March 31, 2010

(Bloomberg)U.S. stock-index futures declined, indicating the Standard & Poor’s 500 Index will pare its fourth straight quarterly advance, after a private report showed employers unexpectedly cut jobs this month. Oracle Corp., Cisco Systems Inc. and JPMorgan Chase & Co. helped lead declines after ADP Employer Services said companies eliminated 23,000 jobs this month, compared with a gain of 40,000 forecast on average by economists in a Bloomberg survey. Goldman Sachs Group Inc. and Morgan Stanley fell as Keefe Bruyette & Woods Inc. cut earnings estimates on weaker investment banking results. “The ADP numbers disappointed investors,” said Peter Jankovskis, who helps manage about $1.8 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois. “Jobs are key to turn consumer spending into something sustainable. Investors in the stock market will be in a wait- and-see mode.”
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Tuesday markets around the world were mildly higher. Last night Asian markets closed lower and European markets are higher at midday. Gold futures extended their gains on Wednesday, as the dollar fell further against its major rivals after data showed that companies in the U.S. private sector shed 23,000 jobs in March. Gold for April delivery rose $8.50 to $1,113 an ounce in electronic trading on Globex. Germany's jobless total fell by a seasonally-adjusted 31,000 in March, the Federal Labor Office reported Wednesday. On an unadjusted basis, the total fell by 75,000 to 3.568 million. Economists had expected the adjusted figure to rise by around 10,000.
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The Ford warrants were priced at $5. This morning Ford shares sold off again as the big boys and girls continued to play their games. We obviously were early reentering our Ford position but Ford is one stock that we think is an excellent play on the recovery. Ford is making money with car sales running at an annual rate of 11 million. When, not if, car sales return to an annual rate of 15 million Ford is going to earn $10 per share. That is what leverage does in the auto industry.

We bought Ford warrants (to buy shares at $9.20 which expire on 1/01/2013) at less than the offering price and also doubled our share position in the common at $1 per share lower than our last purchase. At some point we will exit the common and hold the warrants.
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Is it time for a correction?

Investors’ Intelligence has 48% bulls and 19% bears in it latest reporting period.
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In that same vein, the revolving door at Treasury provides access to the big boys and sometimes girls although not so much. It really is still a boys club. Or maybe the girls are too honest. This story is about a fellow named Ken Wilson. Notice that Wilson went from Goldman Sachs to the Treasury during the crisis (because he was just so invaluable to Hank) during which he talked with and took advice from the folks at Goldman and Black Rock. After his one year sojourn at Treasury during which he made the decisions that rescued all his former employers and current and gave a gold mine to his future employer Wilson moved on to Black Rock which is managing the Treasury’s portfolio of crappy investments that Wilson helped the Treasury to buy. But now Wilson is collecting pay as a Vice Chairman of Black Rock and not as a Treasury employee. Who said the Robber Barons are dead?
http://www.bloomberg.com/

http://www.davemanuel.com/2008/07/22/henry-paulson-needs-your-help/
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Drill Baby Drill: Obama cops out again, and the Repubs won’t be happy anyway. All the states where the offshore drilling will be allowed have Republican governors. Obama may be two-faced but he certainly isn’t stupid.

http://www.huffingtonpost.com/2010/03/31/obama-oil-drilling-plan-e_n_519553.html

http://enviroknow.com/2010/03/31/obama-takes-the-lead-on-drill-baby-drill/

People turn table and rob a bank.
http://www.huffingtonpost.com/2010/03/30/paris-bank-robbers-dig-wa_n_518356.html
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European stocks fell after disappointing U.S. jobs data stoked concerns that official government figures later in the week will come in weaker than anticipated. Gold gained $10 to $115 and Oil was up $1.18 to $83.55.
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Big Business, GOP Complain That Health Reform Slashes Corporate Welfare (http://www.huffingtonpost.com/2010/03/31/corporate-america-squeals_n_519976.html)

The Republican Party and major corporations have joined forces in the first major rearguard attack on health care reform, charging that the cost of complying with "Obamacare" is resulting in hundreds of millions of dollars in added business expenses.

The crime that reform is guilty of: Slashing corporate welfare.

Under the previous system, major corporations were subsidized by the government to provide prescription drug coverage to their retired employees. At the same time, corporations could claim on their tax returns that it was they -- not the taxpayers -- who paid for the drug coverage, and could write the expense off as a tax deduction.

Health care reform cuts out that fat. The corporations still get taxpayer money to help pay for their drug coverage, but they can no longer continue the fiction that they're using their own money to do it.

Being forced to operate on a diet of leaner corporate welfare benefits will make U.S. companies less able to compete, Republicans argue. Removing the benefit will also force large corporations to compete on a level -- or at least closer to level -- playing field with small businesses, who don't get the subsidy. The charge-offs play into the line that Republicans are pushing -- namely that health care reform is a "job killer."

So far, Boeing, AT&T, AK Steel, 3M, Caterpillar, Deere, Prudential and Valero Energy have all said that reform is forcing them to take significant charge-offs on their balance sheet. The welfare cuts don't go into effect for several years, but accounting rules require the reduction to be taken in the year the law is passed.
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The major market measures close lower. Breadth was 2/1 negative and volume was holiday light except for Ford.

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March 30, 2010

March 29, 2010

We will be traveling tomorrow and so there will be no post.
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Most Asian stock markets rose Monday, with China's markets surging after the launch date for stock index futures was set, but the Nikkei fell 0.1% on ex-dividend selling ahead of the end of the fiscal year. European shares traded slightly higher, with deal speculation boosting wireless-telecom giant Vodafone (VOD), while miners also advanced. Asian markets closed mostly higher, with China's market surging as the launch date for stock-index futures was set. U.S. stock futures rose Monday on optimism surrounding the global economy ahead of the release of nonfarm payrolls figures at the end of the week

U.S. consumer spending rose 0.3% in February, as expected, even though personal income didn't budge amid high joblessness, while inflation stayed benign. Personal income was flat compared to the prior month, the Commerce Department said Monday. Private wages and salaries posted a small increase of $2 billion, but proprietors' income fell. The saving rate slowed, as did a key gauge of inflation.

The Greek government moved to quickly test credit markets with the sale of a seven-year, euro-denominated bond after euro-zone leaders last week backed a joint European-International Monetary Fund standby bailout plan. News reports said guidance for the 5 billion euro ($6.7 billion) benchmark issue was at 310 basis points, equal to a yield of about 6%.

Ford Motor Co. (F) said Sunday it has reached an agreement to sell Volvo Car Corp. to Zhejiang Holding Group of China for $1.8 billion. The U.S. automaker has been in discussions to finalize the sale of its Swedish unit for months. The transaction is expected to close in the third quarter, Ford said in a statement.
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The United Auto Workers union is hoping to raise at least $1.3 billion for its retiree health trust by selling all of its 362 million warrants for Ford Motor Co. stock. The trust got the warrants in December 2009 as part of the UAW's contract with the automaker. The automaker and union agreed to the trust to help the company remove retiree health care costs from its books. The trust set a minimum price for each warrant at $3.50. Each warrant gives the holder the right to buy a Ford share at $9.20.

They should be selling the warrants at a premium, not a discount. In fact they should apply to list them. We would much rather own the warrants for the leverage. Some large investment bank is advising them and it is a stupid decision. Shares of Ford are off on the news and we bought Ford for a trade in most accounts. The warrants sale sets up an arbitrage situation but once the warrants are sold the share price should move higher.
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A discussion of large hedge funds and performance:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aG6Sm37czbss&pos=6
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Morgan Stanley Will Be Citi Stake Underwriter (CNBC)
Morgan Stanley will be responsible for selling the government’s 27 percent stake in Citi in what is known as a “dribble-out” process that could take the rest of the year. The plan is to sell between 8 percent and 10 percent of average daily volume each day. That will likely begin after Citi reports its next earnings on April 19.
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How dumb in the war in Afghanistan? Besides the tragedy of all the troops and civilians being killed and wounded the NYT reports:

The effort to win over Afghans on former Taliban turf in Marja has put American and NATO commanders in the unusual position of arguing against opium eradication, pitting them against some Afghan officials who are pushing to destroy the harvest.

From Gen. Stanley A. McChrystal on down, the military’s position is clear: “U.S. forces no longer eradicate,” as one NATO official put it. Opium is the main livelihood of 60 to 70 percent of the farmers in Marja, which was seized from Taliban rebels in a major offensive last month. American Marines occupying the area are under orders to leave the farmers’ fields alone.“Marja is a special case right now,” said Cmdr. Jeffrey Eggers, a member of the general’s Strategic Advisory Group, his top advisory body. “We don’t trample the livelihood of those we’re trying to win over.”

Of course if we win them over then we will destroy their crops. Until then we will let them sell their opium to drug traffickers and spend billions in the U.S. to try and apprehend drug kingpins. Up is down and round is square.
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Money for Grasshoppers: Can you imagine that Republicans want money for grasshoppers?

Wyoming’s all Republican Congressional delegation (one representative and two senators) doesn’t want the Feds telling them what to do–except when they want U.S. taxpayers to give them money to help with a problem in the state.

