9/2/07 Welcome To September
Ameriquest Mortgage Co, the largest U.S. subprime lender as recently as 2005, is closing, the latest home loan provider to shut down amid the nation's housing market slump. Citigroup Inc agreed to buy the wholesale mortgage lending and payment collection assets of Ameriquest's parent, ACC Capital Holdings, for an undisclosed price.
Toyota plans to sell 10.4 million vehicles globally in 2009, well above the auto industry's current 30-year-old record and another sign of the Japanese automaker's momentum toward displacing industry kingpin General Motors.
"There are hopeful, positive signals," IAEA chief Mohamed ElBaradei said in an interview with the weekly Der Spiegel, released ahead of its publication Sunday. "For the first time, we have agreed with the Iranians on a kind of road map, a timetable according to which the outstanding questions should be cleared up." "By November, at the latest December, we should be able to see whether the Iranians are keeping the promises they gave," he said. "If they did not do that, a great chance - perhaps the last one - would be lost for Tehran."
The Bush administration can go ahead with a pilot program to allow as many as 100 Mexican trucking companies to freely haul their cargo anywhere within the U.S. for the next year, a federal appeals court ruled Friday. The 9th U.S. Circuit Court of Appeals denied a request made by the Teamsters union, the Sierra Club and the nonprofit Public Citizen to halt the program.
Cosmos Bank, the Taiwanese lender, narrowly avoided a takeover by the government on Friday by agreeing to sell a controlling stake to SAC Capital, a US hedge fund group, and GE Money at a steep discount. Taiwan’s largest issuer of cash-advance cards signed a memorandum of understanding with SAC’s private equity arm and GE Money, a finance arm of General Electric, under which the two investors would pay $900m for a combined 80 per cent stake in Cosmos.
Zman: " Gas Inventories Are Now 12% Above The Five Year Average (down from 13% last week), and 2% Above Last Year's Record Levels."
Boeing is expected to announce Wednesday a further delay in the first flight of its 787 Dreamliner jet — one that could push that milestone into late October or beyond, according to a person close to the program...Replacing thousands of temporary fasteners with permanent ones has taken longer than anticipated, and the installation of wiring and other systems has hardly begun, according to the source.
According to rigzone, the government of Kazakhstan expects compensation for what it sees as "tens of billions of dollars" of economic harm due to massive cost overruns and delays at the Kashagan oil project, led by Italy's Eni, a government official said Friday.
Dr. Jeff Miller (courtesy of Seeking Alpha):
# Fed funds have averaged 5.25% over the past five days, and 5.00% over the past fifteen, since the crisis began.
# The Fed’s last permanent injection of liquidity was May 3rd. That’s a pretty long time for no injection, even in a tightening cycle.
# The monetary base is flat, growing little over the last year. If policy changed recently, I can’t see it.
# Policy change doesn’t show up in the monetary aggregates either, but lag effects dominate here.
# 3 month LIBOR is back around 5.60%, and the 3-month T-bill around 4% (rallying today). A TED spread at 1.6% indicates a lot of fear. Kinda surprised that swap spreads have not budged much.
According to the FT, investment banks are set to cut 10-15 per cent of their staff across the board as turmoil in the markets takes its toll on revenues. The bulk of cuts are expected in structured credit and leveraged finance, though recruitment experts said other investment banking areas could be affected.
The Times: "The banks that underwrote the $45 billion acquisition of TXU Corp, the world’s biggest buyout, have offered to pay the $1 billion (£495 million) break fee in a desperate attempt to convince the private equity backers to drop their bid. It is understood that the banks asked Kohlberg Kravis Roberts and TPG to consider withdrawing their offer after the turmoil in the credit markets meant that the banks would have little or no chance of syndicating the record-breaking $37 billion loan to investors. The banks include Goldman Sachs, Morgan Stanley, Citigroup, Lehman Brothers and JPMorgan.”
According to the WSJ, a survey by the Mortgage Bankers Association found that mortgages on properties that aren’t occupied by the owner -- mostly investment homes -- account for between 21% and 32% of the defaults on prime-quality home loans in Arizona, California, Florida and Nevada, states where overdue payments are mounting fast. Defaults were high on both prime and subprime loans.
George W. Bush: " You can fool some of the people all the time, and those are the ones you want to concentrate on."
Saturday, September 01, 2007
Friday, August 31, 2007
The Speech And Government Numbers
9/1/07 The Speech And Gov't Numbers
Orders for U.S.-made factory goods rose by 3.7% in July, the Commerce Department reported Friday. Excluding transportation, however, orders rose by 2.4%. Shipments rose by 2.6%. Orders for durable goods rose 6.0% in July. In a preliminary report last week, they were reported to rise by 5.9%. Shipments of durable goods rose by 3.9% in July, revised up slightly from the 3.8% reported last week. Orders for core capital goods rose by 1.7% in July. In June, those orders fell by 0.2%.
Bernanke said the central bank will be paying "particularly close attention to the timeliest indicators" to assess how the recent credit crisis and financial market turmoil is impacting the real economy. Bernanke said the economy continued to expand into the summer despite the weakness in housing but "in light of recent financial developments, economic data bearing on past months or quarters may be less useful than usual for our forecasts of economic activity and inflation." Bernanke repeated the Federal Open Market Committee pledge to act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets. He said it is not the responsibility of the Fed to protect lenders and investors from the consequences of their financial decisions, but quickly added that "developments in financial markets can have broad economic effects felt by many outside the markets and the Fed must take those effects into account when determining policy. Bernanke said the central bank stands ready to take additional steps to provide liquidity and promote the orderly functioning or markets. Bernanke offered no clear signal that the Fed is poised to cut interest rates in a speech to central bankers. In other words, pretty vanilla remarks in my view.
The Chicago purchasing managers index was relatively unchanged at 53.8% in August vs. 53.4% in July. The new orders index rose to 58.4% vs. 53.4% in July.
Inflation was milder than expected in July, with total inflation rising 0.1%, matching the 0.1% gain for core inflation excluding food and energy costs. In the past year, the Federal Reserve's preferred measure of core inflation has risen 1.9%, just within the Fed's unofficial target zone. Nominal incomes increased 0.5%, the best since March after rising 0.4% in June. After adjusting for inflation and taking out taxes, real disposable incomes grew 0.5%, the best since February. Inflation-adjusted spending rose 0.3% in July after two tepid months of spending. Savings was up 0.7%.
Accredited Home Lenders surged 32% to $8.35 in pre-open trade as Lone Star Funds said in a letter late Thursday it is willing to offer $214 million, or $8.50 a share for the firm. Lone Star is tabling 44% less than it first offered for the troubled subprime lender.
India's economy expanded at a higher-than-expected 9.3% during fiscal first quarter ended June from a year ago on robust growth in the manufacturing and services sectors, according to official data released Friday. Economists polled by both Dow Jones Newswires and Reuters estimated growth of 8.9%. India's gross domestic product rose 9.1% during the January-March period.
Barclays on Friday threw a $1.4bn lifeline to a structured debt vehicle the bank helped set up with Cairn Capital, the London-based hedge fund, and is considering similar moves for other vehicles.
Borrowing from the Fed's discount window dropped to $1.101 billion as of Wednesday, about half the $2.001 billion level reported a week earlier, the central bank disclosed yesterday.
Oct. crude climbed 68 cents to close at $74.04 a barrel. October natural gas fell 3% Friday to close at $5.468 per million British thermal units, down 4.7% from a week ago and down 14.8% from a month ago. Gold closed up $8 for the session.
In the short trading session on Friday the month ended on a strong note with the Dow up 157, the Nasdaq up 32 and the S&P 500 up almost 20 points. We now enter September, which is historically the worst month of the year.
Orders for U.S.-made factory goods rose by 3.7% in July, the Commerce Department reported Friday. Excluding transportation, however, orders rose by 2.4%. Shipments rose by 2.6%. Orders for durable goods rose 6.0% in July. In a preliminary report last week, they were reported to rise by 5.9%. Shipments of durable goods rose by 3.9% in July, revised up slightly from the 3.8% reported last week. Orders for core capital goods rose by 1.7% in July. In June, those orders fell by 0.2%.
Bernanke said the central bank will be paying "particularly close attention to the timeliest indicators" to assess how the recent credit crisis and financial market turmoil is impacting the real economy. Bernanke said the economy continued to expand into the summer despite the weakness in housing but "in light of recent financial developments, economic data bearing on past months or quarters may be less useful than usual for our forecasts of economic activity and inflation." Bernanke repeated the Federal Open Market Committee pledge to act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets. He said it is not the responsibility of the Fed to protect lenders and investors from the consequences of their financial decisions, but quickly added that "developments in financial markets can have broad economic effects felt by many outside the markets and the Fed must take those effects into account when determining policy. Bernanke said the central bank stands ready to take additional steps to provide liquidity and promote the orderly functioning or markets. Bernanke offered no clear signal that the Fed is poised to cut interest rates in a speech to central bankers. In other words, pretty vanilla remarks in my view.
The Chicago purchasing managers index was relatively unchanged at 53.8% in August vs. 53.4% in July. The new orders index rose to 58.4% vs. 53.4% in July.
Inflation was milder than expected in July, with total inflation rising 0.1%, matching the 0.1% gain for core inflation excluding food and energy costs. In the past year, the Federal Reserve's preferred measure of core inflation has risen 1.9%, just within the Fed's unofficial target zone. Nominal incomes increased 0.5%, the best since March after rising 0.4% in June. After adjusting for inflation and taking out taxes, real disposable incomes grew 0.5%, the best since February. Inflation-adjusted spending rose 0.3% in July after two tepid months of spending. Savings was up 0.7%.
Accredited Home Lenders surged 32% to $8.35 in pre-open trade as Lone Star Funds said in a letter late Thursday it is willing to offer $214 million, or $8.50 a share for the firm. Lone Star is tabling 44% less than it first offered for the troubled subprime lender.
India's economy expanded at a higher-than-expected 9.3% during fiscal first quarter ended June from a year ago on robust growth in the manufacturing and services sectors, according to official data released Friday. Economists polled by both Dow Jones Newswires and Reuters estimated growth of 8.9%. India's gross domestic product rose 9.1% during the January-March period.
Barclays on Friday threw a $1.4bn lifeline to a structured debt vehicle the bank helped set up with Cairn Capital, the London-based hedge fund, and is considering similar moves for other vehicles.
Borrowing from the Fed's discount window dropped to $1.101 billion as of Wednesday, about half the $2.001 billion level reported a week earlier, the central bank disclosed yesterday.
Oct. crude climbed 68 cents to close at $74.04 a barrel. October natural gas fell 3% Friday to close at $5.468 per million British thermal units, down 4.7% from a week ago and down 14.8% from a month ago. Gold closed up $8 for the session.
In the short trading session on Friday the month ended on a strong note with the Dow up 157, the Nasdaq up 32 and the S&P 500 up almost 20 points. We now enter September, which is historically the worst month of the year.
Thursday, August 30, 2007
Where Do I Begin?
8/31/07 Where Do I Begin?
Outstanding volumes of commercial paper fell $62.8 billion last week, or 3.1%, to $1.98 trillion, the Federal Reserve reported Thursday. Asset-backed paper fell by $59.4 billion, or 5.6%, to $998 billion. The total decline in short-term securities over the past three weeks has totaled $244 billion, or 11%.
Thornburg Mortgage Inc. priced a public offering of 20 million shares of its 10% Series F cumulative convertible redeemable preferred stock at $25 each, generating net proceeds of $473 million. The shares are convertible into common stock at the option of the holder at any time at a conversion price of $11.50 each. Thornburg said the proceeds will be primarily used to improve its liquidity position and to resume its origination of mortgage loans and acquisition of mortgage-backed securities.
Freddie Mac reported its second quarter net income declined 45% primarily due to a higher provision for credit losses and mark-to-market losses on credit-related items.
As of Aug. 24, the Bank of Montreal had bought $1 billion of paper from eight of its mutual funds, $90 million from six funds operated by Altamira Investment Services Inc. and $560 million from pooled funds. It said it expect to buy the rest of the $2 billion of paper shortly. National Bank said it "is in contact with other customers who hold [asset-backed commercial paper] acquired through the bank or its subsidiaries and is working with them to attempt to resolve their liquidity and other issues in the context of their overall banking relationship."
Initial jobless claims for the week ended Aug. 25 rose by 9,000 to 334,000, the highest since April 14, the Labor Department reported Thursday. The four-week average of those claims climbed by 6,250 to 324,500. It was the highest since April 28. The number of people continuing to collect unemployment benefits climbed by 13,000, reaching 2.60 million in the week ended Aug. 18. It marked the highest level since April 14. The four-week average of continuing claims rose by 11,250 to 2.56 million, the highest level since mid-January 2006.
Analysts at Lehman Brothers on Thursday lowered their profit estimates for the largest U.S. brokerage firms, citing the uncertainty in the credit markets. "We believe that third-quarter earnings will be significantly impacted by the dislocation in the credit and asset-backed/mortgage markets, only partially offset by strength in currencies, rates and commodities as well as decent equities comparisons and favorable investment banking conditions at least through July," the analysts wrote in a research note.
H&R Block Inc said it was trying to renegotiate the sale of its Option One Mortgage Corp unit and would get out subprime lending after its quarterly loss more than doubled.
The municipal government of Beijing plans to build underground natural gas reserves by 2010 to ensure supplies will meet soaring demand, the city's economic planner said in a 2006-2010 plan for urban gas development. The city's natural gas demand is expected to reach 7 billion-8 billion cubic meters a year by 2010, compared with 2.6 billion cubic meters in 2004, according to the plan posted Wednesday by the Beijing Development and Reform Commission on its Web site. A comparable figure for last year wasn't provided.
The U.N. nuclear agency said Thursday that Iran was producing less nuclear fuel than expected and praised Tehran for ''a significant step forward'' in explaining past atomic actions that have raised suspicions. The assessment is expected to make it more difficult for the United States to rally support for a new round of sanctions against Tehran.
Sears Holdings Corp. reported fiscal second-quarter earnings that were down 40 percent, reflecting softer results from the Chicago retail company's Kmart and domestic Sears operations. Profit margins came under pressure because sales declined 4 percent to $12.24 billion from $12.79 billion.
Turkmen President Gurbanguly Berdymukhamedov has inaugurated construction of a 7,000-kilometer gas pipeline to China to be completed by 2009, the official Turkmen newspaper said.
Iraq has failed to meet all but three of 18 congressionally mandated benchmarks for political and military progress, according to a draft of a Government Accountability Office report. The document questions whether some aspects of a more positive assessment by the White House last month adequately reflected the range of views the GAO found within the administration.
Gasoline prices rose to a near six- week high in Europe on speculation falling stockpiles will increase demand for exports.
A company does not make an application with the FDA to proceed to phase III
trials unless they are confident that they will in fact be able to proceed.( This is a May 2007 release: "We are extremely pleased with the positive reception that our Phase 2B studies received at the AUA meeting," stated Dr. Trevor Hallam, Palatin's Executive Vice President of R&D. Dr. Hallam further commented, "We are looking forward to discussing these results with the FDA at an end of Phase
2 meeting later this year and moving to Phase 3 trials as soon as
possible." What took place? Do I feel stupid? No need to ask. It will not be the last time I look stupid! "Palatin Technologies, Inc. and King Pharmaceuticals, Inc. announced today that they have delayed plans for the initiation of Phase 3 clinical trials with bremelanotide, a first in class melanocortin agonist drug candidate, for the treatment of male erectile dysfunction (ED). The decision follows responses from representatives of the U.S. Food and Drug Administration (FDA), which raised serious concerns about the acceptable benefit/risk ratio to support the progression of the proposed program into Phase 3 studies for ED. After reviewing the data generated in the Phase 1 and 2 studies, the FDA questioned the overall efficacy results and the clinical benefit of this product in both the general and diabetic ED populations, and cited blood pressure increases as its greatest safety concern. Though not supportive of the proposed Phase 3 studies for ED with bremelanotide, the FDA stated that it was amenable to proposals for a different drug development pathway, such as for a second-line therapy in non-responders to currently approved PDE-5 inhibitors."The safety of patients in our clinical program has always been our number one priority and we will work closely with the FDA, King, and our advisors to determine the next steps for the program," stated Carl Spana, Ph.D., President and Chief Executive Officer of Palatin. Palatin and King plan to review the FDA comments in the overall context of the program in order to determine next steps related to the further development of bremelanotide for the treatment of ED." Just an aside. In all the research documentation, I have not seen a mention of high blood pressure as a side effect.
According to Bloomberg, "Standard & Poor's said business conditions for securities firms are worse than in the second half of 1998 and revenue from investment banking and trading could fall 47 percent in the final six months of this year."
Henry To: "Approximately 90% of all subprime mortgages that were originated from 2004 to 2006 will be eventually subjected to resets - with a peak of sometime in the spring of next year. Given that 1) less than 50% are "full doc" loans, 2) About 25% to 30% are interest-only ARM loans, and that 3) the average combined loan-to-value ratio is about 92% to 95% - when the 2004 to 2006 vintages reset over the next 18 months, it is going to be vicious. Of course, all the above won't matter too much if we are still in an era of rising house prices and easy financing - but as everyone and his neighbor should now know, that era is now over."
Gold for December delivery fell $1.50, or 0.2%, to $673.90 an ounce on the New York Mercantile Exchange. Copper futures closed nearly unchanged at $3.35 a pound. Among precious metals, silver for September delivery slipped 5 cents to $11.791 an ounce. October platinum lost $6.70 a pound to close at $1,260.10 an ounce, while palladium slipped 20 cents to close at $335.60 an ounce.
``There's that fear of commercial paper that's driving people into the bills market,'' said Nasri Toutoungi, who oversees $23 billion of bonds in Hartford, Connecticut, at Hartford Investment Management Co. ``It's becoming irrational.'' The yield on the three-month Treasury bill fell 21 basis points, or 0.21 percentage point, to 3.80 percent at 3:45 p.m. in New York, according to Bloomberg data. The yield has dropped 114 basis points since Aug. 8.
According to FT, Barclays rushed to reassure investors and depositors on Thursday night after it was forced by what it said was a technical glitch to borrow from the Bank of England’s emergency reserves for the second time in just over a week.The UK bank issued a statement after it emerged it had borrowed £1.6bn (€2.4bn) from the central bank’s emergency facility on Wednesday evening. The facility, which carries a penalty rate of interest, has become the subject of intense scrutiny by investors as they search for signs of distress as a result of the recent turmoil in the capital markets.
In the week ending Aug. 29, primary credit borrowing at the discount window averaged $1.3 billion, up from an average of $1.2 billion a week ago. On Wednesday alone, primary credits totaled $1.1 billion, down from $2 billion a week earlier. The data show that, aside from the previously announced loans by five major money center banks, little or no new borrowing from the discount window has taken place.
Outstanding volumes of commercial paper fell $62.8 billion last week, or 3.1%, to $1.98 trillion, the Federal Reserve reported Thursday. Asset-backed paper fell by $59.4 billion, or 5.6%, to $998 billion. The total decline in short-term securities over the past three weeks has totaled $244 billion, or 11%.
Thornburg Mortgage Inc. priced a public offering of 20 million shares of its 10% Series F cumulative convertible redeemable preferred stock at $25 each, generating net proceeds of $473 million. The shares are convertible into common stock at the option of the holder at any time at a conversion price of $11.50 each. Thornburg said the proceeds will be primarily used to improve its liquidity position and to resume its origination of mortgage loans and acquisition of mortgage-backed securities.
Freddie Mac reported its second quarter net income declined 45% primarily due to a higher provision for credit losses and mark-to-market losses on credit-related items.
