From Calculated Risk: February Economic Summary in Graphs
From Big Picture: Words from the Investment Wise
Saturday, February 28, 2009
Saturday, February 21, 2009
Tuesday, February 17, 2009
Saturday, February 14, 2009
S&P Q4 Earnings Collapsed
From the Big Picture: S&P500 Q4 Earnings Collapse
Because of the "kitchen sink" earnings writeoffs being reported currently, trailing four-quarter earnings per share are down some 67% from their $84.92 high in 2Q'07 down to $27.69 in 4Q'08 as estimated from 85% of the S&P 500 companies who have reported through 2/12/09.
S&P further estimates that the current $27.69 will drop to $14.15 in 3Q'09, which will be a 83% collapse from their high nine quarters earlier.
With the S&P 500 index at 827, the stock market's current P/E ratio is currently 30 and an incredible 58 based on earnings three quarters from now.
Because of the "kitchen sink" earnings writeoffs being reported currently, trailing four-quarter earnings per share are down some 67% from their $84.92 high in 2Q'07 down to $27.69 in 4Q'08 as estimated from 85% of the S&P 500 companies who have reported through 2/12/09.
S&P further estimates that the current $27.69 will drop to $14.15 in 3Q'09, which will be a 83% collapse from their high nine quarters earlier.
With the S&P 500 index at 827, the stock market's current P/E ratio is currently 30 and an incredible 58 based on earnings three quarters from now.
Friday, February 13, 2009
Fair Value for S&P = 440
From Big Picture: Fair Value for S&P = 440
From WSJ about earnings collapse.
From WSJ about earnings collapse.
The flip side of earnings is valuation — and that is the main problem here:
There are hints lately that the economy’s collapse isn’t quite as precipitous as it once was, which suggests the worst may be over for corporate profits, too. That doesn’t mean they are anywhere close to normal.
Since World War II, earnings have grown at about 6% a year, slightly trailing economic growth. But earnings have fallen well off trend during the current recession.
“As-reported” earnings per share — which, unlike “operating” EPS, conform to accounting standards — of companies in the S&P 500 are on pace to total just $28.75 for the past four quarters, according to Standard & Poor’s. That is roughly 61% below where they would be had they maintained a 6% growth rate in recent years, estimates Vitaliy Katsenelson, head of research at Investment Management Associates in Denver.
Slap a 15 multiple on that, and you end up with a very ugly S&P500 number . . .
New Office Policy - Fun!
EFFECTIVE AUGUST 1, 2008
NEW OFFICE POLICY
Dress Code:
1) You are advised to come to work dressed according to your salary.
2) If we see you wearing Prada shoes and carrying a Gucci bag, we will assume you are doing well financially and therefore do not need a raise.
3) If you dress poorly, you need to learn to manage your money better, so that you may buy nicer clothes, and therefore you do not need a raise.
4) If you dress just right, you are right where you need to be and therefore you do not need a raise.
Sick Days:
We will no longer accept a doctor's statement as proof of sickness. If you are able to go to the doctor, you are able to come to work.
Personal Days:
Each employee will receive 104 personal days a year. They are called Saturdays & Sundays.
Bereavement Leave:
This is no excuse for missing work. There is nothing you can do for dead friends,
relatives or co-workers. Every effort should be made to have non-employees attend the funeral arrangements in your place. In rare cases where employee involvement is necessary, the funeral should be scheduled in the late afternoon. We will be glad to allow you to work through your lunch hour and subsequently leave one hour early.
Bathroom Breaks:
Entirely too much time is being spent in the toilet. There is now a strict three-minute time limit in the stalls. At the end of three minutes, an alarm will
sound, the toilet paper roll will retract, the stall door will open, and a picture will be taken. After your second offense, your picture will be posted on the
company bulletin board under the 'Chronic Offenders' category. Anyone caught smiling in the picture will be sectioned under the company's mental health policy.
Lunch Break:
* Skinny people get 30 minutes for lunch, as they need to eat more, so that they can look healthy.
* Normal size people get 15 minutes for lunch to get a balanced meal to maintain their average figure.
* Chubby people get 5 minutes for lunch, because that's all the time needed to drink a Slim-Fast.
Thank you for your loyalty to our company. We are here to provide a positive employment experience. Therefore, all questions, comments, concerns, complaints, frustrations, irritations, aggravations, insinuations,
allegations, accusations, contemplations, consternation and input should be directed elsewhere.
The Management
Pass this on to all who are employed!
NEW OFFICE POLICY
Dress Code:
1) You are advised to come to work dressed according to your salary.
2) If we see you wearing Prada shoes and carrying a Gucci bag, we will assume you are doing well financially and therefore do not need a raise.
3) If you dress poorly, you need to learn to manage your money better, so that you may buy nicer clothes, and therefore you do not need a raise.
4) If you dress just right, you are right where you need to be and therefore you do not need a raise.
Sick Days:
We will no longer accept a doctor's statement as proof of sickness. If you are able to go to the doctor, you are able to come to work.
Personal Days:
Each employee will receive 104 personal days a year. They are called Saturdays & Sundays.
Bereavement Leave:
This is no excuse for missing work. There is nothing you can do for dead friends,
relatives or co-workers. Every effort should be made to have non-employees attend the funeral arrangements in your place. In rare cases where employee involvement is necessary, the funeral should be scheduled in the late afternoon. We will be glad to allow you to work through your lunch hour and subsequently leave one hour early.
Bathroom Breaks:
Entirely too much time is being spent in the toilet. There is now a strict three-minute time limit in the stalls. At the end of three minutes, an alarm will
sound, the toilet paper roll will retract, the stall door will open, and a picture will be taken. After your second offense, your picture will be posted on the
company bulletin board under the 'Chronic Offenders' category. Anyone caught smiling in the picture will be sectioned under the company's mental health policy.
Lunch Break:
* Skinny people get 30 minutes for lunch, as they need to eat more, so that they can look healthy.
* Normal size people get 15 minutes for lunch to get a balanced meal to maintain their average figure.
* Chubby people get 5 minutes for lunch, because that's all the time needed to drink a Slim-Fast.
Thank you for your loyalty to our company. We are here to provide a positive employment experience. Therefore, all questions, comments, concerns, complaints, frustrations, irritations, aggravations, insinuations,
allegations, accusations, contemplations, consternation and input should be directed elsewhere.
The Management
Pass this on to all who are employed!
Stimulus Package Explained (Q&A) - Big Picture
From Big Picture: Stimulus Package Explained (Q&A)
Sometime this year, taxpayers will receive an Economic Stimulus Payment. This is a very exciting new program that I will explain using the Q and A format:
Sometime this year, taxpayers will receive an Economic Stimulus Payment. This is a very exciting new program that I will explain using the Q and A format:
Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers.
Q. Where will the government get this money?
A. From taxpayers.
Q. So the government is giving me back my own money?
A. No, they are borrowing it from China. Your children are expected to repay the Chinese.
Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.
Q. But isn’t that stimulating the economy of China ?
A. Shut up.
Below is some helpful advice on how to best help the US economy by spending your stimulus check wisely:
If you spend that money at Wal-Mart, all the money will go to China.
If you spend it on gasoline it will go to Hugo Chavez, the Arabs and Al Queda
If you purchase a computer it will go to Taiwan.
If you purchase fruit and vegetables it will go to Mexico, Honduras, and Guatemala (unless you buy organic).
If you buy a car it will go to Japan and Korea.
If you purchase prescription drugs it will go to India
If you purchase heroin it will go to the Taliban in Afghanistan
If you give it to a charitable cause, it will go to Nigeria.
And none of it will help the American economy. We need to keep that money here in America. You can keep the money in America by spending it at yard sales, going to a baseball game, or spend it on prostitutes, beer (domestic only), or tattoos, since those are the only businesses still in the US.
Sunday, February 8, 2009
Saturday, February 7, 2009
From NYTime:
Monday, February 2, 2009
Worst January Ever
As goes January so goes the year. Or so they say.
It was the worst January ever for the Dow industrial and S&P 500, according to Stock Trader's Almanac data.
The Dow lost 8.8% and the S&P 500 lost 8.6% in the month.
