Wednesday, January 27, 2010
Amazon Bubble Has Only Slightly Deflated
Amazon stock price has come down from it is ridiculous levels since we have mentioned it. It is down around 15%, but that is not nearly enough in terms of valuation. Of course you might want to be careful of a bounce given the market being down a few days in a row and we are still in the complacent go-go stages and this stock is loved by a bunch of momentum investors who are not necessarily investors or plain just don't know what they are doing if they think they are buying a good value. I have no argument this is a great company. I use it all the time myself, but as mentioned in Wall Street Meat by Andy Kessler in his book, Amazon is not much different than the milk company with huge sales, but razor thin margins, which will not change. Margins will not change because their business model depends on volumes and to bring volumes in they have to sell things cheaper than competitors, aka low margins. This is the same thing (again as mentioned in the aforementioned book) that happened to buy.com. Amazon will be a great company, but do not expect huge margins going forward either. Also, as nice as Kindle might be -which I am not a big fan of nor use one- it will not be the next iPod or make Amazon the next Apple -which, too, is way overvalued by the way. And yes, Apple, too, is a great company, just not a good stock.
The Baidu Bubble
If you believe China is a bubble and the stock market will crater following their property bubble, you might consider BIDU as a short. The stock rallied from 100 bucks to 450 bucks and from a valuation point looks ridiculous to me. Of course it is one of the popular go-go stocks, so it is tough to short a stock like that. But a slightly longer term (such as sep 10 or jan 11) way out of the money put looks quite attractive to me.
Flawed Model Of Banks and Why Not To Invest In Them
It does not make sense to invest in a business where the employees and management that are supposed to be working for you act like you are there for them and they decide whatever they want to pat themselves and have no shame paying even more than all of the earnings. I am talking about Goldman Sachs, JPMorgan, Bank of America, Morgan Stanley, and Citigroup mainly. According to an article that recently came out in the NY Times Goldman Sachs (after chickening from paying themselves in the last quarter due to public outrage) paid themselves 45% or earnings, JPM 63%, Bank of America 88%, Morgan Stanley 94%, and Citigroup 145%. Quite some outrageous numbers. Also, do not be fooled by Goldman looking like the least percentage. The percentage is lower because they "made" more money. That more money came from our pockets as taxpayers of course through the channel of the Fed and the Treasury giftin -illegally- a lot of money to them as was evidenced in the AIG hearings today. Why invest in firms that keep most if not all of the earnings to themselves rather than distributing to shareholders. These companies should be trading at deep discount premiums assuming they are not insolvent. That is a whole different topic since they are deeply insolvent, but market does not care.
Here is the NY Times article:
"
Ailing Banks Favor Salaries Over Shareholders
Published: January 26, 2010
Finding the winners on Wall Street is usually as simple as looking at pay. Rarely are bankers who lose money paid as generously as those who make it.
But this year is unusual. A handful of big banks that are struggling in the postbailout world are, by some measures, the industry’s most magnanimous employers. Roughly 90 cents out of every dollar that these banks earned in 2009 — and sometimes more — is going toward employee salaries, bonuses and benefits, according to company filings.
Amid all the commotion over the large bonuses that many bankers are collecting, what stands out is not only how much the stars are making. It is also how much of the profits lesser lights are taking home.
To compete with well-heeled rivals, banks like Citigroup are giving their employees an unheard-of cut of the winnings. Citigroup paid its employees so much in 2009 — $24.9 billion — that the company more than wiped out every penny of profit. After paying its employees and returning billions of bailout dollars, Citigroup posted a $1.6 billion annual loss.
Granted, the bankers and traders who work for Wall Street’s biggest moneymakers are still collecting the richest rewards. But this bonus season, banking executives are rethinking how to divide the spoils.
Goldman Sachs, that highest of highfliers, is doing the unthinkable. It is giving its employees an unusually small cut of its profits — about 45 cents out of every dollar — even though its paydays will, in dollar terms, rank among the richest of all time.
That 45-cent figure, known as the payout ratio, represents the amount of compensation that Goldman is meting out relative to the pool of profits available for compensation. Until recently, the ratio for most Wall Street banks hovered around 60 cents of every dollar, in line with other labor- and talent-intensive industries like retailing and health care.
Most Americans would be thrilled to collect a Goldman-style paycheck. If compensation were spread evenly among the bank’s 36,200 employees, each would take home about $447,000.
But to keep up with the Goldmans, laggards like Citigroup are handing out fat slices of their profits, leaving little left over for their shareholders. Citigroup is, in effect, paying its employees $1.45 for every dollar the company took in last year. On average, its workers stand to earn $94,000 each.
Bank of America, meantime, is spending 88 cents of every dollar it made in 2009 to compensate its workers. At Morgan Stanley, that figure is 94 cents.