As of Aug. 24, the Bank of Montreal had bought $1 billion of paper from eight of its mutual funds, $90 million from six funds operated by Altamira Investment Services Inc. and $560 million from pooled funds. It said it expect to buy the rest of the $2 billion of paper shortly. National Bank said it "is in contact with other customers who hold [asset-backed commercial paper] acquired through the bank or its subsidiaries and is working with them to attempt to resolve their liquidity and other issues in the context of their overall banking relationship."
Initial jobless claims for the week ended Aug. 25 rose by 9,000 to 334,000, the highest since April 14, the Labor Department reported Thursday. The four-week average of those claims climbed by 6,250 to 324,500. It was the highest since April 28. The number of people continuing to collect unemployment benefits climbed by 13,000, reaching 2.60 million in the week ended Aug. 18. It marked the highest level since April 14. The four-week average of continuing claims rose by 11,250 to 2.56 million, the highest level since mid-January 2006.
Analysts at Lehman Brothers on Thursday lowered their profit estimates for the largest U.S. brokerage firms, citing the uncertainty in the credit markets. "We believe that third-quarter earnings will be significantly impacted by the dislocation in the credit and asset-backed/mortgage markets, only partially offset by strength in currencies, rates and commodities as well as decent equities comparisons and favorable investment banking conditions at least through July," the analysts wrote in a research note.
H&R Block Inc said it was trying to renegotiate the sale of its Option One Mortgage Corp unit and would get out subprime lending after its quarterly loss more than doubled.
The municipal government of Beijing plans to build underground natural gas reserves by 2010 to ensure supplies will meet soaring demand, the city's economic planner said in a 2006-2010 plan for urban gas development. The city's natural gas demand is expected to reach 7 billion-8 billion cubic meters a year by 2010, compared with 2.6 billion cubic meters in 2004, according to the plan posted Wednesday by the Beijing Development and Reform Commission on its Web site. A comparable figure for last year wasn't provided.
The U.N. nuclear agency said Thursday that Iran was producing less nuclear fuel than expected and praised Tehran for ''a significant step forward'' in explaining past atomic actions that have raised suspicions. The assessment is expected to make it more difficult for the United States to rally support for a new round of sanctions against Tehran.
Sears Holdings Corp. reported fiscal second-quarter earnings that were down 40 percent, reflecting softer results from the Chicago retail company's Kmart and domestic Sears operations. Profit margins came under pressure because sales declined 4 percent to $12.24 billion from $12.79 billion.
Turkmen President Gurbanguly Berdymukhamedov has inaugurated construction of a 7,000-kilometer gas pipeline to China to be completed by 2009, the official Turkmen newspaper said.
Iraq has failed to meet all but three of 18 congressionally mandated benchmarks for political and military progress, according to a draft of a Government Accountability Office report. The document questions whether some aspects of a more positive assessment by the White House last month adequately reflected the range of views the GAO found within the administration.
Gasoline prices rose to a near six- week high in Europe on speculation falling stockpiles will increase demand for exports.
A company does not make an application with the FDA to proceed to phase III
trials unless they are confident that they will in fact be able to proceed.( This is a May 2007 release: "We are extremely pleased with the positive reception that our Phase 2B studies received at the AUA meeting," stated Dr. Trevor Hallam, Palatin's Executive Vice President of R&D. Dr. Hallam further commented, "We are looking forward to discussing these results with the FDA at an end of Phase
2 meeting later this year and moving to Phase 3 trials as soon as
possible." What took place? Do I feel stupid? No need to ask. It will not be the last time I look stupid! "Palatin Technologies, Inc. and King Pharmaceuticals, Inc. announced today that they have delayed plans for the initiation of Phase 3 clinical trials with bremelanotide, a first in class melanocortin agonist drug candidate, for the treatment of male erectile dysfunction (ED). The decision follows responses from representatives of the U.S. Food and Drug Administration (FDA), which raised serious concerns about the acceptable benefit/risk ratio to support the progression of the proposed program into Phase 3 studies for ED. After reviewing the data generated in the Phase 1 and 2 studies, the FDA questioned the overall efficacy results and the clinical benefit of this product in both the general and diabetic ED populations, and cited blood pressure increases as its greatest safety concern. Though not supportive of the proposed Phase 3 studies for ED with bremelanotide, the FDA stated that it was amenable to proposals for a different drug development pathway, such as for a second-line therapy in non-responders to currently approved PDE-5 inhibitors."The safety of patients in our clinical program has always been our number one priority and we will work closely with the FDA, King, and our advisors to determine the next steps for the program," stated Carl Spana, Ph.D., President and Chief Executive Officer of Palatin. Palatin and King plan to review the FDA comments in the overall context of the program in order to determine next steps related to the further development of bremelanotide for the treatment of ED." Just an aside. In all the research documentation, I have not seen a mention of high blood pressure as a side effect.
According to Bloomberg, "Standard & Poor's said business conditions for securities firms are worse than in the second half of 1998 and revenue from investment banking and trading could fall 47 percent in the final six months of this year."
Henry To: "Approximately 90% of all subprime mortgages that were originated from 2004 to 2006 will be eventually subjected to resets - with a peak of sometime in the spring of next year. Given that 1) less than 50% are "full doc" loans, 2) About 25% to 30% are interest-only ARM loans, and that 3) the average combined loan-to-value ratio is about 92% to 95% - when the 2004 to 2006 vintages reset over the next 18 months, it is going to be vicious. Of course, all the above won't matter too much if we are still in an era of rising house prices and easy financing - but as everyone and his neighbor should now know, that era is now over."
Gold for December delivery fell $1.50, or 0.2%, to $673.90 an ounce on the New York Mercantile Exchange. Copper futures closed nearly unchanged at $3.35 a pound. Among precious metals, silver for September delivery slipped 5 cents to $11.791 an ounce. October platinum lost $6.70 a pound to close at $1,260.10 an ounce, while palladium slipped 20 cents to close at $335.60 an ounce.
``There's that fear of commercial paper that's driving people into the bills market,'' said Nasri Toutoungi, who oversees $23 billion of bonds in Hartford, Connecticut, at Hartford Investment Management Co. ``It's becoming irrational.'' The yield on the three-month Treasury bill fell 21 basis points, or 0.21 percentage point, to 3.80 percent at 3:45 p.m. in New York, according to Bloomberg data. The yield has dropped 114 basis points since Aug. 8.
According to FT, Barclays rushed to reassure investors and depositors on Thursday night after it was forced by what it said was a technical glitch to borrow from the Bank of England’s emergency reserves for the second time in just over a week.The UK bank issued a statement after it emerged it had borrowed £1.6bn (€2.4bn) from the central bank’s emergency facility on Wednesday evening. The facility, which carries a penalty rate of interest, has become the subject of intense scrutiny by investors as they search for signs of distress as a result of the recent turmoil in the capital markets.
In the week ending Aug. 29, primary credit borrowing at the discount window averaged $1.3 billion, up from an average of $1.2 billion a week ago. On Wednesday alone, primary credits totaled $1.1 billion, down from $2 billion a week earlier. The data show that, aside from the previously announced loans by five major money center banks, little or no new borrowing from the discount window has taken place.
Wednesday, August 29, 2007
Not Quiet On The Western Front
8/30/07 Not Quiet On The Western Front
In a bid to expand its presence in Europe, Kazakhstan's state-controlled oil and gas company KazMunayGas has agreed to buy a 75% equity stake in oil firm Rompetrol Group N.V. in an acquisition estimated to be worth $2.7 billion.
The key asset of Netherlands-based Rompetrol Group N.V. is refiner Rompetrol Rafinare SA in Romania, whose shares surged 14% on the Bucharest Stock Exchange Tuesday. In a bid to expand its presence in Europe, Kazakhstan's state-controlled oil and gas company KazMunayGas has agreed to buy a 75% equity stake in oil firm Rompetrol Group N.V. in an acquisition estimated to be worth $2.7 billion.
The key asset of Netherlands-based Rompetrol Group N.V. is refiner Rompetrol Rafinare SA in Romania, whose shares surged 14% on the Bucharest Stock Exchange Tuesday.
The Daily Reckoning: “The Bush regime says it is going to designate part of Iran’s military – the Revolutionary Guards – a terrorist organization, whose bases and facilities Bush intends to bomb along with Iran’s nuclear energy sites. Three U.S. aircraft carrier strike forces are deployed off Iran. B-2 Stealth bombers are being fitted to carry 30,000 pound ‘bunker-buster’ bombs to use against hardened sites. Politicized U.S. generals assert that Iran is providing arms and aid to the Iraqi resistance to the U.S. occupation. The media are feeding the U.S. population the same propaganda about nonexistent Iranian weapons of mass destruction that they fed us about nonexistent Iraqi weapons of mass destruction. A former CIA Middle East field officer, Robert Baer, has written in Time magazine that the Bush regime has decided to attack the Revolutionary Guards within the next six months. Remember the ‘cakewalk war’? Well, this time the neocons think that an attack on the Revolutionary Guards will free Iran from Islamic influence and cause Iranians to back the U.S. against their own government.
“Lies, unprovoked aggression, and delusional expectations – the same ingredients that produced the Iraq catastrophe – all over again. The entire Bush regime and both political parties are complicit, along with the media and U.S. allies.”
"According to our analysis, although more measures have been taken to control the inflation, the (increase in the consumer price index) this year will likely be above 3 percent," Su Ning, a vice governor of the People's Bank of China, said at a news conference in Beijing.
Kate Incontrera: "Auto sales have been weak this year - and if the data from August, which is reported on September 4, is negative, it will be the sixth month this year and the third month in a row that sales have been down."
Washington Post:" President Bush plans to ask Congress next month for up to $50 billion in additional funding for the war in Iraq, a White House official said yesterday, a move that appears to reflect increasing administration confidence that it can fend off congressional calls for a rapid drawdown of U.S. forces.The request -- which would come on top of about $460 billion in the fiscal 2008 defense budget and $147 billion in a pending supplemental bill to fund the wars in Afghanistan and Iraq -- is expected to be announced after congressional hearings scheduled for mid-September featuring the two top U.S. officials in Iraq. Army Gen. David H. Petraeus and Ambassador Ryan C. Crocker will assess the state of the war and the effect of the new strategy the U.S. military has pursued this year."
In California, where the median home price is well above $500,000, jumbo mortgages are as much as 44 percent of all mortgages issued in certain metro areas, according to data from First American LoanPerformance. In and around San Francisco, where the median home price is about $1.1 million, the tougher financing environment has created a "hesitancy" and has led to some canceled escrows for buyers around the $1 million range, said Rick Turley, president of the San Francisco and Peninsula Region for Coldwell Banker Residential Brokerage.
According to Bloomberg, Cheyne Capital Management Ltd., whose Queen's Walk mortgage bond fund reported losses in June, may be forced to sell assets backing a $6 billion commercial paper program after a global credit market rout. The Cheyne Finance LLC fund has been selling investments and has enough cash to repay commercial paper due through November, London-based hedge fund company Cheyne Capital Management said in a statement. Standard & Poor's cut Cheyne Finance's ratings yesterday, citing the deteriorating market value of its assets.
Investor confidence in high-risk, high-yield loans worsened today, according to traders of credit- default swaps. The iTraxx LevX Index of contracts on loans to 35 European companies fell 0.125 to 95.75, according to Deutsche Bank AG. The index dropped to 92.5 on July 30, the lowest since it started trading in October.
When Interstate Bakeries Corp. announced Tuesday that it was withdrawing from the Southland bread market, it meant that after Oct. 20, local shoppers no longer will be able to buy Wonder Bread. Interstate is closing four bakeries - in Pomona, Glendale, Los Angeles and San Diego - as well as eliminating 325 distribution routes and closing 17 distribution centers and 19 outlet stores.
The hardest-hit area will be Pomona, home of the largest of the four bakeries. Company spokeswoman Maya Pogoda said 768 of the 1,300 jobs are either directly or indirectly related to the Pomona plant.
"Interstate Bakeries has been in Chapter 11 bankruptcy since September 2004 and the company made the decision they can't afford to have losing markets if they hope to get back to profitability," Pogoda said. "We will stop baking and selling bread after Oct. 20 and the plant will close Oct. 29."
T. Rowe Price New Era"s Manager Charles Ober: ExxonMobil and Schlumberger are blue chips that Ober still likes. Among the major oil companies, he also likes France's Total and England's BP. He also recommends energy service firms Baker Hughes and BJ Services.
On Thursday morning, equities shot up strongly right at the opening but not the financials, such as, Countrywide and Goldman Sachs.
The American Petroleum Institute reported a fall of 4.9 million barrels in crude supplies for the week ended August 24. The Energy Department had reported a decline of 3.5 million barrels for the latest week. Motor gasoline supplies were down 2.4 million barrels, the API said. The government reported that supplies were down 3.6 million barrels. Distillate supplies climbed 1.7 million barrels, the API said. They were up 900,000 barrels, according to the Energy Department. Refinery utilization, meanwhile, slipped 1.3 percentage points to 90.3 percent of capacity.
Altria Group Inc. said Wednesday that it will pursue a spinoff of Philip Morris International unit to its shareholders and the precise timing will be announced in January.
Enzio von Pfiel: "The yen is going to strengthen massively, we reckon from 116 now to about 100 within three months. Reason: the US market is headed for an October crash,and that implies that there is going to be plenty of blood on the streets as regards yen carry trades. They will get unwound, so people who previously sold yen and bought higher-yielding assets on margin will find their bankers calling them to cover yen positions. In our piece of 7th July we suggested continuing with the yen carry trade; now we suggest that you get out of the yen carry trade.
The yield on the three-month Treasury bill was yield was down 34 basis points at 3.987%, while the yield on the six-month bill was down 44 basis points at 4.244%.
Moody's believes that the firms, Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Bros and Bear Stearns, have sufficient earnings strength and diversification to be able to absorb the necessary mark-downs on the loan pipeline while still generating positive, albeit depressed, earnings and a respectable level of profitability.
Samsung has edged Motorola aside to become the world's second-largest maker of cell phones.
The average rate on a one-year adjustable mortgage surged to 6.51 percent, the highest since January 2001, from 5.84 percent the prior week. The rate also surpassed the cost of a 30-year fixed loan for the first time.
The Federal Reserve will probably cut its benchmark interest rate to 4 percent as slowing U.S. economic growth restrains inflation, said Edward Hyman, chairman of International Strategy and Investment Group.
According to Bloomberg, wheat rose to a record, extending a rally that began in March, on signs dry weather in Ukraine and Australia may hurt production, reducing world supplies already expected to be the lowest in 26 years. Ukraine, the world's seventh-largest wheat exporter, will ship 58 percent less grain this year after a three-month drought, the country's agriculture minister said. Hotter- than-normal weather may reduce production in Australia, a country that was expected to be the second-largest exporter in the marketing year that started June 1, analysts said.
Gold has gained 5.9 percent this year as the dollar has fallen 3.4 percent against the euro. Silver has dropped 7.2 percent this year. One might consider accumulating a position in silver at these levels.
December gold climbed $1.90 to close at $675.40 an ounce Wednesday. September silver gained 8 cents to end at $11.845 an ounce and September copper finished at $3.35 a pound, up 1.2%.
Oct. crude up 2.5%, or $1.78, to close at $73.51 a barrel. Natural gas dipped 12 cents to $5.47.
The Teamsters Union said it will ask a federal appeals court to block the Bush administration's plan to begin allowing Mexican trucks to carry cargo anywhere in the United States. The union said it has been told by officials in the Transportation Department's Federal Motor Carrier Safety Administration that the first Mexican trucks will be coming across the border on Saturday. Teamsters leaders said they planned to seek an emergency injunction today from the Ninth Circuit U.S. Court of Appeals in San Francisco.
Kevin Duffy: "The current credit meltdown is a solvency crisis. Cheap and plentiful credit is what caused the current mess. More of the same can only make it worse. It is only a matter of time before this shot of credit heroine wears off. As with all drugs, at some point simply increasing the dosage has little or no stimulative effect. Sometimes the best medicine is withdrawal."
The VIX took it on the chin on Wednesday and dropped back to the 23.50 level as the Dow jumped 247 points, the Nasdaq 62, and the S&P about 32. The financial sector did a bit better but nothing better than mediocre.
Dry bulk vessel costs, measured by the London-based Baltic Dry Index, on Wednesday reached an all-time high of 7,474 points, up almost 100 per cent over the past 12 months, pushing the cost of a Panamax to almost $60,000 a day.
These burgeoning costs are significantly higher than what was anticipated just 6 months ago. According to the FT, the International Grain Council, the industry body, last week said several important grain routes, notably from the US to Asia, had double the transit volume in the past year, contributing to rising dry bulk carrier freight costs.
In a bid to expand its presence in Europe, Kazakhstan's state-controlled oil and gas company KazMunayGas has agreed to buy a 75% equity stake in oil firm Rompetrol Group N.V. in an acquisition estimated to be worth $2.7 billion.
The key asset of Netherlands-based Rompetrol Group N.V. is refiner Rompetrol Rafinare SA in Romania, whose shares surged 14% on the Bucharest Stock Exchange Tuesday. In a bid to expand its presence in Europe, Kazakhstan's state-controlled oil and gas company KazMunayGas has agreed to buy a 75% equity stake in oil firm Rompetrol Group N.V. in an acquisition estimated to be worth $2.7 billion.
The key asset of Netherlands-based Rompetrol Group N.V. is refiner Rompetrol Rafinare SA in Romania, whose shares surged 14% on the Bucharest Stock Exchange Tuesday.
The Daily Reckoning: “The Bush regime says it is going to designate part of Iran’s military – the Revolutionary Guards – a terrorist organization, whose bases and facilities Bush intends to bomb along with Iran’s nuclear energy sites. Three U.S. aircraft carrier strike forces are deployed off Iran. B-2 Stealth bombers are being fitted to carry 30,000 pound ‘bunker-buster’ bombs to use against hardened sites. Politicized U.S. generals assert that Iran is providing arms and aid to the Iraqi resistance to the U.S. occupation. The media are feeding the U.S. population the same propaganda about nonexistent Iranian weapons of mass destruction that they fed us about nonexistent Iraqi weapons of mass destruction. A former CIA Middle East field officer, Robert Baer, has written in Time magazine that the Bush regime has decided to attack the Revolutionary Guards within the next six months. Remember the ‘cakewalk war’? Well, this time the neocons think that an attack on the Revolutionary Guards will free Iran from Islamic influence and cause Iranians to back the U.S. against their own government.
“Lies, unprovoked aggression, and delusional expectations – the same ingredients that produced the Iraq catastrophe – all over again. The entire Bush regime and both political parties are complicit, along with the media and U.S. allies.”
"According to our analysis, although more measures have been taken to control the inflation, the (increase in the consumer price index) this year will likely be above 3 percent," Su Ning, a vice governor of the People's Bank of China, said at a news conference in Beijing.
Kate Incontrera: "Auto sales have been weak this year - and if the data from August, which is reported on September 4, is negative, it will be the sixth month this year and the third month in a row that sales have been down."
Washington Post:" President Bush plans to ask Congress next month for up to $50 billion in additional funding for the war in Iraq, a White House official said yesterday, a move that appears to reflect increasing administration confidence that it can fend off congressional calls for a rapid drawdown of U.S. forces.The request -- which would come on top of about $460 billion in the fiscal 2008 defense budget and $147 billion in a pending supplemental bill to fund the wars in Afghanistan and Iraq -- is expected to be announced after congressional hearings scheduled for mid-September featuring the two top U.S. officials in Iraq. Army Gen. David H. Petraeus and Ambassador Ryan C. Crocker will assess the state of the war and the effect of the new strategy the U.S. military has pursued this year."
