10/28/07 Alibaba
Alibaba.com Ltd., one of China's fastest-growing technology companies, reached its goal of raising $1.5 billion in its initial public offering Saturday, people close to the deal said. Alibaba, an e-commerce portal, sold 858.9 million shares, or a 17 percent stake, at roughly $1.75 each, a source told Dow Jones Newswires on condition of anonymity.The shares will debut on the Hong Kong stock market on Nov. 6. The IPO price translates to a multiple of 55 times its forecast 2008 earnings. Alibaba -- whose Web sites allow companies in China and overseas to trade with one another online -- is one of China's fastest growing Internet companies. It has seen its registered members soar from 6 million in 2004 to 24.6 million in 2007. Paying members increased from 77,000 in 2004 to 255,000 by June 2007. Yahoo! Inc., which holds a 39 percent stake in Alibaba's parent, Alibaba Group, had agreed to subscribe to about $100 million worth of shares.
About 1 1/2 months ago I mentioned considering Yahoo for purchase at $23 and noted Yahoo was the way to play the upcoming Alibaba IPO. Compared to Google, VMware, Apple, RIMM, and others it looks like Yahoo is a slow mover; however, the rise to $33 isn't too bad.
Bertrand Russell: “The biggest cause of trouble in the world today is that the stupid people are so sure about things and the intelligent folks are so full of doubts."
According to the WSJ, "Barry Diller and John Malone are having relationship issues. The two media moguls have made a fortune together. But lately, Mr. Diller's IAC/InterActiveCorp. hasn't been looking good. And Mr. Malone, who owns a majority voting stake, is talking as if the union is heading for the rocks."
Barry Diller has made his investors good returns. Malone would, in my view, make a mistake to interfere.
Richard Benson: "Derivatives are by design extraordinarily leveraged, so small changes in the financial markets can affect their value in a big way. A sizable wave in the financial markets can easily be magnified and turned into a tsunami of market losses. With the current level of credit derivatives all sitting off-balance sheet (and unnoticed like the SIV's recently were), unsuspecting investors could wake up to discover more alarming losses amounting to a few trillion dollars that were neither anticipated nor welcome. Finally, the financial institutions that have exposure to on-balance sheet credit risk are the Who's Who of major hedge funds, major banks, and Wall Street investment banks. Guess who the major counterparties are in the derivatives market? Why, they’re the same major players! So, while Bear Stearns has become the poster boy for all that's wrong with subprime mortgages, don't worry. Other firms like JP Morgan Chase, Morgan Stanley, Citibank, Merrill Lynch, and even Goldman Sachs, may have their pictures posted alongside Bear Stearns’ in the “Hall of Shame” when corporate credits turn down. Crumbling credit combined with deadly leverage can prove fatal to portfolios invested in financial stocks."
It's hard to believe that Total Money Market Fund Assets have risen to almost $3 trillion.
Downgrades on CDOs are just around the corner. They will cover tens of billions of this type of paper. The bounce in financials will prove, in my view, a dead cat bounce. The fallout hasn't even begun to be seen. All eyes are on the Fed. Rate decreases will not save the day. The Fed will ease but in the past week the spread on CMBSs rose a point.
Doug Noland: "It is worth noting that MBIA and Ambac combine for about $1.9 Trillion of “net debt service outstanding” – the amount of debt securities and Credit instruments they have guaranteed, at least in part, to make scheduled payments in the event of default. Throw in the Trillions of Credit insurance written by the mortgage guarantors and you’re talking real “money.” Importantly, the marketplace is beginning to question the long-term viability of the Credit insurance industry, placing many Trillions of dollars of debt securities in potential market limbo...Subprime and the SIVs are peanuts these days in comparison to the gigantic global CDO and Credit derivatives markets. CDOs may lack transparency, trade infrequently, and operate outside of market pricing (“mark-to-model”). Nonetheless, CDO exposure now permeates the entire global financial system – exposure that regrettably mushroomed in the midst of the most reckless end-of-cycle mortgage excesses imaginable. Rumors this week had major insurance companies suffering huge CDO losses. To what extent the big insurance “conglomerates” have exposure to CDOs and other Credit derivatives is unclear today, but there is no doubt that the global leveraged speculating community is knee deep in the stuff. Importantly, as goes the U.S. mortgage market, so goes the CDOs. I’m not optimistic...Returning to the vulnerable CDO market, some key dynamics are in play. With California now at the brink, uncertain but huge losses are in the pipeline for jumbo, “alt-A,” and “option-ARM” mortgages – loans that were for the most part thought sound only weeks ago. The market began to revalue the top-rated CDO tranches this week, a process that should only accelerate. “AAA” is not going to mean much. If things unfold as I expect, a full-fledged run from California mortgage exposure could be in the offing. And as the dimensions of this debacle come into clearer market view, the viability of the Credit insurers will be cast further in doubt – with ramifications for Trillions of securities and derivatives. General Credit Availability would suffer mightily."
Bloomberg's Matthew Brown reports “Iraq wants to diversify out of dollars to preserve the value of its foreign exchange reserves after the U.S. currency fell, the head of the central bank said. ‘We would like to diversify, definitely,’ Sinan al-Shabibi, governor of the Central Bank of Iraq, said in an interview in Washington. ‘This is a prudent policy.’ And you thought those in the Iraq government were buffoons.
The Goldman Sachs Commodities Index has only increased 33.4% y-t-d. Of course inflation is muted, says the Fed. I wonder whether the 11.5% growth in M3 money supply has anything to do with inflation and the collapse of the dollar.
Those long the dollar should also be long Charmin.
Mexico’s central bank raised its benchmark interest rate by a quarter percentage point to 7.50 percent.
Doug Noland: "The nightmare scenario - where the market abruptly comes to recognize that the leveraged speculating is hopelessly stuck in illiquid CDO, ABS, MBS, derivative and equities positions - doesn’t seem all that outrageous or distant this week. Unfortunately, today’s Ponzi-style acute fragility (as was demonstrated this summer in subprime, asset-backed CP, SIVs and the like) and speculative dynamics dictate that he who panics first panics best. I don’t expect the sophisticated players to hang around and wait for securities to be properly priced and the full extent of illiquidity and the unfolding Credit debacle to be recognized. And while Bubbling markets do delay the inevitable reversal of speculative flows from the leveraged speculating community, they only compound the risk of an inevitable ravaging run from illiquidity. We’ll see to what extent the Fed is willing to spur increasingly destabilizing global stock market speculation and dollar liquidation in false hope that lower rates can somehow mitigate Structured Finance Under Duress."
Peter Schiff : "So while most regard the Fed as the primary inflation fighter, in reality it is the sole inflation creator."
Footnoted.org: "Meritage Homes announced that its revenues from home closings were down 34% from third quarter 2006, with breathtaking declines of 65% in Nevada, 58% in Arizona, and 50% in California. And in a pessimistic-sounding move, the company took substantial write-offs of goodwill based on its expectation that “the downturn of the housing market will be deeper and longer than previously anticipated.” Nevertheless, Meritage threw in this cheery quote from Chairman and CEO Steven Hilton, exclamation point and all: “For those considering a home purchase as a long-term investment, and eager to enjoy the many benefits of home ownership, we hope they conclude that now is a great time to buy a home!” Thanks, Steve, but I think I’m going to pass."
Banks foreclosed on 3,242 Bay Area homes in the third quarter -- a 622% increase over last year.
The trade group Mortgage Bankers Association projects a 31 percent decline in mortgage origination volume between 2006 and 2008.
Terry Pratchett: “The trouble with having an open mind, of course, is that people will insist on coming along and trying to put things in it."
Saturday, October 27, 2007
Thursday, October 25, 2007
The Rejection
10/26/07 The Rejection
Cablevision's shareholders rejected the Dolan's family $10.6 billion offer to take the company private. I guess they forgot about bulls, bears, and pigs.
Terra Industries Inc.'s third-quarter earnings more than quadrupled to $54.4 million, or 51 cents a share, from $10.3 million, or 10 cents a share in the year-ago period. The Sioux City, Iowa, maker of agriculture nitrogen products said revenues in the recent quarter rose to $593.7 million from $464.8 million last year. Looking ahead, Terra projected robust nitrogen demand as farmers plant more acres of corn and wheat.
Agriculture and fertilizer company Bunge Ltd.'s third-quarter net profit more than doubled to $351 million, or $2.70 a share, from $169 million, or $1.40 a share, a year earlier. Net sales rose 82% to $12.68 billion. Analysts had forecast earnings of $1.77 a share on revenue of $9.47 billion. Bunge said its agriculture business improved across the board and its fertilizer unit continued to perform strongly. The company said it expects good market fundamentals to continue into 2008 and raised its profit guidance for 2007 by $60 million to a range of $690 million to $710 million.
Fertilizer company Potash Corp.'s third-quarter net profit rose 67% to $243.1 million, or 75 cents a share, from $145.2 million, or 46 cents a share, a year earlier. Sales for the period rose 36% to $1.3 billion. Analysts polled by Thomson Financial were expecting earnings of 82 cents a share on revenue of $1.15 billion. "We are now benefiting from rapidly growing economies in the developing world which increases the demand for crops used in food, animal feed, fiber and fuel," the group said. Potash also held to its prior guidance for 2007 earnings of $3.00 to $3.25 a share.
Black and Decker's "earnings per share declined from the prior year level, due in large part to commodity inflation," said Chief Executive Nolan Archibald in a statement.
Warren Buffett said South Korean stocks offer better value than other world markets and cautioned the U.S. dollar will continue to weaken against other currencies, according to media reports. He expects the problems in the U.S. subprime mortgage market to weigh on U.S. consumers for up to two years, but added the economy will eventually rebound.
Motorola's sales declined 17% to $8.8 billion. Motorola said it shipped 37.2 million handsets in the quarter. Sales in the mobile device segment fell 36% to $4.5 billion. Motorola estimated its market share in the quarter at 13%. The company said it sees fourth-quarter earnings from continuing operations in a range of 12 cents to 14 cents a share, excluding charges related to the restructuring.
Travelers' lifted its 2007 operating income guidance to a range of $6.52 to $6.62 a share compared to an earlier forecast of between $5.80 and $6.05 a share.
Honda expects full-year net profit of 640 billion yen, up from an earlier estimate of 625 billion yen. The car maker left its estimate of group operating income unchanged at 880 billion yen and cut its net revenue estimate to 12.3 trillion yen from 12.35 trillion yen earlier.
Pulte Homes' net new home orders for the third quarter fell sharply to 4,582 units from 7,299 units while the company's backlog as of Sept. 30 was valued at $4.09 billion, compared with a backlog of $5.81 billion at the end of September last year. Pulte expects fourth-quarter profit at break-even to 10 cents a share but declined to provide a forecast beyond the immediate quarter due to "difficult market conditions that persist."
Home builder Ryland Group Inc. continued to lose money in the third quarter as the weak housing market reduced demand for its homes and the value of its inventory.The company said that new home orders in the third quarter fell 20.9% from a year earlier and that the dollar value of the new orders declined 27%.
Bank of America is cutting roughly 3,000 jobs and launching a strategic review of its investment banking business after recent poor performance from the unit.
Aetna raised its full-year forecast for operating earnings per share to $3.48, against its previous outlook of $3.40 to $3.42. It projected 2008 operating earnings of $4 per share.
In the Bay Area - which, by the California Association of Realtors' measure is made up of Alameda, Contra Costa, Marin, San Francisco, Santa Clara, San Mateo and Solano counties - sales of existing, stand-alone homes plunged 45.6 percent between September 2006 and September 2007, while the median sales price slid 5 percent to $702,240. September's median was a whopping 17.7 percent below May's peak of $853,910.
German business confidence dropped to a 20-month low in October.
Lehman Bros. now expects the Federal Reserve to cut its overnight lending rate by a full percentage to 3.75% by the middle of 2008, including a rate cut next week.
Robert Prechter: "All the fancy credit and investment structures in place today, and the spread of investment fever to the broad population, are consistent with a time of extreme optimism. Therefore they are consistent with pre-crash conditions...When the Fed engages in a large volume of repos, it helps banks on the margin avoid immediate disaster. But in doing so, it also delays the inevitable price adjustments and gives bankers a false sense of security, thus encouraging them to create more and more unsound loans. In the end, all this manipulation merely increases both the likelihood of a crash and the size of the decline. But you have to realize that the Fed and the banks could not get away with such activities in the absence of optimism. Society in recent years has had a voracious appetite for credit, and the Fed is merely helping the banking system provide it...the probability of a major bear market is unquestionably the highest in history. Just to give you some perspective: At the 1987 high, the Dow’s dividend yield had been below that of 1929 for three months; it’s now been below it for 13 years. At the peak in 1987, there had been only 3 readings at or above 90 percent bulls among stock traders on the Daily Sentiment Index; in recent months there have been 51 such readings. Today’s price-to-book value ratio for the Dow is three times as high as it was in 1987 and 1929. And these are tops. Forget about comparing today’s values to market bottoms. So yeah, I would say there’s risk of a crash, too...With optimism at a record in both duration and extent, with an unprecedented breadth of public participation, with record leverage in the investment markets, with a grotesquely bloated debt structure, and with cracks appearing in the credit markets beginning with sub-prime mortgages, I think the storm cellar is a good place to camp for awhile. Put your money in the safest cash equivalents you can find, ideally outside the banking system, and hibernate. When stocks and property become bargains again, you can venture back into the markets. But investing at today’s valuations is not prudent."
The Cato Report courtesy of Daily Reckoning:
"Discretionary spending soared in Bush's first term by 48%, not adjusted for inflation, more than twice as much as Bill Clinton spent (21.6%) in two terms.
"Defense spending under Bush has grown an average of 5.7% a year, compared to LBJ's of 4.9% (adjusted for inflation).
"Homeland security spending also has soared, to about $31 billion last year, triple the pre-9/11 number
"Education spending is up, adjusted for inflation, 18% annually since 2001.
"The 2002 farm bill caused agri-spending to double from 1990s levels."
New orders for manufactured durable goods in September decreased $3.8 billion or 1.7 percent to $214.5 billion, the U.S. Census Bureau announced today. This was the second consecutive monthly decrease and followed a 5.3 percent August decrease. Excluding transportation, new orders increased 0.3 percent. Excluding defense, new orders increased 0.7 percent. Shipments Shipments of manufactured durable goods in September, down three of the last four months, decreased $4.4 billion or 2.0 percent to $211.6 billion. This followed a 1.9 percent August decrease.
BEA Systems Inc. would be willing to negotiate a takeover agreement with a prospective buyer - including Oracle Corp. - at a price of $21 a share.
Ensco International: "Looking ahead to the fourth quarter of 2007, we currently expect a decline in our quarterly earnings...due to the continuing softness in the U.S. Gulf of Mexico jackup market and mobilization downtime on several of our international jackups prior to commencement of new contracts," the company said.
The number of initial claims in the week ending October 20 fell 8,000 to 331,000. The four-week average of initial claims rose 7,750 to 324,750. This is the highest level since the week ended September 1. Meanwhile, the number of Americans receiving state jobless benefits rose 7,000 to 2.53 million in the week ending October 13. The four-week moving average of continuing claims fell 3,750 to 2.53 million, the lowest since June 23.
Tribune Chairman and Chief Executive Officer Dennis FitzSimons said the company still expects to close its $8.2 billion transaction to go private in the the current fourth quarter, following receipt of certain regulatory approvals.
The recently announced six-month delay in the 787 Dreamliner program could cost Boeing close to $1 billion in added expenses, a leading Wall Street analyst said Wednesday.
Another government revision: Sales of new homes rebounded in September from summer sales levels that were much weaker than previously reported, the Commerce Department reported Thursday. Sales increased 4.8% to a seasonally adjusted annual rate of 770,000 from a revised 735,000 in August. Previously, August's sales had been reported at a 795,000 pace. September's sales were slightly higher than the 758,000 pace expected by economists. The three previous months were revised sharply lower, which means the housing market was much weaker in the middle of the year than previous believed. Sales of new homes are down 23.3% in the past year.
The Oil Drum: "Peak exports simply means that oil-producing countries are using more and more oil at home – leaving less to sell abroad. Moreover, sentiment is starting to develop in many nations that they must save some oil for future generations, not just sell it to the foreign devils as quickly as possible. This clearly means that major oil importers will face a shortfall in their ability to obtain oil many months or years sooner than they had been anticipating. The fall in the amount of oil available for purchase is likely to drop much more quickly than declines in production. When world oil exports fall, if they have not started doing so already, effects are likely to sharp and painful."
The outstanding level of asset-backed commercial paper fell for the 11th straight week, the Federal Reserve reported Thursday. Asset-backed paper dropped by $4.6 billion, or 0.5%, to $884 billion.
Natural gas supplies rose by 68 billion cubic feet to 3,443 billion cubic feet in the week ending Oct. 19, the Energy Department reported.
Two million subprime-mortgage foreclosures are on the horizon by 2009 if home prices continue their downward spiral, a congressional report said Thursday. A report by the Joint Economic Committee also estimated that $71 billion in housing wealth will be destroyed and states will lose $917 million in property tax revenue.
Robert McHugh: "We essentially got a fourth Hindenburg Omen observation Wednesday, October 24th, as the lower of NYSE New Highs and New Lows was 2.15 percent of total issues traded, which rounds up to 2.20 percent. It really is splitting hairs at this point, since we already have a confirmed Hindenburg Omen on the clock, suggesting we are in a high risk period for a significant decline. Today's near hit reinforces the key issue with the Hindenburg Omen, that being we sit in a very unhealthy market right now, and it hasn't gotten any better with this week's countertrend rally."
China's copper imports and its alloys jumped 93 percent to 1.2 million metric tons in the nine months ended Sept. 30 from a year earlier, the Beijing-based customs office said today. Copper, used in pipes and wires, has gained more than fourfold since 2003 as demand surged in China, the world's fastest- growing major economy.
Dec. crude ends up $3.36 at $90.46 a barrel on Nymex, and that's an all-time high close. Natural gas rose 22 cents to end the day at $7.19.
Microsoft reported a net profit of $4.29 billion, or 45 cents per diluted share, up from $3.48 billion, or 35 cents per diluted share, a year earlier. Revenue rose 27 percent to $13.76 billion in the three months ended September 30. Analysts, on average, had forecast 39 cents per share in profit.
Microsoft raised full-year earnings estimates to a range of $1.78 to $1.81 per share from a previous range of $1.69 to $1.73. It also raised its full-year revenue estimate range by almost $2 billion, to $58.8 billion to $59.7 billion.
U.S. banks had $3 million in outstanding loans from the Federal Reserve's discount window on Wednesday, down from $10 million the previous Wednesday, the Fed reported Thursday. For the week ending on Wednesday, outstanding loans averaged $142 million per day, up from $126 million the week before.
Gold futures for December delivery rose $5.40, or 0.7 percent, to $771 an ounce on the Comex division of the New York Mercantile Exchange, and have risen 21% this year. Silver futures for December delivery rose 31.5 cents, or 2.3 percent, to $13.905 an ounce. The metal is up 7.5 percent this year.
Native American Proverb: “A Native American grandfather talking to his young grandson tells the boy he has two wolves inside of him struggling with each other. The first is the wolf of peace, love and kindness. The other wolf is fear, greed and hatred. "Which wolf will win, grandfather?" asks the young boy. "Whichever one I feed," is the reply.”
Cablevision's shareholders rejected the Dolan's family $10.6 billion offer to take the company private. I guess they forgot about bulls, bears, and pigs.
Terra Industries Inc.'s third-quarter earnings more than quadrupled to $54.4 million, or 51 cents a share, from $10.3 million, or 10 cents a share in the year-ago period. The Sioux City, Iowa, maker of agriculture nitrogen products said revenues in the recent quarter rose to $593.7 million from $464.8 million last year. Looking ahead, Terra projected robust nitrogen demand as farmers plant more acres of corn and wheat.
