Farewell, Adieu, Auf Wiedesehen, Good-bye

March 10, 2007

LAST BLOG BY DR. BOB

Stocks rose from the dead; the Dow added back 1.34% to 12,276 and markets overseas rose. The dollar was up to  ¥118.23/$ and $1.3115/€. Oil prices dropped 2.58% to $60.05. Gold stabilized at $650.00. On HedgeStreet, oil and the euro dominated trading.

Several important releases are coming this week: the current account, PPI and core, CPI and core, and industrial production and capacity utilization.

LAST BLOG – CONTACT INFO

If you have current issues to discuss, write to robert.dubil@business.utah.edu. I’ll shoot you an e-mail back. Over and out.

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Markets Rocked by a Selloff

March 4, 2007

LAST WEEKLY BLOG BY DR. BOB

Stock markets around the globe were rocked by a sharp selloff sparked by, depending on who you believe, the drop in China, Alan Greenspan’s recession prediction or a UFO landing in western Texas. After a more than 100% rise of the Shanghai index last year, a 10% correction is nothing for a market with a closed capital account. Greenspan said that there is a probability of a recession, not that it will happen for sure. So that leaves the UFO as the most likely explanation. The more so that it wouldn’t be the first time that one landed in Texas … More importantly, the 10-year Treasury yield dropped 16bp to 4.515% and the yen staged a huge 3.51% rally to ¥116.85/$. The euro rose only 0.21% to $1.3194/€. Oil prices rose another $0.50 to $61.64. Gold dropped an incredible $42.20 to $641.50 and no one talked about it. A definite slowing is happening in the U.S. economy, and the yield curve has inverted even more – the 3-month Tbill yields 5.122%, the 30-year Treasury 4.651% – but an economic meltdown will not happen. This week has economic data relevant to the plight of our economy. On HedgeStreet, oil dominated trading capturing 30% of the volume.

ECONOMIC RELEASES THIS WEEK:
Monday: ISM Services 57.0.
Tuesday: Productivity +1.7%, orders -4%.
Wednesday: Crude inventories, prior 1.421m.
Thursday: Initial claims 335K. Non-farm payrolls 100K, unemployment 4.6% and the rest unimportant. Trade balance -$60.0bn.

CHINA TO BE THE BIGGEST POLLUTER  … GORE’S CARBON FOOTPRINT … JOLIE TO ADOPT AGAIN … McLATTE

China will be become the biggest emitter of CO2 by 2009. But the Europeans will not stop blaming the U.S. for melting Greenland, speaking English and forcing them to eat junk food … Al Gore got an Oscar (surprise!) for his ‘inconvenient truth’. Meanwhile Al apparently enjoys a giant pool at his Tennessee home, heated by conventional heaters using more energy per month that a family of four over a year. Good for him! … Angelina filed papers in Vietnam to adopt another baby. What’s wrong with a poor baby from Philadelphia? … McDonald’s will add sub-$3 lattes to its menu this year. They’ll be microwavable in 20 sec, have 60g of trans fat and you’ll be able to supersize them to 64 oz for 29 cents. God help us all.

LAST BLOG – CONTACT INFO

This is my last regular weekly blog. If you have current issues to discuss, send me an e-mail to robert.dubil@business.utah.edu. I’ll post answers here once a month or shoot you an e-mail back. Next week’s blog will be short and final.


Oil Rise Will Temper Growth

February 25, 2007

OIL AND GOLD UP AGAIN

Oil prices shot up 2.95% last week to reach $61.14. Gold added 2.14% to reach $683.10. That sent U.S. stocks down; the Dow lost 120 to close at 12,647. However, markets overseas were up. The Nikkei reached a seven-year high at 18,188; the FTSE closed at 6401. The markets in China and Taiwan were closed for the Lunar Year. The dollar slid to $1.3166/€ against the euro and rose to ¥121.09/$, despite the move by the BofJ to raise the rates. Continued suprime troubles and Iran worries drove the Treasurys up slightly; the 10-year yielded 4.678%. The rise in oil prices, if it is sustained, may shave the healthy GDP gains this year, and lets hope that the rise in gold does not augur resurgent inflation pressures. We may end up with slower growth, but more inflation, despite recent rosy Fed pronouncements. On HedgeStreet, oil and gold dominated the volume; silver and the euro were active too. New real estate contracts were introduced.

ECONOMIC RELEASES THIS WEEK:
Tuesday: Durable orders -2%, consumer confidence 109, existing home sales 6.24m.
Wednesday: Q4 GDP 2.4%, deflator 1.5%. New home sales 1.09m. Crude inventories published, prior 3.694m.
Thursday: Income 0.3%, spending 0.4%. Initial claims at 325K. Construction spending -0.4%. Auto sales 5.1m, trucks 7.3m, total down 0.3m. ISM index at 50.0.

