2/9/08 Reason For Optimism?
Robert McHugh: "Trannies do not seem too worried about economic prospects, and may be sending a message that a bottom is in, that the worst will be over before long, and that over the horizon, perhaps the latter half of 2008, we will see a rebound in both markets and the economy. Dow Theory says that for this Bear Market to continue, both the Industrials and the Transportation average must close below their recent closing lows. A crash now would accomplish that. The two key numbers are January 22nd, 2008's 11,971.19 in the Industrials, and January 17th, 2008's 4,140.29 in the Trannies. As of Thursday's close, the Industrials sit 275.81 points above this Bear market re-confirmation level, pretty close, however, the Trannies sit 616.58 points, about 15 percent, above its threshold. In other words, it would take a stock market crash for Trannies to confirm. Put another way, unless we get a stock market crash that takes the Trannies down with it, this Bear Market is terminal. Amazing.
Here is the thing: Dow Theory says, if one of the averages hits a new low, but the other fails to confirm, then this primary trend decline can no longer be trusted. It also sets the stage for a potential new primary trend Bull Market signal, should both averages then rise above their previous highs. In other words, it is possible the blue chips will plunge another 10 percent within this Bear market, however if Trannies do not follow, do not close below 4,140.29, it gives reason for optimism. Over the past week, while the Industrials and techs sunk nearly 5 percent, the Trannies held relatively firm, down only 1.5 percent, and in fact rose the past two days."
According to AMG Data Services, Including ETF activity, Equity funds report net cash outflows totaling -$7.912 billion in the week ended 2/6/08 with Domestic funds reporting net outflows of -$9.144 billion and Non-domestic funds reporting net inflows of $1.232 billion;
Excluding ETF activity, Equity funds report net cash inflows totaling $1.829 billion with Domestic funds reporting net inflows of $1.313 billion and Non-domestic funds reporting net inflows totaling $516 million.
A U.S. recession is now an even bet as job losses and the housing contraction jeopardize the longest- ever expansion in consumer spending, according to a Bloomberg News survey.
ExxonMobil has won a court battle to freeze $12 billion in assets of Petroleos de Venezuela as compensation for nationalization of projects.
Business Week: "Microsoft has long been underappreciated by the Street and by investors. Martin Sass figures the stock, currently trading at a price-earnings ratio of 14, is cheap based on the company's expectations of yearly double-digit growth in 2008 and 2009. Revenue growth is projected at 14% to 18% over the next two years, says Sass. In the current difficult economic times, Microsoft and Google are both doing fairly well, he adds. Microsoft should continue to gain market share in software, generating 60% of its revenues in foreign markets. Excluding any deal with Yahoo, Sass expects Microsoft stock to hit $40 in a year. Should Microsoft bag Yahoo, that would be a big positive for Microsoft shares, says Sass. Some analysts worry that the potential integration challenges in buying Yahoo could generate headaches for Microsoft, in part because of a dilution in earnings. But they agree that the hostile bid for Yahoo makes strategic sense to jump-start Microsoft's online presence with consumers, advertisers, and publishers. It would enable the software giant to "better monetize its online assets over time," says Brad Reback of Oppenheimer."
Coventry Health expects 2008 annual earnings between $4.42 to $4.58 on revenue between $12.35 billion and $12.9 billion.
In early Friday trading, crude oil futures rose over $1 a barrel on Friday, up $1.05 to $89.16 a barrel. Iran has started building a second atomic power plant, Itar-Tass news agency quoted Iran's ambassador to Russia as saying, according to Reuters.
Imperial Sugar Co said an explosion late Thursday damaged its refinery in Port Wentworth, Georgia and injured a number of workers. The company said the number and severity of the injuries is not fully known. It added the extent of the damage caused is being investigated and it doesn't know how long the facility will have to be closed.
Chrysler LLC is working on plans to nearly halve the number of models in its product line and significantly reduce the number of dealers, The Wall Street Journal reported late Thursday in its online edition. Chrysler executives told dealers in meetings recently that they have accepted the "reality" that Chrysler can't expect to increase its sales volume dramatically, the newspaper said.
According to the WSJ, credit-card delinquencies are rising across the nation, a sign that some Americans are at the end of their rope financially. The result could be a sharp pullback in consumer spending that would further weaken the U.S. economy.
According to the WSJ, Sen. Clinton raised $118.3 million in 2007, compared with Sen. Obama's $103.8 million. But that advantage didn't last long. The campaign brought in $13.5 million in January, compared with a record-breaking $32 million for Sen. Obama during the same period. The Obama campaign now says it is on track to bring in $30 million this month.
Randall Forsyth: "According to the productivity numbers, total hours worked fell by 1.5% in the fourth quarter. Looking at the Labor Department's payroll data, however, hours worked rose 1% during that period. Why the discrepancy? The payrolls data count workers on companies' payrolls. The productivity data, by contrast, count all workers, including the self-employed. If the latter rose while the former fell, it's reasonable to infer that the self-employed were working less. That's important because the self-employed have become an increasingly large portion of the U.S. economy, and not just because of the E-bay entrepreneurs that Vice President Dick Cheney is fond of citing. During the housing bubble, the army of mortgage brokers and realtors swelled. The barriers to entry into those fields are minimal. As the former head of mortgage operations of a major New York bank once told me, a mortgage broker is a used-car salesman with a better suit. (Apologies to used-car salesmen.) In any case, thousands of people began to earn a living by getting a slice of the housing boom. But even when they went to work for a mortgage or real-estate firm, they remained independent contractors, not employees. That meant that they weren't on firms' payrolls (and not counted in the establishment survey of the monthly employment report.) Their independent-contractor status also precludes their receiving unemployment benefits. The legions of freelancers extend beyond the salesmen and saleswomen who raked it in during the housing boom to those did the honest work in the construction trades, from electricians to carpenters, who worked for contractors (also entrepreneurs.) Many of this corps that swelled and prospered during the housing bubble are out of work. But they can't file for unemployment insurance. According to Paul Kasriel, the director of economic research for Northern Trust, hours worked by the self-employed were down sharply in the fourth quarter. Jobless claims, meanwhile, are moving up but not as rapidly as in past recessions. "So, the independent-contractor hypothesis might be the explanation given everything else seems to indicate we have entered a recession," he writes in an e-mail."
According to Bloomberg, The risk of companies defaulting soared to a record on speculation funds invested in credit derivatives are being liquidated, according to traders of credit-default swaps. Contracts on the benchmark Markit iTraxx Europe index of 125 companies with investment-grade ratings rose 7.25 basis points to a 98.75, the highest since the index started in 2004, according to JPMorgan Chase & Co. The Markit CDX North America Investment Grade Index rose 5.5 basis points to 129.5 at 7 a.m. in New York, according to Lehman Brothers Holdings Inc. ``There is speculation structured products are being unwound,'' said Jim Reid, head of fundamental credit strategy at Deutsche Bank AG in London. Structured credit funds typically generate income by selling credit-default swaps on investment-grade companies. Funds have lost money since the cost of insuring against company default soared in the wake of the credit crisis triggered by the worst U.S. housing slump in 26 years. They are now having to buy default protection to offset losses, driving benchmark indexes higher. Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates worsening perceptions of credit quality; a decline, the opposite. The Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings increased 15 basis points to a record 540 today, JPMorgan prices show."
If Mike Bloomberg were to put his toe in the presidential race, what impact could that have on the results in November?
Henry To: "The best thing that one can do to his/her financial health right now is to stop watching CNBC and to stop reading the business section of newspapers."
According to the Chicago Tribune, four major U.S. carriers, including United Airlines, appear closer to consummating deals that would radically remake the airline industry, say people close to the airlines.
Chicago-based United is in merger talks with Continental Airlines and is poised to seal its deal if Delta Air Lines and Northwest Airlines combine first, sources say.
As mortgage crisis claims more Bay Area homes, an increasing number of tenants face rapid evictions.
According to the SF Chronicle, the president of a Japanese mobile carrier that owns a stake in Yahoo said Thursday he is in talks with Yahoo chief Jerry Yang about how to respond to Microsoft's takeover bid. "The talks have just started," said Masayoshi Son, president of Softbank Corp., at a news conference about earnings. "We need much more exchange before coming to a final decision." Last week, Microsoft offered to buy Yahoo Inc. for about $44.6 billion. Softbank owns a 3.9 percent stake in Yahoo of the U.S. and about 40 percent of Yahoo Japan. Yahoo Inc. in turn owns about a third of Yahoo Japan.
Zman: "This week's natural gas withdrawal eroded the surplus to the five year average and built upon the YoY deficit...
Where do we exit the withdrawal season relative to historical averages?
* Their are 8 weeks left in the typical injection season. Over the last five years, aggregate withdrawals during these 8 weeks have ranged from 650 to 825 Bcf.
* This would yield a season end (end of March) range of 1,230 to 1,400 Bcf. Last year gas troughed at 1,511 Bcf.
* An average for storage is pretty useless here as we've had a wide range of end of season levels over the last 5 years (700 to 1,700 Bcf)…
* …but a sub 2007 level (1,511 Bcf) start to the injection season is a good start.
* I'll have a new supply growth and summer demand growth piece out relatively soon…
* …and a piece on the growing liquefaction and regas capacity for 2008/09."
Brett Steenbarger: "We still have only 29% of stocks in the S&P 500 Index trading above their 50-day moving averages. While that's above Wednesday's low level of 17%, it suggests that weakness is still dominant for many sectors. Indeed, only 40% of the SPX stocks are trading above their 20-day averages. Interestingly, a greater proportion of small caps (49%) are trading above their 20-day averages than large caps. On the other hand, we're only seeing 25% of NASDAQ 100 issues trading above that benchmark. That having been said, the majority of issues are off their recent 52-week lows: among NYSE common stocks only we had 40 new lows on Thursday. That level hit 700 at the January lows."
The euro had a big drop versus the dollar as European Central Bank President Jean-Claude Trichet acknowledged that Europe won't escape the fallout from the U.S. economic slowdown. The dollar erased its loss for the year against the euro and an index measuring its performance against six of the U.S.'s biggest trading partners climbed to the highest in three weeks after Trichet said yesterday he's open to cutting interest rates.
The Organization of Petroleum Exporting Countries may cut crude production when it meets next month to keep the price above $80 a barrel, oil ministry officials from four of the group's nations said.
With the Yahoo board meeting, there is no question in my mind that their legal advisor, Skadden Arps, will strongly suggest that the board accept the Microsoft offer. At best, in my view, Microsoft would add another 50 cents to the pot. If I were running Microsoft, I'd add zip.
The Wall Street Journal writes that inflation concerns are increasing at the Fed.
Shell said it will not be able to honor all its export contracts from its southern Nigerian Bonny export terminal for two months because of sabotage.
McDonald's Corp. said sales at locations open more than 13 months increased 5.7 percent in January, spurred by growth in Europe and Asia. Comparable-store sales at U.S. outlets rose 1.9 percent, more than the 1.5 percent increase McDonald's forecast Jan. 28.
Weyerhaeuser Co. said Friday it swung to a fourth-quarter loss as the deteriorating U.S. housing market cut into demand for lumber — a downturn the paper and wood products company expects will continue through 2008.
Wal-Mart says its shoppers are redeeming their holiday gift cards for basic items — pasta sauce, diapers, laundry detergent — instead of iPods or DVDs.
Bill Bonner: "Yesterday, we noted that Americans had misunderstood what capitalism is. It is not a system that makes people rich. It is only a context, in which people CAN get rich, if they do the right thing. It is a moral context, in which virtue is rewarded and error is punished. Given misleading signals by their financial authorities, Americans made a big error - they spent too much and saved too little. Now they are being punished for it, even while the feds tell them that they were doing the right thing all along…and that they're going to get more money and credit so they can continue doing it. But nature - whom capitalism allows to express herself - will have her way. Nature wants to correct the errors of the past five years, at least. Maybe she wants to correct the errors of the last 25 years…we don't know. But she's got a switch in her hand, and we're staying out of her way!"
Tiffany said Friday it expects 2008 earnings of $2.50-$2.55 a share.
Nucor to buy David J. Joseph Co. for about $1.44 billion.
Alliance Data Systems Corp. has withdrawn its lawsuit against affiliates of The Blackstone Group, saying the private equity firm appears to be working to complete its proposed acquisition of the company. "Blackstone has in its court filings, correspondence with federal regulators and public statements said that it is committed to working toward the closing of its acquisition of the company, including working with Alliance Data on proposals directed to resolving regulatory issues," Alliance said in a statement. The company said Friday it has now “identified various potential solutions” to the regulatory hurdles Blackstone had cited in backing away from the acquisition.
As I have said previously, I expect this deal to be completed, but at a lower price than the original $81.75. I believe a fair value in today's environment would be in the $73 range.
Gold for April delivery surged $12.30 at $922.30 an ounce on the New York Mercantile Exchange. Crude for March delivery rallied $3.66, or 4.2%, to close at $91.77 a barrel on the New York Mercantile Exchange.
A federal appeals court struck down a Bush Administration policy that would exempt power plants from certain environmental regulations, The Associated Press reported Friday.
The Dow Jones Industrial Average fell 64.9 points to 12,182.1, off 4.4% from a week ago. The S&P 500 fell 5.62 points to 1,331.29, down 4.6% on the week, while the Nasdaq Composite climbed 11.82 points to close at 2,304.85, a weekly drop of 4.5%.
Polaroid Corp. is shutting its remaining U.S. film plants in March and will get out of making film for its venerable instant-picture cameras by the end of the year.
A fall in US inventories of wheat to a 60-year low drove prices of the grain sharply higher on Friday to a fresh record, intensifying fears of rising global food price inflation.
US wheat futures – global benchmarks for the grain – have jumped by their daily trading limit each day this week. Prices for Minneapolis wheat, the US variety most suitable for making flour, rose 10.7 per cent on the week, extending its price surge since the beginning of the year to 50 per cent.
A fall in US inventories of wheat to a 60-year low drove prices of the grain sharply higher on Friday to a fresh record, intensifying fears of rising global food price inflation. US wheat futures – global benchmarks for the grain – have jumped by their daily trading limit each day this week. Prices for Minneapolis wheat, the US variety most suitable for making flour, rose 10.7 per cent on the week, extending its price surge since the beginning of the year to 50 per cent. As a result of the price pressure, the Minneapolis Grain Exchange will remove the daily price limit on the spot-month hard red spring wheat contract for trading on February 25, the first time it has done so.
Friday, February 08, 2008
Thursday, February 07, 2008
Extra Caution
2/8/08 Extra Caution
Warren Buffett: ``If something is unsustainable, it's going to have consequences; so far the consequences have been a general decline in the dollar against major currencies. If we continue the same policies, we're going to get the same results in the next five or 10 years.''...Problems in the U.S. financial sector are "poetic justice" for bankers who designed and sold complex investments that have since gone sour, the billionaire investor Warren Buffett said on Wednesday. "It's sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end," he said.
Harry Truman: " Never kick a fresh turd on a hot day."
The Bank of England cut its key interest rate by a quarter percentage point to 5.25%, as expected while the ECB left its rate unchanged at 4%.
The next wave from the subprime mortgage crisis will flow past lenders and homebuilders and strike nonfinancial U.S. companies with forced write-downs, the chief executive of PricewaterhouseCoopers warned. Samuel DiPiazza, chief executive of the Big Four accounting firm, pointed out that many nonfinancial companies were exposed through securities in their own investment portfolios, according to a Reuters report.
According to the FT, the US Treasury inflation securities market is currently playing down concern about inflation and focusing on the gloomy growth prospects for the economy. The recent performance of the Treasury inflation protected security (Tips) market suggests that investors do not strongly believe that the Federal Reserve has damaged its inflation credibility with its aggressive cuts in interest rates.
For 2008, Bunge said it's looking to generate earnings of $6.01 to $6.30 a share, as opposed to the FactSet-derived mean of $6.50 a share.
Excluding restructuring charges and tax gains, PepsiCo's earnings rose to 80 cents from 74 cents. .
Costco Wholesale's January same-store sales rose 7%, with 5% growth in the U.S. and 19% growth overseas.
Wal-Mart Stores Inc reported a lower-than-expected 0.5 percent rise in its January sales at U.S. stores open at least a year, excluding fuels sales, citing unfavorable weather and gift card redemptions that were below expectations. "Comparable store sales in the United States for the February four-week period are estimated to be between flat and two percent," said Tom Schoewe, executive vice president and chief financial officer.
The company will open "The Clinic at Wal-Mart" as a joint venture with local hospital systems in Atlanta, Dallas and Little Rock, Ark., starting in April.
Target Corp.'s January same-store sales fell 1.1% from a year earlier, hurt in part by weaker lawn and garden and jewelry sales.
Seeking Alpha on Cisco: "The stock is trading with a 7% free cash flow yield (a level that typically attracts value buyers) and 14x PE new lowered forecasts. Reducing 6-month price target to $28 from $32."
Millennium Pharmaceuticals expects 2008 net income of $10 million to $25 million and non-GAAP earnings of $80 million to $95 million.
Gap Inc. said January same-store sales fell 2% from a year earlier, hurt in part by Gap North America and Old Navy North America sales.
For fiscal 2008, Ross Stores expects to earn $1.89 to $1.90 a share. For fiscal 2009 it's forecasting same-store sales gains of 1% to 2% and earnings per share in the range of $2.10 to $2.20.
Kohl's Corp. said January same-store sales fell by 8.3%.
Abercrombie & Fitch's January sales at stores open at least one year were flat compared with results from a year ago.
Initial U.S. jobless claims for the week ended Feb. 2 fell by 22,000 to 356,000, the lowest level in two weeks. Last week's claims, however, were revised upward, to 378,000 from 375,000. The four-week moving average of new claims rose by 8,500 to 335,000. Continuing jobless claims rose to their highest level since October 2005, by 75,000 to 2.78 million.
Bank of America says it's raising rates on some card accounts based on "periodic" reviews of consumers' risk. The change, it says, isn't directly linked to delinquencies on mortgages and other consumer loans. But as banks' losses mount, they're jacking up fees and rates and tightening rules on all sorts of consumer loans — from credit cards to auto loans — to cushion their losses, some analysts say. "Banks will want to make up that income somewhere," says William McCracken of Synergistics Research, a research firm. "They're going to be much more aggressive. Everyone is going to see some (price) increase unless they have perfect credit."
BJ's Wholesale's January same-store sales rose 7.8%.
Family Dollar Stores Inc.'s January same-store sales remained flat.
Ann Taylor's January same-store sales broke even in January.
Nordstrom Inc.'s January sales at stores open at least one year fell 6.6%.
Timberland's same-store sales, or sales at stores open at least a year, fell 9.3 percent at domestic locations and 5.5 percent worldwide.
Diamond Offshore Drilling Inc.will pay a special dividend of $1.25 a share on March 3 to shareholders of record on Feb. 18. The Houston firm also declared its regular cash dividend of 12.5 cents a share.
D.R. Horton posted a fiscal first-quarter loss of $128.8 million, or 41 cents a share, with revenue falling to $1.71 billion from $2.8 billion. The quarterly results included $245.5 million in pre-tax charges to cost of sales for inventory impairments and write-offs of deposits and pre-acquisition costs related to land option contracts that the company does not intend to pursue. It earned $109.7 million in the year-ago period. Its sales order backlog of homes under contract at Dec. 31, 2007 was 8,138 homes worth $2 billion, compared to 16,694 homes worth $4.7 billion at Dec. 31, 2006.
Denver builder M.D.C. Holdings said its fourth-quarter net loss widened to $281 million, or $6.14 a share, from a loss of $6.46 million, or 14 cents a share, in the year-ago period. Revenue dropped to $785 million from $1.34 billion, and the company took pre-tax charges of $175.2 million for asset impairments and $7.8 million for write-offs of deposits and pre-acquisition costs associated with land option contracts the company does not intend to pursue. It had orders, net of cancellations, for 748 homes with an estimated sales value of $187.0 million during the 2007 fourth quarter, compared with net orders for 1,571 homes with an estimated sales value of $515.0 million during the same period in 2006.
George Ure: "Expect Israel to lash out, perhaps in the next week, and attempt some serious butt-kicking in the Middle East, but perhaps doing so in a way which backfires and results in heaps of world public opinion/scorn being laid at Israel's feet."
Sam Zell bought $737 million in stock, becoming Starwood's second-largest holder.
Right now, Clinton leads in pledged delegates, 811 to 794, according to the Associated Press.
Oil Minister Gholam Hossein Nozari said Iran's oil output hit a record 4.184 mln barrels per day, the highest since the 1979 Islamic revolution, the official IRNA agency reported.
Rob Hanna: "Price is becoming stretched, but the price drop alone isn’t providing any huge edge. An example would be the current Nasdaq price action. The Nasdaq has dropped over 1.25% three days in a row. Looking back to 1985 this has happened 48 other times. Over the next 1-2 days the Nasdaq has rebounded about 2/3 of the time. Not a bad ratio, but the average losing trade dropped about 4%. That’s more downside risk than I’d like to take on."
