STOCK MARKET WATCH, Tuesday July 17

[ozymandius]

Source: DU

Tuesday July 17, 2007

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 555 LONG DAYS
DAYS SINCE DEMOCRACY DIED (12/12/00) 2384 DAYS
WHERE'S OSAMA BIN-LADEN? 2096 DAYS
DAYS SINCE ENRON COLLAPSE = 2057
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 10
Enron execs conveniently deceased = 3
Other Arrests of Execs = 54

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U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES-----------------------------S&P FUTURES

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AT THE CLOSING BELL WHEN BUSH TOOK OFFICE on January 22, 2001
Dow - 10,578.24
Nasdaq - 2,757.91
S&P 500 - 1,342.90
Oil - $27.69/bbl
Gold - $266.70/oz.

AT THE CLOSING BELL ON July 16, 2007

Dow... 13,950.98 +43.73 (+0.31%)
Nasdaq... 2,697.33 -9.67 (-0.36%)
S&P 500... 1,549.52 -2.98 (-0.19%)
Gold future... 666.30 -1.00 (-0.15%)
30-Year Bond 5.13% -0.07 (-1.31%)
10-Yr Bond... 5.04% -0.07 (-1.29%)






GOLD, EURO, YEN, Loonie and Silver

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PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [e-mail]

For information on protests and other actions Citizens For Legitimate Government

---

Read more: DU

[ozymandius]

1. News Corp, Dow Jones reach tentative $5 bln deal: report

Without any further ado...

NEW YORK (Reuters) - Dow Jones & Co. Inc. Chief Executive Richard Zannino tentatively agreed on Monday to a $5 billion takeover bid by News Corp., though the company's controlling Bancroft family remains divided on the deal, the Wall Street Journal reported.

The agreement in principle will be put to the full Dow Jones board on Tuesday evening, said the newspaper, which is Dow Jones' flagship publication and the asset most coveted by News Corp. Chairman and Chief Executive Rupert Murdoch.

Michael Elefante, the Bancroft family's lead trustee, has scheduled a meeting for Thursday to present the agreement to all Bancroft family members before asking for their final vote, the Journal said on its Web site.

Elefante is expected to give the family several days to make a decision, suggesting a final resolution could be achieved next week, it added.

http://www.reuters.com/article/innovationNews/idUSSP1151220070717

[ozymandius]

2. Today's Market WrapUp

Bernanke Babble Analysis
BY ROB KIRBY

Last week, the esteemed chairman of the Federal Reserve – Mr. Benjamin Bernanke - dropped by the Monetary Economics Workshop of the National Bureau of Economics Research and imparted some of his wisdom upon the masses in a speech titled, Inflation Expectations and Inflation Forecasting.

A ‘ripping critique’ of Mr. Bernanke’s speech was penned this past weekend by The Prudent Bear’s, Doug Noland.

In his speech, his authoritativeness (Bernanke) offered this quip – or nugget if you will - on the effect of rising oil prices on inflation,

“A one-off change in energy prices can translate into persistent inflation only if it leads to higher expected inflation and a consequent ‘wage-price spiral.’ With inflation expectations well anchored, a one-time increase in energy prices should not lead to a permanent increase in inflation but only to a change in relative prices.”

The Fed Chairman – the man doing ALL the money printing – he’s o.k. with the inevitable push this creates on asset prices but he’s simultaneously confessing his CONCERN about this metastasizing into higher wage demands? It’s like folks disadvantaged by HIS monetary debasement and subsequently trying to “keep up” through higher wages are as unwelcome as a hurricane in the Gulf.

!!:grr:

http://www.financialsense.com/Market/wrapup.htm

[UpInArms]

3. dollar watch

http://quotes.ino.com/chart/?s=NYBOT_DX&v=i

Last trade 80.531 Change -0.037 (-0.05%)

Dollar on the Ropes

http://www.dailyfx.com/story/topheadline/Dollar_on_the_Ropes_1184562306661.html

The horrid Retail Sales numbers which printed at -0.9% vs. 0.2% expected broke the will of the last standing dollar bulls and pushed the EURUSD to all time highs above the 1.3800 level in early New York trade on Friday. The data made it crystal clear that despite the relatively buoyant employment numbers the US consumer is now in a deep funk as the Mortgage Equity Withdrawal spigot has been completely shut off providing no alternative source of income aside from the relatively stagnant wages. In fact credit card borrowing jumped to its highest levels in 6 months in May suggesting that the US consumer has turned to his last source of available funds. None of this of course bodes well for second half growth as spending which makes up more than 70% US GDP is likely continue to be drag on the overall economy.

Next week the calendar offers little hope to greenback bulls unless it provides a series of upside surprises. The middle of the week should set the tone with Industrial Production on Tuesday of key importance followed by Housing starts on Wednesday. If manufacturing aided by the weak dollar continues to perform well then it will be the one bright spot in the US economy, providing a small offset to the gloomy consumer news. Furthermore, should housing data on Wednesday suggest some stabilization then we may have a reflex rally on the assumption that the worst is over. Yet these are all thin reeds of hope to base an argument for a EURUSD top. The one strong reason may be sentiment. Our proprietary SSI gauge is flashing gross imbalances in positioning suggesting that a pause in the uptrend may be near. -BS



...more...

The Path to a Stronger Dollar is Through a Weaker One

http://www.dailyfx.com/story/dailyfx_reports/daily_fundamentals/The_Path_to_a_Stronger_1184622300612.html

New records will either be made or lost this week because not only do we have a very busy economic calendar, but Federal Reserve Chairman Ben Bernanke will also be delivering his semi-annual testimony on the economy and monetary policy. The weakness of the US dollar and continual rise in oil prices will keep the Federal Reserve hawkish as they bank their hopes for a second half recovery on the movements of the US currency. We have already seen the benefits that a weak dollar can instill on the economy. Just last week, the US reported that exports rose to a record high in the month of May and it could not have done so without a weaker dollar. Since the beginning of last year, the trade weighted dollar has fallen 7.7 percent and is now testing lows last seen in the end of 2004. The jump in the Empire state manufacturing survey confirms that the weak dollar continues to benefit the manufacturing sector. After hitting a 1 year high last month, analysts were looking for a sharp retracement, but activity continued to accelerate with the manufacturing index edging up to its highest level since June 2006. Tomorrow, the action begins with producer prices, followed by the Treasury International Capital flow report, Industrial Production and the NAHB housing market index. Net foreign securities purchases and industrial production are expected to remain strong, but the expectations for producer prices are low despite the jump in import prices. With the rally in the EUR/USD becoming exhausted, any upside surprise could drive a much needed recovery in the US dollar. The FX markets are cyclical, so the path to a stronger dollar will be through a weaker one.

...more...

[Ghost Dog]

36. Pound hits new 26-year high

http://asia.news.yahoo.com/070717/afp/070717111700eco.html

LONDON (AFP) - The British pound struck a fresh 26-year high point on inflation concerns Tuesday while the euro hovered around its record peak against the dollar.

The pound hit 2.0438 dollars -- last seen in 1981 -- as dealers seized on June inflation data that pointed toward higher British interest rates, analysts said.

"The Bank (of England) will not be happy to see that core inflation climbed to 2.0 percent in June, which was its highest level since March 1997 and up from 1.9 percent in May and 1.8 percent in April," Global Insight economist Howard Archer said.

