5/15/09 Economic Fascism
Consumer prices held flat in April but fell 0.7% in the last 12 months, the biggest drop in 54 years. Overall, U.S. consumer prices were unchanged in April after seasonal adjustments and have fallen 0.7% in the past 12 months, the largest decline in 54 years. Core inflation - which excludes volatile food and energy prices - rose 0.3%, boosted by a 9.3% increase in tobacco prices. Over the past year, the core CPI is up 1.9%.
The output of the nation's factories, mines and utilities fell 0.5% in April, the Federal Reserve said Friday. Output has fallen in six straight months and 15 out of the last 16 months. The output of most major market groups fell in April. Output in March was also slightly weaker than previously estimated. Output fell a revised 1.7% in March, compared with the initial estimate of a 1.5% drop. Capacity utilization - a gauge of slack in the economy -- fell to a record low 69.1%.
Manufacturing activity in the New York area contracted at the slowest pace since last August, the New York Federal Reserve Bank said Friday. The bank's Empire State Manufacturing index rose to negative 4.6 in May. The index had improved significantly in April to negative 14.7 from negative 38.2 in March. While 28% of respondents said conditions had worsened, 23% said that they had improved. The new orders fell several points and remained below zero, while the shipments index inched into positive territory. The prices received index fell to a record low.
J.C.Penney raised its full-year profit projection to 50 cents to 65 cents a share.
"The first quarter was clearly a difficult one for us," said Abercrombie and Fitch's Chief Executive Mike Jeffries. "With a challenging economic environment, the consumer continues to show a reluctance to spend on premium brands; a price consciousness dictating shopping habits unlike anything I have ever seen."
The euro-zone economy contracted at a record quarterly rate of 2.5% in the first three months of the year, statistics agency Eurostat reported Friday.
Hong Kong sank further into recession during the first quarter of the year, as gross domestic product fell 7.8% from the year before and a seasonally adjusted 4.3% from the fourth quarter, the city's government said Friday.
Swedish fashion retailer Hennes & Mauritz said Friday that its same-store sales rose 8% in April, while sales in local currencies rose 19% from a year earlier. The group said it had 1,804 stores, compared to 1,560 a year earlier.
German gross domestic product plunged 6.9% on a calendar-adjusted basis in the first quarter of 2009, against a year ago, which was the largest drop since records began in 1970, the Federal Statistical Office said Friday.
The Treasury is prepared to inject up to $22 billion into the insurers under the rescue plan launched last fall as the Troubled Asset Relief Program, said a person familiar with the matter. It's all about controlling another industry. Economic fascism is spreading throughout the U.S.
According to AMG Data, for the week ending May 13,
Equity Fund Inflows $7.1 Bil; Taxable Bond Fund Inflows $4.8 Bil
xETFs - Equity Fund Inflows $2.3 Bil; Taxable Bond Fund Inflows $3.1 Bil.
Russia’s
economic output plummeted 23 percent in the first quarter from the previous three months as industrial production plunged and the government’s 3 trillion- ruble ($93.5 billion) stimulus package failed to boost lending.
Gross domestic product declined an annual 9.5 percent in the period, the Federal Statistics Service said on its Web site today, citing preliminary data. It was the biggest year-on-year slump since the first three months of 1995, according to Bloomberg data. The annual decline was forecast by Deputy Economy Minister Andrei Klepach on April 23.
China's natural gas industry is developing rapidly, and market demand is estimated to reach 110 billion cubic meters in 2010, growing from 80 billion cubic meters in 2008, according to Wang Tianxi, general director of China City Gas Society.
However, natural gas supply in 2010 is expected to mark 90 billion cubic meters, falling short of market demand.
Net foreign purchases of long-term securities were $55.8B in March, more than the $35B economists were looking for, and more than double February's $22B. Private investors were net buyers of $30B, and foreign institutions bought $26.4B.
Mike Shedlock: "All things considered, oil prices are due for a pullback and gasoline prices at the pump are likely to follow. Moreover, with the possible exception of food, consumer prices in general will remain under pressure, if not indeed negative on a year over year comparison basis for quite some time as well as falling producer prices pass up the chain."
Emulex Corp. on Friday said its board of directors has unanimously voted to reject semiconductor equipment maker Broadcom Corp.'s unsolicited $764 million cash tender offer for a second time. Emulex called the bid, at $9.25 per share, "grossly inadequate" and says it "significantly undervalues" Emulex's long-term prospects. The company went on to say that Broadcom's bid fails to compensate Emulex shareholders for initiatives that will start to "meaningfully impact" Emulex's earnings during the next 12 months and beyond. Further, Emulex said, the bid was "clearly timed to take advantage" of its depressed stock price, which has been impacted by the worldwide economic recession.
UMichigan consumer sentiment up to 67.9 in May.
The last filly to win the Preakness was 85 years ago. Rachel Alexandra, a filly, is the favorite to win the race. If the condition of the track is in decent shape, I pick her to win.
Despite having the best operating performance in the retail sector over the past 12 months, Wal-Mart shares remain only 2 1/2 points above their 52-week low.
The Mexican central bank on Friday cut its key interest rate by 75 basis points to 5.25%, in line with the expectations of economists surveyed by Dow Jones Newswires. The bank said in an statement that economic contraction has intensified. Rate policymakers have cut the key rate by 300 basis points since January. The finance ministry earlier this month said it expects the economy to contract by 4.1%, with 0.3% of that pullback to come from the impact of the H1N1, or swine flu, outbreak.
The dollar index fell 0.4% to 82.295.
A sustainable recovery will occur only when the corporate system will be cleaned of losses and capitalism risks collapsing if this does not happen, Marc Faber, the author of "The Gloom, Boom & Doom Report," told CNBC Friday. The central banks will continue to print money at full speed, but long-term this strategy will lead to a fall in purchasing power and living standards, especially in developed countries, Faber said.
American Express Co. said on Friday that its write-off rate for bad credit card debt passed 10% in April, up from less than 9% in March and February. The company said its net writeoff rate on an owned basis, the loans that it includes in its own balance sheet, rose to 10.4%, while managed net writeoffs, which include loans it has securitized, rose to 10.1%.
U.S. credit card defaults rose in April to record highs, with Citigroup and Wells Fargo posting double digit loss rates, as the recession slashed more than 2 million jobs since the beginning of the year.
"U.S. card credit quality continues to struggle," John Williams, an analyst at Macquarie Research, said in a note to clients.
Crude dropped $2 to $56.55 a barrel. Gold rose $1.70 to $930. Copper dropped to $2 to end at $200.
The Dow Jones Industrial Averageshed 62.68 points, or 0.8%, to 8,268.64, leaving the blue chips 3.6% off for the week. The S&P 500 declined 10.19 points, or 1.1%, to 882.88, off 5% from the week-ago close, while the Nasdaq Composite dropped 9.07 points, or 0.5%, to end at 1,680.14, with the technology-laden index snapping a nine-week winning streak.
Friday, May 15, 2009
Thursday, May 14, 2009
First-Time Claims
5/14/09 First-Time Claims
George Will: "For the first time, neither sales nor property nor income taxes are the largest source of money for state and local governments. The federal government is....The Obama administration is bold. It also is careless regarding constitutional values and is acquiring a tincture of lawlessness....The Obama administration's agenda of maximizing dependency involves political favoritism cloaked in the raiment of "economic planning" and "social justice" that somehow produce results superior to what markets produce when freedom allows merit to manifest itself, and incompetence to fail.
The administration's central activity — the political allocation of wealth and opportunity — is not merely susceptible to corruption, it is corruption."
General Motors Corp and Chrysler aim to drop as many as 3,000 U.S. dealers and are expected to begin sending notifications as early as Thursday, three people briefed on the still developing plans said.
GM, facing a U.S. government-imposed deadline of June 1 to restructure or file for bankruptcy, is expected to send termination notices to up to 2,000 dealers -- a third of its roughly 6,000 U.S. dealers, the sources told Reuters.
Chrysler, which filed for bankruptcy on April 30, will also tell up to 1,000 of its 3,189 U.S. dealers it is terminating their franchise agreements, according to the sources who asked not to be identified because the controversial closure plans have not been yet announced.
First-time claims for state unemployment benefits rose due to layoffs in the auto sector, the Labor Department reported Thursday. The number of initial claims in the week ending May 9 rose 32,000 to 637,000. It's the highest level since mid-April. Economists had been expecting claims to rise. They estimated that about 27,000 Chrysler employees are eligible to file claims in the wake of the company's bankruptcy filing. Claims in the previous week were revised to a decrease of 30,000 to 605,000 compared with the initial estimate of a drop of 34,000 to 601,000. The four-week average of initial claims rose 6,000 to 630.500. Meanwhile, the number of Americans receiving state jobless benefits rose to/a record 6.56 million in the week ending May 2. The four-week moving average of continuing claims rose 128,750 to 6.34 million. The insured unemployment rate rose to 4.9%, the highest level in this cycle.
At Osterville Fish Market in Cape Cod, lobster fell as low as $5 a pound around Christmas, down 50% from the $10 it sold for in recent years. Though, they’ve started to creep back up, selling between $7 to $9 a pound, depending on the size of the lobster.
Wholesale prices rose 0.3% in April after seasonable adjustments, with higher food prices offsetting a drop in energy prices, the Labor Department reported Thursday. The producer price index has fallen 3.7% in the past year, the biggest year-over-year fall since January 1950, the government said. The core PPI - which excludes food and energy prices - rose 0.1% in April. Core prices are up 3.4% in the past year. The PPI had fallen 1.2% in March.
At the earlier stages of processing, prices received by producers of intermediate goods moved down 0.5 percent following a 1.5-percent decrease a month earlier, and the crude goods index advanced 3.0 percent after declining 0.3 percent in March. Crude goods pricing had been down for 8 consecutive months.
The International Energy Agency lowered this year's global oil demand forecast. Demand is projected to fall 2.6 million barrels a day comparing with 2008, 200,000 barrels more than the IEA had projected a month ago, according to a IEA monthly report released Thursday. "Continued oil demand weakness is premised on strong economic recovery later this year remaining elusive," the IEA said in the report.
Wal-Mart Stores Inc. said that its first-quarter profit from continuing operations rose slightly to $3.03 billion, or 77 cents a share, from $3.029 billion, or 76 cents, in the year-earlier period. Revenue including membership income in the quarter ended April 30 fell to $94.2 billion from $94.9 billion, hurt by a stronger dollar. The company forecast second-quarter profit of 83 cents to 88 cents a share with Wal-Mart U.S. and Sam's Club each expecting their comparable store sales to be between flat and up 3%.
According to the WSJ, Obama is weighing plans to detain terror suspects on U.S. soil -- indefinitely and without trial -- as part of a plan to retool trials held for Guantanamo prisoners.
BT Group PLC Thursday slashed its dividend and said it plans to cut as many as 15,000 jobs next year after write-downs at its troubled global services division pushed the U.K. telecommunications company to a fiscal fourth-quarter net loss.
California officials who face a staggering new budget deficit that could reach $21.3 billion are up against an unexpected problem - the potential loss of billions of dollars in federal economic stimulus money if education and health care spending is cut too deeply. The Obama administration has told California that unless the $74 million in cuts are rescinded, it will deny the state $6.8 billion in stimulus money.
George Ure: "With Social Security and Medicare THERE IS NO SAVINGS FUND!! All there is to back up the Bonds is an "ASSUMPTION" that the US Government is going to raise the Income Tax Rates quite dramatically in the future when it comes time to pay off those bonds (which is never going to happen).
ANY increase in the Social Security or Medicare taxes so as to "Save the system" is really no such thing, it is just a Back Door Income Tax Increase on the lower income WORKERS in the country (remember these taxes do NOT apply to non-workers income, ie: interest, dividends, capital gains etc.) since the money being collected is being immediately spent for general government expenses. "
Nouriel Roubini: "THE 19th century was dominated by the British Empire, the 20th century by the United States. We may now be entering the Asian century, dominated by a rising China and its currency. While the dollar’s status as the major reserve currency will not vanish overnight, we can no longer take it for granted. Sooner than we think, the dollar may be challenged by other currencies, most likely the Chinese renminbi. This would have serious costs for America, as our ability to finance our budget and trade deficits cheaply would disappear."
Yesterday AIG's CEO admitted that the failed insurance company will not be able to pay back the federal government's massive bailout for three to five years, a much longer period than the public was told initially. Even that may be too optimistic since it is contingent on a global economic recovery.
French textile workers were recently made an offer that most, undoubtedly, refused: relocate to India and work for local wages or lose their job. The Times of London reported May 12 that the Carreman company gave its employees the unenviable choice in part to comply with French labor laws.
Carreman told workers they could keep their jobs if they moved to Bangalore at a 96% pay cut, according to the Times. They were not offered airline tickets. A recent online search put the cost of a one-way ticket from Charles De Gaulle airport in Paris to Bangalore airport at about $628, with a plane change.
POSCO, the world's No.4 steelmaker, unexpectedly cut its domestic product prices by up to 20 percent on Thursday, its biggest ever reduction, as a rebound in the Korean won threatened to open the door to cheaper imports.
Despite swift price cuts this year by many Asian rivals, the South Korean mill had resisted making its first reductions since January 2006 until it had finished talks on annual iron ore contract prices. But protracted negotiations and more aggressive action by foreign competitors appear to have forced its hand.
Carlisle Cos. Inc. said Thursday it will temporarily close heavy truck trailer production operations in North Dakota and Pennsylvania.
U.S. natural gas inventories rose 95 billion cubic feet in the week ended May 8, the Energy Information Administration reported Thursday. At 2,013 billion cubic feet, stocks were 497 billion cubic feet higher than last year at this time and 374 billion cubic feet above the five-year average, the EIA reported.
Pelosi says she was informed that senior lawmakers had been briefed on the use of the method in 2003. But she says the CIA misled her earlier about the techniques.
In a 2002 briefing, officials said they had legal opinions saying that harsh interrogation techniques could be used. Pelosi said the only mention of waterboarding at that meeting was that it was not being employed.
Joe Picerno: "Nonetheless, we're still in a period of erratic economic behavior and it remains to be seen if we're merely in a temporary lull that precedes another round of pain vs. a true cyclical bottom. Hope springs eternal, but we still need more data to make a stronger declaration that the worst has passed. And even if it has, patience is still required.
The official end of the recession isn't likely to bring a material change in the discouraging economic news. The technical end of recessions still bring plenty of pain for Joe Sixpack in the ensuing quarters. The fact that this recession is the deepest since the Great Depression suggests that the recovery period, whenever it commences, will be unusually slow and sluggish. And that's the optimistic outlook!"
Blockbuster's U.S. same store sales declined 11% in the quarter. The company reiterated its forecast for 2009 adjusted earnings before interest, taxes, depreciation and amortization in a range of $305 million to $325 million.
Nike Inc. plans to cut 1,750 jobs, or about 5% of its global workforce, The Associated Press reported late Thursday.
Nordstrom said it expects to report a 2009 profit of $1.25 to $1.50 a share, up from a range of $1.10 to $1.40 a share.
The Dow Jones industrial average added 46.43 points to 8,331.32, the S&P rose 9 points, and the Nasdaq climbed 25 points.
President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.
“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”
Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”
The president pledged to work with Congress to shore up entitlement programs such as Social Security and Medicare and said he was confident that the House and Senate would pass health-care overhaul bills by August.
George Will: "For the first time, neither sales nor property nor income taxes are the largest source of money for state and local governments. The federal government is....The Obama administration is bold. It also is careless regarding constitutional values and is acquiring a tincture of lawlessness....The Obama administration's agenda of maximizing dependency involves political favoritism cloaked in the raiment of "economic planning" and "social justice" that somehow produce results superior to what markets produce when freedom allows merit to manifest itself, and incompetence to fail.
The administration's central activity — the political allocation of wealth and opportunity — is not merely susceptible to corruption, it is corruption."
General Motors Corp and Chrysler aim to drop as many as 3,000 U.S. dealers and are expected to begin sending notifications as early as Thursday, three people briefed on the still developing plans said.
GM, facing a U.S. government-imposed deadline of June 1 to restructure or file for bankruptcy, is expected to send termination notices to up to 2,000 dealers -- a third of its roughly 6,000 U.S. dealers, the sources told Reuters.
Chrysler, which filed for bankruptcy on April 30, will also tell up to 1,000 of its 3,189 U.S. dealers it is terminating their franchise agreements, according to the sources who asked not to be identified because the controversial closure plans have not been yet announced.
First-time claims for state unemployment benefits rose due to layoffs in the auto sector, the Labor Department reported Thursday. The number of initial claims in the week ending May 9 rose 32,000 to 637,000. It's the highest level since mid-April. Economists had been expecting claims to rise. They estimated that about 27,000 Chrysler employees are eligible to file claims in the wake of the company's bankruptcy filing. Claims in the previous week were revised to a decrease of 30,000 to 605,000 compared with the initial estimate of a drop of 34,000 to 601,000. The four-week average of initial claims rose 6,000 to 630.500. Meanwhile, the number of Americans receiving state jobless benefits rose to/a record 6.56 million in the week ending May 2. The four-week moving average of continuing claims rose 128,750 to 6.34 million. The insured unemployment rate rose to 4.9%, the highest level in this cycle.
At Osterville Fish Market in Cape Cod, lobster fell as low as $5 a pound around Christmas, down 50% from the $10 it sold for in recent years. Though, they’ve started to creep back up, selling between $7 to $9 a pound, depending on the size of the lobster.
Wholesale prices rose 0.3% in April after seasonable adjustments, with higher food prices offsetting a drop in energy prices, the Labor Department reported Thursday. The producer price index has fallen 3.7% in the past year, the biggest year-over-year fall since January 1950, the government said. The core PPI - which excludes food and energy prices - rose 0.1% in April. Core prices are up 3.4% in the past year. The PPI had fallen 1.2% in March.
At the earlier stages of processing, prices received by producers of intermediate goods moved down 0.5 percent following a 1.5-percent decrease a month earlier, and the crude goods index advanced 3.0 percent after declining 0.3 percent in March. Crude goods pricing had been down for 8 consecutive months.
The International Energy Agency lowered this year's global oil demand forecast. Demand is projected to fall 2.6 million barrels a day comparing with 2008, 200,000 barrels more than the IEA had projected a month ago, according to a IEA monthly report released Thursday. "Continued oil demand weakness is premised on strong economic recovery later this year remaining elusive," the IEA said in the report.
Wal-Mart Stores Inc. said that its first-quarter profit from continuing operations rose slightly to $3.03 billion, or 77 cents a share, from $3.029 billion, or 76 cents, in the year-earlier period. Revenue including membership income in the quarter ended April 30 fell to $94.2 billion from $94.9 billion, hurt by a stronger dollar. The company forecast second-quarter profit of 83 cents to 88 cents a share with Wal-Mart U.S. and Sam's Club each expecting their comparable store sales to be between flat and up 3%.
According to the WSJ, Obama is weighing plans to detain terror suspects on U.S. soil -- indefinitely and without trial -- as part of a plan to retool trials held for Guantanamo prisoners.
BT Group PLC Thursday slashed its dividend and said it plans to cut as many as 15,000 jobs next year after write-downs at its troubled global services division pushed the U.K. telecommunications company to a fiscal fourth-quarter net loss.
California officials who face a staggering new budget deficit that could reach $21.3 billion are up against an unexpected problem - the potential loss of billions of dollars in federal economic stimulus money if education and health care spending is cut too deeply. The Obama administration has told California that unless the $74 million in cuts are rescinded, it will deny the state $6.8 billion in stimulus money.
George Ure: "With Social Security and Medicare THERE IS NO SAVINGS FUND!! All there is to back up the Bonds is an "ASSUMPTION" that the US Government is going to raise the Income Tax Rates quite dramatically in the future when it comes time to pay off those bonds (which is never going to happen).