Farmers and ranchers across the West are bracing for a grasshopper infestation that could devastate millions of acres of crops and land used for grazing. ... To try to get ahead of the problem, Wyoming has allocated $2.7 million for suppression efforts, including aerial spraying of the pesticide Dimilin, which is fatal to maturing grasshoppers. But Wyoming's congressional delegation—concerned that's not nearly enough—has demanded federal help. "It does not appear as though the USDA has any sense of urgency in the face of this pending plague," the delegation wrote in a letter to Agriculture Secretary Tom Vilsack last month. Wyoming Gov. Dave Freudenthal this month weighed in as well, writing a public letter urging county, state and federal officials to join forces to prevent "economic and ecological damage." The forecast, he said, suggests an infestation "with disastrous implications."
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In the past few weeks every time Ford moved over $14 selling came into the market place. Now we think we understand why. Our guess is that some folks knew about the warrant deal and were setting up short positions either real or synthetic to lock in the guaranteed profit if the UAW is stupid enough to listen to investment advisors looking for a fee who are telling them to sell the warrants at $3.50 per warrant.
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Passover begins tonight. Chag Pesach Kasher veSameach!

In case you were wondering how it and Easter are determined; Easter is easy, Passover not so much: http://quasar.as.utexas.edu/BillInfo/ReligiousCalendars.html
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Europe closed higher. Gold gained $10 to $1125 and Oil was up $2.50 to $82.50.
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The major stock measures were mildly higher all day. Breadth was positive and volume was light. We will be back Wednesday.
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March 26, 2010

Holiday trading next week:

Passover in 2010 will start on Tuesday, the 30th of March and will continue for 7 days until Monday, the 5th of April.

Note that in the Jewish calendar, a holiday begins on the sunset of the previous day, so observing Jews will celebrate Passover on the sunset of Monday, the 29th of March.

Markets are closed Banks open on Good Friday April 2.

The prince and princess and entourage arrive on April 1 for a week.
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Greek banks rallied in the first trading day since euro-zone nations detailed an aid package it could offer if Greece was unable to sell bonds, while broader European stock markets were a bit weaker. Asian markets rose strongly Friday as worries about euro-zone debt problems eased. The euro's rebound boosted the Nikkei 1.6% to its highest finish in nearly 18 months.

J.P. Morgan upped Nokia (NOK) and Research In Motion (RIMM) to overweight from neutral, started Qualcomm(QCOM) at overweight and Motorola (MOT) and Ericsson (ERIC) at underweight in a research note arguing 2010 will be the year of the mobile computer, or smartphone. "Smartphone prices look likely to drop, but we find that price elasticity is high and believe this bodes well for industry health," the broker said. Google (GOOG) and Apple (AAPL) are well positioned for mobile content and advertising converging but Nokia, Research In Motion and Palm also have opportunities.

RadioShack Corp. (RSH) is considering a sale of the company that could fetch more than $3 billion, according to a Friday report in the New York Post that cited investment bankers close to the situation. (Money for buyouts is not stimulative; it is a zero sum game ☺)
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Final Fourth-quarter growth in U.S. GDP revised down to 5.6%; still fastest rate in six years. Consensus GDP was 5.9% and before that we had Preliminary GDP. We think Final is final unless it isn’t.
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Round up the usual suspects: (WSJ) More than a dozen banks and investment firms are suspected co-conspirators in a criminal probe by the Justice Department's Antitrust Division into alleged bid rigging and price fixing in the municipal derivatives market, according to a court filing. The list of banks was inadvertently filed earlier this week in U.S. District Court in Manhattan as part of a request for a bill of particulars in a criminal case against three former executives of CDR Financial Products Inc., a California municipal-bond broker. The executives, including CDR founder David Rubin, were indicted in October on conspiracy and fraud charges. They have denied wrongdoing. ... The banks and investment firms include units of J.P. Morgan Chase & Co., UBS AG, Citigroup Inc., Wells Fargo & Co., Bank of America Corp., General Electric Co. and Societe Generale. None of the alleged co-conspirators have been accused of criminal wrongdoing.
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Markets weaken:

SEOUL--A South Korean naval ship sank following an explosion near a disputed maritime border with North Korea in the Yellow Sea late Friday, prompting a rescue mission to save approximately 100 sailors. A short time later, a second naval ship later fired shots at an unidentified vessel, according to South Korea's Yonhap news agency. Defense officials were trying to determine what caused the explosion, which occurred about 10:45 p.m. local time. Korean TV reports speculated the ship was struck by a torpedo though there was no immediate official word.
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To some the stock market recovery seems divorced from the reality of the economy. But stocks are anticipatory and so the movement of the markets has worked as a predicator of events-- 4th quarter GDP up 5.7% after the markets had recovered 50%. The continued up move in the first quarter of this year would seem to indicate better times ahead.

One reason for recent markets improvement is the liquidity (money funds, hedge fund leverage, Fed creating cash) and the need for return. Short term rates at zero really don’t cut it for folks who live on there savings. There is so much money is flooding the markets and only so many places to place it. The old adage is that folks buy’em higher and sell’em lower and that is certainly holding true.

The action in the retailers is a good example. There was no economic reason for retail stocks to trade at going out of business prices last March. Sales were down but most were showing profits or manageable losses. But the hedge funds were shorting them with abandon as one of the only games in town. This March all the retail stocks are climbing like they are all moving to Rodeo Drive. Hedgies, having covered their last shorts in January and February, are buying with the same abandon they sold short last year. The same action is occurring in other areas of the stock market reinforcing Economics 101- too much money chasing too few goods.

In the real world we have earned a good return on our assets for now and we would rather be outside liking in than looking for the exits. We think stocks are mildly overpriced and we have no real feel for the economy going forward but we don’t think the economy is as health as stocks seem to suggest. Markets never crash off the top. And so we guess a correction of 5% to 8%, a tradable but failing rally and then a move lower into summer. Our emphasis is on the guess. Comfortably ensconced in cash if we are wrong we only give up gains not incur losses.
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Nobody said it would be free and AT&T can certainly afford it.

On March 23, 2010, the President signed into law comprehensive health care reform legislation under the Patient Protection and Affordable Care Act (HR 3590).  Included among the major provisions of the law is a change in the tax treatment of the Medicare Part D subsidy.  AT&T Inc. ("AT&T") intends to take (tax deductible) non-cash charge of approximately $1 billion in the first quarter of 2010 to reflect the impact of this change.  As a result of this legislation, including the additional tax burden, AT&T will be evaluating prospective changes to the active and retiree health care benefits offered by the company.
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This is their story and they are sticking to it, for now at least: (WSJ) France and Germany backed a deal under which European Union countries and the International Monetary Fund would play a joint role in any bailout of Greece. The compromise solution that brings reluctant Germans on board for a possible Greek aid package also puts the wealthy bloc in the embarrassing position of turning to an organization that typically engineers rescues in the developing world. French President Nicolas Sarkozy and German Chancellor Angela Merkel, meeting here ahead of a summit of all 27 EU leaders, reached an accord under which EU nations would direct a potential bailout of Greece--and contribute a majority of its funding--and the IMF would play a supporting role, people familiar with the matter said.
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These polls contain the seeds for several Polish jokes:

(Bloomberg) -- Tea Party activists, who are becoming a force in U.S. politics, want the federal government out of their lives except when it comes to creating jobs. More than 90 percent of Tea Party backers interviewed in a new Bloomberg National Poll say the U.S. is verging more toward socialism than capitalism, the federal government is trying to control too many aspects of private life and more decisions should be made at the state level. At the same time, 70 percent of those who sympathize with the Tea Party, which organized protests this week against President Barack Obama’s health-care overhaul, want a federal government that fosters job creation. They also look to the government to rein in Wall Street, with almost half saying the government should do something about executive bonuses. Supporters are also conflicted over whether private-enterprise elements should be introduced into government programs like Social Security and Medicare.
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(WSJ) Ayad Allawi’s predominantly Sunni alliance has won Iraq’s national election, narrowly edging out Prime Minister Nouri Al Maliki’s list to become the largest bloc in the country’s next parliament. The final preliminary results show Mr. Allawi’s Iraqiya bloc winning 91 seats in the 325-member parliament to 89 seats for Mr. Maliki’s State of Law. The upset threatens to end the lock on power that Iraq’s majority Shiites have enjoyed since the 2003 after decades of oppression under Saddam Hussein and could severely test the country’s fragile institutions. Before the announcement, Shiite politicians warned of violence should their parties lose the election.
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European stocks closed lower but up for the week. Oil lost 70 pennies to $79.92. Gold gained $12 to $1105. 1 Euro = 1.3343 U.S. dollars.
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Uncle Alan is the guy who in 2001 backed the huge Federal tax cut because he was worried that financial markets would collapse if the U.S. retired all its debt and there were no government bonds in which to invest.

http://thehill.com/blogs/on-the-money/budget/89363-greenspan-qdebt-which-we-have-never-seen-beforeq Alan Greenspan cautioned Friday the U.S. faces a mountain of debt, the likes of which the country "has never seen before." In an interview with Bloomberg Television, Greenspan, former Federal Reserve chairman, warned that the debt could dampen the economic recovery.

"There is basically this huge overhang of federal debt which we have never seen before," Greenspan said. "It is going to have a marked impact eventually unless it is contained, on long-term rates. That will make a housing recovery very difficult to implement and put a dampening on capital investment as well." The Congressional Budget Office estimated that under President Barack Obama's budget, the U.S. would have a $9.8 trillion deficit between 2011 and 2020. "One of the unfortunate fallouts from these huge amounts of money that we're putting in the budget and the Fed is that $1 billion is not what it used to be," Greenspan said. "You cannot turn someone's debt down who is requesting $20 million or $400 million when we are talking trillions."
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The major market measures were mixed at the close. The DJIA was up 10 points and the S&P 500 up 1 while the NAZZ was lower. Breath was flat and volume light.