Elsewhere, the European single currency rose to 1.3790 dollars in early European trading, compared with 1.3772 late in New York on Monday.

The euro had shot up over 1.38 dollars last Friday for the first time since its creation in 1999, as weaker-than-expected retail sales in the United States compounded concerns about the world's richest economy.

Gains for the euro on Tuesday were limited by data showing investor confidence in Germany fell noticeably in July.

The ZEW economic research institute's economic expectations index, based on a poll of 306 analysts and institutional investors, fell by 9.9 points to plus 10.4 points in July, ZEW said in a statement.

The sharpness of the decline was unexpected. Analysts had been projecting only a slight easing in the index to just under 20 points after the barometer declined slightly last month.

"German business confidence is all of a sudden starting to look a little more shaky with the euro flying high, oil prices surging and financial confidence looking unsettled right now," Bear Stearns analyst David Brown said.

"If German business starts to get cold feet about the strength of recovery it will automatically begin to shut down optimistic investment intentions and new hiring plans. It could take a big bite out of potential demand this year," he said.

/...

edit: Watch on Swiss Franc (CHF), Pound Sterling (GBP)

[mojavekid]

38. Daily Pfennig 7/17/07: The Data Cometh...

http://www.kitcocasey.com/displayArticle.php?id=1497

Good day... The dollar stayed in a fairly tight range yesterday as the markets wait in anticipation for the plethora of data we will get over the next two days. The only data released yesterday in the U.S. was the incredibly volatile Empire State Manufacturing number, which came in well above expectations. This number has been so volatile that even the dollar bulls largely ignored the unexpected increase in the NY-area manufacturing index.

Today we will get a little better picture of the inflation situation in the U.S., along with the very important TIC flows. But the data doesn’t stop there as Industrial production, capacity utilization, NAHB housing market index, and the ABC consumer confidence numbers will all be released in the U.S. this morning and early afternoon. Producer prices are expected to show a slight decrease in June with the year-on-year numbers expected at 3.6% compared to last month's 4.1% increase. If the numbers come in as expected, the dollar will see more selling as there will be less reason for the FOMC to consider raising interest rates.

We will also see just how many U.S. financial assets foreigners are continuing to purchase. Foreign net buying probably slowed in May to $70 billion, from $84.1 billion the prior month, according to a Bloomberg survey of economists. Last month's report showed international demand for U.S. Treasuries slowed to a net increase of $376 million in April, the weakest demand since investors sold a net $3.5 billion of bonds and notes a year earlier. This information is critical for currency investors, as our dollar has been propped up over the past two years by foreign buying of U.S. assets. We have been warning investors for years that if, or rather when, the foreign investors start to reduce their purchases and diversify their reserves, the US$ will get sold off. The moves we have seen in the past few months are just the beginning of what will likely be another long leg down in the overall dollar trend which began in 2002.

One of the reasons governments have wanted to keep a majority of their reserves in US$ is that the greenback is what is demanded for one of the most precious commodities, oil. Ty Keough, along with a few of our readers, pointed out a story on Friday afternoon which I forgot to share with you yesterday. It said Iran wants Japan to pay yen for oil. We have seen a number of stories on Iran and other Mideast nations that want to start receiving euros for oil, but this is the first one which talked about yen for oil. At $10B (USD) per year, this isn't a big deal for Japan, but it would cause less selling of yen for dollars to buy oil. It also illustrates the shaky ground the US$ is on as the "world's reserve currency."

more...

[ozymandius]

4. Today's Reports

8:30 AM PPI Jun
Briefing Forecast 0.2%
Market Expects 0.1%
Prior 0.9%

8:30 AM Core PPI Jun
Briefing Forecast 0.2%
Market Expects 0.2%
Prior 0.2%

9:00 AM Net Foreign Purchases May
Briefing Forecast -
Market Expects $72.0B
Prior $84.1B

9:15 AM Industrial Production Jun
Briefing Forecast 0.4%
Market Expects 0.5%
Prior 0.0%

9:15 AM Capacity Utilization Jun
Briefing Forecast 81.5%
Market Expects 81.6%
Prior 81.3%

http://biz.yahoo.com/c/e.html

[UpInArms]

12. PPI numbers in and, boy, do I have some land to sell ya!

01. U.S. June PPI capital equipment prices up 0.3%
8:30 AM ET, Jul 17, 2007 - 1 minute ago

02. U.S. June PPI intermediate goods prices up 0.5%
8:30 AM ET, Jul 17, 2007 - 1 minute ago

03. U.S. June PPI crude goods prices rise 0.3%
8:30 AM ET, Jul 17, 2007 - 1 minute ago

04. U.S. June PPI energy prices fall 1.1%
8:30 AM ET, Jul 17, 2007 - 1 minute ago

05. U.S. June PPI foods prices fall 0.8%
8:30 AM ET, Jul 17, 2007 - 1 minute ago

06. U.S. June core intermediate PPI slowest rise in 3 years
8:30 AM ET, Jul 17, 2007 - 1 minute ago

07. U.S. PPI up 3.3% in past year
8:30 AM ET, Jul 17, 2007 - 1 minute ago

08. U.S. June core PPI rises 0.3% vs. 0.2% gain expected
8:30 AM ET, Jul 17, 2007 - 1 minute ago

09. U.S. June PPI falls 0.2% vs. 0.2% gain expected
8:30 AM ET, Jul 17, 2007 - 1 minute ago

[ozymandius]

15. Someone needs to check their math.

Because I'll bet you these figures were based on faith - not logic.

[MaineDem]

17. Energy prices down???

And I can tell you that food prices certainly didn't fall.

[ozymandius]

21. Truly mind-boggling.

When Bush was sworn into office the average price of gasoline was $1.47/gal. Consider that in six years fuel prices have more than doubled. Then figure how much the price of food reflects transportation costs.

If an honest economic analyst does this then we'll see what politicized federal agencies dare not mention: comprehensive long-term inflation. By measuring the rate of inflation in the tenths of points monthly, the true cost of living is hidden. Most people do not pay attention that closely.

[Gregorian]

47. I argued this with, and they countered with housing deflation.

They said that the cost of food is negligent in comparison to the cost of real estate, which is declining, so there is no inflation. To which I say, real estate will have to drop by a half before it's considered affordable.

$5 for a gallon of milk is what people made in a month's work a hundred years ago. Not important. Just saying.

[UpInArms]

18. Spin: Inflation falls at wholesale level

http://news.yahoo.com/s/ap/20070717/ap_on_bi_go_ec_fi/economy;_ylt=An2O5QxvKjKIOUkZ.HvMVrRv24cA

WASHINGTON - Wholesale inflation posted a better-than-expected reading in June as both food and energy costs retreated.

The Labor Department said its Producer Price Index fell by 0.2 percent last month, the first decline since a 0.6 percent dip in January. Since that time, wholesale prices had been recording big gains, reflecting the fact that gasoline surged to record levels and food costs have been rising because of heavy demand for corn to use in ethanol.

But in June, food prices dropped by 0.8 percent and energy prices were down 1.1 percent.

<snip>

Through the first six months of this year, prices at the wholesale level have been rising at an annual rate of 6.4 percent, a sharp acceleration from a flat reading for the final six months of last year.

However, most of the rising price pressures reflected the spurt in energy costs, which eased a bit in June.