The Nasdaq's loss of 6.4% was eclipsed by last January's loss of 9.9%. That 2008 loss was the worst in the tech average's history, going back to its inception in 1971.
It was the worst January ever for the Dow industrial and S&P 500, according to Stock Trader's Almanac data.
The Dow lost 8.8% and the S&P 500 lost 8.6% in the month.
The Nasdaq's loss of 6.4% was eclipsed by last January's loss of 9.9%. That 2008 loss was the worst in the tech average's history, going back to its inception in 1971.
Saturday, January 31, 2009
Great January Economic Summary
From Calculated Risk: January Economic Summary in Graphs
1. New Home Sales in December
2. Housing Starts in December
3. Construction Spending in November
4. Strip Mall Vacancy Rate
5. December Employment Report
6. December Retail Sales
7. LA Port Traffic in December
8. December Capacity Utilization
9.Vehicle Sales
10. NAHB Builder Confidence in January
11. Architecture Billings Index for December
12. Vehicle Miles Driven in November
13. Existing Home Sales in December
14. Existing Home Inventory
15. Case Shiller House Prices for November
16. California Notices of Default
17. ATA Truck Tonnage Index
18. Unemployment Claims
19. Restaurant Performance Index for December
20. New Home Sales
1. New Home Sales in December
2. Housing Starts in December
3. Construction Spending in November
4. Strip Mall Vacancy Rate
5. December Employment Report
6. December Retail Sales
7. LA Port Traffic in December
8. December Capacity Utilization
9.Vehicle Sales
10. NAHB Builder Confidence in January
11. Architecture Billings Index for December
12. Vehicle Miles Driven in November
13. Existing Home Sales in December
14. Existing Home Inventory
15. Case Shiller House Prices for November
16. California Notices of Default
17. ATA Truck Tonnage Index
18. Unemployment Claims
19. Restaurant Performance Index for December
20. New Home Sales
Monday, January 26, 2009
Leading Economic Indicator Up
From Big Picture: Fed Activity Boosts Leading Economic Indicators:
Leading economic indicators (LEI) index rose 0.3% month over month in December. However:
Stock Prices, Jobless Claims, Pace of Deliveries, Average Work Week, and Building Permits were all negative. Consumer Goods Orders, Non-defense Cap Goods Orders, and Consumer Expectations were all essentially flat.
Leading economic indicators (LEI) index rose 0.3% month over month in December. However:
Stock Prices, Jobless Claims, Pace of Deliveries, Average Work Week, and Building Permits were all negative. Consumer Goods Orders, Non-defense Cap Goods Orders, and Consumer Expectations were all essentially flat.
Coincident-to-lagging index fell; The coincident to lagging index, which tends to have a stronger correlation with GDP growth, conversely fell 0.1% over the month to stand 4.7% lower year-over year.
The surge in real money supply growth added a full percentage point to the headline number. From September till today, this has added between 0.4ppts and 1.0ppts to each month’s gain. The artificial boost to the LEIs has not translated into increased lending from the banks.
How bad are tech earnings?
From the Big Picture: How Bad Are Tech Earnings?
1. PC DEMAND IS SUFFERING big time. Microsoft and Intel are both cutting jobs; Advanced Micro Devices (AMD) posted a 33% drop in profits; Disk-drive maker Seagate ’s (STX) revenues were down 34%; Logitech (LOGI), reported a March-quarter miss.
2. MOBILE-PHONE SALES are in trouble. Nokia (NOK) reported a 19.5% Q4 revenue decline; Warnings were already out from Motorola (MOT) and Sony Ericsson;
3. CONSUMER-ELECTRONICS demand is non-existent. Sony (SNE) expects a loss for its March 2009 fiscal year. GPS device maker TomTom (TOM2.AE) issued an earnings warning; and Foxconn International (2038.HK)
4. THE CHIP BUSINESS CONTINUES to erode. Taiwan Semiconductor (TSM) reported a 31% Q4 earnings decline. MEMC Electronic Materials(WFR) sees March-quarter revenues down 50%; Marvell (MRVL) sharply reduced its Q4 guidance.
1. PC DEMAND IS SUFFERING big time. Microsoft and Intel are both cutting jobs; Advanced Micro Devices (AMD) posted a 33% drop in profits; Disk-drive maker Seagate ’s (STX) revenues were down 34%; Logitech (LOGI), reported a March-quarter miss.
2. MOBILE-PHONE SALES are in trouble. Nokia (NOK) reported a 19.5% Q4 revenue decline; Warnings were already out from Motorola (MOT) and Sony Ericsson;
3. CONSUMER-ELECTRONICS demand is non-existent. Sony (SNE) expects a loss for its March 2009 fiscal year. GPS device maker TomTom (TOM2.AE) issued an earnings warning; and Foxconn International (2038.HK)
4. THE CHIP BUSINESS CONTINUES to erode. Taiwan Semiconductor (TSM) reported a 31% Q4 earnings decline. MEMC Electronic Materials(WFR) sees March-quarter revenues down 50%; Marvell (MRVL) sharply reduced its Q4 guidance.
5. EVEN THE GOOD EARNINGS REPORTS aren’t so good. IBM’s Q4 revenues actually missed by more than $1 billion, dropping 6%, and their full-year profits reflect cost cutting, not top-line growth. Apple (AAPL) exceeded both top line and perofit expectations, but iPhone sales disappointed, falling 36% from Q3; desktop Mac sales were weak, and Apple same-store sales were down from last year. Google (GOOG) beat estimates, but concerns as the ad market continues to soften.
Layoff Today
1. Texas Instrument: 12% = 3,400 jobs
2. IBM: 2,800 jobs
3. Caterpillar: 20,000
4. Sprint: 8,000
5. Pfizer: 19,000 = 10%, does not include merge with Wyeth
6. Home Depot: 7,000
7. Phillips: 6,000
Bloomberg reports 74,000 job cuts today alone. Before today, at least 15 companies announced they planned to eliminate 93,000 positions so far in January.
2. IBM: 2,800 jobs
3. Caterpillar: 20,000
4. Sprint: 8,000
5. Pfizer: 19,000 = 10%, does not include merge with Wyeth
6. Home Depot: 7,000
7. Phillips: 6,000
Bloomberg reports 74,000 job cuts today alone. Before today, at least 15 companies announced they planned to eliminate 93,000 positions so far in January.
Sunday, January 25, 2009
Banking Fears
From Calculated Risk: MPs Urge Nationalize of RBS
From Calculated Risk: State Street and Regions Financial
From Calculated Risk: Roubini: U.S. Credit Losses May Reach 3.6 Trillions
From Calculated Risk: Bank of England to Start Buying Assets, Germany Bails Out Hypo - Again
From Calculated Risk: Big Bank Cliff Diving
From Calculated Risk: Bad CRE Loans Threaten Regional Banks
From Calculated Risk: More on New UK Bank Bailout
From Calculated Risk: The Next Step for the U.S. Bank Bailout
From Calculated Risk: Assistance to BAC
From Calculated Risk: JPM Earnings Call Notes
From Calculated Risk: State Street and Regions Financial
From Calculated Risk: Roubini: U.S. Credit Losses May Reach 3.6 Trillions
From Calculated Risk: Bank of England to Start Buying Assets, Germany Bails Out Hypo - Again
From Calculated Risk: Big Bank Cliff Diving
From Calculated Risk: Bad CRE Loans Threaten Regional Banks
From Calculated Risk: More on New UK Bank Bailout
From Calculated Risk: The Next Step for the U.S. Bank Bailout
From Calculated Risk: Assistance to BAC
From Calculated Risk: JPM Earnings Call Notes
Housing Data Wrap Up
From Calculated Risk: Housing Starts at All-time low
From Calculated Risk: Architecture Billings Index Near Record Low
From Calculated Risk: NAHB Housing Market Index Falls to New Record Low
From Calculated Risk: National Association of Home Builders: Prices to Fall 29% in 2009
From Calculated Risk: Apartment market Weakens Further
From Calculated Risk: Architecture Billings Index Near Record Low
From Calculated Risk: NAHB Housing Market Index Falls to New Record Low
From Calculated Risk: National Association of Home Builders: Prices to Fall 29% in 2009
From Calculated Risk: Apartment market Weakens Further
U.S. Vehicle Miles Driven Falls Sharply
From Calculated Risk: DOT: U.S. Vehicle Miles Driven Falls Sharply
From CNBC: Take your positions: Energy Earnings
Travel on all roads and streets changed by -5.3% (-12.9 billion vehicle miles) for November 2008 as compared with November 2007. Travel for the month is estimated to be 230.4 billion vehicle miles. Cumulative Travel for 2008 changed by -3.7% (-102.1 billion vehicle miles). The Cumulative estimate for the year is 2,656.2 billion vehicle miles of travel.
