8/19/06 The CBO Report
The taxable profits of corporate America will fall 8 per cent next year and remain on a downward slope until 2010, a new study by the Congressional Budget Office predicts. The CBO estimates that total taxable profits will inch up in 2008 but fall again in 2009 and 2010, and will not recover their current level in nominal cash terms for almost a decade. The CBO projects a dramatic decline in the share of corporate profits in national income, with taxable profits falling from a peak of 13.4 per cent of gross domestic product this year to 9 per cent in 2014.
Meanwhile it sees a modest increase in the labor share of national income, with wages and salaries rising from 45.0 per cent of GDP to 45.9 per cent four years from now. This reflects an assumption that employee compensation, broadly measured, will rise more rapidly at about 3.3 per cent annually in the coming years, compared with 2.5 per cent last year and 2.9 per cent this. (At the same time, we need to see how inflation offsets the compensation gains and whether consumer spending creates negative savings. In addition, how much faster might debt created by consumers grow than consumer savings?)
The Univ. of Michigan consumer sentiment index dropped to 78.7 in August from 84.7 in July. The index is at its lowest level since October. The current conditions index dropped to 100.8 in August from 103.5 in July. The expectations index fell from 72.5 in July to 64.5 in August, the lowest since October.
From globeandmail.com: National Bank Financial economists don't buy the idea that the housing market in the United States is coasting to a soft landing. And they aren't the only ones pointing to the increasingly disturbing statistics on that market. Clément Gignac, chief economist and strategist, and Eric Dubé, an economist, noted that U.S. housing starts are already down 20.7 per cent from their January, 2006 peak “and some leading indicators are suggesting more declines are to be expected in the months to come,” they warned in a recent economic comment. They also noted that the National Association of Home Builders reported this week that traffic of prospective buyers had tumbled to its lowest level since 1991, a recession year. Furthermore, U.S. building permits have plummeted 22 per cent from their peak last September. “These indicators combined with the skyrocketing inventory of new homes for sales are more consistent with a hard landing, rather than a soft landing scenario for the U.S. real estate sector,” the economists said. That makes it important to monitor the impact of the weakening real estate market on house prices and on American consumers' wealth, they said. “While baby boomers are likely to be forced to scale down their irrational exuberance about home prices appreciation, they should soon feel the need to restore their savings rate,” they added, and that could set the stage for a prolonged period of sub-par gross domestic product growth around 2 to 2.5 per cent.
In the fourth quarter Ford is planning a 21% reduction in production, and this translates into about 168,000 fewer cars and trucks. That is nearly the production of one assembly plant for an entire year. For full-year 2006, Ford now plans to produce 3.048 million vehicles at its North American assembly plants - 1.134 million cars and 1.914 million trucks - a 9% reduction from 2005.
Bill Ford, the company's chairman and CEO, stated "we know this decision will have a dramatic impact on our employees, as well as our suppliers," Bill Ford told employees. "This is, however, the right call for our customers, our dealers and our long-term future.” The Detroit Free Press opined the production cuts seem like a shrewd move to clean out dealer showrooms in time for Ford's new product assault, which will begin late this year and continue through 2007 and 2008. The revised production plan, Ford said, is expected to sharply reduce the supply of several models and reduce pressure on sales incentives and dealer inventory carrying costs.
This is, in my view, a smart move.
China's central bank raised its benchmark one-year lending and deposit rates by 0.27% Friday, as part of an ongoing effort to curb skyrocketing investment and loan growth. The People's Bank of China said it was raising the one-year lending rate to 6.12%, and the one-year deposit rate to 2.52%, according to reports. It said the hikes will take effect on Aug. 19.
The Nasdaq rose 5% this past week and the S&P and the Dow increased about one-half of that. The stampede into treasuries continues, and this debt market now is figuring in two rate cuts into the mix over the next nine months or so. If that optimism is not translated into reality, there are going to be some big losses on the books.
The market has gotten all exited about the big Microsoft buyback program - about $36 billion. To me, it's a variation on the $30 billion one-time dividend of a a year or two ago. I suggested taking advantage of the strength at $30 and over (pre-dividend pay out) and heavily cutting back positions. I am saying the same thing now at $25+.
In my view, the company will continue to disappoint and make poor use of its research dollars. Management skills are definitely in short supply.
BHP Billiton shut the world's biggest copper mine after striking workers in Chile blocked all roads to the site, cutting off metal supplies at a time of surging demand. Copper prices jumped 3.6 percent after BHP Billiton, the world's largest mining company, said it called off talks with the union following the blockade. A 12-day-old strike by 2,052 miners seeking higher pay at the Escondida mine had already cut production to as little as 40 percent of capacity.
Crude held at the $70 level and rallied back to $71 a barrel.
Doug Noland: "With acute vulnerability pervading some key housing markets - as well as the general risk to the Mortgage Finance Bubble - in the spotlight, the Fed is poised to accommodate the ongoing profligate financing environment. I find it astounding that our policymakers have absolutely no inclination – or demonstrate any sensitivity to their responsibility - to discipline or subdue “Wall Street finance.” Instead, they are determined to safeguard a highly improvident and destabilizing financial backdrop and incentive structure. This may very well perpetuate the current aged boom somewhat, but their will be no avoiding the painful aftermath. Today’s Menacing Financial Structure has decisively sealed such a fate. "
Despite a loss of 3.8% in the past week, the Goldman Sachs Commodities Index is still up 10.1% for 2006.
India's July exports increased 35% from one year ago.
Would you rather invest in a Schwab short-term money market fund at 4.93% or a 10-year treasury at 4.84%?
Jennifer Barry: "Silver's supply picture is especially tight. After peaking near 130 million ounces in February, the COMEX warehouse stocks plummeted this month to 98.47 million ounces. That is the lowest level reached this decade."
Lost in the Fog has two cancerous tumors and they cannot be surgically removed. This 4-year old is an Eclipse Award winner. That is only part of the story. There is a loving bond between the horse's owner, Harry Aleo, its trainer, Greg Gilchrist, and its Hall of Fame jockey, Russell Baze. Cancer is rare in a horse, and this horse is a rare once-in-a-lifetime animal.
Pilgrim's Pride Corporation announced that it has sent a proposal to Gold
Kist, Inc. offering to purchase all of the outstanding
shares of Gold Kist common stock for $20.00 per share in cash. The
transaction is valued at approximately $1 billion, plus the assumption of
Gold Kist's debt of $144 million. Pilgrim's Pride's offer represents a
premium of approximately 55% over Gold Kist's closing stock price of $12.93
on Friday, August 18, 2006.
Using consensus earnings estimates for fiscal 2007, Pilgrim's Pride
expects that the transaction will be accretive to earnings per share in the
first full year after the completion of the transaction, including
approximately $50 million of anticipated synergies expected to come
primarily from the optimization of production and distribution facilities
and cost savings in purchasing, production, logistics and SG&A.
"We believe the combination of Pilgrim's Pride and Gold Kist will
create the world's leading chicken producer and result in substantial value
creation for our respective shareholders, employees, business partners and
other constituencies," said O.B. Goolsby, Jr., President and Chief
Executive Officer of Pilgrim's Pride. "The combined company will maintain a
balanced portfolio of fresh chicken and value-added products and expand its
geographic reach and customer base, enabling it to compete more efficiently
in the industry and provide even better service to its customers.
"Our proposal provides Gold Kist's shareholders with a substantial
approximately 55% premium for their shares in cash. We look forward to
sitting down with the members of Gold Kist's Board of Directors as soon as
possible to work jointly with them to quickly close this transaction,"
added Mr. Goolsby.
It is interesting to note that conversations began back in 2004 and there has been
correspondence since February 2006. In addition, to place more pressure on Gold Kist's board, Pilgrim submitted a slate of nine nominees for election to Gold Kist's board at the upcoming annual meeting of shareholders.
Friday, August 18, 2006
Thursday, August 17, 2006
Is The Economy Simply Pausing?
8/18/06 Is The Economy Pausing?
The Philly Fed index rose to 18.5 in August from 6.0 in July. The new orders index rose to 15.7 in August from 10.1 in July. The shipments index rose to 22.3 from 10.2 in July. The prices paid index fell to 45.3 from 50.3 in July. The prices received index stayed at 17.1. The future activity gauge dipped to 7.4 in August from 15.4 in July.
The CBO projects a federal deficit of $260 billion and $286 billion in 2007. You think interest rates will decline with greater twin tower deficits?
The Conference Board announced that the U.S. leading index decreased 0.1 percent, the coincident indexincreased 0.2 percent and the lagging index decreased 0.1 percent in July.
The leading index has decreased in four of the last six months and the
leading index has fallen below its most recent high reached in January.
At the same time, real GDP grew at a 2.5 percent annual rate in the
second quarter, following a 5.6 percent gain in the first quarter. The
behavior of the leading index so far suggests that slow to moderate
economic growth should continue in the second half of the year.
LEADING INDICATORS. Five of the ten indicators that make up the leading
index increased in July. The positive contributors - beginning with the
largest positive contributor - were average weekly manufacturing hours,
vendor performance, stock prices, index of consumer expectations, and
manufacturers' new orders for consumer goods and materials*. The negative
contributors - beginning with the largest negative contributor - were
building permits, average weekly initial claims for unemployment insurance
(inverted), interest rate spread, manufacturers' new orders for nondefense
capital goods*, and real money supply*.
Weekly jobless claims dropped 10,000 to 312,000.
Teddy Roosevelt: "It is not the critic who counts, not the man who points out how the strong man stumbled, or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes short again and again, who knows the great enthusiasms, the great devotions, and spends himself in a worthy cause, who at best knows achievement and who at the worst if he fails at least fails while daring greatly so that his place shall never be with those cold and timid souls who know neither victory nor defeat."
The dollar sold at a one week low versus the euro, yen, and Swiss Franc. Gold sold at a 7-week low at $625 an ounce. Natural gas futures hit a 3-week low at 6.69 per million BTUs. Crude closed at an 8-week low of $70.10 a barrel.
Nickel fell for the first session in seven after the London Metal Exchange imposed trading restrictions to ease a shortage of the metal.
The LME, the world's largest metals exchange, yesterday limited the cost at which short-position holders can borrow the metal. The intervention came as plunging stockpiles helped push prices for the metal, which is used in stainless-steel making, to a record. It was the first time the exchange imposed such restriction on nickel since 1988.
Stockpiles of nickel tracked by the LME dropped 42 tons, or 0.7 percent, to 6,120 tons, the exchange said today in a daily report. The inventory has plunged 83 percent this year.
United States District Judge Anna Diggs Taylor in Detroit is the first federal judge to strike down the National Security Agency's monitoring of American computer, phone and other electronic communications. Judge Taylor ruled that the NSA program violates Constitutional rights to free speech and privacy.
The Gap scaled down their expectations for the remainder of 2006 and now project yearly earnings between $1.08 and $1.12. Maybe the stock has, at $16+, some speculative merit as a takeover candidate. Beyond that, I think the company has little going for it.
Nordstrom said it expects to earn $2.31 to $2.39 a share for its full fiscal year, including 6 cents worth of stock option expenses. Analysts currently expect earnings of $2.34. The stock does not seem like a bargain at $35+.
Much has been said that this week's rally has taken place on light volume. Some have opined that it is August and that volume is normally light at this time of the year.
My view is the following: in 1974 many days volume did not get to 10 million shares. In sum, millions were lost on light volume. Conversely, millions can be made on light volume. I don't give a hoot about the volume. I just want to make money and take as small a risk as possible in achieving the gain.
I received many emails about the crappy call I made on Jones Apparel. I don't like losing money and I did lose $1.25 on each share. No excuses. I stunk the house out.
There have been other lousy calls over the past year or so. The absolute worst was going long Dell and shorting HP when the market caps were the same. I got reamed but good. It's interesting. I've made more mistakes in the past year than I have in any year in the last 10, and yet my gains are twice the average for the past 10 years. You can laugh but I would rather make my average yearly return and not make the mistakes.
James Joyce: "A man's errors are his portals of discovery."
The Philly Fed index rose to 18.5 in August from 6.0 in July. The new orders index rose to 15.7 in August from 10.1 in July. The shipments index rose to 22.3 from 10.2 in July. The prices paid index fell to 45.3 from 50.3 in July. The prices received index stayed at 17.1. The future activity gauge dipped to 7.4 in August from 15.4 in July.
The CBO projects a federal deficit of $260 billion and $286 billion in 2007. You think interest rates will decline with greater twin tower deficits?
The Conference Board announced that the U.S. leading index decreased 0.1 percent, the coincident indexincreased 0.2 percent and the lagging index decreased 0.1 percent in July.
The leading index has decreased in four of the last six months and the
leading index has fallen below its most recent high reached in January.
At the same time, real GDP grew at a 2.5 percent annual rate in the
second quarter, following a 5.6 percent gain in the first quarter. The
behavior of the leading index so far suggests that slow to moderate
economic growth should continue in the second half of the year.
LEADING INDICATORS. Five of the ten indicators that make up the leading
index increased in July. The positive contributors - beginning with the
largest positive contributor - were average weekly manufacturing hours,
vendor performance, stock prices, index of consumer expectations, and
manufacturers' new orders for consumer goods and materials*. The negative
contributors - beginning with the largest negative contributor - were
building permits, average weekly initial claims for unemployment insurance
(inverted), interest rate spread, manufacturers' new orders for nondefense
capital goods*, and real money supply*.
Weekly jobless claims dropped 10,000 to 312,000.
Teddy Roosevelt: "It is not the critic who counts, not the man who points out how the strong man stumbled, or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes short again and again, who knows the great enthusiasms, the great devotions, and spends himself in a worthy cause, who at best knows achievement and who at the worst if he fails at least fails while daring greatly so that his place shall never be with those cold and timid souls who know neither victory nor defeat."
The dollar sold at a one week low versus the euro, yen, and Swiss Franc. Gold sold at a 7-week low at $625 an ounce. Natural gas futures hit a 3-week low at 6.69 per million BTUs. Crude closed at an 8-week low of $70.10 a barrel.
Nickel fell for the first session in seven after the London Metal Exchange imposed trading restrictions to ease a shortage of the metal.
The LME, the world's largest metals exchange, yesterday limited the cost at which short-position holders can borrow the metal. The intervention came as plunging stockpiles helped push prices for the metal, which is used in stainless-steel making, to a record. It was the first time the exchange imposed such restriction on nickel since 1988.
Stockpiles of nickel tracked by the LME dropped 42 tons, or 0.7 percent, to 6,120 tons, the exchange said today in a daily report. The inventory has plunged 83 percent this year.
United States District Judge Anna Diggs Taylor in Detroit is the first federal judge to strike down the National Security Agency's monitoring of American computer, phone and other electronic communications. Judge Taylor ruled that the NSA program violates Constitutional rights to free speech and privacy.
The Gap scaled down their expectations for the remainder of 2006 and now project yearly earnings between $1.08 and $1.12. Maybe the stock has, at $16+, some speculative merit as a takeover candidate. Beyond that, I think the company has little going for it.
Nordstrom said it expects to earn $2.31 to $2.39 a share for its full fiscal year, including 6 cents worth of stock option expenses. Analysts currently expect earnings of $2.34. The stock does not seem like a bargain at $35+.
Much has been said that this week's rally has taken place on light volume. Some have opined that it is August and that volume is normally light at this time of the year.
My view is the following: in 1974 many days volume did not get to 10 million shares. In sum, millions were lost on light volume. Conversely, millions can be made on light volume. I don't give a hoot about the volume. I just want to make money and take as small a risk as possible in achieving the gain.
I received many emails about the crappy call I made on Jones Apparel. I don't like losing money and I did lose $1.25 on each share. No excuses. I stunk the house out.
There have been other lousy calls over the past year or so. The absolute worst was going long Dell and shorting HP when the market caps were the same. I got reamed but good. It's interesting. I've made more mistakes in the past year than I have in any year in the last 10, and yet my gains are twice the average for the past 10 years. You can laugh but I would rather make my average yearly return and not make the mistakes.
James Joyce: "A man's errors are his portals of discovery."
Wednesday, August 16, 2006
The Consumer And The Economy
8/17/06 The Consumer And The Economy
When you cut thru all the data points and the Fed pausing or stopping, in the end, what matters is the consumer. Why? The consumer accounts for 70% of the economy.
So consider this.
Real average weekly earnings decreased by 0.1 percent from June to July
after seasonal adjustment, according to preliminary data released by the
Bureau of Labor Statistics of the U.S. Department of Labor. A 0.4 percent
increase in average hourly earnings was more than offset by a 0.5 percent
increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W). Average weekly hours were unchanged.
Data on average weekly earnings are collected from the payroll reports of
private nonfarm establishments. Earnings of both full-time and part-time
workers holding production or nonsupervisory jobs are included. Real average
weekly earnings are calculated by adjusting earnings in current dollars for
changes in the CPI-W.
Average weekly earnings rose by 4.1 percent, seasonally adjusted, from July
2005 to July 2006. After deflation by the CPI-W, average weekly earnings
decreased by 0.1 percent. Before adjustment for seasonal change and inflation,
average weekly earnings were $571.48 in July 2006, compared with $542.49 a year
earlier.
During the first seven months of 2006, the CPI-U rose at a 4.8 percent
seasonally adjusted annual rate(SAAR). This compares with an increase of 3.4 percent for all of 2005. For those independently wealthy, inflation is not a problem. For the majority of Americans, it is a problem, and that combined with a weakening housing market, creates an atmosphere of uneasiness. Wall Street professionals may be able to ignore the problems. Their incomes average well into the 6 figures. For them, the glass is definitely half full. Of course, they are mostly investing other people's money and, in the vast majority of circumstances, getting paid to do a crappy job.