Gasoline prices, which hit a record of $3.227 in late May fell steadily in June and early July before edging up again in recent weeks over renewed concerns about production problems. However, that rebound is expected to be temporary as refineries get back to full production.

Gasoline prices at the wholesale level fell by 3.9 percent in June, the biggest drop since a 13 percent plunge in January. Overall energy costs were down 1.1 percent last month as electric power and liquefied petroleum gas both fell while natural gas prices rose.

...more...

[MaineDem]

20. How can they say this without their noses growing?

They're spinning so fast it's all a blur.

[UpInArms]

25. up is down - war is peace

[MaineDem]

27. Perfect! n/t

[UpInArms]

39. Net Foreign Purchases May

http://www.reuters.com/article/hotStocksNews/idUSN2943463220070717

excerpt:

Net overall capital inflows into the U.S. rose to $105.9 billion in May, with corporate bond and equities purchases driving long-term monthly investments to a record high, the Treasury department said.

"It is a very large number," said Camilla Sutton, currency strategist with Scotia Capital in Toronto. "It's a very volatile series and what is interesting is the underlying, the private has moved aggressively higher and official buying came in negative and that is the first time we have seen a negative print in some time. It's probably a net neutral for the dollar.

...more...

CBSMarketwatch is not posting the reports ?

[UpInArms]

40. Industrial Production and Capacity Utilization reports

30. U.S. Q2 industrial production up 2.9% vs 1.1% rise Q1
9:15 AM ET, Jul 17, 2007 - 1 hour ago

31. U.S. June capacity utilization 81.7% vs 81.3% in May
9:15 AM ET, Jul 17, 2007 - 1 hour ago

32. U.S. May industrial output down rev 0.1% vs flat prev est.
9:15 AM ET, Jul 17, 2007 - 1 hour ago

33. U.S. June industrial production up 0.5% vs 0.6% forecast
9:15 AM ET, Jul 17, 2007 - 1 hour ago

[ozymandius]

5. Oil prices rise

VIENNA, Austria - U.S. benchmark oil prices rose Tuesday, building on gains of the previous session on concerns that more operating refineries in the U.S. will increase demand for crude oil.

Oil has risen on those worries amid reports that U.S. refineries and a pipeline were returning to service quickly after unexpected problems. But forecasts of U.S. gasoline stock builds in a report due Wednesday helped ease concerns of shortages prevalent during the high-demand American summer driving season, keeping increases in check

Light, sweet crude for August delivery rose 24 cents to $74.39 a barrel by afternoon in Europe in electronic trading on the New York Mercantile Exchange. The contract had gained 22 cents to settle at $74.15 a barrel on Monday. The last time a front-month contract closed over $74 was Aug. 11.

-cut-

While one U.S. refinery, a 108,000-barrel-per-day facility in Coffeyville, Kansas, remains closed after a flood, others have rebounded quickly from unexpected outages over the past week. A BP PLC refinery in Whiting, Indiana, returned a 250,000 barrel-per-day piece of equipment to service, and a pipeline linking Texas to Illinois was reopened after a leak forced its closure on Sunday.

http://news.yahoo.com/s/ap/oil_prices

Petroleum inventories are due to be released tomorrow (Wednesday)

[ozymandius]

19. An economist agrees with me! - by Tim Iacono

Econbrowser has always been one of my favorite economic blogs and James Hamilton one my favorite economists, of which there are few - maybe just the one, come to think of it.

It's nice to see that he agrees with my "quick-take" on the IEA Medium Term Oil Market Report the other day, offering up a chart on recent Saudi oil production that may help to explain the premise of my missive "We're going to need a good recession".

In an Econbrowser post yesterday, he too quickly spotted the glaring problem in the IEA report and, as you might expect of an economist, made the case in a much more convincing, detailed sort of way than you would expect from someone like yours truly who only dabbles in the dismal science.

But conspicuous by its absence is a discussion of the production decline in Saudi Arabia. The report lists 2007 Saudi production capacity at 10.8 mb/d, but does not offer a theory as to why Saudi production is currently only 8.6 mb/d and has dropped by a million barrels a day over the last two years.

So Saudi Arabia accounts for most of the 3.1 mb/d in OPEC spare capacity that IEA currently perceives. And they are assuming that Saudi capacity will increase from 10.8 mb/d to 12.6 mb/d by 2012, even as their "implied OPEC spare capacity" drops from 3.1 mb/d to 2.2 mb/d. So, as I do the math, that means they are basically assuming that actual Saudi production is going to increase by 2.7 mb/d over the next five years.

Which makes you wonder-- If IEA doesn't know or won't say why Saudi production has been on a declining trend recently, why is it reasonable to assume that now it's going to increase by almost 3 mb/d?

And makes you wonder all the more what's really going on under the Arabian Desert, doesn't it?

One more question, and then I'll leave you alone-- If IEA thinks we'll be in trouble even if we get a nice 2.7 mb/d boost from the Saudis, what's the forecast look like if that increase from the Kingdom never comes?

http://badmacro.blogspot.com/2007/07/economist-agrees-with-me.html

[UpInArms]

6. Retail slump in June hints at tired consumer

http://www.reuters.com/article/businessNews/idUSL1374452020070713?feedType=RSS

NEW YORK (Reuters) - Retail sales posted their steepest drop in nearly two years in June, according to government data on Friday, indicating the housing market slump and soaring gasoline costs are depressing consumer spending.

The Commerce Department reported a 0.9 percent decline in June sales where economists had looked for a 0.1 percent gain, far outweighing small upward revisions to the figures for May.

"The rise in gasoline prices absorbs a big chunk of spendable income," said Nigel Gault, director of U.S. economic research at Global Insight. "Consumers had to spend $53 billion more in the second quarter at an annual rate than they did in the first. Eventually they need to cut back somewhere else."

Consumer confidence did rebound in early July, but only after hitting a 10-month low in June. Historically, sentiment remains near levels experienced in early 2001, just before the economy entered a brief period of recession.

The Reuters/University of Michigan Surveys of Consumers said consumer sentiment rose in early July, with its index hitting 92.4 following June's final reading of 85.3.

...more...

[UpInArms]

7. McDonald's to Report a Rare Loss

http://www.nytimes.com/2007/07/17/business/17mcdonald.html?ex=1342324800&en=8f87f49b35740813&ei=5088&partner=rssnyt&emc=rss

CHICAGO, July 16 (AP) — The McDonald’s Corporation said Monday that it expected to post its second quarterly loss in more than 50 years because of a hefty one-time charge on the sale of some Latin American operations.

But the world’s biggest fast-food restaurant chain said its business was growing because of momentum from its popular breakfast menu.

McDonald’s, based in Oak Brook, Ill., said it expected to report a net loss of 60 cents a share when it releases second-quarter earnings July 24.

<snip>

In April, McDonald’s announced a plan to cede control of 1,600 restaurants in Latin America and the Caribbean in an effort to strengthen profit. The deal will have a noncash impairment charge of $1.6 billion in the second quarter. But it reduces the company’s financial exposure in a challenging region and will bring McDonald’s about $700 million in cash.

...more...

(edited for weirdness in title line - #8217;s instead of an apostrophe)

[UpInArms]

8. UBS and New York Reach a Settlement on Brokerage Fees

http://www.nytimes.com/2007/07/17/business/17fees.html?ex=1342324800&en=b135151321a1edd0&ei=5088&partner=rssnyt&emc=rss

ALBANY, July 16 (AP) — UBS reached a $23.3 million settlement Monday with New York State, which said the company had inappropriately guided customers into a fee-based brokerage program.