In California, where the median home price is well above $500,000, jumbo mortgages are as much as 44 percent of all mortgages issued in certain metro areas, according to data from First American LoanPerformance. In and around San Francisco, where the median home price is about $1.1 million, the tougher financing environment has created a "hesitancy" and has led to some canceled escrows for buyers around the $1 million range, said Rick Turley, president of the San Francisco and Peninsula Region for Coldwell Banker Residential Brokerage.
According to Bloomberg, Cheyne Capital Management Ltd., whose Queen's Walk mortgage bond fund reported losses in June, may be forced to sell assets backing a $6 billion commercial paper program after a global credit market rout. The Cheyne Finance LLC fund has been selling investments and has enough cash to repay commercial paper due through November, London-based hedge fund company Cheyne Capital Management said in a statement. Standard & Poor's cut Cheyne Finance's ratings yesterday, citing the deteriorating market value of its assets.
Investor confidence in high-risk, high-yield loans worsened today, according to traders of credit- default swaps. The iTraxx LevX Index of contracts on loans to 35 European companies fell 0.125 to 95.75, according to Deutsche Bank AG. The index dropped to 92.5 on July 30, the lowest since it started trading in October.
When Interstate Bakeries Corp. announced Tuesday that it was withdrawing from the Southland bread market, it meant that after Oct. 20, local shoppers no longer will be able to buy Wonder Bread. Interstate is closing four bakeries - in Pomona, Glendale, Los Angeles and San Diego - as well as eliminating 325 distribution routes and closing 17 distribution centers and 19 outlet stores.
The hardest-hit area will be Pomona, home of the largest of the four bakeries. Company spokeswoman Maya Pogoda said 768 of the 1,300 jobs are either directly or indirectly related to the Pomona plant.
"Interstate Bakeries has been in Chapter 11 bankruptcy since September 2004 and the company made the decision they can't afford to have losing markets if they hope to get back to profitability," Pogoda said. "We will stop baking and selling bread after Oct. 20 and the plant will close Oct. 29."
T. Rowe Price New Era"s Manager Charles Ober: ExxonMobil and Schlumberger are blue chips that Ober still likes. Among the major oil companies, he also likes France's Total and England's BP. He also recommends energy service firms Baker Hughes and BJ Services.
On Thursday morning, equities shot up strongly right at the opening but not the financials, such as, Countrywide and Goldman Sachs.
The American Petroleum Institute reported a fall of 4.9 million barrels in crude supplies for the week ended August 24. The Energy Department had reported a decline of 3.5 million barrels for the latest week. Motor gasoline supplies were down 2.4 million barrels, the API said. The government reported that supplies were down 3.6 million barrels. Distillate supplies climbed 1.7 million barrels, the API said. They were up 900,000 barrels, according to the Energy Department. Refinery utilization, meanwhile, slipped 1.3 percentage points to 90.3 percent of capacity.
Altria Group Inc. said Wednesday that it will pursue a spinoff of Philip Morris International unit to its shareholders and the precise timing will be announced in January.
Enzio von Pfiel: "The yen is going to strengthen massively, we reckon from 116 now to about 100 within three months. Reason: the US market is headed for an October crash,and that implies that there is going to be plenty of blood on the streets as regards yen carry trades. They will get unwound, so people who previously sold yen and bought higher-yielding assets on margin will find their bankers calling them to cover yen positions. In our piece of 7th July we suggested continuing with the yen carry trade; now we suggest that you get out of the yen carry trade.
The yield on the three-month Treasury bill was yield was down 34 basis points at 3.987%, while the yield on the six-month bill was down 44 basis points at 4.244%.
Moody's believes that the firms, Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Bros and Bear Stearns, have sufficient earnings strength and diversification to be able to absorb the necessary mark-downs on the loan pipeline while still generating positive, albeit depressed, earnings and a respectable level of profitability.
Samsung has edged Motorola aside to become the world's second-largest maker of cell phones.
The average rate on a one-year adjustable mortgage surged to 6.51 percent, the highest since January 2001, from 5.84 percent the prior week. The rate also surpassed the cost of a 30-year fixed loan for the first time.
The Federal Reserve will probably cut its benchmark interest rate to 4 percent as slowing U.S. economic growth restrains inflation, said Edward Hyman, chairman of International Strategy and Investment Group.
According to Bloomberg, wheat rose to a record, extending a rally that began in March, on signs dry weather in Ukraine and Australia may hurt production, reducing world supplies already expected to be the lowest in 26 years. Ukraine, the world's seventh-largest wheat exporter, will ship 58 percent less grain this year after a three-month drought, the country's agriculture minister said. Hotter- than-normal weather may reduce production in Australia, a country that was expected to be the second-largest exporter in the marketing year that started June 1, analysts said.
Gold has gained 5.9 percent this year as the dollar has fallen 3.4 percent against the euro. Silver has dropped 7.2 percent this year. One might consider accumulating a position in silver at these levels.
December gold climbed $1.90 to close at $675.40 an ounce Wednesday. September silver gained 8 cents to end at $11.845 an ounce and September copper finished at $3.35 a pound, up 1.2%.
Oct. crude up 2.5%, or $1.78, to close at $73.51 a barrel. Natural gas dipped 12 cents to $5.47.
The Teamsters Union said it will ask a federal appeals court to block the Bush administration's plan to begin allowing Mexican trucks to carry cargo anywhere in the United States. The union said it has been told by officials in the Transportation Department's Federal Motor Carrier Safety Administration that the first Mexican trucks will be coming across the border on Saturday. Teamsters leaders said they planned to seek an emergency injunction today from the Ninth Circuit U.S. Court of Appeals in San Francisco.
Kevin Duffy: "The current credit meltdown is a solvency crisis. Cheap and plentiful credit is what caused the current mess. More of the same can only make it worse. It is only a matter of time before this shot of credit heroine wears off. As with all drugs, at some point simply increasing the dosage has little or no stimulative effect. Sometimes the best medicine is withdrawal."
The VIX took it on the chin on Wednesday and dropped back to the 23.50 level as the Dow jumped 247 points, the Nasdaq 62, and the S&P about 32. The financial sector did a bit better but nothing better than mediocre.
Dry bulk vessel costs, measured by the London-based Baltic Dry Index, on Wednesday reached an all-time high of 7,474 points, up almost 100 per cent over the past 12 months, pushing the cost of a Panamax to almost $60,000 a day.
These burgeoning costs are significantly higher than what was anticipated just 6 months ago. According to the FT, the International Grain Council, the industry body, last week said several important grain routes, notably from the US to Asia, had double the transit volume in the past year, contributing to rising dry bulk carrier freight costs.
Tuesday, August 28, 2007
State Of Flux
8/29/07 State Of Flux
Market conditions for vendors of dynamic random access memory components are set to worsen in September after prices for the oversupplied chips stabilized in July, which brought an end to severe price erosion that has rocked the industry this year, according to technology researcher iSuppli.
Previously, iSuppli hadn't expected DRAM prices to face pressure until October.
The researcher cuts it 2007 global DRAM revenue forecast to $34.6 billion, equating to growth of 2% over 2006. In April, iSuppli had projected that revenue would grow 8.6% on the year, reaching $36.9 billion.
Home Depot said it netted $7.9 billion from the sale of its Supply division. Hughes Supply is the crown jewel of this division. I was a stockholder in Hughes before it was sold to Home Depot for cash. Hughes is well run and a good business. I think Home Depot made a foolish decision to dump this division for so low a price.
EarthLink Inc. outlined a corporate restructuring plan, including the elimination of about 900 jobs.
The number of Americans without health insurance rose to 47 million from 44.8 million, 15.8% of the population. How many with insurance do not have catastrophic insurance?
The consumer confidence index fell from 111.9 in July to 105.0, its lowest level since last August.
The yen continues to gain strength versus the dollar.
The TICKS were really weak from Tuesday's opening of trading. The same is true for the advance/decline ratio. The VIX has rebounded to the 26 level, while the Nasdaq has plummeted 60 points, the S&P about 35, and the Dow fell 280 points. It's another wipe out day. The market closed at the low of the day, a bad sign for tomorrow.
Number-one U.S. drug benefit manager Medco Health Solutions will buy diabetes-care provider PolyMedica Corp. for $1.5 billion. The $53/share all-cash offer represents a 17% premium over Monday's $45.29 close.
U.S. national home prices in the second quarter slid a record 3.2% from a year earlier, according to Standard & Poor's S&P/Case-Shiller Home Price Index. “The year-over-year decline reported in the 2nd quarter of 2007 for the National Home Price Index is the lowest point in its reported history, which dates back to January 1987. On a regional level 17 of the 20 metro areas are showing declines in their annual growth rate from what was reported in May.”
Rob Kirby: "The Fed’s Open Market Operations have lately been almost exclusively REPOS of both Agency and Mortgaged-Backed paper. The temporary ‘funding’ being provided to the holders of this debt IN NO WAY resolves the underlying problem which is one of solvency, not liquidity. Unfortunately, increased liquidity and/or lower interest rates will not improve an insolvent counterparty’s creditworthiness. What the unprecedented ‘liquidity add’ amounts to is the “MUSIC” in a game of musical chairs. If as and when the MUSIC stops, it’s a pretty safe bet that chairs are going to be harder to find than hen’s teeth – because there are none."
The natural gas contract for September delivery expires Wednesday.
Gold for December delivery fell $2.70 to close at $673.50 an ounce on the New York Mercantile Exchange. October platinum rose $8.30 to end at $1,260.60 an ounce. December palladium fell $4.40, or 1.3%, to close at $332.55 an ounce and September copper dropped 3.80 cents to $3.3115 a pound.
TimesOnLine: "State Street, the American bank, has been identified as having $22 billion (£10.9 billion) of exposure to asset-backed commercial paper conduits, the off-balance sheet vehicles that have caused severe problems for rivals in recent weeks amid turmoil in credit markets. According to regulatory filings, the Boston-based bank has credit lines to at least six conduits, which account for 17 per cent of its total assets. That proportion makes State Street the most highly exposed bank to conduits among its European and American peers."
The benchmark 10-year Treasury note was up 11/32 at 101 24/32 with a yield of 4.531%. The 30-year long bond was up 1/32 at 102 5/32, with a yield of 4.863%. The two-year note was up 6/32 at 100 30/32 with a yield of 4.119%. The dollar remains under pressure as it nears the 80 level.
"The political power of the occupiers is collapsing rapidly," Iran's Ahmadinejad said at a news conference, referring to U.S. troops in Iraq. "Soon, we will see a huge power vacuum in the region. Of course, we are prepared to fill the gap, with the help of neighbors and regional friends like Saudi Arabia, and with the help of the Iraqi nation."
Crude-oil for October delivery traded on the New York Mercantile Exchange finished with a 19-cent loss at $71.74 a barrel. Natural gas for September gained 25.5-cent, or 4.7%, to $5.635 per million British thermal units.
Market conditions for vendors of dynamic random access memory components are set to worsen in September after prices for the oversupplied chips stabilized in July, which brought an end to severe price erosion that has rocked the industry this year, according to technology researcher iSuppli.
Previously, iSuppli hadn't expected DRAM prices to face pressure until October.
The researcher cuts it 2007 global DRAM revenue forecast to $34.6 billion, equating to growth of 2% over 2006. In April, iSuppli had projected that revenue would grow 8.6% on the year, reaching $36.9 billion.
Home Depot said it netted $7.9 billion from the sale of its Supply division. Hughes Supply is the crown jewel of this division. I was a stockholder in Hughes before it was sold to Home Depot for cash. Hughes is well run and a good business. I think Home Depot made a foolish decision to dump this division for so low a price.
EarthLink Inc. outlined a corporate restructuring plan, including the elimination of about 900 jobs.
The number of Americans without health insurance rose to 47 million from 44.8 million, 15.8% of the population. How many with insurance do not have catastrophic insurance?
The consumer confidence index fell from 111.9 in July to 105.0, its lowest level since last August.
The yen continues to gain strength versus the dollar.
The TICKS were really weak from Tuesday's opening of trading. The same is true for the advance/decline ratio. The VIX has rebounded to the 26 level, while the Nasdaq has plummeted 60 points, the S&P about 35, and the Dow fell 280 points. It's another wipe out day. The market closed at the low of the day, a bad sign for tomorrow.
Number-one U.S. drug benefit manager Medco Health Solutions will buy diabetes-care provider PolyMedica Corp. for $1.5 billion. The $53/share all-cash offer represents a 17% premium over Monday's $45.29 close.
U.S. national home prices in the second quarter slid a record 3.2% from a year earlier, according to Standard & Poor's S&P/Case-Shiller Home Price Index. “The year-over-year decline reported in the 2nd quarter of 2007 for the National Home Price Index is the lowest point in its reported history, which dates back to January 1987. On a regional level 17 of the 20 metro areas are showing declines in their annual growth rate from what was reported in May.”
Rob Kirby: "The Fed’s Open Market Operations have lately been almost exclusively REPOS of both Agency and Mortgaged-Backed paper. The temporary ‘funding’ being provided to the holders of this debt IN NO WAY resolves the underlying problem which is one of solvency, not liquidity. Unfortunately, increased liquidity and/or lower interest rates will not improve an insolvent counterparty’s creditworthiness. What the unprecedented ‘liquidity add’ amounts to is the “MUSIC” in a game of musical chairs. If as and when the MUSIC stops, it’s a pretty safe bet that chairs are going to be harder to find than hen’s teeth – because there are none."
The natural gas contract for September delivery expires Wednesday.
Gold for December delivery fell $2.70 to close at $673.50 an ounce on the New York Mercantile Exchange. October platinum rose $8.30 to end at $1,260.60 an ounce. December palladium fell $4.40, or 1.3%, to close at $332.55 an ounce and September copper dropped 3.80 cents to $3.3115 a pound.
TimesOnLine: "State Street, the American bank, has been identified as having $22 billion (£10.9 billion) of exposure to asset-backed commercial paper conduits, the off-balance sheet vehicles that have caused severe problems for rivals in recent weeks amid turmoil in credit markets. According to regulatory filings, the Boston-based bank has credit lines to at least six conduits, which account for 17 per cent of its total assets. That proportion makes State Street the most highly exposed bank to conduits among its European and American peers."
The benchmark 10-year Treasury note was up 11/32 at 101 24/32 with a yield of 4.531%. The 30-year long bond was up 1/32 at 102 5/32, with a yield of 4.863%. The two-year note was up 6/32 at 100 30/32 with a yield of 4.119%. The dollar remains under pressure as it nears the 80 level.
"The political power of the occupiers is collapsing rapidly," Iran's Ahmadinejad said at a news conference, referring to U.S. troops in Iraq. "Soon, we will see a huge power vacuum in the region. Of course, we are prepared to fill the gap, with the help of neighbors and regional friends like Saudi Arabia, and with the help of the Iraqi nation."
Crude-oil for October delivery traded on the New York Mercantile Exchange finished with a 19-cent loss at $71.74 a barrel. Natural gas for September gained 25.5-cent, or 4.7%, to $5.635 per million British thermal units.
Monday, August 27, 2007
Justice
8/28/07 Justice
Justice can arrive late. But better late than never. Alberto Gonzalez finally resigned.
Yahoo announced two real-time communication features that are the first of their kind from a leading Web mail service. These include the ability to send free text messages from Yahoo! Mail to mobile phone numbers in the US, Canada, India, and the Philippines, and the ability to send instant messages (IM) from Yahoo! Mail to members of the world's largest combined IM community, including users of Yahoo! Messenger and Windows Live® Messenger(2).
Home Depot's board agreed to sell Home Depot Supply for $8.5 billion to Bain Capital, Carlyle Group and Clayton, Dubilier & Rice, about 18% less than the price hammered out in June. In addition, Home Depot itself will hold about 12.5% of the unit's equity and guarantee some of the debt issued by the banks to finance the acquisition. Basically, it cost about $8+ billion to buy the components of the Supply division. The only ones to get rich on this will be lawyers and possibly the private equity guys and possibly the investment bankers putting the debt package together. This is, in my view, a lousy deal for the shareholders.
The Home Depot has launched its bid to sell to the world's most populous nation.
At a ceremony Sunday in Beijing that included drummers and dragon dancers — a traditional Chinese symbol for luck — Annette Verschuren, Home Depot's president for Asia and Canada, called the company's investment in 12 stores a "historic milestone" for the world's largest home improvement retailer.
U.S. Steel Corp is to acquire Stelco Inc for about $1.1 billion to strengthen its position as a supplier of flat-rolled steel products in North America, the companies said. U.S. Steel will acquire Stelco for C$38.50 per share, amounting to about $1.1 billion, based on about 30 million fully diluted shares, according to the companies.
Nasdaq may sell its stake in the London Stock Exchange to Borse Dubai and make a joint bid with the Gulf exchange for Nordic exchange owner OMX , The Daily Telegraph said on Monday.
Kazakhstan on Monday called a three-month halt to work at the giant Kashagan oilfield, claiming that a consortium led by Italy's ENI had broken environmental rules at the project and evaded customs duties on imported equipment.
Bad credit has supplanted terrorism as the gravest immediate risk threatening the economy, a key national research group reported Monday.
Borrowers' withering ability to pay their bills and the subsequent fallout in the credit markets this summer topped the list of short-term risks on peoples' minds, according to a survey of 258 members conducted by the National Association of Business Economics.
Indian companies that process U.S. mortgages are reporting fewer work orders and diminishing revenue because of the subprime loan fallout overseas. Several companies have moved employees once assigned to mortgage documentation and related services to other areas. There is a fear of layoffs should the crisis in the United States continue.
John Hussman: " Indeed, there is no evidence that historically reliable valuation measures have lost their validity. Though the stock market has maintained relatively high multiples since the late 1990's, those multiples have thus far been associated with poor extended returns. Specifically, based on the most recent, reasonably long-term period available, the S&P 500 has (predictably) lagged Treasury bills for not just seven years, but now more than eight-and-a-half years. Investors will place themselves in quite a bit of danger if they believe that the “echo bubble” from the 2002 lows is some sort of new era for market valuations."
In the Bay Area, home sales volume has fallen to the lowest level in 12 years. Although prices in certain higher-end communities are holding steady, they are decreasing in neighborhoods with a large number of new or entry-level homes. Houses are lingering on the market much longer.
Former US Treasury Secretary Larry Summers warned that the United States may be heading into recession as the biggest victim to date of the sub-prime mortgage debacle was humiliatingly sold for a token sum in Germany."It would be far too premature to judge this crisis over," Mr Summers said. "I would say the risks of recession are now greater than they've been any time since the period in the aftermath of 9/11."
Acer said it would pay $1.90 per Gateway share, representing a premium of 57 percent over Gateway's last closing price.
Sales of existing homes dropped for a fifth straight month in July, falling to the slowest pace in nearly five years, while home prices fell for a record 12th consecutive month. The National Association of Realtors reported that sales of existing homes dipped by 0.2 percent last month to a seasonally adjusted annual rate of 5.75 million units.The median price of a home sold last month slid to $230,200, down by 0.6 percent from the median price a year ago. It marked the 12th consecutive month that home prices have declined compared with a year ago, an all-time high. The supply of homes for sale at the end of the month climbed 5.1 percent to 4.59 million. At the current sales pace, that represented 9.6 months' worth, up from 9.1 months' worth at the end of the prior month. The inventory of single-family homes represented a 9.2 months' supply, the most since October 1991.
Lyle Gramley, a former Fed governor and now senior economic adviser to the Stanford Group Co. in Washington:``The economist who has done the seminal work on the impact of credit crunches on the economy is named Ben S. Bernanke. He's well aware of the fact that this situation could pose serious downside risks for the U.S. economy. His views are the ones that are going to ultimately prevail.''
