• Nortel Networks Corp. (NRTLQ) said it plans to slash 3,200 jobs as part of the company’s efforts to climb out of bankruptcy protection. “With the unprecedented economic environment and resultant impacts on revenues, significant changes are required to regain our financial footing,” Chief Executive Officer Mike Zafirovski said in a statement, Bloomberg reported. “Tough decisions are being made to restructure the company and work towards a successful emergence from creditor protection.”

• Seed and fertilizer producer Agrium Inc. (AGU) made an unsolicited $3.6 billion bid for CF Industries Holdings Inc. (CF), a nitrogen and phosphate fertilizer producer. The $72-a-share proposal is 30% more than CF’s Tuesday closing price, and is a shot to dissuade CF from buying rival Terra Industries Inc. (TRA), Bloomberg reported.

• Ambac Financial Group Inc. (ABK) posted a $2.34 billion, or $8.14 a share, fourth-quarter loss. The bond insurer set nearly $1 billion aside for losses tied to residential mortgage debt, Reuters reported.

• U.S. President Barack Obama yesterday (Wednesday) nominated former Washington State Gov. Gary Locke – a Democrat with strong ties to China – as his choice for U.S. Commerce Secretary, the Voice of America reported. Locke, the son of Chinese immigrants, served two terms as Washington’s governor, making him the first Chinese-American governor in the United States. Locke was a strong proponent of trade with China during his time in office, and led several trade missions to the country. Two prior candidates withdrew – one over an ethics probe and the other over political differences with the new president

• Crude oil continued to rise yesterday (Wednesday) climbing $2.54, more than 6%, to settle at $42.50 a barrel on the New York Mercantile Exchange. The rally came after gasoline inventories showed a 1.7% rise in demand.

• The San Francisco Chronicle, founded during the gold rush of the mid-19th century, could be shut down, Reuters reported. The paper lost more than $50 million last year and this year’s losses to date are worse, according to its owner, Hearst Corp. “Survival is the outcome we all want to achieve,” said Hearst Corp Chief Executive Frank Bennack Jr. “But without the specific changes we are seeking across the entire Chronicle organization, we will have no choice but to quickly seek a buyer for the Chronicle or, should a buyer not be found, to shut the newspaper down.”

Source: Global Investment News Briefs Thursday, February 26, 2009

“The Fed and Treasury have not yet provided a panacea, but merely avoided another imminent disaster,” reported BCA Research on Wednesday. That was before the Treasury recapitalized the Fed’s balance-sheet with an extra $100 billion…just in time for the Fed to lead the world’s big central banks in pumping $242 billion into the US and European money markets.

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Sure, that quarter of a trillion dollars helped talk inter-bank lending rates down off the window ledge. But for the third time this week, government action failed to stem losses in financial stocks. Because “they have not yet found a fiscal solution targeted at ending the underlying rot,” as BCA goes on – “i.e. putting a floor under the housing market and economy.

“Congress is now starting to consider a system-wide solution (similar to the Resolution Trust Corporation) but any initiative may have to wait for the next administration.”

And the next administration won’t be short of policy prescriptions to choose from. No one is, in fact.

“Don’t pay too much attention to the financial sector’s self-interested bleating. Protect public interests first,” urges Martin Wolf in the Financial Times . Dishing out four do’s and four don’ts for the UK government on Thursday, he must be a different Martin Wolf from the economist writing in the Wednesday FT – even though they’ve both got a plan.

“Governments cannot credibly promise to wash their hands of a financial breakdown,” wrote the doppelganger. “This is the lesson of at least a century of financial history.”

So what to do? “An enormous Resolution Trust Corporation-style approach for the banking and securities system may be required,” says Bill Clinton’s former deputy Treasury secretary, Roger Altman – also in the FT – even though “the cost to taxpayers would be huge.”

How huge? “America will need a $1,000 billion bail-out,” says Kenneth Rogoff, ex-head of the International Monetary Fund (IMF), yet again in the Financial Times. “Regardless of the Fed and Treasury’s most determined efforts, the political pressures for a much larger bail-out [up to $2,000 billion] are going to be irresistible.”