Agriculture and fertilizer company Bunge Ltd.'s third-quarter net profit more than doubled to $351 million, or $2.70 a share, from $169 million, or $1.40 a share, a year earlier. Net sales rose 82% to $12.68 billion. Analysts had forecast earnings of $1.77 a share on revenue of $9.47 billion. Bunge said its agriculture business improved across the board and its fertilizer unit continued to perform strongly. The company said it expects good market fundamentals to continue into 2008 and raised its profit guidance for 2007 by $60 million to a range of $690 million to $710 million.
Fertilizer company Potash Corp.'s third-quarter net profit rose 67% to $243.1 million, or 75 cents a share, from $145.2 million, or 46 cents a share, a year earlier. Sales for the period rose 36% to $1.3 billion. Analysts polled by Thomson Financial were expecting earnings of 82 cents a share on revenue of $1.15 billion. "We are now benefiting from rapidly growing economies in the developing world which increases the demand for crops used in food, animal feed, fiber and fuel," the group said. Potash also held to its prior guidance for 2007 earnings of $3.00 to $3.25 a share.
Black and Decker's "earnings per share declined from the prior year level, due in large part to commodity inflation," said Chief Executive Nolan Archibald in a statement.
Warren Buffett said South Korean stocks offer better value than other world markets and cautioned the U.S. dollar will continue to weaken against other currencies, according to media reports. He expects the problems in the U.S. subprime mortgage market to weigh on U.S. consumers for up to two years, but added the economy will eventually rebound.
Motorola's sales declined 17% to $8.8 billion. Motorola said it shipped 37.2 million handsets in the quarter. Sales in the mobile device segment fell 36% to $4.5 billion. Motorola estimated its market share in the quarter at 13%. The company said it sees fourth-quarter earnings from continuing operations in a range of 12 cents to 14 cents a share, excluding charges related to the restructuring.
Travelers' lifted its 2007 operating income guidance to a range of $6.52 to $6.62 a share compared to an earlier forecast of between $5.80 and $6.05 a share.
Honda expects full-year net profit of 640 billion yen, up from an earlier estimate of 625 billion yen. The car maker left its estimate of group operating income unchanged at 880 billion yen and cut its net revenue estimate to 12.3 trillion yen from 12.35 trillion yen earlier.
Pulte Homes' net new home orders for the third quarter fell sharply to 4,582 units from 7,299 units while the company's backlog as of Sept. 30 was valued at $4.09 billion, compared with a backlog of $5.81 billion at the end of September last year. Pulte expects fourth-quarter profit at break-even to 10 cents a share but declined to provide a forecast beyond the immediate quarter due to "difficult market conditions that persist."
Home builder Ryland Group Inc. continued to lose money in the third quarter as the weak housing market reduced demand for its homes and the value of its inventory.The company said that new home orders in the third quarter fell 20.9% from a year earlier and that the dollar value of the new orders declined 27%.
Bank of America is cutting roughly 3,000 jobs and launching a strategic review of its investment banking business after recent poor performance from the unit.
Aetna raised its full-year forecast for operating earnings per share to $3.48, against its previous outlook of $3.40 to $3.42. It projected 2008 operating earnings of $4 per share.
In the Bay Area - which, by the California Association of Realtors' measure is made up of Alameda, Contra Costa, Marin, San Francisco, Santa Clara, San Mateo and Solano counties - sales of existing, stand-alone homes plunged 45.6 percent between September 2006 and September 2007, while the median sales price slid 5 percent to $702,240. September's median was a whopping 17.7 percent below May's peak of $853,910.
German business confidence dropped to a 20-month low in October.
Lehman Bros. now expects the Federal Reserve to cut its overnight lending rate by a full percentage to 3.75% by the middle of 2008, including a rate cut next week.
Robert Prechter: "All the fancy credit and investment structures in place today, and the spread of investment fever to the broad population, are consistent with a time of extreme optimism. Therefore they are consistent with pre-crash conditions...When the Fed engages in a large volume of repos, it helps banks on the margin avoid immediate disaster. But in doing so, it also delays the inevitable price adjustments and gives bankers a false sense of security, thus encouraging them to create more and more unsound loans. In the end, all this manipulation merely increases both the likelihood of a crash and the size of the decline. But you have to realize that the Fed and the banks could not get away with such activities in the absence of optimism. Society in recent years has had a voracious appetite for credit, and the Fed is merely helping the banking system provide it...the probability of a major bear market is unquestionably the highest in history. Just to give you some perspective: At the 1987 high, the Dow’s dividend yield had been below that of 1929 for three months; it’s now been below it for 13 years. At the peak in 1987, there had been only 3 readings at or above 90 percent bulls among stock traders on the Daily Sentiment Index; in recent months there have been 51 such readings. Today’s price-to-book value ratio for the Dow is three times as high as it was in 1987 and 1929. And these are tops. Forget about comparing today’s values to market bottoms. So yeah, I would say there’s risk of a crash, too...With optimism at a record in both duration and extent, with an unprecedented breadth of public participation, with record leverage in the investment markets, with a grotesquely bloated debt structure, and with cracks appearing in the credit markets beginning with sub-prime mortgages, I think the storm cellar is a good place to camp for awhile. Put your money in the safest cash equivalents you can find, ideally outside the banking system, and hibernate. When stocks and property become bargains again, you can venture back into the markets. But investing at today’s valuations is not prudent."
The Cato Report courtesy of Daily Reckoning:
"Discretionary spending soared in Bush's first term by 48%, not adjusted for inflation, more than twice as much as Bill Clinton spent (21.6%) in two terms.
"Defense spending under Bush has grown an average of 5.7% a year, compared to LBJ's of 4.9% (adjusted for inflation).
"Homeland security spending also has soared, to about $31 billion last year, triple the pre-9/11 number
"Education spending is up, adjusted for inflation, 18% annually since 2001.
"The 2002 farm bill caused agri-spending to double from 1990s levels."
New orders for manufactured durable goods in September decreased $3.8 billion or 1.7 percent to $214.5 billion, the U.S. Census Bureau announced today. This was the second consecutive monthly decrease and followed a 5.3 percent August decrease. Excluding transportation, new orders increased 0.3 percent. Excluding defense, new orders increased 0.7 percent. Shipments Shipments of manufactured durable goods in September, down three of the last four months, decreased $4.4 billion or 2.0 percent to $211.6 billion. This followed a 1.9 percent August decrease.
BEA Systems Inc. would be willing to negotiate a takeover agreement with a prospective buyer - including Oracle Corp. - at a price of $21 a share.
Ensco International: "Looking ahead to the fourth quarter of 2007, we currently expect a decline in our quarterly earnings...due to the continuing softness in the U.S. Gulf of Mexico jackup market and mobilization downtime on several of our international jackups prior to commencement of new contracts," the company said.
The number of initial claims in the week ending October 20 fell 8,000 to 331,000. The four-week average of initial claims rose 7,750 to 324,750. This is the highest level since the week ended September 1. Meanwhile, the number of Americans receiving state jobless benefits rose 7,000 to 2.53 million in the week ending October 13. The four-week moving average of continuing claims fell 3,750 to 2.53 million, the lowest since June 23.
Tribune Chairman and Chief Executive Officer Dennis FitzSimons said the company still expects to close its $8.2 billion transaction to go private in the the current fourth quarter, following receipt of certain regulatory approvals.
The recently announced six-month delay in the 787 Dreamliner program could cost Boeing close to $1 billion in added expenses, a leading Wall Street analyst said Wednesday.
Another government revision: Sales of new homes rebounded in September from summer sales levels that were much weaker than previously reported, the Commerce Department reported Thursday. Sales increased 4.8% to a seasonally adjusted annual rate of 770,000 from a revised 735,000 in August. Previously, August's sales had been reported at a 795,000 pace. September's sales were slightly higher than the 758,000 pace expected by economists. The three previous months were revised sharply lower, which means the housing market was much weaker in the middle of the year than previous believed. Sales of new homes are down 23.3% in the past year.
The Oil Drum: "Peak exports simply means that oil-producing countries are using more and more oil at home – leaving less to sell abroad. Moreover, sentiment is starting to develop in many nations that they must save some oil for future generations, not just sell it to the foreign devils as quickly as possible. This clearly means that major oil importers will face a shortfall in their ability to obtain oil many months or years sooner than they had been anticipating. The fall in the amount of oil available for purchase is likely to drop much more quickly than declines in production. When world oil exports fall, if they have not started doing so already, effects are likely to sharp and painful."
The outstanding level of asset-backed commercial paper fell for the 11th straight week, the Federal Reserve reported Thursday. Asset-backed paper dropped by $4.6 billion, or 0.5%, to $884 billion.
Natural gas supplies rose by 68 billion cubic feet to 3,443 billion cubic feet in the week ending Oct. 19, the Energy Department reported.
Two million subprime-mortgage foreclosures are on the horizon by 2009 if home prices continue their downward spiral, a congressional report said Thursday. A report by the Joint Economic Committee also estimated that $71 billion in housing wealth will be destroyed and states will lose $917 million in property tax revenue.
Robert McHugh: "We essentially got a fourth Hindenburg Omen observation Wednesday, October 24th, as the lower of NYSE New Highs and New Lows was 2.15 percent of total issues traded, which rounds up to 2.20 percent. It really is splitting hairs at this point, since we already have a confirmed Hindenburg Omen on the clock, suggesting we are in a high risk period for a significant decline. Today's near hit reinforces the key issue with the Hindenburg Omen, that being we sit in a very unhealthy market right now, and it hasn't gotten any better with this week's countertrend rally."
China's copper imports and its alloys jumped 93 percent to 1.2 million metric tons in the nine months ended Sept. 30 from a year earlier, the Beijing-based customs office said today. Copper, used in pipes and wires, has gained more than fourfold since 2003 as demand surged in China, the world's fastest- growing major economy.
Dec. crude ends up $3.36 at $90.46 a barrel on Nymex, and that's an all-time high close. Natural gas rose 22 cents to end the day at $7.19.
Microsoft reported a net profit of $4.29 billion, or 45 cents per diluted share, up from $3.48 billion, or 35 cents per diluted share, a year earlier. Revenue rose 27 percent to $13.76 billion in the three months ended September 30. Analysts, on average, had forecast 39 cents per share in profit.
Microsoft raised full-year earnings estimates to a range of $1.78 to $1.81 per share from a previous range of $1.69 to $1.73. It also raised its full-year revenue estimate range by almost $2 billion, to $58.8 billion to $59.7 billion.
U.S. banks had $3 million in outstanding loans from the Federal Reserve's discount window on Wednesday, down from $10 million the previous Wednesday, the Fed reported Thursday. For the week ending on Wednesday, outstanding loans averaged $142 million per day, up from $126 million the week before.
Gold futures for December delivery rose $5.40, or 0.7 percent, to $771 an ounce on the Comex division of the New York Mercantile Exchange, and have risen 21% this year. Silver futures for December delivery rose 31.5 cents, or 2.3 percent, to $13.905 an ounce. The metal is up 7.5 percent this year.
Native American Proverb: “A Native American grandfather talking to his young grandson tells the boy he has two wolves inside of him struggling with each other. The first is the wolf of peace, love and kindness. The other wolf is fear, greed and hatred. "Which wolf will win, grandfather?" asks the young boy. "Whichever one I feed," is the reply.”
Wednesday, October 24, 2007
The Reversal
10/25/07 The Reversal
Down more than 200 points early on, the Dow Jones Industrial Average finished 1 point lower, at 13,675.3. The S&P 500 shed 3.71 points to 1,515.88, while the Nasdaq Composite lost 24.5 points to 2,774.76. Why the reversal? The rumor that the Fed was about to announce another rate cut and with the rumor there was short covering.
National Oilwell Varco Inc.said third-quarter net income doubled to $366 million, or $1.02 a share from $176.6 million, or 50 cents a share in the year-ago period. Revenue climbed to 45% to $2.58 billion. Backlog for capital equipment orders for the company's Rig Technology unit increased to $8 billion, from $7.2 billion in the previous quarter. New orders during the quarter were a record $1.9 billion. "The company's backlog for capital equipment continued to increase as a result of strong demand for its drilling equipment, particularly for international offshore rigs," the company said.
Allegheny Technologies said third-quarter net income rose 21% to $193.9 million, or $1.88 a share, from $160.2 million, or $1.56 a share in the year-ago period. Revenue rose to $1.34 billion from $1.29 billion. "Our third quarter 2007 results had two divergent story lines," the company said. "Strong demand trends continued in our High Performance Metals segment and for our high-value flat-rolled products. On the other hand, shipments of our standard stainless products were extraordinarily weak."
Nabors Industries Ltd.'s third-quarter net income fell to $218 million, or 76 cents a share, from $292.8 million, or $1.02 a share, a year ago. The results include the sale of the Sea Mar offshore unit, a one-time item that added 8 cents a share to the bottom line. Revenue for the three months ended Sept. 30 slipped to $1.23 billion from $1.26 billion a year ago.
Chubb increased its 2007 operating income forecast to a range of $6.05 to $6.15 a share, from a previous target of $5.70 to $6.10 a share.
Amazon.com saw earnings surge more than 300% for the third quarter, topping expectations. The company reported earnings of $80 million, or 19 cents a share, for the quarter ended Sept. 30 compared to earnings of $19 million, or 5 cents a share, for the same period last year. Revenue grew 41% to $3.26 billion from $2.31 billion last year. Analysts expected the company to report earnings per share of 18 cents on revenue of $3.14 billion, according to consensus forecasts from Thomson Financial.
Research in Motion announced a deal to sell its popular BlackBerry wireless device in China. The company said it has signed an agreement with Alcatel-Lucent to distribute the BalckBerry in China.
For the fourth quarter, Talbots currently anticipates a loss per share in the range of 5 cents to 10 cents, including 9 cents a share of one-time expenses. This range assumes total company fourth quarter same-store sales in the negative mid-single digit range, with Talbots down mid-single digits, and J. Jill flat to slightly up. Based on the current forecast, at the end of the third quarter the company will be out of compliance with its acquisition loan financial covenants.
Home builder Centex Corp.swung to a fiscal second-quarter loss of $643.8 million, or $5.26 a share, from a profit of $137 million, or $1.11 a share, in the year-ago period. Revenue fell to $2.22 billion from $2.82 billion a year ago. Analysts surveyed by Thomson Financial estimated a quarterly loss of $3.26 a share on revenue of $2.08 billion.
Amazon.com saw earnings surge more than 300% for the third quarter, topping expectations. The company reported earnings of $80 million, or 19 cents a share, for the quarter ended Sept. 30 compared to earnings of $19 million, or 5 cents a share, for the same period last year. Revenue grew 41% to $3.26 billion from $2.31 billion last year. Analysts expected the company to report earnings per share of 18 cents on revenue of $3.14 billion, according to consensus forecasts from Thomson Financial.
Research in Motion announced a deal to sell its popular BlackBerry wireless device in China. The company said it has signed an agreement with Alcatel-Lucent to distribute the BalckBerry in China.
Tribune's net income attributable to common shareholders fell 5.8 percent to $152.8 million from $162.2 million a year ago. Net income per share rose 87.7 percent to $1.22 from 65 cents last year because of a lower number of shares outstanding in the most recent quarter. Excluding a gain from a tax benefit and a charge related to job cuts, income was 38 cents a share, compared with the average analyst expectation of 26 cents a share, according to Reuters Estimates. Revenue fell 4.1 percent to $1.28 billion.
Boeing cut its 2008 revenue view because of delivery delays for its 787 Dreamliner.
According to the WSJ, subprime mortgages aren't the only challenge facing Countrywide Financial Corp., the nation's biggest home-mortgage lender. Some loans classified as prime when they were originated are now going bad at a rapid pace. These loans are known as option adjustable-rate mortgages, or option ARMs.
Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency. ``I'm in the process of -- I hope in the next few months -- getting all of my assets out of U.S. dollars,'' said Rogers, 65, who correctly predicted the commodities rally in 1999. ``I'm that pessimistic about what's happening in the U.S.''
The U.S. housing market's steep falloff continues to take a heavy toll on USG Corp., the Chicago building-products maker which on Tuesday reported a punishing 95 percent drop in third-quarter earnings. "Conditions in the housing market have deteriorated further as the inventory of unsold homes continues to build and the availability of mortgage financing has tightened," said Chairman and Chief Executive Officer William C. Foote, adding that the residential repair and remodeling sector is softening as well. "We do not expect a quick rebound in the housing market," Foote said, noting that market conditions suggest the housing sector "will remain weak for the balance of 2007 and at least through 2008."
The Big Picture: " The well regarded Jeremy Grantham -- the "G" in GMO -- points out in his quarterly letter to shareholders that home prices are trading several standard deviations above their "fair value." Grantham notes that the 2000 tech bubble was statistically a 3-standard deviation, 100-year event. As his nearby chart shows, House prices are also at 3 standard deviations from their intrinsic values. In order to return to more appropriate levels, prices need to drop 25% -- or just stay flat for 5 years."
Amazon's profit outlook for the holiday season "was a little bit below our expectations," said Colin Sebastian, who follows the company for Lazard Capital Markets in San Francisco. "The stock, at $100, is almost priced at perfection, and any material change in expectations is going to have an impact." After rising to $100 on Tuesday, the stock reversed and plummeted to $88.
ConocoPhillips said its Q3 net income fell from a year ago, to $3,673 million ($2.23/share), from $3,876 million ($2.31/share) in 2006. Revenue fell $2 billion to $46.1 billion. Earnings exceeded analyst estimates of $2.19/share.
Brad Setser: "6% of Bear Stearns a day. That is basically what the US has to sell to China to finance its current account deficit right now.
Not 6% of Bear ($1 billion) every business day. 6% of Bear every single day of the year. Financing the deficit requires selling more like 10% of Bear ($1.5 to $2b) every business day."
Sales of existing homes and condos fell 8% in September to the lowest level in at least eight years. Sales of existing homes and condos fell to a seasonally adjusted annual rate of 5.04 million, the lowest since 1999, when the real estate group began tracking combined single-family and condo sales. Inventories of unsold homes and condos rose to a 10.5-month supply, the largest in at least eight years. For single-family homes alone, sales fell 8.6% in September to a seasonally adjusted annual rate of 4.38 million, the lowest sales pace since January 1998.
The Houston Chronicle is cutting about 5 percent of its work force through layoffs.
The Energy Department reported a 5.3 million barrel drop in crude supplies for the week ending Oct. 19. Total motor gasoline inventories decreased by 2 million barrels in the latest week, while distillate supplies fell by 1.8 million barrels. Meanwhile, the API said crude supplies dropped by 6.3 million barrels.
Dec. gold ends up $2.50 at $765.60 an ounce on Nymex.
MICROSOFT TAKES $240 MILLION STAKE IN FACEBOOK, VALUING SERVICE AT $15 BILLION. That's a big valuation on 48 million Facebook users.
Amgen affirmed its forecast of $4.13 to $4.23 in adjusted 2007 earnings.
VMware Inc. reported a third-quarter profit of $65 million, or 18 cents a share, on revenue of $358 million, and this compares with the year ago period when it earned $19.2 million, or 6 cents a share, on $189 million in sales. Excluding charges and one-time expenses, VMware would have earned $85 million, or 23 cents a share. VMware topped the estimates of analysts surveyed by Thomson Financial, who forecast a profit of 17 cents a share on $334 million in revenue.
Crude oil for December delivery surged $1.83 to end at $87.10 a barrel on the New York Mercantile Exchange. Other energy futures also posted strong gains. November reformulated gasoline surged 3.86 cents at $2.1475 a gallon and November heating oil gained 4.22 cents at $2.3420 a gallon. November natural gas rallied 21.10 cents, or 3%, at $6.972 per million British thermal units.
Will Rogers: “Rumor travels faster, but it don't stay put as long as truth.”
Down more than 200 points early on, the Dow Jones Industrial Average finished 1 point lower, at 13,675.3. The S&P 500 shed 3.71 points to 1,515.88, while the Nasdaq Composite lost 24.5 points to 2,774.76. Why the reversal? The rumor that the Fed was about to announce another rate cut and with the rumor there was short covering.