ANY increase in the Social Security or Medicare taxes so as to "Save the system" is really no such thing, it is just a Back Door Income Tax Increase on the lower income WORKERS in the country (remember these taxes do NOT apply to non-workers income, ie: interest, dividends, capital gains etc.) since the money being collected is being immediately spent for general government expenses. "
Nouriel Roubini: "THE 19th century was dominated by the British Empire, the 20th century by the United States. We may now be entering the Asian century, dominated by a rising China and its currency. While the dollar’s status as the major reserve currency will not vanish overnight, we can no longer take it for granted. Sooner than we think, the dollar may be challenged by other currencies, most likely the Chinese renminbi. This would have serious costs for America, as our ability to finance our budget and trade deficits cheaply would disappear."
Yesterday AIG's CEO admitted that the failed insurance company will not be able to pay back the federal government's massive bailout for three to five years, a much longer period than the public was told initially. Even that may be too optimistic since it is contingent on a global economic recovery.
French textile workers were recently made an offer that most, undoubtedly, refused: relocate to India and work for local wages or lose their job. The Times of London reported May 12 that the Carreman company gave its employees the unenviable choice in part to comply with French labor laws.
Carreman told workers they could keep their jobs if they moved to Bangalore at a 96% pay cut, according to the Times. They were not offered airline tickets. A recent online search put the cost of a one-way ticket from Charles De Gaulle airport in Paris to Bangalore airport at about $628, with a plane change.
POSCO, the world's No.4 steelmaker, unexpectedly cut its domestic product prices by up to 20 percent on Thursday, its biggest ever reduction, as a rebound in the Korean won threatened to open the door to cheaper imports.
Despite swift price cuts this year by many Asian rivals, the South Korean mill had resisted making its first reductions since January 2006 until it had finished talks on annual iron ore contract prices. But protracted negotiations and more aggressive action by foreign competitors appear to have forced its hand.
Carlisle Cos. Inc. said Thursday it will temporarily close heavy truck trailer production operations in North Dakota and Pennsylvania.
U.S. natural gas inventories rose 95 billion cubic feet in the week ended May 8, the Energy Information Administration reported Thursday. At 2,013 billion cubic feet, stocks were 497 billion cubic feet higher than last year at this time and 374 billion cubic feet above the five-year average, the EIA reported.
Pelosi says she was informed that senior lawmakers had been briefed on the use of the method in 2003. But she says the CIA misled her earlier about the techniques.
In a 2002 briefing, officials said they had legal opinions saying that harsh interrogation techniques could be used. Pelosi said the only mention of waterboarding at that meeting was that it was not being employed.
Joe Picerno: "Nonetheless, we're still in a period of erratic economic behavior and it remains to be seen if we're merely in a temporary lull that precedes another round of pain vs. a true cyclical bottom. Hope springs eternal, but we still need more data to make a stronger declaration that the worst has passed. And even if it has, patience is still required.
The official end of the recession isn't likely to bring a material change in the discouraging economic news. The technical end of recessions still bring plenty of pain for Joe Sixpack in the ensuing quarters. The fact that this recession is the deepest since the Great Depression suggests that the recovery period, whenever it commences, will be unusually slow and sluggish. And that's the optimistic outlook!"
Blockbuster's U.S. same store sales declined 11% in the quarter. The company reiterated its forecast for 2009 adjusted earnings before interest, taxes, depreciation and amortization in a range of $305 million to $325 million.
Nike Inc. plans to cut 1,750 jobs, or about 5% of its global workforce, The Associated Press reported late Thursday.
Nordstrom said it expects to report a 2009 profit of $1.25 to $1.50 a share, up from a range of $1.10 to $1.40 a share.
The Dow Jones industrial average added 46.43 points to 8,331.32, the S&P rose 9 points, and the Nasdaq climbed 25 points.
President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.
“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”
Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”
The president pledged to work with Congress to shore up entitlement programs such as Social Security and Medicare and said he was confident that the House and Senate would pass health-care overhaul bills by August.
Wednesday, May 13, 2009
The Continuing Collapse
5/13/09 The Continuing Collapse
David Walker: "Long before the current financial crisis, nearly two years ago, a little-noticed cloud darkened the horizon for the US government. It was ignored. But now that shadow, in the form of a warning from a top credit rating agency that the nation risked losing its triple A rating if it did not start putting its finances in order, is coming back to haunt us.
That warning from Moody’s focused on the exploding healthcare and Social Security costs that threaten to engulf the federal government in debt over coming decades. The facts show we’re in even worse shape now, and there are signs that confidence in America’s ability to control its finances is eroding."
China will increase imports of commodities including oil and boost inventories of strategic raw materials to take advantage of weak prices, the nation’s economic planner said in March. The country is also buying commodities as it attempts to diversify investments away from Treasuries. Copper imports by China, the world’s largest consumer, rose to a record for a third month in April, according to the customs office. Aluminum purchases also jumped to a record.
The number of U.S. households faced with
losing their homes to foreclosure jumped 32 percent in April compared with the same month last year, with Nevada, Florida and California showing the highest rates, according to data released Wednesday.
More than 342,000 households received at least one foreclosure-related notice in April, RealtyTrac Inc. said. That means one in every 374 U.S. housing units received a foreclosure filing last month, the highest monthly rate since the Irvine, Calif.-based foreclosure listing firm began its report in January 2005.
April was the second straight month with more than 300,000 households receiving a foreclosure filing, as the number of borrowers with mortgage troubles failed to abate.
The Bank of England in its quarterly inflation report said its view on 2009 economic output is worse than in its February report, due to lower-than-expected activity in the first quarter and a judgement it is likely to take longer for bank lending to return to normal than previously assumed. It also increased its estimate on inflation in the medium term, though it still sees CPI below its 2% target.
Euro-zone industrial production slumped 20% in March from year-earlier levels, Eurostat said Wednesday. On a monthly basis, production slipped 2%.
China's retail sales continued to expand at a rapid pace, data showed Wednesday, with April's sales totaling 934.32 billion yuan ($136.5 billion), up 14.8% from a year earlier and in line with March's 14.7% rise, according to data released by the National Bureau of Statistics.
China's industrial production in April rose 7.3% from a year earlier, easing from an 8.3% expansion in March, according to data released Wednesday from the National Bureau of Statistics. Production had been expected to rise to rise 8.0% according to the median forecast of analysts polled by Dow Jones Newswires.
Chrysler's bankruptcy may take as long as two years, instead of the two months that President Barack Obama suggested as a target, Bloomberg said, citing an administration official.
The 60 days projected by Obama at an April 30 press conference announcing Chrysler's bankruptcy only applies to a sale of the automaker's best assets to a new entity, the official told the news agency.
Oil supplies fell by 3.13 million barrels to 370.7 million last week, the American Petroleum Institute said late yesterday. Crude inventories fell by 4.7 million barrels in the week ended May 8, the Energy Information Administration reported. The EIA also reported a 4.1 million barrels decrease in gasoline inventories and a 1 million barrels gain in distillates, which include diesel and heating oil.
Kuwait’s central bank reduced its benchmark interest rate by half a percentage point to 3 percent, the fifth cut since October 2008, the state news agency
KUNA reported, citing the central bank governor.
The Organization of Petroleum Exporting Countries boosting oil production last month for the first time since July, exceeding its quota by 967,000 barrels a day and backtracking its implementation of supply cuts intended to stem falling prices.
The 11 OPEC members bound by targets implemented 77 percent of planned output cuts of 4.2 million barrels a day, compared to a revised 82 percent for March, the Vienna-based organization said in a monthly report today.
Those 11 nations, which excludes Iraq, pumped 25.812 million barrels a day in April, the report said, citing secondary sources, which include estimates from analysts and news organizations. That compares with 25.587 million a day in March. Those 11 nations have a target of 24.845 million barrels a day that took effect from Jan. 1.
World oil demand is still shrinking as the global economy contracts, OPEC said on Wednesday, adding a recent rise in oil prices reflects sentiment rather than fundamentals, which are far from balanced.
The Organization of the Petroleum Exporting Countries said in its Monthly Oil Market Report demand would drop by 1.57 million barrels per day (bpd) in 2009 to average 84.03 million bpd. Its previous forecast was for demand to fall by 1.37 million bpd.
Liz Claiborne Q1 EPS of -$0.37 misses by $0.14. Revenue of $780M (-28.8%) vs. $884M.
Retail Sales -0.4% in April from a month ago, well short of economist consensus of +0.1%. Sales are 10.1% lower than a year ago. Ex-auto, sales were -0.5% vs. consensus of +0.2%. Electronics sales fell 2.8% in April, leading decliners. Auto sales were up 0.2%, while building materials were up 0.3%. Motor vehicle and parts sales were 20.7% lower than April 2008.April's sales decline was the eight drop in the last 10 months. With 2/3 of the economy dependent on the consumer, this puts the green shoot theory in the toilet.
Import prices +1.6% in April, after rising 0.2% (revised) in March, vs. consensus of +0.6%. Most of the increase came from a rise in petroleum prices. Prices are -16.3% from a year ago. Export prices were +0.5% M/M and -6.8% Y/Y. The exports index is down 6.8% over 12 months - a drop that matches March's 12-month change as the largest decline since the data was first published in September 1983.
Toyota Motor Corp. said Wednesday it will cut vehicle production 28 percent this year to its lowest level in seven years.
The world's largest automaker, struggling as sales fall across the globe, says it aims to produce 6.68 million vehicles in 2009, down from 9.24 million in 2008.
"We expect the severe conditions to continue this year," said Toyota spokeswoman Ryoko Nishinohara.
Mark Papa, CEO of EOG Resources, Inc., said he expects the impact from the decline in gas-oriented drilling will result in natural gas production falling by 4.5 billion cubic feet per day (Bcf/d) by the end of the year. He believes the resulting North American natural gas production declines could be reversed by early in 2010 if $7 per Mcf gas prices return or the gas-directed rig count falls below 650. This view compares with that of the Petroleum Industry Research Association (PIRA) that believes gas production will be 3 Bcf/d lower at year end.
Seagate to cut 1,100 jobs, or about 2.5% workforce.
Macy's posted a loss of $88 million, or 21 cents per share, for the period ended May 2. That compares with a loss of $59 million, or 14 cents per share, a year earlier.
The results included restructuring charges of $138 million, or 5 cents per share related to the consolidation of divisions and initiatives to tailor merchandise to local markets. Excluding those charges, the company lost 16 cents.
Revenues fell to $5.12 billion from $5.74 billion a year ago. Analysts surveyed by Thomson Reuters, who generally exclude one-time items, were expecting a loss of 20 cents per share on sales of $5.2 billion.
Reggie Middleton: "Mortgage foreclosure rate stood at 8.86% as of March 31, 2009 with US home foreclosure filings increasing 46% to 341,180 as of March 31, 2009 over last year. This number is significantly understated due to the fact that many, if not most, of the largest lenders were either under or just exiting a moratorium on foreclosures in the US. This moratorium, or more accurately, the lack thereof, will cause an extreme spike in foreclosure fillings in the upcoming months. As U.S housing prices continue to decline (with S&P Case Shiller Index declining 5% in 2009 in the first two months) mortgage forecloses and delinquencies are expected to reach additional historical peaks resulting in higher loan losses for banks on real estate loans. The Fed's 2 year cumulative loan loss rate for Alt A loans (7.5%-9.5%) appear overly optimistic and is even lower than current delinquency as of December 31, 2008 (9.69%). Based on the Fed's data (that's right, this data is sourced directly from the Fed itself, which explicitly contradicts the data that the Fed released for its stress tests) for Loan losses for Alt -A loans as of March, 2009 (for loans past due and current foreclosures) adjusted for recovery based on LTV taking into consideration price decline and original LTV, 2 yr cumulative losses for Alt A is expected to reach 19.98% which is significantly higher than Fed's adverse case of 9.5-13% - nearly twice as much! The Alt-A category is probably one of the most dangerous for the banks, for this is expected to literally explode over the next 24 months (and is in part masked by moratoriums), as is confirmed through our independent research and, ironically, through the Fed's data itself!"
Bill Bonner: "But if America really wanted to protect its wealth, its power, and its position in the world, it should fight the depression in an entirely different way. Instead of bailing out failed businesses it should let them go bust. Instead of coddling the executives who mismanaged their companies, it should turn them loose. Instead of shoring up reckless banks, it should help knock them down.
And instead of spending money on stimulus programs…it should give money back to the taxpayers so they can stimulate the economy, or not, as they choose. Taxes should be cut in line with government spending. This would boost savings, reduce debt, and… gradually…increase investment and consumer spending too."
Verizon agreed to sell 4.8 million access lines in 14 states to Frontier Communications for $5.25 billion in stock, tripling that company's size.
Delinquencies are snowballing on construction loans and mortgages for office buildings, malls and apartments. The trend is particularly worrisome in Southern California.
Continental Airlines Inc said Wednesday it intends to close its Tampa, Fla., reservation center and eliminate about 500 jobs as more customers purchase their tickets online.
According to MarketWatch, U.S. businesses pared their inventories in March, but sales fell even faster and companies made no progress in bringing bloated inventories back into line with demand, according to Commerce Department data released Wednesday. Inventories fell 1% in March, the seventh consecutive decline. Meanwhile, business sales dropped 1.6%. With the benefit of some favorable rounding, the inventory-to-sales ratio remained at an elevated 1.44 for all businesses in March. The ratio was at 1.28 a year ago. The inventory-to-sales ratio rose a tenth in manufacturing, retail and wholesaling, meaning all three major business sectors dug themselves deeper into the hole.
Investors are the most bearish on Treasuries since June amid concern the record pace of U.S. debt sales will erode demand, a survey of Bloomberg users showed.
Participants forecast higher Treasury yields over the next six months as the U.S. government finances bank bailouts, economic stimulus plans and fund a record budget deficit, according to 1,361 respondents from New York to Tokyo to London in the Bloomberg Professional Global Confidence Index.
Treasuries are suffering their biggest losses since 1994 this year as issuance increases and investors turn to higher- yielding assets on signs the worst of the recession is over. U.S. government debt has lost 3.3 percent since December, after posting a gain of 14 percent in 2008 as investors sought a refuge from losses on securities tied to subprime mortgages, according to Merrill Lynch & Co.’s U.S. Treasury Master index.
With the arrival of Spring, it is timely for some green shoots to appear in the forest; however, successful investors will be able to discern that the few green shoots are but a blip in the overall appearance of the forest. In this case, can you distinguish the forest from the green shoots? Isn't much of a stretch.
U.S. mortgage application demand slid to the lowest level since mid-March, driven by a drop in requests to refinance loans even as borrowing costs dipped toward record lows last week, the Mortgage Bankers Association said on Wednesday.
Richard Rahn: "If a U.S. business operating globally has to pay a 35 percent (U.S.) corporate tax rate (the second-highest in the world) plus state corporate taxes while its international competitors pay much lower rates, the U.S. company will be at a competitive disadvantage. Rather than provide necessary tax relief, the new Treasury proposals, if enacted, will give American multinational companies two basic choices for the long run - move the company outside the United States to a more tax-friendly jurisdiction, or go out of business and fire the workers."
GM shares at $1 and market cap below $1 billion.
Chris Clugston: "Most Americans believe that we are “exceptional”—both as a society and as a species. We believe that America was ordained through divine providence to be the societal role model for the world. And we believe that through our superior intellect, we can harness and even conquer Nature in our continuous quest to improve the material living standards associated with our ever-increasing population.
The truth is that our pioneering predecessors drifted, quite by accident, upon a veritable treasure trove of natural resources and natural habitats, which they wrested by force from the native inhabitants, and which we have persistently overexploited in order to create and perpetuate our American way of life. The truth is that through our “divine ordination” and “superior intellect”, we have been persistently and systematically eliminating the very resources upon which our way of life and our existence depend.
We now find ourselves in a “predicament”. We are irreparably overextended—living hopelessly beyond our means ecologically and economically—at a time when the supplies of many critical resources upon which we depend will soon be insufficient to enable our American way of life. We are about to discover that we are simply another unsustainable society subject to the inescapable consequence of our unsustainable resource utilization behavior—societal collapse."
The Bank of England has warned that Britain's economic recovery is likely to be "slow and protracted," tempering positive sentiment from a flurry of economic data that suggested the recession had hit bottom.
The New York Times reported Wednesday that less than 6% of the stimulus money has been paid out.
Stuart Varney: "The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell 'em what to do. Control. Direct. Command." The TARP funds had warrants attached, and Uncle Sam wants to exercise the warrants as part of any repayment.
Douglas Leech, the founder and chief executive of Centra Bank, a small West Virginia bank that participated in the capital assistance program but returned the money after the government imposed new conditions, said he complained strongly about the Treasury Department’s decision to demand repayment of the warrants. That effectively raised the interest rate he paid on a $15 million loan to an annual rate of about 60 percent, he said.
“What they did is wrong and fundamentally un-American,” he said. “Even though the government told us to take this money to increase our lending, the extra charge meant we had less money to lend. It was the equivalent of a penalty for early withdrawal.”
Crude ends down 83 cents, or 1.4%, at $58.02.
AK Steel said Wednesday that it will likely idle most of its operations in Ashland, Ky. beginning late in July or early August. The move will affect about 750 hourly and salaried employees and was prompted by GM and Chrysler's production cuts as well as the global recession, the company said. The plant is expected to remain idle until through the end of 2009.
The S&P 500 goes negative for the year again. The S&P drops 24+ points, the Dow 184, and the Nasdaq about 52.
The vast majority of complex and opaque over-the-counter derivatives must be traded on centralized clearinghouses, the Treasury Department reported on Wednesday as part of its regulatory reform effort for exotic financial products. As part of the plan, derivatives traders would be required to report trades and improve their record-keeping.
Jack in the Box Inc. expects adjusted earnings of $2.08 to $2.20 a share in fiscal 2009.
Whole Foods Market late Wednesday reported net income fell 32% to $27.3 million, or 19 cents a share, for its fiscal second quarter. A year ago, Whole Foods posted net income of $40 million, or 29 cents a share. Sales were flat at $1.9 billion. As expected, store traffic slowed at existing stores due to weaker consumer spending. Comparable store sales - a key measure of grocer health -- was negative 4.8% vs. a gain of 6.7% a year earlier.
David Walker: "Long before the current financial crisis, nearly two years ago, a little-noticed cloud darkened the horizon for the US government. It was ignored. But now that shadow, in the form of a warning from a top credit rating agency that the nation risked losing its triple A rating if it did not start putting its finances in order, is coming back to haunt us.
That warning from Moody’s focused on the exploding healthcare and Social Security costs that threaten to engulf the federal government in debt over coming decades. The facts show we’re in even worse shape now, and there are signs that confidence in America’s ability to control its finances is eroding."
China will increase imports of commodities including oil and boost inventories of strategic raw materials to take advantage of weak prices, the nation’s economic planner said in March. The country is also buying commodities as it attempts to diversify investments away from Treasuries. Copper imports by China, the world’s largest consumer, rose to a record for a third month in April, according to the customs office. Aluminum purchases also jumped to a record.
The number of U.S. households faced with
losing their homes to foreclosure jumped 32 percent in April compared with the same month last year, with Nevada, Florida and California showing the highest rates, according to data released Wednesday.
More than 342,000 households received at least one foreclosure-related notice in April, RealtyTrac Inc. said. That means one in every 374 U.S. housing units received a foreclosure filing last month, the highest monthly rate since the Irvine, Calif.-based foreclosure listing firm began its report in January 2005.
April was the second straight month with more than 300,000 households receiving a foreclosure filing, as the number of borrowers with mortgage troubles failed to abate.
The Bank of England in its quarterly inflation report said its view on 2009 economic output is worse than in its February report, due to lower-than-expected activity in the first quarter and a judgement it is likely to take longer for bank lending to return to normal than previously assumed. It also increased its estimate on inflation in the medium term, though it still sees CPI below its 2% target.
Euro-zone industrial production slumped 20% in March from year-earlier levels, Eurostat said Wednesday. On a monthly basis, production slipped 2%.
China's retail sales continued to expand at a rapid pace, data showed Wednesday, with April's sales totaling 934.32 billion yuan ($136.5 billion), up 14.8% from a year earlier and in line with March's 14.7% rise, according to data released by the National Bureau of Statistics.
China's industrial production in April rose 7.3% from a year earlier, easing from an 8.3% expansion in March, according to data released Wednesday from the National Bureau of Statistics. Production had been expected to rise to rise 8.0% according to the median forecast of analysts polled by Dow Jones Newswires.
