6/5/10 Government Controls
Bloomberg (Shobhana Chandra): "Unemployed Americans are facing the longest wait on record to find work... The average duration of unemployment jumped to 34.4 weeks in May from 33 weeks the prior month and 16.5 weeks in December 2007... The number of unemployed has almost doubled to 15 million since the start of worst slump since the 1930s."
John Mauldin: "On May 27th the BEA released its first revision to its 1st Quarter 2010 GDP growth rate measurement, lowering the number from a 3.2% annualized growth rate to 3.0% annualized growth. One day later the Consumer Metrics Institute's 'Daily Growth Index' was signaling what we should expect the BEA's measurement of the 3rd Quarter 2010 GDP growth rate to be contracting at about a 2.0% rate.
"The prior BEA estimate of 1st Quarter 2010 GDP growth trailed our 'Daily Growth Index' by 127 days, and because of the rapid rate that the economy was cooling when the measurements were being made the newly adjusted estimate is now trailing our 'Daily Growth Index' by 125 days. Since the 3rd Quarter of 2010 ends 125 days after May 28th (when our 'Daily Growth Index' was recording a 'growth' rate of -1.99%), if the BEA estimates continue to trail our 'Daily Growth Index' in a consistent manner we should expect that the 3rd Quarter's GDP 'growth' rate will be in the -2.0% neighborhood."
TierOne Bank is 81st U.S. bank failure of 2010. TierOne Bank had $2.2 billion in deposits. The failure of TierOne Bank in Lincoln, Neb., means an estimated $297.8M hit to the FDIC's Deposit Insurance Fund. Along with closings in Mississippi and Illinois, that makes 81 failed institutions in 2010.
TierOne was the fourth-largest bank in Nebraska with approximately $2.8 billion in assets as of March 31. It lost $300 million last year on real estate-related loans in Florida, Nevada and other states.
Great Western Bank, of Sioux Falls, South Dakota, agreed to purchase TierOne and assume its $2.2 billion in deposits. TierOne's 69 branch offices will reopen on Saturday as branches of Great Western, said the Federal Deposit Insurance Corp.
Israeli soldiers boarded a ship carrying pro-Palestinian activists, with the military saying there was no violence and the ship was now under Israeli control.
Capital Economics' Paul Dales says that a 39% four-week plunge in mortgage applications signals what's around the corner. With the homebuyers credit now finished, "it is only a matter of time before the underlying weakness of the housing market becomes uncomfortably clear.
Guy Lerner: "I believe natural gas is putting in a bottom, and it has the potential for an extended bullish run. "
Bloomberg (Kate Haywood): "Credit-default swaps on sovereign bonds surged to a record on speculation Europe's debt crisis is worsening after Hungary said it's in a 'very grave situation' because a previous government lied about the economy. The cost of insuring against losses on Hungarian sovereign debt jumped 107.5 bps to a record 416... Swaps on France, Austria, Belgium and Germany also rose, sending the Markit iTraxx SovX Western Europe Index of contracts on 15 governments 21 bps higher to an-all time high of 174.4."
The dollar index rose 2.0% to 88.239 (up 13.3% y-t-d).
Doug Noland: "When confidence is running high, financial conditions run loose. The marginal borrower - Greece, a highly-leveraged U.S. corporation, or perhaps a private-equity fund - enjoys easy Credit Availability. The tendency of things is for finance to expand, asset prices to inflate and economic "output" to increase. And they all feed merrily on themselves. But - in this unstable financial world - the Credit noose begins a rapid tightening the moment confidence is shaken. And the inevitable reversal of financial flows and attendant speculator deleveraging ensures vicious contagion effects, acute fragility, and destabilizing crises of confidence.
One can say that reflations fueled by marketable-based finance are prone to be dynamic and powerful. Unfortunately, once unleashed, these forces are just as powerful on the downside as during expansionary periods. Payback time comes when greed turns to fear and bull falls victim to bear. Finance proves fickle and unreliable. I fear U.S. financial and economic recoveries were built upon inflated expectations and unjustified confidence. Fleeting confidence now creates myriad risks associated with unmet expectations, disappointment and disillusionment."
Early data suggest home sales dropped far more than expected in May, even accounting for the expiration of the homebuyer tax credit - with some markets showing declines of 25-30%.
BP Plc said it aims to siphon off most of the oil gushing from the ruptured deep-sea wellhead within days.
South Korea's leader on Saturday ruled out going to war with North Korea, hours after his government asked the United Nations to punish the communist nation over the sinking of a warship.
Copper traded down to its lowest level since October 2009.
Barron's: "Barclays Capital analyst Douglas Anmuth this morning trimmed his EPS estimates for Google (GOOG) to reflect the impact of the weakening of the Euro against the dollar, as well as the recent decision to change distribution strategy for the Nexus One smart phone.
For 2010, Anmuth now sees profits of $27.67, down from $27.89; for 2011, he goes to $31.61, from $32.36.
Nonetheless, he maintains his Overweight rating and $650 price target."
First, Obama wanted to decide on salaries and bonuses. Now, he wants to determine a public corporation's right to declare dividends to its shareowners. When you voted for Obama, did you know a fascist dictator was coming into power in this land of the free and the brave?
Turning to BP's financial position, Svanberg said, "It remains our aim as always to strike the right balance for shareholders between current returns through the dividend, sustained investment for long term growth and maintaining a prudent gearing level. We will do all we can to protect and grow the value of the company in which you have invested.
"We fully understand the importance of our dividend to our shareholders. Future decisions on the quarterly dividend will be made by the Board, as they always have been, on the basis of the circumstances at the time. All factors will be considered and the decision taken in the long term interests of the shareholders."
In commenting on the significant financial costs of the incident, the company pointed out that:
* BP has already spent over $1 billion in gross direct costs for the response, clean up and relief wells.
* Spending at this rate is expected to continue for some time beyond successful completion of work to stop the flow of oil from the damaged well. Any fines and penalties would present additional costs.
* The costs of containment, removal and clean up are likely to be largely complete in 2010.
* The longer-term costs of environmental remediation, claims and litigation are not predictable at this stage, but they will be sizable and are likely to be spread over many years. Hayward assured shareholders that the company was prepared to meet those costs. "We will also meet our obligations to our employees, and to our other stakeholders, including hundreds of thousands of shareholders, and millions more savers in mutual and pension funds, who rely on their investment in BP as part of their financial security and in many cases their retirement income. The financial consequences of this incident will undoubtedly be severe, but BP is a strong company and we have weathered many storms before."
G20 drops support for fiscal stimulus. European officials said today that budget tightening needs to come next year, and German Chancellor Angela Merkel said that growth can’t come at the price of high state budget deficits.
The civilian labor force fell by 322,000 May.
Rebecca Howard: "New Zealand has emerged as an oil-exploration hotspot for some of the world's top energy companies, but the surprise rush of interest is intensifying concerns among environmentalists about a local version of the catastrophic Gulf of Mexico oil spill.
Brazil's state-owned giant Petroleo Brasileiro this week secured a five-year permit to explore the Raukumara Basin, located off the North Island's East Coast.
The move comes a few months after Anadarko of the U.S. acquired acreage off the coast of New Zealand for the first time, while ExxonMobil is hoping to strike oil or gas in the Great South Basin.
"I'm sure that all Petrobras' competitors will be looking with some interest at their involvement here," said Energy and Resources Minister Gerry Brownlee. "It's verification New Zealand is a very prospective country."
Ashok Shah, the CIO at London & Capital: "There is a risk that the sovereign debt crisis could morph into another run on undercapitalized banks in Europe," Shah said. "The IMF can support liquidity but do nothing about solvency."
With swap spreads negative in the U.S., UK and Japan, Shah says this is not just a euro zone problem and is increasingly worried about the politicians' response to the crisis.
Saturday, June 05, 2010
Friday, June 04, 2010
Miserable Employment Report
6/4/10 Miserable Employment Report
U.S. nonfarm payrolls expanded by a seasonally adjusted 431,000 in May, but virtually all the new jobs were temporary jobs at the U.S. Census, leaving private-sector hiring very weak in May, the Labor Department reported Friday. Excluding 411,000 temporary Census workers, payrolls rose by 20,000 in May. According to the survey of 400,000 business establishments, private-sector payrolls increased by 41,000, the fifth straight gain. The unemployment rate fell to a seasonally adjusted 9.7% in May from 9.9% in April, according to a separate survey of 60,000 households. 31,000 gain in temp help and 215k birth-death adjustment. This is a miserable report and clearly not surprising on my part. There are now more than 15 million unemployed, including 6.8 million who have been jobless for more than six months.
Off about 60 points before the report, futures for the Dow Jones Industrial Average were down 212 points at 10,046.00. S&P 500 futures were down 24.50 points at 1,079.00. Nasdaq 100 futures were off 40 points at 1,857.75.
The euro drops to 1.1960 vs. the dollar and to an all-time low vs the swiss franc.
Hungary's BUX index fell 3.4% to 21,286.80 on Friday. "Comments from the PM's spokesman, Peter Szijjarto, raised the possibility that Hungary could default on its debts and that the new government would (bizarrely) not implement austerity measures," said analysts at RBC Capital Markets. "The new right-wing government said that the previous administration had lied about the true state of the fiscal accounts and the deficit was double the officially agreed IMF target of 3.8%of GDP," they added.
Leading policymakers were unusually candid on Friday in voicing fears that the euro zone's financial and banking woes could derail the global economic recovery.
ZeroHedge: "Three days into the month, and the Treasury has already redeemed $169 billion in debt, of which $137 billion in Bills. Run-rated (for Bills alone) this is about $5.5 trillion annually, or basically 63% of all marketable US debt. And somehow the Treasury is lowering the amount of new bond issuance beginning next week. We wonder just where Tim Geithner will get the much needed cash to plug not only the increasing daily deficit spending (today alone the US burned $21 billion net of debt transfers, gross the number was even worse), as well as to fund daily rolls once rates start eventually increasing. This is financial suicide, although the Treasury knows that all too well. It is now stuck in a corner and has no way out than to hope for the best."
The troubles of Greece and other heavily indebted European governments dominated conversations ahead of a meeting of finance ministers and central bankers of the Group of 20 of the world's top developed and emerging economies, Canadian Finance Minister Jim Flaherty said.
"It is essential to ensure continued recovery that Europe fix its banks. It is essential that certain vulnerable European nations follow through with major fiscal consolidation, and get the job done," Flaherty told reporters in Busan, South Korea.
Rob Hanna: 'Thursday’s market action was marked by low volume and a narrow range. Both came in at the lowest levels in over a month, Such uninspired action has often led to pullbacks in the past. "
Crude oil futures for July delivery fell $1.58, or 2.1%, to $73.03 a barrel. Gold for August dropped $7, or 0.6%, to $1,203.10 an ounce.
A report by Reuters that a growing number of Chinese exporters turn down euro payment.
Rumors have been spreading this morning that French bank Societe Generale SA is having some problems with its derivatives situation, the Financial Times’s Neil Dennis reports. SocGen declined to comment, notes Dennis. SocGen shares fell 8% in Paris.
The Federal Reserve said that U.S. commercial paper outstanding fell to the lowest on record. The U.S. market for short-term IOUs, commercial paper, declined $10.2 billion to $1.06 trillion in the week ended June 2, the lowest since at least 1999, data compiled by Bloomberg show.
Wal-Mart Stores Inc. said it plans to buy back as much as $15 billion of shares in a new program announced Friday at its annual shareholders meeting. The plan replaces the existing $15 billion program, which had about $5 billion remaining, Chief Financial Officer Tom Schoewe said. Wal-Mart has bought back $18.5 billion of shares the past three years and said it plans to pay more than $4.5 billion in dividends this year. Its annual dividend rose 11% to $1.21 a share this year from $1.09 a share last year.
The Dow Jones Industrial Average fell 323 points, or 3.2%, to end at 9,931.97, its worst one-day drop since May 20. The S&P 500 index fell 37.95 points, or 3.4%, to 1,064.88. Of the S&P's 10 sectors, industrials fell the hardest, off 4.6%, followed by financials and materials, both down 3.9%. The Nasdaq Composite fell 83.86 points, or 3.6%, to 2,219.17. For the week, the Dow fell 2%, the S&P was down 2.3%, and the Nasdaq dropped 1.7%.
Crude for July delivery lost $3.10 to $71.51 a barrel - the largest-single day drop for a most-active contract since February 4, when prices dropped 5%. Gold for August delivery added $7.70, or 0.6%, to settle at $1,217.70. Other metals ended lower, with palladium and copper the worst hit.
David Rosenberg: "Real organic income is still not growing and down nearly $500 billion from pre-recession levels."
U.S. nonfarm payrolls expanded by a seasonally adjusted 431,000 in May, but virtually all the new jobs were temporary jobs at the U.S. Census, leaving private-sector hiring very weak in May, the Labor Department reported Friday. Excluding 411,000 temporary Census workers, payrolls rose by 20,000 in May. According to the survey of 400,000 business establishments, private-sector payrolls increased by 41,000, the fifth straight gain. The unemployment rate fell to a seasonally adjusted 9.7% in May from 9.9% in April, according to a separate survey of 60,000 households. 31,000 gain in temp help and 215k birth-death adjustment. This is a miserable report and clearly not surprising on my part. There are now more than 15 million unemployed, including 6.8 million who have been jobless for more than six months.
Off about 60 points before the report, futures for the Dow Jones Industrial Average were down 212 points at 10,046.00. S&P 500 futures were down 24.50 points at 1,079.00. Nasdaq 100 futures were off 40 points at 1,857.75.
The euro drops to 1.1960 vs. the dollar and to an all-time low vs the swiss franc.
Hungary's BUX index fell 3.4% to 21,286.80 on Friday. "Comments from the PM's spokesman, Peter Szijjarto, raised the possibility that Hungary could default on its debts and that the new government would (bizarrely) not implement austerity measures," said analysts at RBC Capital Markets. "The new right-wing government said that the previous administration had lied about the true state of the fiscal accounts and the deficit was double the officially agreed IMF target of 3.8%of GDP," they added.
Leading policymakers were unusually candid on Friday in voicing fears that the euro zone's financial and banking woes could derail the global economic recovery.
ZeroHedge: "Three days into the month, and the Treasury has already redeemed $169 billion in debt, of which $137 billion in Bills. Run-rated (for Bills alone) this is about $5.5 trillion annually, or basically 63% of all marketable US debt. And somehow the Treasury is lowering the amount of new bond issuance beginning next week. We wonder just where Tim Geithner will get the much needed cash to plug not only the increasing daily deficit spending (today alone the US burned $21 billion net of debt transfers, gross the number was even worse), as well as to fund daily rolls once rates start eventually increasing. This is financial suicide, although the Treasury knows that all too well. It is now stuck in a corner and has no way out than to hope for the best."
The troubles of Greece and other heavily indebted European governments dominated conversations ahead of a meeting of finance ministers and central bankers of the Group of 20 of the world's top developed and emerging economies, Canadian Finance Minister Jim Flaherty said.
"It is essential to ensure continued recovery that Europe fix its banks. It is essential that certain vulnerable European nations follow through with major fiscal consolidation, and get the job done," Flaherty told reporters in Busan, South Korea.
Rob Hanna: 'Thursday’s market action was marked by low volume and a narrow range. Both came in at the lowest levels in over a month, Such uninspired action has often led to pullbacks in the past. "
Crude oil futures for July delivery fell $1.58, or 2.1%, to $73.03 a barrel. Gold for August dropped $7, or 0.6%, to $1,203.10 an ounce.
A report by Reuters that a growing number of Chinese exporters turn down euro payment.
Rumors have been spreading this morning that French bank Societe Generale SA is having some problems with its derivatives situation, the Financial Times’s Neil Dennis reports. SocGen declined to comment, notes Dennis. SocGen shares fell 8% in Paris.
The Federal Reserve said that U.S. commercial paper outstanding fell to the lowest on record. The U.S. market for short-term IOUs, commercial paper, declined $10.2 billion to $1.06 trillion in the week ended June 2, the lowest since at least 1999, data compiled by Bloomberg show.
Wal-Mart Stores Inc. said it plans to buy back as much as $15 billion of shares in a new program announced Friday at its annual shareholders meeting. The plan replaces the existing $15 billion program, which had about $5 billion remaining, Chief Financial Officer Tom Schoewe said. Wal-Mart has bought back $18.5 billion of shares the past three years and said it plans to pay more than $4.5 billion in dividends this year. Its annual dividend rose 11% to $1.21 a share this year from $1.09 a share last year.
The Dow Jones Industrial Average fell 323 points, or 3.2%, to end at 9,931.97, its worst one-day drop since May 20. The S&P 500 index fell 37.95 points, or 3.4%, to 1,064.88. Of the S&P's 10 sectors, industrials fell the hardest, off 4.6%, followed by financials and materials, both down 3.9%. The Nasdaq Composite fell 83.86 points, or 3.6%, to 2,219.17. For the week, the Dow fell 2%, the S&P was down 2.3%, and the Nasdaq dropped 1.7%.
Crude for July delivery lost $3.10 to $71.51 a barrel - the largest-single day drop for a most-active contract since February 4, when prices dropped 5%. Gold for August delivery added $7.70, or 0.6%, to settle at $1,217.70. Other metals ended lower, with palladium and copper the worst hit.
David Rosenberg: "Real organic income is still not growing and down nearly $500 billion from pre-recession levels."
Thursday, June 03, 2010
ADP
6/3/10 ADP
ADP said U.S. companies hired 55,000 additional workers in May, short of the 100,000 forecast by economists.
The report comes one day before the government releases its estimates of nonfarm payrolls and the unemployment rate. The MarketWatch concensus looks for a gain of 513,000 in May, including about 400,000 workers hired temporarily to conduct the 2010 Census. Service-producing industries added 78,000 jobs, the fifth straight increase, ADP said. Goods-producing industries shed 23,000 jobs, despite a gain of 15,000 in manufacturing.
Costco reported. Excluding higher gasoline prices and stronger foreign currencies, comparable-store sales rose 5% in May, reflecting increases of 5% in the U.S. and 9% internationally, Costco reported.
BP said Thursday that it supports the U.S. government's decision to construct six sand barriers to protect Louisiana marshes and that the company will fund the estimated $360 million cost of the project. "BP is committed to implementing the most effective measures to protect the coastline of Louisiana and reduce the impact of the oil and gas spill in the Gulf of Mexico," said CEO Tony Hayward. BP said it has already provided $170 million to Louisiana, Alabama, Mississippi and Florida to help with their response costs and has paid around $42 million in compensation to people and companies affected by the spill.
Nonfarm business sector labor productivity increased at a 2.8 percent annual rate during the first quarter of 2010, the U.S. Bureau of Labor Statistics reported today, with output rising 4.0 percent and hours rising 1.1 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the first quarter of 2009 to the first quarter of 2010, output increased 3.0 percent while hours fell 3.0 percent, yielding an increase in productivity of 6.1 percent (tables A, and 2). This gain in productivity from the same quarter a year ago was the largest since output per hour increased 6.1 percent over the four-quarter period ending in the first quarter of 2002.
The number of Americans receiving food stamps in March topped 40 million for the first time as the jobless rate hovered near a 26-year high.
"In the week ending May 29, the advance figure for seasonally adjusted initial claims was 453,000, a decrease of 10,000 from the previous week's revised figure of 463,000. The 4-week moving average was 459,000, an increase of 1,750 from the previous week's revised average of 457,250.
The advance seasonally adjusted insured unemployment rate was 3.6 percent for the week ending May 22, unchanged from the prior week's unrevised rate of 3.6 percent.
The advance number for seasonally adjusted insured unemployment during the week ending May 22 was 4,666,000, an increase of 31,000 from the preceding week's revised level of 4,635,000. The 4-week moving average was 4,654,000, an increase of 9,750 from the preceding week's revised average of 4,644,250.
Marty Chenard: "Institutional Distribution levels are decreasing. If they converge more, with Institutional selling dropping below the 9000 level, then the market's bias will start shifting to short term positive."
Rob Hanna: "The CBI closed Wednesday at 10, which is as low as it has been lately. This is now the 9th trading day in a row with a close of 10 or higher - a very long stretch for such an extreme reading. This raises the question of whether having such strongly oversold stocks take so long to bounce suggests anything. Is this failure of the CBI to drop back down a sign of more market weakness to come? Or does it suggest that perhaps it is just taking some time to carve out a meaningful bottom?