Under the settlement, UBS Financial Services agreed to pay $21.3 million to approximately 3,000 current and former clients of its InsightOne brokerage program and a $2 million penalty to the state.

The private wealth management company reached the settlement after an investigation by Attorney General Andrew M. Cuomo into allegations that UBS had pushed thousands of traditional brokerage customers into the fee-based InsightOne accounts.

A lawsuit filed in December accused UBS of violating state fraud laws, breaches of fiduciary duty and common law fraud. It also alleged that UBS had been aware that InsightOne would be unsuitable and more costly for brokerage customers making few trades a year.

“UBS convinced customers to rely on its advice and then abused that trust,” Mr. Cuomo said in a statement Monday.

...more...

[whistle]

9. What was the stock market high when Bill Clinton left office

...wasn't it at around 12,000? So really what has Bush done for the market taking into account inflation which is going up by 4.5% annually for the past five years under Bush? To have kept pace with inflation the Dow index should be at the 15,000 mark. and to have stayed ahead of the inflation curve the Dow might need to be over 18,000 right now. Bush's economy has been a total failure especially considering that the gains have been almost completely due to the wars Bush created.

[ozymandius]

13. numbers

Check the numbers at the top of the thread that show the averages when Bush was sworn into office.

[UpInArms]

10. Subprime Woes: A Company's Stock Suffers, but Mostly in Silence

http://www.nytimes.com/2007/07/17/business/17place.html?ex=1342324800&en=d17857561f4bc90d&ei=5088&partner=rssnyt&emc=rss

By its own measures, everything looks good at ACA Capital Holdings, a financial management and insurance company. But other numbers do not look so good, and the stock price is falling rapidly. The company will not comment on what is going on.

In New York Stock Exchange trading yesterday, ACA shares fell 22 percent, dropping $1.87, to $6.59, on the heaviest volume in the company’s brief history. The shares have lost a third of their value since Thursday, and are trading at less than half of their value a month ago.

ACA has written billions of dollars worth of insurance on the value of financial assets, and it manages collateralized debt obligations, or C.D.O.’s — investment vehicles that invest in bonds backed by risky mortgages and other debt — on billions more. Some of the C.D.O.’s it manages for others were mentioned by bond rating agencies last week as candidates for downgrading.

But it is not clear how much pain ACA could suffer from the subprime market. In detailing its exposure to subprime mortgage loans on its Web site last week, the company said that nearly all of its direct exposure to subprime mortgage debt came through securities rated AAA by at least one bond rating agency. Such securities have generally held their value even as others have plunged in market value amid turmoil in the subprime market.

Late yesterday, Standard & Poor’s, the rating agency, said it was considering lowering ratings on various securities issued by 19 C.D.O.’s, including 4 managed, though not owned, by ACA. The agency said the moves “reflect the increased probability of default” of underlying mortgages.

http://www.nytimes.com/imagepages/2007/07/17/business/20070717_PLACE_GRAPHIC.html

...more...

[ozymandius]

11. U.S. stocks head for lower open

NEW YORK - U.S. stocks headed for a lower open Tuesday ahead of economic data on housing as well as a handful of quarterly results from blue chip names including Coca-Cola Co., Intel Corp. and Merrill Lynch.

Tuesday's session follows a day in which the Dow Jones industrial average came within about 11 points of the psychological barrier of 14,000 and broader stocks fell but largely held onto sharp advances logged toward the end of last week.

Investors who have been concerned about rising prices as they try to determine what the Federal Reserve will do to combat inflation will pay close attention to the Labor Department's planned release of the Producer Price Index. The June PPI is expected to again increase after posting a rise in May. The core figure, which eliminates often volatile food and energy prices, is also expected to rise.

Increasing oil prices have in recent months been widening the distance between the overall and core readings, stirring some concerns that inflation will deplete some of consumers' ability to keep spending and help prop up the economy.*

http://news.yahoo.com/s/ap/20070717/ap_on_bi_st_ma_re/wall_street

*In case this is new information for you - the money we spend on gasoline is figured into the consumer spending numbers. I know - makes no sense in the grand scheme of things such as overall economic health. But it keeps the CNBC cheerleaders happy when they jubilantly report how much money the average consumer digs out of pocket.

[UpInArms]

14. US tech trade deficit tops $102B in '06

http://news.yahoo.com/s/ap/20070717/ap_on_bi_ge/high_tech_u_s__economy

WASHINGTON - The U.S. technology industry imported more computers, high-tech components and consumer electronics in 2006 than it exported, resulting in a record $102 billion trade deficit in the sector, according to a new report due out Tuesday.

Total tech imports hit $322 billion in 2006, up 9 percent from the prior year, according to the report from the tech industry's largest trade group, AeA. The U.S. imported more high-tech goods from China than any other nation.

But the import numbers don't tell the whole picture. Many American companies, such as semiconductor giant Intel Corp., design and test their chips in the United States, but manufacture them in their plants overseas and then import them. Just how many of these "intracompany transfers" make up the overall import figure can't be discerned from government data, according to AeA.

U.S. high-tech exports have increased over the past four years, although they're still running below the dot-com bubble record of $223 billion set in 2000, according to the report from the AeA, which includes Hewlett-Packard Co., Microsoft Corp. and Dell Inc. among its 2,500 members.

...more...

[ozymandius]

16. Dow looks for 14,000 (updated for sentiment)

LONDON (CNNMoney.com) -- Stocks looked set to extend their record-setting run Tuesday after a key inflation report didn't offer any major surprises.

At 8:30 a.m. ET, futures were higher, with a comparison to fair value pointing to a positive opening for U.S. stocks.

Futures got a boost after the Labor Department released its report on the prices of goods at the wholesale level. The government said wholesale prices fell 0.2 percent in June, versus expectations for a rise of 0.1 percent.

The closely watched core Producer Price Index, which excludes food and energy costs, rose 0.3 percent. That exceeded consensus forecasts for a gain of 0.2 percent, but wasn't enough to rattle investors.

The generally tame report could help drive gains on Wall Street, where the Dow industrials has closed at a record high for the past three straight sessions.

http://money.cnn.com/2007/07/17/markets/stockswatch/index.htm?postversion=2007071706

[ozymandius]

22. pre-open numbers and blather

08:33 am : S&P futures vs fair value: +1.1. Nasdaq futures vs fair value: +3.5. Total PPI unexpectedly fell 0.2% (consensus 0.1%) in June, the first decline since January. The more closely-watched core rate, though, rose 0.3% (consensus 0.2%), lifting the year/year rate to 1.8% from 1.6%. Nonetheless, the futures market so far has improved slightly following evidence of a welcome drop in food and energy prices even though bonds have weakened a bit on the slight rise in the core rate. The 10-year note is now down 5 ticks to yield 5.06%.

08:00 am : S&P futures vs fair value: +0.4. Nasdaq futures vs fair value: +2.0. Futures indications are well off their morning lows and now suggest a slightly higher start for stocks. Investors are embracing news that Basell has agreed to buy Lyondell Chemical (LYO) for $12.1 bln in cash while the bulk of this morning's earnings reports (e.g. JNJ, KO, MER, KEY, STT) are also checking in better than expected.