And the details exactly? “Instead of investors relying on the guarantees provided by insurance companies and taking comfort from the work of the ratings agencies,” reckons Tim Congdon – a former “wise man” on the UK Treasury’s panel writing in (you guessed it!) the FT – “the credit assurance should come from the banking industry itself. At least two strongly capitalized and well-regulated banks should provide a guarantee that, in the event that the issuer of a bond defaults, they would cover the deficiency.”

But wouldn’t that simply swap relying on, say, AIG or Ambac (NYSE:ABK) for ultimate guarantees to relying on…well…relying on whom exactly? Congdon and his co-prescriber Brandon Davies, a former treasurer of Barclays bank (NYSE:BCS), don’t say which banks can clear this “well capitalized, well regulated” hurdle just now. But never mind; they’d actually rely on the Fed or Bank of England standing behind the entire system anyway.

~~~~~~~~~~~~Special~~~~~~~~~~~~

The U.S. Economy on its Last Leg

As much as it tries, the Fed won’t be able to prop this economy up for much longer. Like  trying to keep five plates spinning at once, eventually they all will fall.

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“The task of assessing banks’ capital strength and balance-sheet qualities could lie with the central bank and an appropriate regulatory agency, as at present,” Congdon and Davies explain. “Once the guaranteed securities could be transacted freely and readily with central banks, liquidity would quickly return to the wholesale markets.”

This assessment role would differ from today’s model how exactly? The Fed and the FDIC…the Bank of England and the FSA – these dynamic duos judged banking balance-sheets and capitalization amid the greatest mis-reading of risk in history.

And that “free and ready” trading of rated securities; it would mark a change from current practice in what way precisely? The developed world’s six largest central banks swapped $242 billion-worth of liquidity (i.e. government bonds) for system-approved securities on Thursday morning alone.

Yet the FTSE100 in London still ended the day 0.7 percent lower. The S&P slipped into the red to stand almost one-tenth below the start of September.

Oh, for the old days of certainty and clear thinking! “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate…” Those were the days! Policy wonks like Andrew Mellon – US Treasury secretary between 1930-33 – knew how to deal with a debt-led depression. None of these namby-pamby rescues, bail-outs or weasel-worded “conservatorships”. Let the whole thing go bust! Teach ‘em a lesson they’ll never forget!

“Purge the rottenness out of the system [so that] values will be adjusted, and enterprising people will pick up the wrecks from less competent people.”

Trouble was, of course, Mellon’s shock-and-awe plan was too shocking by half for the half-democratic United States of the early ’30s. Britain had already tried the same tack of abject collapse…putting three million people out of their jobs by 1926 and risking a true revolution before finally admitting defeat – and abandoning the Gold Standard – ready to start reflating for growth even as Mellon spoke out.

Seven decades later, the long shadow of dole queues and soup-lines still darkens the way for today’s politicians. The mere mention of 1929 or Austria’s Credit Anstalt also shines a torch to the exit, however.

“Debt retirement which is financed by money creation is an appropriate anti-deflation measure,” as Nobel-prize winning economist James M. Buchanan explains in his Public Principles of Public Debt . “This may be called debt monetization.”

Sounds intriguing, professor! Tell us more before we call Ben Bernanke…

“Debt instruments are replaced by money,” he explains – which is already happening today. Three-month US Treasury bonds are now yielding precisely nothing, making these “near-cash” items so near cash you could roll them up to light your cigar. And you can see how the loans of T-bonds now being made by the Federal Reserve against mortgage-backed bonds, stock-market equities and all investment-grade debt does just what “debt monetization” requires:

Central banks are swapping weak debt for cash. Bingo! The bad debt has vanished. Or maybe not. Maybe it’s just been dumped onto everyone else – consumers, savers, investors and business. But hey! A problem shared is a problem halved. And with $1,000 billion-worth of trouble still due on Ken Rogoff’s best guess, would $900,000 of debt monetization per household really prove something to fear?