I ran some tests and frankly there weren’t enough instances to tell. The only two other instances where the CBI managed to stay above 10 for at least 9 days were 12/16/96 and 9/28/01. In both cases we saw strong rallies that lasted at least a couple of months. If I loosen the requirement to only requiring the CBI to remain at 10 or above for at least 6 days rather than 9, then two more instances arise. They were on 9/4/98 and 7/25/02. These didn’t mark bottoms but they were followed by powerful 1-month rallies.
This isn’t decisive proof that a rally is about to emerge. Still, the stubbornly high CBI certainly doesn’t appear to be bad news."
The U.S. economy is almost strong enough to allow the Fed to begin raising interest rates, but we're not quite there yet, Atlanta Fed President Dennis Lockhart says. "As the economy continues to improve and financial markets find firmer ground, extraordinarily low policy rates will not be needed to promote recovery and will become inconsistent with maintaining price stability."
Natural gas is poised for a rally to $4.80 per million British thermal units this month, according to a technical analysis by Chris Kostas, a senior analyst at Energy Security Analysis Inc.
A momentum indicator known as MACD suggests the July gas contract on the New York Mercantile Exchange is in a “bullish divergence” that will send the futures higher, according to Kostas, based in Wakefield, Massachusetts.
Buffett Expects ‘Terrible Problem’ for Municipal Debt.
“‘The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,’ said Li Daokui, a member of the bank’s monetary policy committee.
“‘It is more than (just) a bubble problem,’ he told the Financial Times in an interview published Tuesday. The property market in the United States collapsed as too many people were unable to repay their high-risk, or sub-prime mortgages, leading to a credit crunch in which thousands lost their homes and lending dried up…
“…He warned the high cost of housing could hamper future growth by slowing urbanisation. Rising prices were also a potential political flashpoint, especially among younger people who felt locked out of having their own home. ‘When prices go up, many people, especially young people, become very anxious,’ he said. ‘It is a social problem.’”
China warns US over a decision to slap duties on imports of Chinese steel gratings.
Natural-gas futures added to gains on Thursday after a report showed a smaller-than-expected increase in the nation's stockpiles. Natural gas for July delivery rose 9 cents, or 2.1%, to $4.52 per million British thermal units. The Energy Information Administration reported Thursday an increase of 88 billion cubic feet in natural gas in storage. Analysts polled by Platts had predicted an increase between 90 and 94 billion cubic feet.
Orders for U.S.-made factory goods increased a seasonally adjusted 1.2% in April, led by a tripling in orders for civilian airplanes and parts, the Commerce Department estimated Thursday. Excluding transportation goods, orders fell 0.5%. Shipments rose 0.6%. Orders for core capital equipment goods fell 2.6% after rising 6.7% in March. Inventories declined 0.2%. The inventory-to-sales ratio remained at 1.24, the lowest since July 2008 and a sign that inventories may be too low. Economists surveyed by MarketWatch were expecting factory orders to rise 1.8%. March orders were revised higher to a 1.7% gain from 1.1% earlier.
Services industries in the United States were growing for the fifth straight month in May, the Institute for Supply Management reported Thursday. The ISM non-manufacturing index was unchanged at 55.4% in May. Economists surveyed by MarketWatch were looking for the index to slide to 55.2% in May. Readings over 50% indicate more firms were expanding than contracting. In May, 16 of 18 industries were growing. The new orders index fell 1.1 percentage points to 57.1%, and the employment index rose above 50% for the first time in 29 months.
EIA: Oil inventories decrease by 1.9 mln barrels. Crude oil for July delivery added $1.75 to settle at $74.61 a barrel on the New York Mercantile Exchange. Natural gas prices jumped 6% as a separate report showed a smaller-than-expected increase in natural gas in storages. Natural gas for July delivery added 27 cents to $4.69 per million British thermal units.
The Dow Jones industrials closed up 6 points to 10,255. Trading was volatile: The blue chips had been up as many as 66 points during the day -- and down as many as 74 points. The Standard & Poor's 500 Index was up 4 points to 1,103. The Nasdaq Composite Index was up 22 points to 2,303.
ZeroHedge: "The Fed lent out $6.6 billion in liquidity swaps this week to foreign banks, of which the biggest beneficiary was the ECB, with a 1 week swap of $5.4 billion and an 84 day swap of $1.0 billion. The only other bank receiving Fed aid was the Bank of Japan, which got $210 million. What is funny is that the ECB is now an example of just how large the FX imbalance in Europe is: the ECB has had to lend out $6.4 billion in dollars even as banks have hoarded €320 billion in euro deposits with the ECB, a new all time record. In other words, nobody wants euros, and everybody is dying to get their hands on dollars. But somehow the market is supposed to believe the funding situation in Europe is ok. Lastly, the $6.6 billion in total Fed liquidity swaps $5.4 billion greater than the prior week's $1.2 billion. We wonder what spin will be applied to explain the 500% increase in world dollar funding requirements."
ADP said U.S. companies hired 55,000 additional workers in May, short of the 100,000 forecast by economists.
The report comes one day before the government releases its estimates of nonfarm payrolls and the unemployment rate. The MarketWatch concensus looks for a gain of 513,000 in May, including about 400,000 workers hired temporarily to conduct the 2010 Census. Service-producing industries added 78,000 jobs, the fifth straight increase, ADP said. Goods-producing industries shed 23,000 jobs, despite a gain of 15,000 in manufacturing.
Costco reported. Excluding higher gasoline prices and stronger foreign currencies, comparable-store sales rose 5% in May, reflecting increases of 5% in the U.S. and 9% internationally, Costco reported.
BP said Thursday that it supports the U.S. government's decision to construct six sand barriers to protect Louisiana marshes and that the company will fund the estimated $360 million cost of the project. "BP is committed to implementing the most effective measures to protect the coastline of Louisiana and reduce the impact of the oil and gas spill in the Gulf of Mexico," said CEO Tony Hayward. BP said it has already provided $170 million to Louisiana, Alabama, Mississippi and Florida to help with their response costs and has paid around $42 million in compensation to people and companies affected by the spill.
Nonfarm business sector labor productivity increased at a 2.8 percent annual rate during the first quarter of 2010, the U.S. Bureau of Labor Statistics reported today, with output rising 4.0 percent and hours rising 1.1 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the first quarter of 2009 to the first quarter of 2010, output increased 3.0 percent while hours fell 3.0 percent, yielding an increase in productivity of 6.1 percent (tables A, and 2). This gain in productivity from the same quarter a year ago was the largest since output per hour increased 6.1 percent over the four-quarter period ending in the first quarter of 2002.
The number of Americans receiving food stamps in March topped 40 million for the first time as the jobless rate hovered near a 26-year high.
"In the week ending May 29, the advance figure for seasonally adjusted initial claims was 453,000, a decrease of 10,000 from the previous week's revised figure of 463,000. The 4-week moving average was 459,000, an increase of 1,750 from the previous week's revised average of 457,250.
The advance seasonally adjusted insured unemployment rate was 3.6 percent for the week ending May 22, unchanged from the prior week's unrevised rate of 3.6 percent.
The advance number for seasonally adjusted insured unemployment during the week ending May 22 was 4,666,000, an increase of 31,000 from the preceding week's revised level of 4,635,000. The 4-week moving average was 4,654,000, an increase of 9,750 from the preceding week's revised average of 4,644,250.
Marty Chenard: "Institutional Distribution levels are decreasing. If they converge more, with Institutional selling dropping below the 9000 level, then the market's bias will start shifting to short term positive."
Rob Hanna: "The CBI closed Wednesday at 10, which is as low as it has been lately. This is now the 9th trading day in a row with a close of 10 or higher - a very long stretch for such an extreme reading. This raises the question of whether having such strongly oversold stocks take so long to bounce suggests anything. Is this failure of the CBI to drop back down a sign of more market weakness to come? Or does it suggest that perhaps it is just taking some time to carve out a meaningful bottom?
I ran some tests and frankly there weren’t enough instances to tell. The only two other instances where the CBI managed to stay above 10 for at least 9 days were 12/16/96 and 9/28/01. In both cases we saw strong rallies that lasted at least a couple of months. If I loosen the requirement to only requiring the CBI to remain at 10 or above for at least 6 days rather than 9, then two more instances arise. They were on 9/4/98 and 7/25/02. These didn’t mark bottoms but they were followed by powerful 1-month rallies.
This isn’t decisive proof that a rally is about to emerge. Still, the stubbornly high CBI certainly doesn’t appear to be bad news."
The U.S. economy is almost strong enough to allow the Fed to begin raising interest rates, but we're not quite there yet, Atlanta Fed President Dennis Lockhart says. "As the economy continues to improve and financial markets find firmer ground, extraordinarily low policy rates will not be needed to promote recovery and will become inconsistent with maintaining price stability."
Natural gas is poised for a rally to $4.80 per million British thermal units this month, according to a technical analysis by Chris Kostas, a senior analyst at Energy Security Analysis Inc.
A momentum indicator known as MACD suggests the July gas contract on the New York Mercantile Exchange is in a “bullish divergence” that will send the futures higher, according to Kostas, based in Wakefield, Massachusetts.
Buffett Expects ‘Terrible Problem’ for Municipal Debt.
“‘The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,’ said Li Daokui, a member of the bank’s monetary policy committee.
“‘It is more than (just) a bubble problem,’ he told the Financial Times in an interview published Tuesday. The property market in the United States collapsed as too many people were unable to repay their high-risk, or sub-prime mortgages, leading to a credit crunch in which thousands lost their homes and lending dried up…
“…He warned the high cost of housing could hamper future growth by slowing urbanisation. Rising prices were also a potential political flashpoint, especially among younger people who felt locked out of having their own home. ‘When prices go up, many people, especially young people, become very anxious,’ he said. ‘It is a social problem.’”
China warns US over a decision to slap duties on imports of Chinese steel gratings.
Natural-gas futures added to gains on Thursday after a report showed a smaller-than-expected increase in the nation's stockpiles. Natural gas for July delivery rose 9 cents, or 2.1%, to $4.52 per million British thermal units. The Energy Information Administration reported Thursday an increase of 88 billion cubic feet in natural gas in storage. Analysts polled by Platts had predicted an increase between 90 and 94 billion cubic feet.
Orders for U.S.-made factory goods increased a seasonally adjusted 1.2% in April, led by a tripling in orders for civilian airplanes and parts, the Commerce Department estimated Thursday. Excluding transportation goods, orders fell 0.5%. Shipments rose 0.6%. Orders for core capital equipment goods fell 2.6% after rising 6.7% in March. Inventories declined 0.2%. The inventory-to-sales ratio remained at 1.24, the lowest since July 2008 and a sign that inventories may be too low. Economists surveyed by MarketWatch were expecting factory orders to rise 1.8%. March orders were revised higher to a 1.7% gain from 1.1% earlier.
Services industries in the United States were growing for the fifth straight month in May, the Institute for Supply Management reported Thursday. The ISM non-manufacturing index was unchanged at 55.4% in May. Economists surveyed by MarketWatch were looking for the index to slide to 55.2% in May. Readings over 50% indicate more firms were expanding than contracting. In May, 16 of 18 industries were growing. The new orders index fell 1.1 percentage points to 57.1%, and the employment index rose above 50% for the first time in 29 months.
EIA: Oil inventories decrease by 1.9 mln barrels. Crude oil for July delivery added $1.75 to settle at $74.61 a barrel on the New York Mercantile Exchange. Natural gas prices jumped 6% as a separate report showed a smaller-than-expected increase in natural gas in storages. Natural gas for July delivery added 27 cents to $4.69 per million British thermal units.
The Dow Jones industrials closed up 6 points to 10,255. Trading was volatile: The blue chips had been up as many as 66 points during the day -- and down as many as 74 points. The Standard & Poor's 500 Index was up 4 points to 1,103. The Nasdaq Composite Index was up 22 points to 2,303.
ZeroHedge: "The Fed lent out $6.6 billion in liquidity swaps this week to foreign banks, of which the biggest beneficiary was the ECB, with a 1 week swap of $5.4 billion and an 84 day swap of $1.0 billion. The only other bank receiving Fed aid was the Bank of Japan, which got $210 million. What is funny is that the ECB is now an example of just how large the FX imbalance in Europe is: the ECB has had to lend out $6.4 billion in dollars even as banks have hoarded €320 billion in euro deposits with the ECB, a new all time record. In other words, nobody wants euros, and everybody is dying to get their hands on dollars. But somehow the market is supposed to believe the funding situation in Europe is ok. Lastly, the $6.6 billion in total Fed liquidity swaps $5.4 billion greater than the prior week's $1.2 billion. We wonder what spin will be applied to explain the 500% increase in world dollar funding requirements."
Wednesday, June 02, 2010
Gulf of Mexico
6/2/10 Gulf of Mexico
BP hopes to place a cap on a fractured oil pipe and contain the Gulf of Mexico spill within the next 24 hours, a top company official said Tuesday.
"If everything goes well, within the next 24 hours, we could have this contained," BP's chief operating officer Doug Suttles told reporters in Louisiana.
The U.S. Food and Drug Administration approved on Tuesday the sale of Amgen Inc's osteoporosis drug Prolia to help prevent fractures in postmenopausal women just days after the medicine received European approval.
US Mint has run out of American Eagle silver coins and is also out of gold American Eagles.
FT: "The events of May 6 revealed that while getting rid of old-style “specialist” market makers has reduced the cost of trading by narrowing bid-ask spreads, the benefit has come at a cost. Now, no one has an obligation to provide prices for all shares all the time during a trading day, as trading has fragmented across an array of electronic trading venues and traders. The moment the markets grow too risky, many new electronic market makers appear only too willing to head for the exit.”
Martin Hutchinson: "In its simplest form as understood by leftist politicians and many of the dozier members of the general public, Keynes' theory is nothing more nor less than a fallacy. It fails to recognize that the stimulus money has to come from somewhere, and that withdrawing it from circulation will have an opposing effect on jobs that may cancel out the Keynesian effect of the spending. The Congressional Budget Office's scoring of the jobs created by the stimulus, for example, estimates the Keynesian multiplier for each item of spending and from this estimates job creation. It neither corrects its estimates by reference to newly released unemployment data, nor takes account of the economic effect of the government borrowing that funds the stimulus spending.
Keynes himself, a subtler economist than many of his followers, did not take account of the effect of interest rates on conditions generally, but he also did not recommend “stimulus” spending in every downturn. In his view, only when the economy had become trapped in a suboptimal equilibrium, with some available resources unused and output below the full employment level, should a burst of government spending be used to get it out. Such a suboptimal equilibrium is theoretically impossible under classical economics, but Keynes, recognizing the real world in the labor market if not the capital market, postulated that in a world with strong unions wages might be sticky on the downside, in which case the labor market could equilibrate at less than full employment."
Japanese Prime Minister Yukio Hatoyama will announce his resignation at an emergency meeting of ruling Democratic Party of Japan lawmakers later Wednesday, national broadcaster NHK reported. NHK said Hatoyama conveyed his intent to resign to DPJ leaders.
Employers announced 38,810 job cuts in the month, slightly more than the 38,326 unveiled in April, according to the report from global outplacement consultancy Challenger, Gray & Christmas.
Iran's central bank has announced it will sell 45 billion euros from its foreign exchange reserves to buy dollars and gold, Reuters reported Wednesday, citing China's official Xinhua news agency.
The market for corporate bond sales closed as concern European banks will take more writedowns and losses led investors to shun all but the safest government debt.
No companies issued bonds in the U.S. yesterday, compared with $2.2 billion on the corresponding day following the Memorial Day weekend in 2009, according to data compiled by Bloomberg. In Europe, 1.35 billion euros ($1.66 billion) was raised from two sales of covered bonds, versus 6.5 billion euros a year earlier, Bloomberg data show.
China's Stocks Decline to 13-Month Low.
China Daily: "A year and half after the first shock waves of the global financial tsunami, Western economies - including the US and the European Union (EU) but excluding Australia and Canada, which are big natural resources exporters - are marching toward economic failure. I base this assertion on just one thing: Their governments are afraid to do the right thing.
With the full knowledge of what their fatal policies will lead to, their politicians do not seem to have the political courage to rally the support of the people to accept the necessary pain and make the sacrifices as preached by the Washington Consensus. Instead, Western governments have taken the other direction.
Much attention has been focused on the stagflation effect of spawning banknotes from helicopters, a metaphor for monetary quantitative easing.
That was bad already. Worse, the money has been given to a bunch of rich crooks who created the present quagmire in the first place. This is more than robbing the poor to pay the rich.
It is a typical case of grave moral hazard, especially in the US, where those who follow the rules are being punished for the benefit of those who destroy them. The world is now turned upside down, and it clearly spells trouble."
Stephen Schork: " Last week spot Nymex Henry Hub futures traded up through and closed above (positively sloped) 14, 30 and 50 day moving averages. What’s more, as of Friday the RSI, 58.1, was also sloped to the upside. These are indeed bullish events, but with one caveat… volume was very weak last week.
Nevertheless, here at The Schork Report we remain cautiously bullish in gas as we approach the dog days of summer."
Americans make up 5 per cent of the world's population but guzzle 25 per cent of the oil supply. Were our demand for oil considerably less, then companies would not be drilling one mile down in the ocean. All Americans are responsible for this oil spill.
The pending home sales index rose 6% in April after an upwardly revsed 7.1% increase in March, the National Association of Realtors reported Wednesday. The index covers signed contracts, not final sales, which usually lag by a month or two. The federal government has been subsidizing home sales with tax credits of up to $8,000 for qualified buyers who signed a sales contract by the end of April. The sale must close by June 30 to qualify. The index is up 22% compared with April 2009.
UK insurer Prudential has abandoned its plan to buy AIG's Asian life unit for $35.5 billion, leaving management under fire and the company facing a $659 million bill for failure.
BP Plc successfully cut the riser pipe at the ruptured well in the bottom of the Gulf of Mexico, but the diamond wire blade got stuck during the second cut on Wednesday, Coast Guard Admiral Thad Allen said in a press conference. BP will attempt to work the blade out of the pipe or possibly lower a second saw down to the pipe. Allen said BP remains confident that it will make the cut in order to put a cap over the leaking pipe. The results of the effort should be known by the end of the day, he said. If it's a clean cut, BP will put a cap with a rubber seal on it to capture the leaking oil; if not, it'll use a looser-fitting top hat cap to capture the oil, he said.
Jim Letourneau: "While things are looking pretty grim for the Gulf of Mexico, it's no stranger to having oil contaminate its ecosystem. Indeed natural processes are responsible for more than 60% of the petroleum entering North American waters, according to the National Academies. I'm not saying the BP (BP) disaster is excusable but sometimes having some sense of proportion can lead informed discussion instead of a media circus. The NASA Earth Observatory scientists estimated in 2000 that oil seeps from the sea floor at more than 600 locations. In aggregate, the annual volume of natural seepage in the Gulf of Mexico is conservatively estimated to equal that of two Exxon (XOM) Valdez spills every year. The issue with the BP disaster is that all the oil is coming from a single source like a fire hose instead of hundreds of leaking faucets. The use of dispersants may help mitigate the damage and give hydrocarbon-degrading microbes a better chance to chow down on some of the spill."
The Financial Times on Monday reported that, according to several Google employees, Windows is on its way out in the company as a result of security concerns.
The Dow Jones industrials jumped 226 points, or 2.3%, to 10,250. The Nasdaq Composite Index added 59 points, or 2.6%, to 2,281. The Standard & Poor's 500 Index was up 28 points, or 2.6%, to 1,098.
Crude-oil stockpiles declined 1.4 million barrels in the week ended May 28, The American Petroleum Institute reported Wednesday. The trade group based in Washington. Analysts polled by Platts had predicted a decline of 1 million barrels. Gasoline inventories declined by 962,000 barrels, the API reported. That compared to expectations of a decrease around 750,000, according to Platts. Crude oil settled marginally higher on Wednesday, at $72.86 a barrel, and traded at $73.42 a barrel in after-hours electronic trading.
BP hopes to place a cap on a fractured oil pipe and contain the Gulf of Mexico spill within the next 24 hours, a top company official said Tuesday.
"If everything goes well, within the next 24 hours, we could have this contained," BP's chief operating officer Doug Suttles told reporters in Louisiana.
The U.S. Food and Drug Administration approved on Tuesday the sale of Amgen Inc's osteoporosis drug Prolia to help prevent fractures in postmenopausal women just days after the medicine received European approval.
US Mint has run out of American Eagle silver coins and is also out of gold American Eagles.
FT: "The events of May 6 revealed that while getting rid of old-style “specialist” market makers has reduced the cost of trading by narrowing bid-ask spreads, the benefit has come at a cost. Now, no one has an obligation to provide prices for all shares all the time during a trading day, as trading has fragmented across an array of electronic trading venues and traders. The moment the markets grow too risky, many new electronic market makers appear only too willing to head for the exit.”