Hilaire Belloc: “Statistics are the triumph of the quantitative method, and the quantitative method is the victory of sterility and death”
Southwest is offering three round-trip, non-stop flights a day between San Francisco and Chicago's Midway Airport, eight non-stop daily flights to San Diego and seven daily non-stop flights to Las Vegas. They had stopped flying from SF in 2001.
European Central Bank President Jean- Claude Trichet stepped back from his earlier signal that interest rates will be increased next week, saying policy makers plan to wait before deciding whether financial market turbulence is hurting economic growth.
The collapse of the subprime home mortgage market is infecting the U.S. auto industry. Car and truck buyers, especially those with lower credit scores, often are finding it harder to get financing. Vehicle-loan delinquencies are rising among higher-risk customers. And as budget-squeezed consumers put off vehicle purchases, industry forecasters are cutting their sales predictions for 2007.
Iran's envoy to Beijing, Javad Mansouri, says the volume of trade exchange between Iran and China is to reach 18 billion dollars in 2007, which is a rise of about twenty percent.
Gold for December delivery fell $1.30 to close at $676.20 an ounce on the New York Mercantile Exchange. Lead, aluminum, and copper were standout winners on Monday. According to Bloomberg, refined-copper imports in China, the world's biggest consumer of the metal, jumped 65 percent last month and have more than doubled in the January-through-July period. The country has bought more of the metal in the past seven months than in the whole of 2006.
China, the world's biggest aluminum producer and consumer, is likely to go back to being a net importer of the metal in a few years, despite its surging production, a senior industry official said Monday. "(To shift back to being a net importer) is entirely possible. It will probably come after 2010," Pan Jiazhu, secretary general of China Nonferrous Metals Industry Association, told Dow Jones Newswires in an interview.
Crude oil for October delivery rose 88 cents to close at $71.97 a barrel on the New York Mercantile Exchange, marking the contract's highest closing level since August 15. September reformulated gasoline rose 5.79 cents, or nearly 3%, to close at $2.0393 a gallon. ``Gasoline is very tight in the harbor,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``Traders believe the strength in September gasoline will spill over into the October contract.'' Natural gas closed off the day's low but still declined 16 cents to $5.37.
The yen snapped a three-day decline against the dollar and euro as traders pared riskier investments funded by loans in Japan.
Brett Steenbarger:"Recently, the gap in yields between 3 month Treasury bills and 3 month commercial paper widened significantly... The resulting run for the safety of T-bills depressed their yields, creating a gap last week of 1.92%. To put that into perspective, I went back to 1980 (N = 1444 trading weeks) and found that this was the widest gap during that time. Indeed, the second widest gap was 1.43%, registered during the market panic in October, 1987. The median gap since 1980 has been 1.09%."
Justice can arrive late. But better late than never. Alberto Gonzalez finally resigned.
Yahoo announced two real-time communication features that are the first of their kind from a leading Web mail service. These include the ability to send free text messages from Yahoo! Mail to mobile phone numbers in the US, Canada, India, and the Philippines, and the ability to send instant messages (IM) from Yahoo! Mail to members of the world's largest combined IM community, including users of Yahoo! Messenger and Windows Live® Messenger(2).
Home Depot's board agreed to sell Home Depot Supply for $8.5 billion to Bain Capital, Carlyle Group and Clayton, Dubilier & Rice, about 18% less than the price hammered out in June. In addition, Home Depot itself will hold about 12.5% of the unit's equity and guarantee some of the debt issued by the banks to finance the acquisition. Basically, it cost about $8+ billion to buy the components of the Supply division. The only ones to get rich on this will be lawyers and possibly the private equity guys and possibly the investment bankers putting the debt package together. This is, in my view, a lousy deal for the shareholders.
The Home Depot has launched its bid to sell to the world's most populous nation.
At a ceremony Sunday in Beijing that included drummers and dragon dancers — a traditional Chinese symbol for luck — Annette Verschuren, Home Depot's president for Asia and Canada, called the company's investment in 12 stores a "historic milestone" for the world's largest home improvement retailer.
U.S. Steel Corp is to acquire Stelco Inc for about $1.1 billion to strengthen its position as a supplier of flat-rolled steel products in North America, the companies said. U.S. Steel will acquire Stelco for C$38.50 per share, amounting to about $1.1 billion, based on about 30 million fully diluted shares, according to the companies.
Nasdaq may sell its stake in the London Stock Exchange to Borse Dubai and make a joint bid with the Gulf exchange for Nordic exchange owner OMX , The Daily Telegraph said on Monday.
Kazakhstan on Monday called a three-month halt to work at the giant Kashagan oilfield, claiming that a consortium led by Italy's ENI had broken environmental rules at the project and evaded customs duties on imported equipment.
Bad credit has supplanted terrorism as the gravest immediate risk threatening the economy, a key national research group reported Monday.
Borrowers' withering ability to pay their bills and the subsequent fallout in the credit markets this summer topped the list of short-term risks on peoples' minds, according to a survey of 258 members conducted by the National Association of Business Economics.
Indian companies that process U.S. mortgages are reporting fewer work orders and diminishing revenue because of the subprime loan fallout overseas. Several companies have moved employees once assigned to mortgage documentation and related services to other areas. There is a fear of layoffs should the crisis in the United States continue.
John Hussman: " Indeed, there is no evidence that historically reliable valuation measures have lost their validity. Though the stock market has maintained relatively high multiples since the late 1990's, those multiples have thus far been associated with poor extended returns. Specifically, based on the most recent, reasonably long-term period available, the S&P 500 has (predictably) lagged Treasury bills for not just seven years, but now more than eight-and-a-half years. Investors will place themselves in quite a bit of danger if they believe that the “echo bubble” from the 2002 lows is some sort of new era for market valuations."
In the Bay Area, home sales volume has fallen to the lowest level in 12 years. Although prices in certain higher-end communities are holding steady, they are decreasing in neighborhoods with a large number of new or entry-level homes. Houses are lingering on the market much longer.
Former US Treasury Secretary Larry Summers warned that the United States may be heading into recession as the biggest victim to date of the sub-prime mortgage debacle was humiliatingly sold for a token sum in Germany."It would be far too premature to judge this crisis over," Mr Summers said. "I would say the risks of recession are now greater than they've been any time since the period in the aftermath of 9/11."
Acer said it would pay $1.90 per Gateway share, representing a premium of 57 percent over Gateway's last closing price.
Sales of existing homes dropped for a fifth straight month in July, falling to the slowest pace in nearly five years, while home prices fell for a record 12th consecutive month. The National Association of Realtors reported that sales of existing homes dipped by 0.2 percent last month to a seasonally adjusted annual rate of 5.75 million units.The median price of a home sold last month slid to $230,200, down by 0.6 percent from the median price a year ago. It marked the 12th consecutive month that home prices have declined compared with a year ago, an all-time high. The supply of homes for sale at the end of the month climbed 5.1 percent to 4.59 million. At the current sales pace, that represented 9.6 months' worth, up from 9.1 months' worth at the end of the prior month. The inventory of single-family homes represented a 9.2 months' supply, the most since October 1991.
Lyle Gramley, a former Fed governor and now senior economic adviser to the Stanford Group Co. in Washington:``The economist who has done the seminal work on the impact of credit crunches on the economy is named Ben S. Bernanke. He's well aware of the fact that this situation could pose serious downside risks for the U.S. economy. His views are the ones that are going to ultimately prevail.''
Hilaire Belloc: “Statistics are the triumph of the quantitative method, and the quantitative method is the victory of sterility and death”
Southwest is offering three round-trip, non-stop flights a day between San Francisco and Chicago's Midway Airport, eight non-stop daily flights to San Diego and seven daily non-stop flights to Las Vegas. They had stopped flying from SF in 2001.
European Central Bank President Jean- Claude Trichet stepped back from his earlier signal that interest rates will be increased next week, saying policy makers plan to wait before deciding whether financial market turbulence is hurting economic growth.
The collapse of the subprime home mortgage market is infecting the U.S. auto industry. Car and truck buyers, especially those with lower credit scores, often are finding it harder to get financing. Vehicle-loan delinquencies are rising among higher-risk customers. And as budget-squeezed consumers put off vehicle purchases, industry forecasters are cutting their sales predictions for 2007.
Iran's envoy to Beijing, Javad Mansouri, says the volume of trade exchange between Iran and China is to reach 18 billion dollars in 2007, which is a rise of about twenty percent.
Gold for December delivery fell $1.30 to close at $676.20 an ounce on the New York Mercantile Exchange. Lead, aluminum, and copper were standout winners on Monday. According to Bloomberg, refined-copper imports in China, the world's biggest consumer of the metal, jumped 65 percent last month and have more than doubled in the January-through-July period. The country has bought more of the metal in the past seven months than in the whole of 2006.
China, the world's biggest aluminum producer and consumer, is likely to go back to being a net importer of the metal in a few years, despite its surging production, a senior industry official said Monday. "(To shift back to being a net importer) is entirely possible. It will probably come after 2010," Pan Jiazhu, secretary general of China Nonferrous Metals Industry Association, told Dow Jones Newswires in an interview.
Crude oil for October delivery rose 88 cents to close at $71.97 a barrel on the New York Mercantile Exchange, marking the contract's highest closing level since August 15. September reformulated gasoline rose 5.79 cents, or nearly 3%, to close at $2.0393 a gallon. ``Gasoline is very tight in the harbor,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``Traders believe the strength in September gasoline will spill over into the October contract.'' Natural gas closed off the day's low but still declined 16 cents to $5.37.
The yen snapped a three-day decline against the dollar and euro as traders pared riskier investments funded by loans in Japan.
Brett Steenbarger:"Recently, the gap in yields between 3 month Treasury bills and 3 month commercial paper widened significantly... The resulting run for the safety of T-bills depressed their yields, creating a gap last week of 1.92%. To put that into perspective, I went back to 1980 (N = 1444 trading weeks) and found that this was the widest gap during that time. Indeed, the second widest gap was 1.43%, registered during the market panic in October, 1987. The median gap since 1980 has been 1.09%."
Sunday, August 26, 2007
Numbers
8/27/07 Numbers
When you read numbers, it is imperative to know how they have been compiled. Take home sales from the Commerce Dept. Upbeat numbers were released on Friday.
How is that possible? Easy. The Commerce Department numbers count home sales when the contract is signed between the homeowner and the builder, and they do not capture cancellations. Many builders recently have reported high cancellation rates. Numbers, especially from the government, can lead to wrong conclusions. "Closings that are scheduled to take place are not taking place," says Marvin Moss, a North Miami Beach real-estate attorney. He is suing several developers to help clients get out of contracts.
In 2006, the number of new condominium units completed jumped 145% to 102,800, from 41,900 in 2003, according to the U.S. Census Bureau. Last year was the highest level since 1985, when 135,800 units were built. So far this year, 48,354 units have been built and another 72,000 are under construction, according to New York research firm Reis Inc.
The percentage of bank construction loans overall that are in default has risen to 2.3% in the second quarter of 2007 from 1.0% at the end of 2005 . "Condos are a significant share of defaults and delinquencies going on," says Matthew Anderson of Foresight Analytics, an Oakland, Calif., research firm. His analysis shows condo lending ballooned to $31.3 billion in 2006 from $8.4 billion in 2003. These figures don't include the large amounts flowing into condos from hedge funds and investment banks.
Consider actions taken in the so-called public interest (Ayn Rand would puke).
As Fortune Magazine noted, certain banking regulations in question effectively limit a bank's funding exposure to an affiliate to 10% of the bank's capital. But the Fed has allowed Citibank and Bank of America to blow through that level. Citigroup and Bank of America are able to lend up to $25 billion apiece under this exemption, according to the Fed. If Citibank used the full amount, "that represents about 30% of Citibank's total regulatory capital, which is no small exemption," says Charlie Peabody, banks analyst at Portales Partners. The Fed says that it made the exemption in the public interest, because it allows Citibank to get liquidity to the brokerage in "the most rapid and cost-effective manner possible." Using 30% of total regulatory capital for mortgages is prudent?
According to the WSJ, Sachsen LB, the second German bank to become embroiled in the credit-liquidity crunch, voted to sell itself to another German bank amid a souring investment in a London hedge fund also hurt by the fallout. The Eastern German state of Saxony's cabinet Sunday voted to sell Sachsen, the struggling state lender, to Landesbank Baden-Württemberg, another state-owned bank based in Stuttgart, a spokesman for the state cabinet said. The cabinet will call an extraordinary meeting to inform the state's parliament. The sale also requires the approval of Sachsen LB's other owners, set to meet later Sunday. The state of Saxony owns about 37% of Sachsen, with Sachsen-Finanzgruppe, which represents local savings banks and municipal authorities, holding the rest.
According to the SF Chronicle, in recent years, commercial real estate prices have been driven up by buyers such as Blackstone and Tishman, who were able to bid up prices as long as lenders of commercial mortgage-backed securities were offering low-rate, interest-only financing for as much as 95 percent of the purchase price. But in the future, if the only financing available is for interest and principal loans at 75 percent of the market value, with an interest rate a percentage point higher than before, the price that investors would be willing to pay for a building, given the same market conditions, could be 20 to 25 percent less.
Concerns over asset-backed paper has not affected government money funds. Their assets have grown by $118 billion to $589.5 billion over the past two weeks, according to iMoneyNet. By comparison, assets of prime money funds - a much larger category - have grown by only $3.7 billion to $1.7 trillion.
The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950. On an inflation-adjusted basis, the national median price — the level at which half of all homes are more expensive and half are less — is not likely to return to its 2007 peak for more than a decade, according to Moody’s Economy.com, a research firm. Global Insight expects a decline of 4 percent, or roughly 10 percent in inflation-adjusted terms, between the peak earlier this year and the projected low point in 2009. In California, prices are expected to decline 16 percent — or about 20 percent after taking inflation into account.
The Oil Drum: "To rebuild its environmental image in America, BP has refused to take up the increased pollution limits it has been offered in order to upgrade a refinery near Chicago. But unless there are unexpected technological breakthroughs, the $3.8bn plan will be scrapped, and a US refining capacity shortage will grow more acute."
Target Corp. reported its profit from credit cards rose 34 percent in the second quarter, although same-store sales rose by only 4.9 percent.
"The real problem lies in the basics: Median-earning families simply don't have enough money to pay the mortgage, buy health insurance, pay for transportation and day care and still put groceries on the table," said Elizabeth Warren, a Harvard law professor and author of "The Two-Income Trap." "Others can make it day to day, but when a child gets sick or the transmission falls out of the car or there's a cutback in overtime, their cushion is so small that they can't manage even the smallest mismatch between expenses and income.
"Families have been making up the shortfall with credit and someday, perhaps someday very soon, the credit music will stop."
Brett Steenbarger: "You can see clearly that new highs have consistently expanded during the recent market rally. Interestingly, going back to the start of 2004 (N = 908 trading days) when new highs have exceeded new lows by more than 20 issues (N = 30), the next ten days in SPY have averaged a loss of -.56% (14 up, 16 down). That is considerably weaker than the average 10 day gain in SPY for the remainder of the sample of .32%.
This suggests that, by the time a solid majority of issues are making new short-term highs, the buyers have generally gotten their business done and there has been no bullish edge in the near term."
Since their Aug. 16 intraday lows, the Dow is now up 7.4%, the S&P is up 5.3%, and the Nasdaq has risen 7.8%.
Singapore's state-owned Temasek Holdings has approached Nasdaq to buy its 30 percent stake in the London Stock Exchange , a newspaper reported on Sunday. The Sunday Times said in an unsourced report that Temasek had made the approach in recent days and the deal could lead to a full takeover of the LSE by the Singaporean investor.
Gen. Petraeus: "We will be in Iraq in some way for nine to 10 years."
Thomas Paine: "He who is the author of a war lets loose the whole contagion of hell and opens a vein that bleeds a nation to death."
"Funding sources have dried up for all loan products except for conforming loan product," explains Erik Hand, president of Bellevue,WA-based Response Mortgage. "Anything outside of those product types and your options are limited because there's no investor appetite for those loans anymore."
Caroline Baum: " When things get dicey, the lack of transparency contributes to risk aversion. At times like these, the formula is simple: Don't ask + don't tell = sell."
“Global financial markets need Japan’s interest rate to be returned to normal,” said Bank of Australia chief Glenn Stevens on August 17th. “It’s fundamentally a distortion to have Japan’s interest rates as low as they are. The sooner the Japanese interest rates are able to be normal again, the better from the point of view of the global-financial system,” he declared.
South Korean Finance Minister Kwon O-kyu: "The yen-carry trade and misalignment among major currencies are not good for the global economy."
Early Tuesday, there will be a total lunar eclipse, the second this year. It will be visible in North and South America, especially in the West. People in the Pacific islands, eastern Asia, Australia and New Zealand also will be able to view it if skies are clear.
Iran vowed on Sunday to use a new 2 000-pound "smart" bomb against its enemies and unveiled mass production of the new weapon, state television reported. "We will use these (bombs) against our enemies when the time comes," Defence Minister Mostafa Mohammad Najjar said on state television on Sunday.
Psychiatrist Justin Frank noted in a July 27 memorandum updating his book, "Bush on the Couch": "We are left with a president who cannot actually govern, because he is incapable of reasoned thought in coping with events outside his control, like those in the Middle East. "This makes it a monumental challenge — as urgent as it is difficult — not only to get him to stop the carnage in the Middle East, but also to prevent him from undertaking a new, perhaps even more disastrous adventure — like going to war with Iran, in order to embellish the image he so proudly created for himself after 9/11 as the commander in chief of "the first war of the 21st century.'"
James Madison: "All men having power ought to be mistrusted."
Robert Higgs of the Independent Institute: "The trillion-dollar defense budget is already here." Higgs calculated that U.S. military-related spending in 2006 was actually $934.9 billion if we figure in Homeland Security ($69.1bln), the Dept. of Energy, which oversees nuclear weapons ($16.6 bln) and the Dept. of Veterans Affairs ($69.8 bln), as well as other juicy pork chops. In May, the Democrat-controlled House and Senate approved almost $95 billion for the ongoing wars in Afghanistan and Iraq through September.
In a recent climate change report, Citigroup noted that every 1 billion gallons of additional ethanol production would require 28 billion cubic feet of natural gas to fire the ethanol distilleries.
Between 7/13 and 8/15, the short interest in Yahoo declined by 8.5 million shares.
Karl Marx: "The development of civilization and industry in general has always shown itself so active in the destruction of forests that everything that has been done for their conservation and production is completely insignificant in comparison."
When you read numbers, it is imperative to know how they have been compiled. Take home sales from the Commerce Dept. Upbeat numbers were released on Friday.
How is that possible? Easy. The Commerce Department numbers count home sales when the contract is signed between the homeowner and the builder, and they do not capture cancellations. Many builders recently have reported high cancellation rates. Numbers, especially from the government, can lead to wrong conclusions. "Closings that are scheduled to take place are not taking place," says Marvin Moss, a North Miami Beach real-estate attorney. He is suing several developers to help clients get out of contracts.
In 2006, the number of new condominium units completed jumped 145% to 102,800, from 41,900 in 2003, according to the U.S. Census Bureau. Last year was the highest level since 1985, when 135,800 units were built. So far this year, 48,354 units have been built and another 72,000 are under construction, according to New York research firm Reis Inc.
The percentage of bank construction loans overall that are in default has risen to 2.3% in the second quarter of 2007 from 1.0% at the end of 2005 . "Condos are a significant share of defaults and delinquencies going on," says Matthew Anderson of Foresight Analytics, an Oakland, Calif., research firm. His analysis shows condo lending ballooned to $31.3 billion in 2006 from $8.4 billion in 2003. These figures don't include the large amounts flowing into condos from hedge funds and investment banks.
