....At some point the inflationists should accept the reality that they are a big part of the problem – and not the solution. Is that what the bond market is beginning to tell us? "
Mike Paulenoff: "The U.S. Nat Gas Fund ETF (UNG) was up for most of the session Friday, closing flat, while the U.S. Oil Fund ETF (USO) closed down more than three-quarters of a percent. My pattern work is warning me that crude oil prices are peaking, but that natural gas prices are bottoming. Could that actually happen?
I have been in this business long enough not to doubt what I think the charts are telling me. With that in mind, let's have a look at the pattern that continues to develop in the UNG. The UNG closed more than 40 cents off its intraday low and was threatening intraday to hurdle key micro resistance at 15.02 on the way to revisit its prior rally peak at 16.10. If such a scenario unfolds, then a hurdle of 16.10 will be considered extremely bullish and should trigger upside acceleration towards 17.75-18.00 thereafter.
At this juncture, only a sudden downside reversal and break of 14.00 will begin to compromise my current outlook." One should note the ratio of a barrel of crude to a thousand cubic feet of natural gas last week rose above 18-to-1, a rather elevated level not seen since the 1990-'91 period.
Bank of Lincolnwood, Lincolnwood, Illinois, was closed Friday by the Illinois Department of Financial and Professional Regulation, Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Republic Bank of Chicago, Oak Brook, Illinois, to assume all of the deposits of Bank of Lincolnwood.
The Oil Drum: "Over the next 11 years, Canada's oil industry is likely to produce 500,000 barrels a day less than was forecast a year ago, the Canadian Association of Petroleum Producers (CAPP) said Friday.
The forecast for the oilsands has dropped even further, the industry group said in an annual report on expected future production."
In the U.S., long a lure for Latin American immigrants, the number of undocumented workers from the region appears to have peaked, and may now be falling, according to a recent study by the Pew Hispanic Center. The population of South Americans, for example, has declined by as much as 400,000 from a peak of about three million in 2006, says Pew demographer Jeffrey Passel. Much of the declines are among high-skilled workers from Colombia, where the security situation has improved, and Brazil, whose economy has seen huge growth in recent years.
"What we're seeing is the normal outflow" of migrants leaving the U.S. to go back home, and "a huge drop-off in the inflow" coming into the U.S., says Mr. Passel.
In the case of Mexico, Latin America's largest supplier of new immigrants to the U.S., data released this week by the Mexican government shows emigration to the U.S. dropped 13% in the first quarter of 2009. In the same period, more people returned to Mexico than left Mexico for the U.S., about 139,000 and 137,000, respectively.
A record 27 percent of the nation's 14.5 million jobless have been unemployed for about six months or longer. Many are only now seeing their unemployment benefits expire, their homes falling into foreclosure and their lives upended. The number of long-term unemployed (jobless at least 27 weeks) increased by 268,000 in May, to 3.9 million.
In April, 47.1 percent of all people collecting state unemployment insurance exhausted the usual maximum of 26 weeks of benefits without finding work, according to the Bureau of Labor Statistics. That is the highest rate on record, going back to 1972, when the Labor Department began keeping track.
The $787 billion stimulus package that Congress passed in February contained $27.1 billion to help states extend unemployment benefits. As of mid-May, 2.5 million people were collecting extended benefits. The time limit has been increased to 59 to 79 weeks.
In December 2007, there were about two unemployed workers for every opening, Labor Department data show. As of March, there were five for every opening.
The average 30-year mortgage rate rose to a six-month high of 5.29% this week from 4.91% the previous week, according to Freddie Mac. "If the meltdown continues in the bond market, then mortgage yields will soon be at levels that choke off refinancing activity," said economist Ed Yardeni, who runs his own investment firm. "Even worse, they could abort any necessary recovery in home sales and prices."
Retail, manufacturing employment fell at an accelerating pace—by 156,000 jobs in May, compared with April's loss of 149,000 jobs. "The concern is that we're replacing $25-an-hour jobs with $12-an-hour jobs," says Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland. Morici says this trend has been going on for decades in the U.S., but that "the recession is exacerbating this weakness in the economy." How about $8 an hour jobs!
"We're losing our middle class now," says Andrew Stettner, deputy director of the National Employment Law Project, or NELP, a low-wage worker advocacy organization. "Will those who lose middle-class jobs go back to middle-class jobs? That's the big question."
Michael Santoli: "When the corporate-level profit outlook is as hazy as it is now, and when the market has so confounded the majority's stance, the technical picture gets more attention -- thus, all the focus last week on the S&P 500's surpassing its 200-day average for the first time in 358 days, the longest such streak aside from the one that ended in the summer of 1932. The almanac says that when the index spent 200 or more days beneath the 200-day average, there then was typically some additional upside over subsequent months. But note that this market has also had to rise more in order to nudge above this 200-day measure than in any past instance, aside from '32 -- and that in early 2002, this crossover proved a painfully false signal of strength."
The Indiana pension funds which own $42.5M of Chrysler's $6.9B in secured debt pull out their last stop, appealing to Supreme Court Justice Ruth Bader Ginsburg to block Fiat's purchase of Chrysler's assets. Unless Ginsburg decides to hear the appeal, the sale will close Monday.
Mike Burk: "The market is overbought and likely to correct over the next week or so.
I expect the major indices to be lower on Friday June 12 than they were on Friday June 5.
John Mauldin: "According to the Economist the total US spend on healthcare is 15.4% of GDP including both state and private . With that it gets 2.6 doctors per 1,000 people, 3.3 hospital beds and its people live to an average age of 78.2....
As a whole Europe spends 9.6% of GDP on healthcare, has 3.9 doctors per 1,000 people, 6.6 hospital beds and live until they are 81.15 years old."
Alan Abelson: "While payrolls slid by 345,000, much below the consensus guess, it was the usual hokey number, getting a lift from the wonderful birth/death model, which somehow summoned up 220,000 jobs and did so, magically, out of thin air."
Bill Gross: "Staying rich in this future world will require strategies that reflect this altered vision of global economic growth and delevered financial markets. Bond investors should therefore confine maturities to the front end of yield curves where continuing low yields and downside price protection is more probable. Holders of dollars should diversify their own baskets before central banks and sovereign wealth funds ultimately do the same. All investors should expect considerably lower rates of return than what they grew accustomed to only a few years ago. Staying rich in the "new normal" may not require investors to resemble Balzac as much as Will Rogers, who opined in the early 30s that he wasn't as much concerned about the return on his money as the return of his money."