National Oilwell Varco Inc.said third-quarter net income doubled to $366 million, or $1.02 a share from $176.6 million, or 50 cents a share in the year-ago period. Revenue climbed to 45% to $2.58 billion. Backlog for capital equipment orders for the company's Rig Technology unit increased to $8 billion, from $7.2 billion in the previous quarter. New orders during the quarter were a record $1.9 billion. "The company's backlog for capital equipment continued to increase as a result of strong demand for its drilling equipment, particularly for international offshore rigs," the company said.
Allegheny Technologies said third-quarter net income rose 21% to $193.9 million, or $1.88 a share, from $160.2 million, or $1.56 a share in the year-ago period. Revenue rose to $1.34 billion from $1.29 billion. "Our third quarter 2007 results had two divergent story lines," the company said. "Strong demand trends continued in our High Performance Metals segment and for our high-value flat-rolled products. On the other hand, shipments of our standard stainless products were extraordinarily weak."
Nabors Industries Ltd.'s third-quarter net income fell to $218 million, or 76 cents a share, from $292.8 million, or $1.02 a share, a year ago. The results include the sale of the Sea Mar offshore unit, a one-time item that added 8 cents a share to the bottom line. Revenue for the three months ended Sept. 30 slipped to $1.23 billion from $1.26 billion a year ago.
Chubb increased its 2007 operating income forecast to a range of $6.05 to $6.15 a share, from a previous target of $5.70 to $6.10 a share.
Amazon.com saw earnings surge more than 300% for the third quarter, topping expectations. The company reported earnings of $80 million, or 19 cents a share, for the quarter ended Sept. 30 compared to earnings of $19 million, or 5 cents a share, for the same period last year. Revenue grew 41% to $3.26 billion from $2.31 billion last year. Analysts expected the company to report earnings per share of 18 cents on revenue of $3.14 billion, according to consensus forecasts from Thomson Financial.
Research in Motion announced a deal to sell its popular BlackBerry wireless device in China. The company said it has signed an agreement with Alcatel-Lucent to distribute the BalckBerry in China.
For the fourth quarter, Talbots currently anticipates a loss per share in the range of 5 cents to 10 cents, including 9 cents a share of one-time expenses. This range assumes total company fourth quarter same-store sales in the negative mid-single digit range, with Talbots down mid-single digits, and J. Jill flat to slightly up. Based on the current forecast, at the end of the third quarter the company will be out of compliance with its acquisition loan financial covenants.
Home builder Centex Corp.swung to a fiscal second-quarter loss of $643.8 million, or $5.26 a share, from a profit of $137 million, or $1.11 a share, in the year-ago period. Revenue fell to $2.22 billion from $2.82 billion a year ago. Analysts surveyed by Thomson Financial estimated a quarterly loss of $3.26 a share on revenue of $2.08 billion.
Amazon.com saw earnings surge more than 300% for the third quarter, topping expectations. The company reported earnings of $80 million, or 19 cents a share, for the quarter ended Sept. 30 compared to earnings of $19 million, or 5 cents a share, for the same period last year. Revenue grew 41% to $3.26 billion from $2.31 billion last year. Analysts expected the company to report earnings per share of 18 cents on revenue of $3.14 billion, according to consensus forecasts from Thomson Financial.
Research in Motion announced a deal to sell its popular BlackBerry wireless device in China. The company said it has signed an agreement with Alcatel-Lucent to distribute the BalckBerry in China.
Tribune's net income attributable to common shareholders fell 5.8 percent to $152.8 million from $162.2 million a year ago. Net income per share rose 87.7 percent to $1.22 from 65 cents last year because of a lower number of shares outstanding in the most recent quarter. Excluding a gain from a tax benefit and a charge related to job cuts, income was 38 cents a share, compared with the average analyst expectation of 26 cents a share, according to Reuters Estimates. Revenue fell 4.1 percent to $1.28 billion.
Boeing cut its 2008 revenue view because of delivery delays for its 787 Dreamliner.
According to the WSJ, subprime mortgages aren't the only challenge facing Countrywide Financial Corp., the nation's biggest home-mortgage lender. Some loans classified as prime when they were originated are now going bad at a rapid pace. These loans are known as option adjustable-rate mortgages, or option ARMs.
Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency. ``I'm in the process of -- I hope in the next few months -- getting all of my assets out of U.S. dollars,'' said Rogers, 65, who correctly predicted the commodities rally in 1999. ``I'm that pessimistic about what's happening in the U.S.''
The U.S. housing market's steep falloff continues to take a heavy toll on USG Corp., the Chicago building-products maker which on Tuesday reported a punishing 95 percent drop in third-quarter earnings. "Conditions in the housing market have deteriorated further as the inventory of unsold homes continues to build and the availability of mortgage financing has tightened," said Chairman and Chief Executive Officer William C. Foote, adding that the residential repair and remodeling sector is softening as well. "We do not expect a quick rebound in the housing market," Foote said, noting that market conditions suggest the housing sector "will remain weak for the balance of 2007 and at least through 2008."
The Big Picture: " The well regarded Jeremy Grantham -- the "G" in GMO -- points out in his quarterly letter to shareholders that home prices are trading several standard deviations above their "fair value." Grantham notes that the 2000 tech bubble was statistically a 3-standard deviation, 100-year event. As his nearby chart shows, House prices are also at 3 standard deviations from their intrinsic values. In order to return to more appropriate levels, prices need to drop 25% -- or just stay flat for 5 years."
Amazon's profit outlook for the holiday season "was a little bit below our expectations," said Colin Sebastian, who follows the company for Lazard Capital Markets in San Francisco. "The stock, at $100, is almost priced at perfection, and any material change in expectations is going to have an impact." After rising to $100 on Tuesday, the stock reversed and plummeted to $88.
ConocoPhillips said its Q3 net income fell from a year ago, to $3,673 million ($2.23/share), from $3,876 million ($2.31/share) in 2006. Revenue fell $2 billion to $46.1 billion. Earnings exceeded analyst estimates of $2.19/share.
Brad Setser: "6% of Bear Stearns a day. That is basically what the US has to sell to China to finance its current account deficit right now.
Not 6% of Bear ($1 billion) every business day. 6% of Bear every single day of the year. Financing the deficit requires selling more like 10% of Bear ($1.5 to $2b) every business day."
Sales of existing homes and condos fell 8% in September to the lowest level in at least eight years. Sales of existing homes and condos fell to a seasonally adjusted annual rate of 5.04 million, the lowest since 1999, when the real estate group began tracking combined single-family and condo sales. Inventories of unsold homes and condos rose to a 10.5-month supply, the largest in at least eight years. For single-family homes alone, sales fell 8.6% in September to a seasonally adjusted annual rate of 4.38 million, the lowest sales pace since January 1998.
The Houston Chronicle is cutting about 5 percent of its work force through layoffs.
The Energy Department reported a 5.3 million barrel drop in crude supplies for the week ending Oct. 19. Total motor gasoline inventories decreased by 2 million barrels in the latest week, while distillate supplies fell by 1.8 million barrels. Meanwhile, the API said crude supplies dropped by 6.3 million barrels.
Dec. gold ends up $2.50 at $765.60 an ounce on Nymex.
MICROSOFT TAKES $240 MILLION STAKE IN FACEBOOK, VALUING SERVICE AT $15 BILLION. That's a big valuation on 48 million Facebook users.
Amgen affirmed its forecast of $4.13 to $4.23 in adjusted 2007 earnings.
VMware Inc. reported a third-quarter profit of $65 million, or 18 cents a share, on revenue of $358 million, and this compares with the year ago period when it earned $19.2 million, or 6 cents a share, on $189 million in sales. Excluding charges and one-time expenses, VMware would have earned $85 million, or 23 cents a share. VMware topped the estimates of analysts surveyed by Thomson Financial, who forecast a profit of 17 cents a share on $334 million in revenue.
Crude oil for December delivery surged $1.83 to end at $87.10 a barrel on the New York Mercantile Exchange. Other energy futures also posted strong gains. November reformulated gasoline surged 3.86 cents at $2.1475 a gallon and November heating oil gained 4.22 cents at $2.3420 a gallon. November natural gas rallied 21.10 cents, or 3%, at $6.972 per million British thermal units.
Will Rogers: “Rumor travels faster, but it don't stay put as long as truth.”
Can Apple And Google Carry The Load?
10/24/07 Can Apple And Google Carry The Load?
Merrill Lynch & Co.said the summer's credit crisis triggered a bigger-than-expected $7.9 billion writedown during the third quarter.
Biogen forecast 2007 earnings of $1.84 to $1.94 a share, or $2.60 to $2.70 on an adjusted basis. On average, analysts surveyed by Thomson Financial expected the company to earn $2.67 for the year. Biogen has put itself up for sale.
Tellabs Inc.'s third-quarter profit fell from a year ago amid slower demand for its telecommunications networking products in North America. Tellabs reported net income of $4 million, or 1 cent a share, down from $59 million or 13 cents a share, in the year-ago quarter. Looking ahead, Tellabs said fourth quarter revenue will be flat with the third quarter.
Lexmark International Group, Inc. said it will transfer roughly 1,650 jobs to low-cost countries by the end of 2008 in a move that should save about $40 million in 2008 and $60 million later.
Whirlpool said it sees fiscal 2007 earnings from continiung operations in the range of $8 to $8.50 a share and free cash flow of $600 million to $650 million.
Smith International said third-quarter net incomer rose 26% to $166.8 million, or 83 cents a share, with revenue up 17% to $2.25 billion. It sees fiscal year earnings at the top end of its $3.15 to $3.25 a share view.
Coach Inc. said fiscal first-quarter net income rose 23 percent, driven by higher sales of its fall bags.
The WSJ reported Last month, as the nation's housing slump continued, consumer bankruptcy filings increased almost 23% from a year earlier -- representing nearly 69,000 people -- according to the American Bankruptcy Institute, a nonprofit research group whose members include bankruptcy attorneys, judges and lenders. Overall, consumer bankruptcy filings were up 44.76% during the first nine months of this year.
Caterpillar's CEO : "Sales and revenues in North America were down 11%. From an end market standpoint, inside North America, it is a very weak picture for many of the industries that we serve. U.S. housing is down and we expect it to continue its decline. Non-residential construction is weak. Coal mining and quarrying are down in the U.S. And on-highway truck engines are down significantly from last year and we do not see much sign of a major turnaround for awhile."
American Express said the provisions it set aside for future losses in its U.S. card business jumped 44%, spurred in part by growth in its lending portfolio but also reflecting spreading credit problems.
China's economy may expand 11.5 percent and the inflation rate will be 4.3 percent this year, said Wang Xiaoguang, an economist at the National Development and Reform Commission.
Growth in UK financial services could halve as a result of the credit squeeze, holding back the economy and forcing the government to slash growth in public spending, the Ernst & Young Item club warned. It also predicts that more discerning lending practices and lower bonus payments in London could turn the housing market’s “soft landing” into a sharper correction – but judges a big housing recession to be unlikely.
Daily Reckoning: "Foreclosures in the yankee state are running three times last year's level. And losses are working their way up the socio-economic ladder. Goldman Sachs' (NYSE:GS) Trust 2006-S3 is a sophisticated investment instrument containing 8,274 mortgages. One out of every six of those mortgages is in default - only 18 months after the thing was put together. When that many people stop paying, it wipes out the entire capital value of the derivative. And since speculators usually take leveraged positions, the losses can go much further."
Neumann Homes, one of Chicago's largest homebuilders, announced on Monday that it intends to file for bankruptcy.
The company, ranked among the top 10 in Chicago, also builds in Wisconsin and Colorado. Company CEO Kenneth P. Neumann said in the statement that "significant downturn in the Detroit, Chicago and Denver housing markets resulted in this situation. ... Even after the significant help we have received from our lenders this year, the company can no longer weather this storm."
Fires in Southern California have caused about 500,000 to be evacuated from their homes and, in total, almost 1 million have
left their homes.
Oracle said Tuesday its $17 per share offer to acquire BEA Systems will expire Oct. 28 unless BEA's board executes an acquisition agreement and lets shareholders vote on the bid.
As of October, finance companies had announced 130,000 job cuts for the year to date, according to outplacement firm Challenger, Gray & Christmas. That's more than double the 50,000 cuts announced in 2006 and well ahead of the record 116,000 announced in 2001.
Chain-store sales for the week ended Oct. 20 rose 2.2% from the year-ago period, according to a survey released on Tuesday by the International Council of Shopping Centers and UBS Securities. On a week-over-week basis, sales fell 1.5%. "The latest week's dip reflected the confluence of deeper price discounts and warm weather that turned consumers off from seasonal apparel," said Michael Niemira, chief economist for ICSC. For October, ICSC expects retail sales to increase by about 2%.
The U.S. dollar index remains in the toilet at 77.57.
Lockheed Martin slightly raised its full-year earnings forecast, on the back of higher sales of its jet fighters and electronic warfare systems.
The Oil Drum: "What needs to be understood is that peak oil likely means peak food. About 17% of US energy use goes into agriculture. The food in the grocery store that you buy traveled a long way to get to you, and it was probably grown with fossil-fuel intensive fertilizers and pesticides. As of 1994, it took 400 gallons of oil and equivalents to feed each US citizen, and that number has probably gone up."
Robert McHugh: "The Weekly MACD positive territory blue histograms are not only shrinking, which serves as a necessary precursor to a "sell" signal, but generated a new "sell" signal Monday, October 22nd, as they went negative. The MACD Daily generated a "sell" signal Monday, October 15th, and worsened since then. The Dow Industrials sit in the middle of the Bollinger Bands on the weekly charts Monday, leaving open several possibilities - either a continuance lower, or a corrective rebound. In other words, at the moment the short-term pattern is somewhat vague. The McClellan Oscillator went negative as week ago for the first time since August 20th, and worsened the rest of the week, however is not at an extreme oversold level. The small change it gave last Thursday led to Friday's huge price move.
In combination, when we see prices hit the upper Bollinger Band (which we saw in all major indices last week) plus also see shrinking blue positive histograms in the index's weekly MACD, then we can expect a tradable decline to begin. We noted last week that we had both conditions."
Stephen Roach: "With both income and wealth effects under pressure, I don't see any way saving-short, overly-indebted American consumers can maintain excessive consumption growth. For a US economy that has drawn disproportionate support from a record 72% share of personal consumption, a consumer-led capitulation spells high and rising recession risk. Unfortunately, the same prognosis is likely for a still US-centric global economy."
Oil stocks are being picked to rise by a 28-to-1 margin at the U.K. financial betting web site BetsForTraders.com, the company said Tuesday. The financial site said that's an "unprecedented" ratio. As a contrarian, that gives me further impetus to cut back in the sector.
State Street's Global Investor Confidence Index fell 6.1 points to a level of 82.6, from last month's revised reading of 88.7, pressured by cautious investors in North America.
Wal-Mart plans capital expenditures for its current fiscal year of $14.7 billion to $15.4 billion, lower than its previous forecast. In June, the retailer forecast fiscal year capital spending would be $15.5 billion, down from $17 billion, saying it would open fewer supercenters than planned to try to boost sales at existing stores.
Gold for December delivery gained $3.10 to close at $763.10 an ounce on the New York Mercantile Exchange.
Merrill Lynch & Co.said the summer's credit crisis triggered a bigger-than-expected $7.9 billion writedown during the third quarter.
Biogen forecast 2007 earnings of $1.84 to $1.94 a share, or $2.60 to $2.70 on an adjusted basis. On average, analysts surveyed by Thomson Financial expected the company to earn $2.67 for the year. Biogen has put itself up for sale.
Tellabs Inc.'s third-quarter profit fell from a year ago amid slower demand for its telecommunications networking products in North America. Tellabs reported net income of $4 million, or 1 cent a share, down from $59 million or 13 cents a share, in the year-ago quarter. Looking ahead, Tellabs said fourth quarter revenue will be flat with the third quarter.
Lexmark International Group, Inc. said it will transfer roughly 1,650 jobs to low-cost countries by the end of 2008 in a move that should save about $40 million in 2008 and $60 million later.
Whirlpool said it sees fiscal 2007 earnings from continiung operations in the range of $8 to $8.50 a share and free cash flow of $600 million to $650 million.
Smith International said third-quarter net incomer rose 26% to $166.8 million, or 83 cents a share, with revenue up 17% to $2.25 billion. It sees fiscal year earnings at the top end of its $3.15 to $3.25 a share view.
Coach Inc. said fiscal first-quarter net income rose 23 percent, driven by higher sales of its fall bags.
The WSJ reported Last month, as the nation's housing slump continued, consumer bankruptcy filings increased almost 23% from a year earlier -- representing nearly 69,000 people -- according to the American Bankruptcy Institute, a nonprofit research group whose members include bankruptcy attorneys, judges and lenders. Overall, consumer bankruptcy filings were up 44.76% during the first nine months of this year.
Caterpillar's CEO : "Sales and revenues in North America were down 11%. From an end market standpoint, inside North America, it is a very weak picture for many of the industries that we serve. U.S. housing is down and we expect it to continue its decline. Non-residential construction is weak. Coal mining and quarrying are down in the U.S. And on-highway truck engines are down significantly from last year and we do not see much sign of a major turnaround for awhile."
American Express said the provisions it set aside for future losses in its U.S. card business jumped 44%, spurred in part by growth in its lending portfolio but also reflecting spreading credit problems.
China's economy may expand 11.5 percent and the inflation rate will be 4.3 percent this year, said Wang Xiaoguang, an economist at the National Development and Reform Commission.
Growth in UK financial services could halve as a result of the credit squeeze, holding back the economy and forcing the government to slash growth in public spending, the Ernst & Young Item club warned. It also predicts that more discerning lending practices and lower bonus payments in London could turn the housing market’s “soft landing” into a sharper correction – but judges a big housing recession to be unlikely.
Daily Reckoning: "Foreclosures in the yankee state are running three times last year's level. And losses are working their way up the socio-economic ladder. Goldman Sachs' (NYSE:GS) Trust 2006-S3 is a sophisticated investment instrument containing 8,274 mortgages. One out of every six of those mortgages is in default - only 18 months after the thing was put together. When that many people stop paying, it wipes out the entire capital value of the derivative. And since speculators usually take leveraged positions, the losses can go much further."
Neumann Homes, one of Chicago's largest homebuilders, announced on Monday that it intends to file for bankruptcy.
The company, ranked among the top 10 in Chicago, also builds in Wisconsin and Colorado. Company CEO Kenneth P. Neumann said in the statement that "significant downturn in the Detroit, Chicago and Denver housing markets resulted in this situation. ... Even after the significant help we have received from our lenders this year, the company can no longer weather this storm."
Fires in Southern California have caused about 500,000 to be evacuated from their homes and, in total, almost 1 million have
left their homes.
Oracle said Tuesday its $17 per share offer to acquire BEA Systems will expire Oct. 28 unless BEA's board executes an acquisition agreement and lets shareholders vote on the bid.
As of October, finance companies had announced 130,000 job cuts for the year to date, according to outplacement firm Challenger, Gray & Christmas. That's more than double the 50,000 cuts announced in 2006 and well ahead of the record 116,000 announced in 2001.
Chain-store sales for the week ended Oct. 20 rose 2.2% from the year-ago period, according to a survey released on Tuesday by the International Council of Shopping Centers and UBS Securities. On a week-over-week basis, sales fell 1.5%. "The latest week's dip reflected the confluence of deeper price discounts and warm weather that turned consumers off from seasonal apparel," said Michael Niemira, chief economist for ICSC. For October, ICSC expects retail sales to increase by about 2%.
The U.S. dollar index remains in the toilet at 77.57.
Lockheed Martin slightly raised its full-year earnings forecast, on the back of higher sales of its jet fighters and electronic warfare systems.
The Oil Drum: "What needs to be understood is that peak oil likely means peak food. About 17% of US energy use goes into agriculture. The food in the grocery store that you buy traveled a long way to get to you, and it was probably grown with fossil-fuel intensive fertilizers and pesticides. As of 1994, it took 400 gallons of oil and equivalents to feed each US citizen, and that number has probably gone up."