September crude fell $1.16 to close at $71.89 a barrel, an almost eight-week low. September natural gas fell 9.5 cents to close at $6.766 per million British thermal units. Meanwhile equities scored another big rally and closed at their best levels in several months. On the other hand, the dollar index broke decidedly under 85 while Treasury bond yields dropped significantly with the 30-year even dipping under 5%. I never would have imagined this scenario.
December gold closed at $639 an ounce in New York, up $6.10 Wednesday after losing more than $29 in the last four sessions. September silver rose 20 cents to close at $12.285 an ounce, while September copper fell 5.75 cents to end at $3.47 a pound.
Dallas Fed President Richard Fisher: "If anybody tells you with absolute conviction that the Fed is done raising interest rates or with equal conviction that they have only paused and will raise rates more starting in September or October, remind yourself that at best - and I'm being generous here - they are only guessing."
Building permits, a leading indicator of housing construction, plunged 6.5% to a seasonally adjusted annual rate of 1.75 million. This is the biggest monthly decline since September 1999. Permits are at their lowest level since August 2002.
China permitted the biggest gain in the yuan since ending a peg to the dollar in July last year, a day after allowing the largest decline, suggesting the central bank is easing controls over the exchange rate.
The yuan rose as much as 0.24 percent against the dollar today, as 13 of 15 leading Asian currencies climbed. The central bank on Aug. 9 said it would allow more ``flexibility'' in the new system, which allows the yuan to float with reference to currencies of leading trading partners.
The yuan climbed 0.16 percent to 7.9875 to the dollar as of 5:20 p.m. in Shanghai, according to data Bloomberg compiled.
When you cut thru all the data points and the Fed pausing or stopping, in the end, what matters is the consumer. Why? The consumer accounts for 70% of the economy.
So consider this.
Real average weekly earnings decreased by 0.1 percent from June to July
after seasonal adjustment, according to preliminary data released by the
Bureau of Labor Statistics of the U.S. Department of Labor. A 0.4 percent
increase in average hourly earnings was more than offset by a 0.5 percent
increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W). Average weekly hours were unchanged.
Data on average weekly earnings are collected from the payroll reports of
private nonfarm establishments. Earnings of both full-time and part-time
workers holding production or nonsupervisory jobs are included. Real average
weekly earnings are calculated by adjusting earnings in current dollars for
changes in the CPI-W.
Average weekly earnings rose by 4.1 percent, seasonally adjusted, from July
2005 to July 2006. After deflation by the CPI-W, average weekly earnings
decreased by 0.1 percent. Before adjustment for seasonal change and inflation,
average weekly earnings were $571.48 in July 2006, compared with $542.49 a year
earlier.
During the first seven months of 2006, the CPI-U rose at a 4.8 percent
seasonally adjusted annual rate(SAAR). This compares with an increase of 3.4 percent for all of 2005. For those independently wealthy, inflation is not a problem. For the majority of Americans, it is a problem, and that combined with a weakening housing market, creates an atmosphere of uneasiness. Wall Street professionals may be able to ignore the problems. Their incomes average well into the 6 figures. For them, the glass is definitely half full. Of course, they are mostly investing other people's money and, in the vast majority of circumstances, getting paid to do a crappy job.
September crude fell $1.16 to close at $71.89 a barrel, an almost eight-week low. September natural gas fell 9.5 cents to close at $6.766 per million British thermal units. Meanwhile equities scored another big rally and closed at their best levels in several months. On the other hand, the dollar index broke decidedly under 85 while Treasury bond yields dropped significantly with the 30-year even dipping under 5%. I never would have imagined this scenario.
December gold closed at $639 an ounce in New York, up $6.10 Wednesday after losing more than $29 in the last four sessions. September silver rose 20 cents to close at $12.285 an ounce, while September copper fell 5.75 cents to end at $3.47 a pound.
Dallas Fed President Richard Fisher: "If anybody tells you with absolute conviction that the Fed is done raising interest rates or with equal conviction that they have only paused and will raise rates more starting in September or October, remind yourself that at best - and I'm being generous here - they are only guessing."
Building permits, a leading indicator of housing construction, plunged 6.5% to a seasonally adjusted annual rate of 1.75 million. This is the biggest monthly decline since September 1999. Permits are at their lowest level since August 2002.
China permitted the biggest gain in the yuan since ending a peg to the dollar in July last year, a day after allowing the largest decline, suggesting the central bank is easing controls over the exchange rate.
The yuan rose as much as 0.24 percent against the dollar today, as 13 of 15 leading Asian currencies climbed. The central bank on Aug. 9 said it would allow more ``flexibility'' in the new system, which allows the yuan to float with reference to currencies of leading trading partners.
The yuan climbed 0.16 percent to 7.9875 to the dollar as of 5:20 p.m. in Shanghai, according to data Bloomberg compiled.
Tuesday, August 15, 2006
Business As Usual?
8/16/06 Business As Usual?
It's nothing personal. Monday I mentioned that Jones Apparel traded at $30.38, the highest price in many weeks, and in a straight line, in minutes, promptly sold down $1 in price. I mentioned the top executives of the company where all out of the office at a charity effort hosted by the corporation. In Tuesday's online edition of the WSJ the paper stated Bain Capital and Jones Apparel could not agree on price and that the auction of the company was finito. Do you think the entity or entities selling the shares on Monday had been tipped about the WSJ article? Do you think the WSJ had their information confirmed by Jones management? On Tuesday morning the stock sold down to $27.30 before inching back to $29.06. I spoke with the CFO and he was very clear. When the company has something to report they will do so. Maybe the company will be sold and maybe it will not happen. In either event, the SEC should investigate this incident. For me, it's just business.
Nouriel Roubini: "The US needs to borrow every year almost another trillion US dollars – on top of all the previous stock of past borrowing - to finance its still increasing external deficit. Thus, the risks that things will get out of hand and trigger a financial meltdown of the scale that was experienced in 1987 are serious."
Foreign central banks unloaded Treasurys for the second consecutive month, selling $4.4 billion.
The core PPI -- which excludes food and energy prices - fell 0.3%, the first decline since October. However, core intermediate goods prices rose 0.7%, bringing the year-over-year increase to 7.9%, the most since February 2005. Separately, the New York Federal Reserve Bank said the bank's Empire State Manufacturing index fell to 10.3 in August from a revised 16.6 in July. This is the slowest growth pace since June 2005. As a result, we witnessed another triple digit rally but this one held. The S&P closed at a 2 1/2 month high and the Nasdaq at a one month high. I think the inflation data for the CPI, which comes out on the 16th, will show a very different picture.(The CPI has averaged 4.3% over the past 12 months.) Treasuries had a big rally and the energy sector and metals took another hit. The dollar dipped again to just above the 85 level for the index.
The EU's second quarter GDP rose 0.9%, the strongest gain in 6 years.
The latest monthly retail sales in China rose 13.7%.
The National Association of Home Builders said its index of sentiment among homebuilders plunged 7 points to 32 -- its lowest since February 1991 -- and less than half the level of a year ago.
Data made available at the Intenational Rubber Study Group (IRGS) indicated that with the average annual growth of rubber consumption by 4.7 percent, world rubber consumption by 2010 would reach 10.988 million tons.
In the meantime, world natural rubber production would only reach 10.677 million tons, assuming that growth rate stood at 3.6 percent.
The VIX closed at 13.42, off .84 on the day, and is back down to the low volatility
region. That's what the price would indicate. Maybe the smart thing to do would be to go long volatility. We're approaching Sept/Oct.
It's nothing personal. Monday I mentioned that Jones Apparel traded at $30.38, the highest price in many weeks, and in a straight line, in minutes, promptly sold down $1 in price. I mentioned the top executives of the company where all out of the office at a charity effort hosted by the corporation. In Tuesday's online edition of the WSJ the paper stated Bain Capital and Jones Apparel could not agree on price and that the auction of the company was finito. Do you think the entity or entities selling the shares on Monday had been tipped about the WSJ article? Do you think the WSJ had their information confirmed by Jones management? On Tuesday morning the stock sold down to $27.30 before inching back to $29.06. I spoke with the CFO and he was very clear. When the company has something to report they will do so. Maybe the company will be sold and maybe it will not happen. In either event, the SEC should investigate this incident. For me, it's just business.
Nouriel Roubini: "The US needs to borrow every year almost another trillion US dollars – on top of all the previous stock of past borrowing - to finance its still increasing external deficit. Thus, the risks that things will get out of hand and trigger a financial meltdown of the scale that was experienced in 1987 are serious."
Foreign central banks unloaded Treasurys for the second consecutive month, selling $4.4 billion.
The core PPI -- which excludes food and energy prices - fell 0.3%, the first decline since October. However, core intermediate goods prices rose 0.7%, bringing the year-over-year increase to 7.9%, the most since February 2005. Separately, the New York Federal Reserve Bank said the bank's Empire State Manufacturing index fell to 10.3 in August from a revised 16.6 in July. This is the slowest growth pace since June 2005. As a result, we witnessed another triple digit rally but this one held. The S&P closed at a 2 1/2 month high and the Nasdaq at a one month high. I think the inflation data for the CPI, which comes out on the 16th, will show a very different picture.(The CPI has averaged 4.3% over the past 12 months.) Treasuries had a big rally and the energy sector and metals took another hit. The dollar dipped again to just above the 85 level for the index.
The EU's second quarter GDP rose 0.9%, the strongest gain in 6 years.
The latest monthly retail sales in China rose 13.7%.
The National Association of Home Builders said its index of sentiment among homebuilders plunged 7 points to 32 -- its lowest since February 1991 -- and less than half the level of a year ago.
Data made available at the Intenational Rubber Study Group (IRGS) indicated that with the average annual growth of rubber consumption by 4.7 percent, world rubber consumption by 2010 would reach 10.988 million tons.
In the meantime, world natural rubber production would only reach 10.677 million tons, assuming that growth rate stood at 3.6 percent.
The VIX closed at 13.42, off .84 on the day, and is back down to the low volatility
region. That's what the price would indicate. Maybe the smart thing to do would be to go long volatility. We're approaching Sept/Oct.
Monday, August 14, 2006
The Peace Rally
8/15/06 The Peace Rally
The pre-opening indicated a big day for equities. After a strong start it built to a triple digit gain for the Dow, a double digit gain for the S&P, and a big move for Intel, Cisco, Oracle, and the like. Conversely, the energy sector took a hit and so did the metals. The 2-year Treasury once again traded at a 5.01% yield and the 10-year was close behind at 5.00%. The dollar index bravely held onto to the 85 level. This tune has been played many times in the last few months -- except for the peace part. Not to be confusing, the killing continues at high levels in Iraq.
This week we can view the latest PPI and CPI numbers. The impulse from the Fed and the media will be to downplay and disappointing data. They will clearly have the opportunity to do plenty of downplaying. Then on Friday we have option expiration. In sum, there is plenty of room for shenanigans this week. I will continue to sell into rallies.
Martin Huchinson: "The Federal budget is likely to remain a problem for many years. The long term difficulties involving Medicare and social security will combine with military and homeland security expenditures to create continued upward pressure on public spending as a percentage of Gross Domestic Product. Since Congress has shown repeatedly that it lacks the will either to raise taxes or to economize in other areas, the federal budget deficit will grow further. This will tend to push up real interest rates – the decade long holiday from real interest rates above 1-2% will come definitively to an end. Nominal rates will depend on inflation, which the government and the Fed will attempt to fudge, but in the end the sheer volume of long term financing to cover the Federal budget deficit will make the reported rate of inflation almost irrelevant. Thus if inflation is reported as 4% per annum and is really 5% per annum, as today (while the Fed, by leaving out whichever items are rising in price, persists in claiming a 2-3% rate) the 30 year Treasury bond rate will be around 8%, and home mortgages will be unobtainable below 9%."
The Fed said banks were more willing to make loans to consumers as demand got "moderately stronger" in the last three months. The Fed surveyed 56 domestic banks and 17 foreign banks. Meanwhile, standards for approving commercial and industrial loans also eased, the Fed reported. About 14% of survey respondents said they loosened credit terms for business loans.
This is a difficult market. I never take anything for granted and do my very best to minimize risks while achieving rewards. Monday was a day to double check reality. Remember about that triple digit gain for Dow. Well, the Dow, Nasdaq, and S&P gave up almost all their gains by the close of trading.
I had mentioned I have recently concentrated on four stocks - Jones Apparel, Univision, Ford, and Ingersoll Rand. On Monday, Ford was the beneficiary of a Bear Stearns recommendation. It rose over 40 cents and topped $7.80. Univision managed a gain of a few pennies. Ingersoll Rand was lousy all day and finished just above $36, and that reperesented a loss of over 80 cents. It's a good thing I like to buy stocks on the downside. Jones Apparel was the strange one. It rallied in the morning to $30.38, the highest price in well over a month. Then it traded down $1 in a straight line before closing down about 30 cents. It should be noted that once a year the company holds a charity golf event for back to school. All the top management is there. That event was Monday. If the company had an announcement to make, it would have been done, in my view, over the weekend, and not when management was unavailable to field inquiries. Nothing can be taken for granted in this environment. One needs to have a wide field of vision and stay alert.
Previously, income grew more or less in step with household wealth. From 1962 to 1966, a period of low inflation and robust economic growth, real private sector wages rose 27.5 percent while real net worth increased 23.6 percent, according to Bloomberg News calculations based on government data. In the five-year period ending in 1996, real net worth gained 15.6 percent while private wages grew 11.3 percent.
More recently, the gap between household net worth and wage growth has widened. From 2001 to 2005, the value of household assets minus liabilities rose 16.6 percent after inflation. Private sector wages rose just 2.7 percent.
Nearly 7,000 Alaskans will lose their earthquake insurance as their policies come up for renewal in the coming months.
Allstate Insurance Co. is cutting its optional earthquake coverage nationwide, and will drop this plan as policies come up for renewal, said Caitlin Gorand, spokeswoman for Allstate's Northwest region.
"It's part of a larger catastrophic management strategy," Gorand said. "The insurance industry is in the business of managing risk. We're trying to manage our exposure to mega-catastrophes." You can count on Allstate!
Recent earthquakes have taken plave in Mexico City and New Zealand. Suppose the hurricane season is mild but world-wide earthquakes are 6.0 and higher and occur much more frequently than history would suggest?
Computer Associates is cutting 1,700 jobs.
Target Corp. said it still expects its August sales at stores open at least one year to rise between 2% and 4%. This is compared to a 6.3% rise in August same-store sales in the year-ago period.
The Philly Fed now think CPI inflation will average an annual 3.6 percent in the third quarter, up a full percentage point from their previous estimate of 2.6 percent. Smaller upward revisions marked subsequent quarters: to 2.8 percent in the fourth quarter from an earlier 2.4 percent, and from 2.7 percent in the first quarter of 2007 from 2.3 percent.
The pre-opening indicated a big day for equities. After a strong start it built to a triple digit gain for the Dow, a double digit gain for the S&P, and a big move for Intel, Cisco, Oracle, and the like. Conversely, the energy sector took a hit and so did the metals. The 2-year Treasury once again traded at a 5.01% yield and the 10-year was close behind at 5.00%. The dollar index bravely held onto to the 85 level. This tune has been played many times in the last few months -- except for the peace part. Not to be confusing, the killing continues at high levels in Iraq.
This week we can view the latest PPI and CPI numbers. The impulse from the Fed and the media will be to downplay and disappointing data. They will clearly have the opportunity to do plenty of downplaying. Then on Friday we have option expiration. In sum, there is plenty of room for shenanigans this week. I will continue to sell into rallies.
Martin Huchinson: "The Federal budget is likely to remain a problem for many years. The long term difficulties involving Medicare and social security will combine with military and homeland security expenditures to create continued upward pressure on public spending as a percentage of Gross Domestic Product. Since Congress has shown repeatedly that it lacks the will either to raise taxes or to economize in other areas, the federal budget deficit will grow further. This will tend to push up real interest rates – the decade long holiday from real interest rates above 1-2% will come definitively to an end. Nominal rates will depend on inflation, which the government and the Fed will attempt to fudge, but in the end the sheer volume of long term financing to cover the Federal budget deficit will make the reported rate of inflation almost irrelevant. Thus if inflation is reported as 4% per annum and is really 5% per annum, as today (while the Fed, by leaving out whichever items are rising in price, persists in claiming a 2-3% rate) the 30 year Treasury bond rate will be around 8%, and home mortgages will be unobtainable below 9%."
The Fed said banks were more willing to make loans to consumers as demand got "moderately stronger" in the last three months. The Fed surveyed 56 domestic banks and 17 foreign banks. Meanwhile, standards for approving commercial and industrial loans also eased, the Fed reported. About 14% of survey respondents said they loosened credit terms for business loans.
This is a difficult market. I never take anything for granted and do my very best to minimize risks while achieving rewards. Monday was a day to double check reality. Remember about that triple digit gain for Dow. Well, the Dow, Nasdaq, and S&P gave up almost all their gains by the close of trading.
I had mentioned I have recently concentrated on four stocks - Jones Apparel, Univision, Ford, and Ingersoll Rand. On Monday, Ford was the beneficiary of a Bear Stearns recommendation. It rose over 40 cents and topped $7.80. Univision managed a gain of a few pennies. Ingersoll Rand was lousy all day and finished just above $36, and that reperesented a loss of over 80 cents. It's a good thing I like to buy stocks on the downside. Jones Apparel was the strange one. It rallied in the morning to $30.38, the highest price in well over a month. Then it traded down $1 in a straight line before closing down about 30 cents. It should be noted that once a year the company holds a charity golf event for back to school. All the top management is there. That event was Monday. If the company had an announcement to make, it would have been done, in my view, over the weekend, and not when management was unavailable to field inquiries. Nothing can be taken for granted in this environment. One needs to have a wide field of vision and stay alert.