Chrysler's bankruptcy may take as long as two years, instead of the two months that President Barack Obama suggested as a target, Bloomberg said, citing an administration official.
The 60 days projected by Obama at an April 30 press conference announcing Chrysler's bankruptcy only applies to a sale of the automaker's best assets to a new entity, the official told the news agency.
Oil supplies fell by 3.13 million barrels to 370.7 million last week, the American Petroleum Institute said late yesterday. Crude inventories fell by 4.7 million barrels in the week ended May 8, the Energy Information Administration reported. The EIA also reported a 4.1 million barrels decrease in gasoline inventories and a 1 million barrels gain in distillates, which include diesel and heating oil.
Kuwait’s central bank reduced its benchmark interest rate by half a percentage point to 3 percent, the fifth cut since October 2008, the state news agency
KUNA reported, citing the central bank governor.
The Organization of Petroleum Exporting Countries boosting oil production last month for the first time since July, exceeding its quota by 967,000 barrels a day and backtracking its implementation of supply cuts intended to stem falling prices.
The 11 OPEC members bound by targets implemented 77 percent of planned output cuts of 4.2 million barrels a day, compared to a revised 82 percent for March, the Vienna-based organization said in a monthly report today.
Those 11 nations, which excludes Iraq, pumped 25.812 million barrels a day in April, the report said, citing secondary sources, which include estimates from analysts and news organizations. That compares with 25.587 million a day in March. Those 11 nations have a target of 24.845 million barrels a day that took effect from Jan. 1.
World oil demand is still shrinking as the global economy contracts, OPEC said on Wednesday, adding a recent rise in oil prices reflects sentiment rather than fundamentals, which are far from balanced.
The Organization of the Petroleum Exporting Countries said in its Monthly Oil Market Report demand would drop by 1.57 million barrels per day (bpd) in 2009 to average 84.03 million bpd. Its previous forecast was for demand to fall by 1.37 million bpd.
Liz Claiborne Q1 EPS of -$0.37 misses by $0.14. Revenue of $780M (-28.8%) vs. $884M.
Retail Sales -0.4% in April from a month ago, well short of economist consensus of +0.1%. Sales are 10.1% lower than a year ago. Ex-auto, sales were -0.5% vs. consensus of +0.2%. Electronics sales fell 2.8% in April, leading decliners. Auto sales were up 0.2%, while building materials were up 0.3%. Motor vehicle and parts sales were 20.7% lower than April 2008.April's sales decline was the eight drop in the last 10 months. With 2/3 of the economy dependent on the consumer, this puts the green shoot theory in the toilet.
Import prices +1.6% in April, after rising 0.2% (revised) in March, vs. consensus of +0.6%. Most of the increase came from a rise in petroleum prices. Prices are -16.3% from a year ago. Export prices were +0.5% M/M and -6.8% Y/Y. The exports index is down 6.8% over 12 months - a drop that matches March's 12-month change as the largest decline since the data was first published in September 1983.
Toyota Motor Corp. said Wednesday it will cut vehicle production 28 percent this year to its lowest level in seven years.
The world's largest automaker, struggling as sales fall across the globe, says it aims to produce 6.68 million vehicles in 2009, down from 9.24 million in 2008.
"We expect the severe conditions to continue this year," said Toyota spokeswoman Ryoko Nishinohara.
Mark Papa, CEO of EOG Resources, Inc., said he expects the impact from the decline in gas-oriented drilling will result in natural gas production falling by 4.5 billion cubic feet per day (Bcf/d) by the end of the year. He believes the resulting North American natural gas production declines could be reversed by early in 2010 if $7 per Mcf gas prices return or the gas-directed rig count falls below 650. This view compares with that of the Petroleum Industry Research Association (PIRA) that believes gas production will be 3 Bcf/d lower at year end.
Seagate to cut 1,100 jobs, or about 2.5% workforce.
Macy's posted a loss of $88 million, or 21 cents per share, for the period ended May 2. That compares with a loss of $59 million, or 14 cents per share, a year earlier.
The results included restructuring charges of $138 million, or 5 cents per share related to the consolidation of divisions and initiatives to tailor merchandise to local markets. Excluding those charges, the company lost 16 cents.
Revenues fell to $5.12 billion from $5.74 billion a year ago. Analysts surveyed by Thomson Reuters, who generally exclude one-time items, were expecting a loss of 20 cents per share on sales of $5.2 billion.
Reggie Middleton: "Mortgage foreclosure rate stood at 8.86% as of March 31, 2009 with US home foreclosure filings increasing 46% to 341,180 as of March 31, 2009 over last year. This number is significantly understated due to the fact that many, if not most, of the largest lenders were either under or just exiting a moratorium on foreclosures in the US. This moratorium, or more accurately, the lack thereof, will cause an extreme spike in foreclosure fillings in the upcoming months. As U.S housing prices continue to decline (with S&P Case Shiller Index declining 5% in 2009 in the first two months) mortgage forecloses and delinquencies are expected to reach additional historical peaks resulting in higher loan losses for banks on real estate loans. The Fed's 2 year cumulative loan loss rate for Alt A loans (7.5%-9.5%) appear overly optimistic and is even lower than current delinquency as of December 31, 2008 (9.69%). Based on the Fed's data (that's right, this data is sourced directly from the Fed itself, which explicitly contradicts the data that the Fed released for its stress tests) for Loan losses for Alt -A loans as of March, 2009 (for loans past due and current foreclosures) adjusted for recovery based on LTV taking into consideration price decline and original LTV, 2 yr cumulative losses for Alt A is expected to reach 19.98% which is significantly higher than Fed's adverse case of 9.5-13% - nearly twice as much! The Alt-A category is probably one of the most dangerous for the banks, for this is expected to literally explode over the next 24 months (and is in part masked by moratoriums), as is confirmed through our independent research and, ironically, through the Fed's data itself!"
Bill Bonner: "But if America really wanted to protect its wealth, its power, and its position in the world, it should fight the depression in an entirely different way. Instead of bailing out failed businesses it should let them go bust. Instead of coddling the executives who mismanaged their companies, it should turn them loose. Instead of shoring up reckless banks, it should help knock them down.
And instead of spending money on stimulus programs…it should give money back to the taxpayers so they can stimulate the economy, or not, as they choose. Taxes should be cut in line with government spending. This would boost savings, reduce debt, and… gradually…increase investment and consumer spending too."
Verizon agreed to sell 4.8 million access lines in 14 states to Frontier Communications for $5.25 billion in stock, tripling that company's size.
Delinquencies are snowballing on construction loans and mortgages for office buildings, malls and apartments. The trend is particularly worrisome in Southern California.
Continental Airlines Inc said Wednesday it intends to close its Tampa, Fla., reservation center and eliminate about 500 jobs as more customers purchase their tickets online.
According to MarketWatch, U.S. businesses pared their inventories in March, but sales fell even faster and companies made no progress in bringing bloated inventories back into line with demand, according to Commerce Department data released Wednesday. Inventories fell 1% in March, the seventh consecutive decline. Meanwhile, business sales dropped 1.6%. With the benefit of some favorable rounding, the inventory-to-sales ratio remained at an elevated 1.44 for all businesses in March. The ratio was at 1.28 a year ago. The inventory-to-sales ratio rose a tenth in manufacturing, retail and wholesaling, meaning all three major business sectors dug themselves deeper into the hole.
Investors are the most bearish on Treasuries since June amid concern the record pace of U.S. debt sales will erode demand, a survey of Bloomberg users showed.
Participants forecast higher Treasury yields over the next six months as the U.S. government finances bank bailouts, economic stimulus plans and fund a record budget deficit, according to 1,361 respondents from New York to Tokyo to London in the Bloomberg Professional Global Confidence Index.
Treasuries are suffering their biggest losses since 1994 this year as issuance increases and investors turn to higher- yielding assets on signs the worst of the recession is over. U.S. government debt has lost 3.3 percent since December, after posting a gain of 14 percent in 2008 as investors sought a refuge from losses on securities tied to subprime mortgages, according to Merrill Lynch & Co.’s U.S. Treasury Master index.
With the arrival of Spring, it is timely for some green shoots to appear in the forest; however, successful investors will be able to discern that the few green shoots are but a blip in the overall appearance of the forest. In this case, can you distinguish the forest from the green shoots? Isn't much of a stretch.
U.S. mortgage application demand slid to the lowest level since mid-March, driven by a drop in requests to refinance loans even as borrowing costs dipped toward record lows last week, the Mortgage Bankers Association said on Wednesday.
Richard Rahn: "If a U.S. business operating globally has to pay a 35 percent (U.S.) corporate tax rate (the second-highest in the world) plus state corporate taxes while its international competitors pay much lower rates, the U.S. company will be at a competitive disadvantage. Rather than provide necessary tax relief, the new Treasury proposals, if enacted, will give American multinational companies two basic choices for the long run - move the company outside the United States to a more tax-friendly jurisdiction, or go out of business and fire the workers."
GM shares at $1 and market cap below $1 billion.
Chris Clugston: "Most Americans believe that we are “exceptional”—both as a society and as a species. We believe that America was ordained through divine providence to be the societal role model for the world. And we believe that through our superior intellect, we can harness and even conquer Nature in our continuous quest to improve the material living standards associated with our ever-increasing population.
The truth is that our pioneering predecessors drifted, quite by accident, upon a veritable treasure trove of natural resources and natural habitats, which they wrested by force from the native inhabitants, and which we have persistently overexploited in order to create and perpetuate our American way of life. The truth is that through our “divine ordination” and “superior intellect”, we have been persistently and systematically eliminating the very resources upon which our way of life and our existence depend.
We now find ourselves in a “predicament”. We are irreparably overextended—living hopelessly beyond our means ecologically and economically—at a time when the supplies of many critical resources upon which we depend will soon be insufficient to enable our American way of life. We are about to discover that we are simply another unsustainable society subject to the inescapable consequence of our unsustainable resource utilization behavior—societal collapse."
The Bank of England has warned that Britain's economic recovery is likely to be "slow and protracted," tempering positive sentiment from a flurry of economic data that suggested the recession had hit bottom.
The New York Times reported Wednesday that less than 6% of the stimulus money has been paid out.
Stuart Varney: "The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell 'em what to do. Control. Direct. Command." The TARP funds had warrants attached, and Uncle Sam wants to exercise the warrants as part of any repayment.
Douglas Leech, the founder and chief executive of Centra Bank, a small West Virginia bank that participated in the capital assistance program but returned the money after the government imposed new conditions, said he complained strongly about the Treasury Department’s decision to demand repayment of the warrants. That effectively raised the interest rate he paid on a $15 million loan to an annual rate of about 60 percent, he said.
“What they did is wrong and fundamentally un-American,” he said. “Even though the government told us to take this money to increase our lending, the extra charge meant we had less money to lend. It was the equivalent of a penalty for early withdrawal.”
Crude ends down 83 cents, or 1.4%, at $58.02.
AK Steel said Wednesday that it will likely idle most of its operations in Ashland, Ky. beginning late in July or early August. The move will affect about 750 hourly and salaried employees and was prompted by GM and Chrysler's production cuts as well as the global recession, the company said. The plant is expected to remain idle until through the end of 2009.
The S&P 500 goes negative for the year again. The S&P drops 24+ points, the Dow 184, and the Nasdaq about 52.
The vast majority of complex and opaque over-the-counter derivatives must be traded on centralized clearinghouses, the Treasury Department reported on Wednesday as part of its regulatory reform effort for exotic financial products. As part of the plan, derivatives traders would be required to report trades and improve their record-keeping.
Jack in the Box Inc. expects adjusted earnings of $2.08 to $2.20 a share in fiscal 2009.
Whole Foods Market late Wednesday reported net income fell 32% to $27.3 million, or 19 cents a share, for its fiscal second quarter. A year ago, Whole Foods posted net income of $40 million, or 29 cents a share. Sales were flat at $1.9 billion. As expected, store traffic slowed at existing stores due to weaker consumer spending. Comparable store sales - a key measure of grocer health -- was negative 4.8% vs. a gain of 6.7% a year earlier.
Tuesday, May 12, 2009
Income Tax Receipts Plummet
5/12/09 Income Tax Receipts Plummet
With the recession undermining income-tax receipts, the U.S. government recorded a $20.9 billion deficit last month, the first April deficit in 26 years, the Treasury Department reported Tuesday. Through the first seven months of the fiscal year, the federal deficit has mounted up to a record $802.3 billion, compared with $153.5 billion at the same time last year. Income-tax receipts are down nearly 31% for the fiscal year so far. Total receipts are down 19% to $1.26 trillion. Spending for the first seven months rose 20% to $2.06 trillion.
The U.S. trade gap with the rest of the world increased in March for the first time in eight months as exports declined faster than imports, the Commerce Department reported Tuesday. Led by a big decline in capital goods sales, exports of goods and services fell 2.4% to a seasonally adjusted $123.6 billion in March, the lowest level since August 2006. Meanwhile, imports of goods and services fell 1% to $151.2 billion, the lowest level since September 2004. The trade deficit - the difference between exports and imports - increased by 5.5% to $27.6 billion in March from $26.1 billion in February.
The U.S. trade deficit with China widened to $15.6 billion in March, the most with any country. For the first three months of the year, the deficit with China has shrunk by about 8% compared with the same period last year.
China's April exports contracted 22.6% from a year earlier, accelerating from a 17.1% slide March, while imports were down 23% on year, compared to a 25.1% decline in March, according to data released Tuesday by the National Bureau of Statistics.
Sony has forecast its first net loss in 14 years for the fiscal year ended March 31. Among major Japanese exporters, the Tokyo-based maker of the Walkman player and PlayStation 3 game machine is no exception in being battered by the global slowdown. The soaring yen, which reduces the value of overseas earnings, and the dropping prices of gadgets have added to the damage. The fiscal year ended March would mark the first time Sony has slid into red ink from troubles in its electronics business. Last time it sank into a net loss, for the fiscal year ending March 1995, its movie division, marred by box office flops and lax cost controls, was to blame.
China, the world's second-largest oil consumer, increased its imports by 13.6% in April to 16.17 million metric tons, or 3.9 million barrels a day, according to the country's customs department.
Banks are overvalued and the government enabled them to have better first quarter earnings than they should, well-known analyst Meredith Whitney told CNBC.
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"At a core basis, I would not own these stocks," Whitney said in a live interview. "Their business models are not going to come back."
For fiscal year 2009, Fossil projected profit of $1.50 to $1.70 a share.
Alpha Natural Resources Inc.and Foundation Coal Holdings Inc. have agreed to merge in a stock-swap deal, valued at about $2 billion, that will give rise to the No. 3 U.S. producer of coal, the companies said. Terms call for Foundation Coal to receive stock in the new entity valued at $32.73 a share, based on the May 8 closing price of Alpha Natural shares. This represents about a 37% premium over the average closing price for Foundation Coal shares in the five days through May 8. Shareholders of Abingdon, Va.-based Alpha Natural shareholders will own about 59% of the new company on a fully diluted basis. The parties said they expect to close on the transaction later this year.
Hayes Lemmerz International Inc., the Northville, Mich., producer of aluminum and steel wheels for cars and trucks, filed to reorganize under Chapter 11 of U.S. bankruptcy law. In a statement late on Monday, the company said it made the filing to facilitate a debt restructuring agreed to by holders of a majority of its secured debt.
Andy Kessler: "The stock market still has big hurdles to clear. You can have a jobless recovery, but you can’t have a profitless recovery. "
Rob Hanna: "
1) Don’t be sucked in to believing that up volume on up days and down volume on down days is necessarily a bullish pattern. Also down volume on up days and up volume on down days aren’t necessarily bearish. There’s a lot of misinformation out there and the real answer may be much more complex.
2) This doesn’t mean volume isn’t a useful tool. I’ve found it especially useful at extremes. "
The Oil Drum: "The present contango in oil prices bears all the hallmarks of an oil market where supplies are well above present fundamental physical consumption.
The recent large inventory build of petroleum, under a steep contango which now is flattening, within the big oil consumers (like the OECD countries and China) have left some with the expectation that major economies soon will begin to grow again, and that the contango now signals increased oil demand and higher oil prices in the future.
My analysis indicates that in recent months, as much as 2 -3 Mb/d of global petroleum supply has been used to build inventories. This is about to come to an end, because available storage is getting closer and closer to full and contango has begun to flatten. When additions to storage cease, the resulting drop in demand can be expected to lead to substantial downward pressure on oil prices."
According to Bloomberg, India’s industrial production fell the most in 16 years in March as the worst global recession since World War II damped demand for the nation’s exports.
Output at factories, utilities and mines declined 2.3 percent from a year earlier after a revised 0.7 percent drop in February, the statistics agency said in New Delhi today. That was more than three times analysts’ estimates and the worst performance since January 1993, according to Bloomberg data.
Niels Jensen: "The US financial sector debt load (as a % of GDP) is now 117%. In the early days of the great bull market in 1982, the same number was 22%. Households are not much better off with total household debt now at 96% of GDP vs. 47% in 1982.... Delinquencies are now on the rise on all mortgage products; however, whereas sub-prime started to deteriorate as early as 2007, it is only recently that delinquencies related to Alt-A and adjustable rate mortgages have taken off, and prime and jumbo loans are only now starting to suffer....governments inevitably underestimate the ultimate cost of a banking crisis, because the indirect costs (such as falling tax revenue in subsequent years) end up much higher than predicted."
Crude for June delivery gained $1.39, or 2.3%, to $59.89 a barrel in early North American electronic trading. It rose to $60.08 earlier. Front-month oil contracts haven't ended above $59 a barrel since Nov. 11.
“It looks to me now as if the markets are now pricing in a rapid recovery, that they’re pricing in a V-shaped recession, which I consider extremely unlikely,” Paul Krugman, 56, said at a forum in Shanghai today. “The market seems to be looking as if this is going to be an average recession, but it’s not."
Chuck Butler: “Many institutional investors use the dollar index as their means of trading the dollar. And to see it fall through its 200-day moving average was enough proof for them that the dollar is heading south.
“The 200-day moving average, for those of you unfamiliar with this term, is a long-term moving average that helps determine the overall health of the asset, which, in this case, we’re talking about the dollar. It is, for all practical purposes, a dividing line, if you will, between as asset being healthy and one that is not.”
The state of Washington settled on a budget two weeks ago that will mean 1,000 layoffs at public colleges and several times that many in elementary and high schools.
The governor of Massachusetts, who cut 1,000 positions late last year, just announced 250 layoffs, with more likely to come soon.
Arizona has already laid off 800 social service workers this year and is facing the likelihood of deeper cuts over the next two. The state no longer investigates all complaints of child or elder abuse.
The nonpartisan Congressional Budget Office (CBO) predicts a gross domestic product decline of 3 percent this year but 2.9 percent growth next year, while the April consensus of 50 blue-chip private economists sees a 2.6 percent decline in 2009 and 1.8 percent growth next year. I predict both growth forecasts will get reduced.
Dallas-based White Energy said a Chapter 11 filing became necessary after high raw material costs coupled with low ethanol prices led to “minimal or nonexistent profit margins.” It also blamed significant debt payments and an inability to raise capital from frozen equity markets.
The move comes just three years after the privately held firm entered the business and on the heels of bankruptcy filings by ethanol powerhouse VeraSun Energy Corp. and Dallas-based Panda Energy, which in January placed its plant near Amarillo in Chapter 11.
Fewer people working means less being paid into the trust funds for Social Security and Medicare.
The Congressional Budget Office recently projected that Social Security will collect just $3 billion more in 2010 than it will pay out in benefits. A year ago, the CBO had projected that Social Security would have a much higher $86 billion cash surplus for the 2010 budget year, which begins Oct. 1. The difference in the two estimates is the result of the recession. I predict SS will show a deficit some time in 2010 and not a surplus.
Last week, Nordstrom said its preliminary reading showed first-quarter sales declined 9.2 percent to $1.71 billion.
Analysts polled by Thomson Reuters expect earnings of 26 cents per share and sales of $1.68 billion.