Robert McHugh: "The Weekly MACD positive territory blue histograms are not only shrinking, which serves as a necessary precursor to a "sell" signal, but generated a new "sell" signal Monday, October 22nd, as they went negative. The MACD Daily generated a "sell" signal Monday, October 15th, and worsened since then. The Dow Industrials sit in the middle of the Bollinger Bands on the weekly charts Monday, leaving open several possibilities - either a continuance lower, or a corrective rebound. In other words, at the moment the short-term pattern is somewhat vague. The McClellan Oscillator went negative as week ago for the first time since August 20th, and worsened the rest of the week, however is not at an extreme oversold level. The small change it gave last Thursday led to Friday's huge price move.
In combination, when we see prices hit the upper Bollinger Band (which we saw in all major indices last week) plus also see shrinking blue positive histograms in the index's weekly MACD, then we can expect a tradable decline to begin. We noted last week that we had both conditions."
Stephen Roach: "With both income and wealth effects under pressure, I don't see any way saving-short, overly-indebted American consumers can maintain excessive consumption growth. For a US economy that has drawn disproportionate support from a record 72% share of personal consumption, a consumer-led capitulation spells high and rising recession risk. Unfortunately, the same prognosis is likely for a still US-centric global economy."
Oil stocks are being picked to rise by a 28-to-1 margin at the U.K. financial betting web site BetsForTraders.com, the company said Tuesday. The financial site said that's an "unprecedented" ratio. As a contrarian, that gives me further impetus to cut back in the sector.
State Street's Global Investor Confidence Index fell 6.1 points to a level of 82.6, from last month's revised reading of 88.7, pressured by cautious investors in North America.
Wal-Mart plans capital expenditures for its current fiscal year of $14.7 billion to $15.4 billion, lower than its previous forecast. In June, the retailer forecast fiscal year capital spending would be $15.5 billion, down from $17 billion, saying it would open fewer supercenters than planned to try to boost sales at existing stores.
Gold for December delivery gained $3.10 to close at $763.10 an ounce on the New York Mercantile Exchange.
Monday, October 22, 2007
The Continuation
10/23/07 The Continuation
Rob Peebles: "Dear Social Security Administration:
Although I am not yet eligible for Social Security, I am writing to thank you for your latest Cost of Living Adjustment (COLA) for recipients. I would never have believed you possessed the courage to bump the oldsters’ monthly payments by a paltry 2.3% - the smallest increase since 2004. You rock! Thanks to you, the typical retiree’s monthly payment will increase by just $24. If they don’t blow that on higher ticket prices in Branson, they’ll spend it on the gas to get there.
Which reminds me: Your timing was astonishing! You made this announcement just as oil prices were approaching $90 a barrel. A bold move! And get this: that same day, heating oil hit a record $2.75 in Massachusetts. That means aging Red Sox fans will be paying 17% more to keep their New England cottages cozy this winter. You really are the best.
And speaking of cottages, what do retirees most often complain about besides poorly lit parking? I’ll tell you what – property taxes. According to the Tax Foundation, median property taxes jumped almost 8% last year. Oh sure, the lucky ones live in areas that freeze property tax rates for seniors. But should they have to move – Gotcha! They have to pay taxes on their home’s current market value. Just another reason that your 2.3% COLA is 100% chutzpah.
And then there’s the irony: There’s you, a humongous government agency running a government program designed to help retirees, announcing a 2.3% COLA. And then there’s Medicare, another humongous government agency designed to help retirees, announcing the very same month that it’s charging 3.1% more for insurance premiums. Ouch! Oh sure, that’s only a few bucks more a month out of their Velcro wallets, but the hike reminds older folks that their inflation rate is much higher than the CPI that purports to measure inflation generally. And guess what? You don’t care. Awesome!
Speaking of “awesome,” I have to congratulate you on how cleverly you play the COLA game. After all, you don’t come up with the adjustments: you get them from the Bureau of Labor Statistics. There, they have rooms full of math whizzes working hard to come up with the COLAs for you. It’s their inflation calculation. No matter how ridiculous the CPI sounds, no matter how much they jack with “hedonics” or mess around with the housing component, it’s not your problem. Even that whole “steak prices are up so we’re buying chicken” angle is not your doing -- even if the next month’s calculation throws out the chicken component and substitutes cat food. You just implement whatever the number crunchers say and move on. Brilliant!
And the way you and the BLS are keeping the inflation rate for the elderly under your hats – remarkable! Oh yes, I know about the CPI-E, but I don’t know much – as you intended! From their website, I can see that the BLS has estimated seniors’ cost of living increases over certain periods. But there doesn’t seem to be any current data. For example, I can’t find a CPI-E number comparable to the 2.3% figure you used to adjust the COLA. Coincidence? Ha ha ha ha!"
Indian proverb: "Keep five yards from a carriage, ten yards from a horse, and a hundred yards from an elephant; but the distance one should keep from a wicked man cannot be measured."
The markets from some complex derivatives remain broken and may recover only gradually, said Randall Kroszner, a governor of Federal Reserve Board on Monday. "I would suggest that....the recovery may be a relatively gradual process and these markets may not look the same when they re-emerge," Kroszner said.
And for those who believe in the tooth fairy: "The Federal Reserve will continue to monitor developments in financial markets and act as needed to support the effective functioning of these markets and to foster sustainable economic growth and price stability," Kroszner said in a speech here to the Institute of International Bankers.
The NY Times reported collateralized debt obligations — made up of bonds backed by thousands of subprime home loans — are starting to shut off cash payments to investors in lower-rated bonds as credit-rating agencies downgrade the securities they own, according to analysts and industry executives. Cutting off the cash flow, which is governed by rules and mathematical formulas that vary by security, is expected to accelerate in the months ahead.Such a cutoff would be the latest blow to financial markets as investors try to anticipate the next problem that might shake confidence.
Bear Stearns and China's CITIC Securities announced an agreement in principle in which each firm would invest $1 billion in the other.
Kohlberg Kravis Roberts and Goldman Sachs will cancel their $8 billion takeover for Harman International but invest $400 million in convertible notes that the audio systems maker will use for a stock buyback, the companies said Monday. KKR and Goldman won't be sued and won't have to pay a termination fee under the agreement struck.
The New York Board of Trade is planning to shut its futures pits in the next six months as electronic commodities trading takes over, The New York Post reported.
Halliburton Co.'s third-quarter profit rose to $727 million, or 79 cents a share, from $611 million, or 58 cents a share, in the year-ago period. Revenue climbed to $3.93 billion from $3.39 billion a year ago. Results for the latest quarter received a favorable boost of $133 million, or 15 cents a share, from the recognition of U.S. foreign tax credits, and include a $21 million charge, or 2 cents a share, in after-tax charges related to environmental matters. Analysts surveyed by Thomson Financial estimated quarterly net income of 64 cents a share on revenue of $3.87 billion. Halliburton CEO Dave Lesar said the company expects North American land drilling pricing pressure to continue in the fourth quarter amid a battle for market share. The oil services firm said it'll keep costs under control to preserve its profits. In a more hopeful sign, the company said its expects the pressure pump and drilling business in North America to grow next year, with revenue and operating income expected to increase.
Weatherford International Ltd., the Houston provider of mechanical solutions, technology and services for oil-and-gas drilling and production, reported third-quarter net income rose 25% on 16% higher revenue. Earnings reached $292.7 million, or 84 cents a share, from $234.2 million, or 66 cents, in the year-earlier period. Revenue rose to $1.97 billion from $1.7 billion.
Merck & Co. said its third-quarter profit rose sharply, helped by sales of its vaccines and cholesterol drugs, and raised its 2007 profit forecast in view of strong current trends.
Ernst & Young's ITEM Club, a London-based economic research group, said in a report that it cut its growth forecast for the UK for 2008 to 2.1% from 2.5%. "This is a very timely tightening, targeting parts of the financial sector that were growing too fast and were too dependent on cheap credit," the report said.
Electrolux stated the risk for further decline in the U.S. appliance market, continued raw material cost increases and cost pressures on European margins adds uncertainty to the outlook for 2007.
Californian homes are overvalued by as much as 40 percent and stricter lending standards will probably contribute to ``material'' price declines, according to analysts at Goldman Sachs.
A veteran Wall Street analyst, Irv Zelman, chief executive of the research firm Zelman & Associates, says it's unlikely the U.S. housing market will recover before 2009, adding there's a ``50 to 60 percent chance of a recession,'' as the housing slump curbs consumer spending.
Wolfgang Munchau: "The market in inflation-protected bonds is less liquid than the market for ordinary government bonds. Hence there is a liquidity premium, which raises their price and depresses their yields, leading to a persistent underestimate of future inflationary expectations."
John Hussman: "As of Friday, the Dow and S&P 500 closed Friday within a fraction of a percent of where they were minutes prior to the Fed's September 18th interest rate announcement. And just for the record, the Fed has still added zero liquidity to the banking system. The total amount lent by the Fed to the banking system through the discount window fell again last week to just $240 million. Total bank reserves fell in September, from $44.9 billion to $42.5 billion. The monetary base – the only monetary aggregate that the Fed directly controls, fell in September from $853.482 billion to $851.279 billion. At least $19 billion of temporary repos will come due on Thursday, so the Fed won't be “injecting liquidity” into the banking system when it predictably rolls these over."
Half of likely US voters said they would never vote for Senator Hillary Clinton for president, a new survey by Zogby International shows. The latest Zogby survey showed 50% of those polled said they would never vote for her, compared with 46% of likely voters who said the same thing in a Zogby survey in March. Among Democratic women, 17% said they would not vote for Clinton.
The Oil Drum: "The German-based Energy Watch Group will release its study in London today saying that global oil production peaked in 2006 - much earlier than most experts had expected. The report, which predicts that production will now fall by 7% a year, comes after oil prices set new records almost every day last week, on Friday hitting more than $90 (£44) a barrel."
The national average price for gasoline rose about 5 cents over the last two weeks, according to a survey released Sunday.The average price of regular gasoline on Friday was $2.80 a gallon, mid-grade was $2.92, and premium was $3.03, oil industry analyst Trilby Lundberg said.
Brett Steenbarger: "In short, there has been no bearish edge to selling into a sizable gap down when the prior day has been down sharply. Indeed, on average, the trader would have made money by buying the open and holding through the following day."
Wachovia cut by 15 cents a share its 2008 profit target for Schlumberger to $5.05 a share on a more conservative outlook for its North American business. "Schlumberger has consistently said activity-related revenue growth is tied to offshore rig count growth," Wachovia said in a note to clients. "But it cautioned about inefficiency in first year activity of newbuild rigs and more generally about susceptibility to slowdowns associated with large, more complicated projects; it also acknoweldged troubled spots including Nigera, Kazakhstan and Libya."
Goodman Global Inc. said it OK'd a deal to be bought by private equity firm Hellman & Friedman LLC for $25.60 a share in cash.
Rohm & Haas Co.said it would seek to raise prices 5% to 15% on most of its chemical products, effective Nov. 1. "The costs of key raw materials" -- such as propylene, ethylene, methanol and others -- "have remained persistently high," said Pierre Brondeau, executive vice president for specialty materials, in a statement.
Gold for December delivery closed down $8.40 at $760 an ounce on the New York Mercantile Exchange. Crude for November delivery closed down $1.04, or 1%, at $87.56 a barrel on the New York Mercantile Exchange. The November front-month contract expired at the end of Monday's session.
Twelve wildfires fed by winds, high temperatures and low humidity have burned more than 100,665 acres (40,739 hectares) from Santa Barbara to San Diego County near the Mexican border, said Daniel Berlant, a spokesman for the California Department of Forestry.
David Yu: "Essentially, for about a month, the tech-heavy Nasdaq Index was on its own zero gravity parabolic flight while the retail sector, which incidentally sells these tech companies' products, was in a deep hole back on earth...If the SPX needed to be recalibrated, the Nasdaq would probably need a major tuneup. In order for the market to get back on track, the variance between the producers and the retailers of their products will have to be corrected."
Apple's net profit was $904 million, or $1.01 per share in its fiscal fourth quarter, compared with $542 million, or 62 cents per share, a year earlier. Revenue was $6.22 billion, up 29 percent from $4.84 billion a year earlier. These results beat Wall Street's average targets of 85 cents per share earnings and $6.06 billion revenue, according to the average forecast on Reuters Estimates. Apple also forecast fiscal first-quarter revenue of $9.2 billion, ahead of the $8.7 billion Wall Street target.
Target Corp. on Monday trimmed its October forecast for sales growth at stores open at least a year to a range of 2% to 4% as the company cited "greater than normal daily volatility and continued disappointing sales results for the first two weeks" of the month. It had previously forecast same-store sales growth of 3% to 5% for October.
General Motors Corp. will lay off 1,000 workers after Thanksgiving at its Lansing, Mich.-plant, which builds the Buick Enclave, Saturn Outlook and GMC Acadia.
Rob Peebles: "Dear Social Security Administration:
Although I am not yet eligible for Social Security, I am writing to thank you for your latest Cost of Living Adjustment (COLA) for recipients. I would never have believed you possessed the courage to bump the oldsters’ monthly payments by a paltry 2.3% - the smallest increase since 2004. You rock! Thanks to you, the typical retiree’s monthly payment will increase by just $24. If they don’t blow that on higher ticket prices in Branson, they’ll spend it on the gas to get there.
Which reminds me: Your timing was astonishing! You made this announcement just as oil prices were approaching $90 a barrel. A bold move! And get this: that same day, heating oil hit a record $2.75 in Massachusetts. That means aging Red Sox fans will be paying 17% more to keep their New England cottages cozy this winter. You really are the best.
And speaking of cottages, what do retirees most often complain about besides poorly lit parking? I’ll tell you what – property taxes. According to the Tax Foundation, median property taxes jumped almost 8% last year. Oh sure, the lucky ones live in areas that freeze property tax rates for seniors. But should they have to move – Gotcha! They have to pay taxes on their home’s current market value. Just another reason that your 2.3% COLA is 100% chutzpah.
And then there’s the irony: There’s you, a humongous government agency running a government program designed to help retirees, announcing a 2.3% COLA. And then there’s Medicare, another humongous government agency designed to help retirees, announcing the very same month that it’s charging 3.1% more for insurance premiums. Ouch! Oh sure, that’s only a few bucks more a month out of their Velcro wallets, but the hike reminds older folks that their inflation rate is much higher than the CPI that purports to measure inflation generally. And guess what? You don’t care. Awesome!
Speaking of “awesome,” I have to congratulate you on how cleverly you play the COLA game. After all, you don’t come up with the adjustments: you get them from the Bureau of Labor Statistics. There, they have rooms full of math whizzes working hard to come up with the COLAs for you. It’s their inflation calculation. No matter how ridiculous the CPI sounds, no matter how much they jack with “hedonics” or mess around with the housing component, it’s not your problem. Even that whole “steak prices are up so we’re buying chicken” angle is not your doing -- even if the next month’s calculation throws out the chicken component and substitutes cat food. You just implement whatever the number crunchers say and move on. Brilliant!
And the way you and the BLS are keeping the inflation rate for the elderly under your hats – remarkable! Oh yes, I know about the CPI-E, but I don’t know much – as you intended! From their website, I can see that the BLS has estimated seniors’ cost of living increases over certain periods. But there doesn’t seem to be any current data. For example, I can’t find a CPI-E number comparable to the 2.3% figure you used to adjust the COLA. Coincidence? Ha ha ha ha!"
Indian proverb: "Keep five yards from a carriage, ten yards from a horse, and a hundred yards from an elephant; but the distance one should keep from a wicked man cannot be measured."
The markets from some complex derivatives remain broken and may recover only gradually, said Randall Kroszner, a governor of Federal Reserve Board on Monday. "I would suggest that....the recovery may be a relatively gradual process and these markets may not look the same when they re-emerge," Kroszner said.
And for those who believe in the tooth fairy: "The Federal Reserve will continue to monitor developments in financial markets and act as needed to support the effective functioning of these markets and to foster sustainable economic growth and price stability," Kroszner said in a speech here to the Institute of International Bankers.
The NY Times reported collateralized debt obligations — made up of bonds backed by thousands of subprime home loans — are starting to shut off cash payments to investors in lower-rated bonds as credit-rating agencies downgrade the securities they own, according to analysts and industry executives. Cutting off the cash flow, which is governed by rules and mathematical formulas that vary by security, is expected to accelerate in the months ahead.Such a cutoff would be the latest blow to financial markets as investors try to anticipate the next problem that might shake confidence.
Bear Stearns and China's CITIC Securities announced an agreement in principle in which each firm would invest $1 billion in the other.
Kohlberg Kravis Roberts and Goldman Sachs will cancel their $8 billion takeover for Harman International but invest $400 million in convertible notes that the audio systems maker will use for a stock buyback, the companies said Monday. KKR and Goldman won't be sued and won't have to pay a termination fee under the agreement struck.
The New York Board of Trade is planning to shut its futures pits in the next six months as electronic commodities trading takes over, The New York Post reported.
Halliburton Co.'s third-quarter profit rose to $727 million, or 79 cents a share, from $611 million, or 58 cents a share, in the year-ago period. Revenue climbed to $3.93 billion from $3.39 billion a year ago. Results for the latest quarter received a favorable boost of $133 million, or 15 cents a share, from the recognition of U.S. foreign tax credits, and include a $21 million charge, or 2 cents a share, in after-tax charges related to environmental matters. Analysts surveyed by Thomson Financial estimated quarterly net income of 64 cents a share on revenue of $3.87 billion. Halliburton CEO Dave Lesar said the company expects North American land drilling pricing pressure to continue in the fourth quarter amid a battle for market share. The oil services firm said it'll keep costs under control to preserve its profits. In a more hopeful sign, the company said its expects the pressure pump and drilling business in North America to grow next year, with revenue and operating income expected to increase.
Weatherford International Ltd., the Houston provider of mechanical solutions, technology and services for oil-and-gas drilling and production, reported third-quarter net income rose 25% on 16% higher revenue. Earnings reached $292.7 million, or 84 cents a share, from $234.2 million, or 66 cents, in the year-earlier period. Revenue rose to $1.97 billion from $1.7 billion.
Merck & Co. said its third-quarter profit rose sharply, helped by sales of its vaccines and cholesterol drugs, and raised its 2007 profit forecast in view of strong current trends.
Ernst & Young's ITEM Club, a London-based economic research group, said in a report that it cut its growth forecast for the UK for 2008 to 2.1% from 2.5%. "This is a very timely tightening, targeting parts of the financial sector that were growing too fast and were too dependent on cheap credit," the report said.
Electrolux stated the risk for further decline in the U.S. appliance market, continued raw material cost increases and cost pressures on European margins adds uncertainty to the outlook for 2007.
Californian homes are overvalued by as much as 40 percent and stricter lending standards will probably contribute to ``material'' price declines, according to analysts at Goldman Sachs.
A veteran Wall Street analyst, Irv Zelman, chief executive of the research firm Zelman & Associates, says it's unlikely the U.S. housing market will recover before 2009, adding there's a ``50 to 60 percent chance of a recession,'' as the housing slump curbs consumer spending.
Wolfgang Munchau: "The market in inflation-protected bonds is less liquid than the market for ordinary government bonds. Hence there is a liquidity premium, which raises their price and depresses their yields, leading to a persistent underestimate of future inflationary expectations."
John Hussman: "As of Friday, the Dow and S&P 500 closed Friday within a fraction of a percent of where they were minutes prior to the Fed's September 18th interest rate announcement. And just for the record, the Fed has still added zero liquidity to the banking system. The total amount lent by the Fed to the banking system through the discount window fell again last week to just $240 million. Total bank reserves fell in September, from $44.9 billion to $42.5 billion. The monetary base – the only monetary aggregate that the Fed directly controls, fell in September from $853.482 billion to $851.279 billion. At least $19 billion of temporary repos will come due on Thursday, so the Fed won't be “injecting liquidity” into the banking system when it predictably rolls these over."
