5/23/09 Anarchy And Tyranny
John Adams: "The moment the idea is admitted into society that property is not as sacred as the laws of God, and there is not a force of law and public justice to protect it, anarchy and tyranny commence."
Justice Louis Brandeis: "Experience should teach us to be most on our guard to protect liberty when the Government's purposes are beneficent. Men born to freedom are naturally alert to repel invasion of their liberty by evil-minded rulers. The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding."
Daniel Webster: "Good intentions will always be pleaded for any assumption of power. The Constitution was made to guard the people against the dangers of good intentions. There are men in all ages who mean to govern well, but they mean to govern. They promise to be good masters, but they mean to be masters."
Doug Noland: "The issue is not whether the U.S. “inevitably” loses its AAA rating. Rather, the focal point of the current economic debate should be on whether our well-intended policymakers (fiscal and monetary) have charted a course that risks bankrupting the entire economy. I’ll continue to argue that the paramount policy priority should be avoiding such an outcome. And I will add that there is ample confirmation these days of the inherent propensity for inflationary developments to proceed toward the worst-case scenario....I fear the current policy path ensures an especially arduous and protracted adjustment period – along with myriad problems associated with an unwieldy inflation backdrop....Now, more than ever before, “Keynesian” inflationism is THE Bubble. When it eventually bursts Washington policymakers will have little left to offer. "
David Swensen, the top-ranked college endowment manager in the past decade, said individual investors should own inflation-protected Treasuries because U.S. economic recovery efforts may lead to an increase in consumer prices.
“We’ve had this massive fiscal stimulus, massive monetary stimulus, and it’s hard to see how that doesn’t translate into pretty substantial inflation, or at least pretty substantial risk of inflation,” Swensen, Yale University’s investment chief, said in an interview on the “Consuelo Mack WealthTrack” television show that aired yesterday. Treasury Inflation- Protected Securities “should be in every investor’s portfolio," he said.
247wallst.com: "The Administration is starting to face some resistance in Congress about its plan to put GM (GM) into Chapter 11 using Treasury money to sustain the company as it works it way back to profitability. The government put another $4 billion into the car company yesterday. In the process of a government supported bankruptcy, $27 billion in bondholder capital will probably become worthless, GM workers will be laid off, and hundreds of dealers will be closed."
According to the FT, under the current plan, the US government would cancel most or all of its existing debt in the company and invest in a “new” GM that could emerge from bankruptcy in the autumn, said a person close to the matter.
C.S. Lewis: " Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber barons cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience."
Pastor Niemoller: "First they came for the Jews, but I did nothing because I am not a Jew. Then they came for the socialists, but I did nothing because I am not a socialist. Then they came for the Catholics, but I did nothing because I am not a Catholic. Finally, they came for me, but by then there was no one left to help me."
Richard E. Byrd: "A hand from Washington will be stretched out and placed upon every man's business; the eye of the federal inspector will be in every man's counting house.... The law will of necessity have inquisical features, it will provide penalties, it will create complicated machinery. Under it, men will be hauled into courts distant from their homes. Heavy fines imposed by distant and unfamiliar tribunals will constantly menace the taxpayer. An army of federal inspectors, spies, and detectives will descend upon the state."
Saturday, May 23, 2009
Friday, May 22, 2009
Treasuries And The Dollar
5/22/09 Treasuries And The Dollar
Crude for July delivery rose 87 cents, or 1.4%, to $61.92 a barrel in early North American trading. Gold for June delivery rose $8.40, or 0.9%, to $959.60 an ounce in early North American electronic trading.
Average retail U.S. gasoline prices rose 3 cents to $2.39 a gallon on Friday, ahead of the 2009 Memorial Day weekend, according to the AAA Daily Fuel Gauge Report.
The Bank of Japan, for the first time in nearly three years, acknowledged Friday that there are signs of improvement in the economy. "The pace of deterioration in economic conditions is likely to moderate gradually, leading to a leveling out of the economy," the central bank's board members said at the conclusion of a two-day meeting.
Red Robin reported a 47 percent decline in first-quarter earnings as sales at stores open at least a year fell 8.1 percent. The company said the same-store sales decline — a key metric of retail health — accelerated to 11.1 percent in the first four weeks of the current quarter.
The Oil Drum: "Mexican oil exports plunged 18.2% in April to levels unseen since 1990 outside hurricane seasons, in more grim news for a key economic motor relied on for a major chunk of government revenues.
Crude export volumes tumbled to 1.177 million barrels per day as yields at Mexico's aging Cantarell field continued to plummet, state oil monopoly Pemex said today.
Oil production declined 4.2% year-on-year to 2.642 million bpd in April, the fourth month in a row that it has been below a targeted level of 2.7 million bpd, according to a Reuters report. "
The FDIC seized BankUnited Financial in the 34th -- and largest -- bank failure this year, at an estimated cost of $4.9 billion to the agency's insurance fund.
The dollar was weaker against both the euro and the Japanese yen, continuing its decline after plunging sharply Thursday on worry that the U.S. could also face a threat to its credit rating.
The Obama administration is preparing to send General Motors into bankruptcy as early as the end of next week under a plan that would give the automaker tens of billions of dollars more in public financing as the company seeks to shrink and reemerge as a global competitor, sources familiar with the discussions said.
The Treasury Department's watchdog has uncovered improper backdating of cash infusions at six thrifts including IndyMac, in an investigation that already has prompted the removal of the federal thrift agency's acting director.
Federal regulators were aware of the backdating at two of the thrifts, and directed or authorized those institutions to do it, the Treasury's inspector general said in a report Thursday. Pushing back the dates of the infusions can allow banks to meet quarterly government requirements for capital reserves.
The median home price in California declined 0.9% to $221,000 in April from $223,000 in March, MDA DataQuick said in a report released Thursday.
The figures marked a third consecutive month that the median price declined less than 1%. Last year's average month-to-month decline was more than 4%.
Federal Reserve Bank of Boston President Eric Rosengren said the U.S. recovery would be slow and deflation is a bigger threat than inflation. Inflation is a major concern of all bondholders because it erodes the value of fixed payments.
Banks negotiating to reclaim stock warrants they granted in return for Troubled Asset Relief Program money may shortchange taxpayers by almost $10 billion if Treasury Secretary Timothy Geithner’s first sale sets the pace, data compiled by Bloomberg show.
While 17 financial institutions have repaid TARP funds, only one has come to terms with the U.S. on the value of the rights to buy stock that taxpayers received for the risk of recapitalizing the industry. That was Old National Bancorp in Evansville, Indiana, which gave the Treasury Department $1.2 million for warrants that may have been worth $5.81 million, according to the data.
If Geithner makes the same deal for all companies in the rescue program, lenders may walk away with 80 percent of profits taxpayers might have claimed.
MasterCard Inc., the world’s second- largest electronic payments network, will lose more than half of a $59 billion portfolio of debit-card users after JPMorgan Chase & Co. decided to shift more business to Visa Inc., two people familiar with the matter said.
President Hugo Chavez ordered the takeover of at least six metal, ceramic and other companies Thursday, accelerating his push to spread socialism and build "an industrial complex" in Venezuela.
The companies include Venezuelan steelmaker Siderurgica Venezolana SA, ceramic tile-maker Ceramica Carabobo, and iron producer Materiales Siderurgicos SA, or Matesi. Matesi is owned by the Argentine-Italian conglomerate Techint through its Luxembourg-based subsidiary Tenaris.
Also affected is iron producer Complejo Siderurgico de Guayana, whose shareholders include Japanese investment conglomerate Marubeni Corp., Japanese steelmaker Kobe Steel Ltd., and Mexico's Tubos de Acero de Mexico SA.
"I think the time has come when California has to live within its means. We're having some pretty tough financial times back here ourselves," said Rep. Wally Herger (R-Chico). "I'm not sure the federal government has the means to step in. . . . Somewhere along the line, California has to recognize that they've got to cut back on their spending."
Rep. Brad Sherman (D-Sherman Oaks), who said he had tried to put together a delegation letter in support of the federal loan guarantee but got no support from his GOP colleagues, said, "We're in competition with Wall Street for the same money, and Wall Street is not without its supporters."
Recently famous fund manager John Paulson has been piling into gold funds. If you recall, Paulson gained celebrity for his early and aggressive shorting of all things subprime and financial, a move which garnered all sorts of accolades… highest-paid fund manager of last year, Barron’s No. 1 fund, etc.
Paulson has now become the largest holder of the SPDR Gold Trust, better known as GLD. His fund owns a whopping 8.7% stake, worth over $2.8 billion. That’s his No. 1 holding, worth over 30% of his entire portfolio.
According to a recently filed 13-K, he’s also picked up super-sized stakes in the Gold Miners ETF (GDX), Gold Fields, Kinross Gold and AngloGold Ashanti.
For the week ended March 20, AMG Data Services reported Equity Fund Inflows $1.5 Bil; Taxable Bond Fund Inflows $4 Bil
xETFs - Equity Fund Inflows $810 Mil; Taxable Bond Fund Inflows $2.8 Bil.
For 9 to 10 consecutive weeks, there have been inflows for international as well as emerging market funds.
Rob Hanna: "First, trying to buy all 3+ day pullbacks prior to 1987 was a losing strategy. After that it the market showed less tendency to trend and an increased tendency reverse. Buying 3+ day drops became profitable.... Until very recently there was no advantage to buying the third close lower in a row....The further the market drops, the more vicious the snapback is likely to be....The bottom line is that 3 lower closes may indicate the market is getting stretched. The market will likely bounce some time soon. It doesn’t normally offer much of a day 4 edge on its own, though."
Treasury prices declined Friday, pushing yields on the benchmark 10-year note to the highest since November, as investors prepare The Treasury Department will sell $101 billion in 2-, 5- and 7-year notes next week.
The biggest Wall Street crisis since the Great Depression isn’t just a setback for New York or bankers. The finance industry’s contraction may wipe out $185 billion in wages and profits, or $600 for every man, woman and child in the U.S., according to Thomas Philippon, a finance professor at New York University’s Stern School of Business. The trail of reduced income affects car mechanics, waiters, sports teams, hair stylists, jewelers, housecleaners and watch repair shops.
“We’re seeing lots of lives derailed,” said Simon Johnson, professor of entrepreneurship at the Massachusetts Institute of Technology.
The Federal Reserve's myriad emergency programs for the U.S. economy threaten the central bank's independence, raising the risk of future inflation, Philadelphia Federal Reserve President Charles Plosser said on Thursday.
--------------------------------------------------------------------------------
To resolve the problem, Plosser argued the Treasury Department should agree to take on riskier assets like mortgage bonds that have been absorbed by the Fed in an effort to free up credit markets.
Bill Gross, co-chief investment officer of bond giant Pacific Investment Management Co, said he believes the United States will be downgraded in three to four years.
The Australian and New Zealand dollars rose to seven-month highs against the greenback on concern record debt sales will endanger the U.S. government’s credit rating.
Crude for July delivery rose 58 cents, or 1%, to $61.63 a barrel in late afternoon North American electronic trading.
U.S. 10-year Treasury bond yields rose to 3.45%. “We are testing key levels on the long end of the market,” said Hicham Hajhamou, a trader in New York at BNP Paribas, one of the 16 primary dealers that trade with the Federal Reserve. “There’s a lack of confidence in dollar assets and the bond market is repricing itself.”
The U.S. Dollar Index plunged to 80.04.
Champaign, Ill.-based Strategic Capital Bank was closed by regulators Friday, marking the 35th bank failure of 2009, the Federal Deposit Insurance Corp. said Friday.
Macomb, Ill.-based Citizens National Bank was closed by regulators, the 36th bank failure of the year and the second Illinois closure announced on Friday, according to the the Federal Deposit Insurance Corp.
GMAC LLC, an auto finance arm part-owned by General Motors Corp. and Cerberus Capital Management, will need to cut $1 billion in costs by the end of the year, The Wall Street Journal reported late Friday on its Web site, citing people familiar with the matter. The cuts represent 20% of GMAC's expense base.