Consider actions taken in the so-called public interest (Ayn Rand would puke).
As Fortune Magazine noted, certain banking regulations in question effectively limit a bank's funding exposure to an affiliate to 10% of the bank's capital. But the Fed has allowed Citibank and Bank of America to blow through that level. Citigroup and Bank of America are able to lend up to $25 billion apiece under this exemption, according to the Fed. If Citibank used the full amount, "that represents about 30% of Citibank's total regulatory capital, which is no small exemption," says Charlie Peabody, banks analyst at Portales Partners. The Fed says that it made the exemption in the public interest, because it allows Citibank to get liquidity to the brokerage in "the most rapid and cost-effective manner possible." Using 30% of total regulatory capital for mortgages is prudent?
According to the WSJ, Sachsen LB, the second German bank to become embroiled in the credit-liquidity crunch, voted to sell itself to another German bank amid a souring investment in a London hedge fund also hurt by the fallout. The Eastern German state of Saxony's cabinet Sunday voted to sell Sachsen, the struggling state lender, to Landesbank Baden-Württemberg, another state-owned bank based in Stuttgart, a spokesman for the state cabinet said. The cabinet will call an extraordinary meeting to inform the state's parliament. The sale also requires the approval of Sachsen LB's other owners, set to meet later Sunday. The state of Saxony owns about 37% of Sachsen, with Sachsen-Finanzgruppe, which represents local savings banks and municipal authorities, holding the rest.
According to the SF Chronicle, in recent years, commercial real estate prices have been driven up by buyers such as Blackstone and Tishman, who were able to bid up prices as long as lenders of commercial mortgage-backed securities were offering low-rate, interest-only financing for as much as 95 percent of the purchase price. But in the future, if the only financing available is for interest and principal loans at 75 percent of the market value, with an interest rate a percentage point higher than before, the price that investors would be willing to pay for a building, given the same market conditions, could be 20 to 25 percent less.
Concerns over asset-backed paper has not affected government money funds. Their assets have grown by $118 billion to $589.5 billion over the past two weeks, according to iMoneyNet. By comparison, assets of prime money funds - a much larger category - have grown by only $3.7 billion to $1.7 trillion.
The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950. On an inflation-adjusted basis, the national median price — the level at which half of all homes are more expensive and half are less — is not likely to return to its 2007 peak for more than a decade, according to Moody’s Economy.com, a research firm. Global Insight expects a decline of 4 percent, or roughly 10 percent in inflation-adjusted terms, between the peak earlier this year and the projected low point in 2009. In California, prices are expected to decline 16 percent — or about 20 percent after taking inflation into account.
The Oil Drum: "To rebuild its environmental image in America, BP has refused to take up the increased pollution limits it has been offered in order to upgrade a refinery near Chicago. But unless there are unexpected technological breakthroughs, the $3.8bn plan will be scrapped, and a US refining capacity shortage will grow more acute."
Target Corp. reported its profit from credit cards rose 34 percent in the second quarter, although same-store sales rose by only 4.9 percent.
"The real problem lies in the basics: Median-earning families simply don't have enough money to pay the mortgage, buy health insurance, pay for transportation and day care and still put groceries on the table," said Elizabeth Warren, a Harvard law professor and author of "The Two-Income Trap." "Others can make it day to day, but when a child gets sick or the transmission falls out of the car or there's a cutback in overtime, their cushion is so small that they can't manage even the smallest mismatch between expenses and income.
"Families have been making up the shortfall with credit and someday, perhaps someday very soon, the credit music will stop."
Brett Steenbarger: "You can see clearly that new highs have consistently expanded during the recent market rally. Interestingly, going back to the start of 2004 (N = 908 trading days) when new highs have exceeded new lows by more than 20 issues (N = 30), the next ten days in SPY have averaged a loss of -.56% (14 up, 16 down). That is considerably weaker than the average 10 day gain in SPY for the remainder of the sample of .32%.
This suggests that, by the time a solid majority of issues are making new short-term highs, the buyers have generally gotten their business done and there has been no bullish edge in the near term."
Since their Aug. 16 intraday lows, the Dow is now up 7.4%, the S&P is up 5.3%, and the Nasdaq has risen 7.8%.
Singapore's state-owned Temasek Holdings has approached Nasdaq to buy its 30 percent stake in the London Stock Exchange , a newspaper reported on Sunday. The Sunday Times said in an unsourced report that Temasek had made the approach in recent days and the deal could lead to a full takeover of the LSE by the Singaporean investor.
Gen. Petraeus: "We will be in Iraq in some way for nine to 10 years."
Thomas Paine: "He who is the author of a war lets loose the whole contagion of hell and opens a vein that bleeds a nation to death."
"Funding sources have dried up for all loan products except for conforming loan product," explains Erik Hand, president of Bellevue,WA-based Response Mortgage. "Anything outside of those product types and your options are limited because there's no investor appetite for those loans anymore."
Caroline Baum: " When things get dicey, the lack of transparency contributes to risk aversion. At times like these, the formula is simple: Don't ask + don't tell = sell."
“Global financial markets need Japan’s interest rate to be returned to normal,” said Bank of Australia chief Glenn Stevens on August 17th. “It’s fundamentally a distortion to have Japan’s interest rates as low as they are. The sooner the Japanese interest rates are able to be normal again, the better from the point of view of the global-financial system,” he declared.
South Korean Finance Minister Kwon O-kyu: "The yen-carry trade and misalignment among major currencies are not good for the global economy."
Early Tuesday, there will be a total lunar eclipse, the second this year. It will be visible in North and South America, especially in the West. People in the Pacific islands, eastern Asia, Australia and New Zealand also will be able to view it if skies are clear.
Iran vowed on Sunday to use a new 2 000-pound "smart" bomb against its enemies and unveiled mass production of the new weapon, state television reported. "We will use these (bombs) against our enemies when the time comes," Defence Minister Mostafa Mohammad Najjar said on state television on Sunday.
Psychiatrist Justin Frank noted in a July 27 memorandum updating his book, "Bush on the Couch": "We are left with a president who cannot actually govern, because he is incapable of reasoned thought in coping with events outside his control, like those in the Middle East. "This makes it a monumental challenge — as urgent as it is difficult — not only to get him to stop the carnage in the Middle East, but also to prevent him from undertaking a new, perhaps even more disastrous adventure — like going to war with Iran, in order to embellish the image he so proudly created for himself after 9/11 as the commander in chief of "the first war of the 21st century.'"
James Madison: "All men having power ought to be mistrusted."
Robert Higgs of the Independent Institute: "The trillion-dollar defense budget is already here." Higgs calculated that U.S. military-related spending in 2006 was actually $934.9 billion if we figure in Homeland Security ($69.1bln), the Dept. of Energy, which oversees nuclear weapons ($16.6 bln) and the Dept. of Veterans Affairs ($69.8 bln), as well as other juicy pork chops. In May, the Democrat-controlled House and Senate approved almost $95 billion for the ongoing wars in Afghanistan and Iraq through September.
In a recent climate change report, Citigroup noted that every 1 billion gallons of additional ethanol production would require 28 billion cubic feet of natural gas to fire the ethanol distilleries.
Between 7/13 and 8/15, the short interest in Yahoo declined by 8.5 million shares.
Karl Marx: "The development of civilization and industry in general has always shown itself so active in the destruction of forests that everything that has been done for their conservation and production is completely insignificant in comparison."
Saturday, August 25, 2007
Exempt
8/26/07 Exempt
Fortune: "The Aug. 20 letters from the Fed to Citigroup and Bank of America state that the Fed, which regulates large parts of the U.S. financial system, has agreed to exempt both banks from rules that effectively limit the amount of lending that their federally-insured banks can do with their brokerage affiliates. The exemption, which is temporary, means, for example, that Citigroup's Citibank entity can substantially increase funding to Citigroup Global Markets, its brokerage subsidiary. Citigroup and Bank of America requested the exemptions, according to the letters, to provide liquidity to those holding mortgage loans, mortgage-backed securities, and other securities."
According to a survey of 258 members conducted by the National Association of Business Economics, 32 percent of its surveyed members cited loan defaults and excessive debt as their biggest near-term concern. Only 20 percent of members cited defense and terrorism as their biggest immediate worry, down from 35 percent when the survey was last conducted in March. Credit risk also topped gas prices, inflation and government spending.
Paul Kasriel: "So, there is no free bailout to the predicament we have gotten into as a result of Greenspan’s cheap credit and moral hazard policies. For those that think there are free bailouts, I suggest that they read the writings of Frederic Bastiat, a 19th century French political economist, who preached that in economic analysis, one must take into account not only what is seen, but what is not seen. In other words, employ general equilibrium analysis, not just partial equilibrium analysis."
Brad Setser: "The recent custodial data from the Fed leaves no doubt that foreign central banks have dramatically reduced their Treasury holdings in August. Thanks to Russ Winter, I realized that the New York Fed reports two numbers for foreign custodial holdings – the average holdings over the course of the week, and the number on the end of the (reporting) week. Using the end of week data, the Fed’s custodial holdings of Treasuries fell by $44.2b from August 1 to August 23. That’s big. Most of the fall came in the past two weeks. Custodial holdings of Agencies rose by $12.6b – offsetting some of the fall in Treasury holdings. But overall central bank custodial holdings still fell significantly – by close to $30b. That hasn’t happened for a while."
LA Times: "With tours extended, multiple deployments and new tactics that put them in bare posts in greater danger, they feel leaders are out of touch with reality...many soldiers are increasingly disdainful of the happy talk that they say commanders on the ground and White House officials are using in their discussions about the war."
Hermann Goering: "Naturally the common people don't want war; neither in Russia, nor in England, nor in America, nor in Germany. That is understood. But after all, it is the leaders of the country who determine policy, and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country."
House prices have been falling in parts of the UK this summer as mortgage costs have become more expensive, according to research from the FT house price index. They include Carmarthenshire, down 11.8 per cent; Hartlepool, down 6 per cent, Monmouthshire, down 4 per cent, and Powys, down 3.7 per cent in the three months to June.
The board of the parent company of Philip Morris USA and Philip Morris International is to meet next week to decide whether to spin off the international arm of its cigarette business, The New York Times reported on Saturday.
Washington Post: "White House officials said they do expect Petraeus and Bush to begin outlining what a "post-surge" strategy might look like. They said the key date is April 2008, when the military will have to begin bringing units home unless it is willing to extend troop rotations from 15 to 18 months. Another senior official, who also spoke on the condition of anonymity to discuss White House thinking more freely, said he expects the U.S. presence to return to pre-buildup levels of 15 combat brigades and about 130,000 troops a year from now, down from about 160,000. "We all know where we want to get to," this official said. "We all know that there will be a long-term robust troop presence that will outlast this president." Aside from lives lost, injured, and emotionally impaired, has any consideration been given to the fact that we do not have the money for this war? Should central banks continue to substantially reduce their treasury holdings, we will soon be in one big headache of a problem.
Rigzone: "Alberta's revenues from selling exploration rights have slumped more than 60% so far this year, knocked by low natural gas prices, rising oil sands development costs and weak equity markets."
The oil-field services industry is directly tied to E&P spending. Worldwide E&P spending is expected to rise 13% to more than $300 billion in 2007, according to the mid-year E&P spending report by Lehman Bros. The vast majority is earmarked for drilling in the Eastern Hemisphere.
Pakistan, a nuclear-armed state, said it successfully tested an air-launched cruise missile that can carry ``all types of warheads.
Yahoo is that it's the only online source of NFL games.
Mike Burk: "During the 3rd year of the Presidential Cycle, in the coming week, returns have been pretty good. The SPX has been up 74% of the time with an average return of 0.5% and the OTC has been up 64% of the time with an average return of 0.71%. Over all years the average returns have been negative...I am uncomfortable drawing comparisons to 1987 and do not mean to imply that a 1987 style crash is likely. 1987 like 2007 was the 3rd year of the Presidential Cycle and there are similarities in many of the indicator and price patterns. Be careful. I expect the major indices to be lower on Friday August 31 than they were on Friday August 24."
Doug Noland: "Total Commercial Paper dropped $90.2bn last week to $2.042 TN, now with a y-t-d gain of $67.9bn (5.3% annualized). Asset-backed commercial paper has declined $120.9bn during the past two weeks to $1.053 TN (up $96.6bn y-o-y). CP has increased $206bn, or 11.2%, over the past 52 weeks..."Banks worldwide have $891 billion at risk in asset-backed commercial paper facilities because of credit agreements that ensure investors are paid back when the short-term debt matures, Fitch Ratings said...With the past couple days of strong stock market gains and the perception that abundant liquidity has returned, scant attention will be paid to Bill Gross commenting yesterday that the asset-backed commercial paper market was likely "history."... I further believe that the vulnerable dollar will prove the proverbial Achilles heel for the upcoming easing cycle. The days of aggressive - and market-pleasing - Greenspan-style rate collapses could prove a luxury of the past...The issue then, as it is today, is not some finite amount of liquidity to keep the banks solvent and markets liquid, but instead the enormous ongoing Credit Creation and Intermediation necessary to sustain levitated asset prices, incomes, corporate earnings and government receipts. I personally believe it is at this point likely impossible to maintain these extremely inflated Credit and Economic Bubbles. The risk intermediation requirements are untenable, especially if trust in Wall Street finance - and, importantly, in contemporary "money" - is waning. Indeed, I expect the current backdrop to prove an absolute Credit and liquidity glutton. Central bankers will be faced with the dilemma of accommodating an insatiable appetite for liquidity injections or, at some point in the not too distant future, attempt to draw a line in the sand and hope for the best."
China's apparent oil demand rose five per cent in July from a year ago, rebounding from June's tepid increase, as refiners stepped up fuel imports to make up for slower growth in refinery output, data showed on Wednesday. Demand from the world's second-largest oil user stood at 7.06 million barrels per day (bpd) last month, and 6.9 million bpd in the first seven months, or 4.5 per cent above a year ago, according to calculations based on official data. Demand rose at a paltry two per cent in June.
According to the NY Times, a Chinese technology company has expressed interest in buying a maker of computer disk drives in the United States. I doubt whether Seagate would be interested in selling to a Chinese company. The CFO of Western Digital, in a Form 4 filed with the SEC, reported he sold 39,784 shares of stock Monday for $20.66 to $20.83 apiece. If he thought the company were to be purchased, I doubt he would have sold the stock.
Thomas Jefferson: “I hope our wisdom will grow with our power, and teach us that the less we use our power the greater it will be.”
I expect King Pharmaceuticals Inc. and Palatin Technologies Inc. to announce the results of their meeting with the Food and Drug Administration concerning the safety data for their erectile dysfunction drug candidate, Bremelanotide, which has completed a midstage, or Phase II, clinical trial. I fully expect the FDA to determine the companies can proceed to a late stage, or Phase III, clinical trial. Final approval should take about 15 months or so. One should recall this drug is both for male and female sexual dysfunction. There is no drug currently on the market for females.
Fortune: "The Aug. 20 letters from the Fed to Citigroup and Bank of America state that the Fed, which regulates large parts of the U.S. financial system, has agreed to exempt both banks from rules that effectively limit the amount of lending that their federally-insured banks can do with their brokerage affiliates. The exemption, which is temporary, means, for example, that Citigroup's Citibank entity can substantially increase funding to Citigroup Global Markets, its brokerage subsidiary. Citigroup and Bank of America requested the exemptions, according to the letters, to provide liquidity to those holding mortgage loans, mortgage-backed securities, and other securities."
According to a survey of 258 members conducted by the National Association of Business Economics, 32 percent of its surveyed members cited loan defaults and excessive debt as their biggest near-term concern. Only 20 percent of members cited defense and terrorism as their biggest immediate worry, down from 35 percent when the survey was last conducted in March. Credit risk also topped gas prices, inflation and government spending.
Paul Kasriel: "So, there is no free bailout to the predicament we have gotten into as a result of Greenspan’s cheap credit and moral hazard policies. For those that think there are free bailouts, I suggest that they read the writings of Frederic Bastiat, a 19th century French political economist, who preached that in economic analysis, one must take into account not only what is seen, but what is not seen. In other words, employ general equilibrium analysis, not just partial equilibrium analysis."
Brad Setser: "The recent custodial data from the Fed leaves no doubt that foreign central banks have dramatically reduced their Treasury holdings in August. Thanks to Russ Winter, I realized that the New York Fed reports two numbers for foreign custodial holdings – the average holdings over the course of the week, and the number on the end of the (reporting) week. Using the end of week data, the Fed’s custodial holdings of Treasuries fell by $44.2b from August 1 to August 23. That’s big. Most of the fall came in the past two weeks. Custodial holdings of Agencies rose by $12.6b – offsetting some of the fall in Treasury holdings. But overall central bank custodial holdings still fell significantly – by close to $30b. That hasn’t happened for a while."
LA Times: "With tours extended, multiple deployments and new tactics that put them in bare posts in greater danger, they feel leaders are out of touch with reality...many soldiers are increasingly disdainful of the happy talk that they say commanders on the ground and White House officials are using in their discussions about the war."
Hermann Goering: "Naturally the common people don't want war; neither in Russia, nor in England, nor in America, nor in Germany. That is understood. But after all, it is the leaders of the country who determine policy, and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country."
House prices have been falling in parts of the UK this summer as mortgage costs have become more expensive, according to research from the FT house price index. They include Carmarthenshire, down 11.8 per cent; Hartlepool, down 6 per cent, Monmouthshire, down 4 per cent, and Powys, down 3.7 per cent in the three months to June.
The board of the parent company of Philip Morris USA and Philip Morris International is to meet next week to decide whether to spin off the international arm of its cigarette business, The New York Times reported on Saturday.
Washington Post: "White House officials said they do expect Petraeus and Bush to begin outlining what a "post-surge" strategy might look like. They said the key date is April 2008, when the military will have to begin bringing units home unless it is willing to extend troop rotations from 15 to 18 months. Another senior official, who also spoke on the condition of anonymity to discuss White House thinking more freely, said he expects the U.S. presence to return to pre-buildup levels of 15 combat brigades and about 130,000 troops a year from now, down from about 160,000. "We all know where we want to get to," this official said. "We all know that there will be a long-term robust troop presence that will outlast this president." Aside from lives lost, injured, and emotionally impaired, has any consideration been given to the fact that we do not have the money for this war? Should central banks continue to substantially reduce their treasury holdings, we will soon be in one big headache of a problem.
Rigzone: "Alberta's revenues from selling exploration rights have slumped more than 60% so far this year, knocked by low natural gas prices, rising oil sands development costs and weak equity markets."
The oil-field services industry is directly tied to E&P spending. Worldwide E&P spending is expected to rise 13% to more than $300 billion in 2007, according to the mid-year E&P spending report by Lehman Bros. The vast majority is earmarked for drilling in the Eastern Hemisphere.
Pakistan, a nuclear-armed state, said it successfully tested an air-launched cruise missile that can carry ``all types of warheads.
Yahoo is that it's the only online source of NFL games.
Mike Burk: "During the 3rd year of the Presidential Cycle, in the coming week, returns have been pretty good. The SPX has been up 74% of the time with an average return of 0.5% and the OTC has been up 64% of the time with an average return of 0.71%. Over all years the average returns have been negative...I am uncomfortable drawing comparisons to 1987 and do not mean to imply that a 1987 style crash is likely. 1987 like 2007 was the 3rd year of the Presidential Cycle and there are similarities in many of the indicator and price patterns. Be careful. I expect the major indices to be lower on Friday August 31 than they were on Friday August 24."