Half of likely US voters said they would never vote for Senator Hillary Clinton for president, a new survey by Zogby International shows. The latest Zogby survey showed 50% of those polled said they would never vote for her, compared with 46% of likely voters who said the same thing in a Zogby survey in March. Among Democratic women, 17% said they would not vote for Clinton.
The Oil Drum: "The German-based Energy Watch Group will release its study in London today saying that global oil production peaked in 2006 - much earlier than most experts had expected. The report, which predicts that production will now fall by 7% a year, comes after oil prices set new records almost every day last week, on Friday hitting more than $90 (£44) a barrel."
The national average price for gasoline rose about 5 cents over the last two weeks, according to a survey released Sunday.The average price of regular gasoline on Friday was $2.80 a gallon, mid-grade was $2.92, and premium was $3.03, oil industry analyst Trilby Lundberg said.
Brett Steenbarger: "In short, there has been no bearish edge to selling into a sizable gap down when the prior day has been down sharply. Indeed, on average, the trader would have made money by buying the open and holding through the following day."
Wachovia cut by 15 cents a share its 2008 profit target for Schlumberger to $5.05 a share on a more conservative outlook for its North American business. "Schlumberger has consistently said activity-related revenue growth is tied to offshore rig count growth," Wachovia said in a note to clients. "But it cautioned about inefficiency in first year activity of newbuild rigs and more generally about susceptibility to slowdowns associated with large, more complicated projects; it also acknoweldged troubled spots including Nigera, Kazakhstan and Libya."
Goodman Global Inc. said it OK'd a deal to be bought by private equity firm Hellman & Friedman LLC for $25.60 a share in cash.
Rohm & Haas Co.said it would seek to raise prices 5% to 15% on most of its chemical products, effective Nov. 1. "The costs of key raw materials" -- such as propylene, ethylene, methanol and others -- "have remained persistently high," said Pierre Brondeau, executive vice president for specialty materials, in a statement.
Gold for December delivery closed down $8.40 at $760 an ounce on the New York Mercantile Exchange. Crude for November delivery closed down $1.04, or 1%, at $87.56 a barrel on the New York Mercantile Exchange. The November front-month contract expired at the end of Monday's session.
Twelve wildfires fed by winds, high temperatures and low humidity have burned more than 100,665 acres (40,739 hectares) from Santa Barbara to San Diego County near the Mexican border, said Daniel Berlant, a spokesman for the California Department of Forestry.
David Yu: "Essentially, for about a month, the tech-heavy Nasdaq Index was on its own zero gravity parabolic flight while the retail sector, which incidentally sells these tech companies' products, was in a deep hole back on earth...If the SPX needed to be recalibrated, the Nasdaq would probably need a major tuneup. In order for the market to get back on track, the variance between the producers and the retailers of their products will have to be corrected."
Apple's net profit was $904 million, or $1.01 per share in its fiscal fourth quarter, compared with $542 million, or 62 cents per share, a year earlier. Revenue was $6.22 billion, up 29 percent from $4.84 billion a year earlier. These results beat Wall Street's average targets of 85 cents per share earnings and $6.06 billion revenue, according to the average forecast on Reuters Estimates. Apple also forecast fiscal first-quarter revenue of $9.2 billion, ahead of the $8.7 billion Wall Street target.
Target Corp. on Monday trimmed its October forecast for sales growth at stores open at least a year to a range of 2% to 4% as the company cited "greater than normal daily volatility and continued disappointing sales results for the first two weeks" of the month. It had previously forecast same-store sales growth of 3% to 5% for October.
General Motors Corp. will lay off 1,000 workers after Thanksgiving at its Lansing, Mich.-plant, which builds the Buick Enclave, Saturn Outlook and GMC Acadia.
Saturday, October 20, 2007
The Music Goes Round And Round
10/21/07 The Music Goes Round And Round
Doug Noland: "Bank Credit ballooned an additional $32.1bn for the week (10/10) surpassing $9.0 TN for the first time. Bank Credit has now posted a 12-week gain of $360bn (18.1% annualized) and y-t-d rise of $707bn, a 10.8% pace. For the week, Securities Credit increased $10.8bn. Loans & Leases jumped $21.3bn to a record $6.606 TN (12-wk gain of $283bn). C&I loans rose $13.3bn, increasing the 2007 growth rate to 22.3%. Real Estate loans increased $7.9bn. Consumer loans added $1.9bn. Securities loans declined $2.2bn, while Other loans added $0.3bn. On the liability side, (previous M3) Large Time Deposits rose $22.4bn (5-wk gain of $100bn).
M2 (narrow) “money” added $1.0bn to a record $7.385 TN (week of 10/8). Narrow “money” has expanded $342bn y-t-d, or 6.1% annualized, and $458bn, or 6.6%, over the past year. For the week, Currency gained $1bn, and Demand & Checkable Deposits jumped $16.5bn. Savings Deposits dropped $25bn, while Small Denominated Deposits added $1.2bn. Retail Money Fund assets increased $7.3bn...The autumn respite from summer Credit tumult has run its course. Global central bankers may have succeeded at least temporarily in their aggressive liquidity operations. This liquidity, however, has characteristically avoided post-Bubble risky mortgages and mortgage-related derivatives. Today, a strong case can be made that Monetary Disorder was only exacerbated. To be sure, the unfolding spectacular bursting of the Mortgage Finance Bubble runs unabated. Meanwhile, myriad other global Bubble excesses have gone to only more dangerous extremes – certainly including global equities markets...It is now becoming clearer to market participants that the major banks in particular have huge exposures to myriad risks market and otherwise, previously having been distributed to various vehicles, structures and market operators. The problem today is that the preponderance of players active in this non-bank risk intermediation have been thinly capitalized and often leveraged. Too many were aggressively writing flood insurance in a drought, without the wherewithal to deal with an eventual flood. There’s now a severe one heading our way whether the Fed cuts rates or not...In the meantime, there is today apparently no alternative than massive banking system inflation. In just 12 weeks, bank Credit has ballooned $360bn. And as much as the unfolding mortgage debacle will impair the banking system, I fear it has already irreparably damaged “Wall Street finance.”..Stock market complacency over the past weeks was astounding. But if the markets head directly south from here, market confidence and the Fed’s capabilities will be tested simultaneously. Lower rates are definitely not the answer. Respite’s Over."
If you are an optimist, you are rooting for a mild recession.
If you are an optimist, then buy on the dip. Be my guest. Run the table.
If you are an optimist, keep your money in dollars. It's like panning for manure.
If you are an optimist, state there is a liquid market when marking to the market.
If you are an optimist, believe treasuries are a flight to quality.
If you are an optimist, reversion to the mean is for yesterdays.
If you are an optimist, then you believe that morals exist in "moral-hazard".
Mike Shedlock: "With "borrow short lend long" strategies everything is fine as long as asset prices rise. However, all hell breaks loose when the value of those long term assets sinks. In adverse conditions, banks are no longer willing to provide short term financing, and instead want their money back. Unfortunately there is no money to give back because the borrowers bet it all on mortgages or other asset backed securities that are now dropping like a rock."
The Associated Press reported currently large amounts of Georgia water are sent downstream to neighboring Florida and Alabama. The drought has heightened tensions among the three states, which have been locked in an ongoing dispute over how to manage the region's limited water supply.
Florida has complained the state is not sending enough water downstream to protect endangered and threatened mussels on the banks of a drying river. And Alabama Gov. Bob Riley has urged the Corps to release more water from Georgia's lakes to help his state cope with the dry conditions.
The Corps manages the water usage between the states. It faced heavy criticism in June when it accidentally released 22 billion gallons of water from Lake Lanier, a major source of drinking water for the fast-growing Atlanta metropolitan area. The error came as the state was sinking into a drought.
Federal officials must allow drought-stricken Georgia to slow the flow of water from its reservoirs, including Lake Lanier, or the state will face a severe water shortage that could affect millions of residents, the state's environmental commissioner warned in a letter to the U.S. Army Corps of Engineers on Friday.
Group of Seven finance ministers and central bankers said the credit-market rout will slow economic growth and strengthened calls for China to let its currency appreciate. ``Recent financial market turbulence, high oil prices and weakness in the U.S. housing sector will likely moderate'' the global expansion, officials said in a statement after meeting in Washington yesterday. ``Our overall economic fundamentals continue to be strong and emerging markets are providing critical impetus.''
Elbert Hubbard: “A pessimist? That's a person who has been intimately acquainted with an optimist.”
Henry To: "Given that railroad companies had been the strongest industry within the Dow Transports over the last 12 months, my guess is that we have seen the top in the Dow Transports in mid July - and at some point, this will put pressure on the Dow Industrials as well. However, given that much of the strength in the U.S. stock market has been focused on the Dow Industrials over the last 7 weeks, there is a good chance that the Dow Industrials will continue to rise over the next couple of weeks, but we believe that any all-time highs will be short-lived. Should this occur, however, chances are that many other major market indices will not confirm this all-time high, such as the Dow Transports, the Dow Utilities, the S&P 400, the Russell 2000, the American Exchange Broker/Dealer, the Value Line Geometric, and the Philadelphia Semiconductor Indices. Should the Dow Industrials make another all-time high - preferably in the 14,200 to 14,500 area, and should this be accompanied by continuing weak breadth and divergences among many market indices, then we will establish a 100% short position in our DJIA Timing System." (Henry established a 50% short on Oct 4th)
Mike Burk: "I think we are at the beginning of a cyclical decline that will take the market below the August lows. The Fed may retard the decline by lowering rates again at the end of the month...I expect the major indices to be lower on Friday October 26 than they were on Friday October 19."
Ayn Rand: “We can evade reality, but we cannot evade the consequences of evading reality."
Doug Noland: "Bank Credit ballooned an additional $32.1bn for the week (10/10) surpassing $9.0 TN for the first time. Bank Credit has now posted a 12-week gain of $360bn (18.1% annualized) and y-t-d rise of $707bn, a 10.8% pace. For the week, Securities Credit increased $10.8bn. Loans & Leases jumped $21.3bn to a record $6.606 TN (12-wk gain of $283bn). C&I loans rose $13.3bn, increasing the 2007 growth rate to 22.3%. Real Estate loans increased $7.9bn. Consumer loans added $1.9bn. Securities loans declined $2.2bn, while Other loans added $0.3bn. On the liability side, (previous M3) Large Time Deposits rose $22.4bn (5-wk gain of $100bn).
M2 (narrow) “money” added $1.0bn to a record $7.385 TN (week of 10/8). Narrow “money” has expanded $342bn y-t-d, or 6.1% annualized, and $458bn, or 6.6%, over the past year. For the week, Currency gained $1bn, and Demand & Checkable Deposits jumped $16.5bn. Savings Deposits dropped $25bn, while Small Denominated Deposits added $1.2bn. Retail Money Fund assets increased $7.3bn...The autumn respite from summer Credit tumult has run its course. Global central bankers may have succeeded at least temporarily in their aggressive liquidity operations. This liquidity, however, has characteristically avoided post-Bubble risky mortgages and mortgage-related derivatives. Today, a strong case can be made that Monetary Disorder was only exacerbated. To be sure, the unfolding spectacular bursting of the Mortgage Finance Bubble runs unabated. Meanwhile, myriad other global Bubble excesses have gone to only more dangerous extremes – certainly including global equities markets...It is now becoming clearer to market participants that the major banks in particular have huge exposures to myriad risks market and otherwise, previously having been distributed to various vehicles, structures and market operators. The problem today is that the preponderance of players active in this non-bank risk intermediation have been thinly capitalized and often leveraged. Too many were aggressively writing flood insurance in a drought, without the wherewithal to deal with an eventual flood. There’s now a severe one heading our way whether the Fed cuts rates or not...In the meantime, there is today apparently no alternative than massive banking system inflation. In just 12 weeks, bank Credit has ballooned $360bn. And as much as the unfolding mortgage debacle will impair the banking system, I fear it has already irreparably damaged “Wall Street finance.”..Stock market complacency over the past weeks was astounding. But if the markets head directly south from here, market confidence and the Fed’s capabilities will be tested simultaneously. Lower rates are definitely not the answer. Respite’s Over."
If you are an optimist, you are rooting for a mild recession.
If you are an optimist, then buy on the dip. Be my guest. Run the table.
If you are an optimist, keep your money in dollars. It's like panning for manure.
If you are an optimist, state there is a liquid market when marking to the market.
If you are an optimist, believe treasuries are a flight to quality.
If you are an optimist, reversion to the mean is for yesterdays.
If you are an optimist, then you believe that morals exist in "moral-hazard".
Mike Shedlock: "With "borrow short lend long" strategies everything is fine as long as asset prices rise. However, all hell breaks loose when the value of those long term assets sinks. In adverse conditions, banks are no longer willing to provide short term financing, and instead want their money back. Unfortunately there is no money to give back because the borrowers bet it all on mortgages or other asset backed securities that are now dropping like a rock."
The Associated Press reported currently large amounts of Georgia water are sent downstream to neighboring Florida and Alabama. The drought has heightened tensions among the three states, which have been locked in an ongoing dispute over how to manage the region's limited water supply.
Florida has complained the state is not sending enough water downstream to protect endangered and threatened mussels on the banks of a drying river. And Alabama Gov. Bob Riley has urged the Corps to release more water from Georgia's lakes to help his state cope with the dry conditions.
The Corps manages the water usage between the states. It faced heavy criticism in June when it accidentally released 22 billion gallons of water from Lake Lanier, a major source of drinking water for the fast-growing Atlanta metropolitan area. The error came as the state was sinking into a drought.
Federal officials must allow drought-stricken Georgia to slow the flow of water from its reservoirs, including Lake Lanier, or the state will face a severe water shortage that could affect millions of residents, the state's environmental commissioner warned in a letter to the U.S. Army Corps of Engineers on Friday.
Group of Seven finance ministers and central bankers said the credit-market rout will slow economic growth and strengthened calls for China to let its currency appreciate. ``Recent financial market turbulence, high oil prices and weakness in the U.S. housing sector will likely moderate'' the global expansion, officials said in a statement after meeting in Washington yesterday. ``Our overall economic fundamentals continue to be strong and emerging markets are providing critical impetus.''
Elbert Hubbard: “A pessimist? That's a person who has been intimately acquainted with an optimist.”
Henry To: "Given that railroad companies had been the strongest industry within the Dow Transports over the last 12 months, my guess is that we have seen the top in the Dow Transports in mid July - and at some point, this will put pressure on the Dow Industrials as well. However, given that much of the strength in the U.S. stock market has been focused on the Dow Industrials over the last 7 weeks, there is a good chance that the Dow Industrials will continue to rise over the next couple of weeks, but we believe that any all-time highs will be short-lived. Should this occur, however, chances are that many other major market indices will not confirm this all-time high, such as the Dow Transports, the Dow Utilities, the S&P 400, the Russell 2000, the American Exchange Broker/Dealer, the Value Line Geometric, and the Philadelphia Semiconductor Indices. Should the Dow Industrials make another all-time high - preferably in the 14,200 to 14,500 area, and should this be accompanied by continuing weak breadth and divergences among many market indices, then we will establish a 100% short position in our DJIA Timing System." (Henry established a 50% short on Oct 4th)
Mike Burk: "I think we are at the beginning of a cyclical decline that will take the market below the August lows. The Fed may retard the decline by lowering rates again at the end of the month...I expect the major indices to be lower on Friday October 26 than they were on Friday October 19."
Ayn Rand: “We can evade reality, but we cannot evade the consequences of evading reality."
Friday, October 19, 2007
Not Just Another Friday
10/20/07 Not Just Another Friday
Caterpillar also now expects 2007 earnings of $5.20 to $5.60 a share, down from its prior estimate of $5.30 to $5.80 a share. Caterpillar's preliminary outlook for 2008 reflects a sales and revenue increase of 5% to 10% and earnings up 5% to 15% from the mid-point of its 2007 estimate.
Steven Madden Ltd. stated that unnamed third parties have expressed interest in buying the company and that shareholders have asked the company to explore alternatives to enhance shareholder value.
For full-year 2007, Harley Davidson expects to ship between 328,000 and 332,000 motorcycles, down from 349,196 in 2006. The company also expects a "modest" decline in revenue and sees full year earnings falling 4% to 6% from 2006. In 2008, Harley anticipates "moderate" revenue growth, and earnings growth in the range of 4% to 7%.
Wachovia Corp.'s third-quarter net profit fell to $1.69 billion, or 89 cents a share, from $1.88 billion, or $1.17 a share, in the year-earlier period. Excluding merger expenses, earnings were $1.71 billion, or 90 cents a share. Analysts polled by Thomson Financial were expecting earnings of $1.03 a share, on average.
Schlumberger Limited's third quarter net income rose 35% to $1.35 billion, or $1.09 a share, from $999.8 million, or 81 cents a share, a year ago. Analysts had been expecting the firm to post earnings per share of $1.07 a share, according to data compiled by Thomson Financial. Sales rose to $5.93 billion, from $5.64 billion a year ago. Schlumberger said that growth in the third quarter was driven by international markets particularly Latin America, Russia, China and Indonesia. "Global demand for oil remains strong while non-OPEC production continues to disappoint," the firm said. However, the company said it could see lower rates for its natural gas processing operations in the U.S. as supplies rise. In addition, the company reported a 3 percent decline in revenue from North America during the third quarter and said it expects delays in Nigeria and Caspian region.
Massachusetts securities regulators have started a probe into whether Bear Stearns Cos. improperly traded with two in-house hedge funds, the Wall Street Journal reported on Friday.
Honeywell International Inc said on Friday profit rose 14.2 percent amid continued strong demand from the aerospace and commercial construction sectors, but results were slightly below Wall Street's expectations.
September home sales in Northern California sank to their lowest level in two decades as mortgages became harder to get, a real estate research firm said Thursday. A total of 5,014 new and resale homes and condominiums were sold last month in nine San Francisco Bay Area counties, a 40.1% drop from the same period a year earlier, according to DataQuick Information Systems.
Last month was the slowest September since the firm began keeping records in 1988.
The Bank of Japan remains committed to raising interest rates as the world's second-largest economy extends its expansion, Deputy Governor Toshiro Muto said. There have bee fits and starts; however, in my view, the carry trade is doomed.
Paul Kasriel: "Multi-family starts fell 34.3% in September whereas single-family starts were down only 1.7%. In terms of permits, the September declines were more evenly distributed - multi-family permits down 7.7% month-to-month in September and single-family permits down 7.1%. Single-family construction is much easier to turn off or on in response to changing demand conditions than is multi-family construction. Given the expectations of weak housing demand as far as the eye can see and given the glut of empty condos around the country, my bet is that the September weakness in multi-family starts will become the norm over the next 12 months."
Richard Daughty: But he (John Williams of Government Shadow Statistics) was not through with me yet, as he went on to report that the federal government will find that "the financial statements for the year will show a deficit based on generally accepted accounting principles likely well in excess of $4 trillion, come mid-December." Four trillion bucks a year in current and deferred federal government spending! A third of GDP! Yikes!" That's what you get with a kinder and smaller government!
Bloomberg: "The New York Board of Trade's dollar index touched 77.406, the weakest since the index began in 1973, down from its 2007 high of 85.28 on January 11."
Commonwealth Edison wants to raise electric bills by roughly 8 percent to replace aging infrastructure in some areas and extend service in fast-growing collar counties.
Roughly 3,300 people working in the western suburbs for oil giant BP PLC received notice today that many will be relocated, and some laid off, as part of the restructuring the company announced late last week, the Tribune has learned.
LA Times: "The commission's (FCC)Republican majority is expected to approve Tribune's request. Adelstein and Copps said Thursday that they were prepared to vote on the waivers."It's entirely inappropriate to exploit the urgency of a business transaction to leverage another agenda," Adelstein said. "It's just not fair to hold it hostage." Martin declined to comment. But his spokeswoman, Tamara Lipper, said the Tribune deal was not a factor in his proposed date for the media ownership vote, which she said Martin would consider changing.