President Dmitri A. Medvedev, who rarely misses a chance to accuse the United States of causing the global financial crisis, told an economic forum on Friday that wobbly American financial policy had made the dollar an undesirable currency for reserves held by central banks. A new world currency may be on the agenda when Medvedev meets counterparts from Brazil, India and China on June 16 at a summit in the Ural Mountains city of Yekaterinburg, the Kremlin said.
Doug Noland: "We’re witnessing the same analytical errors today that were made in the post-tech Bubble analysis: the willingness to inflate an even greater Bubble for the cause of mitigating the pain from the so-called deflationary risks associated with a bursting of THE Bubble. And with each reflation comes a heightened governmental role in both the markets and real economy – to the point where Washington is essentially backstopping the financial and economic systems.....An activist central bank pegging interest rates and manipulating the cost (hence, the flow) of finance creates wonderful opportunities for the savviest traders playing the money game most adeptly. The expansion of Bubbles creates great opportunities and then, for the enlightened, the bursting of these Bubbles provides only greater profits. Mr. McCulley is fond of blaming the “shadow banking system” for our acute financial and economic fragility. Yet the responsibility lies more generally with a deeply flawed monetary policy regime – a regime hopelessly locked in interest-rate manipulation and inflationism....I see no reason to back away from the view that the fundamental dilemma today lies not so much in finance but with our deeply impaired economic structure. This structure is a manifestation of years of mispriced finance, Credit and speculative excess, and resource misallocation. From this perspective, it should be obvious that greater Fed-induced market price distortions and Treasury/Fed-induced Credit expansion will only exacerbate structural impairment and delay readjustment....At some point the inflationists should accept the reality that they are a big part of the problem – and not the solution. Is that what the bond market is beginning to tell us? "
Mike Paulenoff: "The U.S. Nat Gas Fund ETF (UNG) was up for most of the session Friday, closing flat, while the U.S. Oil Fund ETF (USO) closed down more than three-quarters of a percent. My pattern work is warning me that crude oil prices are peaking, but that natural gas prices are bottoming. Could that actually happen?
I have been in this business long enough not to doubt what I think the charts are telling me. With that in mind, let's have a look at the pattern that continues to develop in the UNG. The UNG closed more than 40 cents off its intraday low and was threatening intraday to hurdle key micro resistance at 15.02 on the way to revisit its prior rally peak at 16.10. If such a scenario unfolds, then a hurdle of 16.10 will be considered extremely bullish and should trigger upside acceleration towards 17.75-18.00 thereafter.
At this juncture, only a sudden downside reversal and break of 14.00 will begin to compromise my current outlook." One should note the ratio of a barrel of crude to a thousand cubic feet of natural gas last week rose above 18-to-1, a rather elevated level not seen since the 1990-'91 period.
Bank of Lincolnwood, Lincolnwood, Illinois, was closed Friday by the Illinois Department of Financial and Professional Regulation, Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Republic Bank of Chicago, Oak Brook, Illinois, to assume all of the deposits of Bank of Lincolnwood.
The Oil Drum: "Over the next 11 years, Canada's oil industry is likely to produce 500,000 barrels a day less than was forecast a year ago, the Canadian Association of Petroleum Producers (CAPP) said Friday.
The forecast for the oilsands has dropped even further, the industry group said in an annual report on expected future production."
In the U.S., long a lure for Latin American immigrants, the number of undocumented workers from the region appears to have peaked, and may now be falling, according to a recent study by the Pew Hispanic Center. The population of South Americans, for example, has declined by as much as 400,000 from a peak of about three million in 2006, says Pew demographer Jeffrey Passel. Much of the declines are among high-skilled workers from Colombia, where the security situation has improved, and Brazil, whose economy has seen huge growth in recent years.
"What we're seeing is the normal outflow" of migrants leaving the U.S. to go back home, and "a huge drop-off in the inflow" coming into the U.S., says Mr. Passel.
In the case of Mexico, Latin America's largest supplier of new immigrants to the U.S., data released this week by the Mexican government shows emigration to the U.S. dropped 13% in the first quarter of 2009. In the same period, more people returned to Mexico than left Mexico for the U.S., about 139,000 and 137,000, respectively.
A record 27 percent of the nation's 14.5 million jobless have been unemployed for about six months or longer. Many are only now seeing their unemployment benefits expire, their homes falling into foreclosure and their lives upended. The number of long-term unemployed (jobless at least 27 weeks) increased by 268,000 in May, to 3.9 million.
In April, 47.1 percent of all people collecting state unemployment insurance exhausted the usual maximum of 26 weeks of benefits without finding work, according to the Bureau of Labor Statistics. That is the highest rate on record, going back to 1972, when the Labor Department began keeping track.
The $787 billion stimulus package that Congress passed in February contained $27.1 billion to help states extend unemployment benefits. As of mid-May, 2.5 million people were collecting extended benefits. The time limit has been increased to 59 to 79 weeks.
In December 2007, there were about two unemployed workers for every opening, Labor Department data show. As of March, there were five for every opening.
The average 30-year mortgage rate rose to a six-month high of 5.29% this week from 4.91% the previous week, according to Freddie Mac. "If the meltdown continues in the bond market, then mortgage yields will soon be at levels that choke off refinancing activity," said economist Ed Yardeni, who runs his own investment firm. "Even worse, they could abort any necessary recovery in home sales and prices."
Retail, manufacturing employment fell at an accelerating pace—by 156,000 jobs in May, compared with April's loss of 149,000 jobs. "The concern is that we're replacing $25-an-hour jobs with $12-an-hour jobs," says Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland. Morici says this trend has been going on for decades in the U.S., but that "the recession is exacerbating this weakness in the economy." How about $8 an hour jobs!
"We're losing our middle class now," says Andrew Stettner, deputy director of the National Employment Law Project, or NELP, a low-wage worker advocacy organization. "Will those who lose middle-class jobs go back to middle-class jobs? That's the big question."
Michael Santoli: "When the corporate-level profit outlook is as hazy as it is now, and when the market has so confounded the majority's stance, the technical picture gets more attention -- thus, all the focus last week on the S&P 500's surpassing its 200-day average for the first time in 358 days, the longest such streak aside from the one that ended in the summer of 1932. The almanac says that when the index spent 200 or more days beneath the 200-day average, there then was typically some additional upside over subsequent months. But note that this market has also had to rise more in order to nudge above this 200-day measure than in any past instance, aside from '32 -- and that in early 2002, this crossover proved a painfully false signal of strength."
