5/28/06 Not Surprising
Wal-Mart estimated that May sales rose 2.3 percent at its U.S. stores open at least a year, the low end of its forecast, held back by steep gasoline and utility prices. This should not come as a surprise.
U.S. adults remain very pessimistic about the situation in Iraq, and are not confident that U.S. policies there will be successful. As a result, President Bush's job approval rating in handling the situation in Iraq hasn't changed in two months -- two-thirds (68%) give the president negative marks -- tying an all-time low. This should not come as a surprise.
The Bush Administration late Friday asked federal judges in New York and Michigan late Friday to dismiss a pair of lawsuits filed over the National Security Agency's domestic eavesdropping program, saying litigating them would jeopardize state secrets. This should not come as a surprise.
Mike Burk: "The OTC has been up 100% of the time on the 2nd trading day of June during the 2nd year of the Presidential Cycle." I found this quite surprising.
As I have stated previously, from May 11, in just a few days, the VIX skyrocketed
from 13 to just about 20. In 8 trading days the VIX has declined to 14.26. That is an unprecedented round trip in such a short time frame. It is not business as usual. To think so would ignore the risk of the recent extreme volatility. Let me repeat. Just because the market may be oversold does not mean you need to be a buyer. Do not ignore the potential danger associated with variance swaps. You can be swept away with them.
Saturday, May 27, 2006
Behind The 8 Ball
5/27/06 Behind The 8 Ball
When you cut through all the government numbers for April, the disposable income for Americans declined 0.1% after taking inflation into account. That's the bottom line. Our economy is based primarily on the consumer. With growing inflation pressures, the consumer is still behind the 8 ball. Is the Fed a real inflation fighter?
Peter Schiff: "Higher inflation is actually the government's best friend and is the most politically expedient way to resolve America's economic imbalances and reduce the real burden of repaying its own debts."
The University of Michigan's index of consumer confidence fell to 79.1 this month from 87.4 in April, the biggest drop since hurricanes slammed into the Gulf Coast last year. The final May reading compares with an initial estimate of 79.0. The university's measure of current economic conditions fell by the most since record-keeping began in 1978.
Barron's: "After a long string of double-digit annual price increases, many second-home meccas across the country are witnessing plunging sales and burgeoning inventories of unsold homes."
previously have had chickenpox.
Air fares over Memorial Day weekend were expected to average 10% more than they did last year, AAA said. Hotel rates have climbed 5%. And rental car rates have shot up 19% from a year ago to $36 a day, the highest Memorial Day rate in the past six years.
A panel of three judges said in a 69-page decision that a group of bloggers did not have to divulge their sources to Cupertino's Apple Computer Inc., contending that the same laws that protect traditional journalists, the First Amendment and California's Shield Law, also apply to bloggers.
Analysts expect May sales for General Motors Corp. to lead the decline, with a drop of between 10 and 14 percent compared to the same period in 2005. Sales at Ford Motor Co. are expected to fall between 6 and 8 percent for the month, while DaimlerChrysler AG's Chrysler Group sales are expected to be down about 5 percent.
Because of $3 gas at the pump, the media focuses on the price of crude, which has risen 17% this year, By comparison, wheat futures traded at a 9-year high this week and have gained almost 50% over the past year. Very often the best place to mine for profits is where the media coverage is minimal at best.
On friday, the VIX traded between 15.04 and 14.26, and closed on the low of the day. Volatility continues to diminish while equities have taken a turn for the better. It would be a mistake to dismiss this recent run up in the VIX to the 19+ area and it would be a mistake to return to complacency. You should consider this recent strength an opportunity to lighten positions.
It was one thing to buy GM at $20 and quite another to jump on the Merrill/Prudential bandwagon at $27-29. Believe it or not, the same reasons to buy GM at $20 are no different than at $28. It just required a bit of foresight. GM may return to $29 in a period of time, but for now, there are too many hurdles to warrant this price. Being complacent about GM is a mistake.
On the other hand, everyone has written Ford off. That would be a mistake. Why? Check the cash flow.
Nouriel Roubini: "Q2 growth may already be in the 2-2.5% range that I predicted in January and is likely to further decelerate in H2."
Let's return again to a discussion of volatilty and particularly variance swaps.
Todd Steinberg opines "variance swaps isolate volatility and take away all of the other attributes that you would ordinarily have to factor in, such as interest rates, dividends and movements in the price of the underlying asset." That is a start. Let's turn to the Minyanville staff for some additional thought: "A variance swap is a contract between two parties agreeing to swap cash flows on the measured variance of an underlying asset during a set time frame. Variance is the square of standard deviation. The payout on the variance swap is linear to variance rather than volatility. This means the payout will rise at higher rate than volatility. In a period of rising volatility, this can be problematic if someone is over-leveraged based on a model that is predicting a continuation of muted volatility. The variance swap provides a trader with a "constant" exposure to volatility with a fixed gamma and time decay that is not dependent on stock prices, therefore providing a "pure" play on future volatility.Minyanville Professor John Succo noted a similar situation last October. Describing some of the selling taking place at that time, he wrote: "There is a rather large position in the Street composed of what are called "variance swaps." "Essentially, volatility funds and credit funds have bought variance swaps (long volatility) from several large brokers," Succo wrote. "The volatility funds buy them to make bets on volatility. Credit funds buy them as a correlation hedge against credit risk (as credit spreads widen, volatility tends to pick up)."
This is obviously complicated stuff. However, there is a problem with all of this. What happens when during the trading day, due to the tremendous volatility, trading is halted, and halted for the remainder of the day? Then you are left behind the 8 ball. Not only are these traders hurt, but the every day vanilla investor is impacted as well. Could this have taken place after May 10th? In sum, investing can be simple or complicated. Those that think they are so clever and endowed with self-proclaimed genius may be the first to be carried out.
Thursday, May 25, 2006
Interesting Finding
5/26/06 Interesting Finding
Almost 70,000 women took part in the research, part of a major health investigation in the US called the Nurses Health Study.
Scientists monitored the women for 16 years, keeping records of their weight and sleep patterns.
Compared with the sound sleepers, women who slept no more than five hours a night were 32 per cent more likely to experience major weight gain - defined as an increase of 33 pounds or more - during the course of the study.
They were also 15 per cent more likely to become obese compared with women who slept seven hours.
Gary Lammert: "A dysequilibrium
tipping point of negative equity is now found in a good percentage of 2005 acquired US homes. And the negative equity grows every day with
the growing backlog of oversupply. One of the last major American
manufacturing holdouts, the housing industry, with better blue collar
salaries, mitigated by a proportion of labor provided by the south of the
border non Ellis Island immigrants, is in steep decline. Coupled to its
decline is the US lending industry and the over populated and bloated
real estate industry."
The volume of help-wanted advertising in major U.S. newspapers declined in April, the Conference Board said Thursday. The help wanted index fell to 35 from 37 in March. In the last three months, help-wanted advertising declined in all nine U.S. regions.
I would be surprised if 2nd quarter GDP were not at least a positive 4% grower.
For the past eight years, ethanol has cost an average of 49 cents a gallon more than gasoline, according to data compiled by Bloomberg. Last year, even with oil reaching a then record $70.85 a barrel, it cost refiners $1.61 to make a gallon of gasoline -- less than the $1.80 it cost to buy a gallon of ethanol. Today, the U.S. consumes 4.4 billion gallons of ethanol, or the equivalent of 3 percent of all the gasoline used, according to the Energy Department. The federal mandate will boost that figure to almost 5 percent by 2012. It should be noted that the cost to produce ethanol in Brazil is 50% less than it is in the U.S.
Yesterday, equities had their best day in awhile. It was no coincidence that volatility declined sharply with the VIX closing at 15.50 and having a range of only 1.15 points. The rise in equities was led by GM, Wal-Mart, the energy sector, and the Mastercard IPO. However, all was not rosy. Crude rallied back to 71.40 a barrel, gold had a strong performance, and interest rates were on the rise again with the 10-year at 5.07% and the 30-year at 5.17%. Although interest rates rose, the dollar index declined. The question one should ask is what was the real inflation rate in April and has there been a change in the first three weeks of May. I believe the numbers are not benign and that is a big reason to be cautious.
The National Association of Realtors said Thursday that sales of previously owned single-family homes and condominiums dropped by 2 percent last month to a seasonally adjusted sales pace of 6.76 million units.
The median price of homes sold in April rose to $223,000, an increase of 4.2 percent from April 2005. That represented the smallest year-over-year price gain since September 2001.
Mason Cooley: "Great men wait for the right moment to abandon caution. The rest of us abandon it when impatience becomes too much for us."
The cost of insuring against a default on Italian government bonds – through credit default swaps – rose sharply.
Now that the results of the Lay and Skilling trials are in the books, so to speak, let me remind you of some background facts. You do recall the political contributions Enron/Lay made to Bush and Cheney. You do remember the close friendship between Bush and "Kenny Boy" Lay. You do remember back to the spring of 2001. Vice President Dick Cheney cleared his calendar for an April 17 private meeting with Lay regarding what aides described as "energy policy matters" and "the energy crisis in California." At the meeting Lay handed Cheney a memo that read in part: "The administration should reject any attempt to re-regulate wholesale power markets by adopting price caps...." The administration rejected any attempt to adopt energy price caps. I wonder why Bush and Cheney were not character witnesses at the trial. That's what friends are for ---- in time of need. Have you heard the media bring up any of these points?
Natural gas utility Northwest Natural Gas Co. backed its previous earnings guidance of 2006 earnings between $2.12 and $2.27 per share. Chief Financial Officer David Anderson backed the outlook at the company's annual shareholder meeting. The estimate assumes normal weather.
Arcelor SA agreed to buy most of Russia's OAO Severstal in a 13 billion-euro ($16.6 billion) deal to create the world's biggest steelmaker and repel a hostile bid by Mittal Steel Co.
Brad Setser: "If the global economy goes south because of an oil supply shock, I would run into the Canadian dollar and the Norwegian krone. I would even rather hold the Russian ruble than the US dollar. Putin isn’t the nicest guy, but Russia is now a substantial net creditor – and with oil at $70 Russia is adding about $150b to its reserves a year. I kid not -- Russia's reserves have been rising by $5b a week recently. Its external fundamentals are solid. And I doubt the central bank will be able to resist nominal ruble appreciation forever. I would also prefer the euro and even the yen to the dollar."
Almost 70,000 women took part in the research, part of a major health investigation in the US called the Nurses Health Study.
Scientists monitored the women for 16 years, keeping records of their weight and sleep patterns.
Compared with the sound sleepers, women who slept no more than five hours a night were 32 per cent more likely to experience major weight gain - defined as an increase of 33 pounds or more - during the course of the study.
They were also 15 per cent more likely to become obese compared with women who slept seven hours.
Gary Lammert: "A dysequilibrium
tipping point of negative equity is now found in a good percentage of 2005 acquired US homes. And the negative equity grows every day with
the growing backlog of oversupply. One of the last major American
manufacturing holdouts, the housing industry, with better blue collar
salaries, mitigated by a proportion of labor provided by the south of the
border non Ellis Island immigrants, is in steep decline. Coupled to its
decline is the US lending industry and the over populated and bloated
real estate industry."
The volume of help-wanted advertising in major U.S. newspapers declined in April, the Conference Board said Thursday. The help wanted index fell to 35 from 37 in March. In the last three months, help-wanted advertising declined in all nine U.S. regions.
I would be surprised if 2nd quarter GDP were not at least a positive 4% grower.
For the past eight years, ethanol has cost an average of 49 cents a gallon more than gasoline, according to data compiled by Bloomberg. Last year, even with oil reaching a then record $70.85 a barrel, it cost refiners $1.61 to make a gallon of gasoline -- less than the $1.80 it cost to buy a gallon of ethanol. Today, the U.S. consumes 4.4 billion gallons of ethanol, or the equivalent of 3 percent of all the gasoline used, according to the Energy Department. The federal mandate will boost that figure to almost 5 percent by 2012. It should be noted that the cost to produce ethanol in Brazil is 50% less than it is in the U.S.
Yesterday, equities had their best day in awhile. It was no coincidence that volatility declined sharply with the VIX closing at 15.50 and having a range of only 1.15 points. The rise in equities was led by GM, Wal-Mart, the energy sector, and the Mastercard IPO. However, all was not rosy. Crude rallied back to 71.40 a barrel, gold had a strong performance, and interest rates were on the rise again with the 10-year at 5.07% and the 30-year at 5.17%. Although interest rates rose, the dollar index declined. The question one should ask is what was the real inflation rate in April and has there been a change in the first three weeks of May. I believe the numbers are not benign and that is a big reason to be cautious.
The National Association of Realtors said Thursday that sales of previously owned single-family homes and condominiums dropped by 2 percent last month to a seasonally adjusted sales pace of 6.76 million units.
The median price of homes sold in April rose to $223,000, an increase of 4.2 percent from April 2005. That represented the smallest year-over-year price gain since September 2001.
Mason Cooley: "Great men wait for the right moment to abandon caution. The rest of us abandon it when impatience becomes too much for us."
The cost of insuring against a default on Italian government bonds – through credit default swaps – rose sharply.
Now that the results of the Lay and Skilling trials are in the books, so to speak, let me remind you of some background facts. You do recall the political contributions Enron/Lay made to Bush and Cheney. You do remember the close friendship between Bush and "Kenny Boy" Lay. You do remember back to the spring of 2001. Vice President Dick Cheney cleared his calendar for an April 17 private meeting with Lay regarding what aides described as "energy policy matters" and "the energy crisis in California." At the meeting Lay handed Cheney a memo that read in part: "The administration should reject any attempt to re-regulate wholesale power markets by adopting price caps...." The administration rejected any attempt to adopt energy price caps. I wonder why Bush and Cheney were not character witnesses at the trial. That's what friends are for ---- in time of need. Have you heard the media bring up any of these points?
Natural gas utility Northwest Natural Gas Co. backed its previous earnings guidance of 2006 earnings between $2.12 and $2.27 per share. Chief Financial Officer David Anderson backed the outlook at the company's annual shareholder meeting. The estimate assumes normal weather.
Arcelor SA agreed to buy most of Russia's OAO Severstal in a 13 billion-euro ($16.6 billion) deal to create the world's biggest steelmaker and repel a hostile bid by Mittal Steel Co.
Brad Setser: "If the global economy goes south because of an oil supply shock, I would run into the Canadian dollar and the Norwegian krone. I would even rather hold the Russian ruble than the US dollar. Putin isn’t the nicest guy, but Russia is now a substantial net creditor – and with oil at $70 Russia is adding about $150b to its reserves a year. I kid not -- Russia's reserves have been rising by $5b a week recently. Its external fundamentals are solid. And I doubt the central bank will be able to resist nominal ruble appreciation forever. I would also prefer the euro and even the yen to the dollar."
Wednesday, May 24, 2006
Housing
5/25/06 Housing
When the consensus is that there is a bubble, it is wise to consider alternative scenarios. Over
the past two months, I have attempted to provide some of those thoughts. All housing markets are not the same --- just as all stocks are not the same. There is value somewhere and overvalue somewhere else. Both will be discovered, but not necessarily at the same moment in time.
Sales of new homes in the U.S. unexpectedly rose in April to the highest this year, even as inventories of unsold dwellings climbed to a record. Sales increased 4.9 percent to an annual rate of 1.198 million from a revised 1.142 million in March that was lower than previously reported, the Commerce Department said Wednesday in Washington. There were 565,000 homes for sale at the end of April, the most ever.
Shortly after the durable goods number was released interest rates declined sharply, but the full extent of the rally could not hold as the yield on the 10-year went down to 5% and then rose to 5.04%. Again, the Fed does not control long term interest rates.
When the consensus is that there is a bubble, it is wise to consider alternative scenarios. Over
the past two months, I have attempted to provide some of those thoughts. All housing markets are not the same --- just as all stocks are not the same. There is value somewhere and overvalue somewhere else. Both will be discovered, but not necessarily at the same moment in time.
Sales of new homes in the U.S. unexpectedly rose in April to the highest this year, even as inventories of unsold dwellings climbed to a record. Sales increased 4.9 percent to an annual rate of 1.198 million from a revised 1.142 million in March that was lower than previously reported, the Commerce Department said Wednesday in Washington. There were 565,000 homes for sale at the end of April, the most ever.
Shortly after the durable goods number was released interest rates declined sharply, but the full extent of the rally could not hold as the yield on the 10-year went down to 5% and then rose to 5.04%. Again, the Fed does not control long term interest rates.
