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30 June 2008

Thoughts

Asian stocks were mostly lower overnight with India down over 2% and most others fractionally lower. European bourses are mixed with Sweden up 1% and Germany down over 1% etc. Gold is up $5 in the early going and Oil is touching $143. Treasurers are flat.

The question of the hour is whether the Fed can raise interest rates to fight inflation while unemployment grows and the economy falls into the tank. Stay tuned.
*****

European country indexes closed mixed.
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After trading above $143 Oil closed abut unchanged at $140.25. Gold lost $5 to $925 and Treasuries were flat with the two-year at 2.64% and the ten-year at 3.98%. The Yen closed at 106 to the dollar and the euro equaled $1.57.
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The DJIA closed down 5 points at 11346. The S&P 500 gained 1 point to 1280 and the NAZZ dropped 22 points to 2292.

Breadth was 5/4 negative and volume was moderate.

There were a combined total of 850 new lows and a combined 130 new highs.

The bears won the month and the first half of the year.
*****

 

27 June 2008

Thoughts

The S&P 500 is now at 1283. The previous intraday low for the year was 1256, and the low on a closing basis is 1273. So we'll see if we can break 1273 on a closing basis or 1256 on an intraday basis and have fewer new lows than the March low. If so that would be a positive divergence and set the stage for a rally.

The talking heads are calling for a bottom. Or rather they sound like they are hoping for a bottom. One even gave the 1989 crash scenario as a positive since the markets rallied that Tuesday in 1987. Unfortunately as we remember market measures were 35% off their highs when they did.

Shanghai was down 5% and India off 4% overnight and European bourse indexes are lower by 2% and more. U.S. futures are indicating a slightly higher opening. We have no idea what is going to happen and so we are just watching.
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Personal income was up 1.9% and personal spending was up 0.8 in May. The stimulus package, which mailed about $50 billion worth of tax rebates in April and May, provided a lift to income and savings of consumers last month, the government said on Friday. Thank you Uncle Sam. And there was no inflation in case you were wondering. And how do tax rebate checks count as income?
*****

The up opening is not positive.
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The wide jeans/narrow jeans controversy:

An Oppenheimer analyst downgraded shares of American Eagle Outfitters late Thursday, citing the departure of its president and merchandising chief, a potential fashion misstep and overall economic weakness. Roxanne Meyer downgraded the stock to "Perform" from "Outperform." Meyer said she is less confident that the company's sales will pick up in the second half of the year, and added that American Eagle's jeans may not be in fashion for the back-to-school season. Late Thursday, Susan McGalla said she will leave American Eagle effective Jan. 31, 2009. Meyer described the move as a surprise that raises doubts about a recovery in sales, and in the success of new marketing concepts. Also, American Eagle is offering wide-leg jeans during the back to school season, while other teen retailers are selling skinny jeans, and if American Eagle is out of step with jean fashion trends, it will hurt sales of a key product, Meyer said. She also said heavy discounts could cut the company's profits and margins, and economic conditions are still difficult.
*****

Well, the rally lasted 10 minutes.
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There is a gap from $450 to $525 in Google’s chart that occurred when Google reported better than earnings two months ago. Google is now pulling back down into that gap. Gaps are usually filled.

(A gap occurs when a stock trades at $450 and then the next trade is $525 with no intervening trades in the price range from $450 to $525. Technical theory says that gaps are usually filled although not always. To fill the gap Google would have to trade back down over time to $450.)
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Anheuser Busch is fighting a takeover bid and today announced it will increase profits by- you guessed it- firing workers. That way Augie Busch the 14th or whatever number can keep his job and perks and remain the big man about St Louis.
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It’s high noon and the S&P 500 is right at closing support of 1275. The intraday low on the S&P 500 in the sell off earlier this year was around 1255 so we have a ways to go to hit that today.
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European bourse indexes ended the day and week mostly mildly lower. Mexico and Brazil were slightly higher.
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Gold closed up $15 at $930 and Oil to $143 before settling back to close above $140 at $140.55. No penny ante moves for those two champs. And we were the folks who said the markets wouldn’t rally till oil traded at $10. Oh well they didn’t rally but ……....  The yen was 105 to the dollar and the euro equaled $1.58. No help there either. Finally Treasuries rallied on a flight to quality with the two-year at 2.62% and the ten-year at 3.96%.
*****

The DJIA dropped 100 points to end at 11355. The S&P 500 was down 5 points at 1279 and the NAZZ lost 6 to 1215.

Breadth was 2/1 negative and volume was active. By the way a bunch of shares printed in the last few minutes yesterday to place total volume over 5 billion shares. In our post yesterday we said volume was light but missed the last few minutes and market on close trades.

There were 820 new lows and 80 new highs combined.

The bears won the day and the week.
*****

 

26 June 2008

Thoughts

European markets are lower by 1% and more at midday as the very large Belgium bank Fortis said it will cancel its dividend and raise $12.5 billion in capital to cover losses. The miasma has spread to U.S. markets. Research in Motion reported great earnings but not good enough for traders and the shares are down $14 in the early going. Oracle also had decent earnings but was not positive going forward and its shares also sold off after hours yesterday.

Treasuries have a bid and Gold after being lower is now up $28 while Oil has a $139 handle.

Goldman Sachs placed a sell on the autos and bank stocks before the market opened.
*****

Final first Quarter GDP was announced as up 1%. And so, since a recession is defined as two consecutive quarters of negative GDP, the recession the economy is supposed to be in has been delayed by statistics. And since traders are suggesting a short ten month recession, the statistics suggest that the recession now won’t end till next year since it has not yet begun.

Final GDP is not really final GDP. There is one more absolutely final GDP number, we think. And the GDP price index was up 2.6% in the first quarter which means that all those price increases are figments of our imagination and not real to the numbers crunchers; which may be why the Fed says the economic slowdown is slowing.
*****

Ten minutes into the trading day the DJIA is down 120 points and breadth is 10/1 negative. This may be the washout that leads to the rally that many traders expect or…
*****

Ain’t capitalism great? BankAmerica sold this guy auction rate securities that he can’t sell back to them- or rather- they won’t repurchase from him and now they want to lend him money until the markets improve to the point where there will be bids for the securities. From Bloomberg: http://www.bloomberg.com/

``They were selling me their junk student-loan bonds, knowing the market was going down,'' said Jimmy Walker, 53, who owns a doughnut business in Dallas and who bought $1 million of auction-rate securities on Jan. 23 from BankAmerica.
He says his banker brought in a broker who recommended the securities and never mentioned anything about auctions. ``It took a lot of doughnuts to get $1 million in the bank,'' Walker said. ``That's my life savings. I'll be dead by the time I collect.''
Bank of America spokesman Matt Card said the bank doesn't discuss individual cases. BankAmerica, like other firms, has offered loans to clients stuck in the securities who need money immediately.
*****

Comments by Robert Marcin at realmoney.com:
Still No Fear, Sell Small and Mid Caps
I believe that investors are still clinging to the hopes of the last rally. I do so because of the outperformance, on both up and down days of the small and mid cap stock sectors. If investors really believed in another leg down in stocks and the economy, we would see significant underperformance in these areas.
In light of the catch-downside of small and mid cap stocks I am adding new shorts in this area, in individual stocks as well as the ETFs. When investors finally capitulate, these Indices will make new lows like the S&P and Dow are already doing. At 18-20x's peak trailing profits, the small and mid cap universe is expensive with big negative estimate revisions coming shortly. The stocks have little liquidity and less dividend yields. And they are very exposed to the receding US economy.
I think these stocks are being held up by the proliferation of hedge fund long books, as hedgies tend to focus in this area. But under the duress of a bear market, even hedgies will bail on expensive, small and mid cap favorites.
*****

At 11am The Dow Jones Industrial Average tumbled through its 2008 low and the S&P 500 dropped below the 1300 mark amid a broad market selloff. Financial stocks declined sharply after Goldman Sachs downgraded Citigroup and the U.S. brokerage sector. General Motors crumpled to multi-decade lows after it too was downgraded by Goldman. Crude-oil prices surged nearly $4 a barrel, adding to the pressure on stocks.
*****

European bourse indexes closed off 2% and lower across the continent. Oil ended at $139.94 up over $5 and Gold gained $30 to $915 after being down $10 early in today’s trading. Treasuries were firm on the back of a good auction with the two-year at 2.70% and the ten-year at 4.05%. The euro was $1.57 and the yen rallied to 105 to the dollar. Mexico and Brazil were both down over 2%.
*****

Ouch! They threw out the bathwater, tub, and baby. Stocks ended on their lows of the day with the DJIA down 350 points at 11455. The S&P 500 lost 36 to close at 1285 (1275 is must hold or else support) and the NAZZ surrendered 80 to 2320.

Breadth was 4/1 negative but volume was moderate as down volume exceeded up volume 8/1 which only signifies a lot of selling and not any kind of real panic.

There were 700 new lows and 70 new highs.

The bears still have the reins.
We remain in cash with no inclination to change.
*****

 

25 June 2008

Thoughts

Investors Intelligence reports 33% bulls and 37% bears. That is the lowest bullish figure we have seen in while and suggests that there is going to be a bounce higher. Doom and gloom, which we and others feel, eventually leads to rallies, even in bear markets.
*****

The Fed meets today and stocks are going to open higher. Asian markets were up overnight with Shanghai gaining 3.6%. European bourse indexes are also on the plus side and Gold is up $4 with Oil down $1 and carrying a $136 handle. Treasuries are flat.
*****

Goldman Sachs took Boeing to a sell and dropped its price target from $809 to $60. We guess they don’t do any underwriting for them.
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Bernstein raised AT&T to a buy.
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MasterCard agreed to pay American Express as much as $1.8 billion to settle an antitrust lawsuit claiming that MasterCard had blocked American Express from the bank-issued card business in the U.S. AmEx earlier reached an agreement with Visa to settle similar claims for as much as $2.25 billion. Separately, AmEx said that business conditions "continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations." The CEO of AXP said that “while it is too early to assess the impact of these indicators, the antitrust settlement we’ve reached with MasterCard provides us with a multi-year source of funds that should, among other things, help to lessen the impact of this weakening economic cycle and, when conditions improve, give us the ability to step up investments in the business.” In other words, AXP is going to be writing down bad credit and this money will help fund and obfuscate are dumb loan decisions.
*****

Several months ago the following news would have had the markets down 1% or more. Barclays said it will raise 4.5 billion pounds ($8.86 billion) from investors including Qatar Investment Authority, Challenger, Japan's Sumitomo Mitsui Financial Group, China Development Bank and Singapore's Temasek Holdings. The U.K. lender, whose shares are down more than 40% this year although it has taken few write-downs, said the Qatar group would be the biggest investor with an injection of 1.8 billion pounds.
*****

In the same vein UBS has hired Lazard Frères to explore strategic alternatives like sell its securities division which has been a house of pain and huge write-down’s ($37 billion so far). And the shares are trading higher. The Swiss are supposed to be financial genius when in fact they are just like all the rest of the financial world, smart in bull markets and dumb when the markets go against them. They made their reputation by not taking sides and storing wealth for war participants at zero interest.

All these large financial companies have an edge on folks like us because they see the other side of the order flow. That order flow insight gives them an edge but greed destroyed that edge.
*****

Two hours into the trading session stocks are higher led by financials and retailers. Who would have thunk? It looks like short covering ahead of the Fed minutes at 1:15pm. Crude oil fell more than $4 a barrel after a U.S. government report showed that inventories rose for the first time in six weeks. Inventories gained 803,000 barrels to 301.8 million last week, the Energy Department said. A 1.1 million-barrel drop was forecast by analysts in a Bloomberg News survey. Demand averaged 20.2 million barrels a day in the past four weeks, down 2.3 percent from a year earlier, the report showed.
*****

Fed announcement was the same old same old and stocks are immediately a bit higher and Treasury prices are about the same as they were and lower on the day with the two-year at 2.96% and the ten-year at 4.16%.
*****

Gold finished down $8 and $883 and Oil dropped $2.50 to $134.50. European bourses closed plus 1% and higher and the yen was 108 to the dollar with the euro at $1.55. Treasuries rallied into the close with the two-year finishing at 2.83% and the ten-year at 4.11%.
*****

The Fed met and all is well with stocks as the major measures rallied big-time in the first half hour of the last hour but then gave it all back in the last half hour of the last hour as financials gave up most of their gains for the day and many moved into the red. For example JP Morgan was up $2 in the early going and finished down 20 pennies on the day.

The DJIA gained 8 points to close at 11815. The S&P 500 tacked on 8 to 1323 and the NAZZ jumped 30 to 2400.

Breadth was positive all day ending 2/1 to the good on light volume.

There were a combined 360 new lows and 70 new highs.

The bears remain in control.
*****

 

24 June 2008

Thoughts

Last night we were thinking about our use of the term multiplier effect in relation to GM, Chrysler and Ford’s lost sales that may amount to $100 billion plus this year. The term is usually applied to money introduced into the banking system by the Fed.

The money generated by sales of autos has always had a huge effect on the economy. Auto sales pay the salaries of the workers, interest on company debt, and suppliers. The suppliers then pay their employees. All companies and employees spend the money in their communities and deposit their money in banks. The banks then use the deposits to lend money. And the money keeps flowing through the economy as it passes from buyer of goods and services to provider of goods and services and its employees etc.

