12/24/06 Holiday Greetings
An explosion rocked the outside of a government building in Nigeria's southern oil hub Saturday, soon after the military reported an overnight bombing of a water pipeline leading into a refinery.
The attacks came at the end of a week of violent strikes against petroleum companies in Africa's largest oil-producing nation. Militant groups say people in the oil region aren't benefiting enough from the wealth.
A suspected car bomb blew up outside the headquarters of Rivers State government in Nigeria's oil capital Port Harcourt on Saturday but no one was killed, officials said.
The explosion occurred moments after militants from the Movement for the Emancipation of the Niger Delta (MEND) said they were about to detonate two car bombs in the region. The MEND is fighting for regional autonomy of Nigeria's oil producing south.
David Chapman: "The seventh year of the decade has a decidedly mixed record. The record for the Dow Jones Industrials since inception is a dead heat of six up and six down.
It doesn't particularly help us if the prior year (ending in 6) was an up year or a down year. When years ending in 6 were up (seven times), the year ending in 7 was down four times and up three times, including the past two. When years ending in 6 were down (five times) the year ending in 7 was up three times and down twice (and down big, both times)...With the record of years ending in 7 a dead heat, following an up year in 6 slightly favoring the bears, the third year of a second-term president favoring the bulls, and a the pre-election year also favoring the bulls we have to turn to our key cycles to look for a hint of what is to come for 2007...
Our conclusions on market direction in 2007 are clear. While the broad market could survive until March, we believe that will be either the high or a secondary high. Following that we will begin a five-year bear market with a big portion of the collapse occurring in 2007-08, very similar to the collapse of 1937-38. Gold and precious metals should resume their bull runs in 2007, with an outside chance of gold running to $1,000 an ounce. Other commodities should also rise. Oil should resume its bull market once again once we break out over $70. The US dollar should go into decline, but we expect it to be orderly, with periodic sharp corrections."
Peter Schiff: "The secondary effects of the 1 in 5 sub-prime default rate will be a chain reaction of rising interest rates and falling home prices engendering still more defaults, with the added foreclosures causing the cycle to repeat. In my opinion, when the cycle is fully played out we are more likely to see an 80% default rate rather than 20%.
The main problem is that the majority of these loans were made to people who really cannot afford to repay them and were collateralized by properties whose true values were but a fraction of the loan amounts. Once the music stops and prices return to earth, borrowers who put little or no money down may decide to simply mail in their house keys rather than make additional mortgage payments. Why would anyone stretch to spend 40% of his or her monthly income to service a $700,000 mortgage on a condo valued at $500,000, especially when there are plenty of comparable rentals that are far more affordable?"
It is hard to believe that 70 million Americans were forecast to go out and shop on Dec. 23.
Essar Shipping and Logistics (ESOL), through its subsidiary Essar Oilfields Services, has acquired a semi-submersible rig for $ 220 million (nearly Rs 1000 crore). Essar was the first Indian company to offer contract drilling services in 1985 both for onshore as well as offshore exploration and production (E&P) activity.
The rig has a drilling depth capacity of 25,000 feet and is equipped with top drive, automatic pipe handling systems and rough weather BOP launch system. Industry analysts pointed out the rates for rig had doubled in last six months and companies were scouting for brand new rigs. Essar stated “The shipyards building drilling rigs are overbooked and there are no second hand quality rigs available in the market."
In my view, it is much more advantageous to go out and buy a drilling company than to
contract to have the rigs built. The market has overlooked the long-range demand for rigs, and Helmerich and Payne, Nabors, and Bronco Drilling are selling for a fraction of their true worth- naturally, this is simply my opinion. The same can be said for the oil service companies, and, in particular, BJ Services. At some point, you will look back and kick yourself for not owning shares in these companies.
A Chevron senior drill-site manager comments, "There's a lot of prospects out here we'd like to drill but can't yet because there aren't enough rigs."
Statoil cut 95,000 barrels per day at North Sea oil and gas field for five months.
Saturday, December 23, 2006
Friday, December 22, 2006
Spelling It Out
12/23/06 Spelling It Out
Jas Jain: "For the Year Ending In September 2006:
Number of Housing Units added in a year (Supply) = 2,100,000
Increase In Number of Housing Units Occupied in a year (Demand) = 1,200,000
For the Month of November 2006:
Number of New Housing Units For Which Permits Were Filed = 1,500,000
Number of Housing Units Started = 1,600,000"
You believe the housing market has bottomed?
Paul Kasriel: "The fact that the dollar price of copper has declined along with the fall in the dollar implies that the price of copper has declined in terms of other currencies, not just the dollar. This could suggest that manufacturing activity globally is slowing."
comScore Networks Inc. raised its estimates for total online holiday shopping this season to $24.6 billion, from $24.3 billion, and representing a 25% increase from last year's season.
"For at least the past six years, gas prices have typically been on the decline at this time of year, partly because demand is lower," said Auto Club spokeswoman Carol Thorp. "But lower production levels at California refineries in the past month pushed wholesale gas prices sharply upward around Thanksgiving, and now that increase has been passed on to consumers." Inflation is muted?
George Ure: "Personal saving -- DPI less personal outlays -- was a negative $95.0 billion in November, compared with a negative $71.4 billion in October. Personal saving as a percentage of disposable personal income was a negative 1.0 percent in November, compared with a negative 0.7 percent in October."
Rupert Murdoch's News Corp. will swap its controlling stake in the satellite TV broadcaster DirecTV Group Inc. with Liberty Media Corp. in exchange for Liberty's 16 percent stake in News Corp.
Dan Denning: "The tech bubble may turn out to be a dress rehearsal for an even bigger bubble and threat now. Why do I say that?
"Here's the difference between today and 2000. Seven trillion dollars was wiped out when the tech bubble burst, proving that it was largely fictitious wealth. The real economy didn't really miss a beat…because the money people lost was not money people really had.
"It was paper gains, never realized, and ultimately lost…So all in all, for the most part, it was easy come, easy go.
"Today is much different. People have more at stake (the roof over their head), and less margin for error (fewer real assets on the balance sheet, more liabilities) and there is a connection between private equity/money shuffling capitalism and the housing markets…the connection is debt. And the debt is what makes this bubble different and worse than the last bubble.
"All that is at the household level. If the private equity boom continues (as I believe it will), it will also leave a mountain of debt rubble after the bubble bursts at the corporate level. It's odd, of course, that something as ephemeral as a bubble can leave real debt. Yet because the private equity guys are paying 40 cents for a $1.20 worth of future earnings (making up the difference with borrowed money), the newly-private companies are saddled up with debt they wouldn't have otherwise taken on before. This is, as the article notes, not real investment in new productive assets. It's debt that merely facilitates the transfer of ownership of the company's assets."
The 10-year benchmark Treasury note fell 17/32 to 100-2/32 with a yield of 4.619%, up from 4.55% late Thursday.
February crude closed at $62.41 a barrel, down 25 cents for the Friday session. January natural gas fell 16.5 cents to close at $6.635 per million British thermal units.
February gold closed at $622.30 an ounce, up 70 cents for the session. March silver rose 14.5 cents to close at $12.635 an ounce. March copper was at $2.8525 a pound, down 2.8 cents for the day.
Craig Walters: "A new poll conducted by the Kaiser Family Foundation shows that 65% of Americans strongly favor having the federal government negotiate prescription drug prices for Medicare. An additional 20% are somewhat in favor of this change."
The total U.S. death toll for American troops in Iraq is 2,960. By comparison, the 9/11 death toll was 2,752. You be the judge. Are we winning or losing the war? That does not include 25,000+ of our troops injured in Iraq.
Jas Jain: "For the Year Ending In September 2006:
Number of Housing Units added in a year (Supply) = 2,100,000
Increase In Number of Housing Units Occupied in a year (Demand) = 1,200,000
For the Month of November 2006:
Number of New Housing Units For Which Permits Were Filed = 1,500,000
Number of Housing Units Started = 1,600,000"
You believe the housing market has bottomed?
Paul Kasriel: "The fact that the dollar price of copper has declined along with the fall in the dollar implies that the price of copper has declined in terms of other currencies, not just the dollar. This could suggest that manufacturing activity globally is slowing."
comScore Networks Inc. raised its estimates for total online holiday shopping this season to $24.6 billion, from $24.3 billion, and representing a 25% increase from last year's season.
"For at least the past six years, gas prices have typically been on the decline at this time of year, partly because demand is lower," said Auto Club spokeswoman Carol Thorp. "But lower production levels at California refineries in the past month pushed wholesale gas prices sharply upward around Thanksgiving, and now that increase has been passed on to consumers." Inflation is muted?
George Ure: "Personal saving -- DPI less personal outlays -- was a negative $95.0 billion in November, compared with a negative $71.4 billion in October. Personal saving as a percentage of disposable personal income was a negative 1.0 percent in November, compared with a negative 0.7 percent in October."
Rupert Murdoch's News Corp. will swap its controlling stake in the satellite TV broadcaster DirecTV Group Inc. with Liberty Media Corp. in exchange for Liberty's 16 percent stake in News Corp.
Dan Denning: "The tech bubble may turn out to be a dress rehearsal for an even bigger bubble and threat now. Why do I say that?
"Here's the difference between today and 2000. Seven trillion dollars was wiped out when the tech bubble burst, proving that it was largely fictitious wealth. The real economy didn't really miss a beat…because the money people lost was not money people really had.
"It was paper gains, never realized, and ultimately lost…So all in all, for the most part, it was easy come, easy go.
"Today is much different. People have more at stake (the roof over their head), and less margin for error (fewer real assets on the balance sheet, more liabilities) and there is a connection between private equity/money shuffling capitalism and the housing markets…the connection is debt. And the debt is what makes this bubble different and worse than the last bubble.
"All that is at the household level. If the private equity boom continues (as I believe it will), it will also leave a mountain of debt rubble after the bubble bursts at the corporate level. It's odd, of course, that something as ephemeral as a bubble can leave real debt. Yet because the private equity guys are paying 40 cents for a $1.20 worth of future earnings (making up the difference with borrowed money), the newly-private companies are saddled up with debt they wouldn't have otherwise taken on before. This is, as the article notes, not real investment in new productive assets. It's debt that merely facilitates the transfer of ownership of the company's assets."
The 10-year benchmark Treasury note fell 17/32 to 100-2/32 with a yield of 4.619%, up from 4.55% late Thursday.
February crude closed at $62.41 a barrel, down 25 cents for the Friday session. January natural gas fell 16.5 cents to close at $6.635 per million British thermal units.
February gold closed at $622.30 an ounce, up 70 cents for the session. March silver rose 14.5 cents to close at $12.635 an ounce. March copper was at $2.8525 a pound, down 2.8 cents for the day.
Craig Walters: "A new poll conducted by the Kaiser Family Foundation shows that 65% of Americans strongly favor having the federal government negotiate prescription drug prices for Medicare. An additional 20% are somewhat in favor of this change."
The total U.S. death toll for American troops in Iraq is 2,960. By comparison, the 9/11 death toll was 2,752. You be the judge. Are we winning or losing the war? That does not include 25,000+ of our troops injured in Iraq.
Thursday, December 21, 2006
Rig Shortages
12/22/06 Shortages And Stress
I have written several times about drilling rig shortages and my suggestions to consider the purchase of Helmerich and Payne as well as Transocean. The following is a piece from seeking alpha: "Bloomberg reports a severe shortage of deep-sea oil drilling rig availability is creating delays in exploration and production for oil majors such as Chevron, which is struggling to exploit the "Jack" oil field in the Gulf of Mexico, the deepest well ever tested, announced in September. A Chevron senior drill-site manager comments, "There's a lot of prospects out here we'd like to drill but can't yet because there aren't enough rigs." Amidst the shortage, daily rental fees continue to rise, having doubled over the past 18 months. Transocean, the world's largest rig operator charges as much as $520,000/day. There are only 18 rigs in existence that can reach the deepest discoveries, and there are currently 31 rigs on order globally with such capabilities. Of these, only two will be finished next year and 13 will be ready in '08. Meanwhile, the delay in exploring and producing oil in the Gulf of Mexico means the U.S. will continue to rely on OPEC. Total daily rig operating costs which can exceed $1m/day are seen hurting profits of oil majors. Analysts surveyed by Bloomberg estimate average net income growth of 12% this year, versus 35% in '05. Earlier this month, Chevron announced a 23% increase in capex for '07 to $19.6b."
Arcelor Mittal has a memorandum of understanding with the state of Orissa in India to build a plant there in a project that will cost $9 billion.
China and oil-rich Kazakhstan have decided to work on a trans-border oil pipeline while completing the survey and delimitation of their border areas, the state media reported today.
This was stated in a document signed by Chinese President Hu Jintao and Kazakhstan President Nursultan Nazarbayev here last evening.
China and Kazakhstan also signed 11 cooperation agreements covering trade, energy, science and technology, culture and education.
The agreements include an outline agreement on oil pipeline construction and a framework agreement for Chinese funding worth USD 292.8 million.
The Labor Department reported that 315,000 U.S. workers filed initial claims for jobless benefits in the week ending Dec. 16, an increase of 9,000 from the previous week. Continuing jobless claims rose to 2.52 million, the highest amount since January.
The U.S. economy grew at a 2% real seasonally adjusted annual rate in the third quarter, slightly lower than the 2.2% estimated a month ago, the Commerce Department reported Thursday. It was the slowest growth since the fourth quarter of 2005. The economy grew at a 2.6% pace in the second quarter.
Representatives from the California-based Chandler family, Tribune Co.'s largest shareholder, attended sales presentations for the company at its Chicago headquarters this week, according to a published report.
Citing unidentified sources with knowledge of the situation, the Chicago Tribune reported Thursday that the family seems to be working with at least one of the private-equity firms that have shown interest in the company.
The Conference Board reported that the Composite Index of Leading Economic Indicators
increased 0.1% in November, following a 0.1% increase in October, and a
0.4% increase in September.
Says Ken Goldstein, Labor Economist at The Conference Board: "The
slower economy of the second half of 2006 might continue into the first
half of 2007. But it may not get any slower. Energy prices are down. The
housing slump does not appear to be deepening. And the economy retains
considerable strength. The unemployment rate remains relatively low.
Inflation is low, and so are interest rates. These are all positives with
respect to consumption and investment. At this stage, something else must
develop, either to give the economy a new jolt of energy to speed it up, or
a new snag that could force the economy to slow more."
The Conference Board reported that the Coincident Index increased 0.2%
in November, as well as in October, and increased 0.1 percent in September.
The Lagging Index increased 0.5% in November, compared with a 0.2% rise in
October and September.
About three-fourths of people in the United States, Australia, Canada, France, Germany, Italy, South Korea and the United Kingdom say they experience stress on a daily basis, according to AP-Ipsos polling. Those anxious feelings are even more intense during the holidays.
The Iranian government and China's biggest offshore oil producer, CNOOC Ltd. (0883.HK), have signed a $16-billion natural gas deal, Iranian news agency Mehr reported Wednesday. The deal would cover the development of Iran's northern Pars gas field and the construction of liquefied natural gas facilities which will export gas to China.
Rigzone reported the Iranian Oil Ministry will carry out all its oil-industry related equipment purchases in euros instead of dollars after the Iranian government decided to base its new-year budget in euros, Iran's oil minister, Kazem Vaziri Hamaneh, said Wednesday.
"Based on the government's policy of substituting the euro for the dollar, all oil industry purchase contracts will be done in the euro," the official IRNA news agency quoted Vaziri as saying.
Government spokesman Ghollam Hussein Elham said earlier this week that all national hard currency revenues, including those from oil exports, will be calculated in euros in the Iranian budget being drafted for the Iranian fiscal year beginning March 21.
The Energy Department said natural-gas inventories fell 71 billion cubic feet for the week ended Dec. 15. Global Insight expected a decline of 73 billion. Total stocks now stand at 3.167 trillion cubic feet, up 342 billion cubic feet from the year-ago level, and 274 billion cubic feet above the five-year average, the government data said.
Iran’s oil minister on Wednesday admitted that Tehran was having trouble financing oil projects, in a rare acknowledgment of the economic cost of its nuclear dispute.
“Currently, overseas banks and financiers have decreased their co-operation,” Kazem Vaziri-Hamaneh told the oil ministry news agency, Shana.
Richmond Federal Reserve Bank President Jeffery Lacker said he's not persuaded that inflation has moderated. "Such a moderation is not yet evident, despite the two most recent CPI reports.It would take several months worth of data to provide statistically convincing evidence of a moderation in inflation."
February gold fell $2.70 to close at $621.60 an ounce in New York Thursday. March silver fell 15.5 cents, or 1.2%, to end at $12.49 an ounce and March copper finished at a fresh, six-month low of $2.8805 a pound, down 7.4 cents, or 2.5%.
The Federal Reserve Bank of Philadelphia said its Philly Fed index fell to negative 4.3 in December from positive 5.1 in November. Indicators for new orders and unfilled orders also fell below zero. Shipments remained healthy.
February crude fell $1.06 to close at $62.66 a barrel Thursday. January natural-gas futures finished at $6.80 per million British thermal units.
I have written several times about drilling rig shortages and my suggestions to consider the purchase of Helmerich and Payne as well as Transocean. The following is a piece from seeking alpha: "Bloomberg reports a severe shortage of deep-sea oil drilling rig availability is creating delays in exploration and production for oil majors such as Chevron, which is struggling to exploit the "Jack" oil field in the Gulf of Mexico, the deepest well ever tested, announced in September. A Chevron senior drill-site manager comments, "There's a lot of prospects out here we'd like to drill but can't yet because there aren't enough rigs." Amidst the shortage, daily rental fees continue to rise, having doubled over the past 18 months. Transocean, the world's largest rig operator charges as much as $520,000/day. There are only 18 rigs in existence that can reach the deepest discoveries, and there are currently 31 rigs on order globally with such capabilities. Of these, only two will be finished next year and 13 will be ready in '08. Meanwhile, the delay in exploring and producing oil in the Gulf of Mexico means the U.S. will continue to rely on OPEC. Total daily rig operating costs which can exceed $1m/day are seen hurting profits of oil majors. Analysts surveyed by Bloomberg estimate average net income growth of 12% this year, versus 35% in '05. Earlier this month, Chevron announced a 23% increase in capex for '07 to $19.6b."
Arcelor Mittal has a memorandum of understanding with the state of Orissa in India to build a plant there in a project that will cost $9 billion.
China and oil-rich Kazakhstan have decided to work on a trans-border oil pipeline while completing the survey and delimitation of their border areas, the state media reported today.
This was stated in a document signed by Chinese President Hu Jintao and Kazakhstan President Nursultan Nazarbayev here last evening.
China and Kazakhstan also signed 11 cooperation agreements covering trade, energy, science and technology, culture and education.
The agreements include an outline agreement on oil pipeline construction and a framework agreement for Chinese funding worth USD 292.8 million.
The Labor Department reported that 315,000 U.S. workers filed initial claims for jobless benefits in the week ending Dec. 16, an increase of 9,000 from the previous week. Continuing jobless claims rose to 2.52 million, the highest amount since January.
The U.S. economy grew at a 2% real seasonally adjusted annual rate in the third quarter, slightly lower than the 2.2% estimated a month ago, the Commerce Department reported Thursday. It was the slowest growth since the fourth quarter of 2005. The economy grew at a 2.6% pace in the second quarter.
Representatives from the California-based Chandler family, Tribune Co.'s largest shareholder, attended sales presentations for the company at its Chicago headquarters this week, according to a published report.
Citing unidentified sources with knowledge of the situation, the Chicago Tribune reported Thursday that the family seems to be working with at least one of the private-equity firms that have shown interest in the company.
The Conference Board reported that the Composite Index of Leading Economic Indicators
increased 0.1% in November, following a 0.1% increase in October, and a
0.4% increase in September.