Doug Noland: "Total Commercial Paper dropped $90.2bn last week to $2.042 TN, now with a y-t-d gain of $67.9bn (5.3% annualized). Asset-backed commercial paper has declined $120.9bn during the past two weeks to $1.053 TN (up $96.6bn y-o-y). CP has increased $206bn, or 11.2%, over the past 52 weeks..."Banks worldwide have $891 billion at risk in asset-backed commercial paper facilities because of credit agreements that ensure investors are paid back when the short-term debt matures, Fitch Ratings said...With the past couple days of strong stock market gains and the perception that abundant liquidity has returned, scant attention will be paid to Bill Gross commenting yesterday that the asset-backed commercial paper market was likely "history."... I further believe that the vulnerable dollar will prove the proverbial Achilles heel for the upcoming easing cycle. The days of aggressive - and market-pleasing - Greenspan-style rate collapses could prove a luxury of the past...The issue then, as it is today, is not some finite amount of liquidity to keep the banks solvent and markets liquid, but instead the enormous ongoing Credit Creation and Intermediation necessary to sustain levitated asset prices, incomes, corporate earnings and government receipts. I personally believe it is at this point likely impossible to maintain these extremely inflated Credit and Economic Bubbles. The risk intermediation requirements are untenable, especially if trust in Wall Street finance - and, importantly, in contemporary "money" - is waning. Indeed, I expect the current backdrop to prove an absolute Credit and liquidity glutton. Central bankers will be faced with the dilemma of accommodating an insatiable appetite for liquidity injections or, at some point in the not too distant future, attempt to draw a line in the sand and hope for the best."
China's apparent oil demand rose five per cent in July from a year ago, rebounding from June's tepid increase, as refiners stepped up fuel imports to make up for slower growth in refinery output, data showed on Wednesday. Demand from the world's second-largest oil user stood at 7.06 million barrels per day (bpd) last month, and 6.9 million bpd in the first seven months, or 4.5 per cent above a year ago, according to calculations based on official data. Demand rose at a paltry two per cent in June.
According to the NY Times, a Chinese technology company has expressed interest in buying a maker of computer disk drives in the United States. I doubt whether Seagate would be interested in selling to a Chinese company. The CFO of Western Digital, in a Form 4 filed with the SEC, reported he sold 39,784 shares of stock Monday for $20.66 to $20.83 apiece. If he thought the company were to be purchased, I doubt he would have sold the stock.
Thomas Jefferson: “I hope our wisdom will grow with our power, and teach us that the less we use our power the greater it will be.”
I expect King Pharmaceuticals Inc. and Palatin Technologies Inc. to announce the results of their meeting with the Food and Drug Administration concerning the safety data for their erectile dysfunction drug candidate, Bremelanotide, which has completed a midstage, or Phase II, clinical trial. I fully expect the FDA to determine the companies can proceed to a late stage, or Phase III, clinical trial. Final approval should take about 15 months or so. One should recall this drug is both for male and female sexual dysfunction. There is no drug currently on the market for females.
Friday, August 24, 2007
Durable Goods And New Home Sales
8/25/07 Durable Goods And New Home Sales
Orders for U.S.-made durable goods surged in July, jumping 5.9% on higher demand for airplanes, vehicles, computers, machinery, steel and most other kinds of long-lasting manufactured goods the Commerce Department reported Friday. Excluding the 10.8% increase in transportation goods, orders rose 3.7%, the fastest gain in two years. Shipments rose 3.8% in July, and were up 1.9% excluding transportation goods. Inventories rose 0.1%.
Shares in Singapore's DBS Group Holdings , state-controlled Bank of China and its Hong Kong subsidiary, BOC Hong Kong , all dived after they revealed a combined exposure to the U.S. subprime mortgage market of almost $13 billion.
Nouriel Roubini: "In summary: while the extremes of the investors’ panic have receded in the last couple of days the credit markets remain mostly in a severe credit crunch: money markets, commercial paper, asset-backed commercial paper, SIVs, CDOs, LBOs, leveraged loans, subprime, near prime and prime mortgage markets. In all of them the credit crunch is still severe if less extreme than at the time of the peak of the investors’ panic. Persistent credit problems – rather than just illiquidity ones – will keep a variety of credit markets in a crunch for a persistent period of time.
In the meanwhile the housing recession is becoming more severe, consumer confidence is sharply down, retail sales in August look like falling relative to July and the tightening in credit conditions is likely to slow down an already anemic capex spending by the corporate sector."
The Oil Drum: "Lukoil reportedly cuts oil supplies to Germany by one third."
LA Times: "The chairman of the Joint Chiefs of Staff is expected to advise President Bush to reduce the U.S. force in Iraq next year by almost half, potentially creating a rift with top White House officials and other military commanders over the course of the war.
Administration and military officials say Marine Gen. Peter Pace is likely to convey concerns by the Joint Chiefs that keeping well in excess of 100,000 troops in Iraq through 2008 will severely strain the military. This assessment could collide with one being prepared by the U.S. commander in Iraq, Army Gen. David H. Petraeus, calling for the U.S. to maintain higher troop levels for 2008 and beyond."
North Dakota typically produces about one-third of the nation's dry edible beans, a category that includes everything from pinto and navy beans to garbanzos. The U.S. Department of Agriculture is projecting this year's North Dakota crop at 9.6 million 100-pound bags, up 25 percent from last year and close to the 2002 production record of 10.6 million bags.
In contrast, the U.S. crop is pegged at 23.7 million bags, down 2 percent from last year and 11 percent below two years ago. Planted acres were down about 8 percent and acres for harvest were expected to be down about 6 percent.
Sales of new homes in the U.S. unexpectedly rose for the second time this year in July, suggesting the housing market was stabilizing before the rout in credit markets. Purchases increased 2.8 percent to an annual pace of 870,000 last month from a revised 846,000 rate in June that was greater than previously estimated, the Commerce Department said. Compared with a year earlier, purchases were down 10 percent in July. The median price of a new home rose 0.6 percent to $239,500 last month, according to the report. Inventories of unsold homes dropped to 7.5 months at the current sales pace.
"This is July, before the freezing of the market," Mark Zandi of Moody's Economy.com said on CNBC. "So I'm sure we're going to see much weaker numbers for August, September and October. The housing market is going to go down a whole other level in the next few months."In terms of sales, I think the bottom is going to be the end of this year," he said. "In terms of contruction, I don't think there'll be a bottom 'til the beginning of 2008. And in terms of prices, I think it won't be until the end of '08. And that's nationally. Of course, in California and Florida--the markets that are in disarray--the bottom is well into 2009."
In Chicago, wheat for December delivery surged to an all-time high of $7.54 a bushel. Prices have jumped 110 per cent in the past 12 months and have risen threefold since 2000. Canada, the world's second-largest wheat exporter, warned output might be almost 20 per cent below last year as adverse weather damaged the crop as it had done in Europe and Australia.
Todd Harrison: "Indeed, almost 40% of all US wealth is in the hands of the top 1% of the population, compared to 13% 25 years ago. Further, the top .25% of the population owns more wealth than the other 99¾% combined. As this dichotomy manifests, the implications for consumer spending, real-estate investment and long-term savings will be profoundly impacted."
Japan's corporate service prices rose at the fastest pace in more than 15 years, a sign that inflation is taking hold in the world's second-largest economy. The prices companies pay for services such as rents and transportation climbed 1.6 percent in July from a year earlier, the Bank of Japan said.
In early Friday trading, gold, silver, copper, zinc, aluminum, and oil, as well as wheat and soybeans, were all trading higher.
December gold closed at $677.50 an ounce, its highest level since Aug. 15 -- up $9.10 for the day and up $10.70, or 1.6%, for the week. September silver gained 30 cents to close at $11.94 an ounce, up 1.2% for the week. September copper closed at $3.3375 a pound, up 2.3% for the day, and up 6% for the week. Lead rose 5% on Friday.
The U.K. economy accelerated in the second quarter, driven by consumer spending and business services, putting it on course for the best growth performance in three years.
Nabors Industries Ltd.'s shares rose the most in six months on renewed speculation the world's largest onshore oil and natural-gas driller will be bought. It's Friday and these rumors have generally taken place on a Friday.
Morgan Stanley on Friday cut its forecast for retail sales growth in 2008, saying that the current "turmoil" in the credit markets will lead to declines in consumer wealth and available credit as well as more modest job growth in the U.S. Analyst Gregory Melich said despite an improvement this summer, he now expects retail sales to grow 3 percent in 2008, down from a previous forecast of 4.5 percent, which would put growth at its lowest level since 2003. "Household wealth, credit availability, and jobs growth are key lead components of retail sales," Melich wrote. "We are baking deceleration in each of these areas."
The number of rigs actively exploring for oil and natural gas in the United States rose by 21 this week to 1,816. Of the rigs running nationwide, 1,494 were exploring for natural gas and 316 for oil, Houston-based Baker Hughes Inc. reported Friday. Six were listed as miscellaneous. A year ago, the rig count stood at 1,756.
October crude climbed $1.26 to close at $71.09 a barrel Friday. September natural gas fell 9.9 cents to close at $5.523 per million British thermal units, down more than 21% from a week ago.
The Federal Reserve Bank of New York stated banks may pledge asset-backed commercial paper for which they also provide the backup lines of credit.
Richard Pryor: "I went to Zimbabwe. I know how white people feel in America now; relaxed! Cause when I heard the police car I knew they weren't coming after me!"
Orders for U.S.-made durable goods surged in July, jumping 5.9% on higher demand for airplanes, vehicles, computers, machinery, steel and most other kinds of long-lasting manufactured goods the Commerce Department reported Friday. Excluding the 10.8% increase in transportation goods, orders rose 3.7%, the fastest gain in two years. Shipments rose 3.8% in July, and were up 1.9% excluding transportation goods. Inventories rose 0.1%.
Shares in Singapore's DBS Group Holdings , state-controlled Bank of China and its Hong Kong subsidiary, BOC Hong Kong , all dived after they revealed a combined exposure to the U.S. subprime mortgage market of almost $13 billion.
Nouriel Roubini: "In summary: while the extremes of the investors’ panic have receded in the last couple of days the credit markets remain mostly in a severe credit crunch: money markets, commercial paper, asset-backed commercial paper, SIVs, CDOs, LBOs, leveraged loans, subprime, near prime and prime mortgage markets. In all of them the credit crunch is still severe if less extreme than at the time of the peak of the investors’ panic. Persistent credit problems – rather than just illiquidity ones – will keep a variety of credit markets in a crunch for a persistent period of time.
In the meanwhile the housing recession is becoming more severe, consumer confidence is sharply down, retail sales in August look like falling relative to July and the tightening in credit conditions is likely to slow down an already anemic capex spending by the corporate sector."
The Oil Drum: "Lukoil reportedly cuts oil supplies to Germany by one third."
LA Times: "The chairman of the Joint Chiefs of Staff is expected to advise President Bush to reduce the U.S. force in Iraq next year by almost half, potentially creating a rift with top White House officials and other military commanders over the course of the war.
Administration and military officials say Marine Gen. Peter Pace is likely to convey concerns by the Joint Chiefs that keeping well in excess of 100,000 troops in Iraq through 2008 will severely strain the military. This assessment could collide with one being prepared by the U.S. commander in Iraq, Army Gen. David H. Petraeus, calling for the U.S. to maintain higher troop levels for 2008 and beyond."
North Dakota typically produces about one-third of the nation's dry edible beans, a category that includes everything from pinto and navy beans to garbanzos. The U.S. Department of Agriculture is projecting this year's North Dakota crop at 9.6 million 100-pound bags, up 25 percent from last year and close to the 2002 production record of 10.6 million bags.
In contrast, the U.S. crop is pegged at 23.7 million bags, down 2 percent from last year and 11 percent below two years ago. Planted acres were down about 8 percent and acres for harvest were expected to be down about 6 percent.
Sales of new homes in the U.S. unexpectedly rose for the second time this year in July, suggesting the housing market was stabilizing before the rout in credit markets. Purchases increased 2.8 percent to an annual pace of 870,000 last month from a revised 846,000 rate in June that was greater than previously estimated, the Commerce Department said. Compared with a year earlier, purchases were down 10 percent in July. The median price of a new home rose 0.6 percent to $239,500 last month, according to the report. Inventories of unsold homes dropped to 7.5 months at the current sales pace.
"This is July, before the freezing of the market," Mark Zandi of Moody's Economy.com said on CNBC. "So I'm sure we're going to see much weaker numbers for August, September and October. The housing market is going to go down a whole other level in the next few months."In terms of sales, I think the bottom is going to be the end of this year," he said. "In terms of contruction, I don't think there'll be a bottom 'til the beginning of 2008. And in terms of prices, I think it won't be until the end of '08. And that's nationally. Of course, in California and Florida--the markets that are in disarray--the bottom is well into 2009."
In Chicago, wheat for December delivery surged to an all-time high of $7.54 a bushel. Prices have jumped 110 per cent in the past 12 months and have risen threefold since 2000. Canada, the world's second-largest wheat exporter, warned output might be almost 20 per cent below last year as adverse weather damaged the crop as it had done in Europe and Australia.
Todd Harrison: "Indeed, almost 40% of all US wealth is in the hands of the top 1% of the population, compared to 13% 25 years ago. Further, the top .25% of the population owns more wealth than the other 99¾% combined. As this dichotomy manifests, the implications for consumer spending, real-estate investment and long-term savings will be profoundly impacted."
Japan's corporate service prices rose at the fastest pace in more than 15 years, a sign that inflation is taking hold in the world's second-largest economy. The prices companies pay for services such as rents and transportation climbed 1.6 percent in July from a year earlier, the Bank of Japan said.
In early Friday trading, gold, silver, copper, zinc, aluminum, and oil, as well as wheat and soybeans, were all trading higher.
December gold closed at $677.50 an ounce, its highest level since Aug. 15 -- up $9.10 for the day and up $10.70, or 1.6%, for the week. September silver gained 30 cents to close at $11.94 an ounce, up 1.2% for the week. September copper closed at $3.3375 a pound, up 2.3% for the day, and up 6% for the week. Lead rose 5% on Friday.
The U.K. economy accelerated in the second quarter, driven by consumer spending and business services, putting it on course for the best growth performance in three years.
Nabors Industries Ltd.'s shares rose the most in six months on renewed speculation the world's largest onshore oil and natural-gas driller will be bought. It's Friday and these rumors have generally taken place on a Friday.
Morgan Stanley on Friday cut its forecast for retail sales growth in 2008, saying that the current "turmoil" in the credit markets will lead to declines in consumer wealth and available credit as well as more modest job growth in the U.S. Analyst Gregory Melich said despite an improvement this summer, he now expects retail sales to grow 3 percent in 2008, down from a previous forecast of 4.5 percent, which would put growth at its lowest level since 2003. "Household wealth, credit availability, and jobs growth are key lead components of retail sales," Melich wrote. "We are baking deceleration in each of these areas."
The number of rigs actively exploring for oil and natural gas in the United States rose by 21 this week to 1,816. Of the rigs running nationwide, 1,494 were exploring for natural gas and 316 for oil, Houston-based Baker Hughes Inc. reported Friday. Six were listed as miscellaneous. A year ago, the rig count stood at 1,756.
October crude climbed $1.26 to close at $71.09 a barrel Friday. September natural gas fell 9.9 cents to close at $5.523 per million British thermal units, down more than 21% from a week ago.
The Federal Reserve Bank of New York stated banks may pledge asset-backed commercial paper for which they also provide the backup lines of credit.
Richard Pryor: "I went to Zimbabwe. I know how white people feel in America now; relaxed! Cause when I heard the police car I knew they weren't coming after me!"
Thursday, August 23, 2007
Note Of Confidence
8/24/07 Note Of Confidence
Late Wednesday Bank of America, the second-largest U.S. bank, said it bought non-voting preferred stock that yields 7.25 percent and can be converted into Countrywide common stock at $18 per share, 17.5 percent below the shares' Wednesday closing price. Countrywide shares soared 20 percent in after-hours trading.
From my email bag: "PRESIDENTIAL LIBRARY DESTROYED BY FLOOD
Crawford, Texas - A tragic flood this morning destroyed the personal library of President Bush. The flood began in the presidential bathroom where both of the books were kept.
Both books have been lost. A presidential spokesman said the president was devastated, since he was almost finished coloring the second one.
The White House tried to call FEMA, but there was no answer. "
A private equity-led buyout of home-improvement retailer Home Depot Inc's wholesale supply division, due to close on Thursday, could be in trouble because investment banks involved are reluctant to fund the transaction even at a lower price, the Financial Times reported in its online edition, citing people familiar with the negotiations. Home Depot earlier in the month said it was in negotiations with buyers -- Bain Capital Partners, Carlyle Group and Clayton, Dubilier & Rice -- about restructuring deal terms, including lowering the unit's $10.3 billion sale price. But people familiar with the talks said parties hoped to reach a deal for the unit, which supplies materials to home builders and other contractors, the FT said.
Should the Home Depot not close would that dampen the note of confidence from BofA in Countrywide?
The Federal Reserve lent U.S. banks $7 billion in a 14-day repurchase agreement on Thursday, accepting about $6 billion in mortgages as collateral for the loans, the New York Federal Reserve Bank reported. The average yield was 5.07%.
Japan's central bank decided Thursday to keep interest rates unchanged because of recent worries about a U.S. credit crunch that set off roller-coaster fluctuations on global markets. "We need to closely watch developments in international financial markets and the global economy, and tie our assessment to future monetary policy decisions. It is most important that the adjustment process will proceed in an orderly way. I think it will take some time. Re-pricing of risk will probably lead to realization of losses. The process could be painful," BoJ chief Fukui said at his August 23rd press conference.
"Global financial markets need Japan's interest rate to be returned to normal," said Bank of Australia chief Glenn Stevens on August 17th. "It's fundamentally a distortion to have Japan's interest rates as low as they are. The sooner the Japanese interest rates are able to be normal again, the better from the point of view of the global-financial system," he declared.
Jeffrey Cooper: "And if you think emotion has seized the tape, next week sets up as something to behold. For another perspective, next week a lunar eclipse looms on Tuesday, which coincides with the last week of August, a period that is historically is fraught with significant turning points. August 25, which falls on the weekend, is a mirror image of the February 22 peak and the 1987 all-time high. Will it be a high or a low?
If the current rally phase persists into Friday, it may be a superior opportunity for selling and selling short. It will be interesting, to say the least, to observe players' willingness to hold positions over the weekend."
The European Central Bank signaled that it is still inclined to raise interest rates by a quarter of a percentage point on Sept. 6 to 4.25%, provided market turmoil doesn't deepen.
"One of the reasons for the China-US trade imbalance are the American restrictions of exports," Commerce Minister Wang Chao said. "Even when we want to buy products from the United States, we can't buy what we want."
Shell announced reduced production at is Deer Park refinery in the wake of shut in production from Mexico.
Alibaba.com, the business-to-business unit of China's Alibaba Group, submitted an application to list shares on the Hong Kong stock exchange, a person familiar with the situation said Monday. Goldman Sachs and Morgan Stanley will be the lead underwriters of the IPO.
Yahoo owns 40% of this company and its true worth, in my view, is not reflected in the current price for Yahoo. Actionality provides software technology that inserts ads in content for mobile devices, such as mobile phone games. The company claims that it has simplified in-game branding and advertising to the point that it's a one-click process. Yahoo has acquired Actionality, a German mobile advertising technology company, for an undisclosed sum.
Iraqi Prime Minister Nouri Maliki warned the Bush administration after talks with longtime U.S. adversaries in Syria on Wednesday that Iraq "can find friends elsewhere" if Washington doesn't like how he runs his country.