Previously, income grew more or less in step with household wealth. From 1962 to 1966, a period of low inflation and robust economic growth, real private sector wages rose 27.5 percent while real net worth increased 23.6 percent, according to Bloomberg News calculations based on government data. In the five-year period ending in 1996, real net worth gained 15.6 percent while private wages grew 11.3 percent.
More recently, the gap between household net worth and wage growth has widened. From 2001 to 2005, the value of household assets minus liabilities rose 16.6 percent after inflation. Private sector wages rose just 2.7 percent.
Nearly 7,000 Alaskans will lose their earthquake insurance as their policies come up for renewal in the coming months.
Allstate Insurance Co. is cutting its optional earthquake coverage nationwide, and will drop this plan as policies come up for renewal, said Caitlin Gorand, spokeswoman for Allstate's Northwest region.
"It's part of a larger catastrophic management strategy," Gorand said. "The insurance industry is in the business of managing risk. We're trying to manage our exposure to mega-catastrophes." You can count on Allstate!
Recent earthquakes have taken plave in Mexico City and New Zealand. Suppose the hurricane season is mild but world-wide earthquakes are 6.0 and higher and occur much more frequently than history would suggest?
Computer Associates is cutting 1,700 jobs.
Target Corp. said it still expects its August sales at stores open at least one year to rise between 2% and 4%. This is compared to a 6.3% rise in August same-store sales in the year-ago period.
The Philly Fed now think CPI inflation will average an annual 3.6 percent in the third quarter, up a full percentage point from their previous estimate of 2.6 percent. Smaller upward revisions marked subsequent quarters: to 2.8 percent in the fourth quarter from an earlier 2.4 percent, and from 2.7 percent in the first quarter of 2007 from 2.3 percent.
Saturday, August 12, 2006
Observations
8/13/04 Observations
Doug Noland: "It is my view that an unhappy realization may be looming for the markets: the housing slowdown could very well coincide with the emergence of problematic inflation dynamics, while global financial and economic forces might very well play a prominent role in buttressing inflationary pressures in the U.S. and elsewhere, instead of checking them...Thus far, rising short-term rates and contracting lending margins have incited a push for lending volume (bank Credit up 11.3% annualized y-t-d). Stagnating mortgage profits have to this point nurtured aggressive expansion in capital markets, trading, international and prime brokerage (hedge fund services) businesses. Until proven otherwise, I will stick with the view that the profligate Financial Sphere expansion will run unabated until it is interrupted - and perhaps terminated - by financial crisis or some exogenous event."
All 20 stocks in the Dow Jones Transportation Average declined in price this
past week.
Tim Wood: "The recent action seen in the Transportation sector is not good and considerable technical damage has been done. According to Dow theory, the Secondary Trend of the Transports is now bearish. From a cyclical perspective the outlook has been bearish for a month or so and everyday since has just been added confirmation of the now well established bearish trend."
Every day this past week the closing TICK numbers were positive on the NYSE; however, the ARMS Index was negative every day last week on the NYSE. All the more
reason to be especially selective. I am sticking with Jones Apparel, Univision,
Ingersoll Rand, and Ford.
Mike Burk: "The market is oversold going into next week which has had a positive seasonal bias...During the 2nd year of the Presidential Cycle, in the coming week, both the OTC & SPX have been up 70% of the time with a modest gain. Over all years both indexes have been modestly positive."
Thirteen states and Washington, D.C., have sales-tax holidays pegged to back-to-school shopping. That could help soften the blow on families with school-age children, which will spend an average of $527 on back-to-school items this year, according to the National Retail Federation.
John Mauldin: "I do not see this as an environment that is good for stocks. The yield curve is telling us that the economy is headed for problems...
"This time it is different." Five of the most dangerous words in the investment world. To ignore the warning signs is not a prudent thing. This is the time to make sure your portfolio is in an absolute return strategy mode."
Hezbollah leader Hassan Nasrallah said on Saturday that his militia will agree to a UN call for a cease-fire with Israel once a deal on timing is reached. In the meantime, Israel stated they would stop their fighting on Monday morning.
Bush: "America is fighting a tough war against an enemy whose ruthlessness is
clear for all to see...They are seeking to spread their totalitarian
ideology. They're seeking to take over countries like Afghanistan and Iraq
so they can establish safe havens from which to attack free nations." Now I have learned something new. I now know these terorists are the same people trying to take over Iraq. Is that why we invaded Iraq? Bush gets an "A" in morphing.
Berkshire Hathaway now owns close to 16% of USG.
Gerald Scarfe: "And the danger of becoming a thoughtless machine is that you may become mindless and turn to fascism or whatever."
Doug Noland: "It is my view that an unhappy realization may be looming for the markets: the housing slowdown could very well coincide with the emergence of problematic inflation dynamics, while global financial and economic forces might very well play a prominent role in buttressing inflationary pressures in the U.S. and elsewhere, instead of checking them...Thus far, rising short-term rates and contracting lending margins have incited a push for lending volume (bank Credit up 11.3% annualized y-t-d). Stagnating mortgage profits have to this point nurtured aggressive expansion in capital markets, trading, international and prime brokerage (hedge fund services) businesses. Until proven otherwise, I will stick with the view that the profligate Financial Sphere expansion will run unabated until it is interrupted - and perhaps terminated - by financial crisis or some exogenous event."
All 20 stocks in the Dow Jones Transportation Average declined in price this
past week.
Tim Wood: "The recent action seen in the Transportation sector is not good and considerable technical damage has been done. According to Dow theory, the Secondary Trend of the Transports is now bearish. From a cyclical perspective the outlook has been bearish for a month or so and everyday since has just been added confirmation of the now well established bearish trend."
Every day this past week the closing TICK numbers were positive on the NYSE; however, the ARMS Index was negative every day last week on the NYSE. All the more
reason to be especially selective. I am sticking with Jones Apparel, Univision,
Ingersoll Rand, and Ford.
Mike Burk: "The market is oversold going into next week which has had a positive seasonal bias...During the 2nd year of the Presidential Cycle, in the coming week, both the OTC & SPX have been up 70% of the time with a modest gain. Over all years both indexes have been modestly positive."
Thirteen states and Washington, D.C., have sales-tax holidays pegged to back-to-school shopping. That could help soften the blow on families with school-age children, which will spend an average of $527 on back-to-school items this year, according to the National Retail Federation.
John Mauldin: "I do not see this as an environment that is good for stocks. The yield curve is telling us that the economy is headed for problems...
"This time it is different." Five of the most dangerous words in the investment world. To ignore the warning signs is not a prudent thing. This is the time to make sure your portfolio is in an absolute return strategy mode."
Hezbollah leader Hassan Nasrallah said on Saturday that his militia will agree to a UN call for a cease-fire with Israel once a deal on timing is reached. In the meantime, Israel stated they would stop their fighting on Monday morning.
Bush: "America is fighting a tough war against an enemy whose ruthlessness is
clear for all to see...They are seeking to spread their totalitarian
ideology. They're seeking to take over countries like Afghanistan and Iraq
so they can establish safe havens from which to attack free nations." Now I have learned something new. I now know these terorists are the same people trying to take over Iraq. Is that why we invaded Iraq? Bush gets an "A" in morphing.
Berkshire Hathaway now owns close to 16% of USG.
Gerald Scarfe: "And the danger of becoming a thoughtless machine is that you may become mindless and turn to fascism or whatever."
Friday, August 11, 2006
Consumer Confidence
8/12/06 Consumer Confidence
Consumer confidence dropped in August, according to the most recent results of the
RBC CASH (Consumer Attitudes and Spending by Household) Index, which
measured the attitudes of 1,001 Americans earlier this week. Consumer
discontent is widespread, with the greatest decline occurring in confidence
regarding economic expectations. The only bright spot is consumer
confidence in job security which rebounded this month. As a result, the RBC
CASH Index, released today by RBC Financial Group, declined to 74.8,
compared to 80.1 in July.
"The drop in the overall index to 74.8 extends the downtrend in place
since February, a decline which is consistent with the rise in energy
prices and a slowing in the housing market during this period," said T.J.
Marta, Economic and Fixed Income Strategist for RBC Capital Markets. "The
price of crude oil, for example, has risen close to $20/bl to a record
$77.03 in recent sessions, and the national average for a gallon of regular
unleaded gas had risen 80 cents to a record $3.04. Additionally, the rate
for a 30-year mortgage had risen 0.80 per cent to 6.79 per cent during this
period, and while that has fallen in recent weeks to 6.42 per cent,
homeowner affordability has dropped to its lowest level since 1989 and
existing home sales continue to fall from their June 2005 peak." Added
Marta, "RBC believes that the U.S. consumer will continue to retrench
during the second half of 2006."
Peter Schiff: "The Fed's claim that it is concerned about inflation, and that it will act decisively to contain it, is just a bluff. Any real commitment would have prompted the Fed to have already raised rates much higher. For the Fed to suggest that it stands ready to raise rates in the future, if the data warrants it, completely misses the point that the data warrants it right now!
The flawed CPI is nonetheless a lagging indicator of inflation. There is so much inflation already in the pipeline that its effect on consumer prices will be seen for years to come. For now, the Fed's private concern is to keep the markets from understanding just how bad inflation already is, and how little resolve it actually has to do anything to contain it. Far from being concerned, the Fed likely views inflation as the only solution to America's problems; a monetary "get out of jail free card." The U.S. now owes so much to foreigners that not only is legitimate repayment impossible, but the very act of servicing the debt will soon become unbearable. Debt repudiation through inflation likely appears to be the most politically palatable "solution."
Brazil's Companhia Vale do Rio Doce (CVRD) announced that it intends to make an all-cash offer to acquire all of the outstanding common shares of Inco Limited at a price of Cdn$ 86.00 in cash per Inco common share.
The combination of CVRD and Inco will create one of the three largest
diversified mining companies in the world, with leading global market
positions in iron ore, pellets, nickel, bauxite, alumina, manganese and
ferroalloys, and an exciting world-class pipeline of projects, supported by
a large-scale, long-life and low-cost asset portfolio.
The acquisition will be financed through a two-year committed bridge
loan facility provided by four large first-tier banks: Credit Suisse, UBS,
ABN AMRO and Santander. CVRD expects to take out the bridge facility with a
long-term capital package within 18 months after the closing of the
proposed transaction.
Michelin is raising prices on car tires by 6-8%.
The U.S. Import Price Index increased 0.9 percent in July, the Bureau
of Labor Statistics of the U.S. Department of Labor reported. A 4.7
percent advance in petroleum prices more than offset a modest 0.1 percent
decline in nonpetroleum prices. The price index of overall exports rose 0.4
percent in July following a 0.7 percent increase in June.
The Commerce Department said retail sales rose 1.4% in July on higher auto and gasoline sales. Excluding autos, retail sales increased 1%.
ConocoPhillips has informed its crude oil customers that because of a shutdown of the pipeline in Prudhoe Bay, Alaska, deliveries may come up short.
Crude and the VIX had something in common this past trading week. Their respective markets were volatile but, by the end of the week, there had been little change in price. It's happened before and it will happen again.
Russian gas giant Gazprom is setting up an energy marketing and trading operation in Houston.
Gary Lammert: "As always expect the discontinuous and the nonlinear … unexpected."
From crudethoughts.blogspot.com and posted by Oilshock:
"Are we past peak ?
Average Daily oil production
Year production
million bpd
--------------------------
2002 77
2003 79.6
2004 83
2005 84.4
2006 84.5 ( First 5 months only )
Highest ever monthly average was 85.05 in December 2005.
If oil is plentyful and price is record high, why isn't the production increasing ?"
Data Source: EIA
Nouriel Roubini: "The next move of the Fed will be an easing - i.e. a cut in the Fed Funds rate - not a tightening, most likely in the fall or winter of this year."
Consumer confidence dropped in August, according to the most recent results of the
RBC CASH (Consumer Attitudes and Spending by Household) Index, which
measured the attitudes of 1,001 Americans earlier this week. Consumer
discontent is widespread, with the greatest decline occurring in confidence
regarding economic expectations. The only bright spot is consumer
confidence in job security which rebounded this month. As a result, the RBC
CASH Index, released today by RBC Financial Group, declined to 74.8,
compared to 80.1 in July.
"The drop in the overall index to 74.8 extends the downtrend in place
since February, a decline which is consistent with the rise in energy
prices and a slowing in the housing market during this period," said T.J.
Marta, Economic and Fixed Income Strategist for RBC Capital Markets. "The
price of crude oil, for example, has risen close to $20/bl to a record
$77.03 in recent sessions, and the national average for a gallon of regular
unleaded gas had risen 80 cents to a record $3.04. Additionally, the rate
for a 30-year mortgage had risen 0.80 per cent to 6.79 per cent during this
period, and while that has fallen in recent weeks to 6.42 per cent,
homeowner affordability has dropped to its lowest level since 1989 and
existing home sales continue to fall from their June 2005 peak." Added
Marta, "RBC believes that the U.S. consumer will continue to retrench
during the second half of 2006."
Peter Schiff: "The Fed's claim that it is concerned about inflation, and that it will act decisively to contain it, is just a bluff. Any real commitment would have prompted the Fed to have already raised rates much higher. For the Fed to suggest that it stands ready to raise rates in the future, if the data warrants it, completely misses the point that the data warrants it right now!
The flawed CPI is nonetheless a lagging indicator of inflation. There is so much inflation already in the pipeline that its effect on consumer prices will be seen for years to come. For now, the Fed's private concern is to keep the markets from understanding just how bad inflation already is, and how little resolve it actually has to do anything to contain it. Far from being concerned, the Fed likely views inflation as the only solution to America's problems; a monetary "get out of jail free card." The U.S. now owes so much to foreigners that not only is legitimate repayment impossible, but the very act of servicing the debt will soon become unbearable. Debt repudiation through inflation likely appears to be the most politically palatable "solution."
Brazil's Companhia Vale do Rio Doce (CVRD) announced that it intends to make an all-cash offer to acquire all of the outstanding common shares of Inco Limited at a price of Cdn$ 86.00 in cash per Inco common share.
The combination of CVRD and Inco will create one of the three largest
diversified mining companies in the world, with leading global market
positions in iron ore, pellets, nickel, bauxite, alumina, manganese and
ferroalloys, and an exciting world-class pipeline of projects, supported by
a large-scale, long-life and low-cost asset portfolio.
The acquisition will be financed through a two-year committed bridge
loan facility provided by four large first-tier banks: Credit Suisse, UBS,
ABN AMRO and Santander. CVRD expects to take out the bridge facility with a
long-term capital package within 18 months after the closing of the
proposed transaction.
Michelin is raising prices on car tires by 6-8%.
The U.S. Import Price Index increased 0.9 percent in July, the Bureau
of Labor Statistics of the U.S. Department of Labor reported. A 4.7
percent advance in petroleum prices more than offset a modest 0.1 percent
decline in nonpetroleum prices. The price index of overall exports rose 0.4
percent in July following a 0.7 percent increase in June.
The Commerce Department said retail sales rose 1.4% in July on higher auto and gasoline sales. Excluding autos, retail sales increased 1%.
ConocoPhillips has informed its crude oil customers that because of a shutdown of the pipeline in Prudhoe Bay, Alaska, deliveries may come up short.
Crude and the VIX had something in common this past trading week. Their respective markets were volatile but, by the end of the week, there had been little change in price. It's happened before and it will happen again.
Russian gas giant Gazprom is setting up an energy marketing and trading operation in Houston.
Gary Lammert: "As always expect the discontinuous and the nonlinear … unexpected."
From crudethoughts.blogspot.com and posted by Oilshock:
"Are we past peak ?
Average Daily oil production
Year production
million bpd
--------------------------
2002 77
2003 79.6
2004 83
2005 84.4
2006 84.5 ( First 5 months only )
Highest ever monthly average was 85.05 in December 2005.
If oil is plentyful and price is record high, why isn't the production increasing ?"
Data Source: EIA
Nouriel Roubini: "The next move of the Fed will be an easing - i.e. a cut in the Fed Funds rate - not a tightening, most likely in the fall or winter of this year."
Thursday, August 10, 2006
Please Take Note
8/11/06 Please Take Note
Our nation's trade deficit continues at roughly $2.1 billion per day.
John Williams: "Inflation, as reported by the Consumer Price Index (CPI) is understated by roughly 2.7% per year. This is due to recent redefinitions of the series as well as to flawed methodologies, particularly adjustments to price measures for quality changes. The concentration of this installment on the quality of government economic reports will be first on CPI series redefinition and the damages done to those dependent on accurate cost-of-living estimates, and on pending further redefinition and economic damage...Although the CPI is not used in the GDP calculation, there are relationships with the price deflators used in converting GDP data and growth to inflation-adjusted numbers. The more inflation is understated, the higher the inflation-adjusted rate of GDP growth that gets reported."
I find it interesting that, over the past three months, hedge funds as a group have lost money. When the going gets tough, the winners still find a way to protect their capital.
So many investors get excited when one of their stock holdings announces a split. Look at the most recent results for Hansen Natural and Anderson Companies. It has been agony since both stocks split.
According to the Houston Chronicle, Charles Hamel, a Virginia-based consultant who has long been a conduit for BP worker complaints, wrote to BP board member Walter Massey on May 22, 2004, saying engineers in BP's Alaska operations felt there was mismanagement of the company's corrosion inspection division. Why am I not surprised by this revelation?
Edward Lapham: "It's a mistake not to pay closer attention to the Chinese because by this time next year, they probably will have scooped up Land Rover and Jaguar as well as MG."