JPMorgan Chase, which has fared better than those three, paid out 63 cents of every dollar.
Citigroup, Bank of America and Morgan Stanley — all of which have repaid their federal aid — defend their pay practices. Press officers for the banks say a number of factors, from one-time accounting charges to the constant need to lure and retain top producers, drove decisions about compensation.
But some analysts and investors say these and other banks are rewarding their employees at shareholders’ expense. The banking industry is quick to pay its workers when times are good but slow to penalize them when times are tough. Pay for performance? Not on Wall Street, the critics say.
“The investor in America sits at the bottom of the food chain,” said John C. Bogle, the founder and former chairman of the Vanguard Group, the mutual fund giant. “The financial industry gets paid before their clients, and we get paid whether times are good or bad.”
Institutional investors are alarmed by what they characterize as excessive rewards for bank employees. While banks are increasing salaries and bonuses for many employees, many have yet to restore dividends that were cut during the financial crisis.
“It’s not a fair shake,” said John A. Hill, chairman of the trustees at Putnam Funds, another big mutual fund company. “I think the shareholders who paid for building that franchise should be getting a bigger share of the franchise’s profits.”
Even now, after all those big bonus numbers, the pay-to-profit ratio for the financial industry might come as a surprise to many people. The five largest banks on Wall Street — Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley — earned a combined $147.4 billion before paying compensation and taxes last year. They plowed back a combined $31.2 billion into their companies and returned a total of $2.1 billion to shareholders in the form of dividends. They paid $114.1 billion to their employees.
Wall Street giants like Goldman Sachs and Morgan Stanley traditionally set aside about half their revenue for compensation. Big diversified banks, like Citigroup and JPMorgan Chase, typically set aside about a third. Most banks have typically viewed compensation as the cost of bringing in new income, even though the main concern for most shareholders is profits.
At some banks, the relationship between pay and profit is a bit tenuous. In 2005, for instance, Morgan Stanley made a pretax profit of $7.4 billion. That year, compensation at the bank averaged $212,000 for each employee. Last year, Morgan Stanley made about $857 million before taxes. But compensation averaged $235,000 for each employee.
In other words, Morgan Stanley employees collected roughly 61 cents out of every dollar the bank made in 2005, and about 94 cents of every dollar last year.
Mark Lake, a Morgan Stanley spokesman, said that 2009 compensation per employee was the lowest in at least seven years if the business then looked as it did today, and that adding thousands of Smith Barney brokers and a large accounting charge led to a higher payout ratio.
Bank of America traditionally paid out a small sliver of its profits to workers and maintained a relatively high dividend. But the bank reversed course after its acquired Merrill Lynch and Countrywide Financial. Now Bank of America has more than doubled the share of earnings it sets aside for employees. It was forced to cut its quarterly dividend to a penny as a condition of its second government bailout and has yet to restore it.
Scott Silvestri, a Bank of America spokesman, attributed the higher compensation costs to a “change in the business mix” after the Merrill Lynch deal. “We must pay those, or we have no company,” Mr. Silvestri said.
Shareholder advocates maintain that Wall Street pay works in favor of management and employees rather than shareholders. The industry’s bonus culture is widely viewed as having helped foster the excessive risk-taking that led to the financial crisis.
In the three years before the crisis, the five Wall Street giants set aside a total of $295 billion in compensation. Had they not handed out bonuses or shifted more compensation into stock, pay experts estimate, those banks might have kept $118 billion of additional capital in the financial system. That is almost equal to the $135 billion of bailout funds that taxpayers poured into those five institutions.
“It’s heads I win, and tails they don’t lose too badly,” said Jesse M. Fried, a professor at Harvard Law School and co-author of “Pay Without Performance.”
Some investors and Washington policy makers argue that shareholders should get a say on pay, even if their vote is nonbinding. Mr. Bogle, of Vanguard, says big investors need to be vigilant.
“If the shareholders would wake up, executive compensation would not be what it is,” he said.
A version of this article appeared in print on January 27, 2010, on page B1 of the New York edition
"
Here is the NY Times article:
"
Ailing Banks Favor Salaries Over Shareholders
Published: January 26, 2010
Finding the winners on Wall Street is usually as simple as looking at pay. Rarely are bankers who lose money paid as generously as those who make it.
But this year is unusual. A handful of big banks that are struggling in the postbailout world are, by some measures, the industry’s most magnanimous employers. Roughly 90 cents out of every dollar that these banks earned in 2009 — and sometimes more — is going toward employee salaries, bonuses and benefits, according to company filings.
Amid all the commotion over the large bonuses that many bankers are collecting, what stands out is not only how much the stars are making. It is also how much of the profits lesser lights are taking home.