The Indiana pension funds which own $42.5M of Chrysler's $6.9B in secured debt pull out their last stop, appealing to Supreme Court Justice Ruth Bader Ginsburg to block Fiat's purchase of Chrysler's assets. Unless Ginsburg decides to hear the appeal, the sale will close Monday.
Mike Burk: "The market is overbought and likely to correct over the next week or so.
I expect the major indices to be lower on Friday June 12 than they were on Friday June 5.
John Mauldin: "According to the Economist the total US spend on healthcare is 15.4% of GDP including both state and private . With that it gets 2.6 doctors per 1,000 people, 3.3 hospital beds and its people live to an average age of 78.2....
As a whole Europe spends 9.6% of GDP on healthcare, has 3.9 doctors per 1,000 people, 6.6 hospital beds and live until they are 81.15 years old."
Friday, June 05, 2009
Payrolls
6/5/09 News
The government reported payrolls fell by 385,000 in May, while the unemployment rate climbed from 8.9% to 9.4%. Payrolls in March and April were revised higher by 82,000. Details of the report were mixed.
The average work week in May fell to 33.1 hours, the lowest on records dating to 1964.
While the payroll figures from a survey of business sites was much better than expected, a separate survey of households showed unemployment increased more than expected. Unemployment rose by 787,000 in the month to 14.5 million, pushing the jobless rate from 8.9% to 9.4%, the highest since August 1983.
Today’s report showed factory payrolls fell by 156,000 after decreasing 154,000 in the prior month. Economists forecast a drop of 150,000. The decline included a drop of 29,800 jobs in auto manufacturing and parts industries.
The bankruptcies of General Motors and Chrysler LLC may generate more job losses in coming months. AutoNation Inc., the largest U.S. new-vehicle retailer, plans to close seven showrooms, while Visteon Corp., the former parts-making unit of Ford Motor Co., and chassis manufacturer Metaldyne Corp. also filed for bankruptcy.
Payrolls at builders fell 59,000 after decreasing 108,000. Financial firms cut payrolls by 30,000, after a 45,000 drop the prior month.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 120,000 workers after reducing 230,000. Retail payrolls decreased by 17,500 after a 36,500 reduction.
Government payrolls declined by 7,000 after rising 92,000 the prior month.
The 9.4 percent May unemployment rate is based on 14.5 million Americans out of work. But that number doesn't include discouraged workers, people who gave up looking for work after four weeks. Add those 792,000 people, and the unemployment rate is 9.8 percent.
The official rate also doesn't include "marginally attached workers," or people who have looked for work in the past year but stopped searching in the past month because of barriers to employment such as child care, poor health or lack of transportation. Add those 1.4 million people, and the unemployment rate would be 10.6 percent.
The official rate also doesn't include "involuntary part-time workers," or the 2.2 million people like Noel who took a part-time job because that's all they could get, plus those whose work hours dropped below the full-time level. Once those 9.1 million workers are added to the unemployment mix, the rate would be 16.4 percent.
All told, nearly 25 million Americans were either unemployed, underemployed or had given up looking for a job in May.
The ranks of involuntary part-timers has increased by 4.9 million in the past year, according to a May study by the Federal Reserve Bank of Cleveland. Many economists now predict unemployment won't peak until 2010. And since employers generally increase the hours of existing workers before hiring new ones, workers could be looking for full-time jobs for some time.
One of every six dollars of Americans' income is now coming in the form of a federal or state check or voucher.
Crude oil for July delivery rose $1.19, or 1.7%, to $70.02 a barrel in electronic trading on Globex.
10-year Treasury yields rise to 3.89% and the 30-year to 4.64%.
The Semiconductor Industry Association said Friday that it expects worldwide semiconductor sales to fall 21.3% in 2009 to $195.6 billion from $248.6 billion in 2008.
Rio Tinto confirmed the termination of its $19.5 billion deal with Chinalco on Friday, scrapping a deal in which Rio would have sold part of itself to China's Aluminium Corp. Rio also confirmed that it will launch rights issues to raise gross proceeds of about $15.2 billion at a sharp discount to the shares' prior close. "Rio has effectively been talking to BHP behind Chinalco's back and Chinalco is entitled to feel like a two-timed lover this morning," said Paul Bartholomew at Steel Business Briefing in Shanghai. "This is a big slap in the face for China."
But the Al-Haramain case isn't waiting. Judge Walker on Wednesday ordered both sides to put the secrecy debate aside and move on to the case itself. That means the Obama administration has to defend the legality of Bush's warrantless wiretapping program.
For plaintiff's attorney Jon Eisenberg, the situation inspires a kind of glee: "What do they do now? Do they oppose it? Do they support it? Was all that campaign rhetoric just rhetoric? Or are they going to follow through? The day of reckoning is upon us," he says.
Actually, the day of reckoning is Sept. 1. That's when the Obama administration's lawyers are due back in front of the judge to explain just where they stand on the legality of Bush's surveillance program.
China will invest up to $50 billion in new International Monetary Fund bonds, the IMF's first deputy director general John Lipsky told Reuters financial television on Friday.
"The Chinese authorities have indicated that ... (they) would be interested in investing up to $50 billion dollars in these bonds when they are ready and we hope that other countries will follow suit," Lipsky said on the sidelines of the St Petersburg Economic Forum.
According to AMG Data Services, for the week ended June 3, Equity Fund Inflows $4 Bil; Taxable Bond Fund Inflows $5.7 Bil
xETFs - Equity Fund Inflows $1.3 Bil; Taxable Bond Fund Inflows $3.8 Bil
On Friday, June 5, the Indiana State Teachers Retirement Fund, the Indiana State Police Pension Trust, and the Indiana Major Moves Construction Fund will attempt to block Chrysler's structured bankruptcy and sale to Fiat (FIA.MI) in New York's Second U.S. Circuit Court of Appeals. The group argues that the U.S. government's intervention in the bankruptcy is unconstitutional, since the proposed plan will pay back unsecured lenders before those that were secured. The unsecured creditors and the United Auto Workers contend the sale is fair and is supported by a majority of Chrysler's creditors.
The outcome of Friday's hearing could provide a road map for how similar challenges will be handled in the case of much larger General Motors, which filed for bankruptcy on June 1.
George Ure: "the CES Birth/Death Model. This is where the government gets to 'guesstimate' what jobs were created. While it is portrayed as being a reasonable statistical inference, if you click over here and read it, you'll find that almost 700,000 jobs (694-thousand to be precise here) have been 'estimated into existence' so far this year..... the real "Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers" is running a Depression era kind of number 16.4% - up from the previous month's 15.8%."