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March 25, 2010

The dollar has eased up from its morning low so that it now trades with a 0.3% loss against competing currencies, but stock futures still point to a solid start for the session. The mood among premarket participants has been generally unaffected by the latest jobless claims tally. Initial jobless claims for the week ended Mar. 20 totaled 442,000, which is a bit less than the expected total of 450,000 and down 14,000 from the prior week. Continuing claims came in at 4.65 million, which is more than the 4.56 million continuing claims that had been expected, but down roughly 54,000 week-over-week.
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(http://www.marketwatch.com/) European shares notched fresh annual highs Thursday, with European officials set to discuss Greece's debt woes. In Asia, export-related stocks helped push the Japanese market slightly higher, while the Hang Seng Composite lost ground in Hong Kong.

Dubai's government said it will commit $9.5 billion to help Dubai World restructure its $23.5 billion of debt. The Dubai government said it would fund the Dubai World investment with its own capital and with $5.7 billion that remains from a loan the government of Abu Dhabi had made available. Dubai World presented its restructuring plan, which includes converting $8.9 billion of debt and claims into equity and injecting $1.5 billion into the firm to fund working capital and interest payments. Two tranches of new debt maturing in five and eight years will also be issued as part of the proposed restructuring.

Ambac Assurance Corp., the bond insurance unit of Ambac Financial Group is handing over to its state regulator control of troubled contracts on securities made up of souring mortgages, totaling about $35 billion that could potentially bleed the insurer dry and endanger its commitments to municipal bondholders. The Wisconsin Office of the Insurance Commissioner, will suspend payments totaling about $120 million for March to holders of these contracts. As long as the regulator is overseeing these contracts, monthly payments beyond March are also suspended. In 2009, Ambac paid out $1.4 billion in claims to policyholders, according to an annual filing with its regulator. These payments were primarily related to losses on securities made up of souring mortgage loans, according to people familiar with the matter. An Ambac spokeswoman was unavailable for comment.

The commissioner's office will seek to unwind those insurance contracts that Ambac sold to financial firms but can't fully pay off without jeopardizing claims of other policyholders. Those contracts being unwound were intended to protect investors mainly from losses on mortgage securities. .... Citigroup's exposure to Ambac, using a "fair value" estimate, is $4.5 billion, according to Citigroup's annual report. Citigroup has reserves of about $5.5 billion for exposure to so-called monoline insurers, including Ambac, in the event they are unable to fulfill their commitments. ... But, in the past decade, Ambac moved into the more lucrative (our comment -as in big bonus for executives on phantom earnings-) arena known as "structured finance." A big chunk of these were known as collateralized debt obligations, or CDOs, that pooled risky subprime bonds, whose value has deteriorated substantially. As of Sep. 2009, Ambac had exposure to $48.7 billion of CDOs. (Our comment- A year and a half ago this news would have caused the markets to swoon. Today it is a back page story in the WSJ. We think it means that Citi and other banks and insurance companies and pension funds are now at risk on $35 billion of financial instruments that have underlying mortgages in default on which they are no longer going to receive the interest payments. And they are going to lose all the money on the underlying principle. But what is $35 billion among friends?
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European stocks rose as sovereign debt concerns abated, pushing the main bourses to near-two-year highs and boosting the euro against the dollar. Oil was down 10 pennies to $80.40 and Gold was unchanged at $1090. 1 Euro = 1.3356 U.S. dollars.
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A European official said Greece is saved and stocks rallied. Then another European official said not so fast and the rally evaporated in the last hour. And that is how trading decisions are made. It was a race to bell in the final hour for the major market measures – the DJIA did; the NAZZ and S&P 500 didn’t – to stay in positive territory. Breadth was negative and volume was moderate.
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March 24, 2010

Action in Europe is mixed after Fitch lowered its sovereign credit rating on Portugal to AA- from AA. The announcement has also sent the euro sharply lower against the dollar. The announcement has generally overshadowed news that the latest assessment of eurozone services and manufacturing grew at the fastest pace since 2007 with the index measure coming in at a better-than-expected 55.5. Meanwhile, a report indicated that industrial orders in the 16-country eurozone fell 2% month-on-month in January. In Britain, the FTSE is flat at the moment. Xstrata is down considerably, but Anglo American is up after it was upgraded by analysts at JPMorgan. Banks are a bit mixed. In Germany, the DAX is currently up 0.1%. The bourse has been helped by a jump in German business confidence for March. The Wall Street Journal reported that Daimler AG (DAI) has agreed to pay $185 million to resolve a long-running U.S. investigation into allegations that the German auto maker paid tens of millions of dollars in bribes to secure business overseas, according to sources. In France, the CAC is currently down 0.5% amid relatively broad pressure. Total (TOT) is a primary source of weakness at the moment, but EADS is up after WEO said that the European reimbursable loan mechanism for aircraft subsidies is legal. In Asia, the MSCI Asia Pacific Index slipped 0.2%, but Japan's Nikkei tacked on 0.4%. Kyocera (KYO) and Canon (CAJ) were among the better performers, as was Mitsubishi Electric after it raised its earnings forecast. Shares of video game maker Nintendo were especially strong, though. In Hong Kong, the Hang Seng eked out a 0.1% gain. Upbeat results from Bank of China buoyed buying among banking stocks. In mainland China, the Shanghai Composite settled 0.1% higher.
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(WSJ) J.P. Morgan Chase & Co. is close to striking a deal for a tax refund of as much as $1.4 billion, due to a little-noticed clause in an economic stimulus bill, The Wall Street Journal reported, citing people familiar with the matter. The law in question allows companies to apply losses from 2008 or 2009 against taxes paid in the previous five years, instead of the previous two years, the report said. As a result, J.P. Morgan would seek more than half the total $2.6 billion in tax refunds that would apply to failed Seattle thrift Washington Mutual, which it bought in 2008. The report estimated that at least 250 other companies expect about $12 billion in federal tax refunds under the law.
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(MarketWatch - www.marketwatch.com) Demand for U.S.-made durable goods rose a seasonally adjusted 0.5% to $178.1 billion in February, the third straight increase in a key forward-looking indicator, according to Commerce Department data. New orders for machinery and civilian aircraft were strong in February, while new orders for autos, defense goods and electronics declined. The 0.5% increase in durable goods orders was weaker than the 1.7% gain expected by economists surveyed by MarketWatch. However, January's orders were revised higher, from a 2.6% gain to 3.9%. December's orders were also revised higher.

Fitch ratings downgraded Portugal's long-term credit rating to AA- from AA. Fitch said the outlook on Portugal's rating was negative, and cited "significant budgetary underperformance in 2009," as a key reason for the downgrade. "A sizeable fiscal shock against a backdrop of relative macroeconomic and structural weaknesses has reduced Portugal's creditworthiness," the rating agency said. (In our mind, a cut from AA to AA- is hardly earthshaking. And we still think the problems in Illinois and California and most of the other state budgets are a lot more negative for economic recovery.)
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(Bloomberg) -- Sales of new homes in the U.S. unexpectedly fell in February to a record low as blizzards, unemployment and foreclosures depressed the market. Purchases decreased 2.2 percent to an annual pace of 308.000, figures from the Commerce Department showed today in Washington. The median sales price climbed by the most in more than two years.
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Jamie Dimon Was Right (http://krugman.blogs.nytimes.com/2010/03/23/jamie-dimon-was-right/?dbk)

About the 19th century, that is.

Dimon was castigated by many people, me included, for saying that a financial crisis is “the type of thing that happens every five, ten, seven, years.” Hey, no big deal.

But that is the way banking worked once upon a time. I’m reading Gary Gorton’s Slapped by the Invisible Hand, which tells us that there were bank panics — systemic crises — in 1873, 1884, 1890, 1893, 1896, 1907, and 1914.

On the other hand, there were no systemic crises from 1934 to 2007.

The problem, as Gorton makes clear, is that the Quiet Period reflected a combination of deposit insurance and strong regulation — undermined by the rise of shadow banking. So we have a choice: restore effective regulation or go back to the bad old days.
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European stocks edged up to close at fresh multi-month highs, but the euro and pound tumbled amid more fiscal fretting in both the euro-zone and the U.K. oil ended down $1.31 at $80.60. Gold dropped $18 to $1086. 1 Euro = 1.3357 U.S. dollars
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Lose $9 billion make a millions- only on Wall Street:
http://www.zerohedge.com/article/why-does-john-mack-hate-volcker-rule-when-ms-prop-was-responsible-single-biggest-prop-loss-w

http://www.observer.com/2010/wall-street/howie-hubler-new-jersey-return-subprime-villain
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Stocks opened a bit higher out of the gate but traded mildly lower through the day. The major measures lost half of what they gained yesterday. With two steps forward and one back the bulls remain in control. Breadth was negative and volume was slight.
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March 23, 2010

Futures are currently still trying to find direction as they as they are only slightly lower at the moment. The Wall Street Journal reports that Secretary of Treasury, Timothy Geithner, will tell a congressional panel today that Fannie Mae (FNM) and Freddie Mac (FRE) won't be allowed to "return to a pre-crisis structure" that rewarded shareholders with big profits, but ultimately burdened tax holders with massive losses. In the ongoing saga between Google (GOOG) and China, CBS News reports that, in response to GOOG's decision to stop censoring the Internet for China by shifting its search engine off the mainland, the country has now accused GOOG of violating promises it made regarding filtering its searching service. Shares of GOOG are relatively unchanged in pre-market trading, although Baidu.com (BIDU) is trading higher by 3%. On the earnings front, Walgreens (WAG) reported Q2 earnings and revenue below consensus. WAG shares are currently trading slightly lower... In international news, Greece is again in the headlines, stating that it wants a European solution to its debt crisis and expects a positive result from the EU on March 25-26. Germany and its EU partners are in disagreement over financial support for Greece, whose debt load is seen hitting 120.4% of gross domestic product this year. Chancellor Angela Merkel continued to rebuff calls for a support deal this week. Reuters has reported that China will likely run a trade deficit of over $8 bln in March, which would make it China's first monthly deficit since April 2004. However, this is expected to be a one-time blip, rather than the beginning of a new trend. Surging domestic demand has grown faster than exports, which have been bogged down by a tepid worldwide recovery.