Since announcing the $44.6 billion offer for Yahoo, Microsoft's share value has declined by over $30 billion.
The U.S. economy has slipped into a mild recession, said Nigel Gault, U.S. chief economist for Global Insight.
Sales contracts on previously owned U.S. homes fell 1.5% in December, a sign that home sales will continue to decline, the National Association of Realtors reported Thursday. The pending home sales index, based on contracts signed but not closed in December, was down 24.2% from the prior year's period.
Energy Information Administration reported on Thursday that U.S. natural gas inventories fell 200 billion cubic feet in the week ending Feb. 1, more than a drop of 170 billion cubic feet expected by analysts at Global Insight, a research firm.
Total seasonally adjusted consumer debt increased by $4.5 billion, or a 2.1% annual rate, in December to $2.55 trillion, the Fed reported. Consumer debt rose a revised $17.1 billion or 8.2% in November, up from the initial estimate of a $15.5 billion or 7.5% gain. Credit-card debt rose by $2.1 billion, or 2.7%, in December to $943.5 billion after a 13.7% gain in November. Non-revolving credit - such as auto loans, personal loans and student loans - increased by $2.4 billion, or 1.8%, to $1.56 trillion after a 4.9% rise in November. For the year, consumer credit grew 5.5%, compared with a 4.5% rise in 2006.
Lydia Maria Child: "Every human being has, like Socrates, an attendant spirit; and wise are they who obey its signals. If it does not always tell us what to do, it always cautions us what not to do."
Warren Buffett: ``If something is unsustainable, it's going to have consequences; so far the consequences have been a general decline in the dollar against major currencies. If we continue the same policies, we're going to get the same results in the next five or 10 years.''...Problems in the U.S. financial sector are "poetic justice" for bankers who designed and sold complex investments that have since gone sour, the billionaire investor Warren Buffett said on Wednesday. "It's sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end," he said.
Harry Truman: " Never kick a fresh turd on a hot day."
The Bank of England cut its key interest rate by a quarter percentage point to 5.25%, as expected while the ECB left its rate unchanged at 4%.
The next wave from the subprime mortgage crisis will flow past lenders and homebuilders and strike nonfinancial U.S. companies with forced write-downs, the chief executive of PricewaterhouseCoopers warned. Samuel DiPiazza, chief executive of the Big Four accounting firm, pointed out that many nonfinancial companies were exposed through securities in their own investment portfolios, according to a Reuters report.
According to the FT, the US Treasury inflation securities market is currently playing down concern about inflation and focusing on the gloomy growth prospects for the economy. The recent performance of the Treasury inflation protected security (Tips) market suggests that investors do not strongly believe that the Federal Reserve has damaged its inflation credibility with its aggressive cuts in interest rates.
For 2008, Bunge said it's looking to generate earnings of $6.01 to $6.30 a share, as opposed to the FactSet-derived mean of $6.50 a share.
Excluding restructuring charges and tax gains, PepsiCo's earnings rose to 80 cents from 74 cents. .
Costco Wholesale's January same-store sales rose 7%, with 5% growth in the U.S. and 19% growth overseas.
Wal-Mart Stores Inc reported a lower-than-expected 0.5 percent rise in its January sales at U.S. stores open at least a year, excluding fuels sales, citing unfavorable weather and gift card redemptions that were below expectations. "Comparable store sales in the United States for the February four-week period are estimated to be between flat and two percent," said Tom Schoewe, executive vice president and chief financial officer.
The company will open "The Clinic at Wal-Mart" as a joint venture with local hospital systems in Atlanta, Dallas and Little Rock, Ark., starting in April.
Target Corp.'s January same-store sales fell 1.1% from a year earlier, hurt in part by weaker lawn and garden and jewelry sales.
Seeking Alpha on Cisco: "The stock is trading with a 7% free cash flow yield (a level that typically attracts value buyers) and 14x PE new lowered forecasts. Reducing 6-month price target to $28 from $32."
Millennium Pharmaceuticals expects 2008 net income of $10 million to $25 million and non-GAAP earnings of $80 million to $95 million.
Gap Inc. said January same-store sales fell 2% from a year earlier, hurt in part by Gap North America and Old Navy North America sales.
For fiscal 2008, Ross Stores expects to earn $1.89 to $1.90 a share. For fiscal 2009 it's forecasting same-store sales gains of 1% to 2% and earnings per share in the range of $2.10 to $2.20.
Kohl's Corp. said January same-store sales fell by 8.3%.
Abercrombie & Fitch's January sales at stores open at least one year were flat compared with results from a year ago.
Initial U.S. jobless claims for the week ended Feb. 2 fell by 22,000 to 356,000, the lowest level in two weeks. Last week's claims, however, were revised upward, to 378,000 from 375,000. The four-week moving average of new claims rose by 8,500 to 335,000. Continuing jobless claims rose to their highest level since October 2005, by 75,000 to 2.78 million.
Bank of America says it's raising rates on some card accounts based on "periodic" reviews of consumers' risk. The change, it says, isn't directly linked to delinquencies on mortgages and other consumer loans. But as banks' losses mount, they're jacking up fees and rates and tightening rules on all sorts of consumer loans — from credit cards to auto loans — to cushion their losses, some analysts say. "Banks will want to make up that income somewhere," says William McCracken of Synergistics Research, a research firm. "They're going to be much more aggressive. Everyone is going to see some (price) increase unless they have perfect credit."
BJ's Wholesale's January same-store sales rose 7.8%.
Family Dollar Stores Inc.'s January same-store sales remained flat.
Ann Taylor's January same-store sales broke even in January.
Nordstrom Inc.'s January sales at stores open at least one year fell 6.6%.
Timberland's same-store sales, or sales at stores open at least a year, fell 9.3 percent at domestic locations and 5.5 percent worldwide.
Diamond Offshore Drilling Inc.will pay a special dividend of $1.25 a share on March 3 to shareholders of record on Feb. 18. The Houston firm also declared its regular cash dividend of 12.5 cents a share.
D.R. Horton posted a fiscal first-quarter loss of $128.8 million, or 41 cents a share, with revenue falling to $1.71 billion from $2.8 billion. The quarterly results included $245.5 million in pre-tax charges to cost of sales for inventory impairments and write-offs of deposits and pre-acquisition costs related to land option contracts that the company does not intend to pursue. It earned $109.7 million in the year-ago period. Its sales order backlog of homes under contract at Dec. 31, 2007 was 8,138 homes worth $2 billion, compared to 16,694 homes worth $4.7 billion at Dec. 31, 2006.
Denver builder M.D.C. Holdings said its fourth-quarter net loss widened to $281 million, or $6.14 a share, from a loss of $6.46 million, or 14 cents a share, in the year-ago period. Revenue dropped to $785 million from $1.34 billion, and the company took pre-tax charges of $175.2 million for asset impairments and $7.8 million for write-offs of deposits and pre-acquisition costs associated with land option contracts the company does not intend to pursue. It had orders, net of cancellations, for 748 homes with an estimated sales value of $187.0 million during the 2007 fourth quarter, compared with net orders for 1,571 homes with an estimated sales value of $515.0 million during the same period in 2006.
George Ure: "Expect Israel to lash out, perhaps in the next week, and attempt some serious butt-kicking in the Middle East, but perhaps doing so in a way which backfires and results in heaps of world public opinion/scorn being laid at Israel's feet."
Sam Zell bought $737 million in stock, becoming Starwood's second-largest holder.
Right now, Clinton leads in pledged delegates, 811 to 794, according to the Associated Press.
Oil Minister Gholam Hossein Nozari said Iran's oil output hit a record 4.184 mln barrels per day, the highest since the 1979 Islamic revolution, the official IRNA agency reported.
Rob Hanna: "Price is becoming stretched, but the price drop alone isn’t providing any huge edge. An example would be the current Nasdaq price action. The Nasdaq has dropped over 1.25% three days in a row. Looking back to 1985 this has happened 48 other times. Over the next 1-2 days the Nasdaq has rebounded about 2/3 of the time. Not a bad ratio, but the average losing trade dropped about 4%. That’s more downside risk than I’d like to take on."
Since announcing the $44.6 billion offer for Yahoo, Microsoft's share value has declined by over $30 billion.
The U.S. economy has slipped into a mild recession, said Nigel Gault, U.S. chief economist for Global Insight.
Sales contracts on previously owned U.S. homes fell 1.5% in December, a sign that home sales will continue to decline, the National Association of Realtors reported Thursday. The pending home sales index, based on contracts signed but not closed in December, was down 24.2% from the prior year's period.
Energy Information Administration reported on Thursday that U.S. natural gas inventories fell 200 billion cubic feet in the week ending Feb. 1, more than a drop of 170 billion cubic feet expected by analysts at Global Insight, a research firm.
Total seasonally adjusted consumer debt increased by $4.5 billion, or a 2.1% annual rate, in December to $2.55 trillion, the Fed reported. Consumer debt rose a revised $17.1 billion or 8.2% in November, up from the initial estimate of a $15.5 billion or 7.5% gain. Credit-card debt rose by $2.1 billion, or 2.7%, in December to $943.5 billion after a 13.7% gain in November. Non-revolving credit - such as auto loans, personal loans and student loans - increased by $2.4 billion, or 1.8%, to $1.56 trillion after a 4.9% rise in November. For the year, consumer credit grew 5.5%, compared with a 4.5% rise in 2006.
Lydia Maria Child: "Every human being has, like Socrates, an attendant spirit; and wise are they who obey its signals. If it does not always tell us what to do, it always cautions us what not to do."
Wednesday, February 06, 2008
Caution
2/7/08 Caution
Toll Bros.said Wednesday that the firm doesn't see any end in sight to housing market woes, and said its first quarter home building revenues fell 22% compared to year-ago levels. ""The housing market remains very weak in most areas. Based on current traffic and deposits, we are not yet seeing much light at the end of the tunnel," said Robert Toll, the firm's chairman and CEO. Toll, the firm, said its backlog fell to $2.40 billion, down 42% from the fiscal first quarter of 2007. It said the number of signed contracts on homes fell 46% from last year. It said the average price of a house it sold fell, while the average price of the cancelled houses rose. Joel Rassman, Toll's chief financial officer, said in a press release, "with conditions still weak in most markets, we expect to continue to face challenging times ahead. We are still in the midst of finalizing our first-quarter impairment analysis; however, we currently estimate that pre-tax write-downs in FY 2008's first quarter will be between $150 million and $300 million." Toll said it will report full fiscal 2008 first quarter results on February 27.
Analysts at Keefe Bruyette & Woods, a firm specializing in the financial sector, cautioned Wednesday that large cap banking stocks may have moved to far, too fast, and it believes the sector is likely to fall in 2008. They said investors have reacted positively to a series of deep Fed interest rate cuts and have bought shares, afraid they might miss a sharp move higher, without paying enough attention to underlying issues. "Investors appear to have looked past weak fundamentals," the analysts cautioned.
Japan's index of leading economic indicators rose in December, but remained below the key 50-level threshold, suggesting the economy may slow or contract. The Cabinet office said Wednesday the index stood at 40.0 in December, up from 18.2 in November.
Japanese stocks ended sharply lower Wednesday, as investors dumped shares amid concerns over the health of the global economy and accelerated economic weakening in the United States. The benchmark Nikkei 225 Average shed 4.7%, or 646.26 points to close at 13,099.24. The broader tracking Topix index was down 4.2% to 1298.41. Elsewhere in the region, Hong Kong's Hang Seng Index ended 5.4% lower at 23,469.46 in shortened half-day trading ahead of the Lunar New Year holidays.
GMAC, the financial services group owned by Cerberus Capital Management and General Motors, is considering the sale of at least part of Residential Capital, its troubled mortgage lender, ResCapafter a hefty fourth-quarter loss.
Time Warner Inc. today said it expected profit growth this year to be in the range of 7% to 9%, down from 17% in 2007 but in line with Wall Street's expectations.
According to the NY Times, the chief executive of Amgen said Monday that the company's decision to sell Japanese distribution rights to many of the drugs in its pipeline was not solely a response to financial pressures caused by the decline in sales of Amgen's flagship anemia drugs. Kevin Sharer, the chief executive, said the deal, which was announced early Monday and could bring the company as much as $1.2 billion, was forged because Amgen had too many experimental compounds to develop on its own. "We just can't, either operationally or financially, develop all these molecules in the three principal geographies," he said, referring to the United States, Europe and Japan. He said financial pressures contributed to the timing of the deal. But "this was an inevitable development" because of the high costs of research and development, he said.
Nouriel Roubini: Tthere is now a rising probability of a “catastrophic” financial and economic outcome, i.e. a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. The Fed is seriously worried about this vicious circle and about the risks of a systemic financial meltdown. That is the reason the Fed had thrown all caution to the wind – after a year in which it was behind the curve and underplaying the economic and financial risks – and has taken a very aggressive approach to risk management; this is a much more aggressive approach than the Greenspan one in spite of the initial views that the Bernanke Fed would be more cautious than Greenspan in reacting to economic and financial vulnerabilities...now that home prices are falling and a severe credit crunch is emerging the retrenchment of private consumption will be serious and protracted. So let us suppose that the recession of 2008 will last at least four quarters and, possibly, up to six quarters."
For the full-year, Devon Energy posted profit of $3.6 billion, or $8 per share, compared with $2.84 billion, or $6.34 per share, in 2006. Revenue rose 16 percent to $11.36 billion. The Wall Street consensus predicted profit of $6.39 per share and revenue of $11.16 billion.
Rob Hanna: "The recent bottom is now looking very much in question. The positive feelings the bounce brought about were nearly all washed away yesterday and today. As I’ve been pointing out, the action immediately after a Follow Through Day is normally telling. So far it doesn’t look good."
Robert McHugh: "Very bad day on Wall Street. You think the crash from October 2007 has been bad? Think again. It may be about to get a lot worse. The S&P 500 had its single worst day in a year Tuesday. The S&P 500's two day drop this week is the worst in five years. If this is the start of Micro degree wave 3 down, as we suspect it is, we are about to enter into the sweet spot of a multi-month Bear market, with potential for a severe stock market crash. Consider this: We have not seen an index's price fail to retrace to the midpoint of its weekly Bollinger Bands after falling below the bottom band, any time over the past 8 years, which includes the last Bear Market, from 2000 to 2002. If this is wave 3 down, it has arrived early, which means this time is different. Not good. Countertrend rallies in Bear Markets almost always reach at least the 20 week moving average in the weekly Bollinger Band analysis, the dotted line shown on page 9, that minimum target suggesting the Industrials should have headed for 13,000, possibly slightly above. Countertrend rallies in Bear Markets almost always reach at least the level where the Fast line for the Full Stochastics analysis reaches at least the 50 level, and more probably reaches the 80 measure. The top for the move would then be confirmed when the Fast crossed decisively below the Slow after reaching one of those target levels. This suggests a minimum upside target for the Industrials of 13,000 +/-. Not looking like it is going to happen."
In California, Clinton won support from seven in 10 Hispanics and three-quarters of Asian voters. I was surprised by the extent of the Latino support.
Productivity of the U.S. non-farm business sector slowed to a 1.8% annual rate in the fourth quarter, the Labor Department estimated Wednesday. Unit labor costs - a key inflationary signal - rose at an annual rate of 2.1% in the fourth quarter. Real hourly compensation fell 0.3%. For all of 2007, productivity rose 1.6%, up from a 1.0% gain in 2006. Unit labor costs rose 3.1%, the most since 2000.
Global steel output increased by 7.5% in 2007, according to the International Iron and Steel Institute. Brazil's output grew by 9.3%. U.S. steel production fell 1.4% in 2007, due in part to cheaper imports.
In early Wednesday trading, Yahoo shares were selling above those of Microsoft.
I guess investors are expecting a small kiss from Microsoft.
Diebold will reduce it global work force by about 800 full-time positions, primarily in North America, Brazil and Western Europe, as part of its $100 million cost-reduction plan. The company said it is evaluating further global manufacturing realignment in the Americas, and additional supply chain rationalization.
George Ure: "We see that the Federal Reserve's H.3 Reserves of Depository Institutions shows that for the last week of January, both on a seasonally adjusted and not seasonally adjusted basis, all the financial reserves (required reserves to support the fractional banking system) were negative. In other words, the fraction in fractional reserve has disappeared. We're now in an 'all borrowed' banking system."
Brent crude oil rose in London after Total SA shut its Elgin-Franklin fields, reducing oil production in the U.K. North Sea. A Total SA spokeswoman was unable to say when production from the fields would resume. Elgin-Franklin produces 175,000 barrels of day of condensate that feeds into the benchmark Forties blend of North Sea oil. Some Forties shipments will be delayed this month because of the halt, traders said. ``If there are disruptions to North Sea shipments then that can definitely raise supply concerns,'' said Stanislav Nazarati, a trader at Letofin AS in Estonia.
U.S. crude inventories rose by 7 million barrels to 300 million barrels in the week ending Feb. 1, U.S. Energy Information Administration reported on Wednesday. After the data, crude-oil futures for March delivery fell $1.03, or 1.2%, to $87.38 a barrel on the New York Mercantile Exchange. Gasoline supplies rose by 3.6 million barrels in the latest week, while distillate stocks grew by 100,000 barrels, EIA reported.
McClatchy, the third-largest U.S. newspaper publisher by circulation, said it now expects first-quarter advertising to decline in the low double-digit percentage. range.
Finance Committee Chairman Max Baucus (D-Mont.) and three of the committee’s other Democrats held a press conference Tuesday with the chief executive officers of three of the country’s top homebuilders. The lawmakers and industry leaders hailed a $14.4 billion tax break in the Finance package that would help homebuilders. The provision would loosen manufacturers’ tax liability by allowing them to use their 2007 and 2008 losses to claim a refund on any taxes paid over the past five years.
"BHP Billiton's offers, while improved, still fail to recognise the underlying value of Rio Tinto's quality assets and prospects," said Rio Tinto Chairman Paul Skinner in a statement. "Our plans are unchanged, and will remain so unless a proposal is made that fully reflects the value of Rio Tinto."
U.S. credit markets are trading as if the economy is in a recession because investors' ``fear has overwhelmed greed,'' Goldman Sachs Group Inc. Chief Financial Officer David Viniar said today.
Macy's reported a January same-store sales drop of 7.1%, well below what the company had forecast for the period. The company said it sees earnings for the full year of $1.85 to $2.15 a share, excluding one-time items and will layoff 2,550 employees.
An overly aggressive Federal Reserve easing campaign would only fuel higher inflation down the road, said Philadelphia Fed president Charles Plosser on Wednesday. "There are those who have expressed the view that in times of economic weakness, the Fed must not worry about inflation and should focus its entire effort on restoring economic growth by dramatically driving interest rates down as far and as rapidly as possible," Plosser said, calling this a "damn the torpedoes, full speed ahead" approach to policy. Ignoring inflation during times of economic weakness "risks undermining our ability to achieve economic growth over the long run," Plosser said. Speaking to a business group in his hometown of Birmingham, Alabama, Plosser said he doesn't agree with conventional wisdom that slower growth will automatically lead to lower inflation.
In after hours shares of Cisco dropped from $23+ to $21+. Why was that? CEO John Chambers said the company expects revenue for the April quarter to grow 10% from the previous year. That equates to revenue of about $9.8 billion, lower than the $10.19 billion expected by analysts for the period, according to Thomson Financial. Chambers said order-growth rates in the month of January were below expectations, leading the company to be cautious about the outlook for the next few months. In the meantime, earnings for the second fiscal quarter grew 10.5%, in line with Wall Street's estimates. On a non-GAAP basis, Cisco said it would have earned $2.4 billion, or 38 cents per share, for the recent quarter. Revenue grew nearly 17% to $9.8 billion. Analysts were expecting earnings of 38 cents a share on revenue of $9.79 billion, according to consensus forecasts from Thomson Financial. In sum, Chambers is saying third quarter revenue will be the same as this second quarter's. For that the shares were punished for $12 billion or 40 times the $300 million revenue shortfall for the third quarter? That's utterly ridiculous. I'll be buying Thursday morning. Chambers said "As we enter the second half of the fiscal year, our innovation pipeline is in excellent shape, our balanced product momentum across core and advanced technologies continues to be solid, and execution against our long-term strategy remains unwavering. This constant evolution of moving into new markets and product adjacencies, alongside our core operational and financial strength, is the hallmark of Cisco’s ability to act upon key market transitions."
For 2007 the most profitable day of the week for equities was Wednesday. Early in the trading day the Dow rallied to plus 95 points. By the end of the day, the Dow ended 65 points in the red.
It seems Billery ran out of money after Super Tuesday. I guess she thought she'd have the nomination sewed up because the coffers ran dry and she needed to loan her campaign $5 million. Obama has plenty of money left. Maybe he's a fiscal conservative.
Gold for April delivery surged $14.70, or 1.6%, to end at $905 an ounce on the New York Mercantile Exchange.
