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According the Reuters, December domestic cars sales were the worst month in years.
Reuters writes that Toyota (TM) will cut plants.
Reuters reports that Apple's (AAPL) Jobs tried to calm investors about his health.
Reuters reports that China is making strategic use of commodity priced collapses.
Reuters reports that Best Buy (BBY) is offering the iPhone at a low price.
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Markets iin Asia were mixed.
The Nikkei rose ,4% to 9,081.
The Hang Seng was down .7% to 15,450.
The Shanghai Composite was up 3% to 1,937.
At the open, the FTSE was up .5% toi 4,603. The Daxx rose ,5% to 5,005. The CAC was up .5% to 3,377.
Data from Reuters
Douglas A. McIntyre
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It is hard to imagine an industry where when sales are off 30% to 40% it is considered a good thing. Welcome, to the Detroit auto company bailout of 2009.
Sales of light vehicles at GM (GM) fell 31% to just over 220,000 units in December. That rate was much worse than for the entire year of 2008 in which sales dropped 23%. But, maybe December could have been worse, so GM shares are up almost 5% to $3.82.
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Why are advertisers who pay cheap ad rates running at premium websites like the tech section of CNN.com? Because the online advertising business is falling to pieces as the first quarter of the year opens. Netflix, known for buying up cheap inventory, has a prime spot at the website of the 24-hour news service.
In the tech section of nytimes.com there are ads running for ancestry.com, another marketer that buys in bulk and gets its impressions cheap. The "leadership" section of forbes.com is running advertising for SkyMall, unlikely to be a company that pays top dollar.
The national news section of usnews.com is running advertising for Keller, a third-tier management school.
Bad omens.
Douglas A. McIntyre
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At the beginning of the decade a number of internet and next-generation technology companies raised money through venture capitalists and IPOs. Many of these companies had little, if any, revenue. Most had relatively high expense structures.
As these firms quickly ate through the cash on their balance sheets and continued to have poor sales prospects, the term "burn rate" was coined. If was defined as the amount of cash a company had on its balance sheet divided by the firm's monthly expenses less any revenue. An operation with $12 million in cash less short-term debt and a $1 million a month "burn rate" was expected to be out of business in a year.
At this point, GM (GM) and Chrysler would make any burn rate risk lists as would a number of retailers who had awful holiday seasons and are facing repayment of debt or revolving credit facilities. That is why Pier 1 (PIR) is trading at $.40 and shares of Dillard's (DDS) are off 80% over the last year.
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As 2009 is kicking off, it is interesting to start seeing the many many forecasts for the US and other major economies. The NBER finally came clean last month about our own organic homegrown recession starting roughly in December 2007. And everyone is expecting the recession to continue in 2009. They expect it here in the U.S., they expect it in the E.U., and they expect it in Asia. What is interesting is how economists are still projecting above-world growth in China.
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The CEO of SandRidge Energy, Inc. (NYSE: SD) sold approximately 8.90 million shares at $5.62/share in a private transaction in order to meet "debt service and tax planning needs." Tom Ward, SandRidge's CEO, retained the option to purchase the shares back at the original price on February 16. The total value of the transaction was about $50 million. Mr. Ward still owns 29.05 million shares of SandRidge common stock.
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Chesapeake Energy Corporation (NYSE:CHK) has sold about $412 million worth of royalty interests in "long-lived, producing assets" in gas fields in Oklahoma and Arkansas. The buyer was a private equity firm, Argonaut Private Equity, and the deal was financed by an affiliate of The Goldman Sachs Group, Inc. (NYSE:GS).
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Analysts already noted the increase in oil prices resulting from the fighting in Gaza. Neither the Palestinians nor the Israelis controls any oil--as the late Israeli Premier Golda Meir famously remarked: "[Moses] took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil!" So why the price boost?
There is fear among traders that war will accomplish what OPEC production cuts have not: a real decline in the amount of oil available on the market, leading to higher prices. That might happen; and if it does, OPEC gets its price boost while it dithers around with virtually non-existent production cuts.
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Deutsche Bank said the biggest issue U.S. banks will face in 2009 is loan losses. The firm expects commercial bank loan losses for the industry to increase from 1.5% (3Q08) to 3% by the end of 2010. They said Citigroup (NYSE: C) could be one of the worst hit and lowered estimates on the stock today to reflect this view.