Moreover most of the goods in involved in the production of autos comes from the U.S. and remains in the U.S. The lost sales by the auto makers will in effect negate the stimulus effect of the $300 checks recently sent to taxpayers because a large chunk of the taxpayer rebate spent at retail will wind up in foreign countries where the goods purchased were produced.

End of lesson.
*****

Asia was lower overnight except Shanghai which was up 1.5%. European bourse indexes are lower at midday and Oil has a $137 handle while Gold is a few dollars higher. U.S. stocks opened mildly lower on the UPS warming but are rallying back to even. Treasuries are flat as the trading day begins.
*****

Ten minutes into the trading session financials have a bid.
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UPS said last night that a sluggish U.S. economy and the raid rise in fuel costs, has cut its second-quarter expectations. UPS said it expects to earn 83 cents to 88 cents for the quarter. It originally anticipated earnings between 97 cents and $1.04. Slow U.S. economic growth and skyrocketing fuel expenses have resulted in lower-than-expected domestic package volume and reduced use of premium air products, the company said. Additionally, it said "the anemic U.S. economy" is affecting international results. However, revenues from the supply chain and freight segment continue to exceed expectations.
*****

Dow Chemical said on Tuesday that it would raise prices for its products by 25 percent, institute freight surcharges and cut back on output of some products because of higher energy prices. The increases are the second in a month by the company, which is based in Midland, Mich., and makes thousands of products ranging from plastic wraps to car parts and insecticides.
*****

Home prices in 20 U.S. metropolitan areas fell in April by the most on record, signaling the housing recession is far from over, a private survey showed today. The S&P/Case-Shiller home price index dropped 15.3 percent from a year earlier.
*****

Goldman Sachs Global Alpha hedge fund rebounded this year after a 40 percent plunge in 2007according to Bloomberg quoting unnamed sources. The fund is up 19 percent through mid-June. That is nice for Goldman since the firm put its own money into the fund at the bottom last year. But the original investors have a way to go to get back to even. Goldman sees the other side and knows how to play it well.
*****

The world's biggest financial firms may fire as many as 175,000 folks by this time next year as Citigroup Inc. and other banks shed workers amid slowing revenue and billions in write downs, executive recruiters say. Financial companies have announced plans to trim more than 83,000 jobs since last July, according to figures compiled by Bloomberg.
*****

The Conference Board's confidence index fell to 50.4, the lowest level since February 1992, from a revised 58.1 in May. Consumers were the most pessimistic about the future in the 41- year history of the index. A separate report today showed home prices in April dropped the most since at least 2001.
*****

Eastman Kodak shares are up 10% today on news that the company will use a $500 million tax refund to buy back $1 billion in shares. At least they are doing the buyback at a 25 year low. We have commented before on banks raising capital by selling shares at their lows after they bought back shares over the past five years at much higher prices.

Ford spent billions to buy Volvo and billions to buy back stock and billions more for Jaguar and Range Rover which they are basically giving away to rid themselves of losses.

And many of the CEOs who made those decisions are still on the job or are receiving cushy pension golden parachutes. The forward planning of the private sector of the U.S. economy has been abysmal for the past decade. And yet Wall Street and its minions continue to wail about government as these same folks urge the government to bail out the banks and mortgage companies.

The share buybacks are nuts and their purpose is to raise the price of the stock so that options granted to executives and board members become profitable. A much better way would be to pay special dividends if the money is burning a hole in the company’s pockets. But executives wouldn’t benefit from that since their interest in the company is usually in the form of options that would not participate in the dividend payout. And on it goes.
*****

European bourse indexes closed fractionally lower.
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Investors’ Intelligence reports more bears than bulls in the latest period. That bearishness is bullish.
*****

Treasuries gained ahead of tomorrow’s Fed meeting with the two-year at 2.85% and the ten-year at 4.10%. Gold gained $4 to $892 and oil was up pennies at $137.12. The yen finished at 108 to the dollar with the euro at $1.55.
*****

After trading higher by one half percent most of the day the major measures gave up the ghost in the final hour of trading. At the bell the DJIA was down 30 points at 11810. The S&P 500 stumbled down to 1315 and the NAZZ dropped 17 to 2375.

Breadth was 2/1 negative at the bell and volume was light.

There were 752 combined new lows and less than 90 combined new highs.

The bears remain.
*****

 

23 June 2008

Thoughts

Asian markets were lower overnight with Shanghai down 2.5%. European bourse indexes are mixed and U.S. stocks are going to open higher as a spate of stock for stocks takeovers are in the News. Gold is $902 and Oil is $135 as the weekend OPEC meeting was a non event. Treasuries are giving a bit of ground in front of the Fed Meeting on Wednesday.
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Big Surprise: Speculative traders' interest in crude oil has grown to the point that they now account for roughly 70% of all trading in West Texas Intermediate crude on the New York Mercantile Exchange, compared with 37% in 2000, according to an investigation by a congressional subcommittee that forms part of an escalating political assault on Wall Street's role in the run-up in oil prices.
*****

Bunge is taking over Corn Products and Republic Services is buying Allied Waste. Also the takeover of BCE in Canada was approved by the

Canadian Supreme Court although the banks who are loaning the money for the $50 plus billion buy may not be as anxious to fund the deal as they were last year before the collapse of the lending markets.
*****

Thanks—Goldman Sachs added U.S. Steel and Elan to its Conviction Buy List. U.S. Steel is trading at $188 up from $14 several years ago and Elan is $34 up from $6. Elan might work - but U.S. Steel?-we would posit the easy money has already been made.
*****

US Treasury securities held by foreign entities: Japan $600 billion; China $500 billion; Britain $250 billion, OPEC $150 billion; Caribbean Banks $115; Hong Kong $60 billion.
*****

Financials are dragging stocks lower today.

And GM is making another new low at unlucky $13. GM has $200 billion in sales. Last month the number of car/truck sales was off 20% and the higher priced SUVs and pickup trucks even more. Assume dollar sales were down 25%. 25% of $200 billion is $50 billion in lost sales and lost multiplier effect on the economy. Multiply by two for Ford and Chrysler and the number is $100 billion in lost sales and stimulus to the economy.

(Multiplier effect: An effect in economics in which an increase in spending produces an increase in national income and consumption greater than the initial amount spent. For example, if a corporation builds a factory, it will employ construction workers and their suppliers as well as those who work in the factory. Indirectly, the new factory will stimulate employment in laundries, restaurants, and service industries in the factory’s vicinity.)
*****

Goldman Sachs reversed its May 5 recommendation for investors to add to U.S. financial and consumer stocks, conceding it was ``clearly wrong'' about the prospects for both groups.

Goldman advised investors to ``underweight'' the categories by allocating less to them than their weightings in the S&P 500 Index. In May, the world's biggest securities firm boosted its rating on financial companies to ``neutral,'' or market-weight, and assigned an ``overweight'' recommendation to consumer shares.

``We boosted our consumer discretionary and financials weights in May on the belief the sectors would benefit from bank recapitalization and fiscal stimulus,'' Goldman wrote to client today. ``Our thesis was clearly wrong in hindsight.''
*****

Here is an interesting Bloomberg article on commercial real estate loans and large banks: http://www.bloomberg.com
*****

Gold dropped $17 to $884 on Monday and Oil gained $1.67 to $136.55. Treasuries were slightly lower with the two-year at 2.90% and the ten-year at 4.17%. European bourse indexes closed mildly mixed and the euro was $1.55 while the yen was 108 to the dollar.
*****

The major measures meandered plus and minus small all day with the DJIA finally closing higher.

At the bell the DJIA was up 10 points at 11850. The S&P 500 gained 1 point to 1318 and the NAZZ dropped 20 to 2385.

Breadth was more than 2/1 negative and volume was active for a summer Monday on the NYSE.

There were over 610 combined new lows and about 130 combined new highs.

Today was a workout day from Friday’s Witching and the bears are in control.
*****

 

20 June 2008

Thoughts

Happy summer (bulls); winter is on the way (bears)
*****

Oil is up $2 in the early going and Gold remains over $900. Treasuries have a bid and stocks are going to open lower as rumors of more write downs at certain financials- you name the company and there is a rumor- are casting a pall on the opening. Asian markets were mixed overnight with Shanghai gaining 3% to end a tumultuous week of trading and India dropping 3%. European bourse indexes are lower at midday.
*****

Michael Gordon of the NYT, who is a mouthpiece for the Pentagon, is reporting that 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. Here we go again.
*****

Today is Quadruple Witching and so anything is possible.  The NYT Iran/Israel story on top of the financial rumors and S&P 500 expiration at the opening has the major measures down over 1% after 30 minutes of trading. The sell off on the S&P 500 futures settlement this morning may be reversed this afternoon by the settlement of the futures and options on individual stocks. Until them the S&P 500 is 10 points below 1335 support right now and needs to regain that level during the day to assuage the bulls.
*****

The Chinese plan for pollution and cutting gasoline consumption: With less than 50 days to the Olympics, Chinese authorities on Friday announced widely-expected plans to almost halve its car population in the capital for a two month period. Starting July 20th, drivers of even and odd-numbers license plates will only be able to drive on alternate days until September 20th, almost a month after the close of the Olympics and three days after the closing ceremony of the Paralympics.

The penalty for violating the rules is death. Just kidding, we think.
*****

Ford Motor lowered its hopes further, blaming $4-a-gallon gasoline and consumers' worries about the economy. The auto maker said 2008 automotive results will be worse than 2007 and that it will difficult for company to break even on an operating basis in 2009. The auto maker also reduced its production outlook and said it will delay introduction of its new F-150 pickup. 
*****

Treasuries closed higher as stocks were lower with the two-year at 2.85%. The ten-year was 4.14%. Oil gained to $134.69 up $2 and change and Gold closed flat at $903. The yen was 107 to the dollar and the euro equaled $1.56. European bourse indexes ended the week 1% and lower.
*****

From The Guardian, a British paper: Crude oil prices rose sharply on the world's commodity markets tonight after the head of Opec dismissed as "irrational and illogical" a call by Gordon Brown for the cartel to pump more oil. Chakib Khelil said the near doubling of oil prices over the past year was due to geopolitical tension, speculation and a shortage of refining capacity rather than a failure by producers to supply enough crude. His comments came as the prime minister flew to Saudi Arabia for a summit meeting on Sunday of oil producers and consumers in Jeddah at which he will press for Opec to help contain rising inflation in the West by pumping more oil.
*****

Probable short covering into the weekend moved stock measures off their lows of the day but the DJIA ended down 220 points to close at 11840. The S&P 500 was off 25 points to 1317 and the NAZZ lost 55 points to 2405.

Breadth was 4/1 negative and volume was witching active.

There was a combined total of 530 new lows on the NAZZ and NYSE and a combined total of 95 new highs.

The bears won the day and the week.
*****

 

19 June 2008

Thoughts

Stocks opened higher out of the box but the financials quickly turned negative with the rest of the markets following. Overnight Asian markets were lower with most down over 2% while Shanghai dropped 6% effectively eliminating yesterday’s 5% rally. European bourse indexes are mildly lower at midday. Oil has a $136 handle and Gold is unchanged. Treasuries again have a bid.
*****

Crude-oil futures fell Thursday after China said it would hike fuel prices, raising questions about the stamina of oil's record-breaking rally. Traders are worried that China's decision to increase the price of products such as gasoline and diesel could crimp its demand growth, although many analysts say consumption patterns in China aren't going to radically change overnight. In a surprise announcement, China said it would raise gasoline and diesel prices by about 18%. Prices of other fuels as well as electricity were also increased. China regulates retail and wholesale prices on oil products and has kept them artificially low as crude oil prices have skyrocketed. This policy has squeezed the country's refiners, who are posting huge losses as a result. This is the first time China has raised its oil product prices since November, and it will be largest increase in more than four years.
*****

One half hour into the trading session oil is down $3 which is helping to arrest the stock swoon. There doesn’t yet seem to be a theme in today’s trading. The S&P 500 is at 31350 which is the line in the snad on the downside for the bulls this week. Today and tomorrow are Quadruple Witching so the markets may be going many directions over the next days and the real trend will emerge next Tuesday.
*****

The Feds are indicting the two Bear Stearns hedge fund managers for lying about what they said to investors in their funds because one of them in an e-mail said that subprime market was toast. The certainly weren’t the first nor the last to be scared inside and putting on a brave face outside, we have done that in the past. Luckily we were mostly right.

A big deal is being made about one of them removing $2 million from the fund. But little mention is made about the fact that he left $4 million in the fund and lost it all.