“Liquidity is increased, and spending will be encouraged,” Buchanan goes on. Or at least, that’s what theory would claim. It certainly looks like a way to fend off debt deflation…and make good on Ben Bernanke’s promise of avoiding a repeat of the Great Depression. Albeit at the cost of rampant inflation in your cost of living. But fact is – or so everyone says – the money supply needs to leap to redeem the banks’ losses.

“Monetize labor, monetize stocks, monetize the farmers, monetize real estate…”

Got a certain ring to it, don’t you think?

Regards,
Adrian Ash
BullionVault

Source: What the World Needs Now…

• Freddie Mac (FRE) yesterday (Wednesday) posted a second-quarter loss that was more than three-times larger than Wall Street expected, The Associated Press reported. Freddie lost $821 million, or $1.63 a share, for the quarter that ended June 30, compared with a profit of $729 million, or 96 cents a share, in the year-ago period. Revenue fell to $1.69 billion from $2.34 billion. Stock analysts surveyed by Thomson Financial expected a loss of just 53 cents a share.

• Sprint Nextel Corp. (S) reported a $344 million loss yesterday (Wednesday), compared with a profit of $19 million a year ago. Revenue fell 11% to $9.06 billion. Sprint ended the quarter with just under 52 million customers, down from 54 million customers a year ago.

• Time Warner Inc.’s (TWX) second-quarter earnings fell 26% on declining subscriber fees at its AOL online unit and lower ad revenue at the Time publishing business, The Associated Press reported. Time Warner said net income fell to $792 million, or 22 cents per share, from $1.07 billion, or 28 cents per share, a year ago. The media conglomerate also took legal and tax steps that make it possible to split its AOL online business and sell it in parts.

• Mining giant Xstrata PLC (PINK: XSRAF) launched a $10 billion takeover bid for the world’s third-biggest platinum producer Lonmin PLC (OTC: LNMIY) yesterday (Wednesday), though Lonmin swiftly rejected the bid. “This is an opportunistic and entirely unwelcome attempt to acquire Lonmin at a price which undervalues its unique assets,” the company said.

• Bond insurer Ambac Financial Group Inc. (ABK) said yesterday (Wednesday) that net income rose to a record $823.1 million, or $2.80 a share, from $173 million, or $1.67 a share, a year earlier.

• Playboy Enterprises Inc. (PLA) yesterday (Wednesday) reported a second-quarter loss of $2.1 million, or 6 cents per share, compared to a profit of $1.9 million, or 6 cents per share, in the second quarter of 2007. Revenue dropped 14% to $73.4 million from $85.7 million in the year-ago period, The Associated Press reported.

• Oil prices fell below $118 a barrel yesterday (Wednesday) – $30 below their July 11 high. Light, sweet crude for September delivery settled 59 cents lower at $118.58 a barrel, after earlier falling as low as $117.11.

Source: Global Investing Roundups Thursday, August 7th, 2008

By the time the smoke had cleared less than half an hour later, gold was down about $27 and silver got creamed for around 75 cents…both with monstrous volume. This is the most blatantly obvious bear raid I’ve seen since the one we had a week ago Monday…LOL!!! I’ve seen bigger price declines in both metals in a single day, but not in such a short time period. The gold cartel finally gets the magic 10/10 “Waterfall Award”…because it’s as straight a line as you’ll ever see. But silver spoiled the show, and I felt compelled to dock the boyz a bit because they didn’t get the price down more than a dollar (even thought the chart was just as pretty as gold’s)…so the boyz over at Scotia Mocatta and HSBC (USA) Ltd. (HBA.PD) only get a 9.9/10. Options expiry on the Comex is tomorrow at the close of business, so they’ve got a couple more days to get it right.

It’s a good bet that virtually every long that was placed last week by speculators and the tech funds got stopped out by the raid yesterday morning. Even Dennis Gartman, who had placed another bet on Friday (and maybe added to his position early on Monday morning if he was really unlucky), got blown out. This is the third time in the last couple of months that he’s been taken out within days (if not hours or minutes) of placing a long bet on the gold market. As one well-known NY gold commentator said yesterday; “Some of gold’s friends will find this amusing…but that is foolish. The question is, what is present in the market which causes this very well informed and alert technical/momentum player to go long immediately before unheralded and massive selling hits the market?” Right in front of options expiry is never a good time to go long either precious metal. The Cartel pulled this very same trick before options expiry in March, April, May…and now June. Dennis, try July 1st…right after first day notice for delivery into the July contract…and do not buy on margin!