General Motors Corp. shares dropped as much as 24% to hit a 76-year low of $1.09 on Tuesday, after CEO Fritz Henderson a day earlier said a bankruptcy is "more probable."
Randall Forsyth: "Boomers' last resort is to go back to work and scrimp and save. And hoping to die before they get old no longer sounds so romantic now that we are old."
As the housing market slowly recovers from the biggest collapse since the Great Depression, homeowners are still finding it hard to unload their current residence without suffering a big loss. As a result, they're deciding to hold onto the house but renting it out in hopes of selling later when the market improves.
"With a glut of housing inventory, renting is a common option" says Jessie Keenan, an adjunct professor at the University of Miami who teaches classes on housing.
The median U.S. home price dropped 14 percent in the first quarter from a year earlier as banks sold repossessed homes.
Prices fell in 134 of 152 metropolitan areas, the Chicago- based National Association of Realtors said today in a news release. The national median existing home price declined to $169,000 and distressed properties typically sold for 20 percent less than other homes on the market.
The Energy Information Administration Tuesday revised lower its world oil demand forecast, saying the global economic downturn will continue to dampen petroleum consumption. World oil consumption is now projected to fall by 1.8 million barrels per day in 2009, a decline that is 400,000 barrels larger than the EIA had projected last month. Oil prices will remain flat for the remainder of the year, averaging about $55 a barrel, the EIA said.
Deloitte's index of consumer spending dropped to 1.46% in April following March's 1.95% gain. Growth factors include tax credits and subsidies for first-time home buyers. Negative factors include home price deflation and rising unemployment.
Naveen Salvaraj: "The Cisco results do not indicate that things will be better in the next 2-3 quarters, barring a dramatic turnaround. Till then, the Cisco sales team has one hell of a task to do!"
According to Bloomberg, soybean prices fell for the first time in three sessions on speculation that China, the world’s biggest buyer, will slow imports as profits drop from making animal feed and cooking oil from the oilseed.
Chinese buyers have asked overseas suppliers to delay loading of 500,000 metric tons of soybeans until June, two company executives said last week. Some importers may have canceled purchases of 300,000 tons, two other executives said. Before today, prices surged 32 percent since March 2 on Chinese purchases, reaching a seven-month high on May 7.
Martin Hutchinson: "Economically, it is currently spring with "green shoots" apparently indicating recovery, burgeoning in the most unexpected places. The economic climate, however, is that of early February rather than mid-April. True recovery is nowhere near imminent, and economic conditions should get considerably worse before it arrives."
Gold for June delivery rose $10.40, or 1.1%, to $923.90 an ounce on the Comex division of the New York Mercantile Exchange.
Since the start of 2008, 5.7 million payroll tax jobs have disappeared. And another 4.3 million jobs are being filled on a part-time basis.
In the nearer term, the trustees estimate that Social Security will take in fewer taxes than the benefits that will be paid out by 2016. Last year, they estimated the near-term shortfall would occur in 2017.
Those who describe Social Security's situation as a crisis point to the 2016 date as the most important, because that's when the government has to start paying the system back with interest.
"When Social Security needs to draw down the 'surplus,' the Treasury will have to borrow money, raise taxes or cut other spending in order to redeem the IOUs," said Charles Konigsberg, a federal budget expert at deficit watchdog group the Concord Coalition.
I think the SS crisis will occur several years before 2016.
The world's largest chip equipment maker Applied Materials Inc posted a quarterly loss as cost cuts failed to fully offset a steep drop in revenue.
Excluding certain items, but including stock-based compensation expenses, the loss was 12 cents a share compared with analysts' average forecast of a loss of 10 cents a share, according to Reuters Estimates.
Revenue tumbled more than 50 percent to $1.02 billion, but was higher than the average Wall Street estimate of $905.3 million.
Intel's Chief Executive Paul Otellini said the chip giant's business in the second quarter was "a little better than expected." Intel did not offer a formal outlook for the second quarter, but said it expects revenue to be roughly flat to the first quarter.
The Dow Jones Industrial Average was up 50 points, or 0.6%, at 8,469. The S&P 500 index fell 0.9 points, or 0.1%, to 908, while the Nasdaq Composite lost 15 points, or 0.9%, to 1,715.
Medicare's trustees warned today that the program's biggest fund would run out of money in just eight years.
Social Security and Medicare are financed primarily by taxes evenly divided between workers and employers that amount to 15.3% of wages.
Thousands of Tully's shareholders will finally get a payday on May 20, when the company distributes $1.03 a share -- for a total of $5.7 million -- to shareholders of record on April 30.
It's not a great return for Tully's roughly 6,000 shareholders, many of whom paid $1 a share in the 1990s to get a piece of the Seattle coffee chain that sought to rival Starbucks.
The money comes from the $40.3 million sale in March of Tully's wholesale business to Green Mountain Coffee Roasters of Vermont, which wants to relocate Tully's roasting machines to a location with more space.
Tully's used about $26 million to pay off debt, and another chunk -- if my math is right, roughly $8 million -- will go toward stabilizing and building its retail business.
That leaves $5.7 million for shareholders, including founder and chairman Tom O'Keefe, who owns about 12 percent of the company.
The dollar index, a measure of the greenback against a trade-weighted basket of six major currencies, hit a four-month low at 82.00, according to FactSet Research, and was at 82.267 in recent trading.
Overall, the industry is going to fare less better as retailers focusing on discretionary merchandise still aren't seeing much of a recovery in consumer spending. While analysts have trimmed their first-quarter forecast to an average profit decline of 19% from a 25% decline expected at the end of March, the drop was still limited in part by Wal-Mart, said Ken Perkins of Retail Metrics. Excluding Wal-Mart, analysts projected the industry to see a profit decline of 27%, Perkins said.
With the recession undermining income-tax receipts, the U.S. government recorded a $20.9 billion deficit last month, the first April deficit in 26 years, the Treasury Department reported Tuesday. Through the first seven months of the fiscal year, the federal deficit has mounted up to a record $802.3 billion, compared with $153.5 billion at the same time last year. Income-tax receipts are down nearly 31% for the fiscal year so far. Total receipts are down 19% to $1.26 trillion. Spending for the first seven months rose 20% to $2.06 trillion.
The U.S. trade gap with the rest of the world increased in March for the first time in eight months as exports declined faster than imports, the Commerce Department reported Tuesday. Led by a big decline in capital goods sales, exports of goods and services fell 2.4% to a seasonally adjusted $123.6 billion in March, the lowest level since August 2006. Meanwhile, imports of goods and services fell 1% to $151.2 billion, the lowest level since September 2004. The trade deficit - the difference between exports and imports - increased by 5.5% to $27.6 billion in March from $26.1 billion in February.
The U.S. trade deficit with China widened to $15.6 billion in March, the most with any country. For the first three months of the year, the deficit with China has shrunk by about 8% compared with the same period last year.
China's April exports contracted 22.6% from a year earlier, accelerating from a 17.1% slide March, while imports were down 23% on year, compared to a 25.1% decline in March, according to data released Tuesday by the National Bureau of Statistics.
Sony has forecast its first net loss in 14 years for the fiscal year ended March 31. Among major Japanese exporters, the Tokyo-based maker of the Walkman player and PlayStation 3 game machine is no exception in being battered by the global slowdown. The soaring yen, which reduces the value of overseas earnings, and the dropping prices of gadgets have added to the damage. The fiscal year ended March would mark the first time Sony has slid into red ink from troubles in its electronics business. Last time it sank into a net loss, for the fiscal year ending March 1995, its movie division, marred by box office flops and lax cost controls, was to blame.
China, the world's second-largest oil consumer, increased its imports by 13.6% in April to 16.17 million metric tons, or 3.9 million barrels a day, according to the country's customs department.
Banks are overvalued and the government enabled them to have better first quarter earnings than they should, well-known analyst Meredith Whitney told CNBC.
--------------------------------------------------------------------------------
"At a core basis, I would not own these stocks," Whitney said in a live interview. "Their business models are not going to come back."
For fiscal year 2009, Fossil projected profit of $1.50 to $1.70 a share.
Alpha Natural Resources Inc.and Foundation Coal Holdings Inc. have agreed to merge in a stock-swap deal, valued at about $2 billion, that will give rise to the No. 3 U.S. producer of coal, the companies said. Terms call for Foundation Coal to receive stock in the new entity valued at $32.73 a share, based on the May 8 closing price of Alpha Natural shares. This represents about a 37% premium over the average closing price for Foundation Coal shares in the five days through May 8. Shareholders of Abingdon, Va.-based Alpha Natural shareholders will own about 59% of the new company on a fully diluted basis. The parties said they expect to close on the transaction later this year.
Hayes Lemmerz International Inc., the Northville, Mich., producer of aluminum and steel wheels for cars and trucks, filed to reorganize under Chapter 11 of U.S. bankruptcy law. In a statement late on Monday, the company said it made the filing to facilitate a debt restructuring agreed to by holders of a majority of its secured debt.
Andy Kessler: "The stock market still has big hurdles to clear. You can have a jobless recovery, but you can’t have a profitless recovery. "
Rob Hanna: "
1) Don’t be sucked in to believing that up volume on up days and down volume on down days is necessarily a bullish pattern. Also down volume on up days and up volume on down days aren’t necessarily bearish. There’s a lot of misinformation out there and the real answer may be much more complex.
2) This doesn’t mean volume isn’t a useful tool. I’ve found it especially useful at extremes. "
The Oil Drum: "The present contango in oil prices bears all the hallmarks of an oil market where supplies are well above present fundamental physical consumption.
The recent large inventory build of petroleum, under a steep contango which now is flattening, within the big oil consumers (like the OECD countries and China) have left some with the expectation that major economies soon will begin to grow again, and that the contango now signals increased oil demand and higher oil prices in the future.
My analysis indicates that in recent months, as much as 2 -3 Mb/d of global petroleum supply has been used to build inventories. This is about to come to an end, because available storage is getting closer and closer to full and contango has begun to flatten. When additions to storage cease, the resulting drop in demand can be expected to lead to substantial downward pressure on oil prices."
According to Bloomberg, India’s industrial production fell the most in 16 years in March as the worst global recession since World War II damped demand for the nation’s exports.
Output at factories, utilities and mines declined 2.3 percent from a year earlier after a revised 0.7 percent drop in February, the statistics agency said in New Delhi today. That was more than three times analysts’ estimates and the worst performance since January 1993, according to Bloomberg data.
Niels Jensen: "The US financial sector debt load (as a % of GDP) is now 117%. In the early days of the great bull market in 1982, the same number was 22%. Households are not much better off with total household debt now at 96% of GDP vs. 47% in 1982.... Delinquencies are now on the rise on all mortgage products; however, whereas sub-prime started to deteriorate as early as 2007, it is only recently that delinquencies related to Alt-A and adjustable rate mortgages have taken off, and prime and jumbo loans are only now starting to suffer....governments inevitably underestimate the ultimate cost of a banking crisis, because the indirect costs (such as falling tax revenue in subsequent years) end up much higher than predicted."
Crude for June delivery gained $1.39, or 2.3%, to $59.89 a barrel in early North American electronic trading. It rose to $60.08 earlier. Front-month oil contracts haven't ended above $59 a barrel since Nov. 11.
“It looks to me now as if the markets are now pricing in a rapid recovery, that they’re pricing in a V-shaped recession, which I consider extremely unlikely,” Paul Krugman, 56, said at a forum in Shanghai today. “The market seems to be looking as if this is going to be an average recession, but it’s not."
Chuck Butler: “Many institutional investors use the dollar index as their means of trading the dollar. And to see it fall through its 200-day moving average was enough proof for them that the dollar is heading south.
“The 200-day moving average, for those of you unfamiliar with this term, is a long-term moving average that helps determine the overall health of the asset, which, in this case, we’re talking about the dollar. It is, for all practical purposes, a dividing line, if you will, between as asset being healthy and one that is not.”
The state of Washington settled on a budget two weeks ago that will mean 1,000 layoffs at public colleges and several times that many in elementary and high schools.
The governor of Massachusetts, who cut 1,000 positions late last year, just announced 250 layoffs, with more likely to come soon.
Arizona has already laid off 800 social service workers this year and is facing the likelihood of deeper cuts over the next two. The state no longer investigates all complaints of child or elder abuse.
The nonpartisan Congressional Budget Office (CBO) predicts a gross domestic product decline of 3 percent this year but 2.9 percent growth next year, while the April consensus of 50 blue-chip private economists sees a 2.6 percent decline in 2009 and 1.8 percent growth next year. I predict both growth forecasts will get reduced.
Dallas-based White Energy said a Chapter 11 filing became necessary after high raw material costs coupled with low ethanol prices led to “minimal or nonexistent profit margins.” It also blamed significant debt payments and an inability to raise capital from frozen equity markets.
The move comes just three years after the privately held firm entered the business and on the heels of bankruptcy filings by ethanol powerhouse VeraSun Energy Corp. and Dallas-based Panda Energy, which in January placed its plant near Amarillo in Chapter 11.
Fewer people working means less being paid into the trust funds for Social Security and Medicare.
The Congressional Budget Office recently projected that Social Security will collect just $3 billion more in 2010 than it will pay out in benefits. A year ago, the CBO had projected that Social Security would have a much higher $86 billion cash surplus for the 2010 budget year, which begins Oct. 1. The difference in the two estimates is the result of the recession. I predict SS will show a deficit some time in 2010 and not a surplus.
Last week, Nordstrom said its preliminary reading showed first-quarter sales declined 9.2 percent to $1.71 billion.
Analysts polled by Thomson Reuters expect earnings of 26 cents per share and sales of $1.68 billion.
General Motors Corp. shares dropped as much as 24% to hit a 76-year low of $1.09 on Tuesday, after CEO Fritz Henderson a day earlier said a bankruptcy is "more probable."
Randall Forsyth: "Boomers' last resort is to go back to work and scrimp and save. And hoping to die before they get old no longer sounds so romantic now that we are old."
As the housing market slowly recovers from the biggest collapse since the Great Depression, homeowners are still finding it hard to unload their current residence without suffering a big loss. As a result, they're deciding to hold onto the house but renting it out in hopes of selling later when the market improves.
"With a glut of housing inventory, renting is a common option" says Jessie Keenan, an adjunct professor at the University of Miami who teaches classes on housing.
The median U.S. home price dropped 14 percent in the first quarter from a year earlier as banks sold repossessed homes.
Prices fell in 134 of 152 metropolitan areas, the Chicago- based National Association of Realtors said today in a news release. The national median existing home price declined to $169,000 and distressed properties typically sold for 20 percent less than other homes on the market.
The Energy Information Administration Tuesday revised lower its world oil demand forecast, saying the global economic downturn will continue to dampen petroleum consumption. World oil consumption is now projected to fall by 1.8 million barrels per day in 2009, a decline that is 400,000 barrels larger than the EIA had projected last month. Oil prices will remain flat for the remainder of the year, averaging about $55 a barrel, the EIA said.
Deloitte's index of consumer spending dropped to 1.46% in April following March's 1.95% gain. Growth factors include tax credits and subsidies for first-time home buyers. Negative factors include home price deflation and rising unemployment.
Naveen Salvaraj: "The Cisco results do not indicate that things will be better in the next 2-3 quarters, barring a dramatic turnaround. Till then, the Cisco sales team has one hell of a task to do!"
According to Bloomberg, soybean prices fell for the first time in three sessions on speculation that China, the world’s biggest buyer, will slow imports as profits drop from making animal feed and cooking oil from the oilseed.
Chinese buyers have asked overseas suppliers to delay loading of 500,000 metric tons of soybeans until June, two company executives said last week. Some importers may have canceled purchases of 300,000 tons, two other executives said. Before today, prices surged 32 percent since March 2 on Chinese purchases, reaching a seven-month high on May 7.
Martin Hutchinson: "Economically, it is currently spring with "green shoots" apparently indicating recovery, burgeoning in the most unexpected places. The economic climate, however, is that of early February rather than mid-April. True recovery is nowhere near imminent, and economic conditions should get considerably worse before it arrives."
Gold for June delivery rose $10.40, or 1.1%, to $923.90 an ounce on the Comex division of the New York Mercantile Exchange.
Since the start of 2008, 5.7 million payroll tax jobs have disappeared. And another 4.3 million jobs are being filled on a part-time basis.
In the nearer term, the trustees estimate that Social Security will take in fewer taxes than the benefits that will be paid out by 2016. Last year, they estimated the near-term shortfall would occur in 2017.
Those who describe Social Security's situation as a crisis point to the 2016 date as the most important, because that's when the government has to start paying the system back with interest.
"When Social Security needs to draw down the 'surplus,' the Treasury will have to borrow money, raise taxes or cut other spending in order to redeem the IOUs," said Charles Konigsberg, a federal budget expert at deficit watchdog group the Concord Coalition.
I think the SS crisis will occur several years before 2016.
The world's largest chip equipment maker Applied Materials Inc posted a quarterly loss as cost cuts failed to fully offset a steep drop in revenue.
Excluding certain items, but including stock-based compensation expenses, the loss was 12 cents a share compared with analysts' average forecast of a loss of 10 cents a share, according to Reuters Estimates.
Revenue tumbled more than 50 percent to $1.02 billion, but was higher than the average Wall Street estimate of $905.3 million.
Intel's Chief Executive Paul Otellini said the chip giant's business in the second quarter was "a little better than expected." Intel did not offer a formal outlook for the second quarter, but said it expects revenue to be roughly flat to the first quarter.
The Dow Jones Industrial Average was up 50 points, or 0.6%, at 8,469. The S&P 500 index fell 0.9 points, or 0.1%, to 908, while the Nasdaq Composite lost 15 points, or 0.9%, to 1,715.
Medicare's trustees warned today that the program's biggest fund would run out of money in just eight years.
Social Security and Medicare are financed primarily by taxes evenly divided between workers and employers that amount to 15.3% of wages.
Thousands of Tully's shareholders will finally get a payday on May 20, when the company distributes $1.03 a share -- for a total of $5.7 million -- to shareholders of record on April 30.
It's not a great return for Tully's roughly 6,000 shareholders, many of whom paid $1 a share in the 1990s to get a piece of the Seattle coffee chain that sought to rival Starbucks.
The money comes from the $40.3 million sale in March of Tully's wholesale business to Green Mountain Coffee Roasters of Vermont, which wants to relocate Tully's roasting machines to a location with more space.
Tully's used about $26 million to pay off debt, and another chunk -- if my math is right, roughly $8 million -- will go toward stabilizing and building its retail business.
That leaves $5.7 million for shareholders, including founder and chairman Tom O'Keefe, who owns about 12 percent of the company.
The dollar index, a measure of the greenback against a trade-weighted basket of six major currencies, hit a four-month low at 82.00, according to FactSet Research, and was at 82.267 in recent trading.
Overall, the industry is going to fare less better as retailers focusing on discretionary merchandise still aren't seeing much of a recovery in consumer spending. While analysts have trimmed their first-quarter forecast to an average profit decline of 19% from a 25% decline expected at the end of March, the drop was still limited in part by Wal-Mart, said Ken Perkins of Retail Metrics. Excluding Wal-Mart, analysts projected the industry to see a profit decline of 27%, Perkins said.
Monday, May 11, 2009
The Federal Budget
5/11/09 The Federal Budget
Will Rodgers: "The budget is like a mythical bean bag. Congress votes mythical beans into it, then reaches in and tries to pull real ones out."
The government will have to borrow nearly 50 cents for every dollar it spends this year, exploding the record federal deficit past $1.8 trillion under new
White House estimates. Budget office figures released Monday would add $89 billion to the 2009 red ink — increasing it to more than four times last year's all-time high as the government hands out billions more than expected for people who have lost jobs and takes in less tax revenue from people and companies making less money.
A fresh estimate of the deficit showed it coming in at $1.84 trillion -- representing a massive 12.9 percent of gross domestic product -- in the current 2009 fiscal year that ends on September 30. A prior White House forecast released in February projected a deficit of $1.75 trillion, or 12.3 percent of GDP.
Agrium Inc. increased its offer to buy smaller fertilizer rival CF Industries Holdings Inc. by $5 a share to $40 a share, plus one Agrium share. The deal values CF Industries at $85.20 a share, or about $4.12 billion based on 48.8 million shares outstanding.