Toll Bros.said Wednesday that the firm doesn't see any end in sight to housing market woes, and said its first quarter home building revenues fell 22% compared to year-ago levels. ""The housing market remains very weak in most areas. Based on current traffic and deposits, we are not yet seeing much light at the end of the tunnel," said Robert Toll, the firm's chairman and CEO. Toll, the firm, said its backlog fell to $2.40 billion, down 42% from the fiscal first quarter of 2007. It said the number of signed contracts on homes fell 46% from last year. It said the average price of a house it sold fell, while the average price of the cancelled houses rose. Joel Rassman, Toll's chief financial officer, said in a press release, "with conditions still weak in most markets, we expect to continue to face challenging times ahead. We are still in the midst of finalizing our first-quarter impairment analysis; however, we currently estimate that pre-tax write-downs in FY 2008's first quarter will be between $150 million and $300 million." Toll said it will report full fiscal 2008 first quarter results on February 27.
Analysts at Keefe Bruyette & Woods, a firm specializing in the financial sector, cautioned Wednesday that large cap banking stocks may have moved to far, too fast, and it believes the sector is likely to fall in 2008. They said investors have reacted positively to a series of deep Fed interest rate cuts and have bought shares, afraid they might miss a sharp move higher, without paying enough attention to underlying issues. "Investors appear to have looked past weak fundamentals," the analysts cautioned.
Japan's index of leading economic indicators rose in December, but remained below the key 50-level threshold, suggesting the economy may slow or contract. The Cabinet office said Wednesday the index stood at 40.0 in December, up from 18.2 in November.
Japanese stocks ended sharply lower Wednesday, as investors dumped shares amid concerns over the health of the global economy and accelerated economic weakening in the United States. The benchmark Nikkei 225 Average shed 4.7%, or 646.26 points to close at 13,099.24. The broader tracking Topix index was down 4.2% to 1298.41. Elsewhere in the region, Hong Kong's Hang Seng Index ended 5.4% lower at 23,469.46 in shortened half-day trading ahead of the Lunar New Year holidays.
GMAC, the financial services group owned by Cerberus Capital Management and General Motors, is considering the sale of at least part of Residential Capital, its troubled mortgage lender, ResCapafter a hefty fourth-quarter loss.
Time Warner Inc. today said it expected profit growth this year to be in the range of 7% to 9%, down from 17% in 2007 but in line with Wall Street's expectations.
According to the NY Times, the chief executive of Amgen said Monday that the company's decision to sell Japanese distribution rights to many of the drugs in its pipeline was not solely a response to financial pressures caused by the decline in sales of Amgen's flagship anemia drugs. Kevin Sharer, the chief executive, said the deal, which was announced early Monday and could bring the company as much as $1.2 billion, was forged because Amgen had too many experimental compounds to develop on its own. "We just can't, either operationally or financially, develop all these molecules in the three principal geographies," he said, referring to the United States, Europe and Japan. He said financial pressures contributed to the timing of the deal. But "this was an inevitable development" because of the high costs of research and development, he said.
Nouriel Roubini: Tthere is now a rising probability of a “catastrophic” financial and economic outcome, i.e. a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. The Fed is seriously worried about this vicious circle and about the risks of a systemic financial meltdown. That is the reason the Fed had thrown all caution to the wind – after a year in which it was behind the curve and underplaying the economic and financial risks – and has taken a very aggressive approach to risk management; this is a much more aggressive approach than the Greenspan one in spite of the initial views that the Bernanke Fed would be more cautious than Greenspan in reacting to economic and financial vulnerabilities...now that home prices are falling and a severe credit crunch is emerging the retrenchment of private consumption will be serious and protracted. So let us suppose that the recession of 2008 will last at least four quarters and, possibly, up to six quarters."
For the full-year, Devon Energy posted profit of $3.6 billion, or $8 per share, compared with $2.84 billion, or $6.34 per share, in 2006. Revenue rose 16 percent to $11.36 billion. The Wall Street consensus predicted profit of $6.39 per share and revenue of $11.16 billion.
Rob Hanna: "The recent bottom is now looking very much in question. The positive feelings the bounce brought about were nearly all washed away yesterday and today. As I’ve been pointing out, the action immediately after a Follow Through Day is normally telling. So far it doesn’t look good."
Robert McHugh: "Very bad day on Wall Street. You think the crash from October 2007 has been bad? Think again. It may be about to get a lot worse. The S&P 500 had its single worst day in a year Tuesday. The S&P 500's two day drop this week is the worst in five years. If this is the start of Micro degree wave 3 down, as we suspect it is, we are about to enter into the sweet spot of a multi-month Bear market, with potential for a severe stock market crash. Consider this: We have not seen an index's price fail to retrace to the midpoint of its weekly Bollinger Bands after falling below the bottom band, any time over the past 8 years, which includes the last Bear Market, from 2000 to 2002. If this is wave 3 down, it has arrived early, which means this time is different. Not good. Countertrend rallies in Bear Markets almost always reach at least the 20 week moving average in the weekly Bollinger Band analysis, the dotted line shown on page 9, that minimum target suggesting the Industrials should have headed for 13,000, possibly slightly above. Countertrend rallies in Bear Markets almost always reach at least the level where the Fast line for the Full Stochastics analysis reaches at least the 50 level, and more probably reaches the 80 measure. The top for the move would then be confirmed when the Fast crossed decisively below the Slow after reaching one of those target levels. This suggests a minimum upside target for the Industrials of 13,000 +/-. Not looking like it is going to happen."
In California, Clinton won support from seven in 10 Hispanics and three-quarters of Asian voters. I was surprised by the extent of the Latino support.
Productivity of the U.S. non-farm business sector slowed to a 1.8% annual rate in the fourth quarter, the Labor Department estimated Wednesday. Unit labor costs - a key inflationary signal - rose at an annual rate of 2.1% in the fourth quarter. Real hourly compensation fell 0.3%. For all of 2007, productivity rose 1.6%, up from a 1.0% gain in 2006. Unit labor costs rose 3.1%, the most since 2000.
Global steel output increased by 7.5% in 2007, according to the International Iron and Steel Institute. Brazil's output grew by 9.3%. U.S. steel production fell 1.4% in 2007, due in part to cheaper imports.
In early Wednesday trading, Yahoo shares were selling above those of Microsoft.
I guess investors are expecting a small kiss from Microsoft.
Diebold will reduce it global work force by about 800 full-time positions, primarily in North America, Brazil and Western Europe, as part of its $100 million cost-reduction plan. The company said it is evaluating further global manufacturing realignment in the Americas, and additional supply chain rationalization.
George Ure: "We see that the Federal Reserve's H.3 Reserves of Depository Institutions shows that for the last week of January, both on a seasonally adjusted and not seasonally adjusted basis, all the financial reserves (required reserves to support the fractional banking system) were negative. In other words, the fraction in fractional reserve has disappeared. We're now in an 'all borrowed' banking system."
Brent crude oil rose in London after Total SA shut its Elgin-Franklin fields, reducing oil production in the U.K. North Sea. A Total SA spokeswoman was unable to say when production from the fields would resume. Elgin-Franklin produces 175,000 barrels of day of condensate that feeds into the benchmark Forties blend of North Sea oil. Some Forties shipments will be delayed this month because of the halt, traders said. ``If there are disruptions to North Sea shipments then that can definitely raise supply concerns,'' said Stanislav Nazarati, a trader at Letofin AS in Estonia.
U.S. crude inventories rose by 7 million barrels to 300 million barrels in the week ending Feb. 1, U.S. Energy Information Administration reported on Wednesday. After the data, crude-oil futures for March delivery fell $1.03, or 1.2%, to $87.38 a barrel on the New York Mercantile Exchange. Gasoline supplies rose by 3.6 million barrels in the latest week, while distillate stocks grew by 100,000 barrels, EIA reported.
McClatchy, the third-largest U.S. newspaper publisher by circulation, said it now expects first-quarter advertising to decline in the low double-digit percentage. range.
Finance Committee Chairman Max Baucus (D-Mont.) and three of the committee’s other Democrats held a press conference Tuesday with the chief executive officers of three of the country’s top homebuilders. The lawmakers and industry leaders hailed a $14.4 billion tax break in the Finance package that would help homebuilders. The provision would loosen manufacturers’ tax liability by allowing them to use their 2007 and 2008 losses to claim a refund on any taxes paid over the past five years.
"BHP Billiton's offers, while improved, still fail to recognise the underlying value of Rio Tinto's quality assets and prospects," said Rio Tinto Chairman Paul Skinner in a statement. "Our plans are unchanged, and will remain so unless a proposal is made that fully reflects the value of Rio Tinto."
U.S. credit markets are trading as if the economy is in a recession because investors' ``fear has overwhelmed greed,'' Goldman Sachs Group Inc. Chief Financial Officer David Viniar said today.
Macy's reported a January same-store sales drop of 7.1%, well below what the company had forecast for the period. The company said it sees earnings for the full year of $1.85 to $2.15 a share, excluding one-time items and will layoff 2,550 employees.
An overly aggressive Federal Reserve easing campaign would only fuel higher inflation down the road, said Philadelphia Fed president Charles Plosser on Wednesday. "There are those who have expressed the view that in times of economic weakness, the Fed must not worry about inflation and should focus its entire effort on restoring economic growth by dramatically driving interest rates down as far and as rapidly as possible," Plosser said, calling this a "damn the torpedoes, full speed ahead" approach to policy. Ignoring inflation during times of economic weakness "risks undermining our ability to achieve economic growth over the long run," Plosser said. Speaking to a business group in his hometown of Birmingham, Alabama, Plosser said he doesn't agree with conventional wisdom that slower growth will automatically lead to lower inflation.
In after hours shares of Cisco dropped from $23+ to $21+. Why was that? CEO John Chambers said the company expects revenue for the April quarter to grow 10% from the previous year. That equates to revenue of about $9.8 billion, lower than the $10.19 billion expected by analysts for the period, according to Thomson Financial. Chambers said order-growth rates in the month of January were below expectations, leading the company to be cautious about the outlook for the next few months. In the meantime, earnings for the second fiscal quarter grew 10.5%, in line with Wall Street's estimates. On a non-GAAP basis, Cisco said it would have earned $2.4 billion, or 38 cents per share, for the recent quarter. Revenue grew nearly 17% to $9.8 billion. Analysts were expecting earnings of 38 cents a share on revenue of $9.79 billion, according to consensus forecasts from Thomson Financial. In sum, Chambers is saying third quarter revenue will be the same as this second quarter's. For that the shares were punished for $12 billion or 40 times the $300 million revenue shortfall for the third quarter? That's utterly ridiculous. I'll be buying Thursday morning. Chambers said "As we enter the second half of the fiscal year, our innovation pipeline is in excellent shape, our balanced product momentum across core and advanced technologies continues to be solid, and execution against our long-term strategy remains unwavering. This constant evolution of moving into new markets and product adjacencies, alongside our core operational and financial strength, is the hallmark of Cisco’s ability to act upon key market transitions."
For 2007 the most profitable day of the week for equities was Wednesday. Early in the trading day the Dow rallied to plus 95 points. By the end of the day, the Dow ended 65 points in the red.
It seems Billery ran out of money after Super Tuesday. I guess she thought she'd have the nomination sewed up because the coffers ran dry and she needed to loan her campaign $5 million. Obama has plenty of money left. Maybe he's a fiscal conservative.
Gold for April delivery surged $14.70, or 1.6%, to end at $905 an ounce on the New York Mercantile Exchange.
Tuesday, February 05, 2008
Weakening Economic News
2/6/08 Weakening Economic News
The ISM non-manufacturing index fell to 41.9% in January from 54.4% in December. The reading was well below the 53.0% expected by economists. Readings below 50% indicate most firms are contracting. A separate report today by Royal Bank of Scotland Group Plc showed Europe's service industries grew in January at the slowest pace since 2003. In early trading, crude oil futures fell $1.57 to $88.45 on continued woes tied to the slowing economy.
Richmond Fed President Jeffrey Lacker became the first Fed official to say publicly that the economy faces the risk of a recession. While the most-likely path for the economy is a period of sluggish growth followed by a pickup, Lacker added: "I can also see the possibility of a mild recession, similar to the last two we have experienced."
Banks are tightening lending standards for businesses and consumers -- even beyond real-estate loans -- and companies' demand for credit has weakened, a new Federal Reserve survey of senior bank-loan officers shows.
Banc of America Securities downgraded Yahoo to neutral from buy, although it increased its price target to $31 from $26. "Even if Yahoo shareholders approve a deal with Microsoft, we believe the acquisition could face significant regulatory hurdles in the U.S. and particularly in the E.U., which could delay the acquisition from closing for quite some time," the broker said.
According to the WSJ, Billiton is offering 3.4 shares of its stock for each share of Rio Tinto.
A weekly survey of consumer attitudes about the economy fell to its lowest level since late 1993, ABC News and the Washington Post reported Tuesday. The ABC/Post consumer comfort index fell six points last week to negative 33. The index has fallen 13 points in the past month, "an unsettling sign," ABC News said, noting a 13-point drop before the 1990 recession and a 14-point drop before the 2001 recession. Just 22% of the consumers polled view the economy as good or fair, a 5-point drop from a week earlier. Attitudes about the buying climate and personal finances also fell.
For the fiscal year, Emerson said it expects earnings of $2.95 to $3.05 a share.
In 2008, Whirlpool expects earnings per share from continuing operations in a range of $8.50 to $9.00.
Tyco in January lifted its 2008 adjusted earnings per share view to a range of $2.60 to $2.70 a share.
For 2008, earnings per share for Corn Products, including a five-cent benefit from CME Group shares, are seen between $2.65 and $2.85 after $2.59 in 2007.
Hedge funds withdrew about 900 billion yen ($8.44 billion) in equities and other investments from Japan last year, according to a published report Tuesday. At the close of 2007, hedge funds had about $24.3 billion in Japanese assets, down 31% from a year earlier, the Nikkei reported, citing data from Eurekahedge Pte. Ltd.
Citigroup doubled its 2008 price forecast for thermal and coking coal to $100 per ton and $200 per ton respectively, citing factors ranging from supply disruptions in Australia and South Africa, cost increases in producing countries, rising currencies in commodity-producing nations and generally tight supplies. Citigroup's previous 2008 price targets were $55 per ton for thermal coal and $95 for coking coal.
Yum Brands raised its 2008 profit target from $1.82 to $1.85 per share, excluding one-time gains.
Arizona expects a billion-dollar shortfall in its $11 billion budget. Forecasters expect a region that grew 7 percent in 2006 to contract this year. Retail sales, which rose 16 percent in 2006, are dropping. Dennis Hoffman, an economics professor at Arizona State University, said he had never seen such a sharp turnabout in 25 years studying the local economy.
Less than a year after Apollo Management LP paid $6.6 billion for real estate broker Realogy Corp., bond prices show the deal may be worthless. Debt used to finance the April purchase trades at 61 cents on the dollar, and derivatives tied to the securities indicate an 80 percent chance that Parsippany, New Jersey-based Realogy will default. Apollo, the private-equity firm run by Leon Black, put up about $2 billion of cash to buy the owner of Coldwell Banker and Century 21, borrowing the rest.
Wickes Furniture Co., hit by the downturn that has hit furniture retailers in the wake of the housing industry's big slump, filed Sunday for Chapter 11 bankruptcy protection. Wickes, based in Wheeling, Illinois is owned by Sun Capital Partners Inc., a Boca Raton investment firm that specializes in leveraged buyouts and other transactions. In its filing with the federal bankruptcy court in Wilmington, Del., Wickes declared that it has assets of between $10 million and $50 million, and estimated its liabilities at between $50 million and $100 million.
Australia's central bank blamed significant inflationary pressures for its decision on Tuesday to raise interest rates to their highest level in close to 12 years.
The 25 basis point rise in the benchmark cash rate to 7 per cent is the third increase in six months and comes despite aggressive cuts in US interest rates in recent weeks. The Reserve Bank of Australia said underlying annualized inflation was around 3.5 per cent, above the upper end of its 2 to 3 per cent target, and higher than it expected a few months ago.
Toyota's profit for the October-December quarter rose 7.5 percent from the previous year as booming sales in China, Africa and South America offset declining U.S. sales and a stronger yen.
BHP Billiton must decide by Wednesday whether it will proceed with a bid for a rival, the Rio Tinto Group, after China intervened with a strategic investment that could sharply increase the price of what would be one of the biggest mergers in corporate history.
According to FT, BP will cut 5,000 jobs.
Up to 5.8 million additional workers in the United States could join the ranks of the unemployed by 2011 if the economy were to fall into a severe recession, according to a report from the Center for Economic and Policy Research.
Martin Marietta sees 2008 EPS at $6.25-$7.00.
GMAC Financial Services said Tuesday it swung to a loss during the fourth quarter due to continued weakness in its residential lending division, Residential Capital LLC. GMAC Financial Services lost $724 million in the fourth quarter, compared with earnings of $1 billion in the prior year period.Residential Capital lost $921 million during the quarter because of continued deterioration in the housing market.
The Chapter 11 filing by supplier Plastech Engineered Products Inc. threatens to halt Chrysler LLC's production at its 14 assembly plants, the automaker says in court papers filed. Citing a parts shortage, Chrysler today said it temporarily closed four assembly plants and canceled a shift at a fifth plant after Plastech filed for Chapter 11 protection.
The Coca-Cola Company has completed an agreement for the purchase of a 40% interest in organic beverage maker Honest Tea.
The China Meteorological Administration said the weather was the coldest in 100 years in central Hubei and Hunan provinces, going by the total number of consecutive days of average temperature less than 1 degree Celsius (33.8 degrees Fahrenheit).
“The long collapse in the United States savings rate is over,” said Ethan S. Harris, chief United States economist for Lehman Brothers. “People are going to start saving the old-fashioned way, rather than letting the stock market and rising home values do it for them.”
To increase its talent pool in India, IT networking major Cisco System India Pvt Ltd has decided to increase its headcount six fold to nearly 360,000 in the next five years.
Gaining a bigger share of mobile advertising is a big reason Microsoft Corp. is bidding $44.6 billion for Yahoo Inc., according to industry observers. Mobile advertising is "part of what Microsoft wants to get into, no doubt," said Phillip Redman, an analyst at Gartner Inc. "Leadership in mobile advertising is still unclaimed, while Google is threatening to do there what it did on the Internet, so Microsoft is being preemptive." "Yahoo touches so many customers and there's so much advertising potential in this deal," said Jeffrey Kagan, an independent analyst in Atlanta. "It's huge."
In addition, it should be noted Yahoo's new Zimbra Collaboration Suite (ZCS) 5.0 allows users to read Microsoft Outlook e-mail alongside Yahoo Mail or Google's Gmail or Zimbra's own branded e-mail. In effect, Zimbra's upgrade lets users read work and personal e-mail side by side. "We really think this is the next generation of Outlook that we are announcing," said Satish Dharmaraj, co-founder and chief executive of Zimbra. Yahoo paid $350 million in September to buy Zimbra, a provider of e-mail, calendar and contacts software that competes with Microsoft and Google.
In my view, the Street does not truly appreciate the benefits of putting Yahoo and Microsoft together. I believe that a year from now Microsoft will be selling closer to $40 than $30. I believe it has excellent risk/reward potential.
Nabors Industries Ltd. reported late Tuesday fourth-quarter net income fell to $222.2 million, or 78 cents a share, from $237.8 million, or 84 cents a share, a year ago. Revenue for the quarter ended Dec. 31 rose slightly to $1.31 billion from $1.3 billion.
Excluding the gains and ABC Radio income, Disney would have earned 49 cents a share in the fiscal first quarter of 2007. Revenue rose 9% to $10.45 billion on improved results at Disney's television networks, theme parks and consumer products division. Disney was expected to earn 52 cents a share on $10 billion in revenue, according to a survey of analysts by Thomson Financial.
United Technologies Corp.has begun talks with Boeing Co. to sort out costs stemming from delays in the rollout of Boeing's 787 Dreamliner, Gregory Hayes, vice president of accounting and finance, told investors meeting here Tuesday. "We have been spending a lot on R&D. It's been a difficult process and we'd like to see some cash to resolve this," he said. Last year UTC's Hamilton Sundstrand subsidiary spent $200 million on research and design associated with the Boeing 787 program, or half of its R&D outlay that year. Currently the company is spending $4 million a week on R&D for the 787 program. It sees that dropping to $2 million to $3 million a week once the 787 is ready for flight. Boeing has said it expects to have the new passenger plane airborne this summer, about a year later than planned.
The Dow Jones Industrial Average fell 370 points, or 2.9%, to 12,265, with all of its 30 components in negative territory. It was the worst percentage decline for the Dow since February of 2007, when the index fell 3.3%. The S&P 500 index dropped 44 points, or 3.2%, to 1,336, while the Nasdaq Composite fell 73 points, or 3%, to 2,309.