Washington Mutual notified 850 call-center workers in Bothell, Washington that their jobs would be gone by fall. The company also gave layoff notices to 550 call-center workers in Jacksonville, Fla. WaMu is moving those functions to less-expensive locations — in Milwaukee, upstate New York and Manila, Philippines.
In April 2006, employers took 1,148 mass layoff actions, seasonally
adjusted, as measured by new filings for unemployment insurance benefits
during the month, the Bureau of Labor Statistics of the U.S. Department
of Labor reported today. Each action involved at least 50 persons from a
single establishment, and the number of workers involved totaled 118,504,
on a seasonally adjusted basis. The number of layoff events rose by 66, and the
number of associated initial claims decreased
by 51 from March 2006. In the manufacturing sector, 358 mass layoff events
were reported during April 2006, seasonally adjusted, resulting in 48,086
initial claims. The number of events in manufacturing was higher than a
month earlier, while the number of initial claims decreased.
Dave Kimble:“Russia's oil exports represent 15.2% of the
world's export trade in oil, making it a much more significant player
than Iran, with 5.8% of export volumes. Russia also produces 25.8% of
the world's gas exports, while Iran is still only entering this market
as an exporter…. Venezuela has 5.4% of the export market.” Russia is planning
on selling oil for rubles (not dollars) in about 2 weeks.
XM Satellite reaffirmed that it remains on track to have positive cash flow
from operations for the fourth quarter of 2006 and on an annual basis for 2007.
"Subscriber growth for the first quarter of 2006 was consistent with
our initial guidance of nine million subscribers by the end of 2006," said
Hugh Panero, President and CEO of XM Satellite Radio. "Although XM has
regained retail market share since the first of the year, the satellite
radio category has seen an overall softness at retail during the second
quarter to date, and we have been later than anticipated with broad
availability of our new products."
The revised guidance of 8.5 million subscribers represents growth of
more than 40 percent over the course of the year. The revised subscriber
guidance leads to a reduction in subscriber revenues and a narrower EBITDA
loss for the year. XM expects to add a total of more than 2.5 million net
new subscribers this year. XM ended 2005 with 5,932,957 subscribers, and
the company added more than 568,000 net new subscribers during the first
quarter of 2006 for a total of more than 6.5 million subscribers.
Yesterday's trading saw another large swing in the VIX, between 17.13 and 19.87.
Therefore, it was not surprising to see equity indices go from positive to
negative to positive etc etc etc. and end with a tiny gain thanks to GM,
Microsoft, and Wal-Mart. Meanwhile, gold lost $36+ an ounce and silver and the other
metals had a rough time. Crude closed just below $70 a barrel. THis recent sharp
decline in the energy sector gives me a reason to revisit Diamond Ofshore and
Chevron.
Many investors are asking whether this is just a normal correction or whether
we have hit a patch of quicksand. I guess it depends on your portfolio and your
objectives. Unlike 1974, I haven't seen anyone jump out of a 24 story window.
The LA Times reports home builder Ryland Group Inc. on Wednesday slashed its 2006 earnings
forecast for a second time this year, citing a 35% decline in sales in
April and May.
The Calabasas-based company said it expected full-year earnings of
$8.50 to $9 a share, based on the sale of 16,500 to 17,000 homes at a
gross profit margin of 23.2%. Before you slit your throat, the stock has already
declined from $83 to $52. Of course it can go lower, but, in my view, most of the
damage has been done.
Tuesday, May 23, 2006
Patience
5/24/06 Patience
Investing requires patience. With some investments you might have been
fortunate enough to have had some terrific returns over a period of years.
Then the stock moves sideways. For example, Microsoft and Home Depot are
selling for the price where the shares traded in 1998. In the case of Medtronic,
the shares are trading today where they were in early 2000. That's a long
dry period but over a period of 20 or more years the returns have been
terrific. You must consistently analyze your holdings and assess your risk/reward
going forward.
Packaged Facts projects sales of natural/organic food and beverages
will soar past $46 billion by 2010, increasing by nearly 63%, as the
popularity and availability of natural/organic products continues to gain
momentum. The addition of Wal-Mart as a major purveyor of organics, rapid
growth in all major supermarkets' private label organic offerings, and
highly anticipated expansion of the widely successful supermarket
"lifestyle" stores assures the forthcoming exponential market growth.
The first rally often is disappointing. Yesterday was no exception. With the Dow, Nasdaq, and S&P 500 up for most of the day, participation was lacking. Yes, the metals and crude
were up but the transports and the utilities were in the red, interest rates were rising, the dollar index was weak, and then some major company shares were on the downside ----
GE, Home Depot, Intel, Advanced Micro, Best Buy, Kellogg, Wrigley, Amgen, IBM, Aetna, Dell,
Applied Materials, Texas Instruments,and Citigroup,just to mention a few. Not
surprisingly, the rally did not hold and the Dow, Nasdaq, and S&P closed on the downside.
In sum, the action lacked conviction. The buyers were holding their breath. The complacency
was gone, and it took less than two weeks for that to occur.
If you listened to Helicopter Ben before the Senate Finance Committee, you could hear a
tremor in his voice. He did not have a frog in his throat. He was nervous and unsure of how to react to the questions. He appeared out of place and clearly did not provide
confidence to the financial markets. That's what happens when you depend on a government
official. More often than not, you will be disappointed.
In after market hours trading, the weakness persisted --- especially in the big tech sector. For example, Microsoft had been up nicely for almost the entire day, but in late trading hours the stock fell to $22.70. In other words, it couldn't even hold the $23.25 level. Apple also weakened to the $62.70 area, and Broadcom dipped under $34. Medtronic's quarterly report was on the money, but the stock was not able to get above $49. St. Jude Medical and Boston Scientific had made new 52-week lows on Tuesday.
I would like to revisit the VIX, the volatility index. On May 12, the index traded below
12 and on May 16 it was only 13. For months the VIX had shown almost no life. Yesterday it had a range of about 3 points between 15.36 and 18.26 and closed at 18.26, the high for the day. As the VIX dropped in the morning, the market rallied and then vice versa in the afternoon. In the last week of trading a higher VIX has been a negative for equities.
Henry To: "
Investing requires patience. With some investments you might have been
fortunate enough to have had some terrific returns over a period of years.
Then the stock moves sideways. For example, Microsoft and Home Depot are
selling for the price where the shares traded in 1998. In the case of Medtronic,
the shares are trading today where they were in early 2000. That's a long
dry period but over a period of 20 or more years the returns have been
terrific. You must consistently analyze your holdings and assess your risk/reward
going forward.
Packaged Facts projects sales of natural/organic food and beverages
will soar past $46 billion by 2010, increasing by nearly 63%, as the
popularity and availability of natural/organic products continues to gain
momentum. The addition of Wal-Mart as a major purveyor of organics, rapid
growth in all major supermarkets' private label organic offerings, and
highly anticipated expansion of the widely successful supermarket
"lifestyle" stores assures the forthcoming exponential market growth.
The first rally often is disappointing. Yesterday was no exception. With the Dow, Nasdaq, and S&P 500 up for most of the day, participation was lacking. Yes, the metals and crude
were up but the transports and the utilities were in the red, interest rates were rising, the dollar index was weak, and then some major company shares were on the downside ----
GE, Home Depot, Intel, Advanced Micro, Best Buy, Kellogg, Wrigley, Amgen, IBM, Aetna, Dell,
Applied Materials, Texas Instruments,and Citigroup,just to mention a few. Not
surprisingly, the rally did not hold and the Dow, Nasdaq, and S&P closed on the downside.
In sum, the action lacked conviction. The buyers were holding their breath. The complacency
was gone, and it took less than two weeks for that to occur.
If you listened to Helicopter Ben before the Senate Finance Committee, you could hear a
tremor in his voice. He did not have a frog in his throat. He was nervous and unsure of how to react to the questions. He appeared out of place and clearly did not provide
confidence to the financial markets. That's what happens when you depend on a government
official. More often than not, you will be disappointed.
In after market hours trading, the weakness persisted --- especially in the big tech sector. For example, Microsoft had been up nicely for almost the entire day, but in late trading hours the stock fell to $22.70. In other words, it couldn't even hold the $23.25 level. Apple also weakened to the $62.70 area, and Broadcom dipped under $34. Medtronic's quarterly report was on the money, but the stock was not able to get above $49. St. Jude Medical and Boston Scientific had made new 52-week lows on Tuesday.
I would like to revisit the VIX, the volatility index. On May 12, the index traded below
12 and on May 16 it was only 13. For months the VIX had shown almost no life. Yesterday it had a range of about 3 points between 15.36 and 18.26 and closed at 18.26, the high for the day. As the VIX dropped in the morning, the market rallied and then vice versa in the afternoon. In the last week of trading a higher VIX has been a negative for equities.
Henry To: "
Let's now review the implications of a Lowry's 90% downside day on the NYSE (which took place last Wednesday). As I have mentioned before, a 90% downside day occurs when both the declining volume and the number of downside points equal or exceed 90% of the total volume and the total number of points, respectively. A 90% downside day sometimes signals the beginning of a panic decline, or if the market is already oversold, further evidence of a very oversold market. Generally, a significant market bottom is preceded by two or more number of 90% downside days. A single 90% downside day like today may create an oversold situation in the short-term - one which would signal a temporary bottom - but with a number of intermediate term indicators (see below charts) still in a semi-oversold or neutral condition, the chances of a bottom here is very low. In fact - as Lowry's points out - in four of the last six bull markets since 1980 - a Lowry's 90% downside day has occurred anywhere from 5 to 15 days subsequent to a bull market top. The occurrence of a 90% downside day on the NYSE has significantly increased the odds that the cyclical bull market which began in October 2002 has now topped out."
This morning the April durable goods ex transportationdeclined by 1.1%. In response, the interest rates declined and the 10-year Treasury yield dropped to 5%. This will lead to more talk that the Fed will not raise rates at the June meeting. Whether or not that takes place, it is important to focus on taking a defensive posture. The utility sector would be a prime area to mine for value.
Monday, May 22, 2006
Buying Time Has A Price Tag
5/23/06 Buying Time Has A Price Tag
It was only a short time ago I discussed the point that the Fed wanted to buy time and look at the data prior to its next meeting, and then decide what to do about rates. That was a novice attitude towards the real world. Time is expensive. The world is beggining to see how expensive. The VIX has rallied from 12+ to 19 and is now trading above its 200 day moving average. Volatility is alive and well. The Nasdaq is at a 6-month low and the Dow at a 1-month low. The dollar index still has trouble holding a rally. Hong Kong, Russia, India's Sensex have been hit hard and so have other emerging markets like those in Latin America. Meanwhile, oil has rallied back to $70 and gasoline and natural gas are holding too. Froth has been taken from the metals but they are still up nicely for the year. Money has been moving into the utilities and other defensive groups.
Over the past several years the globe has been awash in liquidity. Now you must ask is there a dark side to liquidity? Do people really know what they have purchased? Are margin calls around the corner? Is it possible that the excess liquidity has been leveraged to such an extent that there is soon to be a tipping point? Would you bet your portfolio against that notion? How about the ATM on your home?
Over time, one of the best places for to mine for potential profits has been in the spinoff arena, and recently Embarq Corp was spun off from Sprint. Yesterday their CEO spoke at a Lehman conference. At $40 per share the market cap is $6 billion and their revenues are $6.3 billion.
CEO Dan Hesse said Monday that the new local phone company's threat from cable competitors is "greatly exaggerated," despite its anticipated market-share loss. The company is projecting that it will lose 5.5 percent to 7.5 percent of its access lines this year as the availability of phone service from cable companies expands from 40 percent to 90 percent in Embarq's markets. He stated "It is our hope and intention that this year will be the highest level of line losses that we will ever see." Hesse said that less than 10 percent of Embarq's roughly $6 billion in revenue is at risk from cable competition, based on his analysis of cable availability and what services consumers choose in the company's markets. "The size of the cable threat to our business, while sizable, we believe is greatly exaggerated," Hesse said. Hesse also said Monday that the company plans to launch Embarq-branded wireless phones and services next month in a bid to expand providing bundled services to consumers. Embarq will rent Sprint Nextel's infrastructure to provide the service. Regarding mergers and acquisitions, Hesse said that Embarq plans to sit on the sidelines for now but that it could be active in the future. "When we do, we believe a strong balance sheet makes us a more attractive suitor and a more attractive target, either way," he said.
In my view, it pays to monitor Embarq. The risk, in my opinion, far outweighed by the upside
potential. It may be rewarding for those with patience.
Another word about risk. Increased volatility leads to greater risk but also to the possibility of greater reward. You must decide whether large market swings are healthy for your personality.
Remember -- it has been several years without a 10% market correction in the U.S. Volatility has been low. For many, that low volatility has been an impetus to greater conviction on the part of investors. The mentality grew to believing volatility was a thing of the past.
Microsoft Corp. told more than 1,000 contract workers doing software development and testing to take seven business days off without pay to lower costs during this quarter, the company said on Monday.
Toll Brothers said that increased material and labor costs and higher write-downs - mainly from continuing weakness in the metro Detroit market - means that it now expects to report earnings per share for 2006 in a range of $4.69 and $5.16 a share. Previously, earnings were expected in a range of $4.77 and $5.26 a share.
The OECD called on Tuesday for the Federal Reserve to tighten interest rates a bit more as it projected U.S. economic expansion was set to stay solid this year before easing slightly in 2007. "A light 'tap on the brakes' seems necessary to keep the economy in balance," the Paris-based Organization for Economic Cooperation and Development said in its half-yearly Economic Outlook report. It raised its projection for U.S. GDP growth to 3.6 percent in 2006 from the 3.5 percent it forecast in November. Core inflation was seen at 3.0 percent for the year.
Ford is doing a debt exchange. The fixed-rate debt will yield 5.7 percentage points over Treasuries, or about 10.64 percent. The floating-rate securities will pay investors 5.25 percentage points above the London interbank offered rate, or about 10.46 percent. If you believe Ford's cost cutting and new models will turn the company aound, then these bonds present an opportunity.
It was only a short time ago I discussed the point that the Fed wanted to buy time and look at the data prior to its next meeting, and then decide what to do about rates. That was a novice attitude towards the real world. Time is expensive. The world is beggining to see how expensive. The VIX has rallied from 12+ to 19 and is now trading above its 200 day moving average. Volatility is alive and well. The Nasdaq is at a 6-month low and the Dow at a 1-month low. The dollar index still has trouble holding a rally. Hong Kong, Russia, India's Sensex have been hit hard and so have other emerging markets like those in Latin America. Meanwhile, oil has rallied back to $70 and gasoline and natural gas are holding too. Froth has been taken from the metals but they are still up nicely for the year. Money has been moving into the utilities and other defensive groups.
Over the past several years the globe has been awash in liquidity. Now you must ask is there a dark side to liquidity? Do people really know what they have purchased? Are margin calls around the corner? Is it possible that the excess liquidity has been leveraged to such an extent that there is soon to be a tipping point? Would you bet your portfolio against that notion? How about the ATM on your home?
Over time, one of the best places for to mine for potential profits has been in the spinoff arena, and recently Embarq Corp was spun off from Sprint. Yesterday their CEO spoke at a Lehman conference. At $40 per share the market cap is $6 billion and their revenues are $6.3 billion.
CEO Dan Hesse said Monday that the new local phone company's threat from cable competitors is "greatly exaggerated," despite its anticipated market-share loss. The company is projecting that it will lose 5.5 percent to 7.5 percent of its access lines this year as the availability of phone service from cable companies expands from 40 percent to 90 percent in Embarq's markets. He stated "It is our hope and intention that this year will be the highest level of line losses that we will ever see." Hesse said that less than 10 percent of Embarq's roughly $6 billion in revenue is at risk from cable competition, based on his analysis of cable availability and what services consumers choose in the company's markets. "The size of the cable threat to our business, while sizable, we believe is greatly exaggerated," Hesse said. Hesse also said Monday that the company plans to launch Embarq-branded wireless phones and services next month in a bid to expand providing bundled services to consumers. Embarq will rent Sprint Nextel's infrastructure to provide the service. Regarding mergers and acquisitions, Hesse said that Embarq plans to sit on the sidelines for now but that it could be active in the future. "When we do, we believe a strong balance sheet makes us a more attractive suitor and a more attractive target, either way," he said.
In my view, it pays to monitor Embarq. The risk, in my opinion, far outweighed by the upside
potential. It may be rewarding for those with patience.