The benchmark KBW Bank Index, which tracks 24 of the nation's largest banks, jumped 12.1 percent Friday.
George Soros told the Frankfurter Allgemeine Zeitung daily that Asia would be the first region to pull out of the financial crisis and China was set to overtake the United States as the engine of world growth.
"The financial safety net, especially those parts that were more implicit and perceived than explicit and written into the laws, played a significant role in the accumulation of risks that ultimately led to the turmoil we are still experiencing," said Richmond Federal Reserve President Jeffrey Lacker. "While deployment of the financial safety net is often viewed as an essential response to the financial crisis, I believe we need to give serious thought to the extent to which the safety net was actually a significant cause of the crisis," he said in remarks prepared for delivery to a banking conference in Beijing.
Scott Burns: "Government obligations for Social Security and Medicare may soon exceed the combined net worth of every household and nonprofit organization in the country...Last year's Social Security trustee report
estimates that OASDI (Social Security retirement and disability) and HI (hospital insurance), excluding book entry interest for the trust funds, will have more revenue than expenses until 2015. If higher cost assumptions prevail, however, the last year of positive flow will be 2010.
That's next year."
William Greider: " At work, at home and in the public sphere, most people lack the right to exercise much of a voice in the decisions governing their daily lives. Most people (not all) are subject to a system of command and control over their destinies. They know the risks of ignoring the orders from above. Not surprisingly, many citizens are resigned to this condition and accept subservience as "the way things are," and their lives are smaller as a result. Many find it hard to imagine that these confinements could be lessened, even substantially removed, if economic organizations were informed by democratic principles."
Marcus Tullius Cicero: I Like this quote I dislike this quote“The budget should be balanced. Public debt should be reduced. The arrogance of officialdom should be tempered, and assistance to foreign lands should be curtailed, lest Rome become bankrupt.”
Baker Hughes announced that the international rig count for April 2009 was 986, down 26 from the 1,012 counted in March 2009, and down 88 from the 1,074 counted in April 2008. The international offshore rig count for April 2009 was 273, down 8 from the 281 counted in March 2009 and down 24 from the 297 counted in April 2008.
The US rig count for April 2009 was 995, down 110 from the 1,105 counted in March 2009 and down 834 from the 1,829 counted in April 2008. The Canadian rig count for April 2009 was 74, down 122 from the 196 counted in March 2009 and down 32 from the 106 counted in April 2008.
The worldwide rig count for April 2009 was 2,055, down 258 from the 2,313 counted in March 2009 and down 1,004 from the 3,009 counted in April 2008
China's 6 billion euro ($8 billion) luxury market accounts for just 3 percent of global sales, compared with 38 percent in Europe, 33 percent in South and North America and 12 percent in Japan, according to Bain & Co. But China and Brazil are projected to be the two fastest-growing luxury markets through 2012, according to consulting firm Bain & Co.
And sales of designer clothing, jewelry and other luxury goods in China will climb 7 percent this year, while worldwide luxury revenue could fall 10 percent, Bain & Co. forecast. Last year, luxury sales surged 25 percent in China while they were flat worldwide.
After years of resisting shareholder demands to add debt, Microsoft is borrowing to help fund a $40 billion share repurchase program. The Redmond, Washington-based company is also spending billions of dollars on datacenters that run Internet applications to help compete against Google Inc.
The software maker became the first company in a decade to receive the top AAA rating from Standard & Poor’s when it initially filed in September to tap debt markets. Moody’s Investors Service also assigned its highest rating to Microsoft’s debt.
General Motors Corp.CEO Fritz Henderson said in a restructuring update Monday that the automaker has an "urgent" need for funding in its European business while it plans to start notifying North America dealers of closures later this week. Henderson said that bankruptcy is still "probable" as GM approaches the June 1 deadline to prove its viability to the U.S. government.
During the Bush administration, the Justice Department did not file a single case against a dominant firm for violating the antimonopoly law.
Many smaller companies complaining of abusive practices by their larger rivals were so frustrated by the Bush administration’s antitrust policy that they went to the European Commission and to Asian authorities.
Ms. Varney’s new policy more closely aligns American antitrust policy on monopolies and predatory practices with the views of antitrust regulators at the European Commission.
David Rosenberg: "The risk in the market, in our view, is much higher than it was the last time we were close to current market prices back in early January, for the simple reason that we believe professional investors have covered their shorts, lifted their hedges and lowered their cash positions in favor of being long the market. "
Crude for June delivery ended down 13 cents, or 0.2%, to end at $58.50 a barrel on the New York Mercantile Exchange.
.
Obama's budget would tax income from “day-to-day” dealer activities at “ordinary rates,” ending their ability to pay a lower rate on most of their income. That would raise $4.2 billion along with proposals to change tax accounting rules for sales of corporate stock and for convertible debt.
“There is no reason to treat dealers in commodities, commodities derivatives dealers, dealers in securities and dealers in equity options differently than dealers in other types of property,” an explanation of the proposal said. “Dealers earn their income from their day-to-day dealing activities and should be taxed at ordinary rates.”
The life insurance provisions would modify tax rules on the sale of insurance contracts and reduce a deduction that life insurers claim when they manage assets in separate accounts. Those proposals would raise $12.7 billion through 2019.
The document gives details on proposals to keep corporations and individuals from avoiding about $210 billion in taxes from 2011 through 2019 by shifting income to offshore tax havens.
Ford Motor Co. said Monday it is launching a public offering of 300 million shares of common stock, which it will use in part to help fund its retiree health care trust.
Fluor cut its 2009 earnings outlook to a range of $3.80 to $4.10 a share from $3.90 to $4.20 a share.
The Dow Jones Industrial Average fell 155.88 points, or 1.8%, to 8,418.77. The S&P 500 Indexshed 19.97 points, or 2.2%, to 909.26, while the Nasdaq Composite stumbled 7.76 points, or 0.5%, to 1,731.24. Declining issues outnumbered advancers by 4-to-1 in the S&P 500.
Jackie Mason: "I have enough money to last me the rest of my life, unless I buy something."
Will Rodgers: "The budget is like a mythical bean bag. Congress votes mythical beans into it, then reaches in and tries to pull real ones out."
The government will have to borrow nearly 50 cents for every dollar it spends this year, exploding the record federal deficit past $1.8 trillion under new
White House estimates. Budget office figures released Monday would add $89 billion to the 2009 red ink — increasing it to more than four times last year's all-time high as the government hands out billions more than expected for people who have lost jobs and takes in less tax revenue from people and companies making less money.
A fresh estimate of the deficit showed it coming in at $1.84 trillion -- representing a massive 12.9 percent of gross domestic product -- in the current 2009 fiscal year that ends on September 30. A prior White House forecast released in February projected a deficit of $1.75 trillion, or 12.3 percent of GDP.
Agrium Inc. increased its offer to buy smaller fertilizer rival CF Industries Holdings Inc. by $5 a share to $40 a share, plus one Agrium share. The deal values CF Industries at $85.20 a share, or about $4.12 billion based on 48.8 million shares outstanding.
The benchmark KBW Bank Index, which tracks 24 of the nation's largest banks, jumped 12.1 percent Friday.
George Soros told the Frankfurter Allgemeine Zeitung daily that Asia would be the first region to pull out of the financial crisis and China was set to overtake the United States as the engine of world growth.
"The financial safety net, especially those parts that were more implicit and perceived than explicit and written into the laws, played a significant role in the accumulation of risks that ultimately led to the turmoil we are still experiencing," said Richmond Federal Reserve President Jeffrey Lacker. "While deployment of the financial safety net is often viewed as an essential response to the financial crisis, I believe we need to give serious thought to the extent to which the safety net was actually a significant cause of the crisis," he said in remarks prepared for delivery to a banking conference in Beijing.
Scott Burns: "Government obligations for Social Security and Medicare may soon exceed the combined net worth of every household and nonprofit organization in the country...Last year's Social Security trustee report
estimates that OASDI (Social Security retirement and disability) and HI (hospital insurance), excluding book entry interest for the trust funds, will have more revenue than expenses until 2015. If higher cost assumptions prevail, however, the last year of positive flow will be 2010.
That's next year."
William Greider: " At work, at home and in the public sphere, most people lack the right to exercise much of a voice in the decisions governing their daily lives. Most people (not all) are subject to a system of command and control over their destinies. They know the risks of ignoring the orders from above. Not surprisingly, many citizens are resigned to this condition and accept subservience as "the way things are," and their lives are smaller as a result. Many find it hard to imagine that these confinements could be lessened, even substantially removed, if economic organizations were informed by democratic principles."
Marcus Tullius Cicero: I Like this quote I dislike this quote“The budget should be balanced. Public debt should be reduced. The arrogance of officialdom should be tempered, and assistance to foreign lands should be curtailed, lest Rome become bankrupt.”
Baker Hughes announced that the international rig count for April 2009 was 986, down 26 from the 1,012 counted in March 2009, and down 88 from the 1,074 counted in April 2008. The international offshore rig count for April 2009 was 273, down 8 from the 281 counted in March 2009 and down 24 from the 297 counted in April 2008.
The US rig count for April 2009 was 995, down 110 from the 1,105 counted in March 2009 and down 834 from the 1,829 counted in April 2008. The Canadian rig count for April 2009 was 74, down 122 from the 196 counted in March 2009 and down 32 from the 106 counted in April 2008.
The worldwide rig count for April 2009 was 2,055, down 258 from the 2,313 counted in March 2009 and down 1,004 from the 3,009 counted in April 2008
China's 6 billion euro ($8 billion) luxury market accounts for just 3 percent of global sales, compared with 38 percent in Europe, 33 percent in South and North America and 12 percent in Japan, according to Bain & Co. But China and Brazil are projected to be the two fastest-growing luxury markets through 2012, according to consulting firm Bain & Co.
And sales of designer clothing, jewelry and other luxury goods in China will climb 7 percent this year, while worldwide luxury revenue could fall 10 percent, Bain & Co. forecast. Last year, luxury sales surged 25 percent in China while they were flat worldwide.
After years of resisting shareholder demands to add debt, Microsoft is borrowing to help fund a $40 billion share repurchase program. The Redmond, Washington-based company is also spending billions of dollars on datacenters that run Internet applications to help compete against Google Inc.
The software maker became the first company in a decade to receive the top AAA rating from Standard & Poor’s when it initially filed in September to tap debt markets. Moody’s Investors Service also assigned its highest rating to Microsoft’s debt.
General Motors Corp.CEO Fritz Henderson said in a restructuring update Monday that the automaker has an "urgent" need for funding in its European business while it plans to start notifying North America dealers of closures later this week. Henderson said that bankruptcy is still "probable" as GM approaches the June 1 deadline to prove its viability to the U.S. government.
During the Bush administration, the Justice Department did not file a single case against a dominant firm for violating the antimonopoly law.
Many smaller companies complaining of abusive practices by their larger rivals were so frustrated by the Bush administration’s antitrust policy that they went to the European Commission and to Asian authorities.
Ms. Varney’s new policy more closely aligns American antitrust policy on monopolies and predatory practices with the views of antitrust regulators at the European Commission.
David Rosenberg: "The risk in the market, in our view, is much higher than it was the last time we were close to current market prices back in early January, for the simple reason that we believe professional investors have covered their shorts, lifted their hedges and lowered their cash positions in favor of being long the market. "
Crude for June delivery ended down 13 cents, or 0.2%, to end at $58.50 a barrel on the New York Mercantile Exchange.
.
Obama's budget would tax income from “day-to-day” dealer activities at “ordinary rates,” ending their ability to pay a lower rate on most of their income. That would raise $4.2 billion along with proposals to change tax accounting rules for sales of corporate stock and for convertible debt.
“There is no reason to treat dealers in commodities, commodities derivatives dealers, dealers in securities and dealers in equity options differently than dealers in other types of property,” an explanation of the proposal said. “Dealers earn their income from their day-to-day dealing activities and should be taxed at ordinary rates.”
The life insurance provisions would modify tax rules on the sale of insurance contracts and reduce a deduction that life insurers claim when they manage assets in separate accounts. Those proposals would raise $12.7 billion through 2019.
The document gives details on proposals to keep corporations and individuals from avoiding about $210 billion in taxes from 2011 through 2019 by shifting income to offshore tax havens.
Ford Motor Co. said Monday it is launching a public offering of 300 million shares of common stock, which it will use in part to help fund its retiree health care trust.
Fluor cut its 2009 earnings outlook to a range of $3.80 to $4.10 a share from $3.90 to $4.20 a share.
The Dow Jones Industrial Average fell 155.88 points, or 1.8%, to 8,418.77. The S&P 500 Indexshed 19.97 points, or 2.2%, to 909.26, while the Nasdaq Composite stumbled 7.76 points, or 0.5%, to 1,731.24. Declining issues outnumbered advancers by 4-to-1 in the S&P 500.
Jackie Mason: "I have enough money to last me the rest of my life, unless I buy something."
Mounting Credit Card Losses
5/10/09 Mounting Credit Card Losses
GMAC, the troubled automobile lender, may receive a $7.5 billion infusion from the U.S. government as early as next week, the Washington Post reported in its Saturday edition, citing unnamed sources.
The Centers for Disease Control said Saturday afternoon that the number of confirmed cases of the H1N1 flu in the U.S. has risen to 2,254. The cases, which were confirmed using a special viral test, are spread across 43 states and the District of Columbia, according to the agency's website. So far, only two people have died from the disease, both in Texas. During the agency's daily update with reporters on Saturday morning, officials said they had tabulated about 3,000 suspected and confirmed cases of the new flu virus in 45 states.
Bob Bronson: “Unemployment data that leads indicates the stock market will make new lows."
The Oil Drum: "Without moisture this wheat is going to continue to die," he said.
Add in the high costs of planting last fall -- the spike in oil prices drove up the price of petroleum-based fertilizers, fuel and chemicals -- and the chances of making a profit this year look bleak.
"Four or five years ago, we were buying $350 to $400 a ton fertilizer. This wheat crop here, when we fertilized last August or September, fertilizer was $1,100," Sellard says.
"Even if we had a decent crop, even if we cut it decently, this wheat crop will be in the red."
It now takes an average of over 21 weeks to find a new job, a new record.
Mike Burk: "From the March 9 low, the SPX has been up at an annualized rate of 547%, the OTC 539%, the Dow Jones Industrial Average a mere 389% and the Russell 2000 949%. Something has to give.
I expect the major indices to be lower on Friday May 15 than they were on Friday May 8."
The White House said it is unlikely to see positive employment growth until 2010 even if economic activity begins to pick up later this year, according to a report Sunday.
Christina Romer, chairman of the White House Council of Economic Advisers, said while speaking on C-SPAN that she expected unemployment to rise even if gross domestic product begins to grow in the fourth quarter of 2009, the New York Times reported. The projection was similar to the one made last week by Federal Reserve Chairman Ben Bernanke.
GDP has to grow at a rate of about 2.5% before unemployment will fall, said Romer, and it is "unfortunately pretty realistic" that the unemployment rate could hit 9.5%.
Meanwhile, Robert Reich, former labor secretary under President Bill Clinton and an adviser for the Obama campaign, said on ABC's "This Week" program that the rate of growth would have to be 4.5% before unemployment levels begin to reverse, reported the Times.
John Hussman: "To a great extent, the optimism of investors is based primarily on economic “flow” data (spending, job losses, confidence measures) that remain poor, but have been “less bad” than expected. What concerns me far more, however, is that there is a second and almost equivalent mountain of mortgage resets and probable defaults that will begin later this year and extend into 2012. While our unelected bureaucrats have spent over a trillion dollars to make reckless lenders whole, they have done nothing to materially ease foreclosures or avert the oncoming second wave. "
Eric Dash and Andrew Martin: "But if unemployment breaches 10 percent, as many economists predict, the rate of uncollectible balances at some banks could far exceed that level. At American Express and Capital One Financial, around 20 percent of the credit card balances are expected to go bad over this year and next, according to stress test results. At Bank of America, Citigroup and JPMorgan Chase, about 23 percent of card loans are expected to sour.
Even the government’s grim projections may vastly understate the size of the banks’ credit card troubles. According to estimates by Oliver Wyman, a management consulting firm, card losses at the nation’s biggest banks could reach $141.5 billion by 2010 if the regulators’ loss rate was applied to their entire credit card business. It could top $186 billion for the entire credit card industry.
In the official stress test results, regulators published losses only on credit cards held on bank balance sheets. The $82.4 billion figure did not reflect another element in their analysis: tens of billions of dollars in losses tied to credit card loans that the banks packaged into bonds and held off their balance sheets. A portion of those losses, however, will be absorbed by outside investors."
GMAC, the troubled automobile lender, may receive a $7.5 billion infusion from the U.S. government as early as next week, the Washington Post reported in its Saturday edition, citing unnamed sources.
The Centers for Disease Control said Saturday afternoon that the number of confirmed cases of the H1N1 flu in the U.S. has risen to 2,254. The cases, which were confirmed using a special viral test, are spread across 43 states and the District of Columbia, according to the agency's website. So far, only two people have died from the disease, both in Texas. During the agency's daily update with reporters on Saturday morning, officials said they had tabulated about 3,000 suspected and confirmed cases of the new flu virus in 45 states.
Bob Bronson: “Unemployment data that leads indicates the stock market will make new lows."
The Oil Drum: "Without moisture this wheat is going to continue to die," he said.
Add in the high costs of planting last fall -- the spike in oil prices drove up the price of petroleum-based fertilizers, fuel and chemicals -- and the chances of making a profit this year look bleak.
"Four or five years ago, we were buying $350 to $400 a ton fertilizer. This wheat crop here, when we fertilized last August or September, fertilizer was $1,100," Sellard says.
"Even if we had a decent crop, even if we cut it decently, this wheat crop will be in the red."
It now takes an average of over 21 weeks to find a new job, a new record.
Mike Burk: "From the March 9 low, the SPX has been up at an annualized rate of 547%, the OTC 539%, the Dow Jones Industrial Average a mere 389% and the Russell 2000 949%. Something has to give.
I expect the major indices to be lower on Friday May 15 than they were on Friday May 8."
The White House said it is unlikely to see positive employment growth until 2010 even if economic activity begins to pick up later this year, according to a report Sunday.
Christina Romer, chairman of the White House Council of Economic Advisers, said while speaking on C-SPAN that she expected unemployment to rise even if gross domestic product begins to grow in the fourth quarter of 2009, the New York Times reported. The projection was similar to the one made last week by Federal Reserve Chairman Ben Bernanke.
GDP has to grow at a rate of about 2.5% before unemployment will fall, said Romer, and it is "unfortunately pretty realistic" that the unemployment rate could hit 9.5%.
Meanwhile, Robert Reich, former labor secretary under President Bill Clinton and an adviser for the Obama campaign, said on ABC's "This Week" program that the rate of growth would have to be 4.5% before unemployment levels begin to reverse, reported the Times.
John Hussman: "To a great extent, the optimism of investors is based primarily on economic “flow” data (spending, job losses, confidence measures) that remain poor, but have been “less bad” than expected. What concerns me far more, however, is that there is a second and almost equivalent mountain of mortgage resets and probable defaults that will begin later this year and extend into 2012. While our unelected bureaucrats have spent over a trillion dollars to make reckless lenders whole, they have done nothing to materially ease foreclosures or avert the oncoming second wave. "
Eric Dash and Andrew Martin: "But if unemployment breaches 10 percent, as many economists predict, the rate of uncollectible balances at some banks could far exceed that level. At American Express and Capital One Financial, around 20 percent of the credit card balances are expected to go bad over this year and next, according to stress test results. At Bank of America, Citigroup and JPMorgan Chase, about 23 percent of card loans are expected to sour.
Even the government’s grim projections may vastly understate the size of the banks’ credit card troubles. According to estimates by Oliver Wyman, a management consulting firm, card losses at the nation’s biggest banks could reach $141.5 billion by 2010 if the regulators’ loss rate was applied to their entire credit card business. It could top $186 billion for the entire credit card industry.