The firm lowered 2009 estimates on Citi by 30 cents to a loss of $1.00 and 2010 estimates by 40 cents to EPS of $0.75, which mostly reflect higher loss rates and lower revenues than previously modeled.
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It seems that the early bird analyst calls did not capture the notion that analysts are starting 2009 with more opportunities to downgrade stocks. Here are some additional pre-market analyst downgrades from Wall Street this Monday morning:
Here are the top 10 pre-market analyst upgrades and downgrades:
Jon C. Ogg
January 5, 2009
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Steve Jobs, and the Apple Inc. (NASDAQ: AAPL) board of directors, have decided to come out with a full pre-MacWorld attack to address the health of Steve Jobs and some explanations as to why he is not giving the keynote speech this year. First, the good news is that Jobs is running the show. The bad news is that his weight loss isn't just a desire to emulate runway models.
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John Tamny, RealClearMarkets
"Recession Slows Migration in U.S." was a recent Wall Street Journal headline. Since new jobs are frequently the main reason people move, the story wasn't a big surprise.
Unfortunately, the lack of migration related to a less bountiful jobs picture wasn't the full story. Indeed, the other major factor presently keeping Americans grounded is housing. As the Journal article noted, falling home prices "have prompted many people to stay put, rather than risk losing money in a declining housing market."
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It is still fairly thin in analyst upgrades and downgrades as this week marks the return of investment banking and research departments from what is nearly a two-week hiatus. Here are the few stand-out calls we have seen early this morning with more than two hours to the open:
Jon C. Ogg
January 5, 2009
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There may be some speculation that drug giant Pfizer Inc. (NYSE: PFE) is looking at expansion through acquisitions. The FT reported that the world's largest pharmaceutical company is willing to acquire a large rival drug company. It even cites the CEO as saying the company real goal is to grow revenue, which is different than many other goals out there from other peers in the new market. It also brings about the questions about who could be on the buyout target list.
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Detroit has gone to the government well and collected enough money to get it through to late March. It will present forecasts to the government based on cutting costs, keeping market share, and operating in a fairly depressed domestic market.
With Toyota (TM), Honda (HMC), and Nissan struggling, US car companies have at least a chance of holding their piece of the US pie.
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It seems that no matter what the market does, investors still want to see which old tech stock is the one to own for the year ahead. Everyone still remembers the massive growth of the late 1990's despite what happened in 2000 to 2002 and the market malaise of 2008. We are going to still pass on a thought to you which many will consider heresy. Cisco Systems Inc. (NASDAQ: CSCO), Dell Inc. (NASDAQ: DELL), Intel Corp. (NASDAQ: INTC), Microsoft Corp. (NASDAQ: MSFT), and Oracle Corp. (NASDAQ: ORCL) have all evolved to the point that they may soon become no different than Grandma Furgeson's old fashioned utility stock she used to invest in.
We have made this argument many many times. But for 2009 we want you to embrace the notion that many of your old technology leadership companies have now become utilities or appliances. While there are still many outlying factors that are different, this is how these old leaders are evolving. That evolution is not the death of the companies. Not at all. But it will require a rethinking of how they need to be analyzed for the years ahead.
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Spending on cars, clothing, jewelry, furnishings have moved down 20% or more over the last few months. There has been a lot of research that consumers were still willing to buy video games, PCs, and other electronics.
Now, those categories have joined almost every other in a period of rapid sales contraction.
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"Fortes fortuna adiuvat"--Virgil
The question comes up over and over again. How could a massive fraud, which probably went on for well over thirty years, have gone undetected by federal regulators? The answer up until now was that the funds run by Bernie Madoff were rarely looked at carefully by the SEC or other financial regulatory bodies.
It turns out that the reality was worse than that.
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According to Reuters, Obama may seek take cuts of over $300 billion.
Reuters reports that the SEC examined Madoff eight times over 16 years.
Reuters reports that the Fed and European Central Bank plan to attack deflation.
Reuters reports that Sony (SNE) may announce large cost cuts.
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Stocks in Asia were broadly higher.
The Nikkei rose 2.1% to 9,043.
The Hang Seng was up 3.1% to 18,516.
THe Shanghai Composite rose 3.3% to 1,881.
At the open in Europe, the FTSE was up .9% to 4,601. The Daxx moved up 1% to 5,023. The CAC 40 was higher by .7% to 3,372.
Data from Reuters.
