And… action.

Fourth-quarter earnings season is in full swing. Many investors seem to have forgotten over the past few weeks, but American financials still look… umn, bad. Here’s the quick and dirty:

Citigroup, once the world’s second largest bank, is getting dismantled. The pieces are going to the highest bidder, whether the buyer can afford it or not. The mega bank announced yesterday that it has jettisoned Smith Barney into the arthritic hands of Morgan Stanley.

Citi will still hold a 49% stake in the brokerage service. And the Citi/Smith Barney/Morgan Stanley venture will create the world’s biggest brokerage firm — comprised of 20,000 brokers and have over $1.7 trillion under management — but for their sake, we hope they conjure up a catchier brand name.

Still, today, Citi is planning further bust-a-moves. A New York Times article claims the company will soon attempt to split itself in two, separating “core” and “noncore” (aka profitable and notprofitable) segments of the business. Robert Rubin, who among other things helped create this “supermarket” model for Citi, resigned last week. CEO Vikram Pandit will likely follow soon.

Why the mess? Despite selling off its assets and getting over $45 billion from the government’s handout program, Citi is still expected to post a $10 billion loss for the fourth quarter… possibly more.

But the trouble isn’t relegated to Brooks Bros. snoots in New York. HSBC, Europe’s biggest bank, will need to cut its dividend in half and raise $30 billion to stay afloat, analysts at Morgan Stanley predicted today. According to Morgan’s report, profits at HSBC will decline “sharply” this year and not recover until 2011.

HSBC stock fell over 8% in European trading.

German giant Deutsche Bank braced investors today for a $6.3 billion fourth-quarter loss. The bank said it will likely turn in a loss of $5.1 billion for all of 2008.

Even the British bank Barclays, which has been on a buying spree of late, will slash another 2,100 jobs. In part due to its acquisition of a bankrupt Lehman Bros., Barclays said today it will fire about 7% of all its bankers and back-office workers.

The International Monetary Fund (IMF) is even asking for emergency loans, for crissakes.

“The world economic outlook for 2009 will not be good,” IMF Managing Director Dominique Strauss-Kahn warned. The IMF is expected to release its global growth projections for 2009 this week, and Kahn suggested yesterday they won’t be pretty. He predicted a “significant” increase in total global financial losses and write-downs — which have already crested $1.4 trillion.

To combat this worsened forecast, Strauss-Kahn is asking countries of the world to “find an extra $150 billion” to cushion the hit on more impoverished and susceptible economies. The IMF wrote checks totaling $41 billion in November, the biggest monthly bailout tab in its history. If you happen to “find” a couple billion in your couch cushions, let Dominique know.

“Despite a depression unfolding across the globe,” insists Chris Mayer, “emerging economies will still be areas of strength. ‘Emerging economies’ reliance on America is often exaggerated,’ writes The Economist over the weekend. It points to a global share of exports around 20% — a number that hasn’t budged much in a decade. Nonetheless, the longer-term trend is clear: Most of the world’s growth is coming from emerging markets. See this next chart, from The Economist:

“I think this is a trend that will continue. Much of the fast action will happen overseas. Companies without exposure to these economies will simply not grow as fast as those with exposure. All things being equal, I’d rather own a company that makes something Asia needs than one that only caters to North America or Western Europe.

“Also in the emerging market camp’s favor: relatively low debt levels and higher savings rates than the U.S. Not all of them, of course. Some, like Hungary and Estonia and Turkey, have huge debts. But Asia generally shines in this department.”

Back in I.O.U.S.A., we’ve received even more assurance that taxpayer money is in good hands. Tim Geithner, the incoming Treasury secretary and thus head of the IRS, owed over $43,000 in back taxes.

Evidently, he was under the impression working for the IMF makes contributing to Social Security and Medicare an optional affair. What a mess. These guys aren’t even in office yet.

“As America’s economic situation worsens,” notes our small-cap sleuth Jim Nelson, “payday loan shops are cashing in.”

“Many view payday loan shops as corrupt, greedy modern-day loan sharks. In some instances, that’s simply not the case. These loan companies are providing a needed service. No one likes to hear of families being turned out of their houses because of missed mortgage payments. Cash advance businesses offer a solution to these millions of families.

“Instead of eviction, one solution for a working family is to take out a short-term seven- or 14-day payday loan. Obviously, this is the last option. But faced with foreclosure, it’s becoming a more frequently used solution for many who never thought they’d be in that position.

“Many households are taking out payday loans to fund unexpected expenses, too. With more families living paycheck to paycheck than ever before, even paying for the basics is becoming difficult.”

Jim’s found a small company that provides these services, “with a guaranteed flood of business around the corner.” He’s talking about tax refund advances… what should be a frighteningly popular option this year. If you’d like to learn more, check out PSF.

In a similar fold, have you seen this commercial yet?

Hyundai has it bad, but the American consumer has it worse… so the ad execs for the South Korean automaker came up with this clever scheme: Buy a Hyundai today, and if you “lose your income” over the next year, you can bring it back. They call it the “Assurance Program.”

Deflation… bring it on.

In the stock market, major indexes snoozed all day yesterday. The old bats are resting up before the bulk of fourth-quarter earnings announcements hit the fan. The Dow lost a little bit, 0.3%. The S&P 500 finished flat, and the Nasdaq edged up 0.5%. Whatever.

“The U.S. stock market continues to meander in sideways trading action,” notes Wayne Burritt, with some bigger-picture perspective.

“As you can see from this daily chart of the S&P 500 — a good surrogate for the broader U.S. stock market — price action over the last week has unfolded as I anticipated : The market is stuck in a near-term trading range.