So far the slowing economy is more than offsetting the sharp decline in gasoline prices last year. As the demand falls, oil price might fall more also the oil companies.
From CNBC: Take your positions: Energy Earnings
Next week calendar
Earnings:
Monday: American Express, Caterpillar, McDonald's, Netflix, Texas Instrument
Tuesday: Altera, DuPont, Etrade, Sun Micro, Yahoo
Wednesday: AT&T, Conoco Phillips, Intersil, Lam Research, LeCroy, LSI, Canon, Pfizer, Starbucks, Symantec, Wells Fargo
Thursday: 3M, Altria, Broadcom, Fairchild, Ford, JetBlue, KLA-Tencor, Maxim, Microchip, National Instruments, Sony, T.Rowe Price, US Airways
Friday: Chevron, ExxonMobil, Honda, Honeywell, P&G,
Economic Calendar:
Monday: Existing Home Sales, Leading Indicators
Tuesday: S&P Case-Shiller, Consumer Confidence
Wednesday: FOMC Meeting Announcement
Thursday: Durable Goods Order, Jobless Claims, New Home Sales
Friday: GDP, Employment Cost Index, NAPM-Chicago, Consumer Sentiment
Monday: American Express, Caterpillar, McDonald's, Netflix, Texas Instrument
Tuesday: Altera, DuPont, Etrade, Sun Micro, Yahoo
Wednesday: AT&T, Conoco Phillips, Intersil, Lam Research, LeCroy, LSI, Canon, Pfizer, Starbucks, Symantec, Wells Fargo
Thursday: 3M, Altria, Broadcom, Fairchild, Ford, JetBlue, KLA-Tencor, Maxim, Microchip, National Instruments, Sony, T.Rowe Price, US Airways
Friday: Chevron, ExxonMobil, Honda, Honeywell, P&G,
Economic Calendar:
Monday: Existing Home Sales, Leading Indicators
Tuesday: S&P Case-Shiller, Consumer Confidence
Wednesday: FOMC Meeting Announcement
Thursday: Durable Goods Order, Jobless Claims, New Home Sales
Friday: GDP, Employment Cost Index, NAPM-Chicago, Consumer Sentiment
Saturday, January 24, 2009
Coming Back
I have not posted anything for a week. And there are a lot of actions during this week, corporate earnings, banking/financial sector crisis. Now I am back to blog again and I will try to catch up some of the big headlines happened in last week.
Thursday, January 15, 2009
U.S. Foreclosure Filings in 2008 rose 81% from 2007
From MarketWatch: U.S. Foreclosure Filings in 2008 rose 81% from 2007
U.S. foreclosure filings in 2008 rose 81% from 2007 and tripled from 2006. A total of nearly 3.16 million foreclosure filings -- measured by default notices, auction-sale notices, and bank repossessions -- were reported in 2008. 1.84% of all U.S. housing units --1 of every 54 -- received at least one foreclosure filing during the year, up from 1.03% in 2007. In December, foreclosure filings were reported on more than 303,000 U.S. properties. That's up 17% from November and 41% from the year-earlier month. In the fourth quarter, foreclosure activity rose 40% from the year-earlier quarter.
U.S. foreclosure filings in 2008 rose 81% from 2007 and tripled from 2006. A total of nearly 3.16 million foreclosure filings -- measured by default notices, auction-sale notices, and bank repossessions -- were reported in 2008. 1.84% of all U.S. housing units --1 of every 54 -- received at least one foreclosure filing during the year, up from 1.03% in 2007. In December, foreclosure filings were reported on more than 303,000 U.S. properties. That's up 17% from November and 41% from the year-earlier month. In the fourth quarter, foreclosure activity rose 40% from the year-earlier quarter.
Today's Earnings
From Yahoo! Finance: Intel 4Q profit plunges 90%, meets forecasts
Intel Corp. says its fourth-quarter profit plunged 90 percent. But the chip maker still met Wall Street's subdued expectations. Intel was hurt by a huge writedown and wheezing PC sales that have crimped demand for microprocessors.
Intel Corp. says its fourth-quarter profit plunged 90 percent. But the chip maker still met Wall Street's subdued expectations. Intel was hurt by a huge writedown and wheezing PC sales that have crimped demand for microprocessors.
Net income was $234 million, or 4 cents per share, compared with $2.3 billion, or 38 cents per share, in the year-ago period. Sales were $8.2 billion, a 23 percent shortfall from last year. Intel blunted the shock of the big declines by lowering its guidance twice.
From Yahoo! Finance: Genentech 4Q profit rises, but just short of views
Biotechnology company Genentech Inc.'s fourth-quarter profit fell short of Wall Street expectations, despite a 47 percent boost from higher sales of the blockbuster cancer drug Avastin. The company also set a weaker-than-expected profit outlook for 2009.
During the quarter, profit reached $931 million, or 87 cents per share, up from $632 million, or 59 cents per share, a year earlier. Revenue rose 25 percent to $3.71 billion from $2.97 billion.
Banking Fear - Citi, BAC, JPM
From Yahoo! Finance: US mulls Fresh aid Package for Bank of America
The federal government is considering a fresh multibillion-dollar aid package for Bank of America Corp. to help it absorb losses at Merrill Lynch.
From Yahoo! Finance: JPMorgan posts profit, but "disappointing" one
JPMorgan Chase narrowly avoided a loss in the fourth quarter, indicating that it is weathering the financial crisis better than some of the other big banks. But the meager profit was driven by its acquisition of Washington Mutual Inc., and the bank added $4.1 billion to loan loss reserves -- proving that it is not immune to the deepening global recession.
Royal Bank of Scotland Group said it sold a 4.26% equity stake in Bank of China for about $2.3 billion. The decision is part of the ongoing review of the company's businesses announced in October.
The federal government is considering a fresh multibillion-dollar aid package for Bank of America Corp. to help it absorb losses at Merrill Lynch.
Shares of both Bank of America plummeted more than 20 percent. Bank of America could get another capital infusion from the government, and possibly secure government guarantees against losses on problem loans. A fresh capital injection could come from the Treasury Department's $700 billion bailout pot, while any money that might be put up for loan guarantees could come from a mix of government sources.
Bank of America has received a total of $25 billion in capital injections from the Treasury bailout fund, called the Troubled Asset Relief Program, or TARP. That includes $10 billion for Merrill Lynch & Co., which Bank of America bought in a deal that closed Jan. 1.
Bank of America, which reports its fourth-quarter and annual results Tuesday, declined comment about a new aid package Thursday. The Wall Street Journal late Wednesday reported that the government was nearing a new deal with Bank of America, and said details of the aid are expected to be announced with earnings next week. Some analysts are predicting the nation's biggest bank by assets to report a loss or lower-than-expected earnings for the fourth quarter. Its board has already halved the company's dividend and could slash the payout again.From Yahoo! Finance: JPMorgan posts profit, but "disappointing" one
JPMorgan Chase narrowly avoided a loss in the fourth quarter, indicating that it is weathering the financial crisis better than some of the other big banks. But the meager profit was driven by its acquisition of Washington Mutual Inc., and the bank added $4.1 billion to loan loss reserves -- proving that it is not immune to the deepening global recession.
Chief Executive Jamie Dimon called the quarter "very disappointing." Results were hurt by $2.9 billion in markdowns in JPMorgan's investment bank, and losses in various types of loans -- from mortgages to home equity loans to credit cards to commercial real estate loans.