Freight volumes are still trending lower. The year-on-year deficit has widened from minus 14 per cent at beginning of March to minus 18 per cent at the beginning of Apr, minus 21.6 per cent at the beginning of May and and then minus 23.5 per cent at the start of June.
A federal appeals court cleared the way for Fiat SPA to buy bankrupt automaker Chrysler, according to media reports late Friday.
U.S. consumers paid down more debt than they took on in April for the seventh time in the past nine months, the Federal Reserve reported Friday. Consumer credit fell by $15.7 billion, or 7.4% at an annual rate, to $2.52 trillion. It was the second largest decline in outstanding debt on record, exceeded by March's $16.6 billion drop. Revolving credit, such as credit cards, fell by $8.6 billion, or an 11% annual rate, to $930.9 billion. Nonrevolving debt, such as auto loans, fell $7.1 billion, or 5.3% annualized, to $1.59 trillion. The figures do not include debt backed by real estate, such as mortgages or home equity lines. Debt can decline if consumers pay down debt or if banks write off debt.
June gold settled at $961.70, down $19.50 an ounce, or 2%. July silver closed at $15.39 an ounce, down 51 cents, or 3.2%. Copper ended nearly flat, losing 2 cents to settle at $2.28 a pound. Platinum for July delivery closed at $1,286 an ounce, off $7.1, or 0.5%. September palladium closed at $259.8 an ounce, up $4.4, or 1.7%. Crude oil for July delivery fell 37 cents, or 0.5%, to end at $68.44 a barrel on the New York Mercantile Exchange.
The Dow Jones industrial average gained 12.89 points, or 0.15 percent, to 8,763.13. The Standard & Poor's 500 Index declined 2.37 points, or 0.25 percent, to 940.09. The Nasdaq Composite Index dipped 0.60 of a point, or 0.03 percent, to 1,849.42.
The government reported payrolls fell by 385,000 in May, while the unemployment rate climbed from 8.9% to 9.4%. Payrolls in March and April were revised higher by 82,000. Details of the report were mixed.
The average work week in May fell to 33.1 hours, the lowest on records dating to 1964.
While the payroll figures from a survey of business sites was much better than expected, a separate survey of households showed unemployment increased more than expected. Unemployment rose by 787,000 in the month to 14.5 million, pushing the jobless rate from 8.9% to 9.4%, the highest since August 1983.
Today’s report showed factory payrolls fell by 156,000 after decreasing 154,000 in the prior month. Economists forecast a drop of 150,000. The decline included a drop of 29,800 jobs in auto manufacturing and parts industries.
The bankruptcies of General Motors and Chrysler LLC may generate more job losses in coming months. AutoNation Inc., the largest U.S. new-vehicle retailer, plans to close seven showrooms, while Visteon Corp., the former parts-making unit of Ford Motor Co., and chassis manufacturer Metaldyne Corp. also filed for bankruptcy.
Payrolls at builders fell 59,000 after decreasing 108,000. Financial firms cut payrolls by 30,000, after a 45,000 drop the prior month.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 120,000 workers after reducing 230,000. Retail payrolls decreased by 17,500 after a 36,500 reduction.
Government payrolls declined by 7,000 after rising 92,000 the prior month.
The 9.4 percent May unemployment rate is based on 14.5 million Americans out of work. But that number doesn't include discouraged workers, people who gave up looking for work after four weeks. Add those 792,000 people, and the unemployment rate is 9.8 percent.
The official rate also doesn't include "marginally attached workers," or people who have looked for work in the past year but stopped searching in the past month because of barriers to employment such as child care, poor health or lack of transportation. Add those 1.4 million people, and the unemployment rate would be 10.6 percent.
The official rate also doesn't include "involuntary part-time workers," or the 2.2 million people like Noel who took a part-time job because that's all they could get, plus those whose work hours dropped below the full-time level. Once those 9.1 million workers are added to the unemployment mix, the rate would be 16.4 percent.
All told, nearly 25 million Americans were either unemployed, underemployed or had given up looking for a job in May.
The ranks of involuntary part-timers has increased by 4.9 million in the past year, according to a May study by the Federal Reserve Bank of Cleveland. Many economists now predict unemployment won't peak until 2010. And since employers generally increase the hours of existing workers before hiring new ones, workers could be looking for full-time jobs for some time.
One of every six dollars of Americans' income is now coming in the form of a federal or state check or voucher.
Crude oil for July delivery rose $1.19, or 1.7%, to $70.02 a barrel in electronic trading on Globex.
10-year Treasury yields rise to 3.89% and the 30-year to 4.64%.
The Semiconductor Industry Association said Friday that it expects worldwide semiconductor sales to fall 21.3% in 2009 to $195.6 billion from $248.6 billion in 2008.
Rio Tinto confirmed the termination of its $19.5 billion deal with Chinalco on Friday, scrapping a deal in which Rio would have sold part of itself to China's Aluminium Corp. Rio also confirmed that it will launch rights issues to raise gross proceeds of about $15.2 billion at a sharp discount to the shares' prior close. "Rio has effectively been talking to BHP behind Chinalco's back and Chinalco is entitled to feel like a two-timed lover this morning," said Paul Bartholomew at Steel Business Briefing in Shanghai. "This is a big slap in the face for China."
But the Al-Haramain case isn't waiting. Judge Walker on Wednesday ordered both sides to put the secrecy debate aside and move on to the case itself. That means the Obama administration has to defend the legality of Bush's warrantless wiretapping program.
For plaintiff's attorney Jon Eisenberg, the situation inspires a kind of glee: "What do they do now? Do they oppose it? Do they support it? Was all that campaign rhetoric just rhetoric? Or are they going to follow through? The day of reckoning is upon us," he says.
Actually, the day of reckoning is Sept. 1. That's when the Obama administration's lawyers are due back in front of the judge to explain just where they stand on the legality of Bush's surveillance program.
China will invest up to $50 billion in new International Monetary Fund bonds, the IMF's first deputy director general John Lipsky told Reuters financial television on Friday.
"The Chinese authorities have indicated that ... (they) would be interested in investing up to $50 billion dollars in these bonds when they are ready and we hope that other countries will follow suit," Lipsky said on the sidelines of the St Petersburg Economic Forum.