Another word about risk. Increased volatility leads to greater risk but also to the possibility of greater reward. You must decide whether large market swings are healthy for your personality.
Remember -- it has been several years without a 10% market correction in the U.S. Volatility has been low. For many, that low volatility has been an impetus to greater conviction on the part of investors. The mentality grew to believing volatility was a thing of the past.
Microsoft Corp. told more than 1,000 contract workers doing software development and testing to take seven business days off without pay to lower costs during this quarter, the company said on Monday.
Toll Brothers said that increased material and labor costs and higher write-downs - mainly from continuing weakness in the metro Detroit market - means that it now expects to report earnings per share for 2006 in a range of $4.69 and $5.16 a share. Previously, earnings were expected in a range of $4.77 and $5.26 a share.
The OECD called on Tuesday for the Federal Reserve to tighten interest rates a bit more as it projected U.S. economic expansion was set to stay solid this year before easing slightly in 2007. "A light 'tap on the brakes' seems necessary to keep the economy in balance," the Paris-based Organization for Economic Cooperation and Development said in its half-yearly Economic Outlook report. It raised its projection for U.S. GDP growth to 3.6 percent in 2006 from the 3.5 percent it forecast in November. Core inflation was seen at 3.0 percent for the year.
Ford is doing a debt exchange. The fixed-rate debt will yield 5.7 percentage points over Treasuries, or about 10.64 percent. The floating-rate securities will pay investors 5.25 percentage points above the London interbank offered rate, or about 10.46 percent. If you believe Ford's cost cutting and new models will turn the company aound, then these bonds present an opportunity.
Common painkillers such as ibuprofen increase the risk of heart problems in older people , say researchers. They found that 14 per cent of patients admitted to hospital for heart failure for the first time were taking painkillers, compared with 10 per cent of healthy people.
The Waiting Game
5/22/06 The Waiting Game
I frequently provide timely quotes from John Hussman. He's a bright guy and puts his money where his mouth is. Here is what he had to say today. "Our fully hedged investment position in stocks doesn't require any forecasts here – the prevailing combination of valuations and market action has historically produced unsatisfactory returns on average – and this is sufficient reason to be defensive. That said, I strongly encourage investors to evaluate their exposure to market risk here. The Strategic Growth Fund is fully hedged, so I don't have concerns about general market direction on the Fund, but for other investments that are more linked to general market movements, if you could not accept or financially tolerate a market decline of 20-30% in the value of those holdings, you're probably not being realistic in terms of the risks you're taking."
Yields on 10-year U.S. notes, German bunds and Japanese government securities with the same maturity dropped at least 4 basis points in early morning trading. Prices of gold, copper, oil and zinc all fell, driving stocks of mining companies down worldwide.
Microsoft Corp. today announced the industry's first pay-as-you-go personal
computing offerings powered by Microsoft(R) FlexGo(TM) technology, enablingmore-flexible Microsoft Windows(R)-based PC purchasing options forcustomers in emerging markets. Customers can get a full featured Windows-enabled PC with low entry costs that they can access using prepaid cards or through a monthly subscription.
The Financial Times reported the US Chamber of Commerce has warned that the US could lose its leading position in global capital markets if it does not reform its regulatory environment. The call reflects mounting concerns that tough Sarbanes-Oxley rules and the increasing competitiveness of stock and derivatives exchanges in Europe and Asia, could permanently divert capital flows away from the US.
I frequently provide timely quotes from John Hussman. He's a bright guy and puts his money where his mouth is. Here is what he had to say today. "Our fully hedged investment position in stocks doesn't require any forecasts here – the prevailing combination of valuations and market action has historically produced unsatisfactory returns on average – and this is sufficient reason to be defensive. That said, I strongly encourage investors to evaluate their exposure to market risk here. The Strategic Growth Fund is fully hedged, so I don't have concerns about general market direction on the Fund, but for other investments that are more linked to general market movements, if you could not accept or financially tolerate a market decline of 20-30% in the value of those holdings, you're probably not being realistic in terms of the risks you're taking."
Yields on 10-year U.S. notes, German bunds and Japanese government securities with the same maturity dropped at least 4 basis points in early morning trading. Prices of gold, copper, oil and zinc all fell, driving stocks of mining companies down worldwide.
Microsoft Corp. today announced the industry's first pay-as-you-go personal
computing offerings powered by Microsoft(R) FlexGo(TM) technology, enablingmore-flexible Microsoft Windows(R)-based PC purchasing options forcustomers in emerging markets. Customers can get a full featured Windows-enabled PC with low entry costs that they can access using prepaid cards or through a monthly subscription.
The Financial Times reported the US Chamber of Commerce has warned that the US could lose its leading position in global capital markets if it does not reform its regulatory environment. The call reflects mounting concerns that tough Sarbanes-Oxley rules and the increasing competitiveness of stock and derivatives exchanges in Europe and Asia, could permanently divert capital flows away from the US.
Dean Richardson, chief of surgery at the University of Pennsylvania's school of veterinary medicine at the New Bolton Center, performed the 5-hour, 10-minute surgery on Barbaro's right-hind leg. "No one's going to want to hear this," Richardson said. "He's still a coin toss, even after everything went well." Barbaro's fractures were above and below the ankle. He also dislocated the ankle joint, doctors said. The pastern bone was in "probably 20-plus pieces," Richardson said afterward. A metal plate was put in, 23 screws were inserted and the ankle joint was fused, meaning it will not be a joint anymore if the fusion is successful.
When he came out of surgery, Barbaro was lifted by sling and placed on a raft in a pool so he could calmly awake from the anesthetic.
Richardson said the horse "practically jogged back to his stall" and was wearing a cast from just below the hock to the hoof.
"Right now he's very happy," Richardson said. "He's eating, he's doing very good. But I've been doing this too long to know that day one is not the end of things."
Barbaro, who will be at the center for at least several weeks and possibly much longer, did pass another hurdle: Richardson found that the blood supply in the colt's injured leg was adequate.
UK Prime Minister Tony Blair said he expects Iraq's security forces to reach full strength by the end of the year, paving the way for Western troops to withdraw from the country.
Sunday, May 21, 2006
The Unexpected
5/21/06 The Unexpected
When money managers went home on Friday night, the vast majority stated the market was oversold and positioned for a bounce. That statement has little meaning. First, a market can remain oversold for some time. There is no magic formula that states the market must return to the green. Second, a bounce could be for one hour or one day and not have legs. Third, when the vast majority say something, watch out. The market consistently accomodates the fewest number of participants at any one time. Epect the unexpected.
I have felt for months that Barbaro had the potential to be the greatest racehorse in the last 25 years. The horse trains brilliantly and races with ease. The unexpected happened yesterday. Instead of winning the Preakness in possible record time, the horse was pulled up by his jockey after a 100 yards or so. The ankle was broken in two places. Would this be an injury that ended in tragedy like Ruffian's? Hopefully, the vets at the Univ. of Pennsylvania will be able to save this horse. It's wise to appreciate what we have when we have it. Don't save the appreciation for a later time. There may not be a later time. Expect the unexpected.
When money managers went home on Friday night, the vast majority stated the market was oversold and positioned for a bounce. That statement has little meaning. First, a market can remain oversold for some time. There is no magic formula that states the market must return to the green. Second, a bounce could be for one hour or one day and not have legs. Third, when the vast majority say something, watch out. The market consistently accomodates the fewest number of participants at any one time. Epect the unexpected.
I have felt for months that Barbaro had the potential to be the greatest racehorse in the last 25 years. The horse trains brilliantly and races with ease. The unexpected happened yesterday. Instead of winning the Preakness in possible record time, the horse was pulled up by his jockey after a 100 yards or so. The ankle was broken in two places. Would this be an injury that ended in tragedy like Ruffian's? Hopefully, the vets at the Univ. of Pennsylvania will be able to save this horse. It's wise to appreciate what we have when we have it. Don't save the appreciation for a later time. There may not be a later time. Expect the unexpected.
Saturday, May 20, 2006
Positioning
5/20/06 Positioning
Whether the market is rising or falling or fairly stagnant, it is mandatory to position oneself properly. Each idividual has his/her tolerance for risk. Remember- the first rule is to limit loss to the minimum and thereby protect your nest egg. Google is not for everyone nor is a U.S. Treasury bond. The second rule is to understand your investment. I promise you that the large investment houses do not fully comprehend their trading in derivatives. They are an accident waiting to happen, and can carry many innocent investors out with them. Here is a small snippet from the Financial Times: "The recent sharp falls in stock markets appear to have been exacerbated by an unusual wave of derivatives activity on the part of hedge funds and big banks, traders yesterday indicated."
Please do not play the game of predicting a bottom or the next bounce. It is a foolhardy as predicting a top to copper. This week commodity prices had their biggest weekly drop in more than 25 years, led by metals and grains. Gold dropped about $100. Crude declined to a 6-week low. These are declines in long-term bull markets. Treasury bonds had a rally in a bear market.
It doesn't matter how many Fed governors call for a pause. The Fed does not control long-term interest rates. We depend on foreign capital.
Bloomberg noted "The global derivatives market expanded to a record $298 trillion in the second half of 2005, led by a 34 percent increase in contracts to insure debt payments, the Bank for International Settlements said... Credit-default swaps rose to $13.7 trillion..."
Make no mistake. Derivatives are the ultimate weapon of mass destruction in financial markets.
A deputy governor of Sweden's Riksbank, Lars Nyberg, said it will soon be time to take the next step towards a less expansionary monetary policy.
He said the expansionary monetary policy can still be seen in, for example, growing credit facilities as well as rising house prices, which now appears to have spread to the commercial property market."The economic indicators and inflation prospects imply it will soon be time to take the next step towards less expansionary monetary policy... in line with market expectations," Nyberg said.
Maybe the Fed and our financial institutions will arrive at the same consclusion as did the Riksbank --- before it's too late.
Whether the market is rising or falling or fairly stagnant, it is mandatory to position oneself properly. Each idividual has his/her tolerance for risk. Remember- the first rule is to limit loss to the minimum and thereby protect your nest egg. Google is not for everyone nor is a U.S. Treasury bond. The second rule is to understand your investment. I promise you that the large investment houses do not fully comprehend their trading in derivatives. They are an accident waiting to happen, and can carry many innocent investors out with them. Here is a small snippet from the Financial Times: "The recent sharp falls in stock markets appear to have been exacerbated by an unusual wave of derivatives activity on the part of hedge funds and big banks, traders yesterday indicated."
Please do not play the game of predicting a bottom or the next bounce. It is a foolhardy as predicting a top to copper. This week commodity prices had their biggest weekly drop in more than 25 years, led by metals and grains. Gold dropped about $100. Crude declined to a 6-week low. These are declines in long-term bull markets. Treasury bonds had a rally in a bear market.
It doesn't matter how many Fed governors call for a pause. The Fed does not control long-term interest rates. We depend on foreign capital.
Bloomberg noted "The global derivatives market expanded to a record $298 trillion in the second half of 2005, led by a 34 percent increase in contracts to insure debt payments, the Bank for International Settlements said... Credit-default swaps rose to $13.7 trillion..."
Make no mistake. Derivatives are the ultimate weapon of mass destruction in financial markets.
A deputy governor of Sweden's Riksbank, Lars Nyberg, said it will soon be time to take the next step towards a less expansionary monetary policy.
He said the expansionary monetary policy can still be seen in, for example, growing credit facilities as well as rising house prices, which now appears to have spread to the commercial property market."The economic indicators and inflation prospects imply it will soon be time to take the next step towards less expansionary monetary policy... in line with market expectations," Nyberg said.
Maybe the Fed and our financial institutions will arrive at the same consclusion as did the Riksbank --- before it's too late.
Thursday, May 18, 2006
More Spending
5/19/06 More Spending
In a close vote at 1am early Thursday morning, the House passed a $2.7 trillion spending bill.
The measure calls for increasing military spending by 7 percent, to nearly $558 billion in 2007, a figure that includes $50 billion for military operations in Iraq and Afghanistan. The package would essentially freeze or cut spending on most domestic discretionary programs, including education, energy and national parks, and it calls for trimming $6.8 billion over five years from entitlement programs like Medicaid and farm subsidies. The plan would raise the debt ceiling by $653 billion, to $9.6 trillion, and it assumes that the shortfall next year will be $348 billion, about what it is likely to be in 2006.
The laugh of the week: FBI agents began digging on a farm in Milford Township late Wednesday looking for fresh clues in the 1975 disappearance of former Teamsters boss Jimmy Hoffa.
Factory activity expanded for the 11th straight month in the Philadelphia region in May, the Philadelphia Federal Reserve Bank said Thursday. The Philly Fed's business outlook survey rose to 14.4 from 13.2 in April.
Richard Daughty: "Nowadays, "growth" in GDP is created only by increasing debt, which creates new money, which increases prices, which is also a measure of an increase in GDP, and then the inflation that produced the higher prices (and thus the higher GDP) is ignored, making it look like the economy "grew."
In a smart move, a MarketSafeSM Gold Bullion CD from EverBank® is now available.
June natural gas dropped to $5.88 per million British thermal units, its lowest level since late Jan. 2005 after the Energy Department said natural-gas inventories rose 91 billion cubic feet for the week ended May 12.
The Conference Board reported that the Composite Index of Leading Economic Indicators declined 0.1% in April, following a 0.4% rise in March and a 0.4% decline in February. Says Ken Goldstein, Labor Economist at The Conference Board: "The economy is cooling off from the torrid pace of the first quarter. The composite index of Coincident Economic Indicators increased again in April,an indication that the economy carried some forward momentum into the early part of the second quarter. The Leading Economic Indicators, however, edged lower in April. This latest decline, combined with some earlier softening,suggests growth in the third quarter may be slower. With the price of a barrel of oil still around $70, and with interest rates slowly rising, the economy isn't likely to be picking up steam."
Three of the ten indicators that make up the leading index increased in April. The positive contributors -- beginning with the largest positive contributor -- were vendor performance, stock prices, and interest rate spread. The negative contributors -- beginning with the largest negative contributor -- were building permits,manufacturers' new orders for nondefense capital goods, index of consumer expectations, average weekly initial claims for unemployment insurance(inverted), real money supply, and manufacturers' new orders for consumer goods and materials. The average weekly manufacturing hours held steady in April.
In early Thursday trading treasury yields dropped significantly. For example, the 10-year declined to 5.08% from 5.16% and the 30-year from 5.29% to 5.21%. Has anything changed from a fundamental basis? Richmond Fed President Jeffrey Lacker stated ``the inflation outlook is at the borderline of acceptable and perhaps moving beyond. In circumstances like that, containing inflation has to be the primary focus.'' I would continue to avoid the U.S. Treasury market. Why? I think rates will continue to rise and I believe the dollar will continue to fall in value against other major currencies.
More than one billion people in the world have access to the Internet, with a quarter of them with broadband, or high-speed connections, according to a survey.
The report by the firm eMarketer said the milestone of one billion was reached in late 2005, and that nearly 250 million households had broadband connections. The firm estimates that of these people, 845 million use the Internet regularly. It's time for me to focus some attention on the long-term potential for Yahoo and eBay as shares of both are out of favor.
Venezuela's national assembly approved a reform of the organic hydrocarbons law that hikes the royalty rate for all crude exploration and production projects, in some cases doubling the existing rate.
No global warming? According to earthfiles.com, "6,298 Glaciers Are Melting At Unprecedented Rate of 7% Ice Loss Per Year."
June gold closed at $680.90, down $10.90. July silver dropped 72 cents, or 5.4%, to close at a three-week low of $12.52 an ounce. July platinum fell 1.4% and June palladium lost 2.8%. But July copper gained 3.95 cents to close at $3.711 a pound.
Bay Area home sales in April dropped to their lowest level in five years while prices slowly reached a new peak, according to a report on Wednesday.
In the nine-county Bay Area region, 8,358 new and resale houses and condos were sold in April, according to DataQuick Information Systems. That was down more than 14 percent from 9,745 for March, and down just over 25 percent from 11,158 a year ago.
St. Louis Fed president William Poole: "The risks on the inflation side are tilted to the upside,"
Dell Inc. will start using chips from Advanced Micro Devices Inc. in its high-end server product line later this year, both companies said in separate statements late Thursday. This marks the first time Dell has used chips from AMD in its products.
President Bush will nominate Federal Reserve Gov. Donald Kohn to serve as the central bank's vice chairman, the White House announced Thursday. As I have stated so often, Kohn was my choice to take over after Greenspan retired.