Martin Hutchinson: "In its simplest form as understood by leftist politicians and many of the dozier members of the general public, Keynes' theory is nothing more nor less than a fallacy. It fails to recognize that the stimulus money has to come from somewhere, and that withdrawing it from circulation will have an opposing effect on jobs that may cancel out the Keynesian effect of the spending. The Congressional Budget Office's scoring of the jobs created by the stimulus, for example, estimates the Keynesian multiplier for each item of spending and from this estimates job creation. It neither corrects its estimates by reference to newly released unemployment data, nor takes account of the economic effect of the government borrowing that funds the stimulus spending.
Keynes himself, a subtler economist than many of his followers, did not take account of the effect of interest rates on conditions generally, but he also did not recommend “stimulus” spending in every downturn. In his view, only when the economy had become trapped in a suboptimal equilibrium, with some available resources unused and output below the full employment level, should a burst of government spending be used to get it out. Such a suboptimal equilibrium is theoretically impossible under classical economics, but Keynes, recognizing the real world in the labor market if not the capital market, postulated that in a world with strong unions wages might be sticky on the downside, in which case the labor market could equilibrate at less than full employment."
Japanese Prime Minister Yukio Hatoyama will announce his resignation at an emergency meeting of ruling Democratic Party of Japan lawmakers later Wednesday, national broadcaster NHK reported. NHK said Hatoyama conveyed his intent to resign to DPJ leaders.
Employers announced 38,810 job cuts in the month, slightly more than the 38,326 unveiled in April, according to the report from global outplacement consultancy Challenger, Gray & Christmas.
Iran's central bank has announced it will sell 45 billion euros from its foreign exchange reserves to buy dollars and gold, Reuters reported Wednesday, citing China's official Xinhua news agency.
The market for corporate bond sales closed as concern European banks will take more writedowns and losses led investors to shun all but the safest government debt.
No companies issued bonds in the U.S. yesterday, compared with $2.2 billion on the corresponding day following the Memorial Day weekend in 2009, according to data compiled by Bloomberg. In Europe, 1.35 billion euros ($1.66 billion) was raised from two sales of covered bonds, versus 6.5 billion euros a year earlier, Bloomberg data show.
China's Stocks Decline to 13-Month Low.
China Daily: "A year and half after the first shock waves of the global financial tsunami, Western economies - including the US and the European Union (EU) but excluding Australia and Canada, which are big natural resources exporters - are marching toward economic failure. I base this assertion on just one thing: Their governments are afraid to do the right thing.
With the full knowledge of what their fatal policies will lead to, their politicians do not seem to have the political courage to rally the support of the people to accept the necessary pain and make the sacrifices as preached by the Washington Consensus. Instead, Western governments have taken the other direction.
Much attention has been focused on the stagflation effect of spawning banknotes from helicopters, a metaphor for monetary quantitative easing.
That was bad already. Worse, the money has been given to a bunch of rich crooks who created the present quagmire in the first place. This is more than robbing the poor to pay the rich.
It is a typical case of grave moral hazard, especially in the US, where those who follow the rules are being punished for the benefit of those who destroy them. The world is now turned upside down, and it clearly spells trouble."
Stephen Schork: " Last week spot Nymex Henry Hub futures traded up through and closed above (positively sloped) 14, 30 and 50 day moving averages. What’s more, as of Friday the RSI, 58.1, was also sloped to the upside. These are indeed bullish events, but with one caveat… volume was very weak last week.
Nevertheless, here at The Schork Report we remain cautiously bullish in gas as we approach the dog days of summer."
Americans make up 5 per cent of the world's population but guzzle 25 per cent of the oil supply. Were our demand for oil considerably less, then companies would not be drilling one mile down in the ocean. All Americans are responsible for this oil spill.
The pending home sales index rose 6% in April after an upwardly revsed 7.1% increase in March, the National Association of Realtors reported Wednesday. The index covers signed contracts, not final sales, which usually lag by a month or two. The federal government has been subsidizing home sales with tax credits of up to $8,000 for qualified buyers who signed a sales contract by the end of April. The sale must close by June 30 to qualify. The index is up 22% compared with April 2009.
UK insurer Prudential has abandoned its plan to buy AIG's Asian life unit for $35.5 billion, leaving management under fire and the company facing a $659 million bill for failure.
BP Plc successfully cut the riser pipe at the ruptured well in the bottom of the Gulf of Mexico, but the diamond wire blade got stuck during the second cut on Wednesday, Coast Guard Admiral Thad Allen said in a press conference. BP will attempt to work the blade out of the pipe or possibly lower a second saw down to the pipe. Allen said BP remains confident that it will make the cut in order to put a cap over the leaking pipe. The results of the effort should be known by the end of the day, he said. If it's a clean cut, BP will put a cap with a rubber seal on it to capture the leaking oil; if not, it'll use a looser-fitting top hat cap to capture the oil, he said.
Jim Letourneau: "While things are looking pretty grim for the Gulf of Mexico, it's no stranger to having oil contaminate its ecosystem. Indeed natural processes are responsible for more than 60% of the petroleum entering North American waters, according to the National Academies. I'm not saying the BP (BP) disaster is excusable but sometimes having some sense of proportion can lead informed discussion instead of a media circus. The NASA Earth Observatory scientists estimated in 2000 that oil seeps from the sea floor at more than 600 locations. In aggregate, the annual volume of natural seepage in the Gulf of Mexico is conservatively estimated to equal that of two Exxon (XOM) Valdez spills every year. The issue with the BP disaster is that all the oil is coming from a single source like a fire hose instead of hundreds of leaking faucets. The use of dispersants may help mitigate the damage and give hydrocarbon-degrading microbes a better chance to chow down on some of the spill."
The Financial Times on Monday reported that, according to several Google employees, Windows is on its way out in the company as a result of security concerns.
The Dow Jones industrials jumped 226 points, or 2.3%, to 10,250. The Nasdaq Composite Index added 59 points, or 2.6%, to 2,281. The Standard & Poor's 500 Index was up 28 points, or 2.6%, to 1,098.
Crude-oil stockpiles declined 1.4 million barrels in the week ended May 28, The American Petroleum Institute reported Wednesday. The trade group based in Washington. Analysts polled by Platts had predicted a decline of 1 million barrels. Gasoline inventories declined by 962,000 barrels, the API reported. That compared to expectations of a decrease around 750,000, according to Platts. Crude oil settled marginally higher on Wednesday, at $72.86 a barrel, and traded at $73.42 a barrel in after-hours electronic trading.
Tuesday, June 01, 2010
Oil Sector Losses
6/1/10 Oil Sector Losses
HP to cut 9,000 jobs.
BP shares down 19% in London.
The euro traded at $1.2118 versus the dollar in recent action.
Rob Hanna: "we’ve reached an area where risk has pretty much maxed out in the past under similar conditions – at least temporarily. "
Euro buying power is down over 10% against the yuan so far through this 2010 crisis.
Fadel Gheit, an analyst at Oppenheimer Research, notes Exxon originally set aside $5.4 billion to cover legal settlements and paid $3.4 billion in cleanup costs. The Exxon legal settlement was eventually reduced to just $507.5 million with $500 million in interest payments.
In a potentially early indicator of an economic slowdown in China, the country's purchasing managers' index fell more than expected in April. Hang Seng -1.4%, Nikkei -0.6%. China’s Purchasing Managers’ Index dropped to 53.9 from 55.7 in April, seasonally adjusted, the Federation of Logistics and Purchasing said, less than the median 54.5 estimate in a Bloomberg News survey of 18 economists.
John Hussman: "My impression is that the main struggle of the stock market here is not about Europe, but rather centers on the likelihood that the U.S. will experience a second wave of credit strains. Clearly, the level of credit strains will be a function of mortgage delinquencies and foreclosure losses, both realized and anticipated. I've noted that we entered the primary window for these strains to emerge only a few months ago. Alt-A and Option-ARM mortgage resets will hit their stride between now and November, with a second, even higher peak in 2011, before finally trailing off in early 2012. I am most concerned about the "recognition phase" in which the current, very low estimates of credit strains are revised by investors....
I tend to get particularly concerned when the market begins to exhibit extremely large fluctuations at ten-minute intervals. This sort of increasing "micro-volatility" is troublesome, particularly when in the context of a leadership reversal coming off of overvalued, overbought, overbullish extremes. The last time we observed similar internal dispersion coupled with a leadership reversal was at the 2007 market peak.
As I noted in the July, 30 2007 comment (Market Internals Go Negative), "This is much like what happens when a substance goes through a “phase transition,” for example, from a gas to a liquid or vice versa. Portions of the material begin to act distinctly, as if the particles are choosing between the two phases, and as the transition approaches its “critical point,” you start to observe larger clusters as one phase takes precedence and the particles that have “made a choice” affect their neighbors. You also observe fast oscillations between order and disorder in the remaining particles. So a phase transition features internal dispersion followed by leadership reversal. My impression is that this analogy also extends to the market's tendency to experience increasing volatility at 5-10 minute intervals prior to major declines."
The Bank of Canada raised its key interest rate from a record low today, the first Group of Seven country to do so since last year’s global recession, and said further moves will be “weighed carefully” against future growth in Canada and elsewhere.
The target rate on overnight loans between commercial banks rose to 0.5 percent from 0.25 percent, as predicted by 25 of 27 economists surveyed by Bloomberg News. It was Mark Carney’s first increase as governor and the bank’s first since July 2007.
Advanced economies face years of anemic growth and the risk of a double-dip recession as their citizens cope with sluggish employment and highly indebted governments, economist Nouriel Roubini said on Monday.
ately off nearly $2 a barrel, as worries about Europe's debt troubles had investors flocking to the U.S. dollar, helping push the euro to a four-year low. "A stronger U.S. dollar is undermining demand for oil as a hedge against inflation," noted analysts at Action Economics. The contract for July delivery fell $1.84, or 2.5%, to $72.13 a barrel on the Comex division of the New York Mercantile Exchange.
The problems in China's housing market are more severe than those in the US before the financial crisis because they combine a potential bubble with the risk of social discontent, according to an adviser to the Chinese central bank. Li Daokui, a professor at Tsinghua University and a member of the Chinese central bank's monetary policy committee, said recent state measures to cool the property market needed to be part of a long-term push to bring high prices under control . He added there were still signs the economy was overheating and urged modest increases in interest rates and the level of the currency. "The housing market problem in China is much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis," he said in an interview. "It is more than [just] a bubble problem."
ECB expects additional $239.26B in write-downs by European banks.
The Institute for Supply Management said its index of national factory activity slipped to 59.7 in May from 60.4 in April. The median forecast of 73 economists surveyed by Reuters was for a reading of 59.0. A reading above 50 indicates expansion in the sector.
The report's employment component rose to 59.8, the highest since May 2004, from 58.5, while new orders held steady at 65.7, suggesting slower growth in the euro zone has yet to have much effect on U.S. manufacturing.
Upward revisions to earnings estimates for the S&P 500 have been overly optimistic, said Adam Parker, chief investment strategist at BernsteinResearch, in a report Tuesday. Consensus estimates for 2010 imply 30% growth in earnings per share to $82 a share in 2010, and 18% growth to $97 a share in 2011. In contrast, Parker predicts 25% EPS growth for 2010, to $79 a share, and 9% growth in 2011 to $86 a share. "Our view is that the EPS estimates embedded in consensus are too high for 2011 and perhaps for the second half of this year," wrote Parker. The "record pace" of upward revisions has fueled too much optimism, he said. "The challenge is that you will likely not see any evidence of this in the first half of the year," he said. He recommended owning companies with lower EPS growth expectations.
The five key companies connected to the spill over the last six weeks--- BP, Anadarko Petroleum, Transocean Ltd., Cameron, and Halliburton--combined, the five companies have lost 36.6% of their market capitalization since the week in which Deepwater Horizon exploded and later sank, spewing millions of gallons of crude oil into the Gulf of Mexico. The market loss to date approximates $40 billion. That does not take into account the losses reflected in other companies within the oil service and oil-related sector.
The Dow Jones Industrial Average fell 112.61 points, or 1.1%, to 10,024.02, after it rose up to 10,218 during the session. The S&P 500 index fell 18.70 points, or 1.7%, to 10,024.71, pressured by a 4.3% drop in its energy sector. The Nasdaq Composite dropped 34.71 points, or 1.5%, to 2,222.33.
Reuters reports that "The U.S. mint sold 190,000 1-ounce American Eagle gold coins in May, the largest number since January 1999, and the most in any month so far in 2010, according to a spokesman for the U.S. agency."
HP to cut 9,000 jobs.
BP shares down 19% in London.
The euro traded at $1.2118 versus the dollar in recent action.
Rob Hanna: "we’ve reached an area where risk has pretty much maxed out in the past under similar conditions – at least temporarily. "
Euro buying power is down over 10% against the yuan so far through this 2010 crisis.
Fadel Gheit, an analyst at Oppenheimer Research, notes Exxon originally set aside $5.4 billion to cover legal settlements and paid $3.4 billion in cleanup costs. The Exxon legal settlement was eventually reduced to just $507.5 million with $500 million in interest payments.
In a potentially early indicator of an economic slowdown in China, the country's purchasing managers' index fell more than expected in April. Hang Seng -1.4%, Nikkei -0.6%. China’s Purchasing Managers’ Index dropped to 53.9 from 55.7 in April, seasonally adjusted, the Federation of Logistics and Purchasing said, less than the median 54.5 estimate in a Bloomberg News survey of 18 economists.
John Hussman: "My impression is that the main struggle of the stock market here is not about Europe, but rather centers on the likelihood that the U.S. will experience a second wave of credit strains. Clearly, the level of credit strains will be a function of mortgage delinquencies and foreclosure losses, both realized and anticipated. I've noted that we entered the primary window for these strains to emerge only a few months ago. Alt-A and Option-ARM mortgage resets will hit their stride between now and November, with a second, even higher peak in 2011, before finally trailing off in early 2012. I am most concerned about the "recognition phase" in which the current, very low estimates of credit strains are revised by investors....
I tend to get particularly concerned when the market begins to exhibit extremely large fluctuations at ten-minute intervals. This sort of increasing "micro-volatility" is troublesome, particularly when in the context of a leadership reversal coming off of overvalued, overbought, overbullish extremes. The last time we observed similar internal dispersion coupled with a leadership reversal was at the 2007 market peak.
As I noted in the July, 30 2007 comment (Market Internals Go Negative), "This is much like what happens when a substance goes through a “phase transition,” for example, from a gas to a liquid or vice versa. Portions of the material begin to act distinctly, as if the particles are choosing between the two phases, and as the transition approaches its “critical point,” you start to observe larger clusters as one phase takes precedence and the particles that have “made a choice” affect their neighbors. You also observe fast oscillations between order and disorder in the remaining particles. So a phase transition features internal dispersion followed by leadership reversal. My impression is that this analogy also extends to the market's tendency to experience increasing volatility at 5-10 minute intervals prior to major declines."
The Bank of Canada raised its key interest rate from a record low today, the first Group of Seven country to do so since last year’s global recession, and said further moves will be “weighed carefully” against future growth in Canada and elsewhere.
The target rate on overnight loans between commercial banks rose to 0.5 percent from 0.25 percent, as predicted by 25 of 27 economists surveyed by Bloomberg News. It was Mark Carney’s first increase as governor and the bank’s first since July 2007.
Advanced economies face years of anemic growth and the risk of a double-dip recession as their citizens cope with sluggish employment and highly indebted governments, economist Nouriel Roubini said on Monday.
ately off nearly $2 a barrel, as worries about Europe's debt troubles had investors flocking to the U.S. dollar, helping push the euro to a four-year low. "A stronger U.S. dollar is undermining demand for oil as a hedge against inflation," noted analysts at Action Economics. The contract for July delivery fell $1.84, or 2.5%, to $72.13 a barrel on the Comex division of the New York Mercantile Exchange.
The problems in China's housing market are more severe than those in the US before the financial crisis because they combine a potential bubble with the risk of social discontent, according to an adviser to the Chinese central bank. Li Daokui, a professor at Tsinghua University and a member of the Chinese central bank's monetary policy committee, said recent state measures to cool the property market needed to be part of a long-term push to bring high prices under control . He added there were still signs the economy was overheating and urged modest increases in interest rates and the level of the currency. "The housing market problem in China is much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis," he said in an interview. "It is more than [just] a bubble problem."
ECB expects additional $239.26B in write-downs by European banks.
The Institute for Supply Management said its index of national factory activity slipped to 59.7 in May from 60.4 in April. The median forecast of 73 economists surveyed by Reuters was for a reading of 59.0. A reading above 50 indicates expansion in the sector.
The report's employment component rose to 59.8, the highest since May 2004, from 58.5, while new orders held steady at 65.7, suggesting slower growth in the euro zone has yet to have much effect on U.S. manufacturing.
Upward revisions to earnings estimates for the S&P 500 have been overly optimistic, said Adam Parker, chief investment strategist at BernsteinResearch, in a report Tuesday. Consensus estimates for 2010 imply 30% growth in earnings per share to $82 a share in 2010, and 18% growth to $97 a share in 2011. In contrast, Parker predicts 25% EPS growth for 2010, to $79 a share, and 9% growth in 2011 to $86 a share. "Our view is that the EPS estimates embedded in consensus are too high for 2011 and perhaps for the second half of this year," wrote Parker. The "record pace" of upward revisions has fueled too much optimism, he said. "The challenge is that you will likely not see any evidence of this in the first half of the year," he said. He recommended owning companies with lower EPS growth expectations.
The five key companies connected to the spill over the last six weeks--- BP, Anadarko Petroleum, Transocean Ltd., Cameron, and Halliburton--combined, the five companies have lost 36.6% of their market capitalization since the week in which Deepwater Horizon exploded and later sank, spewing millions of gallons of crude oil into the Gulf of Mexico. The market loss to date approximates $40 billion. That does not take into account the losses reflected in other companies within the oil service and oil-related sector.
The Dow Jones Industrial Average fell 112.61 points, or 1.1%, to 10,024.02, after it rose up to 10,218 during the session. The S&P 500 index fell 18.70 points, or 1.7%, to 10,024.71, pressured by a 4.3% drop in its energy sector. The Nasdaq Composite dropped 34.71 points, or 1.5%, to 2,222.33.
Reuters reports that "The U.S. mint sold 190,000 1-ounce American Eagle gold coins in May, the largest number since January 1999, and the most in any month so far in 2010, according to a spokesman for the U.S. agency."
Monday, May 31, 2010
Memorial Day
5/31/10 Memorial Day
Although no sculptured marble should rise to their memory, nor engraved stone bear record of their deeds, yet will their remembrance be as lasting as the land they honored. ~Daniel Webster
China warned on Monday that Europe's struggle to contain ballooning debt posed a risk to global economic growth, raising the specter of a double-dip recession.
Premier Wen Jiabao, addressing business leaders during an official visit to Japan, issued his warnings a day after France admitted it will struggle to keep its top credit rating and days after a downgrade of Spain's credit status again jolted financial markets.
BP shares dropped more than 8% in Frankfurt trade, with more than 1 million shares changing hands.
Bloomberg: Dollar bonds sold by China real estate companies this year are the worst performers among Asian non-financial corporate debt denominated in the U.S. currency amid concern the nation’s property market is overheating.
Yields on the $3.9 billion of bonds issued by Kaisa Group Holdings Ltd., Country Garden Holdings Co. and seven other developers since January widened by an average 2.26 percentage points relative to Treasuries as of last week, according to data compiled by Bloomberg. That’s more than the 2.05 percentage- point increase in spreads for the seven dollar-denominated bonds sold by other companies in Asia outside Japan.
Israeli commandos stormed Gaza-bound aid ships on Monday and at least 10 pro-Palestinian activists on board were killed, unleashing a diplomatic crisis and charges of a "massacre" from the Palestinian president.
France admitted on Sunday that keeping its top-notch credit rating would be "a stretch" without some tough budget decisions, following German hints that Berlin may resort to raising taxes to help bring down its deficit.
"Most of BP's fuel oil team, including the global head and the heads of the three trading centers, have left in the past month," a U.S.-based source said.
BP has been a major player over the past 15 years in the fuel oil market. In Asia, it regularly trades 500,000-600,000 tonnes of physical cargoes monthly.
The departures in the U.S. of fuel oil leader, Tim Gawne, another physical trader and the third who traded derivatives, left the team with one derivatives trader, the sources said.