Jones Apparel management placed themselves on the auction block 5months ago. They hired Goldman Sachs to handle the sale. Earnings for this year will approximate $2.20 per share. The company is opening more Anne Klein stores as well as adding to locations for rejuvenated Barney's. At $29.87 I believe you should give some consideration to purchasing shares. In my opinion, the company will shortly announce a deal to be acquired, and a price above $33.50 could be a realistic expectation.
In the second quarter of 2006, employers took 1,213 mass layoff actions
in the private, nonfarm sector that resulted in the separation of 251,341
workers from their jobs for at least 31 days, according to preliminary
figures released by the U.S. Department of Labor's Bureau of Labor Sta-
tistics. The number of extended mass layoff actions and affected workers
were both slightly higher than a year earlier. The over-the-year increases were most notable in food and beverage stores, foodmanufacturing, and general merchandise stores. In the second quarter of 2006, extended mass layoffs that involve the movement of work within the same company or to a different company, either domestically or outside the U.S., occurred in 9 percent of the nonseasonal layoff events and 13 percent of worker separations. Among employers who anticipated
recalling laid-off workers, 50 percent expected to extend the offer to all
laid-off workers, a smaller proportion than a year ago.
The completion of seasonal work accounted for 37 percent of all events
and resulted in 125,688 separations during the period. Layoffs due to in-
ternal company restructuring (bankruptcy, business ownership change, finan-
cial difficulty, and reorganization) represented 15 percent of events and
resulted in 42,289 separations, 17 percent of total separations. Permanent
closure of worksites occurred in 11 percent of all events and affected
30,402 workers, with both figures higher than a year ago.
The National Oceanic and Atmospheric Administration said a return of El Nino would bring wetter-than-average weather to portions of the Gulf Coast and southeastern U.S., and warmer-than-average temperatures to the West, northern Great Plains and upper Midwest between January and March 2007.
"Based on recent trends, there is a 50 percent chance that weak El Nino conditions will develop late this year and continue through early 2007," said Vernon Kousky, a NOAA scientist who also monitors La Nina, the opposite of El Nino.
Greenland’s ice sheet is the second biggest in the world, containing about 2.5m cu km of ice, or 10 per cent of the world’s total ice mass. The University of Texas study found that about 240 cu km are melting every year.
The Dow Jones Transportation Average has been melting too-- about 15% over the past 5 weeks.
Our nation's trade deficit continues at roughly $2.1 billion per day.
John Williams: "Inflation, as reported by the Consumer Price Index (CPI) is understated by roughly 2.7% per year. This is due to recent redefinitions of the series as well as to flawed methodologies, particularly adjustments to price measures for quality changes. The concentration of this installment on the quality of government economic reports will be first on CPI series redefinition and the damages done to those dependent on accurate cost-of-living estimates, and on pending further redefinition and economic damage...Although the CPI is not used in the GDP calculation, there are relationships with the price deflators used in converting GDP data and growth to inflation-adjusted numbers. The more inflation is understated, the higher the inflation-adjusted rate of GDP growth that gets reported."
I find it interesting that, over the past three months, hedge funds as a group have lost money. When the going gets tough, the winners still find a way to protect their capital.
So many investors get excited when one of their stock holdings announces a split. Look at the most recent results for Hansen Natural and Anderson Companies. It has been agony since both stocks split.
According to the Houston Chronicle, Charles Hamel, a Virginia-based consultant who has long been a conduit for BP worker complaints, wrote to BP board member Walter Massey on May 22, 2004, saying engineers in BP's Alaska operations felt there was mismanagement of the company's corrosion inspection division. Why am I not surprised by this revelation?
Edward Lapham: "It's a mistake not to pay closer attention to the Chinese because by this time next year, they probably will have scooped up Land Rover and Jaguar as well as MG."
Jones Apparel management placed themselves on the auction block 5months ago. They hired Goldman Sachs to handle the sale. Earnings for this year will approximate $2.20 per share. The company is opening more Anne Klein stores as well as adding to locations for rejuvenated Barney's. At $29.87 I believe you should give some consideration to purchasing shares. In my opinion, the company will shortly announce a deal to be acquired, and a price above $33.50 could be a realistic expectation.
In the second quarter of 2006, employers took 1,213 mass layoff actions
in the private, nonfarm sector that resulted in the separation of 251,341
workers from their jobs for at least 31 days, according to preliminary
figures released by the U.S. Department of Labor's Bureau of Labor Sta-
tistics. The number of extended mass layoff actions and affected workers
were both slightly higher than a year earlier. The over-the-year increases were most notable in food and beverage stores, foodmanufacturing, and general merchandise stores. In the second quarter of 2006, extended mass layoffs that involve the movement of work within the same company or to a different company, either domestically or outside the U.S., occurred in 9 percent of the nonseasonal layoff events and 13 percent of worker separations. Among employers who anticipated
recalling laid-off workers, 50 percent expected to extend the offer to all
laid-off workers, a smaller proportion than a year ago.
The completion of seasonal work accounted for 37 percent of all events
and resulted in 125,688 separations during the period. Layoffs due to in-
ternal company restructuring (bankruptcy, business ownership change, finan-
cial difficulty, and reorganization) represented 15 percent of events and
resulted in 42,289 separations, 17 percent of total separations. Permanent
closure of worksites occurred in 11 percent of all events and affected
30,402 workers, with both figures higher than a year ago.
The National Oceanic and Atmospheric Administration said a return of El Nino would bring wetter-than-average weather to portions of the Gulf Coast and southeastern U.S., and warmer-than-average temperatures to the West, northern Great Plains and upper Midwest between January and March 2007.
"Based on recent trends, there is a 50 percent chance that weak El Nino conditions will develop late this year and continue through early 2007," said Vernon Kousky, a NOAA scientist who also monitors La Nina, the opposite of El Nino.
Greenland’s ice sheet is the second biggest in the world, containing about 2.5m cu km of ice, or 10 per cent of the world’s total ice mass. The University of Texas study found that about 240 cu km are melting every year.
The Dow Jones Transportation Average has been melting too-- about 15% over the past 5 weeks.
Wednesday, August 09, 2006
The Dry Bulk Market
8/10/06 The Dry Bulk Market
Marsoft: "After weakening significantly in the first quarter of 2006, the dry bulk market abruptly changed course in the second quarter. Handy and Handymax rates increased steadily from March through June, with the gains continuing into July. Panamax and Cape rates generally declined in April, but from May to July they rose quite sharply.
Handy and Handymax spot rates rebounded significantly in the second quarter. Rates for our benchmark transatlantic roundtrip voyage increased by 20-30% in the second quarter, with earnings for a 51,000 dwt Supramax climbing from $14,000 per day to $17,000 per day, and earnings for a small Handy moving up from $9,000 per day to $12,000 per day.
But some of the strongest gains were seen on the back-haul routes, such as Far East/Cont. According to broker reports, Supramax earnings on this route rose from an average of $16,500 per day in the first quarter to $23,500 per day in the second quarter. The upward momentum continued into July, as spot rates climbed to $21,000 per day for a transatlantic roundtrip and to $25,000 per day for the backhaul Far East/Cont route."
For inflation watchers, crude supplies declined 1.1 million barrels in the latest week, gasoline supplies plunged by 3.2 million barrels, and even distillate stocks declined by 200,000 barrels.
The U.S. currency has lost 8 percent against the euro and 2 percent versus the yen this year.
Gold for December delivery closed up $4.70 at $662 an ounce. Silver futures rose 31 cents to $12.57 an ounce, platinum added $7 to $1,263 and palladium rose $2.95 to $326.70 an ounce. Copper futures added 10.8 cents to $3.71 a pound.
BP has so far shut in 200,000 barrels of daily crude oil production, and said that total impacted production could reach 400,000 barrels per day. BP said there is adequate crude supply for its West Coast refineries in the short term and that it does not expect any disruption of gasoline supplies for California or the West Coast during that time. The company is replacing all 16 miles of the Prudhoe Bay oil transit line.
For two consecutive days equities have tried to rally and failed. By the end of the day, the indices were in the red. Yet, during this time, the VIX has ended pretty much unchanged. This bears watching (no pun intended).
Homeland Security Secretary Michael Chertoff said Thursday that a plot to blow up several planes traveling between the U.K. and several U.S. cities bears the hallmarks of an al-Qaida operation.
ImClone Systems Inc. fell sharply ahead of Thursday's opening bell after the biopharmaceutical company said it will remain independent. In January the company hired investment bank Lazard Ltd. (LAZ) to consider a possible sale or merger of the company.
Bank of Korea Governor Lee Seong Tae and his fellow policy makers raised the overnight call rate to 4.50 percent, the highest since September 2001, in Seoul.
China's record trade surplus widened to $14.6 billion from $14.5 billion in June, the Beijing-based customs bureau said today on its Web site. Exports jumped 22.6 percent and imports increased 19.7 percent, the statement said.
Marsoft: "After weakening significantly in the first quarter of 2006, the dry bulk market abruptly changed course in the second quarter. Handy and Handymax rates increased steadily from March through June, with the gains continuing into July. Panamax and Cape rates generally declined in April, but from May to July they rose quite sharply.
Handy and Handymax spot rates rebounded significantly in the second quarter. Rates for our benchmark transatlantic roundtrip voyage increased by 20-30% in the second quarter, with earnings for a 51,000 dwt Supramax climbing from $14,000 per day to $17,000 per day, and earnings for a small Handy moving up from $9,000 per day to $12,000 per day.
But some of the strongest gains were seen on the back-haul routes, such as Far East/Cont. According to broker reports, Supramax earnings on this route rose from an average of $16,500 per day in the first quarter to $23,500 per day in the second quarter. The upward momentum continued into July, as spot rates climbed to $21,000 per day for a transatlantic roundtrip and to $25,000 per day for the backhaul Far East/Cont route."
For inflation watchers, crude supplies declined 1.1 million barrels in the latest week, gasoline supplies plunged by 3.2 million barrels, and even distillate stocks declined by 200,000 barrels.
The U.S. currency has lost 8 percent against the euro and 2 percent versus the yen this year.
Gold for December delivery closed up $4.70 at $662 an ounce. Silver futures rose 31 cents to $12.57 an ounce, platinum added $7 to $1,263 and palladium rose $2.95 to $326.70 an ounce. Copper futures added 10.8 cents to $3.71 a pound.
BP has so far shut in 200,000 barrels of daily crude oil production, and said that total impacted production could reach 400,000 barrels per day. BP said there is adequate crude supply for its West Coast refineries in the short term and that it does not expect any disruption of gasoline supplies for California or the West Coast during that time. The company is replacing all 16 miles of the Prudhoe Bay oil transit line.
For two consecutive days equities have tried to rally and failed. By the end of the day, the indices were in the red. Yet, during this time, the VIX has ended pretty much unchanged. This bears watching (no pun intended).
Homeland Security Secretary Michael Chertoff said Thursday that a plot to blow up several planes traveling between the U.K. and several U.S. cities bears the hallmarks of an al-Qaida operation.
ImClone Systems Inc. fell sharply ahead of Thursday's opening bell after the biopharmaceutical company said it will remain independent. In January the company hired investment bank Lazard Ltd. (LAZ) to consider a possible sale or merger of the company.
Bank of Korea Governor Lee Seong Tae and his fellow policy makers raised the overnight call rate to 4.50 percent, the highest since September 2001, in Seoul.
China's record trade surplus widened to $14.6 billion from $14.5 billion in June, the Beijing-based customs bureau said today on its Web site. Exports jumped 22.6 percent and imports increased 19.7 percent, the statement said.
Tuesday, August 08, 2006
An Important Forecast
6/9/06 An Important Forecast
Nouriel Roubini: "Given the recent flow of dismal U.S. economic indicators (Q2 GDP report, July payrolls, service ISM, etc.) I am now taking the view that the odds of a U.S. recession by year end have increased from my previous 50% to 70% now."
The Bureau of Labor Statistics of the U.S. Department of Labor reported
preliminary productivity data--as measured by output per hour of all persons-
-for the second quarter of 2006. The preliminary seasonally adjusted annual
rates of productivity change in the second quarter were:
1.1 percent in the business sector and
1.1 percent in the nonfarm business sector.
These rates of growth are lower than those in the previous quarter. As
revised, productivity increased 4.5 percent in the business sector and 4.3
percent in the nonfarm business sector in the first quarter of 2006.
In manufacturing, the preliminary productivity changes in the second
quarter were:
3.0 percent in manufacturing,
3.8 percent in durable goods manufacturing, and
2.6 percent in nondurable goods manufacturing.
Manufacturing productivity grew 3.0 percent in the second quarter as output
increased 5.4 percent and hours increased 2.3 percent (seasonally adjusted
annual rates).
Unit labor costs rose 4.2% annualized - the most since the fourth quarter of 2004. First quarter unit labor costs rose 2.5% rather than the 1.6% increase originally reported. Unit labor costs were up 3.2% year-on-year, the fastest pace since the fourth quarter of 2000.
Despite rising unit labor costs, profit margins for corporations are at historically high levels.
Roger Cressey, a former counterterrorism official in the Bush Administration, now runs his own consulting business in Arlington, Virginia.
Cressey said there are about 30 million video surveillance cameras in the United States shooting about four billion hours of footage every week in an effort to recognize possible threats. (Is the greatest possible threat the Administration?)
Toll Brothers said that its quarter-end backlog was approximately $5.59 billion, down 13% from last year's $6.43 billion, while signed contracts were approximately $1.05 billion at the quarter end, down 45% from $1.92 billion last year. The company said that, based upon its current backlog, it expects to deliver between 2,500 and 2,800 homes in the fourth quarter, down from its previous guidance of 2,900 to 3,300 deliveries. For 2006, deliveries are expected at between 8,600 and 8,900 homes.
Puru Saxena: "Every human being must understand that the Federal Reserve IS inflation. The Federal Reserve was established in 1913 to create inflation and its secondary role is to manage the public's inflation FEARS."
Federal Reserve Bank of Richmond President Jeffrey Lacker, who has warned of complacency in fighting inflation, disagreed with the Fed's decision today to forgo an interest-rate increase.
Nouriel Roubini: "Given the recent flow of dismal U.S. economic indicators (Q2 GDP report, July payrolls, service ISM, etc.) I am now taking the view that the odds of a U.S. recession by year end have increased from my previous 50% to 70% now."
The Bureau of Labor Statistics of the U.S. Department of Labor reported
preliminary productivity data--as measured by output per hour of all persons-
-for the second quarter of 2006. The preliminary seasonally adjusted annual
rates of productivity change in the second quarter were:
1.1 percent in the business sector and
1.1 percent in the nonfarm business sector.
These rates of growth are lower than those in the previous quarter. As
revised, productivity increased 4.5 percent in the business sector and 4.3
percent in the nonfarm business sector in the first quarter of 2006.
In manufacturing, the preliminary productivity changes in the second
quarter were:
3.0 percent in manufacturing,
3.8 percent in durable goods manufacturing, and
2.6 percent in nondurable goods manufacturing.
Manufacturing productivity grew 3.0 percent in the second quarter as output
increased 5.4 percent and hours increased 2.3 percent (seasonally adjusted
annual rates).
Unit labor costs rose 4.2% annualized - the most since the fourth quarter of 2004. First quarter unit labor costs rose 2.5% rather than the 1.6% increase originally reported. Unit labor costs were up 3.2% year-on-year, the fastest pace since the fourth quarter of 2000.
Despite rising unit labor costs, profit margins for corporations are at historically high levels.
Roger Cressey, a former counterterrorism official in the Bush Administration, now runs his own consulting business in Arlington, Virginia.
Cressey said there are about 30 million video surveillance cameras in the United States shooting about four billion hours of footage every week in an effort to recognize possible threats. (Is the greatest possible threat the Administration?)
Toll Brothers said that its quarter-end backlog was approximately $5.59 billion, down 13% from last year's $6.43 billion, while signed contracts were approximately $1.05 billion at the quarter end, down 45% from $1.92 billion last year. The company said that, based upon its current backlog, it expects to deliver between 2,500 and 2,800 homes in the fourth quarter, down from its previous guidance of 2,900 to 3,300 deliveries. For 2006, deliveries are expected at between 8,600 and 8,900 homes.
Puru Saxena: "Every human being must understand that the Federal Reserve IS inflation. The Federal Reserve was established in 1913 to create inflation and its secondary role is to manage the public's inflation FEARS."
Federal Reserve Bank of Richmond President Jeffrey Lacker, who has warned of complacency in fighting inflation, disagreed with the Fed's decision today to forgo an interest-rate increase.
Monday, August 07, 2006
Keep On Spending
8/8/06 Keep On Spending
Consumer credit outstanding grew by $10.3 billion in June to $2.186 trillion. That followed a $5.88 billion increase in May. Revolving credit like credit cards increased at a 9.8% annual rate in June. Nonrevolving credit, like auto loans, rose at a 3.2% annual rate in June after falling at a 1.4% annual rate the previous month.
Even following an increase on Aug. 3, ``it can't be denied'' that interest rates are ``still very accommodating,'' Lorenzo Bini Smaghi, an ECB executive board member, said in an Aug. 6 interview with Italian newspaper Il Sole/24 Ore. ``That's the reason that the process of realigning interest rates will continue in coming months.''
Mike Shedlock: "At some point, job losses will matter simply because they have to. People out of work will not be buying much, regardless of whether or not interest rates pause, or even decline."
The Forbes family has agreed to sell a large minority stake in its media empire to Elevation, the buy-out fund of rock star Bono, in a deal worth about $300 million.
ConocoPhillips said its Middle East unit Dubai Petroleum Co. will cede control of the fields to the government's Dubai Petroleum Establishment effective April 2, 2007.