In overseas trading, the MSCI Asia Pacific Index closed unchanged in mixed trade. In Japan, the Nikkei closed -0.5% as the market played catch up after being closed yesterday. Shares of All Nippon Airways plunged 6% after the airline more than doubled its annual loss estimate. But Toshiba ended 3.5% higher on news it was in talks with a company backed by Microsoft Chairman Bill Gates to jointly develop advanced nuclear reactors... The Hang Seng closed +0.3% in Hong Kong, giving up some earlier gains as investors took profit in the afternoon session on worries mainland may further tighten liquidity through a rise in bank reserve ratios. Exporters outperformed on expectations overseas demand for their products would rise as the global economy recovered, dealers said... In mainland China, the Shanghai Composite closed -0.7% after it failed to breach a key technical resistance level, while investors cashed in gains from small-cap shares that had recently outperformed a market rebound... The Kospi closed +0.5% in South Korea as Samsung Electronics settled +1.0%. Construction issues rallied amid order expectations after local media reports South Korean builders were likely to win a significant portion of an estimated $6.6 bln order from Saudi Arabia... In India, the Sensex closed +0.2% rebounding from their steepest drop in six weeks, amid optimism that spending will drive demand, limiting the effect of the central bank's decision to raise interest rates... In Europe, the major markets there are trading with gains today as Great Britain's FTSE is up about 0.40%, Germany's DAX is higher by 0.15%, and France's CAC is also up 0.40%. Of note, Britain's consumer price inflation fell a half point in Feb. to 3%, although it remained above the government's annual target of 2%.
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The taxes that fund the new Health Care Bill:

(Bloomberg) -- President Barack Obama said on the campaign trail in October 2008 that he wanted to “spread the wealth around.” With Obama on the verge of signing sweeping health-care overhaul legislation, he’s about to do just that.

If the final version of the legislation passes the Senate, high-income investors will pay higher Medicare taxes, tax breaks for out-of-pocket medical deductions will be curtailed, and it will cost insurance companies more to pay executives millions of dollars. Those levies will help fund expansion of Medicaid services for the poor and subsidize health insurance to cover millions who don’t currently have benefits.

“It’s very clear that taxes are levied on the wealthy and the benefits will spread across the entire income distribution, with a lot going to expanded Medicaid distribution and expanding health insurance,” said Roberton Williams, an economist at the Tax Policy Center, a Washington research institute backed by the Urban Institute and Brookings Institution. “One couldn’t claim he didn’t keep that promise” to “spread the wealth around.”

In all, the bill would generate $409.2 billion in additional taxes by 2019, according to an analysis by the congressional Joint Committee on Taxation, a nonpartisan agency. The bill also imposes about $69 billion more in penalties for individuals and businesses who don’t meet mandates to buy insurance, according to the Congressional Budget Office, another nonpartisan agency.

Higher Medicare Taxes

Most of the revenue would come from higher Medicare taxes on about 1 million individuals earning more than $200,000 and about 4 million couples filing jointly who make more than $250,000.

The legislation would for the first time apply Medicare taxes to investment income received by these households, beginning in 2013. The 3.8 percent rate would apply to unearned income such as realized capital gains, dividends, interest, rents and royalties. It wouldn’t apply to other income subject to income taxes, including interest from municipal bonds and retirement accounts such as 401(k) plans until funds are withdrawn.

Obama’s budget proposes to allow the existing 15 percent tax rate on dividends and capital gains to rise to 20 percent in 2011 for the same high-earners. Layering a 3.8 percent Medicare tax on top of that would mean a new top rate on dividends and capital gains of 23.8 percent. The top tax rates on interest and rental income would rise to as high as about 44 percent, assuming other Obama tax increases on high-earners are enacted.

The bill also increases the individual’s share of Medicare tax currently imposed on salaries starting at $200,000 for individuals and $250,000 for couples to 2.35 percent, from 1.45 percent currently.

The combination of the new Medicare taxes and Obama’s budget proposals, if they were in place this year, would cost a married couple with a household income of $5 million an extra $287,100 in taxes, according to analysis by the consulting firm Deloitte Tax in Washington.

The Medicare taxes superseded an earlier Senate proposal to tax high-value employer-provided insurance coverage, dubbed “Cadillac plans.” That 40 percent excise tax was delayed until 2018, when it would begin to apply to benefits over $10,200 for individuals and $27,500 for couples.

Those thresholds would be indexed to inflation, which grows at a slower pace than the cost of health care, meaning more employers would likely face the levy over time.

Out-of-Pocket Costs

Other provisions likely to affect higher-income individuals would scale back tax preferences associated with paying out-of- pocket medical expenses. Starting in 2013, Americans under 65 won’t be able to deduct medical expenses until they exceed 10 percent of income, up from 7.5 percent now; retirees would keep the lower threshold.

The bill in 2011 places new restrictions on what can be purchased using special savings accounts funded with pre-tax dollars including health savings accounts. Improper withdrawals from the accounts also would be hit with a new 20 percent tax.

And the legislation for the first time would place a $2,500 limit on what can be contributed to employer-sponsored flexible spending accounts, another type of account funded with pre-tax dollars that can be used to pay for medicines, co-payments, and other expenses. Employers currently set their own limits, typically between $3,000 and $5,000 in the absence of a government cap. This change would cost an average worker about $625 in tax savings, according to WageWorks Inc., a San Mateo, California, company that administers 1.5 million accounts.

Tanning Salons

Consumers who frequent tanning salons would pay a 10 percent excise tax, and those who buy devices such as wheelchairs would pay a 2.3 percent excise tax. Drugmakers may pass on a $3 billion annual fee. Insurance companies would be denied deductions when they pay their executives over $500,000.

Under the reconciliation bill that is now before the Senate, individuals who don’t purchase insurance would be subject to a fine of $325 in 2015 and $695 in 2016. Individuals may be subject to a charge equal to as much as 2.5 percent of their income in 2016, if the total is greater than the flat payment.

Employers with 50 or more workers would pay $2,000 per worker if they don’t offer health insurance. The legislation offers a small business tax credit to help pay for employer- provided premiums.

Companies also would face more scrutiny from the Internal Revenue Service for using tax shelters.
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The NAR reports: February Existing-Home Sales Ease with Mixed Conditions Around the Country (http://www.calculatedriskblog.com/)

Existing-home, which are finalized transactions that include single-family, townhomes, condominiums and co-ops, slipped 0.6 percent nationally to a seasonally adjusted annual rate of 5.02 million units in February from 5.05 million in January, but are 7.0 percent higher than the 4.69 million-unit pace in February 2009.
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Total housing inventory at the end of February rose 9.5 percent to 3.59 million existing homes available for sale, which represents an 8.6-month supply at the current sales pace, up from a 7.8-month supply in January. Raw unsold inventory is 5.5 percent below a year ago.
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1 Euro = 1.3482 U.S. dollars
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We saw a male ring neck pheasant on our farm for the first time in twenty years.
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European stocks edged higher, though investors remained cautious ahead of the U.K. budget and the European Union summit later this week. Oil gained 34 pennies to $80.95. Gold was up $5 to $1106.
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Stocks were higher all day with the major measures up 1%. Breadth was 2/1 to the good and volume was moderate. The bulls remain in control and continue to climb the wall of worry.

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March 22, 2010

Health Care passed. Most stuff like the mandated buying of insurance doesn’t’ take effect until after the presidential election in 2010. What a strange coincidence.
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(MarketWatch) U.S. stock futures pointed to a weaker start Monday with the insurance and pharmaceutical sectors in the spotlight as the House of Representatives passed a health reform bill, while continued jitters around Greek finances and India's rate tightening also played a role. Greek and Irish banking stocks paced a three straight drop for European equities, while Asian stocks fell in the first reaction to India's rate hike on Friday.
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Our sentiments exactly:
http://thetechnicaltakedotcom.blogspot.com/2010/03/investor-sentiment-going-forward.html

Investor Sentiment: Going Forward

In hindsight, the best strategy has been to "set it and forget it" - buy at the bottom in March, 2009 and let it ride. I am sure that is what everyone did! Going forward, the best strategy remains as it has been since October. It will be important to exercise patience and buy at the lows and sell at the highs to capture any profits from this market. While buying low and selling high is always a good policy, it is particularly important here. Extremes in bullish sentiment, as we are seeing now, imply that a price move is either nearing its end or the ascent of prices is surely to show. This is our expectation 85% of the time. The other 15% of the time or what I like to call "it takes bulls to make a bull market" scenario, the market will continue meaningfully higher despite increasing bullish sentiment. We saw this in 1995, 2003, and 2009 when the markets were coming off of long periods of underperformance. I am not banking on this time being different.
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European bourses recovered after U.S. stocks turned higher. Gold lost $10 at $1095 and Oil gained pennies to $81.25.
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Stocks opened lower then rallied for the rest of the day into the close. With no horses in the race we just watched. Breadth was positive and volume light.