German President Horst Koehler said on Monday he was resigning with immediate effect due to widespread criticism of comments he made about the country's military action and commercial interests.
The euro looks set to end the month of May around 7.5 percent lower against the dollar as ongoing debt problems in euro zone countries have rocked confidence in the euro system.
BP told regulators six weeks before its well in the Gulf of Mexico exploded that workers were having trouble maintaining control, according to e-mails.
The patriot's blood is the seed of Freedom's tree. ~Thomas Campbell
Interior Department Secretary Ken Salazar said Thursday a moratorium in place for 33 rigs in the Gulf only applies to exploratory, deepwater wells in 500 feet of water or more, not those that currently are producing oil.
Are they dead that yet speak louder than we can speak, and a more universal language? Are they dead that yet act? Are they dead that yet move upon society and inspire the people with nobler motives and more heroic patriotism? ~Henry Ward Beecher
Rigzone: The relief well is estimated to cost $100 million. The relief wells, in 5,000 ft of water, will be drilled to 16,000 ft below the seabed to seal the leak. The second well is intended to serve as a backup should BP encounter problems reaching the target with the first. BP anticipates that it will take approximately three months to complete each well from the commencement of drilling.
The dead soldier's silence sings our national anthem. ~Aaron Kilbourn
The Sunday Times reports that "three German-built Israeli submarines equipped with nuclear cruise missiles are to be deployed in the Gulf near the Iranian coastline."
The House of Representatives voted Friday to freeze looming Medicare physician payment cuts until 2011 as part of a two-piece benefits package.
The so-called "doc fix" section, separated from the rest of the bill amidst Democratic in-fighting, cleared by a 245-171 vote mostly split down party lines, with only a handful of Republicans supporting it.
The legacy of heroes is the memory of a great name and the inheritance of a great example. ~Benjamin Disraeli
Although no sculptured marble should rise to their memory, nor engraved stone bear record of their deeds, yet will their remembrance be as lasting as the land they honored. ~Daniel Webster
China warned on Monday that Europe's struggle to contain ballooning debt posed a risk to global economic growth, raising the specter of a double-dip recession.
Premier Wen Jiabao, addressing business leaders during an official visit to Japan, issued his warnings a day after France admitted it will struggle to keep its top credit rating and days after a downgrade of Spain's credit status again jolted financial markets.
BP shares dropped more than 8% in Frankfurt trade, with more than 1 million shares changing hands.
Bloomberg: Dollar bonds sold by China real estate companies this year are the worst performers among Asian non-financial corporate debt denominated in the U.S. currency amid concern the nation’s property market is overheating.
Yields on the $3.9 billion of bonds issued by Kaisa Group Holdings Ltd., Country Garden Holdings Co. and seven other developers since January widened by an average 2.26 percentage points relative to Treasuries as of last week, according to data compiled by Bloomberg. That’s more than the 2.05 percentage- point increase in spreads for the seven dollar-denominated bonds sold by other companies in Asia outside Japan.
Israeli commandos stormed Gaza-bound aid ships on Monday and at least 10 pro-Palestinian activists on board were killed, unleashing a diplomatic crisis and charges of a "massacre" from the Palestinian president.
France admitted on Sunday that keeping its top-notch credit rating would be "a stretch" without some tough budget decisions, following German hints that Berlin may resort to raising taxes to help bring down its deficit.
"Most of BP's fuel oil team, including the global head and the heads of the three trading centers, have left in the past month," a U.S.-based source said.
BP has been a major player over the past 15 years in the fuel oil market. In Asia, it regularly trades 500,000-600,000 tonnes of physical cargoes monthly.
The departures in the U.S. of fuel oil leader, Tim Gawne, another physical trader and the third who traded derivatives, left the team with one derivatives trader, the sources said.
German President Horst Koehler said on Monday he was resigning with immediate effect due to widespread criticism of comments he made about the country's military action and commercial interests.
The euro looks set to end the month of May around 7.5 percent lower against the dollar as ongoing debt problems in euro zone countries have rocked confidence in the euro system.
BP told regulators six weeks before its well in the Gulf of Mexico exploded that workers were having trouble maintaining control, according to e-mails.
The patriot's blood is the seed of Freedom's tree. ~Thomas Campbell
Interior Department Secretary Ken Salazar said Thursday a moratorium in place for 33 rigs in the Gulf only applies to exploratory, deepwater wells in 500 feet of water or more, not those that currently are producing oil.
Are they dead that yet speak louder than we can speak, and a more universal language? Are they dead that yet act? Are they dead that yet move upon society and inspire the people with nobler motives and more heroic patriotism? ~Henry Ward Beecher
Rigzone: The relief well is estimated to cost $100 million. The relief wells, in 5,000 ft of water, will be drilled to 16,000 ft below the seabed to seal the leak. The second well is intended to serve as a backup should BP encounter problems reaching the target with the first. BP anticipates that it will take approximately three months to complete each well from the commencement of drilling.
The dead soldier's silence sings our national anthem. ~Aaron Kilbourn
The Sunday Times reports that "three German-built Israeli submarines equipped with nuclear cruise missiles are to be deployed in the Gulf near the Iranian coastline."
The House of Representatives voted Friday to freeze looming Medicare physician payment cuts until 2011 as part of a two-piece benefits package.
The so-called "doc fix" section, separated from the rest of the bill amidst Democratic in-fighting, cleared by a 245-171 vote mostly split down party lines, with only a handful of Republicans supporting it.
The legacy of heroes is the memory of a great name and the inheritance of a great example. ~Benjamin Disraeli
Sunday, May 30, 2010
Oil Spill
5/30/10 Oil Spill
The Oil Drum: "Top Kill Fails To Plug Oil Spill, BP Now To Try LMRP Cap
The oil giant immediately began readying its next attempted fix, using robot submarines to cut the pipe that's gushing the oil and cap it with funnel-like device, but the only guaranteed solution remains more than two months away.
The company determined the "top kill" had failed after it spent three days pumping heavy drilling mud into the crippled well 5,000 feet underwater. It's the latest in a series of failures to stop the crude that's fouling marshland and beaches, as estimates of how much oil is leaking grow more dire.
BP said preparations have been made for the possible deployment of the lower marine riser package (LMRP) cap containment system, which would be complex because of the depth of the oil leak.Deployment would first involve removing the damaged riser from the top of the failed BOP to leave a cleanly-cut pipe at the top of the BOP's LMRP.The cap, a containment device with a sealing grommet, will be connected to a riser from the Discoverer Enterprise drillship, 5,000 feet above on the surface, and placed over the LMRP with the intention of capturing most of the oil and gas flowing from the well. Mr Suttles said it should capture "most of the oil" and was expected to last at least four days but "we cannot guarantee success at this time."
Gretchen Morgenson: "Glass-Steagall was a 34-page document.
The two bills that the Senate and the House are currently chewing over as part of what may be a momentous financial reordering weigh in at a whopping 3,000 pages, combined.
Yet despite all that verbiage, there are flaws in both bills that would let Wall Street continue devising financial black boxes that have the potential to go nuclear. And even if the best of both bills becomes law, investors, taxpayers and the economy will remain vulnerable to banking crises."
Mike Burk: "Indicators derived from downside volume and new lows offer the most timely indications of bottoms. Last week new lows all but disappeared but downside volume did not. When there is a discrepancy like this it is usually the other way around....Since 1963, over all years the OTC in June has been up 53% of the time with an average return of 0.3%. However, during the 2nd year of the Presidential Cycle June has been has been up only 27% time with an average loss of -1.4% (the last up June during the 2nd year of the Presidential Cycle was 1998)....
The market has been following the average seasonal pattern for the 2nd year of the Presidential Cycle quite closely this year. That pattern calls for a rally through the end of next week followed by a resumption of the decline.
I expect the major averages to be higher on Friday June 4 than they were on Friday May 28."
Arnold Bock: "The magnitude of current private and government debt, coupled with massive unfunded contingent liabilities for promises of future services to their citizens, will prove to be impossible for many nations to fund. Massive inflation in the money supply will become the preferred vehicle to deflect the default monster and will result in vastly devalued currencies and price inflation as a prelude to default. Such action will be a desperate attempt to buy time to stave off the inevitable and will result in social unrest caused by persons whose comfortable lifestyle and elevated standard of living is about to disintegrate before their very eyes."
Guy Lerner: "The "Dumb Money" indicator is bearish and this is a bullish signal. This is the first bullish signal since March 8, 2009."
Payrolls climbed by 508,000 workers last month, the biggest increase since 1997, according to the median estimate of 64 economists surveyed by Bloomberg News. The gain reflected a surge in government hiring of temporary help to conduct the census and a 180,000 rise in private employment, according to the survey. The Census Bureau had said it would take on 970,000 temporary workers from April through June to conduct the population count that occurs every 10 years.
Seeking Alpha: "Thousands of Americans expecting to keep their homes after starting trial mortgage modifications could still wind up in foreclosure thanks to a technicality known as investor-based denial - which allows the final owner of the debt, usually invisible to the homeowner, to veto the conversion from trial to permanent mod."
“The technical damage that has been done to the charts is quite formidable," Gijsels said. "A lot of indices have turned the corner and are trading below their 200-day moving average. In many case we are not too far from a death cross," a bearish sign where a 50-day moving average drops below the 200-day moving average.
Tobacco company Reynolds American said Friday it will close two cigarette plants as it adjusts to declining demand for cigarettes.
Barry Ritholtz: "Matt Simmons says “Top Kill” is a sideshow, misses the big problem of a second leak 5 to 7 miles away releasing up to 120,000 barrels/day. Simmons goes on to say we might need nukes to seal the leak.
Bloomberg:
Today Matt Simmons, one of the largest investment bankers in the energy industry appeared on Bloomberg. The chairman of Simmons & Co. INTL went on to explain that there is much more to the oil leak than the news has been reporting. Last Sunday, NOAA confirmed reports of a second fissure about 5-7 miles from the original. This new fissure appears to be releasing a plume the size of Delaware and Maryland combined! He went on to state that “the plume from the riser is minor thing… the best estimate is about 120,000 barrels of oil per day”.
"The evil of the world is made possible by nothing but the sanction [that] you give it." ('John Galt Speech' 1957)
The Oil Drum: "Top Kill Fails To Plug Oil Spill, BP Now To Try LMRP Cap
The oil giant immediately began readying its next attempted fix, using robot submarines to cut the pipe that's gushing the oil and cap it with funnel-like device, but the only guaranteed solution remains more than two months away.
The company determined the "top kill" had failed after it spent three days pumping heavy drilling mud into the crippled well 5,000 feet underwater. It's the latest in a series of failures to stop the crude that's fouling marshland and beaches, as estimates of how much oil is leaking grow more dire.
BP said preparations have been made for the possible deployment of the lower marine riser package (LMRP) cap containment system, which would be complex because of the depth of the oil leak.Deployment would first involve removing the damaged riser from the top of the failed BOP to leave a cleanly-cut pipe at the top of the BOP's LMRP.The cap, a containment device with a sealing grommet, will be connected to a riser from the Discoverer Enterprise drillship, 5,000 feet above on the surface, and placed over the LMRP with the intention of capturing most of the oil and gas flowing from the well. Mr Suttles said it should capture "most of the oil" and was expected to last at least four days but "we cannot guarantee success at this time."
Gretchen Morgenson: "Glass-Steagall was a 34-page document.
The two bills that the Senate and the House are currently chewing over as part of what may be a momentous financial reordering weigh in at a whopping 3,000 pages, combined.
Yet despite all that verbiage, there are flaws in both bills that would let Wall Street continue devising financial black boxes that have the potential to go nuclear. And even if the best of both bills becomes law, investors, taxpayers and the economy will remain vulnerable to banking crises."
Mike Burk: "Indicators derived from downside volume and new lows offer the most timely indications of bottoms. Last week new lows all but disappeared but downside volume did not. When there is a discrepancy like this it is usually the other way around....Since 1963, over all years the OTC in June has been up 53% of the time with an average return of 0.3%. However, during the 2nd year of the Presidential Cycle June has been has been up only 27% time with an average loss of -1.4% (the last up June during the 2nd year of the Presidential Cycle was 1998)....
The market has been following the average seasonal pattern for the 2nd year of the Presidential Cycle quite closely this year. That pattern calls for a rally through the end of next week followed by a resumption of the decline.
I expect the major averages to be higher on Friday June 4 than they were on Friday May 28."
Arnold Bock: "The magnitude of current private and government debt, coupled with massive unfunded contingent liabilities for promises of future services to their citizens, will prove to be impossible for many nations to fund. Massive inflation in the money supply will become the preferred vehicle to deflect the default monster and will result in vastly devalued currencies and price inflation as a prelude to default. Such action will be a desperate attempt to buy time to stave off the inevitable and will result in social unrest caused by persons whose comfortable lifestyle and elevated standard of living is about to disintegrate before their very eyes."
Guy Lerner: "The "Dumb Money" indicator is bearish and this is a bullish signal. This is the first bullish signal since March 8, 2009."
Payrolls climbed by 508,000 workers last month, the biggest increase since 1997, according to the median estimate of 64 economists surveyed by Bloomberg News. The gain reflected a surge in government hiring of temporary help to conduct the census and a 180,000 rise in private employment, according to the survey. The Census Bureau had said it would take on 970,000 temporary workers from April through June to conduct the population count that occurs every 10 years.
Seeking Alpha: "Thousands of Americans expecting to keep their homes after starting trial mortgage modifications could still wind up in foreclosure thanks to a technicality known as investor-based denial - which allows the final owner of the debt, usually invisible to the homeowner, to veto the conversion from trial to permanent mod."
“The technical damage that has been done to the charts is quite formidable," Gijsels said. "A lot of indices have turned the corner and are trading below their 200-day moving average. In many case we are not too far from a death cross," a bearish sign where a 50-day moving average drops below the 200-day moving average.
Tobacco company Reynolds American said Friday it will close two cigarette plants as it adjusts to declining demand for cigarettes.
Barry Ritholtz: "Matt Simmons says “Top Kill” is a sideshow, misses the big problem of a second leak 5 to 7 miles away releasing up to 120,000 barrels/day. Simmons goes on to say we might need nukes to seal the leak.
Bloomberg:
Today Matt Simmons, one of the largest investment bankers in the energy industry appeared on Bloomberg. The chairman of Simmons & Co. INTL went on to explain that there is much more to the oil leak than the news has been reporting. Last Sunday, NOAA confirmed reports of a second fissure about 5-7 miles from the original. This new fissure appears to be releasing a plume the size of Delaware and Maryland combined! He went on to state that “the plume from the riser is minor thing… the best estimate is about 120,000 barrels of oil per day”.
"The evil of the world is made possible by nothing but the sanction [that] you give it." ('John Galt Speech' 1957)
Saturday, May 29, 2010
Fragility
5/29/10 Fragility
Bloomberg: Some 17% of junk bonds yield at least 10 percentage points more than Treasuries, up from 9.2% last month…The jump is the biggest since the distress ratio rose 11 percentage points in November 2008.
Doug Noland: "Fundamentally, this Bubble’s main price distortions emanate from the market perception that synchronized global fiscal and monetary policies will sustain global financial and economic recoveries. This creates a dynamic where massive issuance of sovereign debt is generally priced in the marketplace with meager little risk premiums. Similarly, the perception that markets and economies are underpinned by government policies ensures that debt instruments throughout – certainly including U.S. corporates, municipal debt, agencies, and mortgages – trade at narrow risk spreads to sovereigns. It’s the ultimate “too big to fail.”....This dramatic loosening of financial conditions inflated global securities prices. Huge rallies in the risk markets played a significant role in bolstering confidence. This combination of loose finance and improved confidence was instrumental in fostering economic recovery. The bounce back in economic activity then supported the bubbling markets and emboldened the speculators. That’s where we’ve been.
Over the past month, markets have gone from close to euphoria to near panic. The global financial Bubble ran smack up against an expanding Greek debt crisis, a tightening of Chinese mortgage Credit, and a tightening regulatory noose around the U.S. financial sector and speculative finance more generally. Complacent, highly speculative and over-liquefied securities markets were bludgeoned by losses, contagion effects, de-leveraging, and general mayhem.....Well, I believe finance has tightened and this tightening will not prove fleeting. The global Bubble has been pierced, a result of Greece – although the catalyst could have as easily been developments in the U.S. or China. But since crisis erupted initially in the Eurozone, the dollar/Treasuries have benefited thus far from de-leveraging and some safehaven perceptions. Many are programmed to interpret this as good news for U.S. recovery, although the important news is that market perceptions have changed; markets have become hyper-volatile; and the backdrop is so uncertain that speculators and investors will choose - or be forced to - rein in risk-taking.
The waves of liquidity unleashed through speculator leveraging and the flight out of safehaven assets has run its course. As we’ve seen over the past few weeks, markets can go from seemingly over-liquefied to illiquid the moment speculators reverse course and head for the exits. The markets have been reminded of this harsh reality and behavior will change. Others would argue that there is no crisis in the U.S. Credit system and, with Treasury yields so low, financial conditions have actually loosened. I would counter that it’s a global financial Bubble and destabilizing contagion effects were unleashed with the big rally in Treasuries....And it’s rising risk aversion that will pressure financial conditions and fuel liquidity concerns. The markets have passed an important inflection point, and faltering markets are certainly not good for fragile confidence."
Life is good. Coney Island's new amusement park is open. On June 11 the movie of Atlas Shrugged goes into production.
WSJ: "Six banks in Washington have failed this year, while about one-fourth of the banks and savings institutions based in the state are operating under toughened regulatory scrutiny."
Seeking Alpha: "insiders' share sales of QQQQ components have outpaced share purchases 3,933 to 1."
Mike Santoli: "BP TAKES THE CONCEPT OF A "DEEP VALUE" investment into a new dimension, as the energy company's shares continue to get pounded to valuation depths rarely seen. The selling comes amid the catastrophic oil-well spill a mile under the Gulf of Mexico.
With BP shares (ticker: BP) at 42.95, down another 5% Friday and off from 60 before the well exploded, the market has relieved the stock of nearly $60 billion in market value.
David Steinberg of DLS Capital, an Illinois-based deep-value manager, says this has generated good value in the stock, even under conservative assumptions of future costs and penalties. Analysts have been cutting BP cash-flow estimates for 2011. The lowest forecast is now $40 billion. This places the company's ratio of enterprise value (market value plus net debt) to cash flow around 4. Its 10-year average multiple is above 6.5.
Viewed another way, BP's enterprise value Friday equaled $8.77 per barrel of oil-equivalent reserves, versus a five-year average of $12.25. Trading back up to that average over the next couple of years would mean a $13 rise in the share price, he notes, atop a dividend yield that now stands above 7% and appears secure."
There’s nothing wrong with throwing a little money at a problem to make it go away. There’s equally nothing wrong with throwing a little borrowed money at a problem to make it disappear, as long as you have the means to pay that borrowed money back. But what happens if you throw a lot of borrowed money at a problem, and the problem doesn’t go away? If you’ve ever experienced a situation like that you can probably understand how Europe feels right now. It just unleashed a magnificent $1 trillion euro bailout and the market responded with a selloff by the end of the week! So what happened? That money was supposed to make the problem go away, after all. And it was a lot of money. Why did the market respond to it with such disdain? We believe the market’s reaction is confirming what we have long suspected: that these bailouts provide next to no long-term value. They don’t produce real jobs. They don’t improve productivity. They just prolong the precarious leverage game played by the financial sector, and do so at tremendous cost to taxpayers. "Bailout and Stimulate" has been the rallying call for governments and central banks since the beginning of this financial crisis – and it has certainly had its impact over the last two years, but not the type of impact we need to propel real, sustainable growth. - Eric Sprott
Wal-Mart is counting on $1 ketchup bottles and sub-$4 cases of Coke to get its low-price mojo back.
The sharp cuts came ahead of Memorial Day weekend. They have already pushed rivals such as Target into price wars. And the markdowns are expected to keep coming throughout the summer.
They're one of the boldest moves the world's largest retailer is making to turn around sluggish business and win back shoppers from rivals. The cuts target 22 foods and other essentials at an average savings of 30 percent -- splashy enough to get attention and perhaps change perceptions.
The world's largest retailer is also restoring items like certain soups and laundry detergent it stopped carrying when it tried to declutter its stores.
Tim W. Wood: "Yes, I think that the advance out of the March 2009 low has been crippled and obviously the events seen in May were not good. Nonetheless, I do not see any evidence in accordance with Dow theory that the bullish primary trend change, associated with the counter-trend bear market advance, has been reversed at this time.