According to AMG Data Services, for the week ended June 3, Equity Fund Inflows $4 Bil; Taxable Bond Fund Inflows $5.7 Bil
xETFs - Equity Fund Inflows $1.3 Bil; Taxable Bond Fund Inflows $3.8 Bil
On Friday, June 5, the Indiana State Teachers Retirement Fund, the Indiana State Police Pension Trust, and the Indiana Major Moves Construction Fund will attempt to block Chrysler's structured bankruptcy and sale to Fiat (FIA.MI) in New York's Second U.S. Circuit Court of Appeals. The group argues that the U.S. government's intervention in the bankruptcy is unconstitutional, since the proposed plan will pay back unsecured lenders before those that were secured. The unsecured creditors and the United Auto Workers contend the sale is fair and is supported by a majority of Chrysler's creditors.
The outcome of Friday's hearing could provide a road map for how similar challenges will be handled in the case of much larger General Motors, which filed for bankruptcy on June 1.
George Ure: "the CES Birth/Death Model. This is where the government gets to 'guesstimate' what jobs were created. While it is portrayed as being a reasonable statistical inference, if you click over here and read it, you'll find that almost 700,000 jobs (694-thousand to be precise here) have been 'estimated into existence' so far this year..... the real "Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers" is running a Depression era kind of number 16.4% - up from the previous month's 15.8%."
Freight volumes are still trending lower. The year-on-year deficit has widened from minus 14 per cent at beginning of March to minus 18 per cent at the beginning of Apr, minus 21.6 per cent at the beginning of May and and then minus 23.5 per cent at the start of June.
A federal appeals court cleared the way for Fiat SPA to buy bankrupt automaker Chrysler, according to media reports late Friday.
U.S. consumers paid down more debt than they took on in April for the seventh time in the past nine months, the Federal Reserve reported Friday. Consumer credit fell by $15.7 billion, or 7.4% at an annual rate, to $2.52 trillion. It was the second largest decline in outstanding debt on record, exceeded by March's $16.6 billion drop. Revolving credit, such as credit cards, fell by $8.6 billion, or an 11% annual rate, to $930.9 billion. Nonrevolving debt, such as auto loans, fell $7.1 billion, or 5.3% annualized, to $1.59 trillion. The figures do not include debt backed by real estate, such as mortgages or home equity lines. Debt can decline if consumers pay down debt or if banks write off debt.
June gold settled at $961.70, down $19.50 an ounce, or 2%. July silver closed at $15.39 an ounce, down 51 cents, or 3.2%. Copper ended nearly flat, losing 2 cents to settle at $2.28 a pound. Platinum for July delivery closed at $1,286 an ounce, off $7.1, or 0.5%. September palladium closed at $259.8 an ounce, up $4.4, or 1.7%. Crude oil for July delivery fell 37 cents, or 0.5%, to end at $68.44 a barrel on the New York Mercantile Exchange.
The Dow Jones industrial average gained 12.89 points, or 0.15 percent, to 8,763.13. The Standard & Poor's 500 Index declined 2.37 points, or 0.25 percent, to 940.09. The Nasdaq Composite Index dipped 0.60 of a point, or 0.03 percent, to 1,849.42.
Thursday, June 04, 2009
Continuing Claims
6/4/09 Continuing Claims
Microsoft Corp. Chief Executive Officer Steven Ballmer said the world’s largest software company would move some employees offshore if Congress enacts President Barack Obama’s plans to impose higher taxes on U.S. companies’ foreign profits.
“It makes U.S. jobs more expensive,” Ballmer said in an interview. “We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”
Obama on May 4 proposed outlawing or restricting about $190 billion in tax breaks for offshore companies over the next decade. Such business groups as the National Foreign Trade Council, the U.S. Chamber of Commerce and the Business Roundtable have denounced the proposed overhaul.
Goldman Sachs lifted its target on light sweet crude oil to $75 a barrel from $52.
Iceland's central bank on Thursday cut its key lending rate by a full percentage point to 12%. The central bank said inflation has started to ease and the currency has started to stabilize, news reports said.
Costco Wholesale Corp reported that for May, comparable-store sales fell 7% while total sales fell 5% to $5.47 billion from $5.77 billion in the year-earlier month.
As Wal-Mart Stores Inc. opens about 150 new or expanded stores in the U.S. in 2009, the company expects to hire about 22,000 people for new positions.
Productivity in the nonfarm business sector - output per hour worked - rose at an annual rate of 1.6% in the quarter as output fell 7.6%, and hours worked fell 9%, the largest drop in hours since 1975.
After reaching new weekly record highs since January, the number of continuing claims for state unemployment benefits has finally declined, decreasing by 15,000 to 6.74 million in the week ended May 23, the Labor Department reported Thursday. However, the four-week average of these claims rose by 88,750 to 6.69 million, a record-high level. First-time applications for benefits fell 4,000 to 621,000 in the week ended May 30, reaching the lowest level since early May. The four-week average of these first-time claims rose 4,000 to 631,250. The level of initial claims is up 68% from the same period in the prior year, and the level of ongoing claims is more than double last year's level. The insured unemployment rate - the proportion of insured workers who are collecting benefits - remained at 5%.
Retail sales results are largely falling short of analysts' estimates in May as consumers continue to stick to the essentials. Shoppers searched for bargains and basics in May, leading many retailers to miss sales expectations Thursday even though the bar was set pretty low for most chains.
RGE Monitor: "The U.S. economy may run trillion dollar deficits in the next few years despite Obama and Geither's statements recently to reduce the deficit to 3% of GDP by 2013. This is because fiscal stimulus and bailout measures will raise spending while tax revenues boom from the corporate and financial sector will slow sharply. Entitlement burden will increase ahead on aging population and health care reforms being debated by the Treasury and Congress will require large resources as well. Rising debt burden poses risk of higher nominal and real interest rates and crowding out of investment in the medium term. Treasury's stance to raise taxes (on high-income individuals, corporates, fund managers, cap-and-trade) to shore up revenues in the coming years may also stifle recovery in private demand."
Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company’s 152-year history to hedge against further asset declines.
“Gold just seems to make sense; it’s a store of value,” Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn. “In the Depression, gold did very, very well.”
Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken.
Intel says it will acquire all outstanding Wind River common shares for $11.50 each, which represents a premium of 44 percent over Wind River's Wednesday closing price of $8.
Textron Inc's Cessna unit plans another round of job cuts in the face of deteriorating demand for corporate aircraft, the diversified U.S. manufacturer said on Thursday.
"Continued order cancellations and weakness in general aviation markets are forcing further revisions to its aircraft production outlook, which will result in additional reductions in Cessna's workforce," the world's largest maker of business jets said in a filing with the U.S. Securities and Exchange Commission.