For the week, though, stocks finished moderately higher, with the blue-chip Dow average up 0.1 percent, the S&P 500 up 0.5 percent and the Nasdaq up 0.7 percent.
Crude for July delivery rose 87 cents, or 1.4%, to $61.92 a barrel in early North American trading. Gold for June delivery rose $8.40, or 0.9%, to $959.60 an ounce in early North American electronic trading.
Average retail U.S. gasoline prices rose 3 cents to $2.39 a gallon on Friday, ahead of the 2009 Memorial Day weekend, according to the AAA Daily Fuel Gauge Report.
The Bank of Japan, for the first time in nearly three years, acknowledged Friday that there are signs of improvement in the economy. "The pace of deterioration in economic conditions is likely to moderate gradually, leading to a leveling out of the economy," the central bank's board members said at the conclusion of a two-day meeting.
Red Robin reported a 47 percent decline in first-quarter earnings as sales at stores open at least a year fell 8.1 percent. The company said the same-store sales decline — a key metric of retail health — accelerated to 11.1 percent in the first four weeks of the current quarter.
The Oil Drum: "Mexican oil exports plunged 18.2% in April to levels unseen since 1990 outside hurricane seasons, in more grim news for a key economic motor relied on for a major chunk of government revenues.
Crude export volumes tumbled to 1.177 million barrels per day as yields at Mexico's aging Cantarell field continued to plummet, state oil monopoly Pemex said today.
Oil production declined 4.2% year-on-year to 2.642 million bpd in April, the fourth month in a row that it has been below a targeted level of 2.7 million bpd, according to a Reuters report. "
The FDIC seized BankUnited Financial in the 34th -- and largest -- bank failure this year, at an estimated cost of $4.9 billion to the agency's insurance fund.
The dollar was weaker against both the euro and the Japanese yen, continuing its decline after plunging sharply Thursday on worry that the U.S. could also face a threat to its credit rating.
The Obama administration is preparing to send General Motors into bankruptcy as early as the end of next week under a plan that would give the automaker tens of billions of dollars more in public financing as the company seeks to shrink and reemerge as a global competitor, sources familiar with the discussions said.
The Treasury Department's watchdog has uncovered improper backdating of cash infusions at six thrifts including IndyMac, in an investigation that already has prompted the removal of the federal thrift agency's acting director.
Federal regulators were aware of the backdating at two of the thrifts, and directed or authorized those institutions to do it, the Treasury's inspector general said in a report Thursday. Pushing back the dates of the infusions can allow banks to meet quarterly government requirements for capital reserves.
The median home price in California declined 0.9% to $221,000 in April from $223,000 in March, MDA DataQuick said in a report released Thursday.
The figures marked a third consecutive month that the median price declined less than 1%. Last year's average month-to-month decline was more than 4%.
Federal Reserve Bank of Boston President Eric Rosengren said the U.S. recovery would be slow and deflation is a bigger threat than inflation. Inflation is a major concern of all bondholders because it erodes the value of fixed payments.
Banks negotiating to reclaim stock warrants they granted in return for Troubled Asset Relief Program money may shortchange taxpayers by almost $10 billion if Treasury Secretary Timothy Geithner’s first sale sets the pace, data compiled by Bloomberg show.
While 17 financial institutions have repaid TARP funds, only one has come to terms with the U.S. on the value of the rights to buy stock that taxpayers received for the risk of recapitalizing the industry. That was Old National Bancorp in Evansville, Indiana, which gave the Treasury Department $1.2 million for warrants that may have been worth $5.81 million, according to the data.
If Geithner makes the same deal for all companies in the rescue program, lenders may walk away with 80 percent of profits taxpayers might have claimed.
MasterCard Inc., the world’s second- largest electronic payments network, will lose more than half of a $59 billion portfolio of debit-card users after JPMorgan Chase & Co. decided to shift more business to Visa Inc., two people familiar with the matter said.
President Hugo Chavez ordered the takeover of at least six metal, ceramic and other companies Thursday, accelerating his push to spread socialism and build "an industrial complex" in Venezuela.
The companies include Venezuelan steelmaker Siderurgica Venezolana SA, ceramic tile-maker Ceramica Carabobo, and iron producer Materiales Siderurgicos SA, or Matesi. Matesi is owned by the Argentine-Italian conglomerate Techint through its Luxembourg-based subsidiary Tenaris.
Also affected is iron producer Complejo Siderurgico de Guayana, whose shareholders include Japanese investment conglomerate Marubeni Corp., Japanese steelmaker Kobe Steel Ltd., and Mexico's Tubos de Acero de Mexico SA.
"I think the time has come when California has to live within its means. We're having some pretty tough financial times back here ourselves," said Rep. Wally Herger (R-Chico). "I'm not sure the federal government has the means to step in. . . . Somewhere along the line, California has to recognize that they've got to cut back on their spending."
Rep. Brad Sherman (D-Sherman Oaks), who said he had tried to put together a delegation letter in support of the federal loan guarantee but got no support from his GOP colleagues, said, "We're in competition with Wall Street for the same money, and Wall Street is not without its supporters."
Recently famous fund manager John Paulson has been piling into gold funds. If you recall, Paulson gained celebrity for his early and aggressive shorting of all things subprime and financial, a move which garnered all sorts of accolades… highest-paid fund manager of last year, Barron’s No. 1 fund, etc.
Paulson has now become the largest holder of the SPDR Gold Trust, better known as GLD. His fund owns a whopping 8.7% stake, worth over $2.8 billion. That’s his No. 1 holding, worth over 30% of his entire portfolio.
According to a recently filed 13-K, he’s also picked up super-sized stakes in the Gold Miners ETF (GDX), Gold Fields, Kinross Gold and AngloGold Ashanti.
For the week ended March 20, AMG Data Services reported Equity Fund Inflows $1.5 Bil; Taxable Bond Fund Inflows $4 Bil
xETFs - Equity Fund Inflows $810 Mil; Taxable Bond Fund Inflows $2.8 Bil.
For 9 to 10 consecutive weeks, there have been inflows for international as well as emerging market funds.
Rob Hanna: "First, trying to buy all 3+ day pullbacks prior to 1987 was a losing strategy. After that it the market showed less tendency to trend and an increased tendency reverse. Buying 3+ day drops became profitable.... Until very recently there was no advantage to buying the third close lower in a row....The further the market drops, the more vicious the snapback is likely to be....The bottom line is that 3 lower closes may indicate the market is getting stretched. The market will likely bounce some time soon. It doesn’t normally offer much of a day 4 edge on its own, though."
Treasury prices declined Friday, pushing yields on the benchmark 10-year note to the highest since November, as investors prepare The Treasury Department will sell $101 billion in 2-, 5- and 7-year notes next week.
The biggest Wall Street crisis since the Great Depression isn’t just a setback for New York or bankers. The finance industry’s contraction may wipe out $185 billion in wages and profits, or $600 for every man, woman and child in the U.S., according to Thomas Philippon, a finance professor at New York University’s Stern School of Business. The trail of reduced income affects car mechanics, waiters, sports teams, hair stylists, jewelers, housecleaners and watch repair shops.
“We’re seeing lots of lives derailed,” said Simon Johnson, professor of entrepreneurship at the Massachusetts Institute of Technology.
The Federal Reserve's myriad emergency programs for the U.S. economy threaten the central bank's independence, raising the risk of future inflation, Philadelphia Federal Reserve President Charles Plosser said on Thursday.
--------------------------------------------------------------------------------
To resolve the problem, Plosser argued the Treasury Department should agree to take on riskier assets like mortgage bonds that have been absorbed by the Fed in an effort to free up credit markets.
Bill Gross, co-chief investment officer of bond giant Pacific Investment Management Co, said he believes the United States will be downgraded in three to four years.
The Australian and New Zealand dollars rose to seven-month highs against the greenback on concern record debt sales will endanger the U.S. government’s credit rating.
Crude for July delivery rose 58 cents, or 1%, to $61.63 a barrel in late afternoon North American electronic trading.
U.S. 10-year Treasury bond yields rose to 3.45%. “We are testing key levels on the long end of the market,” said Hicham Hajhamou, a trader in New York at BNP Paribas, one of the 16 primary dealers that trade with the Federal Reserve. “There’s a lack of confidence in dollar assets and the bond market is repricing itself.”
The U.S. Dollar Index plunged to 80.04.
Champaign, Ill.-based Strategic Capital Bank was closed by regulators Friday, marking the 35th bank failure of 2009, the Federal Deposit Insurance Corp. said Friday.
Macomb, Ill.-based Citizens National Bank was closed by regulators, the 36th bank failure of the year and the second Illinois closure announced on Friday, according to the the Federal Deposit Insurance Corp.
GMAC LLC, an auto finance arm part-owned by General Motors Corp. and Cerberus Capital Management, will need to cut $1 billion in costs by the end of the year, The Wall Street Journal reported late Friday on its Web site, citing people familiar with the matter. The cuts represent 20% of GMAC's expense base.
For the week, though, stocks finished moderately higher, with the blue-chip Dow average up 0.1 percent, the S&P 500 up 0.5 percent and the Nasdaq up 0.7 percent.
Thursday, May 21, 2009
"Dollar Is Dirt"
5/21/09 "Dollar Is Dirt"
Mark Gilbert: "The odds on the dollar, Treasury bonds and the U.S. government’s AAA grade all heading for the dumpster are shortening.
While currency forecasting is a mug’s game and bond yields can’t quite decide whether to dive toward deflation or surge in anticipation of inflation, every time I think about that credit rating, I hear what Agent Smith in the “Matrix” movies called “the sound of inevitability.”
Several policy missteps suggest that investors should stop trusting -- and lending to -- the U.S. government. These include the state’s pressure on
Bank of America Corp. to buy Merrill Lynch & Co.; the priority given to Chrysler LLC’s unions over the automaker’s secured creditors; and the freedom that some banks will regain to supersize executive bonuses by giving back part of the government money bolstering their balance sheets. "
First-time claims for state unemployment benefits fell by 12,000 to a seasonally adjusted 631,000 in the week ending May 16, the Labor Department reported Thursday. The four-week average of initial claims fell by 3,500 to 628,500, data show. Meanwhile, the number of continuing claims hit a record high, climbing by 75,000 to a seasonally adjusted 6.66 million the week ending May 9. The four-week average of those claims also hit a record, of 6.48 million.
For the full year, Hormel forecast earnings in the range of $2.15 to $2.25 a share.
Standard & Poor's cut its credit-rating outlook on the U.K. to negative from stable though it affirmed the country's AAA sovereign credit rating. "We have revised the outlook on the U.K. to negative due to our view that, even assuming additional fiscal tightening, the net general government debt burden could approach 100% of GDP and remain near that level in the medium term," Standard & Poor's credit analyst David Beers said. "We base our opinion on our updated projections of general government deficits in 2009-2013. These projections reflect our more cautious view of how quickly the erosion in the government's revenue base may be repaired, the extent to which the growth in government spending can be curtailed, and consequently the pace at which historically high fiscal deficits are likely to narrow."
WSJ: "For the first three months of 2009, U.S. merchandise imports declined about 30% to $352.5 billion compared with the same period a year earlier."
The Oil Drum: "Fatih Birol, The IEA's advisor to 28 industrialized countries, said in an interview he expected oil and gas upstream investment to fall 21%, or about US$100-billion ($113.8-billion), in 2009 from 2008 due to the global recession.
"Energy investment is plunging," Mr. Birol said. "If these two come together --a further cut down in the investment and a quick and strong recovery in the economy -- we may have difficulties in the oil market in a few years' time."
Financial Post: "The U.S. dollar's day of reckoning may be inching closer as its status as a safe-haven currency fades with every uptick in stocks and commodities and its potential risks - debt and inflation - are brought under a harsher spotlight.