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St Joseph's Day 2010

The economy is recovering but so have the markets over the last year. The S&P 500 is 72% higher than it was a year ago. At that time we commented that market conditions didn’t warrant a market level as low as it was and that we would hold stocks until they recovered to more reasonable levels. And we did. When the S&P 500 recovered to the 900 level we moved to cash. We missed the next 15% move. At year end after the major market measures had pulled back 9% we reestablished positions. Having gained 8% and more in accounts since mid December we have again chosen to return to cash since we think the greed/reward ratio tips toward greed.

Employment numbers have been flat (job losses = job gains) for the past two months but the employment that is now available is at significantly lower salaries than that of jobs lost. And with the turmoil in individual state budgets even the salaries and benefits of government employees and/or the number of employed are going to be reduced. The stimulus was too little and directed incorrectly but it was enough to stave off disaster. And with Social Security and Pension payments plus Medicare and other government programs a steady stream of spending –that was not available in the 1930s-continues to flow into the economy and will probably prevent any relapse into recession.

With unemployment holding at 10% the psychology of individual on the line workers probably entertains a little less fear of layoff. The recovery of stock portfolios and stabilization of housing prices, albeit at lower levels has created complacency in the markets. The rally in the last 12 months has been inexorable but not frantic. That has been a positive. But it is our take that at some point a correction of more that 9% will occur. We are content to have recovered and survived. We will leave the possible last 5% move higher before a significant pullback to those younger and more nimble than we.
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Davy Crockett R.I.P.: http://www.nytimes.com/2010/03/19/arts/television/19parker.html?hpw




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(Yahoo) In Europe, stories related to proposed financial support for Greece continue to come across news wires, but any clear or official resolution remains absent. As for corporate news, Britain's Lloyds Banking Group (LYG) reported that it expects to post a profit in 2010, since provisions for bad assets are not as large as previously forecast. The news has helped lift other banking issues and supported a 0.7% gain for Britain's FTSE. Financial issues are also leading France's CAC, which is up 0.5% at the moment. BNP Paribas, Societe Generale, and Credit Agricole currently lead the list of top performers. In Germany, the DAX is up 0.4%. Deutsche Bank (DB) is a leader among advancing issues, which outnumber decliners by 3-to-1.

In Asia, Japan's Nikkei concluded the week with a 0.8% gain as its advancing issues outnumbered its decliners by 4-to-1. The broad-based advance helped the Nikkei finish the week on a positive note and solidify a modest weekly gain of 0.7%. Kyocera (KYO), Canon (CAJ), Honda Motor (HMC), and Sony (SNE) were primary sources of strength in the latest session. According to reports, Samsung Electronics predicted a strong 2010 and said it is aiming for double-digit sales growth from last year's record high. Hong Kong's Hang Seng had a more modest gain of 0.2% in its final session of the week. That helped it secure a weekly gain of 0.8%. Bank of China and China Construction Bank were primary sources of strength in the final session of the week. However, HSBC (HBC) was a key laggard. In mainland China, the Shanghai Composite closed Friday with a 0.7% gain and a 1.8% weekly gain.
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(WSJ) China's Geely said talks to acquire Ford Motor's Volvo unit have hit a snag because of unspecified delays at Ford, but added it still expects the deal to be completed.
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We’ve heard this before:

(WSJ) A potential spike in bad debts as a result of a government-backed lending surge is likely to be the biggest challenge for China's banks in the next few years, but lenders should be able to keep the problem at a "manageable level," Standard & Poor's Ratings Services said.
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Bad to worse:

(MarketWatch) Shares of Palm (PALM) dropped more than 15% in pre-market trading after issuing a revenue forecast for the current quarter that was far below market expectations. The company's inventory of its latest so-called smartphones has built up at wireless carriers and management expects future sales to be weak until it can clear out the channels. The company said its fiscal third-quarter loss narrowed to $18.5 million or 13 cents a share, from $95 million, or 89 cents a share, a year earlier.
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We decided to eliminate our final two positions and go to all cash. We sold Ford for a profit and Boston Scientific for a scratch profit/loss.
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Financials are lower because Goldman lowered its forecast for 2nd quarter bank profits by 155. The drop in financials ahs soured the entire market. Today ends Quintuple Witching.
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Headline: Fed must identify banks that needed bailout funds, appeals court says. http://www.bloomberg.com/apps/news?pid=20601087&sid=aUpIaeiWKF2s
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Penny wise:

(NYT) Arizona on Thursday became the first state to eliminate its Children's Health Insurance Program when Gov. Jan Brewer signed an austere budget that will leave nearly 47,000 low-income children without coverage.

The Arizona budget is a vivid reflection of how the fiscal crisis afflicting state governments is cutting deeply into health care. The state also will roll back Medicaid coverage for childless adults in a move that is expected to eventually drop 310,000 people from the rolls.

State leaders said they were left with few choices because of a $2.6 billion projected shortfall next year. But hospital officials and advocates for low-income people said they were worried that emergency rooms would be overrun by patients who had few other options for care, and that children might suffer enduring developmental problems because of inadequate medical attention.

Read more: http://swampland.blogs.time.com/2010/03/19/underplayed-story-of-the-day-arizona-drops-childrens-health-care-program/#ixzz0iecjH8FE
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The other side of the coin: Why stocks could continue to rise with the S&P 500 reaching 1225:

(Bloomberg)  The Standard & Poor’s 500 index has entered an “air pocket” of little resistance as it pushed to a 17-month high, according to analysts at Instinet, who say the benchmark could extend its rally.

The area of little resistance extends to between 1,180 and 1,200, where prices may keep rising even with low volume, said Instinet’s New York-based chief market technician John Schlitz.

The benchmark index for U.S. stocks broke out of a chart pattern known as an inverted head and shoulders in July, generating a price target of 1,225, Schlitz said in a telephone interview on March 17. That’s 5.1 percent higher than the S&P 500’s closing level of 1,165.83 yesterday, and could signal the measure will advance to about that point.

“Should the index eventually reach” 1,225, “we expect significant resistance to develop,” Schlitz said. The 61.8 percent Fibonacci retracement level of the bear market resides within 10 points of that level, he said.

Fibonacci analysis is based on a formula developed by 13th century mathematician Leonardo da Pisa, known as Fibonacci, who discovered the sequence while studying the reproduction rate of rabbits. Analysts use the indicator to determine levels where buy and sell orders may be clustered. Fibonacci ratios include 23.6, 38.2, 50, 61.8 and 76.4 percent moves.

The S&P 500 has recorded just one loss of more than 0.4 percent since Feb. 8. The S&P 500 closed above its daily mid- range in 23 of the 26 trading days during that span, Instinet said in a note co-written by Schlitz.

Stocks ‘Muscle Higher’

An “underlying sense of caution is generating intraday sell-offs which--although ultimately unsuccessful--are taking some of the pressure off the short-term overbought conditions,” Schlitz wrote. “That, together with light overhead resistance, is allowing the market to muscle higher on low volume.”

U.S. stocks rose March 17, sending the S&P 500 to its highest since September 2008, after a drop in producer prices supported the Federal Reserve’s assessment that the economic recovery isn’t stoking inflation. The benchmark slipped less than a point yesterday.

The S&P 500 closed at 1,150.23 on Jan. 19, the highest level since October 2008, and then plunged 8.1 percent through Feb. 8 on concern over deficits in European nations including Greece and speculation that the Fed will need to rein in emergency stimulus measures as the economy improves. The index has since recovered that loss and extended its rebound since the March 9, 2009, lows to 72 percent.

Technical analysts observe price charts to forecast resistance levels, or ceilings restricting further price increases, and support levels, or floors limiting declines. The trading patterns and prices are used to predict changes in a security, commodity, currency or index.
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Oil dropped $1.67 to $80.53 and Gold closed at $1105 down $22. European stocks closed mostly lower, as concern about Greece's fiscal situation rose again. The euro weakened on the dollar, 1 Euro = 1.3529 U.S. dollars.
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The major measures opened higher but reversed in the first hour of trading and were lower for the rest of the session. Breadth was 2/1 negative and volume was light for a Quarterly Witching day.

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18 March 2010

The crocuses are up and the tulip and hollyhock greens are also showing. Spring is on the way but snow is predicted for Saturday.
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(YAHOO) The Consumer Price Index for February was flat; a 0.1% monthly increase had been expected. Core prices increased 0.1% month-over-month, as expected. The February figures followed January's 0.2% monthly increase for headline CPI and a 0.1% monthly decrease for core CPI. Meanwhile, initial jobless claims for the week ended Mar. 13 totaled 457,000, which is on par with the 455,000 initial claims that had been expected and down 5,000 from the prior week. Continuing claims totaled 4.58 million, which is greater than the 4.52 million continuing claims that had been expected. Continuing claims for the prior week were upwardly revised to 4.57 million.