It did not say how many jobs would be cut and a spokesman did not immediately return a call seeking a comment.
General Dynamics Corp Inc planned to buy Axsys Technologies Inc, a maker of surveillance and imaging systems, for $643 million.
Axsys shares rose 6 percent in morning trading to $53, below the offer price of $54.
Natural gas inventories rise 124 bcf last week. Analysts surveyed by energy information provider Platts had expected a gain of 120 billion cubic feet. After a rocky start, UNG moved into the plus column and so did natural gas.
Average rates on the 30-year fixed-rate mortgage hit a 25-week high after jumping more than a third of a percentage point this week, according to Freddie Mac's weekly survey of conforming mortgage rates, released on Thursday.
Medical bills are involved in more than 60 percent of U.S. personal bankruptcies, an increase of 50 percent in just six years, U.S. researchers reported Thursday.
More than 75 percent of these bankrupt families had health insurance but still were overwhelmed by their medical debts, the team at Harvard Law School, Harvard Medical School and Ohio University reported in the American Journal of Medicine.
"Using a conservative definition, 62.1 percent of all bankruptcies in 2007 were medical; 92 percent of these medical debtors had medical debts over $5,000, or 10 percent of pretax family income," the researchers wrote. "Most medical debtors were well-educated, owned homes and had middle-class occupations."
Yields on 10-year notes rose 17 basis points to 3.71%.
On the Comex division of the New York Mercantile Exchange, copper for July delivery gained 8.9 cents to end at $2.301 a pound. Gold for June delivery rose $16.70, or 1.7%, to $981.20 an ounce, and July silver gained 58.5 cents, or 3.8%, to $15.895 an ounce. Crude jumps 5%, approaching $70 in afternoon trade.
The Dow Jones Industrial Average gained 74.96 points, or 0.9%, to 8,750.2. The S&P 500 added 10.7 points, or 1.2%, to 942.46, while the Nasdaq Composite rose 24.1 points, or 1.3%, to 1,850.
Mining giant Rio Tinto PLC has walked away from a $19.5 billion deal with China's Aluminium Corp., The Wall Street Journal reported on its Web site Thursday. The deal would have given the state-owned company, also known as Chinalco, an 18% stake in Rio Tinto, according to the Journal.
Microsoft Corp. Chief Executive Officer Steven Ballmer said the world’s largest software company would move some employees offshore if Congress enacts President Barack Obama’s plans to impose higher taxes on U.S. companies’ foreign profits.
“It makes U.S. jobs more expensive,” Ballmer said in an interview. “We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”
Obama on May 4 proposed outlawing or restricting about $190 billion in tax breaks for offshore companies over the next decade. Such business groups as the National Foreign Trade Council, the U.S. Chamber of Commerce and the Business Roundtable have denounced the proposed overhaul.
Goldman Sachs lifted its target on light sweet crude oil to $75 a barrel from $52.
Iceland's central bank on Thursday cut its key lending rate by a full percentage point to 12%. The central bank said inflation has started to ease and the currency has started to stabilize, news reports said.
Costco Wholesale Corp reported that for May, comparable-store sales fell 7% while total sales fell 5% to $5.47 billion from $5.77 billion in the year-earlier month.
As Wal-Mart Stores Inc. opens about 150 new or expanded stores in the U.S. in 2009, the company expects to hire about 22,000 people for new positions.
Productivity in the nonfarm business sector - output per hour worked - rose at an annual rate of 1.6% in the quarter as output fell 7.6%, and hours worked fell 9%, the largest drop in hours since 1975.
After reaching new weekly record highs since January, the number of continuing claims for state unemployment benefits has finally declined, decreasing by 15,000 to 6.74 million in the week ended May 23, the Labor Department reported Thursday. However, the four-week average of these claims rose by 88,750 to 6.69 million, a record-high level. First-time applications for benefits fell 4,000 to 621,000 in the week ended May 30, reaching the lowest level since early May. The four-week average of these first-time claims rose 4,000 to 631,250. The level of initial claims is up 68% from the same period in the prior year, and the level of ongoing claims is more than double last year's level. The insured unemployment rate - the proportion of insured workers who are collecting benefits - remained at 5%.
Retail sales results are largely falling short of analysts' estimates in May as consumers continue to stick to the essentials. Shoppers searched for bargains and basics in May, leading many retailers to miss sales expectations Thursday even though the bar was set pretty low for most chains.
RGE Monitor: "The U.S. economy may run trillion dollar deficits in the next few years despite Obama and Geither's statements recently to reduce the deficit to 3% of GDP by 2013. This is because fiscal stimulus and bailout measures will raise spending while tax revenues boom from the corporate and financial sector will slow sharply. Entitlement burden will increase ahead on aging population and health care reforms being debated by the Treasury and Congress will require large resources as well. Rising debt burden poses risk of higher nominal and real interest rates and crowding out of investment in the medium term. Treasury's stance to raise taxes (on high-income individuals, corporates, fund managers, cap-and-trade) to shore up revenues in the coming years may also stifle recovery in private demand."
Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company’s 152-year history to hedge against further asset declines.
“Gold just seems to make sense; it’s a store of value,” Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn. “In the Depression, gold did very, very well.”
Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken.
Intel says it will acquire all outstanding Wind River common shares for $11.50 each, which represents a premium of 44 percent over Wind River's Wednesday closing price of $8.
Textron Inc's Cessna unit plans another round of job cuts in the face of deteriorating demand for corporate aircraft, the diversified U.S. manufacturer said on Thursday.
"Continued order cancellations and weakness in general aviation markets are forcing further revisions to its aircraft production outlook, which will result in additional reductions in Cessna's workforce," the world's largest maker of business jets said in a filing with the U.S. Securities and Exchange Commission.
It did not say how many jobs would be cut and a spokesman did not immediately return a call seeking a comment.
General Dynamics Corp Inc planned to buy Axsys Technologies Inc, a maker of surveillance and imaging systems, for $643 million.
Axsys shares rose 6 percent in morning trading to $53, below the offer price of $54.
Natural gas inventories rise 124 bcf last week. Analysts surveyed by energy information provider Platts had expected a gain of 120 billion cubic feet. After a rocky start, UNG moved into the plus column and so did natural gas.
Average rates on the 30-year fixed-rate mortgage hit a 25-week high after jumping more than a third of a percentage point this week, according to Freddie Mac's weekly survey of conforming mortgage rates, released on Thursday.
Medical bills are involved in more than 60 percent of U.S. personal bankruptcies, an increase of 50 percent in just six years, U.S. researchers reported Thursday.