Japan's economy grew at an annual 1.9 percent pace in the three months ended March 31, the Cabinet Office said today in Tokyo. The median forecast of 28 economists was for the economy to grow at a 1.1 percent pace. The yen rallied after release of this news.
Symantec sued Microsoft and wants to prevent the release of the Vista operating system. According to the complaint, Microsoft has rewritten the volume management software for its next version of Windows in ways that were not allowed under the licence between the two companies.They used it to develop a rival product, said a spokesperson for Symantec.
Douglas V. Gnazzo: "At its present rate of expansion the current account outcome is headed for $1 TRILLION for the year. Total indebtedness in the United States now amounts to $40 trillion. At interest rates of 5%, this requires annual financing costs of approximately $2 trillion. Real disposable income edged up by 1.4% in 2005, while spending increased 3.5%." If you were a foreigner holding dollars and/or dollar denominated assets, would you be worried?
In a close vote at 1am early Thursday morning, the House passed a $2.7 trillion spending bill.
The measure calls for increasing military spending by 7 percent, to nearly $558 billion in 2007, a figure that includes $50 billion for military operations in Iraq and Afghanistan. The package would essentially freeze or cut spending on most domestic discretionary programs, including education, energy and national parks, and it calls for trimming $6.8 billion over five years from entitlement programs like Medicaid and farm subsidies. The plan would raise the debt ceiling by $653 billion, to $9.6 trillion, and it assumes that the shortfall next year will be $348 billion, about what it is likely to be in 2006.
The laugh of the week: FBI agents began digging on a farm in Milford Township late Wednesday looking for fresh clues in the 1975 disappearance of former Teamsters boss Jimmy Hoffa.
Factory activity expanded for the 11th straight month in the Philadelphia region in May, the Philadelphia Federal Reserve Bank said Thursday. The Philly Fed's business outlook survey rose to 14.4 from 13.2 in April.
Richard Daughty: "Nowadays, "growth" in GDP is created only by increasing debt, which creates new money, which increases prices, which is also a measure of an increase in GDP, and then the inflation that produced the higher prices (and thus the higher GDP) is ignored, making it look like the economy "grew."
In a smart move, a MarketSafeSM Gold Bullion CD from EverBank® is now available.
June natural gas dropped to $5.88 per million British thermal units, its lowest level since late Jan. 2005 after the Energy Department said natural-gas inventories rose 91 billion cubic feet for the week ended May 12.
The Conference Board reported that the Composite Index of Leading Economic Indicators declined 0.1% in April, following a 0.4% rise in March and a 0.4% decline in February. Says Ken Goldstein, Labor Economist at The Conference Board: "The economy is cooling off from the torrid pace of the first quarter. The composite index of Coincident Economic Indicators increased again in April,an indication that the economy carried some forward momentum into the early part of the second quarter. The Leading Economic Indicators, however, edged lower in April. This latest decline, combined with some earlier softening,suggests growth in the third quarter may be slower. With the price of a barrel of oil still around $70, and with interest rates slowly rising, the economy isn't likely to be picking up steam."
Three of the ten indicators that make up the leading index increased in April. The positive contributors -- beginning with the largest positive contributor -- were vendor performance, stock prices, and interest rate spread. The negative contributors -- beginning with the largest negative contributor -- were building permits,manufacturers' new orders for nondefense capital goods, index of consumer expectations, average weekly initial claims for unemployment insurance(inverted), real money supply, and manufacturers' new orders for consumer goods and materials. The average weekly manufacturing hours held steady in April.
In early Thursday trading treasury yields dropped significantly. For example, the 10-year declined to 5.08% from 5.16% and the 30-year from 5.29% to 5.21%. Has anything changed from a fundamental basis? Richmond Fed President Jeffrey Lacker stated ``the inflation outlook is at the borderline of acceptable and perhaps moving beyond. In circumstances like that, containing inflation has to be the primary focus.'' I would continue to avoid the U.S. Treasury market. Why? I think rates will continue to rise and I believe the dollar will continue to fall in value against other major currencies.
More than one billion people in the world have access to the Internet, with a quarter of them with broadband, or high-speed connections, according to a survey.
The report by the firm eMarketer said the milestone of one billion was reached in late 2005, and that nearly 250 million households had broadband connections. The firm estimates that of these people, 845 million use the Internet regularly. It's time for me to focus some attention on the long-term potential for Yahoo and eBay as shares of both are out of favor.
Venezuela's national assembly approved a reform of the organic hydrocarbons law that hikes the royalty rate for all crude exploration and production projects, in some cases doubling the existing rate.
No global warming? According to earthfiles.com, "6,298 Glaciers Are Melting At Unprecedented Rate of 7% Ice Loss Per Year."
June gold closed at $680.90, down $10.90. July silver dropped 72 cents, or 5.4%, to close at a three-week low of $12.52 an ounce. July platinum fell 1.4% and June palladium lost 2.8%. But July copper gained 3.95 cents to close at $3.711 a pound.
Bay Area home sales in April dropped to their lowest level in five years while prices slowly reached a new peak, according to a report on Wednesday.
In the nine-county Bay Area region, 8,358 new and resale houses and condos were sold in April, according to DataQuick Information Systems. That was down more than 14 percent from 9,745 for March, and down just over 25 percent from 11,158 a year ago.
St. Louis Fed president William Poole: "The risks on the inflation side are tilted to the upside,"
Dell Inc. will start using chips from Advanced Micro Devices Inc. in its high-end server product line later this year, both companies said in separate statements late Thursday. This marks the first time Dell has used chips from AMD in its products.
President Bush will nominate Federal Reserve Gov. Donald Kohn to serve as the central bank's vice chairman, the White House announced Thursday. As I have stated so often, Kohn was my choice to take over after Greenspan retired.
Japan's economy grew at an annual 1.9 percent pace in the three months ended March 31, the Cabinet Office said today in Tokyo. The median forecast of 28 economists was for the economy to grow at a 1.1 percent pace. The yen rallied after release of this news.
Symantec sued Microsoft and wants to prevent the release of the Vista operating system. According to the complaint, Microsoft has rewritten the volume management software for its next version of Windows in ways that were not allowed under the licence between the two companies.They used it to develop a rival product, said a spokesperson for Symantec.
Douglas V. Gnazzo: "At its present rate of expansion the current account outcome is headed for $1 TRILLION for the year. Total indebtedness in the United States now amounts to $40 trillion. At interest rates of 5%, this requires annual financing costs of approximately $2 trillion. Real disposable income edged up by 1.4% in 2005, while spending increased 3.5%." If you were a foreigner holding dollars and/or dollar denominated assets, would you be worried?
Wednesday, May 17, 2006
Remote
5/18/06 Remote
The headline news was that the Nasdaq had a sharp drop and was now negative for the year. Not to be completely outdone, trading curbs were in place yesterday morning and the S&P 500 declined to its lowest point in 3 motnhs. Maybe that wasn't the most important news. Let's consider this:
John Snow: "The prospect is 'remote' for a sudden dollar drop." Now, why out of the blue, would Snow make such a statement? I strongly suggest you give this some important thought. In early trading yesterday, the dollar index was at 83.70, right at a 13 month low. The CPI came out and indicated inflation was alive and well -- only a surprise to those with their head up their rear end. Interest rates immediately rose and the 10-year Treasury traded up to a 5.18% yield and the 30-year up to 5.29%. Gold had been up about $20 and then lost that gain. However, as the Nasdaq and the Dow were getting slammed, the dollar index rallied up to 84.75, a huge move in 2 1/2 hours. Some might say because there was noise from euroland that the recent strength in the euro would hurt exports. The euro over a year ago was much stronger and exports were not hurt. Was it short covering? We need to watch the dollar index carefully.
As interest rates rose, there was a greater notion that the Fed would raise again at the next meeting. Housing stocks got hit again. The sentiment was so bearish that, some of these June puts were10 points out of the money, and had my name on them. I want people to sleep at night with this insurance.
Are things in housing that bad? Meritage Homes Corp. Chief Executive Steven Hilton on Wednesday said that, in spite of slowing housing markets, the home builder will meet its 2006 profit forecast between $11.25 and $11.50 a share, up from $8.88 a share in 2005. Speaking at the company's annual investor conference, Hilton said the company expects to offset lower orders by expanding its community count. Despite some markets softening, he noted the long-term outlook for home builders is positive, citing immigration, retiree migration, job-income growth, more baby boomers purchasing vacation homes, and supply constraints due to entitlement delays and no-growth attitudes in some neighborhoods. The stock sells around $59+ and the June 50 puts are trading for 35 cents.
Japan is holding less dollars than at any point in the last two years. That is a smart decision.
Petroleum deliveries for April were down 1.5% from a year earlier, the API said. Refinery utilization averaged 87.7% in April, down from 92.6% in the year-ago period, it said. The API also pointed out that with the transition this spring to a greater use of ethanol in gasoline, "more inventory is likely to appear as 'blending components' rather than as 'finished gasoline," because ethanol is typically blended into gasoline as the product leaves the terminal for the retail outlets.
Jon Markman points out that, according to Ned Davis Research data, since 1950, the market has lost 3.5% during the period from April 30 to Sept. 30 during midterm election years, versus a gain of 0.9% in the period in all years and a gain of 5.6% in the other half of the year -- Sept. 30 to April 30.
In April, Turkmenistan signed a deal to supply China with 30 billion cubic meters of gas per year from 2009 to 2039. "Even if many analysts doubt Turkmenistan's ability to meet this contract, that deal evokes the contradictions inherent in China's transitional phase," the Washington-based Jamestown Foundation said in a report. "In its substance it evokes the old approach: China subsidizing dictators by paying for pipelines as well as for gas and trying to knock prices down while tying up the producer for 30 years."
For well over a year, I have been writing about the global energy deals that China and India made and are making. I spent a good deal of time writing about Kazakhstan, a key long-term energy supplier. Not once did I write that the U.S. was a participant in any of these deals. Why? No one wants to do business with Bush and Cheney and few want our dollars. The polls indicate the American public has had with this crew. Now it's time to finish the job in the elections to be held this year. It's nothing personal. We just should not be represented by inept leaders, and that is being mild.
The majority of homes sold in the United States are too expensive for a family with the median income, the National Association of Home Builders and Wells Fargo said Wednesday. The housing opportunity index rose to 41.3% in the first quarter from a record low 41% in the fourth quarter, meaning that 41.3% of homes sold were affordable for a family earning the median income. Prices of homes sold fell $4,000 to $250,000 while interest rates rose to 6.39% from 6.21%. The median household income rose to $59,600 from $58,000.
Average weekly earnings rose by 4.1 percent, seasonally adjusted, from April 2005 to April 2006. After deflation by the CPI-W, average weekly earnings increased by 0.4 percent.
There is no denying that rising inflation presents problems for all areas of our society. At the same point, a greater emphasis needs to be placed on the fact that foreign purchases of U.S. Treasury bonds hit a 3-year low in March, the latest figures that are available. I see a continuation of this trend and it spells trouble -- big trouble. We are dependent on foreign capital to fund our growing deficits.
Thomas Jefferson: "Ignorance is preferable to error, and he is less remote from the truth who believes nothing than he who believes what is wrong."
The headline news was that the Nasdaq had a sharp drop and was now negative for the year. Not to be completely outdone, trading curbs were in place yesterday morning and the S&P 500 declined to its lowest point in 3 motnhs. Maybe that wasn't the most important news. Let's consider this:
John Snow: "The prospect is 'remote' for a sudden dollar drop." Now, why out of the blue, would Snow make such a statement? I strongly suggest you give this some important thought. In early trading yesterday, the dollar index was at 83.70, right at a 13 month low. The CPI came out and indicated inflation was alive and well -- only a surprise to those with their head up their rear end. Interest rates immediately rose and the 10-year Treasury traded up to a 5.18% yield and the 30-year up to 5.29%. Gold had been up about $20 and then lost that gain. However, as the Nasdaq and the Dow were getting slammed, the dollar index rallied up to 84.75, a huge move in 2 1/2 hours. Some might say because there was noise from euroland that the recent strength in the euro would hurt exports. The euro over a year ago was much stronger and exports were not hurt. Was it short covering? We need to watch the dollar index carefully.
As interest rates rose, there was a greater notion that the Fed would raise again at the next meeting. Housing stocks got hit again. The sentiment was so bearish that, some of these June puts were10 points out of the money, and had my name on them. I want people to sleep at night with this insurance.
Are things in housing that bad? Meritage Homes Corp. Chief Executive Steven Hilton on Wednesday said that, in spite of slowing housing markets, the home builder will meet its 2006 profit forecast between $11.25 and $11.50 a share, up from $8.88 a share in 2005. Speaking at the company's annual investor conference, Hilton said the company expects to offset lower orders by expanding its community count. Despite some markets softening, he noted the long-term outlook for home builders is positive, citing immigration, retiree migration, job-income growth, more baby boomers purchasing vacation homes, and supply constraints due to entitlement delays and no-growth attitudes in some neighborhoods. The stock sells around $59+ and the June 50 puts are trading for 35 cents.
Japan is holding less dollars than at any point in the last two years. That is a smart decision.
Petroleum deliveries for April were down 1.5% from a year earlier, the API said. Refinery utilization averaged 87.7% in April, down from 92.6% in the year-ago period, it said. The API also pointed out that with the transition this spring to a greater use of ethanol in gasoline, "more inventory is likely to appear as 'blending components' rather than as 'finished gasoline," because ethanol is typically blended into gasoline as the product leaves the terminal for the retail outlets.
Jon Markman points out that, according to Ned Davis Research data, since 1950, the market has lost 3.5% during the period from April 30 to Sept. 30 during midterm election years, versus a gain of 0.9% in the period in all years and a gain of 5.6% in the other half of the year -- Sept. 30 to April 30.
In April, Turkmenistan signed a deal to supply China with 30 billion cubic meters of gas per year from 2009 to 2039. "Even if many analysts doubt Turkmenistan's ability to meet this contract, that deal evokes the contradictions inherent in China's transitional phase," the Washington-based Jamestown Foundation said in a report. "In its substance it evokes the old approach: China subsidizing dictators by paying for pipelines as well as for gas and trying to knock prices down while tying up the producer for 30 years."
For well over a year, I have been writing about the global energy deals that China and India made and are making. I spent a good deal of time writing about Kazakhstan, a key long-term energy supplier. Not once did I write that the U.S. was a participant in any of these deals. Why? No one wants to do business with Bush and Cheney and few want our dollars. The polls indicate the American public has had with this crew. Now it's time to finish the job in the elections to be held this year. It's nothing personal. We just should not be represented by inept leaders, and that is being mild.
The majority of homes sold in the United States are too expensive for a family with the median income, the National Association of Home Builders and Wells Fargo said Wednesday. The housing opportunity index rose to 41.3% in the first quarter from a record low 41% in the fourth quarter, meaning that 41.3% of homes sold were affordable for a family earning the median income. Prices of homes sold fell $4,000 to $250,000 while interest rates rose to 6.39% from 6.21%. The median household income rose to $59,600 from $58,000.
Average weekly earnings rose by 4.1 percent, seasonally adjusted, from April 2005 to April 2006. After deflation by the CPI-W, average weekly earnings increased by 0.4 percent.
There is no denying that rising inflation presents problems for all areas of our society. At the same point, a greater emphasis needs to be placed on the fact that foreign purchases of U.S. Treasury bonds hit a 3-year low in March, the latest figures that are available. I see a continuation of this trend and it spells trouble -- big trouble. We are dependent on foreign capital to fund our growing deficits.
Thomas Jefferson: "Ignorance is preferable to error, and he is less remote from the truth who believes nothing than he who believes what is wrong."
Tuesday, May 16, 2006
Analysis
5/17/06 Analysis
By now we know that the April PPI rose 0.8% and the core rate (ex food and energy) only 0.1%.
When analyzing a business, the core rate means nothing. Take Wal-Mart. They are concerned about the impact high energy costs are having on their customers. BJ Wholesale explained their margins were reduced due to higher gas prices. I can give example after example. However, the bond market chose to focus soley on the core rate and interest rates declined for the second consecutive day. Do you really think all businesses can pass increased costs on to their customers? If you do, I think you should trade in the bond pits.