In accordance with Dow theory it is the close that counts, not the intraday high or low. Also in accordance with Dow theory, the primary trend is considered to be in force until it is reversed by a joint move of the averages with a move above or below the previous secondary high or low point. In the case of an advance, a move below the previous secondary low point is required. I have received numerous e-mails asking me if the recent violation of the May 7th closing low constituted a bearish primary trend change. In my eyes, the answer is no. I believe that the move down into the May 7th closing low was part of the same move that carried the market to the most recent lows. In other words, I do not believe that the May 7th closing lows were of the proper degree to have marked a secondary low point....The Phase II decline is out there and it will be global in nature."
ZeroHedge: "BP Suspends "Top Kill" For Second Time After Trying Two Junk Shots. Less Than 10% of Injection Fluids are Staying Inside the Leaking Pipes."
Bloomberg: Some 17% of junk bonds yield at least 10 percentage points more than Treasuries, up from 9.2% last month…The jump is the biggest since the distress ratio rose 11 percentage points in November 2008.
Doug Noland: "Fundamentally, this Bubble’s main price distortions emanate from the market perception that synchronized global fiscal and monetary policies will sustain global financial and economic recoveries. This creates a dynamic where massive issuance of sovereign debt is generally priced in the marketplace with meager little risk premiums. Similarly, the perception that markets and economies are underpinned by government policies ensures that debt instruments throughout – certainly including U.S. corporates, municipal debt, agencies, and mortgages – trade at narrow risk spreads to sovereigns. It’s the ultimate “too big to fail.”....This dramatic loosening of financial conditions inflated global securities prices. Huge rallies in the risk markets played a significant role in bolstering confidence. This combination of loose finance and improved confidence was instrumental in fostering economic recovery. The bounce back in economic activity then supported the bubbling markets and emboldened the speculators. That’s where we’ve been.
Over the past month, markets have gone from close to euphoria to near panic. The global financial Bubble ran smack up against an expanding Greek debt crisis, a tightening of Chinese mortgage Credit, and a tightening regulatory noose around the U.S. financial sector and speculative finance more generally. Complacent, highly speculative and over-liquefied securities markets were bludgeoned by losses, contagion effects, de-leveraging, and general mayhem.....Well, I believe finance has tightened and this tightening will not prove fleeting. The global Bubble has been pierced, a result of Greece – although the catalyst could have as easily been developments in the U.S. or China. But since crisis erupted initially in the Eurozone, the dollar/Treasuries have benefited thus far from de-leveraging and some safehaven perceptions. Many are programmed to interpret this as good news for U.S. recovery, although the important news is that market perceptions have changed; markets have become hyper-volatile; and the backdrop is so uncertain that speculators and investors will choose - or be forced to - rein in risk-taking.
The waves of liquidity unleashed through speculator leveraging and the flight out of safehaven assets has run its course. As we’ve seen over the past few weeks, markets can go from seemingly over-liquefied to illiquid the moment speculators reverse course and head for the exits. The markets have been reminded of this harsh reality and behavior will change. Others would argue that there is no crisis in the U.S. Credit system and, with Treasury yields so low, financial conditions have actually loosened. I would counter that it’s a global financial Bubble and destabilizing contagion effects were unleashed with the big rally in Treasuries....And it’s rising risk aversion that will pressure financial conditions and fuel liquidity concerns. The markets have passed an important inflection point, and faltering markets are certainly not good for fragile confidence."
Life is good. Coney Island's new amusement park is open. On June 11 the movie of Atlas Shrugged goes into production.
WSJ: "Six banks in Washington have failed this year, while about one-fourth of the banks and savings institutions based in the state are operating under toughened regulatory scrutiny."
Seeking Alpha: "insiders' share sales of QQQQ components have outpaced share purchases 3,933 to 1."
Mike Santoli: "BP TAKES THE CONCEPT OF A "DEEP VALUE" investment into a new dimension, as the energy company's shares continue to get pounded to valuation depths rarely seen. The selling comes amid the catastrophic oil-well spill a mile under the Gulf of Mexico.
With BP shares (ticker: BP) at 42.95, down another 5% Friday and off from 60 before the well exploded, the market has relieved the stock of nearly $60 billion in market value.
David Steinberg of DLS Capital, an Illinois-based deep-value manager, says this has generated good value in the stock, even under conservative assumptions of future costs and penalties. Analysts have been cutting BP cash-flow estimates for 2011. The lowest forecast is now $40 billion. This places the company's ratio of enterprise value (market value plus net debt) to cash flow around 4. Its 10-year average multiple is above 6.5.
Viewed another way, BP's enterprise value Friday equaled $8.77 per barrel of oil-equivalent reserves, versus a five-year average of $12.25. Trading back up to that average over the next couple of years would mean a $13 rise in the share price, he notes, atop a dividend yield that now stands above 7% and appears secure."
There’s nothing wrong with throwing a little money at a problem to make it go away. There’s equally nothing wrong with throwing a little borrowed money at a problem to make it disappear, as long as you have the means to pay that borrowed money back. But what happens if you throw a lot of borrowed money at a problem, and the problem doesn’t go away? If you’ve ever experienced a situation like that you can probably understand how Europe feels right now. It just unleashed a magnificent $1 trillion euro bailout and the market responded with a selloff by the end of the week! So what happened? That money was supposed to make the problem go away, after all. And it was a lot of money. Why did the market respond to it with such disdain? We believe the market’s reaction is confirming what we have long suspected: that these bailouts provide next to no long-term value. They don’t produce real jobs. They don’t improve productivity. They just prolong the precarious leverage game played by the financial sector, and do so at tremendous cost to taxpayers. "Bailout and Stimulate" has been the rallying call for governments and central banks since the beginning of this financial crisis – and it has certainly had its impact over the last two years, but not the type of impact we need to propel real, sustainable growth. - Eric Sprott
Wal-Mart is counting on $1 ketchup bottles and sub-$4 cases of Coke to get its low-price mojo back.
The sharp cuts came ahead of Memorial Day weekend. They have already pushed rivals such as Target into price wars. And the markdowns are expected to keep coming throughout the summer.
They're one of the boldest moves the world's largest retailer is making to turn around sluggish business and win back shoppers from rivals. The cuts target 22 foods and other essentials at an average savings of 30 percent -- splashy enough to get attention and perhaps change perceptions.
The world's largest retailer is also restoring items like certain soups and laundry detergent it stopped carrying when it tried to declutter its stores.
Tim W. Wood: "Yes, I think that the advance out of the March 2009 low has been crippled and obviously the events seen in May were not good. Nonetheless, I do not see any evidence in accordance with Dow theory that the bullish primary trend change, associated with the counter-trend bear market advance, has been reversed at this time.
In accordance with Dow theory it is the close that counts, not the intraday high or low. Also in accordance with Dow theory, the primary trend is considered to be in force until it is reversed by a joint move of the averages with a move above or below the previous secondary high or low point. In the case of an advance, a move below the previous secondary low point is required. I have received numerous e-mails asking me if the recent violation of the May 7th closing low constituted a bearish primary trend change. In my eyes, the answer is no. I believe that the move down into the May 7th closing low was part of the same move that carried the market to the most recent lows. In other words, I do not believe that the May 7th closing lows were of the proper degree to have marked a secondary low point....The Phase II decline is out there and it will be global in nature."
ZeroHedge: "BP Suspends "Top Kill" For Second Time After Trying Two Junk Shots. Less Than 10% of Injection Fluids are Staying Inside the Leaking Pipes."
Friday, May 28, 2010
The Consumer
5/28/10 The Consumer
Consumer spending in the U.S. unexpectedly stalled in April as Americans used growing wages to rebuild savings.
The pause in purchases compared with a 0.3 percent increase projected by the median forecast of economists surveyed by Bloomberg News and followed a 0.6 percent gain in March, Commerce Department figures showed today in Washington. Incomes climbed 0.4 percent for a second month, and the savings rate rose for the first time in four months.
With incomes running faster than spending, the personal savings rate rose to 3.6% of disposable income from 3.1% in March. It was the highest savings rate since January. Inflation was tame. Core inflation rose 1.2% in the past year, the slowest rate since last September. The US personal savings rate increased from a revised 2.8% to 3.2% in April.
The euro is falling in May for the sixth straight month versus the dollar, its longest string of monthly losses since spring 2000. The shared currency was first introduced in 1999.
ZeroHedge: "The power games among the ranks of Europe's puppet elite continue (the real elite as is well known consists of a few CEOs of insolvent banks). Earlier today, Pierre Lellouche, France's Europe minister, came out with another statement our of left field, that could set off the next round of European destabilization. In an interview with the FT, Lellouche said that the €440 billion European bailout "is an enormous change. It explains some of the reticence. It is expressly forbidden in the treaties by the famous no bail-out clause. De facto, we have changed the treaty.” As the bailout is already being pursued by various German scholars on grounds it is forbidden by the EU constitution, this statement will not be taken lightly by Germany which has had to lose major internal political credibility to enforce a bail out that it itself is not enamored with. Sure enough, the FT notes: "Mr Lellouche’s comments are likely to go down badly in Germany, where the government has insisted the debt guarantee scheme to help beleaguered eurozone members is a temporary mechanism, set up on an intergovernmental basis where Berlin retains a veto, and in no way implies a breach of the EU’s treaties."Furthermore , as was noted previously, a finding that the bailout is not constitutional would render the entire support mechanism moot, resulting in the imminent bankruptcy of Greece. Is this yet another concerted subversive effort on behalf of the European labor interests to expel the underperforming PIIGS and sink the euro? "
Royal Dutch Shell said it would pay $4.7 billion cash to buy privately held East Resources Inc, giving it substantially more exposure to crucial shale gas plays in North America.
But analysts cautioned the deal would put pressure on Shell's balance sheet at a time the company is already planning substantial spending.
The deal will increase Shell's daily gas production in North America by about 7.5 percent and give it access to a swathe of the Marcellus Shale, the northeastern U.S. rock formation that is one of the crucial sources of future U.S. gas production.
Companies sold the least amount of bonds in a decade this month as concern Europe’s sovereign debt crisis will slow the global economy drove up relative borrowing costs by the most since the aftermath of Lehman Brothers Holdings Inc.’s collapse.
Borrowers issued $66.1 billion of debt in currencies from dollars to yen, a third of April’s tally and the least since December 2000, according to data compiled by Bloomberg. At least 14 companies withdrew offerings, including New York-based retailer Jones Apparel Group Inc. and theater chain operator Regal Entertainment Group.
BP said Friday its price tag for the worst oil spill in U.S. history climbed close to $1 billion as the firm continues its effort to plug the blown out well that's been gushing at least 12,000 barrels a day for five weeks.
BP said it has spent $930 million on the project since the well blew out in late April.
George Ure: "Several years back, a cycle watcher named Steve Puetz attempted to see if eclipses and market crashes were somehow related. He studied eight of the greatest crashes in financial history, from the Holland Tulip Mania of 1637 to the Nikkei of 1990. He found that market crashes tend to occur near full moons, and that the greatest number of crashes start after the first full moon after a solar eclipse, when that full moon is also a lunar eclipse. Puetz found that all eight crashes occurred six days before to three days after a full moon that occurred within six weeks of a solar eclipse. The odds of that being a coincidence, Puetz calculated, are less than 1 in 127,000." The NASA Eclipse web site says we have a total solar eclipse coming up on July 11th. And that means the next full moon after July 11th will come July 26th.
Arch Crawford: "Well, when something is worse than the Revolutionary War, World War I, the Great Depression, and World War II, that's bad - it's the worst I've seen the charts in over 200-years. "
As he explains it, says George Ure, there's Mars conjunction Saturn which will be in opposition to Jupiter conjucting Uranus all squaring Pluto.
Lipper FMI reports that investors pulled $5.3 billion from equity mutual fund during the past week, the largest outflow since March 2009. Including ETFs, the outflow was a massive $16.7 billion, the largest since 2002.
The Chicago purchasing managers index fell to 59.7% from 63.8% in April.
The UMich index rose to 73.6 in late May from 72.2 in April. An earlier estimate for May was 73.3. Economists surveyed by MarketWatch had expected a final May reading of 73.4. The long-term average is about 87.
Mexico to ban junk foods from schools.
Paulson & Co., Centerbridge Partners LP and Blackstone Group LP won a bankruptcy auction for hotel chain Extended Stay Inc. with a $3.9 billion bid, a person familiar with the matter said.
Fitch Ratings on Friday downgraded Spain's debt to AA+ from AAA, citing concerns about the country's level of debt relative to its gross domestic product.
The Treasury Department and the Federal Reserve are willing to let bailed-out insurer American International Group Inc. reduce the price it would accept in the sale of its Asian insurance unit, AIA Group Ltd., Bloomberg reported Friday. U.K. life insurer Prudential said Friday it is renegotiating its $35.5 billion deal with AIG to acquire the business.
"North Korean Major General Pak Rim Su refuted the results of the international investigation into the sinking of a South Korean warship and said "any accidental clash that may break out in the waters of the West Sea of Korea or in areas along the Demilitarized Zone will lead to all out war," at a press conference today, according a KCNA statement."
Sun West Bank in Las Vegas, Nev. was shut down late Friday, according to the Federal Deposit Insurance Corp., pushing up the total of U.S. bank closures in 2010 to 78. City National Bank, a subsidiary of City National Corp., will assume all of Sun West's deposits. Granite Community Bank N.A. in Granite Bay, Calif., was closed on Friday, according to the Federal Deposit Insurance Corp., bringing the number of U.S. bank closures in 2010 to 77. Three affiliated banks in Florida were closed Friday, according to the Federal Deposit Insurance Corp., raising the tally of bank failures in 2010 to 76. The Bank of Florida - Southeast in Fort Lauderdale; the Bank of Florida - Southwest in Naples; and the Bank of Florida - Tampa Bay in Tampa were shut down.
On Friday, the Dow Jones Industrial Average fell 122.36 points, or 1.2%, to 10,136.63. The broad S&P 500 index fell 13.65, or 1.2%, to 1,089.41, while the Nasdaq Composite fell 20.64 points, or 0.9%, to 2,257.04. For the week, the Dow fell 0.6% but the broad market index rose 0.2% and the Nasdaq gained 1.3%. For the month of May, however, the Dow fell 7.9% and the S&P fell 8.2%, both having their worst monthly performance in 15 months. The Nasdaq fell 8.3% in May, its worst month since Nov. 2008.
Consumer spending in the U.S. unexpectedly stalled in April as Americans used growing wages to rebuild savings.
The pause in purchases compared with a 0.3 percent increase projected by the median forecast of economists surveyed by Bloomberg News and followed a 0.6 percent gain in March, Commerce Department figures showed today in Washington. Incomes climbed 0.4 percent for a second month, and the savings rate rose for the first time in four months.
With incomes running faster than spending, the personal savings rate rose to 3.6% of disposable income from 3.1% in March. It was the highest savings rate since January. Inflation was tame. Core inflation rose 1.2% in the past year, the slowest rate since last September. The US personal savings rate increased from a revised 2.8% to 3.2% in April.
The euro is falling in May for the sixth straight month versus the dollar, its longest string of monthly losses since spring 2000. The shared currency was first introduced in 1999.
ZeroHedge: "The power games among the ranks of Europe's puppet elite continue (the real elite as is well known consists of a few CEOs of insolvent banks). Earlier today, Pierre Lellouche, France's Europe minister, came out with another statement our of left field, that could set off the next round of European destabilization. In an interview with the FT, Lellouche said that the €440 billion European bailout "is an enormous change. It explains some of the reticence. It is expressly forbidden in the treaties by the famous no bail-out clause. De facto, we have changed the treaty.” As the bailout is already being pursued by various German scholars on grounds it is forbidden by the EU constitution, this statement will not be taken lightly by Germany which has had to lose major internal political credibility to enforce a bail out that it itself is not enamored with. Sure enough, the FT notes: "Mr Lellouche’s comments are likely to go down badly in Germany, where the government has insisted the debt guarantee scheme to help beleaguered eurozone members is a temporary mechanism, set up on an intergovernmental basis where Berlin retains a veto, and in no way implies a breach of the EU’s treaties."Furthermore , as was noted previously, a finding that the bailout is not constitutional would render the entire support mechanism moot, resulting in the imminent bankruptcy of Greece. Is this yet another concerted subversive effort on behalf of the European labor interests to expel the underperforming PIIGS and sink the euro? "
Royal Dutch Shell said it would pay $4.7 billion cash to buy privately held East Resources Inc, giving it substantially more exposure to crucial shale gas plays in North America.
But analysts cautioned the deal would put pressure on Shell's balance sheet at a time the company is already planning substantial spending.
The deal will increase Shell's daily gas production in North America by about 7.5 percent and give it access to a swathe of the Marcellus Shale, the northeastern U.S. rock formation that is one of the crucial sources of future U.S. gas production.
Companies sold the least amount of bonds in a decade this month as concern Europe’s sovereign debt crisis will slow the global economy drove up relative borrowing costs by the most since the aftermath of Lehman Brothers Holdings Inc.’s collapse.
Borrowers issued $66.1 billion of debt in currencies from dollars to yen, a third of April’s tally and the least since December 2000, according to data compiled by Bloomberg. At least 14 companies withdrew offerings, including New York-based retailer Jones Apparel Group Inc. and theater chain operator Regal Entertainment Group.
BP said Friday its price tag for the worst oil spill in U.S. history climbed close to $1 billion as the firm continues its effort to plug the blown out well that's been gushing at least 12,000 barrels a day for five weeks.
BP said it has spent $930 million on the project since the well blew out in late April.
George Ure: "Several years back, a cycle watcher named Steve Puetz attempted to see if eclipses and market crashes were somehow related. He studied eight of the greatest crashes in financial history, from the Holland Tulip Mania of 1637 to the Nikkei of 1990. He found that market crashes tend to occur near full moons, and that the greatest number of crashes start after the first full moon after a solar eclipse, when that full moon is also a lunar eclipse. Puetz found that all eight crashes occurred six days before to three days after a full moon that occurred within six weeks of a solar eclipse. The odds of that being a coincidence, Puetz calculated, are less than 1 in 127,000." The NASA Eclipse web site says we have a total solar eclipse coming up on July 11th. And that means the next full moon after July 11th will come July 26th.
Arch Crawford: "Well, when something is worse than the Revolutionary War, World War I, the Great Depression, and World War II, that's bad - it's the worst I've seen the charts in over 200-years. "
As he explains it, says George Ure, there's Mars conjunction Saturn which will be in opposition to Jupiter conjucting Uranus all squaring Pluto.
Lipper FMI reports that investors pulled $5.3 billion from equity mutual fund during the past week, the largest outflow since March 2009. Including ETFs, the outflow was a massive $16.7 billion, the largest since 2002.
The Chicago purchasing managers index fell to 59.7% from 63.8% in April.
The UMich index rose to 73.6 in late May from 72.2 in April. An earlier estimate for May was 73.3. Economists surveyed by MarketWatch had expected a final May reading of 73.4. The long-term average is about 87.
Mexico to ban junk foods from schools.
Paulson & Co., Centerbridge Partners LP and Blackstone Group LP won a bankruptcy auction for hotel chain Extended Stay Inc. with a $3.9 billion bid, a person familiar with the matter said.
Fitch Ratings on Friday downgraded Spain's debt to AA+ from AAA, citing concerns about the country's level of debt relative to its gross domestic product.
The Treasury Department and the Federal Reserve are willing to let bailed-out insurer American International Group Inc. reduce the price it would accept in the sale of its Asian insurance unit, AIA Group Ltd., Bloomberg reported Friday. U.K. life insurer Prudential said Friday it is renegotiating its $35.5 billion deal with AIG to acquire the business.
"North Korean Major General Pak Rim Su refuted the results of the international investigation into the sinking of a South Korean warship and said "any accidental clash that may break out in the waters of the West Sea of Korea or in areas along the Demilitarized Zone will lead to all out war," at a press conference today, according a KCNA statement."
Sun West Bank in Las Vegas, Nev. was shut down late Friday, according to the Federal Deposit Insurance Corp., pushing up the total of U.S. bank closures in 2010 to 78. City National Bank, a subsidiary of City National Corp., will assume all of Sun West's deposits. Granite Community Bank N.A. in Granite Bay, Calif., was closed on Friday, according to the Federal Deposit Insurance Corp., bringing the number of U.S. bank closures in 2010 to 77. Three affiliated banks in Florida were closed Friday, according to the Federal Deposit Insurance Corp., raising the tally of bank failures in 2010 to 76. The Bank of Florida - Southeast in Fort Lauderdale; the Bank of Florida - Southwest in Naples; and the Bank of Florida - Tampa Bay in Tampa were shut down.