Ashraf Laidi, chief market strategist at CMC Markets, said Wednesday a "serious case of dollar damage" was underway.
"We long warned about the day of reckoning for the dollar emerging at the next economic recovery," Mr. Laidi said in a note.
GM cuts 240 Canadian dealers.
The Treasury is poised to inject more than $7 billion into GMAC, the first installment of a new aid package that could reach $14 billion.
AAA projects that a little more than 4 million Californians will take trips of more than 50 miles this weekend - a decline of 2.3 percent from last year, when travel also declined.
The number of Californians expected to travel by air, the AAA says, is down 5.8 percent, to 343,000. Driving remains the most popular way to get out of town, with 3.2 million Californians expected to hit the road. But that's down by 2.1 percent.
The government says Taiwan's economy contracted by a record 10.2 percent year-on-year in the first quarter of 2009. Singapore's gross domestic product fell an annualized, seasonally adjusted 14.6 percent in the first quarter from the previous quarter and slid 10.1 percent from a year earlier, the Trade and Industry Ministry said Thursday.
The ministry said last month that GDP plunged 19.7 percent from the previous quarter and 11.5 percent from a year earlier based on preliminary data largely from January and February.
Speaking at the National Archives, a backdrop chosen because it is the home of the U.S. Constitution, Bill of Rights and Declaration of Independence, the president will say that America must continue to see those documents as the "foundation of liberty and justice in this country, and a light that shines for all who seek freedom, fairness, equality and dignity in the world," a senior administration official said early this morning.
Maya MacGuineas: "On two separate issues -- health-care and the budget -- the president has promised savings of $2 trillion. A total of $4 trillion dollars -- now that's real money. Unfortunately, the claims are completely exaggerated."
“We’ve moved away from the abyss,” said
David Semmens, an economist at Standard Chartered Bank in New York. Still, “the economy is going to stay very anemic. The labor market is just very weak, and people aren’t going to have the access to credit that they previously had.”
RGE Monitor: "Commodity prices seem to be getting ahead of fundamentals again. As of May 13, 2009, the Rogers International Commodity Index rose 7.6% since the start of 2009 on the belief that putative ‘green shoots’ around the world validated a V-shaped economic recovery in 2009. However, these 'green shoots' might still be a signal of the stabilization of economic activity at low levels, rather than a return to trend growth. Even if GDP growth around the world has bottomed, growth may continue to be negative or sluggish until 2011. As such, commodity price gains might reveal a false sign of economic recovery – and so might the recent spate of bear market rallies in stock markets and inflows into emerging markets. The strong uptrend in commodity prices since February has been propelled more by technicals (investment demand, opportunistic stockpiling at low prices) than fundamentals (real growth in physical demand and production). Commodity prices could snap back to reality before resuming a more moderate uptrend in line with a U-shaped global growth path. "
The index of leading economic indicators rose 1% in April - the first increase in seven months -- following a revised dip of 0.2% in March. "The question is how long before declines in activity give way to small increases. If the indicators continue on the current track, that point might be reached in the second half of the year," said Ken Goldstein, economist at the Conference Board. Of the 10 indicators that comprise the index, seven rose in April, with the largest positive contribution from stock prices. The largest negative contribution came from the real money supply.
U.S. May Philly Fed index -22.6 vs. -24.4 April.
Discount retail chain Ross Stores Inc. said Thursday its first-quarter profit rose 15 percent as consumers were attracted to its bargain prices amid the recession. The company raised its full-year profit forecast.
The National Archives lost a computer hard drive containing massive amounts of sensitive data from the Clinton administration, including Social Security numbers, addresses, and Secret Service and White House operating procedures, congressional officials said Tuesday.
Brent Steenbarger: " When SPY has been down for two consecutive days since 2000 and then opens the next day lower, the day session averages a gain of .14% (105 up, 77 down). Across all other sessions, the day trade has averaged a loss of -.03% (1086 up, 1089 down). "
Gold for June delivery added $13.80, or 1.5%, to finish at $951.20, its highest close since March 23, on the Comex division on the New York Mercantile Exchange. Light, sweet crude fell 99 cents to settle at $61.05 a barrel, after closing at $62.04, a six-month high, on Wednesday.
China, the second biggest oil consumer, increased oil consumption by 4% in April, the first year-on-year gain in six months, according to a report released by energy information provider Platts on Thursday.
BankUnited Financial, the largest lender based in Florida, was shut down by banking regulators and sold to a group of private-equity firms, the Federal Deposit Insurance Corp. said late Thursday.
The yield on 10-year Treasury bonds rose to 3.37%.
Autodesk said it has begun a cost-cutting plan that would involve the elimination of about 430 jobs.
The Dow Jones Industrial Average slid 130 points, or 1.5%, to close at 8,292. The Nasdaq Composite Index shed 33 points, or 1.9%, to 1,695, and the Standard & Poor's 500 Index lost 15 points, or 1.7%, to close at 888.
The dollar continued to lose ground today, sliding to a six-month low against the euro.
Mark Gilbert: "The odds on the dollar, Treasury bonds and the U.S. government’s AAA grade all heading for the dumpster are shortening.
While currency forecasting is a mug’s game and bond yields can’t quite decide whether to dive toward deflation or surge in anticipation of inflation, every time I think about that credit rating, I hear what Agent Smith in the “Matrix” movies called “the sound of inevitability.”
Several policy missteps suggest that investors should stop trusting -- and lending to -- the U.S. government. These include the state’s pressure on
Bank of America Corp. to buy Merrill Lynch & Co.; the priority given to Chrysler LLC’s unions over the automaker’s secured creditors; and the freedom that some banks will regain to supersize executive bonuses by giving back part of the government money bolstering their balance sheets. "
First-time claims for state unemployment benefits fell by 12,000 to a seasonally adjusted 631,000 in the week ending May 16, the Labor Department reported Thursday. The four-week average of initial claims fell by 3,500 to 628,500, data show. Meanwhile, the number of continuing claims hit a record high, climbing by 75,000 to a seasonally adjusted 6.66 million the week ending May 9. The four-week average of those claims also hit a record, of 6.48 million.
For the full year, Hormel forecast earnings in the range of $2.15 to $2.25 a share.
Standard & Poor's cut its credit-rating outlook on the U.K. to negative from stable though it affirmed the country's AAA sovereign credit rating. "We have revised the outlook on the U.K. to negative due to our view that, even assuming additional fiscal tightening, the net general government debt burden could approach 100% of GDP and remain near that level in the medium term," Standard & Poor's credit analyst David Beers said. "We base our opinion on our updated projections of general government deficits in 2009-2013. These projections reflect our more cautious view of how quickly the erosion in the government's revenue base may be repaired, the extent to which the growth in government spending can be curtailed, and consequently the pace at which historically high fiscal deficits are likely to narrow."
WSJ: "For the first three months of 2009, U.S. merchandise imports declined about 30% to $352.5 billion compared with the same period a year earlier."
The Oil Drum: "Fatih Birol, The IEA's advisor to 28 industrialized countries, said in an interview he expected oil and gas upstream investment to fall 21%, or about US$100-billion ($113.8-billion), in 2009 from 2008 due to the global recession.
"Energy investment is plunging," Mr. Birol said. "If these two come together --a further cut down in the investment and a quick and strong recovery in the economy -- we may have difficulties in the oil market in a few years' time."
Financial Post: "The U.S. dollar's day of reckoning may be inching closer as its status as a safe-haven currency fades with every uptick in stocks and commodities and its potential risks - debt and inflation - are brought under a harsher spotlight.
Ashraf Laidi, chief market strategist at CMC Markets, said Wednesday a "serious case of dollar damage" was underway.
"We long warned about the day of reckoning for the dollar emerging at the next economic recovery," Mr. Laidi said in a note.
GM cuts 240 Canadian dealers.
The Treasury is poised to inject more than $7 billion into GMAC, the first installment of a new aid package that could reach $14 billion.
AAA projects that a little more than 4 million Californians will take trips of more than 50 miles this weekend - a decline of 2.3 percent from last year, when travel also declined.
The number of Californians expected to travel by air, the AAA says, is down 5.8 percent, to 343,000. Driving remains the most popular way to get out of town, with 3.2 million Californians expected to hit the road. But that's down by 2.1 percent.
The government says Taiwan's economy contracted by a record 10.2 percent year-on-year in the first quarter of 2009. Singapore's gross domestic product fell an annualized, seasonally adjusted 14.6 percent in the first quarter from the previous quarter and slid 10.1 percent from a year earlier, the Trade and Industry Ministry said Thursday.
The ministry said last month that GDP plunged 19.7 percent from the previous quarter and 11.5 percent from a year earlier based on preliminary data largely from January and February.
Speaking at the National Archives, a backdrop chosen because it is the home of the U.S. Constitution, Bill of Rights and Declaration of Independence, the president will say that America must continue to see those documents as the "foundation of liberty and justice in this country, and a light that shines for all who seek freedom, fairness, equality and dignity in the world," a senior administration official said early this morning.
Maya MacGuineas: "On two separate issues -- health-care and the budget -- the president has promised savings of $2 trillion. A total of $4 trillion dollars -- now that's real money. Unfortunately, the claims are completely exaggerated."
“We’ve moved away from the abyss,” said
David Semmens, an economist at Standard Chartered Bank in New York. Still, “the economy is going to stay very anemic. The labor market is just very weak, and people aren’t going to have the access to credit that they previously had.”
RGE Monitor: "Commodity prices seem to be getting ahead of fundamentals again. As of May 13, 2009, the Rogers International Commodity Index rose 7.6% since the start of 2009 on the belief that putative ‘green shoots’ around the world validated a V-shaped economic recovery in 2009. However, these 'green shoots' might still be a signal of the stabilization of economic activity at low levels, rather than a return to trend growth. Even if GDP growth around the world has bottomed, growth may continue to be negative or sluggish until 2011. As such, commodity price gains might reveal a false sign of economic recovery – and so might the recent spate of bear market rallies in stock markets and inflows into emerging markets. The strong uptrend in commodity prices since February has been propelled more by technicals (investment demand, opportunistic stockpiling at low prices) than fundamentals (real growth in physical demand and production). Commodity prices could snap back to reality before resuming a more moderate uptrend in line with a U-shaped global growth path. "
The index of leading economic indicators rose 1% in April - the first increase in seven months -- following a revised dip of 0.2% in March. "The question is how long before declines in activity give way to small increases. If the indicators continue on the current track, that point might be reached in the second half of the year," said Ken Goldstein, economist at the Conference Board. Of the 10 indicators that comprise the index, seven rose in April, with the largest positive contribution from stock prices. The largest negative contribution came from the real money supply.
U.S. May Philly Fed index -22.6 vs. -24.4 April.
Discount retail chain Ross Stores Inc. said Thursday its first-quarter profit rose 15 percent as consumers were attracted to its bargain prices amid the recession. The company raised its full-year profit forecast.
The National Archives lost a computer hard drive containing massive amounts of sensitive data from the Clinton administration, including Social Security numbers, addresses, and Secret Service and White House operating procedures, congressional officials said Tuesday.
Brent Steenbarger: " When SPY has been down for two consecutive days since 2000 and then opens the next day lower, the day session averages a gain of .14% (105 up, 77 down). Across all other sessions, the day trade has averaged a loss of -.03% (1086 up, 1089 down). "
Gold for June delivery added $13.80, or 1.5%, to finish at $951.20, its highest close since March 23, on the Comex division on the New York Mercantile Exchange. Light, sweet crude fell 99 cents to settle at $61.05 a barrel, after closing at $62.04, a six-month high, on Wednesday.
China, the second biggest oil consumer, increased oil consumption by 4% in April, the first year-on-year gain in six months, according to a report released by energy information provider Platts on Thursday.
BankUnited Financial, the largest lender based in Florida, was shut down by banking regulators and sold to a group of private-equity firms, the Federal Deposit Insurance Corp. said late Thursday.