As Northwest's flight attendants prepare to strike as early as Aug. 15, their union says it's fighting cuts the company imposed last week, including making a temporary 21% wage cut taken in November stick through 2011. The union also is fighting cuts to medical benefits and changes to work rules that reduce total compensation by as much as 40%.
Chain store sales rose 2.5% for the week ended Aug. 5, compared to the year-ago period, according to a survey from the International Council of Shopping Centers and UBS Securities LLC released on Tuesday. "It is surprising that there was not more of a lift over the last week," said Michael Niemira, ICSC's chief economist and director of research. "However, the crosscurrents between the regional state tax holidays, taking place in 10 states and the District of Columbia this past weekend, and the abnormally hot weather and high gasoline prices seemingly took a bite out of potential demand."
Teva Pharmaceutical increased its earnings outlook for the year, saying that Ivax, which it acquired in January, is already contributing to profit. It's now expecting earnings between $2.15 and $2.25 a share on revenue of $8.5 billion; it previously forecast earnings between $2 and $2.15 a share.
The number of 20-day new lows now exceeds 500.
According to the Detroit News, Gov. Jennifer Granholm and Mark Fields, president of Ford Motor Co.'s Americas group, are expected to jointly announce a new tax-incentive agreement Wednesday between the state and the struggling automaker, according to people familiar with the situation.
In exchange for what promises to be a rich package of incentives, Fields will reaffirm Ford's commitment to future investment in Michigan.
The governor will pledge credits equal to a fixed percentage of Ford's future investments in the state through the Michigan Economic Growth Authority.
These so-called MEGA tax credits are designed to promote the creation and retention of jobs in Michigan. The value of these tax credits depends on the magnitude of Ford's future expansion in the state, but sources say the benefit to the automaker could easily reach tens of millions of dollars.
If the Fed pauses today, there is a likelihood of a short-term rally. However, we will soon be in the September-October period, and I would use the rally to lighten up on your weak holdings. Better buying opportunities will present themselves down the road.
Consumer credit outstanding grew by $10.3 billion in June to $2.186 trillion. That followed a $5.88 billion increase in May. Revolving credit like credit cards increased at a 9.8% annual rate in June. Nonrevolving credit, like auto loans, rose at a 3.2% annual rate in June after falling at a 1.4% annual rate the previous month.
Even following an increase on Aug. 3, ``it can't be denied'' that interest rates are ``still very accommodating,'' Lorenzo Bini Smaghi, an ECB executive board member, said in an Aug. 6 interview with Italian newspaper Il Sole/24 Ore. ``That's the reason that the process of realigning interest rates will continue in coming months.''
Mike Shedlock: "At some point, job losses will matter simply because they have to. People out of work will not be buying much, regardless of whether or not interest rates pause, or even decline."
The Forbes family has agreed to sell a large minority stake in its media empire to Elevation, the buy-out fund of rock star Bono, in a deal worth about $300 million.
ConocoPhillips said its Middle East unit Dubai Petroleum Co. will cede control of the fields to the government's Dubai Petroleum Establishment effective April 2, 2007.
As Northwest's flight attendants prepare to strike as early as Aug. 15, their union says it's fighting cuts the company imposed last week, including making a temporary 21% wage cut taken in November stick through 2011. The union also is fighting cuts to medical benefits and changes to work rules that reduce total compensation by as much as 40%.
Chain store sales rose 2.5% for the week ended Aug. 5, compared to the year-ago period, according to a survey from the International Council of Shopping Centers and UBS Securities LLC released on Tuesday. "It is surprising that there was not more of a lift over the last week," said Michael Niemira, ICSC's chief economist and director of research. "However, the crosscurrents between the regional state tax holidays, taking place in 10 states and the District of Columbia this past weekend, and the abnormally hot weather and high gasoline prices seemingly took a bite out of potential demand."
Teva Pharmaceutical increased its earnings outlook for the year, saying that Ivax, which it acquired in January, is already contributing to profit. It's now expecting earnings between $2.15 and $2.25 a share on revenue of $8.5 billion; it previously forecast earnings between $2 and $2.15 a share.
The number of 20-day new lows now exceeds 500.
According to the Detroit News, Gov. Jennifer Granholm and Mark Fields, president of Ford Motor Co.'s Americas group, are expected to jointly announce a new tax-incentive agreement Wednesday between the state and the struggling automaker, according to people familiar with the situation.
In exchange for what promises to be a rich package of incentives, Fields will reaffirm Ford's commitment to future investment in Michigan.
The governor will pledge credits equal to a fixed percentage of Ford's future investments in the state through the Michigan Economic Growth Authority.
These so-called MEGA tax credits are designed to promote the creation and retention of jobs in Michigan. The value of these tax credits depends on the magnitude of Ford's future expansion in the state, but sources say the benefit to the automaker could easily reach tens of millions of dollars.
If the Fed pauses today, there is a likelihood of a short-term rally. However, we will soon be in the September-October period, and I would use the rally to lighten up on your weak holdings. Better buying opportunities will present themselves down the road.
Sunday, August 06, 2006
Inflation Under Control?
8/7/06 Inflation Under Control?
The Walt Disney Co. raised prices at its Florida theme parks on January 1, when the price rose to $63 from $59.75. Yesterday a price hike from $63 to $67 went into effect. I guess the company is anticipating no problems with the weather this hurricane season. With $3 a gallon gasoline, I think it's a stupid move to be raising prices. Then again, I disagreed with their moving forward in a movie project with Mel Gibson. If I owned the stock (which I do not), I'd sell it.
The cost of one transportation project near Wisconsin Dells rose 44 percent over the past six months. Transportation Secretary Frank Busalacchi attributed the increase in part to the cost of structural steel, which jumped 45.6 percent, and excavation costs, up 21.5 percent in the last 12 months.
According to the report, the cost of the U.S. Highway 12 project from Lake Delton to Sauk City rose $47.3 million to $155 million, a 44 percent increase.
Meanwhile, costs for the U.S. Highway 41 project from De Pere to Suamico more than doubled, increasing from $205 million to $416.5 million, since the project was first planned in 2002.
I assure you that Wisconsin does not have a monopoly on rising costs for transportation projects.
Ford Motor Co. may sell Land Rover together with Jaguar to drum up interest, The Sunday Times (of London) newspaper reported, citing unnamed sources.
A July telephone survey of more than 1,000 people conducted by Boston Consulting Group found that 76% of Americans believe gas prices will rise for the remainder of the year. Another 48% said it was possible for gas prices to hit $5.50 a gallon at some point. Michigan gas prices currently average $3.04 a gallon, AAA Michigan reports.
BP has indefinitely shut down the nation's biggest oilfield after finding a pipeline leak, removing about 8 percent of U.S. oil production and stoking fears that already high gas prices will shoot up further.
John Hussman: "We should not be surprised to observe stagflation, falling stocks, weak profits, flat bonds, and a dollar crisis in the months ahead."
Crude traded over $77 a barrel this morning.
Apple's Worldwide Developers Conference is held today thru Friday at SF's Moscone Center. Will Mac's new operating system, Leopard, prove more advanced than Microsoft's Vista?
Martin Feldstein: "A mild slowing of economic growth is generally not sufficient to reverse rising inflation. That generally requires a sustained period of excess capacity in product and labor markets, with GDP growth falling significantly or even turning negative."
Should an event take place to create a freefall in stocks, be prepared to watch the actions of the Fed's Plunge Protection Team. It's members are the Fed chairman, the SEC chairman, the Commodities Futures Trading Commission chairman, the Secretary of the Treasury, and members of financial institutions, such as, Goldman Sachs, Morgan Stanley, and Merrill Lynch.
I'd like to revisit an article written on 7/3/03 by Eric Jewell entitled
Osama Bin Laden and Promis(e)Software:
"Today, financial institutions and Intelligence departments use Promise software worldwide. This means that factions of the US government can quickly access any computer in these networks. The implications are astounding. This gives the ability to add, delete, or modify any file or files within any given intelligence agency using this software. A picture can be put with any name and any information and make it possible for whole terrorist organizations to travel freely with false papers just because the computers were hacked into and all the information fed into them to effectively change any identity. The possibilities within financial institutions are equally as great. Accounts can be created and funds moved from any account to any account.
The question is, why was Bin Laden recently provided with a copy of this software? The answer may possibly be found in both the intelligence and the financial arenas. Now his men which were trained by the CIA can travel freely with no fear of reprisal. George Bush Sr. was vice president when the software was developed, and is a definite insider of this faction of government that sent Promise worldwide. He is connected to the Bin Laden family through the Carlyle Group, which means that both the Bin Laden fortune and the Bush fortune are greatly increased with every military act. The problem is finances if Osama is to remain armed and create worldwide fear to carry on the Bush Agenda of turning America into a police state and leading us further into the New World Order, he needs further funding. With the "Promise" software Bin Laden need never worry again about how we will further fund him. Bank accounts can be very messy in that they can be traced, and indeed much US money has been traced to him already and then quickly buried. Now he has the ability to just create an account in any name to be collected whenever it is needed to obtain whatever is deemed necessary."
The Walt Disney Co. raised prices at its Florida theme parks on January 1, when the price rose to $63 from $59.75. Yesterday a price hike from $63 to $67 went into effect. I guess the company is anticipating no problems with the weather this hurricane season. With $3 a gallon gasoline, I think it's a stupid move to be raising prices. Then again, I disagreed with their moving forward in a movie project with Mel Gibson. If I owned the stock (which I do not), I'd sell it.
The cost of one transportation project near Wisconsin Dells rose 44 percent over the past six months. Transportation Secretary Frank Busalacchi attributed the increase in part to the cost of structural steel, which jumped 45.6 percent, and excavation costs, up 21.5 percent in the last 12 months.
According to the report, the cost of the U.S. Highway 12 project from Lake Delton to Sauk City rose $47.3 million to $155 million, a 44 percent increase.
Meanwhile, costs for the U.S. Highway 41 project from De Pere to Suamico more than doubled, increasing from $205 million to $416.5 million, since the project was first planned in 2002.
I assure you that Wisconsin does not have a monopoly on rising costs for transportation projects.
Ford Motor Co. may sell Land Rover together with Jaguar to drum up interest, The Sunday Times (of London) newspaper reported, citing unnamed sources.
A July telephone survey of more than 1,000 people conducted by Boston Consulting Group found that 76% of Americans believe gas prices will rise for the remainder of the year. Another 48% said it was possible for gas prices to hit $5.50 a gallon at some point. Michigan gas prices currently average $3.04 a gallon, AAA Michigan reports.
BP has indefinitely shut down the nation's biggest oilfield after finding a pipeline leak, removing about 8 percent of U.S. oil production and stoking fears that already high gas prices will shoot up further.
John Hussman: "We should not be surprised to observe stagflation, falling stocks, weak profits, flat bonds, and a dollar crisis in the months ahead."
Crude traded over $77 a barrel this morning.
Apple's Worldwide Developers Conference is held today thru Friday at SF's Moscone Center. Will Mac's new operating system, Leopard, prove more advanced than Microsoft's Vista?
Martin Feldstein: "A mild slowing of economic growth is generally not sufficient to reverse rising inflation. That generally requires a sustained period of excess capacity in product and labor markets, with GDP growth falling significantly or even turning negative."
Should an event take place to create a freefall in stocks, be prepared to watch the actions of the Fed's Plunge Protection Team. It's members are the Fed chairman, the SEC chairman, the Commodities Futures Trading Commission chairman, the Secretary of the Treasury, and members of financial institutions, such as, Goldman Sachs, Morgan Stanley, and Merrill Lynch.
I'd like to revisit an article written on 7/3/03 by Eric Jewell entitled
Osama Bin Laden and Promis(e)Software:
"Today, financial institutions and Intelligence departments use Promise software worldwide. This means that factions of the US government can quickly access any computer in these networks. The implications are astounding. This gives the ability to add, delete, or modify any file or files within any given intelligence agency using this software. A picture can be put with any name and any information and make it possible for whole terrorist organizations to travel freely with false papers just because the computers were hacked into and all the information fed into them to effectively change any identity. The possibilities within financial institutions are equally as great. Accounts can be created and funds moved from any account to any account.
The question is, why was Bin Laden recently provided with a copy of this software? The answer may possibly be found in both the intelligence and the financial arenas. Now his men which were trained by the CIA can travel freely with no fear of reprisal. George Bush Sr. was vice president when the software was developed, and is a definite insider of this faction of government that sent Promise worldwide. He is connected to the Bin Laden family through the Carlyle Group, which means that both the Bin Laden fortune and the Bush fortune are greatly increased with every military act. The problem is finances if Osama is to remain armed and create worldwide fear to carry on the Bush Agenda of turning America into a police state and leading us further into the New World Order, he needs further funding. With the "Promise" software Bin Laden need never worry again about how we will further fund him. Bank accounts can be very messy in that they can be traced, and indeed much US money has been traced to him already and then quickly buried. Now he has the ability to just create an account in any name to be collected whenever it is needed to obtain whatever is deemed necessary."
Saturday, August 05, 2006
Take A Hard Look
8/6/06 Take A Hard Look
Crude oil prices may increase to $100 a barrel on winter demand and because of concern over supplies getting disrupted, Iran's Deputy Oil Minister Hadi Nejad-Hosseinian said.
"There is still a possibility of crude reaching $100 a barrel due to geopolitical problems worldwide and peaking of winter demand,"
One cannot ignore geopolitical issues and their impact on the price of crude. However, it might prove more fruitful to take a hard look at the current conditions
of Saudi Arabia's Ghawar field and Mexico's Cantarell field, certainly two of the world's largest. Production has topped out in both and declining quickly in the
Cantarell field. In all likelihood, production at Ghawar is overstated. I found it interesting that China is getting more daily crude from Africa than from the Saudis.
Since the U.S. is so dependent on foreign oil, just from where do you believe we will get our future deliveries to meet current demand? At the moment, when there are three consecutive days of intense heat, we will curtail our demand and therefore avoid overloading the grid. Will we be forced to curtail our daily demand for crude?
I see this coming around the bend.
Doug Noland: "I actually believe that major Greenspan-style unilateral rate cuts in response to economic weakness are a thing of the past. Whether it appreciates it today or not, the Bernanke Fed has lost significant autonomy to the now massive flows of global finance. Importantly, this powerful pool of global finance Bubble increasingly dictates inflationary trends, and the Fed's determination to sustain the U.S. Credit Bubble only ensures that these global flows become only more commanding and destabilizing. Inflationary pressures are building and, as we are observing with energy prices, increasingly destabilizing. And, the dollar...
The vulnerable dollar is poised to play spoiler for the inflationists and the Fed. In this regard, it is worth pondering this evening that when the Fed cut rates 50 bps to 6% on January 1, 2001, the dollar index traded at 110. A year later, after the Fed had quickly dropped rates to 1.75%, the dollar index was approaching its high of 120. Clearly, the Fed back then enjoyed great leeway to cut and inflate. Conversely, the Fed began raising rates from the low of 1% in June of 2004 with the dollar index at about 90. Now, 17 hikes later, the dollar index is near 84. It is also worth repeating that when the Fed was cutting rates aggressively in 2001 Current Account Deficits were running less than $100 billion quarterly. They are now double this amount."
The nation's governors on Saturday launched a bipartisan drive to block a move to expand the president's authority to take over National Guard troops in case of natural disaster or homeland security threats.
In Naperville,Illinois, in the past 12 months, 28 homes have sold from $1.2 million to $1.6 million. Currently, there are 89 on the market -- a 30-month supply. As an incentive to buyers, one homeowner is offering a new Hummer.
Mike Burk: "Diminishing new lows make a good case that a cycle low occurred on July 21, but many of the short term momentum indicators are at or near their highs of the past 3 months suggesting a pull back next week. I expect the major indices to be lower on Friday August 11 than they were on Friday August 4."
In Australia, the Olivier Internet Job Index rose by 2.22 per cent to a new high of 232,283 new jobs advertised online last month.
Olivier Group director Robert Olivier said the high level of employment was creating wages pressure, which in turn was helping to drive inflation.
The boiling hot employment market was a significant factor behind the Reserve Bank of Australia's (RBA) decision to lift interest rates last week, Mr Olivier added.
"It's the price of people, as workers, not just the price of petrol or bananas that looks like the driver to us," he said.
"Unemployment is at a record low, the skills shortage is biting hard and in-demand employees know they have the upper hand."
According to The Guardian, a consortium led by Qatar's state-owned investment fund and investment bank UBS is expected to join the £7bn battle to acquire Thames Water which has been put up for sale by German owner, RWE.
The Hong Kong government is currently consulting the public about a possible sales tax. It said in a statement that Hong Kong must take advantage of its current economic strength to shore up public finances for future generations.
"We must act now to broaden our tax base for the future prosperity of Hong Kong. This will ultimately affect each Hong Kong resident individually," the statement said.
Crude oil prices may increase to $100 a barrel on winter demand and because of concern over supplies getting disrupted, Iran's Deputy Oil Minister Hadi Nejad-Hosseinian said.
"There is still a possibility of crude reaching $100 a barrel due to geopolitical problems worldwide and peaking of winter demand,"
One cannot ignore geopolitical issues and their impact on the price of crude. However, it might prove more fruitful to take a hard look at the current conditions
of Saudi Arabia's Ghawar field and Mexico's Cantarell field, certainly two of the world's largest. Production has topped out in both and declining quickly in the
Cantarell field. In all likelihood, production at Ghawar is overstated. I found it interesting that China is getting more daily crude from Africa than from the Saudis.
Since the U.S. is so dependent on foreign oil, just from where do you believe we will get our future deliveries to meet current demand? At the moment, when there are three consecutive days of intense heat, we will curtail our demand and therefore avoid overloading the grid. Will we be forced to curtail our daily demand for crude?