With last week’s break-out in both metals now firmly and thoroughly crushed, I’m sure that the powers that be would love both gold and silver to go to sleep over the summer months. Both metals are now safely below their respective 20- and 50-day moving averages once again. We’ll have to see what happens, but I wouldn’t bet any money that these metals will cooperate, as the bullish triangles still look like they are about to bust out to the upside…like they tried last week. Let’s see what July brings once month end and quarter end are out of the way.

The 200-day moving averages still lurk below…although not too far below…and from here it would be a virtual non-event if they were taken out. The cartel can do it any time they want. If you don’t believe me, please review yesterday’s gold and silver charts…or the previous Monday’s. One more day like either of those would be all that it would take.

Open interest numbers for Friday trading in gold and silver showed that gold o.i. rose 2,572 contracts and silver o.i. fell 299 contracts. If all trades that occurred on Monday are reported in a timely manner, the gold open interest numbers for Monday should be quite something…and should make the COT this Friday.

I mentioned in my report on Saturday that Friday’s Commitment of Traders report “was a yawner.” However, I neglected to point out the concentration ratios of the ‘eight or less’ traders in the Commercial category that Ted Butler gave me. These traders are, of course, the market making bullion banks. As of last Tuesday’s cut-off, these banks were short 78.6% of the entire Comex silver market and 82.8% of the entire Comex gold market. Once again, here’s the LBMA members list. The first eleven names that are on that list are the ‘market makers’. I would be prepared to bet some serious coin that the ‘8 or less’ traders (for both gold and silver) will be found almost exclusively in this eleven name list…and that they are all the same firms. The link is here.

In gold news I see that Australia’s gold production is down 7% year/year…and Vietnam suspended gold imports to tame the trade deficit. Vietnam has already imported 60 tonnes of gold so far this year…a 100% increase over the same period last year. Lastly, Dubai reported an 18% rise in gold sales in May.

And also of extreme interest was the action of the HUI yesterday, which finished in positive territory despite the crucifixions of both monetary metals. Although I don’t wish to look a gift horse in the mouth…after eight years of involvement with GATA (Gold Anti-Trust Action Committee)…we (including this writer) have a tendency to be suspicious of such counterintuitive stock moves whether the precious metals prices are falling (or rising). It wouldn’t be the first time that the boyz loaded up on cheap shares while everyone else was unloading theirs, so they can use them to sell into (and blunt) any upcoming major precious metals stock rallies…especially at the very peaks…like what happened in March just before the gold price got creamed, where the shares sold off heavily (and counterintuitively) the day before the top. But hey…maybe they’re just trying to make a buck on the upcoming rally!

After all this commentary I only have one story today. It’s entitled “Asia Clearing Union to Introduce Euro Alongside U.S. Dollar to East Payment Settlement”. This basically gives the euro equality with the US dollar. The story is linked here.

It took everything that the President’s Working Group had in their little bag of tricks to keep the house of cards from falling over yesterday…dollar up, US futures markets spun positive, Japan’s huge opening loses blunted, gold and silver crushed. They tried the same with oil and got stuffed. But ominously, the Banking Index (KRX) got creamed again on the continuing woes of MBIA and Ambac (ABK). It hit a ten year low with yesterday’s close. The 3-year chart is linked here…and it’s ugly.

See you tomorrow.

Source:And Then There’s This… Tuesday, June 24, 2008

Moody’s Investors Service, subsidiary of Moody’s Corp. (MCO), downgraded MBIA to A2 from Aaa, and Ambac from Aaa to Aa. The downgrade caused MBIA shares to shed more than 13% of their value, with an 86-cent decline to close at $5.59 on Friday. Ambac shares fared a bit better, gaining 2 cents to close at $2.05.