The modestly positive disposition, though, is certainly subject to change at the bottom of the hour given the Fed's repeatedly hawkish stance and the fact that investors will get the latest read on inflation at the wholesale level at 8:30 ET. Economists are expecting just a 0.1% jump in total PPI and another 0.2% increase in the core component, which would likely leave a tame 1.7% year/year rate. The 10-year note is currently down 3 ticks to yield 5.05 %.

[Buttercup McToots]

23. Interesting...

http://www.bloomberg.com/apps/news?pid=email_en&refer=home&sid=aaqZ8.eQix_k

Snip:
Stocks in U.S. Poised for 10 Percent Drop, Options Bets Show

By Nick Baker and Michael Tsang


Traders work in the S&P 500 futures pit July 16 (Bloomberg) -- Bets in the options market against the Standard & Poor's 500 Index have exceeded wagers it will rise by a 2-to-1 margin for a month, the longest since Bloomberg began compiling the data in 1995.

That's seen as a warning sign the market is due for a decline of 5 to 10 percent after the S&P 500 rose to two records last week, say managers of almost $1 trillion at Morgan Stanley Global Wealth Management, National City Private Client Group and Russell Investment Group. The Leuthold Group, whose flagship fund has beaten 99 percent of similar funds over the last five years, expects the S&P 500 to slide as much as 19 percent by the end of the year.

The options market is ``a bell ringer,'' said David Darst, who oversees $728 billion as chief investment strategist at New York-based Morgan Stanley's private banking unit. ``On a short- term basis, the market's ahead of itself and could have a pullback.'' Darst, who cashed in some stocks in the past 12 months, said the market could drop as much as 10 percent.

The increase in so-called put options coincides with analysts' outlook for the worst corporate earnings since 2002. Retail sales slid in June by the most in almost two years, a signal that near-record gasoline prices and falling home values are taking a bigger toll on consumers than economists had forecast.

[Demeter]

26. Only 10%?

or is that on a per day basis?

[democrat2thecore]

50. Time to load up on those international stocks!

Risk? Yes. Is the U.S. market due for a MAJOR correction? Hell yes.
I'll buy the International stocks.

[Buttercup McToots]

24. $80.30

per Kitco

[Ghost Dog]

28. Asian Stocks Rise, Led by Taiwan; Japan's Shares Fall on Quake(s)

http://www.bloomberg.com/apps/news?pid=20601080&sid=af2y5iXc4QCo&refer=asia

July 17 (Bloomberg) -- Asian stocks rose, paced by Taiwan's biggest companies after UBS AG raised its estimate for the nation's benchmark. Japanese stocks fell, led by insurers and power producers, after yesterday's earthquake.

Taiwan Cement Corp. and Cathay Financial Holding Co. paced gains after the brokerage raised its 12-month estimate for the nation's Taiex index to 12,000.

``The UBS report is a confidence booster and investors can buy industry leaders as a way to benefit in the bull market,'' said Phil Chen, who manages $154 million at Grand Cathay Securities Investment Trust Co. in Taipei.

Millea Holdings Inc., Japan's No. 1 insurer by market value, declined after yesterday's magnitude 6.8 quake in northwest Japan killed at least nine people and destroyed property. Tokyo Electric Power Co. dropped as it was ordered to keep closed a damaged nuclear power plant that leaked contaminated water.

The Morgan Stanley Capital International Asia-Pacific Index gained less than 0.1 percent to 159.27 as of 7.20 p.m. in Tokyo. Japan's Nikkei 225 Stock Average dropped 0.1 percent to 18,217.27, while the broader Topix index fell 0.3 percent. Japan's markets were closed yesterday for a holiday, a day on which India's Sensitive Index was the only regional benchmark to advance.

Asian benchmarks rose, apart from Singapore, Malaysia, the Philippines, India and Sri Lanka. Thailand's SET Index was little changed, while markets in South Korea were shut.

Shenzhen Development Bank Co. led a surge in China's CSI 300 Index after the company said profit more than doubled. Cnooc Ltd. and Nippon Oil Corp. jumped as oil prices traded near an 11-month high. Paladin Resources Ltd. climbed on speculation the Australian uranium explorer will receive a takeover bid.

/...

[Ghost Dog]

29. Japan says econ recovering, rate hike seen nearing

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070717:MTFH52435_2007-07-17_07-49-45_T135399&type=comktNews&rpc=44

TOKYO, July 17 (Reuters) - The Japanese government stuck to its view that the economy was recovering despite weak industrial output, while noting softer consumer confidence, in a monthly economic report issued on Tuesday.

"The economy is recovering despite weakness in some sectors of industrial production," the government said, using the same phrase for the fourth straight month.

Economics Minister Hiroko Ota said a slowdown in exports to the United States was part of the reason behind the weakness in output and vowed to monitor developments in the world's biggest economy.

Bank of Japan Governor Toshihiko Fukui, nevertheless, said he was not worried about production, in a sign that the central bank sees that the economy remains on a recovery track, paving the way for future rate hikes.

...

More than two-thirds of economists surveyed by government-affiliated Economic Planning Association expect the BOJ to raise interest rates in August.

/...

[Ghost Dog]

30. Quake may lead TEPCO to use thermal power-analysts

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070717:MTFH52680_2007-07-17_08-06-01_T293373&type=comktNews&rpc=44

TOKYO, July 17 (Reuters) - The unplanned closure of Tokyo Electric Power Co.'s quake-hit nuclear plant during the peak season could force Asia's lagest utility to restart fossil fuel power plants, leading to increased demand for non-nuclear fuel, analysts said on Tuesday.

TEPCO (9501.T: Quote, NEWS , Research) does not anticipate an electricity shortage in the short term, but the indefinite shutdown of the 8,212 megawatt-power plant, the world's largest, could mean it facing a power crunch this summer, which is forecast to be hot, they said.

Asia's largest utility was told by the government to delay restarting its Kashiwazaki-Kariwa plant, located near the focus of Monday's quake, until its safety can be ensured.

"If the Kashiwazaki plant is going to be closed for a long time, TEPCO will have to make a decision about when to restart its thermal power plants fairly quickly," said an official at Japan's Institute of Energy Economics.

"If it decides to run thermal plants, the company will have to buy fuel oil from the spot market," he said.

Toshinori Ito, a senior analyst at UBS Securities Japan, said TEPCO could overcome a possible shortage by seeking help from other utilities or asking big users to limit usage of electricity during the summer season.

The IEEJ official agreed TEPCO could turn to other utility companies for extra electricity supplies, although he said there was a possibility this would be insufficient if consumption at other utilities rises during the peak season.

/...

[Ghost Dog]

33. Japanese Stocks Decline, Led by Insurers After Earthquake

http://www.bloomberg.com/apps/news?pid=20601101&sid=abSnFntTfwbI&refer=japan

July 17 (Bloomberg) -- Japanese stocks dropped, led by insurance companies such as Millea Holdings Inc. and power producers after a magnitude 6.8 earthquake struck northwest Japan yesterday, damaging a nuclear reactor operated by Tokyo Electric Power Co.

The event will probably result in a push for more spending on quakeproofing, the Nikkei newspaper reported. The Topix Insurance Index had the biggest percentage loss among the 33 industry groups in the broad measure. Tokyo Electric declined to its lowest since December.