The yield on 10-year Treasury bonds rose to 3.37%.
Autodesk said it has begun a cost-cutting plan that would involve the elimination of about 430 jobs.
The Dow Jones Industrial Average slid 130 points, or 1.5%, to close at 8,292. The Nasdaq Composite Index shed 33 points, or 1.9%, to 1,695, and the Standard & Poor's 500 Index lost 15 points, or 1.7%, to close at 888.
The dollar continued to lose ground today, sliding to a six-month low against the euro.
Wednesday, May 20, 2009
The VIX
5/20/09 The VIX
Mike Shedlock: "Think the US stock market is going to come roaring back if consumer deleveraging plays out as it must? Think again.
Expect another "Lost Decade" when it comes to housing and the stock market. It's the deflationary payback for the greatest credit binge in world history."
Japanese Finance Minister Kaoru Yosano warned Wednesday that the nation's economy faces further downside risks due to the deteriorating job market, according to remarks reported by Kyodo News. "We need to keep in mind the risk of further downward pressure on the economy as significant adjustments in the job market continue to be a concern," he was quoted as saying following the Wednesday release of data showing a record drop in gross domestic product during the January-March period. Japan's economy contracted by a 15.2 percent annual pace in the first quarter — its sharpest drop on record — as exports plunged, companies slashed production and families cut back on spending, the government said Wednesday.
Ann Taylor Stores Corp.swung to a first-quarter loss of $2.31 million, or 4 cents a share, from profit of $25.9 million, or 43 cents, a year earlier. Sales fell to $426.7 million from $591.7 million. The company sees second-quarter sales to "again remain under significant pressure," primarily at its Ann Taylor chain.
Deere & Co. said Wednesday its fiscal second-quarter earnings fell to $472 million, or $1.11 a share, from $764 million, or $1.74 a share, in the year-ago period. Sales plunged 17% to $6.8 billion. For the fiscal year through October, Deere forecast net income of $1.1 billion with downside risk. Deere projected sales to be down about 19% for fiscal 2009 and down about 26% for the third quarter.
Toll Brothers Inc., a luxury-home builder, estimated second-quarter home-building revenue fell 51% from the year-earlier quarter to $388.3 million while units sold fell 47% to 648. The backlog at April 30 was $944.3 million, down 55%, and 1,581 units, down 48%. Net signed contracts for the quarter were valued at $298.3 million, down 40%, covering 582 units, down 37%.
The Oil Drum: "World oil production peaked in July 2008 at 74.82 million barrels/day (mbd) and now has fallen to about 71 mbd. It is expected that oil production will decline slowly to about December 2010 as OPEC production increases while non-OPEC production decreases. After 2010 the resulting annual production decline rate increases to 3.4% as OPEC production is unable to offset cumulative non-OPEC declines. "
Target said profit fell to $522 million, or 69 cents per share for its fiscal first quarter ended May 2, from $602 million, or 74 cents per share, a year earlier.
Sales edged up to $14.4 billon from $14.3 billion.
President
Mahmoud Ahmadinejad said Iran test-fired a new advanced missile Wednesday with a range capable of reaching Israel and U.S. Mideast bases.
BJ's Wholesale Club Inc. said Wednesday that its first-quarter profit rose 42 percent, narrowly beating Wall Street expectations, and raised its 2009 profit guidance.
Today, Albertsons will announce a plan to lower prices for thousands of goods at its 222 Southern California supermarkets. The initiative is aimed at regaining budget-minded customers both from its rivals and those lost to discounters such as Wal-Mart Stores Inc. and Target Corp.
California voters rejected a package of budget-balancing measures that Governor
Arnold Schwarzenegger said were needed to keep a $15 billion deficit from widening to $21 billion. A proposal to limit lawmaker pay passed.
“I respect the will of the people who are frustrated with the dysfunction in our budget system,” Schwarzenegger said in a statement from Washington conceding defeat. “In order to prevent a fiscal disaster, Democrats and Republicans must collaborate and work together to address this shortfall.”
Federal Reserve Bank of San Francisco: "In the long-run, however, consumption cannot grow faster than income because there is an upper limit to how much debt households can service, based on their incomes. For many U.S. households, current debt levels appear too high, as evidenced by the sharp rise in delinquencies and foreclosures in recent years. To achieve a sustainable level of debt relative to income, households may need to undergo a prolonged period of deleveraging, whereby debt is reduced and saving is increased."
The federal agency that backs up pension plans of failed companies saw its deficit balloon to a record $33.5 billion in the first half of the fiscal year, acting director Vince Snowbarger will tell Congress on Wednesday. About half of the $22.5 billion increase came from plan terminations, and another third came from the drop in interest rates. The Pension Benefit Guaranty Corp. lost $3 billion on its investments. As of March 31, 68% of the PBGC portfolio was in bonds and 30% was in equities. In the past year, the PBGC moved to boost the percentage of equities in its portfolio, a controversial move that went against the recommendations of the Government Accountability Office.
The number of confirmed cases of the new Influenza A (H1N1) flu has risen to 10243 and the death toll has edged up to 80, the World Health Organization (WHO) said on Wednesday.
Architects reported lower billings again in April, but new inquiries about building projects rose, the American Institute of Architects said Wednesday. "A growing number of architecture firms report potential projects arising from federal stimulus funds," said Kermit Baker, chief economist for the industry group. "Still, too many architects are continuing to report difficult conditions to feel confident that the economic landscape for the construction industry will improve very quickly." The billing index fell to 42.8 in April after rising by eight points to 43.7 in March. The new inquiries index rose to 56.8.
The VIX, as the Chicago Board Options Exchange Volatility Index is known, and Europe’s VStoxx Index have both retreated to their lowest levels since Sept. 12, the last trading day before Lehman filed the biggest bankruptcy in U.S. history.
“Volatility fell off a cliff,” said Carl Mason, head of U.S. equity derivatives strategy at BNP Paribas in New York. “I don’t get the sense that many investors are putting on new hedges, but if they are they’re not hedging against a complete meltdown.”
The stock market may hit new lows this year or the next as the current rally has been largely caused by the money printed by central banks and fundamental problems remain unsolved, legendary investor Jim Rogers told CNBC Wednesday. Governments have not solved the essential problems that caused the crisis but instead they "flooded the world with money," according to Rogers. Trying to solve the problem of too much consumption and too much debt with more consumption "defies belief" and will not work, he said.
Soybeans in Chicago advanced to the highest in more than seven months on speculation that output of the crop from a Chinese province and from South America may decline, potentially boosting demand for U.S. supplies. Soybeans are approaching $12 a bushel.
Japan’s output of copper and copper- alloy fabricated products may total 700,000 metric tons this fiscal year, 17 percent more than initially forecast on higher Chinese demand, the Japan Copper and Brass Association said.
First-quarter sales of handsets fell to 269 million units, down 14.5% from the fourth quarter of 2008 and 9.4% from a year earlier.
However, smart-phone sales increased 12.7% to 36 million units, and represented 13.5% of all mobile-device sales in the first quarter, up from 11% a year earlier, Gartner said.
"Much of the smart-phone growth during the first quarter of 2009 was driven by touch-screen products, both in midtier and high-end devices," said Roberta Cozza, principal analyst at Gartner.
Lack of demand and lack of credit will keep the U.S. commercial real estate market weak for the remainder of the year, the National Association of Realtors said Wednesday. The NAR's quarterly leading indicator for commercial real estate fell 4.8% in the first quarter compared with the fourth and is down 12.9% compared with a year ago.
Brett Steenbarger: "
A defining feature of the market rally to this point is that higher prices have attracted less total participation. At some point--the point at which the narrowing participation translates into a narrowed participation of stocks--the rally loses enough steam that its upside potential becomes severely limited. While the Dow stocks are near their bull highs, I just posted to Twitter that new 20-day highs yesterday were only 1117. That is less than half of the levels of new highs seen earlier this month. That has me questioning the bull's legs."
The Oil Drum: "The energy equivalence of natural gas to oil is about 6 to 1, so $7 natural gas would be similar to $42 oil and $10 natural gas would be similar to $60 oil, at least for transportation purposes.
Natural gas in the US usually trades at a substantial discount (as much as 50%) to the Btu equivalent of oil, though, because of the high cost of transporting the gas, and because it is not as highly valued as oil. For these reasons, for electricity and heating, most users would find $8 to $10 natural gas quite expensive. If prices were this high, homeowners would find it necessary to cut back on other purchases to pay their heating and electricity bills.
Getting a balance on natural gas is very tricky. Pipelines and built infrastructure are inflexible. Building only a few too many vehicles could tip the balance the other direction again. Changes in natural gas for electrical use could have an almost immediate effect, and would need to be considered in the balance.
It seems like natural gas has the potential to do more than it is now doing, if we could only figure out how to harness the capabilities of what we have. To do this, we will need to keep the price high enough and get the right amount of new end use infrastructure built."
Crude inventories decreased by 2.1 million barrels in the week ended May 15, the Energy Information Administration reported. Analysts surveyed by Platts had expected a gain of 1.5 million barrels. Meanwhile, gasoline inventories fell by 4.3 million barrels and distillate stockpiles rose by 600,000 barrels.
The Dollar Index, used by Intercontinental Exchange Inc. to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, dropped as much as 1.2 percent to 81.129, the lowest level since Jan. 2, on reduced demand for safety.
Gold for June delivery rose $10.70, or 1.2%, to end at $937.40 an ounce on the Comex division of the New York Mercantile Exchange, the highest level since March 26.
Crude for July delivery, the new front-month contract, gained $1.94, or 3.2%, to end at $62.04 a barrel on the New York Mercantile Exchange, the highest closing level for a front-month contract since Nov. 10.
Peter Eliades: "We believe this market is in danger, perhaps even great danger, once again. We know that sounds dramatic, but the fact that the indexes and averages stopped where they did has deepened the analogy between 1930-1931 and the current time zone. Until or unless new recovery highs are established, it will be our contention that this market could be headed to new lows for the year much sooner than most believe possible."
"Hell would have to freeze over for us to get out of this," said Cincinnati Council member Leslie Ghiz. "There will be layoffs. There will be cuts. And it will be painful."
Bill Luby: "First, the historical average of the VIX for 20 years of data extending back to 1990 is 20.12 (dotted black line in the chart below.) The mean VIX for all of 2008, which includes a relatively calm April through August, is 32.68. Looking back at the five year period of 1998-2002, which included the Long-Term Capital Management debacle and the end of the 1990s bull market, the average VIX during this period was 25.27. Current data show S&P 500 historical volatility for the 10, 20 and 30 day lookback periods at 30.88, 27.24 and 30.53, respectively.
The bottom line: 25.00 is a low number for a volatile period."
The Dow Jones Industrial Average shed 53 points to close at 8,422. The Nasdaq Composite Index lost 7 points to 1,728, and the Standard & Poor's 500 Index slid 5 points to end the session at 903.
Mike Shedlock: "Think the US stock market is going to come roaring back if consumer deleveraging plays out as it must? Think again.
Expect another "Lost Decade" when it comes to housing and the stock market. It's the deflationary payback for the greatest credit binge in world history."
Japanese Finance Minister Kaoru Yosano warned Wednesday that the nation's economy faces further downside risks due to the deteriorating job market, according to remarks reported by Kyodo News. "We need to keep in mind the risk of further downward pressure on the economy as significant adjustments in the job market continue to be a concern," he was quoted as saying following the Wednesday release of data showing a record drop in gross domestic product during the January-March period. Japan's economy contracted by a 15.2 percent annual pace in the first quarter — its sharpest drop on record — as exports plunged, companies slashed production and families cut back on spending, the government said Wednesday.
Ann Taylor Stores Corp.swung to a first-quarter loss of $2.31 million, or 4 cents a share, from profit of $25.9 million, or 43 cents, a year earlier. Sales fell to $426.7 million from $591.7 million. The company sees second-quarter sales to "again remain under significant pressure," primarily at its Ann Taylor chain.