Says Ken Goldstein, Labor Economist at The Conference Board: "The
slower economy of the second half of 2006 might continue into the first
half of 2007. But it may not get any slower. Energy prices are down. The
housing slump does not appear to be deepening. And the economy retains
considerable strength. The unemployment rate remains relatively low.
Inflation is low, and so are interest rates. These are all positives with
respect to consumption and investment. At this stage, something else must
develop, either to give the economy a new jolt of energy to speed it up, or
a new snag that could force the economy to slow more."
The Conference Board reported that the Coincident Index increased 0.2%
in November, as well as in October, and increased 0.1 percent in September.
The Lagging Index increased 0.5% in November, compared with a 0.2% rise in
October and September.
About three-fourths of people in the United States, Australia, Canada, France, Germany, Italy, South Korea and the United Kingdom say they experience stress on a daily basis, according to AP-Ipsos polling. Those anxious feelings are even more intense during the holidays.
The Iranian government and China's biggest offshore oil producer, CNOOC Ltd. (0883.HK), have signed a $16-billion natural gas deal, Iranian news agency Mehr reported Wednesday. The deal would cover the development of Iran's northern Pars gas field and the construction of liquefied natural gas facilities which will export gas to China.
Rigzone reported the Iranian Oil Ministry will carry out all its oil-industry related equipment purchases in euros instead of dollars after the Iranian government decided to base its new-year budget in euros, Iran's oil minister, Kazem Vaziri Hamaneh, said Wednesday.
"Based on the government's policy of substituting the euro for the dollar, all oil industry purchase contracts will be done in the euro," the official IRNA news agency quoted Vaziri as saying.
Government spokesman Ghollam Hussein Elham said earlier this week that all national hard currency revenues, including those from oil exports, will be calculated in euros in the Iranian budget being drafted for the Iranian fiscal year beginning March 21.
The Energy Department said natural-gas inventories fell 71 billion cubic feet for the week ended Dec. 15. Global Insight expected a decline of 73 billion. Total stocks now stand at 3.167 trillion cubic feet, up 342 billion cubic feet from the year-ago level, and 274 billion cubic feet above the five-year average, the government data said.
Iran’s oil minister on Wednesday admitted that Tehran was having trouble financing oil projects, in a rare acknowledgment of the economic cost of its nuclear dispute.
“Currently, overseas banks and financiers have decreased their co-operation,” Kazem Vaziri-Hamaneh told the oil ministry news agency, Shana.
Richmond Federal Reserve Bank President Jeffery Lacker said he's not persuaded that inflation has moderated. "Such a moderation is not yet evident, despite the two most recent CPI reports.It would take several months worth of data to provide statistically convincing evidence of a moderation in inflation."
February gold fell $2.70 to close at $621.60 an ounce in New York Thursday. March silver fell 15.5 cents, or 1.2%, to end at $12.49 an ounce and March copper finished at a fresh, six-month low of $2.8805 a pound, down 7.4 cents, or 2.5%.
The Federal Reserve Bank of Philadelphia said its Philly Fed index fell to negative 4.3 in December from positive 5.1 in November. Indicators for new orders and unfilled orders also fell below zero. Shipments remained healthy.
February crude fell $1.06 to close at $62.66 a barrel Thursday. January natural-gas futures finished at $6.80 per million British thermal units.
Wednesday, December 20, 2006
Further Developments
12/21/06 Further Developments
Palatin Technologies and King Pharmaceuticals Complete Enrollment in
Pre-Menopausal Cohort of a Phase 2 Clinical Trial Evaluating Bremelanotide in Pre- and Post-Menopausal Female Sexual Dysfunction Patients. "Based on positive results from a pilot safety/clinical pharmacology study evaluating bremelanotide in FSD patients, Palatin and King Pharmaceuticals are jointly committed to advancing the clinical development of bremelanotide for FSD and are pleased to report continued progress in the execution of our development program," said Trevor Hallam, Ph.D., Palatin's Executive Vice President of Research & Development. "Both female sexual dysfunction and male sexual dysfunction represent significant market opportunities where we believe bremelanotide has the potential to address unmet medical needs."
George Ure: "Turn off all the power (as people in the Pacific Northwest found out last week) and suddenly you can't get milk or gasoline because the credit card machines don't work." That's true of gas pumps and gasoline etc.
Sasol will spend R45 billion in the three years to June 2009 on its capital expenditure programme.
"About 75 percent of this is set to take place within the energy sector, and an estimated 60 percent of the total will be spent in South Africa," Sasol added.
The petrochemicals group again indicated that it was engaged in preliminary feasibility studies to examine the possibility of building a second coal-to-liquids plant in South Africa.
Charlie Bobrinskoy of Ariel Capital Management in Chicago, which owns 6.6 percent of Tribune, said, "We are pleased that the board and its advisers are running a thorough process to explore all opportunities to maximize shareholder value."
M&F Worldwide Corp. said it would buy John H. Harland Company for $1.7 billion, or $52.75 a share in cash, a premium of $8.28, or 19%, over its Tuesday closing price of $44.47 a share. The merger is expected to close in the second half of 2007. M&F is controlled by Ronald Perelman, and hence, I have no interest in following this transaction to possible completion.
Bush said Tuesday for the first time that American forces were not winning in Iraq. He also said the military would be expanded to fight a long-term battle against terrorism.
Research firm Gartner expects there to be over 21 million WiMax connections in North America by 2011.
John Williams: "GAAP-Based Federal Deficit Jumps to $4.6 Trillion. Total Federal Obligations at $54.6 Trillion. Energy Pricing Gimmicks Distort CPI and Trade Deficit."
FedEx Corp. reported lower-than-expected quarterly profit on Wednesday and forecast earnings in the current period below Wall Street estimates.
Talisman Energy Inc. said Tuesday it is expanding its share buyback and will repurchase up to 10 percent of its public float over the year ending March 27.
From time to time, I mention various technology I believe will resonate over the long term. Some has been in the biotech field and some in other technology, such as, Google's search and Skype's voip. Today I'd like to leave you with Arts Alliance Labs, Inc. and their Consumer Recommendation Software for online retail businesses, a secure infrastructure for the growing Digital Cinema network around the globe, and BenTen, a framework for online community applications. I believe the offerings from AAL are the thing of the present and the future.
The American Petroleum Institute reported a drop of 4.3 million barrels in crude supplies for the week ended Dec. 15. The Energy Department had reported a fall of 6.3 million. Motor gasoline supplies were down 300,000 barrels, the API said, but the government's reported a rise of 1 million. Distillate supplies were down 1.4 million barrels, the API said, contrary to the 1.2 million-barrel rise reported by the government.
Bill Cara: "I think markets will only truly revert to normal after the next spike in gold -- something like we saw in the 1970's, where currency imbalances had to be dealt with (and gold spiked), which led to a series of Bear markets (1973-4, 1978, and 1981-2).
At this point, traders can expect a growing number of analyst downgrades and fewer numbers of upgrades because objective analysts on Wall Street can no longer ignore the fact that debt (public and private) is being created faster than wealth (ie, the increase of real enterprise value)."
A new Center for Responsible Lending (CRL) study reveals that 2.2 million American households will lose their homes and as much as $164 billion due to foreclosures in the subprime mortgage market. Titled, "Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners," the CRL study is the first comprehensive, nationwide review of millions of subprime mortgages originated from 1998 through the third quarter of 2006.
February gold fell $1.10 to close at $624.30 an ounce and March silver ended at $12.69 an ounce, down 2 cents for the session. March copper lost 6.3 cents, or 2.1%, to finish at $2.9545 a pound.
It's been about one week since approximately 150,000 of Puget Sound's customers have been without power in the Pacific Northwest. It should be noted that a similar storm hit the area in 1993. In the interim, Puget Sound has had several rate increases but only marginally improved the underground infrastructure of the power delivered to the customers. We are talking about elderly without electricity or heat in 30 degree weather. We are talking about non-working elevators. For a time, pharmacies had no power and prescriptions could not be filled. I have not even begun to discuss the business lost during the holiday season, and that should approach $750 million. Puget Sound will ask for more rate increases. Unfortunately the local PUC is an old boy network. They should make Puget Sound pay each residential customer at least $1,000 for the food thrown out and the extra expense for gasoline ( the local gasoline stations that had power raised their prices by 10 to 20 cents a gallon and the gas lines were an hour long)and for the doctor bills caused by no heat. In addition, the PUC should then all resign for the lack of due diligence. As an aside, I have not dealt with the hundreds of millions of dollars lost by businesses during the past week and going forward into Christmas. Puget Sound should be held accountable. If I were stupid enough to be a Puget Sound stockholder, I would surely sell the shares.
Charles Kingsley: "Pain is no evil, unless it conquers us."
David Walker, Comptroller of the US, recently stated that the GAO had found so many significant material deficiencies in the government’s accounting systems that the GAO was “unable to express an opinion” on the financial statements. Can you imagine if the United States of America were a public company? Enron looks good by comparison. How would you like to be a creditor of the U.S.?
Here's a little more to chew on from David Walker: "Despite improvement in both the fiscal year 2006 reported net operating cost and the cash-based budget deficit, the U.S. government’s total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the Nation’s total output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000.
As this long-term fiscal imbalance continues to grow, the retirement of the “baby boom” generation is closer to becoming a reality with the first wave of boomers eligible for early retirement under Social Security in 2008.
Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance." Don't be alarmed. The remedy from Bush is to go out and shop!
Natural-gas futures closed down 4.4% ahead of a government supply update on Thursday.
February crude rose 26 cents to close at $63.72 a barrel Wednesday.
ElkCorp said Wednesday it has received an unsolicited cash tender offer to purchase all of its shares for $40 each from Building Materials Corporation of America. It is amazing to me the multiple offers forthcoming for so many companies.
Albert Einstein: "The only justifiable purpose of political institutions is to ensure the unhindered development of the individual."
Palatin Technologies and King Pharmaceuticals Complete Enrollment in
Pre-Menopausal Cohort of a Phase 2 Clinical Trial Evaluating Bremelanotide in Pre- and Post-Menopausal Female Sexual Dysfunction Patients. "Based on positive results from a pilot safety/clinical pharmacology study evaluating bremelanotide in FSD patients, Palatin and King Pharmaceuticals are jointly committed to advancing the clinical development of bremelanotide for FSD and are pleased to report continued progress in the execution of our development program," said Trevor Hallam, Ph.D., Palatin's Executive Vice President of Research & Development. "Both female sexual dysfunction and male sexual dysfunction represent significant market opportunities where we believe bremelanotide has the potential to address unmet medical needs."
George Ure: "Turn off all the power (as people in the Pacific Northwest found out last week) and suddenly you can't get milk or gasoline because the credit card machines don't work." That's true of gas pumps and gasoline etc.
Sasol will spend R45 billion in the three years to June 2009 on its capital expenditure programme.
"About 75 percent of this is set to take place within the energy sector, and an estimated 60 percent of the total will be spent in South Africa," Sasol added.
The petrochemicals group again indicated that it was engaged in preliminary feasibility studies to examine the possibility of building a second coal-to-liquids plant in South Africa.
Charlie Bobrinskoy of Ariel Capital Management in Chicago, which owns 6.6 percent of Tribune, said, "We are pleased that the board and its advisers are running a thorough process to explore all opportunities to maximize shareholder value."
M&F Worldwide Corp. said it would buy John H. Harland Company for $1.7 billion, or $52.75 a share in cash, a premium of $8.28, or 19%, over its Tuesday closing price of $44.47 a share. The merger is expected to close in the second half of 2007. M&F is controlled by Ronald Perelman, and hence, I have no interest in following this transaction to possible completion.
Bush said Tuesday for the first time that American forces were not winning in Iraq. He also said the military would be expanded to fight a long-term battle against terrorism.
Research firm Gartner expects there to be over 21 million WiMax connections in North America by 2011.
John Williams: "GAAP-Based Federal Deficit Jumps to $4.6 Trillion. Total Federal Obligations at $54.6 Trillion. Energy Pricing Gimmicks Distort CPI and Trade Deficit."
FedEx Corp. reported lower-than-expected quarterly profit on Wednesday and forecast earnings in the current period below Wall Street estimates.
Talisman Energy Inc. said Tuesday it is expanding its share buyback and will repurchase up to 10 percent of its public float over the year ending March 27.
From time to time, I mention various technology I believe will resonate over the long term. Some has been in the biotech field and some in other technology, such as, Google's search and Skype's voip. Today I'd like to leave you with Arts Alliance Labs, Inc. and their Consumer Recommendation Software for online retail businesses, a secure infrastructure for the growing Digital Cinema network around the globe, and BenTen, a framework for online community applications. I believe the offerings from AAL are the thing of the present and the future.
The American Petroleum Institute reported a drop of 4.3 million barrels in crude supplies for the week ended Dec. 15. The Energy Department had reported a fall of 6.3 million. Motor gasoline supplies were down 300,000 barrels, the API said, but the government's reported a rise of 1 million. Distillate supplies were down 1.4 million barrels, the API said, contrary to the 1.2 million-barrel rise reported by the government.
Bill Cara: "I think markets will only truly revert to normal after the next spike in gold -- something like we saw in the 1970's, where currency imbalances had to be dealt with (and gold spiked), which led to a series of Bear markets (1973-4, 1978, and 1981-2).
At this point, traders can expect a growing number of analyst downgrades and fewer numbers of upgrades because objective analysts on Wall Street can no longer ignore the fact that debt (public and private) is being created faster than wealth (ie, the increase of real enterprise value)."
A new Center for Responsible Lending (CRL) study reveals that 2.2 million American households will lose their homes and as much as $164 billion due to foreclosures in the subprime mortgage market. Titled, "Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners," the CRL study is the first comprehensive, nationwide review of millions of subprime mortgages originated from 1998 through the third quarter of 2006.
February gold fell $1.10 to close at $624.30 an ounce and March silver ended at $12.69 an ounce, down 2 cents for the session. March copper lost 6.3 cents, or 2.1%, to finish at $2.9545 a pound.
It's been about one week since approximately 150,000 of Puget Sound's customers have been without power in the Pacific Northwest. It should be noted that a similar storm hit the area in 1993. In the interim, Puget Sound has had several rate increases but only marginally improved the underground infrastructure of the power delivered to the customers. We are talking about elderly without electricity or heat in 30 degree weather. We are talking about non-working elevators. For a time, pharmacies had no power and prescriptions could not be filled. I have not even begun to discuss the business lost during the holiday season, and that should approach $750 million. Puget Sound will ask for more rate increases. Unfortunately the local PUC is an old boy network. They should make Puget Sound pay each residential customer at least $1,000 for the food thrown out and the extra expense for gasoline ( the local gasoline stations that had power raised their prices by 10 to 20 cents a gallon and the gas lines were an hour long)and for the doctor bills caused by no heat. In addition, the PUC should then all resign for the lack of due diligence. As an aside, I have not dealt with the hundreds of millions of dollars lost by businesses during the past week and going forward into Christmas. Puget Sound should be held accountable. If I were stupid enough to be a Puget Sound stockholder, I would surely sell the shares.
Charles Kingsley: "Pain is no evil, unless it conquers us."
David Walker, Comptroller of the US, recently stated that the GAO had found so many significant material deficiencies in the government’s accounting systems that the GAO was “unable to express an opinion” on the financial statements. Can you imagine if the United States of America were a public company? Enron looks good by comparison. How would you like to be a creditor of the U.S.?
Here's a little more to chew on from David Walker: "Despite improvement in both the fiscal year 2006 reported net operating cost and the cash-based budget deficit, the U.S. government’s total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the Nation’s total output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000.
As this long-term fiscal imbalance continues to grow, the retirement of the “baby boom” generation is closer to becoming a reality with the first wave of boomers eligible for early retirement under Social Security in 2008.
Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance." Don't be alarmed. The remedy from Bush is to go out and shop!
Natural-gas futures closed down 4.4% ahead of a government supply update on Thursday.
February crude rose 26 cents to close at $63.72 a barrel Wednesday.
ElkCorp said Wednesday it has received an unsolicited cash tender offer to purchase all of its shares for $40 each from Building Materials Corporation of America. It is amazing to me the multiple offers forthcoming for so many companies.
Albert Einstein: "The only justifiable purpose of political institutions is to ensure the unhindered development of the individual."
Tuesday, December 19, 2006
Expectations
12/20/06 Expectations
Construction on new homes rebounded in November, rising 6.7% after a whopping 14% drop in October, the Commerce Department reported Tuesday. Building permits, meanwhile, fell 3% to a fresh nine-year low, signaling that the housing market remains very weak. Starts rose 6.7% in November to a seasonally adjusted annual rate of 1.588 million. Starts are down 25.5% in the past year. Building permits, considered a leading indicator, fell 3% to a seasonally adjusted annual rate of 1.506 million. Building permits are down 31.3% in the past year.
Producer prices rose by much more than expected in November, with the core producerprice index rising by the most since July 1980, the Labor Department said. The November producer price index climbed by 2%, the biggest rise since November 1974, statistics show. Most of the gain in the headline producer price number was in energy prices, which rose by 6.1%. Of that, 17.9% was gasoline prices, while 14.6% was diesel fuel. I find it interesting that, in other government data, inflation is tame because they state energy prices declined. If you go to the pump and/or pay for heating oil, the answer is pretty clear. By the way, regular unleaded gas in the Seattle area is now $2.77 a gallon.
A Pentagon report found an average of almost 960 attacks on U.S. and Iraqi targets every week from early August to early November.
The Thai government has reversed a decision to impose tough capital controls on foreign investors in the stock market after the benchmark SET index lost 15% overnight, according to Forex.com. The Thai central bank on Monday announced measures that would lock up 30% of new foreign currency deposits for a year and said the measures would become effective Tuesday. The central bank said it was trying to curb speculation that had caused the Thai baht to appreciate by about 17% against the dollar this year. "The government has now reversed the decision after seeing the effect," said Forex.com.
Nouriel Roubini provides some points in a speech by John Duggan, Comptroller of the Currency:
"* 5% of mortgage originations in 1994 were sub-prime; that is now up to 20%.
* Interest-only and payment-option ARMS were 2% of loan originations in 2000, they now account for 40%.
* 20% of payment-option ARMs originated in the past two years have loan value greater than home value, a figure that would double to 40% if home prices were to decline another 10%. Thus many mortgage holders have significant negative equity in their homes.
* 50% of the sub-prime market is now made up of ‘stated income’ mortgages where "the borrower pays the lender not to verify the borrower’s stated income on the loan application, making it possible for the borrower to artificially inflate the size of his or her income in order to qualify for a bigger mortgage."
* A study by the Mortgage Asset Research Institute found that 60% of applications for these ‘stated income’ loans exaggerated income by at least 50%.
* The increase in debt-servicing ("payment shock") coming from negative ammortization mortgages can be severe: if rates are reset even only by 2 percentage points the payment increase will amount to a near doubling of the amount of the initial monthly payments."
Zmann: "Houston Ship Channel has been shut in for 5 days with fog. 60 tankers await unloading. The region accounts for 12% of US refining capacity and I’ve seen one report of reduced throughput due to the delayed unloadings. This should set up some pretty sizable withdrawal expectations for this week and next for gasoline and heating oil."
Circuit City Stores Inc. said it swung to a loss in the fiscal third quarter as deep discounts on flat-panel televisions and computer hardware and software cut into profit margins. It also lowered its full-year sales outlook.
Oracle's sales fell short of expectations.
The peso's 6.2 percent gain against the dollar in the past six months adds to the savings for Mexicans on clothes, shoes and electronics. Mexican shoppers come from Monterrey, the northern industrial hub that is 150 miles south of Laredo, and from as far as Mexico City, 700 miles away. They spend $500 to $1,000 a trip, said Michael Patrick, director of the Texas Center for Border Economic and Enterprise Development at Texas A&M International University in Laredo.