"This has nothing to do with any particular transaction," Lipper said. "This has only to do with the fact that he thought this was the appropriate time given where we are in the process to begin a dialogue with his colleagues about how we could bring this to a close." Although Martin probably has enough support from fellow Republicans on the commission to pass whatever media ownership changes he proposes, he prefers a consensus on almost every vote. His move to link Tribune to the broader media ownership issue could help draw Adelstein's vote, as well as limit backlash from key congressional Democrats such as Sen. Richard J. Durbin (D-Ill.), who wrote to Martin in June to urge prompt action on the waivers."
McDonald's Corp., the world's largest restaurant company, said third-quarter profit increased 27 percent, helped by coffee and chicken in the U.S. and burgers in Europe.
Gilead Sciences posted Q3 earnings and sales above Wall Street consensus estimates.
Intuitive Surgical traded up almost 5% after beating earnings and raising guidance.
Todd Harrison pointed out that Thursday's Investor's Intelligence sentiment survey (that showed 62% bulls) was the highest reading since December 2004.
According to AMG Data, Including ETF activity, Equity funds report net cash inflows totaling $302 million in the week ended 10/17/07 with Domestic funds reporting net outflows of -$2.541 billion and Non-domestic funds reporting net inflows of $2.843 billion; Excluding ETF activity, Equity funds report net cash inflows totaling $894 million with Domestic funds reporting net inflows of $225 million and Non-domestic funds reporting net inflows totaling $669 million; Money Market funds report net cash inflows totaling $20.100 billion bringing the total net assets invested in the sector to a record $2.87 Trillion.
Home builder NVR Inc. stated new orders rose 12% to 2,660 units although it noted activity slowed "significantly" in August and September due to tightening in credit markets. The average new-order price in the third quarter fell 9% from a year earlier to $330,100, the builder said. The cancellation rate rose to 27% from 16% in the second quarter.
Robert McHugh: "We got a third consecutive Hindenburg Omen observation on Thursday, October 18th. These are the first observations since July 2007, so we consider it the start of another cluster. This is important because for all the statistical probabilities of a coming major decline to apply, there need to be at least two Hindenburg Omen observations within a thirty day period. We now we have three, which means there is a much higher than normal probability that a significant stock market decline will occur within the next four months, with the greatest likelihood being the decline would start within 41 days."
According to Bloomberg, credit-default swaps rose the most in three months this week as a planned $80 billion fund to rescue structured investment vehicles failed to stop two funds from warning they may be unable to repay debt.
Pakistan's central bank will continue with its ``monetary tightening'' to contain inflation, central bank Governor Shamshad Akhtar said.
Cabela's Inc., the retailer of hunting, fishing and camping equipment, reduced its forecast, saying it expects 2007 earnings to increase ``at a high single digit growth rate.'' The company had anticipated growth of more than 10 percent.
SanDisk Corp., the world's largest maker of digital-camera memory chips, said prices in the fourth quarter will fall ``moderately more'' than the 16 percent drop in the third quarter.
MMM reported third-quarter revenue of $6.18 billion, missing its projection of $6.29 billion.
One might ponder the following: the 10-year Treasury yield this week collapsed to 4.39%. At the same time, the Dow Jones Utility Average dropped from 520 to 498. Normally, the latter will rise as rates decline, and two-year note yields have fallen 40 basis points this week to the lowest since September 2005. The last time they had a bigger decrease was in the week ended Jan. 11, 2002. Futures traded on the Chicago Board of Trade suggested a 94 percent chance the Fed will reduce the target rate for overnight lending between banks a quarter-percentage point to 4.5 percent on Oct. 31, compared with 32 percent odds a week ago. What a difference a week makes.
Wachovia on Friday warned that the downturn in US credit markets might extend into next year as writedowns from losses on leveraged loans and mortgage-backed securities triggered a 10 per cent drop in third-quarter earnings.
"The reality of hunger is right here," said the Rev. Melony Samuels, director of The BedStuy Campaign against Hunger, a church-affiliated food pantry in Brooklyn. The pantry scrambled to feed 5,000 new families over the past 12 months, up almost 70 percent from 3,000 the year before.
"I am shocked to see such numbers," Samuels said, "and I am really concerned that this is just the beginning of what we are going to see."
In the past three months, Samuels has seen more clients in higher-paying jobs -- the $35,000 range -- line up for food as the fallout of the subprime mortgage woes takes hold. The Regional Food Bank of Northeastern New York, which covers 23 counties in New York State, cited a 30 percent rise in visitors in the first nine months of this year, compared with 2006.
The Dow wasn't even down 370 points on Friday and the pundits are talking about fear. Look at Amazon, Apple, Google, Garmin, RIMM, VMware, Yahoo, Intuitive Surgical etc etc. Shareholders in those companies are smelling money. The fear is in the financials. Yet, Bear Stearns is still trading at $117 and only a few days ago Goldman Sachs was at $235. The bottom line is simple: the blood hasn't even begun to run in the streets. Give me a break about the fear factor. It's pure BS.
Caterpillar also now expects 2007 earnings of $5.20 to $5.60 a share, down from its prior estimate of $5.30 to $5.80 a share. Caterpillar's preliminary outlook for 2008 reflects a sales and revenue increase of 5% to 10% and earnings up 5% to 15% from the mid-point of its 2007 estimate.
Steven Madden Ltd. stated that unnamed third parties have expressed interest in buying the company and that shareholders have asked the company to explore alternatives to enhance shareholder value.
For full-year 2007, Harley Davidson expects to ship between 328,000 and 332,000 motorcycles, down from 349,196 in 2006. The company also expects a "modest" decline in revenue and sees full year earnings falling 4% to 6% from 2006. In 2008, Harley anticipates "moderate" revenue growth, and earnings growth in the range of 4% to 7%.
Wachovia Corp.'s third-quarter net profit fell to $1.69 billion, or 89 cents a share, from $1.88 billion, or $1.17 a share, in the year-earlier period. Excluding merger expenses, earnings were $1.71 billion, or 90 cents a share. Analysts polled by Thomson Financial were expecting earnings of $1.03 a share, on average.
Schlumberger Limited's third quarter net income rose 35% to $1.35 billion, or $1.09 a share, from $999.8 million, or 81 cents a share, a year ago. Analysts had been expecting the firm to post earnings per share of $1.07 a share, according to data compiled by Thomson Financial. Sales rose to $5.93 billion, from $5.64 billion a year ago. Schlumberger said that growth in the third quarter was driven by international markets particularly Latin America, Russia, China and Indonesia. "Global demand for oil remains strong while non-OPEC production continues to disappoint," the firm said. However, the company said it could see lower rates for its natural gas processing operations in the U.S. as supplies rise. In addition, the company reported a 3 percent decline in revenue from North America during the third quarter and said it expects delays in Nigeria and Caspian region.
Massachusetts securities regulators have started a probe into whether Bear Stearns Cos. improperly traded with two in-house hedge funds, the Wall Street Journal reported on Friday.
Honeywell International Inc said on Friday profit rose 14.2 percent amid continued strong demand from the aerospace and commercial construction sectors, but results were slightly below Wall Street's expectations.
September home sales in Northern California sank to their lowest level in two decades as mortgages became harder to get, a real estate research firm said Thursday. A total of 5,014 new and resale homes and condominiums were sold last month in nine San Francisco Bay Area counties, a 40.1% drop from the same period a year earlier, according to DataQuick Information Systems.
Last month was the slowest September since the firm began keeping records in 1988.
The Bank of Japan remains committed to raising interest rates as the world's second-largest economy extends its expansion, Deputy Governor Toshiro Muto said. There have bee fits and starts; however, in my view, the carry trade is doomed.
Paul Kasriel: "Multi-family starts fell 34.3% in September whereas single-family starts were down only 1.7%. In terms of permits, the September declines were more evenly distributed - multi-family permits down 7.7% month-to-month in September and single-family permits down 7.1%. Single-family construction is much easier to turn off or on in response to changing demand conditions than is multi-family construction. Given the expectations of weak housing demand as far as the eye can see and given the glut of empty condos around the country, my bet is that the September weakness in multi-family starts will become the norm over the next 12 months."
Richard Daughty: But he (John Williams of Government Shadow Statistics) was not through with me yet, as he went on to report that the federal government will find that "the financial statements for the year will show a deficit based on generally accepted accounting principles likely well in excess of $4 trillion, come mid-December." Four trillion bucks a year in current and deferred federal government spending! A third of GDP! Yikes!" That's what you get with a kinder and smaller government!
Bloomberg: "The New York Board of Trade's dollar index touched 77.406, the weakest since the index began in 1973, down from its 2007 high of 85.28 on January 11."
Commonwealth Edison wants to raise electric bills by roughly 8 percent to replace aging infrastructure in some areas and extend service in fast-growing collar counties.
Roughly 3,300 people working in the western suburbs for oil giant BP PLC received notice today that many will be relocated, and some laid off, as part of the restructuring the company announced late last week, the Tribune has learned.
LA Times: "The commission's (FCC)Republican majority is expected to approve Tribune's request. Adelstein and Copps said Thursday that they were prepared to vote on the waivers."It's entirely inappropriate to exploit the urgency of a business transaction to leverage another agenda," Adelstein said. "It's just not fair to hold it hostage." Martin declined to comment. But his spokeswoman, Tamara Lipper, said the Tribune deal was not a factor in his proposed date for the media ownership vote, which she said Martin would consider changing.
"This has nothing to do with any particular transaction," Lipper said. "This has only to do with the fact that he thought this was the appropriate time given where we are in the process to begin a dialogue with his colleagues about how we could bring this to a close." Although Martin probably has enough support from fellow Republicans on the commission to pass whatever media ownership changes he proposes, he prefers a consensus on almost every vote. His move to link Tribune to the broader media ownership issue could help draw Adelstein's vote, as well as limit backlash from key congressional Democrats such as Sen. Richard J. Durbin (D-Ill.), who wrote to Martin in June to urge prompt action on the waivers."
McDonald's Corp., the world's largest restaurant company, said third-quarter profit increased 27 percent, helped by coffee and chicken in the U.S. and burgers in Europe.
Gilead Sciences posted Q3 earnings and sales above Wall Street consensus estimates.
Intuitive Surgical traded up almost 5% after beating earnings and raising guidance.
Todd Harrison pointed out that Thursday's Investor's Intelligence sentiment survey (that showed 62% bulls) was the highest reading since December 2004.
According to AMG Data, Including ETF activity, Equity funds report net cash inflows totaling $302 million in the week ended 10/17/07 with Domestic funds reporting net outflows of -$2.541 billion and Non-domestic funds reporting net inflows of $2.843 billion; Excluding ETF activity, Equity funds report net cash inflows totaling $894 million with Domestic funds reporting net inflows of $225 million and Non-domestic funds reporting net inflows totaling $669 million; Money Market funds report net cash inflows totaling $20.100 billion bringing the total net assets invested in the sector to a record $2.87 Trillion.
Home builder NVR Inc. stated new orders rose 12% to 2,660 units although it noted activity slowed "significantly" in August and September due to tightening in credit markets. The average new-order price in the third quarter fell 9% from a year earlier to $330,100, the builder said. The cancellation rate rose to 27% from 16% in the second quarter.
Robert McHugh: "We got a third consecutive Hindenburg Omen observation on Thursday, October 18th. These are the first observations since July 2007, so we consider it the start of another cluster. This is important because for all the statistical probabilities of a coming major decline to apply, there need to be at least two Hindenburg Omen observations within a thirty day period. We now we have three, which means there is a much higher than normal probability that a significant stock market decline will occur within the next four months, with the greatest likelihood being the decline would start within 41 days."
According to Bloomberg, credit-default swaps rose the most in three months this week as a planned $80 billion fund to rescue structured investment vehicles failed to stop two funds from warning they may be unable to repay debt.
Pakistan's central bank will continue with its ``monetary tightening'' to contain inflation, central bank Governor Shamshad Akhtar said.
Cabela's Inc., the retailer of hunting, fishing and camping equipment, reduced its forecast, saying it expects 2007 earnings to increase ``at a high single digit growth rate.'' The company had anticipated growth of more than 10 percent.
SanDisk Corp., the world's largest maker of digital-camera memory chips, said prices in the fourth quarter will fall ``moderately more'' than the 16 percent drop in the third quarter.
MMM reported third-quarter revenue of $6.18 billion, missing its projection of $6.29 billion.
One might ponder the following: the 10-year Treasury yield this week collapsed to 4.39%. At the same time, the Dow Jones Utility Average dropped from 520 to 498. Normally, the latter will rise as rates decline, and two-year note yields have fallen 40 basis points this week to the lowest since September 2005. The last time they had a bigger decrease was in the week ended Jan. 11, 2002. Futures traded on the Chicago Board of Trade suggested a 94 percent chance the Fed will reduce the target rate for overnight lending between banks a quarter-percentage point to 4.5 percent on Oct. 31, compared with 32 percent odds a week ago. What a difference a week makes.
Wachovia on Friday warned that the downturn in US credit markets might extend into next year as writedowns from losses on leveraged loans and mortgage-backed securities triggered a 10 per cent drop in third-quarter earnings.
"The reality of hunger is right here," said the Rev. Melony Samuels, director of The BedStuy Campaign against Hunger, a church-affiliated food pantry in Brooklyn. The pantry scrambled to feed 5,000 new families over the past 12 months, up almost 70 percent from 3,000 the year before.
"I am shocked to see such numbers," Samuels said, "and I am really concerned that this is just the beginning of what we are going to see."
In the past three months, Samuels has seen more clients in higher-paying jobs -- the $35,000 range -- line up for food as the fallout of the subprime mortgage woes takes hold. The Regional Food Bank of Northeastern New York, which covers 23 counties in New York State, cited a 30 percent rise in visitors in the first nine months of this year, compared with 2006.
The Dow wasn't even down 370 points on Friday and the pundits are talking about fear. Look at Amazon, Apple, Google, Garmin, RIMM, VMware, Yahoo, Intuitive Surgical etc etc. Shareholders in those companies are smelling money. The fear is in the financials. Yet, Bear Stearns is still trading at $117 and only a few days ago Goldman Sachs was at $235. The bottom line is simple: the blood hasn't even begun to run in the streets. Give me a break about the fear factor. It's pure BS.
Thursday, October 18, 2007
The Financials And The Danger Game
10/19/07 The Financials And The Danger Game
Washington Mutual reported a 72% decline in quarterly earnings and stated the ongoing weakness in the mortgage market would hurt results through the end of the year. What makes them think it will be better in 2008?
SunTrust Banks Inc. reported third-quarter earnings fell 23% on flat revenue, reflecting net valuation losses and severance expenses. The net valuation losses -- SunTrust marked to market valuations on loan warehouses and trading assets and liabilities carried at fair value -- knocked 28 cents a share off earnings. The severance costs -- for 2,400 job cuts in 2007 and planned for 2008 -- cut another 8 cents. Revenue was $2.04 billion vs. $2.03 billion.
Bank of America Corp.'s third-quarter earnings slid 32% to $3.7 billion, or 82 cents a share, from $5.42 billion, or $1.18 a share, a year earlier, hurt in part by a decline in global corporate and investment banking revenue. The results were significantly below expectations. The Charlotte, N.C. commercial bank's net interest income rose to $8.62 billion from $8.59 billion, while its provision for credit losses increased to $2.03 billion from $1.17 billion a year ago. Trading revenues declined over 90%!. Trading losses, defaults and writedowns cost almost $4 billion. The company's CFO sees home equity chargeoffs rising.
UnitedHealth said it is targeting earnings in a range of $3.49 to $3.50 a share for 2007. Earnings for 2008 are seen in a range of $3.95 to $4.00 a share and the company said it is planning to buy back around $7 billion of its shares by the end of 2008.
The country's vice head of National Development and Reform Commission, Zhu Zhixin, said Thursday in Beijing that the consumer price index in September increased by 6.2% from a year ago, after rising as much as 6.5% in the previous month, according to Reuters. "Prices may run at a high level for some time, but the possibility of a significant price rise is small," said Zhu, according to the report. When will this inflation be exported?
Chinese state-owned Citic Bank said Thursday it has held no talks with Bear Stearns about buying a stake in the U.S. investment bank, just days after a Chinese regulator said such a bid was under way.
Nokia's profit rose 85%.
Leading Wall Street chief executives predicted a 37% chance of a U.S. economic recession in the next 12 months, according to a survey released Wednesday.
In April, when the previous Financial Services Forum semiannual survey was conducted, the executives saw only a 24% chance of a recession in the coming 12 months.The forum is a policy group made up of the chief executives of 20 of the world's largest financial institutions, including Citigroup Inc., Morgan Stanley, Goldman Sachs Group and MetLife Inc.
The International Monetary Fund said thedollar “remains overvalued” and rejected claims the euro had risen too far. Contradicting Rodrigo Rato, the outgoing IMF managing director, who last week said “right now the dollar is undervalued”, the fund’s staff conclude the dollar is still too high. The multilateral lender also forecast slower growth in 2008 at 4.75 per cent, compared with 5.2 per cent expected this year.
PMI Group Inc., the second-largest U.S. mortgage insurer, forecast a third-quarter loss of $1.05 a share, citing losses in its U.S. unit and a drop in the value of its stake in Financial Guaranty Insurance Company. PMI's U.S. mortgage unit will incur losses amounting to $350 million in the quarter after the worst housing market for 16 years drove up home-loan defaults.
MGIC Investment Corp., the largest U.S. mortgage insurer, posted its first quarterly loss in 16 years and said it won't be profitable in 2008 as foreclosures increase from record levels. The net loss of $372.5 million, or $4.60 a share, was the worst quarter for the Milwaukee-based company since it went public in 1991.
Since July, 991 buy-to-let mortgage products - 72 per cent of the total - aimed at subprime customers with patchy credit histories have been withdrawn. In prime buy-to-let mortgages 438 products have been withdrawn, plus another 611 products - about 16 per cent of the mortgage deals on offer - in prime residential mortgage lending.
Thomas Tan: "The sub-prime is only the 1st layer of the onion being peeled, there is much worse danger yet to be revealed. It is amazing to see the high growth in all kinds of fixed income products during last 10 years called SIVs (structured investment Vehicles) such as RMBSs (residential mortgage backed securities), CDOs (collateralized debt obligations), ABS (asset backed securities for credit cards and auto loans), and all the OTC (over the counter) erotic and complex credit derivatives associated with them created and held by Wall St banks and financial institutions. This has been the largest financial alchemy after the medieval gold alchemy. Similar to medieval, this could turn out to be a pipe dream. The questions to be asked: Are these products really securitized, collateralized and backed by anything as claimed? Are these OTC credit derivatives really creating value as claimed? In general, most of these derivatives are unregulated, lack of any standards, no transparency, not public traded, no bid/ask price but an assigned "price" by the black box computer model, and no clearinghouse to guarantee anything. Their values thus returns are marked to model instead of marked to market, when in trouble, they are totally dependent on the balance sheet of their counterparts for survivability...What deepens this crisis is the level of leverage. Leverage is a double edge sword. Many hedge funds in trouble these days are the ones having over 5 to 1 leverage on their portfolio in order to generate double digit paper "return". Imaging 16-19% times only a leverage factor of 5, basically the whole portfolio is wiped out. This is exactly what happened to the two Bear Stearns hedge funds, they leveraged to 8 to 1, and got totally wiped out."
Dan Castellaneta: “All right, let's not panic. I'll make the money by selling one of my livers. I can get by with one.”
The National Association of Home Builders reported that current buyer traffic fell to a record low.
The dollar hit a record low against the euro on Thursday.
The head of the Federal Communications Commission has circulated an ambitious plan to relax the decades-old media ownership rules, including repealing a rule that forbids a company to own both a newspaper and a television or radio station in the same city. This would be a big plus towards completing the Tribune deal.
The Labor Department reported Thursday that applications for jobless benefits hit 337,000 last week, an increase of 28,000 from the previous week. That was the biggest one-week surge since jobless claims jumped 42,000 the week of Feb. 10.The increase was four times larger than the gain of 6,000 that economists had been expecting.