Deere & Co. said Wednesday its fiscal second-quarter earnings fell to $472 million, or $1.11 a share, from $764 million, or $1.74 a share, in the year-ago period. Sales plunged 17% to $6.8 billion. For the fiscal year through October, Deere forecast net income of $1.1 billion with downside risk. Deere projected sales to be down about 19% for fiscal 2009 and down about 26% for the third quarter.
Toll Brothers Inc., a luxury-home builder, estimated second-quarter home-building revenue fell 51% from the year-earlier quarter to $388.3 million while units sold fell 47% to 648. The backlog at April 30 was $944.3 million, down 55%, and 1,581 units, down 48%. Net signed contracts for the quarter were valued at $298.3 million, down 40%, covering 582 units, down 37%.
The Oil Drum: "World oil production peaked in July 2008 at 74.82 million barrels/day (mbd) and now has fallen to about 71 mbd. It is expected that oil production will decline slowly to about December 2010 as OPEC production increases while non-OPEC production decreases. After 2010 the resulting annual production decline rate increases to 3.4% as OPEC production is unable to offset cumulative non-OPEC declines. "
Target said profit fell to $522 million, or 69 cents per share for its fiscal first quarter ended May 2, from $602 million, or 74 cents per share, a year earlier.
Sales edged up to $14.4 billon from $14.3 billion.
President
Mahmoud Ahmadinejad said Iran test-fired a new advanced missile Wednesday with a range capable of reaching Israel and U.S. Mideast bases.
BJ's Wholesale Club Inc. said Wednesday that its first-quarter profit rose 42 percent, narrowly beating Wall Street expectations, and raised its 2009 profit guidance.
Today, Albertsons will announce a plan to lower prices for thousands of goods at its 222 Southern California supermarkets. The initiative is aimed at regaining budget-minded customers both from its rivals and those lost to discounters such as Wal-Mart Stores Inc. and Target Corp.
California voters rejected a package of budget-balancing measures that Governor
Arnold Schwarzenegger said were needed to keep a $15 billion deficit from widening to $21 billion. A proposal to limit lawmaker pay passed.
“I respect the will of the people who are frustrated with the dysfunction in our budget system,” Schwarzenegger said in a statement from Washington conceding defeat. “In order to prevent a fiscal disaster, Democrats and Republicans must collaborate and work together to address this shortfall.”
Federal Reserve Bank of San Francisco: "In the long-run, however, consumption cannot grow faster than income because there is an upper limit to how much debt households can service, based on their incomes. For many U.S. households, current debt levels appear too high, as evidenced by the sharp rise in delinquencies and foreclosures in recent years. To achieve a sustainable level of debt relative to income, households may need to undergo a prolonged period of deleveraging, whereby debt is reduced and saving is increased."
The federal agency that backs up pension plans of failed companies saw its deficit balloon to a record $33.5 billion in the first half of the fiscal year, acting director Vince Snowbarger will tell Congress on Wednesday. About half of the $22.5 billion increase came from plan terminations, and another third came from the drop in interest rates. The Pension Benefit Guaranty Corp. lost $3 billion on its investments. As of March 31, 68% of the PBGC portfolio was in bonds and 30% was in equities. In the past year, the PBGC moved to boost the percentage of equities in its portfolio, a controversial move that went against the recommendations of the Government Accountability Office.
The number of confirmed cases of the new Influenza A (H1N1) flu has risen to 10243 and the death toll has edged up to 80, the World Health Organization (WHO) said on Wednesday.
Architects reported lower billings again in April, but new inquiries about building projects rose, the American Institute of Architects said Wednesday. "A growing number of architecture firms report potential projects arising from federal stimulus funds," said Kermit Baker, chief economist for the industry group. "Still, too many architects are continuing to report difficult conditions to feel confident that the economic landscape for the construction industry will improve very quickly." The billing index fell to 42.8 in April after rising by eight points to 43.7 in March. The new inquiries index rose to 56.8.
The VIX, as the Chicago Board Options Exchange Volatility Index is known, and Europe’s VStoxx Index have both retreated to their lowest levels since Sept. 12, the last trading day before Lehman filed the biggest bankruptcy in U.S. history.
“Volatility fell off a cliff,” said Carl Mason, head of U.S. equity derivatives strategy at BNP Paribas in New York. “I don’t get the sense that many investors are putting on new hedges, but if they are they’re not hedging against a complete meltdown.”
The stock market may hit new lows this year or the next as the current rally has been largely caused by the money printed by central banks and fundamental problems remain unsolved, legendary investor Jim Rogers told CNBC Wednesday. Governments have not solved the essential problems that caused the crisis but instead they "flooded the world with money," according to Rogers. Trying to solve the problem of too much consumption and too much debt with more consumption "defies belief" and will not work, he said.
Soybeans in Chicago advanced to the highest in more than seven months on speculation that output of the crop from a Chinese province and from South America may decline, potentially boosting demand for U.S. supplies. Soybeans are approaching $12 a bushel.
Japan’s output of copper and copper- alloy fabricated products may total 700,000 metric tons this fiscal year, 17 percent more than initially forecast on higher Chinese demand, the Japan Copper and Brass Association said.
First-quarter sales of handsets fell to 269 million units, down 14.5% from the fourth quarter of 2008 and 9.4% from a year earlier.
However, smart-phone sales increased 12.7% to 36 million units, and represented 13.5% of all mobile-device sales in the first quarter, up from 11% a year earlier, Gartner said.
"Much of the smart-phone growth during the first quarter of 2009 was driven by touch-screen products, both in midtier and high-end devices," said Roberta Cozza, principal analyst at Gartner.
Lack of demand and lack of credit will keep the U.S. commercial real estate market weak for the remainder of the year, the National Association of Realtors said Wednesday. The NAR's quarterly leading indicator for commercial real estate fell 4.8% in the first quarter compared with the fourth and is down 12.9% compared with a year ago.
Brett Steenbarger: "
A defining feature of the market rally to this point is that higher prices have attracted less total participation. At some point--the point at which the narrowing participation translates into a narrowed participation of stocks--the rally loses enough steam that its upside potential becomes severely limited. While the Dow stocks are near their bull highs, I just posted to Twitter that new 20-day highs yesterday were only 1117. That is less than half of the levels of new highs seen earlier this month. That has me questioning the bull's legs."
The Oil Drum: "The energy equivalence of natural gas to oil is about 6 to 1, so $7 natural gas would be similar to $42 oil and $10 natural gas would be similar to $60 oil, at least for transportation purposes.
Natural gas in the US usually trades at a substantial discount (as much as 50%) to the Btu equivalent of oil, though, because of the high cost of transporting the gas, and because it is not as highly valued as oil. For these reasons, for electricity and heating, most users would find $8 to $10 natural gas quite expensive. If prices were this high, homeowners would find it necessary to cut back on other purchases to pay their heating and electricity bills.
Getting a balance on natural gas is very tricky. Pipelines and built infrastructure are inflexible. Building only a few too many vehicles could tip the balance the other direction again. Changes in natural gas for electrical use could have an almost immediate effect, and would need to be considered in the balance.
It seems like natural gas has the potential to do more than it is now doing, if we could only figure out how to harness the capabilities of what we have. To do this, we will need to keep the price high enough and get the right amount of new end use infrastructure built."
Crude inventories decreased by 2.1 million barrels in the week ended May 15, the Energy Information Administration reported. Analysts surveyed by Platts had expected a gain of 1.5 million barrels. Meanwhile, gasoline inventories fell by 4.3 million barrels and distillate stockpiles rose by 600,000 barrels.
The Dollar Index, used by Intercontinental Exchange Inc. to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, dropped as much as 1.2 percent to 81.129, the lowest level since Jan. 2, on reduced demand for safety.
Gold for June delivery rose $10.70, or 1.2%, to end at $937.40 an ounce on the Comex division of the New York Mercantile Exchange, the highest level since March 26.
Crude for July delivery, the new front-month contract, gained $1.94, or 3.2%, to end at $62.04 a barrel on the New York Mercantile Exchange, the highest closing level for a front-month contract since Nov. 10.
Peter Eliades: "We believe this market is in danger, perhaps even great danger, once again. We know that sounds dramatic, but the fact that the indexes and averages stopped where they did has deepened the analogy between 1930-1931 and the current time zone. Until or unless new recovery highs are established, it will be our contention that this market could be headed to new lows for the year much sooner than most believe possible."
"Hell would have to freeze over for us to get out of this," said Cincinnati Council member Leslie Ghiz. "There will be layoffs. There will be cuts. And it will be painful."
Bill Luby: "First, the historical average of the VIX for 20 years of data extending back to 1990 is 20.12 (dotted black line in the chart below.) The mean VIX for all of 2008, which includes a relatively calm April through August, is 32.68. Looking back at the five year period of 1998-2002, which included the Long-Term Capital Management debacle and the end of the 1990s bull market, the average VIX during this period was 25.27. Current data show S&P 500 historical volatility for the 10, 20 and 30 day lookback periods at 30.88, 27.24 and 30.53, respectively.
The bottom line: 25.00 is a low number for a volatile period."
The Dow Jones Industrial Average shed 53 points to close at 8,422. The Nasdaq Composite Index lost 7 points to 1,728, and the Standard & Poor's 500 Index slid 5 points to end the session at 903.
Tuesday, May 19, 2009
The Yuan's Status
5/19/09 The Yuan's Status
Optimism that the housing slump had hit bottom was damaged Tuesday when the government reported that construction on new housing projects slowed to a record low pace in April. The Commerce Department says construction of new homes and apartments fell 12.8 percent last month to a seasonally adjusted annual rate of 458,000 units, the lowest pace on records going back a half-century.
Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 494,000.
This is 3.3 percent (±2.3%) below the revised March rate of 511,000 and is 50.2 percent (±1.4%) below the revised April 2008 estimate of 991,000.
Home Depot still sees fiscal 2009 sales down 9% with negative comparable-store sales in the high-single-digit area and earnings per share from continuing operations down 7%. “Our markets, and the consumer in general, remain under pressure,” Chairman and Chief Executive Frank Blake said in a statement. In the latest quarter, the average ticket dropped 8.2 percent to $52.67.
HSBC Holdings Plc and Bank of East Asia Ltd. won approval to be the first foreign banks to sell yuan bonds in Hong Kong from Chinese regulators, who want to boost the currency’s international role. The Financial Times reports China and Brazil have discussed using their own currencies for trade. The U.S. has been replaced by China as Brazil's biggest trading partner. Brazil is a key supplier of soybeans, iron ore and other raw materials to China. China promised to loan $10b to Petrobras, the state oil company which is seeking new funds to finance its extensive investment program especially as it plans to exploit the n
ew pre-salt layer oil finds which could be quite costly.
Medtronic Inc. issued its fiscal 2010 financial forecast early Tuesday, stating it sees revenue growing 5% to 8% on a constant currency basis. Adjusted earnings per share should come in between $3.10 and $3.20.
Medtronic to cut 1,500 to 1,800 jobs.
Woody Brock: "There is a genuine risk that the huge amount of debt that accrues and must be serviced in the future could transform the US into a "banana republic" in the much longer run. This risk is heightened by the need to fund soaring Social Security and Medicare "entitlements," as record numbers of baby-boomers retire during the next two decades. Moreover, as time goes on, it is precisely these longer-term risks that will matter most to the market, and will increasingly be discounted. Investors of every stripe will be impacted."
As Rob Hanna pointed out, " Monday wasn’t just a 5-day low in Nasdaq volume, it was the lowest level in over a month accompanying a 3% Nasdaq index rise...Indications are for weakness in the days following such an occurrence."
China's outline for the oil refining sector calls for raising crude oil processing capacity by about 18 percent from last year to 405 million tons a year by 2011.
By then, China plans to build three or four major refineries in the Yangtze River Delta, near Shanghai, and the Pearl River Delta, near Hong Kong in southern China, the notice by the State Council said.