From Daily Reckoning: "Mortgage equity withdrawal (MEW) has faltered, to an annualized rate of $214.2 billion in the third quarter of this year after peaking at $730.5 billion a year earlier."
Harrah's Entertainment Inc. has agreed to be acquired by private-equity firms Apollo Management and Texas Pacific Group for $16.7 billion plus the assumption of $11 billion in debt, according to a media report Tuesday. The private equity firms agreed to pay $90 a share for the Las Vegas casino giant, the Wall Street Journal reported on its Web site, citing a person close to the matter. Two months ago, the firms bid $81 a share, the report said. Harrah's top managers, including CEO Gary Loveman, are expected to be retained by the new owners, the Journal reported. Under the merger agreement, Harrah's may solicit superior proposals from third parties during the next 25 days, and the board of Harrah's intends to solicit superior proposals during this period. The transaction is expected to be completed in one year, and is subject to approval from shareholders and regulators.
January crude rose 94 cents to close at $63.15 a barrel on Tuesday. The February contract, which is now the front-month futures contract, climbed 67 cents to end at $63.46.
February gold climbed $7.50 to close at $625.40 an ounce Tuesday. March silver added 18.5 cents to finish at $12.71 an ounce, but March copper lost 1.2 cents to end at $3.0175 a pound.
Redback Networks Inc. announced a definitive agreement to be acquired by Ericsson for $2.1 billion or $25 dollars per Redback share. The acquisition is expected to occur by means of a tender offer for all of the outstanding shares of Redback common stock.
Construction on new homes rebounded in November, rising 6.7% after a whopping 14% drop in October, the Commerce Department reported Tuesday. Building permits, meanwhile, fell 3% to a fresh nine-year low, signaling that the housing market remains very weak. Starts rose 6.7% in November to a seasonally adjusted annual rate of 1.588 million. Starts are down 25.5% in the past year. Building permits, considered a leading indicator, fell 3% to a seasonally adjusted annual rate of 1.506 million. Building permits are down 31.3% in the past year.
Producer prices rose by much more than expected in November, with the core producerprice index rising by the most since July 1980, the Labor Department said. The November producer price index climbed by 2%, the biggest rise since November 1974, statistics show. Most of the gain in the headline producer price number was in energy prices, which rose by 6.1%. Of that, 17.9% was gasoline prices, while 14.6% was diesel fuel. I find it interesting that, in other government data, inflation is tame because they state energy prices declined. If you go to the pump and/or pay for heating oil, the answer is pretty clear. By the way, regular unleaded gas in the Seattle area is now $2.77 a gallon.
A Pentagon report found an average of almost 960 attacks on U.S. and Iraqi targets every week from early August to early November.
The Thai government has reversed a decision to impose tough capital controls on foreign investors in the stock market after the benchmark SET index lost 15% overnight, according to Forex.com. The Thai central bank on Monday announced measures that would lock up 30% of new foreign currency deposits for a year and said the measures would become effective Tuesday. The central bank said it was trying to curb speculation that had caused the Thai baht to appreciate by about 17% against the dollar this year. "The government has now reversed the decision after seeing the effect," said Forex.com.
Nouriel Roubini provides some points in a speech by John Duggan, Comptroller of the Currency:
"* 5% of mortgage originations in 1994 were sub-prime; that is now up to 20%.
* Interest-only and payment-option ARMS were 2% of loan originations in 2000, they now account for 40%.
* 20% of payment-option ARMs originated in the past two years have loan value greater than home value, a figure that would double to 40% if home prices were to decline another 10%. Thus many mortgage holders have significant negative equity in their homes.
* 50% of the sub-prime market is now made up of ‘stated income’ mortgages where "the borrower pays the lender not to verify the borrower’s stated income on the loan application, making it possible for the borrower to artificially inflate the size of his or her income in order to qualify for a bigger mortgage."
* A study by the Mortgage Asset Research Institute found that 60% of applications for these ‘stated income’ loans exaggerated income by at least 50%.
* The increase in debt-servicing ("payment shock") coming from negative ammortization mortgages can be severe: if rates are reset even only by 2 percentage points the payment increase will amount to a near doubling of the amount of the initial monthly payments."
Zmann: "Houston Ship Channel has been shut in for 5 days with fog. 60 tankers await unloading. The region accounts for 12% of US refining capacity and I’ve seen one report of reduced throughput due to the delayed unloadings. This should set up some pretty sizable withdrawal expectations for this week and next for gasoline and heating oil."
Circuit City Stores Inc. said it swung to a loss in the fiscal third quarter as deep discounts on flat-panel televisions and computer hardware and software cut into profit margins. It also lowered its full-year sales outlook.
Oracle's sales fell short of expectations.
The peso's 6.2 percent gain against the dollar in the past six months adds to the savings for Mexicans on clothes, shoes and electronics. Mexican shoppers come from Monterrey, the northern industrial hub that is 150 miles south of Laredo, and from as far as Mexico City, 700 miles away. They spend $500 to $1,000 a trip, said Michael Patrick, director of the Texas Center for Border Economic and Enterprise Development at Texas A&M International University in Laredo.
From Daily Reckoning: "Mortgage equity withdrawal (MEW) has faltered, to an annualized rate of $214.2 billion in the third quarter of this year after peaking at $730.5 billion a year earlier."
Harrah's Entertainment Inc. has agreed to be acquired by private-equity firms Apollo Management and Texas Pacific Group for $16.7 billion plus the assumption of $11 billion in debt, according to a media report Tuesday. The private equity firms agreed to pay $90 a share for the Las Vegas casino giant, the Wall Street Journal reported on its Web site, citing a person close to the matter. Two months ago, the firms bid $81 a share, the report said. Harrah's top managers, including CEO Gary Loveman, are expected to be retained by the new owners, the Journal reported. Under the merger agreement, Harrah's may solicit superior proposals from third parties during the next 25 days, and the board of Harrah's intends to solicit superior proposals during this period. The transaction is expected to be completed in one year, and is subject to approval from shareholders and regulators.
January crude rose 94 cents to close at $63.15 a barrel on Tuesday. The February contract, which is now the front-month futures contract, climbed 67 cents to end at $63.46.
February gold climbed $7.50 to close at $625.40 an ounce Tuesday. March silver added 18.5 cents to finish at $12.71 an ounce, but March copper lost 1.2 cents to end at $3.0175 a pound.
Redback Networks Inc. announced a definitive agreement to be acquired by Ericsson for $2.1 billion or $25 dollars per Redback share. The acquisition is expected to occur by means of a tender offer for all of the outstanding shares of Redback common stock.
Monday, December 18, 2006
Happenings
12/19/06 Happenings
Icos Corp.'s board said on Monday it had agreed to a sweetened takeover offer from Eli Lilly and Co. of $34 per share in cash, up from a previous offer of $32 per share.
Norway's Statoil on Monday said it has agreed to buy the oil and natural-gas division of Norsk Hydro in a deal that will create the world's largest offshore operator.
Pharmacy-benefit manager Express Scripts Inc. is preparing a $26 billion cash-and-stock offer for Caremark Rx Inc., in an effort to break up the company's existing takeover deal with drug chain CVS Corp., according to a media report.
Delta Air Lines Inc. is expected as soon as Tuesday to file a bankruptcy reorganization plan that values the company at $10 billion to $12 billion, substantially more than the $8.4 billion hostile-merger offer from U.S. Airways Group Inc., according to a media report Sunday.
VNU, the closely held media company with businesses like Nielsen Media Research and the publications Billboard and Hollywood Reporter, said it would cut 4000 jobs during 2007.
OPEC on Monday said the fundamentals of the world oil market show signs of weakening in 2007 as economic growth slows and supply from non-OPEC countries rises faster than global demand. In a monthly report, the group that pumps more than a third of the world's oil held its forecast for global demand growth at 1.3 million barrels per day and said a weakening U.S. economy posed risks to the outlook. "Risks for oil demand appear to be more weighed on the downside, given the dangers to global economic growth emanating from a visibly weakening U.S. economy," OPEC said of the 2007 forecast.
Home Depot Inc. said on Monday that investment firm Relational Investors LLC intends to submit a proposal asking the company to appoint a special committee of independent directors to evaluate its direction, management performance and strategic alternatives. Home Depot said it has advised Relational that it will arrange a meeting early in the new year but will oppose the resolution and proxy solicitation that Relational intends to pursue.
The National Retail Federation, a trade group, estimates that shoppers will buy $24.8 billion worth of cards, up 34 percent from last year. About 6 percent, or $4.8 billion, of this year's gift cards will go unused, estimated Laura Lane, vice president of unclaimed property services for Keane Co., a compliance and risk management consulting firm.
A MasterCard Advisors survey, which focuses on credit card spending and other economic indicators, shows that spending in November and December has climbed at half the rate of last year's 8-percent growth.
John Hussman: "So on any given day, what I'm actually doing is running variations of stock selection approaches on historical data – for example, testing the effectiveness of using operating P/E's, earnings momentum, etc. What I find is that the best performing approaches, even over the past decade, are those that emphasize normalized free cash flow, and are conscious of both valuations and market action. What I also find is that the versions that have performed best over the long-term are lagging this year, and that it's difficult to improve on our existing methodology. That's frustrating, but also somewhat comforting... Nothing prevents investors from driving the market higher over the short-term so long as Wall Street analysts propagate the same sort of ignorance that they encouraged in the late 1990's. In any event, further market gains on the hallucination that P/E multiples are “reasonable” will only make the long-term resolution worse. We're willing to accept a limited amount of call option exposure based on the current speculative mood of investors, but a larger speculative exposure is still best executed on a short-term pullback that clears the strenuously overbought condition of the market."
Verizon Communications may sign an agreement as early as Monday with five major Asian telecom carriers to build the first high-speed trans-Pacific undersea cable system directly linking the U.S and China, the Wall Street Journal reported, citing people familiar with the matter. The project is estimated to cost $500 million. The cable system is designed in part to serve the surging volumes of Internet and phone traffic produced by multinational corporations.
The U.S. current account deficit widened to $225.6 billion in the third quarter, or 6.8% of gross domestic product, the Commerce Department reported Monday.
Royal Ahold is in talks with private equity over potentially selling is US food service unit; reports put this as much as $4B to $5B.
Biomet has agreed to be acquired for some $10.9 Billion in cash, a $44 offer from buyers include Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts and the Texas Pacific Group, along with one of Biomet's founders, Dane A. Miller.
ElkCorp is being acquired by the Carlyle Group for $38.00 per share.
MacDermid gets $35 buyout offer from a CEO-led group.
Weight Watchers has launched a self-tender offer for up to 8.3 million shares of its common stock. The New York weight management services company said it would pay between $47 and $54 for each share. The company said the tender offer will expire at 12:00 a.m. Eastern on Jan. 18.
February gold fell $1.20 to close at $617.90 an ounce Monday. March silver dropped 45.5 cents, or 3.5%, to end at $12.525 an ounce. March copper gained 1.3 cents to close at $3.0295 a pound.
January natural gas dropped 33.4 cents, or 4.5%, to close at $7.075 per million British thermal units. January crude fell $1.22 to close at $62.21 a barrel, ahead of Tuesday's futures contract expiration.
The euro rose 0.5% to trade at $1.3164 against the dollar on Tuesday after data from the German Ifo survey showed that its business climate index rose to 108.7, from 106.8 in November, its highest level for 16 years.
For 2006, Cemex expects to meet its EBITDA outlook of $4.1 billion, on revenue of $18 billion. The company sees operating income of more than $2.9 billion. Cemex did not provide any outlook for 2007 due to the "uncertainty around the depth and duration of the ongoing correction in the U.S. residential sector."
Hovnanian Enterprises Inc. said it swung to a fourth-quarter net loss available to shareholders of $117.9 million, or $1.88 a share, as revenue fell and margins narrowed. In the same period last year, the Red Bank, N.J.-based home builder posted net earnings available to shareholders of $165.4 million, or $2.53 a share. Revenue fell 1.5% to $1.75 billion from $1.77 billion. The company expects 2007 per-share earnings of $1.50 to $2, on 16,000 to 18,000 home deliveries. For the first quarter, Hovnanian sees per-share earnings of 5 cents to 10 cents. "We believe that the overall U.S. housing market may hit the bottom in the first half of 2007," said Ara Hovnanian, the company's president and chief executive, in a statement. "However, the housing market is likely to bounce along the bottom for several quarters before pricing and sales pace improves."
A group of Tribune Co. executives led by Chief Executive Dennis FitzSimons together with a consortium of three private investment firms are expected to enter a bid for Tribune, according to a media report Monday. The management consortium includes Providence Equity Partners of Rhode Island, Apollo Management of New York and Madison Dearborn Partners, the Los Angeles Times reported. Tribune's largest shareholder, the Chandler family, is also in talks with investment firm Yucaipa Cos. about making an an offer for some or all of Tribune's assets, the L.A. Times said, citing people familiar with the matter.
Icos Corp.'s board said on Monday it had agreed to a sweetened takeover offer from Eli Lilly and Co. of $34 per share in cash, up from a previous offer of $32 per share.
Norway's Statoil on Monday said it has agreed to buy the oil and natural-gas division of Norsk Hydro in a deal that will create the world's largest offshore operator.
Pharmacy-benefit manager Express Scripts Inc. is preparing a $26 billion cash-and-stock offer for Caremark Rx Inc., in an effort to break up the company's existing takeover deal with drug chain CVS Corp., according to a media report.
Delta Air Lines Inc. is expected as soon as Tuesday to file a bankruptcy reorganization plan that values the company at $10 billion to $12 billion, substantially more than the $8.4 billion hostile-merger offer from U.S. Airways Group Inc., according to a media report Sunday.
VNU, the closely held media company with businesses like Nielsen Media Research and the publications Billboard and Hollywood Reporter, said it would cut 4000 jobs during 2007.
OPEC on Monday said the fundamentals of the world oil market show signs of weakening in 2007 as economic growth slows and supply from non-OPEC countries rises faster than global demand. In a monthly report, the group that pumps more than a third of the world's oil held its forecast for global demand growth at 1.3 million barrels per day and said a weakening U.S. economy posed risks to the outlook. "Risks for oil demand appear to be more weighed on the downside, given the dangers to global economic growth emanating from a visibly weakening U.S. economy," OPEC said of the 2007 forecast.
Home Depot Inc. said on Monday that investment firm Relational Investors LLC intends to submit a proposal asking the company to appoint a special committee of independent directors to evaluate its direction, management performance and strategic alternatives. Home Depot said it has advised Relational that it will arrange a meeting early in the new year but will oppose the resolution and proxy solicitation that Relational intends to pursue.
The National Retail Federation, a trade group, estimates that shoppers will buy $24.8 billion worth of cards, up 34 percent from last year. About 6 percent, or $4.8 billion, of this year's gift cards will go unused, estimated Laura Lane, vice president of unclaimed property services for Keane Co., a compliance and risk management consulting firm.
A MasterCard Advisors survey, which focuses on credit card spending and other economic indicators, shows that spending in November and December has climbed at half the rate of last year's 8-percent growth.
John Hussman: "So on any given day, what I'm actually doing is running variations of stock selection approaches on historical data – for example, testing the effectiveness of using operating P/E's, earnings momentum, etc. What I find is that the best performing approaches, even over the past decade, are those that emphasize normalized free cash flow, and are conscious of both valuations and market action. What I also find is that the versions that have performed best over the long-term are lagging this year, and that it's difficult to improve on our existing methodology. That's frustrating, but also somewhat comforting... Nothing prevents investors from driving the market higher over the short-term so long as Wall Street analysts propagate the same sort of ignorance that they encouraged in the late 1990's. In any event, further market gains on the hallucination that P/E multiples are “reasonable” will only make the long-term resolution worse. We're willing to accept a limited amount of call option exposure based on the current speculative mood of investors, but a larger speculative exposure is still best executed on a short-term pullback that clears the strenuously overbought condition of the market."
Verizon Communications may sign an agreement as early as Monday with five major Asian telecom carriers to build the first high-speed trans-Pacific undersea cable system directly linking the U.S and China, the Wall Street Journal reported, citing people familiar with the matter. The project is estimated to cost $500 million. The cable system is designed in part to serve the surging volumes of Internet and phone traffic produced by multinational corporations.
The U.S. current account deficit widened to $225.6 billion in the third quarter, or 6.8% of gross domestic product, the Commerce Department reported Monday.
Royal Ahold is in talks with private equity over potentially selling is US food service unit; reports put this as much as $4B to $5B.
Biomet has agreed to be acquired for some $10.9 Billion in cash, a $44 offer from buyers include Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts and the Texas Pacific Group, along with one of Biomet's founders, Dane A. Miller.
ElkCorp is being acquired by the Carlyle Group for $38.00 per share.
MacDermid gets $35 buyout offer from a CEO-led group.
Weight Watchers has launched a self-tender offer for up to 8.3 million shares of its common stock. The New York weight management services company said it would pay between $47 and $54 for each share. The company said the tender offer will expire at 12:00 a.m. Eastern on Jan. 18.
February gold fell $1.20 to close at $617.90 an ounce Monday. March silver dropped 45.5 cents, or 3.5%, to end at $12.525 an ounce. March copper gained 1.3 cents to close at $3.0295 a pound.
January natural gas dropped 33.4 cents, or 4.5%, to close at $7.075 per million British thermal units. January crude fell $1.22 to close at $62.21 a barrel, ahead of Tuesday's futures contract expiration.
The euro rose 0.5% to trade at $1.3164 against the dollar on Tuesday after data from the German Ifo survey showed that its business climate index rose to 108.7, from 106.8 in November, its highest level for 16 years.
For 2006, Cemex expects to meet its EBITDA outlook of $4.1 billion, on revenue of $18 billion. The company sees operating income of more than $2.9 billion. Cemex did not provide any outlook for 2007 due to the "uncertainty around the depth and duration of the ongoing correction in the U.S. residential sector."
Hovnanian Enterprises Inc. said it swung to a fourth-quarter net loss available to shareholders of $117.9 million, or $1.88 a share, as revenue fell and margins narrowed. In the same period last year, the Red Bank, N.J.-based home builder posted net earnings available to shareholders of $165.4 million, or $2.53 a share. Revenue fell 1.5% to $1.75 billion from $1.77 billion. The company expects 2007 per-share earnings of $1.50 to $2, on 16,000 to 18,000 home deliveries. For the first quarter, Hovnanian sees per-share earnings of 5 cents to 10 cents. "We believe that the overall U.S. housing market may hit the bottom in the first half of 2007," said Ara Hovnanian, the company's president and chief executive, in a statement. "However, the housing market is likely to bounce along the bottom for several quarters before pricing and sales pace improves."
A group of Tribune Co. executives led by Chief Executive Dennis FitzSimons together with a consortium of three private investment firms are expected to enter a bid for Tribune, according to a media report Monday. The management consortium includes Providence Equity Partners of Rhode Island, Apollo Management of New York and Madison Dearborn Partners, the Los Angeles Times reported. Tribune's largest shareholder, the Chandler family, is also in talks with investment firm Yucaipa Cos. about making an an offer for some or all of Tribune's assets, the L.A. Times said, citing people familiar with the matter.
Sunday, December 17, 2006
Comparing
12/18/06 Comparing
According to the BLS, in September 2006, private industry employer compensation costs averaged $25.52 per hour worked. Wages and salaries averaged $18.04 per hour (70.7 percent), while benefits averaged $7.48 (29.3 percent). By comparison,in state and local government, in September 2006, employer costs averaged $37.91 per
hour worked. Wages and salaries, which accounted for 67.3 percent of the total,
averaged $25.53, while benefits, which accounted for the remaining 32.7 percent, averaged $12.38. Benefit costs increased from 31.4 percent of total compensation
and $10.89 per hour for state and local government workers in September 2004.
