Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Mon 06.30.2008
Commodities Signal Bubble Bursting as First-Half Ends Commodities are heading for their best first half in 35 years. The next six months may not be as rewarding because record prices for oil, copper and a dozen other raw materials may crimp consumption and encourage growth in supply. The 19 commodities in the Reuters/Jefferies CRB Index jumped 29 percent through June 27, the most since 1973 and more than any second-half gain in at least five decades, data compiled by Bloomberg show. The index rose another 0.6 percent as of 2:38 p.m. in London.
Gold off highs as dollar bounces from 1-month low Gold slipped from the five-week high it hit earlier in Monday's session, as the dollar bounced back from a one-month low against a basket of currencies. Firm oil prices, which are holding near the record highs they touched this morning, are continuing to support buying of the precious metal as an inflation hedge, however.
Bank Failures: How Bad Will It Be? Washington Mutual, Wachovia and National City are among the financial institutions that have announced huge losses and are looking for billions of dollars from private equity firms or others in the industry just to keep their doors open. In all likelihood, the bigger banks and savings and loan associations will survive the mortgage debacle and ensuing credit crunch, albeit somewhat battered and bruised. But smaller banks may not fare as well, although it doesn't appear that we'll see a cascade of bank failures. Nevertheless, the increased risk has prompted the Federal Deposit Insurance Corp., or FDIC, to beef up its staffing in anticipation of banks going belly-up.
New recession worry: Bank failures Construction loan problems threaten spike in smaller bank failures and add to worry over credit crunch. As if the economy wasn't already fighting enough strong headwinds, the risk of capital shortfalls and outright failure of the nation's banks is rising. The Federal Deposit Insurance Corp., the federal agency that backs bank deposits, last week reported the biggest jump in "problem institutions" it has seen since the savings and loan crisis of the late 1980s. While the extent of the problem is still low by historic standards, it identified 76 banks as in trouble - a 52% increase from a year ago.
Where will the economy go from here? Economist Irwin Kellner shares his outlook with columnist Marshall Loeb It's all too clear that the economy is in a rough patch. The dollar's weak, energy and food costs are high, the stock market is down, oil is at record levels, and housing values have lost years of gains. What's next?
Global economy could face deeper downturn Central banks' banker says world economy could see deeper, longer downturn than most expect The global economy could face a deeper downturn than many currently expect amid rising inflation and the turmoil on financial markets, the Bank for International Settlements said at its annual meeting Monday. "In the aftermath of a long credit-driven boom, it would not be surprising to see turmoil in financial markets, slowing real growth and temporarily rising inflation," the BIS said in its annual report. "While difficult to predict, their interaction does appear to point to a deeper and more protracted global downturn than the consensus view seems to expect."
Inflation worry limits Fed flexibility The past few days of trading have seen financial markets rocked by a realisation of just how fraught with dangers the US macroeconomic The core dynamic of the credit squeeze - financial sector weakness causing and then being amplified by economic weakness – has resurfaced. And it has been compounded by a resurgence of inflation risk, driven by record oil prices.
Volatility Drops Most Since 2001 as Dollar Fall Slows Currency volatility fell by the most since 2001 this quarter, reducing the chances central bankers will seek to bolster the dollar. JPMorgan Chase & Co.'s index of implied volatility on dollar options against the euro, the yen, the British pound, the Swiss franc and the Australian and Canadian dollars declined 2.21 percentage points to 10.28 percent. It's the biggest drop since the second quarter of 2001.
Oil rises to record on concerns about Iran Crude oil rose to a record above $143 a barrel on Monday on speculation the dispute over Iran's nuclear program may disrupt supply from the second-largest OPEC producer. Pressure on Iran to end its uranium enrichment program and the falling value of the U.S. dollar may drive prices to $170 a barrel, the president of the Organization of Petroleum Exporting Countries, Chakib Khelil, said Saturday. Oil is headed for its biggest six-month gain since 1999 as investors shun equities for commodities, looking for a hedge against a weaker dollar and quickening inflation.
U.S. Won't Let Iran Close Strait of Hormuz, Fifth Fleet Says The U.S. won't allow Iran to shut the Strait of Hormuz, through which the bulk of Middle East oil shipments is transported, a spokesman for the Fifth Fleet said. "They will not close it,'' Lieutenant Nate Christensen said in a telephone interview today from Bahrain, where the fleet is based. "The Strait of Hormuz is vital international waters.'' The head of Iran's Revolutionary Guard said on June 28 that Iran may seize control of the Strait if the country were attacked by Israel, Agence France-Presse reported.
Global stock markets keep grinding lower As the United States markets edge toward bear territory, losing nearly 20 percent of their value from last fall's peak, investors might wonder where they can turn for relief. The gloomy answer: nowhere. Many of the major markets in Europe and around the world have already entered a bear market. Germany and France are among the markets suffering the most, and once high-flying emerging markets in countries like China and India have collapsed even more drastically.
Eurozone inflation jumps to 4% Prices in the eurozone are rising at 4 per cent a year, the highest inflation rate the 15-nation bloc has seen since statistics began in 1997 and a further sign the European Central Bank will raise its main rate from 4 to 4.25 per cent on Thursday. Eurostat, the European Union’s statistics office, said on Monday in its initial “flash” estimate the annual rate of price rises jumped from 3.7 per cent in May to 4.0 per cent in June, twice as high as the ECB’s target of below but “close to” 2 per cent. Record-high energy prices were the main reason for the increase. The June rate is higher than the 3.9 per cent level predicted by economists and further grist to the mill of the inflation-hawks on the policy board of the Frankfurt-based institution.
Let Big Brokers Fail; Buy Gold Not Oil: Marc Faber The Federal Reserve should let the big investment banks go bust if they made unwise investment decisions, and investors should take refuge in gold, because the central bank has been "misleading" the markets, Marc Faber, editor and publisher of "The Gloom, Boom & Doom Report," told "Worldwide Exchange." Fears that another major investment bank may get into trouble have hammered stocks recently but some analysts have said the major Wall Street banks were safe as the Fed cannot afford to let them fail.
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Fri 06.27.2008
Gold Soars to One-Month High as Bernanke and Buffett Square Off on the Economy Gold surged nearly 4% yesterday (Wednesday), as the U.S. Federal Reserve appears hesitant to raise lending rates despite signs of severely escalating inflation. The price of gold jumped $30.30 to trade at $915 an ounce as of 11:45 a.m. EDT, its highest level since May. "The Fed said that inflation is a major concern, but they’re not going to do anything about it, which made gold go ballistic,” Leonard Kaplan, the president of Prospector Asset Management, told Bloomberg News. "The dollar is going to get slammed again."
Oil jumps to new above $142 as equities wilt Oil leapt to a new record high above $142 a barrel on Friday, extending gains after surging nearly 4 percent in the previous session, as tumbling global stock markets helped to trigger a wider commodities rally. U.S. light crude for August delivery was $1.70 up at $141.34 a barrel by 8:12 a.m. EDT, off a record high of $142.26. London Brent crude was $1.39 up at $141.22, off a record high of $142.13. World stocks fell to a three-month low as a fast deteriorating global inflation picture intensified concerns over the outlook for corporate profits, hastening the rush of investors' funds into commodities. Oil and Gold Soar Anew as Stocks Drop $$ In a sign that any pause is little more than a chance to catch its breath, commodities markets surged, with crude-oil futures reaching yet another record and gold making its largest one-day move in 23 years. "The consensus is that this market is not able to be pushed down," says Raymond Carbone, a floor trader with Paramount Options Inc. at the New York Mercantile Exchange. Soaring prices for raw materials and crops have confounded Washington, prompting lawmakers to summon regulators, oil traders and economists to testify in recent weeks about whether, beyond the challenge of meeting relentless world-wide demand, speculative trading is causing a price bubble. So far, attempts to prick the bubble, if it exists, have failed, and a wide gap exists between those who claim the hundreds of billions of dollars in relatively new commodities investments in recent years is bound to propel prices and those who say financial players merely help a market function better by increasing buyers and sellers.
Fed aided Wall Street to avert "contagion" Fed: Emergency help for Wall Street was necessary to avert "contagion" of financial system The Federal Reserve was scrambling to prevent a "contagion" from infecting the nation's financial system when it took unprecedented actions to back a Bear Stearns rescue package and provide emergency loans to big Wall Street firms. The Federal Reserve released documents Friday providing insights into its private deliberations in March that led to those controversial decisions. The Fed's actions came when credit and financial problems were intensifying, threatening to paralyze the entire financial system and plunge the economy into a recession.
Buffett vs. Bernanke: The inflation showdown The billionaire investor says inflation is 'exploding,' but the Fed believes commodity price shocks should subside. Even Warren Buffett is wrong some of the time. Federal Reserve chairman Ben Bernanke is hoping this is one of them. Buffett, the billionaire investor behind Berkshire Hathaway, fingered "exploding" inflation Wednesday as the biggest risk to the economy. "I think inflation is really picking up," Buffett said on CNBC. "It's huge right now, whether it's steel or oil," he continued. "We see it everywhere." Indeed, the prices of gasoline and milk have shot past $4 a gallon, and Dow Chemical has announced twice in the past month that it's raising prices to offset soaring commodity costs.
Japan inflation at 10-year high Soaring oil and commodities drive up Japan's core inflation, sap household spending Soaring oil and commodity prices hit Japan's economy with a one-two punch in May, thrusting up inflation, driving consumers to tighten their pocketbooks and threatening to derail the country's modestly growing economy. Japan's core inflation excluding volatile fresh food prices rose 1.5 percent in May from a year earlier, the quickest pace since a consumption tax hike in March 1998, the government said Friday. Household spending in May, meanwhile, sank 3.2 percent from the previous year, according to the Ministry of Internal Affairs and Communications. That was worse than a market forecast for a 2 percent decline and marked the deepest slump since September 2006.
The Bank of America Housing Bailout Bill The new housing bailout bill would let mortgage lenders off the hook for sour mortgages, as it would let the Federal Housing Administration assume the risk for these bad debts, shifting the burden to taxpayers and bond investors, though the program could help bond investors who bought securities backed by bad mortgages if it stops borrowers from going into foreclosure, putting those bonds into default. The legislation would help borrowers unload tens of billions of dollars worth of bad mortgages, getting their debt forgiven and letting them use federal loan guarantees to get cheaper mortgages via refinancings at lower rates. However, two “discussion documents” about a potential housing bailout bill, both of which are stamped “confidential and proprietary” that Bank of America authored and circulated among Congress, shows that the legislation now making its way through the corridors of Washington, DC is almost word for word what Bank of America wanted. The first Bank of America document is dated February 11, and is entitled "Federal Homeownership Preservation Corp." The second is dated March 11, 2008, and is entitled "FHA Housing Stabilization and Homeownership Retention Act of 2008."
Consumers extremely gloomy, UMich survey says. U.S. consumers grew more pessimistic in June, according to a survey released Friday by the University of Michigan and Reuters. The consumer sentiment index fell to 56.4 in June from 59.6 in May and 56.6 in mid-June. It's the lowest since 1980 and the third-lowest reading in the 56-year history of the survey. More consumers said their own finances had worsened than ever before. Nine of 10 said the economy was in recession, citing high energy prices, lost jobs, slow growth and the credit crunch. Two-thirds expect the slump to last several years. Consumers' expectations for inflation over the next year climbed to the highest level in more than 20 years. Fed May Give Private Equity - More Leeway to Help Banks $$ The Federal Reserve may soon make it easier for private-equity firms and others to invest in the nation's ailing banks, according to people familiar with the matter. With bank stocks crumbling and the second quarter drawing to a close Monday, the changes could offer a lifeline to cash-strapped lenders desperate to secure capital. "This would be a bit of a sea change for the Fed," said Gregory Lyons, head of the financial-services practice at law firm Goodwin Procter LLP. "A number of banks would love to access the private-equity pool. It's a clean slug of money."
Disappearing now: $6 trillion in housing wealth A Washington think tank is warning that housing prices are falling at an accelerating level, destroying wealth at a pace that will cost the average homeowner $85,000 in lost wealth this year alone. The projections by the Center for Economic and Policy Research are based on the numbers in Tuesday's Case-Shiller home price index, which showed accelerating price declines in most big cities. GM drops to 53-year low, Goldman urges "sell" Shares of General Motors Corp hit their lowest level since 1955 and dragged down the auto sector on Thursday after Goldman Sachs cut the struggling U.S. industry's largest manufacturer to a "sell" rating and warned it would have to raise capital. The panicky slide in GM shares caps a period of growing concern about liquidity risks to U.S. automakers and suppliers from a domestic auto market reeling from record gas prices and the impact of a housing slump and tighter credit.
Gold Futures Climb as Fed Keeps Rates Steady; Silver Advances Gold surged the most in seven months on speculation the Federal Reserve won't rush to raise borrowing costs to curb inflation. Silver also gained. The Fed yesterday kept its benchmark interest rate at 2 percent, even as policy makers acknowledged heightening inflationary expectations. Gold reached an all-time high of $1,033.90 an ounce in March as fuel, corn and other commodities soared and the dollar fell to a record against the euro. "The Fed said that inflation is a major concern, but they're not going to do anything about it, which made gold go ballistic,'' said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. "The dollar is going to get slammed again.''
Fed signals aggressive rate cutting is done Federal Reserve signals aggressive rate cuts are over; unclear about when rate hikes will come The Federal Reserve's aggressive period of cutting interest rates to keep the country from falling into a recession is over. That point is in general agreement. The trouble starts when you try to figure out what period the Fed has now entered. Could the central bank keep rates unchanged for a considerable period? Yes, many analysts say, predicting that the Fed will leave rates alone until next spring. However, other economists are still worried that the Fed could start ratcheting up rates much sooner than that, especially if this year's surge in oil prices does not soon abate.