Whatever, one would guess that the CEOs of all the banks and brokers that have sucked wind this year would be prime targets for the Feds if they are really serious about getting folks who misled shareholders. But of course they aren’t. Hedge funds are by their nature speculative instruments. Banks aren’t.
*****

For example, Citi raised capital by selling shares and now it says: Citi’s Chief Financial Officer Gary Crittenden told analysts on Thursday the New York bank will see a fresh round of write-downs from failing mortgage investments in the bank's second-quarter results, and said credit costs from souring consumer loans "may continue to rise throughout the year." Mr. Crittenden said Citigroup will set aside more money in the second quarter than it did last quarter to offset failing consumer loans. He also said that when investors demand higher yields for owning complex asset-backed securities like collateralized debt obligations, each incremental rise in those yields means a related decline in value in similar securities sitting on Citigroup's balance sheet .He said Citigroup does not mark the value of those securities -- the source of much of the bank's recent decline in performance -- directly to market prices, but instead uses a proprietary model that accounts for market values as one component in valuing the securities.
*****

On the Citi news most financials are lower with JPM the best of the lot down $1.50. The major measures are higher at noon because Oil is $3 lower.
*****

News from the land of milk and honey: A Crawford County woman is in pain and a little embarrassed after accidentally shooting herself in the foot Tuesday afternoon while patrolling her garden for woodchucks. Late Tuesday afternoon, the 45-year-old rural Ferryville, Wisconsin woman called 911 to report she had shot herself, Crawford County Sheriff Jerry Moran reported. The woman told authorities she was in her garden with a loaded .22-caliber bolt-action rifle, waiting for woodchucks that have been bothering her vegetable garden, Moran said. The gun, which had a problem with its safety, accidentally discharged. The woman was taken to Vernon County Memorial, where she was treated and released, Moran said.
*****

Oil ended down almost $5 at $131.80. Gold gained $10 to $904. Treasuries gave ground with the two-year at 2.95% and the ten-year at 4.23%. European bourse indexes closed lower. The yen was 108 to the dollar and one euro equaled $1.55.
*****

The major market measures staged a rally in the last hour and one half of trading to close higher on the day.

The DJIA gained 35 points to end at 12065. The S&P 500 rose 5 to 1343 and the NAZZ jumped 30 to 2460.

Breadth was flat at the bell and volume on the NYSE was about yesterday’s 4 billion shares.

There were 205 new lows on the NYSE and 90 new highs.

The bulls retrieved serve today.
*****

 

18 June 2008

Rose moon tonight see end of today’s post

Thoughts

Stocks are opening lower this morning as lousy earnings from Federal Express and Morgan Stanley plus the announcement by Fifth Third that it was cutting its dividend and raising $2 billion in capital by selling a convertible preferred stocks and noncore but profitable businesses put the cabash on any hopes for a rally.

Asian markets were mixed with Shanghai finally moving higher gaining 5% and India down 1.7%. European bourses are lower at midday. Gold is $3 higher as the trading day in NYC commences. Oil has a $134 handle and Treasuries have a bid in the early going as stocks sell off.
*****

Investors Intelligence number showed a large increase in bears in the latest reporting week. Bulls were 35% versus 42% and bears were 37% versus 32%.  A large bearish contingent is considered bullish in the perverted thinking of Wall Street that the crowd is always wrong, unless it isn’t.<
*****

We think the markets are and will act as they did in the first oil shock in the 1973. As we said yesterday we see similarities in market action between then and now. And so we repeat our scenario:

Why we are in cash:

The DJIA had touched 1000 in 1968 and then entered a bear market that lasted until May 1970 and saw the markets drop 44%. From May 1970 to January 1973 stocks gained 91%.

Between 1973 and 1974 oil prices tripled. And in that same time period the stocks markets dropped 44%.

From January 2000 to October 2002 stocks dropped 38% and then rallied for the next five years to top out in October 2007 up 91%. Since October 2007 stocks are down 10%.

Oil prices have tripled over the past year. Coupled with the subprime mortgage crisis and rise in other commodity prices it is our view that stocks have not adequately reflected the dislocations that are going to occur. This morning’s CPI report of 3.7% month over month rise and 7% year over year increase suggest that inflation is.

Until we have a better handle we will stay as we are.
*****

Here is a little new to brighten the day for bears:

Royal Bank of Scotland Issues Crash Alert and BIS Warns of Great Depression

Global stock markets are braced for one of the worst crashes in 100 years, according to the Royal Bank of Scotland (RBS) credit strategy team. RBS credit strategy team, in a special report for clients, said it expects inflation to paralyze economies and spark the crash. The report advised investors to be prepared for a severe downturn in global stock and credit markets, saying the S&P 500 index is likely to fall by more than 300 points to around 1,050 points by September. Bob Janjuah, the report's author is highly respected in the City after his foresighted warnings last year about the credit crisis proved accurate.

from realmoney.com :It should be noted that the Royal Bank of Scotland statement was originally released on June 11 and Janjuah has been heralding Armageddon for over a year now. Markets usually don't crash when RBS is yelling "fire.”
*****

Gold closed up $10 at $897. Oil gained $2 and change at $136.50. European bourse indexes closed lower while treasuries gained as the markets lost.
*****

With the markets entering the final hour of trading the S&P 500 is again at the 1335 to 1340 area that held last week and must hold again this week. With quarter end which is also yearend for many no profit institutions our guru is guessing-but not betting-that support holds this time around.
*****

Stocks rallied in the final hour to cut their daily loss in half but then ran out of steam and headed lower in the last fifteen minutes of trading.

The DJIA closed down 130 points at 12030. The S&P 500 lost 13 points to 1338 and the NAZZ dropped 28 points to 2430.

Breadth was over 2/1 negative and volume picked up with the NYSE reaching 4 billion shares.

There were 215 new lows and 70 new highs on the NYSE and 250 new lows and 60 new highs on the NAZZ.

The bears won the day.
*****

 

Rose Moon tonight:

The moon will appear to be a giant pink sphere tonight, a sight that scientists call the Moon Illusion, according to the NASA Web site.

The sight occurs each year on June 18 and is called a solstice moon because summer solstice occurs on June 21, according to this NASA site.

"This is significant because the sun and full moon are like kids on a seesaw; when one is high, the other is low,” a description on the NASA Web site says. “This week’s high solstice sun gives us a low, horizon-hugging moon and a strong Moon Illusion.”

The solstice moon also is often called Strawberry Moon, according to NASA's Imagine the Universe site. On the site, an astrophysicist explains it this way:

"The Full Moon of June generally goes by the epithet of the 'Rose Moon,' or the 'Flower Moon,' while people in certain areas blessed with berries, as ours is, prefer to call it the 'Strawberry Moon.'

From NASA’s website: http://science.nasa.gov/headlines.

On Wednesday night, June 18th, step outside at sunset and look around. You'll see a giant form rising in the east. At first glance it looks like the full Moon. It has craters and seas and the face of a man, but this "moon" is strangely inflated. It's huge!

You've just experienced the Moon Illusion.

Above: The full Moon beams through trees in Manchester, Maryland. Credit: Edmund E. Kasaitis. Copyright 2008; all rights reserved.

There's no better time to see it. The full Moon of June 18th is a "solstice moon", coming only two days before the beginning of northern summer. This is significant because the sun and full Moon are like kids on a see-saw; when one is high, the other is low. This week's high solstice sun gives us a low, horizon-hugging Moon and a strong Moon Illusion.

Sky watchers have known for thousands of years that low-hanging moons look unnaturally big. At first, astronomers thought the atmosphere must be magnifying the Moon near the horizon, but cameras showed that is not the case. Moons on film are the same size regardless of elevation: example. Apparently, only human beings see giant moons.

Are we crazy?

After all these years, scientists still aren't sure. When you look at the Moon, rays of moonlight converge and form an image about 0.15 mm wide on the retina in the back of your eye. High moons and low moons make the same sized spot, yet the brain insists one is bigger than the other. Go figure.

A similar illusion was discovered in 1913 by Mario Ponzo, who drew two identical bars across a pair of converging lines, like the railroad tracks pictured right. The upper yellow bar looks wider because it spans a greater apparent distance between the rails. This is the "Ponzo Illusion."

Right: The Ponzo Illusion. Image credit: Dr. Tony Phillips. [More]

Some researchers believe that the Moon Illusion is Ponzo's Illusion, with trees and houses playing the role of Ponzo's converging lines. Foreground objects trick your brain into thinking the Moon is bigger than it really is.

But there's a problem: Airline pilots flying at very high altitudes sometimes experience the Moon Illusion without any objects in the foreground. What tricks their eyes?

Maybe it's the shape of the sky. Humans perceive the sky as a flattened dome, with the zenith nearby and the horizon far away. It makes sense; birds flying overhead are closer than birds on the horizon. When the moon is near the horizon, your brain, trained by watching birds (and clouds and airplanes), miscalculates the Moon's true distance and size.

Below: The "flattened sky" model for the Moon Illusion. Source: Explaining the Moon Illusion by Lloyd Kaufman and James H. Kaufman.

There are other explanations too. It doesn't matter which is correct, though, if all you want to do is see a big beautiful Moon. The best time to look is around moonrise, when the Moon is peeking through trees and houses or over mountain ridges. The table below (scroll down) lists rise times for selected US cities.

A fun activity: Look at the Moon directly and then through a narrow opening of some kind. For example, 'pinch' the moon between your thumb and forefinger or view it through a cardboard tube, which hides the foreground terrain. Can you make the optical illusion vanish?

Stop that! You won't want to miss the Moon Illusion.

 

Moonrise over Selected US Cities

City

Time
Zone

June 17

June 18

June 19

New York, NY

EDT

8:07 p.m.

8:58 p.m.

9:41 p.m.

San Diego, CA

PDT

7:37 p.m.

8:28 p.m.

9:13 p.m.

Washington, DC

EDT

8:13 p.m.

9:03 p.m.

9:47 p.m.

Honolulu, HI

HST

6:53 p.m.

7:44 p.m.

8:31 p.m.

Chicago, IL

CDT

8:09 p.m.

8:59 p.m.

9:42 p.m.

Houston, TX

CDT

7:58 p.m.

8:49 p.m.

9:35 p.m.

Denver, CO

MDT

8:12 p.m.

9:02 p.m.

9:45 p.m.

Miami, FL

EDT

7:43 p.m.

8:35 p.m.

9:22 p.m.

Seattle, WA

PDT

9:02 p.m.

9:51 p.m.

10:30 p.m.

Anchorage, AK

ADT

12:30 a.m.

1:04 a.m.

1:15 a.m.

Augusta, ME

EDT

8:06 p.m.

8:57 p.m.

9:39 p.m.

 

 

*****

 

17 June 2008

Thoughts

Goldman Sachs beat estimates and all is right with the world as Turn-up Tuesday begins. Adobe also beat and those results coupled with Intel announcing that it will spin off a division that makes solar chips has the bulls in a pre-market opening festive mood. Oil is down a couple of dollars with a $132 handle and Gold is up $2.

Asian markets were mixed with China down another 2.7% at 2700 which is 60% lower than the high last fall. European bourses are higher by 1% and more at midday.
*****

The Producer Price Index was up 1.4 % in May and up 7% year over year on the stuff that matters but stripping out essentials like food and energy the core PPI year over year is up 3%. Treasuries were better until the number came but they are now flat on the day.

The Producer Price Index measures prices of goods at the wholesale level. There are three broad subcategories within PPI: crude, intermediate, and finished. The market tracks the finished goods index most closely, as it represents prices for goods that are ready for sale to the end user. Goods prices at the crude and intermediate stages of production often provide an indication of coming (dis)inflationary pressures, but the closer you get to crude goods, the more that these prices track commodity prices which are already available in traded indexes such as the CRB (Commodity Research Bureau).

The market used to place more emphasis on the index excluding food and energy, referred to as the core rate. Food and energy prices tend to be quite volatile and obscure trends in the underlying inflation rate. Though the market reaction is determined by the month/month changes, year/year changes are also noted by analysts. The index is not revised on a monthly basis, but annual revisions to seasonal adjustment factors can produce small adjustments to past releases. Recently there has been talk among gurus that the actual number may be more important than the core number
*****

Why we are in cash:

The DJIA had touched 1000 in 1968 and then entered a bear market that lasted until May 1970 and saw the markets drop 44%. From May 1970 to January 1973 stocks gained 91%.

Between 1973 and 1974 oil prices tripled. And in that same time period the stocks markets dropped 44%.

From January 2000 to October 2002 stocks dropped 38% and then rallied for the next five years to top out in October 2007 up 91%. Since October 2007 stocks are down 10%.

Oil prices have tripled over the past year. Coupled with the subprime mortgage crisis and rise in other commodity prices it is our view that stocks have not adequately reflected the dislocations that are going to occur. This morning’s CPI report of 3.7% month over month rise and 7% year over year increase suggest that inflation is.

Until we have a better handle we will stay as we are.

*****

Well that was one quick rally. We guess some traders did pay attention to PPI. The major measures are back to even and Lehman is lower after and hour of trading. With bank stocks in the red today may be a glass half empty day for them.
*****

Gold closed $1 higher at $886. Oil dropped $1 to $133.85. The yen was 108 to the dollar and the euro equaled $1.55. Treasuries caught a bid with the two-year at 2.92% and the ten-year at 4.22% as the WSJ journal and other papers printed Fed inspired stories that an interest increase in not in the cards in the near future.
*****

European bourse indexes close higher while Mexico was slower by over 1% and Brazil was 2% higher.
*****

Goldman Sachs was $4 higher in morning trading and is now $2 lower at the close of trading. The rest of the markets have followed.

The DJIA lost 110 points to end at 12160. The S&P 500 gave up 8 points to 1350 and the NAZZ dropped 15 to 2460.

Breadth as more than 3/2 negative on the NYSE and volume was summer light.

There were 125 new lows and 80 new highs on the NYSE.