"If the economic environment deteriorates further, which is a distinct possibility, it is reasonable to expect additional negative impact on our market-related businesses, continued higher loan losses and increases to our credit reserves," Dimon said in a statement. The New York-based bank on Thursday reported a profit of $702 million, or 7 cents per share, down 76 percent from $2.97 billion, or 86 cents per share, a year ago.
During the fourth quarter, JPMorgan's investment bank posted a loss of $2.4 billion, after a profit of $124 million a year ago. Card services also reported a loss of $371 million, after a profit of $609 million a year ago, as more cardholders failed to make their payments. Losses in cards are expected to rise as unemployment increases. Dimon said that in his opinion, unemployment will rise to between 7.5 percent and 8 percent, at minimum.The retail financial services segment reported a 15 percent drop in profit to $624 million, due to losses in consumer lending. Income from asset management fell to $255 million from $527 million, while income from the corporate and private equity business rose to $1.5 billion from $270 million. The commercial banking unit reported a record profit of $480 million, up from $288 million a year ago. Treasury and securities services also posted a record profit, of $533 million, up from $422 million. For all of 2008, JPMorgan Chase posted a profit of $5.6 billion, or $1.37 a share. That was down from a record annual profit in 2007 of $15.4 billion, or $4.38 a share.
From MarketWatch: Financials Fall as Citi Shares Drop (1/14/2009)
Investors focused their attention on Citigroup Inc. shares of which fell below $5 for the first time since Nov. 21. They touched an intraday low of $4.44.
The fall came following reports that Citi will soon unveil a plan to unload several businesses and reduce its size by one-third. The moves will effectively dismantle the old, super-sized Citi model pioneered in part by former chief Sandy Weill.
Fears about Citi also rose after its announcement Wednesday that it will report fourth-quarter financial results before the open on Friday, nearly a week earlier than its previously scheduled Jan. 22 release date. Citi did not give a reason for the change in its timetable.
Royal Bank of Scotland Group said it sold a 4.26% equity stake in Bank of China for about $2.3 billion. The decision is part of the ongoing review of the company's businesses announced in October.
Barclays PLC saw its shares fall more than 14%. Barclays said it will cut about 2,100 jobs in investment banking and investment management, and further headcount reductions may be in the offing.
Deutsche Bank traded down 9%. The German bank said it will report a loss of about $6.4 billion for the fourth quarter, citing weak markets and the impact of further write-downs. Germany's largest listed bank said "exceptional market conditions" severely hurt its sales and trading operations. It also faces losses from its efforts to slash exposure to risky assets an impairment charge at fund unit DWS Scudder and "substantial" injections into money market funds.
December Wholesale Prices Fall 1.9%
From Yahoo! Finance: December Wholesale Prices Fall 1.9%
Another huge plunge in energy costs sent wholesale inflation down for a fifth straight month in December, closing out a year in which prices dropped by the largest amount in seven years.
Wholesale prices fell by 1.9 percent in December. For the year, the government said wholesale prices fell by 0.9%, the first annual decline since prices dropped by 1.6% in 2001. By contrast, inflation at the wholesale level soared by 6.2 percent in 2007.
Core inflation, which excludes food and energy, posted a modest 0.2 percent rise in December. For the year, core inflation was up 4.3 percent, the biggest annual increase since a 4.4 percent increase in 1988.
Another huge plunge in energy costs sent wholesale inflation down for a fifth straight month in December, closing out a year in which prices dropped by the largest amount in seven years.
Wholesale prices fell by 1.9 percent in December. For the year, the government said wholesale prices fell by 0.9%, the first annual decline since prices dropped by 1.6% in 2001. By contrast, inflation at the wholesale level soared by 6.2 percent in 2007.
Core inflation, which excludes food and energy, posted a modest 0.2 percent rise in December. For the year, core inflation was up 4.3 percent, the biggest annual increase since a 4.4 percent increase in 1988.
Energy prices last month dropped by 9.3 percent, reflecting a record 25.7 percent plunge in the cost of gasoline. Food costs fell by 1.5 percent, the biggest monthly decline since February 2006.
The cost of passenger cars jumped by 1.2 percent in December, the biggest gain since August.
The big slowdown in inflation at the wholesale level also has been reflected in falling prices at the consumer level. Consumer prices plunged by 1.7 percent in November, the largest one-month decline on records going back 61 years. That surpassed a 1 percent drop in October.
New Jobless Claims increase more than expected
From Yahoo! Finance: New Jobless Claims increase more than expected
The Labor Department reported Thursday that first-time requests for unemployment insurance jumped to a seasonally adjusted 524,000 in the week ending Jan. 10, from an upwardly revised figure of 470,000 the previous week. Analysts had expected 500,000 new claims. The increase is partly due to a flood of requests from newly-laid off people who delayed filing claims over the holidays, a Labor Department analyst said.
The layoffs continued Thursday.
1. MeadWestvaco, which makes paper and plastic products: cut 2,000 (10%)
2. Software company Autodesk Inc.: 750 jobs (10%)
3. Google: Close three engineering offices and cut 100 recruiters
4. Seagate: Cut 2,950 jobs (6%)
5. Pfizer
6. Motorola: 4000 more jo
7. Textron Inc.
8. Cummins Inc.
The Labor Department reported Thursday that first-time requests for unemployment insurance jumped to a seasonally adjusted 524,000 in the week ending Jan. 10, from an upwardly revised figure of 470,000 the previous week. Analysts had expected 500,000 new claims. The increase is partly due to a flood of requests from newly-laid off people who delayed filing claims over the holidays, a Labor Department analyst said.
The layoffs continued Thursday.
1. MeadWestvaco, which makes paper and plastic products: cut 2,000 (10%)
2. Software company Autodesk Inc.: 750 jobs (10%)
3. Google: Close three engineering offices and cut 100 recruiters
4. Seagate: Cut 2,950 jobs (6%)
5. Pfizer
6. Motorola: 4000 more jo
7. Textron Inc.
8. Cummins Inc.
The four-week average of claims, which smooths out fluctuations, fell by 8,000 to 518,500 last week. In one spot of good news, the number of people continuing to request benefits declined to 4.5 million from an upwardly revised 4.6 million the previous week. The continuing claims lag the initial claims data by one week. Still, the number of people remaining on the rolls is near a 26-year high and is up sharply from a year ago, when it stood at 2.7 million.
Wednesday, January 14, 2009
Retail Sales Fall
After the worst holiday season in 40 years, retailers face more sales declines in the months ahead as the recession deepens, job losses mount and consumers retrench further. Last month's weakness -- more than double what economists had expected -- has extended into the new year with bankruptcy filings, store closings and more layoffs.
Excluding autos, retail sales were down a record 3.1 percent in December, reflecting the widespread weakness in most other areas, led by the big plunge at gasoline stations. But even with gasoline sales removed, retail sales were down a sizable 1.4 percent in December.From Big Picture: Retail Sales Fall 9.8%
- December 2008 Sales down 2.7% from November and down 9.8% percent versus December 2007, a record sixth straight monthly fall
- December 2008 Sales = $343.2 billion
- 2008 total sales (12 months of calendar year) were essentially flat — down 0.1% percent from 2007, less than the margin of error, first annual drop since record started in 1992.
- November sales were also revised lower. Ex-Autos, sales fell 3.1% for the month. Health and personal care were the sole growth areas. Going ex-autos and ex-gasoline, sales fell 1.5%.
- Total sales for the October through December 2008 holiday shopping period were down 7.7% from the same period a year ago.
- Gasoline stations sales were down 35.5% from December 2007, and off 15.9%;
- Auto sales were down 22.4% from last year.
- Sales were down 1.8% at furniture retailers; 2.5% at clothing stores; 1.0% at electronic stores; 2.2% at eating and drinking establishments; 0.4% at sporting goods, hobby and book stores; 1.3% at general merchandise stores; 1.4% at food and beverage stores; 2.9% at building material and garden supplies dealers; and 1.9% at mail order and Internet retailers.