Fed Shifts Its Concern to Inflation The Federal Reserve’s policy makers ratcheted up their worries about inflation on Wednesday without abandoning their view that the American economy is weak. They left the key short-term interest rate they control unchanged, ending a streak of rate cuts stretching back to last summer, when the bursting of the housing bubble and the ensuing credit squeeze brought economic growth almost to a halt. At the end of a two-day meeting, the Fed officials voted to hold at 2 percent the short-term federal funds rate, which affects what consumers pay for mortgages, car loans and other credit. In a statement, the 10 policy makers made inflation more of a concern than economic weakness, the first time they had done so in months. Wall Street Sold Auction-Rate to Investors as It Warned Issuers Yanping Cui, 57, says she invested in auction-rate bonds last December at the urging of a broker at UBS AG in Long Beach, California. The same month, UBS told one of the issuers of those securities, a New Hampshire student-loan agency, that the $330 billion market was in danger of failing. That's exactly what happened in February, when mounting mortgage losses forced dealers who underwrote and managed the market for more than 20 years to stop acting as buyers of last resort. Cui was told she wouldn't get her money back until the market recovered.
Housing Aid Bill Passes Senate Test A bill aimed at helping hundreds of thousands of homeowners in danger of foreclosure cleared an important test vote in the Senate on Tuesday, raising the prospects for final passage of an aid bill by mid-summer. By 83 to 9, the Senate agreed to end debate on the assistance package and move to a final vote, which could come very soon. The test vote was considered crucial, since 60 votes were required under Senate rules to bring the debate to a close. Housing legislation still has other obstacles to overcome, notably a veto threat from the White House. Differences between the Senate and the House, which approved a somewhat different housing-rescue bill by 266 to 154 last month, will have to be ironed out. And the senators will have to work out differences among themselves on various amendments to their version.
Americans, Hurt by Rising Gas Prices, Curb Spending, Poll Finds Most Americans say they are feeling the pain from rising gasoline prices and many are tightening their belts in response, a Bloomberg/Los Angeles Times survey shows. "It costs me double to fill up the tank,'' says J.L. Harder, a 75-year-old retiree and poll respondent in Peoria, Texas. ``We don't go on vacation and don't visit the relatives.'' He isn't alone. Seven in 10 of those surveyed say higher gas prices have caused them "financial hardship.'' More than 1 in 3 respondents say they have cut back on their spending over the last six months as oil and food prices surged and unemployment rose.
Oil prices rising after steep fall Oil futures rose sharply Thursday after OPEC's president said oil prices could rise well above $150 a barrel this year and Libya said it may cut oil production. Light, sweet crude for August delivery rose as high as $138.95 a barrel shortly after the New York Mercantile Exchange opened before retreating some to trade up $2.50 at 137.05. Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said he believes oil prices could rise to between $150 and $170 a barrel this summer before declining later in the year. Khelil said he doesn't think prices will reach $200 a barrel. The head of Libya's national oil company said the country may cut crude production because the oil market is well supplied, according to news reports.
American Express sees worsening credit conditions MasterCard shares rose $13.86, or 4.9 percent, to $294.23 in midafternoon trading. American Express had accused the Purchase, N.Y.-based credit and debit card processor of conspiring to discourage some banks from issuing its credit cards. MasterCard said it agreed to make 12 quarterly payments of $150 million to American Express, and plans to book a $1 billion charge related to the settlement in the current fiscal quarter.
Countrywide's Pressures Mount Three States File Legal Actions; Holders Clear Sale The legal and financial pressures on Countrywide Financial Corp. mounted Wednesday as officials in three states filed separate legal actions against the mortgage lender. The actions, by the attorneys general of California and Illinois, and the Washington State Department of Financial Institutions, came on the same day that Countrywide shareholders voted to approve the sale of the company to Bank of America Corp. The all-stock transaction was valued at $4 billion when Bank of America agreed to buy Countrywide in January. But Bank of America shares have since slipped, and the value has fallen to about $2.8 billion. The transaction is scheduled to close on July 1.
Gloom with a view BUILDERS REVISE FORECASTS DOWNWARD The nation's housing market is in worse shape than anytime in more than 50 years, Harvard researchers said this week, and things are particularly bleak for most new-home builders. Even the economist for the California Building Industry Association said Wednesday that a statewide home-building recovery is a long way off. So where does that withering forecast leave thousands of home builders and building industry suppliers who depend on growth to survive?
Commodity Volatility Soaks General Mills Volatile commodity prices are making for soggy results at food manufacturer General Mills. On Wednesday, General Mills reported double-digit sales increases in its fiscal fourth quarter, ended May 25, but a drop in profits as the mark-to-market valuation of certain commodity positions ate into its accounting.
Lennar 2Q loss narrows; sees worsening conditions Lennar posts narrower 2nd-quarter loss, but sees housing market deterioration ahead Homebuilder Lennar Corp., said Thursday its fiscal second-quarter loss narrowed, but the company continued to struggle through the housing market doldrums, posting a 61 percent drop in revenue and taking hefty charges to write down land values and deposits. The Miami-based company, one of the nation's largest builders of residential homes, also said it expects further deterioration in the housing market this year.
Security Matters: I've Seen the Future, and It Has a Kill Switch It used to be that just the entertainment industries wanted to control your computers -- and televisions and iPods and everything else -- to ensure that you didn't violate any copyright rules. But now everyone else wants to get their hooks into your gear. OnStar will soon include the ability for the police to shut off your engine remotely. Buses are getting the same capability, in case terrorists want to re-enact the movie Speed. The Pentagon wants a kill switch installed on airplanes, and is worried about potential enemies installing kill switches on their own equipment. Microsoft is doing some of the most creative thinking along these lines, with something it's calling "Digital Manners Policies." According to its patent application, DMP-enabled devices would accept broadcast "orders" limiting capabilities. Cellphones could be remotely set to vibrate mode in restaurants and concert halls, and be turned off on airplanes and in hospitals. Cameras could be prohibited from taking pictures in locker rooms and museums, and recording equipment could be disabled in theaters. Professors finally could prevent students from texting one another during class. The possibilities are endless, and very dangerous. Making this work involves building a nearly flawless hierarchical system of authority.
Supreme Court Rules That Individuals Have Gun Rights The Supreme Court ruled Thursday that Americans have a right to own guns for self-defense and hunting, the justices' first major pronouncement on gun rights in U.S. history. The court's 5-4 ruling struck down the District of Columbia's 32-year-old ban on handguns as incompatible with gun rights under the Second Amendment. The decision went further than even the Bush administration wanted, but probably leaves most firearms laws intact. The court had not conclusively interpreted the Second Amendment since its ratification in 1791. The amendment reads: ''A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.'' The basic issue for the justices was whether the amendment protects an individual's right to own guns no matter what, or whether that right is somehow tied to service in a state militia. Writing for the majority, Justice Antonin Scalia said that an individual right to bear arms is supported by ''the historical narrative'' both before and after the Second Amendment was adopted. The Constitution does not permit ''the absolute prohibition of handguns held and used for self-defense in the home,'' Scalia said. The court also struck down Washington's requirement that firearms be equipped with trigger locks.
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Wed 06.25.2008
Gold Futures Decline on U.S. Inflation Outlook; Silver Advances Gold fell as a decline in energy costs reduced demand for the precious metal as a hedge against inflation. Silver rose. Crude-oil futures declined for the first time in four sessions after jumping to a record last week and doubling in the past year. The Federal Reserve, which meets today on interest rates, may signal higher U.S. borrowing costs to curb inflation. Gold reached an all-time high of $1,033.90 an ounce in March as corn, gasoline and other commodities soared. "If we get continued weakness in crude, gold can retest the lows,'' said Frank McGhee, the head metals trader at Integrated Brokerage Services LLC in Chicago. "If gold doesn't have support from other markets, it's going to have a technical breakdown.''
Fed talking tough on the threat of inflation Fed likely to keep interest rates unchanged but employ tough talk about inflation threats Federal Reserve Chairman Ben Bernanke and his colleagues, concluding a two-day meeting, are expected to keep talking tough about inflation while stopping short of actually doing anything, at least right away. The Fed is widely expected at the conclusion of Wednesday's discussions to express more concerns about inflation and in that way signal that rate increases could be on the way later this year.
US Bankers talking on eggshells Fed statement likely to be fuzzy - How to be hawkish but not too hawkish This week's Federal Reserve policy statement will likely tread carefully around whether the central bank is more worried about a slowdown or higher inflation, as the Fed seeks to keep its options open and not encourage a nervous market to start betting that interest rate hikes are imminent. There are likely to be more "fuzzy" statements rather than decisive ones in the Fed statement on Wednesday following its closed-door meeting which begins Tuesday afternoon, said Wrightson ICAP in a note to clients. The statement is expected around 2:15 pm Eastern Wednesday. Congress Debates High Oil Prices While Corporations and Consumers Pick up the Tab The price of oil edged up again yesterday, before settling at $137 a barrel flat, as concerns about short-term supplies continues to overwhelm Saudi Arabia’s recent pledge to boost production. With Saudi Arabia offering some, albeit limited, cooperation, Congress has turned its ire on speculators and investment banks. First, demand from China and India was to blame for soaring oil prices. Then the weak dollar, the member nations of OPEC, Big Oil, and now investment banks take their turn in the rotation as politicians scramble to find a suitable scapegoat in an election year.
What's ahead, Who & Why Listen to what Lindsey Williams said last October about oil, who controls it and the politicians. Blame the IMF and the World Bank. . . . 75 minute video - The Non Energy Crisis
Volvo slashes 2,000 jobs Volvo is cutting about 2,000 jobs globally to cope with the weak US dollar, soaring raw material prices, and a sharp downturn in its business in the US. The Swedish carmaker, owned by Ford Motor, announced the cuts on Wednesday as part of a cost reduction programme which it said would reduce its overall cost level by SKr4bn (about $660m).
Exchange Says Efforts to Curb Speculation 'Foolish' Governments would be "foolish'' to limit participation in commodity markets and curb speculation because prices are based on supply and demand, London Metal Exchange Chief Executive Officer Martin Abbott said. Rising demand from emerging markets and a lack of investment by suppliers have created a "structural change'' in commodity markets, fueling higher prices, Abbott said yesterday in an interview in New York. Increasing regulation to limit speculative interest won't lower prices and may hamper the market's role in price discovery, he said. "There is in the commodity space as a whole something going on which cannot be ascribed to simply hot money coming through exchanges,'' said Abbott, who heads the world's largest marketplace for copper, aluminum and other base metals. "It would be very foolish of any government to stifle participation in markets.''
Texas Real Estate Slump > Mexicans to Take It Back More than a century and a half after Mexico lost Texas to the U.S., Virgilio Garza wants a piece of it back. A "Texas for Sale'' sign and cowgirls in boots and white hats greeted Garza at the Convex center in Monterrey, Mexico, earlier this month. A Monterrey developer and investor, Garza was in search of foreclosed U.S. property to buy. "Texas is like our home,'' said Garza, 45, who joined hundreds of Mexicans poring over lists of Texas properties at the four-day event. Garza, who owns manufacturing sites and other land in Mexico, said he and five partners may invest as much as $8 million in Texas. "We believe there can be some opportunities.''
New home sales and prices both drop in May May new home sales tumble 2.5 percent while median prices keep falling as housing woes deepen Sales of new homes tumbled for the sixth time in seven months in May while median prices kept plunging, underscoring the depth of the nation's housing woes. The Commerce Department reported Wednesday that new homes were sold at a seasonally adjusted annual rate of 512,000 units in May, down 2.5 percent from the April level. The median price of a new home sold last month fell to $231,000, down 5.7 percent from a year ago. The report on new home activity in May followed reports Tuesday that showed record home price drops in April, indicating the nation's housing slump is not only deepening but also widening to include previously untouched parts of the country.
Illinois sues Countrywide The Illinois attorney general is suing Countrywide Financial, the troubled mortgage lender, and Angelo Mozilo, its chief executive, contending that the company and its executives defrauded borrowers in the state by selling them costly and defective loans that quickly went into foreclosure. The lawsuit, which is expected to be filed on Wednesday in Illinois state court, accused Countrywide and Mozilo of relaxing underwriting standards, structuring loans with risky features, and misleading consumers with hidden fees and fake marketing claims, like its heavily advertised "no closing costs loan." Countrywide also created incentives for its employees and brokers to sell questionable loans by paying them more on such sales, the complaint said. In reviewing one Illinois mortgage broker's sales of Countrywide loans, the complaint said the "vast majority of the loans had inflated income, almost all without the borrower's knowledge."
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Tues 06.24.2008
Gold Futures Rebound on Interest-Rate Outlook; Silver Advances Gold rebounded on speculation the Federal Reserve is unlikely to raise U.S. borrowing costs anytime soon, weakening the dollar and boosting the appeal of the metal as an alternative investment. Silver also gained. The dollar fell against the euro before the Fed's meeting on interest rates today and tomorrow. Gold reached a record $1,033.90 an ounce on March 17 after the Fed slashed rates over six months, sending the dollar to an all-time low against the euro. "There's some buying ahead of the Fed meeting,'' said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. "A lot of people don't think the Fed can raise rates in this environment. They're stuck between fighting inflation and the need to shore up the economy. The dollar is in a range, and that keeps gold trading in a range.''
A Plan to Grant the Fed Additional Powers Will Only Exacerbate Current U.S. Woes Throughout history, governments have always used crises to justify blatant power grabs. All too often, the "expanded government powers" that resulted from the moves remain in place - even after the crisis subsides. . . . . . .Since the Fed has demonstrated complete incompetence at setting interest rates, why not return that function to the market? Instead of allowing the Fed to inflict unbridled havoc on our economy, why not re-impose some discipline? Instead of looking for new ways to regulate Wall Street, why not find an old way to regulate the Fed? Actually there is a simple answer to all of these questions; it’s called the gold standard.
Bernanke Plays 'Dangerous Game' Balancing Rate Talk With Action Federal Reserve Chairman Ben S. Bernanke, by voicing concern about inflation and the slumping dollar, has fanned investor expectations for an interest-rate increase as soon as August. He may regret it. Raising rates may exacerbate the economic slowdown and roil banks whose losses sent their stocks down the most in a decade this month. Forgoing a rate boost next quarter risks damaging the Fed's credibility and deepening its divisions. Already this year, three officials have dissented on rate decisions.