Most Asian markets declined Thursday, with Japanese exporters dragged lower as the euro weakened against the yen following a report that Greece may seek financial help from the IMF. The Nikkei was off 1.0%.European markets were quiet and mixed at midday.
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We completed our selling today by eliminating Huntington Bank and Sprint for scratch profits. We also sold half the Ford in most accounts for a 30% profit and as a discipline sold half our Boston Scientific position for 10% or less loss. That leaves us with small holdings in Ford and BSX in most accounts and 95% cash. Our take is that the world is not ending but stocks seem ahead of themselves and the economic outlook. We made enough money for clients to live on this year and we would rather be on the sidelines watching for now.
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Diane Swonk, chief economist Mesirow Financial: CPI Subdued, Jobless Claims Still Somewhat Elevated

The Consumer Price Index came in unchanged for the month of February, with declines in energy prices offsetting a slight increase in food and some of the core indices. Vehicle prices increased, as they did in the Producer Index. Once again, the vehicle sector is hardly a hotbed of inflation.

In general, inflation not only remains contained, but continues to decelerate from its pace of a year ago. Moreover, that trend is expected to continue, given the large role that housing plays in inflation measures. This should reassure the inflation hawks that inflation is tame and not a near-term problem. However, it also underscores how weak the recovery truly is.

Indeed, jobless claims edged slightly lower to 455,000 in the most recent week. This is still elevated, especially given the fact that weather is no longer a major distortion to the data. Moreover, ongoing claims remain extremely high, underscoring the difficulty for the already-unemployed to find a job.

The Bottom Line: The economy lost momentum in the first quarter - a critical time for the recovery. The best bet is that we muddle our way into spring and even start to generate some jobs along the way. Economic conditions will feel a little bit better as we move from 2010, through 2011, and into 2012. There is no going back, however, and the road ahead is rocky and uncharted. We are cutting a new path which is fraught with both danger and opportunity. The key is to find the opportunities, and if the financial reform proposals are any indication, we will see whole new industries arise as financial firms stake out their territory and adapt. History doesn't tell us where the jobs will come from - just that they will come.
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Attention Hank and Uncle Alan:

(http://www.huffingtonpost.com/2010/03/18/pak-nam-gi-north-korea-fi_n_503588.html) North Korea executed a former senior official last week as punishment for the country's botched currency reform, a news report said Thursday. In November, North Korea redenominated its currency as part of efforts to lower inflation and reassert control over the country's nascent market economy. However, the measure reportedly worsened the country's food situation by forcing the closure of markets and sparked anger among many North Koreans left with piles of worthless bills. Pak Nam Gi, the ruling Workers' Party finance and planning department chief who spearheaded the currency reform, was executed by a firing squad in Pyongyang last week, South Korea's Yonhap news agency reported, citing unidentified sources. Pak was accused of ruining the nation's economy in a blunder that also damaged public opinion and had a negative impact on leader Kim Jong Il's plan to hand power over to his youngest son, Yonhap said.
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(http://www.calculatedriskblog.com/) Loan Performance: January Home Price Index Shows Narrowing Annual Decline

National home prices, including distressed sales, declined by 0.7 percent in January 2010 compared to January 2009, according to First American CoreLogic and its Loan Performance Home Price Index (HPI). This was a significant improvement over December’s year-over-year price decline of 3.4 percent. Excluding distressed sales, year-over-year prices declined in January by 0.4 percent; while in December the non-distressed HPI fell by 3.3 percent year-over-year. Compared to a year ago, the month-to-month rate of decline is lessening – in January 2009, the HPI showed the largest one month decline in its more than 30-year history. On a month-over-month basis, the national average home price index decline accelerated, falling by 1.9 percent in January 2010 compared to 0.8 percent in December 2009, indicating the housing market still remains weak.
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(Bloomberg) -- Ebullio Capital Management LLP’s commodity hedge fund slumped more than 86 percent last month because of losses in industrial metals.

Assets under management fell to $1.47 million, from $42.3 million in November, according to the company’s February report to investors. The Southend-on-Sea, England-based fund pledged to honor requests from investors to return money after “quite substantial” redemptions in February and March.

“Extraordinary circumstances” forced the fund “to liquidate and/or cancel parts of the physical book and liquidate some long-held speculative positions, mainly in LME non-ferrous metals,” Ebullio founder Lars Steffensen wrote in the report, referring to the London Metal Exchange.
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European stocks closed mostly lower, as concern about Greece's fiscal situation rose again. The euro weakened on the dollar, while oil fell 86 pennies to $82.15 and gold was flat at $1126.
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The major market measures closed mixed with the DJIA and NAZZ slightly higher and the S&P 500 slightly negative. The DJIA has been up 8 days in a row. Breadth was negative and volume was light.

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St Patrick’s Day 2010

(Yahoo/Finance) Stock futures in the U.S. are still slightly higher this morning. In Europe, Britain's FTSE is up 0.4% at the moment. Mining stocks are strong as BHP Billiton (BHP), Xstrata, and Rio Tinto sport gains. Shares of RTP were actually downgraded by analysts at Societe Generale. In economic news, employment data for the U.K. came in better than expected, which has bolstered the British pound. The pound was also helped by the details of minutes from the last Bank of England meeting, during which policymakers voted unanimously to keep monetary policy unchanged. Germany's DAX is currently up 0.8%. Siemens is a leader for the second straight session. Reports indicated that the engineering giant plans to revamp its information technology unit to prepare it for a possible sale or public offering. In France, the CAC is currently up 0.5%... ArcelorMittal is outperforming, but Sanofi-Aventis has slipped amid news that the World Health Organization is conducting a probe into a vaccine from Sanofi. In Asia, the MSCI Asia Pacific Index advanced 1.5% to an eight-week high, while Japan's Nikkei tacked on 1.2% to hit at an eight-week closing high. The Bank of Japan eased policy in move thought to be an attempt to prevent the yen from rising. The central bank doubled the amount available under its short-term lending program to 20 trillion yen from 10 trillion yen. In corporate news, Elpida Memory was a strong performer after the Nikkei business daily said Elpida is expected to return to a hefty profit for its current fiscal year. Tokyo Electron
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While we were away market meandered higher. Investors’ Intelligence has 46% bull and 21% bears in its latest weekly report.
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(MarketWatch) Wholesale prices fell a larger-than-expected 0.6% in February after seasonable adjustments, with energy prices falling 2.9%, the Labor Department reported. This is the largest decline since last July. The producer price index has risen 4.4% in the past year, the government said. The core PPI - which excludes food and energy prices - rose 0.1% in February, more than expected. Core prices are up 1.0% in the past year. Economists surveyed by MarketWatch expected a 0.3% fall in the headline PPI and a 0.1% decline in the core rate.

Members of the Organization of the Petroleum Exporting Countries have agreed to keep the cartel's production quota unchanged at 24.845 million barrels a day, as expected, according to media reports on Wednesday citing delegates. OPEC is holding a meeting in Vienna. An official announcement is expected later on Wednesday.
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Government interference:

(WSJ) Air-safety regulators are ordering U.S. airlines to install new software on Boeing 777s to keep the jetliners from possibly running off the end of runways, a mandate that could ultimately affect more than 800 planes world-wide.

In a safety directive released Tuesday, the Federal Aviation Administration ordered the fix to prevent problems when the autopilot system is inadvertently on while a Boeing 777 aircraft is rolling down the runway just before takeoff.<
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For a price:

(WSJ) A package of 165 condominiums in downtown Orlando, Fla. was sold for $25.9 million at an auction there Monday, the auctioneer, Fisher Auction Co., said.

The winning bid compared with a minimum of $20 million set before the auction of units at a building called the Vue at Lake Eola and shows that investors are pouncing on what they see as bargains even in glutted condo markets like Orlando.

The winner among the nine registered bidders was Condo Developer LLC. Michael Messersmith, a Chicago-based lawyer representing that firm, said it was owned by a family trust but he declined to identify the family. The owners of Condo Developer are interested in acquiring more condo developments in large metropolitan areas across the U.S., Mr. Messersmith said.

The winning bid works out to about $125 per square foot. That compares with an original price of $350 to $450 on the condos several years ago, said Jeff Morris, a managing director at Jones Lang LaSalle, a broker that wasn't involved in the sale.

The 35-story building contains 375 condos, of which 210 already had been sold. The package sold Monday was all the remaining condos plus a vacant retail space of about 8,000 square feet on the ground floor.

The developer of the building, Vue-Orlando LLC, spent about $100 million to construct the tower, opened in 2007, and owes about $53 million to lenders, according to Scott Shuker, a lawyer for the developer. The banks forced the developer into bankruptcy proceedings in November.
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Mortgage Applications Decrease in Latest MBA Weekly Survey: http://www.calculatedriskblog.com/

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.9 percent on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 1.7 percent from the previous week and the seasonally adjusted Purchase Index decreased 2.3 percent from one week earlier. The refinance share of mortgage activity increased to 67.3 percent of total applications from 67.2 percent the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.91 percent from 5.01 percent, with points increasing to 1.30 from 0.82 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the lowest 30-year fixed-rate observed in the survey since mid-December of 2009, yet the effective rate was unchanged from last week due to the significant increase in points.
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Boston Scientific dropped like a rock on Monday when they reported that they had to suspend sales of a heart device because they hadn’t made the proper FDA filing. We bought more shares on the drop because the shares are at a multi-year low and we don’t think (hope) that they can mess up any more than they already have. We also sold our Natural Gas ETF after receiving a K1 for 2009 from the company. We thought UNG was a normal ETF and hate dealing with K1s. Since the K1 reported $0 there is no effect on 2009 tax returns.

