Job Losses Mount on Wall Street

According to Bloomberg:

Wall Street banks hit by mortgage losses and writedowns have cut more than 34,000 jobs in the past nine months, the most since the dot-com boom fizzled in 2001.

Citigroup Inc., Lehman Brothers Holdings Inc. and Morgan Stanley are among the firms that have disclosed headcount reductions so far.

After the Internet bubble burst, 39,800 jobs were eliminated during the same period; the number climbed to 90,000 in the next two years, according to the Securities Industry and Financial Markets Association.

Lehman's home-loan unit, BNC Mortgage LLC, employed 1,600 people before the firm closed it down in August. Mortgage lender First Franklin Financial had 2,300 employees when it was acquired by Merrill Lynch & Co. in January 2007. Merrill shuttered the business this month. All told, at least 100 mortgage companies have suspended operations, closed or been sold since the start of 2007.

It's been widely speculated that when the dust finally settles, Banks will end up losing $700 Billion dollars in this subprime mortgage fiasco. If that happens, wall street will lose over 100,000 jobs!

Bear Stearns Biggest Loser

Joseph Lewis, the billionaire investor who bought 9.4 percent of Bear Stearns Cos. last year, lost $1.16 billion on his stake after the firm agreed to sell itself to JPMorgan Chase & Co. yesterday for $2 a share.

Lewis, the New York-based firm's second-largest holder, paid an average of about $107 apiece for 11 million shares, according to a filing submitted last year to the U.S. Securities and Exchange Commission. Bear's biggest investor at year-end was money manager Barrow Hanley Mewhinney & Strauss Inc., whose 9.7 percent holding has fallen by $991 million.

Mutual funds run by investment bank Morgan Stanley were the third-largest Bear Stearns holder with a 5.4 percent stake and may have lost about $546 million since Dec. 31. James Cayne, Bear's former chief executive officer and fourth-largest holder with a 4.9 percent stake, saw the value of his holding drop by $504 million.
Bear's fifth-largest shareholder, Baltimore-based Legg Mason Capital Management, a unit of Legg Mason Inc. run by Bill Miller, may be down $493 million.

Still No Inflation?

NYT reports that government figures, released Friday, showed that grocery costs had jumped 5.1 percent in 12 months, the latest in a string of increases. In fact, the nation is undergoing its worst grocery inflation since the early 1990s.

With a few exceptions, nearly every grocery category measured by the Labor Department, which compiles the official inflation numbers, has increased in the last year. Milk is up 17 percent, as are dried beans, peas and lentils. Cheese is up 15 percent, rice and pasta 13 percent, and bread 12 percent.

No food product has gone up as much as eggs, jumping 25 percent since February 2007 and 62 percent in the last two years.

"It's a great time to be an egg farmer," said Paul Sauder, a third-generation farmer in Lititz, Pa. His farm ships eggs to food service customers and grocery stores, including Stop & Shop. "We've never encountered this kind of run like we've had right now."

Lead Prices At Historically High Levels

Concerns about the U.S. economy couldn't keep many commodities down in the second quarter.

Lead jumped 37% to $2,645 a ton on the London Metal Exchange. One factor is continued strong demand in Asia for lead-acid batteries for cars and industrial equipment. Prices also jumped in the wake of shipment delays from a major Australian port and a change in China's tax policy that could decrease its lead exports.

With historically low metal inventories, when a supply shock comes, "prices don't know much of a limit," said Catherine Virga, a CPM senior research analyst.

Lead consumption slowed in the 1980s and 1990s amid links to health risks and substitution of other ingredients for it in paints and pipes. "Lead consumers that are left, especially the battery producers, which account for 80% of all lead consumption, have very few alternatives," according to a report by the Barclays Capital unit of Barclays PLC.

-Wall Street Journal

Copper Rises While the US Dollar Falls

According to Bloomberg, Copper rose in New York to the highest in six weeks on speculation a decline in the value of the dollar will boost demand for the metal used in wiring and plumbing as inventories dwindle.

Copper stockpiles monitored by the London Metal Exchange fell 1.8 percent to an eight-month low of 112,600 metric tons. Copper has risen 22 percent this year as inventories fell 38 percent and the U.S. currency fell 2.6 percent against a basket of six major world currencies. Meanwhile, the dollar today touched the lowest level in more than a month against the euro.

Investors in FCX and PCU have done very well in the past year. Too bad I sold my FCX early and missed out on a 50% runnup less than 2 months later!

Anyone Know A Good Saudi Construction Company

All trends point to massive investments in Saudi Arabia's construction sector, with billions of dollars of investment still to come in real estate, industry and the hydrocarbons sector.