Greenspan Says Market 'Crisis' May Extend Into 2009 Former Federal Reserve Chairman Alan Greenspan said financial market turmoil may continue into next year, though Fed efforts in March to revive credit have reduced the instability. "Things do at this particular stage look a little better. But I would caution that we have seen false starts before,'' Greenspan said via satellite today to a conference sponsored by 702 Talk Radio in Johannesburg. Still, "this crisis I fear is going to be with us for a Greenspan's successor, Chairman Ben S. Bernanke, today convenes a two-day meeting of the Federal Open Market Committee, which economists expect will leave the benchmark interest rate unchanged at 2 percent after seven cuts since September. Fed officials are trying to revive economic growth as inflationary pressure rises because of surging commodity prices.
Economy on brink of recession, Greenspan says Former Federal Reserve Chairman Alan Greenspan warned on Tuesday the U.S. economy was on the brink of a recession, with the chances of that happening at more than 50 percent. The U.S. economy has been hit by a credit crisis which began in the sub-prime mortgage market, prompting a series of interest rate cuts to help boost the economy. But price pressures are growing, making more rate cuts unlikely. A quick recovery was unlikely, he said via video link to a conference in Johannesburg. "A rebound at this stage is not something I think is in the immediate outlook," he said.
GMAC's $60 Billion Deal Loses Confidence as Mortgages Burn Cash The 300 bankers gathered at New York's Waldorf-Astoria Hotel last month faced a stark choice: Accept Sam Ramsey's plea to restructure $60 billion of GMAC LLC's debt or risk pushing the lending arm of General Motors Corp., the largest U.S. automaker, to the brink of insolvency.
Home prices extend record slide in April Home prices extended their record slide in April, with every top metropolitan area now posting annual losses and many showing double-digit declines, according to the Standard & Poor's/Case Shiller home price index report on Tuesday. However, the monthly pace of the decline showed some moderation. The S&P/Case Shiller composite index of 20 metro areas fell 1.4 percent in April from March and slumped by a record 15.3 percent over the year.
Consumer confidence tumbles to a 16-year low Consumer confidence fell in June to its lowest in 16 years as high inflation continued to sap confidence and pushed expectations for the future to a record low, the Conference Board said on Tuesday. The Conference Board, an industry group, said its inflation expectations gauge matched the record-high 7.7 percent it hit in May, which will keep Federal Reserve policy makers concerned over price growth as they meet to decide rates on Tuesday and Wednesday.
Paulson, Bernanke Face Cleveland's Golden Rebuke American leaders tell themselves that citizens aren't interested in the nuances of the dollar's value. The yuan exchange rate? That is something Treasury Secretary Henry Paulson deals with at summits like the one this week with Chinese Vice Premier Wang Qishan at Annapolis, Maryland. The inflation rate? Federal Reserve Chairman Ben Bernanke grapples with it. The rest just live with the results. The politicians deceive themselves. Each American brain is constantly updating and editing its own personal dollar index. Americans also try out their theories about their greenbacks in all fields, including mundane thickets of contract law cases.
A New Wave of Congressionally Mandated Energy Profits Is Just Around the Corner Congress is talking about going after oil speculators in an effort to lower prices by limiting the amount of money flowing into oil contracts. We realize that they’re upset, but they’re going about this the wrong way. What’s more, they’re demonstrating a near complete ignorance as to how financial markets actually work.
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Mon 06.23.2008
New Crisis Threatens Healthy Banks Increasing struggles by consumers and businesses to make payments on a variety of loans, not just mortgages, are setting off a new wave of trouble in the financial sector that is battering even institutions that had steered clear of the subprime-home-loan debacle. Late payments on home-equity loans are at a record high, according to fresh data from the Federal Deposit Insurance Corp. The delinquency rates on loans for cars, small businesses and construction are spiking to levels not seen in a decade or more. Unlike last year, when soaring mortgage defaults sparked a crisis of confidence in the financial system, the root of these problems is the downturn in the broader economy. Simply put, consumers and businesses are strapped for cash with job losses growing and retail sales falling, economists said.
Happy Birthday Subprime Crisis, Oil Price up 96% "Oil prices are up 96% since the semi-official beginning of the subprime crisis one year ago this week." What the Saudis give, the Nigerians take away. There was a big oil summit in the Saudi city of Jeddah this weekend. Men in suits from 36 countries, 7 international organisations, and 25 oil companies gathered to solve the world's energy crisis, or at least look like they were doing something. In a statement released at the end of the summit, the group said, "The transparency and regulation of financial markets should be improved through measures to capture more data on index fund activity and to examine cross-exchange interactions in the crude market."That doesn't sound like it's going to make oil any cheaper, does it?
Nakheel chief Chris O'Donnell says US real estate yet to hit the bottom The head of Nakheel, the $80 billion Dubai property business, gave warning yesterday that the real-estate recession in America is far from over and will deteriorate rapidly should the price of oil reach $200 a barrel. Chris O'Donnell, chief executive of Nakheel, said that the US property market had never had to cope with the combined impact of a sub-prime mortgage crisis and a surging oil price. “We have not hit the bottom yet,” he said. Mr O'Donnell, whose Dubai Golden Mile development of flats and offices has begun selling for record prices, also said that while commodity prices had risen sharply, the cost of labour across the United Arab Emirates had also increased about 25 per cent. Companies such as Nakheel had benefited from a cheap Indian labour force, but over the past few years the booming economy in India has pushed wages up, making these immigrant workers more difficult to attract.
Inflation risk overtakes credit crisis as focus of central bankers Now that everyone agrees that it's inflation, not a lingering credit crisis, that poses the gravest risk to the world economy, it's time to think again about central bankers' focus. While policy makers have grown increasingly shrill in their warnings about the danger of $135-plus oil, there's very little they can do as long as growth, particularly in the developed economies of the United States and Europe, remains sluggish. With banks still struggling to shore up their balance sheets and consumer confidence deteriorating on both sides of the Atlantic and in Japan, resorting to higher interest rates to counter inflation may do more harm than good. "The Federal Reserve and the European Central Bank cannot control commodity prices," said David Kelly, chief market strategist at JP Morgan Funds in New York. "Every time we have a bubble, we say we'll raise interest rates. But that's like trying to swat a fly with a sledgehammer - you miss the target but cause a lot of collateral damage."
Citigroup's global investment bank braces for layoffs Citigroup is swinging the corporate axe across its global investment bank this week. Hundreds of investment bankers and traders, including many senior employees, are expected to begin losing their jobs as soon as Monday as the bank moves aggressively to complete the 2,000 layoffs that it announced last March. Bankers in the mergers-and-acquisitions division are expected to face large cuts after surviving prior rounds of layoffs earlier this year. Traders on desks that have been hard hit by the credit crisis are also expected to be casualties. And unlike prior rounds of job reductions that focused on junior and mid-level employees who generated nominal revenue for the firm, more managing directors are expected to be dismissed this time around. The 2,000 layoffs, on top of about 4,200 announced in January, will bring job cuts at Citigroup's investment bank to 6,000, or about 10 percent of that unit's work force. Over all, Citigroup has more than 350,000 employees worldwide.
Order restored on Vliet St. Milwaukee police said they have restored order but will remain outside of the Marcia P. Coggs Human Services Center after a crowd awaiting free food vouchers became unruly this morning. Department spokeswoman Anne E. Schwartz said Vliet St., between N. 12th and N. 13th streets, is blocked and barricades have been installed so people are able to line up around the block of the building at 1220 W. Vliet St. "That line is pretty huge," Schwartz said. "We are going to be here for the duration. We have a pretty good number." Police responded to the building about 7 a.m. after 2,500 people lined up on the sidewalk and eventually began to block traffic in the street. A number of people had rushed the door, and some people became caught in the crush; however, there were no serious injuries, according to Schwartz.
State, city layoffs: 45,000 and counting A squeeze on tax revenues could force local leaders to cut tens of thousands of more jobs. That could add to the nation's economic woes. The latest hit to the economy could come from state houses and city halls across the nation, which are in their worst budget crisis in years. With falling revenue from sales and income taxes, and property-tax declines looming, states, cities and towns have already laid off tens of thousands of government employees. Many expect more job cuts ahead as public officials struggle to balance their budgets. The American Federation of State, County and Municipal Employees, a public employees union, says about 45,000 government layoffs have been announced this year.
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Fri 06.20.2008
Brokers threatened by run on shadow bank system Regulators eye $10 trillion market that boomed outside traditional banking. A network of lenders, brokers and opaque financing vehicles outside traditional banking that ballooned during the bull market now is under siege as regulators threaten a crackdown on the so-called shadow banking system. Big brokerage firms like Goldman Sachs, Lehman Brothers, Morgan Stanley, and Merrill Lynch, which some say are the biggest players in this non-bank financial network, may have the most to lose from stricter regulation. The shadow banking system grew rapidly during the past decade, accumulating more than $10 trillion in assets by early 2007. That made it roughly the same size as the traditional banking system, according to the Federal Reserve.
MBIA, Ambac fall as AAA ratings downgraded Shares of bond insurers Ambac Inc. and MBIA Inc. fell more than 6% each ahead of the opening bell Friday, retreating after Moody's Investors Service cut their AAA ratings on worries about further mortgage-related write-downs. Late Thursday, Moody's also downgraded Ambac's insurance financial strength rating to Aa3 and lowered MBIA's insurance financial strength rating to A2. The ratings agency said it took the action against MBIA on concerns about the bond insurer's financial flexibility and what it called its "impaired franchise," adding that there remains "substantial risk within its portfolio of insured exposures." Moody's said it remained concerned about both companies' continuing exposure to an embattled housing market, particularly their involvement in collateralized debt obligations, securities related to real estate known as CDOs.
Financial Fears Sweep the Globe After RBS Predicts Worldwide Stock-Market Crash RBS analysts have warned clients to brace for a full-blown crash in the global stock-and-bond markets over the next three months as the conflicting realities of slowing growth and rising inflation paralyze the world’s major central banks - causing "all the chickens [to] come home to roost," Great Britain’s Daily Telegraph newspaper reported.The report, which first surfaced late Wednesday, raced across the Internet yesterday (Thursday), though it appears that European news organizations are giving it much wider play than their U.S. counterparts. The predicted swoon would cause the U.S. Standard & Poor’s 500 Index - already down 15% from its trading high of 1,576.09 reached Oct. 11 - to nosedive all the way down to 1,050 by September. For the closely watched, broad-based U.S. stock index, that would represent an additional decline of 22% from yesterday’s close of 1,342.83 - and a total decline of 33% from its Oct. 11 apex.
Merrill Profit Warning Rumors Are Not True U.S. broker Merrill Lynch is not preparing to issue a profit warning Friday, sources tell CNBC. Speculation spread after wire services quoted traders who said there was chatter in the marketplace that Merrill would announce a writedown tied to so-called Alt-A mortgages. A Merrill Lynch spokeswoman declined to comment on the speculation.It's not that surprising that there would be questions surrounding Merrill Lynch's earnings. In recent days, analysts have been reducing their estimates for Merrill earnings. Over the last 30 days, analysts have cut their second-quarter forecasts by an average of 68 percent. Estimates for this year's earnings have fallen a whopping 105 percent, according to Starmine.
Firms, banks borrow more from Fed Wall Street companies and commercial banks borrowed slightly more from the Federal Reserve's emergency lending program over the past week. A Fed report released Thursday said the investment firms averaged $8.6 billion in daily borrowing for the week ending June 18. That compared with $8.4 billion the previous week. The investment houses were given similar loan privileges as commercial banks in March after a run on Bear Stearns pushed the nation's fifth-largest investment bank to the brink of bankruptcy and raised fears that other Wall Street firms might be in jeopardy. Banks, meanwhile, averaged $13.4 billion in daily borrowing for the week. That compared with $13.1 billion in the previous week. The identities of commercial banks and investment houses are not released.
WaMu cuts 1,200 more jobs Washington Mutual Inc. cut another 1,200 jobs Thursday, including 260 in Seattle, the third such round of layoffs in less than a year.While the number of employees to be cut isn't as large as the two most recent reductions, it's still a reflection of the company's continuing struggles in dealing with the mortgage finance mess and WaMu's losses stemming from rising loan delinquencies and defaults. "We will do what we must to return the company to profitability faster and to restore shareholder value," WaMu Chief Executive Kerry Killinger said in a letter to employees.And Killinger suggested the company might not be done cutting.
U.S. says exercise by Israel seemed directed at Iran Israel carried out a major military exercise earlier this month that American officials say appeared to be a rehearsal for a potential bombing attack on Iran's nuclear facilities.Several American officials said the Israeli exercise appeared to be an effort to develop the military's capacity to carry out long-range strikes and to demonstrate the seriousness with which Israel views Iran's nuclear program. More than 100 Israeli F-16 and F-15 fighters participated in the maneuvers, which were carried out over the eastern Mediterranean and over Greece during the first week of June, American officials said. The exercise also included Israeli helicopters that could be used to rescue downed pilots. The helicopters and refueling tankers flew more than 900 miles, which is about the same distance between Israel and Iran's uranium enrichment plant at Natanz, American officials said.
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Thur 06.19.2008
Gold futures rise as U.S. dollar trades mixed Gold futures rose nearly 2% early Thursday, gaining as the U.S. dollar traded mixed against other major currencies. Gold for August delivery gained $10.40 to $903.90 an ounce on the New York Mercantile Exchange. The metal earlier hit an intraday high of $910.50. "Given rising inflation concerns we continue to anticipated increasing investment demand on dips, as reflected by the recent increase in ETF holdings, but the metal still has to overcome chart resistance," said James Moore, analyst at TheBullionDesk.com. In a note to clients, he pegged this resistance range at $897 to $904.50 an ounce. Assuming that level is cleared, Moore said he expects "upside momentum to pick up quickly, with gold pushing back to the $945 area."
Gold May Rise to $5,000 on Inflation Gold prices may rise to $5,000 an ounce as investors seek to protect themselves against accelerating inflation, said Schroder Investment Management Ltd., which oversees $277 billion of assets globally. ``You could easily see for the next several years that prices rise not to $1,000 an ounce, but prices rise to $5,000 an ounce or beyond as inflation psychology becomes more and more embedded and people become desperate to have a source of value,'' said Christopher Wyke, London-based emerging market debt and commodities product manager at Schroder, which oversees about $10 billion of commodity assets. Investors are turning to gold for protection as two-thirds of the world's population cope with inflation rates that are climbing to more than 10 percent, Wyke said.