Shares of companies with factories in the region that were forced to halt production slipped. Sanyo Electric Co. evacuated its facilities, while auto parts maker Riken Corp.'s main plants were damaged.

``The earthquake's biggest effect is on stocks in the insurance and electric power industries,'' said Yoshinori Nagano, who helps oversee about $70 billion at Daiwa Asset Management Co. in Tokyo. ``It's not clear how much insurers will have to pay, but with the typhoon over the weekend as well, there's growing risk of increased natural-disaster costs.''

The Nikkei 225 Stock Average lost 21.68, or 0.1 percent, to 18,217.27. The broader Topix index fell 5.09, or 0.3 percent, to 1778.11. Japan's markets were closed yesterday for a national holiday.

Sumitomo Corp. led gains by oil-related companies after the price of crude climbed above $74 a barrel for the first time since August 2006 and the Nikkei reported the company will expand mining operations in South Africa.

Earthquake Damage

Shipping lines gained, led by Kawasaki Kisen Kaisha Ltd. which advanced on expectations that it would raise its full-year profit forecast because of higher container rates.

/...

[Ghost Dog]

31. HK shares gain, stay above 23,000; Fosun jumps

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070717:MTFH53501_2007-07-17_08-51-35_HKG32610&type=comktNews&rpc=44

HONG KONG, July 17 (Reuters) - Hong Kong stocks rose 0.5 percent on Tuesday as a strong rebound in mainland-listed equities spurred buying interest, with mainland lender Industrial & Commercial Bank of China (1398.HK: Quote, Profile , Research) getting a further boost from a broker upgrade.

With no single sector dominating the day's trade amid the market's consolidation, one standout was newcomer Fosun International Ltd. (0656.HK: Quote, Profile , Research) which rallied more than 7 percent at one point, as investors saw value in the mainland conglomerate a day after its debut saw profit-taking.

Mainland stock markets were hit by a sell-off on Monday, ahead of a slew of economic data out of China later in the week.

Expectations are high for China's June consumer price index, an inflation indicator, to surge above 4 percent and trigger an interest rate increase by the country's central bank.

But any pullback over the prospect of more tightening measures by Beijing could be reversed, thanks to ample funds in the market, said Andy Lam, strategist at Harris Fraser.

"Market sentiment is very strong," Lam said.

/...

[Ghost Dog]

32. China parliament cautions on overheating -Xinhua

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070717:MTFH56582_2007-07-17_11-32-33_PEK155670&type=comktNews&rpc=44

BEIJING, July 17 (Reuters) - China's economy is showing increasing signs of overheating, underscoring the need for policymakers to be vigilant in the months ahead, a sub-committee of the rubber-stamp parliament said on Tuesday.

Overly rapid credit and investment growth and a ballooning trade surplus were major problems facing the economy, official media cited the financial and economic affairs committee of the National People's Congress as concluding.

"The trend of economic growth going from relatively rapid to overheating is becoming more evident," Xinhua news agency cited the committee as concluding after it had consulted with regulatory bodies, including the central bank and the top planning agency.

It used the same phrasing as recent calls by Premier Wen Jiabao and the central bank for the government to "appropriately tighten monetary policy amid stability".

It also said that China should continue to put the brakes on the supply of land and credit to rein in investment growth and also slow down the expansion of energy-intensive sectors.

The committee also said that China continued to face increasing inflationary pressures, driven by rapid growth in food and property prices.

"China should pay a high degree of attention to the problem of overly rapid growth in food prices, and closely monitor price changes in both domestic and overseas markets," the committee said, according to Xinhua.

/...

[Ghost Dog]

34. European stocks retreat in midday trade

http://mwprices.ft.com/custom/ft2-com/html-story.asp?pulse=true&siteid=ft&dist=ft&guid=%7Bb5a7d4a5%2D8e9d%2D4308%2Da78d%2D97029309deef%7D

European equity markets lost ground on Tuesday as investors worries about key economic figures in the US. US producer price inflation (PPI) data is due out today, followed by consumer price index (CPI) data tomorrow, and both will give an indication of future interest rates in the world’s largest economy. Amid worries of further losses in the subprime mortgage market, the FTSE Eurofirst 300, which hit a new six-and-a-half year high on Monday, lost 12.32 points, or 0.8 per cent, to 1,618.1. Germany’s Dax Index fell 1.3 per cent as investor confidence declined for a second straight month in July, while France’s CAC-40 was off 1 per cent. The mining sector was very weak, with the UK’s Lonmin down 4.2 per cent to £28.16. Oil stocks also succumbed to profit taking as the crude price slipped from its high of the previous session. Neste Oil of Finland lost 4.2 per cent to €26.74.

[Ghost Dog]

35. FTSE drops 1 pct as inflation data stokes rate fears

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070717:MTFH56648_2007-07-17_11-35-30_L1770708&type=comktNews&rpc=44

LONDON, July 17 (Reuters) - Britain's top share index fell nearly 1 percent on Tuesday as inflation data stoked fears of further interest rate increases in the UK and miners also weighed on the index, suffering from broker downgrades.

Consumer prices rose 0.2 percent on the month, bringing the annual rate down a 10th of a point to 2.4 percent, which is still above the central bank's 2.0 percent target and many analysts had predicted a sharper fall.

The market had already been downbeat in early trade as investors braced for U.S. inflation data after fresh fears over the subprime mortgage market fuelled concerns about the state of the world's largest economy.

"Marginal disappointment on the CPI numbers I think is really what's rattling the market here," said Philip Lawlor, chief portfolio strategist at Nomura.

"They weren't really bad numbers but at the margin they didn't come down quite as much as people anticipated so the expectation now is (the data) will force the hand of the Bank of England to move rates yet again."

The BoE raised its basic rate to 5.75 percent in July.

At 1115 GMT the FTSE 100 index .FTSE was down 0.9 percent.

/...

[Ghost Dog]

44. European equities fall, snap 3-day winning streak

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070717:MTFH65558_2007-07-17_17-05-51_L17828230&type=comktNews&rpc=44

LONDON, July 17 (Reuters) - European stocks closed lower on Tuesday as investors worrried about the impact of the troubles in the U.S. subprime market and weaker-than-expected German investment sentiment.

Oil firms slipped, with Total (TOTF.PA: Quote, Profile , Research) down 1.1 percent and Eni (ENI.MI: Quote, Profile , Research) 0.4 percent lower as London Brent crude oil futures lost 1.6 percent to $75.0 a barrel after a recent rise.

Among losers, Novartis (NOVN.VX: Quote, Profile , Research) shed 1.1 percent after the Swiss drugmaker cut its 2007 sales forecasts and said two important new treatments faced delays in winning U.S. approval.

The FTSEurofirst 300 index <.FTEU3> of leading European shares closed down 0.5 percent at 1,622.8, snapping a three-day winning run during which the index gained nearly 2 percent.

The benchmark hit a 6-1/2-year closing high on Monday and is still up about 9 percent so far this year.

Earlier, a survey by the ZEW economic think tank showed its economic sentiment indicator for Europe's largest economy, based on responses from analysts and institutional investors, fell to 10.4 this month from 20.3 in June.

...

Around Europe, London's FTSE 100 .FTSE lost 0.6 percent, Paris's CAC-40 <.FCHI> shed 0.4 percent and Frankfurt's DAX <.GDAXI> declined 0.8 percent.