I see this coming around the bend.
Doug Noland: "I actually believe that major Greenspan-style unilateral rate cuts in response to economic weakness are a thing of the past. Whether it appreciates it today or not, the Bernanke Fed has lost significant autonomy to the now massive flows of global finance. Importantly, this powerful pool of global finance Bubble increasingly dictates inflationary trends, and the Fed's determination to sustain the U.S. Credit Bubble only ensures that these global flows become only more commanding and destabilizing. Inflationary pressures are building and, as we are observing with energy prices, increasingly destabilizing. And, the dollar...
The vulnerable dollar is poised to play spoiler for the inflationists and the Fed. In this regard, it is worth pondering this evening that when the Fed cut rates 50 bps to 6% on January 1, 2001, the dollar index traded at 110. A year later, after the Fed had quickly dropped rates to 1.75%, the dollar index was approaching its high of 120. Clearly, the Fed back then enjoyed great leeway to cut and inflate. Conversely, the Fed began raising rates from the low of 1% in June of 2004 with the dollar index at about 90. Now, 17 hikes later, the dollar index is near 84. It is also worth repeating that when the Fed was cutting rates aggressively in 2001 Current Account Deficits were running less than $100 billion quarterly. They are now double this amount."
The nation's governors on Saturday launched a bipartisan drive to block a move to expand the president's authority to take over National Guard troops in case of natural disaster or homeland security threats.
In Naperville,Illinois, in the past 12 months, 28 homes have sold from $1.2 million to $1.6 million. Currently, there are 89 on the market -- a 30-month supply. As an incentive to buyers, one homeowner is offering a new Hummer.
Mike Burk: "Diminishing new lows make a good case that a cycle low occurred on July 21, but many of the short term momentum indicators are at or near their highs of the past 3 months suggesting a pull back next week. I expect the major indices to be lower on Friday August 11 than they were on Friday August 4."
In Australia, the Olivier Internet Job Index rose by 2.22 per cent to a new high of 232,283 new jobs advertised online last month.
Olivier Group director Robert Olivier said the high level of employment was creating wages pressure, which in turn was helping to drive inflation.
The boiling hot employment market was a significant factor behind the Reserve Bank of Australia's (RBA) decision to lift interest rates last week, Mr Olivier added.
"It's the price of people, as workers, not just the price of petrol or bananas that looks like the driver to us," he said.
"Unemployment is at a record low, the skills shortage is biting hard and in-demand employees know they have the upper hand."
According to The Guardian, a consortium led by Qatar's state-owned investment fund and investment bank UBS is expected to join the £7bn battle to acquire Thames Water which has been put up for sale by German owner, RWE.
The Hong Kong government is currently consulting the public about a possible sales tax. It said in a statement that Hong Kong must take advantage of its current economic strength to shore up public finances for future generations.
"We must act now to broaden our tax base for the future prosperity of Hong Kong. This will ultimately affect each Hong Kong resident individually," the statement said.
Friday, August 04, 2006
Employment
8/5/04 Employment
Nonfarm payroll employment increased by 113,000 in
July, and the unemployment rate rose to 4.8 percent. Average hourly earnings
increased by 7 cents, or 0.4 percent, in July. Over the 12 months ending in July,
average hourly earnings have risen by 3.8 percent.
In the service-providing sector, employment in
professional and business services rose by 43,000 over
the month. Employment was flat over
the month in temporary help services.
Employment in leisure and hospitality increased by
42,000 in July, mainly due to continued job growth in food
services and drinking places (+29,000). Health care
employment also continued on an upward trend, with an
increase of 23,000. Job gains occurred in hospitals and
in nursing and residential care facilities.
The number of jobs in retail trade was unchanged in
July; employment in general merchandise stores declined by
8,000 over the month and has fallen by 74,000 since August
2005. Construction employment was little changed for the fifth month in a row; over
the period, job growth in nonresidential construction has been
offset by job losses in residential and heavy construction.
Manufacturing employment edged down by 15,000 in July,
largely offsetting an increase in June. Over the month,
manufacturing hours increased by 0.2 hour, while factory
overtime was down by 0.1 hour.
The number of unemployed persons edged up to 7.2 million in July. A year earlier, the number of unemployed persons was 7.5 million and the jobless rate was 5.0 percent.
Following a decline in June, the number of long-term unemployed
persons--those unemployed 27 weeks or longer--returned to its May level of 1.3 million. These long-term unemployed accounted for 18.6 percent of total unemployment, about the same as in May.
After trending down for several months, the number of unemployed persons who
were reentrants to the labor force increased to 2.4 million in July. This group
accounted for 32.7 percent of total unemployment, up from 30.0 percent in June.
The benchmark 10-year Treasury note closed 15/32 higher at 101 23/32 with a yield of 4.903%.
Even though the Fed Fund futures are predicting there is almost no chance for the Fed to raise ates next week, equities could not hold their opening rally and quickly turned into the red column. I know it doesn't mean much, but Ford continues to rally despite bad news. The stock powered through $7 on the upside and that has not taken place for quite some time. It is beginning to act like GM did at $19 and $20.
The question one must ask is where do we go from here? Do you want to buy 10-year Treasury bonds at 4.90% or the 30-year at 4.99% as the dollar weakens daily? Are stocks more attractive than bonds? Or is being hedged and/or in cash the smartest move?
Hovnanian, a homebuilder, now sees earnings in a range of $1.10 to $1.20 a share for the third quarter ended July 31, down from a range of $1.40 to $1.50 a share previously. And for the full year, Hovnanian's pegged its updated forecast at $5 to $5.75 a share, down from a prior range of $7.20 to $7.40 a share.
Christopherson Homes is laying off 18 percent of its employees over the next three to six months, company officials said Thursday.
Sonoma County's largest home builder will lay off 25 to 30 workers in a range of jobs at both its Santa Rosa headquarters and its Sacramento division.
"We hope this downturn will be short-lived but we will continue to make adjustments deemed necessary," said George Casey, the company's chief executive officer.
"We look forward to the time when the market rebounds and when Northern California begins to grow again. When this happens, we believe we will be well positioned to continue to grow Christopherson Homes as we have over the last nearly 30 years," he said.
Nonfarm payroll employment increased by 113,000 in
July, and the unemployment rate rose to 4.8 percent. Average hourly earnings
increased by 7 cents, or 0.4 percent, in July. Over the 12 months ending in July,
average hourly earnings have risen by 3.8 percent.
In the service-providing sector, employment in
professional and business services rose by 43,000 over
the month. Employment was flat over
the month in temporary help services.
Employment in leisure and hospitality increased by
42,000 in July, mainly due to continued job growth in food
services and drinking places (+29,000). Health care
employment also continued on an upward trend, with an
increase of 23,000. Job gains occurred in hospitals and
in nursing and residential care facilities.
The number of jobs in retail trade was unchanged in
July; employment in general merchandise stores declined by
8,000 over the month and has fallen by 74,000 since August
2005. Construction employment was little changed for the fifth month in a row; over
the period, job growth in nonresidential construction has been
offset by job losses in residential and heavy construction.
Manufacturing employment edged down by 15,000 in July,
largely offsetting an increase in June. Over the month,
manufacturing hours increased by 0.2 hour, while factory
overtime was down by 0.1 hour.
The number of unemployed persons edged up to 7.2 million in July. A year earlier, the number of unemployed persons was 7.5 million and the jobless rate was 5.0 percent.
Following a decline in June, the number of long-term unemployed
persons--those unemployed 27 weeks or longer--returned to its May level of 1.3 million. These long-term unemployed accounted for 18.6 percent of total unemployment, about the same as in May.
After trending down for several months, the number of unemployed persons who
were reentrants to the labor force increased to 2.4 million in July. This group
accounted for 32.7 percent of total unemployment, up from 30.0 percent in June.
The benchmark 10-year Treasury note closed 15/32 higher at 101 23/32 with a yield of 4.903%.
Even though the Fed Fund futures are predicting there is almost no chance for the Fed to raise ates next week, equities could not hold their opening rally and quickly turned into the red column. I know it doesn't mean much, but Ford continues to rally despite bad news. The stock powered through $7 on the upside and that has not taken place for quite some time. It is beginning to act like GM did at $19 and $20.
The question one must ask is where do we go from here? Do you want to buy 10-year Treasury bonds at 4.90% or the 30-year at 4.99% as the dollar weakens daily? Are stocks more attractive than bonds? Or is being hedged and/or in cash the smartest move?
Hovnanian, a homebuilder, now sees earnings in a range of $1.10 to $1.20 a share for the third quarter ended July 31, down from a range of $1.40 to $1.50 a share previously. And for the full year, Hovnanian's pegged its updated forecast at $5 to $5.75 a share, down from a prior range of $7.20 to $7.40 a share.
Christopherson Homes is laying off 18 percent of its employees over the next three to six months, company officials said Thursday.
Sonoma County's largest home builder will lay off 25 to 30 workers in a range of jobs at both its Santa Rosa headquarters and its Sacramento division.
"We hope this downturn will be short-lived but we will continue to make adjustments deemed necessary," said George Casey, the company's chief executive officer.
"We look forward to the time when the market rebounds and when Northern California begins to grow again. When this happens, we believe we will be well positioned to continue to grow Christopherson Homes as we have over the last nearly 30 years," he said.
Thursday, August 03, 2006
Further Evidence
8/4/06 Further Evidence
The ECB, The Bank of England, and the Bank of Australia all raised their interest rates. Therefore, it is not surprising to see the U.S. dollar index remain under 85.
Iran's President has a solution to the Mideast conflict -- the answer is to destroy Israel.
Factory orders for June increased 1.2%. The July ISM Services Index was 54.8 versus 57 in June.Within the index, the price component rose to 74.8% from 73.9% in June, suggesting inflation pressures continue to build.
Palatin Technologies, Inc. and King Pharmaceuticals, Inc. announced results of Part 2 of a Phase IIa pilot study evaluating the effects of bremelanotide in post-menopausal women diagnosed with female sexual arousal disorder (FSAD). Results showed that on a 14-item questionnaire, 73 percent of the women reported an increased level of genital arousal while on bremelanotide compared with 23 percent of women on placebo. Also, 46 percent of women on bremelanotide reported an increased level of sexual desire while only 19 percent of women responded similarly after placebo treatment. Additionally, subjects receiving bremelanotide reported a higher incidence of engaging in sexual activity compared to placebo. The current study follows a similarly designed clinical study conducted with
pre-menopausal patients with FSAD, the results of which were recently published in the July 2006 issue of The Journal of Sexual Medicine.
"The results of this study in post-menopausal women corroborate the previous results reported in pre-menopausal women and supports the further advancement of bremelanotide for the treatment of FSAD," said Trevor Hallam, Ph.D., Executive Vice President, Research & Development of Palatin Technologies.
I continue to believe that long-term investors in Palatin will be nicely rewarded. Institutions largely ignore stocks priced under $5. In my view, they will catch on in due time.
Wm. Stacy Locke, Pioneer Drilling's President and Chief Executive Officer, stated, "Demand for our rigs has remained strong and we have continued to see increases in dayrates in each of our operating areas. Average drilling revenues per day increased $1,532 per revenue day to $19,154 in our fiscal first quarter of 2007, compared to our fourth quarter of fiscal 2006. Average drilling costs increased $801 per revenue day during the same period, of which $541 related to labor costs and $241 to supply, repair, maintenance and equipment disposal costs. As a result, average drilling margins per revenue day increased $731 per day to $9,004, or an increase of 9% over the fourth quarter of fiscal 2006. We continued to pursue term drilling contracts during the quarter. Currently, 44 of our 59 rigs, or 75%, are operating under term contracts of six months to two years in duration, of which 15 have remaining terms of six to 12 months, eight have a remaining term of 12 to 18 months and four have a remaining term in excess of 18 months.
"To date, we have completed eight rigs of our 16 rig new-build program and expect to have the eight remaining rigs begin working under contract over the next nine months or so," continued Mr. Locke. "Since April 1, 2006, the beginning of our new fiscal year, we have added four 1000-hp electric rigs: one rig to the Utah division; one rig to the South Texas division; and two rigs to the North Texas division. Each of these rigs is designed to be quick- to-move and rig up, contains modern mud-cleaning equipment and has two independently powered, high-horsepower mud pumps.
"Our investment in new-build rigs and our commitment to upgrade and modernize our existing fleet has allowed Pioneer to expand its customer base. Currently, 59% of the rigs are working for publicly traded independents or major oil and gas companies. In the June quarter, we spent approximately $8,300,000 upgrading six rigs, using over 230 potential revenue days in the upgrade process. We believe that our fleet is well positioned to be highly competitive in any market conditions we encounter."
Time Warner Inc.'s AOL online division on Thursday said about 5,000, or about 26 percent of its 19,000 employees, will not be employed by the company within six months as a result of its retructuring.
The number of workers collecting jobless benefits rose by 11,000 to 2.48 million in the week ending July 22. The four-week average of continuing jobless claims rose by 8,000 to 2.47 million, the most since March. As a reminder, once an individual ceases to collect unemployment benefits, that individual is no longer counted as unemployed.
The audited financial statement — prepared by the Treasury Department — reveals a federal government in far worse financial shape than official budget reports indicate, a USA TODAY analysis found. The government has run a deficit of $2.9 trillion since 1997, according to the audited number. The official deficit since then is just $729 billion. The difference is equal to an entire year's worth of federal spending.
Univision Communications Inc. on Thursday said its second-quarter profit nearly tripled on a 38% revenue increase at its television networks and stations. The company earned $107.4 million, or 32 cents a share, compared with a profit of $36.1 million, or 10 cents a share -- including the writedown of a loss in the fair value of an investment -- in the prior year. Earnings in the latest three months include $16.3 million in charges related to the company's move to put itself up for sale, costs related to its ongoing litigation with Grupo Televisa and stock-based compensation. Excluding those charges, Univision would have earned $116.6 million, or 34 cents a share, in the latest quarter. Revenue rose to $634 million from $508 million. (Corrects profit excluding charges in latest quarter.) Unfortunately, yesterday was not a very good day for Starbucks, Medtronic, St. Jude Medical, Boston Scientific, CBS, Sprint, Transocean Oil, Prudential Financial, MGM Mirage, and Las Vegas Sands, to name a few.
The 2-year Treasury yield is 4.98% and the 10-year is 4.94%. Again, we have an inverted yield curve.
Many economists are suggesting that the nonfarm payrolls for July will increase by 143,000 and that wage inflation will rise slightly. As such, there is an increasing consensus that the Fed will pause next week. Will that help Target's sales or the results from the Gap? Pier I says they see a worsening macro-economic environment. It could be that their merchandise stinks the house out.
General John Abizaid, the top U.S. commander in the Middle East:``The sectarian violence is probably as bad as I've seen it, in Baghdad in particular,'' Abizaid told the Senate Armed Services Committee in Washington. ``If not stopped, Iraq could slide into civil war.'' As I have said for the last 5+ years, Bush will go down as the worst president in our history.
The ECB, The Bank of England, and the Bank of Australia all raised their interest rates. Therefore, it is not surprising to see the U.S. dollar index remain under 85.
Iran's President has a solution to the Mideast conflict -- the answer is to destroy Israel.
Factory orders for June increased 1.2%. The July ISM Services Index was 54.8 versus 57 in June.Within the index, the price component rose to 74.8% from 73.9% in June, suggesting inflation pressures continue to build.
Palatin Technologies, Inc. and King Pharmaceuticals, Inc. announced results of Part 2 of a Phase IIa pilot study evaluating the effects of bremelanotide in post-menopausal women diagnosed with female sexual arousal disorder (FSAD). Results showed that on a 14-item questionnaire, 73 percent of the women reported an increased level of genital arousal while on bremelanotide compared with 23 percent of women on placebo. Also, 46 percent of women on bremelanotide reported an increased level of sexual desire while only 19 percent of women responded similarly after placebo treatment. Additionally, subjects receiving bremelanotide reported a higher incidence of engaging in sexual activity compared to placebo. The current study follows a similarly designed clinical study conducted with
pre-menopausal patients with FSAD, the results of which were recently published in the July 2006 issue of The Journal of Sexual Medicine.
"The results of this study in post-menopausal women corroborate the previous results reported in pre-menopausal women and supports the further advancement of bremelanotide for the treatment of FSAD," said Trevor Hallam, Ph.D., Executive Vice President, Research & Development of Palatin Technologies.
I continue to believe that long-term investors in Palatin will be nicely rewarded. Institutions largely ignore stocks priced under $5. In my view, they will catch on in due time.
Wm. Stacy Locke, Pioneer Drilling's President and Chief Executive Officer, stated, "Demand for our rigs has remained strong and we have continued to see increases in dayrates in each of our operating areas. Average drilling revenues per day increased $1,532 per revenue day to $19,154 in our fiscal first quarter of 2007, compared to our fourth quarter of fiscal 2006. Average drilling costs increased $801 per revenue day during the same period, of which $541 related to labor costs and $241 to supply, repair, maintenance and equipment disposal costs. As a result, average drilling margins per revenue day increased $731 per day to $9,004, or an increase of 9% over the fourth quarter of fiscal 2006. We continued to pursue term drilling contracts during the quarter. Currently, 44 of our 59 rigs, or 75%, are operating under term contracts of six months to two years in duration, of which 15 have remaining terms of six to 12 months, eight have a remaining term of 12 to 18 months and four have a remaining term in excess of 18 months.
"To date, we have completed eight rigs of our 16 rig new-build program and expect to have the eight remaining rigs begin working under contract over the next nine months or so," continued Mr. Locke. "Since April 1, 2006, the beginning of our new fiscal year, we have added four 1000-hp electric rigs: one rig to the Utah division; one rig to the South Texas division; and two rigs to the North Texas division. Each of these rigs is designed to be quick- to-move and rig up, contains modern mud-cleaning equipment and has two independently powered, high-horsepower mud pumps.