I realize that I must be in far left field. I continually look for risk. It's much harder to produce on-going excellent returns if your are trying to overcome losses. Wall Street has clearly forgotten about volatility and risk. Just look at the VIX. It closed under 10 on Friday. Money managers dream of fees and soft landings. By comparison, I am always checking under the hood. How can one realistically expect a soft landing from the largest debtor nation in the history of the universe? Think about the scenario: the Fed will be on hold for the next 6 months and then ease. GDP growth will be around 2.5% in 2007. Foreign countries will still treasure U.S. treasuries. Housing prices will land on a soft cushion. U.S. vehicle demand will not decline below 15.5 million in 2007. By comparison, I'd rather side with the tooth fairy.
As for the tooth fairy, an interesting strategy for the wekend was selling the Harrah's Entertainment December 80 puts for 70 cents in Friday's trading. The puts were put to me over this weekend. That places a cost of $79.30 a share. We'll have to see how this works out on Monday or Tuesday. In the meantime, Private equity firms Apollo Management and Texas Pacific Group were near reaching a deal to buy Harrah's Entertainment Inc. on Sunday, with an announcement possible on Monday, sources familiar with the situation said.The Wall Street Journal reported on its Web site that the offer would be worth at least $90 per share, or $16.7 billion, based on 186 million shares outstanding. One must remember it takes quite some time to get all the gaming license approvals in a takeover of this type.
Royal Dutch Shell is on the brink of a deal to bring Russian gas monopoly Gazprom into the $22 billion Sakhalin-2 project, a spokesman said on Sunday.
comScore Networks released its estimates of consumer online non-travel (retail) spending at U.S. sites for the 2006 holiday season through December 15. During the first 45 days of the holiday season, total online retail spending reached $19.48 billion, marking a 25-percent increase versus the corresponding days in 2005.
Realogy Stockholders To Receive $30.00 Per Share. It has entered into a definitive agreement for the Company to be acquired by an affiliate of Apollo Management, L.P., a leading private equity firm, in a transaction valued at approximately $9.0 billion, including the assumption or repayment of approximately $1.6 billion of net indebtedness and legacy contingent and other liabilities of approximately $750 million.
A powerful tool of molecular biology may be able to ensure that breast cancer patients receive a correct
evaluation of lymph node status during initial surgery. Speaking at the 29th Annual San Antonio Breast Cancer Symposium, Peter Blumencranz, MD, from Morton Plant Mease Healthcare, reported the development of a new
assessment system based on reverse transcriptase-polymerase chain reaction (RT-PCR). This new system, called the GeneSearch(TM) Breast Lymph Node (BLN) assay, is being proposed as a more accurate replacement for
techniques currently in use, including frozen section and touch prep cytology.
When patients undergo surgery for breast cancer, lymph nodes suspected of harboring metastases are removed and sent to a pathologist for assessment while the patient is still under anesthesia. In frozen section evaluation, the lymph node is frozen and sliced, and the slice is examined under a microscope. For touch prep cytology, the node is cut open, and the cut surface touched to a slide, leaving behind a small sampling of cells that can be examined microscopically. Both techniques are very fast, but their accuracy is limited. After initially being classified as "node-negative" on the basis of these techniques, a patient may ultimately be reclassified as node-positive once
the node is examined more carefully. She must then undergo additional surgery and anesthesia in order to have an axillary dissection, which can be financially costly, as well as psychologically burdensome for the
patient. The BLN assay analyzes a full 50% of the lymph node, compared with about 5% in even the most meticulous standard approaches. The node is ground and analyzed with special probes that identify specific proteins
associated with breast cancer cells. This technique is so powerful that it can detect the presence of proteins from a single cancer cell. The BLN assay is a rapid, closed-tube system that takes approximately 30 minutes to run (roughly equivalent to the amount of time it takes to obtain a frozen section in many institutions). Because the results of the
assay are an objective "yes" or "no" for the presence of metastases, it can be easily administered by a trained technician, freeing up the valuable time of experienced pathologists. Only half of the lymph node is used, leaving the other half available for more intense study in those cases where the answer is "yes."
Two clinical trials in the US and Europe have validated the use of the BLN assay. These studies showed that the assay was much more accurate in detecting both micro- and macrometastases in suspicious lymph nodes,
compared with frozen section and particularly with touch prep cytology. This high degree of accuracy means that the number of call-backs for secondary axillary node surgery can be reduced, decreasing both cost and patient anxiety.
According to the BLS, in September 2006, private industry employer compensation costs averaged $25.52 per hour worked. Wages and salaries averaged $18.04 per hour (70.7 percent), while benefits averaged $7.48 (29.3 percent). By comparison,in state and local government, in September 2006, employer costs averaged $37.91 per
hour worked. Wages and salaries, which accounted for 67.3 percent of the total,
averaged $25.53, while benefits, which accounted for the remaining 32.7 percent, averaged $12.38. Benefit costs increased from 31.4 percent of total compensation
and $10.89 per hour for state and local government workers in September 2004.
I realize that I must be in far left field. I continually look for risk. It's much harder to produce on-going excellent returns if your are trying to overcome losses. Wall Street has clearly forgotten about volatility and risk. Just look at the VIX. It closed under 10 on Friday. Money managers dream of fees and soft landings. By comparison, I am always checking under the hood. How can one realistically expect a soft landing from the largest debtor nation in the history of the universe? Think about the scenario: the Fed will be on hold for the next 6 months and then ease. GDP growth will be around 2.5% in 2007. Foreign countries will still treasure U.S. treasuries. Housing prices will land on a soft cushion. U.S. vehicle demand will not decline below 15.5 million in 2007. By comparison, I'd rather side with the tooth fairy.
As for the tooth fairy, an interesting strategy for the wekend was selling the Harrah's Entertainment December 80 puts for 70 cents in Friday's trading. The puts were put to me over this weekend. That places a cost of $79.30 a share. We'll have to see how this works out on Monday or Tuesday. In the meantime, Private equity firms Apollo Management and Texas Pacific Group were near reaching a deal to buy Harrah's Entertainment Inc. on Sunday, with an announcement possible on Monday, sources familiar with the situation said.The Wall Street Journal reported on its Web site that the offer would be worth at least $90 per share, or $16.7 billion, based on 186 million shares outstanding. One must remember it takes quite some time to get all the gaming license approvals in a takeover of this type.
Royal Dutch Shell is on the brink of a deal to bring Russian gas monopoly Gazprom into the $22 billion Sakhalin-2 project, a spokesman said on Sunday.
comScore Networks released its estimates of consumer online non-travel (retail) spending at U.S. sites for the 2006 holiday season through December 15. During the first 45 days of the holiday season, total online retail spending reached $19.48 billion, marking a 25-percent increase versus the corresponding days in 2005.
Realogy Stockholders To Receive $30.00 Per Share. It has entered into a definitive agreement for the Company to be acquired by an affiliate of Apollo Management, L.P., a leading private equity firm, in a transaction valued at approximately $9.0 billion, including the assumption or repayment of approximately $1.6 billion of net indebtedness and legacy contingent and other liabilities of approximately $750 million.
A powerful tool of molecular biology may be able to ensure that breast cancer patients receive a correct
evaluation of lymph node status during initial surgery. Speaking at the 29th Annual San Antonio Breast Cancer Symposium, Peter Blumencranz, MD, from Morton Plant Mease Healthcare, reported the development of a new
assessment system based on reverse transcriptase-polymerase chain reaction (RT-PCR). This new system, called the GeneSearch(TM) Breast Lymph Node (BLN) assay, is being proposed as a more accurate replacement for
techniques currently in use, including frozen section and touch prep cytology.
When patients undergo surgery for breast cancer, lymph nodes suspected of harboring metastases are removed and sent to a pathologist for assessment while the patient is still under anesthesia. In frozen section evaluation, the lymph node is frozen and sliced, and the slice is examined under a microscope. For touch prep cytology, the node is cut open, and the cut surface touched to a slide, leaving behind a small sampling of cells that can be examined microscopically. Both techniques are very fast, but their accuracy is limited. After initially being classified as "node-negative" on the basis of these techniques, a patient may ultimately be reclassified as node-positive once
the node is examined more carefully. She must then undergo additional surgery and anesthesia in order to have an axillary dissection, which can be financially costly, as well as psychologically burdensome for the
patient. The BLN assay analyzes a full 50% of the lymph node, compared with about 5% in even the most meticulous standard approaches. The node is ground and analyzed with special probes that identify specific proteins
associated with breast cancer cells. This technique is so powerful that it can detect the presence of proteins from a single cancer cell. The BLN assay is a rapid, closed-tube system that takes approximately 30 minutes to run (roughly equivalent to the amount of time it takes to obtain a frozen section in many institutions). Because the results of the
assay are an objective "yes" or "no" for the presence of metastases, it can be easily administered by a trained technician, freeing up the valuable time of experienced pathologists. Only half of the lymph node is used, leaving the other half available for more intense study in those cases where the answer is "yes."
Two clinical trials in the US and Europe have validated the use of the BLN assay. These studies showed that the assay was much more accurate in detecting both micro- and macrometastases in suspicious lymph nodes,
compared with frozen section and particularly with touch prep cytology. This high degree of accuracy means that the number of call-backs for secondary axillary node surgery can be reduced, decreasing both cost and patient anxiety.
Saturday, December 16, 2006
Touchy Feely
12/17/06 Touchy Feely
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (3.0% annualized rate) in November. Over the last 12 months, the median CPI rose 3.7%. Can you feel the pain from inflation? Look at a chart of the dollar over the last 12 months, 24 months, and so forth. That spells out your purchasing power. It spells PUKE.
"The inflation statistics have a Christmas-y feel to them, because they reflect heavydiscounting," said Chicago economist Robert Dederick. "There clearly is a lot of price-cutting taking place, especially in cars, apparel and electronics."
George Ure reported sources with a U.S. Delegation in Beijing have told The Hal Turner Show the Chinese government has informed visiting Bush Administration officials they intend to dump One TRILLION U.S. Dollars from China's Currency Reserves and convert those funds into Euros, gold and silver!
China was allegedly asked to withhold the announcement until Bullion Markets closed for the weekend to prevent an instant spike in gold and silver prices. This delay will give the world the weekend to consider appropriate actions rather than have a knee-jerk reaction which could see the U.S. Dollar totally collapse in value Monday.
According to this Senior source, China told the U.S. delegation they no longer have faith in U.S. Currency for several reasons:
1) The Federal Reserve Bank ceased publishing "M3" data in March, making it nearly impossible for anyone to know how much cash is being printed. China said this act made it impossible to tell how much a Dollar is worth.
2) The U.S. Dollar has lost upwards of thirty percent (30%) of its value against other foreign currencies in the recent past, meaning China has lost almost $300 Billion simply by holding U.S. Dollars in its reserves.
3) The U.S. has no plans whatsoever to reduce deficit spending or ability pay down any of its existing debt without printing money to pay it off.
For these reasons China has decided to implement an aggressive sell-off of U.S. Dollars before the rest of the world does so. China reportedly told the US delegation; "we are the largest holder of U.S. Currency and if the rest of the world unloads theirs before we unload ours, we will lose our shirts."
Douglas A. McIntyre: "Someone forgot to tell the programmers at Microsoft that the new Vista operating system had to work with current version of SQL server database management software. The database management interface is critical if Micorosft wants to take business from Oracle. The global database business is estimated at $14 billion. Microsoft has painted itself in a corner."
"India will overtake China next year as the world's fastest-growing major economy on rising consumer and government spending, Credit Suisse's chief Asia economist Dong Tao said. Credit Suisse raised its 2007 growth forecast for India's $775 billion economy, Asia's fourth biggest, to 10 percent from 8.5 percent... China's $2.2 trillion economy is expected to grow 9.9 percent next year from 10.4 percent in 2006..."
According to a Bloomberg report, "China's crude imports may rise 10.2 percent this year because of rising domestic demand, China Securities Journal reported, quoting a government official. The nation may import 140 million metric tons of crude this year, equivalent to 48 percent of total demand..."
John Mauldin points out that the Liscio Report observed "the weakening consumption trend is now established, and the majority of our tax contacts expressed real concern about slowing in sales tax collections. It now appears clear that consumers are not spending the billions of dollars they have saved on gas in recent months, and comments on the effects of the dual slowdowns in housing and manufacturing centered on how much more is to come." Liscio was referring to his checks on sales tax collections for the month of November.
Mike Burk: "Several short term indicators bottomed last week just in time for the year end rally that should begin next week. I expec the major indices to be higher on Friday December 22 than they were on Friday December 15."
From the BLS: "Real average weekly earnings rose by 0.2 percent from October to November after seasonal adjustment, according to preliminary data released by the Bureau of Labor Statistics of the U.S. Department of Labor. This increase
stemmed from a 0.2 percent increase in average hourly earnings combined with a
0.1 percent decrease in the Consumer Price Index for Urban Wage Earners and
Clerical Workers (CPI-W). Average weekly hours were unchanged...
Average weekly earnings rose by 4.4 percent, seasonally adjusted, from
November 2005 to November 2006. After deflation by the CPI-W, average weekly
earnings increased by 2.6 percent. Before adjustment for seasonal change and
inflation, average weekly earnings were $572.91 in November 2006, compared with
$550.94 a year earlier." Now think about the real inflation for health care and food and tuition etc, and you tell me how far your wage gains went AFTER TAXES.
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (3.0% annualized rate) in November. Over the last 12 months, the median CPI rose 3.7%. Can you feel the pain from inflation? Look at a chart of the dollar over the last 12 months, 24 months, and so forth. That spells out your purchasing power. It spells PUKE.
"The inflation statistics have a Christmas-y feel to them, because they reflect heavydiscounting," said Chicago economist Robert Dederick. "There clearly is a lot of price-cutting taking place, especially in cars, apparel and electronics."
George Ure reported sources with a U.S. Delegation in Beijing have told The Hal Turner Show the Chinese government has informed visiting Bush Administration officials they intend to dump One TRILLION U.S. Dollars from China's Currency Reserves and convert those funds into Euros, gold and silver!
China was allegedly asked to withhold the announcement until Bullion Markets closed for the weekend to prevent an instant spike in gold and silver prices. This delay will give the world the weekend to consider appropriate actions rather than have a knee-jerk reaction which could see the U.S. Dollar totally collapse in value Monday.
According to this Senior source, China told the U.S. delegation they no longer have faith in U.S. Currency for several reasons:
1) The Federal Reserve Bank ceased publishing "M3" data in March, making it nearly impossible for anyone to know how much cash is being printed. China said this act made it impossible to tell how much a Dollar is worth.
2) The U.S. Dollar has lost upwards of thirty percent (30%) of its value against other foreign currencies in the recent past, meaning China has lost almost $300 Billion simply by holding U.S. Dollars in its reserves.
3) The U.S. has no plans whatsoever to reduce deficit spending or ability pay down any of its existing debt without printing money to pay it off.
For these reasons China has decided to implement an aggressive sell-off of U.S. Dollars before the rest of the world does so. China reportedly told the US delegation; "we are the largest holder of U.S. Currency and if the rest of the world unloads theirs before we unload ours, we will lose our shirts."
Douglas A. McIntyre: "Someone forgot to tell the programmers at Microsoft that the new Vista operating system had to work with current version of SQL server database management software. The database management interface is critical if Micorosft wants to take business from Oracle. The global database business is estimated at $14 billion. Microsoft has painted itself in a corner."
"India will overtake China next year as the world's fastest-growing major economy on rising consumer and government spending, Credit Suisse's chief Asia economist Dong Tao said. Credit Suisse raised its 2007 growth forecast for India's $775 billion economy, Asia's fourth biggest, to 10 percent from 8.5 percent... China's $2.2 trillion economy is expected to grow 9.9 percent next year from 10.4 percent in 2006..."
According to a Bloomberg report, "China's crude imports may rise 10.2 percent this year because of rising domestic demand, China Securities Journal reported, quoting a government official. The nation may import 140 million metric tons of crude this year, equivalent to 48 percent of total demand..."
John Mauldin points out that the Liscio Report observed "the weakening consumption trend is now established, and the majority of our tax contacts expressed real concern about slowing in sales tax collections. It now appears clear that consumers are not spending the billions of dollars they have saved on gas in recent months, and comments on the effects of the dual slowdowns in housing and manufacturing centered on how much more is to come." Liscio was referring to his checks on sales tax collections for the month of November.
Mike Burk: "Several short term indicators bottomed last week just in time for the year end rally that should begin next week. I expec the major indices to be higher on Friday December 22 than they were on Friday December 15."
From the BLS: "Real average weekly earnings rose by 0.2 percent from October to November after seasonal adjustment, according to preliminary data released by the Bureau of Labor Statistics of the U.S. Department of Labor. This increase
stemmed from a 0.2 percent increase in average hourly earnings combined with a
0.1 percent decrease in the Consumer Price Index for Urban Wage Earners and
Clerical Workers (CPI-W). Average weekly hours were unchanged...
Average weekly earnings rose by 4.4 percent, seasonally adjusted, from
November 2005 to November 2006. After deflation by the CPI-W, average weekly
earnings increased by 2.6 percent. Before adjustment for seasonal change and
inflation, average weekly earnings were $572.91 in November 2006, compared with
$550.94 a year earlier." Now think about the real inflation for health care and food and tuition etc, and you tell me how far your wage gains went AFTER TAXES.
Friday, December 15, 2006
Reality
12/16/06 Reality
Excluding food and energy, the CPI-U advanced at a 2.6 percent SAAR in the first 11 months of 2006 after increasing 2.2 percent in 2005. Some analysts suggested that investors reinterpreted the CPI data as a lagging indicator and noted that there are other signs showing that inflation in fact may be increasing.
On Friday morning, 700,000 of Puget Sound's customers in and around Seattle were without power. The Seahawks had a meltdown in the second half of Thursday's game with the 49ers.
In October, foreign investors bought a net $62.2 billion in securities, the Treasury said. It's up from $57.8 billion in September. In October, Chinese investors held $344.9 billion in Treasurys, up from $342.3 billion in September.
Illinois Tool Works Inc. on Friday warned it was cutting its forecast profit range for the fourth quarter, citing expected weakness in the North American market.
ITW, which also said it had already suffered two months of lower-than-expected base revenue growth, now expects to earn 72 cents to 74 cents a share in the fourth quarter, compared with a previous range of 77 cents to 81 cents.
From Seeking Alpha: "Gambling company Penn National made a mostly cash bid for its much larger competitor Harrah's Entertainment, challenging the current bid for Harrah's placed by private equity partners Texas Pacific and Apollo Management. The private equity group earlier in the week submitted an all-cash bid of $87 a share, and sources indicate Penn is offering $88.50. Harrah's currently trades at $79.10 a share, with a market cap of $14.7 billion vs. Penn's market cap of just $3.3 billion. The Penn offer, backed by Lehman Brothers and Wachovia, would create a joint entity with substantial debt. Harrah's is also considering a leveraged recapitalization, taking on more debt while paying shareholders a dividend or buying back stock. Penn stock has climbed 18.4% year to date, while Harrah's stock still trades well below the takeover prices due to the long period expected for casino licensing clearance."
Crude for January delivery rose 92 cents to $63.43 a barrel. January natural gas fell 14.6 cents to $7.409 per million British thermal units.
February gold fell $11.80 to close at $619.10 an ounce. March silver sank 97 cents to end at $12.98 an ounce after a four-week low of $12.96. March copper closed at six-month low of $3.0165 a pound, down 4.1 cents for the day and down 3.1% for the week.
Bloomberg reported Japanese five-year government notes fell the most in a month after stocks advanced and a Bank of Japan survey showed confidence among manufacturers rose to the highest in two years.