The bears awoke to a glass half full and turned turned-up Tuesday around to turned-down Tuesday.
*****

 

16 June 2008

Thoughts

Asian markets were higher overnight and even China managed to gain a bit while Japan was up over 2% and Hong Kong gained over 1%. European markets are mostly small higher at midday. Gold is up $2 and Oil almost touched $140 in trading this early morning. Treasuries are flat.
*****

Lehman announced losses about as expected and the shares are $1 higher and leading financials to positive readings and hour into the trading day. The DJIA opened down about 90 points and then rallied to down about 50 and settled into a summer doldrums trade. Financials are bouncing while other areas as telephone stocks and tech are mixed. Volume is light.
*****

AIG fired its CEO. That move is three years too late.
*****

Verizon and AT&T were downgraded and are trading lower.
*****

Saudi Arabia said it is going to pump more oil and the rise in the price of oil this morning is counterintuitive except to the big boys and girls who have made commodity futures and stocks the tech mania of the current market.
*****

The following is from a WSJ blog report from the conference call by Lehman on their earnings:

This is my responsibility and I wanted you to hear a few things from me directly,” he says. “We made a decision to build out our best-in-class mortgage origination and distribution platforms. We made active decisions to deploy our capital, some of which in hindsight were poor choices because we really didn’t react actively enough in the environment. We accumulated positions in leveraged loans that we thought we could syndicate and clearly not all of those could be sold.” He says the firm is in the process of delevering.

Unsaid in this blog report is that Lehman is sorry it didn’t get rid of the leveraged loans on which it lost money. How was Lehman to get rid of the loans? By selling them to customers, that way customers would have taken the losses not Lehman. That is what the favorite investment bank on Wall Street, Goldman Sachs, was able to do.
*****

Oil turned lower at midday and is now down $1.50 which is a $9 swing for the day.  The major stock measures have rallied to the plus side on that swing. Financials remain today’s leaders as bottom fishers are out. We are not among them. We are more interested in the Open playoff on ESPN.
*****

Bloomberg reported this afternoon: Richmond Federal Reserve Bank President Jeffrey Lacker said downside risks to growth have ``diminished'' and reversing previous interest rate cuts makes ``eminent sense'' as the economy recovers. While the danger of a more rapid slowing in growth ``has not entirely disappeared, my sense is that such downside risks have diminished appreciably,'' Lacker said today in a speech in Spartanburg, South Carolina. ``And just as easing policy aggressively in response to emerging downside risks made sense, withdrawing some of that stimulus as those risks diminish makes eminent sense as well.''
*****

Southern California's housing market took another beating last month as median prices fell an average of 27% from a year ago -- the sharpest drop in at least 20 years. The median home sale price in six Southern California counties was $370,000, down from $505,000 a year earlier, according to DataQuick Information Systems. DataQuick said that was the biggest annual decline it has recorded since it began tracking prices in 1988.

Ouch!
*****

Oil closed lower by one dollar and change at $133.78. Gold gained $12 to $885. Treasuries were mildly better with the two-year at 3.01% and the ten-year at 4.24%. European bourses were lower as was Mexico and Brazil closed higher.
*****

The DJIA stayed negative at the close after trading above and below even all day. The DJIA lost 40 points to 12325. The S&P 500 was down 1 point to 1360 and the NAZZ gained 20 to 2475.

Breadth was 5/4 positive on the NYSE and volume was U.S. Open light.

There were 115 new lows and 80 new highs on the NYSE.

The bulls and bears tied today.
*****

 

 

We want to share this article from the June 5 NYT that we found amusing J

Peter Rabbit Must Die

By JOYCE WADLER

THE homeowner, a city-boy artist and illustrator who had moved to rural Pennsylvania, never wanted to kill the woodchucks. Sure, they were ruining the garden and digging up the foundations of outbuildings, but it was a moral issue: the artist, who is still so uncomfortable about what transpired — and so concerned about how his New York clients would feel about it that he is not willing to be identified — did not want to take a life.

Given the size of the property — a 12-acre former horse farm — fencing was out of the question. He bought a Havahart live animal trap but did not catch a thing. And he worried that releasing woodchucks down the road would only be dumping the problem on a neighbor. So he moved on to that tried-and-true landlord’s tactic: harassment. He attached a hose to the exhaust pipe of his old pickup truck and stuffed it into a burrow — not to kill the woodchucks, just to encourage them to move on. That didn’t work, either.

Finally, the artist decided he would have to shoot the animals. First, though, he went to each hole and made an announcement.

“I said: ‘I intend to kill you. You have 24 hours to get out,’ ” he recalls. “I wanted to give them fair warning. I said, ‘If I were you, I would find another place to live.’ I also promised them I would not take a shot unless I knew it would be fatal.”

He is making this into a funny story, he says, but when he killed his first woodchuck he “literally felt sick.”

“I went outside and knelt down to it and said a little prayer to whatever the powers that be that when my turn comes, I will do it as gracefully and uncomplainingly.”

Eventually, though, he embraced his mission, and grew so obsessed with it that an aunt began to call him Woodchuck Johnny. How many did he kill that summer?

“I stopped at 19,” he says. “One was a suicide. It realized its days were numbered and ran in front of a car.”

The artist’s story is not as unusual as some would like to believe. As summer closes in, gardeners around the country are starting to worry about the animals that may end up enjoying their roses and cucumbers more than they do. Any day now, they know, they may come upon a carrot patch ravaged by groundhogs, lettuce ransacked by rabbits and squirrels, or a massacre in the koi pond.

But for many gardeners — the tenderhearted ones, who pride themselves on their decency and compassion — killing pests, particularly those with big eyes, fluffy tails and cousins who work for Disney, could never be a solution of first resort.

“People who garden have an obvious love of life, a reverence for life, and to kill something in order to garden is very rough,” says Liz Krieg, who runs the Rising Sun Greenhouses and Landscape Company in Bethel, Vt., and who dispatches only the scarlet lily beetle.

City people tend to take up gardening in their yards or at their summer houses with a generous attitude toward summer’s bounty, ready to live and let live. The woodchucks want a few zucchini? No problem, there are enough to go around. The rabbits are decimating the lettuce? Get a humane trap and move them elsewhere.

Soon enough, though, they realize it’s not that simple. The animals do not take one or two tomatoes as if they’re in a greenmarket in the Hamptons; they go down the row sampling, so that everything is ruined. Or they uproot and destroy a crop, without eating a thing, in their search for insects and grubs. There is, in fact, a sameness to the stories the gardeners tell: “If they just had taken one head of lettuce, or a few strawberries — but they decimated the whole thing!” After a season of grueling labor and multiple attempts at benign deterrence, the sight of a trashed garden is often the last straw: the moment when a gentle gardener will suddenly go Rambo.

Such was the case with Susanne Williams, a retired supply officer for the Alaska Department of Transportation, who lives with her husband in Douglas, near Juneau. Gardening is a struggle in southeast Alaska, she says; there is not a lot of sun. But she and her husband have two gardens, one at their home overlooking the Gastineau Channel, the other at the local community garden near the Mendenhall Glacier. They give much of their produce to charity and put up mesh at home in an unsuccessful attempt to keep out porcupines.

Five years ago there were serious animal problems at the community garden — black bear, deer, beaver — but “the worst pest of all was the porcupine,” Ms. Williams says. “The kindhearted would trap them and drive them 10 or 15 miles away, until one of the forest people said they just came back.”

It reached a point, Ms. Williams says, when gardeners were so frustrated that at least 30 of the 150 plots were empty.

“So finally, four years ago, we put an electric fence all around this big field, but the porcupines then decide to burrow under the fence,” she says. “They’re ingenious. So we had to put rocks down and pour cement.”

Even then, a porcupine managed to get in. And when she saw it, “strolling along, munching away,” she could stand no more.

“He was after my carrot crop,” she explains. “I said, I just cannot handle this anymore. He sees me and tries to wander off, but they can’t run very fast. I got him with the sledgehammer. He tried to dodge me, but I got him on the head.”

And no, she hasn’t lost any sleep over it.

“It was sad, but I am tired of being the fancy kitchen for critters,” she says. She has a friend in the area who has “just given up” on being kind to the animals: “He goes after them with a pitchfork and puts them in his compost pile. I don’t think the PETA people would like him much.”

She adds: “Doesn’t the spinach scream when it boils? I think probably all living things have some scream going on. We’re all predators, no matter whether we’re animals, mineral, birds or fish, and that’s part of it.”

Taking pest control into your own hands, of course, is no simple matter. There are the ethical and emotional issues, and while it is often legal to kill a pest, there are innumerable federal, state and municipal laws and regulations that may make it illegal.

There would seem, at first, to be many alternatives to killing. Besides mesh and electric fences, there are nets to cast over trees and gardens; foul scents with names like Not Tonight, Deer; and home remedies like sprinkling cayenne pepper around the tomatoes and dumping used cat litter into woodchuck holes. There are scarecrows in the north and fake alligators in the south, and household pets to scare predators away or to do the gardeners’ dirty work. There are capture-and-release traps.

But none of these methods work all the time, and some, depending on the species you are trying to catch and the area in which you live, may not even be legal. The New York State Environmental Protection Law, for example, forbids anyone but a state Nuisance Wildlife Control Operator from transporting a wild animal, which puts the kibosh on the use of capture-and-release traps.

Trapping and moving animals may not be in their best interests, either: a backyard suburban squirrel, transported to a forest, is easy prey for hawks and foxes, said John Hadidian, the director of urban wildlife programs for the Humane Society of the United States and the primary author of “Wild Neighbors: The Humane Approach to Living With Wildlife.” (The book suggests tolerance as its first choice for everything from bats to rats.)

And releasing an animal in a more familiar setting may not be in your neighbors’ best interests.

“We have yet to find anyone in outlying areas who says, ‘We love raccoons, please bring your humanely trapped critters here and let them go,’ ” says Wendell Martin, a retired engineer who has a five-acre garden in Meridian, Idaho, near Boise. Raccoons have uprooted and upended his water lilies to find snails. Mr. Martin finally borrowed a .22 and shot them. It was not an ethical problem for him, he says — the animals are overpopulated in his area — but it was not easy emotionally. (This year there seem to be fewer of them, and he has been trying to protect his plants with wire mesh.)

Then there are the difficulties that can arise when transporting a wild animal.

Jessica DuLong, a Brooklyn writer and marine engineer, managed to grow a fruit-bearing cherry tree on her roof, but even in the wake of what she calls the Great Cherry Massacre of 2007 she was not interested in punishing the squirrels who preyed on it. She trapped one in a live animal trap and set out to Prospect Park with good intentions.

Unfortunately, the squirrel had no way of knowing this. It threw itself against the walls of the cage with such ferocity it cut itself; it defecated; it ran back and forth inside the long cage in a frenzy so that the cage flipped up and down like a manic miniature seesaw. New Yorkers, seeing a fluffy tail in distress, yelled at the human involved.

“This entire class of preschool kids was out in one of their little preschool wagons, and the squirrel is looking rabid and bleeding at the mouth,” she says. “It was not what I had in mind when I started this humanitarian project.”

Not all city people, of course are so sweetly disposed to cute rodents. Joanna Lennig is an executive headhunter who lives in Brooklyn but grew up in Maine and New Hampshire. As a 10-year-old she was stunned to see her mother, “an incredibly polite, retiring, WASP lady,” attacking a woodchuck in the vegetable garden with a shovel.

“You know that body posture someone has when they’re using a pickax,” Ms. Lennig says. “She was just enraged. We just talked about this recently — being WASPs, we’d never talked about it. We were a family who canned the corn and canned the beans and really put food aside for the winter, so having an animal go through the green beans, she was furious. She said she’d had it.”

Ms. Lennig herself has no sentimental attachment to squirrels. About three years ago she saw signs of digging in the rooftop garden of her brownstone, which has pots of blueberry bushes, grape vines, tomatoes and peppers, as well as flowering plants, and is a regular stop on garden tours. She was unconcerned by this evidence of squirrel interlopers until the day she went up to find the garden destroyed, the blueberry bush razed, the tomato plants eaten through.

“There was a wow factor,” Ms. Lennig says. “Like when one looks out at the aftermath of a really, really, really destructive thunderstorm and says, ‘Look at that tree branch on the Volvo.’ ” Ms. Lennig went “straight to rage.” She and her husband bought a Havahart trap and captured a squirrel, then realized they did not have a plan. Transporting it to a nearby park didn’t seem an effective solution. Squirrels, they had heard, were territorial; it would only come back.

They did, however, as conscientious environmentalists, have a large rain barrel on the roof, which they used to water the garden. Who first came up with the idea of drowning, Ms. Lennig cannot recall, but it was her husband who handled the first executions. The trap, which was long and narrow, fit perfectly in the barrel.

Ms. Lennig has yet to be able to deal with the removal of the corpse, which is then thrown into the garbage. But she and her husband are now so comfortable with this form of pest control that when they visited Ms. Lennig’s in-laws at their lakefront property last year, where squirrels were climbing on the deck and ravaging the planters, they offered to drown them.

“My husband and I said, ‘We’ll take them to the lake,’ ” she says, “but our in-laws were having none of that. We had to get in the car and drive them five miles away. I spent the entire weekend like a soccer mom, driving squirrels around.”

Isn’t drowning cruel?

No, Ms. Lennig says. She recalls reading that you lose consciousness and then your heart stops; it’s actually one of the nicer ways to go.