Ohio banks bear the brunt of regionals' woes Write-downs haunt amid falling home values as takeover prospects look muted. As the saga of the subprime mortgage mess and tanking housing market continues to play out at regional banks nationwide, perhaps no state has seen more concentrated banking pain than Ohio. As of the beginning of June, in the last 12 months National City had lost almost 70% of its value, Huntington fell more than 40%, Fifth Third was down 20% and KeyCorp dropped more than 20%. Fifth Third's moves were being read by Wall Street as a sign of things to come both in Ohio and nationwide, some analysts said Wednesday.
Factories slump in Philly as prices soar Factories in the Philadelphia region are being slapped by weaker demand on one side and higher input costs on the other, the Federal Reserve Bank of Philadelphia reported Thursday. The Philly Fed index fell to negative 17.1 from negative 15.6 in May, with the prices-paid index rising to its highest level since 1980 at 69.3 Economists expected the index to improve slightly to negative 12. The new orders index fell to negative 12.4 in June from negative 3.7. Shipments, inventories, unfilled orders and employment indexes all fell. In a special question, 65% of firms said they expect to raise their prices in the next few months because of higher input costs.
Cereal, Sugar, Poultry Price Gains to Top Forecasts, USDA Says The price of cereals, baked goods, sweets and poultry will rise this year by more than expected a month ago because of accelerating costs for grain and fuel, the U.S. Department of Agriculture said. The annual gain for cereals and baked goods will be 9 percent to 10 percent, up from 7.5 percent to 8.5 percent forecast in May and the most since 1980, the USDA said in a report set for release tomorrow. The estimate doesn't reflect flood damage to Midwest crops, which will be included in the July report, the USDA said. Retailers are passing along higher prices to consumers as global demand for food boosts U.S. exports, production is disrupted by harsh weather and more crops are used to make fuel, the USDA said. Corn, wheat, soybeans and rice have reached records this year, while beef, pork and chicken prices rallied.
Rising mortgage rates add to housing woes Rising mortgage rates, reflecting higher inflation, are starting to compound the US housing market's woes. Since March, mortgage rates have climbed as much as a full percentage point. For someone borrowing, say, $400,000, that could tack an extra $320 onto the monthly payment. The implications of rising mortgage rates are not good, say economists and mortgage industry specialists. With the housing market still very weak, higher mortgage rates will act like a brake on any recovery in the sector. A hobbled housing market, moreover, means the economy as a whole will remain weak. "The housing market needs to recover for the economy as a whole to fully recover," says Lawrence Yun, an economist at the National Association of Realtors in Washington. "Without housing recovering, the economy will remain sluggish."
Paulson to Push for More Power for Fed U.S. Treasury Secretary Henry Paulson is expected to urge that the Federal Reserve be given new powers to regulate Wall Street after the collapse of brokerage Bear Stearns, U.S. media reported on Wednesday. In a speech to be delivered on Thursday, Paulson will say that the fall of Bear Stearns has expedited the need for the government to address the "outdated" regulatory oversight structure while not intervening too much in the functioning of markets, The Wall Street Journal and The Washington Post said. "We should quickly consider how to most appropriately give the Fed the authority to access necessary information from highly complex financial institutions and the responsibility to intervene in order to protect the system, so they can carry out the role our nation has come to expect - stabilizing the overall system when it is threatened," Paulson will say, according to prepared remarks obtained by the newspapers.
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Wed 06.18.2008
RBS issues global stock and credit crash alert The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks. "A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist. A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets. Such a slide on world bourses would amount to one of the worst bear markets over the last century.
Paulson & Co. Says Writedowns May Reach $1.3 Trillion John Paulson, founder of hedge fund Paulson & Co., said global writedowns and losses from the credit crisis may reach $1.3 trillion, exceeding the International Monetary Fund's $945 billion estimate. ``We're only about a third of the way through the writedowns,'' Paulson, 52, told the GAIM International hedge fund conference in Monaco today. ``There are a lot of problems out there and it will continue to be felt through the year. We don't see any signs of stabilizing.'' Paulson, whose New York-based company manages about $33 billion, made bets that subprime-mortgage debt would fall after he noticed ``bubble like'' prices. His Paulson Partners fund rose 18 percent a year since it started in 1994, and his main fund focused on subprime debt rose 591 percent last year.
Thornburg Survival in Doubt, Gets SEC Subpoenas Thornburg Mortgage, the jumbo mortgage lender that lost $3.31 billion in the first quarter, said on Wednesday it has received subpoenas from U.S. securities regulators and its survival remains in doubt. The disclosures reflect further problems for the Santa Fe, New Mexico-based lender, which was on the brink of bankruptcy in March before raising $1.35 billion of capital. It said the subpoenas, issued on April 24 and May 23, relate to a previously disclosed probe into Thornburg's restatement of 2007 financial results, demands for more collateral by its lenders, its accounting for mortgage-backed securities, and various disclosures.
World Crude Production Has Peaked: Pickens World crude oil production has topped out at 85 million barrels per day even as demand keeps climbing, helping to drive a stunning surge in prices, billionaire oil investor Boone Pickens said on Tuesday. "I do believe you have peaked out at 85 million barrels a day globally," Pickens, who heads BP Capital hedge fund with more than $4 billion under management, said during testimony to the Senate Energy and Natural Resources Committee. The United States alone has been using "21 million barrels of the 85 million and producing about 7 of the 21, so if I could take just a minute on this point, the demand is about 86.4 million barrels a day, and when the demand is greater than the supply, the price has to go up until it kills demand," Pickens told lawmakers.
As Chinese costs soar, manufacturers expand elsewhere in Asia Canon is no longer building or expanding factories in China, but the company is doubling its work force to 8,000 at a printer factory outside Hanoi. Nissan is expanding a vehicle engineering center nearby. Hanesbrands, based in Winston-Salem, North Carolina, is building two new factories here. Texhong Textile Group of China is constructing two plants for manufacturing spandex. China remains the most attractive destination for industrial investment in the world, drawing almost $83 billion last year. But, in a strategy that companies are calling "China plus one," multinationals - worried about soaring costs in China and about becoming overly dependent on factories in one country - are increasingly establishing or expanding bases elsewhere on the continent, particularly in Vietnam.
Shrinking U.S. car sales take a toll on dealerships In the glory days of Detroit carmakers in the 1960s, Leonard Immke Jr. used to sell 200 new Buicks a month from his vast downtown showroom here filled with gleaming Electras, Rivieras and Skylarks. Now, it takes Len Immke Buick at least a year to sell 200 new cars from its smaller location on the city's blue-collar east side. In May, it sold 10. Most days, only a handful of customers wander in; in rain or snow, there might be none. The pace slows even more at dusk, when the salesmen turn their attention to emptying wastebaskets and vacuuming the carpet. They assumed nightly chores two years ago when the store had to lay off the janitors and other workers to stay in business.
Corn rises as data showed poorer crop conditions Corn futures rose Tuesday for a tenth consecutive session, as data from the U.S. Department of Agriculture showed corn crop conditions were at their worst in more than 10 years. The U.S. Department of Agriculture said in a report late Monday that about 57% of the corn crop was in good or excellent condition as of Sunday, down from 70% a year ago. The crop conditions were the worst since 1996. "The decline in condition was primarily due to excessive rainfall and flooding in the Corn Belt, with the largest rating declines there in Iowa, Missouri, and Wisconsin," the USDA said in a weekly weather report Tuesday.
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Tues 06.17.2008
Silver bulls predict price bounce Silver has a reputation as a "poor man's gold," but some market watchers are betting the metal is poised to gain more respect.While its price in New York is off 17 per cent from its multidecade high of $20.66 (U.S.) an ounce in March, some predict it will rebound and blow past that peak by year end. Silver futures for July delivery jumped 4.1 per cent yesterday to settle at $17.23 an ounce on the Comex division of the New York Mercantile Exchange.With the silver price possibly falling further during the typically weak summer months for precious metals, it may be time to consider investing in silver stocks or bullion for an expected fall rally, observers suggest.
May producer prices gain 1.4%; energy prices surge U.S. wholesale prices increased 1.4% in May, after seasonable adjustments, with energy prices gaining 4.9% and food prices rising 0.8%, the Labor Department reported Tuesday. In the past year, the producer price index, which tracks inflation at the wholesale level, gained 7.2%, the government said. Economists polled by MarketWatch had expected the PPI to rise 0.9% last month. May's core PPI, adjusted to exclude food and energy prices, rose 0.2%, matching analysts' expectations. Core prices are up 3% in the past year. In April, the PPI gained 0.2%, while core PPI rose 0.4%. Also, food prices had shown no growth in April, while energy prices had declined 0.2%. Some observers have been concerned that the trend in core PPI has been uncomfortably high.
Current account deficit widens to $176.4 billion The U.S. current account deficit widened to $176.4 billion in the first three months of the year from $167.2 billion in the fourth quarter, the Commerce Department reported Tuesday. The current account deficit was 5% of gross domestic product. The increase was largely due to lower income earned by Americans overseas. Net financial flows into the United States fell to $124.3 billion from $213.4 billion
Morgan Stanley warns of 'catastrophic event' as ECB fights Federal Reserve The clash between the European Central Bank and the US Federal Reserve over monetary strategy is causing serious strains in the global financial system and could lead to a replay of Europe's exchange rate crisis in the 1990s, a team of bankers has warned."We see striking similarities between the transatlantic tensions that built up in the early 1990s and those that are accumulating again today. The outcome of the 1992 deadlock was a major currency crisis and a recession in Europe," said a report by Morgan Stanley's European experts. Just as then, Washington has slashed rates to bail out the banks and prevent an economic hard-landing, while Frankfurt has stuck to its hawkish line - ignoring angry protests from politicians and squeals of pain from Europe's export industry.
Banks May Need $65 Billion New Capital: Goldman U.S. banks may need to raise $65 billion of additional capital to cope with mounting losses from a global credit crisis that will not peak until 2009, Goldman Sachs analysts said on Tuesday. The new capital would be on top of $120 billion already raised by the industry, analysts led by Richard Ramsden said. Goldman said it lowered its price targets for 14 banking companies and cut its 2008 earnings-per-share forecasts for 11. According to the analysts, the nation's weakened housing market has driven credit deterioration, and home prices will likely keep falling all year. Mounting write-downs and credit losses, and fears of more to come, have caused share prices of many banks to keep falling.
Shoppers set to count rising cost of bananas Bananas have joined the ranks of dairy, meat and wheat products among foodstuffs whose prices are set to surge because of the sharp rise in fuel costs. Chiquita, one of the world’s biggest banana groups, said yesterday that the price of Britain’s most popular fruit had risen 36 per cent last month against the same period a year ago. The company also said that it expected prices to continue to rise throughout the rest of the year, lifted by mounting fuel and fertiliser costs and adverse weather conditions in Central America. To add to the gloom, Chiquita said that it had raised its forecast for the total cost of increased fuel and fertiliser by $200 million (£101.8 million) over the past four weeks. It expects additional costs of $265 million over the year as a whole. Shares in Chiquita yesterday fell by 28.63 per cent to $16.65.
Rising fuel price is taking its toll on truckers High gasoline prices are emptying the pockets of American motorists, but imagine having two 150-gallon tanks to fill. Then imagine that fuel is already above $4 a gallon – approaching $5, in fact. That's the situation facing the nation's truckers, who are wrestling with diesel fuel prices that have risen much more quickly than gasoline prices over the last year. And while many are taking steps to adjust, some are parking their rigs and going out of business. Others are trying to weather falling profits. "Three years ago, I was taking in $1,700 to $2,000 a week," said Ken Frohling, a 50-year-old trucker from South Dakota who recently stopped for fuel in southern Dallas on his way to Houston with a load of wallboard. "This year it's not even $1,000, and it's because of fuel costs."
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Mon 06.16.2008
Dynamics Of The Silver Price Revolution Recently, when silver was topping out at around $21 per ounce, there was an acute shortage of silver available for investing. This investment demand problem threatened to kick silver into an industrial deficit driven price revolution. The problem was resolved via unofficial rationing. New silver eagles and new 100 ounce bars have become increasingly unavailable since that time. In fact the time required to get new 100 ounce silver bars continues to increase. However, as the futures market price of silver went down from $21 dollars per ounce, weak hands holding silver once again have come forward to sell. The weak hands fear further price declines and are unable to wait because of financial stress. I monitor this by watching the prices on ebay.
Crude futures hit record high just below $140 Crude-oil futures soared to a new record high just below $140 a barrel Monday, supported by weakness in the U.S. dollar and despite reports that Saudi Arabia plans to boost its oil production. Crude for July delivery hit a record high of $139.89 a barrel in electronic trading on Globex. The July contract, which expires on Friday, was last up $3.59 at $138.44 a barrel in regular trading on the New York Mercantile Exchange. "Obviously the weak dollar gave us some support," said Phil Flynn, vice president at futures brokerage Alaron Trading in Chicago. Oil trading has become "extremely volatile," he said. "We also cannot look over the fact that China, for the first time, has become a net importer of gasoline," Oxman said.
Saudis May Be Strapped for Oil, Close to Full Capacity Saudi Arabia's pledge to boost oil production by 500,000 barrels per day may not be achievable, a source close to the Saudi oil industry told CNBC.com. The New York Times reported on Saturday, citing unnamed analysts and oil traders briefed by Saudi officials, that the production increase was to be announced at a meeting of oil producing and consuming countries on June 22 in the port city of Jiddah to discuss ways of dealing with soaring energy prices. The increase would bring Saudi's oil production to 10 million barrels a day, the country's highest ever, according to reports by the New York Times and the Middle East Economic. Saudi Arabia is the world's largest oil-producing country.
$5 Gas Likely by July 4th; Get Ready for 'Stay-cation' Americans could be celebrating the Fourth of July with $5-a-gallon gas, and the effects will ring out from sea to shining sea. As consumers use more of their income to fill up their gas tanks, they'll have less to spend on discretionary items like new bathing suits to wear to the beach and jewelry to accessorize. Instead of visiting theme parks and ballgames, they'll be more inclined to find fun things to do at home--"stay-cation" has quickly embedded itself in the American lexicon--and will cook burgers and hotdogs on the grill before heading out to a fancy restaurant. These are just some of the behavioral changes economists and investment advisors are anticipating as the U.S. enters a new age of energy prices and inflation.