Nouriel Roubini: "A rookie central banker. Rising, unsustainable deficits. Rampant financial speculation. A burgeoning trade war with China. Why another financial meltdown is more likely than ever."
Ethanol and grain producer The Andersons Inc. projected earnings per share of between $3.15 and $3.35, up from previous guidance of $2.90 to $3.15 per share.
Hershey Co., the largest U.S. candy maker, said third-quarter profit fell more than analysts estimated and lowered its annual earnings and sales forecasts as Mars Inc. took market share and higher dairy prices raised expenses.
Wal-Mart Stores Inc. cut prices on 15,000 items this week, a 20% increase from its cuts last year. These price cuts come after it slashed prices earlier this month on toys. Additional discounts on electronics, home merchandise, food, and toys will be announced "in the days to come."
The Conference Board said Thursday, reporting that a gauge of future economic growth rose 0.3% in September. Seven of the 10 leading economic indicators increased in September. "So while the financial markets gyrated and the slump in housing intensified, the economy continued to perform at a slow but steady pace," said Ken Goldstein, labor economist at the Conference Board.
Robert McHugh: "We got another Hindenburg Omen observation on Tuesday, October 16th. This is the first observation since July 2007, so we need to exclude it from the July cluster as we are now four months past the last cluster's first observation. We consider Tuesday's observation the start of another cluster. This is important because for all the statistical probabilities of a coming major decline to apply, there need to be at least two Hindenburg Omen observations within a thirty day period. So, now we have the first, which means if we get another over the next month, there is a much higher than normal probability that a significant stock market decline will occur within the next four months, with the greatest likelihood being the decline would start within 41 days...We got a second consecutive Hindenburg Omen observation on Wednesday, October 17th, after yesterday's. These are the first observations since July 2007, so we consider it the start of another cluster. This is important because for all the statistical probabilities of a coming major decline to apply, there need to be at least two Hindenburg Omen observations within a thirty day period. We now we have two, which means there is a much higher than normal probability that a significant stock market decline will occur within the next four months, with the greatest likelihood being the decline would start within 41 days...Let's put it this way, while the odds greatly increase for a major decline now that we have a second observation, that does not mean one will come. It does mean that the odds are astronomically greater than random. The odds of a stock market crash are 25 percent, for example. All the major declines of the past 25 years were preceded by a confirmed (more than two observations within 30 days) Hindenburg Omen. There were no major declines without one preceding it. Now that a second observation has occurred within a 30 day period, that argues for scenario # 1 occurring, a deeper correction, perhaps as much as 1,500 points in the Dow Industrials. There have been instances where the subsequent decline after a confirmed Hindenburg Omen was as low as 4 or 5 percent, so scenario # 2, a minor decline is possible. However, we find it fascinating that we have another confirmed Hindenburg Omen right after a major phi mate and Fibonacci Cluster turn window. Plus a major Bradley model turn date occurred today, so something memorable may be coming."
The level of outstanding asset-backed commercial paper fell by $11 billion, or 1.2%, to $888.3 billion in the week ending Wednesday, the Federal Reserve reported Thursday. Asset-backed paper has fallen for 10 straight weeks, dropping by $295 billion, or 25%.
The Denison Alcoa plant will close. The announcement came from Ply Gem Industries that approximately 180 workers will be jobless. Ply Gem is one of the country’s leading manufacturers of residential exterior building products.
The Philly Fed index dipped to 6.8 in October from 10.9 in September.
John Williams and his Shadow Government Statistics through September:
M3 money supply growing at 14+% and inflation running at 10+%. It is not surprising to find oil above $89 a barrel, gold above $768, and the U.S. dollar index close to making another new multi year low. Why would a foreign entity want to buy dollar denominated assets with rampant inflation and raging credit deterioration? The consumer's balance sheet is under siege and the U.S. government is sinking under deficits. All that is a recipe for the Dow at 14,000?
Buying is picking up in Sallie Mae and its call options.
Chinese investors decreased their holdings of U.S. government debt $8.8 billion in August, while Japanese investments declined $24.8 billion, the Treasury said.
American Standard Cos. lowered its profit outlook for the year because of continued weakness in the residential housing market and high warranty costs.
U.S. banks had borrowed $10 million from the Federal Reserve's discount window as of Wednesday, the Fed said. On Wednesday, outstanding primary credit loans from the Fed (also known as the discount window) totaled $10 million, down from $40 million the previous Wednesday, and far below the $7.2 billion borrowed on Sept. 12.
Excluding certain items, Google said earnings for the period were $3.91 a share. Net revenue, or revenue minus payments made to other sites to acquire Internet traffic, came in at $3.01 billion, Google said. Considering how young a company Google is, these numbers are truly extraordinary. How many companies earn over $1 billion in three months on revenue of $3 billion?
Light, sweet crude for November delivery hit $90.02 in electronic trading Thursday evening. It was only about one year ago that crude had dropped in a straight line to about $50 a barrel. Lots of my friends criticized my thinking for loading up from $60 on down. That's my modus operandi-- to buy on the way down. Each to his own. I continue to believe that patient investors will be rewarded by accumulating natural gas. One way is to buy the ETF under the symbol UNG. It's about $41 and the range is roughly $33 to $54.
Sophocles: “If you are out of trouble, watch for danger."
Washington Mutual reported a 72% decline in quarterly earnings and stated the ongoing weakness in the mortgage market would hurt results through the end of the year. What makes them think it will be better in 2008?
SunTrust Banks Inc. reported third-quarter earnings fell 23% on flat revenue, reflecting net valuation losses and severance expenses. The net valuation losses -- SunTrust marked to market valuations on loan warehouses and trading assets and liabilities carried at fair value -- knocked 28 cents a share off earnings. The severance costs -- for 2,400 job cuts in 2007 and planned for 2008 -- cut another 8 cents. Revenue was $2.04 billion vs. $2.03 billion.
Bank of America Corp.'s third-quarter earnings slid 32% to $3.7 billion, or 82 cents a share, from $5.42 billion, or $1.18 a share, a year earlier, hurt in part by a decline in global corporate and investment banking revenue. The results were significantly below expectations. The Charlotte, N.C. commercial bank's net interest income rose to $8.62 billion from $8.59 billion, while its provision for credit losses increased to $2.03 billion from $1.17 billion a year ago. Trading revenues declined over 90%!. Trading losses, defaults and writedowns cost almost $4 billion. The company's CFO sees home equity chargeoffs rising.
UnitedHealth said it is targeting earnings in a range of $3.49 to $3.50 a share for 2007. Earnings for 2008 are seen in a range of $3.95 to $4.00 a share and the company said it is planning to buy back around $7 billion of its shares by the end of 2008.
The country's vice head of National Development and Reform Commission, Zhu Zhixin, said Thursday in Beijing that the consumer price index in September increased by 6.2% from a year ago, after rising as much as 6.5% in the previous month, according to Reuters. "Prices may run at a high level for some time, but the possibility of a significant price rise is small," said Zhu, according to the report. When will this inflation be exported?
Chinese state-owned Citic Bank said Thursday it has held no talks with Bear Stearns about buying a stake in the U.S. investment bank, just days after a Chinese regulator said such a bid was under way.
Nokia's profit rose 85%.
Leading Wall Street chief executives predicted a 37% chance of a U.S. economic recession in the next 12 months, according to a survey released Wednesday.
In April, when the previous Financial Services Forum semiannual survey was conducted, the executives saw only a 24% chance of a recession in the coming 12 months.The forum is a policy group made up of the chief executives of 20 of the world's largest financial institutions, including Citigroup Inc., Morgan Stanley, Goldman Sachs Group and MetLife Inc.
The International Monetary Fund said thedollar “remains overvalued” and rejected claims the euro had risen too far. Contradicting Rodrigo Rato, the outgoing IMF managing director, who last week said “right now the dollar is undervalued”, the fund’s staff conclude the dollar is still too high. The multilateral lender also forecast slower growth in 2008 at 4.75 per cent, compared with 5.2 per cent expected this year.
PMI Group Inc., the second-largest U.S. mortgage insurer, forecast a third-quarter loss of $1.05 a share, citing losses in its U.S. unit and a drop in the value of its stake in Financial Guaranty Insurance Company. PMI's U.S. mortgage unit will incur losses amounting to $350 million in the quarter after the worst housing market for 16 years drove up home-loan defaults.
MGIC Investment Corp., the largest U.S. mortgage insurer, posted its first quarterly loss in 16 years and said it won't be profitable in 2008 as foreclosures increase from record levels. The net loss of $372.5 million, or $4.60 a share, was the worst quarter for the Milwaukee-based company since it went public in 1991.
Since July, 991 buy-to-let mortgage products - 72 per cent of the total - aimed at subprime customers with patchy credit histories have been withdrawn. In prime buy-to-let mortgages 438 products have been withdrawn, plus another 611 products - about 16 per cent of the mortgage deals on offer - in prime residential mortgage lending.
Thomas Tan: "The sub-prime is only the 1st layer of the onion being peeled, there is much worse danger yet to be revealed. It is amazing to see the high growth in all kinds of fixed income products during last 10 years called SIVs (structured investment Vehicles) such as RMBSs (residential mortgage backed securities), CDOs (collateralized debt obligations), ABS (asset backed securities for credit cards and auto loans), and all the OTC (over the counter) erotic and complex credit derivatives associated with them created and held by Wall St banks and financial institutions. This has been the largest financial alchemy after the medieval gold alchemy. Similar to medieval, this could turn out to be a pipe dream. The questions to be asked: Are these products really securitized, collateralized and backed by anything as claimed? Are these OTC credit derivatives really creating value as claimed? In general, most of these derivatives are unregulated, lack of any standards, no transparency, not public traded, no bid/ask price but an assigned "price" by the black box computer model, and no clearinghouse to guarantee anything. Their values thus returns are marked to model instead of marked to market, when in trouble, they are totally dependent on the balance sheet of their counterparts for survivability...What deepens this crisis is the level of leverage. Leverage is a double edge sword. Many hedge funds in trouble these days are the ones having over 5 to 1 leverage on their portfolio in order to generate double digit paper "return". Imaging 16-19% times only a leverage factor of 5, basically the whole portfolio is wiped out. This is exactly what happened to the two Bear Stearns hedge funds, they leveraged to 8 to 1, and got totally wiped out."
Dan Castellaneta: “All right, let's not panic. I'll make the money by selling one of my livers. I can get by with one.”
The National Association of Home Builders reported that current buyer traffic fell to a record low.
The dollar hit a record low against the euro on Thursday.
The head of the Federal Communications Commission has circulated an ambitious plan to relax the decades-old media ownership rules, including repealing a rule that forbids a company to own both a newspaper and a television or radio station in the same city. This would be a big plus towards completing the Tribune deal.
The Labor Department reported Thursday that applications for jobless benefits hit 337,000 last week, an increase of 28,000 from the previous week. That was the biggest one-week surge since jobless claims jumped 42,000 the week of Feb. 10.The increase was four times larger than the gain of 6,000 that economists had been expecting.
Nouriel Roubini: "A rookie central banker. Rising, unsustainable deficits. Rampant financial speculation. A burgeoning trade war with China. Why another financial meltdown is more likely than ever."
Ethanol and grain producer The Andersons Inc. projected earnings per share of between $3.15 and $3.35, up from previous guidance of $2.90 to $3.15 per share.
Hershey Co., the largest U.S. candy maker, said third-quarter profit fell more than analysts estimated and lowered its annual earnings and sales forecasts as Mars Inc. took market share and higher dairy prices raised expenses.
Wal-Mart Stores Inc. cut prices on 15,000 items this week, a 20% increase from its cuts last year. These price cuts come after it slashed prices earlier this month on toys. Additional discounts on electronics, home merchandise, food, and toys will be announced "in the days to come."
The Conference Board said Thursday, reporting that a gauge of future economic growth rose 0.3% in September. Seven of the 10 leading economic indicators increased in September. "So while the financial markets gyrated and the slump in housing intensified, the economy continued to perform at a slow but steady pace," said Ken Goldstein, labor economist at the Conference Board.
Robert McHugh: "We got another Hindenburg Omen observation on Tuesday, October 16th. This is the first observation since July 2007, so we need to exclude it from the July cluster as we are now four months past the last cluster's first observation. We consider Tuesday's observation the start of another cluster. This is important because for all the statistical probabilities of a coming major decline to apply, there need to be at least two Hindenburg Omen observations within a thirty day period. So, now we have the first, which means if we get another over the next month, there is a much higher than normal probability that a significant stock market decline will occur within the next four months, with the greatest likelihood being the decline would start within 41 days...We got a second consecutive Hindenburg Omen observation on Wednesday, October 17th, after yesterday's. These are the first observations since July 2007, so we consider it the start of another cluster. This is important because for all the statistical probabilities of a coming major decline to apply, there need to be at least two Hindenburg Omen observations within a thirty day period. We now we have two, which means there is a much higher than normal probability that a significant stock market decline will occur within the next four months, with the greatest likelihood being the decline would start within 41 days...Let's put it this way, while the odds greatly increase for a major decline now that we have a second observation, that does not mean one will come. It does mean that the odds are astronomically greater than random. The odds of a stock market crash are 25 percent, for example. All the major declines of the past 25 years were preceded by a confirmed (more than two observations within 30 days) Hindenburg Omen. There were no major declines without one preceding it. Now that a second observation has occurred within a 30 day period, that argues for scenario # 1 occurring, a deeper correction, perhaps as much as 1,500 points in the Dow Industrials. There have been instances where the subsequent decline after a confirmed Hindenburg Omen was as low as 4 or 5 percent, so scenario # 2, a minor decline is possible. However, we find it fascinating that we have another confirmed Hindenburg Omen right after a major phi mate and Fibonacci Cluster turn window. Plus a major Bradley model turn date occurred today, so something memorable may be coming."
The level of outstanding asset-backed commercial paper fell by $11 billion, or 1.2%, to $888.3 billion in the week ending Wednesday, the Federal Reserve reported Thursday. Asset-backed paper has fallen for 10 straight weeks, dropping by $295 billion, or 25%.
The Denison Alcoa plant will close. The announcement came from Ply Gem Industries that approximately 180 workers will be jobless. Ply Gem is one of the country’s leading manufacturers of residential exterior building products.
The Philly Fed index dipped to 6.8 in October from 10.9 in September.
John Williams and his Shadow Government Statistics through September:
M3 money supply growing at 14+% and inflation running at 10+%. It is not surprising to find oil above $89 a barrel, gold above $768, and the U.S. dollar index close to making another new multi year low. Why would a foreign entity want to buy dollar denominated assets with rampant inflation and raging credit deterioration? The consumer's balance sheet is under siege and the U.S. government is sinking under deficits. All that is a recipe for the Dow at 14,000?
Buying is picking up in Sallie Mae and its call options.
Chinese investors decreased their holdings of U.S. government debt $8.8 billion in August, while Japanese investments declined $24.8 billion, the Treasury said.
American Standard Cos. lowered its profit outlook for the year because of continued weakness in the residential housing market and high warranty costs.
U.S. banks had borrowed $10 million from the Federal Reserve's discount window as of Wednesday, the Fed said. On Wednesday, outstanding primary credit loans from the Fed (also known as the discount window) totaled $10 million, down from $40 million the previous Wednesday, and far below the $7.2 billion borrowed on Sept. 12.
Excluding certain items, Google said earnings for the period were $3.91 a share. Net revenue, or revenue minus payments made to other sites to acquire Internet traffic, came in at $3.01 billion, Google said. Considering how young a company Google is, these numbers are truly extraordinary. How many companies earn over $1 billion in three months on revenue of $3 billion?
Light, sweet crude for November delivery hit $90.02 in electronic trading Thursday evening. It was only about one year ago that crude had dropped in a straight line to about $50 a barrel. Lots of my friends criticized my thinking for loading up from $60 on down. That's my modus operandi-- to buy on the way down. Each to his own. I continue to believe that patient investors will be rewarded by accumulating natural gas. One way is to buy the ETF under the symbol UNG. It's about $41 and the range is roughly $33 to $54.
Sophocles: “If you are out of trouble, watch for danger."
Wednesday, October 17, 2007
Perception
10/18/07 Perception
Residential Capital LLC, the home-lending arm of GMAC Financial Services, will announce a reduction of about 25% in its work force.
The unit, known as ResCap, is expected to cut about 3,000 of its 12,000 employees, in addition to the 1,000 who were to be cut by the end of this month, as announced in January.
Thomas Au: "First of all, the fallout from subprime lending will be bad enough as it stands. But the real problem is that “subprime” is a metaphor for the whole U.S. financial culture."
Martin Hutchinson: "As the earnings season in the US stock market gets into full swing, the Dow Jones and Standard and Poors indices go from strength to strength, setting records about every other day. Yet their exuberance has failed to focus on one important factor: corporate earnings have peaked for this cycle and are set to decline substantially in the quarters ahead. The reasons for the peaking are pretty obvious. The credit squeeze in August may have eased, but there is now no doubt that it was a primarily US-led event, centered on the home mortgage industry. That is leading to earnings disasters throughout the financial services sector, with the notable and surprising exception of Goldman Sachs. (It is also bringing into question current risk management techniques; the Morgan Stanley “quant” operation lost $390 million on a single day in August, far more than the theoretical “value at risk” that was the centerpiece of their risk management calculation.) Losses from subprime mortgages are not going away, and they will be recorded in earnings over the next several quarters. As subprime mortgages default, more housing is brought onto the market, and house price declines accelerate. That process causes more previously sound mortgages to become delinquent, either because the homeowner loses his job or simply because the homeowner needs to move but is trapped by a mortgage that is now underwater. Any mortgage made at a higher loan to value ratio than the traditional 80% is endangered by a house price decline extending into the 15-20% range, with more than that on the coasts, as now seems likely."
U.S. architecture firms reported their smallest billings increase in 15 months as tightening credit made it harder for developers to build offices, shopping centers, warehouses and other commercial buildings. The Architecture Billings Index dropped to 51.1 last month, from 53.9 in August, the Washington-based American Institute of Architects said today in a statement. September's level was the lowest since June 2006.
The average retail price of heating oil in Massachusetts hit a record $2.75 a gallon, up 3 cents from a week ago and 40 cents higher than it was last year at this time, according to a state survey released. So much for muted inflation.
European Central Bank council member Klaus Liebscher said the bank remains focused on ``significant'' and rising inflation risks, suggesting it may still raise interest rates. ``The message was and is that risks to price stability are clearly pointing to the upside,'' Liebscher, who also heads Austria's central bank, said in an interview in Vienna.
Mike Shedlock: "Under the proposed rescue package Citigroup, J.P. Morgan Chase & Co. and Bank of America Corp. will set up a fund, or "superconduit," to act as a buyer of last resort. It will pay market prices for SIV assets in an effort to prevent dumping. [Mish comment: In other words, Citigroup is setting up a fund to buy assets from itself. How convenient. By the way, when you are buying something from yourself, who determines market price?"
Home sales in Southern California plummeted in September to a two-decade low.
In Southern California in September, home sales in six counties -- Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura -- fell 48.5% from the same month last year. They were at their lowest since DataQuick Information Systems, a real estate service, began compiling such statistics in 1988.
AT&T Mobility, the largest U.S. wireless carrier, confirmed Tuesday that some employees may be laid off as it transfers some of its information-technology work to IBM.
Consumer prices rose at the sharpest rate (0.3%) in four months during September, the government reported on Wednesday, as energy costs picked up after three months of decline. Meanwhile, a separate government report showed that U.S. home construction starts fell 10.2 percent in September to their lowest level in more than 14 years while building permit activity, a sign of future construction plans also dropped to a level not seen since mid-1993.
Consumer prices in September were 2.8 percent higher than a year ago, the largest 12-month increase since a matching 2.8 percent gain in March 2007, department officials said. Core prices were up 2.1 percent on a year-over-year basis.So far in 2007, consumer prices have risen at a 3.6 percent annual rate, well ahead of the 2.5 percent increase registered for all of 2006.