Moody’s downgrades follow similar reductions from Standard & Poor’s and Fitch Ratings Inc.

Many even question MBIA’s very survival, as it lacks the $2.6 billion in capital needed to regain its Aaa rating, according to Moody’s.

MBIA Chairman and Chief Executive Jay Brown fought off critics, saying that “despite the change in our ratings from Moody’s, our financial condition is very strong.”

“We remain committed to maintaining capital strength for our policyholders and financial flexibility consistent with our goals of increasing shareholder value,” Brown added in a company statement.

The downgraded ratings may have had an immediate affect on the insurers’ share prices, but also raised more questions about the more than $1 trillion in securities the firms guarantee. Those securities become riskier with the downgrade of the guaranteeing firms, making it more likely that defaults will escalate.

“The trouble for the banks is that the protection provided by the monolines becomes ‘less effective’ as the credit ratings of the monolines are downgraded,” said Simon Adamson, an analyst at CreditSights, MarketWatch reported.

“In other words, the probability that the monolines will pay out on the contracts decreases,” he wrote in a note to clients last week.

Some see the decline in ratings as an open door to new competitors.

“The issue really is, would they ever be able to get back to a triple A rating and I would think that would be a very heavy lift for them,” billionaire investor Wilbur Ross said in an interview on Bloomberg Television on Friday. “On the other side of this credit crunch, people will be even more sensitive about ratings and the quality of the paper they’re buying.”

And it’s likely that the “other side” of the credit crunch is still far off, according to analysts at the Royal Bank of Scotland Group PLC (ADR: RBS).

RBS analysts have warned clients to brace for a full-blown crash in the global stock-and-bond markets in the next three months, as the conflicting realities of slowing growth and rising inflation paralyze the world’s major central banks – causing “all the chickens [to] come home to roost,” Great Britain’s Daily Telegraph newspaper reported.

The predicted swoon would cause the U.S. Standard & Poor’s 500 Index – already down 16% from its trading high of 1,576.09 reached Oct. 11 – to nosedive all the way down to 1,050 by September. For the closely watched, broad-based U.S. stock index, that would represent an additional decline of 20% from Friday’s close of 1,317.93- and a total decline of 33% from its Oct. 11 apex.

Source: Moody’s Joins Other Rating Agencies in Downgrade of Ambac, MBIA 

But if the central bank does pare short-term interest rates, it’s likely to be the last such move in awhile; the Fed will take a break and give its rate cuts a chance to work their way through the U.S. economic system.

Despite an active-economic-calendar schedule this week – which includes a report on first-quarter gross-domestic product, and several other statistics that could confirm that the U.S. economy is entrenched in a recession – the Fed’s machinations should dominate this week’s headlines, given that the central bank’s interest-rate-setting arm is set to meet Tuesday and Wednesday.

Any announcements about interest rates will be made at 2:15 p.m. Wednesday. Experts also say that whatever the Fed says about its expectations will be just as important as what it actually does to the benchmark Federal Funds rate.

“I don’t think there’s any question that they’ll cut [a quarter-percentage point] off the rate,” David Rosenberg, chief economist for Merrill Lynch & Co. Inc. (MER), told The International Herald Tribune. “The real question is what they say about the future. It won’t be an ‘all clear’ signal. But they’ll find a way to tell the markets that they’ve done enough for now, simply put.”
Not everyone agrees.

“There is no reason why the Fed should be cutting rates right now,” Richard Yamarone, director of economic research at Argus Research Corp., told MarketWatch.com.

Yamarone may be thinking back to some of the public comments certain of the central bankers themselves have been making.

Back on April 18, Fed officials hinted that they would be reluctant to cut the benchmark Federal Funds rate yet again, given that the slumping U.S. economy also faced a major inflationary threat. Indeed, Philadelphia Fed President Charles Plosser warned against believing that interest-rate cuts were “the solution to most, if not all, economic ills.”