The federal budget deficit is projected to total $158 billion in fiscal 2007, which ends Sept. 30, narrowing from $248 billion in the previous year, the Congressional Budget Office said Thursday in its update of its annual budget projections. "Nevertheless, the budget outlook for the long term remains daunting, primarily because of rising costs for health care," said the nonpartisan agency, which serves as Congress' budget analyst.
FDIC officials acknowledged that more evidence of the housing-market stress will show up in results for the current quarter. The occurrence of what they call "declining credit quality" for banks likely will hit with fuller force in the July-September period, they said.
The amount of U.S. commercial paper outstanding had its biggest weekly percentage drop since 2000 as investors shunned debt that may be linked to mortgages and other risky assets and instead opted for the safety of Treasuries. The amount dropped $90.2 billion, or 4.23 percent, to a seasonally adjusted $2.04 trillion as of yesterday from Aug. 15, according to the Federal Reserve. The percentage drop is the biggest drop since at least November 2000, according to data compiled by Bloomberg.
While U.S. Federal Reserve Chairman Ben S. Bernanke is under pressure from investors to loosen monetary policy, his counterparts in Australia, Chile, China, Norway, South Africa, and South Korea are among those lifting borrowing costs.
Amstar Financial Holdings is closing its mortgage banking subsidiary and transferring the operations to The Money Store, the company said Wednesday. The Money Store has agreed to take over management of 109 Amstar branches across the country, which employ more than 300 people.
Natural-gas inventories rose by 23 billion cubic feet for the week ended August 17, the Energy Department said Thursday, and that was slightly below estimates. Total stocks now stand at 2.926 trillion cubic feet, up 77 billion cubic feet from the year-ago level and 333 billion cubic feet above the five-year average, the government data said.
U.S. intelligence agencies have written a mixed report on Iraq, finding some progress but judging that the Baghdad government may not be able to carry it forward, a defense official said Thursday. Then, the top analysts in the U.S. spy community concluded that Iraqi leaders will be hard pressed to craft a lasting political settlement or improve their security capabilities in the next year and a half. They also found that growing and entrenched polarization between Shiite and Sunni Muslims, inadequate Iraqi security forces, weak leaders and the success of extremists' efforts to use violence to exacerbate the sectarian war all created a situation that would be difficult to improve. "Iraqi political leaders remain unable to govern effectively," the 10-page document, a declassified summary of a more detailed National Intelligence Estimate, concludes.
The chief executive of Countrywide Financial Corp said the housing market was "certainly not getting better" and could push the economy into a recession.
"If we can bail out Chrysler, why can't we support the American homeowner?" Bill Gross wrote in his monthly investment outlook on PIMCO's Web site.
December gold fell 30 cents to close at $668.40 an ounce Thursday. September silver gained 7.5 cents to close at $11.64 an ounce and September copper finished at $3.263 a pound, up 1.6%.
According to Bloomberg, the cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, climbed the most in 20 months and may extend its rally as cargo demand strengthens. September demand is outpacing that of August ``by a long way,'' Tim Coffin, an analyst at London-based Capital Shipbrokers LP, said in an e-mailed note today. Tanker-hire prices are ``firming fast,'' he said, ``we didn't expect it.''
Bookings for supertankers sailing from the Middle East to Asia account for 47 percent of global demand for the carriers, according to New York-based McQuilling Brokerage Partners LLP. Shipments to the U.S. and Caribbean, the second-biggest market, account for 14 percent of demand for supertankers.
October crude climbed 57 cents to close at $69.83 a barrel Thursday. September reformulated gasoline gained 1.8% to close at $1.9232 a gallon. September natural gas closed higher for the first time since Friday, up 4.4 cents to end at $5.622 per million British thermal units, after a slightly smaller-than-expected climb in last week's supplies.
Gap said it now expects fiscal 2007 per-share earnings of 83 cents to 88 cents, up from its prior outlook of 76 cents to 86 cents.
Because the Fed redeemed $5 billion in Treasuries earlier in the week in anticipation of higher borrowing, the Fed actually added no new net money to the system this week.
Science Applications International Corp. said Thursday it started work on a contract to manage chemicals and packaged petroleum for the Department of Defense. The contract includes a five-year base term, a five-year option period and a top value of $6.2 billion. It was originally awarded May 2, though a protest was lodged. The Government Accountability Office denied that protest and told the company Aug. 15 that work could resume.
Late Wednesday Bank of America, the second-largest U.S. bank, said it bought non-voting preferred stock that yields 7.25 percent and can be converted into Countrywide common stock at $18 per share, 17.5 percent below the shares' Wednesday closing price. Countrywide shares soared 20 percent in after-hours trading.
From my email bag: "PRESIDENTIAL LIBRARY DESTROYED BY FLOOD
Crawford, Texas - A tragic flood this morning destroyed the personal library of President Bush. The flood began in the presidential bathroom where both of the books were kept.
Both books have been lost. A presidential spokesman said the president was devastated, since he was almost finished coloring the second one.
The White House tried to call FEMA, but there was no answer. "
A private equity-led buyout of home-improvement retailer Home Depot Inc's wholesale supply division, due to close on Thursday, could be in trouble because investment banks involved are reluctant to fund the transaction even at a lower price, the Financial Times reported in its online edition, citing people familiar with the negotiations. Home Depot earlier in the month said it was in negotiations with buyers -- Bain Capital Partners, Carlyle Group and Clayton, Dubilier & Rice -- about restructuring deal terms, including lowering the unit's $10.3 billion sale price. But people familiar with the talks said parties hoped to reach a deal for the unit, which supplies materials to home builders and other contractors, the FT said.
Should the Home Depot not close would that dampen the note of confidence from BofA in Countrywide?
The Federal Reserve lent U.S. banks $7 billion in a 14-day repurchase agreement on Thursday, accepting about $6 billion in mortgages as collateral for the loans, the New York Federal Reserve Bank reported. The average yield was 5.07%.
Japan's central bank decided Thursday to keep interest rates unchanged because of recent worries about a U.S. credit crunch that set off roller-coaster fluctuations on global markets. "We need to closely watch developments in international financial markets and the global economy, and tie our assessment to future monetary policy decisions. It is most important that the adjustment process will proceed in an orderly way. I think it will take some time. Re-pricing of risk will probably lead to realization of losses. The process could be painful," BoJ chief Fukui said at his August 23rd press conference.
"Global financial markets need Japan's interest rate to be returned to normal," said Bank of Australia chief Glenn Stevens on August 17th. "It's fundamentally a distortion to have Japan's interest rates as low as they are. The sooner the Japanese interest rates are able to be normal again, the better from the point of view of the global-financial system," he declared.
Jeffrey Cooper: "And if you think emotion has seized the tape, next week sets up as something to behold. For another perspective, next week a lunar eclipse looms on Tuesday, which coincides with the last week of August, a period that is historically is fraught with significant turning points. August 25, which falls on the weekend, is a mirror image of the February 22 peak and the 1987 all-time high. Will it be a high or a low?
If the current rally phase persists into Friday, it may be a superior opportunity for selling and selling short. It will be interesting, to say the least, to observe players' willingness to hold positions over the weekend."
The European Central Bank signaled that it is still inclined to raise interest rates by a quarter of a percentage point on Sept. 6 to 4.25%, provided market turmoil doesn't deepen.
"One of the reasons for the China-US trade imbalance are the American restrictions of exports," Commerce Minister Wang Chao said. "Even when we want to buy products from the United States, we can't buy what we want."
Shell announced reduced production at is Deer Park refinery in the wake of shut in production from Mexico.
Alibaba.com, the business-to-business unit of China's Alibaba Group, submitted an application to list shares on the Hong Kong stock exchange, a person familiar with the situation said Monday. Goldman Sachs and Morgan Stanley will be the lead underwriters of the IPO.
Yahoo owns 40% of this company and its true worth, in my view, is not reflected in the current price for Yahoo. Actionality provides software technology that inserts ads in content for mobile devices, such as mobile phone games. The company claims that it has simplified in-game branding and advertising to the point that it's a one-click process. Yahoo has acquired Actionality, a German mobile advertising technology company, for an undisclosed sum.
Iraqi Prime Minister Nouri Maliki warned the Bush administration after talks with longtime U.S. adversaries in Syria on Wednesday that Iraq "can find friends elsewhere" if Washington doesn't like how he runs his country.
The federal budget deficit is projected to total $158 billion in fiscal 2007, which ends Sept. 30, narrowing from $248 billion in the previous year, the Congressional Budget Office said Thursday in its update of its annual budget projections. "Nevertheless, the budget outlook for the long term remains daunting, primarily because of rising costs for health care," said the nonpartisan agency, which serves as Congress' budget analyst.
FDIC officials acknowledged that more evidence of the housing-market stress will show up in results for the current quarter. The occurrence of what they call "declining credit quality" for banks likely will hit with fuller force in the July-September period, they said.
The amount of U.S. commercial paper outstanding had its biggest weekly percentage drop since 2000 as investors shunned debt that may be linked to mortgages and other risky assets and instead opted for the safety of Treasuries. The amount dropped $90.2 billion, or 4.23 percent, to a seasonally adjusted $2.04 trillion as of yesterday from Aug. 15, according to the Federal Reserve. The percentage drop is the biggest drop since at least November 2000, according to data compiled by Bloomberg.
While U.S. Federal Reserve Chairman Ben S. Bernanke is under pressure from investors to loosen monetary policy, his counterparts in Australia, Chile, China, Norway, South Africa, and South Korea are among those lifting borrowing costs.
Amstar Financial Holdings is closing its mortgage banking subsidiary and transferring the operations to The Money Store, the company said Wednesday. The Money Store has agreed to take over management of 109 Amstar branches across the country, which employ more than 300 people.
Natural-gas inventories rose by 23 billion cubic feet for the week ended August 17, the Energy Department said Thursday, and that was slightly below estimates. Total stocks now stand at 2.926 trillion cubic feet, up 77 billion cubic feet from the year-ago level and 333 billion cubic feet above the five-year average, the government data said.
U.S. intelligence agencies have written a mixed report on Iraq, finding some progress but judging that the Baghdad government may not be able to carry it forward, a defense official said Thursday. Then, the top analysts in the U.S. spy community concluded that Iraqi leaders will be hard pressed to craft a lasting political settlement or improve their security capabilities in the next year and a half. They also found that growing and entrenched polarization between Shiite and Sunni Muslims, inadequate Iraqi security forces, weak leaders and the success of extremists' efforts to use violence to exacerbate the sectarian war all created a situation that would be difficult to improve. "Iraqi political leaders remain unable to govern effectively," the 10-page document, a declassified summary of a more detailed National Intelligence Estimate, concludes.
The chief executive of Countrywide Financial Corp said the housing market was "certainly not getting better" and could push the economy into a recession.
"If we can bail out Chrysler, why can't we support the American homeowner?" Bill Gross wrote in his monthly investment outlook on PIMCO's Web site.
December gold fell 30 cents to close at $668.40 an ounce Thursday. September silver gained 7.5 cents to close at $11.64 an ounce and September copper finished at $3.263 a pound, up 1.6%.
According to Bloomberg, the cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, climbed the most in 20 months and may extend its rally as cargo demand strengthens. September demand is outpacing that of August ``by a long way,'' Tim Coffin, an analyst at London-based Capital Shipbrokers LP, said in an e-mailed note today. Tanker-hire prices are ``firming fast,'' he said, ``we didn't expect it.''
Bookings for supertankers sailing from the Middle East to Asia account for 47 percent of global demand for the carriers, according to New York-based McQuilling Brokerage Partners LLP. Shipments to the U.S. and Caribbean, the second-biggest market, account for 14 percent of demand for supertankers.
October crude climbed 57 cents to close at $69.83 a barrel Thursday. September reformulated gasoline gained 1.8% to close at $1.9232 a gallon. September natural gas closed higher for the first time since Friday, up 4.4 cents to end at $5.622 per million British thermal units, after a slightly smaller-than-expected climb in last week's supplies.
Gap said it now expects fiscal 2007 per-share earnings of 83 cents to 88 cents, up from its prior outlook of 76 cents to 86 cents.
Because the Fed redeemed $5 billion in Treasuries earlier in the week in anticipation of higher borrowing, the Fed actually added no new net money to the system this week.
Science Applications International Corp. said Thursday it started work on a contract to manage chemicals and packaged petroleum for the Department of Defense. The contract includes a five-year base term, a five-year option period and a top value of $6.2 billion. It was originally awarded May 2, though a protest was lodged. The Government Accountability Office denied that protest and told the company Aug. 15 that work could resume.
Wednesday, August 22, 2007
The Comfort Zone
8/23/07 The Comfort Zone
The U.S. consumer comfort index fell 9 points last week to negative 20, the sharpest decline in more than 21 years of weekly polling, according to a report released Tuesday by ABC and the Washington Post. It's the lowest reading in the index since Hurricane Katrina hit the Gulf Coast nearly two years ago. "The decline is broadly based among population groups, and there seems not to be a single negative event to blame, but a confluence" of factors, ABC's Gary Langer said, citing the stock market, housing and credit markets, the Fed's warning about the economy, high gas prices, and even the war in Iraq. Fewer than a third of consumers polled said the economy is "good" or "fair."
“I think we are going to see a big increase in bankruptcies in 2007-08,” Mr Wilbur Ross, chairman and chief executive of the private equity group that bears his name, told the Financial Times. “Every time you compound leverage, you cut the margins for error.”
Bill Bonner: "My point is that if you don't appreciate trouble, properly, you will go looking for it. And if you go looking for it, you will sooner or later find it."
Paul Kasriel: "I am confident that the FOMC will lower its federal funds rate target before year-end, but I am not as confident it will occur on or before the September 18 FOMC meeting...I continue to believe that the FOMC's fed funds rate target will not be lowered de jure until its October 30-31 meeting. If I am right, there is going to be severe "disappointment" in the financial markets at 2:15 pm EDT on September 18, which, in turn, will increase the probabilities of an October 31 cut in the target rate."
Richard Daughty: "In the 1950's, every dollar of new debt produced over $4.00 of economic activity. But by Year 2000 it had dropped to 20 cents of GDP growth and only 10 cents by 2005. Last month fell to only a nickel of economic growth for every dollar of debt growth." Hahaha! Nice investing there, dudes!"
Japan's financial watchdog will set limits on how much consumers can borrow from credit firms by the end of the year, according to reports. Consumer credit firms will not be permitted to extend loans that total more than a third of an individual's annual income, according to the Nikkei News Wednesday. The new rules will be enforced by the Financial Services Agency and are in accordance with new laws on money lending that come into effect in 2009, the Nikkei reported.
Japan's trade surplus fell 21.1% in July from a year ago, as growth in imports outpaced that of exports, according to government data released Wednesday. The decline is sharper than the 10.2% drop expected by economists polled in a survey by Dow Jones Newswires and Nikkei News, and comes on top of a 53% jump in Japan's June trade surplus.
Google got 64% of U.S. searches in July, Yahoo! got 22.1% and MSN 8.8%.
BHP Billiton stated that, for fiscal 2008, it expects significant volume growth in oil, copper, iron ore and nickel. BHP rebased its final dividend payment to 27 cents a share, up 46% compared to last year. The firm said that, despite moderating U.S. economic growth, global economic fundamentals remain strong and the ongoing strength shown by emerging Asian economies should support global growth. Recent discussions with customers have indicated that they do not expect the volatility in the U.S. and European credit markets to have a material impact on raw material demand. In the interim, prices are likely to stay high relative to historical levels, albeit with increased volatility, BHP added.
Toyota Motor Corp. aims to sell around 10.4 million vehicles worldwide in 2009 on rising demand in North America as well as emerging countries such as China, reported the Nikkei business daily Wednesday, without citing a source. Toyota will become the first automaker to sell more than 10 million units in a single year, if it manages to achieve the target.
Online brokers TD Ameritrade and E-Trade are in merger talks, according to a report Wednesday in the online edition of The Wall Street Journal.
The Reserve Bank of Australia injected A$2.75 billion ($2.2 billion) into the financial system Wednesday in an effort to bolster market liquidity, according to reports. The central bank bought A$4.68 billion in securities, offsetting a system deficit of A$1.93 billion, according to Dow Jones Newswires.
Accredited Home Lenders said it will cut its work force to 1,000 people -- from 2,600 at the end of June -- and close 65 branches. The company will immediately stop accepting applications for home loans in the U.S., though it will honor the loans it has already committed to finance.
Upper Deck Co., the North Las Vegas sports- and entertainment-publishing company, said it ended its $10.75-a-share offer to acquire Topps Co., the New York producer of sports cards. Topps has urged its holders to approve a $9.75-a-share bid from entities held by the entertainment investor Michael Eisner and Madison Dearborn Partners. Two proxy advisory firms, Institutional Shareholder Services and Glass Lewis, have urged Topps holders to reject the Eisner-Madison deal. Topps has called Upper Deck's $10.75 proposal "not genuine." A special meeting of Topps holders to vote on the Eisner-Madison transaction is set for Aug. 30.
Dubai agreed to pay up to $5.1 billion for a 9.5 percent stake in MGM Mirage Inc and half the casino company's CitiCenter hotels and apartments project in Las Vegas.
Brent Steenbarger: "We've had three straight sessions in which equity put volume has been lower than equity call volume, a sign of some trader relief after the Fed announcement. We haven't had such a string of three days since 7/19. Indeed, we've had equity put volume exceed call volume 13 of the last 20 sessions."
As of Tuesday, at least 3,707 members of the U.S. military had died in Iraq since the beginning of the war in March 2003, according to an Associated Press count.
Deaths continue as the vacation period continues.
China's stock markets are at a record high. On Aug. 22, China's benchmark CSI 300 stock index blasted through the all-important 5000 level, shrugging off an interest-rate hike by the central government announced the previous day, to close up 78.98 points, to 5051.69. The index, which tracks the 300 most important companies listed in Shanghai and Shenzhen, has jumped 147% this year.
Beazer Homes USA Inc. sued U.S. Bank National Association to prevent the bank from declaring Beazer in default on $1.38 billion in loans, the company said in a regulatory filing late Tuesday.
"We, along with many others, are concerned about the dislocation in the secondary mortgage market," Toll Bros. CEO Robert Toll said in a statement. Robert Toll said cancellations had reached their highest rate in more than two decades. Reducing home production until the current oversupply is absorbed is a key step to bringing housing markets back into equilibrium, he added.Toll reiterated that it would not issue any projections, citing uncertainties in the mortgage market, impairments and sales paces. Problems in subprime lending -- loans to those with sketchy credit histories -- have made it even more difficult for potential buyers, even those with good credit, to get a mortgage. "Nevertheless, tightening credit standards will likely shrink the pool of potential home buyers," Robert Toll said. "Mortgage market liquidity issues and higher borrowing rates may impede some customers from closing, while others may find it more difficult to sell their existing homes. "However, we believe that our buyers generally should be able to continue to secure mortgages, due to their typically lower loan-to-value ratios and attractive credit profiles."
``WCI continued to focus on reducing costs and generating cash flow in the second quarter,'' said Jerry Starkey, President and CEO of WCI Communities. ``Year-to-date, WCI has generated $119.8 million in cash flow from operating and investing activities and expects to end 2007 having generated a combined $530 million to $730 million ($520 million to $720 million from operating activities and $10 million from investing activities), in large part as a result of closing ten towers, including our two largest towers ever constructed.'' Starkey continued, ``Land sales and recreational amenity conversions are an important part of WCI's business model and we are actively marketing numerous land parcels, including commercial, mixed/use and residential land, as well as recreational assets. We estimate that the aggregate value of these assets range from about $200 million to $300 million. Many of these assets were acquired or developed more than five years ago and are expected to generate significant profits in addition to cash flow. The upper range of our projected cash flow for this year includes approximately $60 million or so from this pool of assets.'' The Company's expected cash flow from operations assume that about 500 to 600 traditional homes close in the second half of the year. The backlog of almost 700 traditional homes as of June 30, 2007 includes about 500 homes scheduled to close by year end.