Douglas A. McIntyre
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Unrelated and often random comments from the incoming Congress and administration are beginning to create a tapestry of remarkable pessimism and diminished hope. No one believes now that the economy can be fixed fairly quickly even with a new $750 billion bailout package.
There was little reason to anticipate that this plan, designed to put hundreds of billions of dollars over two years into national infrastructure with a target of creating three million jobs, would work quickly. Most of the programs which are part of this economic package are complex and will take several quarters to add jobs for American workers.
Word is that the new administration and new Congress may add a $350 billion tax cut to other programs, but the passage of this legislation is far from assured.
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There is no good news in the most recent Bloomberg survey of economists regarding the unemployment situation in the US.
The new poll indicates that "The U.S. economy probably lost more jobs in 2008 than in any year since the end of World War II as firings rippled from homebuilders and automakers to banks and retailers."
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One of the more subtle parts of the government bailout of GMAC came after the financial arm of the car company, now majority owned by star-crossed hedge fund Cerberus, got its $6 billion in aid.
GMAC had gone to its bondholders and asked them to swap their paper for a combination of equity and cash.
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The Chinese government has finally set up a system to bring fast wireless 3G service to its citizens. In a country where handsets are used the way that many people in the US and EU use laptops, the move will bring a new generation of multimedia access to hundreds of millions of people and should make several US companies a lot of money.
According to The Wall Street Journal. "China Mobile Ltd. (CHL), the dominant carrier, would be assigned the Chinese-developed TD-SCDMA standard. The global standards WCDMA and CDMA-2000 are to go to China Unicom Ltd. (CHU) and China Telecom Ltd., respectively."
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The great promise of the online commerce industry has been that it would grow at a rate faster than bricks-and-mortar retailers, and that this advantage might go on for years. E-commerce makes it easier to compare prices, easier to find items, easier to buy them, and allows purchases to be shipped and not carried home--often for free.
As gas prices rose earlier this year, e-commerce gained what should have been another advantage over physical stores.
It looks like almost none of that worked out. A rough economy has sunk all retail boats. Whatever edge online shopping had has been destroyed.
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The mathematics of the US car company bailout are simple. At least the car companies say that they are.
Expenses get cut. Labor costs go down to what they are for Japanese auto firms operating in the US. Creditor costs get chopped as debt is traded for equity. The failure of the GMAC debt swap program shows that not everyone will go along with that. The final piece is that suppliers take a haircut.
On the revenue side, things are even less complex.
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There is a hardware developer obsession with "unlocking" the Apple (AAPL) iPhone that has spread to the media. The state of being unlocked allows the handset to be used on networks which do not have cellular distribution deals with Apple. In the US, that privilege belongs to AT&T (T). Since some network technology is not compatible with the iPhone, it is not such a big deal as it seems at first.
In theory, Apple should be fine no matter how many of its new 3G handsets are unlocked. It should be paid for each one of them. It may lose some money from AT&T, which pays it part of the subscriber revenue it brings in from the calling plans linked to iPhone sales. It probably makes up for that by all the additional sales it makes to people who want to unlock their handsets for less restricted use.
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The Madoff disaster could not have been the only situation where a money management firm took advantage of suckers. The market has been too good over the last five years, and hedge funds have been too spectacular.
The SEC, finally stirred into doing its job, is beginning to uncover more unsavory activity.
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The incoming Obama administration faces any number of sizable challenges. One thing the President-elect proposes is to spend $150 billion "over the next ten years to catalyze private efforts to build a clean energy future." That money is supposed to help create 5 million new jobs.
The new administration also proposes to increase the amount of electricity that comes from renewable sources from 10% in 2012 to 25% by 2025. Another laudable goal.
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Retail stocks are in rally mode despite forecasts that a large number of stock chains could file for bankruptcy this year and more than 70,000 individual stores could close.
The move up may be due to a sense of relief that an economic stimulus package could help the economy later this year. The idea that retail would benefit from this in the near future is far-fetched. Unemployment, which often lags consumer confidence and GDP, could still move to 10% later this year.
Over the last five days, shares of Macy's (M) are up 20%.
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Following weak manufacturing data from Russia, China, and India, the Institute for Supply Management announced that US manufacturing measured by its PMI dropped sharply in December to 32.4 from 36.2 in November.
New orders dropped more sharply to 22.7, down 5.2 points.
The weakest sectors included textiles, paper products, transportation equipment, computer products, and chemical.