We placed the money in Boston Scientific.
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In the spirit of selling when we can, not when we have to we are moving to 85% cash. We sold GE, Nokia, Nvdia, Dell, and Alcoa for nice percentage gains. We sold Goodyear and Deutsch Telekom for scratch profits.

The Model Portfolio is double where it was last year at this time. The Model is up almost 9% for the year and at its all time high.

Large accounts are up 7% to 9% for the year and smaller accounts are plus 10% and more. The S&P 500 is within 3% of our target.
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European stocks rose, helped by S&P's remarks that it no longer considers a downgrade of Greece's credit rating to be imminent. Oil ended up 95 pennies at $82.55 and Gold lost $2 to $1120.
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The major market measures were up all day and managed to hold most of their gains to finish 1/2% higher. Breathe was 2/1 to the good as the financials were strong and volume was light. Thursday and Friday are Quintuple Witching days so expect more volatility.


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16 March 2010

15 March 2010

12 March 2010

We will be traveling Monday and Tuesday and so the next post will be on Wednesday St Patrick’s Day.
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Katie’s phone died in the Arizona desert. Her stop on day 7 at Salome was interesting but there were no phones or computers or much else there and so she was unable to post. Today she and Kelle arrive in Phoenix. She will post as soon a she can. Saturday the women ride 53 miles to Apache Junction followed by a 56 mile ride on Sunday to Globe, Az. Monday they move on to Safford, AZ in an 83 mile ride followed the next day by 75 miles to end the day in a new state at Lordsburg, New Mexico. A St Patrick’s day ride of 47 miles through the tail end of the Rocky Mountains will end at Silver City, NM after which they will spend the evening celebrating and take the next day Thursday off. The weather promises to be and in the 70s in Arizona and the 60s in New Mexico with a 20% chance of on Sunday.

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Thoughts

Arrived

Neither snow nor rain etc will keep the American shopper from shopping. (MarketWatch) U.S. retail sales posted an unexpected gain in February despite falling car demand amid trouble at Toyota and fierce blizzards that crippled the East Coast for days. Retail sales rose 0.3% last month compared with January, the Commerce Department said. Excluding the car sector, all other retail sales rose 0.8%. With the Super Bowl early in the month, sales at electronic store soared.
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(Reuters) - Women's clothing retailer AnnTaylor Stores Corp reported a surprise quarterly profit on Friday, helped by tight inventory management and improved merchandise.

The retailer, which operates its namesake Ann Taylor chain and the more casual, less expensive LOFT stores, said net income was $41 million, or nil per share, compared to a loss of $375.6 million, or $6.66 per share, a year earlier. Excluding restructuring charges, the company earned 5 cents per share. Analysts, on average, were expecting a loss of 1 cent per share, according to Thomson Reuters I/B/E/S. Net sales fell about 3 percent to $469.1 million. Same-store sales fell 0.6 percent, as a 2.1 percent increase at LOFT stores helped mitigate a 7.3 percent decline at Ann Taylor. For the current first quarter, AnnTaylor expects total net sales of $445 million, above analysts' average estimate of $443.7 million.

For the full year, AnnTaylor expects total sales in 2010 to rise, helped by a return to same-store sales growth at both of its chains. It expects total store square footage to decline 3 percent this year, as it plans to close about 72 stores and open 30.
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(Yahoo/Finance) 8 AM: U.S. stock futures continue to point to a higher start. Meanwhile, Europe's major bourses are firmly higher amid news that eurozone industrial production during January spiked 1.7% month-over-month. That exceeded the call from economists for a 0.6% increase. Britain's FTSE is currently up 0.4%. Royal Bank of Scotland (RBS), Lloyds Banking Group (LYG), and Barclays (BCS) are up solidly. In Germany, the DAX is currently up 0.9%. Deutsche Post is a primary leader. The stock stopped its two-day slide after UniCredit Research upgraded the name. Meanwhile, France's CAC is up 0.6% at the moment. Valeo is among the top performers. In Asia, the MSCI Asia Pacific Index tacked on 0.3%, while Japan's Nikkei closed 0.8% higher. Exporters gained ground amid speculation that the Bank of Japan may take additional steps to ease monetary policy after Japanese Prime Minister Hatoyama called for firm steps to stem the yen's strength. The comments precede central bank meeting next week. Hitachi (HIT) advanced after its incoming president said he has no plans to pursue additional capital raising and that the company must return to profit at any cost. Honda Motor (HMC) gained after the Nikkei business daily reported the automaker's CR-Z hybrid sports car is drawing unprecedented demand. In Hong Kong, the Hang Seng slipped 0.1%. However, Sun Hung Kai Properties gained after it forecast a stronger-than-expected first-half profit. In mainland China, the Shanghai Composite fell 1.2%. Banks weighed on the index.
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Retailers have had a nice run in the last few weeks and we want to lock in some profits and so we sold ANN and AEO for nice gains, Chico’s for a not so much gain as well as INTC and HAIN for solid gains. We also sold AT&T for flat to more than the dividend gain.  We sold VZ for twice two quarters and more of dividend gain. We want to raise cash in accounts and selling these two is the easy way to do it. We don’t understand why these two issues haven’t moved higher but we would rather keep our more volatile holdings right now while getting back to 40% invested and selling these two issues accomplishes that.
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European stocks closed lower as investors fretted about potential tightening of monetary policy in China, while lackluster U.S. economic data weighed on Wall Street. Gold ended down $6 at $1102 and Oil was $81.13 down 90 pennies.
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The stock market measures ended flat on Friday in light trading. The DJIA was up slightly and the NAZZ and S&P 500 were down slightly. Breadth was flat.


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11 March 2010

Spring is here as the redwing blackbird males arrived this morning warbling to stake out their territory for the females that will follow. The snow is melting and the fog hangs low over the remaining snow piles as ugly March gives promise of nicer times to come.
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Early market action suggests the pullback from the run up is upon us. As long as it doesn’t turn into a route (always the caveat) this correction will be healthy for a further advance to our target of 1250 on the S&P 500 by May.

The reason the talking heads and wire services are giving for the pullback is that traders are worried about Chinese inflation. Say What? How about the markets being up a gilllion days in a row on light volume with a rest needed as the more likely reason.
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(WSJ) --British oil giant BP PLC said Thursday it bought into a diverse and broad deepwater exploration portfolio that includes assets off the shores of Brazil, Azerbaijan and the U.S., in a $7 billion deal with U.S. independent oil and gas producer  Devon Energy Corp. The deal gives BP a greater footprint in two of its core areas--the Gulf of Mexico and the Caspian Sea--and its first entry into Brazil's prolific offshore basins.
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Oops!! He was just doing his civic duty and will probably refuse any cash reward.

HSBC account data theft affects 24,000 accounts. http://dealbreaker.com/

The bank was just kidding when it said previously that “less than 10 clients” were affected after a former HSBC computer specialist stole client data from the bank which he handed over to French tax authorities.
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Why is it that the supposed socialist Obama folk have the backs of the financial titans on Wall Street?

(WSJ) Geithner (Treasury Timmy) has warned the European Commission that its proposals for more restrictive regulation of alternative fund managers could affect cross-border investment, demonstrating how the controversial European Union directive could have transatlantic ramifications.

Europe wants to regulate hedge funds and other financial entities to prevent what occurred last year but Trusting Timmy is afraid the markets will collapse. Of course he and his Congressional allies also think that making hedge fund managers pay regular income tax and Medicare tax on their individual billions in earnings would hamper the system also. The remarkable reality is that the hedge funds get all this protection from a tax rates all the rest of us have to pay for a mere pittance –for them- of political contributions.
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Hooray? U.S. foreclosure filings rose 6% in February from a year earlier, the smallest increase in four years.
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(WSJ) The U.S. trade deficit narrowed to $37.29 billion in January, the Commerce Department said. A 1.7% decline in imports outpaced a 0.3% drop in exports as the volume of oil imports hit its lowest level in more than a decade. Separately, the number of idled U.S. workers applying for jobless benefits fell by 6,000 to 462,000 last week, the Labor Department reported, but total claims lasting more than one week rose and the four-week moving average of new claims also climbed.
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The bank stocks are not rolling over with the rest of the markets. That is mitigating this morning’s downdraft. It is probably the result of traders’ dawning understanding the Senate fiancé bill is to the likening of the banks. It should be since the banks wrote it.
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We bought another tranche of Huntington Bank, our only bank stock. It is speculative and remains a manageable position of portfolios.
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(WSJ) Verizon Wireless will have its first next-generation 4G handset in mid-2011, about six months earlier than the company had said before. The carrier could have a phone that runs on Long Term Evolution, a type of high-speed wireless technology, three to six months after it launches the service, Anthony Melone, chief technology officer at Verizon Wireless, said in an interview. The company expects to launch the service in some markets by the end of the year. The move is a key step in making faster, next-generation networks useable by consumers. Earlier uses will involve data cards for laptops. It will be some time before full coverage is available, however, and the first LTE phones will feature dual chipsets so they can work on Verizon's existing mobile-phone network.
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The gods are not happy with Chile: Three strong earthquakes rattled Chile's central-south on Thursday, minutes before Sebastian Pinera was sworn in as the country's new president.