The stock market took a very negative view of the housing numbers. In April, starts declined by 7.4%, the weakest monthly number since November 2004, and permits dropped by 5.4%. Some brokerage firms lowered their earnings estimates for various housing stocks. I think the lower housing starts and permits are good for the industry. Inventory levels need to be reduced, and when they do, bids for homes will once again reach the offering side of the market. KB Homes recently dropped about 8 points in price down to $65+ a share. Starting tomorrow, there are 22 trading days until June options expire. The June $45 KB Homes puts are selling for 20 to 25 cents. The stock has to decline about 50 cents a day on average for those puts to be worth a penny. There is plenty of fear in this group; however, even with Microsoft dropping to a new 52-week low and breaking $23 on the downside, the Microsoft June $22.50
puts are trading around 25 cents.
Marketwatch reported that Medtronic Inc. yesterday said clinical results from two studies show that its Endeavor drug-eluting coronary stent continues to provide significant and sustained efficacy and safety over time, with low rates of repeat procedures and no observations of late-stent thrombosis. The Endeavor stent received CE Mark approval in July 2005, and is not yet approved for use in the United States. The Minneapolis-based medical device company said it filed its first pre-market approval module with the Food and Drug Administration in October 2005, and remains on track for PMA approval in 2007. Medtronic presented the data at the Paris Course on Revascularization.
New research from the NationalInstitute on Aging (NIA) demonstrates that natural compounds available inWild Blueberries increased lifespan and slowed aging-related declines in awhole organism. Working with elegans, an invertebrate model ofmicroscopic-sized worms in a family called nematodes, the study examinedthe effects of Wild Blueberry polyphenols on lifespan and aging (AgingCell, 5(1): 59-68, February 2006). According to the study published by Mark Wilson, MS and collaborators,"This is a significant finding that lends support to previous experimentson cultured cells or short-term rodent studies showing beneficial effectsin aging-related declines and stress resistance...and thus represents asignificant advance in the study of the biological effects of naturalcompounds." Nematodes represent a common in vivo model for studying agingand longevity. Certain aspects of aging are similar between nematodes andmammals, including humans. There is evidence that Wild Blueberry compoundsmay impact cell signaling and gene expression working beyond their directantioxidant effect by reducing stress signals. Cellular stress andinflammation are related to many diseases of aging including heart disease,cancer and neurodegenerative diseases.
I would like to add one more thought to the PPI. Those expecting inflation to moderate might consider that, at the earlier stages of processing, prices for intermediate goods moved up 0.9 percent in April, after edging down 0.1 percent in the prior month, while the crude goods index increased 1.2 percent, following a 2.7-percent decrease in March. One month does not make a trend; however, these figures cannot be dismissed.
Apple dropped 4% yesterday to just below the $65 level. Several market sources cited a bearish report by broker/deal research firm Off the Record Research. A total of 71,696 calls and 79,462 puts changed hands in Apple across the U.S. options market, above its average daily volume of 117,806 contracts, according to Track Data. The May options expire this Friday and recently Apple has declined about 9 points. Apple was not alone. Microsoft, Dell, and eBay made new 52-week lows as did D.R. Horton. KB Homes came within a fraction of a point of a new 52-week low.
Lazy Days, a large privately held retailer of recreational vehicles, reported lower first-quarter sales. But an analyst noted Tuesday that demand for motor homes could be stronger than it appears, based on sales of used vehicles. "Given its size, we believe Lazy Days serves as a proxy for industry retail trends," Baird U.S. Equity Research analyst Craig Kennison said in a note to investors Tuesday.
The company registered a 3 percent drop in first-quarter revenue, as a 3 percent increase in sales of used vehicles was more than offset by a 7 percent decline in new vehicle sales, according to Kennison.
Lazy Days, based in Tampa, Fla., is a major retailer for manufacturers Monaco Coach Corp., Winnebago Industries Inc. and Thor Corp.
Venezuela is considering selling its fleet of 21 U.S.-made F-16 fighter jets to another country, perhaps Iran, in response to a U.S. ban on arms sales to President Hugo Chavez's government, a military official said Tuesday.
Matrix Research upgraded Cascade Natural Gas from neutral to a strong buy.
Marsoft: "After a brief rally in the fourth quarter of 2005, dry bulk freight rates fell anew in the first quarter of 2006, with spot rates tumbling to their lowest levels since early 2003. Period charter rates have followed much the same path as spot rates over the past year, with one-year TC rates generally falling by about 50% compared to their early 2005 peaks.
Cape rates fell back significantly in early 2006, though they remained well above their average level of the past 25 years. For our benchmark Tubarao/Rotterdam iron ore voyage, we estimate that earnings fell from $49,000 per day in late 2005 to an average of $38,000 per day in the first quarter of 2006, the lowest level since mid-2003.
Panamax spot rates on our benchmark USG/Japan grain route fell by nearly 20% in $/tonne terms during the first quarter of 2006, but after accounting for a 7% rise in bunker costs, earnings declined by a steeper 30%, from $23,000 per day in late 2005 to just $16,000 per day in early 2006, their lowest level in three years. Meanwhile, Panamax one-year TC rates declined for a fourth consecutive quarter, tumbling from $19,000 per day in the final quarter of 2005 to just below $17,000 per day in the first quarter of 2006.
Handy and Handymax spot rates also fell by about 30% in the first quarter of 2006. On our benchmark transatlantic roundtrip voyage, we estimate that earnings for a 51,000 dwt Handymax fell from $20,000 per day to $14,000 per day, while small Handy rates for the same trip dropped from $14,000 per day to $9,000 per day."
Russian President Putin: "The Rouble must become a more widespread means of international transactions. To this end, we need to open a stock exchange in Russia to trade in oil, gas, and other goods to be paid for in Roubles." Please don't dismiss this thought. It sounds similar to the Iranian oil bourse.
This morning the British pound rose as high as $1.9003 from $1.8859. The euro and yen also advanced against the dollar ahead of U.S. CPI figures later in the session. Gold and copper had big gains as well. It is no coincidence that the CPI will be released early today.
Xstrata, the UK-listed mining group, launched a US$14.6bn unsolicited bid for Canadian nickel miner Falconbridge.
According to the latest Post/ABC survey, Bush's disapproval rating among Republicans has nearly doubled, from 16 percent to 30 percent, in the past month while his approval rating dipped below 70 percent for the first time. Public dissatisfaction with Bush has grown in lockstep with opposition to the conflict in Iraq. Not quite a third — 32 percent — said they approve of the way Bush is handling Iraq, down five points in the past month and a new low in Post-ABC polling. About a third say Iraq has been worth the cost, the lowest level of support recorded in Post-ABC polls. Two in three Americans believe the war has not been worth it, a view shared by eight in 10 Democrats, seven in 10 independents and a third of all Republicans.
More than 180 000 people were evacuated from coastal areas of southern China Wednesday as Typhoon Chanchu, the strongest storm to hit the region at this time of year, churned towards the mainland and Hong Kong.
The rain appears to have finally stopped in New England.
Applications for mortgage loans at major banks rose by 4.6% last week, the Mortgage Bankers Association said Wednesday. Applications are down 14.7% from a year ago.
By now we know that the April PPI rose 0.8% and the core rate (ex food and energy) only 0.1%.
When analyzing a business, the core rate means nothing. Take Wal-Mart. They are concerned about the impact high energy costs are having on their customers. BJ Wholesale explained their margins were reduced due to higher gas prices. I can give example after example. However, the bond market chose to focus soley on the core rate and interest rates declined for the second consecutive day. Do you really think all businesses can pass increased costs on to their customers? If you do, I think you should trade in the bond pits.
The stock market took a very negative view of the housing numbers. In April, starts declined by 7.4%, the weakest monthly number since November 2004, and permits dropped by 5.4%. Some brokerage firms lowered their earnings estimates for various housing stocks. I think the lower housing starts and permits are good for the industry. Inventory levels need to be reduced, and when they do, bids for homes will once again reach the offering side of the market. KB Homes recently dropped about 8 points in price down to $65+ a share. Starting tomorrow, there are 22 trading days until June options expire. The June $45 KB Homes puts are selling for 20 to 25 cents. The stock has to decline about 50 cents a day on average for those puts to be worth a penny. There is plenty of fear in this group; however, even with Microsoft dropping to a new 52-week low and breaking $23 on the downside, the Microsoft June $22.50
puts are trading around 25 cents.
Marketwatch reported that Medtronic Inc. yesterday said clinical results from two studies show that its Endeavor drug-eluting coronary stent continues to provide significant and sustained efficacy and safety over time, with low rates of repeat procedures and no observations of late-stent thrombosis. The Endeavor stent received CE Mark approval in July 2005, and is not yet approved for use in the United States. The Minneapolis-based medical device company said it filed its first pre-market approval module with the Food and Drug Administration in October 2005, and remains on track for PMA approval in 2007. Medtronic presented the data at the Paris Course on Revascularization.
New research from the NationalInstitute on Aging (NIA) demonstrates that natural compounds available inWild Blueberries increased lifespan and slowed aging-related declines in awhole organism. Working with elegans, an invertebrate model ofmicroscopic-sized worms in a family called nematodes, the study examinedthe effects of Wild Blueberry polyphenols on lifespan and aging (AgingCell, 5(1): 59-68, February 2006). According to the study published by Mark Wilson, MS and collaborators,"This is a significant finding that lends support to previous experimentson cultured cells or short-term rodent studies showing beneficial effectsin aging-related declines and stress resistance...and thus represents asignificant advance in the study of the biological effects of naturalcompounds." Nematodes represent a common in vivo model for studying agingand longevity. Certain aspects of aging are similar between nematodes andmammals, including humans. There is evidence that Wild Blueberry compoundsmay impact cell signaling and gene expression working beyond their directantioxidant effect by reducing stress signals. Cellular stress andinflammation are related to many diseases of aging including heart disease,cancer and neurodegenerative diseases.
I would like to add one more thought to the PPI. Those expecting inflation to moderate might consider that, at the earlier stages of processing, prices for intermediate goods moved up 0.9 percent in April, after edging down 0.1 percent in the prior month, while the crude goods index increased 1.2 percent, following a 2.7-percent decrease in March. One month does not make a trend; however, these figures cannot be dismissed.
Apple dropped 4% yesterday to just below the $65 level. Several market sources cited a bearish report by broker/deal research firm Off the Record Research. A total of 71,696 calls and 79,462 puts changed hands in Apple across the U.S. options market, above its average daily volume of 117,806 contracts, according to Track Data. The May options expire this Friday and recently Apple has declined about 9 points. Apple was not alone. Microsoft, Dell, and eBay made new 52-week lows as did D.R. Horton. KB Homes came within a fraction of a point of a new 52-week low.
Lazy Days, a large privately held retailer of recreational vehicles, reported lower first-quarter sales. But an analyst noted Tuesday that demand for motor homes could be stronger than it appears, based on sales of used vehicles. "Given its size, we believe Lazy Days serves as a proxy for industry retail trends," Baird U.S. Equity Research analyst Craig Kennison said in a note to investors Tuesday.
The company registered a 3 percent drop in first-quarter revenue, as a 3 percent increase in sales of used vehicles was more than offset by a 7 percent decline in new vehicle sales, according to Kennison.
Lazy Days, based in Tampa, Fla., is a major retailer for manufacturers Monaco Coach Corp., Winnebago Industries Inc. and Thor Corp.
Venezuela is considering selling its fleet of 21 U.S.-made F-16 fighter jets to another country, perhaps Iran, in response to a U.S. ban on arms sales to President Hugo Chavez's government, a military official said Tuesday.
Matrix Research upgraded Cascade Natural Gas from neutral to a strong buy.
Marsoft: "After a brief rally in the fourth quarter of 2005, dry bulk freight rates fell anew in the first quarter of 2006, with spot rates tumbling to their lowest levels since early 2003. Period charter rates have followed much the same path as spot rates over the past year, with one-year TC rates generally falling by about 50% compared to their early 2005 peaks.
Cape rates fell back significantly in early 2006, though they remained well above their average level of the past 25 years. For our benchmark Tubarao/Rotterdam iron ore voyage, we estimate that earnings fell from $49,000 per day in late 2005 to an average of $38,000 per day in the first quarter of 2006, the lowest level since mid-2003.
Panamax spot rates on our benchmark USG/Japan grain route fell by nearly 20% in $/tonne terms during the first quarter of 2006, but after accounting for a 7% rise in bunker costs, earnings declined by a steeper 30%, from $23,000 per day in late 2005 to just $16,000 per day in early 2006, their lowest level in three years. Meanwhile, Panamax one-year TC rates declined for a fourth consecutive quarter, tumbling from $19,000 per day in the final quarter of 2005 to just below $17,000 per day in the first quarter of 2006.
Handy and Handymax spot rates also fell by about 30% in the first quarter of 2006. On our benchmark transatlantic roundtrip voyage, we estimate that earnings for a 51,000 dwt Handymax fell from $20,000 per day to $14,000 per day, while small Handy rates for the same trip dropped from $14,000 per day to $9,000 per day."
Russian President Putin: "The Rouble must become a more widespread means of international transactions. To this end, we need to open a stock exchange in Russia to trade in oil, gas, and other goods to be paid for in Roubles." Please don't dismiss this thought. It sounds similar to the Iranian oil bourse.
This morning the British pound rose as high as $1.9003 from $1.8859. The euro and yen also advanced against the dollar ahead of U.S. CPI figures later in the session. Gold and copper had big gains as well. It is no coincidence that the CPI will be released early today.
Xstrata, the UK-listed mining group, launched a US$14.6bn unsolicited bid for Canadian nickel miner Falconbridge.
According to the latest Post/ABC survey, Bush's disapproval rating among Republicans has nearly doubled, from 16 percent to 30 percent, in the past month while his approval rating dipped below 70 percent for the first time. Public dissatisfaction with Bush has grown in lockstep with opposition to the conflict in Iraq. Not quite a third — 32 percent — said they approve of the way Bush is handling Iraq, down five points in the past month and a new low in Post-ABC polling. About a third say Iraq has been worth the cost, the lowest level of support recorded in Post-ABC polls. Two in three Americans believe the war has not been worth it, a view shared by eight in 10 Democrats, seven in 10 independents and a third of all Republicans.
More than 180 000 people were evacuated from coastal areas of southern China Wednesday as Typhoon Chanchu, the strongest storm to hit the region at this time of year, churned towards the mainland and Hong Kong.
The rain appears to have finally stopped in New England.
Applications for mortgage loans at major banks rose by 4.6% last week, the Mortgage Bankers Association said Wednesday. Applications are down 14.7% from a year ago.
Monday, May 15, 2006
Changing Tides
5/16/06 Changing Tides
U.S. home builders have turned negative on the housing market for the first time since just after 9/11, the National Association of Home Builders and Wells Fargo said Monday. The NAHB/Wells Fargo housing market index, a builders' sentiment gauge, fell six points in May from a revised 51 to 45, the lowest level since June 1995, the industry group said. The index shows more builders say the market is "poor" than say it's "good." The index has fallen 23 points in the last seven months. In May, builders' assessment of current single-family home sales fell to 50 from 55. The assessment of future sales dropped to 54 from 59. The assessment of the traffic of prospective buyers dropped to 32 from 39. Meanwhile, the NAR reported that, from 3/2005 to 3/2006 price of a single family home rose 10.3% on a nationwide basis. It will be interesting to see what the results are for the next 12 months. For example, existing home sales are down more than 15% in five states that have had the hottest housing markets, the National Association of Realtors said Monday. Sales were down 22.2% year-over-year in Arizona, 19.2% in California, 18.2% in the District of Columbia, 15.7% in Florida and 15% in Nevada, the real estate group said. Nationally, sales of existing homes fell 2.1% year-over-year in the first quarter. The hot states now are New Mexico, Louisiana, Montana and Mississippi.
Capital flows into the United States fell to $69.8 billion in March after reaching a revised $90.5 billion in February, the Treasury Department said Monday. In sum, the capital flow in March covered the monthly trade deficit by $7 billion but that excludes the budget deficit that is running over $25 billion a month in the red.
Manufacturing activity in the New York area expanded at a slower pace in May, the New York Federal Reserve Bank said Monday. The bank's Empire State Manufacturing index fell to 12.4 in May from 15.8 in April. This is the lowest level since June 2005.
eBay's Skype, the Web telephone company, on Monday announced a marketing promotion that will allow its users in the United States and Canada to make free calls to conventional wireline and mobile phones.
Gary Lammert: "March 2000 was not Sept-October 1929. But perhaps May 2006 is April 1932.The borrowers of last resort: the American consumer and the taxrefunding and war borrowing US government are unknowingly nearexhaustion. The American president with low unemployment, continuedtax rebates, and recent hefty tax revenues is perhaps as unsuspectingof the deterministic fractal valuation events soon to unfold as is hisincreasingly dissatisfied public. Mr.Hoover with his ample treasuryhad a relatively enviable position."