"Our investment in new-build rigs and our commitment to upgrade and modernize our existing fleet has allowed Pioneer to expand its customer base. Currently, 59% of the rigs are working for publicly traded independents or major oil and gas companies. In the June quarter, we spent approximately $8,300,000 upgrading six rigs, using over 230 potential revenue days in the upgrade process. We believe that our fleet is well positioned to be highly competitive in any market conditions we encounter."
Time Warner Inc.'s AOL online division on Thursday said about 5,000, or about 26 percent of its 19,000 employees, will not be employed by the company within six months as a result of its retructuring.
The number of workers collecting jobless benefits rose by 11,000 to 2.48 million in the week ending July 22. The four-week average of continuing jobless claims rose by 8,000 to 2.47 million, the most since March. As a reminder, once an individual ceases to collect unemployment benefits, that individual is no longer counted as unemployed.
The audited financial statement — prepared by the Treasury Department — reveals a federal government in far worse financial shape than official budget reports indicate, a USA TODAY analysis found. The government has run a deficit of $2.9 trillion since 1997, according to the audited number. The official deficit since then is just $729 billion. The difference is equal to an entire year's worth of federal spending.
Univision Communications Inc. on Thursday said its second-quarter profit nearly tripled on a 38% revenue increase at its television networks and stations. The company earned $107.4 million, or 32 cents a share, compared with a profit of $36.1 million, or 10 cents a share -- including the writedown of a loss in the fair value of an investment -- in the prior year. Earnings in the latest three months include $16.3 million in charges related to the company's move to put itself up for sale, costs related to its ongoing litigation with Grupo Televisa and stock-based compensation. Excluding those charges, Univision would have earned $116.6 million, or 34 cents a share, in the latest quarter. Revenue rose to $634 million from $508 million. (Corrects profit excluding charges in latest quarter.) Unfortunately, yesterday was not a very good day for Starbucks, Medtronic, St. Jude Medical, Boston Scientific, CBS, Sprint, Transocean Oil, Prudential Financial, MGM Mirage, and Las Vegas Sands, to name a few.
The 2-year Treasury yield is 4.98% and the 10-year is 4.94%. Again, we have an inverted yield curve.
Many economists are suggesting that the nonfarm payrolls for July will increase by 143,000 and that wage inflation will rise slightly. As such, there is an increasing consensus that the Fed will pause next week. Will that help Target's sales or the results from the Gap? Pier I says they see a worsening macro-economic environment. It could be that their merchandise stinks the house out.
General John Abizaid, the top U.S. commander in the Middle East:``The sectarian violence is probably as bad as I've seen it, in Baghdad in particular,'' Abizaid told the Senate Armed Services Committee in Washington. ``If not stopped, Iraq could slide into civil war.'' As I have said for the last 5+ years, Bush will go down as the worst president in our history.
Wednesday, August 02, 2006
The New Reality
8/3/06 The New Reality
Looking at the various markets, we are to believe the new reality is for declining interest rates to co-exist with a weaker dollar, a rising inflationary environment, and a consumer-based economy that will not falter even though the consumer is saddled with paychecks chipped away by rising federal, state, and local taxes and by higher energy expenses.
Dietrich Bonhoeffer: "To understand reality is not the same as to know about outward events. It is to perceive the essential nature of things. The best-informed man is not necessarily the wisest. Indeed there is a danger that precisely in the multiplicity of his knowledge he will lose sight of what is essential. But on the other hand, knowledge of an apparently trivial detail quite often makes it possible to see into the depth of things. And so the wise man will seek to acquire the best possible knowledge about events, but always without becoming dependent upon this knowledge. To recognize the significant in the factual is wisdom."
Ford Motor Co. said Wednesday it's lowered the suggested retail price sfor its F-150 pick-up truck product line by as much as $1,400. The company said the average price reductions, by cab style, are $720 for its Regular Cab models, $830 for its SuperCabs and $949 for its SuperCrews. Including destination charges, it said pricing for its F-150 XL Regular Cab 4X2 will begin at $19,120 and that the product line's pricing will range up to $39,565 for the F-150 Lariat King Ranch SuperCrew 4X4. Ford stated "Based on the recent trend in sales, we now expect our Premier Automotive Group operating segment to be unprofitable for 2006."
Saks Inc. said it's selling its Parisian specialty department store business to Belk Inc. for $285 million in cash. The company said it will distribute a large part of the price to shareholders, either through a share buyback, special dividend or combination of the two.
The ADP report looks for nonfarm payrolls to grow by about 114,000 in July vs. the 143,000 expected by economists.
Walgreen Co. on Wednesday said July sales at stores open at least one year rose 9.7%.
Returning to Ford, the company hired Kenneth Leet, a former M&A banker with Goldman Sachs and B of A, to act as an advisor to the CEO of Ford. Leet will look at the divisions of the company and recommend which should be sold. There was a mention in the WSJ of possibly looking at alliances. I doubt this. The company has had many alliances over the years. That would not be a new direction. I continue to believe that the company will be sold in whole or in parts.
Salman Rushdie: "Reality is a question of perspective; the further you get from the past, the more concrete and plausible it seems -- but as you approach the present, it inevitably seems incredible."
Crude for September delivery rose 90 cents to $75.81 a barrel. Natural-gas prices rose 22.5 cents to end at $7.799 per million British Thermal Units. Gasoline futures rose 6.15 cents to $2.338 a gallon while heating oil futures ended up 4.9 cents at $2.129 a gallon. The 10-year Treasury ignored the rise in energy prices and the yield dropped to 4.96%.
Gold for October delivery closed up $5.20 at $657.60. Silver rose 50.5 cents to $12.245 an ounce. Platinum added $2.10 to $1,260.60, palladium added $7 to $328.95 an ounce, and copper lost 0.2 cent to $3.591 a pound.
In the first quarter, Medtronic said pacemaker sales grew 3 percent to $460 million, and ICD sales fell 6 percent to $675 million from last year. Spinal revenue rose 14 percent to $598 million from a year ago. Overall, sales and earnings rose but fell short of analyst expectations. Medtronic shares fell $3.18, or 6.2 percent, to $47.75 in after-hours trading on the INET electronic exchange.
Starbucks said sales at coffee shops open at least 13 months rose 4 percent in July. Three analysts' forecasts ranged from a rise of 6 percent to 7 percent in comparable-store sales, according to research reports.
"This is the first time we've seen comp-store sales drop this low, so concerns about overall consumer spending and its effect on Starbucks will now be affecting the shares," said Don Gher, chief investment officer with Bellevue, Washington-based investment firm Coldstream Capital Management. In after-hours trading the shares declined 7% to $31.
Richard Daughty: "My Sensitive Mogambo Nose For Danger (SMNFD) catches a whiff of the overpowering stench of a looming disaster writ large, as inflation in the price of energy is, if I may lapse into official theoretical economist-speak, the "Revenge Of Stark Reality" theory, which, if you are even passingly familiar with the term "revenge", is all you need to know to be afraid and paranoid, as you should be. Ugh.
****Mogambo sez: Gold, silver and oil have been a winner for the last three years, and they will surely be a winner for the next three, too. And almost certainly more.
So keep loading up with them. One day you will be very, very glad (VVG) you did."
Looking at the various markets, we are to believe the new reality is for declining interest rates to co-exist with a weaker dollar, a rising inflationary environment, and a consumer-based economy that will not falter even though the consumer is saddled with paychecks chipped away by rising federal, state, and local taxes and by higher energy expenses.
Dietrich Bonhoeffer: "To understand reality is not the same as to know about outward events. It is to perceive the essential nature of things. The best-informed man is not necessarily the wisest. Indeed there is a danger that precisely in the multiplicity of his knowledge he will lose sight of what is essential. But on the other hand, knowledge of an apparently trivial detail quite often makes it possible to see into the depth of things. And so the wise man will seek to acquire the best possible knowledge about events, but always without becoming dependent upon this knowledge. To recognize the significant in the factual is wisdom."
Ford Motor Co. said Wednesday it's lowered the suggested retail price sfor its F-150 pick-up truck product line by as much as $1,400. The company said the average price reductions, by cab style, are $720 for its Regular Cab models, $830 for its SuperCabs and $949 for its SuperCrews. Including destination charges, it said pricing for its F-150 XL Regular Cab 4X2 will begin at $19,120 and that the product line's pricing will range up to $39,565 for the F-150 Lariat King Ranch SuperCrew 4X4. Ford stated "Based on the recent trend in sales, we now expect our Premier Automotive Group operating segment to be unprofitable for 2006."
Saks Inc. said it's selling its Parisian specialty department store business to Belk Inc. for $285 million in cash. The company said it will distribute a large part of the price to shareholders, either through a share buyback, special dividend or combination of the two.
The ADP report looks for nonfarm payrolls to grow by about 114,000 in July vs. the 143,000 expected by economists.
Walgreen Co. on Wednesday said July sales at stores open at least one year rose 9.7%.
Returning to Ford, the company hired Kenneth Leet, a former M&A banker with Goldman Sachs and B of A, to act as an advisor to the CEO of Ford. Leet will look at the divisions of the company and recommend which should be sold. There was a mention in the WSJ of possibly looking at alliances. I doubt this. The company has had many alliances over the years. That would not be a new direction. I continue to believe that the company will be sold in whole or in parts.
Salman Rushdie: "Reality is a question of perspective; the further you get from the past, the more concrete and plausible it seems -- but as you approach the present, it inevitably seems incredible."
Crude for September delivery rose 90 cents to $75.81 a barrel. Natural-gas prices rose 22.5 cents to end at $7.799 per million British Thermal Units. Gasoline futures rose 6.15 cents to $2.338 a gallon while heating oil futures ended up 4.9 cents at $2.129 a gallon. The 10-year Treasury ignored the rise in energy prices and the yield dropped to 4.96%.
Gold for October delivery closed up $5.20 at $657.60. Silver rose 50.5 cents to $12.245 an ounce. Platinum added $2.10 to $1,260.60, palladium added $7 to $328.95 an ounce, and copper lost 0.2 cent to $3.591 a pound.
In the first quarter, Medtronic said pacemaker sales grew 3 percent to $460 million, and ICD sales fell 6 percent to $675 million from last year. Spinal revenue rose 14 percent to $598 million from a year ago. Overall, sales and earnings rose but fell short of analyst expectations. Medtronic shares fell $3.18, or 6.2 percent, to $47.75 in after-hours trading on the INET electronic exchange.
Starbucks said sales at coffee shops open at least 13 months rose 4 percent in July. Three analysts' forecasts ranged from a rise of 6 percent to 7 percent in comparable-store sales, according to research reports.
"This is the first time we've seen comp-store sales drop this low, so concerns about overall consumer spending and its effect on Starbucks will now be affecting the shares," said Don Gher, chief investment officer with Bellevue, Washington-based investment firm Coldstream Capital Management. In after-hours trading the shares declined 7% to $31.
Richard Daughty: "My Sensitive Mogambo Nose For Danger (SMNFD) catches a whiff of the overpowering stench of a looming disaster writ large, as inflation in the price of energy is, if I may lapse into official theoretical economist-speak, the "Revenge Of Stark Reality" theory, which, if you are even passingly familiar with the term "revenge", is all you need to know to be afraid and paranoid, as you should be. Ugh.
****Mogambo sez: Gold, silver and oil have been a winner for the last three years, and they will surely be a winner for the next three, too. And almost certainly more.
So keep loading up with them. One day you will be very, very glad (VVG) you did."
Tuesday, August 01, 2006
Relieving Stress
8/2/06 Relieving Stress
The top 10 ways to relieve Stress:
1. Mad TV Show
2. Watching the Fed print money
3. Listening to Mel Gibson explain he is not an anti-Semite
4. The Daily Show
5. Watching the Fed fight inflation
6. Watching Bush salute
7. Dave Chappelle
8. The Geico ad with Little Richard
9. The Colbert Report
10.Bush struggling to tell the truth, and losing the battle
The Commerce Department said construction spending rose 0.3% in June. The National Association of Realtors said the pending home sales index rose 0.4% in June, its second month of gains, it is down 9.6% in the past 12 months.
The ISM Manufacturing index rose to 54.7% in July from 53.8% in June. New orders fell to 56.1% in July from 57.9% in June; however, production picked up to 57.6% from 55.1% in the previous month. The employment index rose to 50.7% from 48.7%. The price index jumped to 78.5% from 76.5%. This is the highest level since October.
A U.S. Department of Commerce report showed personal consumption dropped in June by .2%.
Some high P/E stocks are taking it on the chin, such as, Whole Foods down 6 points and Expeditors down
5 points.
Challenger Gray and Christmas said there were 37,168 job cuts in July, down 50% from June. This was the lowest in six years.
Eastman Kodak's report was from hunger and the stock dropped under 20.
The dollar index has been holding at or above the 85 level. If the Friday employment report surprises on the upside, I do not believe the 85 level will hold.
The core personal consumption expenditure price index (excluding food and energy) increased 0.2% for the third straight month in June, the U.S. Commerce Department said, and has risen 2.4% in the past 12 months, matching the largest year-over-year gain since April 1995.
Personal incomes rose 0.6% in June, outpacing the 0.4% increase in consumer spending. The personal savings rate rose to negative 1.5% from negative 1.6%.
Crude for September delivery rose 51 cents to $74.91. Gasoline futures closed up 6.32 cents, or 2.9% to $2.28 a barrel. Natural-gas futures fell 63.70 cents to $7.57 per million British thermal units. Heating oil futures rose 4.28 cents to $2.08 a barrel.
Gold for Oct. delivery closed up $12 at $652.40. Platinum added $16.90 to $1,258.50. Copper rose 2.3 cents to $3.593 a pound. Silver added 27 cents to $11.74 an ounce.
Vehicle sales for GM, Ford, and Chrysler were so lousy I almost puked. Nissan should be a perfect match for GM. Their sales stunk the house out too.
ContraryInvestor.com: "Residential real estate affordability depends on two key components - cost of capital and price. As of the most recent readings (June of this year), the housing affordability composite index rests at a low not seen since mid-1989. The National Association of Realtors also breaks down affordability between fixed and ARM buyers. The ARM affordability component of the composite fell to a low not seen for 20 years. We have the very strong feeling that looking ahead, the character of residential real estate is not going to be primarily dependent on cost of capital, but perhaps more driven by price sensitivity than at any time in decades given the leverage already built up at the household level...Can this current dollar volume "inventory" situation in residential real estate resolve itself without further ruffling a few price feathers? Although the final hard versus soft landing verdict on housing, and by extension the US economy, remains to be delivered, storm clouds have clearly gathered and continue to grow just a bit darker by the day. If we were you, we'd take a few steps back from the proverbial housing cycle landing pad...just in case. We're not so sure we want to be too close to this thing when it lands."
Traders are now pricing in a 43% chance that the Fed will raise its target on overnight rates to 5.50% from 5.25% after its Aug. 8 meeting, up from a 32% chance late Monday.
Libor is the highest since the start of 2001.The premium banks now charge over the Libor rate is the widest in 13 months.
Bertrand Russell: "One of the symptoms of an approaching nervous breakdown is the belief that one's work is terribly important."
The top 10 ways to relieve Stress:
1. Mad TV Show
2. Watching the Fed print money
3. Listening to Mel Gibson explain he is not an anti-Semite
4. The Daily Show
5. Watching the Fed fight inflation
6. Watching Bush salute
7. Dave Chappelle
8. The Geico ad with Little Richard
9. The Colbert Report
10.Bush struggling to tell the truth, and losing the battle
The Commerce Department said construction spending rose 0.3% in June. The National Association of Realtors said the pending home sales index rose 0.4% in June, its second month of gains, it is down 9.6% in the past 12 months.
The ISM Manufacturing index rose to 54.7% in July from 53.8% in June. New orders fell to 56.1% in July from 57.9% in June; however, production picked up to 57.6% from 55.1% in the previous month. The employment index rose to 50.7% from 48.7%. The price index jumped to 78.5% from 76.5%. This is the highest level since October.
A U.S. Department of Commerce report showed personal consumption dropped in June by .2%.
Some high P/E stocks are taking it on the chin, such as, Whole Foods down 6 points and Expeditors down
5 points.
Challenger Gray and Christmas said there were 37,168 job cuts in July, down 50% from June. This was the lowest in six years.
Eastman Kodak's report was from hunger and the stock dropped under 20.
The dollar index has been holding at or above the 85 level. If the Friday employment report surprises on the upside, I do not believe the 85 level will hold.
The core personal consumption expenditure price index (excluding food and energy) increased 0.2% for the third straight month in June, the U.S. Commerce Department said, and has risen 2.4% in the past 12 months, matching the largest year-over-year gain since April 1995.
Personal incomes rose 0.6% in June, outpacing the 0.4% increase in consumer spending. The personal savings rate rose to negative 1.5% from negative 1.6%.
Crude for September delivery rose 51 cents to $74.91. Gasoline futures closed up 6.32 cents, or 2.9% to $2.28 a barrel. Natural-gas futures fell 63.70 cents to $7.57 per million British thermal units. Heating oil futures rose 4.28 cents to $2.08 a barrel.
Gold for Oct. delivery closed up $12 at $652.40. Platinum added $16.90 to $1,258.50. Copper rose 2.3 cents to $3.593 a pound. Silver added 27 cents to $11.74 an ounce.
Vehicle sales for GM, Ford, and Chrysler were so lousy I almost puked. Nissan should be a perfect match for GM. Their sales stunk the house out too.