To compete with well-heeled rivals, banks like Citigroup are giving their employees an unheard-of cut of the winnings. Citigroup paid its employees so much in 2009 — $24.9 billion — that the company more than wiped out every penny of profit. After paying its employees and returning billions of bailout dollars, Citigroup posted a $1.6 billion annual loss.
Granted, the bankers and traders who work for Wall Street’s biggest moneymakers are still collecting the richest rewards. But this bonus season, banking executives are rethinking how to divide the spoils.
Goldman Sachs, that highest of highfliers, is doing the unthinkable. It is giving its employees an unusually small cut of its profits — about 45 cents out of every dollar — even though its paydays will, in dollar terms, rank among the richest of all time.
That 45-cent figure, known as the payout ratio, represents the amount of compensation that Goldman is meting out relative to the pool of profits available for compensation. Until recently, the ratio for most Wall Street banks hovered around 60 cents of every dollar, in line with other labor- and talent-intensive industries like retailing and health care.
Most Americans would be thrilled to collect a Goldman-style paycheck. If compensation were spread evenly among the bank’s 36,200 employees, each would take home about $447,000.
But to keep up with the Goldmans, laggards like Citigroup are handing out fat slices of their profits, leaving little left over for their shareholders. Citigroup is, in effect, paying its employees $1.45 for every dollar the company took in last year. On average, its workers stand to earn $94,000 each.
Bank of America, meantime, is spending 88 cents of every dollar it made in 2009 to compensate its workers. At Morgan Stanley, that figure is 94 cents.
JPMorgan Chase, which has fared better than those three, paid out 63 cents of every dollar.
Citigroup, Bank of America and Morgan Stanley — all of which have repaid their federal aid — defend their pay practices. Press officers for the banks say a number of factors, from one-time accounting charges to the constant need to lure and retain top producers, drove decisions about compensation.
But some analysts and investors say these and other banks are rewarding their employees at shareholders’ expense. The banking industry is quick to pay its workers when times are good but slow to penalize them when times are tough. Pay for performance? Not on Wall Street, the critics say.
“The investor in America sits at the bottom of the food chain,” said John C. Bogle, the founder and former chairman of the Vanguard Group, the mutual fund giant. “The financial industry gets paid before their clients, and we get paid whether times are good or bad.”
Institutional investors are alarmed by what they characterize as excessive rewards for bank employees. While banks are increasing salaries and bonuses for many employees, many have yet to restore dividends that were cut during the financial crisis.
“It’s not a fair shake,” said John A. Hill, chairman of the trustees at Putnam Funds, another big mutual fund company. “I think the shareholders who paid for building that franchise should be getting a bigger share of the franchise’s profits.”
Even now, after all those big bonus numbers, the pay-to-profit ratio for the financial industry might come as a surprise to many people. The five largest banks on Wall Street — Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley — earned a combined $147.4 billion before paying compensation and taxes last year. They plowed back a combined $31.2 billion into their companies and returned a total of $2.1 billion to shareholders in the form of dividends. They paid $114.1 billion to their employees.
Wall Street giants like Goldman Sachs and Morgan Stanley traditionally set aside about half their revenue for compensation. Big diversified banks, like Citigroup and JPMorgan Chase, typically set aside about a third. Most banks have typically viewed compensation as the cost of bringing in new income, even though the main concern for most shareholders is profits.
At some banks, the relationship between pay and profit is a bit tenuous. In 2005, for instance, Morgan Stanley made a pretax profit of $7.4 billion. That year, compensation at the bank averaged $212,000 for each employee. Last year, Morgan Stanley made about $857 million before taxes. But compensation averaged $235,000 for each employee.
In other words, Morgan Stanley employees collected roughly 61 cents out of every dollar the bank made in 2005, and about 94 cents of every dollar last year.
Mark Lake, a Morgan Stanley spokesman, said that 2009 compensation per employee was the lowest in at least seven years if the business then looked as it did today, and that adding thousands of Smith Barney brokers and a large accounting charge led to a higher payout ratio.
Bank of America traditionally paid out a small sliver of its profits to workers and maintained a relatively high dividend. But the bank reversed course after its acquired Merrill Lynch and Countrywide Financial. Now Bank of America has more than doubled the share of earnings it sets aside for employees. It was forced to cut its quarterly dividend to a penny as a condition of its second government bailout and has yet to restore it.
Scott Silvestri, a Bank of America spokesman, attributed the higher compensation costs to a “change in the business mix” after the Merrill Lynch deal. “We must pay those, or we have no company,” Mr. Silvestri said.
Shareholder advocates maintain that Wall Street pay works in favor of management and employees rather than shareholders. The industry’s bonus culture is widely viewed as having helped foster the excessive risk-taking that led to the financial crisis.