Oil revenue surpluses are boosting the government budget and overall spending. In 2007, the Saudi government allocated more than $42 billion for various projects and programs in its 2007 budget.

In the private sector, investments in the industrial sector, especially in petrochemicals, will require construction investments reaching more than $500 billion over the next 10 years depending on the project and construction time frame. Like the rest of the Gulf, the kingdom's construction boom has reached unprecedented levels in 2006 and expected to gain more momentum in 2007 and beyond.

-Export.gov

Anyone know a Saudi construction company that trades on the US stock exchage?

How To Save Half A Million Dollars?

According to the U.S. Commerce Department, 40% of American households believe they could accumulate $500,000 more easily through the lottery than by savings.

If only you could save $12,000 per year and invested it at 12% in a tax-defferred account, you'd get there about 14 years! Sounds like a more fool-proof way than playing the lottery!

Sleeper Stocks Of 2007

RadioShack Corp. and Amazon.com Inc. have defied short sellers and Wall Street analysts this year by posting the top gains in the Standard & Poor's 500 Index.

Shares of RadioShack, the third-largest U.S. electronics chain, and Amazon, the world's biggest online retailer, were among the 10 most-shorted in the S&P 500 as of June 15, according to data from the New York Stock Exchange and the Nasdaq Stock Market. Short sellers try to profit from stock declines by selling borrowed shares and buying them back at a lower price.

RadioShack has almost doubled since December on buyout speculation and earnings that beat analysts' projections. Amazon jumped 71 percent as the company increased its 2007 profit forecast and introduced a new music download service.

-Bloomberg

Sub-prime CDOs Dressed Up In Hooker Heels!

Holders of investment-grade portions of collateralized debt obligations may lose all of their money in the securities, which have been dressed up in "six-inch hooker heels," according to Bill Gross, manager of the world's biggest bond fund.

Subprime mortgage bonds made up about $100 billion of the $375 billion of CDOs sold in the U.S. in 2006, Moody's Investors Service and Morgan Stanley data show.

CDOs are created by bankers and money managers who bundle together securities and divide them into slices with credit ratings as high as AAA from Standard & Poor's and Aaa by Moody's.

Gross maintains his prediction the Federal Reserve will cut its target interest rate in the next six months as a slowdown in the housing market causes risk premiums to rise and the U.S. economy to slow. Gross said in October that slowing U.S. growth would prompt the Fed to lower rates in the first half of this year. The Fed has kept the benchmark rate at 5.25 percent for the past year.

-Bloomberg

Demand For Diamonds About To Rise?

There will soon be derivatives based on diamonds. A few outfits are coming out soon with some kind of diamond futures. This is only my personal opinion, but I believe we're going to see a major bull market in larger diamonds (three carets and up). Any diamond over ten carets is now considered rare.

A few years ago the Sotheby's and Christie auction catalogues were filled with larger size diamonds for sale. Now, nobody seems to want to part with their large diamonds. The catalogues have very few for sale. I believe the price for larger stones is headed considerably higher.

-Richard Russell

Diamonds are forever – or so investors in the latest alternative investment to hit the London Stock Exchange will be hoping.

Diapason Commodities Management is aiming to raise $400m for the first listed fund to invest in gemstones, buying only large polished diamonds worth more than $1m.

The fund is the latest in a series of offbeat investments aimed at satisfying booming demand for "alternative" returns that are not directly linked to stock and bond markets. Many commodities have already become mainstream, and the search for new investment frontiers has seen investors pile money into hedge funds specialising in reinsurance, wine, art, shipping, and even football players.

Diapason argues that diamond prices have lagged behind the boom in other commodities and are due for a further cyclical upswing – helped by a rise in numbers of wealthy individuals willing to buy extremely expensive jewellery, supply constraints and low stockpiles.

-Financial Times

Hmm....didn't someone put together a hedge fund for antique violins too?

Mortgage Defaults To Worsen

Losses in the U.S. mortgage market may be the `tip of the iceberg` as borrowers fail to keep up with rising payments on billions worth of adjustable-rate loans in coming months, Bank of America Corp. analysts said.

Homeowners with about $515 billion on adjustable-rate home loans will pay more this year, and another $680 billion worth of mortgages will reset next year, analysts led by Robert Lacoursiere wrote in a research note today. More than 70 percent of the total was granted to subprime borrowers, people with the riskiest credit records, they said.

Surging defaults on subprime loans have pushed at least 60 mortgage companies to close or sell operations and forced Bear Stearns Cos. to offer a $3.2 billion bailout for one of two money-losing hedge funds. New foreclosures set a record in the first quarter, with subprime borrowers leading the way, the Mortgage Bankers Association reported.