"Given the pattern of gently rising interest rates, equity markets may tend to mark time over the summer, in a traditional pattern, before picking up momentum in the autumn," Peter Thomson, chief investment officer at Taylor Young Investment Management said in a note.

Among gainers, Swedish white goods maker Electrolux (ELUXb.ST: Quote, Profile , Research) jumped 8.4 percent after it pleased investors with an unexpectedly strong quarter.

/...

[Ghost Dog]

46. Downgrades weigh on FTSE

http://mwprices.ft.com/custom/ft2-com/html-story.asp?pulse=true&siteid=ft&dist=ft&guid=%7Bb28ceb43%2D2fe9%2D4759%2D9d7d%2Df5e71918aafa%7D

London equities fell back on Tuesday as broker downgrades weighed and investors reacted cautiously to UK inflation data, shrugging off rises on US markets taking the Dow Jones Industrial Average to record intraday highs. New government figures showed that the annual rate of UK consumer price inflation eased to 2.4 per cent in June from 2.5 per cent in May, a smaller fall than had been expected. The core CPI annual rate, which strips out energy, food, alcohol and tobacco prices, climbed from 1.9 per cent to 2 per cent, its highest level for 10 years and raising fears of further interest rate rises. The FTSE 100 lost 0.6 per cent to 6,659.10, with only a handful of stocks in positive territory, while the mid-cap FTSE 250 1 per cent weaker at 11,801.0.

[UpInArms]

37. Merrill Lynch CFO says subprime still shaky

http://www.reuters.com/article/bondsNews/idUSN1720681220070717

NEW YORK (Reuters) - The chief financial officer at Merrill Lynch & Co. Inc. (MER.N: Quote, Profile, Research) said on Tuesday the subprime mortgage and collateralized debt obligation sectors have yet to fully stabilize.

But Merrill Lynch Chief Financial Officer Jeff Edwards said that he is seeing some positive signals from those markets. He made his remarks during a conference call with analysts and investors.

[mojavekid]

43. Bloomberg: Goldman, JPMorgan Saddled With Debt They Can't Sell (Update2)

http://www.bloomberg.com/apps/news?pid=20601103&sid=aserXf4f8u2M&refer=us

July 17 (Bloomberg) -- Goldman Sachs Group Inc., JPMorgan Chase & Co. and the rest of Wall Street are stuck with at least $11 billion of loans and bonds they can't readily sell.

The banks have had to dig into their own pockets to finance parts of at least five leveraged buyouts over the past month because of the worst bear market in high-yield debt in more than two years, data compiled by Bloomberg show.

Bankers, who just a few months ago boasted that demand for high-yield assets was so great that they would have no problem raising debt for a $100 billion LBO, are now paying for their overconfidence. The cost of tying up their own capital may curb earnings and stem the flood of LBOs, which generated a record $8.4 billion in fees during the first half of 2007, according to Brad Hintz, the former chief financial officer at New York-based Lehman Brothers Holdings Inc.

``The private equity firms, being very tough negotiators, are unlikely to let the banks off the hook,'' said Martin Fridson, chief executive officer of high-yield research firm FridsonVision LLC in New York. ``They'll say that's your problem and that's why we're paying you: To take risk.''

more...

[Ghost Dog]

41. Toronto stocks rebound as investors seek value

http://yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=2007-07-17T142405Z_01_N17208225_RTRIDST_0_MARKETS-CANADA-STOCKS.XML

TORONTO, July 17 (Reuters) - Toronto's main stock market index jumped more than 80 points early on Tuesday, buoyed by firm commodity prices, as investors snapped up stocks offering value after steep losses in the previous session.

Just after the open, the Toronto Stock Exchange's S&P/TSX composite index <.GSPTSE> was up 82.76 points, or 0.6 percent, at 14,421.01. On Monday, the index shed 158.25 points.

All 10 of the TSX index's main groups rose, led by a 1 percent boost in the energy group and a 0.5 percent climb in the materials sector. Telecommunication stocks were up 0.8 percent.

Energy shares, which account for about 30 percent of the overall market, gained as the price for U.S. crude oil jumped 1.4 percent to $75.19 a barrel.

Most of the country's biggest producers were higher, including Suncor Energy (SU.TO: Quote, Profile , Research), which climbed C$1.49 to C$98.87 and Canadian Natural Resources (CNQ.TO: Quote, Profile , Research), which gained 94 Canadian cents to C$73.86.

Materials shares rose on the back of firmer metals prices, including a record high for lead, while gold stocks benefited from a rebound in spot gold prices.

/..

[UpInArms]

42. OT: Couple may lose home over $1.63 tax bill

http://www.9news.com/news/article.aspx?storyid=73825

SLIDELL, La. (AP) - A $1.63 property tax bill that never reached its destination in 1996 has turned into a nightmare for Kermit and Dolores Atwood, who are now trying to keep from losing their home over the unpaid notice.

Dolores Atwood calls the events that followed the wayward bill, including the eventual sale of their home at a sheriff's tax sale, "seven years of emotional hell."

<snip>

The couple hopes recent state court decisions, which say their home should never have been put up for sale, withstand appeals by a land company.

In 2000, the Atwoods learned their four-bedroom home had been sold in a tax sale three years earlier for the $1.63 in unpaid taxes, plus 10 cents interest and $125 in sale costs.

<snip>

Atwood then complained to the sheriff's and assessor's offices that she never received the bill and knew nothing about it. The house, which the couple has owned mortgage-free since 1968, previously was totally state homestead exempt, meaning there was no tax bill, Atwood said.

...more...

[mojavekid]

45. Dr. Housing Bubble: MISSION ACCOMPLISHED:

http://www.financialsense.com/fsu/editorials/drhousing/2007/0716.html



MISSION ACCOMPLISHED:
3 HOUSING ISSUES:
Multiple Bottoms, Declining Dollar,
and More Sub-prime and Alt-A Defaults
by Dr. Housing Bubble
drhousingbubble.blogspot.com
July 16, 2007





It is said that the definition of insanity is doing the same thing over and over and expecting a different result. If we adhere to this definition, housing pundits must be clinically insane because since the middle of 2006 we’ve been hearing rhetoric of “yes, today we’ve reached bottom.” Amazing how these folks live on one way streets. During the past seven years, each new record high was welcomed and when asked if this was a peak most would respond that the sky was the limit. No end in their immediate future. If up to them, housing would appreciate 20% each year until the end of time. Yet now that we’ve experienced only a few moderately challenging quarters the housing complex is ready to throw in the towel and issue a Siren call that this is the absolute bottom, mission accomplished. They would like us to believe their rhetoric as gospel and ignore every fundamental economic indicator pointing to the contrary.

Multiple Bottoms

Let us take a look at a few bottom calls from David Lereah, the former chief economist for the National Association of Realtors:

May 25, 06: "This may be the bottom. It appears May is a little better." (Real Estate Journal)

September 25, 06: "We've been anticipating a price correction and now it's here. The price drop has stopped the bleeding for housing sales. We think the housing market has now hit bottom." (Bloomberg)

Dec 29, 06: "It appears we've hit bottom, the price drops are necessary to stir sales. It is working." (Globe and Mail )

Mr. Lereah also issued a bottom call in March but at this point why keep track? We also have Leslie Appleton-Young from the California Association of Realtors saying "Our economy is growing. We're running about on par with what we see nationally.” Apparently she didn’t take a look at the massive hit in GDP during the first quarter that came out early this year. And of course we have the talking heads over at the Fed saying that we’ve reached bottom in the housing market. Sometimes I feel like I’m taking crazy pills listening to these folks. How can we be at bottom if for the next two years we will be facing resets of approximately $100 billion per month according to the MBA. Take a look at this chart:

snip...