A reporter remembers reading just the opposite (and the Humane Society agrees that drowning is inhumane).

“Listen,” Ms. Lennig says. “I’m a former attorney. What do I know?”

Few who have made the leap from pacifism to search-and-destroy missions are this open on the subject. Who, after all, wants to risk being labeled a hardened animal killer? There are, however, those willing to take the heat. Boldest are those who admit to killing garden pests simply because they are annoying.

Dan Rattiner is the founder of Dan’s Papers and the author of “In the Hamptons: My Fifty Years With Farmers, Fishermen, Artists, Billionaires and Celebrities.” He has a house in East Hampton, and for the last three years he has hired exterminators to get rid of the carpenter bees, which, he is well aware, do not sting.

So what do they do?

“They sort of follow you around,” Mr. Rattiner says. “They’re curious, like Curious George bees.”

That sounds sort of sweet.

No, Mr. Rattiner says.

“You can’t sit outside — the carpenter bees come over to see what you’re eating,” he says. “They don’t land on you, it’s not like menacing, it’s like having small children that aren’t yours. You just want them gone. There’s no other way to do it, and I feel very badly about it. I don’t know why they keep coming back. You’d think they’d talk to each other about what happened last year.”

Many gardeners are able to kill only one species.

“If I see a spider, I would never kill it,” says Jessica Melville, a nurse in Woodstock, Vt. “We have woodchucks in the yard; they don’t bother me at all.”

But Ms. Melville, who lives with her husband, Hunter, and two sons, is terrified of snakes. Unfortunately, her home, an 1850 farmhouse, is built into a stone wall that the local milk snakes and garter snakes love. Ms. Melville’s husband, who co-founded cyberrentals.com, explained to her that those snakes are harmful only to the insects they catch, but no matter. Before kneeling down in the perennial bed, Ms. Melville used to do what her family called her snake dance, jumping up and down, because when those snakes heard the pounding, they slithered away. If she happened to see a snake, she’d retreat into the house, and that would be it for that day’s gardening.

The Melvilles tried a granulated repellent called Snake Away. It didn’t work, so Mr. Melville, who occasionally hunts birds, bought his wife a 20-gauge shotgun. Although some might think a snake would be a difficult target, it is not. Often, when a predator is near, a snake will freeze.

“I just went up really close,” Ms. Melville says. “I was probably five feet from it. The first shot I missed. The second time I got it and then it was: ‘Oh, this is great! One less snake I have to deal with.’ ”

Ms. Melville has been shooting snakes for the last three years and estimates that she has killed about 15. But she’s killing snakes that are eating bugs? Doesn’t that distress her?

“No,” Ms. Melville says. “I’m just a happier gardener.”

Second thoughts? Regrets? Nightmares?

“Nope, never,” Ms. Melville says. “I’m just glad they’re gone.”

Regrets are even rarer among those whose livelihoods are threatened by pests.

Oskian Yaziciyan lives in Homestead, Fla., about a 20-minute drive north of Key Largo, where he runs Goldfish & Koi U.S.A., a two-and-a-half-acre ornamental fish and water lily farm. He has great feelings of affection for some of the animals other people detest. He had a pet squirrel as a boy and loves to watch squirrels. He finds them charming.

On the other hand, when he first began his business 12 years ago, and an equally adorable raccoon figured out how to depress a pipe to let the water out of a tank and ate about $6,000 worth of koi, it did not end well.

So what did Mr. Yaziciyan do?

“I’m not going to tell you,” Mr. Yaziciyan said. “I told my wife I took it to the Everglades.”

Mr. Yaziciyan has since made a practice of covering the ponds with shade cloth, netting or wire. It is not an aesthetic solution. And it doesn’t always get rid of his biggest problem: birds. Herons, which are a protected species, are a problem, as are crows, Mr. Yaziciyan wrote in an e-mail message, because they eat the eyes out of fish and snatch surface swimmers. Heron, with their rapierlike beaks, are adept killing machines.

Koi are very expensive fish — you have a 14- or 15-inch koi, depending on the grade, it could be $50 or $2,000,” says Mr. Yaziciyan, whose own stock ranges from a more modest $5 to $500. “They go for the larger fish, your prize fish. They even kill fish they are unable to swallow. They pull it out of the water, eat its guts out.”

This eating-the-eyes-out part is casting a new light on the bucolic animal kingdom, Mr. Yaziciyan is told.

“I got a lot of blind fish,” Mr. Yaziciyan says.

Mr. Yaziciyan says he does not touch the heron. But he has gone after ravens, blue birds and crows with a net, banging their heads against a concrete or wood surface. It’s a quick death.

One visualizes a chirping cartoon bird, advising Snow White on an available share in the woods. We’re talking the bluebird of happiness, Mr. Yaziciyan. Isn’t it difficult to slam it against the concrete?

“Not really,” Mr. Yaziciyan says. “It’s a small bird. It may be a blue jay, maybe a blue bird with gray on it. I’ve seen them poke the eyes out of the fish. You gotta do what you gotta do. You got a $50 fish that is totally useless. No one will buy a fish with one eye. I got dozens of fish with one eye.”

The food chain is a brutal business. Or a natural one. Which brings us back to the artist with the groundhog problem. He was finally able to make a little bit of peace with shooting the woodchucks on his property by cooking and eating them. “It was a way of taking full responsibility for taking a life,” he says. “Almost like a spiritual journey.”

“Any number of local people offered up recipes,” the artist adds. “The guy who was doing some roofing work was Italian, and he described this wonderful recipe: essentially shallots, red wine, cured green olives, black pepper and rosemary. My father-in-law had a big helping. He declared it the best woodchuck he’d ever eaten.”

There Are Other Ways

JOHN HADIDIAN, the director of urban wildlife programs for the Humane Society of the United States, is skeptical when he hears of gardeners who claim they have tried everything to rid themselves of urban pests. He also cautions that gardeners who kill animals and birds may be breaking the law, noting that the Migratory Bird Treaty Act, for example, protects most species of birds.

Killing animals often does not solve the problem. “Woodchucks are a classic case,” Mr. Hadidian says. “If you do nothing to alter the burrow system or to protect against reinvasion, it’s going to be back.”

Mr. Hadidian is the primary author of “Wild Neighbors: The Humane Approach to Living With Wildlife,” which offers information about wild animals as well as creative and humane methods of discouraging them from eating your plants. To protect corn from raccoons, who tend to go for it when it ripens, the book suggests leaving a radio “tuned to an all-night talk show” out in the garden on the nights just before harvest. Or one might try the more prosaic electrical fence.

For help, Mr. Hadidian suggests calling the society’s wildlife hotline, (203) 389-4411, which is open from 8 a.m. to 8 p.m., Eastern time. (It has a staff of two.)

There is also the approach offered by Catherine Wachs, a gardener who runs the Right Brain Design advertising company and lives in Larchmont, N.Y.:

“I do what the Bible says: Leave the corners of your field unharvested for the poor and strangers among you.”

*****

 

13 June 2008

Thoughts

Happy Friday the 13th. http://www.snopes.com/luck/friday13

KeyCorp is selling $1 billion in common stock - 85.1 million shares at $11.75 each, a 1.9% discount to Thursday's closing price - and $650 million in preferred stock that carries a 7.75% yield and $14.10 conversion price. We especially liked the comments of the CEO: "By significantly oversubscribing to the combined offerings, investors are showing great confidence in our longer term business strategy. The strong investor response restores our capital ratios and better positions the company for current economic conditions and future growth opportunities." Hooray, Hooray, KEY is selling stock to the public that it in its wisdom purchased at $20 per share higher last year. That is the old buy/high sell low theory of losing money that is so prevalent among banks and brokers this year. And these are the folks managing the countries’ wealth.
*****

JP Morgan’s head economist Bruce Kasman is looking for a 25 basis point increase in the Funds rate in September’s meeting and a gradual tightening thru 2009 with a yearend forecast of 3.75% for end of 2009
*****

Oil has a $134 handle in the early going and gold is down $4. Treasuries are continuing to move lower although at a slower pace than yesterday. The two-year is touching 3%.

Asian markets were mostly lower with China down another 3% which makes almost 15% on the week. European bourse indexes are again mildly lower at midday.

Stocks are rallying out of the gate with yesterday’s bums showing mixed results. Yahoo is down another $2 while Lehman is up $2, for now.
*****

Core CPI for May was up 0.25 and year over year up 2.3%. Regular folks CPI was up 0.5% in May and 4.2% year over year.

University of Michigan Consumer Sentiment was 56 when 59 was expected. That number is a 28 year low.
*****

In the banking crisis in the early 1990s all the Texas banks but one went broke or were acquired with nothing for shareholders. We know because we were smart and bought a package of them in case one or two went broke. Oops. And after our bad luck with them we sold Citi on the low at $11 because we were shell shocked.

We thought of this when Key Bank raised money overnight. Maybe all the Ohio banks have to go broke/be acquired for nothing before the current crisis ends.
*****

Stocks are trying to bounce higher from the 1340 level again today with the major measures up 1% in the early going. Maybe today will be the charm that gets the rally going. The bulls are sure trying.
*****

We wonder when the media will wake up and look at the Chinese stock market’s recent action. When it was rising 2% a day last year the media couldn’t say enough about the action.
*****

There are reports that the Saudis are looking into increasing oil production. Oil is lower on the news.
*****

Exxon Mobile said it now plans to sell to distributors its remaining 820 company-owned stations and another 1,400 outlets operated by dealers. Exxon Mobil didn't disclose financial details but said the sales will take place over a "multiyear period."

Our guess is that they are doing it so that when gas reaches $10 a gallon and folks begin attacking gas stations Exxon will only smile and keep collecting their money. Exxon says it is getting out of the business because it isn’t making any money at retail. Of course refiners aren’t making any money either and that is why refineries aren’t being built. We guess Exxon is just doing business as a public service.
*****

Oil closed the week at $134.87 down almost $2 on the day. Gold was up $2 at $873. Treasuries closed lower in price on the short end with the two-year at 3.04% after treading down to 2.90% during the day and the ten-year 4.26%. The yen was $108 to the dollar and the euro equaled $1.53. European bourse indexes closed small fractions higher while Mexico and Brazil were small fractions lower.
*****

We sold our last stock, J Crew. Now we are all cash.
*****

Buy programs in the last hour helped the major measures close on their highs for the day and bulls can enjoy their weekend while bears fret.

The DJIA closed up 166 points at 12307. The S&P 500 rose 20 to 1360 and the NAZZ jumped 50 to 2455.

Breadth was 2/1 positive and volume was moderate.

There were 155 new lows and 40 new highs on the NYSE.

The bulls won the day and stemmed the tide for the weekend at least.
*****

 

12 June 2008

Thoughts

Lehman is in the news this again having fired its COO and CFO overnight. The CFO Erin Callan had been the subject of many complimentary stories in the financial press in the last few months. Sic transit gloria.
*****

Citigroup said on Thursday that it would close a hedge fund co-founded by Citi’s now chief executive Vikram Pandit, just 11 months after the global bank acquired it for more than $800 million.  In April, Citigroup Vice Chairman Lewis Kaden said in an interview with Fortune magazine that the July 2007 Old Lane purchase was a way for the bank to recruit Pandit…. ``This transaction is an investment as much as it is an acquisition,'' ousted Citigroup CEO Charles Prince said of the deal in April last year, citing the 20-year track records of Pandit and Havens. So Pandit made a bundle of change (the WSJ reports $165 million) and got a new job in the bargain and Citi is out $800 million. And now you know why Citi is in the mess it is. And the board of directors remains the same wise solons.
*****

And a Belgian brewery wants to buy Bud for $65 per share. – InBev, the world's biggest brewer by sales, rose the most since February in Brussels trading after saying it has ``strong support'' from banks to finance its $46.3 billion cash offer to buy Budweiser. The Belgium-based brewer said late yesterday that it intends to pay for the unsolicited bid with at least $40 billion of debt arranged by lenders including Banco Santander SA, even as banks worldwide offer fewer loans, and avoid a non- investment-grade credit rating. A loan that size implies InBev will have to sell less stock than some analysts had expected.
*****

Asian markets were lower overnight by almost 2% across the board. Shanghai is now down 11% on the week and priced at less than half of where it was last fall when the news media were running all the stories of the new Chinese investors who were flocking to stocks. There are no stories now.

European bourses are mildly higher at midday and Gold is down $10. Oil is off $2 with a $134 handle. Treasuries are lower in price, higher in yield.
*****

15 minutes into the trading day and the bounce off support is occurring with the S&P 500 up 1%. Now it has to hold for the bulls to breathe a bit easier.
*****

The WSJ:

Old Lane's demise is the latest embarrassment for banks that operate hedge funds or have bought stakes in them. Bear Stearns Cos., Goldman Sachs Group Inc. and UBS AG also have stumbled badly in hedge funds during the credit crunch, piling up billions of dollars in losses for themselves or their clients. The problems suggest that hedge funds, typically known for their independence and entrepreneurial spirit, may have trouble thriving within huge financial institutions.

Or maybe it is because these large trading outfits make their money by taking the other side of client trades. They see the order flow (which the clients don’t) and trade and profit accordingly. And the fewer large investment banks the more concentrated the order flow and the greater the profit potential from trading with the knowledge of client actions. For example Goldman made money this last year by shorting sub prime while its customers were buying.