Saks said it lost $5.1 million, or 4 cents per share, in the first quarter ended May 2. That compares with a profit of $17.3 million, or 12 cents per share, a year earlier.
Revenue fell 27 percent to $621.3 million, from $850 million a year earlier. Sales at stores open at least a year, known as same-store sales, dropped almost 28 percent.
The EIA expects total U.S. marketed natural gas production to drop by 1.0% in 2009 and by another 2.8% in 2010.
Auto sales continue to be week this month as consumers struggle with lack of confidence and lack of credit, General Motors CEO Fritz Henderson said Tuesday.
Richard Duncan: “The dollar standard is inherently flawed and increasingly unstable. Its collapse will be the most important economic event of the 21st century...Its demise is imminent. The only question is, will it be death by fire – hyperinflation – or death by ice – deflation? Fortunes will be made and lost, depending on the answer to that question.”
Michael Martin, Speaker of the U.K. House of Commons, resigns over the expenses scandal. He's the first Speaker to resign in 300 years.
Nouriel Roubini: "But while the rate of economic contraction is now lower than the free fall and near-depression experienced by many economies in Q4 of 20008 and Q1 of 2009 the recent optimism that “green shoots” of recovery will lead to the recession to bottom out by the middle of this year and that recovery to potential growth will rapidly occur in 2010 appears to be grossly misplaced. A careful assessment of the data suggests that rather than green shoots there are plenty of yellow weeds both in the short term and in the medium term."
The average price a domestic flier pays to fly one mile, excluding taxes and fees, fell nearly 11% in April to 13.4 cents, the Air Transport Association said Tuesday. International April yields also fell dramatically, with trans-Atlantic yields down 22% to 9.9 cents and trans-Pacific yields down 17% to 10.3 cents, the trade group said. Flights to Latin American saw yields fall just 8% to 12.8 cents, ATA said.
Paul Krugman: "Job losses were likely to continue into 2011, meaning "the period of a depressed economy" could last until 2013 or 2014, he said.
The Chicago Board Options Exchange Volatility Index Wall Street's favorite measure of investor concern, pierced the psychological 30 level Tuesday for the first time in eight months, indicating the perceived need for portfolio insurance is diminishing.
The so-called VIX fell 0.73 percent to 30.02 after notching a session low of 29.95, its lowest level since Sept. 19, 2008.
With Congress moving to limit penalties on riskier borrowers, the New York Times reports that credit-card companies may try to offset the lost revenue by ending benefits for those who pay on time.
Volkswagen AG said Tuesday it and Porsche Automobil Holding SE have resumed discussions to form an integrated auto company.
Gold futures end 0.5% higher at $926.70 an ounce. Analysts surveyed by energy information provider Platts expect a 1.5-million-barrel drop in crude inventories. Crude for June delivery ended up 62 cents, or 1.1%, at $59.65 a barrel on the New York Mercantile Exchange.
The Dow Jones Industrial Average down 29 points, or 0.3%, at 8,474. The S&P 500 index lost 1.6 points, or 0.2%, to finish at 908, while the Nasdaq Composite ended in the green, up 2 points, or 0.1%, at 1,734.
For the quarter ended April 30, H-P reported earnings of $1.7 billion, or 70 cents a share, compared to earnings of $2.1 billion, or 80 cents a share, for the same period the previous year. On a non-GAAP basis, the company said it would have earned $2.1 billion, or 86 cents a share, for the recent period. Sales fell 3% to $27.4 billion. For fiscal 2009, the company still expects an adjusted profit of $3.76 to $3.88 a share, but now expects revenue to fall 4 to 5 percent. It had previously forecast revenue to fall 2 to 5 percent. H-P also disclosed plans to lay off another 6,000 workers -- on top of previously announced job cuts.
Optimism that the housing slump had hit bottom was damaged Tuesday when the government reported that construction on new housing projects slowed to a record low pace in April. The Commerce Department says construction of new homes and apartments fell 12.8 percent last month to a seasonally adjusted annual rate of 458,000 units, the lowest pace on records going back a half-century.
Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 494,000.
This is 3.3 percent (±2.3%) below the revised March rate of 511,000 and is 50.2 percent (±1.4%) below the revised April 2008 estimate of 991,000.
Home Depot still sees fiscal 2009 sales down 9% with negative comparable-store sales in the high-single-digit area and earnings per share from continuing operations down 7%. “Our markets, and the consumer in general, remain under pressure,” Chairman and Chief Executive Frank Blake said in a statement. In the latest quarter, the average ticket dropped 8.2 percent to $52.67.
HSBC Holdings Plc and Bank of East Asia Ltd. won approval to be the first foreign banks to sell yuan bonds in Hong Kong from Chinese regulators, who want to boost the currency’s international role. The Financial Times reports China and Brazil have discussed using their own currencies for trade. The U.S. has been replaced by China as Brazil's biggest trading partner. Brazil is a key supplier of soybeans, iron ore and other raw materials to China. China promised to loan $10b to Petrobras, the state oil company which is seeking new funds to finance its extensive investment program especially as it plans to exploit the n
ew pre-salt layer oil finds which could be quite costly.
Medtronic Inc. issued its fiscal 2010 financial forecast early Tuesday, stating it sees revenue growing 5% to 8% on a constant currency basis. Adjusted earnings per share should come in between $3.10 and $3.20.
Medtronic to cut 1,500 to 1,800 jobs.
Woody Brock: "There is a genuine risk that the huge amount of debt that accrues and must be serviced in the future could transform the US into a "banana republic" in the much longer run. This risk is heightened by the need to fund soaring Social Security and Medicare "entitlements," as record numbers of baby-boomers retire during the next two decades. Moreover, as time goes on, it is precisely these longer-term risks that will matter most to the market, and will increasingly be discounted. Investors of every stripe will be impacted."
As Rob Hanna pointed out, " Monday wasn’t just a 5-day low in Nasdaq volume, it was the lowest level in over a month accompanying a 3% Nasdaq index rise...Indications are for weakness in the days following such an occurrence."
China's outline for the oil refining sector calls for raising crude oil processing capacity by about 18 percent from last year to 405 million tons a year by 2011.
By then, China plans to build three or four major refineries in the Yangtze River Delta, near Shanghai, and the Pearl River Delta, near Hong Kong in southern China, the notice by the State Council said.
Saks said it lost $5.1 million, or 4 cents per share, in the first quarter ended May 2. That compares with a profit of $17.3 million, or 12 cents per share, a year earlier.
Revenue fell 27 percent to $621.3 million, from $850 million a year earlier. Sales at stores open at least a year, known as same-store sales, dropped almost 28 percent.
The EIA expects total U.S. marketed natural gas production to drop by 1.0% in 2009 and by another 2.8% in 2010.
Auto sales continue to be week this month as consumers struggle with lack of confidence and lack of credit, General Motors CEO Fritz Henderson said Tuesday.
Richard Duncan: “The dollar standard is inherently flawed and increasingly unstable. Its collapse will be the most important economic event of the 21st century...Its demise is imminent. The only question is, will it be death by fire – hyperinflation – or death by ice – deflation? Fortunes will be made and lost, depending on the answer to that question.”
Michael Martin, Speaker of the U.K. House of Commons, resigns over the expenses scandal. He's the first Speaker to resign in 300 years.
Nouriel Roubini: "But while the rate of economic contraction is now lower than the free fall and near-depression experienced by many economies in Q4 of 20008 and Q1 of 2009 the recent optimism that “green shoots” of recovery will lead to the recession to bottom out by the middle of this year and that recovery to potential growth will rapidly occur in 2010 appears to be grossly misplaced. A careful assessment of the data suggests that rather than green shoots there are plenty of yellow weeds both in the short term and in the medium term."
The average price a domestic flier pays to fly one mile, excluding taxes and fees, fell nearly 11% in April to 13.4 cents, the Air Transport Association said Tuesday. International April yields also fell dramatically, with trans-Atlantic yields down 22% to 9.9 cents and trans-Pacific yields down 17% to 10.3 cents, the trade group said. Flights to Latin American saw yields fall just 8% to 12.8 cents, ATA said.
Paul Krugman: "Job losses were likely to continue into 2011, meaning "the period of a depressed economy" could last until 2013 or 2014, he said.
The Chicago Board Options Exchange Volatility Index Wall Street's favorite measure of investor concern, pierced the psychological 30 level Tuesday for the first time in eight months, indicating the perceived need for portfolio insurance is diminishing.
The so-called VIX fell 0.73 percent to 30.02 after notching a session low of 29.95, its lowest level since Sept. 19, 2008.
With Congress moving to limit penalties on riskier borrowers, the New York Times reports that credit-card companies may try to offset the lost revenue by ending benefits for those who pay on time.
Volkswagen AG said Tuesday it and Porsche Automobil Holding SE have resumed discussions to form an integrated auto company.
Gold futures end 0.5% higher at $926.70 an ounce. Analysts surveyed by energy information provider Platts expect a 1.5-million-barrel drop in crude inventories. Crude for June delivery ended up 62 cents, or 1.1%, at $59.65 a barrel on the New York Mercantile Exchange.
The Dow Jones Industrial Average down 29 points, or 0.3%, at 8,474. The S&P 500 index lost 1.6 points, or 0.2%, to finish at 908, while the Nasdaq Composite ended in the green, up 2 points, or 0.1%, at 1,734.
For the quarter ended April 30, H-P reported earnings of $1.7 billion, or 70 cents a share, compared to earnings of $2.1 billion, or 80 cents a share, for the same period the previous year. On a non-GAAP basis, the company said it would have earned $2.1 billion, or 86 cents a share, for the recent period. Sales fell 3% to $27.4 billion. For fiscal 2009, the company still expects an adjusted profit of $3.76 to $3.88 a share, but now expects revenue to fall 4 to 5 percent. It had previously forecast revenue to fall 2 to 5 percent. H-P also disclosed plans to lay off another 6,000 workers -- on top of previously announced job cuts.
Monday, May 18, 2009
Delinquencies
5/18/09 Delinquencies
Lowe's forecast second-quarter profit of 51 cents to 55 cents a share with comparable sales expected to decline in a range of 4% to 8%. For the year, the company sees profit of $1.13 to $1.25 a share with comparable sales falling as much as 8%.
After cutting rates a total 3.75 percentage points since September, Israel's central-bank will raise its benchmark interest rate 0.25 percentage point to 0.75% at the end of the year, Citigroup said in a report dated Monday.
India's stocks soared out of the open Monday, with the benchmark Sensex 30 rising 10.7%, triggering market circuit-breakers to halt trading for one hour. The leap came amid optimism that the Congress Party's alliance victory in the just-concluded general election will result in a more market-friendly economic policy. India's rupee surged the most since 1986.
New research by Sandler O'Neill also suggests as many as 500 more banks could close.
John Hussman: "The Fed has turned its balance sheet into a garbage dump, in order to accommodate all of the additional Treasury issuance required to finance the rescue of bank bondholders....The bottom line is that the attempt to save bank bondholders from losses – to provide monetary compensation without economic production – is not sound economic policy but is instead a grand monetary experiment that has never been tried in the developed world except in Germany circa 1921. This policy can only have one of two effects: either it will crowd out over $1 trillion of gross domestic investment that would otherwise have occurred if the appropriate losses had been wiped off the ledger (instead of making bank bondholders whole), or it will result in a stunning and durable increase in the quantity of base money, which will ultimately be accompanied not by a year or two of 5-6% inflation, but most probably by a near-doubling of the U.S. price level over the next decade. As I've noted previously, the growth rate of government spending is better correlated with subsequent inflation than even growth in money supply itself, particularly at 4-year intervals. Regardless of near-term deflation pressures from a continued mortgage crisis, our present course is consistent with double digit inflation once any incipient recovery emerges....As long as we have a set of economic policies aimed at running massive government deficits at the same time individuals are encouraged not to save, we will risk driving this economy into the ground for a very, very long time. "
The average price for a gallon of gasoline in the United States increased nearly 25 cents in the past three weeks on a rise in
crude oil prices, according to the Lundberg survey released on Sunday.