Five-year notes pared their gains for the week after the Tankan showed companies plan to boost spending at the fastest pace in 15 years. The report may restore confidence the world's second- largest economy will recover from slower-than-expected growth in the third quarter, supporting the central bank's case for raising interest rates in coming months.
``The Tankan survey will make it easier for the BOJ to justify raising rates in January,'' said Hiroaki Takai, who helps oversee the equivalent of about $6.8 billion in assets at Sumitomo Mitsui Asset Management Co. in Tokyo. ``Given that, yields look too low and investors probably won't be keen on buying bonds.'' It will be important to watch the yen carry trade if rates in Japan rise in January.
Excluding food and energy, the CPI-U advanced at a 2.6 percent SAAR in the first 11 months of 2006 after increasing 2.2 percent in 2005. Some analysts suggested that investors reinterpreted the CPI data as a lagging indicator and noted that there are other signs showing that inflation in fact may be increasing.
On Friday morning, 700,000 of Puget Sound's customers in and around Seattle were without power. The Seahawks had a meltdown in the second half of Thursday's game with the 49ers.
In October, foreign investors bought a net $62.2 billion in securities, the Treasury said. It's up from $57.8 billion in September. In October, Chinese investors held $344.9 billion in Treasurys, up from $342.3 billion in September.
Illinois Tool Works Inc. on Friday warned it was cutting its forecast profit range for the fourth quarter, citing expected weakness in the North American market.
ITW, which also said it had already suffered two months of lower-than-expected base revenue growth, now expects to earn 72 cents to 74 cents a share in the fourth quarter, compared with a previous range of 77 cents to 81 cents.
From Seeking Alpha: "Gambling company Penn National made a mostly cash bid for its much larger competitor Harrah's Entertainment, challenging the current bid for Harrah's placed by private equity partners Texas Pacific and Apollo Management. The private equity group earlier in the week submitted an all-cash bid of $87 a share, and sources indicate Penn is offering $88.50. Harrah's currently trades at $79.10 a share, with a market cap of $14.7 billion vs. Penn's market cap of just $3.3 billion. The Penn offer, backed by Lehman Brothers and Wachovia, would create a joint entity with substantial debt. Harrah's is also considering a leveraged recapitalization, taking on more debt while paying shareholders a dividend or buying back stock. Penn stock has climbed 18.4% year to date, while Harrah's stock still trades well below the takeover prices due to the long period expected for casino licensing clearance."
Crude for January delivery rose 92 cents to $63.43 a barrel. January natural gas fell 14.6 cents to $7.409 per million British thermal units.
February gold fell $11.80 to close at $619.10 an ounce. March silver sank 97 cents to end at $12.98 an ounce after a four-week low of $12.96. March copper closed at six-month low of $3.0165 a pound, down 4.1 cents for the day and down 3.1% for the week.
Bloomberg reported Japanese five-year government notes fell the most in a month after stocks advanced and a Bank of Japan survey showed confidence among manufacturers rose to the highest in two years.
Five-year notes pared their gains for the week after the Tankan showed companies plan to boost spending at the fastest pace in 15 years. The report may restore confidence the world's second- largest economy will recover from slower-than-expected growth in the third quarter, supporting the central bank's case for raising interest rates in coming months.
``The Tankan survey will make it easier for the BOJ to justify raising rates in January,'' said Hiroaki Takai, who helps oversee the equivalent of about $6.8 billion in assets at Sumitomo Mitsui Asset Management Co. in Tokyo. ``Given that, yields look too low and investors probably won't be keen on buying bonds.'' It will be important to watch the yen carry trade if rates in Japan rise in January.
Thursday, December 14, 2006
Option Expiration Day
12/15/06 Option Expiration Day
The Energy Department said natural-gas inventories fell 168 billion cubic feet for the week ended Dec. 8. Total stocks now stand at 3.238 trillion cubic feet, up 245 billion cubic feet from the year-ago level, and 225 billion cubic feet above the five-year average, the government data said.
OPEC's announced intention is to cut another 500,000 [barrels per day] of production, effective February 1st.
The Labor Department said initial jobless claims dropped by 20,000 to 304,000 in the week ending Dec. 9, lower than the 320,000 economists were expecting. Separately, the Department said the prices of goods imported into the U.S. rose 0.2% in November. Imported natural gas prices climbed 30.3% in November, hitting a two-year high, according to the Labor Department. Imported petroleum prices, meanwhile, dropped 1.6%. Excluding petroleum import prices, import prices rose by 0.7%. Import prices excluding all fuels rose by 0.1%.
Tobacco group Gallaher on Thursday confirmed it's received a preliminary offer approach. The group said it's in talks with the third party about the possibility of a recommended cash offer of 1,140 pence a share in cash.
North American production will continue its slide in 2007, despite falling to a longtime low in 2006. Ward's AutoForecasts projects total output in 2007 at 15.65 million units, 1.1% down from 2006's estimated 15.83 million, itself a 3.0% decline
from 2005.
Jim Rogers:"The slowest bull market in commodities lasted 15 years and the longest
23 years which means that investing in commodities will be profitable."
until at least 2013 and up to 2021...Investing in commodity-producing companies can turn out to be an even riskier bet than sticking with buying the things outright. Supply and demand will move the price of copper, for instance, while the share prices of copper miners can depend on less predictable factors such as the overall condition of the stock market, the company`s balance sheet, its executive team, labour problems, environmental issues, and so on."
Marketplace's Dan Grech: "Entertainment mogul David Geffen has offered $2 billion cash for the Los Angeles Times, but Tribune is holding out for a buyer who wants everything on the menu."
The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Wednesday, reported that the percentage of mortgage payments that were 30 or more days past due for all loans tracked jumped to 4.67 percent in the July-to-September quarter.
That marked a sharp rise from the second quarter's delinquency rate of 4.39 percent and was the worst showing since the final quarter of last year, when delinquent payments climbed to a 2 1/2-year high in the aftermath of the devastating Gulf Coast hurricanes.
This could be important. YRC Worldwide Inc.'s cut its fourth-quarter per-share earnings outlook to 95 cents to $1.05 from its prior view of $1.40 to $1.50. The company also lowered its 2006 earnings outlook to $5 to $5.10 a share from $5.45 to $5.55 a share. This is the merger of Yellow Freight and Roadway Express.
Manufacturing activity in the New York area slipped in December, the New York Federal Reserve Bank said Thursday. The bank's Empire State Manufacturing index fell to 23.1 in December from 26.7 in November. New orders rose to 25.1 in December from 22.4 in November. Shipments were little changed. The prices paid index fell to its lowest level of the year. The unfilled orders index also fell sharply. The inventories index dropped into negative territory.
January crude rose $1.14, or 1.9%, to close at $62.51 a barrel. January natural gas fell 11.8 cents to close at $7.555 per million British thermal units.
February gold fell $1.50 to end at $630.90 an ounce in New York. March silver was up 3.5 cents to end at $13.95 an ounce and March copper at $3.0575 a pound, closing up 2.45 cents.
The Energy Department said natural-gas inventories fell 168 billion cubic feet for the week ended Dec. 8. Total stocks now stand at 3.238 trillion cubic feet, up 245 billion cubic feet from the year-ago level, and 225 billion cubic feet above the five-year average, the government data said.
OPEC's announced intention is to cut another 500,000 [barrels per day] of production, effective February 1st.
The Labor Department said initial jobless claims dropped by 20,000 to 304,000 in the week ending Dec. 9, lower than the 320,000 economists were expecting. Separately, the Department said the prices of goods imported into the U.S. rose 0.2% in November. Imported natural gas prices climbed 30.3% in November, hitting a two-year high, according to the Labor Department. Imported petroleum prices, meanwhile, dropped 1.6%. Excluding petroleum import prices, import prices rose by 0.7%. Import prices excluding all fuels rose by 0.1%.
Tobacco group Gallaher on Thursday confirmed it's received a preliminary offer approach. The group said it's in talks with the third party about the possibility of a recommended cash offer of 1,140 pence a share in cash.
North American production will continue its slide in 2007, despite falling to a longtime low in 2006. Ward's AutoForecasts projects total output in 2007 at 15.65 million units, 1.1% down from 2006's estimated 15.83 million, itself a 3.0% decline
from 2005.
Jim Rogers:"The slowest bull market in commodities lasted 15 years and the longest
23 years which means that investing in commodities will be profitable."
until at least 2013 and up to 2021...Investing in commodity-producing companies can turn out to be an even riskier bet than sticking with buying the things outright. Supply and demand will move the price of copper, for instance, while the share prices of copper miners can depend on less predictable factors such as the overall condition of the stock market, the company`s balance sheet, its executive team, labour problems, environmental issues, and so on."
Marketplace's Dan Grech: "Entertainment mogul David Geffen has offered $2 billion cash for the Los Angeles Times, but Tribune is holding out for a buyer who wants everything on the menu."
The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Wednesday, reported that the percentage of mortgage payments that were 30 or more days past due for all loans tracked jumped to 4.67 percent in the July-to-September quarter.
That marked a sharp rise from the second quarter's delinquency rate of 4.39 percent and was the worst showing since the final quarter of last year, when delinquent payments climbed to a 2 1/2-year high in the aftermath of the devastating Gulf Coast hurricanes.
This could be important. YRC Worldwide Inc.'s cut its fourth-quarter per-share earnings outlook to 95 cents to $1.05 from its prior view of $1.40 to $1.50. The company also lowered its 2006 earnings outlook to $5 to $5.10 a share from $5.45 to $5.55 a share. This is the merger of Yellow Freight and Roadway Express.
Manufacturing activity in the New York area slipped in December, the New York Federal Reserve Bank said Thursday. The bank's Empire State Manufacturing index fell to 23.1 in December from 26.7 in November. New orders rose to 25.1 in December from 22.4 in November. Shipments were little changed. The prices paid index fell to its lowest level of the year. The unfilled orders index also fell sharply. The inventories index dropped into negative territory.
January crude rose $1.14, or 1.9%, to close at $62.51 a barrel. January natural gas fell 11.8 cents to close at $7.555 per million British thermal units.
February gold fell $1.50 to end at $630.90 an ounce in New York. March silver was up 3.5 cents to end at $13.95 an ounce and March copper at $3.0575 a pound, closing up 2.45 cents.
Wednesday, December 13, 2006
In The Works
12/14/06 In The Works
Seeking Alpha: "The Chandler Family, 20% owners and long-time critics of the Tribune Company, have begun talking with several private equity firms about forming a consortium to become majority shareholders in Tribune, the New York Times reported this morning.trb The family, one of Southern California's most powerful has clashed with Tribune's management for years and six months ago, got the company to agree to put itself on the auction block. However bids have been slow in coming, and for much less than the company anticipated, in large part due to the heavy tax payments that will accompany any transfer of the company. As insiders, the Chandlers can avoid many of the taxation issues while spinning off segments of the diversified media company, which owns two of the nation's largest papers - the L.A. Times and Chicago Tribune - two dozen TV stations and the Chicago Cubs. Neither the Chandlers nor the Tribune were available for comment."
"Zacks.com just released its latest additions and deletions to its proprietary All Star Analyst portfolio. Members on this exclusive list include BJ Services Company...This exclusive portfolio represents all stocks with a Strong Buy rating from at least four analysts with a 5-Star All Star ranking. These are the brokerage analysts whose stock recommendations proved to be the most profitable for investors. Since July 2002, this portfolio has generated an annualized return of 7.53%. Here is a synopsis of why these stocks are in the All Star Analysts Portfolio: BJ Services Company BJS announced that fiscal fourth quarter earnings per share surged year over year to 76 cents, while consolidated revenue of $1.22 billion jumped 36% from $892.3 million. EPS also bettered the consensus by 2.7%. The rebound in Canadian activity, as well as improvements in Africa, Latin America and the Middle East, led to the solid quarterly results. For the fiscal year, the oilfield services company reported earnings per share of $2.52, compared to $1.38 in the previous year, with consolidated revenue rising 35% to $4.4 billion from $3.2 billion in fiscal 2005. For fiscal 2007, BJ Services expects earnings per share between $3.15 and $3.25 with revenue growth expectations in excess of 20%."
Raymond James strategist Jeff Saut: "Almost 2% of the NYSE's entire market capitalization has been taken private... since the beginning of this year."
The volume of applications for mortgages from major U.S. banks climbed to the highest level in more than a year last week, the Mortgage Bankers Association reported Wednesday.
Applications, encompassing both those for loans to purchase homes and for refinancings of existing mortgages, increased 11.4% last week to the highest level since October 2005. Total applications are up 22.2% compared with the same week a year ago. Application volumes had been down by double-digit percentages for most of the year. Yet, Richard M. Kovacevich, chairman and chief executive of Wells Fargo, tells Barrons the mortgage market has turned "pretty ugly."
Showing surprising strength, seasonally adjusted U.S. retail sales increased by 1% in November, the first gain since July, the Commerce Department reported Wednesday. Excluding the 0.9% gain in motor vehicle sales, retail sales rose 1.1%, the largest gain since January. I continue to believe the stars this holiday shopping season will be gift cards and online sales. This is the same statement I have made for the last three years.
Randall Forsyth of Barrons: "Bridgewater Associates contends wiggles in the yen are having an impact on speculative positions, which are "now massive." The yen-carry trade -- which effectively means shorting the Japanese currency -- has pushed the yen to a record low against the euro, with the common currency fetching nearly 155 yen vs less than 140 yen at the beginning of 2006. Bridgewater sees the current market environment as precarious, and reminiscent of 1998, when the collapse of Long Term Capital Markets threatened the global financial system. They can't say what the catalyst of a break might be -- an increase in the Chinese yuan could be one, for instance. That could lead to an appreciation of all Asian currencies, including the yen, which have been suppressed by the region's central banks who don't want their economies to lose export competitiveness.The yen's rise could again ripple through the emerging markets, some of which already are looking shaky. India's SENSEX has been under pressure in recent days, which could spread to other emerging markets, write Bank of America's Raja Visweswaran and John Schofield. Emerging equity and debt markets are highly correlated, while emerging-market debt also is correlated with high-yield corporates. "We would assume a further widening of the current downward move in select [emerging market] indices would most likely result in a broader market correction across many other risk asset categories."
World energy demand is likely to climb an average 1.6 percent per year to reach about 325 million barrels of oil equivalent a day by 2030, Exxon Mobil predicts. That means global energy demand will be up about 60 percent from 2000 levels, Jaime Spellings, the Irving-based oil giant's general manager for corporate planning, told analysts.
The American Petroleum Institute reported a drop of 8.3 million barrels in crude supplies for the week ended Dec. 8. The Energy Department had reported a fall of 4.3 million. Motor gasoline supplies were down 1.1 million barrels, the API said, vs. the government's reported fall of 100,000. Distillate supplies were down 2.7 million barrels, the API said, compared with the 500,000-barrel fall reported by the government.
Inventories at U.S. businesses rose in October to their highest level in relation to sales in more than two and a half years, the Commerce Department reported Wednesday. Sales at U.S. businesses fell 0.2% in October after a record 2.3% drop in September. Meanwhile, inventories rose 0.4% in October, as expected by economists, after a revised 0.3% gain in September. The inventory-to-sales ratio rose to 1.31 from 1.30. It's the highest since February 2004.
January crude rose 35 cents to end at $61.37 a barrel. January natural gas gained 24.3 cents to end at $7.673 per million British thermal units.
February gold climbed 70 cents to close at $632.40 an ounce Wednesday. March silver fell 6.5 cents to end at $13.915 an ounce and March copper lost 6.15 cents to close at $3.033 a pound, its lowest closing level since late June.
Henry To: "U.S. households now have the most leveraged balance sheets in history. Moreover, in a credit-based and financially-leveraged society such as the United States, one needs to tread very carefully if you are a central banker, and thus the last thing that the Fed wants is a declining net worth of American households... Bottom line: The United States (and even more so, the United Kingdom since it does not have a great agricultural, technology, or entertainment industry such as what we have in the U.S.) today is more dependent on asset appreciation and the financial sector than ever - and both the Federal Reserve and the central banks of the world will continue to do what they can to uphold this trend going forward."
Seeking Alpha: "The Chandler Family, 20% owners and long-time critics of the Tribune Company, have begun talking with several private equity firms about forming a consortium to become majority shareholders in Tribune, the New York Times reported this morning.trb The family, one of Southern California's most powerful has clashed with Tribune's management for years and six months ago, got the company to agree to put itself on the auction block. However bids have been slow in coming, and for much less than the company anticipated, in large part due to the heavy tax payments that will accompany any transfer of the company. As insiders, the Chandlers can avoid many of the taxation issues while spinning off segments of the diversified media company, which owns two of the nation's largest papers - the L.A. Times and Chicago Tribune - two dozen TV stations and the Chicago Cubs. Neither the Chandlers nor the Tribune were available for comment."
"Zacks.com just released its latest additions and deletions to its proprietary All Star Analyst portfolio. Members on this exclusive list include BJ Services Company...This exclusive portfolio represents all stocks with a Strong Buy rating from at least four analysts with a 5-Star All Star ranking. These are the brokerage analysts whose stock recommendations proved to be the most profitable for investors. Since July 2002, this portfolio has generated an annualized return of 7.53%. Here is a synopsis of why these stocks are in the All Star Analysts Portfolio: BJ Services Company BJS announced that fiscal fourth quarter earnings per share surged year over year to 76 cents, while consolidated revenue of $1.22 billion jumped 36% from $892.3 million. EPS also bettered the consensus by 2.7%. The rebound in Canadian activity, as well as improvements in Africa, Latin America and the Middle East, led to the solid quarterly results. For the fiscal year, the oilfield services company reported earnings per share of $2.52, compared to $1.38 in the previous year, with consolidated revenue rising 35% to $4.4 billion from $3.2 billion in fiscal 2005. For fiscal 2007, BJ Services expects earnings per share between $3.15 and $3.25 with revenue growth expectations in excess of 20%."
Raymond James strategist Jeff Saut: "Almost 2% of the NYSE's entire market capitalization has been taken private... since the beginning of this year."
The volume of applications for mortgages from major U.S. banks climbed to the highest level in more than a year last week, the Mortgage Bankers Association reported Wednesday.
Applications, encompassing both those for loans to purchase homes and for refinancings of existing mortgages, increased 11.4% last week to the highest level since October 2005. Total applications are up 22.2% compared with the same week a year ago. Application volumes had been down by double-digit percentages for most of the year. Yet, Richard M. Kovacevich, chairman and chief executive of Wells Fargo, tells Barrons the mortgage market has turned "pretty ugly."
Showing surprising strength, seasonally adjusted U.S. retail sales increased by 1% in November, the first gain since July, the Commerce Department reported Wednesday. Excluding the 0.9% gain in motor vehicle sales, retail sales rose 1.1%, the largest gain since January. I continue to believe the stars this holiday shopping season will be gift cards and online sales. This is the same statement I have made for the last three years.
Randall Forsyth of Barrons: "Bridgewater Associates contends wiggles in the yen are having an impact on speculative positions, which are "now massive." The yen-carry trade -- which effectively means shorting the Japanese currency -- has pushed the yen to a record low against the euro, with the common currency fetching nearly 155 yen vs less than 140 yen at the beginning of 2006. Bridgewater sees the current market environment as precarious, and reminiscent of 1998, when the collapse of Long Term Capital Markets threatened the global financial system. They can't say what the catalyst of a break might be -- an increase in the Chinese yuan could be one, for instance. That could lead to an appreciation of all Asian currencies, including the yen, which have been suppressed by the region's central banks who don't want their economies to lose export competitiveness.The yen's rise could again ripple through the emerging markets, some of which already are looking shaky. India's SENSEX has been under pressure in recent days, which could spread to other emerging markets, write Bank of America's Raja Visweswaran and John Schofield. Emerging equity and debt markets are highly correlated, while emerging-market debt also is correlated with high-yield corporates. "We would assume a further widening of the current downward move in select [emerging market] indices would most likely result in a broader market correction across many other risk asset categories."