The Commerce Department said housing starts set an annual pace of 1.191 million units in September, lower than the 1.285 million units expected by economists. It was the lowest pace for housing starts since the March 1993 rate of 1.083 million units. Building permits fell 7.3 percent, the sharpest decline since January 1995, to an annual rate of 1.226 million.
The Oil Drum: "Both the International Energy Agency (IEA) and Energy Information Administration (EIA) figures show that global liquids production has been on a plateau since 2005. The IEA figures result in an average global production in 2007 up to September of 85.03 million b/d, almost to the same as the average 2006 production of 85.00 million b/d and higher than the average 2005 production of 84.10 million b/d. The EIA puts the average global 2007 production up to July at 84.40 million b/d, slightly lower than the average 2006 production of 84.60 million b/d and the average 2005 production of 84.63 million b/d.
World total liquids production remains on a peak plateau since 2006 and is forecast to fall off this peak plateau in the middle of 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 84.50 mbd. A good increase up to 85.10 mbd occurred for September 2007. As long as demand continues increasing then prices will also continue increasing."
Bankers sold $2.2 billion of First Data Corp. senior unsecured bonds Tuesday, marking the first sizable sale of a leveraged buyout-related offering in the high-yield bond market since the summer credit crunch.
Come January, Social Security benefits for nearly 50 million Americans are going up 2.3 percent, the smallest increase in four years. It will mean an extra $24 per month in the average check, the government announced Wednesday. It's no wonder the government inflation numbers are so understated. That equates to screwing those on Social Security.
The parliament in Ankara convened at 3 p.m. Wednesday to decide whether to let Prime Minister Recep Tayyip Erdogan authorize a military incursion across Turkey's southern border with Iraq. Lawmakers voted 507-19 in favor of empowering the government to order the military to cross into Iraq during a one-year period, Parliament Speaker Koksal Toptan said.
United Technologies Corp. is forecasting a "challenging" year for 2008 due to moderating worldwide growth and a slowing U.S. economy, but the industrial conglomerate doesn't' expect a recession, said Greg Hayes, vice president of accounting and finance.
Crude oil futures reach new record high of $89 a barrel.
U.S. economic activity has slowed over the six weeks, according to the latest Beige Book report on current economic conditions released by the Federal Reserve on Wednesday.
I found it interesting that there was a gigantic decline in treasury yields on Wednesday, and yet, there was a decline in the Dow Jones Utility Average.
Allstate Corp.said late Wednesday its third-quarter net income fell to $978 million, or $1.70 a share, from $1.16 billion, or $1.83 a share, in the year-ago period. Consolidated revenue rose to $8.99 billion from $8.74 billion last year. Analysts surveyed by Thomson Financial estimated earnings per share of $1.67 on revenue of $8.94 billion.
Boston Scientific to cut 2,300 jobs.
Dan Millman: “Pain is a relatively objective, physical phenomenon; suffering is our psychological resistance to what happens. Events may create physical pain, but they do not in themselves create suffering. Resistance creates suffering. Stress happens when your mind resists what is...The only problem in your life is your mind's resistance to life as it unfolds.”
Residential Capital LLC, the home-lending arm of GMAC Financial Services, will announce a reduction of about 25% in its work force.
The unit, known as ResCap, is expected to cut about 3,000 of its 12,000 employees, in addition to the 1,000 who were to be cut by the end of this month, as announced in January.
Thomas Au: "First of all, the fallout from subprime lending will be bad enough as it stands. But the real problem is that “subprime” is a metaphor for the whole U.S. financial culture."
Martin Hutchinson: "As the earnings season in the US stock market gets into full swing, the Dow Jones and Standard and Poors indices go from strength to strength, setting records about every other day. Yet their exuberance has failed to focus on one important factor: corporate earnings have peaked for this cycle and are set to decline substantially in the quarters ahead. The reasons for the peaking are pretty obvious. The credit squeeze in August may have eased, but there is now no doubt that it was a primarily US-led event, centered on the home mortgage industry. That is leading to earnings disasters throughout the financial services sector, with the notable and surprising exception of Goldman Sachs. (It is also bringing into question current risk management techniques; the Morgan Stanley “quant” operation lost $390 million on a single day in August, far more than the theoretical “value at risk” that was the centerpiece of their risk management calculation.) Losses from subprime mortgages are not going away, and they will be recorded in earnings over the next several quarters. As subprime mortgages default, more housing is brought onto the market, and house price declines accelerate. That process causes more previously sound mortgages to become delinquent, either because the homeowner loses his job or simply because the homeowner needs to move but is trapped by a mortgage that is now underwater. Any mortgage made at a higher loan to value ratio than the traditional 80% is endangered by a house price decline extending into the 15-20% range, with more than that on the coasts, as now seems likely."
U.S. architecture firms reported their smallest billings increase in 15 months as tightening credit made it harder for developers to build offices, shopping centers, warehouses and other commercial buildings. The Architecture Billings Index dropped to 51.1 last month, from 53.9 in August, the Washington-based American Institute of Architects said today in a statement. September's level was the lowest since June 2006.
The average retail price of heating oil in Massachusetts hit a record $2.75 a gallon, up 3 cents from a week ago and 40 cents higher than it was last year at this time, according to a state survey released. So much for muted inflation.
European Central Bank council member Klaus Liebscher said the bank remains focused on ``significant'' and rising inflation risks, suggesting it may still raise interest rates. ``The message was and is that risks to price stability are clearly pointing to the upside,'' Liebscher, who also heads Austria's central bank, said in an interview in Vienna.
Mike Shedlock: "Under the proposed rescue package Citigroup, J.P. Morgan Chase & Co. and Bank of America Corp. will set up a fund, or "superconduit," to act as a buyer of last resort. It will pay market prices for SIV assets in an effort to prevent dumping. [Mish comment: In other words, Citigroup is setting up a fund to buy assets from itself. How convenient. By the way, when you are buying something from yourself, who determines market price?"
Home sales in Southern California plummeted in September to a two-decade low.
In Southern California in September, home sales in six counties -- Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura -- fell 48.5% from the same month last year. They were at their lowest since DataQuick Information Systems, a real estate service, began compiling such statistics in 1988.
AT&T Mobility, the largest U.S. wireless carrier, confirmed Tuesday that some employees may be laid off as it transfers some of its information-technology work to IBM.
Consumer prices rose at the sharpest rate (0.3%) in four months during September, the government reported on Wednesday, as energy costs picked up after three months of decline. Meanwhile, a separate government report showed that U.S. home construction starts fell 10.2 percent in September to their lowest level in more than 14 years while building permit activity, a sign of future construction plans also dropped to a level not seen since mid-1993.
Consumer prices in September were 2.8 percent higher than a year ago, the largest 12-month increase since a matching 2.8 percent gain in March 2007, department officials said. Core prices were up 2.1 percent on a year-over-year basis.So far in 2007, consumer prices have risen at a 3.6 percent annual rate, well ahead of the 2.5 percent increase registered for all of 2006.
The Commerce Department said housing starts set an annual pace of 1.191 million units in September, lower than the 1.285 million units expected by economists. It was the lowest pace for housing starts since the March 1993 rate of 1.083 million units. Building permits fell 7.3 percent, the sharpest decline since January 1995, to an annual rate of 1.226 million.
The Oil Drum: "Both the International Energy Agency (IEA) and Energy Information Administration (EIA) figures show that global liquids production has been on a plateau since 2005. The IEA figures result in an average global production in 2007 up to September of 85.03 million b/d, almost to the same as the average 2006 production of 85.00 million b/d and higher than the average 2005 production of 84.10 million b/d. The EIA puts the average global 2007 production up to July at 84.40 million b/d, slightly lower than the average 2006 production of 84.60 million b/d and the average 2005 production of 84.63 million b/d.
World total liquids production remains on a peak plateau since 2006 and is forecast to fall off this peak plateau in the middle of 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 84.50 mbd. A good increase up to 85.10 mbd occurred for September 2007. As long as demand continues increasing then prices will also continue increasing."
Bankers sold $2.2 billion of First Data Corp. senior unsecured bonds Tuesday, marking the first sizable sale of a leveraged buyout-related offering in the high-yield bond market since the summer credit crunch.
Come January, Social Security benefits for nearly 50 million Americans are going up 2.3 percent, the smallest increase in four years. It will mean an extra $24 per month in the average check, the government announced Wednesday. It's no wonder the government inflation numbers are so understated. That equates to screwing those on Social Security.
The parliament in Ankara convened at 3 p.m. Wednesday to decide whether to let Prime Minister Recep Tayyip Erdogan authorize a military incursion across Turkey's southern border with Iraq. Lawmakers voted 507-19 in favor of empowering the government to order the military to cross into Iraq during a one-year period, Parliament Speaker Koksal Toptan said.
United Technologies Corp. is forecasting a "challenging" year for 2008 due to moderating worldwide growth and a slowing U.S. economy, but the industrial conglomerate doesn't' expect a recession, said Greg Hayes, vice president of accounting and finance.
Crude oil futures reach new record high of $89 a barrel.
U.S. economic activity has slowed over the six weeks, according to the latest Beige Book report on current economic conditions released by the Federal Reserve on Wednesday.
I found it interesting that there was a gigantic decline in treasury yields on Wednesday, and yet, there was a decline in the Dow Jones Utility Average.
Allstate Corp.said late Wednesday its third-quarter net income fell to $978 million, or $1.70 a share, from $1.16 billion, or $1.83 a share, in the year-ago period. Consolidated revenue rose to $8.99 billion from $8.74 billion last year. Analysts surveyed by Thomson Financial estimated earnings per share of $1.67 on revenue of $8.94 billion.
Boston Scientific to cut 2,300 jobs.
Dan Millman: “Pain is a relatively objective, physical phenomenon; suffering is our psychological resistance to what happens. Events may create physical pain, but they do not in themselves create suffering. Resistance creates suffering. Stress happens when your mind resists what is...The only problem in your life is your mind's resistance to life as it unfolds.”
The Beat Goes On
10/17/07 The Beat Goes On
Only a slim majority of the 12 Federal Reserve district banks supported a half a percentage point cut in interest rates in September, according to minutes of the discount rate meetings released Tuesday.
Bernanke said the housing slump will be a ``significant drag'' on the economy into 2008.
"The ongoing housing correction is not ending as quickly as it might have appeared late last year," Paulson said in remarks prepared for delivery at Georgetown University. "And it now looks like it will continue to adversely impact our economy, our capital markets and many homeowners for some time yet."
"Let me be clear," Paulson said, "despite strong economic fundamentals, the housing decline is still unfolding. ... The longer home prices remain stagnant or fall, the greater the penalty to our future economic growth."
"The market for new homes is dead for all practical purposes," wrote Patrick McPherron, an economist for Moody's Economy.com.
Quintana Maritime explores strategic alternatives.
For October, ICSC expects retail sales to increase by about 2.5%, slightly improved from the sluggish 1.7% gain in September.
USBancorp said said conditions in the mortgage and housing markets are likely to remain tough over the next few quarters, and will likely lead to rising charge-offs and retail delinquencies. It said it expects its net interest margin to remain stable in the fourth quarter.
China Citic Bank Corp., the financial unit of Chinese conglomerate China Citic Group, is bidding for a stake in U.S. financial group Bear Stearns Cos., according to media reports citing a senior government official Tuesday.
D.R. Horton Inc , the largest U.S. home builder, said on Tuesday that quarterly net orders for new homes plunged 39 percent amid a spike in cancellations as the U.S. housing market continued to skip along rock bottom.
Ericsson AB said third-quarter profit was lower than its forecasts.
KeyCorp, Ohio's third-largest bank, reported third-quarter earnings per share from continuing operations of 57 cents, missing analysts' estimates of 73 cents.
The China Securities Regulatory Commission must protect investors and prevent market risks, Vice Chairman Tu Guangshao said at the Communist Party congress in Beijing. The country's investors should be ``more rational'' since ``the higher the share prices, the greater the risk,'' Chairman Shang Fulin said.
China Investment Corp., which manages the $200 billion sovereign wealth fund, said it may get more of the nation's record currency reserves to invest based on returns.
Harley-Davidson, Inc.'s results to disappoint.
The dollar amount of loans eligible for purchase by government-sponsored enterprises Fannie Mae and Freddie Mac won't go below the current level of $417,000 in 2008, the companies' regulator said Tuesday.
Paul L. Kasriel: "We think the Federal Open Market Committee (FOMC) will stand pat on its federal funds rate target at its upcoming October 30-31 meeting. We believe that one of the reasons it chose the more aggressive, 50-basis-point fed funds rate target cut at its September 18 meeting was so it would not feel compelled to change the target rate as frequently. But because weak September chain-store retail sales are likely to be a harbinger of weak holiday retail sales, the FOMC will be moved to cut its federal funds rate target again at its December 11 meeting. In other words, no Halloween treat from Bernanke & Co., but an early holiday gift."
Bear Stearns said it would eliminate 310 more mortgage jobs and analysts warned that investment banks may wind up making much bigger cuts. The news came as Bear reorganised its mortgage business and brought the bank’s total cuts to 540. It came a day after Morgan Stanley laid off 600 mortgage-related workers and Credit Suisse said it would shed 170 in its investment banking arm, bringing its total job losses to 320. Lehman Brothers has cut 2,500 mortgage-related jobs.
The Federal Reserve said that industrial output edged up 0.1 percent in September following no change at all in August. The August reading had been reported a month ago as a stronger 0.2 percent gain.
Video-rental chain Movie Gallery Inc. filed for bankruptcy Tuesday, succumbing to a mountain of debt incurred when it bought rival Hollywood Entertainment for $1 billion in 2005.
International investors sold a record amount of U.S. financial assets in August as tightening access to credit threatened economic growth and spurred an exodus from American stocks. Total holdings of equities, notes and bonds fell a net $69.3 billion after an increase of $19.2 billion in July, the Treasury Department said today in Washington. Including short- term securities such as Treasury bills, foreigners sold a net $163 billion, compared with a gain in the previous month.
The seasonally adjusted housing market index fell to a record low of 18 in October from 20 in September, the National Association of Home Builders reported Tuesday. It's the lowest reading in the index since its inception in 1985.
The Dolans say they won't raise their going private bid for Cablevision.
Why did Boeing oust the 787 program chief Michael Bair?
In after hours, Intel,Yahoo, and IBM saw their shares rise as their results exceeded estimates. It must be me but I wasn't very impressed. That must mean both stocks will rise to the moon. Meanwhile, Intel also announced that it plans to cut 2,000 jobs in the fourth quarter,reducing its total headcount to about 86,000.
Thornburg Mortgage swings to loss and omits dividend.
Midland Co., the Cincinnati specialty insurer, definitively agreed to be acquired by Munich Re for $65 a share cash, or $1.3 billion, the companies said. In a statement on Wednesday, the companies said the German reinsurer would also assume Midland's debt.
India's Sensex was recently down as much as 5.1% at 18,089.71.
Nomura, Japan's largest securities firm, plans to shutter its U.S. mortgage business in the wake of losses on mortgage-backed securities.
Only a slim majority of the 12 Federal Reserve district banks supported a half a percentage point cut in interest rates in September, according to minutes of the discount rate meetings released Tuesday.
Bernanke said the housing slump will be a ``significant drag'' on the economy into 2008.
"The ongoing housing correction is not ending as quickly as it might have appeared late last year," Paulson said in remarks prepared for delivery at Georgetown University. "And it now looks like it will continue to adversely impact our economy, our capital markets and many homeowners for some time yet."
"Let me be clear," Paulson said, "despite strong economic fundamentals, the housing decline is still unfolding. ... The longer home prices remain stagnant or fall, the greater the penalty to our future economic growth."
"The market for new homes is dead for all practical purposes," wrote Patrick McPherron, an economist for Moody's Economy.com.
Quintana Maritime explores strategic alternatives.
For October, ICSC expects retail sales to increase by about 2.5%, slightly improved from the sluggish 1.7% gain in September.
USBancorp said said conditions in the mortgage and housing markets are likely to remain tough over the next few quarters, and will likely lead to rising charge-offs and retail delinquencies. It said it expects its net interest margin to remain stable in the fourth quarter.
China Citic Bank Corp., the financial unit of Chinese conglomerate China Citic Group, is bidding for a stake in U.S. financial group Bear Stearns Cos., according to media reports citing a senior government official Tuesday.
D.R. Horton Inc , the largest U.S. home builder, said on Tuesday that quarterly net orders for new homes plunged 39 percent amid a spike in cancellations as the U.S. housing market continued to skip along rock bottom.
Ericsson AB said third-quarter profit was lower than its forecasts.
KeyCorp, Ohio's third-largest bank, reported third-quarter earnings per share from continuing operations of 57 cents, missing analysts' estimates of 73 cents.
The China Securities Regulatory Commission must protect investors and prevent market risks, Vice Chairman Tu Guangshao said at the Communist Party congress in Beijing. The country's investors should be ``more rational'' since ``the higher the share prices, the greater the risk,'' Chairman Shang Fulin said.
China Investment Corp., which manages the $200 billion sovereign wealth fund, said it may get more of the nation's record currency reserves to invest based on returns.
Harley-Davidson, Inc.'s results to disappoint.
The dollar amount of loans eligible for purchase by government-sponsored enterprises Fannie Mae and Freddie Mac won't go below the current level of $417,000 in 2008, the companies' regulator said Tuesday.
Paul L. Kasriel: "We think the Federal Open Market Committee (FOMC) will stand pat on its federal funds rate target at its upcoming October 30-31 meeting. We believe that one of the reasons it chose the more aggressive, 50-basis-point fed funds rate target cut at its September 18 meeting was so it would not feel compelled to change the target rate as frequently. But because weak September chain-store retail sales are likely to be a harbinger of weak holiday retail sales, the FOMC will be moved to cut its federal funds rate target again at its December 11 meeting. In other words, no Halloween treat from Bernanke & Co., but an early holiday gift."
Bear Stearns said it would eliminate 310 more mortgage jobs and analysts warned that investment banks may wind up making much bigger cuts. The news came as Bear reorganised its mortgage business and brought the bank’s total cuts to 540. It came a day after Morgan Stanley laid off 600 mortgage-related workers and Credit Suisse said it would shed 170 in its investment banking arm, bringing its total job losses to 320. Lehman Brothers has cut 2,500 mortgage-related jobs.
The Federal Reserve said that industrial output edged up 0.1 percent in September following no change at all in August. The August reading had been reported a month ago as a stronger 0.2 percent gain.
Video-rental chain Movie Gallery Inc. filed for bankruptcy Tuesday, succumbing to a mountain of debt incurred when it bought rival Hollywood Entertainment for $1 billion in 2005.
International investors sold a record amount of U.S. financial assets in August as tightening access to credit threatened economic growth and spurred an exodus from American stocks. Total holdings of equities, notes and bonds fell a net $69.3 billion after an increase of $19.2 billion in July, the Treasury Department said today in Washington. Including short- term securities such as Treasury bills, foreigners sold a net $163 billion, compared with a gain in the previous month.
The seasonally adjusted housing market index fell to a record low of 18 in October from 20 in September, the National Association of Home Builders reported Tuesday. It's the lowest reading in the index since its inception in 1985.
The Dolans say they won't raise their going private bid for Cablevision.
Why did Boeing oust the 787 program chief Michael Bair?
In after hours, Intel,Yahoo, and IBM saw their shares rise as their results exceeded estimates. It must be me but I wasn't very impressed. That must mean both stocks will rise to the moon. Meanwhile, Intel also announced that it plans to cut 2,000 jobs in the fourth quarter,reducing its total headcount to about 86,000.
Thornburg Mortgage swings to loss and omits dividend.
Midland Co., the Cincinnati specialty insurer, definitively agreed to be acquired by Munich Re for $65 a share cash, or $1.3 billion, the companies said. In a statement on Wednesday, the companies said the German reinsurer would also assume Midland's debt.
India's Sensex was recently down as much as 5.1% at 18,089.71.
Nomura, Japan's largest securities firm, plans to shutter its U.S. mortgage business in the wake of losses on mortgage-backed securities.
Subscribe to:
Posts (Atom)