On Friday, the Dow Jones Industrial Average fell 122.36 points, or 1.2%, to 10,136.63. The broad S&P 500 index fell 13.65, or 1.2%, to 1,089.41, while the Nasdaq Composite fell 20.64 points, or 0.9%, to 2,257.04. For the week, the Dow fell 0.6% but the broad market index rose 0.2% and the Nasdaq gained 1.3%. For the month of May, however, the Dow fell 7.9% and the S&P fell 8.2%, both having their worst monthly performance in 15 months. The Nasdaq fell 8.3% in May, its worst month since Nov. 2008.
Thursday, May 27, 2010
China
5/27/10 China
China is reviewing its eurozone debt holdings in the wake of Europe's financial problems, the Financial Times reported in its online edition Wednesday. China's State Administration of Foreign Exchange, which manages the reserves, has expressed concern about its exposure to the five eurozone markets of Greece, Ireland, Italy, Portugal and Spain, the newspaper said. State Administration of Foreign Exchange holds an estimated $630 billion of eurozone bonds in its reserves, according to the FT.
Daniel Gross: "About 23 percent of U.S. exports go to Europe (see Page 19) and about 19 percent go to members of the European Union. The crisis in Europe is bad for American companies that ship their output across the Atlantic and whose goods have to compete with suddenly cheaper European goods."
In its first forecast for the storm season that begins next Tuesday, the National Oceanic and Atmospheric Administration forecast 14 to 23 named storms, with 8 to 14 developing into hurricanes, nearly matching 2005's record of 15.
The Dow yesterday was at the lowest close of the year, with the only times the Dow has closed under 10k being in a three day brief period between February 5 and 7th.
BP began a top kill procedure Wednesday afternoon, pumping 50000 pounds of thick, viscous fluid twice the density of water into the pipe that is leaking in its latest attempt to stop the flow of oil.
A statement on the website for China State Administration of Foreign Exchange Thursday said reports that may sell some of its holdings in eurobonds were "groundless." Those reports triggered late selling for U.S. stocks Wednesday as the euro dipped below a key threshold. The denial helped pushed Europe stocks and the euro higher.
SAFE also said it supports measures taken by the European Union and the International Monetary Fund to ensure financial stability within the euro zone and is confident markets will overcome the recent difficulties. It also said it views the euro zone as "one of the most important investment markets" and a key component in its strategy to hold diversified investments for the long term. The statement appears to counter a Financial Times report Wednesday that said the agency was discussing plans to diversify some of its estimated $630 billion in euro-bonds that it holds as part of $2.4 trillion forex stockpile.
Transocean supervisors that were aboard the Deepwater Horizion rig told government officials Wednesday about a disagreement with BP officials hours before the blast on Aprl 20 that killed 11 and resulted in the current oil leak in the Gulf of Mexico. In a joint hearing held by the U.S. Coast Guard and the Minerals Management Service in Louisiana, Douglas Brown, Transocean's chief mechanic on the rig, said that key representatives from both companies had a heated argument in an 11 a.m. meeting on that day, according to a report by The Wall Street Journal. Brown said Transocean's crew leaders objected to a decision by BP on how to start removing heavy drilling fluid and replace it with lighter sea water from a riser pipe connected to the well head. BP declined to comment on the testimony.
Wal-Mart's Asda Group has agreed to acquire the U.K. stores of discount-supermarket group Netto FoodStores for $1.12 billion.
Costco Wholesale Corp.,reported that fiscal third-quarter net income rose 46% on 12% higher net sales and 10% higher same-store sales. For the quarter ended May 9, net income reached $306 million, or 68 cents a share, from $210 million, or 48 cents, in the year-earlier quarter. Net sales rose to $17.39 billion from $15.48 billion. Total revenue, which includes membership fees, rose 12% to $17.78 billion from $15.81 billion. The earnings reflect a gain in the latest quarter of $14 million before taxes from a partial reversal of the Canadian tax liability; and a year-ago pretax charge of $34 million from a litigation settlement. A survey of analysts by FactSet Research produced consensus estimates of 66 cents of profit on $17.54 billion of sales. Same-store sales for the latest quarter reflected rises of 6% in the U.S. and 26% internationally. Excluding higher gasoline prices and stronger currencies in Canada, the U.K. and South Korea, same-store sales rose 4%, reflecting increases of 3% in the U.S. and 8% overseas.
The U.S. economy grew at a 3.0% pace in the first quarter - lower than the 3.2% previously reported - owing mainly to smaller increases in consumer spending and investment in business software, the government said Thursday. Economists surveyed by MarketWatch expected first-quarter growth to be revised up to 3.5%.
Dan Fuss, whose Loomis Sayles Bond Fund beat 95 percent of competitors the past year, said he sold all of his Treasury holdings because of prospects interest rates will rise as the U.S. borrows unprecedented amounts.
“The fundamentals are awful,” Fuss said in a telephone interview yesterday from Boston. “The incremental borrower of funds in the U.S. capital markets is rapidly becoming the U.S. Treasury. Do you really want to buy the debt of the biggest issuer?”
The number of people applying for unemployment benefits fell 14,000 to a seasonally adjusted 460,000 in the week ended May 22, the Labor Department reported Thursday. Economists surveyed by MarketWatch had expected a result of 458,000. The four-week average of initial claims -- a better gauge of employment trends than the volatile week-to-week number -- rose 2,250 to stand at 456,500. For the week ended May 15, continuing claims fell 49,000 to 4.61 million. The four-week average of these ongoing claims also declined, off 11,500 to 4.64 million, the lowest level since January 2009. In the week ended May 8, about 5.34 million jobless workers, not seasonally adjusted, were receiving extended federal benefits, down about 2,700 from the prior week. Altogether, 9.87 million people were collecting some type of unemployment benefits in the week ended May 8, down about 78,000 from the prior week.
The percentage of corporate bonds considered in distress surged this week to the highest since 2009 as investors dumped debt of the neediest borrowers on concern Europe’s fiscal crisis will make it harder for them to refinance.
More than 17 percent of junk bonds yield at least 10 percentage points over Treasuries, up from 9.2 percent last month, Bank of America Merrill Lynch’s Global High-Yield Index shows. The jump is the biggest since the distress ratio rose 11 percentage points in November 2008, two months after Lehman Brothers Holdings Inc. collapsed. Bonds of MGM Mirage and Freescale Semiconductor Inc. joined the list this month.
U.S. distressed bonds have lost 10 percent in May, according to the indexes, as credit markets seize up amid speculation Greece and other nations in Europe with rising budget deficits won’t be able to meet their debt payments. Junk bond sales plunged this month to the lowest level since March 2009, data compiled by Bloomberg show.
May 27 (Bloomberg) -- Greece’s struggle to fix its budget crisis may signal to other governments that it’s easier to default than cut spending, creating “massive” risk for bondholders, said Citigroup Inc. credit strategist Matt King.
“You can’t put Greece in a vacuum,” King said at a high- yield financing conference in Paris organized by IIR Ltd. Other governments may “decide the pain in reducing fiscal spending is just not worth it, especially when a lot of these bonds are held by foreigners,” he said.
Barry Ritholtz: "The WSJ notes that several of the biggest banks (Bank of America, Deutsche Bank and Citigroup) are lowering their net borrowings in the “repo” market by 41% at the ends of each quarter tomake their balance sheet look better for Q reports."
BP began a top kill procedure Wednesday afternoon, pumping 50000 pounds of thick, viscous fluid twice the density of water into the pipe that is leaking in its latest attempt to stop the flow of oil.
A statement on the website for China State Administration of Foreign Exchange Thursday said reports that may sell some of its holdings in eurobonds were "groundless." Those reports triggered late selling for U.S. stocks Wednesday as the euro dipped below a key threshold. The denial helped pushed Europe stocks and the euro higher.
SAFE also said it supports measures taken by the European Union and the International Monetary Fund to ensure financial stability within the euro zone and is confident markets will overcome the recent difficulties. It also said it views the euro zone as "one of the most important investment markets" and a key component in its strategy to hold diversified investments for the long term. The statement appears to counter a Financial Times report Wednesday that said the agency was discussing plans to diversify some of its estimated $630 billion in euro-bonds that it holds as part of $2.4 trillion forex stockpile.
Transocean supervisors that were aboard the Deepwater Horizion rig told government officials Wednesday about a disagreement with BP officials hours before the blast on Aprl 20 that killed 11 and resulted in the current oil leak in the Gulf of Mexico. In a joint hearing held by the U.S. Coast Guard and the Minerals Management Service in Louisiana, Douglas Brown, Transocean's chief mechanic on the rig, said that key representatives from both companies had a heated argument in an 11 a.m. meeting on that day, according to a report by The Wall Street Journal. Brown said Transocean's crew leaders objected to a decision by BP on how to start removing heavy drilling fluid and replace it with lighter sea water from a riser pipe connected to the well head. BP declined to comment on the testimony.
Wal-Mart's Asda Group has agreed to acquire the U.K. stores of discount-supermarket group Netto FoodStores for $1.12 billion.
George Ure: "
I just love John Crudele's ongoing exposure in the NY Post ("Two more Census workers blow the whistle") on how Census workers got fires and rehired to make it look like more hiring has been going on that is really the case."
By Jason Simpkins, Managing Editor, Money Morning
The euro's recent struggles have done more than bring the currency's viability into question. They've put the European Central Bank (ECB) on a collision course with a liquidity crisis.
The ECB is running low on dollars, and that problem could escalate when the U.S. Federal Reserve closes swap lines that were temporarily reinstated as the Greek debt crisis escalated. Additionally, more deposits are being yanked from the central bank as holders question whether or not the ECB has enough juice to stop a classic bank panic.
Monsanto Co., the world’s largest seed company, cut its profit forecast after deciding to reduce the price of its Roundup herbicide because of an oversupplied market.
Profit in the fiscal year through August will be $2.40 to $2.60 a share, excluding some items, from $3.10 to $3.30 previously, St. Louis-based Monsanto said today in a statement.
The Oil Drum: "I am putting up these two pictures to show why I believe that the injection pressure of mud into the well has dropped, indicating that BP have filled the well, and are now holding pressure to see if there are any problems. I would assume, if none develop, that they will inject cement to seal the top of the well, sometime today."
Gary Dorsch: "Thus, the focus of the second phase of the European debt crisis has shifted from the specter of a sovereign bond default to a frightful situation where European banks may become unwilling to lend money to the private sector, or could demand higher interest rates or impose tougher collateral rules. In other words, the markets fear a “double-dip” liquidity crunch, which could deprive European companies with junk bond ratings of badly needed funds as banks become more risk averse.
Since May 10th credit default swaps for the Euro-zone’s top 50 junk rated bonds has surged to as high as €625,000 to insure €10 million of debt. That’s up sharply from €460,000 since the $1 trillion bank rescue plan was announced. In fact, the European corporate bond market has been effectively shut down for banks with bond issuance slumping to $2.6 billion in May, down from $82 billion in January....
The European Central Bank (ECB) has crossed the Rubicon agreeing to monetize hundreds of billions of Euros held in Greek, Portuguese, and Spanish bonds. In the process the supply of Euros in world money markets is likely to increase. The ECB’s efforts at sterilizing the bond purchases are voluntary and have been feeble at best. Furthermore, at the end of the day, there is little chance that Greece’s 2.5 million working citizens can repay 300 billion Euros of debt, while at the same time absorbing 25% wage cuts in the public sector and paying 23% VAT taxes.
At some point Greece’s government would seek to untangle the noose strangling its economy and demand a restructuring the country’s debts, and in a polite way tell its lenders to take a big haircut. Argentina is holding a $20 billion debt swap this month at 45 cents on the dollar, nine years after defaulting on $95 billion of loans. The Euro would remain a very unstable and weak currency. Reports that Beijing is becoming increasingly nervous about its Euro zone bond holdings drove the Euro to as low as $1.2180 and fueled a flight for safety into gold."
Barron's: latest weekly M2 money supply is registering at $8,529 billion, whereas last week it was $8,504 billion, and $8,315 billion at this time last year.
The Senate passed the Restoring American Financial Stability Act last week, approving a new program that would reduce mortgage payments for the unemployed.
The program would provide $3bn from the Troubled Asset Relief Program (TARP) to lend up to $50,000 to unemployed homeowners, who could reasonably resume making payments again within two years. The program was modeled after the Homeowners’ Emergency Mortgage Assistance Program (HEMAP) in Pennsylvania.
Kuwait's sovereign wealth fund, the Kuwait Investment Authority, on Thursday denied a report in a Kuwait newspaper that it planned to reduce its exposure to investments in the euro zone, Reuters reported. "KIA denies local newspaper reports that there is a consideration by (KIA) to reduce its investments and presence in European countries ... as a reaction to crises that some European countries are facing," KIA said in a statement. The Al-Anba newspaper earlier Thursday said the fund planned to reduce euro-zone investments due to worries about Portugal and Spain.
Coast Guard Admiral Thad Allen said Thursday that BP's effort to plug its leaking oil well through its "top kill" procedure appears to be working, according to a report by The Los Angeles Times. The oil continues to flow, but at lower pressure. BP Plc spokesman Mark Salt declined to confirm the report, but said the operations continue. Allen also said the government is preparing to release an esimate of the amount of oil that has been leaking from the well. Official estimates have been at 5,000 barrels a day, but others have said the leak is worse.
Dubai International Capital and a committee of banks asked lenders on Thursday for a three-month extension to Sept. 30 of certain maturities, though the size of the debt in question was not specified.
In trading on Globex this morning, July crude oil prices were up 1.76 to $73.27.
madhedgefundtrader:
" Post date: 05/27/2010 - 07:00
There is a massive structural imbalance in residential real estate that will take at least a decade or more to unwind. 26 million homes for sale and 70 million missing buyers do not add up to a bull market. 80 million retiring baby boomers are putting huge generational pressure on the market. Losing a city the size of San Francisco in demand every year. A replay of 1929 to 1955 when prices remained flat?"
ZeroHedge: "The WSJ reports that, as broadly expected, Lehman is not alone in its illegal Repo 105 window-dressing scam: it turns out that Citigroup and Bank Of America also routinely used such shady practices for years. As Michael Rapoport reports, "Citigroup said the misclassified transactions-of $5.7 billion as of the end of 2009, and as much as $9.2 billion over the past three years-involved "a very limited number of our business units" that "used this type of transaction in very small amounts." So its all good - fraud may have been performed but it was just nickel and diming: after all it's not like Citigroup was robbing cemeteries or anything (and since guilt was neither admitted nor denied in that specific case, one can say Citi was never sleeping because it was robbing graveyards but only due to honest mistake). Sure enough, this disclosure come only after the SEC demanded clarification on Repo-105 comparable transactions at all major firms. And with such daily distractions as ten trillions point swings in the market, and crude oil filling up the world ocean, who really cares anymore that all US banks commit fraud on a daily basis. The punchline: "Bank of America and Citigroup say their misclassifications were due to errors--not an attempt to make themselves look less risky." Well, that surely justifies everything."
China to have surplus diesel and gasoline next year, according to PetroChina.
EIA Natural Gas Storage Change Forecast
For Week Ending 5/21/2010
Surveys and Analysts Forecasts
Stor. Change
Type
Bentek
98
Build
Survey
BNP Paribas
97
Build
Survey
Dow Jones Average
100
Build
Survey
PIRA
98
Build
Surve
Platts
98-102
Build
Survey
EIA: storage + 104. Working gas in storage was 2,269 Bcf as of Friday, May 21, 2010, according to EIA estimates. This represents a net increase of 104 Bcf from the previous week. Stocks were 71 Bcf higher than last year at this time and 318 Bcf above the 5-year average of 1,951 Bcf. In the East Region, stocks were 117 Bcf above the 5-year average following net injections of 55 Bcf. Stocks in the Producing Region were 115 Bcf above the 5-year average of 730 Bcf after a net injection of 31 Bcf. Stocks in the West Region were 86 Bcf above the 5-year average after a net addition of 18 Bcf. At 2,269 Bcf, total working gas is above the 5-year historical range.
Property developers are estimated to owe the Spanish banking industry 300 billion euros ($369 billion) following a decade-long, debt-fuelled property boom. Many banks now have huge property portfolios and analysts have been looking at what would happen if things got worse.
Simon Goodfellow, the head of European equity strategy research at ING Wholesale Banking, has been drawing comparisons with the Japanese housing bubble between 1981 and 1991.
“The boom in Japanese house prices from 1981 to 1991 saw prices rise by 225 percent," Goodfellow said. "In Spain between 1998 and 2008 Spanish house prices rose by 178 percent.”
So far, Spanish house prices have only fallen by 10 percent, according to Goodfellow.
The Dow Jones industrials surged 285 points, or 2.9%, to 10,259. It was the blue chips' second-best one-day gain of the year. The Standard & Poor's 500 Index was up 35 points, or 3.3%, to 1,103. And the Nasdaq Composite Index soared 82 points, or 3.7%, to 2,278 -- and ended the day back in the black for the year.
A 7.2-magnitude earthquake struck Vanuatu in the South Pacific on Friday at 4:14 a.m. local time, the U.S. Geological Survey said. The epicenter was about 300 miles from Port Vila, Vanuatu's capital, and 1,290 miles from Brisbane, Australia. So far, NOAA's West Coast and Alaska Tsunami Warning Center does not expect a tsunami along the West Coast of the United States.
China is reviewing its eurozone debt holdings in the wake of Europe's financial problems, the Financial Times reported in its online edition Wednesday. China's State Administration of Foreign Exchange, which manages the reserves, has expressed concern about its exposure to the five eurozone markets of Greece, Ireland, Italy, Portugal and Spain, the newspaper said. State Administration of Foreign Exchange holds an estimated $630 billion of eurozone bonds in its reserves, according to the FT.
Daniel Gross: "About 23 percent of U.S. exports go to Europe (see Page 19) and about 19 percent go to members of the European Union. The crisis in Europe is bad for American companies that ship their output across the Atlantic and whose goods have to compete with suddenly cheaper European goods."
In its first forecast for the storm season that begins next Tuesday, the National Oceanic and Atmospheric Administration forecast 14 to 23 named storms, with 8 to 14 developing into hurricanes, nearly matching 2005's record of 15.
The Dow yesterday was at the lowest close of the year, with the only times the Dow has closed under 10k being in a three day brief period between February 5 and 7th.
BP began a top kill procedure Wednesday afternoon, pumping 50000 pounds of thick, viscous fluid twice the density of water into the pipe that is leaking in its latest attempt to stop the flow of oil.
A statement on the website for China State Administration of Foreign Exchange Thursday said reports that may sell some of its holdings in eurobonds were "groundless." Those reports triggered late selling for U.S. stocks Wednesday as the euro dipped below a key threshold. The denial helped pushed Europe stocks and the euro higher.
SAFE also said it supports measures taken by the European Union and the International Monetary Fund to ensure financial stability within the euro zone and is confident markets will overcome the recent difficulties. It also said it views the euro zone as "one of the most important investment markets" and a key component in its strategy to hold diversified investments for the long term. The statement appears to counter a Financial Times report Wednesday that said the agency was discussing plans to diversify some of its estimated $630 billion in euro-bonds that it holds as part of $2.4 trillion forex stockpile.
Transocean supervisors that were aboard the Deepwater Horizion rig told government officials Wednesday about a disagreement with BP officials hours before the blast on Aprl 20 that killed 11 and resulted in the current oil leak in the Gulf of Mexico. In a joint hearing held by the U.S. Coast Guard and the Minerals Management Service in Louisiana, Douglas Brown, Transocean's chief mechanic on the rig, said that key representatives from both companies had a heated argument in an 11 a.m. meeting on that day, according to a report by The Wall Street Journal. Brown said Transocean's crew leaders objected to a decision by BP on how to start removing heavy drilling fluid and replace it with lighter sea water from a riser pipe connected to the well head. BP declined to comment on the testimony.
Wal-Mart's Asda Group has agreed to acquire the U.K. stores of discount-supermarket group Netto FoodStores for $1.12 billion.
Costco Wholesale Corp.,reported that fiscal third-quarter net income rose 46% on 12% higher net sales and 10% higher same-store sales. For the quarter ended May 9, net income reached $306 million, or 68 cents a share, from $210 million, or 48 cents, in the year-earlier quarter. Net sales rose to $17.39 billion from $15.48 billion. Total revenue, which includes membership fees, rose 12% to $17.78 billion from $15.81 billion. The earnings reflect a gain in the latest quarter of $14 million before taxes from a partial reversal of the Canadian tax liability; and a year-ago pretax charge of $34 million from a litigation settlement. A survey of analysts by FactSet Research produced consensus estimates of 66 cents of profit on $17.54 billion of sales. Same-store sales for the latest quarter reflected rises of 6% in the U.S. and 26% internationally. Excluding higher gasoline prices and stronger currencies in Canada, the U.K. and South Korea, same-store sales rose 4%, reflecting increases of 3% in the U.S. and 8% overseas.