Jim Jubak: "The central bank's interest-rate cuts may be a quick fix for 2008, but they'll create a massive inflationary push in 2009, leading us right back into another boom-bust cycle."
Moving company Allied Van Lines Inc., along with corporate parent Sirva Inc., filed Tuesday for bankruptcy protection, a victim of its heavy debt load and the downturn in the U.S. housing industry. The company, which listed assets of $924 million and debts of $1.2 billion, sought Chapter 11 protection in U.S. Bankruptcy Court in Manhattan after reaching a deal with its lenders to cut its debt by about $200 million.
Asian stock index futures dropped after U.S. service industries contracted at the fastest pace in six years and Fitch Ratings said it may downgrade the AAA insurance rating on MBIA Inc., the largest bond guarantor.
After the close on Wednesday Cisco will report quarterly results and they will approximate 38 cents in earnings per share on $9.8 billion in revenue. For the year that ends in July, I anticipate revenue of about $40 billion and EPS of about $1.59. At $23+, the shares are, in my view, sharply undervalued.
The ISM non-manufacturing index fell to 41.9% in January from 54.4% in December. The reading was well below the 53.0% expected by economists. Readings below 50% indicate most firms are contracting. A separate report today by Royal Bank of Scotland Group Plc showed Europe's service industries grew in January at the slowest pace since 2003. In early trading, crude oil futures fell $1.57 to $88.45 on continued woes tied to the slowing economy.
Richmond Fed President Jeffrey Lacker became the first Fed official to say publicly that the economy faces the risk of a recession. While the most-likely path for the economy is a period of sluggish growth followed by a pickup, Lacker added: "I can also see the possibility of a mild recession, similar to the last two we have experienced."
Banks are tightening lending standards for businesses and consumers -- even beyond real-estate loans -- and companies' demand for credit has weakened, a new Federal Reserve survey of senior bank-loan officers shows.
Banc of America Securities downgraded Yahoo to neutral from buy, although it increased its price target to $31 from $26. "Even if Yahoo shareholders approve a deal with Microsoft, we believe the acquisition could face significant regulatory hurdles in the U.S. and particularly in the E.U., which could delay the acquisition from closing for quite some time," the broker said.
According to the WSJ, Billiton is offering 3.4 shares of its stock for each share of Rio Tinto.
A weekly survey of consumer attitudes about the economy fell to its lowest level since late 1993, ABC News and the Washington Post reported Tuesday. The ABC/Post consumer comfort index fell six points last week to negative 33. The index has fallen 13 points in the past month, "an unsettling sign," ABC News said, noting a 13-point drop before the 1990 recession and a 14-point drop before the 2001 recession. Just 22% of the consumers polled view the economy as good or fair, a 5-point drop from a week earlier. Attitudes about the buying climate and personal finances also fell.
For the fiscal year, Emerson said it expects earnings of $2.95 to $3.05 a share.
In 2008, Whirlpool expects earnings per share from continuing operations in a range of $8.50 to $9.00.
Tyco in January lifted its 2008 adjusted earnings per share view to a range of $2.60 to $2.70 a share.
For 2008, earnings per share for Corn Products, including a five-cent benefit from CME Group shares, are seen between $2.65 and $2.85 after $2.59 in 2007.
Hedge funds withdrew about 900 billion yen ($8.44 billion) in equities and other investments from Japan last year, according to a published report Tuesday. At the close of 2007, hedge funds had about $24.3 billion in Japanese assets, down 31% from a year earlier, the Nikkei reported, citing data from Eurekahedge Pte. Ltd.
Citigroup doubled its 2008 price forecast for thermal and coking coal to $100 per ton and $200 per ton respectively, citing factors ranging from supply disruptions in Australia and South Africa, cost increases in producing countries, rising currencies in commodity-producing nations and generally tight supplies. Citigroup's previous 2008 price targets were $55 per ton for thermal coal and $95 for coking coal.
Yum Brands raised its 2008 profit target from $1.82 to $1.85 per share, excluding one-time gains.
Arizona expects a billion-dollar shortfall in its $11 billion budget. Forecasters expect a region that grew 7 percent in 2006 to contract this year. Retail sales, which rose 16 percent in 2006, are dropping. Dennis Hoffman, an economics professor at Arizona State University, said he had never seen such a sharp turnabout in 25 years studying the local economy.
Less than a year after Apollo Management LP paid $6.6 billion for real estate broker Realogy Corp., bond prices show the deal may be worthless. Debt used to finance the April purchase trades at 61 cents on the dollar, and derivatives tied to the securities indicate an 80 percent chance that Parsippany, New Jersey-based Realogy will default. Apollo, the private-equity firm run by Leon Black, put up about $2 billion of cash to buy the owner of Coldwell Banker and Century 21, borrowing the rest.
Wickes Furniture Co., hit by the downturn that has hit furniture retailers in the wake of the housing industry's big slump, filed Sunday for Chapter 11 bankruptcy protection. Wickes, based in Wheeling, Illinois is owned by Sun Capital Partners Inc., a Boca Raton investment firm that specializes in leveraged buyouts and other transactions. In its filing with the federal bankruptcy court in Wilmington, Del., Wickes declared that it has assets of between $10 million and $50 million, and estimated its liabilities at between $50 million and $100 million.
Australia's central bank blamed significant inflationary pressures for its decision on Tuesday to raise interest rates to their highest level in close to 12 years.
The 25 basis point rise in the benchmark cash rate to 7 per cent is the third increase in six months and comes despite aggressive cuts in US interest rates in recent weeks. The Reserve Bank of Australia said underlying annualized inflation was around 3.5 per cent, above the upper end of its 2 to 3 per cent target, and higher than it expected a few months ago.
Toyota's profit for the October-December quarter rose 7.5 percent from the previous year as booming sales in China, Africa and South America offset declining U.S. sales and a stronger yen.
BHP Billiton must decide by Wednesday whether it will proceed with a bid for a rival, the Rio Tinto Group, after China intervened with a strategic investment that could sharply increase the price of what would be one of the biggest mergers in corporate history.
According to FT, BP will cut 5,000 jobs.
Up to 5.8 million additional workers in the United States could join the ranks of the unemployed by 2011 if the economy were to fall into a severe recession, according to a report from the Center for Economic and Policy Research.
Martin Marietta sees 2008 EPS at $6.25-$7.00.
GMAC Financial Services said Tuesday it swung to a loss during the fourth quarter due to continued weakness in its residential lending division, Residential Capital LLC. GMAC Financial Services lost $724 million in the fourth quarter, compared with earnings of $1 billion in the prior year period.Residential Capital lost $921 million during the quarter because of continued deterioration in the housing market.
The Chapter 11 filing by supplier Plastech Engineered Products Inc. threatens to halt Chrysler LLC's production at its 14 assembly plants, the automaker says in court papers filed. Citing a parts shortage, Chrysler today said it temporarily closed four assembly plants and canceled a shift at a fifth plant after Plastech filed for Chapter 11 protection.
The Coca-Cola Company has completed an agreement for the purchase of a 40% interest in organic beverage maker Honest Tea.
The China Meteorological Administration said the weather was the coldest in 100 years in central Hubei and Hunan provinces, going by the total number of consecutive days of average temperature less than 1 degree Celsius (33.8 degrees Fahrenheit).
“The long collapse in the United States savings rate is over,” said Ethan S. Harris, chief United States economist for Lehman Brothers. “People are going to start saving the old-fashioned way, rather than letting the stock market and rising home values do it for them.”
To increase its talent pool in India, IT networking major Cisco System India Pvt Ltd has decided to increase its headcount six fold to nearly 360,000 in the next five years.
Gaining a bigger share of mobile advertising is a big reason Microsoft Corp. is bidding $44.6 billion for Yahoo Inc., according to industry observers. Mobile advertising is "part of what Microsoft wants to get into, no doubt," said Phillip Redman, an analyst at Gartner Inc. "Leadership in mobile advertising is still unclaimed, while Google is threatening to do there what it did on the Internet, so Microsoft is being preemptive." "Yahoo touches so many customers and there's so much advertising potential in this deal," said Jeffrey Kagan, an independent analyst in Atlanta. "It's huge."
In addition, it should be noted Yahoo's new Zimbra Collaboration Suite (ZCS) 5.0 allows users to read Microsoft Outlook e-mail alongside Yahoo Mail or Google's Gmail or Zimbra's own branded e-mail. In effect, Zimbra's upgrade lets users read work and personal e-mail side by side. "We really think this is the next generation of Outlook that we are announcing," said Satish Dharmaraj, co-founder and chief executive of Zimbra. Yahoo paid $350 million in September to buy Zimbra, a provider of e-mail, calendar and contacts software that competes with Microsoft and Google.
In my view, the Street does not truly appreciate the benefits of putting Yahoo and Microsoft together. I believe that a year from now Microsoft will be selling closer to $40 than $30. I believe it has excellent risk/reward potential.
Nabors Industries Ltd. reported late Tuesday fourth-quarter net income fell to $222.2 million, or 78 cents a share, from $237.8 million, or 84 cents a share, a year ago. Revenue for the quarter ended Dec. 31 rose slightly to $1.31 billion from $1.3 billion.
Excluding the gains and ABC Radio income, Disney would have earned 49 cents a share in the fiscal first quarter of 2007. Revenue rose 9% to $10.45 billion on improved results at Disney's television networks, theme parks and consumer products division. Disney was expected to earn 52 cents a share on $10 billion in revenue, according to a survey of analysts by Thomson Financial.
United Technologies Corp.has begun talks with Boeing Co. to sort out costs stemming from delays in the rollout of Boeing's 787 Dreamliner, Gregory Hayes, vice president of accounting and finance, told investors meeting here Tuesday. "We have been spending a lot on R&D. It's been a difficult process and we'd like to see some cash to resolve this," he said. Last year UTC's Hamilton Sundstrand subsidiary spent $200 million on research and design associated with the Boeing 787 program, or half of its R&D outlay that year. Currently the company is spending $4 million a week on R&D for the 787 program. It sees that dropping to $2 million to $3 million a week once the 787 is ready for flight. Boeing has said it expects to have the new passenger plane airborne this summer, about a year later than planned.
The Dow Jones Industrial Average fell 370 points, or 2.9%, to 12,265, with all of its 30 components in negative territory. It was the worst percentage decline for the Dow since February of 2007, when the index fell 3.3%. The S&P 500 index dropped 44 points, or 3.2%, to 1,336, while the Nasdaq Composite fell 73 points, or 3%, to 2,309.
Jim Jubak: "The central bank's interest-rate cuts may be a quick fix for 2008, but they'll create a massive inflationary push in 2009, leading us right back into another boom-bust cycle."
Moving company Allied Van Lines Inc., along with corporate parent Sirva Inc., filed Tuesday for bankruptcy protection, a victim of its heavy debt load and the downturn in the U.S. housing industry. The company, which listed assets of $924 million and debts of $1.2 billion, sought Chapter 11 protection in U.S. Bankruptcy Court in Manhattan after reaching a deal with its lenders to cut its debt by about $200 million.
Asian stock index futures dropped after U.S. service industries contracted at the fastest pace in six years and Fitch Ratings said it may downgrade the AAA insurance rating on MBIA Inc., the largest bond guarantor.
After the close on Wednesday Cisco will report quarterly results and they will approximate 38 cents in earnings per share on $9.8 billion in revenue. For the year that ends in July, I anticipate revenue of about $40 billion and EPS of about $1.59. At $23+, the shares are, in my view, sharply undervalued.
Monday, February 04, 2008
Opportunity
2/5/08 Opportunity
Microsoft's (MSFT) historic $45 billion bid for Yahoo! (YHOO) is a fabulous deal for Yahoo shareholders, and creates a rare buying opportunity for Microsoft shares, Barron's magazine says.
A fresh surge in financial-sector layoffs contributed to a 69% increase in corporate job-cut announcements in January, according to the latest tally compiled by outplacement firm Challenger Gray & Christmas released Monday. U.S. corporations announced 74,986 job reductions last month, up from December's 44,416 and 19% higher compared with the previous January, Challenger Gray reported. The financial sector cut 15,789 positions, accounting for more than a fifth of the documented job cuts for January. Job cuts remain below levels seen in the 2001 recession, noted John Challenger, CEO of the firm that bears his name.
"If the economy dips into a full-blown recession, it will likely be caused by a drop in consumer spending and the effects of the high price of energy," Challenger said in a release. "In that case, we would expect to see job cutting in areas such as retail, consumer products, and transportation."
The White House expects the government to end the current fiscal year with a deficit of $410 billion. Don't be surprised if the number proves too low.
The World Bank Monday lowered its 2008 economic growth forecast for China to 9.6% from 10.8% previously, citing the impact on its exports from a global slowdown. The World Bank also raised its consumer price index forecast for China to 4.6% from 3.8% previously, according to reports.
According to Fortune Magazine, last week, buried deep in the ugly details of Countrywide Financial Corp.'s earnings release, was the news that its $32.4 billion portfolio of prime HELOCs - home equity lines of credit - had begun to rapidly deteriorate. The reeling Calabasas, Ca.-lender was forced to take a $704 million charge related to homeowners' inability to pay back equity they extracted from their homes.The structure of these loans appears to spell trouble for Countrywide and other home lenders with big home equity loan books. According to an overlooked Moody's Investors Services note that came out last Wednesday, once a certain threshold of losses is achieved in a home equity loan securitization pool, the bond holder is paid off ahead of the lender. What's worse is that it's difficult to see how large a lender's exposure is to home equity loans. Known as rapid amortization, this risk is treated as a contingent liability for Countrywide and other home equity loan lenders and is carried off balance sheet, until deterioration occurs and the lender goes on the hook for the loans. Countrywide is the nation's biggest home equity lender, with around 9% of the market.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, climbed 378.18 to 4,950.12 at the 3 p.m. close, the biggest fluctuation among indexes included in global benchmarks. All of the measure's 300 members rose, apart from 15 that were suspended or unchanged.
Archer Daniels Midland Co. said Monday its fiscal second-quarter profit rose 7 percent, helped by higher volumes and selling prices. Profit for the quarter ended Dec. 31 rose to $473 million, or 73 cents per share, for the three months ended Dec. 31 from $441 million, or 67 cents per share, a year ago. Revenue rose 50 percent to $16.5 billion from $10.98 billion last year.
Brett Steenbarger: "Friday closed with 1728 new 20-day highs against only 256 new lows. Among NYSE common stocks only, we had 31 new 52-week highs against only 6 new lows. This strength has been mirrored by the very positive sentiment expressed in the Adjusted NYSE TICK, which has closed positive 7 of the last 9 trading sessions and quite positive for the last two sessions. I generally have not found it profitable to fade the market for anything more than a short-term trade when such strength is evident."
Hillary Clinton and Barack Obama are statistically tied for voter support nationwide, a Washington Post/ABC News poll found. In my view, the MO is going in Obama's direction.
According to Reuters, a long anticipated deal by Altria Group Inc to buy smokeless tobacco company UST Inc could be reached within months, but the price remains the toughest sticking point, sources familiar with the potential deal said on Friday.
John Hussman: "The current economic downturn is likely to focus its damage on asset prices – the U.S. dollar, home values, low and mid-quality debt, and equity prices (largely through the combination of narrowing profit margins and lower valuations). In short, I expect that we are in the process of what might be called a “write off recession,” where significant amounts of asset value and perceived wealth will ultimately be written off. There will undoubtedly be some “wealth effects” on the real economy, but I would expect these to be only moderate."
China's biggest bank, Industrial & Commercial Bank of China Ltd., has set aside reserves equal to 30 percent of its $1.2 billion in sub-prime holdings to cover possible losses, a state news agency reported Monday.
Google has been removed from the Goldman Sachs Technology Framework Favorite Growth List and the stock is also being removed from the Goldman Sachs Conviction Buy List.
Wendy's International posted a higher quarterly profit Monday as cost-savings overshadowed declining sales at its fast food restaurants.
Earthfiles: "February 4, 2008 - Fourth Undersea Fiber Optic Cable Cut. Cable linking Qatar to the United Arab Emirates was damaged on Sunday, February 3, causing more telecommunication disruptions. Egypt's Communications Ministry reported Sunday that damage to the undersea internet cables in the Mediterranean was not caused by ship anchors, as previously speculated. In fact, the Egyptian transport ministry said that onshore video cameras at the location of the damaged cables did not show any ship traffic in the area when the communication cables were damaged. Third damaged cable on Friday, February 1, 2008, is called Falcon and provides communication to countries in the Mediterranean and Gulf regions, according to Dow Jones Newswires. On Thursday, January 31, 2008, two other undersea fiber optic cables owned by Flag Telecom and consortium SeaMeWe-4 between Alexandria, Egypt and Palermo, Italy, were cut - according to Du, a state-owned Dubai telecom provider. Stephan Beckert, an analyst with TeleGeography, told CNN the first two damaged cables provide the majority of international communications between Europe and the Middle East. Cause? With public communications cut off in Iran and other Middle East regions, a geopolitical speculation is that cutting major undersea fiber optic communication cables is deliberate sabotage before some unknown upcoming event in the Middle East or elsewhere."
Clorox now expects earnings of $3.20 per share to $3.35 per share for the year, from a previous range of $3.33 per share to $3.50 per share. The previous range did not include its Burt's Bees acquisition.
Wm Wrigley Jr Co said profit was $155 million, or 56 cents a diluted share, compared with $128.8 million, or 46 cents a share, a year earlier. Quarterly net sales, for the fourth quarter that ended December 31, were $1.42 billion, up from $1.22 billion a year ago. The company declared a quarterly dividend of 33.5 cents per share, up 16 percent from its prior dividend of 29 cents.
Core capital equipment orders rose 4.5% in December, revised up from 4.4% estimated a week ago, the government said. Factory orders increased 2.3% in December. Orders for durable goods increased 5% in December, revised down from 5.2% estimated a week ago. Orders for nondurable goods fell 0.4%.
The $515.4 billion in Pentagon spending for 2009 that President Bush proposed to Congress on Monday does not include the cost of fighting the wars in Iraq and Afghanistan.
The inflation watch: $5 corn, $10 wheat, and $13 soybeans.
European producer-price inflation accelerated in December to the fastest pace in a year, boosted by surging energy costs. Factory-gate prices increased 4.3 percent from a year earlier after gaining 4.2 percent in November, the European Union statistics office in Luxembourg said today.
News Corp. Chairman Rupert Murdoch said Monday that the company has no intention of making a bid for Yahoo Inc.
Sun-Times Media Group Inc., the owner of the Chicago Sun-Times and other newspapers, said late Monday its board is evaluating strategic alternatives for the company, along with the possibility of a sale.
Fox television network is seeing no signs of an advertising slowdown, despite a struggling economy. Ad rates are up by a double-digit percentage compared with this time a year ago at both Fox Broadcasting and at the company's cable networks, led by Fox News Channel.
Super Bowl XLII generated $250 million in gross revenue for Fox and its television stations, the biggest one-day haul in News Corp.'s history. The game drew more than 97.5 million viewers, according to Nielsen Media Research's overnight measurement of the largest U.S. television markets, making it likely to be the most-watched Super Bowl ever.
The Dow Jones Industrial Average was down 108 points at 12,635, with 23 of its 30 component stocks in negative territory.The S&P 500 index lost 14 points to 1,380, while the Nasdaq Composite dropped 30 points to 2,382.
Crude oil for March delivery rose $1.06, or 1.2%, to close at $90.02 a barrel. Gold for April delivery declined $4.10 to end at $909.40 an ounce on the New York Mercantile Exchange.
Mike Burk: "The market is overbought...The rapid decline in the number of new lows implies risk is limited for the next few weeks, however, the extreme number of new lows at the January 22 low implies a retest of the price lows in the next few months...Over all years since 1928 February has been 2nd to September as the worst month of the year for the SPX, up 53% of the time with an average return of -0.3%. During the 4th year of the Presidential Cycle February’s returns have been similar to other years while April and May have had greater average losses...I expect the major indices to be higher on Friday February 8 than they were on Friday February 1."
Iran's Oil Bourse will serve as a place to trade oil products and crude oil. The Ministry of Economy will be setting up the petrochemicals section by February 19. The Oil Bourse is supposed to trade oil products in non-dollar currencies and many analysts hold the opinion that it could deal a blow to the already declining greenback.
Microsoft's (MSFT) historic $45 billion bid for Yahoo! (YHOO) is a fabulous deal for Yahoo shareholders, and creates a rare buying opportunity for Microsoft shares, Barron's magazine says.
A fresh surge in financial-sector layoffs contributed to a 69% increase in corporate job-cut announcements in January, according to the latest tally compiled by outplacement firm Challenger Gray & Christmas released Monday. U.S. corporations announced 74,986 job reductions last month, up from December's 44,416 and 19% higher compared with the previous January, Challenger Gray reported. The financial sector cut 15,789 positions, accounting for more than a fifth of the documented job cuts for January. Job cuts remain below levels seen in the 2001 recession, noted John Challenger, CEO of the firm that bears his name.