World energy demand is likely to climb an average 1.6 percent per year to reach about 325 million barrels of oil equivalent a day by 2030, Exxon Mobil predicts. That means global energy demand will be up about 60 percent from 2000 levels, Jaime Spellings, the Irving-based oil giant's general manager for corporate planning, told analysts.
The American Petroleum Institute reported a drop of 8.3 million barrels in crude supplies for the week ended Dec. 8. The Energy Department had reported a fall of 4.3 million. Motor gasoline supplies were down 1.1 million barrels, the API said, vs. the government's reported fall of 100,000. Distillate supplies were down 2.7 million barrels, the API said, compared with the 500,000-barrel fall reported by the government.
Inventories at U.S. businesses rose in October to their highest level in relation to sales in more than two and a half years, the Commerce Department reported Wednesday. Sales at U.S. businesses fell 0.2% in October after a record 2.3% drop in September. Meanwhile, inventories rose 0.4% in October, as expected by economists, after a revised 0.3% gain in September. The inventory-to-sales ratio rose to 1.31 from 1.30. It's the highest since February 2004.
January crude rose 35 cents to end at $61.37 a barrel. January natural gas gained 24.3 cents to end at $7.673 per million British thermal units.
February gold climbed 70 cents to close at $632.40 an ounce Wednesday. March silver fell 6.5 cents to end at $13.915 an ounce and March copper lost 6.15 cents to close at $3.033 a pound, its lowest closing level since late June.
Henry To: "U.S. households now have the most leveraged balance sheets in history. Moreover, in a credit-based and financially-leveraged society such as the United States, one needs to tread very carefully if you are a central banker, and thus the last thing that the Fed wants is a declining net worth of American households... Bottom line: The United States (and even more so, the United Kingdom since it does not have a great agricultural, technology, or entertainment industry such as what we have in the U.S.) today is more dependent on asset appreciation and the financial sector than ever - and both the Federal Reserve and the central banks of the world will continue to do what they can to uphold this trend going forward."
Tuesday, December 12, 2006
No Surprises
12/13/06 No Surprises
The Energy Information Administration said Tuesday that it still expects world oil demand to grow by 1.5 million barrels a day in 2007. The EIA, the official energy statistics arm of the U.S. government, said it expects U.S. petroleum consumption to rise by 300,000 barrels a day in 2007 after a flat 2006. The agency is expecting surplus world crude oil production capacity to increase only slighty. "However, OPEC's production cuts mean that, for the first time in months, surplus production capacity is no longer restricted to just Saudi Arabia," it said.
The Fed remains on hold.
Fiscal fourth-quarter net income for Goldman Sachs surged to $3.15 billion, or $6.59 a share, for the three months ended November 24, from $1.63 billion, or $3.35, in the year-ago period. Goldman's net revenue rose 47 percent to $9.41 billion.
Texas Pacific Group and Silver Lake Partners will buy Sabre Holdings Corp. , owner of the Travelocity hotel and flight-booking Web site, for $4.45 billion as they look to profit from a boom in travel services.
The Commerce Department said the October trade gap in Washington narrowed 8.4 percent to $58.9 billion, less than forecast by economists.
The use of ethanol has caused a surge in the price of corn to an 11 year high.
Gary Gordon of Annaly Mortgage: "We Americans have tested the limits of affordability over the past five years," he says. "Since the end of 2001, disposable personal income is up about 25% and mortgage rates are little changed. That argues for 25% higher home prices. Instead, home prices rose by an average of 50% and in many markets by 100% or more."
Crude closed at $61.02 a barrel.
The White House says President Bush has largely decided on a new approach to the Iraq war that he will announce next month, but he gave no public hint of his plan Tuesday.
Australia's Qantas Airways Ltd. rejected on Wednesday a conditional A$10.9 billion ($8.6 billion) buyout offer from a group led by Macquarie Bank Ltd. and private equity firm Texas Pacific Group.
The WSJ reported that UAL and Continental are holding merger talks.
General Electric Co. on Tuesday affirmed its earnings estimate for the end of 2006 and forecast profit growth of 10% to 13% in 2007
"We will deliver a high-visibility, low-risk 2007," stated Jeff Immelt, General Electric CEO.
The Energy Information Administration said Tuesday that it still expects world oil demand to grow by 1.5 million barrels a day in 2007. The EIA, the official energy statistics arm of the U.S. government, said it expects U.S. petroleum consumption to rise by 300,000 barrels a day in 2007 after a flat 2006. The agency is expecting surplus world crude oil production capacity to increase only slighty. "However, OPEC's production cuts mean that, for the first time in months, surplus production capacity is no longer restricted to just Saudi Arabia," it said.
The Fed remains on hold.
Fiscal fourth-quarter net income for Goldman Sachs surged to $3.15 billion, or $6.59 a share, for the three months ended November 24, from $1.63 billion, or $3.35, in the year-ago period. Goldman's net revenue rose 47 percent to $9.41 billion.
Texas Pacific Group and Silver Lake Partners will buy Sabre Holdings Corp. , owner of the Travelocity hotel and flight-booking Web site, for $4.45 billion as they look to profit from a boom in travel services.
The Commerce Department said the October trade gap in Washington narrowed 8.4 percent to $58.9 billion, less than forecast by economists.
The use of ethanol has caused a surge in the price of corn to an 11 year high.
Gary Gordon of Annaly Mortgage: "We Americans have tested the limits of affordability over the past five years," he says. "Since the end of 2001, disposable personal income is up about 25% and mortgage rates are little changed. That argues for 25% higher home prices. Instead, home prices rose by an average of 50% and in many markets by 100% or more."
Crude closed at $61.02 a barrel.
The White House says President Bush has largely decided on a new approach to the Iraq war that he will announce next month, but he gave no public hint of his plan Tuesday.
Australia's Qantas Airways Ltd. rejected on Wednesday a conditional A$10.9 billion ($8.6 billion) buyout offer from a group led by Macquarie Bank Ltd. and private equity firm Texas Pacific Group.
The WSJ reported that UAL and Continental are holding merger talks.
General Electric Co. on Tuesday affirmed its earnings estimate for the end of 2006 and forecast profit growth of 10% to 13% in 2007
"We will deliver a high-visibility, low-risk 2007," stated Jeff Immelt, General Electric CEO.
Pressure Points
12/12/06 Pressure Points
"The exchange rate issue is A) a sovereign issue and this is our principle. B) We will take internal and external balances into account when making decisions on the yuan," People’s Bank of China assistant governor Yi Gang told reporters on the sidelines of a financial forum. China has let the yuan rise by about 3,45% since it revalued the currency by 2,1% in July last year.
Greenspan: "I expect that the dollar will continue to drift downwards until there will be a change in the U.S. balance of payments," Greenspan told a business conference here via video-link from the United States.
"There has been some evidence that OPEC nations are beginning to switch their reserves out of dollars and into euro and yen," Greenspan said.
"It is imprudent to hold everything in one currency," he said, adding that at some point the dollar will be moving lower.
"That will be the experience of the next few years," Greenspan said.
The inventory-to-sales ratio rose to 1.20 in October from 1.18 in September. The last time the ratio was bigger was in November 2003. The inventory-sales ratio stood at a record low 1.15 in May, June and July. The typical wholesaler has about 37 days of sales on hand, up from 35 days in July. As an aside, the gift card business amounted to $19 billion in 2005, and this year it is anticipated to rise to $30 billion. A good deal of these cards will be redeemed in January and not in December. Retailers cannot count the cards as sales until the merchandise is redeemed.
DuPont Co., the third-largest U.S. chemical maker, will eliminate 1,500 agriculture jobs and cut output of herbicides and pesticides in a plan to increase spending on genetically modified seeds.
Brazilian steelmaker CSN offered on Monday to buy Anglo-Dutch rival Corus Group Plc for 4.9 billion pounds ($9.6 billion) in cash, trumping a bid made only hours earlier by India's Tata Steel.
State-owned Dubai Ports World said on Monday it had agreed to sell its U.S. port operations to an American International Group unit after relinquishing control of them to allay concerns about U.S. national security. It is a 100% cash deal.
Multiple firms including Silver Lake Partners and Texas Pacific Group have bid for Saber Holdings , owner of the Travelocity Web site, according to a source familiar with the situation. The deal could approach $4.3 billion.
Next year will likely bring a second annual decline in existing home sales, the National Association of Realtors predicted on Monday. Sales of existing homes are expected to decline 8.6 percent to 6.47 million for 2006 and contract another 1 percent to 6.40 million units next year. I believe that forecast for 2007 is too optimistic.
Europe's biggest medical device maker, Smith & Nephew Plc , is close to bidding about $11 billion for U.S. rival Biomet Inc. , sources familiar with the situation said on Sunday. One of the sources told Reuters bids were due by Tuesday and other companies were also likely to submit offers for Biomet. A
winning bid of at least $45 a share would not surprise me.
Goldman Sachs reports their quarterly earnings tomorrow. They should surprise on the upside and that may be so for guidance going into 2007. Lehman and Bear Stearns report on Thursday. Morgan Stanley will report on December 19.
On Wednesday bids are due on Harrah's, and a final level of $86 could be in the cards.
Hedge fund S.A.C. Capital disclosed that it owned 5.1% of Phelps Dodge Corp. as of Dec. 7. But the fund said that it plans to vote its shares against Phelps Dodge's pending takeover by Freeport-McMoRan Copper & Gold. In a securities filing, S.A.C. said the deal "would not provide full and fair value to the issuer's shareholders."
DaimlerChrysler AG could lay off up to 16 percent of the workers in its North American truck operations next year due to an expected downturn in demand, the head of the automaker's truck operations said on Monday.
John Hussman: "Over the past three years, profit margins have widened to record levels, which has detached P/E ratios from other fundamental measures – such as price/revenue, price/dividend, and price/book ratios. The S&P 500 is currently about double its historical norms on those metrics. That isn't a forecast that stocks have to eliminate that valuation gap, but it certainly does suggest that stocks are priced to deliver unsatisfactory long-term returns from these prices.It bears repeating that if profit margins were at normal levels – even on the basis of profit margins that prevailed during the 1990's (indeed, anytime prior to the past 3 years) – the price/earnings ratio of the S&P 500 would currently be nearly 25. Unless investors want to speculate on the notion of a “permanently high plateau” in profit margins, the stock market is strenuously overvalued at present. Neither current earnings nor “forward” earnings should be considered – in themselves – as anything close to robust or reliable metrics of value here."
Texas Instruments Inc. cut its fourth-quarter financial targets late Monday, and forecast sales in the range of $3.35 billion to $3.50 billion and earnings per share from operations between 37 cents to 40 cents. Its previous outlook called for sales in the range of $3.46 billion to $3.75 billion and earnings per share between 40 cents to 46 cents.
January natural gas fell 13.4 cents to close at $7.427 per million British thermal units. January crude fell 81 cents to close at a two-week low of $61.22 a barrel.
Barclays Global Investors filed a new 13G on BJ Services and now is the holder of 10.15% of the outstanding shares.
Marsoft: "After a spectacular third quarter performance, the dry bulk market has been a bit more tame over the past couple of months. A brief October rally fizzled in the second half of the month, and a similar pattern was seen in November, with rates moving up at the start of the month before losing some momentum. But in general, the market remains very firm, with most freight rates at their highest levels since the first half of 2005. Over the past month, most rates have moved up, with the Baltic Cape TC index rising from $60,000 per day in mid-October to $63,000 per day by mid-November. Likewise, the Baltic Panamax TC Index rose from $30,000 per day to $33,000 per day over this period. However, the smaller ships saw a mild decline in spot rates over the past month.
Gottschalks Inc.said its board has retained UBS Investment Bank to assist its special strategic committee in exploring "various alternatives."
Benjamin Graham: "Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market."
"The exchange rate issue is A) a sovereign issue and this is our principle. B) We will take internal and external balances into account when making decisions on the yuan," People’s Bank of China assistant governor Yi Gang told reporters on the sidelines of a financial forum. China has let the yuan rise by about 3,45% since it revalued the currency by 2,1% in July last year.
Greenspan: "I expect that the dollar will continue to drift downwards until there will be a change in the U.S. balance of payments," Greenspan told a business conference here via video-link from the United States.
"There has been some evidence that OPEC nations are beginning to switch their reserves out of dollars and into euro and yen," Greenspan said.
"It is imprudent to hold everything in one currency," he said, adding that at some point the dollar will be moving lower.
"That will be the experience of the next few years," Greenspan said.
The inventory-to-sales ratio rose to 1.20 in October from 1.18 in September. The last time the ratio was bigger was in November 2003. The inventory-sales ratio stood at a record low 1.15 in May, June and July. The typical wholesaler has about 37 days of sales on hand, up from 35 days in July. As an aside, the gift card business amounted to $19 billion in 2005, and this year it is anticipated to rise to $30 billion. A good deal of these cards will be redeemed in January and not in December. Retailers cannot count the cards as sales until the merchandise is redeemed.
DuPont Co., the third-largest U.S. chemical maker, will eliminate 1,500 agriculture jobs and cut output of herbicides and pesticides in a plan to increase spending on genetically modified seeds.
Brazilian steelmaker CSN offered on Monday to buy Anglo-Dutch rival Corus Group Plc for 4.9 billion pounds ($9.6 billion) in cash, trumping a bid made only hours earlier by India's Tata Steel.
State-owned Dubai Ports World said on Monday it had agreed to sell its U.S. port operations to an American International Group unit after relinquishing control of them to allay concerns about U.S. national security. It is a 100% cash deal.
Multiple firms including Silver Lake Partners and Texas Pacific Group have bid for Saber Holdings , owner of the Travelocity Web site, according to a source familiar with the situation. The deal could approach $4.3 billion.
Next year will likely bring a second annual decline in existing home sales, the National Association of Realtors predicted on Monday. Sales of existing homes are expected to decline 8.6 percent to 6.47 million for 2006 and contract another 1 percent to 6.40 million units next year. I believe that forecast for 2007 is too optimistic.
Europe's biggest medical device maker, Smith & Nephew Plc , is close to bidding about $11 billion for U.S. rival Biomet Inc. , sources familiar with the situation said on Sunday. One of the sources told Reuters bids were due by Tuesday and other companies were also likely to submit offers for Biomet. A
winning bid of at least $45 a share would not surprise me.
Goldman Sachs reports their quarterly earnings tomorrow. They should surprise on the upside and that may be so for guidance going into 2007. Lehman and Bear Stearns report on Thursday. Morgan Stanley will report on December 19.
On Wednesday bids are due on Harrah's, and a final level of $86 could be in the cards.
Hedge fund S.A.C. Capital disclosed that it owned 5.1% of Phelps Dodge Corp. as of Dec. 7. But the fund said that it plans to vote its shares against Phelps Dodge's pending takeover by Freeport-McMoRan Copper & Gold. In a securities filing, S.A.C. said the deal "would not provide full and fair value to the issuer's shareholders."
DaimlerChrysler AG could lay off up to 16 percent of the workers in its North American truck operations next year due to an expected downturn in demand, the head of the automaker's truck operations said on Monday.
John Hussman: "Over the past three years, profit margins have widened to record levels, which has detached P/E ratios from other fundamental measures – such as price/revenue, price/dividend, and price/book ratios. The S&P 500 is currently about double its historical norms on those metrics. That isn't a forecast that stocks have to eliminate that valuation gap, but it certainly does suggest that stocks are priced to deliver unsatisfactory long-term returns from these prices.It bears repeating that if profit margins were at normal levels – even on the basis of profit margins that prevailed during the 1990's (indeed, anytime prior to the past 3 years) – the price/earnings ratio of the S&P 500 would currently be nearly 25. Unless investors want to speculate on the notion of a “permanently high plateau” in profit margins, the stock market is strenuously overvalued at present. Neither current earnings nor “forward” earnings should be considered – in themselves – as anything close to robust or reliable metrics of value here."
Texas Instruments Inc. cut its fourth-quarter financial targets late Monday, and forecast sales in the range of $3.35 billion to $3.50 billion and earnings per share from operations between 37 cents to 40 cents. Its previous outlook called for sales in the range of $3.46 billion to $3.75 billion and earnings per share between 40 cents to 46 cents.
January natural gas fell 13.4 cents to close at $7.427 per million British thermal units. January crude fell 81 cents to close at a two-week low of $61.22 a barrel.
Barclays Global Investors filed a new 13G on BJ Services and now is the holder of 10.15% of the outstanding shares.
Marsoft: "After a spectacular third quarter performance, the dry bulk market has been a bit more tame over the past couple of months. A brief October rally fizzled in the second half of the month, and a similar pattern was seen in November, with rates moving up at the start of the month before losing some momentum. But in general, the market remains very firm, with most freight rates at their highest levels since the first half of 2005. Over the past month, most rates have moved up, with the Baltic Cape TC index rising from $60,000 per day in mid-October to $63,000 per day by mid-November. Likewise, the Baltic Panamax TC Index rose from $30,000 per day to $33,000 per day over this period. However, the smaller ships saw a mild decline in spot rates over the past month.
Gottschalks Inc.said its board has retained UBS Investment Bank to assist its special strategic committee in exploring "various alternatives."
Benjamin Graham: "Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market."
Sunday, December 10, 2006
Events
12/11/06 Events
Home affordability and the housing industry received a big boost today from Congress, which approved a measure that would for the first time allow lower- and moderate-income home buyers to deduct the full cost of mortgage insurance from their federal taxes in 2007. The provision was included in the omnibus tax bill approved by Congress early Sunday morning.
Mike Burk: "Next Friday is the third Friday of December, one of 4 Triple Witching Fridays during the year when options and futures contracts expire. The tables below show how the OTC and SPX have performed during the week prior to the 3rd Friday in December during the 2nd year of the Presidential Cycle...The OTC has been up about 50% of the time with a very slight positive bias. The SPX has been up about 60% of the time with a stronger bias...Seasonally next week is neutral and at some point the market will take break from its consistent upward move. Many of the breadth indicators have been deteriorating since mid October so next week would be a convenient time for a little adjustment. There has been no build up of new lows so any decline is likely to be brief.I expect the major indices to be lower on Friday December 15 than they were on Friday December 8."
Ludwig von Mises: "Not everything that exists today is reasonable; but this does not mean that everything that does not exist is sensible."
Iraq Study Group member Leon Panetta tells Newsweek that the ISG agreed, in a private discussion not included in its report, that about 60,000 to 70,000 U.S. troops would have to stay on in Iraq after 2008 in order to support a "transition team" program which could put the elite of the Army's professional corps in harm's way for
years. That includes advisers and the quick-reaction forces needed to
protect them, as well as logistical support and Special Operations troops,
report a team of Newsweek correspondents in the December 18 issue.
The Northern Trust December Economic Outlook: "We continue to expect sub-2% annualized real GDP growth in the final quarter of this year and have revised down our first-quarter 2007 forecast to 1.8% from 2.0% -- not much more than a rounding error. In addition to the fifth consecutive quarterly decline in real residential investment expenditures, we expect a considerable deceleration in the growth of real business expenditures for capital equipment and software in the fourth quarter, based on the weak October shipments data for nondefense capital goods excluding aircraft. ...Based on the excesses of the past real estate boom, the considerable supply overhang and the typical peak-to-trough behavior of residential investment expenditures, we continue to expect that the trough of the housing recession is not near at hand."
From Footnoted.org: "Earlier this week, Ingersoll Rand (IR) filed this 8-K, which said that it was replacing old change-in-control agreements with its senior executives that expired on Dec. 1 with new ones "that decreased the value of the benefits" that the execs would receive following a change of control. That certainly sounded like something worthy of a rare footnoted.org gold star. But a bit more digging into earlier filings appears to indicate that while two executives would see a slight reduction in what they would otherwise receive — from three times salary and bonus to 2.5 times — the new agreements seemingly expand the number of top executives covered.