After several years in which residential rental prices had little or no rise, the dynamics are changing and rents are on the rise. How will that impact the CPI in coming months?
Rep. Ron Paul: "Our relative wealth as a nation is measured in dollars, and the steady erosion of the value of those dollars means we will all be poorer in the future. The artificial stimulation of our economy through cheap money comes with a price. When dollars are abundant, they are worth less. This is the reality facing Americans today, especially older Americans who rely on savings to finance their retirement years."
Profit margins narrowed for the first time in at least two years and expenses rose. Investors were disappointed that the earnings gain was spurred by credit card revenue and a one-time tax gain. Target's results were hurt by markdowns and investments to buy more merchandise direct from manufacturers, Goldman, Sachs & Co. analyst Adrianne Shapira said today in a report. Those of you who purchased Wal-Mart stock and sold Target short have a handsome gain on the books.
Despite a sharp decline in oil, gold, silver, copper, zinc and other metals, despite a continued rise in volatility, despite a drop in interest rates and a rise in the dollar index, equities simply have trouble gaining traction. The Dow and the S&P 500 registered modest gains and the Nasdaq a small loss.
The President of Venezuela yesterday offered to supply the poor in Britain with cheap heating oil in the winter, in an apparent attempt to embarrass Tony Blair's Government.
The NAHB projects home sales will fall 12 percent in 2006 from record sales in 2005, and new single-family home starts will decline 7 percent from last year. The index has declined on a seasonally adjusted basis every month since January. D.R. Horton, the nation's largest homebuilder, declined to a new 52-week low.
Wal-Mart stated first-quarter net income rose 6.3% to $2.615 billion, or 63 cents a share, with revenue up 12.2% to $80.47 billion. Analysts polled by Thomson First Call were expecting earnings of 61 cents a share on revenue of $80.43 billion. The company said its inventory performance was the best it's seen in many quarters, and expects a 2% to 4% U.S. same-store sales rise in the second quarter, and earnings between 70 cents and 74 cents a share. It continues to see fiscal year earnings between $2.88 and $2.95 a share.
House Majority Leader John Boehner said Monday he will not push legislation to reduce the U.S. tariff on ethanol imports.
Bush wants "middle ground" on immigration. It does not surprise me that he did not mention prosecuting those who hire illegal imiigrants. You don't need the national guard for that and you don't need to seek additional funding for that. However, it does require a leader who knows the difference between right and wrong.
U.S. home builders have turned negative on the housing market for the first time since just after 9/11, the National Association of Home Builders and Wells Fargo said Monday. The NAHB/Wells Fargo housing market index, a builders' sentiment gauge, fell six points in May from a revised 51 to 45, the lowest level since June 1995, the industry group said. The index shows more builders say the market is "poor" than say it's "good." The index has fallen 23 points in the last seven months. In May, builders' assessment of current single-family home sales fell to 50 from 55. The assessment of future sales dropped to 54 from 59. The assessment of the traffic of prospective buyers dropped to 32 from 39. Meanwhile, the NAR reported that, from 3/2005 to 3/2006 price of a single family home rose 10.3% on a nationwide basis. It will be interesting to see what the results are for the next 12 months. For example, existing home sales are down more than 15% in five states that have had the hottest housing markets, the National Association of Realtors said Monday. Sales were down 22.2% year-over-year in Arizona, 19.2% in California, 18.2% in the District of Columbia, 15.7% in Florida and 15% in Nevada, the real estate group said. Nationally, sales of existing homes fell 2.1% year-over-year in the first quarter. The hot states now are New Mexico, Louisiana, Montana and Mississippi.
Capital flows into the United States fell to $69.8 billion in March after reaching a revised $90.5 billion in February, the Treasury Department said Monday. In sum, the capital flow in March covered the monthly trade deficit by $7 billion but that excludes the budget deficit that is running over $25 billion a month in the red.
Manufacturing activity in the New York area expanded at a slower pace in May, the New York Federal Reserve Bank said Monday. The bank's Empire State Manufacturing index fell to 12.4 in May from 15.8 in April. This is the lowest level since June 2005.
eBay's Skype, the Web telephone company, on Monday announced a marketing promotion that will allow its users in the United States and Canada to make free calls to conventional wireline and mobile phones.
Gary Lammert: "March 2000 was not Sept-October 1929. But perhaps May 2006 is April 1932.The borrowers of last resort: the American consumer and the taxrefunding and war borrowing US government are unknowingly nearexhaustion. The American president with low unemployment, continuedtax rebates, and recent hefty tax revenues is perhaps as unsuspectingof the deterministic fractal valuation events soon to unfold as is hisincreasingly dissatisfied public. Mr.Hoover with his ample treasuryhad a relatively enviable position."
After several years in which residential rental prices had little or no rise, the dynamics are changing and rents are on the rise. How will that impact the CPI in coming months?
Rep. Ron Paul: "Our relative wealth as a nation is measured in dollars, and the steady erosion of the value of those dollars means we will all be poorer in the future. The artificial stimulation of our economy through cheap money comes with a price. When dollars are abundant, they are worth less. This is the reality facing Americans today, especially older Americans who rely on savings to finance their retirement years."
Profit margins narrowed for the first time in at least two years and expenses rose. Investors were disappointed that the earnings gain was spurred by credit card revenue and a one-time tax gain. Target's results were hurt by markdowns and investments to buy more merchandise direct from manufacturers, Goldman, Sachs & Co. analyst Adrianne Shapira said today in a report. Those of you who purchased Wal-Mart stock and sold Target short have a handsome gain on the books.
Despite a sharp decline in oil, gold, silver, copper, zinc and other metals, despite a continued rise in volatility, despite a drop in interest rates and a rise in the dollar index, equities simply have trouble gaining traction. The Dow and the S&P 500 registered modest gains and the Nasdaq a small loss.
The President of Venezuela yesterday offered to supply the poor in Britain with cheap heating oil in the winter, in an apparent attempt to embarrass Tony Blair's Government.
The NAHB projects home sales will fall 12 percent in 2006 from record sales in 2005, and new single-family home starts will decline 7 percent from last year. The index has declined on a seasonally adjusted basis every month since January. D.R. Horton, the nation's largest homebuilder, declined to a new 52-week low.
Wal-Mart stated first-quarter net income rose 6.3% to $2.615 billion, or 63 cents a share, with revenue up 12.2% to $80.47 billion. Analysts polled by Thomson First Call were expecting earnings of 61 cents a share on revenue of $80.43 billion. The company said its inventory performance was the best it's seen in many quarters, and expects a 2% to 4% U.S. same-store sales rise in the second quarter, and earnings between 70 cents and 74 cents a share. It continues to see fiscal year earnings between $2.88 and $2.95 a share.
House Majority Leader John Boehner said Monday he will not push legislation to reduce the U.S. tariff on ethanol imports.
Bush wants "middle ground" on immigration. It does not surprise me that he did not mention prosecuting those who hire illegal imiigrants. You don't need the national guard for that and you don't need to seek additional funding for that. However, it does require a leader who knows the difference between right and wrong.
Sunday, May 14, 2006
Concerns
5/15/04 Concerns
An index of prices that companies in Japan pay for energy and raw materials climbed 2.5 percent from a year earlier, the 26th successive increase, the Bank of Japan said in Tokyo on Sunday. A 27 percent gain in Dubai crude oil prices this year, the benchmark for Asian refiners, has made it more difficult for companies to pass on costs to customers. . ``Companies just can't pass on costs at the same pace as they did last year,'' said Junichi Makino, a senior economist at Daiwa Institute of Research Ltd. in Tokyo. ``Cost gains will become a bigger concern for corporate profits this year.'' This same cost squeeze face companies in the U.S.
In the latest Newsweek poll, 57 Percent Say Administration Has Gone Too Far in Expanding Presidential Power; 50 Percent Say History Will View Bush as a Below Average President 71 Percent Are Dissatisfied With the Way Things Are Going in the U.S.
Venezuela's President Hugo Chavez warned at a conference in London on Sunday that a US attack on Iran would trigger an enormous military escalation, and he criticized the war in Iraq, calling it the "Vietnam of the 21st century.".
According to the Financial Times, on Tuesday Chile's president will lay the first stone of a new liquid natural gas re-gasification plant at Quintero near the port of Valparaiso. Engineering studies have still to be completed, but the ceremony will underline official commitment to the project being developed by BG of the UK together with local partners Enap, Endesa and Metrogas. The plant, which will cost up to $400m and supply about 45 per cent of Chile’s needs, will depend on imported LNG from Indonesia or Africa and the gas it produces will supplement fuel currently sold to Chile by Argentina.
The Detroit Free Press observed that Sheldon Sandler, founder of Bel Air Partners, a New Jersey financial consulting firm specializing in auto retailing, said the priciest of the major dealerships to acquire now is Lexus, which commands a premium of six to 10 times annual profits, in addition to its property. BMW and Mercedes come next, followed by Honda and Toyota, at multiples of four times profits.
Cadillac, Chevrolet and Chrysler stores command premiums of two to 3 1/2 times annual earnings, but Pontiac, Ford, Buick and Lincoln Mercury dealers are sometimes worth no more than the value of the real estate they occupy, Sandler said.
Early this morning, June gold futures dropped $19 an ounce to $692.80 and July silver futures fell 77.5 cents to $13.46 an ounce.
The yuan strengthened beyond 8 to the dollar for the first time in more than 12 years. How long will it take to get to 7 to the dollar?
In early overseas Monday trading, crude-oil futures fell by more than $1 a barrel.
With the recent spike in the volatility index (VIX), it would not surprise to see an effort to have a very short term rally. Again, if that were the case, I would use the strength to lighten up on trading positions.
Barry Ritholtz: "The breach of a key uptrend in the ratio of the S&P 500 to the 10-year U.S. government bond yield suggests either stock prices are headed much lower or bond yields are headed much higher -- or both -- in the longer term."
"This is the tip of the iceberg. It's going to get worse," Massachusetts Emergency Management Agency spokesman Peter Judge said Sunday. "We fear that 15 rivers will be pushed over flood level or right up to flood level." The governors of New Hampshire and Massachusetts declared states of emergency, while Maine Gov. John Baldacci declared a state of emergency for his state's southernmost county, York County.
Southeast Asian trade ministers(ASEAN) opened talks Monday on ways to speed up economic integration and turn the region into a single market by 2015, five years earlier than planned.
An index of prices that companies in Japan pay for energy and raw materials climbed 2.5 percent from a year earlier, the 26th successive increase, the Bank of Japan said in Tokyo on Sunday. A 27 percent gain in Dubai crude oil prices this year, the benchmark for Asian refiners, has made it more difficult for companies to pass on costs to customers. . ``Companies just can't pass on costs at the same pace as they did last year,'' said Junichi Makino, a senior economist at Daiwa Institute of Research Ltd. in Tokyo. ``Cost gains will become a bigger concern for corporate profits this year.'' This same cost squeeze face companies in the U.S.
In the latest Newsweek poll, 57 Percent Say Administration Has Gone Too Far in Expanding Presidential Power; 50 Percent Say History Will View Bush as a Below Average President 71 Percent Are Dissatisfied With the Way Things Are Going in the U.S.
Venezuela's President Hugo Chavez warned at a conference in London on Sunday that a US attack on Iran would trigger an enormous military escalation, and he criticized the war in Iraq, calling it the "Vietnam of the 21st century.".
According to the Financial Times, on Tuesday Chile's president will lay the first stone of a new liquid natural gas re-gasification plant at Quintero near the port of Valparaiso. Engineering studies have still to be completed, but the ceremony will underline official commitment to the project being developed by BG of the UK together with local partners Enap, Endesa and Metrogas. The plant, which will cost up to $400m and supply about 45 per cent of Chile’s needs, will depend on imported LNG from Indonesia or Africa and the gas it produces will supplement fuel currently sold to Chile by Argentina.
The Detroit Free Press observed that Sheldon Sandler, founder of Bel Air Partners, a New Jersey financial consulting firm specializing in auto retailing, said the priciest of the major dealerships to acquire now is Lexus, which commands a premium of six to 10 times annual profits, in addition to its property. BMW and Mercedes come next, followed by Honda and Toyota, at multiples of four times profits.
Cadillac, Chevrolet and Chrysler stores command premiums of two to 3 1/2 times annual earnings, but Pontiac, Ford, Buick and Lincoln Mercury dealers are sometimes worth no more than the value of the real estate they occupy, Sandler said.
Early this morning, June gold futures dropped $19 an ounce to $692.80 and July silver futures fell 77.5 cents to $13.46 an ounce.
The yuan strengthened beyond 8 to the dollar for the first time in more than 12 years. How long will it take to get to 7 to the dollar?
In early overseas Monday trading, crude-oil futures fell by more than $1 a barrel.
With the recent spike in the volatility index (VIX), it would not surprise to see an effort to have a very short term rally. Again, if that were the case, I would use the strength to lighten up on trading positions.
Barry Ritholtz: "The breach of a key uptrend in the ratio of the S&P 500 to the 10-year U.S. government bond yield suggests either stock prices are headed much lower or bond yields are headed much higher -- or both -- in the longer term."
"This is the tip of the iceberg. It's going to get worse," Massachusetts Emergency Management Agency spokesman Peter Judge said Sunday. "We fear that 15 rivers will be pushed over flood level or right up to flood level." The governors of New Hampshire and Massachusetts declared states of emergency, while Maine Gov. John Baldacci declared a state of emergency for his state's southernmost county, York County.
Southeast Asian trade ministers(ASEAN) opened talks Monday on ways to speed up economic integration and turn the region into a single market by 2015, five years earlier than planned.
Saturday, May 13, 2006
Conditions
5/14/06 Conditions
Earthfiles.com: "The Tibet plateau glaciers have one-sixth of all the world's ice. But those glaciers, which cover about 60,000 square miles at an average height of 13,000 feet above sea level, are melting at the unprecedented rate of 7% per year, triggering drought, desertification and sandstorms in other regions, including China. So far in 2006, China has had thirteen sandstorms. One in mid-April dumped 330,000 tons of sand on Beijing. More than 10 million people, mainly in northern China, are trying to survive a severe drought and lack of drinking water the past month."
Doug Noland: "So far this year, 10-year Treasury yields have jumped 80 basis points to the highest level since May 2002. Over this period, the dollar index has declined about 7%. It should be noted that, as the dollar index sank from 120 to 93 between early-2002 and mid-2003, bond yields collapsed from 5.4% to a low of just above 3%."
Is the dollar a safe haven or the Swiss franc?
Boeing raised list prices about 4 percent for most of its airplanes built in the Seattle area.
The price index of overall exports rose 0.6 percent in April as a 0.7 percent increase in nonagricultural prices more than offset a 0.6 percent decline in agricultural prices. Nonagricultural prices continued the upward trend over each of the past five months, and increased 2.5 percent for the year ended in April. Overall export prices rose 2.4 percent for the same period. The increase in nonagricultural prices was led by a 2.0 percent advance in prices for nonagricultural industrial supplies and materials, the largest monthly increase since October. A sharp rise in fuel prices drove the increase, but higher metals prices were also a contributing factor. The price index for nonagricultural industrial supplies and materials advanced 8.0 percent over the past 12 months.
Iran's President states he considers "invalid" any European proposals that ask Iran to halt uranium enrichment.
Inco said it's raised the cash component of its Falconbridge bid by C$5 a share more by boosting the value of the cash component of the bid, and also said that it now sees $375 million in synergies a year, vs. an earlier estimate of $350 million. Falconbridge also agreed to pay a $450 million break-up fee.
Brett Steenbarger: "We had two consecutive days on Thursday and Friday in which 70% or more of traded issues declined on the day. Since 1990 (N = 4124 trading days), that has only occurred 13 times.The next day, the S&P 500 Index ($SPX) was up by an average .59% (9 up, 4 down)--much stronger than the average daily gain of .04% (2174 up, 1950 down) for the sample overall.Two days later, the S&P was up by an average 1.37% (10 up, 3 down)--considerably stronger than the average two-day gain of .08% (2209 up, 1915 down) for the 1990-2006 sample."
Mike Burk: "The last time there were 5 consecutive down days in the R2K was in March 2005 and before that late December 2004 / early January 2005. Both initiated short term down trends."
Cuba is partnering with companies from China, India, Norway and Canada to exploit offshore resources, according to the U.S.-Cuba Trade Association and the legislation's sponsors.