"If the economy dips into a full-blown recession, it will likely be caused by a drop in consumer spending and the effects of the high price of energy," Challenger said in a release. "In that case, we would expect to see job cutting in areas such as retail, consumer products, and transportation."
The White House expects the government to end the current fiscal year with a deficit of $410 billion. Don't be surprised if the number proves too low.
The World Bank Monday lowered its 2008 economic growth forecast for China to 9.6% from 10.8% previously, citing the impact on its exports from a global slowdown. The World Bank also raised its consumer price index forecast for China to 4.6% from 3.8% previously, according to reports.
According to Fortune Magazine, last week, buried deep in the ugly details of Countrywide Financial Corp.'s earnings release, was the news that its $32.4 billion portfolio of prime HELOCs - home equity lines of credit - had begun to rapidly deteriorate. The reeling Calabasas, Ca.-lender was forced to take a $704 million charge related to homeowners' inability to pay back equity they extracted from their homes.The structure of these loans appears to spell trouble for Countrywide and other home lenders with big home equity loan books. According to an overlooked Moody's Investors Services note that came out last Wednesday, once a certain threshold of losses is achieved in a home equity loan securitization pool, the bond holder is paid off ahead of the lender. What's worse is that it's difficult to see how large a lender's exposure is to home equity loans. Known as rapid amortization, this risk is treated as a contingent liability for Countrywide and other home equity loan lenders and is carried off balance sheet, until deterioration occurs and the lender goes on the hook for the loans. Countrywide is the nation's biggest home equity lender, with around 9% of the market.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, climbed 378.18 to 4,950.12 at the 3 p.m. close, the biggest fluctuation among indexes included in global benchmarks. All of the measure's 300 members rose, apart from 15 that were suspended or unchanged.
Archer Daniels Midland Co. said Monday its fiscal second-quarter profit rose 7 percent, helped by higher volumes and selling prices. Profit for the quarter ended Dec. 31 rose to $473 million, or 73 cents per share, for the three months ended Dec. 31 from $441 million, or 67 cents per share, a year ago. Revenue rose 50 percent to $16.5 billion from $10.98 billion last year.
Brett Steenbarger: "Friday closed with 1728 new 20-day highs against only 256 new lows. Among NYSE common stocks only, we had 31 new 52-week highs against only 6 new lows. This strength has been mirrored by the very positive sentiment expressed in the Adjusted NYSE TICK, which has closed positive 7 of the last 9 trading sessions and quite positive for the last two sessions. I generally have not found it profitable to fade the market for anything more than a short-term trade when such strength is evident."
Hillary Clinton and Barack Obama are statistically tied for voter support nationwide, a Washington Post/ABC News poll found. In my view, the MO is going in Obama's direction.
According to Reuters, a long anticipated deal by Altria Group Inc to buy smokeless tobacco company UST Inc could be reached within months, but the price remains the toughest sticking point, sources familiar with the potential deal said on Friday.
John Hussman: "The current economic downturn is likely to focus its damage on asset prices – the U.S. dollar, home values, low and mid-quality debt, and equity prices (largely through the combination of narrowing profit margins and lower valuations). In short, I expect that we are in the process of what might be called a “write off recession,” where significant amounts of asset value and perceived wealth will ultimately be written off. There will undoubtedly be some “wealth effects” on the real economy, but I would expect these to be only moderate."
China's biggest bank, Industrial & Commercial Bank of China Ltd., has set aside reserves equal to 30 percent of its $1.2 billion in sub-prime holdings to cover possible losses, a state news agency reported Monday.
Google has been removed from the Goldman Sachs Technology Framework Favorite Growth List and the stock is also being removed from the Goldman Sachs Conviction Buy List.
Wendy's International posted a higher quarterly profit Monday as cost-savings overshadowed declining sales at its fast food restaurants.
Earthfiles: "February 4, 2008 - Fourth Undersea Fiber Optic Cable Cut. Cable linking Qatar to the United Arab Emirates was damaged on Sunday, February 3, causing more telecommunication disruptions. Egypt's Communications Ministry reported Sunday that damage to the undersea internet cables in the Mediterranean was not caused by ship anchors, as previously speculated. In fact, the Egyptian transport ministry said that onshore video cameras at the location of the damaged cables did not show any ship traffic in the area when the communication cables were damaged. Third damaged cable on Friday, February 1, 2008, is called Falcon and provides communication to countries in the Mediterranean and Gulf regions, according to Dow Jones Newswires. On Thursday, January 31, 2008, two other undersea fiber optic cables owned by Flag Telecom and consortium SeaMeWe-4 between Alexandria, Egypt and Palermo, Italy, were cut - according to Du, a state-owned Dubai telecom provider. Stephan Beckert, an analyst with TeleGeography, told CNN the first two damaged cables provide the majority of international communications between Europe and the Middle East. Cause? With public communications cut off in Iran and other Middle East regions, a geopolitical speculation is that cutting major undersea fiber optic communication cables is deliberate sabotage before some unknown upcoming event in the Middle East or elsewhere."
Clorox now expects earnings of $3.20 per share to $3.35 per share for the year, from a previous range of $3.33 per share to $3.50 per share. The previous range did not include its Burt's Bees acquisition.
Wm Wrigley Jr Co said profit was $155 million, or 56 cents a diluted share, compared with $128.8 million, or 46 cents a share, a year earlier. Quarterly net sales, for the fourth quarter that ended December 31, were $1.42 billion, up from $1.22 billion a year ago. The company declared a quarterly dividend of 33.5 cents per share, up 16 percent from its prior dividend of 29 cents.
Core capital equipment orders rose 4.5% in December, revised up from 4.4% estimated a week ago, the government said. Factory orders increased 2.3% in December. Orders for durable goods increased 5% in December, revised down from 5.2% estimated a week ago. Orders for nondurable goods fell 0.4%.
The $515.4 billion in Pentagon spending for 2009 that President Bush proposed to Congress on Monday does not include the cost of fighting the wars in Iraq and Afghanistan.
The inflation watch: $5 corn, $10 wheat, and $13 soybeans.
European producer-price inflation accelerated in December to the fastest pace in a year, boosted by surging energy costs. Factory-gate prices increased 4.3 percent from a year earlier after gaining 4.2 percent in November, the European Union statistics office in Luxembourg said today.
News Corp. Chairman Rupert Murdoch said Monday that the company has no intention of making a bid for Yahoo Inc.
Sun-Times Media Group Inc., the owner of the Chicago Sun-Times and other newspapers, said late Monday its board is evaluating strategic alternatives for the company, along with the possibility of a sale.
Fox television network is seeing no signs of an advertising slowdown, despite a struggling economy. Ad rates are up by a double-digit percentage compared with this time a year ago at both Fox Broadcasting and at the company's cable networks, led by Fox News Channel.
Super Bowl XLII generated $250 million in gross revenue for Fox and its television stations, the biggest one-day haul in News Corp.'s history. The game drew more than 97.5 million viewers, according to Nielsen Media Research's overnight measurement of the largest U.S. television markets, making it likely to be the most-watched Super Bowl ever.
The Dow Jones Industrial Average was down 108 points at 12,635, with 23 of its 30 component stocks in negative territory.The S&P 500 index lost 14 points to 1,380, while the Nasdaq Composite dropped 30 points to 2,382.
Crude oil for March delivery rose $1.06, or 1.2%, to close at $90.02 a barrel. Gold for April delivery declined $4.10 to end at $909.40 an ounce on the New York Mercantile Exchange.
Mike Burk: "The market is overbought...The rapid decline in the number of new lows implies risk is limited for the next few weeks, however, the extreme number of new lows at the January 22 low implies a retest of the price lows in the next few months...Over all years since 1928 February has been 2nd to September as the worst month of the year for the SPX, up 53% of the time with an average return of -0.3%. During the 4th year of the Presidential Cycle February’s returns have been similar to other years while April and May have had greater average losses...I expect the major indices to be higher on Friday February 8 than they were on Friday February 1."
Iran's Oil Bourse will serve as a place to trade oil products and crude oil. The Ministry of Economy will be setting up the petrochemicals section by February 19. The Oil Bourse is supposed to trade oil products in non-dollar currencies and many analysts hold the opinion that it could deal a blow to the already declining greenback.
Sunday, February 03, 2008
Funding
2/4/08 War Funding
President George W. Bush will seek $140.7 billion on Monday for the U.S. Army in fiscal 2009, including increased funds to buy helicopters and other equipment, according to budget documents obtained by Reuters. That request would be 8 percent higher than the Army budget requested for fiscal 2008. President George W. Bush will seek $515.4 billion for the Pentagon for fiscal 2009, up 7.5 percent from the funds Congress approved for this year, according to Pentagon documents obtained by Reuters on Friday. In his final budget request on Monday, Bush also will ask Congress for $70 billion in "emergency" funds for the wars in Iraq and Afghanistan, the documents show.
Boeing predicts that the first delivery of their 787 will be in the first quarter of 2009. Boeing said that it would update investors at the end of this year's first quarter on the progress of the 787 and then outline a new delivery schedule for airline customers in April. The company is still hoping to deliver 109 aircraft by the end of next year but if this slips there could be further earnings revisions to reflect compensation payments.
Citigroup has told more than 160,000 customers in the U.K. that they will not be able to use their card cards after the first week of March, according to media reports Saturday. The bank is canceling credit cards for customers it considers risky following a review of accounts at Egg Banking PLC, an Internet bank Citigroup purchased in May 2007, according to a report in The Wall Street Journal. The figure represents about 7% of the Egg unit's credit card customers.
Yahoo Inc said it may take "quite a bit of time" to weigh its strategic options, including keeping the company independent, following Microsoft Corp's $45 billion offer to buy the company.
Yahoo Inc would consider a business alliance with Google Inc as one way to rebuff a $44.6 billion takeover proposal by Microsoft, a source familiar with Yahoo's strategy said on Sunday. Yahoo management is considering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft's bid, that source said. At $31 a share, Yahoo believes the bid undervalues the company, two sources said.
Given the market share Google now has in the search business, I see no way Google could buy Yahoo and get government clearance. As far as outsourcing Yahoo's search business to Google, I take a dim view of that possibility too.
Google Inc. raised the specter of Microsoft Corp. using its proposed $42 billion acquisition of Yahoo Inc. to gain illegal control over the Internet, underscoring the online search leader's queasiness about its two biggest rivals teaming up.
China's largest bank said Sunday it has received approval to buy a 20 percent stake in South Africa's biggest lender.
Platinum roared to another record high on Monday as supply concerns persisted in main producer South Africa, lifting sister-metal palladium to its best level in six years.
According to the FT, the leveraged loan market begins the week in “disarray” following the collapse of efforts to syndicate $14bn of the debt used to finance the $30bn buy-out of Harrah’s Entertainment, bankers say. The group of banks backing buyers Apollo Management and Texas Pacific Group are having trouble selling on the leveraged buy-out debt to third parties. With the bulk of the debt remaining on their books, the banks are sitting on a sizable loss.
The freeze in the debt market means they now face larger potential losses on other big buy-outs, such as BCE and Clear Channel Communications, and will be more desperate to get out of the financing commitments on those deals. Banks are already saddled with more than $150bn of unsyndicated debt, most of it LBO-related, according to S&P data.
President George W. Bush will seek $140.7 billion on Monday for the U.S. Army in fiscal 2009, including increased funds to buy helicopters and other equipment, according to budget documents obtained by Reuters. That request would be 8 percent higher than the Army budget requested for fiscal 2008. President George W. Bush will seek $515.4 billion for the Pentagon for fiscal 2009, up 7.5 percent from the funds Congress approved for this year, according to Pentagon documents obtained by Reuters on Friday. In his final budget request on Monday, Bush also will ask Congress for $70 billion in "emergency" funds for the wars in Iraq and Afghanistan, the documents show.
Boeing predicts that the first delivery of their 787 will be in the first quarter of 2009. Boeing said that it would update investors at the end of this year's first quarter on the progress of the 787 and then outline a new delivery schedule for airline customers in April. The company is still hoping to deliver 109 aircraft by the end of next year but if this slips there could be further earnings revisions to reflect compensation payments.
Citigroup has told more than 160,000 customers in the U.K. that they will not be able to use their card cards after the first week of March, according to media reports Saturday. The bank is canceling credit cards for customers it considers risky following a review of accounts at Egg Banking PLC, an Internet bank Citigroup purchased in May 2007, according to a report in The Wall Street Journal. The figure represents about 7% of the Egg unit's credit card customers.
Yahoo Inc said it may take "quite a bit of time" to weigh its strategic options, including keeping the company independent, following Microsoft Corp's $45 billion offer to buy the company.
Yahoo Inc would consider a business alliance with Google Inc as one way to rebuff a $44.6 billion takeover proposal by Microsoft, a source familiar with Yahoo's strategy said on Sunday. Yahoo management is considering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft's bid, that source said. At $31 a share, Yahoo believes the bid undervalues the company, two sources said.
Given the market share Google now has in the search business, I see no way Google could buy Yahoo and get government clearance. As far as outsourcing Yahoo's search business to Google, I take a dim view of that possibility too.
Google Inc. raised the specter of Microsoft Corp. using its proposed $42 billion acquisition of Yahoo Inc. to gain illegal control over the Internet, underscoring the online search leader's queasiness about its two biggest rivals teaming up.
China's largest bank said Sunday it has received approval to buy a 20 percent stake in South Africa's biggest lender.
Platinum roared to another record high on Monday as supply concerns persisted in main producer South Africa, lifting sister-metal palladium to its best level in six years.
According to the FT, the leveraged loan market begins the week in “disarray” following the collapse of efforts to syndicate $14bn of the debt used to finance the $30bn buy-out of Harrah’s Entertainment, bankers say. The group of banks backing buyers Apollo Management and Texas Pacific Group are having trouble selling on the leveraged buy-out debt to third parties. With the bulk of the debt remaining on their books, the banks are sitting on a sizable loss.
The freeze in the debt market means they now face larger potential losses on other big buy-outs, such as BCE and Clear Channel Communications, and will be more desperate to get out of the financing commitments on those deals. Banks are already saddled with more than $150bn of unsyndicated debt, most of it LBO-related, according to S&P data.
Friday, February 01, 2008
Deals
2/2/08 Deals
Microsoft Corp. is making an unsolicited $44.6 billion offer for Yahoo Inc. In a letter to Yahoo's board of directors, Microsoft Chief Executive Steve Ballmer said the company will bid $31 per share, representing a 62 percent premium to Yahoo's closing stock price Thursday. Yahoo shareholders could choose to receive cash or Microsoft common shares, with the total purchase consisting of 50 percent each cash and stock. Microsoft said it sees at least $1 billion cost savings generated by the merger, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees. The software giant said it believes the takeover would receive regulatory clearance and close in the second half of 2008. MSN and Yahoo! together would have about 35% of the search market. Google has over 50%.
OPEC ministers decided to keep output at present levels at their meeting Friday out of fear that a softening global economy will translate into weakened demand. ``If prices continue to fall as we've seen in Venezuela until now, then we'd probably be prepared to propose a cut at the next OPEC meeting in March,'' Venezuelan Oil Minister Rafael Ramirez told reporters in Vienna yesterday.
Pioneer Drilling Co. will acquire Wedge Well Services, Wedge Wireline and Wedge Fishing and Rental Services from affiliates of Wedge Group Inc. for $303 million in cash. The Wedge Companies provide oil and gas well workover, wireline, and fishing and rental services for energy producers in the United States. Pioneer said that it expects the acquisition to be significantly accretive to 2008 earnings and cash flow per share.
Societe Generale rose 3.8% after BNP Paribas confirmed on Thursday it was mulling a bid and after reports that Credit Agricole could also be interested in buying the firm.
Chinalco and Alcoa said Friday that they've acquired a 12% stake in miner Rio Tinto. The stake was acquired by Shining Prospect, a Singapore-based entity that is wholly owned by Chinalco and into which Alcoa has committed $1.2 billion by way of convertible instruments. Chinalco and Alcoa said they do not currently intend to make an offer for Rio Tinto, but reserve the right to make an offer under certain circumstances. Investment bank Lehman Brothers said it bought the stake in Rio for Chinalco and Alcoa at 60 pounds a share, about 21 percent above Rio's closing price of 49.56 pounds on Thursday.
According to the WSJ, the next president, if he or she serves two terms, could find the U.S. government so deeply in hock that it would face losing its Triple-A credit rating, something that has never happened since Moody's Investors Service began grading U.S. securities in 1917.
John Ing: "America today absorbs about 75 percent of the world's surplus savings. However, a weakened Wall Street can no longer fix America's debt problem. America's trade deficit grew because its savings are less than investment. Between 1997 and 2007, the current deficit increased almost six times from an annual rate of 1.25 percent of GDP to 7 percent. The US needs over $2.5 billion a day of foreign capital to finance its growing deficits. Its consumers for example saw a dramatic jump in household debt to a record $2.5 trillion, which rises to $13.6 trillion if mortgages are added. And since 1995, mortgage debt as a percentage of disposable income increased from 56 percent in ten years to almost 100 percent. Credit card debt alone is almost $1 trillion. In November, consumer debt rose 7.5 percent led by credit card debt which rose 11.3 percent."
Google's CEO: “We are very, very pleased with our year and also with the quarter that just ended. We are optimistic about 2008,” he added.
From 2003 to 2006, the last year for which complete data are available, the world's oil production grew 6.25 percent, to reach 84.6 million barrels per day, according to the federal Energy Information Administration. But demand for oil grew faster, pushed by the growing economies of China and India. Worldwide demand rose 6.43 percent to 84.73 million barrels per day.
Zman: "The natural gas surplus is only a quarter of what it was this time last year given the help of a hot summer and now, a cold winter...The CPC has underestimated the cold of this winter for five of the last six weeks. Keep that up much longer and the old E&P complaint of , "oh, if only we could have a normal winter" may go by the wayside."
The Oil Drum: "Dr Jim Buckee has just retired as President and CEO of Talisman Energy, a major independent Canadian oil company with a market capitalisation of $25-billion. On the phone from Perth, Dr Buckee told me that 'peak oil' was now either here, or very close. JIM BUCKEE: It is the underlying decline of the world's major fields that is the dominant driving factor here. If you think that at the moment the world is consuming 30-plus billion barrels a year of oil and is finding seven or eight billion barrels a year. And this state of affairs has been going on now for 20 or more years. It's obviously unsustainable and the world is increasingly drawing on the bigger older fields. You couple that notion with the irreversibility of decline and you've got a very alarming picture."
Wireless equipment maker LM Ericsson AB reported a sharp drop in fourth-quarter net profits and said Friday it would lay off around 1,000 employees in Sweden because of costs cuts.
European Central Bank council member Nicholas Garganas said the bank won't be driven by investor expectations of an interest-rate cut as inflation remains ``a major concern.'' ``Our monetary policy is not led on what the markets expect,'' Garganas, who also heads the Greek central bank, said in an interview late yesterday in his office in Athens. ``I'm very concerned about the high inflation rate. Inflation risks remain on the upside.''
UBS AG, Europe's biggest bank by assets, increased its price forecasts for coal used in power plants in 2008 and 2009 as China's demand rises and rain disrupted supplies from Australia. The price of thermal contract coal will average $100 a metric ton this year, and $125 a ton in 2009, up from previous estimates of $90 and $110, UBS analysts led by Stephen Oldfield and Ghee Peh said in a report today.
According to AMG Data Services, "including ETF activity, Equity funds report net cash outflows totaling -$7.524 billion in the week ended 1/30/08 with Domestic funds reporting net outflows of -$6.315 billion and Non-domestic funds reporting net outflows of -$1.209 billion;
Excluding ETF activity, Equity funds report net cash outflows totaling -$3.724 billion with Domestic funds reporting net outflows of -$2.485 billion and Non-domestic funds reporting net outflows totaling -$1.238 billion."
Rob Hanna: "To summarize the two main points tonight:
1) Don’t be too eager to short. It’s doesn’t have positive expected value just after a Follow Through Day.
2) Watch market action closely over the next week. It should give you a pretty good indication of the intermediate-term."
Exxon's fourth quarter earnings rose to $2.13 a share from $1.76 a share last year. Chevron Q4 earnings $2.32 per share vs $1.74.
Job growth contracted in January for the first time in more than four years, the Labor Department said Friday. Nonfarm payrolls fell by 17,000 in January much weaker than the 85,000 expected by economists surveyed by MarketWatch. The unemployment rate ticked lower to 4.9% in January from 5.0% in the previous month. The department revised December's new-job total up to 82,000 from 18,000.
U.S. Jan. average workweek falls to 33.7 hours vs 33.8 Dec. U.S. Jan. average hourly earnings up 0.2%, up 3.7 yr-on-yr and continues to lag inflation.
Beazer Homes USA Inc said on Friday it would cease some operations, including mortgage origination, causing unspecified charges. The company said besides mortgage origination, it would exit some homebuilding operations in North Carolina, Ohio, South Carolina and Kentucky. Beazer also said it would enter a new marketing services deal with mortgage lender Countrywide Financial Corp .