In the three years before the crisis, the five Wall Street giants set aside a total of $295 billion in compensation. Had they not handed out bonuses or shifted more compensation into stock, pay experts estimate, those banks might have kept $118 billion of additional capital in the financial system. That is almost equal to the $135 billion of bailout funds that taxpayers poured into those five institutions.
“It’s heads I win, and tails they don’t lose too badly,” said Jesse M. Fried, a professor at Harvard Law School and co-author of “Pay Without Performance.”
Some investors and Washington policy makers argue that shareholders should get a say on pay, even if their vote is nonbinding. Mr. Bogle, of Vanguard, says big investors need to be vigilant.
“If the shareholders would wake up, executive compensation would not be what it is,” he said.
A version of this article appeared in print on January 27, 2010, on page B1 of the New York edition
"
QCOM Misses Big Time
Qualcomm misses revenues and earnings and lowers guidance for the rest of 2010. One of the problems they are facing according to the company is that people are choosing cheaper phones. That could be a result of people realizing that they do not really need the expensive iPhones and Blackberrys and the expensive monthly data plans they come with especially in a time when unemployment is very high and rising and people's incomes and buying power -except for goldman- are falling. This is also a sign that the pricing power of Qualcomm will have to decrease over time as has been the case with a lot of technology companies over the last several decades.
Here is a report from AP via Yahoo:
"
Qualcomm sounds cautious note on recovery, pulls back on 2010 forecast
The company's stock fell 8 percent in extended trading.
A lagging recovery in Europe and Japan and a greater demand for cheap phones prompted the company to reduce its sales estimate for the year, said CEO Paul Jacobs.
Qualcomm had expected sales of $10.5 billion to $11.3 billion for the fiscal year, which ends in September. It's now expecting $10.4 billion to $11 billion. It kept its full-year earnings estimate, at $1.56 per share to $1.76 per share.
However, Qualcomm gave a forecast for the current quarter that came in under the expectations of Wall Street analysts. It expects earnings of 49 cents to 53 cents excluding items, and revenue between $2.4 billion and $2.6 billion. Analysts were expecting earnings of 57 cents per share, excluding items, on revenue of $2.75 billion.
For the just-ended fiscal first quarter, Qualcomm posted net income that more than doubled. But it said much of the increase was due to investment income, as financial markets stabilized.
It posted net income of $841 million, or 50 cents per share, in the quarter that ended Dec. 27. That was up from $341 million, or 20 cents per share, in the same period the year before.
Revenue rose 6 percent from the same period a year earlier to $2.67 billion.
The company says that earnings excluding one-time items were 62 cents per share. Analysts, on average, were expecting a profit of 56 cents per share on sales of $2.7 billion, according to Thomson Reuters.
Shares of Qualcomm, which is based in San Diego, were down $3.95, or 8.4 percent, at $43.29 after the release of the results.
"
Here is a report from AP via Yahoo:
"
Qualcomm stock dives on cautious forecast
Qualcomm sounds cautious note on recovery, pulls back on 2010 forecast
, On Wednesday January 27, 2010, 4:42 pm
NEW YORK (AP) -- Qualcomm Inc., whose chips and other technologies are used in vast numbers of cell phones, sounded a cautious note on the economy on Wednesday, saying a "subdued" recovery forced it to slightly dial back expectations for 2010.The company's stock fell 8 percent in extended trading.
A lagging recovery in Europe and Japan and a greater demand for cheap phones prompted the company to reduce its sales estimate for the year, said CEO Paul Jacobs.
Qualcomm had expected sales of $10.5 billion to $11.3 billion for the fiscal year, which ends in September. It's now expecting $10.4 billion to $11 billion. It kept its full-year earnings estimate, at $1.56 per share to $1.76 per share.
However, Qualcomm gave a forecast for the current quarter that came in under the expectations of Wall Street analysts. It expects earnings of 49 cents to 53 cents excluding items, and revenue between $2.4 billion and $2.6 billion. Analysts were expecting earnings of 57 cents per share, excluding items, on revenue of $2.75 billion.
For the just-ended fiscal first quarter, Qualcomm posted net income that more than doubled. But it said much of the increase was due to investment income, as financial markets stabilized.
It posted net income of $841 million, or 50 cents per share, in the quarter that ended Dec. 27. That was up from $341 million, or 20 cents per share, in the same period the year before.
Revenue rose 6 percent from the same period a year earlier to $2.67 billion.
The company says that earnings excluding one-time items were 62 cents per share. Analysts, on average, were expecting a profit of 56 cents per share on sales of $2.7 billion, according to Thomson Reuters.
Shares of Qualcomm, which is based in San Diego, were down $3.95, or 8.4 percent, at $43.29 after the release of the results.