Earthfiles.com: "The Tibet plateau glaciers have one-sixth of all the world's ice. But those glaciers, which cover about 60,000 square miles at an average height of 13,000 feet above sea level, are melting at the unprecedented rate of 7% per year, triggering drought, desertification and sandstorms in other regions, including China. So far in 2006, China has had thirteen sandstorms. One in mid-April dumped 330,000 tons of sand on Beijing. More than 10 million people, mainly in northern China, are trying to survive a severe drought and lack of drinking water the past month."
Doug Noland: "So far this year, 10-year Treasury yields have jumped 80 basis points to the highest level since May 2002. Over this period, the dollar index has declined about 7%. It should be noted that, as the dollar index sank from 120 to 93 between early-2002 and mid-2003, bond yields collapsed from 5.4% to a low of just above 3%."
Is the dollar a safe haven or the Swiss franc?
Boeing raised list prices about 4 percent for most of its airplanes built in the Seattle area.
The price index of overall exports rose 0.6 percent in April as a 0.7 percent increase in nonagricultural prices more than offset a 0.6 percent decline in agricultural prices. Nonagricultural prices continued the upward trend over each of the past five months, and increased 2.5 percent for the year ended in April. Overall export prices rose 2.4 percent for the same period. The increase in nonagricultural prices was led by a 2.0 percent advance in prices for nonagricultural industrial supplies and materials, the largest monthly increase since October. A sharp rise in fuel prices drove the increase, but higher metals prices were also a contributing factor. The price index for nonagricultural industrial supplies and materials advanced 8.0 percent over the past 12 months.
Iran's President states he considers "invalid" any European proposals that ask Iran to halt uranium enrichment.
Inco said it's raised the cash component of its Falconbridge bid by C$5 a share more by boosting the value of the cash component of the bid, and also said that it now sees $375 million in synergies a year, vs. an earlier estimate of $350 million. Falconbridge also agreed to pay a $450 million break-up fee.
Brett Steenbarger: "We had two consecutive days on Thursday and Friday in which 70% or more of traded issues declined on the day. Since 1990 (N = 4124 trading days), that has only occurred 13 times.The next day, the S&P 500 Index ($SPX) was up by an average .59% (9 up, 4 down)--much stronger than the average daily gain of .04% (2174 up, 1950 down) for the sample overall.Two days later, the S&P was up by an average 1.37% (10 up, 3 down)--considerably stronger than the average two-day gain of .08% (2209 up, 1915 down) for the 1990-2006 sample."
Mike Burk: "The last time there were 5 consecutive down days in the R2K was in March 2005 and before that late December 2004 / early January 2005. Both initiated short term down trends."
Cuba is partnering with companies from China, India, Norway and Canada to exploit offshore resources, according to the U.S.-Cuba Trade Association and the legislation's sponsors.
Friday, May 12, 2006
The Data
5/13/06 The Data
The talking heads got all excited after the March trade deficit only came in at $62+ billion against an expected $66 billion. Unfortunately, crude prices in April and May are higher than they were in March. As such, unless Boeing delivered a zillion planes in April and zillions more in May, the trade deficit will be more than $66 billion in both April and May. In sum, we are still on target for a $800 billion trade deficit this year. It's no wonder the bond market is in the soup and the dollar continues to tank. As I have said for so long, only someone who wants to lose money will be long dollars and U.S. treasury bonds.
You know foreigners will lighten up on dollar-denominated assets, and that means on-going supply for equities and bonds. In addition, there is more attention being paid to corn, wheat, and soybeans, and for good reason. Demand is rising and will create lower supply levels. I mentioned this at the turn of the year. I believe there is a place for these commodities in long-term accounts.
The University of Michigan's preliminary May index of consumer sentiment was 79.0, down from April's final reading of 87.4. The May reading was the weakest since October 2005, when sentiment hit a 12-year low just after hurricanes Katrina and Rita devastated U.S. southeast petroleum refining capacity and gasoline prices spiked.
"If investments (assets) are passed to a different owner, they need to be compensated," Celso Amorim told reporters Friday at a summit of EU, Latin American and Caribbean leaders.
Bolivia's President Evo Morales warned Thursday that companies including Brazil's Petroleo Brasileiro SA may not be compensated following the forced nationalization of their Bolivian operations.
One should ask-- if business is so strong, why is the consumer sentiment dropping so sharply? What's more important corporate earnings for 5,000+ public companies or millions of folks on Main Street struggling to make ends meet? Wall Street mystics can't see past Wall and Broad Streets. There's a whole world out there and it's not sitting pretty. Don't take my word for it. Take a gander on your own time. As for the Fed, they need to look at the data. Look at the people, you twits! Stop printing the money at alarming rates and making the dollar worthless.
CHC Helicopter Corp. has won three new contracts worth $200 million from Statoil ASA to provide helicopter services in the Norwegian Sea, plus renewal of a $74-million contract to provide the Irish Coast Guard with search-and-rescue service through 2010.
In the latest Harris Interactive poll, of 1,003 U.S. adults surveyed in a telephone poll, 29% think Mr. Bush is doing an “excellent or pretty good” job as president, down from 35% in April and significantly lower than 43% in January. Approval ratings for Congress overall also sank, and now stand at 18%. In sum, 29% are found to be brain dead.
Yesterday, mid-way thru the trading session, the talking heads were grasping for straws--
the dollar index had rallied back up to 84(but didn't hold it) and crude was down to $72. Meanwhile, the VIX is running wild on the upside and the yield curve is steepening with the 2-year at 5.01%, the 10-year at 5.19%, and the 30-year at 5.30%. Those folks with the $2.25 trillion in ARMS are about to feel a great deal of pain.
Can you tell me what jerk is going to buy a 50-year Treasury bond? There was a time when a baby was born, you would buy a savings bond for the child. Would you do that now? Then why buy a 50-year Treasury?
Marc Faber: "To summarize, the higher the S&P 500 goes the more the US dollar will lose its value against gold and foreign currencies. In our opinion, the underperformance of US assets against foreign assets and precious metals, which began in 2002, will continue for as far as the eye can see."
The Department of Justice said Friday Microsoft Corp. has agreed to extend oversight of the software company's final antitrust judgment by at least two years. If the extension is approved by the court, it would expire in fall of 2009. Microsoft has agreed to a 2-year extension of the communications protocol licensing program of the final judgment, along with all its enforcement provisions. Microsoft has also agreed that the government may apply for an additional extension for up to three additional years, through November 2012.
Here's some data for the Fed. The US dollar suffered a severe sell-off on Friday, taking it to its weakest level against a trade-weighted basket of currencies since October 1997. As they say in the trading pits, it's the pause-to-be that refreshes! Naturally, the talking heads will say a weak dollar makes our exports cheaper. Unfortuately, since we depend on foreign capital to fund our deficits, a weak dollar is a bitter pill and a detractor for attracting foreign capital.
Most Mideast currencies are pegged to the dollar which means the value of stock investments held by foreigners has been plummeting in line with the U.S. currency. The Dubai stock market shed 14.35% for the week, while the Abu Dhabi market gave up 10.49%.
The talking heads got all excited after the March trade deficit only came in at $62+ billion against an expected $66 billion. Unfortunately, crude prices in April and May are higher than they were in March. As such, unless Boeing delivered a zillion planes in April and zillions more in May, the trade deficit will be more than $66 billion in both April and May. In sum, we are still on target for a $800 billion trade deficit this year. It's no wonder the bond market is in the soup and the dollar continues to tank. As I have said for so long, only someone who wants to lose money will be long dollars and U.S. treasury bonds.
You know foreigners will lighten up on dollar-denominated assets, and that means on-going supply for equities and bonds. In addition, there is more attention being paid to corn, wheat, and soybeans, and for good reason. Demand is rising and will create lower supply levels. I mentioned this at the turn of the year. I believe there is a place for these commodities in long-term accounts.
The University of Michigan's preliminary May index of consumer sentiment was 79.0, down from April's final reading of 87.4. The May reading was the weakest since October 2005, when sentiment hit a 12-year low just after hurricanes Katrina and Rita devastated U.S. southeast petroleum refining capacity and gasoline prices spiked.
"If investments (assets) are passed to a different owner, they need to be compensated," Celso Amorim told reporters Friday at a summit of EU, Latin American and Caribbean leaders.
Bolivia's President Evo Morales warned Thursday that companies including Brazil's Petroleo Brasileiro SA may not be compensated following the forced nationalization of their Bolivian operations.
One should ask-- if business is so strong, why is the consumer sentiment dropping so sharply? What's more important corporate earnings for 5,000+ public companies or millions of folks on Main Street struggling to make ends meet? Wall Street mystics can't see past Wall and Broad Streets. There's a whole world out there and it's not sitting pretty. Don't take my word for it. Take a gander on your own time. As for the Fed, they need to look at the data. Look at the people, you twits! Stop printing the money at alarming rates and making the dollar worthless.
CHC Helicopter Corp. has won three new contracts worth $200 million from Statoil ASA to provide helicopter services in the Norwegian Sea, plus renewal of a $74-million contract to provide the Irish Coast Guard with search-and-rescue service through 2010.
In the latest Harris Interactive poll, of 1,003 U.S. adults surveyed in a telephone poll, 29% think Mr. Bush is doing an “excellent or pretty good” job as president, down from 35% in April and significantly lower than 43% in January. Approval ratings for Congress overall also sank, and now stand at 18%. In sum, 29% are found to be brain dead.
Yesterday, mid-way thru the trading session, the talking heads were grasping for straws--
the dollar index had rallied back up to 84(but didn't hold it) and crude was down to $72. Meanwhile, the VIX is running wild on the upside and the yield curve is steepening with the 2-year at 5.01%, the 10-year at 5.19%, and the 30-year at 5.30%. Those folks with the $2.25 trillion in ARMS are about to feel a great deal of pain.
Can you tell me what jerk is going to buy a 50-year Treasury bond? There was a time when a baby was born, you would buy a savings bond for the child. Would you do that now? Then why buy a 50-year Treasury?
Marc Faber: "To summarize, the higher the S&P 500 goes the more the US dollar will lose its value against gold and foreign currencies. In our opinion, the underperformance of US assets against foreign assets and precious metals, which began in 2002, will continue for as far as the eye can see."
The Department of Justice said Friday Microsoft Corp. has agreed to extend oversight of the software company's final antitrust judgment by at least two years. If the extension is approved by the court, it would expire in fall of 2009. Microsoft has agreed to a 2-year extension of the communications protocol licensing program of the final judgment, along with all its enforcement provisions. Microsoft has also agreed that the government may apply for an additional extension for up to three additional years, through November 2012.
Here's some data for the Fed. The US dollar suffered a severe sell-off on Friday, taking it to its weakest level against a trade-weighted basket of currencies since October 1997. As they say in the trading pits, it's the pause-to-be that refreshes! Naturally, the talking heads will say a weak dollar makes our exports cheaper. Unfortuately, since we depend on foreign capital to fund our deficits, a weak dollar is a bitter pill and a detractor for attracting foreign capital.
Most Mideast currencies are pegged to the dollar which means the value of stock investments held by foreigners has been plummeting in line with the U.S. currency. The Dubai stock market shed 14.35% for the week, while the Abu Dhabi market gave up 10.49%.
Ammo
5/12/06 Ammo
For the last several years money managers and traders have been buying on the dips,
and that has been a winning strategy. So I ask you. Will you use your ammo today or
ride it out over the weekend? There's no reason for you to be scared. There's nothing new--
gold, copper, and nickel are hitting highs and crude is bouncing around the $73 level, and
interest rates are trending higher, and the trade deficit will exceed $66 billion for the latest month's report. The dollar is getting trampled and the yen is below 110-- it's only the worst in 8 months and the dollar is 129 to the euro--only the worst in a year.
China's trade surplus in April was $10.5 billion-- we've seen it before.
Robert McHugh stated he received the 9th Hindenburg Omen since April 7th yesterday on May 11.
Don't be scared. You didn't give a crap about the other eight. Step up to the plate. I still
want to sell into strength. Make my day.
Now there is something new. Did you notice the voting at the Ford annual meeting? The support
for management was not there. Trouble is circling the company. At the beginning of the year I predicted the company could be sold. I believe that more strongly today. Despite all the difficulties in the U.S. car business, Ford still has plenty of cash flow. It is, in my view, significantly undervalued on a cash flow basis. A private equity combine could have a field day with Ford.
For the last several years money managers and traders have been buying on the dips,
and that has been a winning strategy. So I ask you. Will you use your ammo today or
ride it out over the weekend? There's no reason for you to be scared. There's nothing new--
gold, copper, and nickel are hitting highs and crude is bouncing around the $73 level, and
interest rates are trending higher, and the trade deficit will exceed $66 billion for the latest month's report. The dollar is getting trampled and the yen is below 110-- it's only the worst in 8 months and the dollar is 129 to the euro--only the worst in a year.
China's trade surplus in April was $10.5 billion-- we've seen it before.
Robert McHugh stated he received the 9th Hindenburg Omen since April 7th yesterday on May 11.
Don't be scared. You didn't give a crap about the other eight. Step up to the plate. I still
want to sell into strength. Make my day.
Now there is something new. Did you notice the voting at the Ford annual meeting? The support
for management was not there. Trouble is circling the company. At the beginning of the year I predicted the company could be sold. I believe that more strongly today. Despite all the difficulties in the U.S. car business, Ford still has plenty of cash flow. It is, in my view, significantly undervalued on a cash flow basis. A private equity combine could have a field day with Ford.
Ammo
5/12/06 Ammo
For the last several years money managers and traders have been buying on the dips,
and that has been a winning strategy. So I ask you. Will you use your ammo today or
ride it out over the weekend? There's no reason for you to be scared. There's nothing new--
gold, copper, and nickel are hitting highs and crude is bouncing around the $73 level, and
interest rates are trending higher, and the trade deficit will exceed $66 billion for the latest month's report. The dollar is getting trampled and the yen is below 110-- it's only the worst in 8 months and the dollar is 129 to the euro--only the worst in a year.
China's trade surplus in April was $10.5 billion-- we've seen it before.
Robert McHugh stated he received the 9th Hindenburg Omen since April 7th yesterday on May 11.
Don't be scared. You didn't give a crap about the other eight. Step up to the plate. I still
want to sell into strength. Make my day.
Now there is something new. Did you notice the voting at the Ford annual meeting? The support
for management was not there. Trouble is circling the company. At the beginning of the year I predicted the company could be sold. I believe that more strongly today. Despite all the difficulties in the U.S. car business, Ford still has plenty of cash flow. It is, in my view, significantly undervalued on a cash flow basis. A private equity combine could have a field day with Ford.
For the last several years money managers and traders have been buying on the dips,
and that has been a winning strategy. So I ask you. Will you use your ammo today or
ride it out over the weekend? There's no reason for you to be scared. There's nothing new--
gold, copper, and nickel are hitting highs and crude is bouncing around the $73 level, and
interest rates are trending higher, and the trade deficit will exceed $66 billion for the latest month's report. The dollar is getting trampled and the yen is below 110-- it's only the worst in 8 months and the dollar is 129 to the euro--only the worst in a year.
China's trade surplus in April was $10.5 billion-- we've seen it before.
Robert McHugh stated he received the 9th Hindenburg Omen since April 7th yesterday on May 11.
Don't be scared. You didn't give a crap about the other eight. Step up to the plate. I still
want to sell into strength. Make my day.
Now there is something new. Did you notice the voting at the Ford annual meeting? The support
for management was not there. Trouble is circling the company. At the beginning of the year I predicted the company could be sold. I believe that more strongly today. Despite all the difficulties in the U.S. car business, Ford still has plenty of cash flow. It is, in my view, significantly undervalued on a cash flow basis. A private equity combine could have a field day with Ford.
Tuesday, May 09, 2006
Buying Time
5/11/06 Buying Time
The Fed wants to buy time for the next six weeks to analyze the economic data in an effort to determine whether it is appropriate to raise rates for the 17th time or maintain the Fed Funds at 5%. Unfortunately, time costs money. Puts and calls and other derivatives carry a cost. Who does the Fed think will pay for this time? Clearly, the Fed thinks it will involve no cost for them. I assure you there will be a payment. Markets have some degree of uncertainty and some volatility. Despite what market mavens may believe, our currency is now in the control of foreigners. Money flows determine the direction of all markets, and the cash flow can be found in Asean countries as well as Petro countries. Continued printing of U.S. dollars by the Fed will only fuel inflation. It will not provide a sound platform for our twin tower deficits.