In early Friday trading, the dollar index dropped 0.3% to 74.985.
Crude oil for March delivery slumped $2.79 to $88.96 a barrel on the New York Mercantile Exchange. Gold for April delivery fell $14.50 to end at $913.50 an ounce on the New York Mercantile Exchange.
The ISM index rose to 50.7% from 48.4% in December, the ISM said.
U.S. consumer sentiment rose in January, according to the University of Michigan consumer sentiment survey released Friday by UMich and Reuters. The index rose to 78.4 in January from 75.5 in December. The current conditions index rose to 94.4 from 91.0, while the expectations index gained to 68.1 from 65.6.
On a year-over-year basis, spending on private home construction was down 20.4% in December.
Rep. Ron Paul: "The Constitution was written for one specific purpose and that was to restrain the government, not to restrain the people."
Microsoft Corp. is making an unsolicited $44.6 billion offer for Yahoo Inc. In a letter to Yahoo's board of directors, Microsoft Chief Executive Steve Ballmer said the company will bid $31 per share, representing a 62 percent premium to Yahoo's closing stock price Thursday. Yahoo shareholders could choose to receive cash or Microsoft common shares, with the total purchase consisting of 50 percent each cash and stock. Microsoft said it sees at least $1 billion cost savings generated by the merger, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees. The software giant said it believes the takeover would receive regulatory clearance and close in the second half of 2008. MSN and Yahoo! together would have about 35% of the search market. Google has over 50%.
OPEC ministers decided to keep output at present levels at their meeting Friday out of fear that a softening global economy will translate into weakened demand. ``If prices continue to fall as we've seen in Venezuela until now, then we'd probably be prepared to propose a cut at the next OPEC meeting in March,'' Venezuelan Oil Minister Rafael Ramirez told reporters in Vienna yesterday.
Pioneer Drilling Co. will acquire Wedge Well Services, Wedge Wireline and Wedge Fishing and Rental Services from affiliates of Wedge Group Inc. for $303 million in cash. The Wedge Companies provide oil and gas well workover, wireline, and fishing and rental services for energy producers in the United States. Pioneer said that it expects the acquisition to be significantly accretive to 2008 earnings and cash flow per share.
Societe Generale rose 3.8% after BNP Paribas confirmed on Thursday it was mulling a bid and after reports that Credit Agricole could also be interested in buying the firm.
Chinalco and Alcoa said Friday that they've acquired a 12% stake in miner Rio Tinto. The stake was acquired by Shining Prospect, a Singapore-based entity that is wholly owned by Chinalco and into which Alcoa has committed $1.2 billion by way of convertible instruments. Chinalco and Alcoa said they do not currently intend to make an offer for Rio Tinto, but reserve the right to make an offer under certain circumstances. Investment bank Lehman Brothers said it bought the stake in Rio for Chinalco and Alcoa at 60 pounds a share, about 21 percent above Rio's closing price of 49.56 pounds on Thursday.
According to the WSJ, the next president, if he or she serves two terms, could find the U.S. government so deeply in hock that it would face losing its Triple-A credit rating, something that has never happened since Moody's Investors Service began grading U.S. securities in 1917.
John Ing: "America today absorbs about 75 percent of the world's surplus savings. However, a weakened Wall Street can no longer fix America's debt problem. America's trade deficit grew because its savings are less than investment. Between 1997 and 2007, the current deficit increased almost six times from an annual rate of 1.25 percent of GDP to 7 percent. The US needs over $2.5 billion a day of foreign capital to finance its growing deficits. Its consumers for example saw a dramatic jump in household debt to a record $2.5 trillion, which rises to $13.6 trillion if mortgages are added. And since 1995, mortgage debt as a percentage of disposable income increased from 56 percent in ten years to almost 100 percent. Credit card debt alone is almost $1 trillion. In November, consumer debt rose 7.5 percent led by credit card debt which rose 11.3 percent."
Google's CEO: “We are very, very pleased with our year and also with the quarter that just ended. We are optimistic about 2008,” he added.
From 2003 to 2006, the last year for which complete data are available, the world's oil production grew 6.25 percent, to reach 84.6 million barrels per day, according to the federal Energy Information Administration. But demand for oil grew faster, pushed by the growing economies of China and India. Worldwide demand rose 6.43 percent to 84.73 million barrels per day.
Zman: "The natural gas surplus is only a quarter of what it was this time last year given the help of a hot summer and now, a cold winter...The CPC has underestimated the cold of this winter for five of the last six weeks. Keep that up much longer and the old E&P complaint of , "oh, if only we could have a normal winter" may go by the wayside."
The Oil Drum: "Dr Jim Buckee has just retired as President and CEO of Talisman Energy, a major independent Canadian oil company with a market capitalisation of $25-billion. On the phone from Perth, Dr Buckee told me that 'peak oil' was now either here, or very close. JIM BUCKEE: It is the underlying decline of the world's major fields that is the dominant driving factor here. If you think that at the moment the world is consuming 30-plus billion barrels a year of oil and is finding seven or eight billion barrels a year. And this state of affairs has been going on now for 20 or more years. It's obviously unsustainable and the world is increasingly drawing on the bigger older fields. You couple that notion with the irreversibility of decline and you've got a very alarming picture."
Wireless equipment maker LM Ericsson AB reported a sharp drop in fourth-quarter net profits and said Friday it would lay off around 1,000 employees in Sweden because of costs cuts.
European Central Bank council member Nicholas Garganas said the bank won't be driven by investor expectations of an interest-rate cut as inflation remains ``a major concern.'' ``Our monetary policy is not led on what the markets expect,'' Garganas, who also heads the Greek central bank, said in an interview late yesterday in his office in Athens. ``I'm very concerned about the high inflation rate. Inflation risks remain on the upside.''
UBS AG, Europe's biggest bank by assets, increased its price forecasts for coal used in power plants in 2008 and 2009 as China's demand rises and rain disrupted supplies from Australia. The price of thermal contract coal will average $100 a metric ton this year, and $125 a ton in 2009, up from previous estimates of $90 and $110, UBS analysts led by Stephen Oldfield and Ghee Peh said in a report today.
According to AMG Data Services, "including ETF activity, Equity funds report net cash outflows totaling -$7.524 billion in the week ended 1/30/08 with Domestic funds reporting net outflows of -$6.315 billion and Non-domestic funds reporting net outflows of -$1.209 billion;
Excluding ETF activity, Equity funds report net cash outflows totaling -$3.724 billion with Domestic funds reporting net outflows of -$2.485 billion and Non-domestic funds reporting net outflows totaling -$1.238 billion."
Rob Hanna: "To summarize the two main points tonight:
1) Don’t be too eager to short. It’s doesn’t have positive expected value just after a Follow Through Day.
2) Watch market action closely over the next week. It should give you a pretty good indication of the intermediate-term."
Exxon's fourth quarter earnings rose to $2.13 a share from $1.76 a share last year. Chevron Q4 earnings $2.32 per share vs $1.74.
Job growth contracted in January for the first time in more than four years, the Labor Department said Friday. Nonfarm payrolls fell by 17,000 in January much weaker than the 85,000 expected by economists surveyed by MarketWatch. The unemployment rate ticked lower to 4.9% in January from 5.0% in the previous month. The department revised December's new-job total up to 82,000 from 18,000.
U.S. Jan. average workweek falls to 33.7 hours vs 33.8 Dec. U.S. Jan. average hourly earnings up 0.2%, up 3.7 yr-on-yr and continues to lag inflation.
Beazer Homes USA Inc said on Friday it would cease some operations, including mortgage origination, causing unspecified charges. The company said besides mortgage origination, it would exit some homebuilding operations in North Carolina, Ohio, South Carolina and Kentucky. Beazer also said it would enter a new marketing services deal with mortgage lender Countrywide Financial Corp .
In early Friday trading, the dollar index dropped 0.3% to 74.985.
Crude oil for March delivery slumped $2.79 to $88.96 a barrel on the New York Mercantile Exchange. Gold for April delivery fell $14.50 to end at $913.50 an ounce on the New York Mercantile Exchange.
The ISM index rose to 50.7% from 48.4% in December, the ISM said.
U.S. consumer sentiment rose in January, according to the University of Michigan consumer sentiment survey released Friday by UMich and Reuters. The index rose to 78.4 in January from 75.5 in December. The current conditions index rose to 94.4 from 91.0, while the expectations index gained to 68.1 from 65.6.
On a year-over-year basis, spending on private home construction was down 20.4% in December.
Rep. Ron Paul: "The Constitution was written for one specific purpose and that was to restrain the government, not to restrain the people."
Thursday, January 31, 2008
The Day After
2/1/08 The Day After
Credit card services provider Alliance Data Systems Corp. on Wednesday forecast 2008 profit, above Wall Street expectations on growth in its Epsilon, Canadian loyalty and private label businesses.The company said it expects full-year cash earnings of $4.30 per share for 2008, up 15 percent from $3.75 per share in 2007.
Nouriel Roubini: "The reaction of the stock market to the unexpected 75bps cut by the Fed last week and its reaction today to the further 50bps cut clearly shows that markets and investors are now fully realizing that the US economy is suffering from serious credit, i.e. insolvency, problems, not just illiquidity ones; and that Fed monetary policy can partly tackle illiquidity problems but cannot resolve insolvency ones."
Losses from securities linked to subprime mortgages may exceed $265 billion as regional U.S. banks, credit unions and overseas financial institutions write down the value of their holdings, according to Standard & Poor's.
Profits fell at Japanese megabanks Mitsubishi UFJ Financial Group and Mizuho Financial Group in the nine months through December because of exposure to the U.S. subprime mortgage crisis.
A top agriculture official warned Thursday that snow battering central China has dealt an "extremely serious" blow to winter crops, raising the likelihood of future shortages driving already surging inflation.
One of this nation’s largest employers, the mining industry, virtually halted production for four days last week because Eskom, the dominant, government-controlled utility, could not guarantee enough power to ventilate and cool the deep underground shafts. Companies that mine gold and platinum restarted production only on Tuesday after emergency negotiations with Eskom, South Africa’s Chamber of Mines said. “The shutdown of the mining industry is an extraordinary, unprecedented event,” said Anton Eberhard, a business school professor at the University of Cape Town and an energy expert. “That’s a powerful message, massively damaging to South Africa’s reputation for new investment. Our country was built on the mines.”
For 2008, Raytheon anticipates earnings from continuing operations in the range of $3.65 to $3.80 a share. Analysts are looking for full-year earnings of $3.81 a share.
Amazon.com Inc.will buy Audible Inc. for $11.50 a share in a deal that values the provider of digital spoken word audio content at a 23% premium from its closing price of $9.33 a share in the previous session. The Seattle-based online retailer will commence a cash tender offer to purchase all of the outstanding shares of Audible.com and will assume the company's outstanding stock-based awards, for an aggregate transaction value of approximately $300 million.
Consumers in the 15 countries that share the euro became more pessimistic about the outlook for the economy and more fearful of losing their jobs at the start of 2008. That contributed to a sharp fall in consumer confidence in the euro zone, with sentiment also weakening among manufacturers, service providers, retailers and construction companies. The European Commission's January survey of sentiment in the euro zone, published Thursday, showed the headline measure of consumer confidence fell to -12 from -9 in December, a larger decline that the drop to -10 that was forecast by economists. The measure of industrial confidence fell to +1 from +2, in line with expectations, while the measure of confidence among service providers dropped to +12 from +14.
Inflation across the countries that make up the European single currency is expected to hit an annual rate of 3.2% in January, according to a preliminary estimate released by Eurostat Thursday.
Troubled bond insurer MBIA swung to a fourth-quarter loss of $2.3 billion, or $18.61 per share, on significantly wider spreads and ratings downgrades of securities backing collateralized debt obligations. It earned $181 million in the year-ago quarter. MBIA continues to believe that the balance of the mark-to-market losses are not predictive of future claims and, in the absence of further credit impairment, the cumulative marks should reverse over the remaining life of the insured credit derivatives. On an adjusted basis, its operating loss was $3.30 a share, against Thomson Financial-compiled analyst estimates of $2.97 a share loss. It has a commitment from Warburg Pincus to backstop a $500 million rights offering, and it is considering this and other steps to raise equity.
In his new budget, to be unveiled Monday, President Bush will call for large cuts in the growth of Medicare, far exceeding what he proposed last year, and he will again seek major savings in Medicaid, according to administration officials and budget documents. Over all, the 2009 budget is likely to be the first $3 trillion spending request by a president.
P&G said profit was $3.27 billion, or 98 cents a share, in the fiscal second quarter ended December 31, compared with $2.86 billion, or 84 cents a share, a year earlier.
Tata Chemicals Ltd. Thursday said it has signed a pact to buy U.S.-based chemical company General Chemical Industrial Products Inc. for $1.01 billion. The Indian maker of chemicals, fertilizers and food additives said General Chemical Industrial Products is a major soda ash producer in the U.S. with a capacity of 2.5 million metric tons a year. Soda ash or sodium carbonate is used in the manufacture of glass.
Qatar is reviewing its currency policy and could revalue or drop the dollar peg as the booming Gulf state struggles to tame inflation while the US reduces interest rates to head off a recession. Qatari officials on Wednesday said the gas-rich emirate was considering revaluing its currency or linking it to a trade-weighted basket of currencies as well as other policy proposals aimed at cooling rampant inflation of up to 15 per cent.
Excel Maritime Carriers said Tuesday it would acquire competitor Quintana Maritime in a deal it valued at nearly $2.45 billion that will create one of the world’s largest dry bulk companies by fleet and capacity.
Arthur J. Gallagher & Co.'s said today its fourth-quarter net income fell nearly 5 percent and that it is planning a restructuring that will cut 400 jobs.
Isuzu said Wednesday that it would stop selling passenger vehicles in the U.S., as sales declined to almost nothing in recent years.
A British supermarket chain plans to open at least 18 stores throughout the Bay Area next year, many in neighborhoods that other grocery stores have long avoided. Fresh & Easy Neighborhood Market, the aggressively expanding U.S. division of Tesco PLC, the world's third-largest retailer, plans to build smaller than typical outlets offering prepared meals, fresh produce and perishables in Antioch, Concord, San Jose, San Francisco, Hayward, Oakland, Oakley and elsewhere.
According to rigzone, Suncor Energy announced that its Board of Directors has given final approval to a $20.6 billion investment that is expected to boost crude oil production at the company's oil sands operation by 200,000 barrels per day.
Defaults on privately insured U.S. mortgages rose 37 percent in December from the same month a year earlier, an industry report today showed, as the U.S. housing slump deepened to the worst in a quarter century. The number of insured borrowers falling more than 60 days late on payments jumped to 64,384 last month from 46,921 in December 2006, according to data from members of the Washington- based Mortgage Insurance Companies of America. The defaults represented a 5.5 percent increase from 61,033 in November.
Experts are predicting pump prices, which jumped by almost a dollar a gallon in each of the last two springs in many parts of the United States, will spike again this year as refiners and gas stations switch from winter- to summer-blended fuels. The increases, starting as early as February in southern California, could push the average national price to a record $3.50 a gallon or more by June.
Michelle Leder provided this info from the latest Lennar 10K: "The home-building industry is in the midst of a significant downturn. As a result, we have experienced a significant decline in demand for newly built homes in almost all of our markets. Homebuilders’ inventories of unsold new homes have increased as a result of increased cancellation rates on pending contracts as new home buyers sometimes find it more advantageous to forfeit a deposit than to complete the purchase of the home. In addition, an oversupply of alternatives to new homes, such as rental properties and used homes, has depressed prices and reduced margins. This combination of lower demand and higher inventories affects both the number of homes we can sell and the prices at which we can sell them. For example, in 2007 we experienced a significant decline in our sales results, significant reductions in our margins as a result of higher levels of sales incentives and price concessions, and a higher than normal cancellation rate. We have no basis for predicting how long demand and supply will remain out of balance in markets where we operate or whether, even if demand and supply come back in balance, sales volumes or pricing will return to prior levels."
Rob Hanna: "Emotion drives markets. Large gaps down in an already fearful environment can provide nice buying opportunities. While the win rate is only slightly better than a coin flip, the potential reward far outweighs the risk and provides a quantifiable edge. Agile traders could also improve their risk/reward by fine tuning their entries and exits intraday. Bear markets are driven by fear. Gaps are frequently fearful overreactions. Don’t ride along with the bear."
U.S. employment costs increased 0.8% in the fourth quarter, the same rate as in the previous three months, the Labor Department reported Thursday.
U.S. real consumer spending flattened out in December, further evidence that the economy was getting weaker as the fourth quarter sputtered to an end.
First-time claims for state unemployment benefits rocketed higher in the latest week, the Labor Department reported Thursday. The number of initial claims in the week ending Jan. 26 rose 69,000 to 375,000. It's the highest level since early October and the largest increase since September 2005. The jump was much larger than expected.
Wyeth expects 2008 earnings excluding items of $3.35 to $3.49 a share, down 1% to 5% from 2007. Wyeth projects revenue in 2008 comparable with 2007 revenue of $22.4 billion.
Tesoro Corp. lost $40 million, or 29 cents a share in the fourth quarter, compared to a gain of $158 million, or $1.14 per share, in the year-ago period. The San Antonio, Texas company cited weak profit margin in its refining business, higher operating expenses and poor marketing margins. Tesoro also cited an unplanned outage at a refinery's reformer unit, which impacted results by $30 million. Benchmark margins versus last year were lower by 23% on the West Coast, 36% in the Pacific Northwest, and 7% in the Midwest, the company said.
In early trading, gold futures rose to trade near $930 an ounce on Thursday, S&P 500 futures fell 16.5 points to 1,334.10, Nasdaq 100 futures dropped 23.25 points to 1,788.25 and Dow industrial futures dropped 140 points to 12,254.
The Chicago purchasing managers' index fell to 51.5% in January from 56.4% in December.
Peabody Energy Corp. on Thursday said net income fell 80% on a $175 million loss from discontinued operations, while the coal giant's operating income rose 5% as it boosted the tons it sold in the period. The company warned that flooding in Australia and other issues would impact its first-quarter profit.
The South African Reserve Bank kept its key repo rate unchanged at 11% on Thursday, saying that considerable risks to the inflation outlook remain.
Barack Obama raised $32 million in the single month of January, matching his best three-month period last year, aides said Thursday.
U.S. natural gas inventories lost 274 billion cubic feet to 2,262 billion cubic feet in the week ending Jan. 25, Energy Information Administration reported on Thursday. Analysts at Global Insight were expecting a drop of 260 billion cubic feet.
The dollar index, which tracks the performance of the greenback against six other major currencies, was at 75.271, down from 75.499 late Wednesday.
Deephaven Capital Management LLC is liquidating a hedge fund with $780 million in assets that tries to profit from mergers after U.S. takeovers dried up and returns were little changed last year.
Whirlpool Corp said on Thursday it planned to close two refrigerator plants and cut about 1,250 jobs in a restructuring expected to cost $15 million to $20 million. The plants to be closed were located in LaVergne, Tennessee, affecting about 500 jobs; and Reynosa, Mexico, where 750 jobs will be cut.
Oil producer and refiner Marathon Oil Corp. said sharply lower margins at its refineries made for a difficult fourth quarter, when project delays and higher costs contributed to a 38 percent drop in net income. Fourth-quarter earnings fell to $668 million, or 94 cents per share, from $1.08 billion, or $1.53 per share, in the prior-year period.
Google's fourth quarter, excluding special items, generated earnings per share of $4.43, falling short of analysts' average forecast of $4.47, according to Reuters Estimates. Revenue rose 51 percent to $4.827 billion. Analysts, on average, had predicted revenue of $4.83 billion, with estimates ranging from $4.67 billion to $5.10 billion. Google increased its workforce to 16,805 employees in the fourth quarter, up 5.6 percent from the previous period. The company's share of the U.S. Internet search market rose to 56.3 percent in December from 50.8 percent at the end of 2006, while Yahoo's share fell, according to Nielsen Online. Google accounted for 75 percent of U.S. search advertising in 2007, up from 60 percent in 2006, according to New York-based research firm EMarketer Inc. Google shares traded at $522.54 in extended trading, down from their Nasdaq close of $564.30.
The number of U.S. Internet queries dropped 3.9 percent last month, according to research firm ComScore Inc.
Motorola Inc. said late Thursday that it is considering spinning off its struggling mobile device business.
Intuitive Surgical Inc.'s fourth-quarter profit rose to $49.2 million, or $1.24 a share, compared with $23.6 million, or 64 cents a share, in the year-earlier period.
Standard & Poor's said late Thursday that it put MBIA Inc.ratings on CreditWatch with negative implications. That means the agency could downgrade MBIA's crucial AAA ratings within 90 days.