That’s because according to the proxy filed back in late April, only the five top execs appear to have change agreements. At least they’re the only ones mentioned specifically. That group includes Chairman and CEO Herbert Henkel, CFO Timothy McLevish, General Counsel Patricia Nachtigal, and Senior Vice Presidents Mike Lambach and Chris Vasiloff. But the new agreements include all senior vice presidents. A quick skim of IR’s top management page shows that there’s five additional senior vice presidents who presumably weren’t covered by CIC agreements before."
You may recall that I suggested the purchase of Ingersoll Rand some months back and, on one occasion, my best idea was to sell the 30 and 35 puts, both expired worthless.
IR has once again appeared on a list of possible attractive buyouts by private equity groups. At 40+ the stock certainly does not reflect long-term value, in my view.
November and December inflation rates were exceedingly low. To believe the comparison with those months could be favorable is an irrational thought, in my view.
Ticker Sense: "We're currently a couple of months into year five of the current bull market, and there have only been 3 other S&P 500 bull markets since 1962 that have even lasted five years."
Oil producing countries have reduced their exposure to the dollar to the lowest level in two years and shifted oil income into euros, yen and sterling, according to new data from the Bank for International Settlements.
Assailants hurled a bomb and fired at two vehicles carrying employees of an affiliate of Houston-based Halliburton co. near Algiers on Sunday, killing one Algerian driver, witnesses said. The full extent of the casualties in the attack was not immediately clear.
Home affordability and the housing industry received a big boost today from Congress, which approved a measure that would for the first time allow lower- and moderate-income home buyers to deduct the full cost of mortgage insurance from their federal taxes in 2007. The provision was included in the omnibus tax bill approved by Congress early Sunday morning.
Mike Burk: "Next Friday is the third Friday of December, one of 4 Triple Witching Fridays during the year when options and futures contracts expire. The tables below show how the OTC and SPX have performed during the week prior to the 3rd Friday in December during the 2nd year of the Presidential Cycle...The OTC has been up about 50% of the time with a very slight positive bias. The SPX has been up about 60% of the time with a stronger bias...Seasonally next week is neutral and at some point the market will take break from its consistent upward move. Many of the breadth indicators have been deteriorating since mid October so next week would be a convenient time for a little adjustment. There has been no build up of new lows so any decline is likely to be brief.I expect the major indices to be lower on Friday December 15 than they were on Friday December 8."
Ludwig von Mises: "Not everything that exists today is reasonable; but this does not mean that everything that does not exist is sensible."
Iraq Study Group member Leon Panetta tells Newsweek that the ISG agreed, in a private discussion not included in its report, that about 60,000 to 70,000 U.S. troops would have to stay on in Iraq after 2008 in order to support a "transition team" program which could put the elite of the Army's professional corps in harm's way for
years. That includes advisers and the quick-reaction forces needed to
protect them, as well as logistical support and Special Operations troops,
report a team of Newsweek correspondents in the December 18 issue.
The Northern Trust December Economic Outlook: "We continue to expect sub-2% annualized real GDP growth in the final quarter of this year and have revised down our first-quarter 2007 forecast to 1.8% from 2.0% -- not much more than a rounding error. In addition to the fifth consecutive quarterly decline in real residential investment expenditures, we expect a considerable deceleration in the growth of real business expenditures for capital equipment and software in the fourth quarter, based on the weak October shipments data for nondefense capital goods excluding aircraft. ...Based on the excesses of the past real estate boom, the considerable supply overhang and the typical peak-to-trough behavior of residential investment expenditures, we continue to expect that the trough of the housing recession is not near at hand."
From Footnoted.org: "Earlier this week, Ingersoll Rand (IR) filed this 8-K, which said that it was replacing old change-in-control agreements with its senior executives that expired on Dec. 1 with new ones "that decreased the value of the benefits" that the execs would receive following a change of control. That certainly sounded like something worthy of a rare footnoted.org gold star. But a bit more digging into earlier filings appears to indicate that while two executives would see a slight reduction in what they would otherwise receive — from three times salary and bonus to 2.5 times — the new agreements seemingly expand the number of top executives covered.
That’s because according to the proxy filed back in late April, only the five top execs appear to have change agreements. At least they’re the only ones mentioned specifically. That group includes Chairman and CEO Herbert Henkel, CFO Timothy McLevish, General Counsel Patricia Nachtigal, and Senior Vice Presidents Mike Lambach and Chris Vasiloff. But the new agreements include all senior vice presidents. A quick skim of IR’s top management page shows that there’s five additional senior vice presidents who presumably weren’t covered by CIC agreements before."
You may recall that I suggested the purchase of Ingersoll Rand some months back and, on one occasion, my best idea was to sell the 30 and 35 puts, both expired worthless.
IR has once again appeared on a list of possible attractive buyouts by private equity groups. At 40+ the stock certainly does not reflect long-term value, in my view.
November and December inflation rates were exceedingly low. To believe the comparison with those months could be favorable is an irrational thought, in my view.
Ticker Sense: "We're currently a couple of months into year five of the current bull market, and there have only been 3 other S&P 500 bull markets since 1962 that have even lasted five years."
Oil producing countries have reduced their exposure to the dollar to the lowest level in two years and shifted oil income into euros, yen and sterling, according to new data from the Bank for International Settlements.
Assailants hurled a bomb and fired at two vehicles carrying employees of an affiliate of Houston-based Halliburton co. near Algiers on Sunday, killing one Algerian driver, witnesses said. The full extent of the casualties in the attack was not immediately clear.
Surprises
12/10/06 Surprises
The Financial Times reported "Goldman Sachs’ $10bn flagship hedge fund, Global Alpha, is down nearly 12 per cent for the year, people familiar with the hedge fund’s performance said.The fund, which gained 40 per cent last year, is now on track for its worst annual performance. However, the highly volatile fund has been down more than 12 per cent at times in the past, though it has never finished a year down that much." Can you imagine how the fund would have done had the managers not been privy to so much information!
Doug Noland: " Broker/Dealer Assets have now ballooned $750 billion, or 45%, in just the past two years." That is not astounding. It is totally out of control. At that
rate of growth, the Broker/Dealers will even be able to fund Social Security and Medicare!
Average hourly earnings for private production and
nonsupervisory workers increased 3 cents in November to $16.94, a gain of 0.2 percent. Over the year, average hourly earnings rose by 4.1 percent.
Michael Kahn: "Risk for buying here is getting to be significant. Without considering all the other factors that make a stock market, such as trends in interest rates, inflation and the dollar, there seems to be a lot more downside potential than upside at this point in time."
From the Houston Chronicle: "Prices typically fall in the winter months as Americans do less driving and demand is light. But this week alone, Houston drivers saw an 8-cent hike in the price of regular unleaded gas to $2.15 a gallon, while the statewide average shot up 7 cents to $2.19 a gallon, according to the AAA Texas Weekend Gas Watch, a report released Friday that tracked statewide prices for the week ending Thursday.The national average rose just slightly less, coming in at 5.1 cents over the previous week to $2.29 a gallon, according to Energy Department data. Pump prices are inching up in response to rising crude prices and higher-than-usual demand from U.S. drivers taking advantage of lower fuel costs in recent months, said Jason Toews, co-founder of gas buddy.com, a Web site based in Brooklyn Park, Minn., that helps consumers find low-cost gas stations in their areas. But he predicts gasoline prices will remain "relatively stable, perhaps slightly increasing" through early spring. That's when refiners draw down supplies and switch to cleaner-burning summer gas blends, a process that can boost fuel prices by 50 cents a gallon, he said. Gasoline is prone to premature price increases or "false starts" in December and January before hitting a higher sustained level during the spring and summer months, said Tom Kloza, chief oil analyst at the Oil Price Information Service in New Jersey." The current spike, he said, has more to do with rising wholesale costs involved in producing gasoline than any year-end retail strategy or supply constraints.
Doug Casey: "78 million is the number of baby boomers who are in or approaching retirement. That’s the biggest demographic bulge in U.S history, fully 26% of the population. And many of those 78 million are in a jam. As they approach retirement, they are still carrying historic levels of debt and, on average, have woefully inadequate net worth -- and much of that based on shaky housing prices. In fact, 25% of the retiring boomers – nearly 20,000,000 in all -- are facing retirement with a net worth of less than $50,000. You don’t need to be an accountant to see that, with today’s degraded currency and longer life expectancies, they won’t get very far on so little. This is a real tragedy in the making. After all, what could be sadder than millions of people striving for a lifetime to reach the American dream and then discovering that the “golden years” are just a fantasy, their wealth having been sucked away by decades of inflation and taxes so that politicians and bureaucrats could squander it to grease the skids for their own political success. In 1930, the total share of the U.S. economy directly controlled by or dependent on government was about 11%, leaving the balance of 89% firmly in the hands of private enterprise. Today, by the late Milton Friedman’s calculations, the government’s share of the U.S. economy – including the time and resources required to comply with all the regulations – has ballooned to over 50%, reducing the wealth-creating machinery of free enterprise to an auxiliary engine for government...In fact, according to the Fed, a majority of retired Americans already rely on Social Security for 80% or more of their income."
Doug Noland: “Fed Funds & Repos” expanded at a 26.9% rate during the quarter and “Funding Corps” grew 25% annualized. Broker/Dealer Assets ballooned at a blistering 28% pace during the quarter, expanding balance sheets much more rapidly than the Banks ($168.3bn vs. $39.5bn). Why the need for such aggressive expansion in the face of a slowing economy?"
John Mauldin: "Hugh (Hugh Moore of Guerite Advisors in South Carolina) tells us that "In the previous seven cycles since 1959, housing starts (seasonally adjusted) have fallen, on average, 50.7% from peak-to-trough. Each time housing starts have fallen more than 25% from their most recent peak, a recession has followed (except during the 'credit crunch' of 1966-67 that ended in an economic contraction, but not an 'official' recession)."1967 saw one quarter of contracting GDP, but the official NBER recessions require 2 quarters. The stock market did not like even one quarter of GDP contraction, dropping almost 20%."
In the current Barrons, you might have noticed an article on page 26 on newspaper stocks. Of the majors mentioned, only Tribune Company was projected to have higher earnings in 2007. Selling at 15 times estimated earnings and an enterprise value/cash flow of 8.9 and a dividend yield of 2.2%, I strongly suggest there is limited risk and an upside that could surprise. An entire buyout or significant asset sales are a catalyst that should not be overlooked.
Last week there were only 14 new lows on the NYSE. I guess the number could go to zero but less than zero is out of the question. Is this a sign of a top? It's a warning sign to keep in your mind. Keep your eye on the closing TICK. Last week that number was negative on Thursday and Friday for the Nasdaq.
Ford Motor Co. will extend buy-out offers to most of its while-collar workforce next week, according to a report in the Detroit Free Press Saturday.
I found it interesting that BJ Services closed at $33.03 on Friday, and yet, on Friday, 500 January 2007 calls with s strike price of $40 traded at 15 cents. That's a strong leap of faith or someone knows something that I do not.
The Financial Times reported "Goldman Sachs’ $10bn flagship hedge fund, Global Alpha, is down nearly 12 per cent for the year, people familiar with the hedge fund’s performance said.The fund, which gained 40 per cent last year, is now on track for its worst annual performance. However, the highly volatile fund has been down more than 12 per cent at times in the past, though it has never finished a year down that much." Can you imagine how the fund would have done had the managers not been privy to so much information!
Doug Noland: " Broker/Dealer Assets have now ballooned $750 billion, or 45%, in just the past two years." That is not astounding. It is totally out of control. At that
rate of growth, the Broker/Dealers will even be able to fund Social Security and Medicare!
Average hourly earnings for private production and
nonsupervisory workers increased 3 cents in November to $16.94, a gain of 0.2 percent. Over the year, average hourly earnings rose by 4.1 percent.
Michael Kahn: "Risk for buying here is getting to be significant. Without considering all the other factors that make a stock market, such as trends in interest rates, inflation and the dollar, there seems to be a lot more downside potential than upside at this point in time."
From the Houston Chronicle: "Prices typically fall in the winter months as Americans do less driving and demand is light. But this week alone, Houston drivers saw an 8-cent hike in the price of regular unleaded gas to $2.15 a gallon, while the statewide average shot up 7 cents to $2.19 a gallon, according to the AAA Texas Weekend Gas Watch, a report released Friday that tracked statewide prices for the week ending Thursday.The national average rose just slightly less, coming in at 5.1 cents over the previous week to $2.29 a gallon, according to Energy Department data. Pump prices are inching up in response to rising crude prices and higher-than-usual demand from U.S. drivers taking advantage of lower fuel costs in recent months, said Jason Toews, co-founder of gas buddy.com, a Web site based in Brooklyn Park, Minn., that helps consumers find low-cost gas stations in their areas. But he predicts gasoline prices will remain "relatively stable, perhaps slightly increasing" through early spring. That's when refiners draw down supplies and switch to cleaner-burning summer gas blends, a process that can boost fuel prices by 50 cents a gallon, he said. Gasoline is prone to premature price increases or "false starts" in December and January before hitting a higher sustained level during the spring and summer months, said Tom Kloza, chief oil analyst at the Oil Price Information Service in New Jersey." The current spike, he said, has more to do with rising wholesale costs involved in producing gasoline than any year-end retail strategy or supply constraints.
Doug Casey: "78 million is the number of baby boomers who are in or approaching retirement. That’s the biggest demographic bulge in U.S history, fully 26% of the population. And many of those 78 million are in a jam. As they approach retirement, they are still carrying historic levels of debt and, on average, have woefully inadequate net worth -- and much of that based on shaky housing prices. In fact, 25% of the retiring boomers – nearly 20,000,000 in all -- are facing retirement with a net worth of less than $50,000. You don’t need to be an accountant to see that, with today’s degraded currency and longer life expectancies, they won’t get very far on so little. This is a real tragedy in the making. After all, what could be sadder than millions of people striving for a lifetime to reach the American dream and then discovering that the “golden years” are just a fantasy, their wealth having been sucked away by decades of inflation and taxes so that politicians and bureaucrats could squander it to grease the skids for their own political success. In 1930, the total share of the U.S. economy directly controlled by or dependent on government was about 11%, leaving the balance of 89% firmly in the hands of private enterprise. Today, by the late Milton Friedman’s calculations, the government’s share of the U.S. economy – including the time and resources required to comply with all the regulations – has ballooned to over 50%, reducing the wealth-creating machinery of free enterprise to an auxiliary engine for government...In fact, according to the Fed, a majority of retired Americans already rely on Social Security for 80% or more of their income."
Doug Noland: “Fed Funds & Repos” expanded at a 26.9% rate during the quarter and “Funding Corps” grew 25% annualized. Broker/Dealer Assets ballooned at a blistering 28% pace during the quarter, expanding balance sheets much more rapidly than the Banks ($168.3bn vs. $39.5bn). Why the need for such aggressive expansion in the face of a slowing economy?"
John Mauldin: "Hugh (Hugh Moore of Guerite Advisors in South Carolina) tells us that "In the previous seven cycles since 1959, housing starts (seasonally adjusted) have fallen, on average, 50.7% from peak-to-trough. Each time housing starts have fallen more than 25% from their most recent peak, a recession has followed (except during the 'credit crunch' of 1966-67 that ended in an economic contraction, but not an 'official' recession)."1967 saw one quarter of contracting GDP, but the official NBER recessions require 2 quarters. The stock market did not like even one quarter of GDP contraction, dropping almost 20%."
In the current Barrons, you might have noticed an article on page 26 on newspaper stocks. Of the majors mentioned, only Tribune Company was projected to have higher earnings in 2007. Selling at 15 times estimated earnings and an enterprise value/cash flow of 8.9 and a dividend yield of 2.2%, I strongly suggest there is limited risk and an upside that could surprise. An entire buyout or significant asset sales are a catalyst that should not be overlooked.
Last week there were only 14 new lows on the NYSE. I guess the number could go to zero but less than zero is out of the question. Is this a sign of a top? It's a warning sign to keep in your mind. Keep your eye on the closing TICK. Last week that number was negative on Thursday and Friday for the Nasdaq.
Ford Motor Co. will extend buy-out offers to most of its while-collar workforce next week, according to a report in the Detroit Free Press Saturday.
I found it interesting that BJ Services closed at $33.03 on Friday, and yet, on Friday, 500 January 2007 calls with s strike price of $40 traded at 15 cents. That's a strong leap of faith or someone knows something that I do not.
Friday, December 08, 2006
Expectations
12/9/06 Expectations
In early Friday trading, January crude oil futures were last up 92 cent at $63.41 a barrel on expectations that the Organization of Petroleum Exporting Countries would cut production at the oil cartels meeting on Dec. 14. A report in The Wall Street Journal on Friday suggested that OPEC won't call for an output reduction.The economy added 132,000 jobs in November, above Wall Street expectations of a 112,000 rise. The Labor Department also revised its October and Septbember employment estimates, adding 42,000 payrolls to its original count over the two months period. The unemployment rate ticked higher to 4.5% in November from 4.4% in October. The increase in the unemployment rate was expected. Average hourly earnings increased 3 cents, or 0.2% to $16.94. Economists had been expecting a 0.3% gain.
Heelys (HLYS) priced 6.425 million shares at $21 a share -- well above its $16-$18 range -- for its stock market debut on Friday. Speculation is alive and well with the opening bid of $35!
Bank of America is "very interested" in buying U.K. bank Barclays, according to a Merrill Lynch research report.
The Financial Times reported that Chinese company Wanxiang Group, China's top auto parts supplier, is in talks about buying some of Ford's component businesses.
The University of Michigan said its preliminary reading on consumer sentiment in December was 90.2, down from November's reading of 92.1. The index had been expected to dip slightly to 92.0, according to a median forecast of Wall Street economists polled by Reuters.
Nouriel Roubini: "the coming housing bust may lead to a more severe financial and banking crisis than the S&L crisis of the 1980s. The recent increased financial problems of H&R Block and other sub-prime lending institutions may thus be the proverbial canary in the mine – or tip of the iceberg - and signal the more severe financial distress that many housing lenders will face when the current housing slump turns into a broader and uglier housing bust that will be associated with a broader economic recession. You can then have millions of households with falling wealth, reduced real incomes and lost jobs being unable to service their mortgages and defaulting on them; mortgage delinquencies and foreclosures sharply rising; the beginning of a credit crunch as lending standards are suddenly and sharply tightened with the increased probability of defaults; and finally mortgage lending institutions - with increased losses and saddled with foreclosed properties whose value is falling and that are worth much less than the initial mortgages – that increasingly experience financial distress and risk going bust."
The Financial Times reported "Ownit Mortgage Solutions, in which Merrill Lynch has a 15 per cent stake, closed its doors. Its failure is the latest in a series of ominous developments in the market for subprime mortgages – higher interest loans made to borrowers who are seen as risky because of payment problems or large debt burdens. There has been a sharp rise in the number of borrowers behind on their payments."
“OPEC needs to restrict output further because a plunging dollar has cut the value of oil,” said OPEC president Edmund Daukoru.
Bloomberg reported tankers will load 158,065 barrels a day of Brent in January, down from 267,742 in December, according to the loading program of Royal Dutch Shell Plc.
The busiest shopping season
of the year is well underway and retailers have dollar signs dancing in
their heads, but Americans' economic enthusiasm has cooled. According to
the most recent results of the RBC CASH (Consumer Attitudes and Spending by
Household) Index, which measured the attitudes of 1,000 Americans earlier
this week, consumer confidence dropped more than five points this month.