"
Market Views
Despite being long term bearish and believing that markets are vastly overvalued, I would be careful about a tiny bounce here in the stockmarkets. Markets have been down for about a week with very little bounce so far. There are a lot of reasons for the markets to go down. However, they have been ignored for quite a few months at this point, so I do not know how people would all of a sudden realize this. I am not sure what the catalyst will be for the downside to start significantly, but of course the risk is to the downside at least in the longer term. It can, also, completely break down here from a technical standpoint and we can see significant downside (I would recommend Princeton Financial for technical work - I have followed their work while I was at a hedge fund and they do a great job). However, in the short term complacency continues and we have seen good pullbacks in sectors such as steels and oil as well as precious metals related sectors. I would reduce my longs for the long term, but I would not go out on a limb to short at this point since complacency and manipulation leads the market still. Just my views for the short term which is impossible to know.
Attack On Gold Deepens Defying All Logic Following Federal Reserve Announcement Of Eternal Low Rates If They Can Help It
Wall Of Maturities Facing Banks
IMF warns that despite improving economic conditions (of course they have to say that even when they don't believe it - politics) banks are not adequately capitalized and they are facing a wall of maturities in 2010-2011. That will be why we can expect low Fed Fund Target rates from Bernanke and the Fed as much as they can control the rates since they are practically owned and ruled by Goldman and the other banks. They will try to make it easy for the banks to roll this debt, so that it does not become apparent that these banks are actually all Ponzi schemes and insolvent. However, there is a lot of risk that the Fed loses control of rates as the world central banks drop the dollar as the reserve and global trade currency and market loses complete faith in the Fed and sees it for what it is (useless and corrupt) and the Fed can no longer manipulate the markets illegally. That could be an interesting day and that is why everyone should have at least 20% of their well being in gold and similar assets.
Here is the article from the Telegraph of UK:
"
Here is the article from the Telegraph of UK:
"
Banks must raise billions to fend off crisis, says IMF
The world's biggest banks face an impending funding crisis, with a "wall of maturities" fast approaching, and must raise billions more in capital in the coming years, the International Monetary Fund (IMF) has warned.
By Edmund Conway in Davos
Published: 6:45AM GMT 27 Jan 2010
Published: 6:45AM GMT 27 Jan 2010
In comments which will reignite fears of a relapse into a second financial crisis, the IMF said that banks have yet to bolster their balance sheets sufficiently and could be vulnerable to a whole range of shocks in the coming months.
It also indicated that with governments including the UK and the US borrowing so much in the next few years, there was an increasing chance of a sovereign debt crisis, something which could trigger chaos for public and private sectors alike.
he warnings formed part of the IMF's update to itsGlobal Financial Stability Report and World Economic Outlook, which its managing director, Dominique Strauss-Kahn is planning to roadshow at the World Economic Forum in Davos this week.
The Fund said that, despite the remaining risks to the economic and financial system, policy-makers had "forestalled another Great Depression", and raised its growth forecasts for almost every economy in the world both this year and the next.
It lifted its world growth forecast this year by 0.75pc to 3.9pc, and in an unexpected boost to the Chancellor, Alistair Darling, it lifted its UK forecast by 0.4pc points this year to 1.3pc, putting it in line with the Treasury's own projection.
However, the good news was overshadowed by its fresh warnings about the vulnerability of the banking system. It said that although it was likely to revise its estimate of losses derived from the global financial crisis from its October $3.4 trillion (£2.1 trillion) estimate, banks had still failed to reinforce their balance sheets sufficiently.
It said: "Even though some bank capital has been raised, substantial additional capital may be needed to support the recovery of credit and sustain economic growth under expected new Basel capital adequacy standards".
Banking analysts recently estimated that Barclays would need to raise an extra £17bn in capital to comply with the new rules, with other banks facing similarly large bills. With some insiders suggesting that even the new stricter Basel rules on capital do not go far enough, the potential cost could be higher still.
The IMF also warned that banks face "a wall of maturities looming ahead through 2011–13" in their shorter-term funding. It added: "A future retrenchment in confidence therefore could severely weaken banks' ability to roll over this debt."
However, it is not merely the banks themselves that have caused the IMF concern. It name-checked the UK as one country facing particular scrutiny over the state and sustainability of its public finances, saying the extra debt raised by the Government could, at the very least, "crowd out private sector credit growth, gradually raising interest rates for private borrowers and putting a drag on the economic recovery."
"
Update On Steelmakers From Reuters
Here is an article updating the views on the steelmakers and how they are facing headwinds. Of course they will as there is no real recovery. Had China not been supporting its economy by pushing government spending on infrastructure to make up for the slack from exports (brilliant move for the Chinese by the way - it is textbook, same thing the US did late 1800s early 1900s), the steelmakers would have been in bigger trouble. Another reason they are doing better than they would have otherwise is the fact that steel prices have been rising as investors and governments such as China try to diversify out of US dollars and into hard assets.