In the official stress test results, regulators published losses only on credit cards held on bank balance sheets. The $82.4 billion figure did not reflect another element in their analysis: tens of billions of dollars in losses tied to credit card loans that the banks packaged into bonds and held off their balance sheets. A portion of those losses, however, will be absorbed by outside investors."
Saturday, May 09, 2009
Bear Market Rally
5/9/09 Bear Market Rally
The dollar index dropped 2.4% this week to 82.53 (up 1.5% y-t-d).
Federal regulators on Friday shut down Westsound Bank of Bremerton, Wash., making it the 33rd bank to fail this year.
Alan Abelson: "For that matter, bad as it is, 539,000 doesn't do justice to the severity of the payroll shrinkage. For one thing, it was puffed up by the 72,000 federal census takers signed on by Uncle Sam. And for another, it includes 226,000 supposed jobs, or 60,000 properly adjusted, courtesy of what David Rosenberg calls the Alice-in-Wonderland birth/death model. Ex this pair of extraordinary items, he points out, the headline number would approach 670,000." How could a dismal employment report be viewed positively with 77,000 government workers added to the payroll in April? Since when was government a source of profits? The last time I looked government is resposnible for trillion dollar budget deficits and a continuing loss of the dollar's purchasing power. Welcome to your debt-ridden future and those of your offspring. Say hello to economic fascism.
According to Bloomberg, the Financial Stress Index, which uses 12 components including credit spreads, stock volatility and the price of gold, fell to minus 0.12 today. Values between plus 1 and minus 1 show investors are risk neutral. The measure peaked at 4.68 after Lehman…Inc.’s collapse in September....The system is again rocked by yet another Bubble-related convulsion: today, it’s the self-reinforcing unwind of bearish bets and systemic risk hedges. Washington’s unprecedented measures to intermediate risk and boost marketplace liquidity have spurred a self-reinforcing wave of bearish positions and hedges liquidation. This dynamic has had a major impact in the Credit, equities and, seemingly, more recently in the currency and commodities markets. I would add that this unwinding process tends to generate liquidity throughout the marketplace. And, let’s face it, there is nothing like a big short squeeze to get the animal spirits flowing on the long side. Most will interpret these dynamics bullishly. I would caution that we are witnessing only the latest variant of Acute Monetary Disorder and destabilized markets.
Doug Noland: "From a systemic risk perspective, the unfolding refi boom is anything but inconsequential. By the end of the year, I would not be surprised to see upwards of $1.0 TN of “private” mortgage exposure having been shifted to the various government-related agencies (Fannie, Freddie, Ginnie, FHA, and FHLB). The wholesale transfer of various private sector risks to “Washington” is a key facet of the Government finance Bubble. Nowhere is such redistribution accomplished as effectively and surreptitiously than with a mortgage marketplace incited to refinance by (Fed-induced) collapsing yields. Think in terms of our government placing its stamp of guarantee on hundreds of billions of risky, illiquid and unappealing mortgage securities – transforming them into coveted “money”-like agency securities. Such dynamics work wonders… Previous holders of these mortgages receive cash, while the entire marketplace benefits from higher mortgage prices....In the short-run, I have to presume that major financial sector and market developments will work to stimulate the real economy (as they have repeatedly in the past). At the same time, it’s my view that the economy today is unusually susceptible to an artificial and fleeting recovery. The unwind of bearish hedges will at some point have run its course, concluding a period of major artificial liquidity generation. Moreover, I question the sustainability of the Government Finance Bubble (fiscal and monetary) overall.
The markets are setting themselves up for disappointment. I would posit that the more energized the markets and economy the greater the amount of Credit issuance that will need to be absorbed by the markets (debt and currency). So far, it is mainly Treasury yields that are rising. Government Finance Bubble dynamics would seem to dictate, however, that agency debt and MBS yields could provide the key to both artificial economic recovery and inevitable disappointment. And I would not expect a sinking dollar to support agency securities or Treasuries."
The stress tests are not for the faint of heart. They place stress on your intelligence and carry integrity only for those who believe this Administration supports the rights of individuals. For me, the stress tests are pure bullshit.
According to the WSJ, the Federal Reserve’s initial estimate of capital deficits was much larger than the $75 billion or so reported Thursday. But the agency, toeing a fine line between trying to restore confidence with the tests while also maintaining its credibility, finally agreed to scale back some of the findings "following two weeks of intense negotiations."
Peter Schiff: "Stocks are not rising because the long-term fundamentals of our economy are improving. If anything, the rise in global stock prices is due to investors realizing that cash is even riskier then stocks. The massive inflation that is the source of the stimulus is essentially punishment for those holding cash. To preserve purchasing power, investors must seek alternative stores of value, such as common stock.
It is important to point out that despite an impressive rally, U.S. stocks have substantially underperformed foreign stocks. In the past two months, while the Dow Jones has risen 30%, the Hang Seng and the German DAX have risen by over 50% in U.S. dollars. Commodity prices are also rising, with oil hitting a five-month high. And gold is shining as well, with the HUI index of gold stocks up 30% during the past two months, and 2/3 of those gains occurring in the past month. If this rally really were about improving economic fundamentals, gold stocks would not be among the leaders. Further, during those two months, the U.S. dollar index fell by 7%, with commodity-sensitive currencies such as the Australian and New Zealand dollars surging 20%.
To me, the relative strength of foreign stocks and currencies indicates that perhaps the global economy is not as impaired as many have feared. It has been my view all along that after the initial shock wears off, the world will be better off - once it no longer subsidizes the American economy. The shrinking U.S. current account deficit is evidence of this trend in action. Renewed strength in foreign stocks and weakness in the dollar may indicate that not only is the world decoupling from the U.S., but benefitting as a result."
Ludwig von Mises: "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
Ty Andros: "The Treasury International Capital Report was released for February, and for the second month in a row, was negative to the tune of $97 Billion, marking the continued retreat of capital from US shores. As outlined above, this RETREAT from capital inflows signals the eventual WATERLOO for the US government; funding requirements will need to be shouldered increasingly by domestic savers and what else: "the printing press", aka Quantitative Easing. US savers are offered virtually NO return and immense capital risk buying the long end. Limitless money printing looms as you can expect the Fed to announce additional treasury purchases above the $300 Billion already announced. When the fed meeting ended without additional purchases being announced, the long end took it on the nose."
AT&T said Friday it will buy the bulk of Alltel Wireless assets being divested by Verizon Communications for $2.35 billion, and will sell some Centennial Communications assets to Verizon Wireless for $240 million.
Jerry Doyle: "Economic fascism can be defined as government control over the four P's: Product, Price, Profit Margin, and People. When the government controls the product created by the market, when it controls the price structure for product and company securities, when it controls how much profit particular companies can make, and when it controls the people who are hired and fired, economic freedom has been banished, and economic fascism reigns supreme.
And economic fascism reigns supreme in Barack Obama's America. Just look at the recent government handling of Chrysler. In a series of press conferences this week announcing Chrysler's bankruptcy, Obama hit on all of the four P's."
Tim Wood: "What we are seeing is a bear market rally. The Obama team thinks their efforts are beginning to save the world and the general public is being lulled to sleep thinking that the worst is behind us. This is not the case. I told my subscribers that there were higher degree cycle lows expected in March and from a Dow theory perspective, I anticipated this to coincide with secondary low points. Regardless of what label we put on the March lows, the rally continues and the longer it does, the more false confidence it will foster....As I see it, the last great Bull market began at the 1974 low and ran into the 2007 high, which was a period of 33 years. Some may argue that the bull market began at the 1982 low, but the actual price low occurred in 1974 so I prefer to use that point. But if we measure from the 1982 low the bull market was still 25 years in duration. If the historical relationships with the bear market running approximately one-third the duration of the preceding bull market is to hold this time around, then the bear market would be expected to run some 8 to 11 years depending on where you want to begin your count. In either case with us just now in the 19th month since the October 2007 top it should be obvious by this measure that the bear market is likely not over. Also, another historical marker of secular bear markets, as expressed by Richard Russell, is value. Historically, the dividend yield will be roughly equal to the price earnings ratio at secular bear market bottoms. I have used the S&P data here because I did not have this data as far back on the Industrials. At the 1932 bear market bottom the yield was 10.50% and the P/E was just under 10. At the 1942 bear market bottom the yield was 8.71% and the P/E was 7.3. At the next great bear market bottom in 1974 the yield was 5.9% and with a P/E of 7.24. If we take this same reading at the 1982 low the yield was 6.2% and the P/E was 6.9. Presently, the yield on the S&P is at 2.62 and the P/E sits at 58.97. Yeah, I know that many of the analysts show the P/E on the S&P to be in the 20 to 21 range. That is bogus. Those numbers are based on the so-called “operating price earnings.” The P/E based on Generally Accepted Accounting Principles is 58.97 and that is the same measure as has been used throughout history. The so-called operating price earnings is a measure that became popular in the 1990’s as we moved into the George Orwellian socialist society of today. In any event, based on the real P/E as is represented by GAAP it is safe to say that the P/E and the dividend yield are nowhere near par, and as a result this data also suggests that the March low was NOT the bear market bottom."
I was just thinking. If you need the government to make you feel good, then you truly are a schmuck.
Tyler Durden: "The purchasing power of the dollar over the past 76 years has declined by 94%. And based on current monetary and fiscal policy, we have at least another 94% to go. The only question is whether this will be achieved in 76 months this time."
The dollar index dropped 2.4% this week to 82.53 (up 1.5% y-t-d).
Federal regulators on Friday shut down Westsound Bank of Bremerton, Wash., making it the 33rd bank to fail this year.
Alan Abelson: "For that matter, bad as it is, 539,000 doesn't do justice to the severity of the payroll shrinkage. For one thing, it was puffed up by the 72,000 federal census takers signed on by Uncle Sam. And for another, it includes 226,000 supposed jobs, or 60,000 properly adjusted, courtesy of what David Rosenberg calls the Alice-in-Wonderland birth/death model. Ex this pair of extraordinary items, he points out, the headline number would approach 670,000." How could a dismal employment report be viewed positively with 77,000 government workers added to the payroll in April? Since when was government a source of profits? The last time I looked government is resposnible for trillion dollar budget deficits and a continuing loss of the dollar's purchasing power. Welcome to your debt-ridden future and those of your offspring. Say hello to economic fascism.
According to Bloomberg, the Financial Stress Index, which uses 12 components including credit spreads, stock volatility and the price of gold, fell to minus 0.12 today. Values between plus 1 and minus 1 show investors are risk neutral. The measure peaked at 4.68 after Lehman…Inc.’s collapse in September....The system is again rocked by yet another Bubble-related convulsion: today, it’s the self-reinforcing unwind of bearish bets and systemic risk hedges. Washington’s unprecedented measures to intermediate risk and boost marketplace liquidity have spurred a self-reinforcing wave of bearish positions and hedges liquidation. This dynamic has had a major impact in the Credit, equities and, seemingly, more recently in the currency and commodities markets. I would add that this unwinding process tends to generate liquidity throughout the marketplace. And, let’s face it, there is nothing like a big short squeeze to get the animal spirits flowing on the long side. Most will interpret these dynamics bullishly. I would caution that we are witnessing only the latest variant of Acute Monetary Disorder and destabilized markets.
Doug Noland: "From a systemic risk perspective, the unfolding refi boom is anything but inconsequential. By the end of the year, I would not be surprised to see upwards of $1.0 TN of “private” mortgage exposure having been shifted to the various government-related agencies (Fannie, Freddie, Ginnie, FHA, and FHLB). The wholesale transfer of various private sector risks to “Washington” is a key facet of the Government finance Bubble. Nowhere is such redistribution accomplished as effectively and surreptitiously than with a mortgage marketplace incited to refinance by (Fed-induced) collapsing yields. Think in terms of our government placing its stamp of guarantee on hundreds of billions of risky, illiquid and unappealing mortgage securities – transforming them into coveted “money”-like agency securities. Such dynamics work wonders… Previous holders of these mortgages receive cash, while the entire marketplace benefits from higher mortgage prices....In the short-run, I have to presume that major financial sector and market developments will work to stimulate the real economy (as they have repeatedly in the past). At the same time, it’s my view that the economy today is unusually susceptible to an artificial and fleeting recovery. The unwind of bearish hedges will at some point have run its course, concluding a period of major artificial liquidity generation. Moreover, I question the sustainability of the Government Finance Bubble (fiscal and monetary) overall.
The markets are setting themselves up for disappointment. I would posit that the more energized the markets and economy the greater the amount of Credit issuance that will need to be absorbed by the markets (debt and currency). So far, it is mainly Treasury yields that are rising. Government Finance Bubble dynamics would seem to dictate, however, that agency debt and MBS yields could provide the key to both artificial economic recovery and inevitable disappointment. And I would not expect a sinking dollar to support agency securities or Treasuries."
The stress tests are not for the faint of heart. They place stress on your intelligence and carry integrity only for those who believe this Administration supports the rights of individuals. For me, the stress tests are pure bullshit.
According to the WSJ, the Federal Reserve’s initial estimate of capital deficits was much larger than the $75 billion or so reported Thursday. But the agency, toeing a fine line between trying to restore confidence with the tests while also maintaining its credibility, finally agreed to scale back some of the findings "following two weeks of intense negotiations."
Peter Schiff: "Stocks are not rising because the long-term fundamentals of our economy are improving. If anything, the rise in global stock prices is due to investors realizing that cash is even riskier then stocks. The massive inflation that is the source of the stimulus is essentially punishment for those holding cash. To preserve purchasing power, investors must seek alternative stores of value, such as common stock.
It is important to point out that despite an impressive rally, U.S. stocks have substantially underperformed foreign stocks. In the past two months, while the Dow Jones has risen 30%, the Hang Seng and the German DAX have risen by over 50% in U.S. dollars. Commodity prices are also rising, with oil hitting a five-month high. And gold is shining as well, with the HUI index of gold stocks up 30% during the past two months, and 2/3 of those gains occurring in the past month. If this rally really were about improving economic fundamentals, gold stocks would not be among the leaders. Further, during those two months, the U.S. dollar index fell by 7%, with commodity-sensitive currencies such as the Australian and New Zealand dollars surging 20%.
To me, the relative strength of foreign stocks and currencies indicates that perhaps the global economy is not as impaired as many have feared. It has been my view all along that after the initial shock wears off, the world will be better off - once it no longer subsidizes the American economy. The shrinking U.S. current account deficit is evidence of this trend in action. Renewed strength in foreign stocks and weakness in the dollar may indicate that not only is the world decoupling from the U.S., but benefitting as a result."
Ludwig von Mises: "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
Ty Andros: "The Treasury International Capital Report was released for February, and for the second month in a row, was negative to the tune of $97 Billion, marking the continued retreat of capital from US shores. As outlined above, this RETREAT from capital inflows signals the eventual WATERLOO for the US government; funding requirements will need to be shouldered increasingly by domestic savers and what else: "the printing press", aka Quantitative Easing. US savers are offered virtually NO return and immense capital risk buying the long end. Limitless money printing looms as you can expect the Fed to announce additional treasury purchases above the $300 Billion already announced. When the fed meeting ended without additional purchases being announced, the long end took it on the nose."
AT&T said Friday it will buy the bulk of Alltel Wireless assets being divested by Verizon Communications for $2.35 billion, and will sell some Centennial Communications assets to Verizon Wireless for $240 million.
Jerry Doyle: "Economic fascism can be defined as government control over the four P's: Product, Price, Profit Margin, and People. When the government controls the product created by the market, when it controls the price structure for product and company securities, when it controls how much profit particular companies can make, and when it controls the people who are hired and fired, economic freedom has been banished, and economic fascism reigns supreme.
And economic fascism reigns supreme in Barack Obama's America. Just look at the recent government handling of Chrysler. In a series of press conferences this week announcing Chrysler's bankruptcy, Obama hit on all of the four P's."
Tim Wood: "What we are seeing is a bear market rally. The Obama team thinks their efforts are beginning to save the world and the general public is being lulled to sleep thinking that the worst is behind us. This is not the case. I told my subscribers that there were higher degree cycle lows expected in March and from a Dow theory perspective, I anticipated this to coincide with secondary low points. Regardless of what label we put on the March lows, the rally continues and the longer it does, the more false confidence it will foster....As I see it, the last great Bull market began at the 1974 low and ran into the 2007 high, which was a period of 33 years. Some may argue that the bull market began at the 1982 low, but the actual price low occurred in 1974 so I prefer to use that point. But if we measure from the 1982 low the bull market was still 25 years in duration. If the historical relationships with the bear market running approximately one-third the duration of the preceding bull market is to hold this time around, then the bear market would be expected to run some 8 to 11 years depending on where you want to begin your count. In either case with us just now in the 19th month since the October 2007 top it should be obvious by this measure that the bear market is likely not over. Also, another historical marker of secular bear markets, as expressed by Richard Russell, is value. Historically, the dividend yield will be roughly equal to the price earnings ratio at secular bear market bottoms. I have used the S&P data here because I did not have this data as far back on the Industrials. At the 1932 bear market bottom the yield was 10.50% and the P/E was just under 10. At the 1942 bear market bottom the yield was 8.71% and the P/E was 7.3. At the next great bear market bottom in 1974 the yield was 5.9% and with a P/E of 7.24. If we take this same reading at the 1982 low the yield was 6.2% and the P/E was 6.9. Presently, the yield on the S&P is at 2.62 and the P/E sits at 58.97. Yeah, I know that many of the analysts show the P/E on the S&P to be in the 20 to 21 range. That is bogus. Those numbers are based on the so-called “operating price earnings.” The P/E based on Generally Accepted Accounting Principles is 58.97 and that is the same measure as has been used throughout history. The so-called operating price earnings is a measure that became popular in the 1990’s as we moved into the George Orwellian socialist society of today. In any event, based on the real P/E as is represented by GAAP it is safe to say that the P/E and the dividend yield are nowhere near par, and as a result this data also suggests that the March low was NOT the bear market bottom."
I was just thinking. If you need the government to make you feel good, then you truly are a schmuck.
Tyler Durden: "The purchasing power of the dollar over the past 76 years has declined by 94%. And based on current monetary and fiscal policy, we have at least another 94% to go. The only question is whether this will be achieved in 76 months this time."
Friday, May 08, 2009
Unemployment
5/8/09 Unemployment
The U.S. economy continued to shred jobs at a horrendous pace in April, with nonfarm payrolls falling by 539,000 and the unemployment rate jumping to a 26-year high of 8.9%. . Since the recession began in December 2007, payrolls have fallen by 5.7 million, or 4.1% of payrolls, the largest percentage decline since the 1958 recession. April's loss of 539,000 jobs was the smallest decline since October's 380,000. Job losses were widespread across industries in April. March's payrolls figure was revised to show a decline of 699,000, compared with a previously reported drop of 663,000. Job losses in February were bumped up to 681,000 from the previously estimated 651,000. The manufacturing sector lost 149,000 jobs in April, after shedding 167,000 the prior month. Construction industries cut 110,000 jobs after losing 135,000 in March.
The service-providing industry slashed 269,000 positions after eliminating 381,000 in March.
I wonder how many census takers were hired by the government in April. It might surprise you because overall, private-sector employment fell by 611,000. Among the unemployed, the number of job losers and persons who completed temporary jobs rose by 571,000 in April to 8.8 million. This group has more than doubled in size over the past 12 months. The number of long-term unemployed (those jobless for 27 weeks or more) increased by 498,000 to 3.7 million over the month and has risen by 2.4 mil- lion since the start of the recession in December 2007. In sum, the real unemployment rate is pushing 16%.
The global financial crisis is still spreading and the world economy is going to get worse before getting better, China's Vice Premier Wang Qishan said in a commentary published Friday.
In an article about cooperation between China and Britain in the Financial Times newspaper, Wang, a top Chinese financial official, said the countries should take stronger measures to stimulate an early recovery of the global economy.
"To overcome the current difficulties, it is essential to convert confidence into credit in the market and quickly recover functions of the financial markets," he wrote in the article.
According to AMG Data Services, for the week ended May 6,
Equity Fund Inflows $2.4 Bil; Taxable Bond Fund Inflows $5.6 Bil
xETFs - Equity Fund Inflows $1.2 Bil; Taxable Bond Fund Inflows $3.9 Bil.