H&R Block Inc said its Block Financial Corp. unit tapped working capital credit lines as turmoil in credit markets makes it harder for some companies to raise funds through short-term debt markets. Block said it drew down $200 million from working capital credit lines on August 16, which was then repaid with a second draw of $850 million on Monday. H&R Block has $2 billion available in committed, revolving working capital lines that mature in 2010. "The credit markets have become increasingly constrained and unstable," William Trubeck, Block's chief financial officer, said in a statement. "We have decided to substitute this more stable source of funds to support our short-term needs."
The Fed accepted $2 billion of Agencies as collateral but no mortgages. Wednesday morning the Fed REPOS borrowing was at 5.05% versus Fed Funds at 5.25%.
The American Petroleum Institute reported a rise of 2.5 million barrels in crude supplies for the week ended August 17. The Energy Department had reported a climb of 1.9 million barrels for the latest week. Motor gasoline supplies were down 4.6 million barrels, the API said. The government reported that supplies were down 5.7 million barrels. Distillate supplies fell 1.1 million barrels, the API said. In contrast, the Energy Department said they rose 1.3 million.
Inventories of gas in storage are 2.9 trillion cubic feet, according to Energy Department data and may meet or exceed last year's record supply of 3.461 trillion cubic feet before the winter heating season starts in about 10 weeks.
The European Central Bank said it will lend an extra 40 billion euros ($54 billion) to banks for three months to lower borrowing costs for commercial banks and indicated it may still raise the benchmark interest rate next month.
Banks' troubled real estate loans rose for the fifth consecutive quarter to a total $66.9 billion at the end of the second quarter, the U.S. Federal Deposit Insurance Corporation said on Wednesday. Noncurrent real estate loans -- those overdue by 90 days or more -- were up 36 percent from a year before and up 10.6 percent from the end of the first quarter, the FDIC said. Noncurrent home mortgage loans totaled $27.5 billion, up 47 percent from a year earlier and up 12.6 percent from the end of the first quarter, the FDIC said.
Citibank, on behalf of clients, has accessed $500 million in 30-day term financing under the discount window program announced on Friday by the Federal Reserve Bank of New York. J.P. Morgan Chase & Co., Bank of America Corp.and Wachovia Corp. said Wednesday they have each borrowed $500 million, including some on a term basis, from the discount window facility announced by the Federal Reserve Board late last week.
Bank of America Corp.'s planned acquisition of LaSalle Bank is expected to cost more than 10,500 jobs in the Chicago area, according to a study conducted by the Anderson Economic Group LLC.
General Motors Corp. said Wednesday it has cut overtime shifts at six of its North American plants for full-size pickups and SUVs in response to falling demand for the vehicles amid high fuel prices and a sustained slowdown in the housing market.
With three hours into the trading session, the Dow remains up about 100 points; however, the big money center banks and the big brokers are acting so so. On the other hand, the VIX is down almost 2 points to 23+. Quite a mixed picture. The Dow did finish 145 points higher but the VIX still managed to close around 23. I would be surprised to see a further near term decline in the VIX.
Quantcast is the world's first open internet ratings service. Advertisers can find reports on the audiences of millions of web sites. Publishers can ensure their sites are represented accurately by tagging them for direct measurement. The service is free to everyone.
Delta Financial Corp. has reduced its workforce by 20%, or 300 jobs, to align its operations with the current market conditions. "The rapid deterioration of the credit markets has caused issues in our sector that are beyond our control," said Delta Financial Chief Executive Hugh Miller in a statement.
London-based HSBC, Europe's biggest bank by market value, closed a U.S. mortgage office after failing to finance new loans.
Oil platforms in the Gulf of Mexico remained closed Wednesday after state-owned Petroleos Mexicanos evacuated almost 19,000 workers, shutting 80 percent of the country's oil output.
December gold climbed $2.50 to close at $668.70 an ounce Wednesday. September silver rose 5.5 cents to close at $11.565 an ounce and September copper finished at $3.212 a pound, up 6.2 cents.
Todd Harrison: "If and when investors begin to perceive that central banks are no longer larger than the markets—and this, in my opinion, is simply a matter of time—a crisis in confidence will ensue."
Lehman Brothers Holdings Inc., the biggest underwriter of U.S. bonds backed by mortgages, became the first firm on Wall Street to close its subprime-lending unit and said 1,200 employees will lose their jobs. Shuttering BNC Mortgage LLC will cut earnings by $52 million, Lehman said in a statement today.
Loans more than 90 days past due rose 10.6 percent to $66.9 billion in the period ending June 30, the largest quarterly rise since 1990, the FDIC said in its Quarterly Banking Profile released today.
Capital Fund Management, a Paris- based hedge-fund manager, said its Discus Master Fund could lose as much as 27 percent of its assets, or $407 million, after the bankruptcy of cash-management firm Sentinel Management Group Inc.
October crude fell 31 cents Wednesday to close at $69.26 a barrel, the contract's lowest level since late June. But September gasoline rose 1.4% to close at $1.889 a gallon on a third-weekly decline in supplies. September natural gas fell 4.1% to close at $5.578 per million British thermal units. It's suffered a 20% drop since Friday.
The Oil Drum: "
1. World total liquids production (Fig 1) remains on a peak plateau since 2006 and is forecast to fall off this peak plateau in 2009. According to the IEA, the current peak production of 86.13 mbd occurred on July 2006 and only one year later, June 2007 total liquids production fell to an unexpectedly low 84.28 mbd. As long as demand continues increasing then prices will also continue increasing.
2. Forecast world crude oil and lease condensate (C&C) production retains its 2005 peak (Fig 2). The forecast to 2100 shows declining C&C production, using a bottom up forecast to 2012 (Fig 3). The forecast to 2012 shows a 1%/yr decline rate to 2009, followed by a 4%/yr decline rate to 2012."
Scottsdale, Ariz.-based 1st National Bank Holding Co. closed its wholesale mortgage unit and cut 541 jobs.
Since the start of the year, more than 38,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc. Meanwhile, construction companies have announced nearly 20,000 job cuts this year, while the National Association of Realtors expects membership rolls to decline this year for the first time in a decade.
Paul A. Samuelson: "Politicians like to tell people what they want to hear - and what they want to hear is what won't happen.”
The U.S. consumer comfort index fell 9 points last week to negative 20, the sharpest decline in more than 21 years of weekly polling, according to a report released Tuesday by ABC and the Washington Post. It's the lowest reading in the index since Hurricane Katrina hit the Gulf Coast nearly two years ago. "The decline is broadly based among population groups, and there seems not to be a single negative event to blame, but a confluence" of factors, ABC's Gary Langer said, citing the stock market, housing and credit markets, the Fed's warning about the economy, high gas prices, and even the war in Iraq. Fewer than a third of consumers polled said the economy is "good" or "fair."
“I think we are going to see a big increase in bankruptcies in 2007-08,” Mr Wilbur Ross, chairman and chief executive of the private equity group that bears his name, told the Financial Times. “Every time you compound leverage, you cut the margins for error.”
Bill Bonner: "My point is that if you don't appreciate trouble, properly, you will go looking for it. And if you go looking for it, you will sooner or later find it."
Paul Kasriel: "I am confident that the FOMC will lower its federal funds rate target before year-end, but I am not as confident it will occur on or before the September 18 FOMC meeting...I continue to believe that the FOMC's fed funds rate target will not be lowered de jure until its October 30-31 meeting. If I am right, there is going to be severe "disappointment" in the financial markets at 2:15 pm EDT on September 18, which, in turn, will increase the probabilities of an October 31 cut in the target rate."
Richard Daughty: "In the 1950's, every dollar of new debt produced over $4.00 of economic activity. But by Year 2000 it had dropped to 20 cents of GDP growth and only 10 cents by 2005. Last month fell to only a nickel of economic growth for every dollar of debt growth." Hahaha! Nice investing there, dudes!"
Japan's financial watchdog will set limits on how much consumers can borrow from credit firms by the end of the year, according to reports. Consumer credit firms will not be permitted to extend loans that total more than a third of an individual's annual income, according to the Nikkei News Wednesday. The new rules will be enforced by the Financial Services Agency and are in accordance with new laws on money lending that come into effect in 2009, the Nikkei reported.
Japan's trade surplus fell 21.1% in July from a year ago, as growth in imports outpaced that of exports, according to government data released Wednesday. The decline is sharper than the 10.2% drop expected by economists polled in a survey by Dow Jones Newswires and Nikkei News, and comes on top of a 53% jump in Japan's June trade surplus.
Google got 64% of U.S. searches in July, Yahoo! got 22.1% and MSN 8.8%.
BHP Billiton stated that, for fiscal 2008, it expects significant volume growth in oil, copper, iron ore and nickel. BHP rebased its final dividend payment to 27 cents a share, up 46% compared to last year. The firm said that, despite moderating U.S. economic growth, global economic fundamentals remain strong and the ongoing strength shown by emerging Asian economies should support global growth. Recent discussions with customers have indicated that they do not expect the volatility in the U.S. and European credit markets to have a material impact on raw material demand. In the interim, prices are likely to stay high relative to historical levels, albeit with increased volatility, BHP added.
Toyota Motor Corp. aims to sell around 10.4 million vehicles worldwide in 2009 on rising demand in North America as well as emerging countries such as China, reported the Nikkei business daily Wednesday, without citing a source. Toyota will become the first automaker to sell more than 10 million units in a single year, if it manages to achieve the target.
Online brokers TD Ameritrade and E-Trade are in merger talks, according to a report Wednesday in the online edition of The Wall Street Journal.
The Reserve Bank of Australia injected A$2.75 billion ($2.2 billion) into the financial system Wednesday in an effort to bolster market liquidity, according to reports. The central bank bought A$4.68 billion in securities, offsetting a system deficit of A$1.93 billion, according to Dow Jones Newswires.
Accredited Home Lenders said it will cut its work force to 1,000 people -- from 2,600 at the end of June -- and close 65 branches. The company will immediately stop accepting applications for home loans in the U.S., though it will honor the loans it has already committed to finance.
Upper Deck Co., the North Las Vegas sports- and entertainment-publishing company, said it ended its $10.75-a-share offer to acquire Topps Co., the New York producer of sports cards. Topps has urged its holders to approve a $9.75-a-share bid from entities held by the entertainment investor Michael Eisner and Madison Dearborn Partners. Two proxy advisory firms, Institutional Shareholder Services and Glass Lewis, have urged Topps holders to reject the Eisner-Madison deal. Topps has called Upper Deck's $10.75 proposal "not genuine." A special meeting of Topps holders to vote on the Eisner-Madison transaction is set for Aug. 30.
Dubai agreed to pay up to $5.1 billion for a 9.5 percent stake in MGM Mirage Inc and half the casino company's CitiCenter hotels and apartments project in Las Vegas.
Brent Steenbarger: "We've had three straight sessions in which equity put volume has been lower than equity call volume, a sign of some trader relief after the Fed announcement. We haven't had such a string of three days since 7/19. Indeed, we've had equity put volume exceed call volume 13 of the last 20 sessions."
As of Tuesday, at least 3,707 members of the U.S. military had died in Iraq since the beginning of the war in March 2003, according to an Associated Press count.
Deaths continue as the vacation period continues.
China's stock markets are at a record high. On Aug. 22, China's benchmark CSI 300 stock index blasted through the all-important 5000 level, shrugging off an interest-rate hike by the central government announced the previous day, to close up 78.98 points, to 5051.69. The index, which tracks the 300 most important companies listed in Shanghai and Shenzhen, has jumped 147% this year.
Beazer Homes USA Inc. sued U.S. Bank National Association to prevent the bank from declaring Beazer in default on $1.38 billion in loans, the company said in a regulatory filing late Tuesday.
"We, along with many others, are concerned about the dislocation in the secondary mortgage market," Toll Bros. CEO Robert Toll said in a statement. Robert Toll said cancellations had reached their highest rate in more than two decades. Reducing home production until the current oversupply is absorbed is a key step to bringing housing markets back into equilibrium, he added.Toll reiterated that it would not issue any projections, citing uncertainties in the mortgage market, impairments and sales paces. Problems in subprime lending -- loans to those with sketchy credit histories -- have made it even more difficult for potential buyers, even those with good credit, to get a mortgage. "Nevertheless, tightening credit standards will likely shrink the pool of potential home buyers," Robert Toll said. "Mortgage market liquidity issues and higher borrowing rates may impede some customers from closing, while others may find it more difficult to sell their existing homes. "However, we believe that our buyers generally should be able to continue to secure mortgages, due to their typically lower loan-to-value ratios and attractive credit profiles."
``WCI continued to focus on reducing costs and generating cash flow in the second quarter,'' said Jerry Starkey, President and CEO of WCI Communities. ``Year-to-date, WCI has generated $119.8 million in cash flow from operating and investing activities and expects to end 2007 having generated a combined $530 million to $730 million ($520 million to $720 million from operating activities and $10 million from investing activities), in large part as a result of closing ten towers, including our two largest towers ever constructed.'' Starkey continued, ``Land sales and recreational amenity conversions are an important part of WCI's business model and we are actively marketing numerous land parcels, including commercial, mixed/use and residential land, as well as recreational assets. We estimate that the aggregate value of these assets range from about $200 million to $300 million. Many of these assets were acquired or developed more than five years ago and are expected to generate significant profits in addition to cash flow. The upper range of our projected cash flow for this year includes approximately $60 million or so from this pool of assets.'' The Company's expected cash flow from operations assume that about 500 to 600 traditional homes close in the second half of the year. The backlog of almost 700 traditional homes as of June 30, 2007 includes about 500 homes scheduled to close by year end.
H&R Block Inc said its Block Financial Corp. unit tapped working capital credit lines as turmoil in credit markets makes it harder for some companies to raise funds through short-term debt markets. Block said it drew down $200 million from working capital credit lines on August 16, which was then repaid with a second draw of $850 million on Monday. H&R Block has $2 billion available in committed, revolving working capital lines that mature in 2010. "The credit markets have become increasingly constrained and unstable," William Trubeck, Block's chief financial officer, said in a statement. "We have decided to substitute this more stable source of funds to support our short-term needs."
The Fed accepted $2 billion of Agencies as collateral but no mortgages. Wednesday morning the Fed REPOS borrowing was at 5.05% versus Fed Funds at 5.25%.
The American Petroleum Institute reported a rise of 2.5 million barrels in crude supplies for the week ended August 17. The Energy Department had reported a climb of 1.9 million barrels for the latest week. Motor gasoline supplies were down 4.6 million barrels, the API said. The government reported that supplies were down 5.7 million barrels. Distillate supplies fell 1.1 million barrels, the API said. In contrast, the Energy Department said they rose 1.3 million.
Inventories of gas in storage are 2.9 trillion cubic feet, according to Energy Department data and may meet or exceed last year's record supply of 3.461 trillion cubic feet before the winter heating season starts in about 10 weeks.
The European Central Bank said it will lend an extra 40 billion euros ($54 billion) to banks for three months to lower borrowing costs for commercial banks and indicated it may still raise the benchmark interest rate next month.
Banks' troubled real estate loans rose for the fifth consecutive quarter to a total $66.9 billion at the end of the second quarter, the U.S. Federal Deposit Insurance Corporation said on Wednesday. Noncurrent real estate loans -- those overdue by 90 days or more -- were up 36 percent from a year before and up 10.6 percent from the end of the first quarter, the FDIC said. Noncurrent home mortgage loans totaled $27.5 billion, up 47 percent from a year earlier and up 12.6 percent from the end of the first quarter, the FDIC said.
Citibank, on behalf of clients, has accessed $500 million in 30-day term financing under the discount window program announced on Friday by the Federal Reserve Bank of New York. J.P. Morgan Chase & Co., Bank of America Corp.and Wachovia Corp. said Wednesday they have each borrowed $500 million, including some on a term basis, from the discount window facility announced by the Federal Reserve Board late last week.
Bank of America Corp.'s planned acquisition of LaSalle Bank is expected to cost more than 10,500 jobs in the Chicago area, according to a study conducted by the Anderson Economic Group LLC.
General Motors Corp. said Wednesday it has cut overtime shifts at six of its North American plants for full-size pickups and SUVs in response to falling demand for the vehicles amid high fuel prices and a sustained slowdown in the housing market.
With three hours into the trading session, the Dow remains up about 100 points; however, the big money center banks and the big brokers are acting so so. On the other hand, the VIX is down almost 2 points to 23+. Quite a mixed picture. The Dow did finish 145 points higher but the VIX still managed to close around 23. I would be surprised to see a further near term decline in the VIX.
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Delta Financial Corp. has reduced its workforce by 20%, or 300 jobs, to align its operations with the current market conditions. "The rapid deterioration of the credit markets has caused issues in our sector that are beyond our control," said Delta Financial Chief Executive Hugh Miller in a statement.
London-based HSBC, Europe's biggest bank by market value, closed a U.S. mortgage office after failing to finance new loans.
Oil platforms in the Gulf of Mexico remained closed Wednesday after state-owned Petroleos Mexicanos evacuated almost 19,000 workers, shutting 80 percent of the country's oil output.
December gold climbed $2.50 to close at $668.70 an ounce Wednesday. September silver rose 5.5 cents to close at $11.565 an ounce and September copper finished at $3.212 a pound, up 6.2 cents.
Todd Harrison: "If and when investors begin to perceive that central banks are no longer larger than the markets—and this, in my opinion, is simply a matter of time—a crisis in confidence will ensue."
Lehman Brothers Holdings Inc., the biggest underwriter of U.S. bonds backed by mortgages, became the first firm on Wall Street to close its subprime-lending unit and said 1,200 employees will lose their jobs. Shuttering BNC Mortgage LLC will cut earnings by $52 million, Lehman said in a statement today.
Loans more than 90 days past due rose 10.6 percent to $66.9 billion in the period ending June 30, the largest quarterly rise since 1990, the FDIC said in its Quarterly Banking Profile released today.
Capital Fund Management, a Paris- based hedge-fund manager, said its Discus Master Fund could lose as much as 27 percent of its assets, or $407 million, after the bankruptcy of cash-management firm Sentinel Management Group Inc.
October crude fell 31 cents Wednesday to close at $69.26 a barrel, the contract's lowest level since late June. But September gasoline rose 1.4% to close at $1.889 a gallon on a third-weekly decline in supplies. September natural gas fell 4.1% to close at $5.578 per million British thermal units. It's suffered a 20% drop since Friday.
The Oil Drum: "
1. World total liquids production (Fig 1) remains on a peak plateau since 2006 and is forecast to fall off this peak plateau in 2009. According to the IEA, the current peak production of 86.13 mbd occurred on July 2006 and only one year later, June 2007 total liquids production fell to an unexpectedly low 84.28 mbd. As long as demand continues increasing then prices will also continue increasing.
2. Forecast world crude oil and lease condensate (C&C) production retains its 2005 peak (Fig 2). The forecast to 2100 shows declining C&C production, using a bottom up forecast to 2012 (Fig 3). The forecast to 2012 shows a 1%/yr decline rate to 2009, followed by a 4%/yr decline rate to 2012."
Scottsdale, Ariz.-based 1st National Bank Holding Co. closed its wholesale mortgage unit and cut 541 jobs.
Since the start of the year, more than 38,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc. Meanwhile, construction companies have announced nearly 20,000 job cuts this year, while the National Association of Realtors expects membership rolls to decline this year for the first time in a decade.
Paul A. Samuelson: "Politicians like to tell people what they want to hear - and what they want to hear is what won't happen.”
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