Here is the article:
"
Here is the article:
"
WRAPUP 2-4th-qtr results show U.S. steelmakers face headwinds
* U.S. Steel posts Q4 loss, sees more red ink in Q1
* Nucor posts profit but warns of rising costs
* U.S. Steel shares drop 11 pct, Nucor down 1.29 pct (Adds Nucor CEO comments, closing stock prices)
NEW YORK, Jan 26 (Reuters) - U.S. steelmakers are making a slow recovery from the recession and still face rising raw material costs and other headwinds, quarterly results showed on Tuesday.
U.S. Steel Corp (X.N) posted its fourth consecutive quarterly loss and forecast more red ink in the current quarter, sending its shares down 11.77 percent to $49.61 on the New York Stock Exchange.
Nucor Corp (NUE.N) moved into the black after three quarters of losses but said demand was still hampered by weak markets, especially in the construction sector. Nucor's stock finished down 1.29 percent at $43.56.
Nucor's Chief Executive Officer Dan DiMicco told analysts on a conference call: "Our view remains that real demand is in for a long, slow recovery.
"The fact is, the market stinks ... no product group, no product type, no end market is anywhere near back to where it was two years ago. Raw material costs are putting pressure on everybody."
On Monday, AK Steel Holding Corp (AKS.N) reported a fourth-quarter profit but forecast lower operating profit in the first quarter due to spiraling costs for raw materials like scrap and iron ore.
Asked about the construction market, which relies heavily on steel, DiMicco said: "The reality is, the early part of this year will probably be worse than last year. We have not really seen much of anything from the ... first stimulus package on infrastructure."
Analyst Michelle Applebaum of Steel Market Intelligence in Chicago noted that U.S. Steel and Nucor gave "subdued guidance" for the first quarter of this year, with U.S. Steel giving a warning of an operating loss.
"Steel prices in the U.S. and globally are rising at a rapid clip due to a combination of Chinese demand, running raw material costs and slow restarts. We expect to see margin pressure for the blast furnace steelmakers (like U.S. Steel) ... continue through at least the second quarter," she said.
U.S. Steel's fourth-quarter net loss was $267 million, or $1.86 per share, wider than Wall Street expected, compared with a year-earlier profit of $290 million, or $2.50 per share. Revenue dropped to $3.4 billion from $4.5 billion, the Pittsburgh-based company said.
"We expect to report an overall first-quarter 2010 operating loss in line with the fourth-quarter 2009 as gradually improving business conditions are not yet fully reflected in our operating results," said Chairman and Chief Executive Officer John Surma.
Unlike U.S. Steel, which uses iron ore to make steel in coal-fired blast furnaces, Nucor is a mini-mill manufacturer that uses scrap as its raw material for electric arc furnaces.
Nucor posted its first quarterly profit of 2009, but earnings were down almost 50 percent from a year earlier and revenue fell 29 percent to $2.94 billion.
The company said that while it expects steel mill shipments to rise about 5 percent in the first quarter, it also expects significant increases in scrap costs. (Reporting by Steve James; Editing by John Wallace, Toni Reinhold)
"
Fed Vows To Leave Rates At Historic Lows For Extended Period = Gold Should Be Flying
So the Fed is determined to kill the dollar and ruin this country. It is official. This should mean dollar should be tanking and gold should be flying. Of course as soon as they report they also interfere illegally in the gold markets to get in front of a jump in the gold price. The tail is wagging the dog again.
Here is the article from Bloomberg: Buy physical gold while you can. Fed is giving all of us a gift by manipulating the price down. Nothing lasts forever....
"
Fed Keeps ‘Extended Period’ Pledge, Sees Mortgage-Buying End
"
Here is the article from Bloomberg: Buy physical gold while you can. Fed is giving all of us a gift by manipulating the price down. Nothing lasts forever....
"
Fed Keeps ‘Extended Period’ Pledge, Sees Mortgage-Buying End
By Craig Torres
Jan. 27 (Bloomberg) -- The Federal Reserve kept interest rates near zero and restated its intention to cease buying mortgage-backed securities in March.
At the same time, “the Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets,” the Federal Open Market Committee said in a statement today in Washington.
Policy makers are keeping interest rates “exceptionally low” for an “extended period” as they wind down the record amounts of credit they have provided since the bankruptcy of Lehman Brothers Holdings Inc. in 2008. Kansas City Fed President Thomas Hoenig dissented, saying “financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.”
The Fed also repeated that it will close four facilities supporting money markets and bond dealers in February, as well as dollar swap programs with central banks in Europe and Asia.
The central bank is “prepared to modify these plans if necessary to support financial stability and economic growth,” the statement said. The Fed also said it is winding down the Term Auction Facility and will hold a final auction on March 8.