Tuesday, January 13, 2009
Trade Deficit Declines Sharply
From Calculated Risk: Trade Deficit Declines Sharply
Both exports and imports are declining, but the decline in the trade deficit was mostly about oil prices. Petroleum import prices fell from $92 per barrel in October to under $67 per barrel in November - and will fall further in December.
[T]otal November exports of $142.8 billion and imports of $183.2 billion resulted in a goods and services deficit of $40.4 billion, down from $56.7 billion in October, revised. November exports were $8.7 billion less than October exports of $151.5 billion. November imports were $25.0 billion less than October imports of $208.2 billion.
Both exports and imports are declining, but the decline in the trade deficit was mostly about oil prices. Petroleum import prices fell from $92 per barrel in October to under $67 per barrel in November - and will fall further in December.
[T]otal November exports of $142.8 billion and imports of $183.2 billion resulted in a goods and services deficit of $40.4 billion, down from $56.7 billion in October, revised. November exports were $8.7 billion less than October exports of $151.5 billion. November imports were $25.0 billion less than October imports of $208.2 billion.
Although the trade deficit is declining - and will probably decline further in December because of the continued decline in oil prices - growth in export related businesses will probably no longer be a positive for the U.S. economy as the global economy slides into recession too.
![[TradeNovGraph2008.jpg]](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgcS4fB-n9yYba4VMoqj5bY_2pPMMNHQ85a2YV0mMgKiUf_Lf_OUViKHYS61DNVJMYQh-wgoHtu7fn-zHaPY4kG6iT6BVD-Vbnnh92sjFEHniDCCI6wyhXsLmgEAV3jKIyBm6p2642vQOo/s1600/TradeNovGraph2008.jpg)
This graph shows the U.S. trade deficit through November. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. The current recession is marked on the graph.
The oil deficit declined sharply in November and will decline further in December. But even ex-petroleum, the trade deficit is still declining.
Yesterday's Market
From Bonddad: Today's Market
Some very important technical developments occurred yesterday.
1.) Since the end of November, the SPYs have been in an upward sloping trend channel. Yesterday prices fell through the lower support line of that channel.
2.) Starting in early October, there was a downward sloping trend line that acted like the top of a triangle consolidation pattern. Prices broke through this trend line a little over a week ago. Prices broke back through this line yesterday.
3.) While the RSI has been trending higher for the last few months, it is now at a technically important level
4.) Prices have fallen through all the SMAs over the last few trading days.
It looks as though prices want to test the lower 80s levels again. Considering Alcoa's announcement yesterday to kick off the earnings season along with the announcement that banks will announce their first quarterly loss since 1990, a retesting of lows makes sense right now.
Some very important technical developments occurred yesterday.1.) Since the end of November, the SPYs have been in an upward sloping trend channel. Yesterday prices fell through the lower support line of that channel.
2.) Starting in early October, there was a downward sloping trend line that acted like the top of a triangle consolidation pattern. Prices broke through this trend line a little over a week ago. Prices broke back through this line yesterday.
3.) While the RSI has been trending higher for the last few months, it is now at a technically important level
4.) Prices have fallen through all the SMAs over the last few trading days.
It looks as though prices want to test the lower 80s levels again. Considering Alcoa's announcement yesterday to kick off the earnings season along with the announcement that banks will announce their first quarterly loss since 1990, a retesting of lows makes sense right now.
Monday, January 12, 2009
U.S. Economy May Shrink 1.5% in 2009
From Bloomberg: U.S. Economy May Shrink 1.5% in 2009 as Recession Stymies Fed
Economists slashed forecasts for U.S. growth in 2009 and projected Federal Reserve policy makers won’t be able to start raising interest rates until 2010, according to a monthly Bloomberg News survey.
Economists slashed forecasts for U.S. growth in 2009 and projected Federal Reserve policy makers won’t be able to start raising interest rates until 2010, according to a monthly Bloomberg News survey.
The world’s largest economy will contract 1.5 percent this year, a half percentage point more than projected last month, according to the median of 59 forecasts in the survey taken from Jan. 5 to Jan. 12. The slump will push inflation below what some Fed officials consider price stability, the survey showed.
Gross domestic product dropped at a 5 percent annual pace in the last three months of 2008 and will contract 3 percent this quarter, with a 0.8 percent drop in the next three months, according to the survey median. All estimates were lower than in the previous monthly survey.The odds that the economy will be out of the recession in the next 12 months were 55 percent, the survey showed. Consumer spending, the biggest part of the economy, may fall at a 1.6 percent pace this quarter after dropping 2.7 percent in the last three months of 2008, the survey showed. Combined with the decline in last year’s third quarter, it would be the first time in the postwar era that spending fell during a nine-month span.
Stocks had the biggest one-week drop since November last week on growing concern over the economy and company earnings.The first simultaneous recession in the U.S., Japan and euro area means American businesses will keep paring output.
Prices are retreating as the economy slows. The Fed’s preferred inflation gauge, based on consumer spending and excluding food and fuel costs, will rise 1.2 percent this year, the smallest gain since 1962, the survey showed. The increase would be less than the long-term forecast of 1.3 percent to 1.7 percent that reflects policy makers’ expectations for the level of inflation given “appropriate” monetary policy.
The deceleration, also called disinflation, is less sinister than the persistent decline in costs that economists call deflation. Still, the Fed last month discussed setting an inflation target to discourage expectations that price increases will slow “below desired levels,” according to minutes of the meeting.
China's exports likely contracted 2.8% in December
From MarketWatch: China's exports likely contracted 2.8% in December
China's export growth likely contracted 2.8% in December from a year earlier, its sharpest pace of contraction since 1999. The figures were cited in a J.P. Morgan research note Tuesday which attributed the data to mainland China media reports. The decline follows a 2.2% contraction in November. "The difficulty of obtaining trade finance in the closing months of 2008 may have had a further exacerbating effect on the headline number". China's export growth will likely be flat this year when compared to 2008, although early months of the year will see trade contract.
China's export growth likely contracted 2.8% in December from a year earlier, its sharpest pace of contraction since 1999. The figures were cited in a J.P. Morgan research note Tuesday which attributed the data to mainland China media reports. The decline follows a 2.2% contraction in November. "The difficulty of obtaining trade finance in the closing months of 2008 may have had a further exacerbating effect on the headline number". China's export growth will likely be flat this year when compared to 2008, although early months of the year will see trade contract.
Sony seen reporting 1st operating loss in 14 years
From MarketWatch: Sony seen reporting 1st operating loss in 14 years
Japanese electronics major Sony Corp. is expected to report its first operating loss in 14 years as demand for flat-screen televisions and other consumer products sags and profit margins are pared by a strong yen. Sony is likely to post a group operating loss of around 100 billion yen ($1.12 billion) in the year ending March 31, but the final figure could be significantly higher depending on inventory levels in the January-March quarter.
The loss would be only the second since Sony went public in 1958.
Japanese electronics major Sony Corp. is expected to report its first operating loss in 14 years as demand for flat-screen televisions and other consumer products sags and profit margins are pared by a strong yen. Sony is likely to post a group operating loss of around 100 billion yen ($1.12 billion) in the year ending March 31, but the final figure could be significantly higher depending on inventory levels in the January-March quarter.
The loss would be only the second since Sony went public in 1958.
S&P Broke 10, 20, and 50DMA, also broke the uptrend since Nov 20 Low, are we starting to go down now?
From Bonddad: Market Monday's
From the weekly chart:
-- All the SMAs are moving lower
-- The shorter SMAs are below the longer SMAs
-- Prices are below the 20 and 50 day SMA, but have risen above the 10 day SMA and are currently using the 10 day SMA as technical support
-- The RSI is rising
-- The MACD is turning around
-- The OBV is terrible
From the daily Chart:
-- Prices and the SMA are bundled together in a tight range, indicating indecision
-- The 10 day SMA is rising through the other SMAs
-- The MACD is increasing
-- The RSI is increasing
-- The OBV is neutral
Notice the triple top break-out failed miserably. That is not a good sign for the future. In addition, look at the lack of volume in the second half of the chart relative to the first half of the chart. There is just not a lot of excitement.