Economy forces major shift in spending Wondering how consumers are coping in such a troubled economy? Look at what's selling instead of which sales are tanking. As consumers muddle through all that is plaguing the U.S. economy, they have battened down the hatches and sharply shifted their spending habits, turning to money-saving options that run the gamut from transportation to health as they find ways to pay for dramatic increases in gasoline and food. What emerges is a new paradigm of consumerism that some experts believe will live long after this economic crisis is resolved. "Suddenly consumers are focused on buying what they have to have as opposed to buying what they want to have," said Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based retail consulting and investment-banking firm.
Washington Post says Bernanke will not raise rates Federal Reserve Chairman Ben Bernanke does not intend to raise interest rates because he is more worried about soaring oil prices slowing global growth than he is about their firing inflation, the Washington Post said on Monday. A column by Robert Novak, citing unnamed "sources close to him," said Bernanke "has no plans for a raise." The Federal Reserve declined to comment on the Washington Post column. The column said there was "an unusual difference in outlook on the global economy" between Bernanke and European Central Bank president Jean-Claude Trichet, who has hinted that the ECB will raise rates to combat inflation.
One year later, Wall St. banks' profits have been gutted Only a year ago, Wall Street reveled in an era of superlatives: record deals, record profit, record pay. But a mere 12 months later, nearly half of the profits that major banks reaped during that age of riches have vanished. The numbers are staggering. From early 2004 to mid-2007, a period of unprecedented wealth on Wall Street, seven of the United States' largest financial companies earned a combined $254 billion in profits. But since last July, those same banks - Bank of America, Citigroup, JPMorgan Chase, Lehman Brothers, Merrill Lynch, Goldman Sachs and Morgan Stanley - have written down the value of the assets they hold by $107.2 billion, gutting their earnings and share prices. Worldwide, the reckoning totals $380 billion, much of which reflects a plunge in the value of tricky mortgage investments.
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Fri 06.13.2008
The Russian palladium stockpile - do we need to worry? The comments from Anton Berlin, the head of Norilsk's department for analysis and development, that Russian palladium stockpiles might be "depleted" in one to five years, have prompted a rally in the previously somnolent palladium market. After three weeks of attrition, during which palladium prices drifted down from $455 in the third week of May to touch $420 on June 11th, the comment saw prices jump swiftly to approach $440 on the back of fund buying interest - although it has since run out of steam and is hovering between $435 and $440. Borrowing also appeared in the market, taking the twelve months rate to just over 1% after 70 basis points on the previous close - although 1% for 12 months is hardly a market that is nervous about liquidity or future supply streams.
Chinese "Gold Dragons" Target $2,000 an Ounce Meantime in China, the Bank of Beijing – the country's largest commercial bank by assets – just became the 24th bank to gained approval for Trading Gold on the Shanghai Gold Exchange (SGE). The Bank of Beijing follows three foreign banks – HSBC, Standard Chartered and Nova Scotia – in joining the SGE this week. Access to the Gold Market is also being broadened in Japan, said the Tokyo Stock Exchange today, with the launch on 30th June of a joint-listing for the SPDR Gold Shares ETF based in New York. "We have reason to believe that Gold will hit $2,000 in the coming years after it broke the $1,000 level," said Chinese gold-fund investment manager Wang Weilie to Reuters overnight.
US Home Foreclosures Jumped 48% in May U.S. home foreclosure filings in May increased from April and were a whopping 48 percent higher than a year earlier, real estate data firm RealtyTrac said Friday. Home foreclosure filings in May totaled 261,255, up 7 percent from April, RealtyTrac, an online market of foreclosed properties, said in its U.S. Foreclosure Market Report. The figure is a total of default notices, auction sale notices and bank repossessions."May was the third straight month where we've seen a month-to-month increase in foreclosure activity and the 29th straight month we've seen a year-over-year increase," James J. Saccacio, chief executive officer of RealtyTrac, said in a statement.
CPI rises 0.6% on back of surging energy prices U.S. consumer prices rose at the fastest pace in six months in May, bolstered by surging energy prices, the Labor Department reported Friday. The seasonally adjusted consumer price index rose 0.6% in May, worse than the 0.5% gain expected by economists. The core CPI, which excludes food and energy prices, rose 0.2% as expected. In May, energy prices rose 4.4% after seasonal adjustments, the biggest gain since November. Gasoline prices rose 5.7% after seasonal adjustments. Natural gas prices rose 5.5%. Fuel oil prices jump 10.4%. Food prices rose 0.3%, with beef prices up 1.5%, while dairy, pork and fruit prices fell. Prices for bread and cereal rose 1.6%.
China `Not Smart' to Invest in U.S. Bonds, Cheng Says China's government, which invests up to a third of its $1.68 trillion in currency reserves in Treasuries, is ``not smart'' to invest in U.S. debt and should seek higher returns, a former legislator said. ``I don't think it's a smart move to invest in U.S. bonds,'' said Cheng Siwei, former vice chairman of the National People's Congress, China's legislature, at a Beijing conference. ``We need smart capitalists to invest ourselves,'' instead of lending money to American investors and earning interest, he said. Cheng's remarks on Nov. 7 that China should improve the structure of its foreign reserves by favoring stronger currencies helped pushed the dollar to record lows against the euro. He said today his comments represented his ``personal opinion, not the government's policy.''
Central bank body warns of Great Depression The Bank for International Settlements (BIS), the organisation that fosters cooperation between central banks, has warned that the credit crisis could lead world economies into a crash on a scale not seen since the 1930s.In its latest quarterly report, the body points out that the Great Depression of the 1930s was not foreseen and that commentators on the financial turmoil, instigated by the US sub-prime mortgage crisis, may not have grasped the level of exposure that lies at its heart. According to the BIS, complex credit instruments, a strong appetite for risk, rising levels of household debt and long-term imbalances in the world currency system, all form part of the loose monetarist policy that could result in another Great Depression.
US Airways to cut capacity, jobs on higher fuel costs US Airways said Thursday it will slash 1,700 jobs and cut capacity by as much as 8%, as the troubled airline struggles to contend with a growing fuel crisis. US Airways also said it is canceling the leases on aircraft scheduled for delivery, charging for checked baggage, introducing a new in-flight beverage program and increasing fees associated with employee guest and parent travel programs. "Our industry is profoundly challenged by the dramatic increase in fuel prices, and we must write a new playbook for running a profitable airline in this new and challenging environment," Chairman and Chief Executive Doug Parker said in a news release. The airline said jet fuel costs have nearly doubled in the past year, driving up annual energy expenses by $1.9 billion.
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Thur 06.12.2008
U.S. posts $165.9 bln May budget deficit The U.S. government turned in a $165.93 billion budget deficit for May, a record for that month, as tax revenue fell and federal spending was pushed higher by a tax rebate program meant to stimulate the economy, the U.S. Treasury said on Tuesday. The May deficit compared to a year-earlier deficit of $67.70 billion and was also larger than the $160.0 billion forecast by economists polled by Reuters. Through the first eight months of the fiscal year, the Treasury saw a $319.4 billion deficit, which was largest since a $346 billion deficit at this point in 2004 when the federal budget hit a record $412.7 billion. A Treasury spokesman estimated that tax rebates as part of an economic stimulus package added about $48 billion to the May shortfall.
Lehman CFO Callan, COO Gregory ousted from posts Lehman Bros. Holding said Thursday that Chief Financial Officer Erin Callan and Chief Operating Officer Joseph Gregory are leaving their posts, the latest victims of the credit crisis swirling across Wall Street, laying waste to balance sheets and thinning the ranks of top executives. Lehman stock has been buffeted in recent months as investors question the firm's capital position and its transparency amid the ongoing credit crisis. Callan, who had served as the firm's chief financial officer since December 2007, will be rejoining the investment-banking division in a senior capacity, the firm said in a press release. Lehman said Monday that it sold $130 billion in assets in recent months, reducing leverage, but analysts and others said questions remained about the brokerage firm's illiquid holdings and how it has valued some of those exposures.
Oppenheimer's Whitney: All Bank Dividends Are At Risk Investment banks look to raise new capital and calm the turbulent waves they've been riding, but the recovery is still a long way off, says Meredith Whitney, executive direct of equity research at Oppenheimer & Co. Moreover, says the closely watched Whitney, all banks' dividends are in danger of being eliminated due to ongong, protracted difficulties. "It's a slow bleed. I call this the agony of incrementalism. I wish I could come on here with better news," Whitney told CNBC. Financial shares took a beating Wednesday after news that Lehman Brothers may seek another possible capital-raising deal, increasing the intensity of the swirl of concern surrounding the firm.
House Subcommittee Rejects Plan to Open U.S. Waters to More Oil Exploration Rep. John Peterson, R-Pa., spearheaded the effort. His proposal would open up U.S. waters between 50 and 200 miles off shore for drilling. The first 50 miles off shore would be left alone. But the plan failed Wednesday on a 9-6, party-line vote in a House appropriations subcommittee, which was considering the proposal as part of an Interior Department spending package. With record oil prices and gas prices projected to hover around the $4 mark for the rest of the summer, Republicans have ratcheted up their efforts to open up oil exploration along U.S. coastline. But the long-sought change has so far been unsuccessful. Most offshore oil production and exploration has been banned since a federal law passed in 1981.
Sticker shock at the supermarket Tonya Brown never used to mess much with coupons and in-store "10 for $10" sales. But over the weekend, this mom from Decatur, Ga., came armed to the Kroger grocery store with a fistful of store coupons and sent her kids, Jordan and Nia, out into the aisles in search of bargains. "Just in the last week I've started paying attention," says Ms. Brown. "My main thing is to make sure we eat healthy foods, and those are the ones getting really expensive. It's becoming a real challenge. If we could save $200 a month on groceries, that's major for us right now." Like tens of millions of Americans across the income spectrum, Brown's checkbook is feeling the vise grip of rising prices, tighter credit, and stagnant paychecks.
Bernanke aggravates trade deficit risks The growing United States deficit on trade in goods and services, rising to US$60.9 billion in April from $56.5 billion in March, heightens the risk of recession and surging unemployment. he recent comments by Federal Reserve Board chairman Ben Bernanke about oil-driven inflation only serve to distract attention from these issues and aggravate risks. The deficit, announced on Tuesday by the US Commerce Department and substantially larger than the $59.5 billion consensus forecast, was driven up by higher prices for imported oil and a dramatic surge in imports from China. At 5.1% of gross domestic product, these pose a significant drag on the economy.
Home price drop means $4 trillion in lost capital No one knows when the credit crisis will end. But when it does, U.S home prices may have lost a third of their value, high-yield bond valuations will hit levels close to those seen during the last recession, and what may amount to $1 trillion of Wall Street losses may translate into almost $4 trillion of lost access to capital. That's the view of top credit analysts, who say a U.S. housing decline, sparked last year by subprime mortgage debt defaults, will likely last another two years as a wider group of consumers, including prime borrowers, feel the pinch from a tightening of credit. Peter Acciavatti, a credit analyst and managing director at JP Morgan Securities Inc, said in an interview that Wall Street write-downs and losses totaling at least $325 billion so far may ultimately mean $3.9 trillion in tighter credit conditions.
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Thur 06.11.2008
Inflation fears may push gold back to $1,000/oz Gold is poised to climb back above $1,000 per ounce this year, as inflationary pressures and financial turmoil prompt investors to seek shelter in the metal used as a store of value.But the caveat is gold's fortunes are traditionally strongly tied to the movement of the dollar and significant turnaround in the weak U.S. currency could limit its rally."There's a good chance that it may go back above $1,000 in the short- to medium-term," said Richard Davis, a London-based fund manager at BlackRock. Record high oil prices, a soft dollar and turbulence in the banking sector sparked by the credit crunch pushed gold to a record high of $1,030.80 per ounce on March 17.
Crude At $250: The Mad Hatter Seizes The Oil Prediction Racket Overnight, the head of Russia's state-owned oil company, Gazprom, said that crude would hit $250 next year. He does not want to be bested by rising predictions from investment bankers and agencies in the US. Alexi Miller, the company CEO did say "Today we are witnessing a very great change for hydrocarbons. The level is very high and we think it [the price of oil] will reach $250 a barrel," according to the FT. Alexi may have gotten a bit of support for his opinion. China said the its oil imports were up 13% for the first five months of the year. In May, the number was 25% or 3.8 million barrels a day. China's exports rose 28% last month. The central government knows that oil drives the infrastructure build-out and transportation costs that make the big machine run. In all likelihood, China's claims that it will raise fuel prices are thin. It cannot afford to wring its own neck.
China's producer-price index climbs to 8.2% in May China's producer-price index climbed in May from a year earlier at its fastest pace in three years, as industry grappled with higher prices for oil, coal and steal. The producer-price index climbed 8.2% in May, after rising 8.1% in April, the National Bureau of Statistics said Wednesday. "The rise in the PPI threatens to feed through into sustained higher levels of CPI, even as food prices, the main contributor to the current bout of inflation, stabilize," said Jing Ulrich, chairman of China Equities at JPMorgan Securities in Hong Kong. Coal, which accounts for 70% of China's energy consumption, has doubled in price since the beginning of the year.
CHRYSLER BUILDING ON THE BLOCK The latest Big Apple trophy being coveted by oil-rich sovereign wealth funds is the landmark Chrysler Building. Sources say the super-rich Abu Dhabi Investment Council is negotiating an $800 million deal for a 75 percent stake in the Art Deco treasure that has defined the Midtown skyline since 1930. The Chrysler assets would be purchased from TMW - the German arm of an Atlanta-based investment fund that's been eager to cash out of its Chrysler stake. The deal follows last month's sale of the GM Building and three other Macklowe/Equity Portfolio properties for $3.95 billion to a group of investors including the wealth funds of Kuwait and Qatar and Boston Properties.
