The Ninth Circle of Hell in Dante’s Inferno. The home of traitors to their own kind.
The Conference Board today reported that consumer confidence hit 38 for the month of December, the lowest level since the survey began. The organization said "The further erosion of the Consumer Confidence Index™ reflects the rapid and steep deterioration of economic conditions that occurred in the fourth quarter of 2008."
According to S&P/Case Shiller, home prices fell 18% in October compared with the same month last year.
Home prices are now back to March 2004 levels. The index for the top ten cities is now down 25% from its mid-2006 peak. The twenty city index is down 23.4% for the same period.
Drops in consumer and corporate spending are about to compounded by high fuel prices as crude is likely to move to $50 or better early in 2009.
Both sides in the Gaza conflict have indicated that the fighting could go on for weeks, and there is no reason to believe that the dispute between the parties will not stretch into months. The 2006 Lebanon War went on for more than thirty days.
The Middle East conflict and its effect on oil prices is likely to be worsened by a looming military conflict in Nigeria.
Astoria (AF) remains "underperform" at FBR.
Axsys (AXYS) upped to "buy" at Morgan Joseph.
Yum! (YUM) upgraded to "buy" at Argus.
AgFeed (FEED) downgraded to "neutral" at Global Hunter.
Sources: Briefing.com and wire services.
Douglas A. McIntyre
According to The Wall Street Journal, "The S&P/Case-Shiller home-price index is expected to reflect the continuing toll exacted by the deflating housing bubble. J.P. Morgan estimates that the October year-over-year decline will be 18.2%. In September, the 20-city composite index fell 17.4% from a year earlier."
Douglas A. McIntyre
Thanks for this. Reuters reports that "The auto sector is expected to be the most financially troubled industry in the United States next year, taking the top spot from the homebuilding group, according to a survey of restructuring and bankruptcy professionals released on Monday."
No point in doing the survey next year. The results won’t change.
Douglas A. McIntyre
The Wall Street Journal makes the point that consumer confidence does not mean much if it does not go hand-in-hand with consumer spending. As the paper reports "Gasoline is still getting cheaper, retailers and auto makers are practically giving stuff away." People feel better, which means very little.
The actual dynamics of consumer confidence may actually be much, much worse than that, especially in a period when credit is not available, joblessness is rising, and Americans are still deeply in debt.
"Baby, you can drive my car /yes, I’m gonna be a star/ Baby you can drive my car /And maybe I’ll love you."–The Beatles.
The matchless idiocy which has defined the fall of the US car industry can be summed up by one event. Ford (F) is introducing a "self-parking" automobile.
The Japanese stock market has closed down about 42% for the year. The US markets may do a little better than that, off by 38% or so. For people with money in the market, the distinction may not mean much.
A great deal of the economic trouble in Japan is that its exports are falling rapidly. Since they are such a critical part of the country’s economy, as the global economy gets worse Japan will continue to suffer.
GMAC finally got its designation as a commercial bank. That allowed the firm to get $6 billion in federal money, $5 billion of which comes from the Treasury Department in exchange for preferred notes.
The thought behind dumping all of this capital into GMAC is that it may help restart the company’s auto loan business and also build a floor under the firm’s flagging mortgage business. But, it is probably too little money, and there is no reason to believe that GMAC will lend out any of the cash to potential car buyers.
According to Reuters, GMAC will get $6 billion from the government with $1 billion coming through GM (GM).
Reuters reports that violence in Gaza intensified.
Reuters writes that Japan is looking at a program to buy bad loans.
Markets in Asia were mostly higher.
The Nikkei was up 1.3% to 8,860, but was down 42% for the year. Toyota (TM) fell modestly, and Sony (SNE) rose.
The Hang Seng fell .3% to 14,281.
The Shanghai Composte was down 1% to 1,833.
In Europe, the FTSE opened up .8% to 4,352. The Dax rose up 1.3% to 4.764 and the CAC 40 was up .9% to 3,152.
Data from Reuters.
Douglas A. McIntyre
The media has been full of news about how heavily retailers will have to cut store locations next year. Three weeks ago, 24/7 Wall St. ran an analysis of the retail companies which might not make it to the end of 2009.