As investors on their own they are no smarter or dumber than all the rest of us.
*****

Retail sales rose 1% in May. As Tony Crescenzi at realmoney.com points out with retail sales running at a pace of $385 billion per month, it takes an increase of just $3.85 billion to push retail sales up a percentage point. That's a small sum in comparison to the $120 billion in tax-rebate checks that the government has issued. There were also sharp revisions upward to previous months, totaling nine-tenths of a percentage point both overall, and excluding automobiles. These figures will force estimates upward for the current quarter's gross domestic product. Most forecasters had been expecting a flat-to-down reading for the quarter; expectations for growth in negative territory are likely to shrink markedly following the release of these data. Keep in mind that retail sales are not the end of the story in terms of the income-tax rebates. Consumers spend about $800 billion per month, which obviously means that retail sales do not fully capture all of the money consumers spend, although the data certainly are an excellent guide. If you think that gasoline sales are what drove retail sales, think again. Excluding sales of automobiles and gasoline, retail sales increased 1% in May following gains of 1.1% in April and 0.5% in March. The April and March figures were upwardly revised by 1.3 percentage points compared to what was previously reported, which means that the revisions to the headline figures were rooted in categories unrelated to gasoline. An area of strength in recent months that likely reflects the high price of gasoline has been the non-store category, which reflects sales through catalogues and over the Internet. It saw an increase of 1.6% in May, 3.2% in April and 1.7% in March.
*****

Two hours into the trading day the major measures remain 1% and higher. Volume is good and breadth is 2/1 positive on the NYSE and 3/1 to the good on the NAZZ. Short covering and traders playing the 1340 support level to the upside are moving prices up.
*****

Talbot’s is up $2 to $10.50 on news released yesterday that they have obtained the last $50 million of financing that they were looking for to replace interim financing that was cancelled by two banks. The financing came from majority owner AEON which will loan them an unsecured $50 million. We actually view that event as a negative because now AEON has a creditor’s interest in the company and can take it over in any bankruptcy filing to the detriment of only equity shareholders which it was until this loan.

The shares are up on short covering. There were an astounding 12.5 million shares short with a float of only 19 million shares. We don’t know what has possessed short sellers but they are scrambling to cover since for some reason they must have thought TLB would file bankruptcy imminently. We remain interested but at much lower levels and will let the big boys and girls play their games for now.
*****

At noon the DJIA remains up 100 points but today’s upside trading doesn’t seem to have as much energy as yesterday’s downside trading.
*****

According to technicians GE gave a triple bottom sell signal today and with it trading at a new low of $29 the number $25 is supposedly the next stop. Technical and ETF/Index trading are controlling these markets and so the break in GE is a negative.

As the major measures approach the final hour the DJIA remains up 50 after being 150 points higher early in the session. It is imperative for the bulls that the major stock measure close preferably strongly higher with a last hour rally.
*****

European bourse indexes closed higher on the day as did Mexico and Brazil. Gold lost $10 to $874 and Oil ended up pennies at $136 and change. Treasuries were lower with the two year at 3.01% and the ten-year at 4.20%. It takes 108 yen to buy a dollar and the euro is worth only $1.54 today as the dollar rallied on rate hike talk.
*****

The WSJ is reporting the Microsoft/Yahoo deal is caput and YHOO is down $3 at $22.50.
*****

The Yahoo blowup in the last two hours of trading coupled with Lehman moving back to down over $2 in the final hour drove a stake into the bulls rally. Sell programs moved the major measures to negative at 2:20pm before buy programs in the final fifteen minutes created positive outcome on the day.

The DJIA gained 75 points to finish at 12150. The S&P 500 rose 5 points to 1340 and the NAZZ jumped 10 to 2404.

Breadth was flat and volume was over 4 billion on the NYSE.

There were a total of 370 new lows and a combined 75 new highs on the NYSE and NAZZ.

The bears won the day as we expect today’s failed rally to lead to the sell off resuming tomorrow.
*****

 

11 June 2008

Thoughts

Lehman is taking it on the chin again this morning as they may not survive stories make the rounds. The shares are down $2 in early trading and we think we saw this scenario two months ago. Next come the stories of Hedge funds and institutions moving their accounts and then the final act will occur. The S&P 500 is now below 1350 and on its way to test the line in the sand at 1335-1340.
*****

Asian markets were mixed overnight with China down another 1% but India and Japan both up 1%. European bourses are mixed to higher at midday and Gold is $4 higher after yesterday’s thrashing and Oil ahs a $133. Corn is at all time highs of $6.50 a bushel as rains continue in the plains and speculation continues in Chicago. Treasuries have a bid on financials down and bomb/bomb Iran fears.
*****

There are rumors on the street that Goldman Sachs may take a large write-down when it reports earnings next week and that has weakened financials which rallied yesterday but are giving back those gains plus today.
*****

Oil inventories were down 4 million barrels and that of course has oil up $4. No liquidity and much speculation make for fun for the big boys and girls.
*****

European bourses closed over 1% lower as they ended their trading day when the DJIA was down 150 points.
*****

It may not be the top but some folks know when to take money off the table. Oil and natural-gas producer XTO said it will buy closely held Hunt Petroleum Corp. for $4.19 billion in cash and stock, in a deal that highlights the changing of the guard in the U.S. oil patch.

Hunt Petroleum, which traces its lineage to legendary wildcatter H.L. Hunt, is the largest in a series of private companies, many of them family-owned, that have sold to larger public companies in recent months. Large players are rushing to snap up assets in emerging oil and natural-gas fields, while small producers are seeking to cash in on holdings whose values have soared along with commodities prices.
*****

There’s a fellow on CNBC with a red bowtie like who looks like an investment Tucker Carlson and the steam message (since we don’t listen) says that he is counseling investors to be broadly diversified right now. Given their druthers most folks probably wish they went to cash last October and stayed that way.
*****

As we sit her at 1:30pm watching the tape we are wondering to ourselves whether there is any reason for the markets to rally this afternoon. The only reason is technical and that reason is that the S&P 500 is right at 1340. Even dropping markets dead cat bounce off major support. But if the S&P 500 doesn’t rally then the close could be ugly.
*****

Oil closed up $5+ at $136.70. Gold gained $13 to $884. The yen ended at 107 to the dollar and the euro was worth $1.55. Treasuries gained as stocks lost but closed off their best levels with the two-year closed at 2.82% with the ten-year at 4.08%. Mexico and Brazil were 1% lower.
*****

The S&P 500 closed right on major support. That should lead to a reflex rally in the morning followed by a retest and then….

The DJIA closed down 210 points at 12092. The S&P 500 dropped 22 points to 1337 and the NAZZ gave up 55 points to 2394.

Breadth was 3/1 negative and volume reached 4 billion on the NYSE but was only half that number on the NAZZ.

There were 245 new lows and 40 new highs on the NYSE and 210 new lows and 35 new highs on the NAZZ.

The bears are smiling tonight.
*****

 

10 June 2008

Thoughts

Fasten your seat belts kids because today is going to be interesting. Will it be Turnaround Tuesday or Terrible Tuesday? Only time and whether a trader is long or short will tell.

Markets in Asia fell sharply, with shares in China plunging as investors got their first chance to react to Beijing's latest credit-tightening moves after a holiday on Monday. Shanghai's benchmark index plummeted 7.7% and the Shenzhen Composite dropped 8%. In Hong Kong, the Hang Seng index closed 4.2% lower.
European markets also fell in early trading, with the banking sector leading declines. London, Paris and Frankfurt were all off about 1%.

European bourse indexes are fractionally lower at midday and U.S. futures are suggesting a lower opening. Gold is in the act down $8. Oil has a $134 handle as the trading day begins. According to the gurus we follow the line in the sand is 1340. So 1350 is support and 1340 is the line not to cross.. Our guru thinks the bounce off 1350 yesterday and higher close was positive but the markets will have to do the same trick today.

And so we will either get a rally from this level or not. But then that is always the case.
*****

Texas Instruments narrowed guidance last night but didn’t warn but that news is not doing much for its share price or techs in general.

According to Jim Cramer, JP Morgan is under pressure because traders are betting the Bear Stearns deal will be bad. Traders base that bet on the lousy news from Lehman. Our guess is that JP Morgan had corrected less than most bank stocks and so the short hedge funds decided to go after JPM. We are going to add at lower prices.
*****

The wailers are getting all out of joint about a windfall profits tax on oil companies in the U.S. the windfall tax certainly won’t occur under Cheney/Bush since they are soon to move to employment in the oil sector. But those wailing are certainly glad they are not in Russia where Bush’s soul mate Putin runs things. For their oil is taxed big time as Cheney likes to say:

The Russian government levies an export duty of 65% at prices over $25 a barrel. Add to that various corporate, payroll and production taxes, oilmen complain, and the state creams off as much as 92% of profits. Executives at TNK-BP have argued that rising costs across the oil industry will make many investments in Russia unprofitable unless the tax regime is changed. As it is, TNK-BP accounts for a fifth of BP's production, but only a tenth of its profits. And that is why British Petroleum (BP) is not happy with its deal. We wonder why they made it.
*****

Thanks to those who are emailing and calling to see if we are OK because of the flooding. We live on a ridge that never floods although our basement does because of our lousy planning. But it is nothing a shop-vac can’t handle. Our nearby town of Gays Mills is under water for the second time in ten months and folks there are in dire straits. Soldiers Grove moved after the 1978 flood and so only a few houses are involved. The Soldiers Grove story is here: http://www.soldiersgrove.com/ .
*****

Why not $500?

OAO Gazprom, the world's biggest natural-gas company, expects oil prices to reach $250 a barrel ``in the foreseeable future'' as competition for energy resources increases, Chief Executive Officer Alexei Miller said.  ``We are witnesses of a big jump in the price of hydrocarbons,'' Miller told reporters today in Deauville, France.  State-run Gazprom, Russia's biggest company by market value gets most of its profit from gas sales to Europe, where it has a quarter of the market and prices are pegged to oil. Miller said today that European customers are now paying about $410 per 1,000 cubic meters of gas, more than double what they paid two years ago.
*****

We expected the markets to drop this morning and then rally but we don’t think the drop was severe enough or this rally after one half hour of trading is strong enough to hold. And so we are going to eliminate our JPM holdings and reduce J Crew in our large accounts.
*****

It is hot in NYC so naturally CNBC has folks on to talk about which stocks to buy for the heat play. If it rains tomorrow it will be the rain play. And that goes on top of their vacation getaway prizes for folks who perform the best on a weekly basis in their imaginary portfolios. We keep CNBC on without the sound for news items but sometimes it is exasperating.
*****

This is the blather that passes as investment advice:

Let it ride. That's the judgment of the Apple acolytes, and I am not going to disagree with them. The most important thing, though, is that you have taken something off the table. Especially with the stock up huge today.

Say what? Apple is up $4 per share. The share price is $186. That is like an $18.20 per share priced stock going to $18.60.
*****

Oil ended down $2 at $131.71.Gold dropped $30 to $870. Treasuries were higher in yield with the two-year at 2.90% and the ten-year at 4.10%. European bourse indexes closed lower as did Mexico and Brazil. The euro is worth $154 today and it takes 107 yen to buy a dollar.
*****

We just saw a CNBC promo for an interview with Robert Nardelli. He’s the fellow who suggested out of Home Depot with a nice $300 million golden parachute. He then took the CEO job at Chrysler last year. Out of the frying pan into the fire. We don’t know whether he put any of the $300 million into the Chrysler buyout.
*****

The WSJ has a story today on our favorite topic of outlandish CEO compensation. But at least with golden coffins they have to die to win.

PARTING GIFTS

You still can't take it with you. But some executives have arranged for the next best thing: huge corporate payouts to their heirs if they die in office.

Take Eugene Isenberg, the 78-year-old chief executive of Nabors Industries Ltd. If Mr. Isenberg died tomorrow, Nabors would owe his estate a "severance" payment of at least $263.6 million, company filings show. That's more than the first-quarter earnings at the Houston oil-service company.

Dozens of other companies offer lush death-benefit packages to their top executives, according to a Wall Street Journal review of federal filings. Many companies accelerate unvested stock awards after a death, which by itself can amount to tens of millions of dollars. Some promise giant posthumous severance payouts, supercharged pensions or even a continuation of executives' salaries or bonuses for years after they're dead.

The CEO of Shaw Group Inc. is in line to be paid $17 million for not competing with the engineering and construction company after he dies.

Lockheed Martin Corp.'s top officer didn't even need to die to get a death benefit; Lockheed paid out the sum, about $1 million, in March while he was still very much alive.

Death benefits, sometimes called golden coffins, have been around for years, but until recently the amounts were often impossible to determine or were shrouded in the fog of proxy-statement language. A federal rule change 18 months ago required companies to be clearer about what they're obliged to pay if top executives end their employment, under various circumstances.
*****

It was announced this morning that one billion shares -- half of Ford's outstanding stock -- were offered to Kirk Kerkorian's Tracinda Corporation offer to purchase 20 million shares at a price of $8.50. The shares are trading at $6 so Kerkorian paid $50 million to get his name in the paper.
*****

Talk to Chuck

June 10 (Bloomberg) --Schwab, the largest U.S. online brokerage, may pay the equivalent of half a quarter's profit, or about $260 million, to win public-relations points by settling investors' claims over losses in a bond fund with subprime holdings. The San Francisco-based company is accused in eight proposed class-action suits of misleading investors by describing its Yield Plus Mutual fund in prospectuses as only ``marginally'' riskier than cash. From last July 1 through April 30, investors lost about $1.3 billion, said Boston-based Financial Research Corp., which tracks investment flows for 35,000 funds.