Soaring corn price fuels food inflation fears Fears over the rising cost of food escalated yesterday as the price of corn hit a record high after bad weather. The increase in the price of corn came as the US Department of Agriculture (USDA) forecast a jump in US food prices, expected to rise by 5 per cent this year - the largest increase since 1990 - led by higher prices for bread, biscuits, cereal and bakery products. Meat prices are also expected to drive food price inflation next year, the USDA said. The price of a bushel of corn for delivery in July 2009 rose to a high of $7.31 during trading yesterday, up from $6.73 the day before. The surge was triggered by the USDA cutting its forecast for how much corn it thinks will be produced this year to 148.9 bushels per acre, down from its May estimate of 153.9 bushels.
Credit crunch: RBS boss says more turmoil ahead Royal Bank of Scotland boss Sir Fred Goodwin warned today there is no early end in sight for the credit crunch and economic gloom, admitting the bank had "tempered its risk appetite". Despite continued market turbulence, he was confident of selling the bank's insurance arm for the price it had in mind at the start of the auction."There's an adjustment going on, particularly in the housing market," Sir Fred said. "It is difficult to see it would take less than 12 months to work its way through." He added that "there's clearly more bad news than good news, there's almost exclusively bad news, but I don't think we're looking at the end of the world." He saw "chinks of light" in some areas of capital markets that had been bad and repeatedly reiterated that the bank "remains very much open for business".
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Tues 06.10.2008
Gold futures fall sharply as dollar rises vs. rivals Gold futures fell 3% Tuesday, coming under heavy selling pressure as the U.S. dollar surged against other major currencies. Gold for August delivery dropped $28.30 to $869.80 an ounce on the New York Mercantile Exchange. "I think the issue with gold is the continuation of the rally to the long side into the dollar," said Zachary Oxman, a senior trader at Wisdom Financial. "The dollar/gold trade is negatively correlated right now, and with Bernanke's slew of recent comments related to the dollar and Trichet's comments about inflation, the trade is strongly propping up the dollar and taking out long side trades in gold and other major market currencies," Oxman said.
Fed's Bernanke warns of inflation risk Ben Bernanke, Federal Reserve chairman, believes that the danger of a "substantial downturn" in the US economy has abated over the past month, but that inflation risks are increasing. In a speech on Monday night in Massachusetts, Mr Bernanke said: "Although activity during the current quarter is likely to be weak, the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so."
Paulson to Tell G-8 Dollar Will Reflect Fundamentals Treasury Secretary Henry Paulson will tell his Group of Eight counterparts that "strong'' U.S. long- term fundamentals will be reflected in the dollar, and said he would "never'' rule out intervening in the currency-market. "The long-term fundamentals in my judgment are not only strong, but they compare favorably with those of other industrialized major economies,'' Paulson said in an interview with Bloomberg Television today in Washington. "Those long-term fundamentals are going to be reflected in our currency value.''
Fed, Banks Agree to Default-Swap Changes to Cut Risk Regulators and banks agreed to changes aimed at easing the risk of a collapse in the $62 trillion market for credit-default swaps. Morgan Stanley, Deutsche Bank AG and Goldman Sachs Group Inc. are among the 17 banks creating a system to move trades through a clearinghouse that would absorb a failure by one of the market-makers, the Federal Reserve Bank of New York said yesterday in a statement following a meeting with the firms. This will reduce "the systemic risk when a large counterparty fails,'' Tim Brunne, a Munich-based credit strategist at UniCredit SpA, said in an interview today. "A large portion of the market would be trading against the central counterparty, and that would be a good thing.''
Dollar Rises Versus Yen, Euro; Bernanke Sees Less Economic Risk The dollar rose to a three-month high against the yen and climbed versus the euro after Federal Reserve Chairman Ben S. Bernanke said economic risks have faded, spurring traders to boost "strongly resist'' any waning of public confidence in stable prices. "Strong'' economic fundamentals will translate to dollar strength, Treasury Secretary Henry Paulson said today in a Bloomberg Television interview in Washington.
Oil Ignores Bernanke's Tough Talk on Inflation The stock market is struggling to recover from an early dip Tuesday as traders contemplate the latest inflation-fighting rhetoric from Fed Chairman Ben Bernanke. The Fed "will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as well as for inflation," Bernanke said in a speech Monday evening.
Oil resumes skyward path on demand predictions Oil prices rebound on demand forecasts, supply concerns and tensions in Nigeria Oil prices resumed their upward trek Tuesday, rising sharply as investors focused once again on growing global demand for crude. Retail gasoline prices rose to a new record over $4.04 a gallon. The catalyst for oil's latest advance was an International Energy Agency report that said global demand will continue to rise, especially in China. Demand for fuel for reconstruction work in the aftermath of May's earthquake will boost Chinese oil demand by 5.5 percent this year, the IEA said, a slightly higher forecast than in previous reports.
Saudis Boost Oil Output Saudi Arabia's oil output increased by almost 500,000 barrels a day this quarter, to 9.54 million barrels, sources in the S The current oil prices are unreasonable and unacceptable, the sources said, adding that no date has been set for a meeting between producing and consuming countries. Oil prices retreated after the exclusive CNBC report. Earlier in the day, OPEC member Kuwait said it backed Saudi Arabia's call for a meeting of oil consumers and producers to discuss high prices. OPEC's second-largest oil producer Iran also welcomed the Saudi proposal.
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Mon 06.09.2008
US Mint Issues False Statement on Silver Bullion The US Mint just released a statement concerning the rationing of US Silver Eagles that stated one of the reasons for the rationing program was that the silver bullion had to be newly mined and could only be sourced from US sources. "By law, the United States Mint's American Eagle silver bullion coins must meet exacting specifications and must be composed of newly mined silver acquired from domestic sources. The United States Mint will continue to make every effort to increase its acquisition of silver bullion blanks that meet these specifications and requirements to address continuing high demand in the silver bullion coin market." I believe this to be a false statement.
Lehman to post $2.8 billion quarterly loss Lehman Brothers Holdings Inc. on Monday said it will report a quarterly loss of nearly $3 billion, its first since going public, and set plans to raise $6 billion in capital to offset damage inflicted by the persistent credit crunch that has wreaked havoc on Wall Street and the U.S. economy. The announcement was likely to fuel doubts about Lehman Brothers resiliency in the face of difficult market conditions and stoke the ire of shareholders, who have seen their holdings in the bank lose value recently and whose stakes will be diluted by the capital increase. Net revenue, representing total revenue less interest expense, is expected to be negative $700 million for the latest quarter, down from $5.5 billion in the year-ago period. The decline reflects negative mark-to-market adjustments and principal trading losses, net of gains on certain debt liabilities, Lehman said.
What could be worse than the credit crunch? We’re about to find out The markets have finally woken up to the fact that there are worse things out there than the credit crunch.The vague hope that the financial fall-out was over has seen stock markets around the world rally somewhat since their low points earlier this year. But news at the end of last week knocked them for six. The Dow Jones dived nearly 400 points on Friday, and the turbulence has continued this morning. So what’s shaken them up? The end of last week brought the market face to face with a grim reality that it didn’t really want to hear: that inflation is loose in the system, and it’s not going to vanish any time soon, credit crunch or not. Earlier in the week, Ben Bernanke had reassured the markets, by indicating that he was aware of the weak dollar and high inflation.
Federal Reserve and ECB are in no mood to save us from the consequences of our debt Fetch your tin helmets once again. The European Central Bank is opting for a monetary purge. So too is the US Federal Reserve, now ruled from Dallas.Über-hawks and Cromwellians have gained the upper hand at the great fortress banks. Whether or not they admit it, both are embarked on policies that must lead to retrenchment across the Atlantic world. The City mood turned wicked as the full import of this policy switch sank in last week. On Wall Street, the Dow's 396-point dive on high volume late Friday had an ugly feel. "There is now the distinct possibility of a simultaneous sell-off in global bonds, equities and commodities," said Jonathan Wilmot from Credit Suisse.
Wealth Evaporates as Gas Prices Clobber McMansions Sky-high gasoline prices aren't just raising the cost of Eugene Marino's 120-mile (193-kilometer) round-trip to his job in the Washington area. They're reducing his wealth, too. House prices in his rural subdivision beyond the Blue Ridge Mountains in Charles Town, West Virginia, have plunged as commuting expenses have soared. A four-bedroom home down the street from his is listed for $239,000, after selling new for $360,000 five years ago. Homeowners in the exurbs aren't the only ones whose assets have taken a hit because of the surge in energy costs. Companies such as General Motors Corp. are writing off billions of dollars in plants and equipment that are no longer viable in an age of dearer oil. The destruction of wealth and capital will weigh on U.S. growth for years to come.
Iran sees oil price at $150 per barrel World crude prices are expected to reach $150 per barrel by the end of summer, Iran's representative to the Organisation of the Petroleum Exporting Countries (Opec) was quoted as saying on Sunday. "I forecast that by the end of summer the price of oil will reach $150 per barrel," Mohammad Ali Khatibi was quoted as saying by Iran's state broadcaster, referring to the summer in the northern hemisphere. As reasons for this, he cited a weak US dollar as well as the situation in the Middle East, without elaborating. Iran, which is embroiled in a deepening stand-off with the West over its disputed nuclear programme, is the world's fourth-largest oil producer.
Gas hits national average of $4 for first time Drivers are paying an average of $4 for a gallon of gasoline for the first time. AAA and the Oil Price Information Service say the national average price for a gallon of regular gas rose to $4.005 overnight from $3.988. But consumers in many parts of the country have already been paying well above that price for some time. Gas is expected to keep climbing, putting greater pressure on consumers and businesses, because the price of oil is soaring in futures markets. Light, sweet crude shot up nearly $11 a barrel Friday and approached $140 for the first time. Along with higher fuel costs, consumers are also contending with higher prices for food and other goods because of rising transportation costs.
Crisis shifts to regional lenders Home equity loans are rapidly emerging as the next front of the credit crunch, as falling house prices and lax underwriting lead to growing losses for US regional banks that have huge portfolios of such loans on their balance sheets. The rising defaults on home equity loans, used by people to raise funds by taking out a second mortgage on their houses, underscore how the financial crisis is shifting from big banks’ writedowns on complex derivatives to consumer-related problems for smaller banks. Mounting losses on home equity loans are likely to deepen the financial woes of many US regional lenders, increasing the risk that one of them might fail and raising the possibility of a wave of emergency mergers in the sector.
BlackRock's Doll sees credit crisis lasting 2-4 yrs Fund manager BlackRock (BLK.N: Quote, Profile, Research) expects the global credit crisis to last another two to four years as a weakening U.S. economy triggers more writedowns by banks, its chief investment officer for equities said on Monday. The prediction was one of the starkest so far by a global investor about the length of a crisis that began last year with the collapse of the U.S. subprime mortgage market, roiling financial markets. The turmoil has led the $1.4 trillion money manager to be underweight on financial shares. "The credit crisis will be with us for a long time," said Bob Doll, also vice chairman of BlackRock.
Pentagon blocked Cheney's attack on Iran Pentagon officials firmly opposed a proposal by Vice President Dick Cheney last summer for airstrikes against the Iranian Revolutionary Guards Corps (IRGC) bases by insisting that the administration would have to make clear decisions about how far the United States would go in escalating the conflict with Iran, according to a former George W Bush administration official. J Scott Carpenter, who was then deputy assistant secretary of state in the State Department's Bureau of Near Eastern Affairs, recalled in an interview that senior Defense Department (DoD) officials and the Joint Chiefs used the escalation issue as the main argument against the Cheney proposal. McClatchy newspapers reported last August that Cheney had proposal several weeks earlier "launching airstrikes at suspected training camps in Iran", citing two officials involved in Iran policy.
Hawks still circling on Iran Once again, notably in the wake of last week's annual American Israel Public Affairs Committee (AIPAC) policy conference and the visit to the capital of Prime Minister Ehud Olmert, there's a lot of chatter about a possible attack by Israel and/or the United States on Iran. Olmert appears to have left the White House after meeting with President George W Bush and an earlier dinner with Vice President Dick Cheney quite satisfied on this score, while rumors - most recently voiced by neo-conservative Daniel Pipes - that the administration plans to carry out a "massive" attack in the window between the November elections and Bush's departure from office, particularly if Democratic Senator Barack Obama is his successor, continue to swirl around the capital. What to make of this? Is this real? Or is it psychological warfare designed to persuade Tehran that it really does face devastation if it doesn't freeze its uranium-enrichment program very, very soon and/or to warn Russia and China that they have to put more pressure on Tehran or deal with the consequences of such an attack? Lehman losses set negative tone on Wall St Wall Street stocks were set for a largely flat start on Monday as news of further record losses and a capital raising at Lehman Brothers and near record oil prices wiped out any hope of a significant bounce following Friday’s dramatic sell-off. Lehman, the smallest of the major investment banks, said it lost $2.8bn in the second-quarter, adding that it would raise $6bn in new capital. As speculation over Lehman’s health mounted during the quarter, the firm sold about $130bn of assets, including mortgages and real estate. Moody’s, the credit rating agency, lowered its rating outlook for Lehman from stable to negative but noted that despite market conditions certain core businesses were producing solid revenues and profits and commended the move to raise capital.
Oil seen hitting $150 this summer: Goldman analyst Oil prices are likely to hit $150 a barrel this summer season, the global head of commodities research at Goldman Sachs said on Monday, as tighter supplies outweigh weakening demand. "I would suggest that the likelihood of that happening sooner has increased tremendously ... sometime in summer," Jeffrey Currie told an oil and gas conference in the Malaysian capital, referring to oil at $150 a barrel. Goldman Sachs, the most active investment bank in energy markets and one of the first to point to triple-digit oil more than two years ago -- a once unthinkable level -- said last month oil could shoot up to $200 within the next two years as part of a "super spike."
Why It’s Worse Than You Think For months, economic Pollyannas have looked beyond the dismal headlines and promised a quick recovery in the second half. They're dead wrong. The forgettable first half of 2008 is stumbling to a close. On Friday, the Labor Department reported that American employers axed 49,000 jobs in May, the fifth straight month of job losses—an event that signals a recession sure as the glittery ball dropping on Times Square augurs a New Year. The report, which inspired a 394-point decline in the Dow Jones Industrial Average Friday, was the latest in a run of bad news. Auto sales, the largest retailing sector in the U.S., were off 10.7 percent in May from the year before. And housing? Ugh. Nationwide, according to the Case-Shiller Index, home prices in the first quarter fell 14 percent.