More than 5 million people will lose their jobs this year as the world economy slows, an official at the U.N. labor agency said Thursday
After being down 190 points early in the day, the Dow rose 207.53, or 1.67 percent, to 12,650.36. For the month, the Dow lost 4.63 percent -- its worst January since losing 4.84 percent at the start of 2000. January's pullback was the steepest seen in any month since December 2002. Broader stock indicators also jumped Thursday. The Standard & Poor's 500 index rose 22.74, or 1.68 percent, to 1,378.55, and the Nasdaq composite index rose 40.86, or 1.74 percent, to 2,389.86. The Russell 2000 index of smaller companies rose 17.81, or 2.56 percent, to 713.30. Light, sweet crude for March delivery fell 58 cents to settle at $91.75 a barrel on the New York Mercantile Exchange. Gold closed up slightly at just under $930 an ounce.
Dmitry Medvedev, Russia’s most likely next president, called on Russian business people on Thursday to copy China and go on a global buying spree of foreign companies to bolster the economy and cut dependence on technology from abroad. “This is a very important task. The majority of powerful countries are engaged in this. Many of them are very active, like China. And we should be active, too,” he told a conference for Russia’s most influential business lobby in the southern Russian city of Krasnodar
Moody's Investors Service said late Thursday that it may downgrade ratings of mortgage insurers.
Credit card services provider Alliance Data Systems Corp. on Wednesday forecast 2008 profit, above Wall Street expectations on growth in its Epsilon, Canadian loyalty and private label businesses.The company said it expects full-year cash earnings of $4.30 per share for 2008, up 15 percent from $3.75 per share in 2007.
Nouriel Roubini: "The reaction of the stock market to the unexpected 75bps cut by the Fed last week and its reaction today to the further 50bps cut clearly shows that markets and investors are now fully realizing that the US economy is suffering from serious credit, i.e. insolvency, problems, not just illiquidity ones; and that Fed monetary policy can partly tackle illiquidity problems but cannot resolve insolvency ones."
Losses from securities linked to subprime mortgages may exceed $265 billion as regional U.S. banks, credit unions and overseas financial institutions write down the value of their holdings, according to Standard & Poor's.
Profits fell at Japanese megabanks Mitsubishi UFJ Financial Group and Mizuho Financial Group in the nine months through December because of exposure to the U.S. subprime mortgage crisis.
A top agriculture official warned Thursday that snow battering central China has dealt an "extremely serious" blow to winter crops, raising the likelihood of future shortages driving already surging inflation.
One of this nation’s largest employers, the mining industry, virtually halted production for four days last week because Eskom, the dominant, government-controlled utility, could not guarantee enough power to ventilate and cool the deep underground shafts. Companies that mine gold and platinum restarted production only on Tuesday after emergency negotiations with Eskom, South Africa’s Chamber of Mines said. “The shutdown of the mining industry is an extraordinary, unprecedented event,” said Anton Eberhard, a business school professor at the University of Cape Town and an energy expert. “That’s a powerful message, massively damaging to South Africa’s reputation for new investment. Our country was built on the mines.”
For 2008, Raytheon anticipates earnings from continuing operations in the range of $3.65 to $3.80 a share. Analysts are looking for full-year earnings of $3.81 a share.
Amazon.com Inc.will buy Audible Inc. for $11.50 a share in a deal that values the provider of digital spoken word audio content at a 23% premium from its closing price of $9.33 a share in the previous session. The Seattle-based online retailer will commence a cash tender offer to purchase all of the outstanding shares of Audible.com and will assume the company's outstanding stock-based awards, for an aggregate transaction value of approximately $300 million.
Consumers in the 15 countries that share the euro became more pessimistic about the outlook for the economy and more fearful of losing their jobs at the start of 2008. That contributed to a sharp fall in consumer confidence in the euro zone, with sentiment also weakening among manufacturers, service providers, retailers and construction companies. The European Commission's January survey of sentiment in the euro zone, published Thursday, showed the headline measure of consumer confidence fell to -12 from -9 in December, a larger decline that the drop to -10 that was forecast by economists. The measure of industrial confidence fell to +1 from +2, in line with expectations, while the measure of confidence among service providers dropped to +12 from +14.
Inflation across the countries that make up the European single currency is expected to hit an annual rate of 3.2% in January, according to a preliminary estimate released by Eurostat Thursday.
Troubled bond insurer MBIA swung to a fourth-quarter loss of $2.3 billion, or $18.61 per share, on significantly wider spreads and ratings downgrades of securities backing collateralized debt obligations. It earned $181 million in the year-ago quarter. MBIA continues to believe that the balance of the mark-to-market losses are not predictive of future claims and, in the absence of further credit impairment, the cumulative marks should reverse over the remaining life of the insured credit derivatives. On an adjusted basis, its operating loss was $3.30 a share, against Thomson Financial-compiled analyst estimates of $2.97 a share loss. It has a commitment from Warburg Pincus to backstop a $500 million rights offering, and it is considering this and other steps to raise equity.
In his new budget, to be unveiled Monday, President Bush will call for large cuts in the growth of Medicare, far exceeding what he proposed last year, and he will again seek major savings in Medicaid, according to administration officials and budget documents. Over all, the 2009 budget is likely to be the first $3 trillion spending request by a president.
P&G said profit was $3.27 billion, or 98 cents a share, in the fiscal second quarter ended December 31, compared with $2.86 billion, or 84 cents a share, a year earlier.
Tata Chemicals Ltd. Thursday said it has signed a pact to buy U.S.-based chemical company General Chemical Industrial Products Inc. for $1.01 billion. The Indian maker of chemicals, fertilizers and food additives said General Chemical Industrial Products is a major soda ash producer in the U.S. with a capacity of 2.5 million metric tons a year. Soda ash or sodium carbonate is used in the manufacture of glass.
Qatar is reviewing its currency policy and could revalue or drop the dollar peg as the booming Gulf state struggles to tame inflation while the US reduces interest rates to head off a recession. Qatari officials on Wednesday said the gas-rich emirate was considering revaluing its currency or linking it to a trade-weighted basket of currencies as well as other policy proposals aimed at cooling rampant inflation of up to 15 per cent.
Excel Maritime Carriers said Tuesday it would acquire competitor Quintana Maritime in a deal it valued at nearly $2.45 billion that will create one of the world’s largest dry bulk companies by fleet and capacity.
Arthur J. Gallagher & Co.'s said today its fourth-quarter net income fell nearly 5 percent and that it is planning a restructuring that will cut 400 jobs.
Isuzu said Wednesday that it would stop selling passenger vehicles in the U.S., as sales declined to almost nothing in recent years.
A British supermarket chain plans to open at least 18 stores throughout the Bay Area next year, many in neighborhoods that other grocery stores have long avoided. Fresh & Easy Neighborhood Market, the aggressively expanding U.S. division of Tesco PLC, the world's third-largest retailer, plans to build smaller than typical outlets offering prepared meals, fresh produce and perishables in Antioch, Concord, San Jose, San Francisco, Hayward, Oakland, Oakley and elsewhere.
According to rigzone, Suncor Energy announced that its Board of Directors has given final approval to a $20.6 billion investment that is expected to boost crude oil production at the company's oil sands operation by 200,000 barrels per day.
Defaults on privately insured U.S. mortgages rose 37 percent in December from the same month a year earlier, an industry report today showed, as the U.S. housing slump deepened to the worst in a quarter century. The number of insured borrowers falling more than 60 days late on payments jumped to 64,384 last month from 46,921 in December 2006, according to data from members of the Washington- based Mortgage Insurance Companies of America. The defaults represented a 5.5 percent increase from 61,033 in November.
Experts are predicting pump prices, which jumped by almost a dollar a gallon in each of the last two springs in many parts of the United States, will spike again this year as refiners and gas stations switch from winter- to summer-blended fuels. The increases, starting as early as February in southern California, could push the average national price to a record $3.50 a gallon or more by June.
Michelle Leder provided this info from the latest Lennar 10K: "The home-building industry is in the midst of a significant downturn. As a result, we have experienced a significant decline in demand for newly built homes in almost all of our markets. Homebuilders’ inventories of unsold new homes have increased as a result of increased cancellation rates on pending contracts as new home buyers sometimes find it more advantageous to forfeit a deposit than to complete the purchase of the home. In addition, an oversupply of alternatives to new homes, such as rental properties and used homes, has depressed prices and reduced margins. This combination of lower demand and higher inventories affects both the number of homes we can sell and the prices at which we can sell them. For example, in 2007 we experienced a significant decline in our sales results, significant reductions in our margins as a result of higher levels of sales incentives and price concessions, and a higher than normal cancellation rate. We have no basis for predicting how long demand and supply will remain out of balance in markets where we operate or whether, even if demand and supply come back in balance, sales volumes or pricing will return to prior levels."
Rob Hanna: "Emotion drives markets. Large gaps down in an already fearful environment can provide nice buying opportunities. While the win rate is only slightly better than a coin flip, the potential reward far outweighs the risk and provides a quantifiable edge. Agile traders could also improve their risk/reward by fine tuning their entries and exits intraday. Bear markets are driven by fear. Gaps are frequently fearful overreactions. Don’t ride along with the bear."
U.S. employment costs increased 0.8% in the fourth quarter, the same rate as in the previous three months, the Labor Department reported Thursday.
U.S. real consumer spending flattened out in December, further evidence that the economy was getting weaker as the fourth quarter sputtered to an end.
First-time claims for state unemployment benefits rocketed higher in the latest week, the Labor Department reported Thursday. The number of initial claims in the week ending Jan. 26 rose 69,000 to 375,000. It's the highest level since early October and the largest increase since September 2005. The jump was much larger than expected.
Wyeth expects 2008 earnings excluding items of $3.35 to $3.49 a share, down 1% to 5% from 2007. Wyeth projects revenue in 2008 comparable with 2007 revenue of $22.4 billion.
Tesoro Corp. lost $40 million, or 29 cents a share in the fourth quarter, compared to a gain of $158 million, or $1.14 per share, in the year-ago period. The San Antonio, Texas company cited weak profit margin in its refining business, higher operating expenses and poor marketing margins. Tesoro also cited an unplanned outage at a refinery's reformer unit, which impacted results by $30 million. Benchmark margins versus last year were lower by 23% on the West Coast, 36% in the Pacific Northwest, and 7% in the Midwest, the company said.
In early trading, gold futures rose to trade near $930 an ounce on Thursday, S&P 500 futures fell 16.5 points to 1,334.10, Nasdaq 100 futures dropped 23.25 points to 1,788.25 and Dow industrial futures dropped 140 points to 12,254.
The Chicago purchasing managers' index fell to 51.5% in January from 56.4% in December.
Peabody Energy Corp. on Thursday said net income fell 80% on a $175 million loss from discontinued operations, while the coal giant's operating income rose 5% as it boosted the tons it sold in the period. The company warned that flooding in Australia and other issues would impact its first-quarter profit.
The South African Reserve Bank kept its key repo rate unchanged at 11% on Thursday, saying that considerable risks to the inflation outlook remain.
Barack Obama raised $32 million in the single month of January, matching his best three-month period last year, aides said Thursday.
U.S. natural gas inventories lost 274 billion cubic feet to 2,262 billion cubic feet in the week ending Jan. 25, Energy Information Administration reported on Thursday. Analysts at Global Insight were expecting a drop of 260 billion cubic feet.
The dollar index, which tracks the performance of the greenback against six other major currencies, was at 75.271, down from 75.499 late Wednesday.
Deephaven Capital Management LLC is liquidating a hedge fund with $780 million in assets that tries to profit from mergers after U.S. takeovers dried up and returns were little changed last year.
Whirlpool Corp said on Thursday it planned to close two refrigerator plants and cut about 1,250 jobs in a restructuring expected to cost $15 million to $20 million. The plants to be closed were located in LaVergne, Tennessee, affecting about 500 jobs; and Reynosa, Mexico, where 750 jobs will be cut.
Oil producer and refiner Marathon Oil Corp. said sharply lower margins at its refineries made for a difficult fourth quarter, when project delays and higher costs contributed to a 38 percent drop in net income. Fourth-quarter earnings fell to $668 million, or 94 cents per share, from $1.08 billion, or $1.53 per share, in the prior-year period.
Google's fourth quarter, excluding special items, generated earnings per share of $4.43, falling short of analysts' average forecast of $4.47, according to Reuters Estimates. Revenue rose 51 percent to $4.827 billion. Analysts, on average, had predicted revenue of $4.83 billion, with estimates ranging from $4.67 billion to $5.10 billion. Google increased its workforce to 16,805 employees in the fourth quarter, up 5.6 percent from the previous period. The company's share of the U.S. Internet search market rose to 56.3 percent in December from 50.8 percent at the end of 2006, while Yahoo's share fell, according to Nielsen Online. Google accounted for 75 percent of U.S. search advertising in 2007, up from 60 percent in 2006, according to New York-based research firm EMarketer Inc. Google shares traded at $522.54 in extended trading, down from their Nasdaq close of $564.30.
The number of U.S. Internet queries dropped 3.9 percent last month, according to research firm ComScore Inc.
Motorola Inc. said late Thursday that it is considering spinning off its struggling mobile device business.
Intuitive Surgical Inc.'s fourth-quarter profit rose to $49.2 million, or $1.24 a share, compared with $23.6 million, or 64 cents a share, in the year-earlier period.
Standard & Poor's said late Thursday that it put MBIA Inc.ratings on CreditWatch with negative implications. That means the agency could downgrade MBIA's crucial AAA ratings within 90 days.
More than 5 million people will lose their jobs this year as the world economy slows, an official at the U.N. labor agency said Thursday
After being down 190 points early in the day, the Dow rose 207.53, or 1.67 percent, to 12,650.36. For the month, the Dow lost 4.63 percent -- its worst January since losing 4.84 percent at the start of 2000. January's pullback was the steepest seen in any month since December 2002. Broader stock indicators also jumped Thursday. The Standard & Poor's 500 index rose 22.74, or 1.68 percent, to 1,378.55, and the Nasdaq composite index rose 40.86, or 1.74 percent, to 2,389.86. The Russell 2000 index of smaller companies rose 17.81, or 2.56 percent, to 713.30. Light, sweet crude for March delivery fell 58 cents to settle at $91.75 a barrel on the New York Mercantile Exchange. Gold closed up slightly at just under $930 an ounce.
Dmitry Medvedev, Russia’s most likely next president, called on Russian business people on Thursday to copy China and go on a global buying spree of foreign companies to bolster the economy and cut dependence on technology from abroad. “This is a very important task. The majority of powerful countries are engaged in this. Many of them are very active, like China. And we should be active, too,” he told a conference for Russia’s most influential business lobby in the southern Russian city of Krasnodar
Moody's Investors Service said late Thursday that it may downgrade ratings of mortgage insurers.
Wednesday, January 30, 2008
The Fed
1/31/08 The Fed
The Hong Kong Monetary Authority Thursday announced a half-point cut in its key interest rate to 4.5%, matching a similar reduction overnight by the U.S. Federal Reserve.
Swiss banking group UBS will report a net loss of around 12.5 billion Swiss francs ($11.4 billion) for the fourth quarter, after higher-than-expected write-downs from its U.S. mortgage exposure. The group said write-downs in the quarter will total around $14 billion, with $12 billion coming from positions related to the U.S. subprime market and the rest from other holdings linked to U.S. residential mortgages.
Economic growth slowed to an annual rate of 0.6 percent in October through December, half the rate forecast, following a 4.9 percent pace the previous three months, the Commerce Department said today in Washington. Residential construction dropped by the most in 26 years. For all of 2007, gross domestic product grew 2.2%, the slowest growth since 2002. GDP increased 2.9% in 2006.
Companies in the U.S. private sector added 130,000 jobs in January, according to the ADP employment report released Wednesday. The report two days before the Labor Department reports on nonfarm payroll growth for January. Adding in some 25,000 jobs created by government, the ADP report suggests nonfarm payrolls grew by about 155,000, well above the 70,000 jobs now expected by Wall Street economists.
Boeing raises 2008 EPS view to $5.70 to $5.85.
Kraft Foods Inc.'s fourth-quarter net income fell 6.3% to $585 million, or 38 cents a share, from $624 million, or 38 cents a share, a year earlier, due in part to high input costs. Excluding items, earnings fell 18% to $698 million, or 44 cents a share, from $842 million, or 51 cents a share, a year ago. Kraft expects 2008 earnings of at least $1.56 a share, and non-GAAP earnings of about $1.90 a share.
For 2008 Dominion Resources expects to report operating earnings of $3.05 a share to $3.15 a share and for 2009 it sees earnings in the range of $3.25 to $3.40 a share.
Given a reasonably stable global economy in 2008, Dover expects to grow earnings per share by 10% or more.
Greenspan sees at least a 50% chance of a U.S. recession, Reuters reported.
Baker Hughes reported a 23% profit rise in the fourth quarter to $400.5 million, or $1.26 a share, with revenue up 12% to $2.74 billion.
Approvals of mortgage loans in the United Kingdom slipped to 73,000 in December, falling from 81,000 in November and under performing the six-month rolling average of 100,000, the Bank of England reported Wednesday.
French bank BNP Paribas said Wednesday that it expects fourth quarter profit to fall around 42% to 1 billion euros in the face of a "deepening crisis" for the sector.
Rudy Giuliani will endorse Sen. John McCain as the Republican nominee for president on Wednesday, NBC News reported Tuesday night.
Japan's industrial production expanded a lower-than-expected 1.4% in December from the previous month, with manufacturers expecting their output to decline over the next two months, according to government data released Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity rose 7.5 percent to 1,054.9 in the week ended January 25. It was last higher in late March 2004, the MBA said.
Eastman Kodak Co. earned $215 million, or 71 cents per share in the fourth quarter. This compares with $16 million, or 6 cents per share, in the same quarter a year earlier.
Merck posted a net loss of $1.63 billion, hit by charges related to its Vioxx settlement. Excluding items, earnings were 80 cents a share.
New York state regulators are rethinking a decade-old loophole that allows bond insurers to venture into derivatives.
Merrill lost 42 cents to $57.05 in Germany after Oppenheimer's Meredith Whitney downgraded the bank to ``underperform'' from ``perform.''
``We estimate that Merrill has the highest probability of further writedowns throughout 2008,'' Whitney wrote in a note to clients dated yesterday. ``Merrill could have an additional writedown of roughly $10 billion if the monolines were to be downgraded,'' she added.
According to the FT, the risk of bankruptcies among the big US homebuilders has risen sharply as the economy has weakened and an end to the housing slump remains distant. Credit default swaps on homebuilders, which act as insurance on corporate debt, suggest some of the biggest are at risk of failing to keep up debt payments. According to Byron Douglass, an analyst at Credit Derivatives Research, the most exposed are Standard Pacific, Hovnanian, Beazer and Meritage. All are among the top 15 publicly listed US homebuilders. Mr Douglass said bankruptcies were “highly likely” among top homebuilders. Homebuilding is viewed as the sector most threatened by the slowdown as housing has been the worst-hit part of the economy. On Tuesday Tousa, formerly called Technical Olympic, became the largest homebuilder so far to file for bankruptcy. At least 13 other homebuilders have gone bankrupt since June, according to Bloomberg data.
According to Dean Baker, the co-director of the Center for Economic and Policy Research, average house prices are falling nationwide at an annual rate of more than ten per cent, something not seen since before the Second World War. This means that American households are getting poorer at a rate of more than two trillion dollars a year. Frederic Mishkin, a governor at the Fed, suggests that, for every dollar the typical American family’s housing wealth drops in a year, that family may cut its spending by up to seven cents. Nationwide, that adds up to roughly a hundred and fifty-five billion dollars, which is bigger than President Bush’s stimulus package. And it doesn’t take into account plunging stock prices, collapsing confidence, and the belated imposition of tighter lending practices—all of which will further restrict economic activity.
The developers of the Towers of Channelside, a pair of 29-story luxury condominiums, filed for bankruptcy court protection Friday, stating that Wachovia Corp. cut off its credit. The developer has sold just 89 of the 257 units, according to documents filed in U.S. Bankruptcy Court in Tampa on Friday. Many of the contracts on units that have not closed fell through because buyers backed out, documents said.
Shares of Clear Channel fell $2.25, or 7.2 per cent, to $29.17. Each tick down in the share price represented a message from investors that the company was not worth the $39.20 per share that Thomas H Lee and Bain Capital have offered for the radio broadcaster and outdoor advertising company.
Robert Reich: "The fact is, middle-class families have exhausted the coping mechanisms they have used for more than three decades to get by on median wages that are barely higher than they were in 1970, adjusted for inflation. Male wages today are in fact lower than they were then: the income of a young man in his 30s is now 12 per cent below that of a man his age three decades ago. Yet for years now, America’s middle class has lived beyond its pay cheque. Middle-class lifestyles have flourished even though median wages have barely budged. That is ending and Americans are beginning to feel the consequences."
Yahoo to cut 1,000 jobs.
Confidence among local venture capitalists has plunged to its lowest level since 2004, according to a survey released Tuesday by the University of San Francisco.