Plosser is one of the Fed’s major anti-inflation hawks At the time, Plosser was merely the latest in a string of policy-makers to warn about the rising risks of inflation, essentially suggesting that another rate cut would probably be a very tough sell.

In a speech at Drexel University’s LeBow College of Business in Philadelphia, Plosser said real interest rates were now at “an accommodative level, meaning borrowing costs were low enough to start boosting the U.S. economy’s growth rate back toward its normal historical norm, Reuters reported.

The futures market is projecting a Fed Funds rate of 1.75% by the end of this year. Here’s a look at the futures market’s month-by-month expectations for short-term borrowing costs for the remainder of 2008:

• April: 2.17%.
• May: 1.89%.
• June: 1.85%
• July 1.79%.
• August 2008: 1.76%.
• September 2008: 1.76%.
• October 2008: 1.77%.
• December 2008: 1.73%.

The worries about inflation that Plosser and other inflation hawks have are very real. And those concerns don’t exist solely on our side of the Atlantic. The low U.S. rates are contributing to a weakness in the greenback that’s sent the American currency to record lows against most other key world currencies. That’s fueling a massive run-up in the cost of energy and food-related imports – and that’s inflationary for U.S. buyers.

But it’s made U.S. exports very competitive abroad, acting almost as a big discount for foreign buyers of such wares as Boeing Co. (BA) jetliners. In fact, just last week Boeing surprised Wall Street with record earnings and announced a record order backlog. And pan-European arch-rival Airbus SAS., was forced to announce a price increase on several  of its commercial airliners – because of rising steel prices and because of the falling dollar.

French Economy Minister Christine Lagarde yesterday (Sunday) that the gap between the U.S. and Eurozone interest rates was way too large, and called for a change in rate policies on one side of the Atlantic, or the other.

“We are in a delicate situation where we have, on the one hand, an American Federal (Reserve) which has a policy of very low rates and a European Central Bank which has maintained high interest rates,” Lagarde told LCI Television and RTL Radio, the global wire service Reuters reported. “The differential in interest between the two, it seems to me, is a little too big at the moment.”

Paris has long been a vocal critic of what French President Nicolas Sarkozy has termed the ECB’s overly narrow focus on fighting inflation – and has previously been criticized by Germany for meddling in the business of the “independent” central bank.

With Eurozone inflation running at about 3.6% – its highest rate since the measure for that portion of the European market began in 1997, the European Central Bank (ECB) has left its key refinancing interest rate unchanged at 4.0%, despite some very definite signs that Eurozone growth is slowing.

By comparison, the key U.S. interest rate is at 2.25%, though it may be heading lower this week, and inflation is “officially” said to be at right about 4% – though such experts as Money Morning Contributing Editor Martin Hutchinson believe the actual U.S. inflation rate is actually much higher.

Although the FOMC meeting is likely to top the economic the economic news of the week this week, the GDP report will come in a fairly close second and will be nearly as closely watched by some experts. The reason: Many eternal pessimists are expecting the report to show negative growth during that three-month period.

Why is that important? Simple: According to the National Bureau of Economic Research (NBER), two consecutive quarters of negative growth constitutes a recession.

Most folks “feel” like the U.S. economy is already in a recession. An official designation by the NBER – which usually comes well after the fact – would simply make it official.

In the meantime, some of these other reports this week could help serve as an interim and unofficial “confirmation” of that dour diagnosis of the U.S. economy:

• The health of the manufacturing sector will get a solid assessment via Thursday’s release of the much-watched ISM survey and Friday’s report on factory orders.
• The all-important U.S. labor markets will get significant scrutiny via Thursday’s report on initial jobless claims and Friday’s reports on the U.S. unemployment rate and on non-farm payroll data.