``Schwab will have a particularly difficult time with this type of adverse publicity because they project themselves as a wholesome broker-dealer,'' said Robert Zito, a Carter Ledyard & Milburn lawyer in New York who defends companies in securities suits and isn't involved in Schwab cases. ``This will put a lot of pressure on them to settle.'' The brokerage, which uses founder Charles Schwab in ads encouraging clients to ``Talk to Chuck,'' has started offering some clients from 50 percent to 90 percent of losses under $10,000. For losses of $50,000 or more, offers have been 5 to 20 percent, he said. ``They seemed to be paying a higher percentage to people who were retired or not sophisticated in the financial markets.”
*****

The DJIA gained 5 points to end at 12285. The S&P 500 was down 4 points at 1357 and the NAZZ dropped 10 to 2450.

Breadth was 2/1 negative and volume was light.

There were 190 new lows and 35 new highs on the NYSE and one more new low and one less new high on the NAZZ. We don’t see that very often.

The bears remain in control as Turnaround Tuesday melted in the NYC heat.
*****

 

9 June 2008

Thoughts

Lehman lost almost $3 billion in the quarter and is going to raise $5 billion in capital toady. The street didn’t like those numbers. But stocks rallied at the opening probably as a bounce from Friday’s debacle and the fact the there was no war and that Oil is off $3 in the early going. But financials are not participating and that is not a good sign. Treasuries have a bid and Gold is over $900 up $9 in NYC trading.

Asian markets were mostly lower overnight and European bourse indexes are mixed at midday. The S&P 500 is remains above 1350 and needs to stay above that level. It broke the 1370 support level-which is now resistance-on Friday which suggests a test of 1350.
*****

We are adding some J Crew to accounts as it continues its sell off.
*****

The Dallas Fed’s Richard Fisher is on CNBC pushing an agenda on Social Security and Medicare. And they say the Fed is not involved in politics. Where were these guys on derivatives and subprime and Enron and budget deficits?

He says the U.S. taxpayer has to face up to the liabilities of $100 trillion in future payments on these two programs. Those are large numbers but the GDP (http://www.auburn.edu/~johnspm/gloss/GNP ) of the U.S. every year is $14 trillion. Multiply GDPP times 50 years with 3% growth that is one heck of a lot of money to use to pay the cost of those programs.

Moreover those opposing SS and Medicare never remind us that if the government- which is really all the folks living in the U.S.- doesn’t take care of the elderly then individual families will be paying the health insurance and living expenses. With the programs in place all the citizens share the responsibility. Eliminate the programs and we all pay anyway.
*****

We are going to take our loss on American Eagle and get down to just J Crew.
*****

Now they answer our rhetorical question above: From the online WSJ: The nation's financial system needs tougher regulations and stronger supervision to protect against future crises, Federal Reserve Bank of New York President Timothy Geithner said Monday in a speech calling for greater central bank authority over markets and financial institutions.
*****

JP Morgan is down $2 per share today with a $37 handle and we are going to buy shares in a few larger accounts.
*****

Oil closed at $134.21 down $4. Gold was up $4 to $895. Treasuries ended lower in price on tough Fed speak with the two-year at 2.70% and the ten-year at 4.01%. European bourse indexes were mostly lower by over 1% at their close and Mexico and Brazil were each down over 1%.
*****

Apple introduced its new 3G iphone today and it goes on sale July 11. Hurry and buy before they drop the price.
*****

The DJIA closed up 75 points at 12302 on the strength of the oil/agriculture/commodity plays in the average. The S&P 500 failed at 1370 resistance and then later in the day bounced up at 1350 support to gain 1 point on the day and close at 1362. The NAZZ dropped 15 pins to 2465.

Breadth was 2/1 negative and volume was light.

There were 70 new highs and 165 new lows on the NYSE.

We give the day to the bears since the financials closed down almost 3% on the day.
*****

 

6 June 2008

Thoughts

Well the markets have taken back yesterday all day gains plus in the first half hour of trading with the DJIA down 225 points at 9am. The Employment Report said 45,000 jobs were lost in May. The real kicker to the markets was a Morgan Stanley note that said oil would hit $150 b the fourth of July.

In the old days folks used to talk about how high corn would be on the 4th but this is the new age of markets and gaming the system.

Oil is up $5 to $132 on the prediction and Gold is also $20 higher this morning. At $5 an hour Oil will be at $150 by 2pm.

Asian markets were lower overnight and European bourse indexes are lower at midday following the U.S. markets lower. Treasuries have a bid.
*****

The European Central Bank is preparing for a quarter point increase in its prime rate at its July meeting according to the Financial Times. This would be the first increase in a year and suggests that inflation is on the regulators minds. Coming at a time of slowing economies the raise would be a further whammy.
*****

We have owned a home over the last 40 years and for the first time we awoke this morning wondering about how much it is going to cost to heat our home this winter. Three years ago we spent $2000. This year at present prices it is going cost $7000. That is half the money we paid for our first farm in 1971. Our house is 2500 square feet so we hate to think what the Mc Mansions will cost. The rise in heating costs isn’t on the radar yet will but it will be.
*****

The rally in bonds and German bunds may be related to a story in the British paper The Guardian that suggested that Israel may attack Iran. Prime Minister Olmert of Israel is under investigation for bribery and is being asked to step down. Portions of The Guardian story follow. The whole story may be found at: http://www.guardian.co.uk

'Unavoidable' attack on Iran looms, says Israeli minister

An Israeli minister has said an attack on Iran's nuclear sites will be "unavoidable" if Tehran refuses to halt its alleged weapons programme. In the most explicit threat yet by a member of Ehud Olmert's government, Shaul Mofaz, a deputy prime minister, said the hard line Iranian president, Mahmoud Ahmadinejad, "would disappear before Israel does". "If Iran continues with its programme for developing nuclear weapons, we will attack it. The sanctions are ineffective," Mofaz, who is also Israel's transport minister, said in comments published today by the Yedioth Ahronoth newspaper. "Attacking Iran in order to stop its nuclear plans will be unavoidable." Iranian-born Mofaz is a former army chief and defense minister. He is a member of Olmert's security cabinet and leads regular strategic coordination talks with the US state department. Iran denies trying to build nuclear weapons and has defied western pressure to abandon uranium enrichment.  The leadership in Tehran has threatened that if attacked the country will retaliate against Israel - believed to have the Middle East's only nuclear arsenal - and American targets in the region. Ahmadinejad has repeatedly called for Israel to be wiped off the map since becoming president. On Monday, he said Israel was "about to die and will soon be erased from the geographical scene". Olmert met the US president, George Bush, on Wednesday to discuss concerns over Iran. The Israeli prime minister, who is being pressured to resign over a corruption scandal, has said that Iran's nuclear threat "must be stopped by all possible means". Israeli planes bombed Syria in September, destroying what the US administration said was a partly built nuclear reactor using North Korean help. Syria denied having any such facility. UN inspectors announced this week that they would be visiting Syria to investigate the American claim.
*****

Another reason being given for the rise in the price of oil is that traders and institutions are buying oil as a hedge against a continuing drop in the dollar. And so it really isn’t about demand for oil it is about traders trading. And the little folks are paying the price.

Wal-Mart buys stuff from China so the little people don’t have to pay so much. Unfortunately all the dollars flowing to China from Wal-Mart et al cause the dollar to drop in value. Then traders buy oil to hedge the drop in the dollar and the price of gas and oil and food rise as a result. And the little people pay for that increase so traders can have buy yachts. And Joe six-pack’s $15,000 retirement fund rises to $15,200 as the folks running his fund buy oil and meanwhile his living expenses rise $2000. Not a great deal any way you slice it.
*****

Intel said that the Federal Trade Commission has opened a formal antitrust investigation into the semiconductor giant's business practices. Intel's chief rival, Advanced Micro Devices, has long been lobbying the FTC to investigate Intel, after successfully convincing agencies in Europe, Japan and South Korea to open investigations. AMD contends that Intel uses rebates and other tactics that unfairly exclude it from the market for microprocessor chips, which Intel dominates. Intel insists its practices are fair and lawful.
*****

A friend just reminded us that we go on Medicare in October just in time to use the $1000 per month we will save in medical insurance premiums to pay our heating bills. How lucky can we be?
*****

Bush says more teens in the job market are responsible for the rise in the unemployment rate.
*****

Oil is up $8 at 1pm. as the weekend approaches oil bulls are singing the old John McCain refrain, “Iran, Iran, bomb, bomb, Iran.” Greed before worry.
*****

At 1:30pm Crude is up $10 at $138.82 and the S&P 500 is down 35 points at very critical 1370 super support. With an hour and one half or trading left the oil bulls want to go home long oil in the hopes of a bombing of Iran over the week-end and that has the rest of the markets in turmoil. Trading on such an occurrence sees obscene but then nobody ever said Capitalism is bean ball. And if Bush and Olmert can control themselves the oil bulls will give all the gains back on Monday. We are voting for sanity by sitting happily in cash in our client accounts and the Model Portfolio with positions only in two best of breed retailers.
*****

Gold ended up $26 at $902 on the war trade talk. Oil finished the day around $138.80 up $11 and pennies. Morgan Stanley was wrong; it will only take two days to get to $150 at this rate. Short end Treasuries rallied on the war talk with the two-year at 2.38% and the ten-year at 3.93%. European bourse indexes closed 25 and more lower on Friday and Mexico and Brazil were both down over1%.
*****

The DJIA closed on its low for the day down 403 points at 12210. The S&P 500 closed down 2% at 1360, ten points below major support at 1370. The NAZZ surrendered 75 points to 2475.

Breadth was 4/1 negative and down volume swamped up volume 10/1. Total volume on the NYSE exceeded 4 billion which is heavy for a summer Friday.

There were 115 new lows and 100 new highs on the NYSE. And it was worse on the NAZZ.

The bears regained the low ground.
*****

 

5 June 2008

Thoughts

Asian markets were higher small overnight and European bourse indexes are mixed at midday. Treasuries are flat as the trading day begins and Gold is down $10 while Oil has a $122 handle.
*****

The number of Americans in danger of losing their homes to foreclosure rose to the highest in almost three decades during the first quarter as borrowers who fell behind on payments were unable to sell their homes. New foreclosures rose to a seasonally adjusted 0.99 percent of all U.S. home loans, up from 0.83 percent in the fourth quarter, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure increased to 2.47 percent and the delinquency rate, loans with one or more payments overdue, grew to 6.35 percent. All were the highest since 1979, the Washington-based trade group said. Falling home prices have stalled U.S. real estate sales, making it difficult for people who can't pay their mortgages to sell the properties. The increase in foreclosures was led by states with the biggest price declines over the past two years, said Jay Brinkmann, MBA's vice president of research and economics. California, Florida, Nevada and Arizona accounted for 89 percent of the gain in new foreclosures, he said. ``Price drops mean that even the best borrowers who run into trouble can't get out of their mortgage by selling, particularly in those states,'' Brinkmann said in an interview. ``There's a bleed-over to the rest of the U.S. because until those markets work through their problems, investors in mortgage-backed securities are going to be nervous and credit is going to be tight for everyone.'' Prime adjustable-rate mortgages in California, the largest U.S. state, accounted for 36 percent of all U.S. foreclosures started during the period. The state's subprime adjustable loans were 26 percent of the national total. This week a spokesman for Ed McMahon, who appeared on television's ``The Tonight Show'' for three decades, said the 85-year-old entertainer may lose his Los Angeles estate to foreclosure after trying to sell it for two years for enough to cover his $4.8 million mortgage. The Mortgage Bankers report is based on a survey of 45.2 million loans by mortgage companies, commercial banks, thrifts, credit unions and other financial institutions. The delinquency rate for subprime loans was 18.79 percent, up from 17.31 percent in the fourth quarter, according to the report. The gain was led by loans 30 to 59 days late, at 8.83 percent. The delinquency rate for subprime adjustable-rate mortgages was 22.07 percent and the so-called seriously delinquent share, loans 90 days or more overdue, was 24.11 percent, the report said.
*****

Verizon is going to acquire Alltel for $28 billion. VZ will acquire 13 million subscribers. Sprint including debt is priced at $45 billion (1.9X) and has almost 4X the subscribers. On the other hand France Telecom Thursday said it has begun negotiations aimed at taking over Swedish peer TeliaSonera AB, planning a cash and share offer worth $42 billion. TeliaSonera has 115 million subscribers.
*****

Federal Reserve policy maker Bank of Richmond President Jeffrey Lacker's said lending programs the central bank has created to combat the credit crisis distort private markets, encourage risky behavior and could endanger the Fed's independence.
*****

Rains in the plains make for beans in the teens.