From the weekly chart:
-- All the SMAs are moving lower
-- The shorter SMAs are below the longer SMAs
-- Prices are below the 20 and 50 day SMA, but have risen above the 10 day SMA and are currently using the 10 day SMA as technical support
-- The RSI is rising
-- The MACD is turning around
-- The OBV is terrible
From the daily Chart:
-- Prices and the SMA are bundled together in a tight range, indicating indecision-- The 10 day SMA is rising through the other SMAs
-- The MACD is increasing
-- The RSI is increasing
-- The OBV is neutral
Notice the triple top break-out failed miserably. That is not a good sign for the future. In addition, look at the lack of volume in the second half of the chart relative to the first half of the chart. There is just not a lot of excitement.
Sunday, January 11, 2009
Economic News and Earnings Next Week
Earnings:
Monday: Alcoa
Tuesday: Linear Technology
Wednesday: Xilinx Inc.
Thursday: Genetech, Intel
Friday: First Horizon National Bank, CitiBank
Economic News:
Tuesday: Goldman Store Sales, International Trade
Wednesday: Retail Sales, Input & Export Prices, Business Inventories, Beige Book
Thursday: Producer Price Index, Empire State Manufacturing Survey, Jobless Claims, Philadelphia Fed Survey
Friday: Consumer Price Index, Industrial Production, Consumer Sentiment
Monday: Alcoa
Tuesday: Linear Technology
Wednesday: Xilinx Inc.
Thursday: Genetech, Intel
Friday: First Horizon National Bank, CitiBank
Economic News:
Tuesday: Goldman Store Sales, International Trade
Wednesday: Retail Sales, Input & Export Prices, Business Inventories, Beige Book
Thursday: Producer Price Index, Empire State Manufacturing Survey, Jobless Claims, Philadelphia Fed Survey
Friday: Consumer Price Index, Industrial Production, Consumer Sentiment
Saturday, January 10, 2009
Friday, January 9, 2009
Jobless Rate Jumps to 7.2% in December
From Yahoo! Finance: Jobless rate jumps to 7.2% in December
The nation's unemployment rate bolted to 7.2 percent in December, the highest level in 16 years, as nervous employers slashed 524,000 jobs, capping one of the worst years in modern history for American workers.
For all of 2008, the economy lost a net total of 2.6 million jobs. That was the most since 1945, when nearly 2.8 million jobs were lost. Though the U.S. labor force has more than tripled since then, losses of this magnitude are still being painfully felt.
The nation's unemployment rate bolted to 7.2 percent in December, the highest level in 16 years, as nervous employers slashed 524,000 jobs, capping one of the worst years in modern history for American workers.
For all of 2008, the economy lost a net total of 2.6 million jobs. That was the most since 1945, when nearly 2.8 million jobs were lost. Though the U.S. labor force has more than tripled since then, losses of this magnitude are still being painfully felt.
With employers throttling back hiring, the nation's jobless rate averaged 5.8 percent last year. That was up sharply from 4.6 percent in 2007 and was the highest since 2003.
While economists were forecasting even more payroll reductions in December -- around 550,000 -- job losses in both October and November turned out to be deeper than previously estimated. Revised figures showed employers slashed 584,000 positions in November and 423,000 in October.
The unemployment rate, meanwhile, rose from 6.8 percent in November, to 7.2 percent last month, the highest since January 1993. Economists were expecting the jobless rate to rise to 7 percent.
Losses were widespread in December. Construction companies slashed 101,000, and manufacturers axed a a whopping 149,000 jobs. Professional and business services got rid of 113,000 jobs. Retailers eliminated nearly 67,000 jobs, and leisure and hospitality reduced employment by 22,000. That more than swamped gains in education and health care, and the government. All told, 11.1 million people were unemployed in December.
Not only are employers cutting jobs; they also are cutting workers' hours. The average work week in December fell to 33.3 hours, the lowest level on records dating to 1964.
And the number of people who work part time -- a category that includes those who would like to work full time but whose hours were cut back or those who were unable to find full-time work -- jumped to 8 million in December, from 7.3 million in November.
Average hourly earnings rose to $18.36 in December, up 0.3 percent from the previous month. Economists were expecting a 0.2 percent increase. Over the year, wages have increased 3.7 percent, although high prices for energy and food earlier this year made people feel like their paychecks weren't stretching that far.
From Big Picture and Calculated Risk:
Thursday, January 8, 2009
Open Thread: If S&P drops below 900 and 50DMA, will the Bear Market Rally End? And what happened to SRS's weak performance?
The market struggled a bit today after December Retail results. However, it has been able to finish in the positive territory, and being able to stay above 10, 20, and 50DMA, and stay in the uptrend. Let's see how the market reacts to the government's data on unemployment tomorrow.
The markets wants to rally despite all the bleak economic news. The coming 4Q earnings from companies are going to be horrible too.
The markets wants to rally despite all the bleak economic news. The coming 4Q earnings from companies are going to be horrible too.
Stock Market is Not Cheap!
From Big Picture: Earnings Estimate Fall
Have a look at these estimates for earnings in 2008. They started at $92 (early ‘07) and came down to $48:
Have a look at these estimates for earnings in 2008. They started at $92 (early ‘07) and came down to $48:
On a trailing one-year basis, that puts the Price to Earnings Ratio (P/E) at over 19 as of today. This does not make the market cheap.
And what about 2009? Again, the analysts are in a race to find the bottom.
The current projections are for $42.26 for 2009. That makes the forward P/E 22. That doesn’t look like value at all, when the historical average is closer to 15.
In 2001, as-reported earnings were $24.67. Operating earnings in 2002 were $27.57. Does anyone think the current recession will be milder than the last one? Or shorter?
From Mish: Is the Stock Market Cheap?
For the last two months, we have heard round after round of bottom calls and a consistent message of "stocks are cheap". Some make the claim based on a comparison to treasuries. The reality is it makes no sense to compare stocks to treasuries. What does make sense is to discuss earnings estimates.
Think the stock market is cheap? Let's do the math. The S&P closed at 910. If those earnings estimates hold, the effective PE is 21.53. The historical average PE is about 15. At a PE of 15 the S&P would drop to 634. That is a huge drop of 30% from today's closing price.
What happens if the stock market over shoots as it typically does in bear markets. Assume a PE of 12. At 12, one might expect to see the S&P at 507. That would be an even bigger decline of 44% from here. If:
Earnings PE Target
$25.00 12 300
$35.00 12 420
$45.00 12 540
$55.00 12 660
$25.00 15 375
$35.00 15 525
$45.00 15 675
$55.00 15 825
$25.00 18 450
$35.00 18 630
$45.00 18 810
$55.00 18 990
Looking ahead to 2009, 2010, 2011 there is simply no driver for earnings like we saw in 2002. Enormous leverage, creative financing, and the housing bubble are all gone and are not coming back. The brokerage houses are now under bank rules and leverage will be reduced to 10-1 or possibly 12-1. A reduction in leverage is a reduction in risk, but also potential earnings.
In the immediate future, think about what increasing layoffs are going to do to credit card defaults, foreclosures, commercial real estate, demand for PCs, etc.
Then once the markets bottom, think about how fast those earnings will rise. Here's a hint: It will not be anything remotely like 2002.
Rushing in now on that expectation that stocks are cheap is playing the greater fool's game all over again. Stocks are not cheap, no matter how many pretend otherwise.
Disappoint Retail Sales
From Yahoo! Finance: Retailers report dismal December Sales
As merchants reported their sales figures, confirming fears that the holiday season was the weakest in four decades, the malaise cut through practically all areas from kitchen gadget stores to jewelry purveyors and teen apparel retailers.
As merchants reported their sales figures, confirming fears that the holiday season was the weakest in four decades, the malaise cut through practically all areas from kitchen gadget stores to jewelry purveyors and teen apparel retailers.
The deep discounts that began well before the official start of the holiday season spurred a number of merchants to cut their earnings outlooks on Thursday, fueling more concerns about the health of the industry.
"This suggests that the lower income group is feeling the pinch more than we thought and this is clearly reflected in the lower-than-expected numbers at Wal-Mart," said Ken Perkins, president of research company RetailMetrics LLC. "I think it says the economy is in more dire straits than we thought."
