• The Fed Cuts the Discount Rate
    Posted by on March 17th, 2008 at 7:17 am

    The FOMC meets tomorrow:

    The Federal Reserve on Sunday announced two initiatives designed to bolster market liquidity and promote orderly market functioning. Liquid, well-functioning markets are essential for the promotion of economic growth.
    First, the Federal Reserve Board voted unanimously to authorize the Federal Reserve Bank of New York to create a lending facility to improve the ability of primary dealers to provide financing to participants in securitization markets. This facility will be available for business on Monday, March 17. It will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment-grade debt securities. The interest rate charged on such credit will be the same as the primary credit rate, or discount rate, at the Federal Reserve Bank of New York.
    Second, the Federal Reserve Board unanimously approved a request by the Federal Reserve Bank of New York to decrease the primary credit rate from 3-1/2 percent to 3-1/4 percent, effective immediately. This step lowers the spread of the primary credit rate over the Federal Open Market Committee’s target federal funds rate to 1/4 percentage point. The Board also approved an increase in the maximum maturity of primary credit loans to 90 days from 30 days.
    The Board also approved the financing arrangement announced by JPMorgan Chase & Co. and The Bear Stearns Companies Inc.

  • Hope for the Dollar
    Posted by on March 17th, 2008 at 7:15 am

    If there’s ever a story that involves exchange rates and Chilean strippers, you know I’m on it.

    Bikini-clad pole dancers, mini- skirted hostesses and a deal on foreign exchange await customers at Passapoga, a Santiago nightclub, who pay with U.S. dollars.
    At banks and foreign-exchange bureaus, $1 fetches less than 430 pesos. Passapoga pays 600 pesos.
    “This campaign has had considerable success,” said Jaime Retamal, 55, the club’s manager. “Customers come from all over, but a lot from the U.S.”
    The dollar has lost a quarter of its value against the peso in the past three years, increasing U.S. travelers’ expense for hotels, taxis and restaurants in Chile. Passapoga is discounting the exchange rate to discourage Americans from cutting back on nightclub visits.

  • Chart of the Day
    Posted by on March 14th, 2008 at 1:54 pm

    Sometimes the chart tells the whole story.
    image636.png
    Update: Whoa! Bear was just sold for $2.

  • Where Have We, As a Nation, Gone Wrong?
    Posted by on March 13th, 2008 at 12:48 pm

    The economy must truly be bad:

    Girl Scouts Say Cookie Sales Down
    Girl Scout and Brownie troops say cookie sales are noticeably down this year as their customers struggle to pay for groceries, gasoline and home heating fuel.
    Becky Santos, leader of Brownie Troop 74 in Barrington, said her group sold 300 boxes outside a Wal-Mart recently, down from 500 in the same location last year. Sue Cusack, the troop’s co-leader, said she and her daughter also made fewer door-to-door sales, with some repeat customers buying one box instead of two.
    Jan Arsenault of Barrington said she scaled back her purchase because of the economy but couldn’t resist two boxes.

    Not Samoas. Please lord, NOT THE SAMOAS!!

  • UnitedHealth Cautions
    Posted by on March 13th, 2008 at 9:53 am

    UnitedHealth‘s (UNH) stock got creamed this week after WellCare (WCG) and Humana (HUM) lowered their guidance. Naturally, people have been expecting an earnings warning from UNH bot the company has so far stuck to its 2008 forecast of $3.95 to $4 a share.
    Finally today, UNH didn’t warn, but it did caution:

    UnitedHealth Group management is continuing to actively monitor a variety of trends affecting the sector. Factors the Company is assessing include:
    * Membership trends in risk-based commercial markets and Medicare Advantage product offerings, including Special Needs Plans which serve higher acuity seniors;
    * Benefit buy-downs and continued local pricing dynamics in commercial markets;
    * U.S. Government data showing influenza and influenza-like illness running at high levels across all populations through the first two months of 2008;
    * Medicare Part D plan performance; and,
    * The impact of the Federal Reserve decision to reduce interest rates in the first quarter of 2008.
    Based on data from the first two months of 2008, the Company’s estimates of medical costs incurred in 2007 appear to have been accurate. Through the first two months of 2008, the commercial medical cost trend has performed consistent with the Company’s expectations, with the exception of a higher than expected impact from influenza. The Company also noted that the net unrealized capital gain position in its investment portfolio has continued to strengthen in 2008. The Company’s Enhanced Medicare Part D program performance is consistent with the Company’s plan for the approximately 100,000 participants in these offerings at UnitedHealth Group.
    As evidenced by recent market commentary, there may be pressure on first quarter and full year 2008 results. However, given that it is still early in the year, management believes it is premature to draw adverse conclusions.

  • Gold futures hit $1,000
    Posted by on March 13th, 2008 at 9:37 am

    Finally.
    Gold futures hit $1,000 an ounce for the first time Thursday morning as the dollar continues to decline and crude oil prices rise.

    Gold futures hit the benchmark after the dollar fell below 100 yen during Asian trading Thursday, its weakest against the Japanese currency in 12 years. The dollar also sank to all-time lows against the euro.
    Gold has been pushing up against the $1,000 an ounce mark for weeks mainly due to the weaker dollar. Interest rate cuts – and the prospect of more on the way – have weakened the dollar so much that foreign investors can buy dollar-based commodities like gold more cheaply.

  • The Oil Bubble
    Posted by on March 12th, 2008 at 5:21 pm

    Ronald Bailey says that oil may be ready for a big fall:

    Although U.S. crude oil inventories have fallen, gasoline inventories are at their highest since March, 1993, notes Tim Evans, an energy futures analyst at Citigroup’s Futures Perspective. World oil production was up 2.5 percent in the first quarter of 2008 over the same period in 2007 while world oil consumption rose by just 2 percent. In fact, world production is projected to be 3.3 percent higher in the second quarter and 4.1 percent higher in the third quarter than the same periods a year ago. On the other hand, world demand is projected to rise by just 1.6 percent over the next six months.
    In fact, demand is falling in some countries. According to economist John Kemp at the commodities firm Sempra Metals, the U.S. consumed 4 percent less petroleum in January 2008 than it did the year before. Evans agrees, noting that the U.S. demand for petroleum products began falling off last July. Interestingly, this drop in U.S. oil consumption began before crude prices turned vertical and before we began to see weakness in the broader economy. Even China’s thirst for oil is abating somewhat. Its demand for oil, which once rose at 10 percent per year, has now dropped to 6 percent per year. In addition, world surplus oil production capacity has gone from a very tight 1.5 million barrels per day a couple of years ago to more than 3 million barrels today, says petroleum economist Michael Lynch.

  • StockTickr Interview
    Posted by on March 12th, 2008 at 5:07 pm

    Here’s an interview I did with Dave Mabe over at StockTickr.

  • Client #6 Was Allegedly the Duke of Westminster
    Posted by on March 12th, 2008 at 3:31 pm

    You just knew that a peer had to be involved.

    The escort agency at the heart of the scandal surrounding New York was allegedly also used by the Duke of Westminster.
    The peer was last year exposed as an alleged client of the Emperor Club VIP’s prostitutes.
    Zana Brazdek, then 26, told The News of the World that the duke, Gerald Cavendish Grosvenor, paid her £2,000 for two hours.

  • Another SocGen Employee Held by Police
    Posted by on March 12th, 2008 at 9:13 am

    From Bloomberg:

    Societe Generale SA, the French bank stung by a record trading loss of 4.9 billion euros ($7.6 billion), said another employee has been taken into police custody as part of the investigation into unauthorized trades.
    Police also searched the La Defense headquarters, just outside Paris, of France’s second-biggest bank this morning, Societe Generale spokeswoman Laura Schalk said in an interview.
    Paris prosecutors’ spokeswoman Isabelle Montagne confirmed that a broker from a subsidiary of Societe Generale is now being questioned by police. The employee may be held for up to 24 hours, Montagne said. She declined to name the broker or the subsidiary.