The U.S. economy grew at a 3.0% pace in the first quarter - lower than the 3.2% previously reported - owing mainly to smaller increases in consumer spending and investment in business software, the government said Thursday. Economists surveyed by MarketWatch expected first-quarter growth to be revised up to 3.5%.
Dan Fuss, whose Loomis Sayles Bond Fund beat 95 percent of competitors the past year, said he sold all of his Treasury holdings because of prospects interest rates will rise as the U.S. borrows unprecedented amounts.
“The fundamentals are awful,” Fuss said in a telephone interview yesterday from Boston. “The incremental borrower of funds in the U.S. capital markets is rapidly becoming the U.S. Treasury. Do you really want to buy the debt of the biggest issuer?”
The number of people applying for unemployment benefits fell 14,000 to a seasonally adjusted 460,000 in the week ended May 22, the Labor Department reported Thursday. Economists surveyed by MarketWatch had expected a result of 458,000. The four-week average of initial claims -- a better gauge of employment trends than the volatile week-to-week number -- rose 2,250 to stand at 456,500. For the week ended May 15, continuing claims fell 49,000 to 4.61 million. The four-week average of these ongoing claims also declined, off 11,500 to 4.64 million, the lowest level since January 2009. In the week ended May 8, about 5.34 million jobless workers, not seasonally adjusted, were receiving extended federal benefits, down about 2,700 from the prior week. Altogether, 9.87 million people were collecting some type of unemployment benefits in the week ended May 8, down about 78,000 from the prior week.
The percentage of corporate bonds considered in distress surged this week to the highest since 2009 as investors dumped debt of the neediest borrowers on concern Europe’s fiscal crisis will make it harder for them to refinance.
More than 17 percent of junk bonds yield at least 10 percentage points over Treasuries, up from 9.2 percent last month, Bank of America Merrill Lynch’s Global High-Yield Index shows. The jump is the biggest since the distress ratio rose 11 percentage points in November 2008, two months after Lehman Brothers Holdings Inc. collapsed. Bonds of MGM Mirage and Freescale Semiconductor Inc. joined the list this month.
U.S. distressed bonds have lost 10 percent in May, according to the indexes, as credit markets seize up amid speculation Greece and other nations in Europe with rising budget deficits won’t be able to meet their debt payments. Junk bond sales plunged this month to the lowest level since March 2009, data compiled by Bloomberg show.
May 27 (Bloomberg) -- Greece’s struggle to fix its budget crisis may signal to other governments that it’s easier to default than cut spending, creating “massive” risk for bondholders, said Citigroup Inc. credit strategist Matt King.
“You can’t put Greece in a vacuum,” King said at a high- yield financing conference in Paris organized by IIR Ltd. Other governments may “decide the pain in reducing fiscal spending is just not worth it, especially when a lot of these bonds are held by foreigners,” he said.
Barry Ritholtz: "The WSJ notes that several of the biggest banks (Bank of America, Deutsche Bank and Citigroup) are lowering their net borrowings in the “repo” market by 41% at the ends of each quarter tomake their balance sheet look better for Q reports."
BP began a top kill procedure Wednesday afternoon, pumping 50000 pounds of thick, viscous fluid twice the density of water into the pipe that is leaking in its latest attempt to stop the flow of oil.
A statement on the website for China State Administration of Foreign Exchange Thursday said reports that may sell some of its holdings in eurobonds were "groundless." Those reports triggered late selling for U.S. stocks Wednesday as the euro dipped below a key threshold. The denial helped pushed Europe stocks and the euro higher.
SAFE also said it supports measures taken by the European Union and the International Monetary Fund to ensure financial stability within the euro zone and is confident markets will overcome the recent difficulties. It also said it views the euro zone as "one of the most important investment markets" and a key component in its strategy to hold diversified investments for the long term. The statement appears to counter a Financial Times report Wednesday that said the agency was discussing plans to diversify some of its estimated $630 billion in euro-bonds that it holds as part of $2.4 trillion forex stockpile.
Transocean supervisors that were aboard the Deepwater Horizion rig told government officials Wednesday about a disagreement with BP officials hours before the blast on Aprl 20 that killed 11 and resulted in the current oil leak in the Gulf of Mexico. In a joint hearing held by the U.S. Coast Guard and the Minerals Management Service in Louisiana, Douglas Brown, Transocean's chief mechanic on the rig, said that key representatives from both companies had a heated argument in an 11 a.m. meeting on that day, according to a report by The Wall Street Journal. Brown said Transocean's crew leaders objected to a decision by BP on how to start removing heavy drilling fluid and replace it with lighter sea water from a riser pipe connected to the well head. BP declined to comment on the testimony.
Wal-Mart's Asda Group has agreed to acquire the U.K. stores of discount-supermarket group Netto FoodStores for $1.12 billion.
George Ure: "
I just love John Crudele's ongoing exposure in the NY Post ("Two more Census workers blow the whistle") on how Census workers got fires and rehired to make it look like more hiring has been going on that is really the case."
By Jason Simpkins, Managing Editor, Money Morning
The euro's recent struggles have done more than bring the currency's viability into question. They've put the European Central Bank (ECB) on a collision course with a liquidity crisis.
The ECB is running low on dollars, and that problem could escalate when the U.S. Federal Reserve closes swap lines that were temporarily reinstated as the Greek debt crisis escalated. Additionally, more deposits are being yanked from the central bank as holders question whether or not the ECB has enough juice to stop a classic bank panic.
Monsanto Co., the world’s largest seed company, cut its profit forecast after deciding to reduce the price of its Roundup herbicide because of an oversupplied market.
Profit in the fiscal year through August will be $2.40 to $2.60 a share, excluding some items, from $3.10 to $3.30 previously, St. Louis-based Monsanto said today in a statement.
The Oil Drum: "I am putting up these two pictures to show why I believe that the injection pressure of mud into the well has dropped, indicating that BP have filled the well, and are now holding pressure to see if there are any problems. I would assume, if none develop, that they will inject cement to seal the top of the well, sometime today."
Gary Dorsch: "Thus, the focus of the second phase of the European debt crisis has shifted from the specter of a sovereign bond default to a frightful situation where European banks may become unwilling to lend money to the private sector, or could demand higher interest rates or impose tougher collateral rules. In other words, the markets fear a “double-dip” liquidity crunch, which could deprive European companies with junk bond ratings of badly needed funds as banks become more risk averse.
Since May 10th credit default swaps for the Euro-zone’s top 50 junk rated bonds has surged to as high as €625,000 to insure €10 million of debt. That’s up sharply from €460,000 since the $1 trillion bank rescue plan was announced. In fact, the European corporate bond market has been effectively shut down for banks with bond issuance slumping to $2.6 billion in May, down from $82 billion in January....
The European Central Bank (ECB) has crossed the Rubicon agreeing to monetize hundreds of billions of Euros held in Greek, Portuguese, and Spanish bonds. In the process the supply of Euros in world money markets is likely to increase. The ECB’s efforts at sterilizing the bond purchases are voluntary and have been feeble at best. Furthermore, at the end of the day, there is little chance that Greece’s 2.5 million working citizens can repay 300 billion Euros of debt, while at the same time absorbing 25% wage cuts in the public sector and paying 23% VAT taxes.
At some point Greece’s government would seek to untangle the noose strangling its economy and demand a restructuring the country’s debts, and in a polite way tell its lenders to take a big haircut. Argentina is holding a $20 billion debt swap this month at 45 cents on the dollar, nine years after defaulting on $95 billion of loans. The Euro would remain a very unstable and weak currency. Reports that Beijing is becoming increasingly nervous about its Euro zone bond holdings drove the Euro to as low as $1.2180 and fueled a flight for safety into gold."
Barron's: latest weekly M2 money supply is registering at $8,529 billion, whereas last week it was $8,504 billion, and $8,315 billion at this time last year.
The Senate passed the Restoring American Financial Stability Act last week, approving a new program that would reduce mortgage payments for the unemployed.
The program would provide $3bn from the Troubled Asset Relief Program (TARP) to lend up to $50,000 to unemployed homeowners, who could reasonably resume making payments again within two years. The program was modeled after the Homeowners’ Emergency Mortgage Assistance Program (HEMAP) in Pennsylvania.
Kuwait's sovereign wealth fund, the Kuwait Investment Authority, on Thursday denied a report in a Kuwait newspaper that it planned to reduce its exposure to investments in the euro zone, Reuters reported. "KIA denies local newspaper reports that there is a consideration by (KIA) to reduce its investments and presence in European countries ... as a reaction to crises that some European countries are facing," KIA said in a statement. The Al-Anba newspaper earlier Thursday said the fund planned to reduce euro-zone investments due to worries about Portugal and Spain.
Coast Guard Admiral Thad Allen said Thursday that BP's effort to plug its leaking oil well through its "top kill" procedure appears to be working, according to a report by The Los Angeles Times. The oil continues to flow, but at lower pressure. BP Plc spokesman Mark Salt declined to confirm the report, but said the operations continue. Allen also said the government is preparing to release an esimate of the amount of oil that has been leaking from the well. Official estimates have been at 5,000 barrels a day, but others have said the leak is worse.
Dubai International Capital and a committee of banks asked lenders on Thursday for a three-month extension to Sept. 30 of certain maturities, though the size of the debt in question was not specified.
In trading on Globex this morning, July crude oil prices were up 1.76 to $73.27.
madhedgefundtrader:
" Post date: 05/27/2010 - 07:00
There is a massive structural imbalance in residential real estate that will take at least a decade or more to unwind. 26 million homes for sale and 70 million missing buyers do not add up to a bull market. 80 million retiring baby boomers are putting huge generational pressure on the market. Losing a city the size of San Francisco in demand every year. A replay of 1929 to 1955 when prices remained flat?"
ZeroHedge: "The WSJ reports that, as broadly expected, Lehman is not alone in its illegal Repo 105 window-dressing scam: it turns out that Citigroup and Bank Of America also routinely used such shady practices for years. As Michael Rapoport reports, "Citigroup said the misclassified transactions-of $5.7 billion as of the end of 2009, and as much as $9.2 billion over the past three years-involved "a very limited number of our business units" that "used this type of transaction in very small amounts." So its all good - fraud may have been performed but it was just nickel and diming: after all it's not like Citigroup was robbing cemeteries or anything (and since guilt was neither admitted nor denied in that specific case, one can say Citi was never sleeping because it was robbing graveyards but only due to honest mistake). Sure enough, this disclosure come only after the SEC demanded clarification on Repo-105 comparable transactions at all major firms. And with such daily distractions as ten trillions point swings in the market, and crude oil filling up the world ocean, who really cares anymore that all US banks commit fraud on a daily basis. The punchline: "Bank of America and Citigroup say their misclassifications were due to errors--not an attempt to make themselves look less risky." Well, that surely justifies everything."
China to have surplus diesel and gasoline next year, according to PetroChina.
EIA Natural Gas Storage Change Forecast
For Week Ending 5/21/2010
Surveys and Analysts Forecasts
Stor. Change
Type
Bentek
98
Build
Survey
BNP Paribas
97
Build
Survey
Dow Jones Average
100
Build
Survey
PIRA
98
Build
Surve
Platts
98-102
Build
Survey
EIA: storage + 104. Working gas in storage was 2,269 Bcf as of Friday, May 21, 2010, according to EIA estimates. This represents a net increase of 104 Bcf from the previous week. Stocks were 71 Bcf higher than last year at this time and 318 Bcf above the 5-year average of 1,951 Bcf. In the East Region, stocks were 117 Bcf above the 5-year average following net injections of 55 Bcf. Stocks in the Producing Region were 115 Bcf above the 5-year average of 730 Bcf after a net injection of 31 Bcf. Stocks in the West Region were 86 Bcf above the 5-year average after a net addition of 18 Bcf. At 2,269 Bcf, total working gas is above the 5-year historical range.
Property developers are estimated to owe the Spanish banking industry 300 billion euros ($369 billion) following a decade-long, debt-fuelled property boom. Many banks now have huge property portfolios and analysts have been looking at what would happen if things got worse.
Simon Goodfellow, the head of European equity strategy research at ING Wholesale Banking, has been drawing comparisons with the Japanese housing bubble between 1981 and 1991.
“The boom in Japanese house prices from 1981 to 1991 saw prices rise by 225 percent," Goodfellow said. "In Spain between 1998 and 2008 Spanish house prices rose by 178 percent.”
So far, Spanish house prices have only fallen by 10 percent, according to Goodfellow.
The Dow Jones industrials surged 285 points, or 2.9%, to 10,259. It was the blue chips' second-best one-day gain of the year. The Standard & Poor's 500 Index was up 35 points, or 3.3%, to 1,103. And the Nasdaq Composite Index soared 82 points, or 3.7%, to 2,278 -- and ended the day back in the black for the year.
A 7.2-magnitude earthquake struck Vanuatu in the South Pacific on Friday at 4:14 a.m. local time, the U.S. Geological Survey said. The epicenter was about 300 miles from Port Vila, Vanuatu's capital, and 1,290 miles from Brisbane, Australia. So far, NOAA's West Coast and Alaska Tsunami Warning Center does not expect a tsunami along the West Coast of the United States.
Wednesday, May 26, 2010
BP
5/26/10 BP
"It's almost worth the Great Depression to learn how little our big men know."
Will Rogers
Orders for U.S.-made durable goods rose 2.9% in April on stronger demand for airplanes and communications equipment, the Commerce Department reported Wednesday. Excluding the 16.1% increase in transportation goods, orders fell 1.0%. The increase exceeded the expected 2.5% rise forecast by economists surveyed by MarketWatch. Total orders have risen in four of the past five months. March orders were revised to show almost no change from the prior estimate of a 0.6% decline. Shipments rose 1.4% in April, and were up 1.8% excluding transportation goods. Inventories rose 0.7%. Nondefense capital goods, excluding aircraft, often called core durable-goods orders, fell 2.4% in April after a 6.5% gain in March. On an ex-Defense basis, Durables rose by +3.4%; and on an ex-Transportation basis Durable Goods FELL by 1.0%.
BP said Wednesday that it has begun a series of diagnostic tests to determine whether the "top kill" procedure to plug the oil leak in the Gulf of Mexico can be successfully executed. The company said the top kill procedure could take two days and it cannot be predicted how long it will take to know if the operation has been a success. The company said it will continue to provide a live video feed from the seabed throughout the process.
BP Plc told congressional investigators on Tuesday that pressure tests on a drill pipe showed a fundamental mistake hours before the deadly explosion that caused the Gulf of Mexico oil leak, a memo released by two congressmen showed.
McDonald’s Corp. is raising 250 million Swiss francs ($217 million) from its first sale in the currency in almost three years as investors seek so-called safe- haven alternatives to weakened euro-denominated assets.
The world’s largest restaurant company is offering a yield of about 50 basis points more than the benchmark swap rate on the six-year notes, according to a banker with knowledge of the sale. The sale lifts this week’s corporate issuance in the Swiss currency to 450 million francs, the most since August 2009, according to data compiled by Bloomberg.
Randall Forsyth: "So far, the problems of illiquidity in the money markets are "contained," to borrow a phrase that described the status of subprime mortgages in 2007 and 2008. If so, Libor ought to come back down closer to the Fed funds range. Conversely, a continued upward creep in Libor would indicate the fundamental problems remain."
Spanish top bank BBVA is said to have be unable to renew a $1 billion commercial paper line, according to the WSJ.
ZeroHedge: "Yesterday we reported a rumor that the Fed and the ECB were set to announce "new liquidity measures." Today, the WSJ's Jon Hilsenrath reports that this development would likely materialize in the form of a lowering of the rate at which the Fed offers Euro-Dollar swaps, currently priced at 100 bps over OIS. This has not gone unnoticed by the market: even with 3M Libor flat from yesterday, the front month Eurodollar has surged from yesterday, on this most recent confirmation that the central banks will drown the world in free liquidity before another session of liquidations has to take place."
U.S. new-home sales rose 14.8% in April to their highest level since May 2008, the Commerce Department estimated Wednesday. The increase in new-home sales to a seasonally adjusted annual rate of 504,000 was well above the 425,000 pace expected by economists surveyed by MarketWatch. New-home sales in March were revised to a 439,000 level compared with the previous estimate of 411,000. New-home sales are up 47.8% compared with a year ago. The months' supply of homes on the market fell to 5.0 months in April from 6.2 months in March. Median sales prices have fallen 9.5% in the past year to $198,400.
Tillerson reiterated Exxon's view that oil will continue to provide the majority of the world's energy needs by 2030. Natural gas will outstrip the use of coal by that time, he said.
Anadarko Petroleum Corp. says insurance will cover more than $160 million of costs related to the Gulf of Mexico rig disaster.
The company owns a 25 percent non-operating interest in the field where a rig leased by a unit of BP PLC exploded and sank two weeks ago. Oil continues leaking from the well and the resulting spill is threading wildlife and businesses along the Gulf coastline.
In an SEC filing Anadarko says net insurance coverage will likely total about $177.5 million, less deductibles of $15 million.
"This insurance is designed to cover costs associated with stopping the hydrocarbon release, drilling relief wells and other associated costs," Chairman and CEO Jim Hackett told analysts.
Paul Farrell: "Last March I wrote "6 reasons I'm calling a bottom and a new bull." Today it's time for a new call. We've had a good year. Net gains over 50% in 2009. But now: "Game over, head for the exits." Bears beating bulls. Dow sinking below 6,470...The clock's flashing. Huge point spread. Think bear, think crash, think end of capitalism, think Great Depression II ... This is no buying opportunity, this game's in the refrigerator, call it."
The United States and China have very unique cultures and histories. "But we know," said Secretary Clinton, "that our future, both our challenges and our opportunities, will be shared. We have traveled different paths, but that shared future is our common destination and responsibility."
The Oil Drum: "This is the day when the top kill of the leaking BP well in the Gulf of Mexico will likely be attempted. Kent Wells, Senior Executive VP for Exploration and Production, has given a technical brief on what is likely to happen. Having tried a number of other ways of describing the underlying idea, a more mundane example came to mind. If you have roots growing into the drain that runs out of your house, and you turn the tap on in a bathroom, the water will still be able to get down past the roots, and there is no problem. However if you flush a toilet or equivalent higher flow, this can’t easily get past the roots, and thus the water backs up and flows back out into your basement.
Essentially that is what is being tried. The well has a certain ability to get oil through the Blowout Preventer (BOP) at a given (though debated) flow rate. If the volume is increased, by pumping mud into the well below the BOP, then the well will “back up” and the oil will flow back down the well. As it does more mud enters the well. This is dense enough that, as the column grows longer it pushes down on the oil, and applies enough pressure, due to this weight, to overcome the pressure in the rock. Without that positive difference, there is nothing to drive the oil out, and thus the well is “killed.”
U.S. banks are sitting on $185 Billion in loans that are either 90+ Days Past Due or on Nonaccrual.
The three-month U.S. dollar London interbank offered rate, or Libor, extended its climb to another 10-month high on Wednesday, but the pace of its rise slowed as market tensions surrounding North Korea and South Korea and euro-zone debt woes appeared to ease. Libor was fixed at 0.5378%, the British Bankers' Association said, up from 0.5363% on Tuesday.
ZeroHedge: "The EURJPY is preparing to take out 110 support."
The Dow finished down 69 points to 9,974. The Nasdaq Composite Index was down 15 points to 2,196, and the Standard & Poor's 500 was off 6 points to 1,071.
"It's almost worth the Great Depression to learn how little our big men know."
Will Rogers
Orders for U.S.-made durable goods rose 2.9% in April on stronger demand for airplanes and communications equipment, the Commerce Department reported Wednesday. Excluding the 16.1% increase in transportation goods, orders fell 1.0%. The increase exceeded the expected 2.5% rise forecast by economists surveyed by MarketWatch. Total orders have risen in four of the past five months. March orders were revised to show almost no change from the prior estimate of a 0.6% decline. Shipments rose 1.4% in April, and were up 1.8% excluding transportation goods. Inventories rose 0.7%. Nondefense capital goods, excluding aircraft, often called core durable-goods orders, fell 2.4% in April after a 6.5% gain in March. On an ex-Defense basis, Durables rose by +3.4%; and on an ex-Transportation basis Durable Goods FELL by 1.0%.