More than 75 percent of these bankrupt families had health insurance but still were overwhelmed by their medical debts, the team at Harvard Law School, Harvard Medical School and Ohio University reported in the American Journal of Medicine.
"Using a conservative definition, 62.1 percent of all bankruptcies in 2007 were medical; 92 percent of these medical debtors had medical debts over $5,000, or 10 percent of pretax family income," the researchers wrote. "Most medical debtors were well-educated, owned homes and had middle-class occupations."
Yields on 10-year notes rose 17 basis points to 3.71%.
On the Comex division of the New York Mercantile Exchange, copper for July delivery gained 8.9 cents to end at $2.301 a pound. Gold for June delivery rose $16.70, or 1.7%, to $981.20 an ounce, and July silver gained 58.5 cents, or 3.8%, to $15.895 an ounce. Crude jumps 5%, approaching $70 in afternoon trade.
The Dow Jones Industrial Average gained 74.96 points, or 0.9%, to 8,750.2. The S&P 500 added 10.7 points, or 1.2%, to 942.46, while the Nasdaq Composite rose 24.1 points, or 1.3%, to 1,850.
Mining giant Rio Tinto PLC has walked away from a $19.5 billion deal with China's Aluminium Corp., The Wall Street Journal reported on its Web site Thursday. The deal would have given the state-owned company, also known as Chinalco, an 18% stake in Rio Tinto, according to the Journal.
Wednesday, June 03, 2009
Unemployment
6/3/09 Unemployment
The U.S. private sector eliminated 532,000 net jobs in May, the fewest jobs lost since November, according to the ADP employment index released Wednesday. Goods producing industries cut 267,000 jobs while services cut 265,000. Including government jobs not counted in the ADP report, the ADP index implies total nonfarm payrolls may have fallen by 520,000 in May.
Bill Gross, founder of Pacific Investment Management Co., advised holders of U.S. dollars to diversify before central banks and sovereign wealth funds ultimately do the same amid concern about surging deficits.
The U.S.’s “fortune-producing capabilities seem to be declining, which might suggest that its relative standard of living is doing so as well,” Gross wrote in his June investment outlook posted today on the Newport Beach, California-based firm’s Web site. “If so, the implications are serious.”
NetApp Inc. raised its offer for Data Domain Inc.on Wednesday to $30 a share in cash and stock from $25 to match a bid earlier this week from EMC Corp.
Agrium Inc. on Wednesday reaffirmed its bid for rival fertilizer maker CF Industries Holdings Inc.at $40 a share in cash and one Agrium share for each CF share. Agrium said the offer represents its "best and final price, absent engagement by CF and demonstration of additional value."
Williams-Sonoma affirmed its estimates for the year, saying that while the first-quarter performance was better than expected, the economy remains volatile and promotions may be required as the industry reduces inventory.
The Markit euro-zone composite purchasing managers index for the 16-nation euro zone released Wednesday rose to 44.0 in May, hitting an eight-month high. While still pointing to a contraction in activity, the index posted a record jump from a reading of 41.1 in April.
Planned job cuts announced by U.S. employers totaled 111,182 in May, down 16 percent from the 132,590 layoffs recorded the previous month, according to a report released on Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc.
May marked the lowest monthly total since 95,094 job cuts announced last September. Since reaching a peak in January, job-cut totals have fallen by an average of 17.5 percent per month, according to the report.
However, the decline in layoffs may not continue for long.
"This decline in job cuts could be short-lived. The second quarter is typically the lowest quarter of the year when it comes to job cuts," John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in the report.
"Corporate downsizing may continue to remain slow during the summer months, but if the past is any indication, we could see the pace accelerate again in the latter half of the third quarter through the end of the year," he said.
Much of the downsizing in coming months may come from state and local governments, which have been hard hit by shrinking tax revenues, according to the report.
The government and nonprofit sector led in job cuts, announcing 22,317 layoffs last month and marking the third straight month the sector was the top job cutter.
Brett Steenbarger: "Since 2000, we've had 160 occasions in which there have been four consecutive rising days in the S&P 500 Index (SPY) such as we've had most recently.
Over the following three days, SPY has averaged a loss of -.37% (71 up, 89 down). By contrast, for the rest of the sample, the three-day return on SPY has been -.01% (1169 up, 1030 down).
It appears that some profit taking after a period of steady gains is normal. Indeed, returns have been negative from 1-5 days out following four days of consecutive gain."
Home builder Toll Brothers reported a loss for its fiscal second quarter Wednesday that was slightly wider than analysts predicted, as revenue halved from the same period a year ago.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended May 29 decreased 16.2 percent to 658.7.
Michael Brush: "In the housing market, a lot of prime mortgages are becoming subprime as a new wave of foreclosures begins to hit. Mainstream homeowners -- those previously "safe" borrowers with sound credit who have conservative, fixed-rate mortgages -- are getting into trouble at an alarming rate. "
China, the world’s second-biggest energy consumer, won’t buy more oil for stockpiling until additional storage tanks are built, a government official said.
Boeing Co. and General Dynamics Corp. must pay the government $2.8 billion to settle a nearly two-decade dispute over the cancellation of a Navy contract for a stealth aircraft, the U.S. Court of Appeals for the Federal Circuit ruled Tuesday.
Crude supplies up 2.9 million barrels: EIA. Gasoline stocks down 0.2 million barrels. Distillate stocks up 1.6 million barrels.
Valero said it would lose 50 cents a share in the second quarter. Wall Street analysts expected Valero to earn 41 cents a share, according to a survey by FactSet Research. Valero also said it would issue 40 million shares of stock in a bid to raise about $755 million.
Federal Reserve Chairman Ben Bernanke told Congress the pace of economic contraction is slowing and he sees several factors behind the latest rise in yields.
A federal judge has tossed out more than three dozen lawsuits filed against the nation's telecommunications companies for allegedly participating in the government's e-mail and telephone eavesdropping program done without court approval.
The dismissals were widely expected after Congress in July agreed on new surveillance rules that include immunity from lawsuits for telecommunications companies that allegedly helped the U.S. spy on Americans.
U.S. District Judge Vaughn Walker on Wednesday upheld the constitutionality of the new surveillance rules and dismissed the lawsuits.
But the judge did allow the losing attorneys a chance to revise their lawsuits to include new allegations, if any, that aren't covered by the immunity rules.
The weak labor market is hurting U.S. cities -- centers of many industries and large housing markets -- with 93 metropolitan areas registering an unemployment rate of at least 10 percent in April, according to Labor Department data released on Wednesday.