The average national price for self-serve, regular, unleaded gasoline was $2.3010 a gallon on May 15, up from $2.0549 a gallon on April 24, according to a nationwide survey of 5,000 gas stations.
Pacific Ethanol Inc. said Monday its subsidiaries, which own its four wholly-owned ethanol production facilities, have filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the District of Delaware in an effort to restructure their debt.
China is stockpiling commodities such as copper and iron ore as part of a reallocation of its sovereign wealth amid concern that the value of its dollar assets may decline, according to the Royal Bank of Canada.
“It’s part of an overall desire to decrease its exposure to dollar assets,” said
Brian Jackson, senior strategist at Royal Bank of Canada in Hong Kong, in an interview today. China fears the hundreds of billions of dollars the U.S. is spending on bank bailouts and stimulus will cause “higher inflation and a weaker dollar,” he said.
"I've always been of the theory that if you get the consumer right, you're going to get U.S. GDP right and you'll get the trend in global GDP right," Jim Keegan says.
The Australian: "THE heated debate about the Treasury's rapid growth forecasts beyond 2011 overlooks the fact that we really don't know what is happening to the economy now.
It is still not clear whether the pattern of the global downturn resembles Japan's lost decade, the Great Depression or, as Treasury believes, something much more benign.
The data that is emerging from the world economy is all over the place. Some measures show improvement, some show things are getting worse, while many economists are pinning their hopes on statistics showing the rate at which things are getting worse has itself stopped getting worse. "
A report on homebuilder confidence from the National Association of Home Builders showed more improvement in the battered housing sector. The association's Housing Market Index, which measures industry confidence, rose to a reading of 16 in May, up from 14 in April and the ugly reading of 9 in March. It was the highest reading since September, when it came in at 17. In sum, the reading in May is till below a dismal reading in September. That's reality. Housing is in the toilet.
"The slump will not bottom out until foreclosures slow," Richard Dugas Jr., CEO of Pulte Homes, told the Detroit Free Press in a recent interview. The fact is the employment picture sucks. Not far behind is the income picture. Foreclosures will not slow any time soon.
"We think the season's modest uptick is fueled by spring euphoria," said John Burns, CEO of Irvine, Calif.-based John Burns Real Estate Consulting, who conducts his own survey of builder attitudes. He acknowledged the positive influence of mortgage rates, tax credits and improved affordability, but he said the future isn't as bright as some think.
"Further improvement is tempered by the ongoing competition from foreclosures, limited credit for both buyers and builders, and rising unemployment. Concerns over escalating REOs [bank-owned real estate] and further price erosion still weigh heavily," Burns wrote in a Monday note.
Oil ends up $2.69, or 4.8%, at $59.03 a barrel after a Nigerian militant group threatened to block key waterways in the Niger Delta to try to prevent crude exports, according to Reuters.
A fire at a Sunoco refinery also impacted operations in the northeastern U.S., adding to crude's gain.
June gold ends down $9.60, or 1%, at $921.70.
The Centers of Disease Control said Monday that the agency is seeing an unseasonably high rate of reported flu-like symptoms around the U.S., with highest activity in the Pacific Northwest and Southwest. CDC official Anne Schuchat told reporters that the number of confirmed cases of the H1N1 virus is "just the tip of the iceberg," as it takes time to confirm the cases through laboratory testing. She said that while there was no evidence the current strain was mutating into a more deadly virus, "we do not think the U.S. is out of the woods yet." So far, the CDC has received 1,523 reports of confirmed and suspected cases of the illness in 47 states and the District of Columbia. Six people have died in the U.S. since the illness was first identified last month, including a New York City school administrator over the weekend.
The Supreme Court rules that former Atty. Gen. John Ashcroft and FBI Director Robert Mueller can't be sued by more than 700 Muslim men sent to maximum security prison in the wake of the 2001 attacks.
Americans conducted 14.8 billion core searches in April, a 3% improvement from March, as Google Inc.'s sites continued to dominate the search market, according to comScore Inc.
Some 64% of searches conducted in the month of April were on Google sites, with Yahoo Inc. and Microsoft Corp. having market share of 20.4% and 8.2%, respectively. IAC/Interactive Corp.'s Ask network and Time Warner Inc.'s AOL rounded out the top five, each with results under 5%.
John Bogle: “Our nation’s system of retirement security is imperiled, headed for a serious train wreck.That wreck is not merely waiting to happen; we are running on a dangerous track that is leading directly to a serious crash that will disable major parts of our retirement system.”
Any senior who makes less than $75,000 is going to get the stimulus check and the Making Work Pay tax credit. But getting both is against the rules, so as impolite as it is to give only to take back, millions of seniors are going to find that $250 gift from the government deducted from their tax credit next spring.
American Express to eliminate 4,000 jobs.
The Federal Reserve said on Monday that delinquency rates on all loans jumped to their highest level since 1991, with delinquencies on credit cards hitting the highest rate on record. In addition, the Fed said, all consumer loans hit a delinquency rate of 4.7%, also the highest rate on record, while delinquencies on residential real estate hit the highest rate on record as well. Delinquencies on commercial real estate hit 6.4%, the highest rate since 1993, the Fed said.
The Dow Jones Industrial Average added 235.44 points, or 2.9%, to 8,504.08. The S&P 500 Index rose 26.83 points, or 3%, to 909.71. The Nasdaq Composite advanced 52.22 points, or 3.1%, to 1,732.36.
Lowe's forecast second-quarter profit of 51 cents to 55 cents a share with comparable sales expected to decline in a range of 4% to 8%. For the year, the company sees profit of $1.13 to $1.25 a share with comparable sales falling as much as 8%.
After cutting rates a total 3.75 percentage points since September, Israel's central-bank will raise its benchmark interest rate 0.25 percentage point to 0.75% at the end of the year, Citigroup said in a report dated Monday.
India's stocks soared out of the open Monday, with the benchmark Sensex 30 rising 10.7%, triggering market circuit-breakers to halt trading for one hour. The leap came amid optimism that the Congress Party's alliance victory in the just-concluded general election will result in a more market-friendly economic policy. India's rupee surged the most since 1986.
New research by Sandler O'Neill also suggests as many as 500 more banks could close.
John Hussman: "The Fed has turned its balance sheet into a garbage dump, in order to accommodate all of the additional Treasury issuance required to finance the rescue of bank bondholders....The bottom line is that the attempt to save bank bondholders from losses – to provide monetary compensation without economic production – is not sound economic policy but is instead a grand monetary experiment that has never been tried in the developed world except in Germany circa 1921. This policy can only have one of two effects: either it will crowd out over $1 trillion of gross domestic investment that would otherwise have occurred if the appropriate losses had been wiped off the ledger (instead of making bank bondholders whole), or it will result in a stunning and durable increase in the quantity of base money, which will ultimately be accompanied not by a year or two of 5-6% inflation, but most probably by a near-doubling of the U.S. price level over the next decade. As I've noted previously, the growth rate of government spending is better correlated with subsequent inflation than even growth in money supply itself, particularly at 4-year intervals. Regardless of near-term deflation pressures from a continued mortgage crisis, our present course is consistent with double digit inflation once any incipient recovery emerges....As long as we have a set of economic policies aimed at running massive government deficits at the same time individuals are encouraged not to save, we will risk driving this economy into the ground for a very, very long time. "
The average price for a gallon of gasoline in the United States increased nearly 25 cents in the past three weeks on a rise in
crude oil prices, according to the Lundberg survey released on Sunday.
The average national price for self-serve, regular, unleaded gasoline was $2.3010 a gallon on May 15, up from $2.0549 a gallon on April 24, according to a nationwide survey of 5,000 gas stations.
Pacific Ethanol Inc. said Monday its subsidiaries, which own its four wholly-owned ethanol production facilities, have filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the District of Delaware in an effort to restructure their debt.
China is stockpiling commodities such as copper and iron ore as part of a reallocation of its sovereign wealth amid concern that the value of its dollar assets may decline, according to the Royal Bank of Canada.
“It’s part of an overall desire to decrease its exposure to dollar assets,” said
Brian Jackson, senior strategist at Royal Bank of Canada in Hong Kong, in an interview today. China fears the hundreds of billions of dollars the U.S. is spending on bank bailouts and stimulus will cause “higher inflation and a weaker dollar,” he said.
"I've always been of the theory that if you get the consumer right, you're going to get U.S. GDP right and you'll get the trend in global GDP right," Jim Keegan says.
The Australian: "THE heated debate about the Treasury's rapid growth forecasts beyond 2011 overlooks the fact that we really don't know what is happening to the economy now.
It is still not clear whether the pattern of the global downturn resembles Japan's lost decade, the Great Depression or, as Treasury believes, something much more benign.
The data that is emerging from the world economy is all over the place. Some measures show improvement, some show things are getting worse, while many economists are pinning their hopes on statistics showing the rate at which things are getting worse has itself stopped getting worse. "
A report on homebuilder confidence from the National Association of Home Builders showed more improvement in the battered housing sector. The association's Housing Market Index, which measures industry confidence, rose to a reading of 16 in May, up from 14 in April and the ugly reading of 9 in March. It was the highest reading since September, when it came in at 17. In sum, the reading in May is till below a dismal reading in September. That's reality. Housing is in the toilet.
"The slump will not bottom out until foreclosures slow," Richard Dugas Jr., CEO of Pulte Homes, told the Detroit Free Press in a recent interview. The fact is the employment picture sucks. Not far behind is the income picture. Foreclosures will not slow any time soon.
"We think the season's modest uptick is fueled by spring euphoria," said John Burns, CEO of Irvine, Calif.-based John Burns Real Estate Consulting, who conducts his own survey of builder attitudes. He acknowledged the positive influence of mortgage rates, tax credits and improved affordability, but he said the future isn't as bright as some think.
"Further improvement is tempered by the ongoing competition from foreclosures, limited credit for both buyers and builders, and rising unemployment. Concerns over escalating REOs [bank-owned real estate] and further price erosion still weigh heavily," Burns wrote in a Monday note.
Oil ends up $2.69, or 4.8%, at $59.03 a barrel after a Nigerian militant group threatened to block key waterways in the Niger Delta to try to prevent crude exports, according to Reuters.
A fire at a Sunoco refinery also impacted operations in the northeastern U.S., adding to crude's gain.
June gold ends down $9.60, or 1%, at $921.70.
The Centers of Disease Control said Monday that the agency is seeing an unseasonably high rate of reported flu-like symptoms around the U.S., with highest activity in the Pacific Northwest and Southwest. CDC official Anne Schuchat told reporters that the number of confirmed cases of the H1N1 virus is "just the tip of the iceberg," as it takes time to confirm the cases through laboratory testing. She said that while there was no evidence the current strain was mutating into a more deadly virus, "we do not think the U.S. is out of the woods yet." So far, the CDC has received 1,523 reports of confirmed and suspected cases of the illness in 47 states and the District of Columbia. Six people have died in the U.S. since the illness was first identified last month, including a New York City school administrator over the weekend.
The Supreme Court rules that former Atty. Gen. John Ashcroft and FBI Director Robert Mueller can't be sued by more than 700 Muslim men sent to maximum security prison in the wake of the 2001 attacks.
Americans conducted 14.8 billion core searches in April, a 3% improvement from March, as Google Inc.'s sites continued to dominate the search market, according to comScore Inc.
Some 64% of searches conducted in the month of April were on Google sites, with Yahoo Inc. and Microsoft Corp. having market share of 20.4% and 8.2%, respectively. IAC/Interactive Corp.'s Ask network and Time Warner Inc.'s AOL rounded out the top five, each with results under 5%.
John Bogle: “Our nation’s system of retirement security is imperiled, headed for a serious train wreck.That wreck is not merely waiting to happen; we are running on a dangerous track that is leading directly to a serious crash that will disable major parts of our retirement system.”