BP said Wednesday that it has begun a series of diagnostic tests to determine whether the "top kill" procedure to plug the oil leak in the Gulf of Mexico can be successfully executed. The company said the top kill procedure could take two days and it cannot be predicted how long it will take to know if the operation has been a success. The company said it will continue to provide a live video feed from the seabed throughout the process.
BP Plc told congressional investigators on Tuesday that pressure tests on a drill pipe showed a fundamental mistake hours before the deadly explosion that caused the Gulf of Mexico oil leak, a memo released by two congressmen showed.
McDonald’s Corp. is raising 250 million Swiss francs ($217 million) from its first sale in the currency in almost three years as investors seek so-called safe- haven alternatives to weakened euro-denominated assets.
The world’s largest restaurant company is offering a yield of about 50 basis points more than the benchmark swap rate on the six-year notes, according to a banker with knowledge of the sale. The sale lifts this week’s corporate issuance in the Swiss currency to 450 million francs, the most since August 2009, according to data compiled by Bloomberg.
Randall Forsyth: "So far, the problems of illiquidity in the money markets are "contained," to borrow a phrase that described the status of subprime mortgages in 2007 and 2008. If so, Libor ought to come back down closer to the Fed funds range. Conversely, a continued upward creep in Libor would indicate the fundamental problems remain."
Spanish top bank BBVA is said to have be unable to renew a $1 billion commercial paper line, according to the WSJ.
ZeroHedge: "Yesterday we reported a rumor that the Fed and the ECB were set to announce "new liquidity measures." Today, the WSJ's Jon Hilsenrath reports that this development would likely materialize in the form of a lowering of the rate at which the Fed offers Euro-Dollar swaps, currently priced at 100 bps over OIS. This has not gone unnoticed by the market: even with 3M Libor flat from yesterday, the front month Eurodollar has surged from yesterday, on this most recent confirmation that the central banks will drown the world in free liquidity before another session of liquidations has to take place."
U.S. new-home sales rose 14.8% in April to their highest level since May 2008, the Commerce Department estimated Wednesday. The increase in new-home sales to a seasonally adjusted annual rate of 504,000 was well above the 425,000 pace expected by economists surveyed by MarketWatch. New-home sales in March were revised to a 439,000 level compared with the previous estimate of 411,000. New-home sales are up 47.8% compared with a year ago. The months' supply of homes on the market fell to 5.0 months in April from 6.2 months in March. Median sales prices have fallen 9.5% in the past year to $198,400.
Tillerson reiterated Exxon's view that oil will continue to provide the majority of the world's energy needs by 2030. Natural gas will outstrip the use of coal by that time, he said.
Anadarko Petroleum Corp. says insurance will cover more than $160 million of costs related to the Gulf of Mexico rig disaster.
The company owns a 25 percent non-operating interest in the field where a rig leased by a unit of BP PLC exploded and sank two weeks ago. Oil continues leaking from the well and the resulting spill is threading wildlife and businesses along the Gulf coastline.
In an SEC filing Anadarko says net insurance coverage will likely total about $177.5 million, less deductibles of $15 million.
"This insurance is designed to cover costs associated with stopping the hydrocarbon release, drilling relief wells and other associated costs," Chairman and CEO Jim Hackett told analysts.
Paul Farrell: "Last March I wrote "6 reasons I'm calling a bottom and a new bull." Today it's time for a new call. We've had a good year. Net gains over 50% in 2009. But now: "Game over, head for the exits." Bears beating bulls. Dow sinking below 6,470...The clock's flashing. Huge point spread. Think bear, think crash, think end of capitalism, think Great Depression II ... This is no buying opportunity, this game's in the refrigerator, call it."
The United States and China have very unique cultures and histories. "But we know," said Secretary Clinton, "that our future, both our challenges and our opportunities, will be shared. We have traveled different paths, but that shared future is our common destination and responsibility."
The Oil Drum: "This is the day when the top kill of the leaking BP well in the Gulf of Mexico will likely be attempted. Kent Wells, Senior Executive VP for Exploration and Production, has given a technical brief on what is likely to happen. Having tried a number of other ways of describing the underlying idea, a more mundane example came to mind. If you have roots growing into the drain that runs out of your house, and you turn the tap on in a bathroom, the water will still be able to get down past the roots, and there is no problem. However if you flush a toilet or equivalent higher flow, this can’t easily get past the roots, and thus the water backs up and flows back out into your basement.
Essentially that is what is being tried. The well has a certain ability to get oil through the Blowout Preventer (BOP) at a given (though debated) flow rate. If the volume is increased, by pumping mud into the well below the BOP, then the well will “back up” and the oil will flow back down the well. As it does more mud enters the well. This is dense enough that, as the column grows longer it pushes down on the oil, and applies enough pressure, due to this weight, to overcome the pressure in the rock. Without that positive difference, there is nothing to drive the oil out, and thus the well is “killed.”
U.S. banks are sitting on $185 Billion in loans that are either 90+ Days Past Due or on Nonaccrual.
The three-month U.S. dollar London interbank offered rate, or Libor, extended its climb to another 10-month high on Wednesday, but the pace of its rise slowed as market tensions surrounding North Korea and South Korea and euro-zone debt woes appeared to ease. Libor was fixed at 0.5378%, the British Bankers' Association said, up from 0.5363% on Tuesday.
ZeroHedge: "The EURJPY is preparing to take out 110 support."
The Dow finished down 69 points to 9,974. The Nasdaq Composite Index was down 15 points to 2,196, and the Standard & Poor's 500 was off 6 points to 1,071.
Tuesday, May 25, 2010
$13 Trillion in Debt
5/25/10 $13 Trillion in Debt
“The housing market may be in better shape than this time last year; but, when you look at recent trends there are signs of some renewed weakening in home prices,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “In the past several months we have seen some relatively weak reports across many of the markets we cover. Thirteen MSAs and the two Composites saw their prices drop in March over February. Boston was flat. The National Composite fell by 3.2% compared to the previous quarter and the two Composites are down for the sixth consecutive month.
“While year-over-year results for the National Composite, 18 of the 20 MSAs and the two Composites
improved, the most recent monthly data are not as encouraging. It is especially disappointing that the
improvement we saw in sales and starts in March did not find its way to home prices. Now that the tax
incentive ended on April 30th, we don’t expect to see a boost in relative demand.”
There are signs of “renewed weakness” in U.S. housing markets, accordig to Standard & Poor’s, which just released the March data for home prices, showing that 13 of the 20 main metro areas showed a decline in home prices from February.
The one-year rise in prices in the 20-city composite of 2.35% was below economists’ projections for a 2.9% rise, according to Thomson Reuters.
The national index’s decline accelerated from Q4 to Q1, with a drop of 3.2%, bigger than Q4’s 1% decline, though the national index still rose 2% compared to last year’s Q1.
All this has widened the drop in Dow Industrials futures, currently down 217 points at 9,826.
ZeroHedge: "Total US debt per today's Daily Treasury Statement was $12,989,095 million. Also today, the US Treasury auctioned off $42 billion in coupon debt. This means that as of this moment, assuming the new debt were to settle today, the US has $13,031,095 billion in debt: congratulation America - you have now passed lucky $13 trillion in total debt. But don't worry, we won't stay here for long. At the current rate of issuance, $14 trillion will be passed in 8 months, and $15 trillion in another 7. By the end of 2011, we estimate total US sovereign debt to be about $15.5 trillion. For some recent vivid examples of prosperity courtesy of runaway debt issuance, please see Argentina, Japan and Greece."
Japan's Nikkei average fell 2 percent to its lowest in more than five months on Tuesday, as the euro fell further on worries that Europe's woes now included the health of some banks in addition to sovereign debt problems. The Nikkei finished down 3%.
The spread between Libor and overnight index swaps have also widened, a move that's viewed as a sign of banks growing more reluctant to lend to each other. European banks are being forced to pay more for short-term dollar borrowings than banks in the U.S. and Asia—suggesting that lenders world-wide are increasingly nervous about the risks ahead for European banks.
For 2011, Medtronic expects earnings of $3.45 a share to $3.55 a share, which includes approximately 5 cents a share of dilution from the acquisition of Invatec and the pending ATS Medical acquisition. Analysts expected 2011 earnings of $3.52 a share.
- North Korean leader Kim Jong Il told the military to be combat-ready in a message that coincided with South Korea’s announcement that it blamed his regime for the sinking of a warship, a dissident group said.
Kim’s order was broadcast on May 20 by O Kuk Ryol, vice chairman of the National Defense Commission, according to the website of North Korea Intellectuals Solidarity, a Seoul- based group run by defectors from the communist country.
Wal-Mart says that starting Tuesday the iPhone 3GS with 16 gigabytes of storage space will cost $97 with a two-year contract with AT&T. It currently costs $197.
Minerals Management Service employees accepted lunches and other gifts from oil- and natural-gas companies and used government computers to view porn, an Interior Department report said.
Rigzone: "OGX has identified gas and condensate in well 1-OGX-11D-SPS on the Natal prospect in the shallow waters of the Santos Basin. Thus far, an oil column of about 138 feet (42 meters) with net pay of roughly 112 feet (34 meters) was encountered in sandstone reservoirs in the Santonian section, with high porosity and consistent hydrocarbon shows. Drilling is still in progress by the Ocean Quest semisub, and the well will be drilled to a final depth of up to 20,013 feet (6,100 meters) aiming at additional objectives. The well, the OGX-11D, is situated about 65 miles (104 kilometers) off the coast in the BM-S-59 block in waters measuring 558 feet (170 meters). OGX wholly owns and operates the block."
ZeroHedge: "Libor is now at 0.53%, eurodollars are plunging, new Fed-ECB rescue facilities are rumored to be imminent, Germany is set to introduce a ban on naked shorting of all stocks, and sovereign risk is exploding: it will be a fun day. Spain, Italy and Korea are all more than 20% wider on the day, as the contagion virus is spreading faster and faster toward the heart of Europe."
U.S. consumers are regaining confidence about the economy and their chances for finding a job, the Conference Board said Tuesday, as it reported that its consumer confidence index rose to 63.3 in May from 57.7 in April. It was the third consecutive increase and the highest level since March 2008. The separate expectations index rose to its highest level since August 2007, before the recession began. Although still weak by historical standards, consumer confidence "appears to be gaining some traction," said Lynn Franco, head of consumer research at the private research organization. "The improvement has been fueled by growing optimism about business and labor market conditions."
Canada's main stock market index declined 1.7% on Tuesday as the price of crude oil futures fell below $68 a barrel.
South Korea's central bank intervened in the market Tuesday to defend the Korean won as the currency fell steeply against the U.S. dollar on the back of escalating tensions on the Korean peninsula, according to media reports. The dollar had surged to 1,270 won but eased to close at 1,250 after the Bank of Korea stepped in to sell dollars, according to Yonhap News. Inter-Korea relations have deteriorated in recent days after the South Korean government accused North Korea of sinking a South Korean navy warship and demanded an official apology.
Dell is developing a tablet computer called Streak that will run Google's open-source Android operating system.
Money market rates climbed Tuesday, pushing one metric of banks' willingness to lend to one another to the highest since last April, on growing worries about debt-related problems in Europe. The 3-month London interbank offered rate for dollars rose to the highest since July. The TED spread jumped to 36.9 basis points, or 0.369 percentage points, also the highest since July. The TED spread -- the gap between the three-month T-bill interest rate and three-month Libor -- spiked in October 2008 to more than 460 basis points, according to FactSet Research. In another sign of rising costs for companies to borrow funds, two-year swap spreads rose to 58 basis points, the highest since May 2009. A swap spread is the gap between the rates to exchange floating- for fixed-interest payments and comparable-maturity Treasury yields. Wider spreads mean banks are more hesitant to lend to each other, keeping pressure on their funding costs, and indirectly, the rates they charge homeowners and corporate lenders. "The bottom line is that equity investors will continue to remain tentative until some level of stability emerges among these spreads," Mike O'Rouke, chief market strategist at BTIG.
Oil settles 2.1% lower at $68.75 a barrel.
Three regional Federal Reserve banks last month wanted to raise the discount rate the central bank charges banks for emergency loans, according to minutes from Fed meetings released on Tuesday.
The regional banks of Richmond, St. Louis and Dallas wanted to boost the primary credit rate to 1 percent from the current 0.75 percent in an effort to normalize the differential between it and the benchmark federal funds rate.
The American Petroleum Institute reported Tuesday an increase of 616,000 barrels in oil stockpiles in the week ended May 21. The API also reported a decrease of 3.19 million barrels of gasoline in stock and an increase of 1.5 million barrels in the stocks of distillates, which include diesel and heating oil.
ZeroHedge: "Curve Flattening Continues: 2s10s Now Under 240 bps.....Should the CP rates continue rising without moderation, look for European credit markets to break soon enough."
The Dow Jones industrial average dropped 22.82 points, or 0.23 percent, to 10,043.75. But the Standard & Poor's 500 Index gained just 0.38 point, or 0.04 percent, to end at 1,074.03. The Nasdaq Composite Index shed 2.60 points, or 0.12 percent, to 2,210.95.
“The housing market may be in better shape than this time last year; but, when you look at recent trends there are signs of some renewed weakening in home prices,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “In the past several months we have seen some relatively weak reports across many of the markets we cover. Thirteen MSAs and the two Composites saw their prices drop in March over February. Boston was flat. The National Composite fell by 3.2% compared to the previous quarter and the two Composites are down for the sixth consecutive month.
“While year-over-year results for the National Composite, 18 of the 20 MSAs and the two Composites
improved, the most recent monthly data are not as encouraging. It is especially disappointing that the
improvement we saw in sales and starts in March did not find its way to home prices. Now that the tax
incentive ended on April 30th, we don’t expect to see a boost in relative demand.”
There are signs of “renewed weakness” in U.S. housing markets, accordig to Standard & Poor’s, which just released the March data for home prices, showing that 13 of the 20 main metro areas showed a decline in home prices from February.
The one-year rise in prices in the 20-city composite of 2.35% was below economists’ projections for a 2.9% rise, according to Thomson Reuters.
The national index’s decline accelerated from Q4 to Q1, with a drop of 3.2%, bigger than Q4’s 1% decline, though the national index still rose 2% compared to last year’s Q1.
All this has widened the drop in Dow Industrials futures, currently down 217 points at 9,826.
ZeroHedge: "Total US debt per today's Daily Treasury Statement was $12,989,095 million. Also today, the US Treasury auctioned off $42 billion in coupon debt. This means that as of this moment, assuming the new debt were to settle today, the US has $13,031,095 billion in debt: congratulation America - you have now passed lucky $13 trillion in total debt. But don't worry, we won't stay here for long. At the current rate of issuance, $14 trillion will be passed in 8 months, and $15 trillion in another 7. By the end of 2011, we estimate total US sovereign debt to be about $15.5 trillion. For some recent vivid examples of prosperity courtesy of runaway debt issuance, please see Argentina, Japan and Greece."
Japan's Nikkei average fell 2 percent to its lowest in more than five months on Tuesday, as the euro fell further on worries that Europe's woes now included the health of some banks in addition to sovereign debt problems. The Nikkei finished down 3%.
The spread between Libor and overnight index swaps have also widened, a move that's viewed as a sign of banks growing more reluctant to lend to each other. European banks are being forced to pay more for short-term dollar borrowings than banks in the U.S. and Asia—suggesting that lenders world-wide are increasingly nervous about the risks ahead for European banks.
For 2011, Medtronic expects earnings of $3.45 a share to $3.55 a share, which includes approximately 5 cents a share of dilution from the acquisition of Invatec and the pending ATS Medical acquisition. Analysts expected 2011 earnings of $3.52 a share.
- North Korean leader Kim Jong Il told the military to be combat-ready in a message that coincided with South Korea’s announcement that it blamed his regime for the sinking of a warship, a dissident group said.
Kim’s order was broadcast on May 20 by O Kuk Ryol, vice chairman of the National Defense Commission, according to the website of North Korea Intellectuals Solidarity, a Seoul- based group run by defectors from the communist country.
Wal-Mart says that starting Tuesday the iPhone 3GS with 16 gigabytes of storage space will cost $97 with a two-year contract with AT&T. It currently costs $197.
Minerals Management Service employees accepted lunches and other gifts from oil- and natural-gas companies and used government computers to view porn, an Interior Department report said.
Rigzone: "OGX has identified gas and condensate in well 1-OGX-11D-SPS on the Natal prospect in the shallow waters of the Santos Basin. Thus far, an oil column of about 138 feet (42 meters) with net pay of roughly 112 feet (34 meters) was encountered in sandstone reservoirs in the Santonian section, with high porosity and consistent hydrocarbon shows. Drilling is still in progress by the Ocean Quest semisub, and the well will be drilled to a final depth of up to 20,013 feet (6,100 meters) aiming at additional objectives. The well, the OGX-11D, is situated about 65 miles (104 kilometers) off the coast in the BM-S-59 block in waters measuring 558 feet (170 meters). OGX wholly owns and operates the block."
ZeroHedge: "Libor is now at 0.53%, eurodollars are plunging, new Fed-ECB rescue facilities are rumored to be imminent, Germany is set to introduce a ban on naked shorting of all stocks, and sovereign risk is exploding: it will be a fun day. Spain, Italy and Korea are all more than 20% wider on the day, as the contagion virus is spreading faster and faster toward the heart of Europe."
U.S. consumers are regaining confidence about the economy and their chances for finding a job, the Conference Board said Tuesday, as it reported that its consumer confidence index rose to 63.3 in May from 57.7 in April. It was the third consecutive increase and the highest level since March 2008. The separate expectations index rose to its highest level since August 2007, before the recession began. Although still weak by historical standards, consumer confidence "appears to be gaining some traction," said Lynn Franco, head of consumer research at the private research organization. "The improvement has been fueled by growing optimism about business and labor market conditions."
Canada's main stock market index declined 1.7% on Tuesday as the price of crude oil futures fell below $68 a barrel.
South Korea's central bank intervened in the market Tuesday to defend the Korean won as the currency fell steeply against the U.S. dollar on the back of escalating tensions on the Korean peninsula, according to media reports. The dollar had surged to 1,270 won but eased to close at 1,250 after the Bank of Korea stepped in to sell dollars, according to Yonhap News. Inter-Korea relations have deteriorated in recent days after the South Korean government accused North Korea of sinking a South Korean navy warship and demanded an official apology.
Dell is developing a tablet computer called Streak that will run Google's open-source Android operating system.
Money market rates climbed Tuesday, pushing one metric of banks' willingness to lend to one another to the highest since last April, on growing worries about debt-related problems in Europe. The 3-month London interbank offered rate for dollars rose to the highest since July. The TED spread jumped to 36.9 basis points, or 0.369 percentage points, also the highest since July. The TED spread -- the gap between the three-month T-bill interest rate and three-month Libor -- spiked in October 2008 to more than 460 basis points, according to FactSet Research. In another sign of rising costs for companies to borrow funds, two-year swap spreads rose to 58 basis points, the highest since May 2009. A swap spread is the gap between the rates to exchange floating- for fixed-interest payments and comparable-maturity Treasury yields. Wider spreads mean banks are more hesitant to lend to each other, keeping pressure on their funding costs, and indirectly, the rates they charge homeowners and corporate lenders. "The bottom line is that equity investors will continue to remain tentative until some level of stability emerges among these spreads," Mike O'Rouke, chief market strategist at BTIG.
Oil settles 2.1% lower at $68.75 a barrel.
Three regional Federal Reserve banks last month wanted to raise the discount rate the central bank charges banks for emergency loans, according to minutes from Fed meetings released on Tuesday.
The regional banks of Richmond, St. Louis and Dallas wanted to boost the primary credit rate to 1 percent from the current 0.75 percent in an effort to normalize the differential between it and the benchmark federal funds rate.
The American Petroleum Institute reported Tuesday an increase of 616,000 barrels in oil stockpiles in the week ended May 21. The API also reported a decrease of 3.19 million barrels of gasoline in stock and an increase of 1.5 million barrels in the stocks of distillates, which include diesel and heating oil.
ZeroHedge: "Curve Flattening Continues: 2s10s Now Under 240 bps.....Should the CP rates continue rising without moderation, look for European credit markets to break soon enough."
The Dow Jones industrial average dropped 22.82 points, or 0.23 percent, to 10,043.75. But the Standard & Poor's 500 Index gained just 0.38 point, or 0.04 percent, to end at 1,074.03. The Nasdaq Composite Index shed 2.60 points, or 0.12 percent, to 2,210.95.
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