`The large volume of subprime ARMs scheduled to reset at higher rates in '07 and '08 will pressure already-stretched borrowers,` putting more loans into foreclosure, the Bank of America analysts wrote from New York. A collapse of the Bear Stearns funds `could be the tipping point of a broader fallout from subprime mortgage credit deterioration,` they said.

-Bloomberg

I wouldn't be surprized if companies like LEND sank back down again!

Buy Asian REITs

Morgan Stanley raised $8 billion to create the world's largest global property fund and tap increased demand for real estate in Asia and emerging markets.

Morgan Stanley will invest almost half of the money in Japan and about 25 percent in countries including China and India.

-Bloomberg

Anyone know how to buy Asian REITs?

Is BioDiseal A Commercially Viable Solution

In its monthly crop report released Monday, the U.S. Department of Agriculture said escalating prices have crimped the profitability of some biodiesel plants. At many plants, soybean oil accounts for as much as 80 percent of the operating cost.

Industry experts say biodiesel plants make a profit if soybean oil prices are 34 cents per pound or less.

On Monday, soybean oil for July delivery was trading at nearly 35.5 cents per pound on the Chicago Board of Trade. The market was anticipating prices to rise, said Fred Seamon, a Board of Trade agriculture analyst.

Soybean oil for December 2008 delivery was trading at just under 38 cents a pound, he said.

Seamon said the demand for edible oils in China and India is expected to continue to increase, and the increasing demand from the biodiesel industries in the European Union and the United States for soybean oils is expected to continue to pressure world stockpiles.
-Sioux City Journal

Experts have discovered a crop that can produce diesel fuel... at the same price as regular diesel fuel. Sounds unbelievable, huh? Just think about that for a moment. This plant is going to revolutionize transportation...

- This fuel produces 78% less carbon emissions than regular diesel, so it's popular with the renewable-energy crowd.

- This plant grows anywhere, like a weed, including deserts. Proof: The Saudis are building a plantation on 100,000 hectares of desert right now. In contrast, palm oil is the current choice for biodiesel production in most of the world... but growers must clear massive swathes of rainforest to plant it.

- This plant cannot be eaten by humans. It does not compete with food demand, therefore it is much cheaper than corn or soybeans.

- This plant cannot be eaten by humans, therefore you can irrigate it with any water you want. It doesn't have to be clean water. Water it with water from the nuclear-waste processing facility if you want.

- This plant yields four times as much oil as soybeans, but costs half as much to produce. Soybeans are the cash crop of choice in the U.S. to make biodiesel today.

Basically, this is the perfect plant for making biodiesel... and that's very important.

The world is crazy for renewable energy... crazy enough to put up $19 billion just looking for renewable energy investments. The European Union has mandated that all cars must run on 20% biodiesel by 2020... the UK is introducing similar legislation right now.

India imports 70% of its fuel for transportation. Other Third World countries find themselves in similar situations. In India, there's a strong movement to use biofuels. It's a very fertile country, with more arable land than any other country on earth, including Brazil. India thinks it can grow its diesel cheaper than importing it.

This isn't pie-in-the-sky stuff. Big Oil and big government are getting interested in the plant known as... jatropha.

The government-owned China National Offshore Oil Corp. (CNOOC) is planning to have 80,000 acres of jatropha in Sichuan Province alone by 2010.

Renova Biodiesel of Brazil is expected to plant 60,000 acres of jatropha, and reports suggest that other oil companies are considering planting nearly 500,000 acres in the next four years.

D1 Oils, a British company considered by many to be the leader in cultivation, has plantations from Swaziland to Indonesia and hopes to nearly double its 385,000 acres of jatropha worldwide by the end of 2008.

The Philippine National Oil Co. recently earmarked $14 million for jatropha planting and production, while Indonesia plans to set up 52 biodiesel plants across the country at a cost of $7.3 million.

- Tom Dyson

Look Who's Holding The Bag!

Six Persian Gulf states now have almost $1,600 [billion] in foreign assets, dwarfing even China's mammoth $1,100 Billion of foreign reserves, according to a new report from the Institute of International Finance.

The IIF report attempted to assess how the countries of the Gulf Co-operation Council had deployed their "oil windfall" in recent years. But it noted an "extraordinary deficiency" of information on the capital flows and foreign asset holdings of the GCC's members, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. As well as traditional dollar investments, the IIF said evidence also suggested the six countries had "a strong interest in investments in emerging markets, particularly in the Middle East region and east Asia."

-Financial Times

Interesting Point of View

When beliefs arise from observations, it’s science. When observations arise from beliefs, it’s religion.

300 Breaks The Box Office

In Hollywood the motto is "Nobody knows anything." The wisdom of that motto was confirmed over last weekend when the new film, 300 was shown.

The film was razzed by critics as a comic book movie drowning in catsup-blood. But 300 (which cost about $7 million to make) took in an astounding $70 million over the weekend.