For the month ended May 7, April Equity Fund Outflows -$2.3 Bil; Taxable Bond Fund Inflows $17.3 Bil
xETFs - Equity Fund Inflows $2 Bil; Taxable Bond Fund Inflows $7.3 Bil.
According to Bloomberg, Taiwan’s biggest partsmaker, Tong Yang Industry Co., and TYC Brother Industrial Co., ranked second, both said this week they’re open to deals that may help boost sales in China, Asia’s biggest auto market. China’s push to develop more-advanced cars and warming cross-strait ties may make that possible.
In 2008, according to data from the Kauffman Index of Entrepreneurial Activity, the number of Americans starting businesses each month increased slightly over 2007, moving from 300 out of every 100,000 Americans in 2007 to 320 out of 100,000 last year. As a whole, this means that over half a million new businesses were created each month during 2008.
Toyota Motor Corp. suffered a wider-than-expected net loss for the fiscal year, following a 21.9% drop in revenue. The automaker posted a net loss of 437 billion yen ($4.4 billion) for the fiscal year ended March 31, on net revenue of 20.53 trillion yen. A year ago, it recorded a profit of 1.72 trillion yen and net revenue of 26.29 trillion yen.
McDonald's comparable sales rose 6.9% in April, marking the 72nd consecutive monthly increase. The fastest growing region was Europe where the firm posted a gain of 8.4%.
Paul Krugman: "It’s not at all clear that credit from the Fed, Fannie and Freddie can fully substitute for a healthy banking system. If it can’t, the muddle-through strategy will turn out to be a recipe for a prolonged, Japanese-style era of high unemployment and weak growth.
Actually, a multiyear period of economic weakness looks likely in any case. The economy may no longer be plunging, but it’s very hard to see where a real recovery will come from. And if the economy does stay depressed for a long time, banks will be in much bigger trouble than the stress tests — which looked only two years ahead — are able to capture.
Finally, given the possibility of bigger losses in the future, the government’s evident unwillingness either to own banks or let them fail creates a heads-they-win-tails-we-lose situation. If all goes well, the bankers will win big. If the current strategy fails, taxpayers will be forced to pay for another bailout.
But what worries me most about the way policy is going isn’t any of these things. It’s my sense that the prospects for fundamental financial reform are fading."
Venezuela's President Hugo Chávez said his government will seize the local assets of some international oil-service companies.
Fannie Mae says it needs $19 billion in additional government aid after posting a loss of $23.2 billion in the first quarter as the taxpayer bill from the housing market bust mounts. As part of Wednesday's request, Treasury's funding commitment to Fannie doubled to $200 billion. "Due to current trends in the housing and financial markets, we expect to have a net worth deficit in future periods, and therefore will be required to obtain additional funding from the Treasury," said Fannie in a statement.
James Bullard, President, Federal Reserve Bank of St. Louis, in a Feb 2009 speech: "I will consider the Fed’s balance sheet. There I will stress that while the monetary base has expanded at an extraordinarily fast pace during the fall and winter, much of that expansion has been closely related to the Fed’s lender-of-last-resort function, and cannot be counted on to keep expectations of disinflation and deflation at bay. Because of this, the Fed needs a more systematic method of keeping the persistent component of monetary base growth rates elevated in order to combat the risk of a deflationary trap. Two aggressive programs have been put in place that may help to meet this objective: outright open market purchases of agency debt and agency mortgage-backed securities (MBS) and an expanded Term Asset-Backed Securities Loan Facility (TALF). But the strategies behind these programs have often been described in terms of the possible impact on specific markets. While the programs may help, we remain far from the systematic approach I would like to see."
J.P. Morgan analyst raised his profit estimate for Target to $2.82 a share in 2009 and $3.20 in 2010. Previously, he projected $2.40 and $2.65 respectively. Target said Thursday that its first-quarter profit will be "well above" analysts' average estimate of 52 cents a share, after it made moves to reduce discounts more than expected and to control expenses.
China's largest trading partner is the EU not the U.S.
"The economic recession has been tough on the mailing industry, and we have seen an unprecedented decline in mail volumes and revenue that continued to accelerate during the second quarter," Postmaster General John E. Potter said Wednesday, when the Postal Service released its fiscal second-quarter financial results.
These showed that its mail volume in the quarter ended March 31 totaled 43.8 billion pieces, down 7.5 billion pieces, or 14.7%, compared with a year earlier. The Postal Service reported a second-quarter loss of $1.9 billion. The loss brings the total loss for the fiscal year -- which began Oct. 1 -- to $2.3 billion.
On Monday, the Postal Service is increasing the price of a first-class stamp to 44 cents from 42 cents. The cost of the first ounce for a large envelope will rise to 88 cents from 83 cents and the first ounce of a parcel will be $1.22 instead of $1.17.
Japan's top chipmaker Toshiba Corp. tumbled to a record annual loss amid sinking global demand that has forced it to cut thousands of jobs.
Michael Panzer: "According to Bloomberg, increased government spending will likely require Washington to raise a record $3.25 trillion in the current fiscal year -- a tsunami of supply that suggests yields have lots more room on the upside. Also worth noting is the fact that the yield curve is steepening in the U.S. and in other countries where governments are cranking up the printing presses, signaling that investors are losing faith in those who control the public purse strings."
Rio Tinto Says China's Steel Demand Recovers; March & April Output Gain
Timothy Geithner: The “stress-test results are an important step forward,” Geithner said in a statement announcing the results. “Americans should know that the government stands behind the banking system and that their deposits are safe.” That and 2 bucks will get you
on the bus.
The Fed said assets it acquired in the Bear transaction lost nearly $1 billion in the quarter ended March 31 , falling to $25.7 billion from $26.5 billion .
The residential mortgage-backed securities the Fed acquired from AIG fell to $ 16.1 billion in the quarter from $18.3 billion . The value of collateralized debt obligations the Fed has acquired from AIG fell to $20.2 billion from $27.4 billion .
From Business Week: " Nouriel Roubini says he doesn’t see much in the way of “glimmers of hope” other economists have noted. Unemployment, capital investment, and exports are all worsening, and while there are a few signs of stability in housing, it’s not much. Overall, he figures, the odds of a prolonged “L-shaped” depression have fallen to less than 20%, from about 30%, thanks largely to the efforts of this administration and, to some extent, the last. He expects global contraction of 2% this year, and expansion of about 0.5% next year, “so small it’s going to feel like a recession still.” Still, he adds: “I don’t worry as much as six months ago about a near depression.”
Technology stocks have come under selling pressure this week.
ABC News made a big splash by reporting that it had obtained intelligence documents proving that Nancy Pelosi was briefed about torture techniques in the fall of 2002, as Republicans have been charging.
The Treasury Department is moving too slowly on new rules to oversee derivatives and credit default swaps, said Sen. Maria Cantwell, Democrat of Washington on Friday. "They are slow walking, thinking we're all going to forget what is needed. My patience is running out with the administration having to take five months to say that some of these things ought to be regulated and how they ought to be regulated," Cantwell told Neil Wolin, President Obama's nominee to take the number-two post at Treasury at his confirmation hearing before the Senate Finance Committee.
Abraham Lincoln: "I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption in high places will follow, and the money-power of the country will endeavor to prolong it's reign by working upon the prejudices of the people until the wealth is aggregated in a few hands and the Republic is destroyed."
Berkshire Hathaway reported a first-quarter net loss of $1.534 billion, or $990 per class A equivalent share, late Friday. That compares to net income of $940 million, or $607 per class A equivalent share, in the same period a year earlier. The net results are attributable to Berkshire shareholders. The latest result includes investment and derivatives losses of $2,090 per class A equivalent share. Operating earnings, which exclude investment and derivatives gains and losses, came in at $1,100 per class A equivalent share, Berkshire said.
The Dow Jones Industrial Average added 164.80 points, or 2%, to 8,574.65, giving the blue chips a weekly gain of 4.4%. The S&P 500 rose 21.84 points, or 2.4%, to 929.23, up 5.9% for the week. The Nasdaq Composite gained 22.76 points, 1.3%, to 1,739.00, up 1.2% from the week-ago close.
Crude for June delivery rose $1.92, or 3.4%, to $58.63 a barrel on the New York Mercantile Exchange. It ended the week up 10.2%. June gold slid 60 cents, or 0.1%, to end at $914.90 an ounce on the Comex division of the New York Mercantile Exchange.
The U.S. economy continued to shred jobs at a horrendous pace in April, with nonfarm payrolls falling by 539,000 and the unemployment rate jumping to a 26-year high of 8.9%. . Since the recession began in December 2007, payrolls have fallen by 5.7 million, or 4.1% of payrolls, the largest percentage decline since the 1958 recession. April's loss of 539,000 jobs was the smallest decline since October's 380,000. Job losses were widespread across industries in April. March's payrolls figure was revised to show a decline of 699,000, compared with a previously reported drop of 663,000. Job losses in February were bumped up to 681,000 from the previously estimated 651,000. The manufacturing sector lost 149,000 jobs in April, after shedding 167,000 the prior month. Construction industries cut 110,000 jobs after losing 135,000 in March.
The service-providing industry slashed 269,000 positions after eliminating 381,000 in March.
I wonder how many census takers were hired by the government in April. It might surprise you because overall, private-sector employment fell by 611,000. Among the unemployed, the number of job losers and persons who completed temporary jobs rose by 571,000 in April to 8.8 million. This group has more than doubled in size over the past 12 months. The number of long-term unemployed (those jobless for 27 weeks or more) increased by 498,000 to 3.7 million over the month and has risen by 2.4 mil- lion since the start of the recession in December 2007. In sum, the real unemployment rate is pushing 16%.
The global financial crisis is still spreading and the world economy is going to get worse before getting better, China's Vice Premier Wang Qishan said in a commentary published Friday.
In an article about cooperation between China and Britain in the Financial Times newspaper, Wang, a top Chinese financial official, said the countries should take stronger measures to stimulate an early recovery of the global economy.
"To overcome the current difficulties, it is essential to convert confidence into credit in the market and quickly recover functions of the financial markets," he wrote in the article.
According to AMG Data Services, for the week ended May 6,
Equity Fund Inflows $2.4 Bil; Taxable Bond Fund Inflows $5.6 Bil
xETFs - Equity Fund Inflows $1.2 Bil; Taxable Bond Fund Inflows $3.9 Bil.
For the month ended May 7, April Equity Fund Outflows -$2.3 Bil; Taxable Bond Fund Inflows $17.3 Bil
xETFs - Equity Fund Inflows $2 Bil; Taxable Bond Fund Inflows $7.3 Bil.
According to Bloomberg, Taiwan’s biggest partsmaker, Tong Yang Industry Co., and TYC Brother Industrial Co., ranked second, both said this week they’re open to deals that may help boost sales in China, Asia’s biggest auto market. China’s push to develop more-advanced cars and warming cross-strait ties may make that possible.
In 2008, according to data from the Kauffman Index of Entrepreneurial Activity, the number of Americans starting businesses each month increased slightly over 2007, moving from 300 out of every 100,000 Americans in 2007 to 320 out of 100,000 last year. As a whole, this means that over half a million new businesses were created each month during 2008.
Toyota Motor Corp. suffered a wider-than-expected net loss for the fiscal year, following a 21.9% drop in revenue. The automaker posted a net loss of 437 billion yen ($4.4 billion) for the fiscal year ended March 31, on net revenue of 20.53 trillion yen. A year ago, it recorded a profit of 1.72 trillion yen and net revenue of 26.29 trillion yen.
McDonald's comparable sales rose 6.9% in April, marking the 72nd consecutive monthly increase. The fastest growing region was Europe where the firm posted a gain of 8.4%.
Paul Krugman: "It’s not at all clear that credit from the Fed, Fannie and Freddie can fully substitute for a healthy banking system. If it can’t, the muddle-through strategy will turn out to be a recipe for a prolonged, Japanese-style era of high unemployment and weak growth.
Actually, a multiyear period of economic weakness looks likely in any case. The economy may no longer be plunging, but it’s very hard to see where a real recovery will come from. And if the economy does stay depressed for a long time, banks will be in much bigger trouble than the stress tests — which looked only two years ahead — are able to capture.
Finally, given the possibility of bigger losses in the future, the government’s evident unwillingness either to own banks or let them fail creates a heads-they-win-tails-we-lose situation. If all goes well, the bankers will win big. If the current strategy fails, taxpayers will be forced to pay for another bailout.
But what worries me most about the way policy is going isn’t any of these things. It’s my sense that the prospects for fundamental financial reform are fading."
Venezuela's President Hugo Chávez said his government will seize the local assets of some international oil-service companies.
Fannie Mae says it needs $19 billion in additional government aid after posting a loss of $23.2 billion in the first quarter as the taxpayer bill from the housing market bust mounts. As part of Wednesday's request, Treasury's funding commitment to Fannie doubled to $200 billion. "Due to current trends in the housing and financial markets, we expect to have a net worth deficit in future periods, and therefore will be required to obtain additional funding from the Treasury," said Fannie in a statement.
James Bullard, President, Federal Reserve Bank of St. Louis, in a Feb 2009 speech: "I will consider the Fed’s balance sheet. There I will stress that while the monetary base has expanded at an extraordinarily fast pace during the fall and winter, much of that expansion has been closely related to the Fed’s lender-of-last-resort function, and cannot be counted on to keep expectations of disinflation and deflation at bay. Because of this, the Fed needs a more systematic method of keeping the persistent component of monetary base growth rates elevated in order to combat the risk of a deflationary trap. Two aggressive programs have been put in place that may help to meet this objective: outright open market purchases of agency debt and agency mortgage-backed securities (MBS) and an expanded Term Asset-Backed Securities Loan Facility (TALF). But the strategies behind these programs have often been described in terms of the possible impact on specific markets. While the programs may help, we remain far from the systematic approach I would like to see."
J.P. Morgan analyst raised his profit estimate for Target to $2.82 a share in 2009 and $3.20 in 2010. Previously, he projected $2.40 and $2.65 respectively. Target said Thursday that its first-quarter profit will be "well above" analysts' average estimate of 52 cents a share, after it made moves to reduce discounts more than expected and to control expenses.
China's largest trading partner is the EU not the U.S.
"The economic recession has been tough on the mailing industry, and we have seen an unprecedented decline in mail volumes and revenue that continued to accelerate during the second quarter," Postmaster General John E. Potter said Wednesday, when the Postal Service released its fiscal second-quarter financial results.
These showed that its mail volume in the quarter ended March 31 totaled 43.8 billion pieces, down 7.5 billion pieces, or 14.7%, compared with a year earlier. The Postal Service reported a second-quarter loss of $1.9 billion. The loss brings the total loss for the fiscal year -- which began Oct. 1 -- to $2.3 billion.
On Monday, the Postal Service is increasing the price of a first-class stamp to 44 cents from 42 cents. The cost of the first ounce for a large envelope will rise to 88 cents from 83 cents and the first ounce of a parcel will be $1.22 instead of $1.17.
Japan's top chipmaker Toshiba Corp. tumbled to a record annual loss amid sinking global demand that has forced it to cut thousands of jobs.
Michael Panzer: "According to Bloomberg, increased government spending will likely require Washington to raise a record $3.25 trillion in the current fiscal year -- a tsunami of supply that suggests yields have lots more room on the upside. Also worth noting is the fact that the yield curve is steepening in the U.S. and in other countries where governments are cranking up the printing presses, signaling that investors are losing faith in those who control the public purse strings."
Rio Tinto Says China's Steel Demand Recovers; March & April Output Gain
Timothy Geithner: The “stress-test results are an important step forward,” Geithner said in a statement announcing the results. “Americans should know that the government stands behind the banking system and that their deposits are safe.” That and 2 bucks will get you
on the bus.
The Fed said assets it acquired in the Bear transaction lost nearly $1 billion in the quarter ended March 31 , falling to $25.7 billion from $26.5 billion .
The residential mortgage-backed securities the Fed acquired from AIG fell to $ 16.1 billion in the quarter from $18.3 billion . The value of collateralized debt obligations the Fed has acquired from AIG fell to $20.2 billion from $27.4 billion .
From Business Week: " Nouriel Roubini says he doesn’t see much in the way of “glimmers of hope” other economists have noted. Unemployment, capital investment, and exports are all worsening, and while there are a few signs of stability in housing, it’s not much. Overall, he figures, the odds of a prolonged “L-shaped” depression have fallen to less than 20%, from about 30%, thanks largely to the efforts of this administration and, to some extent, the last. He expects global contraction of 2% this year, and expansion of about 0.5% next year, “so small it’s going to feel like a recession still.” Still, he adds: “I don’t worry as much as six months ago about a near depression.”
Technology stocks have come under selling pressure this week.
ABC News made a big splash by reporting that it had obtained intelligence documents proving that Nancy Pelosi was briefed about torture techniques in the fall of 2002, as Republicans have been charging.
The Treasury Department is moving too slowly on new rules to oversee derivatives and credit default swaps, said Sen. Maria Cantwell, Democrat of Washington on Friday. "They are slow walking, thinking we're all going to forget what is needed. My patience is running out with the administration having to take five months to say that some of these things ought to be regulated and how they ought to be regulated," Cantwell told Neil Wolin, President Obama's nominee to take the number-two post at Treasury at his confirmation hearing before the Senate Finance Committee.
Abraham Lincoln: "I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption in high places will follow, and the money-power of the country will endeavor to prolong it's reign by working upon the prejudices of the people until the wealth is aggregated in a few hands and the Republic is destroyed."
Berkshire Hathaway reported a first-quarter net loss of $1.534 billion, or $990 per class A equivalent share, late Friday. That compares to net income of $940 million, or $607 per class A equivalent share, in the same period a year earlier. The net results are attributable to Berkshire shareholders. The latest result includes investment and derivatives losses of $2,090 per class A equivalent share. Operating earnings, which exclude investment and derivatives gains and losses, came in at $1,100 per class A equivalent share, Berkshire said.
The Dow Jones Industrial Average added 164.80 points, or 2%, to 8,574.65, giving the blue chips a weekly gain of 4.4%. The S&P 500 rose 21.84 points, or 2.4%, to 929.23, up 5.9% for the week. The Nasdaq Composite gained 22.76 points, 1.3%, to 1,739.00, up 1.2% from the week-ago close.
Crude for June delivery rose $1.92, or 3.4%, to $58.63 a barrel on the New York Mercantile Exchange. It ended the week up 10.2%. June gold slid 60 cents, or 0.1%, to end at $914.90 an ounce on the Comex division of the New York Mercantile Exchange.
Thursday, May 07, 2009
Quantative Easing Concerns
5/7/09 Quantative Easing Concerns
Chuck Palahniuk: "When did the future switch from being a promise to being a threat?"
General Motors Corp. lost $6 billion in the first quarter and its revenue was cut nearly in half as car buyers feared the wounded auto giant would enter bankruptcy and no longer honor its warranties.
The Detroit-based company also said it spent $10.2 billion more cash than it took in from January through March, mainly because revenue dropped by a staggering $20 billion, or 47 percent. The company is trying to cut 2,600 dealerships and is in the process of selling or phasing out the Saturn, Saab and Hummer brands. GM has already decided to get rid of Pontiac.
Productivity rose in the first quarter as U.S. firms slashed their workforce, outpacing the drop in output, the Labor Department reported Thursday. Productivity in the nonfarm business sector - output per hour worked - rose at a seasonally adjusted annual rate of 0.8% in the quarter as output fell 8.2%, while hours worked fell 9% -- the largest drop in hours since 1975. Compared with the first quarter in the prior year, productivity was up 1.8%, while unit labor costs rose 2.4%. Within manufacturing, productivity fell 3.4%, while output fell a record 22.4% and hours declined a record 19.7%. The data go back to 1987. Unit labor costs in manufacturing rose 16.7%.
First-time claims for state unemployment benefits fell to the lowest level since late January, the Labor Department reported Thursday, in a sign that a peak may have been passed. The number of initial claims in the week ending May 2 fell 34,000 to 601,000. The four-week average of these initial claims fell 14,750 to 623,500. However, the level of ongoing claims continues to reach record highs, with a gain of 56,000 to reach 6.35 million in the week ending April 25. The four-week moving average of continuing claims also hit yet another record high, rising 125,250 to 6.21 million. The U.S. insured unemployment rate, which represents the portion of all workers covered by unemployment insurance who are collecting benefits, rose to 4.8% -- the highest level since December 1982 -- from 4.7%.