Chairman Ben S. Bernanke, who tomorrow faces a procedural vote in the Senate on his confirmation for a second term, is looking for signs that the return to economic growth is generating jobs and is accompanied by an increase in credit to people and businesses. The U.S. unemployment rate held at 10 percent in December, while consumer credit dropped a record $17.5 billion in November.
Spending, Jobs
“Household spending is expanding at a moderate rate, but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit,” the Fed said in its statement. Businesses “remain reluctant to add to payrolls.”
Verizon Communications Inc., coping with subscriber losses at its fixed-line phone business, said yesterday it will cut about 13,000 jobs at the division this year. Home Depot Inc., the world’s largest home-improvement retailer, also said yesterday it will pare 1,000 U.S. jobs.
Stocks have provided no increase in consumer wealth this year. The Standard & Poor’s 500 Index is down more than 2 percent, and the Nasdaq Composite Index has lost more than 3 percent. Last year, the indexes rose 23.5 percent and 43.9 percent, respectively.
Officials kept their benchmark overnight lending rate between banks in a range of zero to 0.25 percent, where it has been for more than a year. Policy makers said that low rates are contingent on “low rates of resource utilization, subdued inflation trends, and stable inflation expectations.”
“Their forecast is for a subdued recovery and the data have been consistent with that,” Julia Coronado, senior economist at BNP Paribas SA in New York, said before the statement. “Retail sales edged lower in December, and credit is still contracting.”
Factory Capacity
Production in the U.S. rose for a sixth consecutive month in December, and housing markets are stabilizing. Industrial production rose 0.6 percent last month, pushing up factory capacity in use to 72 percent. That’s still below the average plant-use rate of 78.5 percent from 2000 through 2007.
“You have sustainable growth, but far below the trend rate” needed to lower unemployment, John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before today’s Fed decision. “I don’t see how the Fed is going to start raising rates with the unemployment rate at 10 percent.”
The economy expanded at a 4.6 percent annual rate in the final quarter of last year, according to the median estimate of economists surveyed by Bloomberg News. The government will release its advance report on gross domestic product Jan. 29.
Home Sales
Sales of existing homes rose 4.9 percent to 5.16 million in 2009, the first gain in four years, the National Association of Realtors said this week. Fed officials will be watching to see if the end of their mortgage bond purchase programs hinders a recovery in housing.
The average rate on a 30-year fixed mortgage fell to 4.99 percent the week of Jan. 21 from 5.06 percent the previous week, according to Freddie Mac of McLean, Virginia.
The 56-year-old Fed chairman’s first four-year term expires at the end of this month, and the Senate hasn’t yet confirmed the former Princeton University professor for a second four-year term.
Bernanke has presided over two years of economic growth that were followed by a financial crisis that produced the worst recession since the Great Depression. The economy contracted at a 5.4 percent annual rate in the fourth quarter of 2008 and at a 6.4 percent rate in the first quarter of 2009.
Labor-Market Weakness
Employers cut 85,000 jobs in December, after revisions showed a gain of 4,000 in November, the first in almost two years. The unemployment rate held at 10 percent.
Wal-Mart Stores Inc., the world’s largest retailer, will eliminate about 11,200 jobs at its Sam’s Club membership warehouse clubs in the U.S. as it hires an outside company to demonstrate products.
Dallas-based financial services company Comerica Inc. said Jan. 21 that it plans to cut 300 jobs, or about 3 percent of its total workforce, this year.
U.S. central bankers forecast in November a slow decline in unemployment this year with the jobless rate averaging 9.3 percent to 9.7 percent in the fourth quarter, according to their central tendency estimates.
“We’ll definitely see job growth in 2010,” New York Federal Reserve Bank President William Dudley told the Nightly Business Report on PBS Television Jan. 13. “Whether it’ll be sufficient to bring down the unemployment rate, materially, remains to be seen.”
To contact the reporter on this story: Craig Torres in Washington atctorres3@bloomberg.net
Last Updated: January 27, 2010 14:16 EST "
Jeremy Grantham: US Stock Bubble, S&P Worth 850
I think the S&P is worth a lot less than that, but it is refreshing to hear a big money manager see that there is at least vast overvaluation in the markets.
Here is the Wall Street Journal article:
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Here is the Wall Street Journal article:
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A Bear Reawakens After a Bullish Run
GMO's Grantham Sees a Stock Bubble
By JONATHAN BURTON
Jeremy Grantham, the investment guru who correctly predicted the 2009 market rally, now warns that a new bubble is forming.
Stocks are likely to move higher in coming months, but prices are expensive, and long-term investors should be mindful of a volatile mix that Federal Reserve policy and government actions are causing, according to Mr. Grantham, the frequently bearish chief investment strategist at Boston-based institutional money manager GMO.