The movie is about 300 Spartans who held off 27,000 Persians (Iranians) in the historic battle of Thermopylae in 480BC. Poorly made pirated versions of 300 are being shown in Iran, but Iranian leaders are calling for a ban on the film. They claim that 300 shows Iranians as decadent, sexually flamboyant and basically evil.

Hollywood may "not know anything," but it knows box office statistics — 300 could even start a new trend in Hollywood, digital movies made inexpensively on a Hollywood lot.

-Richard Russell,
Dow Theory Letters

This spells success for movie studios! Lets see if this trend continues

Haliburton Moving Offshore

Oil services company Halliburton Co., which plans to move its chief executive to Dubai, said it will add more than 13,000 new employees in 2007.

In a memo sent to workers on Tuesday, Chief Operating Officer Andrew Lane wrote, "It is our expectation that our planned growth for 2007 to 2009 will mean that we will hire more than 13,000 new employees in 2007. This will include growth in our Houston employment numbers."

That growth pace is similar to 2006, when the company added more than 13,000 employees, Halliburton said.

-CNN Money

Don't like the government, or the ones thats next. Just move!

Greenspan Expects Subprime Mortgage Fallout to Spread

Former Federal Reserve Chairman Alan Greenspan said he expects the fallout from subprime-mortgage defaults to spread to other parts of the economy, especially if home prices decline.

``If prices go down, we will have problems -- problems in the sense of spillover to other areas,'' Greenspan said in remarks to the Futures Industry Association meeting in Boca Raton, Florida today. While he hasn't seen such spreading yet, ``I expect to.''

Subprime borrowers, or those with poor or limited credit histories, are increasingly defaulting after looser lending standards allowed them to take on more debt than they could afford. Last month, Greenspan told an audience in Toronto that ``disarray'' in the subprime mortgage market isn't likely to create greater financial instability in the rest of the economy.

``It is not a small issue,'' Greenspan said today. ``If we could wave a wand and prices go up 10 percent, the subprime mortgage problem would disappear.''

U.S. stocks pared gains after the remarks. The Standard & Poor's 500 index rose 3.54 to 1390.71 at 2:27 p.m. in New York after climbing as high as 1395.73.

Greenspan, who was Fed chairman for almost two decades until Ben S. Bernanke took over 13 months ago, has contrasted from his successor in his remarks on the economy. Greenspan said at least three times in the past month that a recession is possible. He didn't say one was likely. He said in an interview this month there's a ``one-third probability'' of a 2007 recession.

Bernanke's View

Bernanke said on March 2 that the central bank sees no ``spillover'' from the rising delinquencies in subprime mortgages. ``We're obviously going to watch it very carefully,'' he added. He told lawmakers Feb. 28 he expects the growth to accelerate. The Fed forecasts the economy will grow between 2.5 percent and 3 percent this year.

How can anyone expect there to not be a spillover effect? Housing was 40% of all job creation for the past 5 years.

Democracy At Work - The Begging Game

Unmentioned in the furor over global warming and declining oil production in the United States: Tariffs that prevent importing ethanol. Sen. Chuck Grassley (R-Iowa) is even working on a new tariff that would block ethanol imports from Trinidad (currently exempt) because entrepreneurs are building sugar-based ethanol refineries there. Even though it's far more energy efficient (and thus cheaper) to make ethanol from sugar instead of corn, our lawmakers want us to have less access to cheap, imported, sugar-based ethanol. Why? Because voters in Iowa grow corn for a living. That's democracy in action. That's your tax dollars at work.

Had dinner with some local business men today. One of them attended college to study political-science. He quit half way. He said politics is a begging game. You're either begging for money or voters. It never ends. The day after you win the election, it starts all over again!

I agree with him. Career politician or career beggar?

New Century Financial Goes Bust

Last week www.lenderimplode.com listed 28 subprime mortgage firms that were shut down or taken over. The count is now 34. Yesterday the third largest lender of subprime mortgages, New Century, stopped accepting new loan applications. The shares were once at $50. Now they are under $4 and falling. The Financial Times reports that they cannot meet their margin calls from their lenders.

Essentially, New Century has been shut out of the capital markets. They are being hit with a wave of lenders who are demanding they take back the mortgages they sold, and my guess is that they do not have the capital they need. Maybe they can sell assets and get them. Who would take their paper or their mortgages today, knowing the problems? The money available to subprime lenders is rapidly evaporating, and until the lending standards are tightened considerably, it will remain that way. Many of the buyers of the Mortgage Backed Securities are going to lose some money

.

This is just the tip of the ice-berg. All lenders and mortgage companies are going to be affected eventually and this will probably pull the country into a recession.