Wal-Mart Stores Inc.said Thursday that its April sales rose 5%, exceeding its own projection and analysts' 2.9% average estimate. Sales at the Wal-Mart chain in the U.S. rose 5.9%, exceeding estimates, helped in part by the Easter calendar shift and an acceleration of traffic and strength in seasonal and discretionary items. Home products had positive sales. The company expects second-quarter to face "challenging comparisons" to the year-earlier quarter, which benefited from the stimulus checks. Sam's Club sales were up 0.3%, missing estimates of a 1.8% gain as jewelry and furniture sales remained soft. The wholesale club chain also was hurt by the closing of stores on Easter Sunday. Meanwhile, the H1N1 swine flu outbreak has affected operations at Walmex in Mexico, Wal-Mart said. Wal-Mart said it will no longer report monthly sales.
Costco Wholesale Corp. said Thursday its April same-store sales dropped 8 percent, hurt by a shift in the timing of the Easter holiday.
Domestic same-store sales fell 7 percent, while international same-store sales slipped 12 percent. Excluding lower gas prices and the stronger dollar, same-store sales were flat. U.S. same-store sales fell 2 percent, excluding gas deflation. International same-store sales climbed 7 percent, excluding the stronger dollar.
Total sales for the period ended May 3 declined 6 percent to $5.18 billion.
The current period included one less sales day due to Easter's shift, which Costco estimated lowered total and same-tore sales by about 2 percent to 3 percent.
Year-to-date same-store sales dropped 3 percent, with U.S. same-store sales off 1 percent and international same-store sales down 10 percent.
DuPont to cut 2,000 jobs.
Sara Lee expects adjusted 2009 earnings of 73-79 cents a share, compared to the Wall Street target of 80 cents a share.
The European Central Bank cut its key interest rate by a quarter point to 1%, a new low for the Frankfurt-based central bank that sets interest rate policy in the euro zone.
The 30-year bond yield rose to the highest since Nov. 18 and the 10-year yield touched the highest point since Nov. 25 before today’s $14 billion bond auction, the last of three sales this week totaling $71 billion. The People’s Bank of China said in a quarterly report central bank policies of buying assets will likely stoke inflation and “cause a sharp adjustment in bond prices.” “The market is reacting to a story out of China over concerns about quantitative easing and the inflation impact,” said Michael Pond, an interest-rate strategist in New York at Barclays Capital Inc., one of the 16 primary dealers that trade Treasuries with the central bank. “It could lead to reduced demand from foreign central banks.”
The 30-year bond yield climbed to 4.28 percent in New York, according to BGCantor Market data. The 3.5 percent security due in February 2039 fell 1 7/32, or $12.19 per $1,000 face amount, to 88 21/32. The 10-year note yield rose eleven basis points to 3.30 percent.
Art Cashin: "You can't forget that we lost about 2 million jobs so far this year and about 3 million last year. You have to wonder if the patient gives enough blood up — even though he's stopped hemorrhaging — that he goes into shock."
"I don't know if it's time to open the bubbly just yet."
Obama's promised line-by-line scrub of the federal budget had produced a roster of 121 budget cuts totaling $17 billion -- or about one-half of 1 percent of the $3.4 trillion budget Congress has approved for next year. Those savings are far exceeded by a phone-book-sized volume detailing Obama's generous increases for domestic programs that will accompany the call for cuts.
Confucius: "He who does not economize will have to agonize. "
Platinum may decline toward $800 an ounce, reversing this year’s 23% gain, as the metal slumps into a “bear trend,” Standard Chartered Bank forecast, citing trading patterns. “Spot platinum is resuming the bear trend, with trendline support giving way and a slide below $1,002 and $999 to build,” David Barclay, the bank’s commodity strategist, wrote. “A break down towards $800 should follow.”
- Alumina Ltd., partner in the world’s biggest producer of the material used to make aluminum, said demand for the metal may contract further this year and expects more cuts to production. “Global demand for aluminum is expected to contract by a further seven percent in 2009,” CEO John Bevan said today. “We expect curtailments will continue during this year.”
An administration official confirms that a $4 billion bridge loan and $3.2 billion in bankruptcy financing won't be paid back by Chrysler following bankruptcy.
Nordstrom Inc. said Thursday its April same-store sales fell 10.8%. Analysts had expected a decline of 12.3%. Sales in the four-week period ended May 2 fell to $561 million, down 6.5% from a year ago, the company said. Meanwhile, first-quarter sales dropped to $1.71 billion, down 9.2% from a year ago.
In early Thursday trading, crude oil for June delivery was up $1.36, or 2.4%, at $57.70 a barrel.
China Economist: "China is aware it must become independent from the dollar at some point. Its recent decision to turn Shanghai into a financial centre by 2020 reflects its anxiety over relying on the dollar system. The US will not pay attention to something so distant. However, if global stagflation takes hold, as I expect it to, it will force China to accelerate reforms to float its currency and create a single, independent and market-based financial system. When that happens, the dollar will collapse."
Randall W. Forsyth: "The bullish dollar ETF broke its below its 200-day moving average while the yen ETF has been bobbing above and below the line -- two indications of less risk aversion in the currency market. The euro ETF, while rising, is still below its 200-day moving average.
But the "other dollar" ETFs -- the Canadian and the Australian -- both have moved decisively above their 200-day moving averages. Commodities have benefited from the lower U.S. dollar, which in turn is boosting these commodity currencies.
A lower dollar traditionally boosts stocks of U.S. multinationals, but with the Obama Administration seeking to end tax breaks for foreign earnings, that textbook move may not work as well."
U.S. natural-gas inventories rose 95 billion cubic feet in the week ended May 1, the Energy Information Administration reported Thursday. Analysts surveyed by Platts had expected a buildup of 89 billion cubic feet to 94 billion cubic feet. Stockpiles were 491 billion cubic feet higher than last year at this time and 362 billion cubic feet above the five-year average. On the New York Mercantile Exchange, natural gas for June delivery fell 3.7 cents, or 1%, to $3.85 per million British thermal units. Later in the morning natural gas reversed to the upside and rose to $4.06 per million British thermal units.UNG closed up $1.04 at $16.21 on 30 million shares. The average daily volume runs about 7 million shares.
Federal Reserve Chairman Ben Bernanke called for increased regulation of U.S. banks.
Perrigo raised its fiscal 2009 forecast for income from continuing operations to $1.80 to $1.90 as share, up from $1.75 to $1.90 a share.
The Obama administration today unveiled details of a $3.4 trillion federal budget for the fiscal year beginning in October. The budget documents, totaling more than 1,500 pages, fill in the details of a broad outline that President Obama released in February. They include a massive appendix listing program-by-program information on the roughly 40 percent of the fiscal 2010 budget that constitutes discretionary spending, which will be set by Congress in what is expected to be a contentious appropriations process.
Consumers' debts fell a record $11.1 billion in March, sending outstanding debt levels dropping at a 5.2% annual pace, the fastest decline since 1990, the Federal Reserve reported Thursday. Consumer debts are up 0.1% in the past year, the slowest growth in 17 years.
Gold for June delivery gained $4.50, or 0.5%, to end at $915.50 an ounce on the Comex division of the New York Mercantile Exchange.
The Dow dropped 102 points, the S&P declined 12 points, and the Nasdaq took a 42 point hit.
The Federal Reserve on Thursday reportedly told GMAC, the lending unit of General Motors Corp., to raise $13.1 billion in capital to ensure the company's stability amid heavy losses. The amount is among the biggest required for any U.S. financial institution, the Washington Post reported, and could be difficult for GMAC to raise.
California was the center of the mortgage meltdown that led to the nation's current economic crisis, as lenders in the state issued a majority of all recent subprime loans, says a nonprofit journalism group based in Washington.
The study published Wednesday on the Center for Public Integrity's Web site analyzed government data on $1.38 trillion worth of subprime mortgages made from 2005 to 2007.
The analysis found that about 56 percent of those loans were originated by 15 lenders from California.
"The size of the industry in California was massive," said John Dunbar, lead reporter on the six-person team that spent more than six months analyzing millions of mortgages.
Mark Sunshine: "Recovery of the securitization market is important because, according to Treasury, before the credit crisis began more than half of small business lending was funded in the shadow banking system. And, it was the securitization market that funded the shadow banking system. But, so far in 2009, the securitization market has managed to only get $21 billion of new securitizations sold to investors and that amount is down more than 94% from 2007. As loans to Main Street made in 2006 and 2007 come due, businesses are having a tough time finding refinancing and TALF hasn’t helped their plight.
So far in 2009, TALF has only managed to purchase a little more than $6 billion of securitized debt. Even worse, in the latest TALF application round there was only a little greater than $10 billion of new demand for funding which given the size of the U.S. economy, is a drop in the bucket."
Gold producers are up 9% in 2009, while gold prices are up just 3% - a reversal from 2008 in which gold gained 5% but producers shares declined 17%.
Mad Magazine: "The only reason a great many American families don't own an elephant is that they have never been offered an elephant for a dollar down and easy weekly payments."
The Central Bank of Chile late Thursday cut its benchmark interest rates by 50 basis points -- 25 more than expected -- to 1.25%.
Chuck Palahniuk: "When did the future switch from being a promise to being a threat?"
General Motors Corp. lost $6 billion in the first quarter and its revenue was cut nearly in half as car buyers feared the wounded auto giant would enter bankruptcy and no longer honor its warranties.
The Detroit-based company also said it spent $10.2 billion more cash than it took in from January through March, mainly because revenue dropped by a staggering $20 billion, or 47 percent. The company is trying to cut 2,600 dealerships and is in the process of selling or phasing out the Saturn, Saab and Hummer brands. GM has already decided to get rid of Pontiac.
Productivity rose in the first quarter as U.S. firms slashed their workforce, outpacing the drop in output, the Labor Department reported Thursday. Productivity in the nonfarm business sector - output per hour worked - rose at a seasonally adjusted annual rate of 0.8% in the quarter as output fell 8.2%, while hours worked fell 9% -- the largest drop in hours since 1975. Compared with the first quarter in the prior year, productivity was up 1.8%, while unit labor costs rose 2.4%. Within manufacturing, productivity fell 3.4%, while output fell a record 22.4% and hours declined a record 19.7%. The data go back to 1987. Unit labor costs in manufacturing rose 16.7%.
First-time claims for state unemployment benefits fell to the lowest level since late January, the Labor Department reported Thursday, in a sign that a peak may have been passed. The number of initial claims in the week ending May 2 fell 34,000 to 601,000. The four-week average of these initial claims fell 14,750 to 623,500. However, the level of ongoing claims continues to reach record highs, with a gain of 56,000 to reach 6.35 million in the week ending April 25. The four-week moving average of continuing claims also hit yet another record high, rising 125,250 to 6.21 million. The U.S. insured unemployment rate, which represents the portion of all workers covered by unemployment insurance who are collecting benefits, rose to 4.8% -- the highest level since December 1982 -- from 4.7%.
Wal-Mart Stores Inc.said Thursday that its April sales rose 5%, exceeding its own projection and analysts' 2.9% average estimate. Sales at the Wal-Mart chain in the U.S. rose 5.9%, exceeding estimates, helped in part by the Easter calendar shift and an acceleration of traffic and strength in seasonal and discretionary items. Home products had positive sales. The company expects second-quarter to face "challenging comparisons" to the year-earlier quarter, which benefited from the stimulus checks. Sam's Club sales were up 0.3%, missing estimates of a 1.8% gain as jewelry and furniture sales remained soft. The wholesale club chain also was hurt by the closing of stores on Easter Sunday. Meanwhile, the H1N1 swine flu outbreak has affected operations at Walmex in Mexico, Wal-Mart said. Wal-Mart said it will no longer report monthly sales.
Costco Wholesale Corp. said Thursday its April same-store sales dropped 8 percent, hurt by a shift in the timing of the Easter holiday.
Domestic same-store sales fell 7 percent, while international same-store sales slipped 12 percent. Excluding lower gas prices and the stronger dollar, same-store sales were flat. U.S. same-store sales fell 2 percent, excluding gas deflation. International same-store sales climbed 7 percent, excluding the stronger dollar.
Total sales for the period ended May 3 declined 6 percent to $5.18 billion.
The current period included one less sales day due to Easter's shift, which Costco estimated lowered total and same-tore sales by about 2 percent to 3 percent.
Year-to-date same-store sales dropped 3 percent, with U.S. same-store sales off 1 percent and international same-store sales down 10 percent.
DuPont to cut 2,000 jobs.
Sara Lee expects adjusted 2009 earnings of 73-79 cents a share, compared to the Wall Street target of 80 cents a share.
The European Central Bank cut its key interest rate by a quarter point to 1%, a new low for the Frankfurt-based central bank that sets interest rate policy in the euro zone.
The 30-year bond yield rose to the highest since Nov. 18 and the 10-year yield touched the highest point since Nov. 25 before today’s $14 billion bond auction, the last of three sales this week totaling $71 billion. The People’s Bank of China said in a quarterly report central bank policies of buying assets will likely stoke inflation and “cause a sharp adjustment in bond prices.” “The market is reacting to a story out of China over concerns about quantitative easing and the inflation impact,” said Michael Pond, an interest-rate strategist in New York at Barclays Capital Inc., one of the 16 primary dealers that trade Treasuries with the central bank. “It could lead to reduced demand from foreign central banks.”
The 30-year bond yield climbed to 4.28 percent in New York, according to BGCantor Market data. The 3.5 percent security due in February 2039 fell 1 7/32, or $12.19 per $1,000 face amount, to 88 21/32. The 10-year note yield rose eleven basis points to 3.30 percent.
Art Cashin: "You can't forget that we lost about 2 million jobs so far this year and about 3 million last year. You have to wonder if the patient gives enough blood up — even though he's stopped hemorrhaging — that he goes into shock."
"I don't know if it's time to open the bubbly just yet."
Obama's promised line-by-line scrub of the federal budget had produced a roster of 121 budget cuts totaling $17 billion -- or about one-half of 1 percent of the $3.4 trillion budget Congress has approved for next year. Those savings are far exceeded by a phone-book-sized volume detailing Obama's generous increases for domestic programs that will accompany the call for cuts.
Confucius: "He who does not economize will have to agonize. "
Platinum may decline toward $800 an ounce, reversing this year’s 23% gain, as the metal slumps into a “bear trend,” Standard Chartered Bank forecast, citing trading patterns. “Spot platinum is resuming the bear trend, with trendline support giving way and a slide below $1,002 and $999 to build,” David Barclay, the bank’s commodity strategist, wrote. “A break down towards $800 should follow.”
- Alumina Ltd., partner in the world’s biggest producer of the material used to make aluminum, said demand for the metal may contract further this year and expects more cuts to production. “Global demand for aluminum is expected to contract by a further seven percent in 2009,” CEO John Bevan said today. “We expect curtailments will continue during this year.”
An administration official confirms that a $4 billion bridge loan and $3.2 billion in bankruptcy financing won't be paid back by Chrysler following bankruptcy.
Nordstrom Inc. said Thursday its April same-store sales fell 10.8%. Analysts had expected a decline of 12.3%. Sales in the four-week period ended May 2 fell to $561 million, down 6.5% from a year ago, the company said. Meanwhile, first-quarter sales dropped to $1.71 billion, down 9.2% from a year ago.
In early Thursday trading, crude oil for June delivery was up $1.36, or 2.4%, at $57.70 a barrel.
China Economist: "China is aware it must become independent from the dollar at some point. Its recent decision to turn Shanghai into a financial centre by 2020 reflects its anxiety over relying on the dollar system. The US will not pay attention to something so distant. However, if global stagflation takes hold, as I expect it to, it will force China to accelerate reforms to float its currency and create a single, independent and market-based financial system. When that happens, the dollar will collapse."
Randall W. Forsyth: "The bullish dollar ETF broke its below its 200-day moving average while the yen ETF has been bobbing above and below the line -- two indications of less risk aversion in the currency market. The euro ETF, while rising, is still below its 200-day moving average.
But the "other dollar" ETFs -- the Canadian and the Australian -- both have moved decisively above their 200-day moving averages. Commodities have benefited from the lower U.S. dollar, which in turn is boosting these commodity currencies.
A lower dollar traditionally boosts stocks of U.S. multinationals, but with the Obama Administration seeking to end tax breaks for foreign earnings, that textbook move may not work as well."
U.S. natural-gas inventories rose 95 billion cubic feet in the week ended May 1, the Energy Information Administration reported Thursday. Analysts surveyed by Platts had expected a buildup of 89 billion cubic feet to 94 billion cubic feet. Stockpiles were 491 billion cubic feet higher than last year at this time and 362 billion cubic feet above the five-year average. On the New York Mercantile Exchange, natural gas for June delivery fell 3.7 cents, or 1%, to $3.85 per million British thermal units. Later in the morning natural gas reversed to the upside and rose to $4.06 per million British thermal units.UNG closed up $1.04 at $16.21 on 30 million shares. The average daily volume runs about 7 million shares.
Federal Reserve Chairman Ben Bernanke called for increased regulation of U.S. banks.
Perrigo raised its fiscal 2009 forecast for income from continuing operations to $1.80 to $1.90 as share, up from $1.75 to $1.90 a share.
The Obama administration today unveiled details of a $3.4 trillion federal budget for the fiscal year beginning in October. The budget documents, totaling more than 1,500 pages, fill in the details of a broad outline that President Obama released in February. They include a massive appendix listing program-by-program information on the roughly 40 percent of the fiscal 2010 budget that constitutes discretionary spending, which will be set by Congress in what is expected to be a contentious appropriations process.
Consumers' debts fell a record $11.1 billion in March, sending outstanding debt levels dropping at a 5.2% annual pace, the fastest decline since 1990, the Federal Reserve reported Thursday. Consumer debts are up 0.1% in the past year, the slowest growth in 17 years.
Gold for June delivery gained $4.50, or 0.5%, to end at $915.50 an ounce on the Comex division of the New York Mercantile Exchange.
The Dow dropped 102 points, the S&P declined 12 points, and the Nasdaq took a 42 point hit.
The Federal Reserve on Thursday reportedly told GMAC, the lending unit of General Motors Corp., to raise $13.1 billion in capital to ensure the company's stability amid heavy losses. The amount is among the biggest required for any U.S. financial institution, the Washington Post reported, and could be difficult for GMAC to raise.
California was the center of the mortgage meltdown that led to the nation's current economic crisis, as lenders in the state issued a majority of all recent subprime loans, says a nonprofit journalism group based in Washington.
The study published Wednesday on the Center for Public Integrity's Web site analyzed government data on $1.38 trillion worth of subprime mortgages made from 2005 to 2007.
The analysis found that about 56 percent of those loans were originated by 15 lenders from California.
"The size of the industry in California was massive," said John Dunbar, lead reporter on the six-person team that spent more than six months analyzing millions of mortgages.
Mark Sunshine: "Recovery of the securitization market is important because, according to Treasury, before the credit crisis began more than half of small business lending was funded in the shadow banking system. And, it was the securitization market that funded the shadow banking system. But, so far in 2009, the securitization market has managed to only get $21 billion of new securitizations sold to investors and that amount is down more than 94% from 2007. As loans to Main Street made in 2006 and 2007 come due, businesses are having a tough time finding refinancing and TALF hasn’t helped their plight.
So far in 2009, TALF has only managed to purchase a little more than $6 billion of securitized debt. Even worse, in the latest TALF application round there was only a little greater than $10 billion of new demand for funding which given the size of the U.S. economy, is a drop in the bucket."
Gold producers are up 9% in 2009, while gold prices are up just 3% - a reversal from 2008 in which gold gained 5% but producers shares declined 17%.
Mad Magazine: "The only reason a great many American families don't own an elephant is that they have never been offered an elephant for a dollar down and easy weekly payments."
The Central Bank of Chile late Thursday cut its benchmark interest rates by 50 basis points -- 25 more than expected -- to 1.25%.
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