"Once again, the Fed is playing with fire," Mr. Grantham wrote in his latest quarterly letter to institutional clients.
The Fed's policy of low interest rates and easy money has boosted the economy but has stimulated Wall Street and stocks even more, Mr. Grantham says. That is why, much to his dismay, he sees another large speculative wave forming.
"I was counting on the Fed and the Administration to begin to get the point that low rates held too long promote asset bubbles, which are extremely dangerous to the economy and the financial system," he writes.
"Now, however, the penny is dropping," he says, "and I realize the Fed is unwittingly willing to risk a third speculative phase, which is supremely dangerous this time because its arsenal now is almost empty."
At the same time, Mr. Grantham says, higher prices suggest a stock market that is increasingly stable and confident, encouraging investors to buy first and ask questions later, if at all.
The upside, at least in the short term, is that speculation will drive the stock market for the next several months, he believes. Accordingly, he says GMO's strategy will be to "very slowly" trim equity positions and to "swallow our distaste for parking the rest in unattractive fixed-income."
This next leg up will be unlike 2009's rally, when low-quality and riskier stocks fared best, Mr. Grantham says. He expects a broader advance, "in which high-quality stocks should hold their own or even outperform."
But it will be a false rally, he finds. The Standard & Poor's 500 is worth "850 or so; thus any advance from here will make it once again seriously overpriced." The S&P 500 closed at 1092.17.
Mr. Grantham is frequently bearish, so it was uncharacteristic in March 2009 when he urged investors to buy stocks. His timing, at the bottom of the market, was correct, just as it was in late 2007, when he warned that stocks were precariously perched.
Going forward, Mr. Grantham predicts a "multiyear headwind" on the markets, during which investors will see "below-average profit margins" and price/earnings ratios in a period more akin to the bumpy 1970s than the bumper 1990s.
Over what Mr. Grantham calls the next "seven lean years," GMO forecasts large-cap U.S. stocks to deliver a real return (after inflation) of 1.3% annualized, while small-caps provide a 0.5% return. The outlook is better for high-quality U.S. stocks, which have an expected yearly return of 6.8%.
"For the longer term, the outperformance of high quality U.S. blue chips compared with the rest of U.S. stocks is … nearly certain," Mr. Grantham says.
International stocks also fare reasonably well in GMO's model, up about 4.7% annualized over the seven-year period, while emerging markets come in with a 3.9% annualized gain.
"Going into this next decade, we start with the U.S. overpriced," Mr. Grantham cautions, "so do not be conned into believing that every bad decade is followed by a good one."
Printed in The Wall Street Journal, page C14
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Gold Being Manipulated Again
Probably to help the guilty people who are talking to the congress right now, Fed -most likely NY Fed managed by Goldman- is attacking gold right now. What else can explain the big volume (bigger than what any individual or firm can afford) push of the price in a matter of seconds to minutes down 12 bucks? This needs to stop. People should just buy physical gold and kill this scheme and press their representatives to shut or audit the Fed to the last little document and to help stop this illegal crime.
How Are Paulson, Bernanke, and Geithner Not In Jail?????
This is for anyone listening to the AIG hearings in congress.
1-AIG
2- GS ridiculousness
3- Ken Lewis, ex CEO of B of A, being threatened by the mentioned people
4- Illegal manipulation of gold, stock, and fixed income markets
5- Illegal bail-out of Bear Stearns
6- Forced takeover of Merill Lynch by Bank of America
7- Fed going beyond their powers
8- FDIC and Fed insuring or buying things beyond their athority
9- All the lies and hidden things
10- Closed door negotiations with Goldman (think Blankfein) over AIG scheme
11- Guarantees by Fed, FDIC, and treasury beyond their authority
12- Outright handing out of money by the same people to their friends at banks, mainly Goldman
13- Misinformation and misleading about the stress tests as well as the conditions of the condition of financial institutions among others
14- They just belong behind bars. These people are pure evil and disgusting and annoying.
1-AIG
2- GS ridiculousness
3- Ken Lewis, ex CEO of B of A, being threatened by the mentioned people
4- Illegal manipulation of gold, stock, and fixed income markets
5- Illegal bail-out of Bear Stearns
6- Forced takeover of Merill Lynch by Bank of America
7- Fed going beyond their powers
8- FDIC and Fed insuring or buying things beyond their athority
9- All the lies and hidden things
10- Closed door negotiations with Goldman (think Blankfein) over AIG scheme
11- Guarantees by Fed, FDIC, and treasury beyond their authority
12- Outright handing out of money by the same people to their friends at banks, mainly Goldman
13- Misinformation and misleading about the stress tests as well as the conditions of the condition of financial institutions among others
14- They just belong behind bars. These people are pure evil and disgusting and annoying.
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