• We’ll get a bit more insight into the psyche of the American consumer with Tuesday’s report on consumer confidence for the month of April and Thursday’s report on personal income and spending for the month of March.
• And we’ll get an overview of Corporate America’s health, as U.S. energy giants Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) reveal how their profit reports have been boosted by record energy prices [likely also prompting new calls for Congressional investigations into allegations of price gouging].  Starbucks Corp. (SBUX) will follow up recent warning with an actual announcement, while Office Depot Inc. (ODP) and Radio Shack Corp. (RSH) will give investors a look inside the world of retail.

Market Matters

Two weeks ago, investors disregarded any semblance of bad news (and lately, there has been plenty) and instead took the stock indices to their highest levels in months. Last week, investors allowed the earnings releases to guide their trading activities while awaiting the Fed’s interest-rate decision and commentary.

So just what did the recent earnings reports say about the current state of Corporate America?

Financialscontinue to stoke the negativity (no surprise there) with Bank of America Corp. (BAC), investment banker Credit Suisse Group (CS), and bond insurer Ambac Financial Group Inc. (ABK) reporting more disappointing results.  Drugmakers, on the other hand, enjoyed a nice quarter with Merck & Co. Inc. (MRK) and Novartis AG (NVS) beating expectations.  While a sluggish economy can’t keep folks out of McDonald’s Corp. (MCD) (as least in its international markets), it does seem to be impacting coffee intake as Starbucks warned that this week’s results (and those for all of 2008) will miss earlier projections.  Of course, dire times lead to more nervous smoking (and higher cigarette sales) as happy Philip Morris International Inc. (PM) shareholders found out this quarter.  While cost-conscious folks stayed home and watched more DVDs, Netflix Inc. (NFLX) warned that future subscriber growth may be limited.

Both Delta Air Lines Inc. (DAL) and Northwest Airlines Corp. (NWA) posted sizable losses on skyrocketing fuel costs, leading some analysts to question the wisdom behind the proposed merger. While the world’s largest shipper, United Parcel Service Inc. (UPS), experienced a jump in profits, management expressed concern about the quarters to follow, since consumers just don’t seem quite as interested in finding out “what Brown can do for you.”  Even techs, which previously had been a savings grace for the market, turned pessimistic this week.  Apple Inc. (AAPL) and Texas Instruments Inc. (TXN) reported decent earnings, but warned about their respective outlooks.

Likewise, high-tech bellwether Microsoft Corp. (MSFT) disappointed with its profit numbers, while investors wait with trepidation to see what becomes of Microsoft’s bid for Yahoo! Inc., (YHOO). Meanwhile, Yahoo beat “The Street’s” expectations. However, the three-week deadline that Microsoft gave Yahoo to come to an agreement on its unsolicited bid passed Saturday without any announcement from either side, leading to the possibility that the battle for Yahoo is about to turn hostile, MarketWatch.com reported.

ConocoPhillips (COP) showed that record energy prices are not hurting everyone, as the No. 3 U.S. oil company reported a 17% increase in profits.

Transactions typically imply growing confidence in corporate boardrooms as management finds the value in certain acquisition targets.  Last week, News Corp. (NWS.A) moved closer to buying Newsday and giving Rupert Murdock greater control over the New York press.

Insurance giant Liberty Mutual Holding Co. Inc. agreed to buy SAFECO Corp. (SAF) in a $6.2 billion deal that will create the 5th-largest property and casualty firm.  Triarc Cos. Inc. (TRY) soon may be adding those terrific “hot-and-juicy” square burgers and addictive Frosty drinks to its Arby’s roast-beef-sandwich menus as it looks to acquire Wendy’s International (WEN) in a deal valued at $2.34 billion. And, of course, there’s still the Microsoft-Yahoo proposal.

With a mixed week on the earnings front, stocks traded relatively flat as investors took some profits from last week’s newfound bullish sentiment, while still searching for a bargain or two.

Economically Speaking

For many Fed-watchers, the prospect for another rate cut has been a foregone conclusion.  After all, central bank Chairman Ben S. Bernanke and clan have let their creative juices flow [not to be confused with the creative juices of those Wendy’s hamburgers] over the past few months; the Fed has tried everything from the aggressive rate-cutting campaign to liquidity injections to arranging the buyout of The Bear Stearns Cos. Inc. (BSC) by JPMorgan Chase & Co. Inc. (JPM).