It was reported that Rio Tinto Group’s advisers say BHP Billiton can afford to increase its takeover offer to as much as five shares for one.
The Oil Drum: "Latest Developments:
1) Plateau production - For the second consecutive month world production has increased significantly, confirming the end of the plateau that began in 2005. The IEA figures result in an average global production in 2007 up to December of 85.26 million b/d, more than the average 2006 production of 85.00 million b/d and the average 2005 production of 84.10 million b/d. The EIA in their International Petroleum Monthly puts the average global 2007 production up to October at 84.47 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.
2) Total liquids - In December world production of total liquids increased by 450,000 barrels per day from October according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 87.00 million b/d, which is the all time maximum liquids production.
3) Conventional crude - Latest available figures from the Energy Information Administration (EIA) show that crude oil production including lease condensates increased by 714,000 b/d from September to October. Total production in October was estimated at 74.12 million b/d, which is 174,000 b/d lower than the all time high crude oil production of 74.30 million b/d reached in May 2005."
According to Bloomberg, the cost of shipping Middle East crude to Asia, the world's busiest route for supertankers, may gain for a third day as refineries seek ships to load around mid-February, swinging vessel-supply in owners' favor. The number of very large crude carriers, or VLCCs, that are available for hire within the next 30 days diminished 14 percent to 84, according to reports from Paris-based shipbroker Barry Rogliano Salles. Refineries need to find tankers for about 50 remaining February cargoes, according to the broker's data.
Nouriel Roubini: "My view is that the recession will be protracted and painful as a shopped-out, saving-less and debt-burdened consumer is on the ropes and now faltering; while the financial system is on the verge of a systemic crisis that will cause a severe credit crunch...Indeed the delinquencies and losses in the financial system are spreading from subprime to near prime and prime mortgages; to credit cards and auto loans; to commercial real estate loans; to leveraged loans that financed reckless LBOs; to the losses of the monolines that are effectively bankrupt and at risk of spreading furher massive losses to money market funds and other financial institutions once they get properly downgraded; and soon enough to corporate defaults and junk bonds that will in turn trigger massive losses on credit default swaps; eventual losses in the financial system may add up to more than $1 trillion."
Cereal and snack maker Kellogg Co. said Wednesday its fourth-quarter profit dipped slightly due in part to higher energy and materials costs and more investment in advertising, but still matched Wall Street's expectations. For the quarter ended Dec. 29, the Battle Creek-based company earned $176 million, or 44 cents per share, compared with $182 million, or 45 cents per share, a year ago. Revenue rose 8 percent to $2.79 billion from $2.58 billion, benefiting partly from stronger net sales by the Kellogg International division.
Bill Bonner: "Yesterday, if you were to buy a 30-year Treasury bond you would have gotten a 4.28% yield. That yield is only a few basis points from the current U.S. consumer price inflation level, as announced by the government's own number torturers. Assuming the number is more-or-less honest, and assuming things don't change, this means that a person who buys a long Treasury bond gives up money now for the right to receive zero return over the next 30 years. Of course, things do change. But the changes that are most likely are those that make this investment even worse. The inflation rate is likely to go up. At 10% inflation, the investor loses 5.72% per year. If the dollar falls against other major currencies, he is out even more."
John Edwards dropping out of presidential race.
The U.S. dollar index is trading at 75.569.
Merrill Lynch & Co., the world's largest brokerage, plans to exit the business of underwriting collateralized debt obligations and other structured credit products after the securities led to a record loss. ``We are not going to be in the CDO and structured-credit types of businesses,'' new Chief Executive Officer John Thain said.
Microsoft Corp. will become the new provider of paid search and contextual advertising links on sites run by The Wall Street Journal.
Altria sees post-spinoff annual dividend of $1.16 and set March 28 as the date for its planned spinoff of Philip Morris International.
Crude inventories rose by 3.6 million barrels to 293 million barrels in the week ending Jan. 25, Energy Information Administration reported on Wednesday. Gasoline supplies rose by 3.6 million barrels in the latest week, while distillate stocks fell by 1.5 million barrels, EIA reported.
Centex reported its fiscal third-quarter loss widened to $975.2 million as the company was hurt by the housing bust and impairment and tax-related charges.
Alliance Data suing Blackstone over stalled merger. The lawsuit, filed in the Delaware Court of Chancery, seeks specific performance to compel Blackstone to comply with its obligations under the merger agreement, including its covenants to use reasonable best efforts to obtain required regulatory approvals and to consummate the merger, and such other relief as the Chancery Court may deem just and proper.
Microsoft Corp. today began the global launch of Microsoft Dynamics CRM 4.0 by announcing the availability of the first eight languages, including English, Spanish, simplified Chinese and French. As part of its commitment to a rapid global rollout, Microsoft is kicking off a 12-week global launch tour today to give organizations worldwide the opportunity to experience Microsoft Dynamics CRM for themselves
Pulte Home's fourth-quarter loss widened to $874.7 million, or $3.46 a share, from $8.41 million, or 3 cents a share, due to the continued weakening of existing home sales.
Standard & Poor's said late Wednesday that it downgraded more mortgage-related securities because delinquencies and foreclosures continue to increase on the underlying home loans. S&P said it downgraded or put on CreditWatch negative 6,389 classes from U.S. subprime residential mortgage-backed securities (RMBS) transactions. They were rated between January 2006 and June 2007. The securities were worth $270.1 billion, which is almost half the original value of U.S. subprime RMBS rated by S&P during 2006 and the first half of 2007. S&P also warned it may downgrade 1,953 ratings from 572 global collateralized debt obligations that are backed by asset-backed securities and other CDOs. That's more than a third of all such CDOs rated by S&P.
Starbucks reported its quarterly profit rose slightly from a year ago as the coffee-shop chain seeks to restructure its operations to improve growth. Starbucks also said it will close 100 under performing U.S stores and expects "low double-digit" earnings-per-share growth in 2008.
Fitch Ratings said on Wednesday that it cut the AAA ratings of Financial Guaranty Insurance Company (FGIC) to AA because the bond insurer doesn't have enough capital to keep its top rating. Fitch warned it may cut FGIC's ratings further in future.
After the half point interest rate cut by the Fed, equities took off on strong triple digit gains and then came back to reality as the Dow Jones Industrial Average declined 37.5 points to 12,442.8. The S&P 500 shed 6.51 points to 1,355.79, while the Nasdaq Composite dropped 9.06 points to 2,349.00.
Amazon.com saw its earnings more than double in the fourth quarter thanks to strong holiday sales. For the quarter ended Dec. 31, Amazon reported earnings of $207 million, or 48 cents a share, compared to earnings of $98 million, or 23 cents a share, for the same period the previous year. Revenue grew 42% to $5.67 billion. For the first quarter, the company said it expects revenue to come in between $3.95 billion and $4.15 billion - ahead of the $3.92 billion predicted by analysts.
Ambac Financial and MBIA Inc. will lose more money than they're currently predicting from guarantees they sold on complex mortgage-related securities, according to Bill Ackman, a longtime critic of the bond insurance industry who is betting against the two companies. Ambac and MBIA shares fell almost 20% in afternoon trading on Wednesday.
Gold for April delivery soared as high as $941.70 an ounce in electronic trading on the New York Mercantile Exchange, hitting a new record high. The contract was last up $8.80 at $939.60 an ounce. Crude for March delivery ended the volatile session up 69 cents, or 0.8%, at $92.33 a barrel on the New York Mercantile Exchange. The U.S. dollar index is flirting with a new low.
The Hong Kong Monetary Authority Thursday announced a half-point cut in its key interest rate to 4.5%, matching a similar reduction overnight by the U.S. Federal Reserve.
Swiss banking group UBS will report a net loss of around 12.5 billion Swiss francs ($11.4 billion) for the fourth quarter, after higher-than-expected write-downs from its U.S. mortgage exposure. The group said write-downs in the quarter will total around $14 billion, with $12 billion coming from positions related to the U.S. subprime market and the rest from other holdings linked to U.S. residential mortgages.
Economic growth slowed to an annual rate of 0.6 percent in October through December, half the rate forecast, following a 4.9 percent pace the previous three months, the Commerce Department said today in Washington. Residential construction dropped by the most in 26 years. For all of 2007, gross domestic product grew 2.2%, the slowest growth since 2002. GDP increased 2.9% in 2006.
Companies in the U.S. private sector added 130,000 jobs in January, according to the ADP employment report released Wednesday. The report two days before the Labor Department reports on nonfarm payroll growth for January. Adding in some 25,000 jobs created by government, the ADP report suggests nonfarm payrolls grew by about 155,000, well above the 70,000 jobs now expected by Wall Street economists.
Boeing raises 2008 EPS view to $5.70 to $5.85.
Kraft Foods Inc.'s fourth-quarter net income fell 6.3% to $585 million, or 38 cents a share, from $624 million, or 38 cents a share, a year earlier, due in part to high input costs. Excluding items, earnings fell 18% to $698 million, or 44 cents a share, from $842 million, or 51 cents a share, a year ago. Kraft expects 2008 earnings of at least $1.56 a share, and non-GAAP earnings of about $1.90 a share.
For 2008 Dominion Resources expects to report operating earnings of $3.05 a share to $3.15 a share and for 2009 it sees earnings in the range of $3.25 to $3.40 a share.
Given a reasonably stable global economy in 2008, Dover expects to grow earnings per share by 10% or more.
Greenspan sees at least a 50% chance of a U.S. recession, Reuters reported.
Baker Hughes reported a 23% profit rise in the fourth quarter to $400.5 million, or $1.26 a share, with revenue up 12% to $2.74 billion.
Approvals of mortgage loans in the United Kingdom slipped to 73,000 in December, falling from 81,000 in November and under performing the six-month rolling average of 100,000, the Bank of England reported Wednesday.
French bank BNP Paribas said Wednesday that it expects fourth quarter profit to fall around 42% to 1 billion euros in the face of a "deepening crisis" for the sector.
Rudy Giuliani will endorse Sen. John McCain as the Republican nominee for president on Wednesday, NBC News reported Tuesday night.
Japan's industrial production expanded a lower-than-expected 1.4% in December from the previous month, with manufacturers expecting their output to decline over the next two months, according to government data released Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity rose 7.5 percent to 1,054.9 in the week ended January 25. It was last higher in late March 2004, the MBA said.
Eastman Kodak Co. earned $215 million, or 71 cents per share in the fourth quarter. This compares with $16 million, or 6 cents per share, in the same quarter a year earlier.
Merck posted a net loss of $1.63 billion, hit by charges related to its Vioxx settlement. Excluding items, earnings were 80 cents a share.
New York state regulators are rethinking a decade-old loophole that allows bond insurers to venture into derivatives.
Merrill lost 42 cents to $57.05 in Germany after Oppenheimer's Meredith Whitney downgraded the bank to ``underperform'' from ``perform.''
``We estimate that Merrill has the highest probability of further writedowns throughout 2008,'' Whitney wrote in a note to clients dated yesterday. ``Merrill could have an additional writedown of roughly $10 billion if the monolines were to be downgraded,'' she added.
According to the FT, the risk of bankruptcies among the big US homebuilders has risen sharply as the economy has weakened and an end to the housing slump remains distant. Credit default swaps on homebuilders, which act as insurance on corporate debt, suggest some of the biggest are at risk of failing to keep up debt payments. According to Byron Douglass, an analyst at Credit Derivatives Research, the most exposed are Standard Pacific, Hovnanian, Beazer and Meritage. All are among the top 15 publicly listed US homebuilders. Mr Douglass said bankruptcies were “highly likely” among top homebuilders. Homebuilding is viewed as the sector most threatened by the slowdown as housing has been the worst-hit part of the economy. On Tuesday Tousa, formerly called Technical Olympic, became the largest homebuilder so far to file for bankruptcy. At least 13 other homebuilders have gone bankrupt since June, according to Bloomberg data.
According to Dean Baker, the co-director of the Center for Economic and Policy Research, average house prices are falling nationwide at an annual rate of more than ten per cent, something not seen since before the Second World War. This means that American households are getting poorer at a rate of more than two trillion dollars a year. Frederic Mishkin, a governor at the Fed, suggests that, for every dollar the typical American family’s housing wealth drops in a year, that family may cut its spending by up to seven cents. Nationwide, that adds up to roughly a hundred and fifty-five billion dollars, which is bigger than President Bush’s stimulus package. And it doesn’t take into account plunging stock prices, collapsing confidence, and the belated imposition of tighter lending practices—all of which will further restrict economic activity.
The developers of the Towers of Channelside, a pair of 29-story luxury condominiums, filed for bankruptcy court protection Friday, stating that Wachovia Corp. cut off its credit. The developer has sold just 89 of the 257 units, according to documents filed in U.S. Bankruptcy Court in Tampa on Friday. Many of the contracts on units that have not closed fell through because buyers backed out, documents said.
Shares of Clear Channel fell $2.25, or 7.2 per cent, to $29.17. Each tick down in the share price represented a message from investors that the company was not worth the $39.20 per share that Thomas H Lee and Bain Capital have offered for the radio broadcaster and outdoor advertising company.
Robert Reich: "The fact is, middle-class families have exhausted the coping mechanisms they have used for more than three decades to get by on median wages that are barely higher than they were in 1970, adjusted for inflation. Male wages today are in fact lower than they were then: the income of a young man in his 30s is now 12 per cent below that of a man his age three decades ago. Yet for years now, America’s middle class has lived beyond its pay cheque. Middle-class lifestyles have flourished even though median wages have barely budged. That is ending and Americans are beginning to feel the consequences."
Yahoo to cut 1,000 jobs.
Confidence among local venture capitalists has plunged to its lowest level since 2004, according to a survey released Tuesday by the University of San Francisco.
It was reported that Rio Tinto Group’s advisers say BHP Billiton can afford to increase its takeover offer to as much as five shares for one.
The Oil Drum: "Latest Developments:
1) Plateau production - For the second consecutive month world production has increased significantly, confirming the end of the plateau that began in 2005. The IEA figures result in an average global production in 2007 up to December of 85.26 million b/d, more than the average 2006 production of 85.00 million b/d and the average 2005 production of 84.10 million b/d. The EIA in their International Petroleum Monthly puts the average global 2007 production up to October at 84.47 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.
2) Total liquids - In December world production of total liquids increased by 450,000 barrels per day from October according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 87.00 million b/d, which is the all time maximum liquids production.
3) Conventional crude - Latest available figures from the Energy Information Administration (EIA) show that crude oil production including lease condensates increased by 714,000 b/d from September to October. Total production in October was estimated at 74.12 million b/d, which is 174,000 b/d lower than the all time high crude oil production of 74.30 million b/d reached in May 2005."
According to Bloomberg, the cost of shipping Middle East crude to Asia, the world's busiest route for supertankers, may gain for a third day as refineries seek ships to load around mid-February, swinging vessel-supply in owners' favor. The number of very large crude carriers, or VLCCs, that are available for hire within the next 30 days diminished 14 percent to 84, according to reports from Paris-based shipbroker Barry Rogliano Salles. Refineries need to find tankers for about 50 remaining February cargoes, according to the broker's data.
Nouriel Roubini: "My view is that the recession will be protracted and painful as a shopped-out, saving-less and debt-burdened consumer is on the ropes and now faltering; while the financial system is on the verge of a systemic crisis that will cause a severe credit crunch...Indeed the delinquencies and losses in the financial system are spreading from subprime to near prime and prime mortgages; to credit cards and auto loans; to commercial real estate loans; to leveraged loans that financed reckless LBOs; to the losses of the monolines that are effectively bankrupt and at risk of spreading furher massive losses to money market funds and other financial institutions once they get properly downgraded; and soon enough to corporate defaults and junk bonds that will in turn trigger massive losses on credit default swaps; eventual losses in the financial system may add up to more than $1 trillion."
Cereal and snack maker Kellogg Co. said Wednesday its fourth-quarter profit dipped slightly due in part to higher energy and materials costs and more investment in advertising, but still matched Wall Street's expectations. For the quarter ended Dec. 29, the Battle Creek-based company earned $176 million, or 44 cents per share, compared with $182 million, or 45 cents per share, a year ago. Revenue rose 8 percent to $2.79 billion from $2.58 billion, benefiting partly from stronger net sales by the Kellogg International division.
Bill Bonner: "Yesterday, if you were to buy a 30-year Treasury bond you would have gotten a 4.28% yield. That yield is only a few basis points from the current U.S. consumer price inflation level, as announced by the government's own number torturers. Assuming the number is more-or-less honest, and assuming things don't change, this means that a person who buys a long Treasury bond gives up money now for the right to receive zero return over the next 30 years. Of course, things do change. But the changes that are most likely are those that make this investment even worse. The inflation rate is likely to go up. At 10% inflation, the investor loses 5.72% per year. If the dollar falls against other major currencies, he is out even more."
John Edwards dropping out of presidential race.
The U.S. dollar index is trading at 75.569.
Merrill Lynch & Co., the world's largest brokerage, plans to exit the business of underwriting collateralized debt obligations and other structured credit products after the securities led to a record loss. ``We are not going to be in the CDO and structured-credit types of businesses,'' new Chief Executive Officer John Thain said.
Microsoft Corp. will become the new provider of paid search and contextual advertising links on sites run by The Wall Street Journal.
Altria sees post-spinoff annual dividend of $1.16 and set March 28 as the date for its planned spinoff of Philip Morris International.
Crude inventories rose by 3.6 million barrels to 293 million barrels in the week ending Jan. 25, Energy Information Administration reported on Wednesday. Gasoline supplies rose by 3.6 million barrels in the latest week, while distillate stocks fell by 1.5 million barrels, EIA reported.
Centex reported its fiscal third-quarter loss widened to $975.2 million as the company was hurt by the housing bust and impairment and tax-related charges.
Alliance Data suing Blackstone over stalled merger. The lawsuit, filed in the Delaware Court of Chancery, seeks specific performance to compel Blackstone to comply with its obligations under the merger agreement, including its covenants to use reasonable best efforts to obtain required regulatory approvals and to consummate the merger, and such other relief as the Chancery Court may deem just and proper.
Microsoft Corp. today began the global launch of Microsoft Dynamics CRM 4.0 by announcing the availability of the first eight languages, including English, Spanish, simplified Chinese and French. As part of its commitment to a rapid global rollout, Microsoft is kicking off a 12-week global launch tour today to give organizations worldwide the opportunity to experience Microsoft Dynamics CRM for themselves
Pulte Home's fourth-quarter loss widened to $874.7 million, or $3.46 a share, from $8.41 million, or 3 cents a share, due to the continued weakening of existing home sales.
Standard & Poor's said late Wednesday that it downgraded more mortgage-related securities because delinquencies and foreclosures continue to increase on the underlying home loans. S&P said it downgraded or put on CreditWatch negative 6,389 classes from U.S. subprime residential mortgage-backed securities (RMBS) transactions. They were rated between January 2006 and June 2007. The securities were worth $270.1 billion, which is almost half the original value of U.S. subprime RMBS rated by S&P during 2006 and the first half of 2007. S&P also warned it may downgrade 1,953 ratings from 572 global collateralized debt obligations that are backed by asset-backed securities and other CDOs. That's more than a third of all such CDOs rated by S&P.
Starbucks reported its quarterly profit rose slightly from a year ago as the coffee-shop chain seeks to restructure its operations to improve growth. Starbucks also said it will close 100 under performing U.S stores and expects "low double-digit" earnings-per-share growth in 2008.
Fitch Ratings said on Wednesday that it cut the AAA ratings of Financial Guaranty Insurance Company (FGIC) to AA because the bond insurer doesn't have enough capital to keep its top rating. Fitch warned it may cut FGIC's ratings further in future.
After the half point interest rate cut by the Fed, equities took off on strong triple digit gains and then came back to reality as the Dow Jones Industrial Average declined 37.5 points to 12,442.8. The S&P 500 shed 6.51 points to 1,355.79, while the Nasdaq Composite dropped 9.06 points to 2,349.00.
Amazon.com saw its earnings more than double in the fourth quarter thanks to strong holiday sales. For the quarter ended Dec. 31, Amazon reported earnings of $207 million, or 48 cents a share, compared to earnings of $98 million, or 23 cents a share, for the same period the previous year. Revenue grew 42% to $5.67 billion. For the first quarter, the company said it expects revenue to come in between $3.95 billion and $4.15 billion - ahead of the $3.92 billion predicted by analysts.
Ambac Financial and MBIA Inc. will lose more money than they're currently predicting from guarantees they sold on complex mortgage-related securities, according to Bill Ackman, a longtime critic of the bond insurance industry who is betting against the two companies. Ambac and MBIA shares fell almost 20% in afternoon trading on Wednesday.
Gold for April delivery soared as high as $941.70 an ounce in electronic trading on the New York Mercantile Exchange, hitting a new record high. The contract was last up $8.80 at $939.60 an ounce. Crude for March delivery ended the volatile session up 69 cents, or 0.8%, at $92.33 a barrel on the New York Mercantile Exchange. The U.S. dollar index is flirting with a new low.
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