Rural U.S. Takes Worst Hit as Gas Tops $4 Average Gasoline prices reached a national average of $4 a gallon for the first time over the weekend, adding more strain to motorists across the country. But the pain is not being felt uniformly. Across broad swaths of the South, Southwest and the upper Great Plains, the combination of low incomes, high gas prices and heavy dependence on pickup trucks and vans is putting an even tighter squeeze on family budgets. Home equity reaches new low The equity Americans have in their most important asset - their homes - has dropped to its lowest level since the end of World War II. Homeowners' portion of equity slipped to 46.2 percent in the first quarter from a revised 47.5 percent in the previous quarter. That was the fifth quarter in a row below the 50 percent mark, the Federal Reserve said Thursday. The total dollar value of equity also fell for the fourth consecutive quarter to $9.12 trillion from $9.52 trillion in the fourth quarter, while Americans' total mortgage debt rose to $10.6 trillion from $10.53 trillion.
What You Need to Know About Bankruptcy Bankruptcy is an epidemic. An astounding 91,214 Americans declared bankruptcy in May, up 31% from the same month a year ago. More than 1 million Americans are expected to declare bankruptcy this year, a jump of nearly 50% from last year, according to the American Bankruptcy Institute. That means at least one in every 100 families will be affected by a bankruptcy. It's a sign of the times: a combination of the housing and mortgage crisis, consumer debt burdens and the strains that rising energy prices are putting on household budgets.
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Fri 06.06.2008
Silver's more than a sparkle in investors' eyes Analysts see price for 'undervalued' metal hitting $50 in next few years Silver has been notorious for moving in tandem with gold, but silver prices have yet to trade anywhere near their record level. Like gold, investors' appetite for silver has been a key catalyst for the increase in the metal's prices, according to CPM Group, a commodity research and consulting-services provider. Gold futures climbed past $1,000 an ounce in March to mark their highest level. Around the same time, silver futures reached a high of around $21 an ounce -- four times higher than the price five years ago, but a far cry from the peak level around $50 in 1980. "Silver remains the most undervalued of all the commodities and all the precious metals and at the very least, the $50 per ounce nominal high of 1980 is very likely to be reached in the next 2 to 3 years," said Mark O'Byrne, a director at Gold and Silver Investments Ltd.
Banks Say Auction-Rate Investors Can't Have Money Franklin Biddar wants his money, and says Bank of America Corp. won't let him have it. The 65-year-old real estate investor from Toms River, New Jersey, said he hasn't had access to cash the bank invested for him in auction-rate preferred shares ever since the market seized up in mid-February. Even when Biddar agreed to sell $100,000 worth of the securities to Fieldstone Capital Group, Charlotte, North Carolina-based Bank of America wouldn't release the bonds, saying the transaction wasn't in his interest, he said. Real estate agents, loan brokers seek other ways to make a living INDUSTRY 'CARNAGE' LIKELY TO CONTINUE, ECONOMIST PREDICTS Jobs in the housing industry have plunged in the last few years amid sluggish home sales and crippled credit markets, leaving thousands of real estate agents and mortgage brokers struggling to make a living. "We expect to see continued carnage in these sectors for the next couple quarters," said economist Ryan Ratcliff of the UCLA Anderson Forecast, referring to real estate and mortgage industry employment. "But we're nearing the bottom, at least."
Oil rises jump almost $7, closing in on record Oil prices jump to near $135 a barrel on weaker dollar and prediction of price spike Oil prices shot up nearly $7 a barrel Friday, extending big gains from the previous day and racing toward an all-time high after a Morgan Stanley analyst predicted prices could hit $150 by the Fourth of July. A further weakening of the dollar helped keep prices high by enticing overseas buyers armed with stronger currencies and other investors looking for a hedge against the greenback. Shadow Supply Of Real Estate May Push Back Housing Revival Housing looks apt to get darker before a dawn, shadowed by unseen inventory. Bank-owned homes typically don't show up in headline figures, nor do ailing borrowers who are still in their homes or owners who want to sell but are waiting in hopes the market will improve. Yet this shadow supply of real and potential homes for sale is large and growing, pushing back a housing recovery, industry figures say. Officially, 4.55 million existing homes were for sale in April, says the National Association of Realtors. At the current low sales pace, it would take 11.2 months to clear that inventory, well above the 3.6 months at the start of 2005. That hefty supply reflects what's found on traditional multiple listings services. But a lot more lurks.
U.S. Economy: Payrolls Fall, Unemployment Rate Climbs The U.S. lost jobs for a fifth month and the unemployment rate rose by the most in more than two decades, as an influx of students into the workforce drove the biggest jump in teenage joblessness since at least 1948. Payrolls fell by 49,000 in May, the Labor Department said today in Washington. The jobless rate increased by half a point to 5.5 percent, higher than every forecast in a Bloomberg News survey. Treasuries climbed and the dollar slid after the report indicated the economy will struggle to rebound from the weakest expansion in five years. UAL Corp.'s United Airlines, truck- engine maker Cummins Inc. and bookseller Borders Group Inc. are among companies announcing job cuts this week as businesses try to survive the slowdown.
Lacker Says Fed Loans to Wall Street Risk More Crises Richmond Federal Reserve Bank President Jeffrey Lacker, challenging Chairman Ben S. Bernanke's unprecedented actions to stem a financial panic, warned that lending to securities firms raises the risk of future tumult. "The danger is that the effect of the recent credit extension on the incentives of financial-market participants might induce greater risk taking,'' Lacker said in a speech to the European Economics and Financial Centre in London. That "in turn could give rise to more frequent crises,'' he said. Lacker urged that the central bank now "clearly'' set boundaries for its help to financial markets. In an interview yesterday on the themes of his speech, Lacker said even those new boundaries may not be believed by investors unless a financial firm fails "in a costly way.'' What it means when the US goes to war Troops, when they battle insurgent forces, as in Iraq, or Gaza or Vietnam, are placed in "atrocity producing situations". Being surrounded by a hostile population makes simple acts, such as going to a store to buy a can of soda, dangerous. The fear and stress push troops to view everyone around them as the enemy. The hostility is compounded when the enemy, as in Iraq, is elusive, shadowy and hard to find. The rage soldiers feel after a roadside bomb explodes, killing or maiming their comrades, is one that is easily directed, over time, to innocent civilians who are seen to support the insurgents.
Israeli attack on Iranian nuclear sites looks "unavoidable" An Israeli attack on Iranian nuclear sites looks ”unavoidable” given the apparent failure of sanctions to deny Tehran technology with bomb-making potential, one of Prime Minister Ehud Olmert’s deputies said on Friday. "If Iran continues with its programme for developing nuclear weapons, we will attack it. The sanctions are ineffective,"Transport Minister Shaul Mofaz told the mass-circulation Yedioth Ahronoth newspaper. "Attacking Iran, in order to stop its nuclear plans, will be unavoidable," said the former army chief who has also been defence minister. It was the most explicit threat yet against Iran from a member of Olmert's government, which, like the Bush administration, has preferred to hint at force as a last resort should U.N. Security Council sanctions be deemed a dead end.
Pee Wee Grill Failure Touches Roto-Rooter, Bimbo, GM Joe Bristol, owner of a Roto-Rooter Inc. franchise in Concord, California, became a victim of the credit crisis last month when Pee Wee Muldoons Bar & Grill in a strip mall 20 miles away filed for bankruptcy protection. "I was going to replace 10 service vehicles this year,'' said Bristol, 67, whose claim for $5,297.75 makes him one of 57 creditors listed in Pee Wee's court filings. "Now, with the economy the way it is, I'm going to hold back. But it seems like everybody on that list is a victim to some degree.''
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Thur 06.05.2008
When Gold Is On Sale, Don’t Cry – Buy! Ohmigod, gold’s dropped under $1,000/oz. Ohmigod, now it’s down over $150/oz! The cries of concern during gold’s latest correction sounded like a teenage girls’ birthday party run amuck. I’m here to tell you, relax. It’s nothing to worry about. In fact, you should be rejoicing you’re being given such a superb chance to buy gold on sale. It isn’t often that Mr. Market offers us a golden opportunity, if you’ll pardon the pun, to buy more of a favorite investment at bargain-sale prices. Gold hit an all-time high of $1011 on March 18. Well, adjusted for inflation it really wasn’t an "all-time" high. Gold would have to be around $2200 an ounce, in today’s dollars, to match its previous record.
Industry needs $700/oz gold to stay afloat - Barrick's Sokalsky On average, gold producers will need the price of gold to stay north of $700/oz if they are to turn a profit in the current environment of rising costs, Barrick Gold CFO Jamie Sokalsky said on Tuesday. Industry cash costs are currently around $450/oz to $500/oz and, taking into account the cost of bringing on new production, depreciation, development costs, exploration, administrative expenses and so on, "that's easily $700/oz to $800/oz", Sokalsky said in webcast presentation. "To us that's the long-term break-even cost to the industry...below $700/oz to $800/oz long term, the industry doesn't make money," he said.Gold prices were pushed skywards in the fourth quarter of 2007 and the first few months of this year, largely by investment demand, as a weakening dollar, the US credit crisis, inflation concerns and geopolicital tensions and uncertainty raised the metal's attractiveness as a safe haven, or wealth-preservation investment.
July euro-zone rate hike called possible The European Central Bank could possibly hike interest rates in July in response to surging inflation pressures, ECB President Jean-Claude Trichet said Thursday. "It is not excluded" that the ECB could move to hike rates next month, he said at his monthly news conference. "It is not certain" that the ECB would hike rate, but it's "possible," he said, adding that the central bank never "precommits" to a move and that policy-setters make their decision on the day they meet. The remarks came in a news conference after the ECB's governing council voted to leave the bank's key lending rate unchanged at 4%, as had been widely expected. Trichet's remarks boosted the euro, with the 15-nation single currency erasing a loss against the greenback to move 0.4% higher on the day to $1.5487. European stocks stumbled and European government bonds fell as yields rose on the possibility of a near-term rise in interest rates.
Cheap talk, pricey banks US Federal Reserve Board chairman Ben Bernanke on Tuesday broke with a long-held convention and discussed the Fed's concerns over the declining US dollar (see also Dead dollar sketch, Asia Times Online, March 4, 2008). Typically, only the US Treasury, now led by Hank Paulson, is supposed to talk about the dollar, but then again perhaps the Fed chairman was peeved with his counterpart's lack of enthusiasm for pushing up the US currency. In any event, the scuttlebutt in Washington has been that Paulson is too busy interviewing for Wall Street jobs that may see him emerge as the head of a banking colossus early next year; with time running out on the Bush administration he doesn't have long before facing the risk of
The Derivatives Market is Unwinding! A couple of months ago, a financial analyst who sells derivatives told me that fears about a meltdown in the derivatives market were unfounded. Yesterday, he told me - with a very worried look - "THE DERIVATIVES MARKET IS UNWINDING!" What does this mean? What are derivatives and why should you care if the market is unwinding? Well, it turns out that the reason that Bear Stearns was about to go belly-up before JP Morgan bought it is that it had held trillions of dollars in derivatives, which were about to go south. (The reason that JP Morgan was so eager to buy Bear Stearns is that it was on the other side of these derivative contracts -- if Bear Stearns had gone under, JP Morgan would have taken a huge hit. But the way the derivative agreements were drafted, a purchase by JP Morgan canceled the derivative contracts, so that JP Morgan didn't experience huge losses.
Secret plan to keep Iraq under US control A secret deal being negotiated in Baghdad would perpetuate the American military occupation of Iraq indefinitely, regardless of the outcome of the US presidential election in November. The terms of the impending deal, details of which have been leaked to The Independent, are likely to have an explosive political effect in Iraq. Iraqi officials fear that the accord, under which US troops would occupy permanent bases, conduct military operations, arrest Iraqis and enjoy immunity from Iraqi law, will destabilise Iraq's position in the Middle East and lay the basis for unending conflict in their country. But the accord also threatens to provoke a political crisis in the US. President Bush wants to push it through by the end of next month so he can declare a military victory and claim his 2003 invasion has been vindicated.
Continental to cut 3,000 jobs, slash capacity, flights Continental Airlines Inc. intends to cut about 3,000 jobs and reduce its fleet size by 8% in order to pay for a share increase in its fuel bill and as the entire industry faces its "worst crisis since 9/11", the carrier said Thursday. "The price of Gulf Coast jet fuel closed yesterday at $151.26 -- about 75% higher than what it was a year ago," the Houston airline said in a statement. "At that price and at our current capacity, our fuel expense this year would be $2.3 billion more than it was last year. That increase alone amounts to about $50,000 per employee." The 3,000 job cuts represent almost 7% of Continental's entire workforce.
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Wed 06.04.2008
Lehman hammered by liquidity rumours Lehman Brothers denied last night that it had sought emergency help from the Federal Reserve as a swirl of rumours sent its share price tumbling.Shares in the blue chip Wall Street firm slumped by as much as 15% at one stage amid speculation that it needs to raise billions of dollars to repair its balance sheet.In response, Lehman tried to crush speculation that it would repeat the trauma of Bear Stearns, which was sold to JP Morgan in a cut-price deal. In a statement released to the media, it said insisted that its liquidity levels were strong and had actually grown in recent months."We did not access the [Federal Reserve's] primary dealer facility today," a Lehman spokesman said in a statement.
Lehman slips again Lehman Brothers shares slipped again during early trading on Wednesday after the Wall Street Journal reported that the brokerage firm is seeking to raise capital from overseas investors. "While a capital raise would dilute shareholdings significantly at these depressed prices, we think it would help soothe investors' nerves and improve Lehman's leverage position," analysts at Standard & Poor's Equity Research wrote in a note to clients on Wednesday. "We expect near-term pressure on the shares to continue, but we don't see a major liquidity crisis, considering Lehman's unencumbered collateral and the availability of the Fed discount window." Lehman shares fell 1.8% to $30.06 during early morning trading. The stock lost almost 10% yesterday.