Corn rose to within 1.5 percent of a record and soybeans rose to a 12-week high as excessive rains in the Midwest flooded some fields, slowing crop development and increasing the risk of production losses. Corn futures for July delivery rose 12.5 cents, or 2 percent, to $6.27 a bushel at 10:18 a.m. on the Chicago Board of Trade, after touching $6.295, the highest since May 12. Most-active futures are up 65 percent in the past year, reaching a record $6.39 on May 9 as demand surged for feed and biofuels. Soybean futures for July delivery rose 38.75 cents, or 2.8 percent, to $14.2775 a bushel in Chicago, after earlier gaining to $14.3175, the highest for a most-active contract since March 11. The price has jumped 72 percent in the past year, touching a record $15.865 on March 3 as demand surged for soy-based feed and vegetable oil.
*****

European shares ended marginally lower. Miners lost ground and exporters were hit after European Central Bank President Jean-Claude Trichet hinted that euro-zone interest rates could rise. 
*****

Gold lost $5 to $880. Oil ended at $127.70 up $5.41. Treasuries gave ground with the two-year at 2.51% and the ten-year at 4.02%. Mexico and Brazil were higher.
*****

Part of the reason for the gain in the major stock measures today is because the share price of Lehman has recovered which means that the Fed machinations to prevent further runs on brokerages by the shorts seems to be working. And that is a relief for the bulls and sis encouraging them to buy which in turn forces the shorts to cover.
*****

The DJIA gained 213 points to erase three days of losses and close at 12605. The S&P 500 rose 27 points to 1403 to close just below 1405 resistance and the NAZZ jumped 48 points to 2550.

Breadth was better than 3/1 both on the NYSE and NAZZ and volume picked up but could have been better than the 3.9 billion traded.

New highs crossed on both the NYSE and NAZZ with a total of 210 new highs and 160 new lows.

The bulls won the day big-time.
*****

 

4 June 2008

Thoughts

Asian markets were lower overnight and European bourses indexes are down 1% and more at midday. Treasuries are firm, Gold is down $3 and Oil has a $123 handle as the trading day begins.
*****

Lehman is still the focus of attention in the financials and it opened lower this morning but now is trading $2 higher and is hauling the financials higher with it. That has added a positive tone to the markets and negates a Financial Times story that suggests that banks may have to take $5 trillion in off balance sheet liabilities on to their books. Say what!
*****

The markets have been trading as a glass half empty for the last few days and we think they will move to a glass half full today or tomorrow. The talk has been of financials but it may rotate soon to the rebate checks and some kids spending them at trendy stores.

We are going back into American Eagle as another best of breed retailer. We are buying for a trade the same as J Crew. American Eagle had a punk earnings report after we sold them last week and yet the shares jumped higher but now have returned to where they were selling. We sold before earnings and fully expected the shares to drop and give us a chance to reenter the stock when we read the earnings report. That shows what we know. Whatever, AEO knows its stuff and so when the retail trade returns over the next few weeks we think AEO will participate.

J Crew is bottoming on a trading basis after the 25% drop of the last week in the share price. JCG’s earnings report disappointed the go-go folks but still forecast 10% growth in earnings in a terrible retail market and so we think a 20 multiple is justified and that when the retail trade returns we think JCG will be one of the first to be grabbed.

The financials of both these retailers are excellent. Moreover over 20% of JCG float (shares available for public trading) is short right now so any move to the upside may be enhanced by short covering.
*****

European stocks closed mostly 1% and more lower as falling oil prices and a rising U.S. dollar weighed on commodity stocks, while financials fell on fear that more capital raising would be needed in the sector. Mexico was flat and Brazil lost another 1% on top of yesterday’s 3% drop.

Oil ended at $121.95 down $2.34 and Gold dropped $1 to $885. Treasuries closed weaker with the two-year at 2.44% and the ten-year at 3.96%.
*****

CNBC is reporting that Verizon is going to buy the recently taken private Alltel Communications.
*****

Tech stocks held their own today as traders moved in to them with the idea that there will be more mergers in the next few months as companies try to take advantage of the favorable merger environment of the Bush administration.

The DJIA closed down 12 points at 12390. The S&P 500 dropped 1 point to 1377 and the NAZZ rose 22 points to 2503.

Breadth was 5/4 negative on the NYSE and 5/4 positive on the NAZZ and volume was light.

There were 40 new highs and 80 new lows on the NYSE and 70 new highs and 130 new lows on the NAZZ.

The bears remain in control.
*****

 

3 June 2008

Thoughts

Asian markets were lower overnight b 1% and more and European bourse indexes are mixed small at midday. Gold is up $2 and Oil has a $125 handle. Treasuries are flat. U.S. futures indicate a slightly higher opening.
*****

GM has decided that it makes sense to build more hybrids and cut back on production of Trucks and SUVs and close four factories and maybe close down the Hummer division. You think? And we read last night that CEO Waggoner made $16 million last year up 60% from the year before. Its scares us to think how much he is going to make if GM ever earns money again.
*****

Lehman is coming to market to raise $3 billion ahead of earnings which were expected to be loss of $300 million but give the capital raising may now be more.
*****

Federal Chairman Bernanke said that interest rates are ``well positioned'' to promote growth and stable prices, and that policy makers are ``attentive'' to the impact of the falling dollar. The Fed is working with the Treasury to ``carefully monitor developments in foreign exchange markets'' and is aware of the effect of the dollar's decline on inflation and price expectations, Bernanke said today in his first speech on the economic outlook in two months. Signs of accelerating inflation bolster Bernanke's case for pausing after the Fed lowered its main interest rate by 3.25 percentage points since September. The central bank is trying to mitigate harm from the collapse of the subprime mortgage market without endangering its credibility for keeping prices in check. “For now, policy seems well positioned to promote moderate growth and price stability over time,'' Bernanke said in prepared remarks. ``We will, of course, be watching the evolving situation closely and are prepared to act as needed to meet our dual mandate.''
*****

We added shares of J Crew to more accounts under $36.
*****

About 12:45pm the DJIA dropped 100 points on a rumor that Lehman had to go to the Fed window to borrow money to fund operations ala Bear Stearns. LEH shares are off $4 today. And as with Bear Stearns rumor may become reality.
*****

GM was trading higher this morning on the restructuring news but upon further reflection the shares are now in the minus column.
*****

Residential Capital, the mortgage lender, said Tuesday that its parent company, GMAC, and the private equity firm Cerberus Capital Management would inject more than $1.4 billion in cash, a move that highlights the company’s struggle to stay solvent. The money will come from asset sales and help ResCap plug a possible $2 billion cash shortage, more than triple the amount it said it needed a month ago, according to a Securities and Exchange Commission filing. ResCap had estimated May 5 that it needed to raise $600 million by June 30 to pay its debts. It said it now believed it might need the additional sum because “adverse” conditions left it unable to sell about $1.3 billion of assets. Mirko Mikelic, a portfolio manager at Fifth Third Asset Management in Grand Rapids, Mich., said that there was the potential for bankruptcy at ResCap, “especially if G.M. and Cerberus get more hesitant about providing capital.” Cerberus led a group in 2006 that paid the General Motors Corporation $7.4 billion in cash for 51 percent of GMAC. GM owns the other 49 percent.
*****

Cerberus are the folks who bought Chrysler last year. We doubt their clients in these two investments are singing today.

Too bad GM didn’t sell all of GMAC. If they had Waggoner might have deserved the $16 million.
*****

Oil ended down $3.40 at $124.37. Gold dropped $12 to $885. European bourse indexes closed higher as their markets closed before the U.S.swoon and Mexico was fractionally lower while Brazil was down 3%. Treasuries were better on a flight to quality on the Lehman rumor with the two-year at 2.42% and the ten-year at 3.90%.
*****

Ford sales down 17%, Chrysler sales down 28%, Toyota sales down 6% and GM sales down 30%. Uuuggggllllllllyyyyyyy.
*****

Around 2pm Lehman issued a statement that they did not access the Fed window and that capital was in surplus at their firm and the DJIA stabilized and rallied slightly. Lehman’s shares moved from down $4 to down $2 and now at 2:20pm are down $3.
*****

The DJIA closed down 50 points at 12450. The S&P 500 dropped 6 points to 1380 and the NAZZ was off 6 points to 2485.

Breadth was flat and volume was light.

There were 55 new highs and 80 new lows on the NYSE.

The bears remain in control.
*****

 

2 June 2008

Thoughts

June arrived with 80 degree weather in the land of milk and honey and for that we are grateful. The weather has been uncertain and different in the last few months and so have the markets. With all the turmoil in the financial industry which in many ways is the backbone of the U.S. economy the stock markets are only down about 10% from their highs of last autumn.

That fact suggests that there is more downside to come as the dislocations caused by the collapse of the housing industry and the mortgage markets and the subsequent losses by the major banks continue to wend their way to the balance sheets of working folks. We were bemused last night as we watched 60 Minutes and saw a story about a fellow who spent $180 million to build the world’s largest sailboat. We don’t begrudge the man his millions or even what he does with them, but it does seem strange both on the part of CBS and this fellow to air such conspicuous consumption during and economic malaise.

On this point we think that many folks and companies haven’t yet come to grips with the reality of the slowdown and probable fact that the downturn and recovery are going to be longer than recent cycles. Barron’s published a bullish article on GM over the weekend reiterating our thoughts that the company shares are trading at a 26 year low and that there is value at these levels. Since we sold our shares last week we were interested in the story. But in markets like these timing is the difference between large losses and excellent buys. It is our belief that having moved our accounts back to close to even for the one and two year periods that remaining on the sidelines (and sacrificing potential gain) is the prudent course of action.

The stock markets are anticipatory and in the past have begun to recover six to nine months before economic recovery is evident. And that timing is what the guessing game is all about. We think there is little to lose not engaging in that guessing game at the present time. For those clients who need to take monthly and yearly distributions we are concerned about the drawdown without recovering the drawdown with earnings from appreciation and dividends. But most of our clients have the resources to withstand the drawdown and the reality of the markets at the present time is that the dilution from drawdown is the price to be paid for avoiding greater diminution of assets from stock market losses.

The billion dollar question is when is when?
*****

Asian markets were higher overnight except India down 2%. European bourse indexes are lower at midday and U.S. markets are also lower as trading begins.

Gold is up $1 and Oil has a $126 handle. Treasuries have a bid.

Wachovia asked its CEO to resign which he did and so now he collects his excellent retirement package while the bank struggles under billions in losses that are the result of the CEO’s non excellent adventures in the financial acquisition games of the past few years. As we say, “the rigors of capitalism only apply to the peons.”
*****

The ISM Manufacturing Index rose in May to 49 from 48 in April. That was better than expected. And construction spending was down 0.4% in April versus down 0.6 in March.
*****

From WSJ: Lenders and investors in mortgages owned about 660,000 foreclosed homes in April, up from 493,000 in January and 231,000 in January 2007, according to First American CoreLogic, a research firm based in Santa Ana, Calif., that collects data from lenders and county clerks. The April total works out to about one in seven previously occupied homes available for sale nationwide. A surge in defaults has increased the inventory of bank-owned homes, known in the trade as REO, for "real estate owned." By cutting prices, lenders have managed to increase sales of such homes sharply in recent months in some cities hit hard by foreclosures, including Las Vegas, Detroit and Sacramento, Calif., local real-estate brokers say. With home prices falling, "holding the assets means further losses," said Mark Fleming, chief economist for First American CoreLogic. But lenders haven't yet managed to catch up with the inflow of foreclosed homes. Mark Zandi, chief economist at Moody's Economy.com, forecasts that the inventory of REO homes won't peak before the end of 2009. In dollar terms, foreclosed one- to four-family homes owned by lenders whose deposits are insured by the Federal Deposit Insurance Corp. more than doubled to $8.56 billion at the end of the first quarter from $3.59 billion a year earlier.
*****

S&P cut its ratings on Mother Merrill, Lehman, BankAmerica and Morgan Stanley and the DJIA moved to down over 200 points at noon on the news. Several market mavens are suggesting that the downgrades are the bottom of the credit crisis because the rating services always are too late. We agree that they are usually late but not that it is the bottom. The DJIA has recovered slightly from those lows in afternoon trading. Volume is light and breadth is over 2/1 negative.
*****

Gold finished up $4 at $895 and Oil was $127.41 up 6 pennies. Treasuries had a bid all day with the two-year at 2.50% and the ten-year at 3.90%. European bourse indexes closed 1% to over 2% lower as did Mexico and Brazil and the dollar gave back some of last week’s gains ending NYC trading at $1.56 to the euro and 105 yen to the dollar.
*****

We bought shares of J Crew in our large/aggressive accounts $36.15 this afternoon. We traded it off the $37.15 level on Friday and it is again trade - which we plan on holding at least overnight.
*****

The DJIA lost 135 points to close at 12505. The S&P 500 dropped 15 points to 1385 and the NAZZ was down 30 points to 2492.

Breadth was almost 3/1 negative and volume was light.

There were 60 new highs and 85 new lows on the NYSE and 70 new highs and 135 new lows on the NAZZ.

The bears began the trading month with a win.
*****

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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Summary of Business Continuity Plan

15624 Lemley Drive, Soldiers Grove, Wi 54655 312-925-5248
The factual statements herein have been taken from sources we believe to be reliable but such statements are made without any representation as to accuracy or completeness or otherwise. From time to time the Lemley Letter, or one or more of its officers or employees, may buy and sell as agent the securities referred to herein or options relating thereto, and may have a long or short position in such securities or options. This report should not be construed as a solicitation or offer of the purchase or sale of securities. Prices shown are approximate. Past performance is no indication of future performance.