Wal-Mart - Same-store sales, or sales at stores opened at least a year, rose 1.2%. Excluding the impact of declining gasoline prices at the pump, the gain was 1.7%, well below the expected 2.8% increase, excluding fuel.
Costco - 4% decline in same-store sales, but excluding the impact of lower gas prices and currency fluctuations, it actually posted a 4% gain.
Sears - December same-store sales dropped 7.3%, and 12.8% drop at domestic Sears stores.
Macy's - Same-store sales fell 4% percent in December. For the combined November-December period, same-store sales were down 7.5%. Cut its fourth-quarter and full-year earnings outlook due to heavy markdowns and announced plans to close 11 underperforming stores.
Saks Inc. - Same-store sales dropped 19.8% in December.
Limited Brands Inc. - 10% drop in same-store sales, also lowered its fourth-quarter earnings outlook.
Gap Inc. - 14% drop in same-store sales, worse than the 9.3 percent decline that analysts had expected. It also cut its earnings outlook.
Williams-Sonoma Inc. - Same-store sales dropped more than 24 percent for the eight-week period ended Dec. 28 and warned its fourth-quarter profit will likely come in at the low end of expectations.
Continuing Jobless Claims Rise More than Expected
From Yahoo! Finance: Continuing Jobless Claims Rise More Than Expected
The number of people continuing to seek unemployment benefits has risen sharply, indicating that laid-off workers are having a harder time finding new jobs as the recession enters its second year.
The Labor Department also reported that initial applications for unemployment insurance dropped by 24,000 to a seasonally adjusted 467,000 for the week ending Jan. 3. Wall Street economists expected initial claims to increase, but the new figure partly reflects the shortened New Year's holiday week. The four-week average of initial claims, which smooths out fluctuations but also includes the shortened holiday weeks, fell by 27,000 to 525,750.
The number of people continuing to seek unemployment benefits has risen sharply, indicating that laid-off workers are having a harder time finding new jobs as the recession enters its second year.
The Labor Department also reported that initial applications for unemployment insurance dropped by 24,000 to a seasonally adjusted 467,000 for the week ending Jan. 3. Wall Street economists expected initial claims to increase, but the new figure partly reflects the shortened New Year's holiday week. The four-week average of initial claims, which smooths out fluctuations but also includes the shortened holiday weeks, fell by 27,000 to 525,750.
The number of people continuing to claim jobless benefits jumped unexpectedly by 101,000 to 4.61 million. That was above analysts' expectations of 4.5 million and the highest level since November 1982.
Unemployment figures due out Friday are expected to show that the U.S. lost a net total of 500,000 jobs in December. If accurate, that would bring total job losses last year to 2.4 million, the first annual job loss since 2001 and the highest since 1945, though the number of jobs has more than tripled since then. The job cuts are expected to send the unemployment rate to 7 percent in December, up from 6.7 percent the previous month. That would be the highest level since June 1993.
Wednesday, January 7, 2009
Commerical Real Estate Delinquencies Double in 90 Days
From Calculated Risk: Commercial Delinquencies Double in past 90 Days
Delinquencies on mortgages for hotels, shopping malls and office buildings were sharply higher in the fourth quarter. New data from Deutsche Bank show that delinquencies on commercial mortgages packaged and sold as bonds (commercial-mortgage-backed securities, or CMBS), which represent nearly a third of the commercial real-estate debt market, nearly doubled during the past three months, to about 1.2%.
The delinquency rate will likely hit 3% by the end of 2009, its highest point in more than a decade. This is not only a problem for CMBS, but many banks and thrifts have excessive exposure to CRE loans: soured commercial mortgages on banks' books jumped to 2.2% as of the third quarter in 2008, from 1.5% at the end of 2007. The research firm estimates that the rate could rise to 2.6% in the fourth quarter of 2008. Banks and thrifts would suffer in a commercial-real-estate downturn because they own nearly 50% of all commercial mortgages outstanding. As of Sept. 30, 2008, some 1,400 commercial banks and savings institutions had more than 300% of their Tier 1 capital in commercial mortgages.
Back in April 2008: Setting aside the 100 largest banks, the shares of commercial real estate loans in bank loan portfolios nearly doubled over the past 10 years and is approaching 50%. The portfolio share at these banks of residential mortgages and other consumer loans, which are more readily securitized, fell by 20% over the same period.
This is a key point that we've been discussing for a few years - most small to mid-sized institutions were not overexposed to the housing bubble because those loans were mostly securitized. Therefore the housing bust led directly to relatively few bank failures over the last couple of years (although some larger banks like WaMu, Wachovia and National City were heavily exposed to residential loans).
However, many small to mid-sized banks have a heavy concentration in commercial real estate (CRE) loans, and also in construction & development (C&D) loans. Now that CRE is weakening - and the C&D loans are coming due - there will probably be a sharp increase in bank failures over the next couple of years. 100s of small bank failures over the next couple of years is expected due to excessive CRE loan concentrations.
Delinquencies on mortgages for hotels, shopping malls and office buildings were sharply higher in the fourth quarter. New data from Deutsche Bank show that delinquencies on commercial mortgages packaged and sold as bonds (commercial-mortgage-backed securities, or CMBS), which represent nearly a third of the commercial real-estate debt market, nearly doubled during the past three months, to about 1.2%.
The delinquency rate will likely hit 3% by the end of 2009, its highest point in more than a decade. This is not only a problem for CMBS, but many banks and thrifts have excessive exposure to CRE loans: soured commercial mortgages on banks' books jumped to 2.2% as of the third quarter in 2008, from 1.5% at the end of 2007. The research firm estimates that the rate could rise to 2.6% in the fourth quarter of 2008. Banks and thrifts would suffer in a commercial-real-estate downturn because they own nearly 50% of all commercial mortgages outstanding. As of Sept. 30, 2008, some 1,400 commercial banks and savings institutions had more than 300% of their Tier 1 capital in commercial mortgages.
Back in April 2008: Setting aside the 100 largest banks, the shares of commercial real estate loans in bank loan portfolios nearly doubled over the past 10 years and is approaching 50%. The portfolio share at these banks of residential mortgages and other consumer loans, which are more readily securitized, fell by 20% over the same period.
This is a key point that we've been discussing for a few years - most small to mid-sized institutions were not overexposed to the housing bubble because those loans were mostly securitized. Therefore the housing bust led directly to relatively few bank failures over the last couple of years (although some larger banks like WaMu, Wachovia and National City were heavily exposed to residential loans).
However, many small to mid-sized banks have a heavy concentration in commercial real estate (CRE) loans, and also in construction & development (C&D) loans. Now that CRE is weakening - and the C&D loans are coming due - there will probably be a sharp increase in bank failures over the next couple of years. 100s of small bank failures over the next couple of years is expected due to excessive CRE loan concentrations.
More Bad News for Commercial Real Estate
From Calculated Risk: Restaurant Performance Index at Record Low
The outlook for the restaurant industry worsened in November, as the National Restaurant Association’s comprehensive index of restaurant activity fell to a record-low level, stood at 96.7 in November, down 0.4 percent from October and its 13th consecutive month below 100.
A solid majority of restaurant operators reported negative same-store sales and traffic levels in November, while nearly one-half expect their sales in six months to be lower than the same period in the previous year.
From Calculated Risk: The Hotel Bust
Fortunes of the once-highflying hotel industry fell hard at the end of 2008 and the prospects for 2009 look grim as anxious Americans cut travel spending and leave plenty of room at the inn.
Hotel operators have seen room reservations fall drastically as business travelers and vacationers cut down on trips. In 2009, U.S. hotels will suffer one of the greatest annual declines in occupancy and revenue in history.
The report predicts a nearly 8% drop this year in revenue per available room, a key industry measurement of performance typically calculated by multiplying a hotel's average daily room rate by its occupancy rate. That would be the fifth-largest drop in revenue per available room since 1930. The largest recent drop was in 2001, when the measurement slipped 10.3%..