OSCARS

Who cares… The 30th annual National Wild Turkey Convention at the Gaylord Opryland Resort in Nashville drew 5,000 visitors. Diamond Rio entertained at the award banquet. Comedian T. Bubba Bechtol and champion caller Preston Pittman attended. A live auction of guns and jewelry was held.


BERNANKE COOLS TEMPERS, AND THE DOLLAR

February 19, 2007

DOLLAR OFF ON LOWER RATES; GOLD UP

Bernanke comments on strong economy and abating inflation offered a prospect of lower rates, perhaps even this year. Additionally, the market expects the Bank of Japan and the ECB to raise rates. The dollar sold off 1.1% against the euro to $1.3138/€ and 1.9% against the yen closing the week at ¥119.43/$. This was the largest weekly yen gain since last May. The 10-year Treasury rose to yield 4.69%. Stocks were up; the Dow closed up 186 at 12767. Crude traded sideways closing at $59.39. Gold added another $5 to close at 672.80. The biggest surprise of the week was the housing starts number 1.408m which was even lower than the low consensus of 1.590m. During the Senate hearings, Bernanke was quizzed by Barney Frank (D-MA) why inflation was his primary focus not growth. Perhaps Mr. Frank should go back to college to take some econ classes to understand that the Fed sets the monetary policy, and he and the rest of the Congress set the fiscal policy. On HedgeStreet, oil, gold and the euro dominated the volume. This week, the exchange is relisting its real estate contracts, adding three more cities to the menu – Las Vegas, Denver and Washington, D.C., bringing the total to ten. The contracts on the median home prices in the ten metro areas will expire quarterly and semi-annually on the May 15 – Aug 15 schedule. The contracts are settled off the National Association of Realtors releases.

ECONOMIC RELEASES THIS WEEK:
Wednesday: CPI +0.1%, core 0.2%; the trend is very encouraging at 2.1% year-on-year overall and 2.6% for the core. Crude inventories and Fed minutes published.
Thursday: Initial claims at 320K.

CARNIVAL IN RIO … THE YEAR OF THE PIG … GM MAY BUY CHRYSLER

Skimpy bras and G-strings rule in Rio this week. But Brazilians can’t understand why Americans view the Carnival as a big porn fest instead of a “collective experience of an aesthetic appreciation of the human body”. Translation: communal sex party … Las Vegas is hoping to earn close to $100m from Asians playing baccarat and 155m people are traveling home in China this week to spend the Lunar New Year with their families. And that just to one city … GM is eyeing a future purchase of Chrysler from DaimlerChrysler after the division goes through the wrenching layoffs. So they can lose billions more than they are already losing.


DON’T SWEAT THE REBOUND IN OIL

February 11, 2007

FIRST HEDGE FUND IPO SKYROCKETS; G-7 ABANDONS YEN TALK

G-7 summitteers dropped the cheap yen from the agenda. And the market interpreted two Fed governors’ comments on the strong U.S. economy as signaling a likely upward bias. As a result, the dollar gained against the yen closing the week at ¥121.68/$ and pared euro’s earlier gains to $1.3006/€. Germany called for Russia’s full membership in G-7. The Germans are held hostage by Russian energy dependence; even the laggard Poles and Czechs are smarter to read the big bear’s real motives. Stocks retreated with the Dow closing at 12581. Crude prices rebounded by close to $10 over the last few weeks, flirting with $61 last week to close at $59.89. Yet with 3.5% Q4 GDP, consumer confidence at 110.3, unabated spending (+0.7% in Dec) and Q4 productivity at +3.0%, it is hard to see how even the housing bust and sputtering Detroit can spoil the party. The Fed governors’ comments only underscore the fact that the risk is more on the upside, and the growth could reignite inflationary pressures. Another 25 bp in short term rates would be a small price to pay for above-3% real growth. We should be so lucky. Meanwhile the smart are cashing in. Fortress Investment’s shares spiked 68% following the first IPO of a hedge fund in the U.S., making the owners supremely rich. Citadel plans to follow suit. The good news is: the private equity offerings are finally coming to the U.S. rather than London; the bad news is: small investors  have no business buying into risk they don’t understand. On HedgeStreet, gold was big last week; its volume topped oil and currencies on four out of five days. Gold rose $21.30 to $667.50 as its steady ascent continues.