Any senior who makes less than $75,000 is going to get the stimulus check and the Making Work Pay tax credit. But getting both is against the rules, so as impolite as it is to give only to take back, millions of seniors are going to find that $250 gift from the government deducted from their tax credit next spring.
American Express to eliminate 4,000 jobs.
The Federal Reserve said on Monday that delinquency rates on all loans jumped to their highest level since 1991, with delinquencies on credit cards hitting the highest rate on record. In addition, the Fed said, all consumer loans hit a delinquency rate of 4.7%, also the highest rate on record, while delinquencies on residential real estate hit the highest rate on record as well. Delinquencies on commercial real estate hit 6.4%, the highest rate since 1993, the Fed said.
The Dow Jones Industrial Average added 235.44 points, or 2.9%, to 8,504.08. The S&P 500 Index rose 26.83 points, or 3%, to 909.71. The Nasdaq Composite advanced 52.22 points, or 3.1%, to 1,732.36.
Sunday, May 17, 2009
High End Housing
5/17/09 High End Housing
SF Chronicle: "After 14 months on the market and about a $1.2 million price cut, a large, newly built home in the Oakland hills is on the verge of selling, assuming the bank allows it to trade for less than what's due on the loan.
The approximately $950,000 "short sale" is a prominent example of something brokers don't like to talk about, at least not brokers who represent owners: High-end properties are increasingly coming under the sort of pressure once reserved for moderate homes. In fact, as slowing price declines fuel hope that the real estate bottom is near, other signs suggest the worst is on its way for the region's upscale market.
"The high end, they're hurting more, actually, and you can bargain more," said Pinky Sohal, a Realtor with Legacy Real Estate & Associates, who is representing the purchaser of 1055 Amito Drive in Oakland, a hedge fund manager whom she declined to name. "They're begging for buyers to come in."
The seller's agent didn't respond to inquires....In the Bay Area, the months of unsold inventory of existing single-family homes priced above $1 million reached 14 months in March, more than double where it stood a year ago, according to the California Association of Realtors. The statistic estimates the time it would take to sell all the homes on the market based on the current rate of transactions.
In contrast, inventory of homes priced below $500,000 fell to just 2.6 months, a nearly 80 percent decline. The same general trends were seen on the state level as well.....In addition, notices of default sent to delinquent borrowers in the Bay Area in the first quarter of this year were up 65 percent from a year earlier in ZIP codes where the median price was $800,000 or more, according to DataQuick data analyzed by The Chronicle. That compares with just 17.6 percent for the region as a whole."
"How serious is the present economic mess?" Charlie Munger asks. "Deadly serious. The worst mess since the Great Depression. You can't tell what happens when people get discouraged enough...."I don't see any reason why a major bank that was 'too big to fail' should be anything but a very boring business," he said. "I don't see any reason why you should have a system where every bright young man fresh out of college should have $8 billion to play with."
Barron's Andrew Bary says the bear market in U.S. Treasurys is just getting started, as markets struggle to digest massive bond issuance, and because the huge government stimulus could eventually lead to much higher inflation.
Jordan and Royal Dutch Shell PLC signed a concessionary agreement Sunday to explore for oil in the country's vast oil shale deposits.
In a consortium announced in Sharjah, United Arab Emirates, Austria's OMV AG and Hungary's MOL said they will each take a 10 percent stake in an Iraqi gas production site operated by the sheikdom's Dana Gas and Crescent Petroleum.
The deal gives the European companies a share of an $8 billion project to extract natural gas from the Khor Mor and Chemchemal fields in Iraq's northern Kurdish region.
Having a guaranteed supply source should jump-start efforts to build the 2,000-mile (3,300-kilometer) Nabucco pipeline linking Turkey to central Europe. Moscow opposes the project, as it would bypass Russian export routes.
The Nikkei 225 Average was down 2.2% at 9,059.54 in early action, and the broader Topix Index gave up 2% at 864.30.
SF Chronicle: "After 14 months on the market and about a $1.2 million price cut, a large, newly built home in the Oakland hills is on the verge of selling, assuming the bank allows it to trade for less than what's due on the loan.
The approximately $950,000 "short sale" is a prominent example of something brokers don't like to talk about, at least not brokers who represent owners: High-end properties are increasingly coming under the sort of pressure once reserved for moderate homes. In fact, as slowing price declines fuel hope that the real estate bottom is near, other signs suggest the worst is on its way for the region's upscale market.
"The high end, they're hurting more, actually, and you can bargain more," said Pinky Sohal, a Realtor with Legacy Real Estate & Associates, who is representing the purchaser of 1055 Amito Drive in Oakland, a hedge fund manager whom she declined to name. "They're begging for buyers to come in."
The seller's agent didn't respond to inquires....In the Bay Area, the months of unsold inventory of existing single-family homes priced above $1 million reached 14 months in March, more than double where it stood a year ago, according to the California Association of Realtors. The statistic estimates the time it would take to sell all the homes on the market based on the current rate of transactions.
In contrast, inventory of homes priced below $500,000 fell to just 2.6 months, a nearly 80 percent decline. The same general trends were seen on the state level as well.....In addition, notices of default sent to delinquent borrowers in the Bay Area in the first quarter of this year were up 65 percent from a year earlier in ZIP codes where the median price was $800,000 or more, according to DataQuick data analyzed by The Chronicle. That compares with just 17.6 percent for the region as a whole."
"How serious is the present economic mess?" Charlie Munger asks. "Deadly serious. The worst mess since the Great Depression. You can't tell what happens when people get discouraged enough...."I don't see any reason why a major bank that was 'too big to fail' should be anything but a very boring business," he said. "I don't see any reason why you should have a system where every bright young man fresh out of college should have $8 billion to play with."
Barron's Andrew Bary says the bear market in U.S. Treasurys is just getting started, as markets struggle to digest massive bond issuance, and because the huge government stimulus could eventually lead to much higher inflation.
Jordan and Royal Dutch Shell PLC signed a concessionary agreement Sunday to explore for oil in the country's vast oil shale deposits.
In a consortium announced in Sharjah, United Arab Emirates, Austria's OMV AG and Hungary's MOL said they will each take a 10 percent stake in an Iraqi gas production site operated by the sheikdom's Dana Gas and Crescent Petroleum.
The deal gives the European companies a share of an $8 billion project to extract natural gas from the Khor Mor and Chemchemal fields in Iraq's northern Kurdish region.
Having a guaranteed supply source should jump-start efforts to build the 2,000-mile (3,300-kilometer) Nabucco pipeline linking Turkey to central Europe. Moscow opposes the project, as it would bypass Russian export routes.
The Nikkei 225 Average was down 2.2% at 9,059.54 in early action, and the broader Topix Index gave up 2% at 864.30.
The Primary Trend
5/16/09 The Primary Trend
The National Automobile Dealers Association, an industry group, says the GM and Chrysler cuts combined could wipe out 100,000 jobs. Even the Administration cannot
hire enough census workers to offset that loss of jobs.
Rob Hanna: "The market is starting to show some weakness in ways it hasn’t since the March bottom. This doesn’t necessarily mean a sharp or sustained pullback will ensue (although there are some clues that it could). It does suggest caution is warranted and traders may need to examine long positions with a more discerning eye than has been necessary in the last 2 months. "
According to Bloomberg, “Middle East economies are ‘doing a lot better’ than other emerging markets as oil producers maintain spending on infrastructure projects, International Monetary Fund Mideast Director Masood Ahmed said… ‘Oil producers have continued to spend during the down turn.’”
Before considering the possibility of a recovery, will it occur from personal consumption, finance, and/or residential real estate ? I think the chances are slim for those being engines of future growth. There has been too much damage in those areas. If you are depending on our government, forget it. The government is broke and getting more broke by the day.
The commercial use of oil from US oil shale deposits is likely at least 10 years away and will require technological advances to get past hurdles standing in the way of its commercial use, Interior Secretary Ken Salazar said Wednesday.
"Oil shale needs to be on the table," Salazar said. "But it needs to be on the table in a realistic way."
Tim Wood: "At the core, the basis of Dow Theory has to do strictly with the price movement of the Industrials and the Transports above and below previous secondary high and low points. Yes, values, as Richard Russell often speaks of is a factor, but even then it all comes down to the price movement of both averages.
Robert Rhea wrote, “Dow’s theory holds that the primary trend, once established, must always be considered to be in force until some indication in the averages nullify or reverses their earlier implication.” In light of this quote, the bearish primary trend that was established on November 21, 2007 when both averages closed below their previous secondary low points, still remains intact and to date, nothing has occurred to nullify or reverse that primary trend change."
Tadashi Yanai, the Japanese entrepreneur behind Fast Retailing Co., owner of the Uniqlo clothes brand, has helped fuel speculation that it will bid for Gap Inc.by saying that this was not "a crazy idea," The Times reported Saturday, citing Yanai.
John Mauldin: "It's been 50 years since we have seen unemployment drop as rapidly as it has in the current recession. Given that we have a much smaller percentage of manufacturing jobs now, that volatility is breathtaking."
Mike Burk: "I think the market is likely to consolidate for a week or two with the blue chips holding up better than the secondaries, followed by a run to new highs by the blue chips, but not the secondaries.
I expect the major indices to be lower on Friday May 22 than they were on Friday May 15."
The National Automobile Dealers Association, an industry group, says the GM and Chrysler cuts combined could wipe out 100,000 jobs. Even the Administration cannot
hire enough census workers to offset that loss of jobs.
Rob Hanna: "The market is starting to show some weakness in ways it hasn’t since the March bottom. This doesn’t necessarily mean a sharp or sustained pullback will ensue (although there are some clues that it could). It does suggest caution is warranted and traders may need to examine long positions with a more discerning eye than has been necessary in the last 2 months. "
According to Bloomberg, “Middle East economies are ‘doing a lot better’ than other emerging markets as oil producers maintain spending on infrastructure projects, International Monetary Fund Mideast Director Masood Ahmed said… ‘Oil producers have continued to spend during the down turn.’”
Before considering the possibility of a recovery, will it occur from personal consumption, finance, and/or residential real estate ? I think the chances are slim for those being engines of future growth. There has been too much damage in those areas. If you are depending on our government, forget it. The government is broke and getting more broke by the day.
The commercial use of oil from US oil shale deposits is likely at least 10 years away and will require technological advances to get past hurdles standing in the way of its commercial use, Interior Secretary Ken Salazar said Wednesday.
"Oil shale needs to be on the table," Salazar said. "But it needs to be on the table in a realistic way."
Tim Wood: "At the core, the basis of Dow Theory has to do strictly with the price movement of the Industrials and the Transports above and below previous secondary high and low points. Yes, values, as Richard Russell often speaks of is a factor, but even then it all comes down to the price movement of both averages.
Robert Rhea wrote, “Dow’s theory holds that the primary trend, once established, must always be considered to be in force until some indication in the averages nullify or reverses their earlier implication.” In light of this quote, the bearish primary trend that was established on November 21, 2007 when both averages closed below their previous secondary low points, still remains intact and to date, nothing has occurred to nullify or reverse that primary trend change."
Tadashi Yanai, the Japanese entrepreneur behind Fast Retailing Co., owner of the Uniqlo clothes brand, has helped fuel speculation that it will bid for Gap Inc.by saying that this was not "a crazy idea," The Times reported Saturday, citing Yanai.
John Mauldin: "It's been 50 years since we have seen unemployment drop as rapidly as it has in the current recession. Given that we have a much smaller percentage of manufacturing jobs now, that volatility is breathtaking."
Mike Burk: "I think the market is likely to consolidate for a week or two with the blue chips holding up better than the secondaries, followed by a run to new highs by the blue chips, but not the secondaries.
I expect the major indices to be lower on Friday May 22 than they were on Friday May 15."
Friday, May 15, 2009
Economic Fascism
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.
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.
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.
--------------------------------------------------------------------------------
"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.
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