Although Americans' assessments of job security rose slightly, overall
consumer sentiment dropped, as consumers expressed concern about current
and future economic conditions, as well as investing. As a result, the RBC
CASH Index for December released today by RBC Financial Group, stands at
86.9, compared to 92.4 in November.
Devon Energy expects to produce approximately 57 million oil-equivalent
barrels (Boe) in the fourth quarter of 2006. This represents a seven
percent increase over Devon's fourth-quarter 2005 production of 53.3
million Boe. On a sequential quarter basis, estimated fourth-quarter
production would be three percent greater than third-quarter 2006
production of 55.4 million Boe.
For the full year 2006, Devon expects to produce approximately 216
million Boe. This includes approximately two million Boe (500,000 Boe in
the fourth quarter of 2006) of production from Devon's Egyptian assets. At
year-end Egypt will be reported as a discontinued operation and these
volumes will be excluded from reported production for all periods
presented. Devon announced its plans to sell all of its interests in Egypt
on November 14, 2006.
Nigerian gunman attacked an export terminal belonging to the Italian company ENI S.p.A taking hostages and killing at least one person.
Justice Litle: "The smart money is buying with abandon because it knows the paper bits floating around today will be worth less than the paper bits floating around tomorrow.
How long can this go on? No one really knows. It's sort of like a game of musical chairs. As long as a veneer of psychological stability is maintained - i.e., as long as cash doesn't become trash too quickly - we could continue to see an upward trend in nominal values, even as real values stall out, or even decline.
Sooner or later, gold is going to break its 1980 highs in nominal terms. (This could easily happen in 2007.) After that, it will break its 1980 highs in inflation-adjusted terms -- which will prove a much more noteworthy feat."
February gold closed at $631 an ounce Friday, down $6 for the session. March silver fell 14 cents to close at $13.895 an ounce. March copper closed at $3.112 a pound, up 1 cent Friday.
The 10 OPEC members bound by the cartel's output agreements produced an average 27.07 million barrels per day (b/d) in November, down 660,000 b/d from October, but still well above the group's new 26.3 million b/d output target, a Platts survey
showed December 8.
Based on Platts' figure for OPEC's November production, the group
exceeded its 26.3 million b/d target by 770,000 b/d.
"Despite the fact that OPEC's cuts are nowhere near what was targeted,
the market still remains solidly above $60," said John Kingston, Platts
global director of oil. "But the group does face a supply/demand equation
that is significantly out of whack, to its possible detriment, as the first
quarter progresses and goes into the second quarter," he explained.
For this reason, it appears that there is significant support among
OPEC ministers to cut crude production again at talks in the Nigerian
capital Abuja when the organization meets December 14.
"Statistics and the marketplace continue to signal hefty inventory
levels for the immediate future and that's bound to concern OPEC a great
deal," Kingston said.
Expedia.com said Friday it plans to repurchase 9.8% of its common stock at a per share price of between $18.50 and $22. The tender offer is expected to begin on Monday.
Fueled by a more optimistic outlook on the strength of the economy and number of jobs
available, U.S. workers' confidence hit new highs in November, according to
a recent survey of 3,654 adults. The Spherion(R) Employee Confidence Index,
a monthly gauge of overall worker confidence, climbed 0.9 points to 60.1 in
November, the third consecutive monthly increase. The survey, conducted by
Harris Interactive(R) on behalf of Spherion Corporation (NYSE: SFN), shows
that 66 percent of workers believe the economy is strengthening or
stabilized, compared to 63 percent in October and 29 percent believe more
jobs are available, versus 27 percent in October.
In October, Eli Lilly and Company announced that it had signed a definitive merger agreement to acquire ICOS Corporation in a cash transaction. Under the terms of the agreement, Lilly will acquire all of the outstanding shares of ICOS common stock at a price of $32 per share, for a total of approximately $2.1 billion. In approximately 2 weeks, ICOS shareholders will vote on the transaction; however, the proxy material fails to mention that last week ICOS initiated an early-stage clinical trial in Europe of an experimental drug for psoriasis. At the very least, in my view, new proxy material should be mailed with this information.
Zillow will allow homeowners and real estate agents to advertise for-sale properties on its website at no cost.
The yield on the 10-year Treasury rose from 4.50% to 4.56%.
January crude fell 46 cents to close at $62.03 a barrel Friday. January natural gas fell 11 cents to close at $7.561 per million British thermal units.
In early Friday trading, January crude oil futures were last up 92 cent at $63.41 a barrel on expectations that the Organization of Petroleum Exporting Countries would cut production at the oil cartels meeting on Dec. 14. A report in The Wall Street Journal on Friday suggested that OPEC won't call for an output reduction.The economy added 132,000 jobs in November, above Wall Street expectations of a 112,000 rise. The Labor Department also revised its October and Septbember employment estimates, adding 42,000 payrolls to its original count over the two months period. The unemployment rate ticked higher to 4.5% in November from 4.4% in October. The increase in the unemployment rate was expected. Average hourly earnings increased 3 cents, or 0.2% to $16.94. Economists had been expecting a 0.3% gain.
Heelys (HLYS) priced 6.425 million shares at $21 a share -- well above its $16-$18 range -- for its stock market debut on Friday. Speculation is alive and well with the opening bid of $35!
Bank of America is "very interested" in buying U.K. bank Barclays, according to a Merrill Lynch research report.
The Financial Times reported that Chinese company Wanxiang Group, China's top auto parts supplier, is in talks about buying some of Ford's component businesses.
The University of Michigan said its preliminary reading on consumer sentiment in December was 90.2, down from November's reading of 92.1. The index had been expected to dip slightly to 92.0, according to a median forecast of Wall Street economists polled by Reuters.
Nouriel Roubini: "the coming housing bust may lead to a more severe financial and banking crisis than the S&L crisis of the 1980s. The recent increased financial problems of H&R Block and other sub-prime lending institutions may thus be the proverbial canary in the mine – or tip of the iceberg - and signal the more severe financial distress that many housing lenders will face when the current housing slump turns into a broader and uglier housing bust that will be associated with a broader economic recession. You can then have millions of households with falling wealth, reduced real incomes and lost jobs being unable to service their mortgages and defaulting on them; mortgage delinquencies and foreclosures sharply rising; the beginning of a credit crunch as lending standards are suddenly and sharply tightened with the increased probability of defaults; and finally mortgage lending institutions - with increased losses and saddled with foreclosed properties whose value is falling and that are worth much less than the initial mortgages – that increasingly experience financial distress and risk going bust."
The Financial Times reported "Ownit Mortgage Solutions, in which Merrill Lynch has a 15 per cent stake, closed its doors. Its failure is the latest in a series of ominous developments in the market for subprime mortgages – higher interest loans made to borrowers who are seen as risky because of payment problems or large debt burdens. There has been a sharp rise in the number of borrowers behind on their payments."
“OPEC needs to restrict output further because a plunging dollar has cut the value of oil,” said OPEC president Edmund Daukoru.
Bloomberg reported tankers will load 158,065 barrels a day of Brent in January, down from 267,742 in December, according to the loading program of Royal Dutch Shell Plc.
The busiest shopping season
of the year is well underway and retailers have dollar signs dancing in
their heads, but Americans' economic enthusiasm has cooled. According to
the most recent results of the RBC CASH (Consumer Attitudes and Spending by
Household) Index, which measured the attitudes of 1,000 Americans earlier
this week, consumer confidence dropped more than five points this month.
Although Americans' assessments of job security rose slightly, overall
consumer sentiment dropped, as consumers expressed concern about current
and future economic conditions, as well as investing. As a result, the RBC
CASH Index for December released today by RBC Financial Group, stands at
86.9, compared to 92.4 in November.
Devon Energy expects to produce approximately 57 million oil-equivalent
barrels (Boe) in the fourth quarter of 2006. This represents a seven
percent increase over Devon's fourth-quarter 2005 production of 53.3
million Boe. On a sequential quarter basis, estimated fourth-quarter
production would be three percent greater than third-quarter 2006
production of 55.4 million Boe.
For the full year 2006, Devon expects to produce approximately 216
million Boe. This includes approximately two million Boe (500,000 Boe in
the fourth quarter of 2006) of production from Devon's Egyptian assets. At
year-end Egypt will be reported as a discontinued operation and these
volumes will be excluded from reported production for all periods
presented. Devon announced its plans to sell all of its interests in Egypt
on November 14, 2006.
Nigerian gunman attacked an export terminal belonging to the Italian company ENI S.p.A taking hostages and killing at least one person.
Justice Litle: "The smart money is buying with abandon because it knows the paper bits floating around today will be worth less than the paper bits floating around tomorrow.
How long can this go on? No one really knows. It's sort of like a game of musical chairs. As long as a veneer of psychological stability is maintained - i.e., as long as cash doesn't become trash too quickly - we could continue to see an upward trend in nominal values, even as real values stall out, or even decline.
Sooner or later, gold is going to break its 1980 highs in nominal terms. (This could easily happen in 2007.) After that, it will break its 1980 highs in inflation-adjusted terms -- which will prove a much more noteworthy feat."
February gold closed at $631 an ounce Friday, down $6 for the session. March silver fell 14 cents to close at $13.895 an ounce. March copper closed at $3.112 a pound, up 1 cent Friday.
The 10 OPEC members bound by the cartel's output agreements produced an average 27.07 million barrels per day (b/d) in November, down 660,000 b/d from October, but still well above the group's new 26.3 million b/d output target, a Platts survey
showed December 8.
Based on Platts' figure for OPEC's November production, the group
exceeded its 26.3 million b/d target by 770,000 b/d.
"Despite the fact that OPEC's cuts are nowhere near what was targeted,
the market still remains solidly above $60," said John Kingston, Platts
global director of oil. "But the group does face a supply/demand equation
that is significantly out of whack, to its possible detriment, as the first
quarter progresses and goes into the second quarter," he explained.
For this reason, it appears that there is significant support among
OPEC ministers to cut crude production again at talks in the Nigerian
capital Abuja when the organization meets December 14.
"Statistics and the marketplace continue to signal hefty inventory
levels for the immediate future and that's bound to concern OPEC a great
deal," Kingston said.
Expedia.com said Friday it plans to repurchase 9.8% of its common stock at a per share price of between $18.50 and $22. The tender offer is expected to begin on Monday.
Fueled by a more optimistic outlook on the strength of the economy and number of jobs
available, U.S. workers' confidence hit new highs in November, according to
a recent survey of 3,654 adults. The Spherion(R) Employee Confidence Index,
a monthly gauge of overall worker confidence, climbed 0.9 points to 60.1 in
November, the third consecutive monthly increase. The survey, conducted by
Harris Interactive(R) on behalf of Spherion Corporation (NYSE: SFN), shows
that 66 percent of workers believe the economy is strengthening or
stabilized, compared to 63 percent in October and 29 percent believe more
jobs are available, versus 27 percent in October.
In October, Eli Lilly and Company announced that it had signed a definitive merger agreement to acquire ICOS Corporation in a cash transaction. Under the terms of the agreement, Lilly will acquire all of the outstanding shares of ICOS common stock at a price of $32 per share, for a total of approximately $2.1 billion. In approximately 2 weeks, ICOS shareholders will vote on the transaction; however, the proxy material fails to mention that last week ICOS initiated an early-stage clinical trial in Europe of an experimental drug for psoriasis. At the very least, in my view, new proxy material should be mailed with this information.
Zillow will allow homeowners and real estate agents to advertise for-sale properties on its website at no cost.
The yield on the 10-year Treasury rose from 4.50% to 4.56%.
January crude fell 46 cents to close at $62.03 a barrel Friday. January natural gas fell 11 cents to close at $7.561 per million British thermal units.
Thursday, December 07, 2006
Happenings
12/8/06 Happenings
From the BJ Services 2006 report: "Based on our forecasted increase in rig activity and improved pricing, we expect continued improvement in our results of operations in fiscal 2007. We expect revenue improvement from all of our business segments." The stock, at $32+, is selling at 10 times projected earnings for 2007.
Tribune Co. said that sales edged higher last month despite a continued slowdown in publishing revenue as the media company's broadcasting and entertainment group delivered a 6.9 percent revenue increase to $106.9 million.
European Central Bank President Jean-Claude Trichet said in a prepared statement that the central bank will "very closely" monitor risks to price stability after making a rate hike to 3.5%. He also revised up 2007 and 2008 economic growth forecasts due to lower energy prices.
Chevron Corp.will buy back up to $5 billion worth of its common stock over a period of up to three years. The new program follows a $5 billion program initiated in April 2004 and another $5 billion program launched in December 2005, which has been completed. The company set its 2007 capital and exploratory spending program at $19.6 billion. That represents a 20% increase from an expected $16 billion in 2006.
The Monster Employment Index rose three points to 175 in November from October, its highest reading since the online recruiter launched the benchmark in October 2003. The November reading, which is up from 149 in November 2005, reflects employers increasing holiday-season and year-end hiring, Monster said.
The Bank of England on Thursday left its key interest rate unchanged after two increases in the last four months have taken the cost of borrowing to a five-year high. The bank held its rate at 5% -- in line with market expectations.
Fears that a slowing U.S. economywill drag the global economy downward are unlikely to materialize,according to PIERS Trade Horizons. Based on second-quarter container trade statistics, the latestavailable, as well as its analysis of key economic indicators andunderlying economic fundamentals, PIERS Trade Horizons expects global realGDP growth will average some 3.25% over the second half of this year,resulting in full-year growth of at least 3.5% for 2006 as a whole, up aquarter-percentage-point from last year. Further out, PIERS forecasts anexpansion in real GDP of 3.3% in 2007. "In other words, growth will moderate but remain solid," says MichaelAndrews, PIERS chief global economist. "This despite a U.S. slowdown." One reason the U.S. slowdown seems to be having limited impact onglobal growth is that it has so far been largely confined to theresidential sector, with few spillover effects to the rest of the economyor to most foreign countries. "We can see the impact of the slowdown in the housing sector on growthin imports of furniture, for example," notes Andrews. Thus, the annualgrowth rate for furniture imports from Northeast Asia, the top source forAmerica's top import, nearly halved to 9.6% in the first half of this year,from the same period a year earlier, after expanding a robust 16.6% in2005. The rate of growth in furniture imports from Southeast Asia fell from8.4% in 2005 to negative 5.3% in the first half of 2006. "However, the slowdown in sales to the U.S. by these countries is beingoffset by growth in business with other countries within their regions -and, in several cases, by growing domestic consumption," explains Andrews. "Generally speaking, exports from the rest of the world to the U.S.relative to total exports for most nations have been declining for sometime, making the U.S. relatively less important as a driver of growth forother nations than has been the case in the past."There is much speculation as to the nonfarm payroll number for November.Inasmuch as the number will be revised at least twice, my interest is passingat best. Rather, I have my eye on the Bank of Japan meeting on Dec. 19.Most believe there will not be a change in rates. I think there is at least a 30% chance of a modest rate increase.
OPEC meets on Dec. 14. MAN Energy analyst Edward Meir stated"We think OPEC's inclination would still be to go for another cut, notso much on concern that prices are low, but more because of the factthat the November cut seems to have fallen short."
Outstanding consumer credit fell by $1.2 billion or an annual rate of 0.6% in October.
January natural gas fell 5.6 cents to close at $7.671 per million British thermal units. January crude was up 30 cents to close at $62.49 a barrel.
ConocoPhillips said it plans to divest about 830 retail outlets, and the company approved 2007 cash capital expenditures of about $11.8 billion.
February gold rose $1.10 to close at $637 an ounce. March silver added 24 cents to $14.035 an ounce, and March copper continued lower to close at $3.102 a pound, down 5.8 cents.
An initial public offering from wheeled sneaker maker Heely's Inc. (HLYS) is expected to price above its $16-$18 range for its stock market debut on Friday, an analyst said Thursday.
From the BJ Services 2006 report: "Based on our forecasted increase in rig activity and improved pricing, we expect continued improvement in our results of operations in fiscal 2007. We expect revenue improvement from all of our business segments." The stock, at $32+, is selling at 10 times projected earnings for 2007.
Tribune Co. said that sales edged higher last month despite a continued slowdown in publishing revenue as the media company's broadcasting and entertainment group delivered a 6.9 percent revenue increase to $106.9 million.
European Central Bank President Jean-Claude Trichet said in a prepared statement that the central bank will "very closely" monitor risks to price stability after making a rate hike to 3.5%. He also revised up 2007 and 2008 economic growth forecasts due to lower energy prices.
Chevron Corp.will buy back up to $5 billion worth of its common stock over a period of up to three years. The new program follows a $5 billion program initiated in April 2004 and another $5 billion program launched in December 2005, which has been completed. The company set its 2007 capital and exploratory spending program at $19.6 billion. That represents a 20% increase from an expected $16 billion in 2006.
The Monster Employment Index rose three points to 175 in November from October, its highest reading since the online recruiter launched the benchmark in October 2003. The November reading, which is up from 149 in November 2005, reflects employers increasing holiday-season and year-end hiring, Monster said.
The Bank of England on Thursday left its key interest rate unchanged after two increases in the last four months have taken the cost of borrowing to a five-year high. The bank held its rate at 5% -- in line with market expectations.
Fears that a slowing U.S. economywill drag the global economy downward are unlikely to materialize,according to PIERS Trade Horizons. Based on second-quarter container trade statistics, the latestavailable, as well as its analysis of key economic indicators andunderlying economic fundamentals, PIERS Trade Horizons expects global realGDP growth will average some 3.25% over the second half of this year,resulting in full-year growth of at least 3.5% for 2006 as a whole, up aquarter-percentage-point from last year. Further out, PIERS forecasts anexpansion in real GDP of 3.3% in 2007. "In other words, growth will moderate but remain solid," says MichaelAndrews, PIERS chief global economist. "This despite a U.S. slowdown." One reason the U.S. slowdown seems to be having limited impact onglobal growth is that it has so far been largely confined to theresidential sector, with few spillover effects to the rest of the economyor to most foreign countries. "We can see the impact of the slowdown in the housing sector on growthin imports of furniture, for example," notes Andrews. Thus, the annualgrowth rate for furniture imports from Northeast Asia, the top source forAmerica's top import, nearly halved to 9.6% in the first half of this year,from the same period a year earlier, after expanding a robust 16.6% in2005. The rate of growth in furniture imports from Southeast Asia fell from8.4% in 2005 to negative 5.3% in the first half of 2006. "However, the slowdown in sales to the U.S. by these countries is beingoffset by growth in business with other countries within their regions -and, in several cases, by growing domestic consumption," explains Andrews. "Generally speaking, exports from the rest of the world to the U.S.relative to total exports for most nations have been declining for sometime, making the U.S. relatively less important as a driver of growth forother nations than has been the case in the past."There is much speculation as to the nonfarm payroll number for November.Inasmuch as the number will be revised at least twice, my interest is passingat best. Rather, I have my eye on the Bank of Japan meeting on Dec. 19.Most believe there will not be a change in rates. I think there is at least a 30% chance of a modest rate increase.
OPEC meets on Dec. 14. MAN Energy analyst Edward Meir stated"We think OPEC's inclination would still be to go for another cut, notso much on concern that prices are low, but more because of the factthat the November cut seems to have fallen short."
Outstanding consumer credit fell by $1.2 billion or an annual rate of 0.6% in October.
January natural gas fell 5.6 cents to close at $7.671 per million British thermal units. January crude was up 30 cents to close at $62.49 a barrel.
ConocoPhillips said it plans to divest about 830 retail outlets, and the company approved 2007 cash capital expenditures of about $11.8 billion.
February gold rose $1.10 to close at $637 an ounce. March silver added 24 cents to $14.035 an ounce, and March copper continued lower to close at $3.102 a pound, down 5.8 cents.
An initial public offering from wheeled sneaker maker Heely's Inc. (HLYS) is expected to price above its $16-$18 range for its stock market debut on Friday, an analyst said Thursday.
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