Domestic automakers stung by truck declines Ford Motor Co. was the first of the major automakers Tuesday to deliver still more evidence of just how brutal it has become to sell big trucks and SUVs in the face of record-high gas prices and a slumping U.S. housing market. General Motors Corp. and Chrysler LLC both followed up with even steeper declines, while Toyota Motor Corp. with is car-heavy lineup -- managed to carve out more U.S. market share despite its lower numbers. Trucks, as expected, were to blame. The fuel-thirsty lineup shed 25.8% from a year ago to 126,364 vehicles. The SUV segment plunged 44% and vans dropped 29%. The F-Series pickup, the long-time best-selling vehicle in the U.S., saw its sales fall 30.6% to 42,973 trucks.
Peak Oil, Peak Food and Peak Everything Else The world keeps turning and the resources get used up. It’s really quite simple. Despite that fact, the debates rage over Peak Oil, Peak Food and peak everything else. It’s about as sensible as rearranging deck chairs on the Titanic. So the "experts" continue to debate whether or not resources are running low. But the evidence is pretty clear, at least to this trader. In the past year, we have seen the oil and agriculture markets explode. And this could be just the beginning of the rally, not the end, as some would have you believe. Personally, I think we are about halfway to the new top for many commodities. That means $200 oil (easily) and gold at $1,500-2,000. The agriculture markets have even further to go, in my opinion.
U.S. dollar faces threats to its reign The United States dollar has been the king currency in the world for decades. Could it now lose its throne? It's "definitely a possibility," says Barry Eichengreen, an economist at the University of California, Berkeley. The US has been spending hundreds of billions on the Iraq war, suffered massive trade deficits for many years ($708 billion in 2007), and now is paying about $1.2 billion a day for imported oil. Moreover, the dollar has been hugely devalued against the euro (the currency of 15 nations in the European Union), the British pound, and some other currencies. Conventional wisdom among economists is that currency ascendancy gives a nation an economic advantage. The US, for instance, finances much of its international payments deficit by issuing Treasury bonds and other debt instruments denominated in dollars. So when the dollar loses value, as it has on foreign-exchange markets, the debts are paid in those same cheaper dollars.
Cheap talk, pricey banks US Federal Reserve Board chairman Ben Bernanke on Tuesday broke with a long-held convention and discussed the Fed's concerns over the declining US dollar (see also Dead dollar sketch, Asia Times Online, March 4, 2008). Typically, only the US Treasury, now led by Hank Paulson, is supposed to talk about the dollar, but then again perhaps the Fed chairman was peeved with his counterpart's lack of enthusiasm for pushing up the US currency. In any event, the scuttlebutt in Washington has been that Paulson is too busy interviewing for Wall Street jobs that may see him emerge as the head of a banking colossus early next year; with time running out on the Bush administration he doesn't have long before facing the risk of joining the unemployment queue himself.
Ed McMahon fighting foreclosure on his Beverly Hills home Ed McMahon, who for decades appeared as Johnny Carson's sidekick on "The Tonight Show," is fighting to avoid foreclosure on his multimillion-dollar Beverly Hills home, according to published reports. The former "Star Search" host was $644,000 behind on payments on $4.8 million in mortgage loans when a unit of Countrywide Financial Corp. filed a default notice Feb. 28 with the Los Angeles County Recorder's Office, The Wall Street Journal first reported late Tuesday. McMahon, 85, has been unable to work as a pitchman for various products since he broke his neck 18 months ago, said his spokesman, Howard Bragman. "There are plenty of people affected by the weak economy, bad housing market or bad health," Bragman said.
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Tues 06.03.2008
SEC Wants to Talk With Bob Chapman The SEC's 67-page complaint names as defendants the Lines brothers; LOM (Holdings) and its various subsidiaries; Anthony Wile, 39, a Canadian living in Florida; Wayne Wile, 63, a Canadian living in the Cayman Islands; Robert Chapman, 72, a stock tout from Florida; William Peever, 48, a Vancouver resident and an LOM client; Phillip Curtis, 47, also a Vancouver resident and an LOM client; and Ryan Leeds, 35, a Florida stock broker. Around the same time, Mr. Chapman and three other newsletter writers issued purportedly independent research reports on Renaissance. Mr. Chapman, who the SEC says secretly controlled 370,000 Renaissance shares, called the company "an incredible opportunity." He said the stock was at $10 and could hit $62, even though it only traded at three cents.
90% US Silver Coin Bags, $1000 Face Since 1 ounce rounds, 10 ounce bars, and 100 ounce bars are getting very hard to find, and a 6-8 week delay is unrealistically unacceptable, some of you may be considering buying 90% Silver. So, I figured that some of my readers would like my experienced opinion on acquiring this kind of silver product. Definition: 90% US Silver Coins come in "bags" of $1000 face value, which consist of 10,000 dimes, or 4000 quarters, or 2000 half dollars. The coins were regularly minted, circulating U.S. silver coinage dating 1964 or earlier. Usually, a "bag" is split up into two or four actual canvas sacks to make it easier to carry. The coins exclude silver dollars, which are another product. The silver is 90% silver, the rest, the other 10% is copper, to help harden and toughen the coinage. There is 0.72 of an ounce of silver in each $1 face value, or 10 dimes, 4 quarters, or 2 half dollars, but the industry counts it as if it's .715 ounces, due to coin wear.
Bernanke defends the dollar Breaking a long-standing tradition of relative silence on the dollar, Federal Reserve Board Chairman Ben Bernanke defended the currency Tuesday and signaled discomfort with the weak currency's ramifications for the U.S. economy. The challenges that the economy has faced over the past year or so "have generated some downward pressures on the foreign-exchange value of the dollar, which have contributed to the unwelcome rise in import prices and consumer price inflation," Bernanke said in a speech via satellite to an international banker's forum. The Fed is "attentive to the implications of changes in the value of the dollar for inflation and inflation expectations and will continue to formulate policy to guard against risks" posed to price stability and sustainable growth, he said.
Lehman looking at capital-raising option Lehman Brothers Holdings Inc. is facing its first quarterly loss since it went public in 1994, and it's considering raising up to $4 billion from the sale common stock, according to a report published Tuesday. The Wall Street Journal reported that if Lehman does attempt a capital raising campaign, it would likely do so by issuing common stock for the first time since it went public. Lehman's shares fell 8% on Monday after financial analysts and ratings agency Standard & Poor's trimmed their ratings, concerned about further write-downs related to the fallout in the mortgage market and dwindling capital reserves. The Journal cited unnamed sources close to the matter as saying the exact amount of the capital that would be raised is unknown, but it quoted analysts and Wall Street executive estimates that it would likely be in the range of $3 billion to $4 billion.
GM closing 4 truck and SUV plants in North America General Motors is closing four truck and SUV plants in the U.S., Canada and Mexico as surging fuel prices hasten a dramatic shift to smaller vehicles. CEO Rick Wagoner said Tuesday before the automaker's annual meeting in Delaware the plants to be closed are in Oshawa, Ontario; Moraine, Ohio; Janesville, Wis.; and Toluca, Mexico. He also said the iconic Hummer brand will be reviewed and potentially sold or revamped. Wagoner said the GM board has approved production of a new small Chevrolet car at a plant in Lordstown, Ohio, in mid-2010 and the Chevy Volt electric vehicle in Detroit. Wagoner announced the moves in response to slumping sales of pickups and SUVs brought on by high oil prices. He said a market shift to smaller vehicles is permanent.
Fed auctions $75 billion to banks to ease credit stresses Battling to relieve stressed credit markets, the Federal Reserve said Tuesday it has provided a total of $435 billion in short-term loans to squeezed banks since December to help them overcome credit problems. The central bank announced the results of its most recent auction -- $75 billion in short-term loans -- the 11th such auction since the program started in December. It's part of an ongoing effort by the Fed to help ease the credit crunch, which erupted last August, intensified in December and January and took another turn for the worst in March. The housing, credit and financial crises have weakened the economy and threaten to push it into recession.
Gulf inflation overshadows US Paulson visit Gulf inflation is still rising at breakneck speed, new data signaled on Monday, spurring calls for gas exporter Qatar to drop its dollar peg and casting a shadow over US efforts to restore support for the greenback. Inflation in Qatar, one of six nations in the Gulf Cooperation Council (GCC) economic and political alliance, rose for a third quarter running in March to a near record of 14.75 percent, official data showed. "Things are not getting better. Action should be taken," Ibrahim al-Ibrahim, the top economic adviser to the country's ruler, said when asked about dropping the peg.
Las Vegas called 'mortgage fraud ground zero' In the shadow of Sunrise Mountain, where Rolling Hills Drive turns into Gold Mine Drive, a plain two-story home sits unoccupied, like thousands of other houses here in southern Nevada. Some of these empty homes have "for sale" signs. Others bear signs saying "foreclosure." Authorities say hundreds of them, including this one on Rolling Hills Drive, should have a different sign out front, one that reads "fraud."Prosecutors contend this house was sold last year to a straw buyer as part of a sprawling mortgage fraud perpetrated by a husband-and-wife team involving 277 properties in greater Las Vegas.Prosecutors have charged Eve Mazzarella, 30, and Steven Grimm, 45, with bank fraud, alleging the two caused banks to make more than $107 million in dubious loans and netted a profit of at least $15 million. Both defendants pleaded not guilty to the charges. A trial has been scheduled for October.
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Mon 06.02.2008
Foreclosure Bus Tour, Sign of Housing Bust, Hits New York Area The foreclosure tour, mobile proof of the U.S. housing bust, has rolled into the New York City market. For $75, prospective buyers on the Long Island version last month got velour banquettes, a supply of potato chips and Reese's Peanut Butter Cups and visits to eight foreclosed homes, with a general contractor and home inspector in tow. And the broker, Miller, who continued his pitch for the three-bedroom, one-bath Cape Cod. "You're in a quiet cul-de-sac in a very nice community for $100,000 less than the surrounding homes,'' he told the prospective buyers.
Home building slump hampers construction spending Construction spending falls in April as home building continues more than two-year slide Construction spending fell again in April as home building continued a more than two-year-long slide. The weakness was offset somewhat by an increase in non-residential spending activity which climbed to a record level. The Commerce Department reported that construction activity fell by 0.4 percent in April after having been down 0.6 percent in March. Construction has not increased since last September as the building industry continues to be battered by the worst slump in housing in decades.
Factory slump wears on, construction dips Factory activity contracted in May for the fourth consecutive month and inflation pressures surged to their highest since in four years, heightening concerns about the world's largest economy. The Institute for Supply Management said its index of national factory activity rose in May to 49.6 from April's 48.6, below the level of 50 that signals contraction although slightly above market expectations. Combined with the ISM's data on inflation, the report gave rise to concerns about stagflation -- rising prices in a weak economy.
Gas prices a risk for casual restaurants, Starbucks Record high U.S. gas prices threaten a new level of pain for casual dining restaurants stuck between value-oriented fast food and high-end eateries whose customers can afford to shrug off the economy's woes. Shops and restaurants around the United States are reporting fewer visitors in the face of a credit crunch, mortgage crisis and price and fuel inflation. Now-common $4-per-gallon gas is a psychological jolt for many, said Bob Goldin, executive vice president at restaurant consulting firm Technomic.
Stocks down after tepid economic data, bank woes Stocks pull back after weak economic data, bank shake-ups, oil resurgence Wall Street retreated sharply Monday on more signs of economic weakness and executive shake-ups at two major banks -- reminders of the ongoing fallout from the credit crisis. The Dow Jones industrial average fell more than 140 points. Two key economic reports indicated that the economy is still struggling. As expected, the Institute for Supply Management's manufacturing index for May showed its fourth straight monthly decline, while the Commerce Department said construction spending dipped in April for the sixth time in seven months due to a drop in home building.
Paulson committed to dollar as reserve currency U.S. Treasury Secretary Henry Paulson on Monday defended the dollar's status as the world's reserve currency and said its recent decline was only a small factor behind a surge in oil prices. "The U.S. dollar has been the world's reserve currency since World War Two and there is a good reason for that. The United States has the largest, most open economy in the world, and our capital markets are the deepest and most liquid," Paulson told a business group in the United Arab Emirates.
Ending dollar peg won't solve Gulf inflation - Paulson U.S. Treasury Secretary Henry Paulson said on Sunday leaders of Gulf oil producers have told him that abandoning their currency pegs to the dollar will not solve their vexing inflation problems. Paulson, speaking to reporters on his plane from Doha to Abu Dhabi as part of a four-day trip to the Gulf, said leaders in the region have "quite an awareness that the peg does not influence inflation to a significant degree".
China Leads Asia in Retreat From Inflation Battle Plummeting currencies did in the first Asian economic miracle. The second may fall victim to surging inflation. Central banks from Beijing to Bangkok are losing their bets that a global slowdown would temper price increases. While export demand from the U.S. and Europe may have eased, it has been replaced by rising domestic consumption that has helped push inflation rates in Asia as high as 26 percent. The result: In China, Thailand, the Philippines and at least eight other Asian economies, benchmark borrowing costs are lower than the rate of inflation, resulting in negative real interest rates, according to data compiled by Bloomberg. The risk is that prices will spiral even faster, leading to overheated economies and an eventual bust.
Ford completes sale of Jaguar, Land Rover to Tata Motors Ford Motor officially unloaded its storied Jaguar and Land Rover businesses today - netting the cash-strapped automaker a $1.7 billion boost that's a mere third of what it paid for the two luxury brands. India's Tata Motors Ltd. said it had completed the purchase of the brands in a deal first announced March 26. Tata is paying about $2.3 billion for the British brands, but Ford is paying about $600 million into the Jaguar-Land Rover pension fund. Ford bought Jaguar for $2.5 billion in 1989 and Land Rover for $2.7 billion in 2000.
'Large shifts in behavior' during commutes create new problems As gas prices climb menacingly toward $5 a gallon, Silicon Valley residents are changing the ways they commute - but some of the new solutions are creating problems of their own. Transit ridership is up across the Bay Area, but riders say parking at Caltrain and BART lots is so jammed that you have to arrive before 6:30 a.m. to find a free spot.
Facing $4 gasoline, more Americans take mass transit More Americans are leaving their cars at home and jumping on buses, trains, and trolleys as retail gasoline prices approach $4 per gallon, according to a report released Monday by the American Public Transportation Association. American mass transit use increased 3.3 percent during the first quarter of 2008 while Americans drove 2.3 percent less during the same period, the report said.
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Patriot Trading Group
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