ECONOMIC RELEASES THIS WEEK:
Monday: Treasury budget +$40.0bn, double the Jan’06 figure. The receipts are running at +11% year-on-year, and the trailing 12-month total is just -$190bn. Now that free-spending Republicans have been booted out, Bush may balance his budget before he leaves office!
Tuesday: Trade deficit at $59.5bn, 7% below last year’s level, and with export growth at 11% outstripping import growth at 5%.
Wednesday: Retail sales at+0.3%, ex-auto +0.3%, underscoring a slowing trend. Business inventories flat. Crude inventories released.
Thursday: Export/import prices. Initial claims at 310K. Industrial production +0.0%, capacity utilization 81.7%. Philly Fed low but positive 5.0.
Friday: Housing starts 1.600m, building permits 1.580m, largest declines in the Northeast and West. Definite signs of stability building since hitting the Oct low: Nov and Dec slightly up, and Jan slightly down.  PPI -0.6%, core 0.2%. The decline is due to a sharp drop in energy prices. The core is at a modest 2.0% year-on-year with only a partial feed-through to CPI. Michigan sentiment 97.0.

NY vs. NY IN 2008… HEIL ZETSCHE   … FOX BUSINESS CHANNEL … OH CANADA

Rudy vs. Hillary: In the left corner, a former prosecutor-turned mayor with three wives under his belt, a liberal, and the man who cleaned out New York. In the right corner, a former lawyer-turned senator with one womanizing husband under her belt, a liberal, and a woman who cleaned out in New York … Zetsche is to announce a “turnaround” plan for Chrysler which will involve layoffs and tying Chrysler closer to Mercedes operations (has he been to Detroit?). A better plan would be to close Chrysler (auf Wiedersehen) and sell Mercedes cars to us for Chrysler prices (danke schön) … Murdoch announced the launch of Fox Business Channel headed by Neal Cavuto to start in Q4. He offered straight business-friendly talk in contrast to the sensationalist CNBC. Let’s face it: Maria is cute but doesn’t know a thing about business. My prediction: just like CNN was dethroned in one year by Fox News, CNBC will be too. Even liberals need honest news when their money is involved … I was looking at maps with my kids this weekend. Did you know that there is a country called Canada to the north of us???


SUPER BOWL PREDICTS A BULL YEAR FOR 2007

February 4, 2007

NFC WIN PLUS UP JANUARY BODE WELL FOR STOCKS

Since both Super Bowl teams this year were original NFC teams, it is all but assured that 2007 would be a good year for stocks. The Super Bowl oracle – NFC team wins, stocks go up; AFC team wins, stocks go down for the year – has been accurate 32 out of 40 times, or 80% of the time. With the Dow 1.3% up in January (62% time: January up, the rest of the year up), shorter hem lines on women’s skirts (consumer confidence), and the third year of the second presidential term (100% up since FDR), only the devil, a voodoo doll or Gore winning the Nobel Peace Prize could ruin the party. Look at last week. The ISM index at 49.3 and non-farm payrolls at 111K came below expectations, and oil price shot up 6.5% to $59.02. The 10-year Treasury and the dollar sold off (to ¥121.04/$ and $1.2967/€). Despite that the Dow gained 166 to close at 12,653.49 and the Nasdaq and the S&P 500 gained more. Stocks in Europe and Japan rose. Punxsutawney Phil did not see his shadow predicting a short winter. That is bound to help ease oil and gas prices. The obvious conclusion: buy stocks, sell oil … More oil in the news: the Saudis supported a production cut, Exxon made $39.5 bn, and Total’s CEO unabashedly said he would seek deals in Iran and Iraq. On HedgeStreet, oil captured more than 50% of the volume on Monday and Tuesday; currencies, gold and silver dominated on other days. All five currencies started the four-expiries-per-day cycle. Last week, the FDIC extended the moratorium on industrial banks dealing a blow to Wal-Mart’s hopes for a bank. This week, Yahoo starts copying Google’s pay-per-click and Nike may announce mall stores.

ECONOMIC RELEASES THIS WEEK:
Monday: ISM Sevices flat at 56.5.
Wednesday: Q4 Productivity 1.6%. Crude inventories and consumer credit.
Thursday: Initial claims at 310K. Inventories down to 0.6%.