The talking heads on TV want to mesmerize you with the Dow approaching the highs of 2000. We are talking about 30 stocks. How about the dollar index at a one-year low, gold at a 26-year high, treasuries at a 5-year high yield, unleaded gasoline at the wholesale level at $2.16, and crude baove $72. How about a cooling housing market sitting on top of $9 trillion in mortgage debt with 25% of that debt in ARMs? How about 3.8% less gasoline available today than 1 year ago, and that's with $3 gasoline? Time never comes cheap. It can be less expensive than some periods but never cheap. It evaporates and you can't get it back. You can't beat time and you can't outsmart the unknown. If you want to rely on the Fed to sort it all out, be my guest. I will appoint you the president of the Schmuck Club.
Medtronic Begins Landmark Clinical Trial: Cardiac Device Combines Defibrillation and Heart Monitoring; Heart-Failure Device Demonstrates Medtronic's Focus on Cardiac Disease Management
The Bank of England stated growth may accelerate to about 3 percent in the fourth quarter before slowing to about 2.75 percent by the final three months of 2007, the central bank estimated in its quarterly inflation report, released in London today. Consumer-price inflation will accelerate to above 2 percent this year before moderating to target by the end of 2007, it said.
For the first time copper sold above $8000 a ton. Meanwhile, gold traded higher to the $709 level.
More than two in three Houston-area residents believe the country is headed for harder times, the highest pessimism level in the 18 years that the Houston Area Survey has asked the question.
StockTradingGuy: "Going back to 1980, the DJI has been up 17 of the last 26 Mays. Over the last 16 years, there have only been 4 down May months. If anything, May seems to be a decent month to be on the long side."
After acquiring Maytag, Whirlool is laying off 4,500 workers.
DaimlerChrysler on Wednesday said that it will add a third work shift to its manufacturing operations in Illinois, where the German-American car giant currently builds the 2007 Dodge Caliber. The plant will begin making the all-new Jeep Compass this month with the 2007 Jeep Patriot on tap for later this year.
The Fed wants to buy time for the next six weeks to analyze the economic data in an effort to determine whether it is appropriate to raise rates for the 17th time or maintain the Fed Funds at 5%. Unfortunately, time costs money. Puts and calls and other derivatives carry a cost. Who does the Fed think will pay for this time? Clearly, the Fed thinks it will involve no cost for them. I assure you there will be a payment. Markets have some degree of uncertainty and some volatility. Despite what market mavens may believe, our currency is now in the control of foreigners. Money flows determine the direction of all markets, and the cash flow can be found in Asean countries as well as Petro countries. Continued printing of U.S. dollars by the Fed will only fuel inflation. It will not provide a sound platform for our twin tower deficits.
The talking heads on TV want to mesmerize you with the Dow approaching the highs of 2000. We are talking about 30 stocks. How about the dollar index at a one-year low, gold at a 26-year high, treasuries at a 5-year high yield, unleaded gasoline at the wholesale level at $2.16, and crude baove $72. How about a cooling housing market sitting on top of $9 trillion in mortgage debt with 25% of that debt in ARMs? How about 3.8% less gasoline available today than 1 year ago, and that's with $3 gasoline? Time never comes cheap. It can be less expensive than some periods but never cheap. It evaporates and you can't get it back. You can't beat time and you can't outsmart the unknown. If you want to rely on the Fed to sort it all out, be my guest. I will appoint you the president of the Schmuck Club.
Medtronic Begins Landmark Clinical Trial: Cardiac Device Combines Defibrillation and Heart Monitoring; Heart-Failure Device Demonstrates Medtronic's Focus on Cardiac Disease Management
The Bank of England stated growth may accelerate to about 3 percent in the fourth quarter before slowing to about 2.75 percent by the final three months of 2007, the central bank estimated in its quarterly inflation report, released in London today. Consumer-price inflation will accelerate to above 2 percent this year before moderating to target by the end of 2007, it said.
For the first time copper sold above $8000 a ton. Meanwhile, gold traded higher to the $709 level.
More than two in three Houston-area residents believe the country is headed for harder times, the highest pessimism level in the 18 years that the Houston Area Survey has asked the question.
StockTradingGuy: "Going back to 1980, the DJI has been up 17 of the last 26 Mays. Over the last 16 years, there have only been 4 down May months. If anything, May seems to be a decent month to be on the long side."
After acquiring Maytag, Whirlool is laying off 4,500 workers.
DaimlerChrysler on Wednesday said that it will add a third work shift to its manufacturing operations in Illinois, where the German-American car giant currently builds the 2007 Dodge Caliber. The plant will begin making the all-new Jeep Compass this month with the 2007 Jeep Patriot on tap for later this year.
Real Time Reality
5/10/06 Real Time Reality
"It is not the fact that gold is close to breaking above $700 that has surprised us, but rather the pace at which it is expanding," said Matthew Parry, an economist at Moody's Economy.com. He emphasized, however, that his company "does not ... envisage the current bull-run having much further to go once $700 has been broken." If Greenspan were now head of the Fed, do you think he'd be concerned with $700 gold and the dollar index at 84.55? Do you think he'd be talking even the remote possibility of a pause?
The NAR forecast for 2006 was something to behold. They predict a 30-year fixed rate mortgage at 7%. The 30-year is now 6.50% with the 10-year Treasury at 5.13% and the 30-year Treasury at 5.21%. What does that tell you about interest rates for the 10-year and the 30-year by year-end? Sounds to me like 5.65% and 5.75% are distinct possibilities. The equity market is not trading on this possibility. Bad endings rarely are projected in advance. Continuing with the NAR forecast, they predict existing home sales to decline 6.4% in 2006, new home sales to drop 11.6%, and starts to dip by 5.4%. Despite all this negativity, the NAR thinks existing home prices will increase by 5.7%. I wouldn't want to stake the equity in one's home on that.
Gary Dorsch: "The Euro zone's M3 money supply is 8.6% higher from a year ago, and the UK's M4 is 12.2% higher. China's M2 money measure is 18.8% higher. The US M3 is off the charts."
Time Warner Inc.'s AOL unit is laying off 1,300 employees, or roughly 7% of its workforce, and closing its call center in Jacksonville, Fla., according to a published report Tuesday.
A new Harris Poll finds that about half of all U.S. adults think it is likely or very likely that there will be a major new war involving many American soldiers (52%) a major terrorist attack like 9/11 in the United States (49%) in the next 10 years. Slightly fewer adults (45%) think that it is likely or very likely that Social Security benefits will be eliminated or sharply reduced, while slightly more than one-third (35%) think it likely or very likely that we will see a woman become president. Approximately one in six (16%) thinks it is likely or very likely that there will be a stock market crash like the one that happened in 1929.
Palatin Technologies,Inc. announced today financial results for the third quarterended March 31, 2006. Total revenues in the quarter ended March 31, 2006were $5.0 million, compared to $2.8 million for the same period in 2005.Palatin reported a net loss of $7.6 million, or ($0.13) per basic anddiluted share, for the quarter ended March 31, 2006, compared to a net lossof $3.9 million, or ($0.07) per basic and diluted share, for the sameperiod in 2005. The increase in the net loss for the quarter ended March 31, 2006 versus the quarter ended March 31, 2005 was primarily attributable toincreased development costs related to bremelanotide, a drug underdevelopment for the treatment of erectile dysfunction (ED) and femalesexual dysfunction (FSD). The Company is currently conducting five clinicalstudies with bremelanotide that were initiated in the current fiscal year. COSTS AND EXPENSES :Total operating expenses for the quarter ended March 31, 2006 were$12.8 million, compared to $6.9 million for the same period in 2005. Development costs directly related to bremelanotide increased by $4.8 million, primarily reflecting costs associated with clinical trials thatwere initiated in the current fiscal year. Costs of other research and development programs also increased, as did spending for research personneland facilities. CASH POSITION :Palatin's cash, cash equivalents and investments totaled $16.3 millionas of March 31, 2006, compared to $18.1 million at June 30, 2005. In April 2006, the Company received $25 million of net proceeds from the sale ofcommon stock and warrants.
Bloomberg's Andy Mukherjee: "Even as they continue to pile up U.S. debt in their foreign- exchange reserves to keep their currencies stable against the dollar, Asian nations, China among them, are preparing for a scenario where the dollar does indeed collapse under the weight of a record U.S. current account deficit. At the Hyderabad meeting, finance ministers of China, Japan and South Korea got together with their counterparts from the Association of Southeast Asian Nations, or Asean. The 13-nation group said it would sponsor a research project, titled ``Toward greater financial stability in the Asian region: Exploring steps to create regional monetary units.''
I would like to take an additional moment to discuss CASCADE NATURAL Gas. With the Oregon decoupling taking effect May 1, with the Washington rate increase most likely taking effect in late 2006, and continued 4-5% growth in their customer base, I envision Cascade earning at least $1.60 per share in the 12 months beginning 1/1/07 with a significant increase in the 24 cent quarterly dividend. That to me is the worst case scenario. The other real possibility is the purchase by a larger northwest gas suppler in the near term. From the 10Q report hot off the press: "To assist the Company in evaluating all available options to maximize shareholder value, the Company has retained J.P. Morgan Securities, Inc., to provide strategic and financial advice as well as regulatory support. In addition, the Company is considering other strategic alternatives, including a possible business combination." The company has never previously stated "a possible business combination." Do you need to be hit over the head to get it?
Ashraf Laidi: "Today's auction of $21 bln in 3-year treasury notes drew 24% participation from foreign investors (indirect bidders), which was above February's 22% but lower than the 2003 and 2004 averages of 27% and 45%. Last month's 2-year auction drew 24% participation -- the lowest since November 2004, while the 5-year auction drew 21% participation -- the lowest since the records began in February 2003."
Investor's Business Daily and TechnoMetrica Market Intelligence said their economic optimism index declined for the third month in a row to 46.1 in May from 48.6 in April. A reading below 50 indicates pessimism.
The Dow reached its all-time high of 11,723 in early 2000. Adjusted for inflation, what would that high be today? In real inflation terms at least 2000 points higher.
The following are the corrected numbers provided by the BLS:
"In manufacturing, productivity changes in the first quarter were: 4.2 percent in manufacturing, 3.8 percent in durable goods manufacturing, and 4.4 percent in nondurable goods manufacturing. Productivity growth in manufacturing in the first quarter of 2006 reflected a 5.8-percent increase in output and a 1.6-percent increase in hours worked in the sector. Output and hours in manufacturing, which includes about 13 percent of U.S. business sector employment, tend to vary more from quarter to quarter than data for the aggregate business and nonfarm business sectors." Please note the increase in hours worked in the manufacturing sector, an indication of the growing strength in this area.
"It is not the fact that gold is close to breaking above $700 that has surprised us, but rather the pace at which it is expanding," said Matthew Parry, an economist at Moody's Economy.com. He emphasized, however, that his company "does not ... envisage the current bull-run having much further to go once $700 has been broken." If Greenspan were now head of the Fed, do you think he'd be concerned with $700 gold and the dollar index at 84.55? Do you think he'd be talking even the remote possibility of a pause?
The NAR forecast for 2006 was something to behold. They predict a 30-year fixed rate mortgage at 7%. The 30-year is now 6.50% with the 10-year Treasury at 5.13% and the 30-year Treasury at 5.21%. What does that tell you about interest rates for the 10-year and the 30-year by year-end? Sounds to me like 5.65% and 5.75% are distinct possibilities. The equity market is not trading on this possibility. Bad endings rarely are projected in advance. Continuing with the NAR forecast, they predict existing home sales to decline 6.4% in 2006, new home sales to drop 11.6%, and starts to dip by 5.4%. Despite all this negativity, the NAR thinks existing home prices will increase by 5.7%. I wouldn't want to stake the equity in one's home on that.
Gary Dorsch: "The Euro zone's M3 money supply is 8.6% higher from a year ago, and the UK's M4 is 12.2% higher. China's M2 money measure is 18.8% higher. The US M3 is off the charts."
Time Warner Inc.'s AOL unit is laying off 1,300 employees, or roughly 7% of its workforce, and closing its call center in Jacksonville, Fla., according to a published report Tuesday.
A new Harris Poll finds that about half of all U.S. adults think it is likely or very likely that there will be a major new war involving many American soldiers (52%) a major terrorist attack like 9/11 in the United States (49%) in the next 10 years. Slightly fewer adults (45%) think that it is likely or very likely that Social Security benefits will be eliminated or sharply reduced, while slightly more than one-third (35%) think it likely or very likely that we will see a woman become president. Approximately one in six (16%) thinks it is likely or very likely that there will be a stock market crash like the one that happened in 1929.
Palatin Technologies,Inc. announced today financial results for the third quarterended March 31, 2006. Total revenues in the quarter ended March 31, 2006were $5.0 million, compared to $2.8 million for the same period in 2005.Palatin reported a net loss of $7.6 million, or ($0.13) per basic anddiluted share, for the quarter ended March 31, 2006, compared to a net lossof $3.9 million, or ($0.07) per basic and diluted share, for the sameperiod in 2005. The increase in the net loss for the quarter ended March 31, 2006 versus the quarter ended March 31, 2005 was primarily attributable toincreased development costs related to bremelanotide, a drug underdevelopment for the treatment of erectile dysfunction (ED) and femalesexual dysfunction (FSD). The Company is currently conducting five clinicalstudies with bremelanotide that were initiated in the current fiscal year. COSTS AND EXPENSES :Total operating expenses for the quarter ended March 31, 2006 were$12.8 million, compared to $6.9 million for the same period in 2005. Development costs directly related to bremelanotide increased by $4.8 million, primarily reflecting costs associated with clinical trials thatwere initiated in the current fiscal year. Costs of other research and development programs also increased, as did spending for research personneland facilities. CASH POSITION :Palatin's cash, cash equivalents and investments totaled $16.3 millionas of March 31, 2006, compared to $18.1 million at June 30, 2005. In April 2006, the Company received $25 million of net proceeds from the sale ofcommon stock and warrants.
Bloomberg's Andy Mukherjee: "Even as they continue to pile up U.S. debt in their foreign- exchange reserves to keep their currencies stable against the dollar, Asian nations, China among them, are preparing for a scenario where the dollar does indeed collapse under the weight of a record U.S. current account deficit. At the Hyderabad meeting, finance ministers of China, Japan and South Korea got together with their counterparts from the Association of Southeast Asian Nations, or Asean. The 13-nation group said it would sponsor a research project, titled ``Toward greater financial stability in the Asian region: Exploring steps to create regional monetary units.''
I would like to take an additional moment to discuss CASCADE NATURAL Gas. With the Oregon decoupling taking effect May 1, with the Washington rate increase most likely taking effect in late 2006, and continued 4-5% growth in their customer base, I envision Cascade earning at least $1.60 per share in the 12 months beginning 1/1/07 with a significant increase in the 24 cent quarterly dividend. That to me is the worst case scenario. The other real possibility is the purchase by a larger northwest gas suppler in the near term. From the 10Q report hot off the press: "To assist the Company in evaluating all available options to maximize shareholder value, the Company has retained J.P. Morgan Securities, Inc., to provide strategic and financial advice as well as regulatory support. In addition, the Company is considering other strategic alternatives, including a possible business combination." The company has never previously stated "a possible business combination." Do you need to be hit over the head to get it?
Ashraf Laidi: "Today's auction of $21 bln in 3-year treasury notes drew 24% participation from foreign investors (indirect bidders), which was above February's 22% but lower than the 2003 and 2004 averages of 27% and 45%. Last month's 2-year auction drew 24% participation -- the lowest since November 2004, while the 5-year auction drew 21% participation -- the lowest since the records began in February 2003."
Investor's Business Daily and TechnoMetrica Market Intelligence said their economic optimism index declined for the third month in a row to 46.1 in May from 48.6 in April. A reading below 50 indicates pessimism.
The Dow reached its all-time high of 11,723 in early 2000. Adjusted for inflation, what would that high be today? In real inflation terms at least 2000 points higher.
The following are the corrected numbers provided by the BLS:
"In manufacturing, productivity changes in the first quarter were: 4.2 percent in manufacturing, 3.8 percent in durable goods manufacturing, and 4.4 percent in nondurable goods manufacturing. Productivity growth in manufacturing in the first quarter of 2006 reflected a 5.8-percent increase in output and a 1.6-percent increase in hours worked in the sector. Output and hours in manufacturing, which includes about 13 percent of U.S. business sector employment, tend to vary more from quarter to quarter than data for the aggregate business and nonfarm business sectors." Please note the increase in hours worked in the manufacturing sector, an indication of the growing strength in this area.
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