Today, The Wall Street Journal ran an article saying that as many as 25% or retailers could fill for bankruptcy next year. Bloomberg posted a piece later in the day saying as many as 72,000 individual stores could close in the first half of next year.
Dow Chemical (DOW) Deal with Kuwait is dead. Falls to $14.93 from 52-week high of $43.43.
Martha Stewart Living (MSO) No special news. Media stocks just keep falling. Drops to $2.55 from 52-week high of $9.99.
Charter Communications (CHTR) Citigroup analyst is concerned about chance of bankruptcy. Plunges to $.085 from 52-week high of $1.68.
Douglas A. McIntyre
Kirk Kerkorian used to be considered "smart money". He wears a dunce hat now that Ford (F) is back near $2. According to Reuters his investment firm, Tracinda Corp., has sold all of its shares in the auto company.
Kerkorian began to buy the stock in late April when the stock was at $7 . At one point he owned over 133 million shares.
Douglas A. McIntyre
In late 2005, China began to fill its strategic petroleum reserve of 102 million barrels. It has added to the reserve on and off ever since, sometimes buying the oil on the open market and other times stashing away a portion of the country’s take from investments in international projects. China’s eventual goal is 400 million barrels.
According to Bloomberg, an official with China’s National Development and Reform Commission has stated in an article for the People’s Daily, that "[t]he current financial crisis, global recession and sluggish energy market offer a favorable opportunity for China to expand cooperation with energy-producing nations and neighboring countries."
Piedmont Natural Gas Company (NYSE:PNY) this morning reported results for its 2008 fiscal year, which ended on October 31st. The company reported EPS of $1.49 on earnings of $110 million, compared with EPS in 2007 of $1.40 and profits of $104.4 million.
The company sold more natural gas because 2008 was colder than 2007, and it also benefited from regulatory adjustments. Its customer base grew 2%, and coupled with the weather and the regulatory changes, margins increased by 5% in 2008. The company also cut operating expenses primarily through adjustments to its defined benefit pension plan.
Piedmont reaffirmed its 2009 EPS guidance of $1.55-$1.65. The company’s stock is off about 1% this morning, and it’s trading about 12% off its 52-week high.
Paul Ausick
SCANA Corporation (NYSE:SCG), a producer and marketer of electricity, will be added to the Standard & Poor’s 500 Index after the market closes on December 31st. To celebrate the occasion, SCANA is offering 2 million new, registered shares. The company plans to use the funds to finance its capital expenditures and for general corporate purposes. Morgan Stanley & Company, a subsidiary of JP Morgan Chase & Company (NYSE:JPM), is the book-runner.
This is a pretty shrewd move. The offering has not been priced yet, but the stock is trading around $35/share with about 117 million shares outstanding. The new offering doesn’t dilute existing shares much, and provides a nice fund to bolster earnings next year by limiting the amount of cash or borrowing the company will have to use to pay for capex.
The state’s energy regulators have tied annual rate increases to improved infrastructure, and SCANA has taken advantage of the ruling. The company benefited from a rate increase in November that sets SCANA’s allowed return at 10.6% for one of its South Carolina operations, and 10.25% for another.
The stock is trading down about 1% this morning, about 20% off its 52-week high. SCANA reiterated its full-year guidance in October, and expects EPS of $2.90-$3.05 per share for 2008.
Paul Ausick
A Bloomberg review of the S&P 500 stocks shows that the fourth quarter of 2008 will probably be the sixth quarter of declining earnings. According to the news service, "Fourth-quarter profit at companies in the Standard & Poor’s 500 Index may have dropped an average of 11.9 percent from a year earlier."
That may be a useful look at the past, but the movement of the stock market is going to be based on expectations for the first quarter of 2009.
Billionaire Mark Cuban disclosed a 9.4%, or 1,200,000 share, stake in Carmike Cinemas, Inc. (Nasdaq: CKEC). Cuban did not hold a prior stake in the company.
Curban disclosed that he paid $2,758,376 for the shares, or about $2.30 per share. Purchases were made from October through December. Shares of Carmike Cinemas closed at $2.03 on Friday.
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