Suddenly, some great prognosticators believe the Fed may be “seven and done” as they drop the Federal Funds rate again (by a minimal quarter of a percentage point this time around) – before going on a “summer hiatus” to give their earlier work the time to take effect.

With oil prices hovering around the (once unheard of) $120/barrel level, some policymakers are sure to claim that inflation should be considered as critical a concern as the sluggish housing market to the U.S. economy’s health. Indeed, comments such as those of Philly Fed President Plosser make it clear that inflation is already becoming an increasingly important consideration.

Additionally, the European Central Bank seems content to keep its lending rate at 4%, so further Fed actions will continue to have devastating impact on the value of the dollar.

The economic calendar was relatively light last week as analysts rested up for this week’s vast array of important data. After a surprising climb (better known now as an aberration) in February, existing home sales plunged again in March, while new homes sales fell to their lowest level in more than 16 years.

Furthermore, the median price of a new home dropped by more than 13% last month, the largest such decline in almost four decades.

Durable goods orders fell in March, as well, although once the volatile transportation sector was removed from the equation, the results did not look half bad.

We hope that investors and analysts got plenty of rest over the weekend to get ready for the bustle of economic reports due throughout this week. Talk of recession should resume with the release of the first-quarter GDP, which many eternal pessimists believe will show negative growth during that three-month stretch.

Weekly Economic Calendar

• Ambec Financial Group Inc. (ABK), the world’s second-largest bond insurer, posted a wider-than-expected loss of $1.66 billion, or $11.69 a share, after more than $3 billion in charges for subprime-mortgage securities, Bloomberg reported. The company has lost 96% of its stock value in the past year.

• Liberty Mutual Group announced that it will buy insurer Safeco Corp. (SAF) for $6.2 billion deal, which would make Liberty the fifth-largest U.S. property and casualty insurer, Reuters reported. Each share of Safeco will be exchanged for $68.25 cash, more than a 50% premium to Safeco’s closing stock price of $45.23 on Tuesday.

• Microsoft Corp. (MSFT) is prepared to walk away from its $43.6 billion bid for Yahoo Inc (YHOO) if the two sides can’t agree on a price, Chief Executive Steve Ballmer said yesterday (Wednesday). “We’re prepared to move forward without a merger with Yahoo,” Ballmer said at a technology conference in Italy. “We think the best way to move forward quickly is to come together with Yahoo. Hopefully that works. But if it doesn’t, we go forward. Time is money,” he said.

• U.S. mortgage applications plunged last week as interest rates soared, the Mortgage Bankers Association said yesterday (Wednesday). The group said its seasonally adjusted index of mortgage applications for the week ended April 18 fell 14.2% to 637.6. Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.04%, up 0.3% from the previous week.

• Susquehanna Bancshares Inc. (SUSQ) reported first-quarter net earnings of $28 million (33 cents a share) up 35% from $20.7 million (40 cents a share) last year, Thomson Financial reported. The company posted net interest income of $98.2 million versus $63 million a year ago.

• The warehouse club, Sam’s Club, part of Wal-Mart Stores Inc. (WMT), has had to limit the amount of rice its members can purchase, The Associated Press reported. Customers will be limited to four bags of Jasmine, Basmati and long grain white rice. The price of rice has reached record highs lately due to supply concerns.

• Shares of bond insurer MBIA Inc. (MBI) plunged yesterday (Wednesday) after its chief rival, Ambac Financial Group Inc. (ABK), announced a first quarter loss of $1.66 billion. MBIA shares dropped over 30% with a decline of $4.49 to close at $8.79. MBIA will not release first quarter earnings until May 13.

• Shares of Level 3 Communications Inc. (LVLT) gained over 20% after the company announced first quarter revenue of $1.09 billion, beating analyst expectations. Despite a quarterly loss of 12 cents per share, the stock jumped 54 cents to close at $2.91 on a positive outlook for the remainder of 2008.