From Calculated Risk: Mall Vacancies Reach 10 Year High
Vacancies at U.S. malls and shopping centers approached 10-year highs in the fourth quarter, and are set to rise further as declining retail sales put more stores out of business. Regional mall vacancies rose to 7.1 percent last quarter from 6.6 percent in the third quarter. It was the highest vacancy rate since tracking regional malls in 2000, as well as the largest quarter-to-quarter jump in vacancies.
At neighborhood and community shopping centers, the vacancy rate rose to 8.9 percent from 8.4 percent in the third quarter, the highest since began publishing quarterly data in 1999. Strip mall vacancy rates are headed for double digits
From Calculated Risk: CRE Crash Spreading
Regional banks may be an even bigger concern. In the last decade, they barreled their way into commercial real estate lending after being elbowed out of the credit card and consumer mortgage business by national players. The proportion of their lending that is in commercial real estate has nearly doubled in the last six years, according to government data. Most regional banks avoided the residential real estate market (because they couldn't compete) and instead focused on CRE lending. Now with CRE imploding, the number of bank failures will probably rise rapidly in 2009.
The outlook for the restaurant industry worsened in November, as the National Restaurant Association’s comprehensive index of restaurant activity fell to a record-low level, stood at 96.7 in November, down 0.4 percent from October and its 13th consecutive month below 100.
A solid majority of restaurant operators reported negative same-store sales and traffic levels in November, while nearly one-half expect their sales in six months to be lower than the same period in the previous year.
From Calculated Risk: The Hotel BustFortunes of the once-highflying hotel industry fell hard at the end of 2008 and the prospects for 2009 look grim as anxious Americans cut travel spending and leave plenty of room at the inn.
Hotel operators have seen room reservations fall drastically as business travelers and vacationers cut down on trips. In 2009, U.S. hotels will suffer one of the greatest annual declines in occupancy and revenue in history.
The report predicts a nearly 8% drop this year in revenue per available room, a key industry measurement of performance typically calculated by multiplying a hotel's average daily room rate by its occupancy rate. That would be the fifth-largest drop in revenue per available room since 1930. The largest recent drop was in 2001, when the measurement slipped 10.3%..
From Calculated Risk: Mall Vacancies Reach 10 Year High
Vacancies at U.S. malls and shopping centers approached 10-year highs in the fourth quarter, and are set to rise further as declining retail sales put more stores out of business. Regional mall vacancies rose to 7.1 percent last quarter from 6.6 percent in the third quarter. It was the highest vacancy rate since tracking regional malls in 2000, as well as the largest quarter-to-quarter jump in vacancies.
At neighborhood and community shopping centers, the vacancy rate rose to 8.9 percent from 8.4 percent in the third quarter, the highest since began publishing quarterly data in 1999. Strip mall vacancy rates are headed for double digits
From Calculated Risk: CRE Crash SpreadingRegional banks may be an even bigger concern. In the last decade, they barreled their way into commercial real estate lending after being elbowed out of the credit card and consumer mortgage business by national players. The proportion of their lending that is in commercial real estate has nearly doubled in the last six years, according to government data. Most regional banks avoided the residential real estate market (because they couldn't compete) and instead focused on CRE lending. Now with CRE imploding, the number of bank failures will probably rise rapidly in 2009.
Readings for the Day
From Bonddad: The "Paradox of Savings"
From Bonddad: Translating FED Speak
From Mish: 44 States Face Huge Budge Shortfalls
From Mish: Massive Jobs Contraction in Small and Medium Sized Businesses
Nonfarm Private Employment Highlights:
• Total employment: -693,000
• Small businesses: -281,000
• Medium businesses: -321,000
• Large businesses: -91,000
• Goods-producing sector: -220,000
• Service-providing sector: -473,000
• Manufacturing industry: -120,000
From Bonddad: Translating FED Speak
From Mish: 44 States Face Huge Budge Shortfalls
From Mish: Massive Jobs Contraction in Small and Medium Sized Businesses
Nonfarm Private Employment Highlights:
• Total employment: -693,000
• Small businesses: -281,000
• Medium businesses: -321,000
• Large businesses: -91,000
• Goods-producing sector: -220,000
• Service-providing sector: -473,000
• Manufacturing industry: -120,000
Intel lowers its 4th Quarter Earning Again
From Calculated Risk: Intel Business Deteri0ates Rapidly
On Oct 14th, Intel projected revenue for Q4 2008: Revenue: Between $10.1 billion and $10.9 billion. Then Intel warned on November 12th and lowered their revenue projection to $8.7 billion to $9.3 billion. Today Intel reported a significant miss.
Intel says its fourth-quarter revenue fell 23 percent from the same period a year earlier, missing its previous outlook because of ongoing weak demand and inventory reductions by its PC maker customers.
The Santa Clara-based chip maker also announced a fourth-quarter impairment charge of about $950 million related to its investment in Clearwire Corp.
Intel estimated quarterly revenue of $8.2 billion, below the $8.74 billion forecast by analysts polled by Thomson Reuters.
Intel Corp., which ships about 80 percent of the world's microprocessors -- the brains of personal computers -- also says its gross margin was at the bottom of its earlier expectation of 55 percent plus or minus a few percentage points.
In November, the company slashed its sales expectations by more than $1 billion, to $9 billion, plus or minus $300 million.
The company now expects to record a loss from equity investments of $1.1 billion to $1.2 billion due to the charge from Clearwire. Previously the company forecast a loss of $50 million from equity investments.
ADP: Private Sector slashed 693,000 jobs in December
From Yahoo! Finance: Private Job Losses Mount in December
U.S. private employers shed 693,000 jobs in December, up sharply from the revised 476,000 jobs lost in November and far more than economists estimated, a report by ADP Employer Services said on Wednesday.
U.S. private employers shed 693,000 jobs in December, up sharply from the revised 476,000 jobs lost in November and far more than economists estimated, a report by ADP Employer Services said on Wednesday.
Separate data also showed planned layoffs at U.S. firms eased in December from the previous month's seven-year high but were up an astounding 275 percent annually as the year-old recession cut a huge swathe of destruction through job market.
Worse yet, he said he still expected a little more than 2 million U.S. job losses over the next year.
He added that the U.S. economy probably contracted at a 5.5 percent annualized rate in the fourth quarter and would shrink 3.5 percent in the first quarter of this year.
Job cuts announced in December totaled 166,348, down 8.4 percent from November's 181,671, Challenger, Gray & Christmas said. Despite the monthly decline, layoffs were up from just 44,416 in the year-ago period.
Overall, employers announced 1,223,993 job cuts in 2008, the largest annual total since 2003, when there were 1,236,426 job cuts.
The American Bankers Association said late payments on U.S. consumer loans rose in the third quarter to their highest level since 1980, with late payments on indirect auto loans and home equity lines of credit hitting the highest ever during that period.
The ABA said it expected delinquencies on all types of U.S. consumer loans to rise in coming quarters.
Tuesday, January 6, 2009
Pending Home Sales Index Declines Again in November
From Calculated Risk: Pending Home Sales Index Declines in November
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in November, fell 4.0 percent to 82.3 from a downwardly revised reading of 85.7 in October, and is 5.3 percent below November 2007 when it was 86.9. The current index is the lowest since the series began in 2001.
Existing home sales have been boosted by all the distress sales in low priced areas. Over time, as foreclosure activity shifts to middle and upper income areas, existing home sales will probably decline. Existing home sales are reported at the close of escrow, pending home sales are reported when contracts are signed. The Pending Home Sales index leads existing home sales by about 45 days, so this suggests existing home sales will decline from December 2008 to January 2009.
From Big Picture: Pending Home Sales Index Collapsed
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in November, fell 4.0 percent to 82.3 from a downwardly revised reading of 85.7 in October, and is 5.3 percent below November 2007 when it was 86.9. The current index is the lowest since the series began in 2001.
Existing home sales have been boosted by all the distress sales in low priced areas. Over time, as foreclosure activity shifts to middle and upper income areas, existing home sales will probably decline. Existing home sales are reported at the close of escrow, pending home sales are reported when contracts are signed. The Pending Home Sales index leads existing home sales by about 45 days, so this suggests existing home sales will decline from December 2008 to January 2009.
From Big Picture: Pending Home Sales Index Collapsed
Subscribe to:
Posts (Atom)