Sub-prime and Alt-A Resets and Defaults

We’ve all heard about the debacle in sub-prime loans. The absolute debauchery going on in companies such as New Century Financial have made many people recoil. Or cases where a 102 year old man was able to obtain a 25 year mortgage loan, apparently with new modified underwriting standards. Or the immigrant worker with a $15,000 salary purchasing a $700,000 home. These stories are tips of the iceberg of what we will be expecting in the next few years. But again, the pundits in the real estate industry maintained that Alt-A loans, those given to prime borrowers but with lax underwriting standards, are now taking a hit. Apparently good credit can turn bad instantly if put in a precarious situation. We are starting to see cracks in this system as well. Maybe this could be part of the fact that 30% of all jobs contributed in the past 7 years have direct ties to real estate. So if real estate goes down, these folks lose their jobs, and no credit can stay good with unemployment.

But don’t listen to the facts. This mission is accomplished. Housing has hit bottom. Go out and buy a home, it is your patriotic duty.

more at link...

[UpInArms]

48. US July Home Builders index falls to 24 vs 27 expected

12. Builders' confidence falls to cyclical lows in all 4 regions
1:01 PM ET, Jul 17, 2007 - 1 hour ago

13. U.S. home builders' index lowest since Jan. 1991
1:01 PM ET, Jul 17, 2007 - 1 hour ago

14. U.S. July home builders index falls to 24 vs. 27 expected
1:01 PM ET, Jul 17, 2007 - 1 hour ago

[ozymandius]

49. closing numbers

Dow 13,971.55 Up 20.57 (0.15%)
Nasdaq 2,712.29 Up 14.96 (0.55%)
S&P 500 1,549.37 Down 0.15 (0.01%)
10-Yr Bond 5.078% Up 0.037
NYSE Volume 2,857,007,000
Nasdaq Volume 2,160,044,000

blather to come

[ozymandius]

52. closing blather

4:20 pm : For a second straight day, stocks finished mixed. A batch of better than expected earnings, more proof the market remains awash in liquidity, and the first drop in producer prices since January initially armed the bulls with enough momentum to power the Dow to its fifth straight victory and, more notably, above 14,000 for the first time ever.

However, some nervousness heading into another deluge of corporate earnings, a closely-watched update on inflation (e.g. CPI), and the start of a two-day testimony before Congress from Fed Chairman Bernanke left some questioning whether the market's sizable gains of late are sustainable.

The Dow closed in record territory again; but its best performer was not among the two components in focus after topping Wall Street's expectations. Johnson & Johnson (JNJ 62.75 -1.05) beat forecasts and backed its full-year profit outlook but lowered its 2007 sales growth guidance. Coca-Cola (KO 53.06 -0.79) also checked in better than expected but continued weakness in North American sales left investors questioning the 52-week high shares hit a day earlier.

The Dow's salvation was American Express (AXP 64.80 +2.92), which accounted for all of the Dow's 20-point gain. The stock soared 4.7% after Goldman Sachs upgraded the stock to Buy and raised its price target to $77 from $66.

A technical breakout in General Electric (GE 40.77 +0.65), the second most heavily-weighted name on the S&P 500, was another bright spot and was the biggest reason behind Industrials pacing the way among just four sectors finishing higher. As evidenced by the Nasdaq turning in the best performance among the major averages, Novellus Systems (NVLS 33.03 +3.34) essentially calling the bottom in bookings helped validate optimism throughout Technology and support our recent upgrade on the sector to Overweight.

KLA-Tencor (KLAC 61.78 +5.08) later in the session offering some upbeat commentary out of the SEMICON West conference also helped pave the way for Intel (INTC 26.32 +0.37), a suggested holding in the Briefing.com Active Portfolio, ahead of its report tonight. A 3.1% rally in Yahoo! (YHOO 27.52 +0.82) ahead of its results after the close and a 2.5% surge in Microsoft (MSFT 30.77 +0.74), which also reports this week, provided additional sector support.

Materials (+0.6%) was the day's third best performing sector. Basell agreeing to buy Lyondell Chemical (LYO 47.05 +6.93) for $12.1 bln in cash and a $2 bln buyback from Rohm & Haas (ROH 61.27 +5.54) earmarked chemical stocks among the session's biggest winners. After being up as much as 1.6% at $75.35/bbl level intraday, crude for August delivery heading into expiration and closing relatively flat was also noteworthy.

Unfortunately, subsequent deterioration in the Energy (-0.9%) sector removed much of the leadership that had helped the S&P 500 recently hit historic highs and contend with the lack of participation from the more heavily weighted Financial sector.

The latter was in focus after Merrill Lynch (MER 86.86 -0.53) posted a 31% jump in Q2 profits; but its CFO saying the market for subprime debt has yet to stabilize prompted a reversal in MER shares and, had it not been for the rally in AXP, the sector would have slipped further into negative territory for the year.

Separately, today's headline PPI unexpectedly falling for the first time in five months due to a drop in food and energy prices was also welcome news for investors. When it was all said and done, though, investors opted to wait for Wednesday's more influential CPI report to get a better inflation read for Fed policy direction. BTK +0.1% DJ30 +20.57 DJTA +0.4% DJUA -0.1% DOT +0.4% NASDAQ +14.96 NQ100 +0.7% R2K +0.2% SOX +3.0% SP400 +0.2% SP500 -0.15 XOI -1.0% NASDAQ Dec/Adv/Vol 1497/1556/2.14 bln NYSE Dec/Adv/Vol 1885/1366/1.43 bln

[DemReadingDU]

51. Two Bear Funds Nearly Worthless

from bonddad:

Weeks after the meltdown of two prominent Bear Stearns Cos. hedge funds that bet heavily on the market for risky home loans, the brokerage has told the funds' investors that the portfolios' assets are almost worthless, according to people familiar with the matter.

The assets in Bear's more-levered fund, the High-Grade Structured Credit Strategies Enhanced Leverage Fund, are worth virtually nothing, according to people familiar with the matter. The assets in the larger, less-levered fund are worth roughly 9% of the value since the end of April, these people said. The April valuations were not immediately available, but in March, before their sharp losses, the enhanced leverage fund had $638 million in investor money, while the other fund had $925 million.

The two funds have been in the spotlight for weeks after suffering heavy losses in the subprime market. Late last month, Bear helped stabilize the less-levered fund with a $1.6 billion secured loan; the enhanced fund began trying to unwind its remaining $1.1 billion in debt.

Bear disclosed this information to investors earlier today and is expected to make a statement this evening, these people said. A spokeswoman for Bear did not return calls for comment.

These losses, which took more than two weeks to calculate because of the fluctuating values in the market for risky, or subprime, mortgage securities, came amid another tumultuous day for the broader mortgage market. One particularly wobbly slice of the market tracked by a closely watched index called the ABX fell to an all-time low of 44.


http://bonddad.blogspot.com/2007/07/this-is-not-good.html


edit to add CNN link...
http://money.cnn.com/news/newsfeeds/articles/djf500/200707171734DOWJONESDJONLINE000700_FORTUNE5.htm