That is more than 13 times the number of cities that notched the same high levels a year earlier, the Department said.
Currently, the national unemployment rate is 8.9 percent, but in nearly 150 cities a higher proportion of residents were out of work this spring.
At the same time, the number of cities posting unemployment rates below 7 percent was 117, which was less than half of the 347 cities recording lower rates just a year earlier.
The Labor Department said nine of the 13 metropolitan areas with jobless rates of at least 15 percent were in California.
The Dow Jones Industrial Average ended off 64.63 points, or 0.7%, to 8,676.2. The S&P 500 Index dropped 12.91 points, or 1.4%, to finish at 931.82. The Nasdaq Composite fell 10.88 points, or 0.6
The U.S. private sector eliminated 532,000 net jobs in May, the fewest jobs lost since November, according to the ADP employment index released Wednesday. Goods producing industries cut 267,000 jobs while services cut 265,000. Including government jobs not counted in the ADP report, the ADP index implies total nonfarm payrolls may have fallen by 520,000 in May.
Bill Gross, founder of Pacific Investment Management Co., advised holders of U.S. dollars to diversify before central banks and sovereign wealth funds ultimately do the same amid concern about surging deficits.
The U.S.’s “fortune-producing capabilities seem to be declining, which might suggest that its relative standard of living is doing so as well,” Gross wrote in his June investment outlook posted today on the Newport Beach, California-based firm’s Web site. “If so, the implications are serious.”
NetApp Inc. raised its offer for Data Domain Inc.on Wednesday to $30 a share in cash and stock from $25 to match a bid earlier this week from EMC Corp.
Agrium Inc. on Wednesday reaffirmed its bid for rival fertilizer maker CF Industries Holdings Inc.at $40 a share in cash and one Agrium share for each CF share. Agrium said the offer represents its "best and final price, absent engagement by CF and demonstration of additional value."
Williams-Sonoma affirmed its estimates for the year, saying that while the first-quarter performance was better than expected, the economy remains volatile and promotions may be required as the industry reduces inventory.
The Markit euro-zone composite purchasing managers index for the 16-nation euro zone released Wednesday rose to 44.0 in May, hitting an eight-month high. While still pointing to a contraction in activity, the index posted a record jump from a reading of 41.1 in April.
Planned job cuts announced by U.S. employers totaled 111,182 in May, down 16 percent from the 132,590 layoffs recorded the previous month, according to a report released on Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc.
May marked the lowest monthly total since 95,094 job cuts announced last September. Since reaching a peak in January, job-cut totals have fallen by an average of 17.5 percent per month, according to the report.
However, the decline in layoffs may not continue for long.
"This decline in job cuts could be short-lived. The second quarter is typically the lowest quarter of the year when it comes to job cuts," John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in the report.
"Corporate downsizing may continue to remain slow during the summer months, but if the past is any indication, we could see the pace accelerate again in the latter half of the third quarter through the end of the year," he said.
Much of the downsizing in coming months may come from state and local governments, which have been hard hit by shrinking tax revenues, according to the report.
The government and nonprofit sector led in job cuts, announcing 22,317 layoffs last month and marking the third straight month the sector was the top job cutter.
Brett Steenbarger: "Since 2000, we've had 160 occasions in which there have been four consecutive rising days in the S&P 500 Index (SPY) such as we've had most recently.
Over the following three days, SPY has averaged a loss of -.37% (71 up, 89 down). By contrast, for the rest of the sample, the three-day return on SPY has been -.01% (1169 up, 1030 down).
It appears that some profit taking after a period of steady gains is normal. Indeed, returns have been negative from 1-5 days out following four days of consecutive gain."
Home builder Toll Brothers reported a loss for its fiscal second quarter Wednesday that was slightly wider than analysts predicted, as revenue halved from the same period a year ago.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended May 29 decreased 16.2 percent to 658.7.
Michael Brush: "In the housing market, a lot of prime mortgages are becoming subprime as a new wave of foreclosures begins to hit. Mainstream homeowners -- those previously "safe" borrowers with sound credit who have conservative, fixed-rate mortgages -- are getting into trouble at an alarming rate. "
China, the world’s second-biggest energy consumer, won’t buy more oil for stockpiling until additional storage tanks are built, a government official said.
Boeing Co. and General Dynamics Corp. must pay the government $2.8 billion to settle a nearly two-decade dispute over the cancellation of a Navy contract for a stealth aircraft, the U.S. Court of Appeals for the Federal Circuit ruled Tuesday.
Crude supplies up 2.9 million barrels: EIA. Gasoline stocks down 0.2 million barrels. Distillate stocks up 1.6 million barrels.
Valero said it would lose 50 cents a share in the second quarter. Wall Street analysts expected Valero to earn 41 cents a share, according to a survey by FactSet Research. Valero also said it would issue 40 million shares of stock in a bid to raise about $755 million.
Federal Reserve Chairman Ben Bernanke told Congress the pace of economic contraction is slowing and he sees several factors behind the latest rise in yields.
A federal judge has tossed out more than three dozen lawsuits filed against the nation's telecommunications companies for allegedly participating in the government's e-mail and telephone eavesdropping program done without court approval.
The dismissals were widely expected after Congress in July agreed on new surveillance rules that include immunity from lawsuits for telecommunications companies that allegedly helped the U.S. spy on Americans.
U.S. District Judge Vaughn Walker on Wednesday upheld the constitutionality of the new surveillance rules and dismissed the lawsuits.
But the judge did allow the losing attorneys a chance to revise their lawsuits to include new allegations, if any, that aren't covered by the immunity rules.
The weak labor market is hurting U.S. cities -- centers of many industries and large housing markets -- with 93 metropolitan areas registering an unemployment rate of at least 10 percent in April, according to Labor Department data released on Wednesday.
That is more than 13 times the number of cities that notched the same high levels a year earlier, the Department said.
Currently, the national unemployment rate is 8.9 percent, but in nearly 150 cities a higher proportion of residents were out of work this spring.
At the same time, the number of cities posting unemployment rates below 7 percent was 117, which was less than half of the 347 cities recording lower rates just a year earlier.
The Labor Department said nine of the 13 metropolitan areas with jobless rates of at least 15 percent were in California.
The Dow Jones Industrial Average ended off 64.63 points, or 0.7%, to 8,676.2. The S&P 500 Index dropped 12.91 points, or 1.4%, to finish at 931.82. The Nasdaq Composite fell 10.88 points, or 0.6
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