ContraryInvestor.com: "Residential real estate affordability depends on two key components - cost of capital and price. As of the most recent readings (June of this year), the housing affordability composite index rests at a low not seen since mid-1989. The National Association of Realtors also breaks down affordability between fixed and ARM buyers. The ARM affordability component of the composite fell to a low not seen for 20 years. We have the very strong feeling that looking ahead, the character of residential real estate is not going to be primarily dependent on cost of capital, but perhaps more driven by price sensitivity than at any time in decades given the leverage already built up at the household level...Can this current dollar volume "inventory" situation in residential real estate resolve itself without further ruffling a few price feathers? Although the final hard versus soft landing verdict on housing, and by extension the US economy, remains to be delivered, storm clouds have clearly gathered and continue to grow just a bit darker by the day. If we were you, we'd take a few steps back from the proverbial housing cycle landing pad...just in case. We're not so sure we want to be too close to this thing when it lands."
Traders are now pricing in a 43% chance that the Fed will raise its target on overnight rates to 5.50% from 5.25% after its Aug. 8 meeting, up from a 32% chance late Monday.
Libor is the highest since the start of 2001.The premium banks now charge over the Libor rate is the widest in 13 months.
Bertrand Russell: "One of the symptoms of an approaching nervous breakdown is the belief that one's work is terribly important."
Monday, July 31, 2006
Stressed
8/1/06 Stressed
Factory activity in the Chicago region accelerated in July, the National Association for Supply Managment-Chicago said Monday. The Chicago purchasing managers index rose to 57.9% from 56.5% in June. The new orders index rose to 60.0% from 57.2%. The prices paid index dipped to 86.8% from 89.0%. The employment index was steady at 50.5%.
St. Louis Fed president William Poole said he hasn't made up his mind whether the Fed should raise rates at its next meeting on Aug. 8. "I am still 50-50, we still have important data yet to come," Poole told reporters after a speech.
John Hussman: "Investors are tenuously sticking to the first story line – moderating growth with no risk of recession, moderating inflation, beliefs that stocks are reasonably valued, and hopes for an end to the tightening cycle. Yet the data are actually consistent with a second story line – emerging (though not imminent) recession risks, persistent “structural” inflation, rich valuations, probable contraction of profit margins, and an incoherent Fed policy that is likely to become even more incoherent in attempting to battle weaker economic growth and persistent inflation simultaneously (not that I believe Fed actions will be effective in any event)."
Yesterday morning the VIX opened up on a gap by about one-half a point at 14.86. For the next four hours or so the VIX barely moved and traded up slightly to 15.13, and finally closed at 14.95. In essence, there was little range on the day. However, my gut tells me that volatility has a chance to spike once again.
A few weeks ago I suggested you consider purchasing natural gas at 6.50 per million cubic feet and adding as it dropped quickly to 5.75. With this heat wave natural gas has had a nice move up to 8.21 and is up 35% for July (certainly not chopped liver), and I believe we should take our profits.
It was over a year ago that I suggested selling one share of Citigroup, one share of B of A, and one share of JP Morgan and buying 3 shares of Wells Fargo. Obviously, the trade could be done in varying amounts but the idea was to keep the ratio the same. After accounting for dividends, the trade is now 13 points in our favor and I suggest we take our profits.
100 degree heat without rain day after day can stress the crops in the field. Now let's consider stress on Main Street. First we'll examine crude and gas at the pump. Let's say gas remains near $3 a gallon for a period of time, for example, in July, August, and September. Over that period there has not been inflation in gasoline because prices have remained the same. However, the pockets of the consumer continue to be stressed and stretched. Now let's combine that with the price of a house. Nationally, on average, prices remain close to the same they were one year ago and let's say that continues between July and September. Within that timeframe some parts of the country are experiencing declines but some, such as in King County, Washington are seeing prices continue to rise. On balance, on average, although nationally the prices are roughly the same, there is an impact on the mindset of the consumer. The individual homeowner begins to question the wealth effect from the home. Why? Houses are sitting on the market longer, there are more homes on the market, and the increases, when they occur, are more nickel and dime rather than in large increments. That change in the mindset creates stress and decreases the propensity to spend freely on non-essential items.
Shell Canada plans to proceed with the first expansion of its Athabasca oilsands project, even though the company says it could cost as much as $12.8 billion.
Teck Cominco Ltd. increased its takeover offer for Inco Ltd. to $82.50 a share, adding $2.7-billion of cash to the bid for the world's second-largest nickel miner.
Doug Casey: “If you invest wisely now, the emerging paper bear market will eventually prove in your favor. As foreign governments look to avail themselves of more gold for their reserves, you should do the same.”
According to earthfiles, the San Andreas Fault is so stressed, the next quake could be magnitude 8.
Alvin Toffler: “Future shock [is] the shattering stress and disorientation that we induce in individuals by subjecting them to too much change in too short a time.”
Factory activity in the Chicago region accelerated in July, the National Association for Supply Managment-Chicago said Monday. The Chicago purchasing managers index rose to 57.9% from 56.5% in June. The new orders index rose to 60.0% from 57.2%. The prices paid index dipped to 86.8% from 89.0%. The employment index was steady at 50.5%.
St. Louis Fed president William Poole said he hasn't made up his mind whether the Fed should raise rates at its next meeting on Aug. 8. "I am still 50-50, we still have important data yet to come," Poole told reporters after a speech.
John Hussman: "Investors are tenuously sticking to the first story line – moderating growth with no risk of recession, moderating inflation, beliefs that stocks are reasonably valued, and hopes for an end to the tightening cycle. Yet the data are actually consistent with a second story line – emerging (though not imminent) recession risks, persistent “structural” inflation, rich valuations, probable contraction of profit margins, and an incoherent Fed policy that is likely to become even more incoherent in attempting to battle weaker economic growth and persistent inflation simultaneously (not that I believe Fed actions will be effective in any event)."
Yesterday morning the VIX opened up on a gap by about one-half a point at 14.86. For the next four hours or so the VIX barely moved and traded up slightly to 15.13, and finally closed at 14.95. In essence, there was little range on the day. However, my gut tells me that volatility has a chance to spike once again.
A few weeks ago I suggested you consider purchasing natural gas at 6.50 per million cubic feet and adding as it dropped quickly to 5.75. With this heat wave natural gas has had a nice move up to 8.21 and is up 35% for July (certainly not chopped liver), and I believe we should take our profits.
It was over a year ago that I suggested selling one share of Citigroup, one share of B of A, and one share of JP Morgan and buying 3 shares of Wells Fargo. Obviously, the trade could be done in varying amounts but the idea was to keep the ratio the same. After accounting for dividends, the trade is now 13 points in our favor and I suggest we take our profits.
100 degree heat without rain day after day can stress the crops in the field. Now let's consider stress on Main Street. First we'll examine crude and gas at the pump. Let's say gas remains near $3 a gallon for a period of time, for example, in July, August, and September. Over that period there has not been inflation in gasoline because prices have remained the same. However, the pockets of the consumer continue to be stressed and stretched. Now let's combine that with the price of a house. Nationally, on average, prices remain close to the same they were one year ago and let's say that continues between July and September. Within that timeframe some parts of the country are experiencing declines but some, such as in King County, Washington are seeing prices continue to rise. On balance, on average, although nationally the prices are roughly the same, there is an impact on the mindset of the consumer. The individual homeowner begins to question the wealth effect from the home. Why? Houses are sitting on the market longer, there are more homes on the market, and the increases, when they occur, are more nickel and dime rather than in large increments. That change in the mindset creates stress and decreases the propensity to spend freely on non-essential items.
Shell Canada plans to proceed with the first expansion of its Athabasca oilsands project, even though the company says it could cost as much as $12.8 billion.
Teck Cominco Ltd. increased its takeover offer for Inco Ltd. to $82.50 a share, adding $2.7-billion of cash to the bid for the world's second-largest nickel miner.
Doug Casey: “If you invest wisely now, the emerging paper bear market will eventually prove in your favor. As foreign governments look to avail themselves of more gold for their reserves, you should do the same.”
According to earthfiles, the San Andreas Fault is so stressed, the next quake could be magnitude 8.
Alvin Toffler: “Future shock [is] the shattering stress and disorientation that we induce in individuals by subjecting them to too much change in too short a time.”
Sunday, July 30, 2006
Facts
7/31/06 Facts
Wal-Mart estimated that July sales rose 2.4 percent at its U.S. stores open at least a year, toward the high end of its forecast. Some discounting probably helped back-to-school sales. One should recall that Target lowered its monthly sales forecast on July 17, and is now expecting a 3 percent to 4 percent same-store sales gain, down from its original forecast for 4 percent to 6 percent growth.
Bill Bonner: "ARMs are in fact diabolical devices intended to speed marginal buyers on the glittering road to hell. ARMs give the weakest buyer the luxury of pretending to buy what he really can’t afford."
Mike Burk: "During the 2nd year of the Presidential Cycle the coming week has had an average negative return of over 2% as measured by the OTC and a modest negative return as measured by SPX. Measuring the week over all years since 1928 the SPX has had a very modest positive bias while the OTC since 1963 has been slightly negative and both have been up about 50% of the time. All of the largest drawdowns for the period have occurred since 1990."
John Howard has agreed to consider a West Australian plan to put aside some of the nation's offshore gas reserves for domestic use. Premier Alan Carpenter wants up to 20 per cent of the reserves to be held back to meet future domestic demand rather than being exported as liquefied natural gas to markets in Asia and North America.
He has warned that, under current contracts, natural gas supplies for West Australian households and industry could run out within 10 to 15 years.
PetroChina has announced that a first batch of crude oil has been successfully piped from Kazakhstan to its oil tank field in northwestern Xinjiang Uygur Autonomous Region via the China-Kazakhstan Pipeline. The oil reached the refinery at 5 p.m. Saturday. The arrival of the first crude oil imports signals full commercial operation for China's first cross-country crude oil pipeline.
It will be interesting to note June's personal income and its comparison with personal spending.
If manufacturing jobs increased in July, what impact might that have on overall onfarm payrolls for the month?
U.S. oil demand in May averaged 20.463 million barrels a day - the highest-ever for the month - and 1.6% above a year earlier, the Energy Information Administration said Friday.
Interest rate rises are expected this week for the Eurozone, Australia and South Africa. The question mark is for the UK.
Wal-Mart estimated that July sales rose 2.4 percent at its U.S. stores open at least a year, toward the high end of its forecast. Some discounting probably helped back-to-school sales. One should recall that Target lowered its monthly sales forecast on July 17, and is now expecting a 3 percent to 4 percent same-store sales gain, down from its original forecast for 4 percent to 6 percent growth.
Bill Bonner: "ARMs are in fact diabolical devices intended to speed marginal buyers on the glittering road to hell. ARMs give the weakest buyer the luxury of pretending to buy what he really can’t afford."
Mike Burk: "During the 2nd year of the Presidential Cycle the coming week has had an average negative return of over 2% as measured by the OTC and a modest negative return as measured by SPX. Measuring the week over all years since 1928 the SPX has had a very modest positive bias while the OTC since 1963 has been slightly negative and both have been up about 50% of the time. All of the largest drawdowns for the period have occurred since 1990."
John Howard has agreed to consider a West Australian plan to put aside some of the nation's offshore gas reserves for domestic use. Premier Alan Carpenter wants up to 20 per cent of the reserves to be held back to meet future domestic demand rather than being exported as liquefied natural gas to markets in Asia and North America.
He has warned that, under current contracts, natural gas supplies for West Australian households and industry could run out within 10 to 15 years.
PetroChina has announced that a first batch of crude oil has been successfully piped from Kazakhstan to its oil tank field in northwestern Xinjiang Uygur Autonomous Region via the China-Kazakhstan Pipeline. The oil reached the refinery at 5 p.m. Saturday. The arrival of the first crude oil imports signals full commercial operation for China's first cross-country crude oil pipeline.
It will be interesting to note June's personal income and its comparison with personal spending.
If manufacturing jobs increased in July, what impact might that have on overall onfarm payrolls for the month?
U.S. oil demand in May averaged 20.463 million barrels a day - the highest-ever for the month - and 1.6% above a year earlier, the Energy Information Administration said Friday.
Interest rate rises are expected this week for the Eurozone, Australia and South Africa. The question mark is for the UK.
Saturday, July 29, 2006
Thoughts
7/30/06 Thoughts
John Maudlin: "If the Fed pauses in August, it will only be because they think the economy is going to slow down much faster than it already is. I do not see how that can be good for the stock market. And if they raise rates yet again, they indicate that they are going to maintain the fight on inflation, until inflation and then the economy do in fact slow down. I just don't see how that is a good environment for the stock market."
I have a feeling in my gut that the current prices at the gas pump will be the highs for 2006.
There is so much press these days about myspace.com. Don't look now but Cyworld.com from South Korea is arriving in the U.S.A. in August. You shouldn't be surprised if Cyworld eats myspace's lunch.
Brett Steenbarger: "I went back to February, 1996 (N = 2618 trading days) and found 565 periods in which SPX had risen between 2%-5% in a ten-day period. When the move was smooth--seven or more of the days rising (N = 248)--the next ten days were up on average by .44% (154 up, 94 down). When the move was not smooth--six or fewer of the days rising (N = 317)--the next ten days were up on average only .08% (166 up, 151 down).
It thus appears that rises interspersed with selling have poorer near-term outcomes than rises that are smooth and consistent. The market's recent 10-day rise, by this gauge, is not necessarily a stimulus for superior returns going forward."
Saudi Arabia will receive about $200 billion in oil revenue this year.
Doug Noland: "It is worth noting that Bank Real Estate Loans expanded at a 13.7% annualized rate during the second quarter (from Fed data), with what appears a major push to commercial real estate lending. Estimates have second quarter bank loan growth as high as 11%, and it is simply difficult to envisage the economy faltering meaningfully in the face of such a rampant expansion of finance."
Volkmar Hable: "In every issue of this Investment Commentary since January I have warned to get out of stocks and prepare for a serious decline. Here we are in the middle of the second leg down, and there are still people owning stocks and hoping for a reversal. This rally into mid-July was the last chance (very likely for this year) to get out of long positions.
Remember: managing risk and avoiding losses is key for long-term success. Don't risk your capital and forget risk management for some short term gains. In a sideways market traders and investors should focus on opportunistic strategies!"
Cascade Natural Gas management is expecting earnings for fiscal year 2006 to be in the range of $1.12 to $1.16. Their outlook assumes average weather for the rest of the fiscal year and excludes fourth quarter costs related to the pending merger with MDU.
More than 60 percent of the United States now has abnormally dry or drought conditions, stretching from Georgia to Arizona and across the north through the Dakotas, Minnesota, Montana and Wisconsin, said Mark Svoboda, a climatologist for the National Drought Mitigation Center at the University of Nebraska at Lincoln.
An area stretching from south central North Dakota to central South Dakota is the most drought-stricken region in the nation, Svoboda said.
"It's the epicenter," he said. "It's just like a wasteland in north central South Dakota."
Benjamin Franklin: "He that's secure is not safe."
John Maudlin: "If the Fed pauses in August, it will only be because they think the economy is going to slow down much faster than it already is. I do not see how that can be good for the stock market. And if they raise rates yet again, they indicate that they are going to maintain the fight on inflation, until inflation and then the economy do in fact slow down. I just don't see how that is a good environment for the stock market."
I have a feeling in my gut that the current prices at the gas pump will be the highs for 2006.
There is so much press these days about myspace.com. Don't look now but Cyworld.com from South Korea is arriving in the U.S.A. in August. You shouldn't be surprised if Cyworld eats myspace's lunch.
Brett Steenbarger: "I went back to February, 1996 (N = 2618 trading days) and found 565 periods in which SPX had risen between 2%-5% in a ten-day period. When the move was smooth--seven or more of the days rising (N = 248)--the next ten days were up on average by .44% (154 up, 94 down). When the move was not smooth--six or fewer of the days rising (N = 317)--the next ten days were up on average only .08% (166 up, 151 down).
It thus appears that rises interspersed with selling have poorer near-term outcomes than rises that are smooth and consistent. The market's recent 10-day rise, by this gauge, is not necessarily a stimulus for superior returns going forward."
Saudi Arabia will receive about $200 billion in oil revenue this year.
Doug Noland: "It is worth noting that Bank Real Estate Loans expanded at a 13.7% annualized rate during the second quarter (from Fed data), with what appears a major push to commercial real estate lending. Estimates have second quarter bank loan growth as high as 11%, and it is simply difficult to envisage the economy faltering meaningfully in the face of such a rampant expansion of finance."
Volkmar Hable: "In every issue of this Investment Commentary since January I have warned to get out of stocks and prepare for a serious decline. Here we are in the middle of the second leg down, and there are still people owning stocks and hoping for a reversal. This rally into mid-July was the last chance (very likely for this year) to get out of long positions.
Remember: managing risk and avoiding losses is key for long-term success. Don't risk your capital and forget risk management for some short term gains. In a sideways market traders and investors should focus on opportunistic strategies!"
Cascade Natural Gas management is expecting earnings for fiscal year 2006 to be in the range of $1.12 to $1.16. Their outlook assumes average weather for the rest of the fiscal year and excludes fourth quarter costs related to the pending merger with MDU.
More than 60 percent of the United States now has abnormally dry or drought conditions, stretching from Georgia to Arizona and across the north through the Dakotas, Minnesota, Montana and Wisconsin, said Mark Svoboda, a climatologist for the National Drought Mitigation Center at the University of Nebraska at Lincoln.
An area stretching from south central North Dakota to central South Dakota is the most drought-stricken region in the nation, Svoboda said.
"It's the epicenter," he said. "It's just like a wasteland in north central South Dakota."
Benjamin Franklin: "He that's secure is not safe."
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