The first aftershock, one of the strongest since a massive 8.8-magnitude quake devastated large swaths of Chile's Maule and Bio Bio regions, was magnitude-7.2, according to the U.S. Geological Service.
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We were interested in this article for what the panel expected 7th graders to know. We didn’t have equations and rational numbers (whatever they are-as opposed to irrational numbers?) until high school. We don’t think we could explain the concepts now.

(NYT) A panel of educators convened by the nation’s governors and state school superintendents proposed a uniform set of academic standards on Wednesday, laying out their vision for what all the nation’s public school children should learn in math and English, year by year, from kindergarten to high school graduation. The new proposals could transform American education, replacing the patchwork of standards ranging from mediocre to world-class that have been written by local educators in every state. Under the proposed standards for English, for example, fifth graders would be expected to explain the differences between drama and prose, and to identify elements of drama like characters, dialogue and stage directions. Seventh graders would study, among other math concepts, proportional relationships, operations with rational numbers and solutions for linear equations. The new standards are likely to touch off a vast effort to rewrite textbooks, train teachers and produce appropriate tests, if a critical mass of states adopts them in coming months, as seems likely. But there could be opposition in some states, like Massachusetts, which already has high standards that advocates may want to keep.
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Germany and France launched a proposal that calls for European trading in credit default swaps to be conducted on transparent exchanges and subjected to minimum holding periods.
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Again we note that the population of Greece is 12 million while the population of California is 36 million. The population of Illinois is 12 million and yet the fear mongers seldom mention that the financial crisis in California and/or Illinois is going to bring down the world financial system. We actually are more worried about California and Illinois and would like to see the $100 billion a year being spent in Afghanistan being spent in the states of the U.S. but then Congress and the White House find it more politically palatably to spend for a war that for a severe recession.
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News to some folks (men & women) we know:

Sex Life Ends at 70 as Health Declines, Study Says (Update1)

By Andrea Gerlin

March 10 (Bloomberg) -- The average person’s sex life ends by the age of 70, according to a report published today in the British Medical Journal. Men age 30 have an average of 35 years of sexually active life remaining, compared with 31 years for women, researchers at the University of Chicago’s department of obstetrics and gynecology estimated after reviewing a survey of 3,000 people. A separate survey of older people showed that by 55, men have an average sexual life expectancy of 15 years and women can expect 10 more years, the researchers found. People in very good or excellent health were almost twice as likely to be interested in sex as people in poorer health, according to the study. Men lost more years of sexual activity as a result of poor health than women, the researchers said. That may motivate men to pursue healthier lifestyles, they said. “Translation of expectations about the duration and quality of sexually active life may, at the individual level, influence important health behaviors to promote or prolong sexual functioning, such as adherence to medical treatment or maintenance of a healthy lifestyle,” the researchers wrote. In statistics, projections of how long people will live vary according to age. Life expectancy increases as people reach middle age because they have survived risks that earlier in life reduced their chances of making it to old age. The team led by Stacy Tessler Lindau, used data from a 1995-1996 survey of 3,000 men and women between ages 25 and 74 and a 2005-2006 survey of 3,000 men and women between 57 and 85. Men were more likely than women to be sexually active, report a having a good quality sex life and be interested in sex, according to the study. The gap was largest among 75- to 85-year-olds. About 40 percent of men in that group were sexually active, compared with 17 percent of women, the researchers found. The study was funded by the University of Chicago and the U.S. National Institutes of Health.
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European stocks closed lower as investors fretted about potential tightening of monetary policy in China, while lackluster U.S. economic data weighed on Wall Street. Gold ended at $1107 down $1 and Oil was $81.86 of 30 pennies. 1 Euro = 1.3674 U.S. dollars, 1 Japanese yen = 0.011048 U.S. dollars
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Bank stocks holding kept the major measures in check after an initial down opening and in the final hour the big boys and girls must have decided to go home long for the day. Thus the major stock measures were higher on the session and breadth improved from 3/2 negative early in today’s trading to 3/2 positive at the close. Volume was moderate.
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10 March 2010

Bluebirds and migrating starlings arrived. (Wikipedia- After a number of misguided attempts to introduce starlings to North America, perhaps 60-100 starlings were released into Central Park, in New York City, in 1890 and 1891, by an acclimatization society headed by Eugene Schieffelin. Their goal was to introduce all birds mentioned in Shakespeare's works. The entire North American population, now numbering more than 200,000,000, descended from these birds.)
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(MarketWatch) European shares continued the week's muted moves, with gains for mining stocks and some financial firms helping push the region's main indexes slightly higher. Major Asian indexes ended mixed after trading in a tight range as investors looked toward crucial economic data due this week, while Chinese stocks snapped a three-day advance amid concerns about policy tightening.
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The dollar is lower against the euro at $1.36 and higher against the yen at 90 yen.
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Bulls are higher at Investors Intelligence at 44% up from 42% last week and Bears are lower at 23% from 24%.
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(Bloomberg) -- Hedge funds that trade currencies are taking hits from politicians casting them as speculators out to sink the euro and push Greece into insolvency. They are also losing money.

Macro funds, so named because they try to profit from macroeconomic trends, fell 1 percent in the first two months of the year, according to data compiled by Chicago-based Hedge Fund Research Inc. Brevan Howard Asset Management LLC, Europe’s largest hedge-fund firm, Moore Capital Management LLC and Tudor Investment Corp. were among those reporting fund losses.

The euro dropped 4.8 percent against the dollar in January and February, while the British pound tumbled 5.8 percent and the cost to insure Greek government debt rose by a third through the beginning of February. Still, macro managers said the lack of sustained moves in markets they favor, such as developing- country stocks and commodities, made it difficult to profit.
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Bond underwriters handling the administration-backed Build America bonds have collected fees topping $1 billion. The fees the banks are earning on these bonds are 50% greater than the fees they normally earn. Contrast the love the Congress has for the large investment banks with the protection it gives to consumers:

(NYT) A Consumer Bill Gives Exemption on Payday Loans: Senator Bob Corker, the Tennessee Republican who is playing a crucial role in bipartisan negotiations over financial regulation, pressed to remove a provision from draft legislation that would have empowered federal authorities to crack down on payday lenders, people involved in the talks said. The industry is politically influential in his home state and a significant contributor to his campaigns, records show.

The Senate Banking Committee’s chairman, Christopher J. Dodd, Democrat of Connecticut, proposed legislation in November that would give a new consumer protection agency the power to write and enforce rules governing payday lenders, debt collectors and other financial companies that are not part of banks.

Late last month, Mr. Corker pressed Mr. Dodd to scale back substantially the power that the consumer protection agency would have over such companies, according to three people involved in the talks.

Mr. Dodd went along, these people said, in an effort to reach a bipartisan deal with Mr. Corker after talks had broken down between Democrats and the committee’s top Republican, Senator Richard C. Shelby of Alabama. The individuals, both Democrats and Republicans, spoke on condition of anonymity because they were not authorized to discuss the negotiations.

Under the proposal agreed to by Mr. Dodd and Mr. Corker, the new consumer agency could write rules for nonbank financial companies like payday lenders. It could enforce such rules against nonbank mortgage companies, mainly loan originators or servicers, but it would have to petition a body of regulators for authority over payday lenders and other nonbank financial companies.

Consumer advocates said that writing rules without the inherent power to enforce them would leave the agency toothless.
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On our afternoon walk yesterday we thought of the cost of the War in Afghanistan. U.S. taxpayers are spending about $80 billion out of pocket per year and with future cost of veterans’ health care and other benefits the cost is at least $100 billion per year. The population of Afghanistan is 12 million give or take. If the average Afghan family average 3 people that means there are 4 million families. The U.S. could offer sanctuary to 2.5 million Afghan units (more than half the population) and pay $40,000 per year to each unit and still spend less that the war is costing per year. Those refugees could be allowed to buy the foreclosed houses taking care of another problem. And no more troops would die in a useless cause.
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(Barron’s) American Eagle shares have continued last night’s rise, currently up 95 cents, or 5.5%, at $18.10, following a better-than-expected Q1 forecast this morning.

AEO said Q4 revenue rose 7.3% to $972 million, beating the average $969 million estimate, and yielding profit per share of 33 cents, in line with estimates. Same-store sales rose 5%, almost double the rate analysts were expecting and gross profit as a percentage of sales increased, year over year, from 34% to 39%.

For this quarter, the company sees profit per share of 15 cents to 17 cents, better than the 15 cents analysts have been projecting.

Last night, the company said it would close its “Martin” group of 28 stores, after the division continued to lose money, boosting the stock in after-hours trading by more than 5%.
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We switched KBE with a $1 profit to Deutsch Telecom with half our money left to add to cash. Bank stocks are higher on takeover rumors. Our guess is that this pop in bank stocks will let the Treasury try to sell part of its Citi stake. Citi is trading close to $4 per share. The Treasury owns its billions of shares at $3.25. With a close over $4 a secondary at $3.75 is just around the corner.
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European stocks closed higher, with an upbeat session on Wall Street providing support after stronger-than-expected economic data from China and the U.S. Oil ended at $82.02 up 40 pennies and Gold was down $15 at $1107.
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The major measures closed slightly higher on Wednesday with the S&P 500 up and The DJIA lower. Boeing was up $2.50 in the DJIA while 20 of the thirty issues were lower. AIG was up $3.40 AIG as a hot issue is not positive. Breadth was plus and volume light.

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