$155M HOUSE … MISS LOSER USA … EXXON VS SYRIA … VIVE LA FRANCE

An under-construction house in Wyoming was listed at $155 million. It has its own ski lift and helipad. There are ten potential buyers. Wealth is not concentrated after all … Miss USA Tara Conner revealed cocaine use (illegal), and underage drinking and driving (illegal). The Donald gave her a second chance. Back in the 1990s, Vanessa Williams posed nude (legal) and was stripped of the crown. You still want to be the Donald’s apprentice? … Exxon made $39.5 bn profit in one year. By comparison, the annual GDP (=revenue) of some countries in $bn is: Libya $38.7, Sudan $27.5 Syria $27.3, Serbia $24.0, and 100 countries even lower than that. How come on the news, I hear about these losers, and I don’t hear anything about one of our great winners? … French health minister is considering rules to force employers to allow napping on the job. If you add that to coffee, sex, smoking and listening to Céline Dion, the French work about 5.2 hours a week and get 7 weeks of vacation. Americans work 33.9 hours and get two weeks. C’est malade, but at least we don’t have to live with the French.


Shifting Perceptions?

January 28, 2007

DOLLAR FIRM; OIL UP; STOCKS, BONDS DOWN

What a change one week makes! Oil moved up sharply last week closing at $55.42 on Iran and Nigeria tensions, reduced production from Mexico’s largest field and a U.S. proposal to build up the Strategic Petroleum Reserve. Stocks sold off; the Dow closed down 78.51 to close at 12,487. Bonds sold off; the 10-year Treasury yield was up 10bp to 4.879%. Gold was up $9 to $644.50. There is a growing consensus in the market that the Fed’s next move, if any, is more likely to be up then down. Apart from the surprise drop in existing home sales, all other economic news has been good lately. The prevailing feeling is that the slowdown in the economy overall may not big enough to tame inflation pressures. Fed inaction may be good for the dollar. The greenback seesawed throughout the week as the market awaited economic news, at the end firming up against the yen to ¥121.60/$ and against the euro to $1.2913/€. The housing market (and autos) is the Achilles heel of the economy. The subprime BBB- mortgage bonds have seen a 10 pt. decline over the last six months as some home values have dropped below mortgage principals in that segment. On HedgeStreetoil and the euro dominated volume, followed by gold. This week, several contracts are going to be de-listed and the exchange is changing its trading hours to align them more closely with New York and Chicago commodity markets. The contracts being delisted are 30-year mortgage rates, wholesale gas, copper and heating oil. The new trading hours will be 8am to 4pm ET. By popular demand, currencies will go from three to four intraday closes at 10am, 12, 2pm and 4pm. This will allow more trading opportunities in all five currency pairs.

This week: Fed’s no-raise decision; FDIC moratorium on industrial banks expires, but will Wal-Mart get an ILC?; MS Vista hits the stores; earnings from Google, Verizon, Merck, P&G, Boeing, Time Warner and Exxon; Tokyo-NYSE tie-up?

ECONOMIC RELEASES THIS WEEK:
Tuesday: Consumer confidence at 110, the highest level since March 2002.
Wednesday: Advance Q4’06 GDP is expected at 3.0%, up from 2.0% in Q3 on strong personal saving, but a 6% decline in fixed investment, and strong exports. Chain deflator down to 1.7%. Chicago PMI at 52.0, and flat construction spending. Also released, crude inventories and FOMC policy statement (no change expected, but the read on direction – bias to raise – will be key).
Thursday: Personal income up 0.5%, personal spending up 0.7%. Claims at 318K. ISM at 51.5. Auto sales for Jan down to 5.4m, truck sales up to 7.4, total unchanged.
Friday: Nonfarm payrolls 150K consensus, 135K briefing.com, unemployment flat at 4.5%. Factory orders 1.5%. Michigan sentiment revision flat or down. 

BUSH GOES GREEN … FORD LOSES $12 BN in ’06 … DAVOS SCHMAVOS

In the State of the Union address, Bush called for a 20% reduction in gasoline use by 2017 (why not 3017), spending on renewable energy (=new cash for farmers) and shifting the taxing of health insurance premiums from employers to employees in order to help those who purchase it individually (expect GM and Ford to shift health costs to the unions). The ethanol lobby is super happy; corn is currently trading at a multiyear high (the poor in Mexico cannot afford their diet staple – tortillas) and vodka has never been more expensive. In my next car, I’ll have drinking taps installed on the fuel tank (C2H5OH is pretty tasty, especially on the rocks and with lime) … Ford lost $12 bn in 2006, almost $2K on every car they sold. The CEO Mullaly said they expected to return to profitability by 2009 through increased sales of new models. Let’s see: lose $2K per vehicle, increase sales. Hmmm … Correction to last week’s report: John Kerry decided not to run for president. What he actually said was that at least he thought that he should not decide if he should run or not run, unless he decided to run or not to run … Al Gore gained another 15 pounds. Global warming was the cause … At Davos, the 2400 participants at the World Economic Forum came up with absolutely nothing, as always. The European air has not produced any original thinking since Albert Einstein left for Princeton in Dec 1932.