“In fact, after hitting an upside range limit of 944 last week, the S&P got busy retreating to the downside. It’s now poised to retest intermediate lows in the 857 area. If that breaks, a move to the lower bound of its intermediate term range — 741 on the S&P — is certainly in the cards.

Now, while that’s surely not the uptrend we’re all looking for, don’t forget that the market has shaped this trading range in spite of simply terrible fundamental news. And that shows uncommonly strong market character, a factor we didn’t see much of last year.

“So where do we go from here? Like a star athlete that’s hit a slump, the stock market is trying its best to wage war and move to the upside. Until we get some positive fundamental data points — especially on the housing front — it’s going to have a tough time breaking out to the upside. And that means that sideways chop will likely hang around for a while.”

This morning, the Dow opened down 150 points, largely because of this:

Retail sales plunged 2.7% from November to December, the Commerce Dept. said today. Factor out auto sales, and it’s a 3.1% fall — the biggest drop in 17 years history, and twice as bad as the Street anticipated.

Year over year retail fell 9.8% — another record plunge.

For all of 2008, retail sales fell 0.1%, the first full year decline since the Commerce Dept. started keeping track in ’92. Retail sales have fallen six months in a row, the longest losing streak on the books.

Yet that little green slip of paper we call a dollar continues to defy gravity. Despite all the gloom and doom sputtering from every corner of the financial press, the dollar index is up another half a point this morning, to 84.5.

Yesterday, we read a review of our book The Demise of the Dollar on the sycophantic syndication site Seeking Alpha, in which the reviewer called comments like the above “anti-dollar.” How, we wanted to ask, can you be against a currency? He then accused us of “hating” the Federal Reserve. How can you hate a bank? Some people, we’ve learned after 16 years in this business, are just idiots.

Gold, which according to the above reviewer we “love,” remains suppressed. The spot price has been stuck at $820 over the last 36 hours.

But oil is bucking the trend. Even though the dollar is still rising, crude has inched back up to $37 a barrel. You can thank OPEC… the cartel is saber rattling again today, and for some reason, the market has decided to listen. We’ve heard a couple warnings from Saudi Arabia lately, all suggesting the country is ready and willing to cut production more than OPEC decided at its last meeting, in December. Leaders from Saudi and Venezuela are reiterating the same today.

Also attributing to the rising cost of energy, it looks like the Russian gas conflict with Ukraine might not truly be over. The two nations signed a deal and made nice in front of the cameras, but the spigots are still running dry. Several regions of the EU are still without Russian gas, now for the seventh day in a row.

Russia says the gas is flowing but the Ukraine won’t open its network of pipelines. The Ukraine says there is no gas to be distributed… grab a beer, kick back and watch from a distance… this one isn’t over yet.

But maybe not that far a distance? Russian President Medvedev suggested yesterday that Ukraine was “dancing” to Washington’s music. The plot thickens…

“I have been doing business,” writes a reader, “in Eastern Europe since 1991 — sales of oil and gas equipment, projects, etc. Some of my customers are intimately knowledgeable (with the carnal type of knowledge) of the purchase of Russian/Ukrainian gas.

“Here in our Western system, when the gas product is passed from one company to the next, we use a protocol known as a ‘custody transfer.’ Gas is measured, often by both sides, using specially approved and calibrated flow measurement devices. In addition, the gas is also analyzed with a gas chromatograph to establish the quality of the gas. Here, we are more interested in buying Btu (or gigajoules) than simply a volume of gas. Producers are paid for what they produce and discounted based on the quality of the gas they sell. High-quality gas commands a higher price that low-quality gas…

“In the Russian ‘system’ — the seller tells you how much you bought, and, further, how much you will pay for the gas that (supposedly) arrives into your country.

“So imagine the scenario: Russia sells gas to Ukraine — Ukraine transports the gas to Western Europe and marks up the product prior to sales. The gas routing passes through several former Warsaw Pact countries or is fed via feeder lines into nearby countries — Romania, Hungary, Bulgaria, etc.

“Imagine further that gas sold to these feeder-line countries have absolutely no say on custody transfer or absolute knowledge of the volume of gas that they are actually receiving. Ukraine will not put custody transfer flow measurement in the cross-border locations. Nor will it allow customer countries to measure the incoming gas and honor the amounts. ‘You pay for what we say you get’ is the approach. ‘And if you don’t like it, get your gas elsewhere!”

“The only likely reason for this insistence on the status quo is the ‘shrinkage’ that is actually occurring inside Ukraine. Who knows what corrupt officials are making a profit off the ‘stolen gas’ — that Romania et al. are paying for?

“So it may be a mistake to accuse Mr. Putin of being the cause of the problem . X amount of gas crosses the Ukrainian border on the Russian side and X minus Y (in-country shrinkage) crosses the border on the other side…

“Of course, this shouldn’t matter to Mr. Putin — if the gas is actually bought and paid for by the Ukrainians prior to being marked up and sold to the European customers. But it certainly matters to the countries that are being held hostage — paying world prices for gas while only getting a partial delivery on their investment… and not being able to do anything about it.”

The 5: Thanks for the insight.

Source:Credit Crisis Sequel, Global Bank Bailout, Emerging Markets Still a Buy?, Gas Wars and More!

Back in October, while the world was busy putting out the fires of a financial crisis that still burns, little-thought-of Turkmenistan made a bombshell of an announcement. It seemed to gather little notice at the time. But it could become much more important as the Russian-Ukraine dynamic gets worse.

Gaffney, Cline and Associates, a British consulting firm, completed an audit of Turkmenistan’s Yoloten-Osman natural gas deposits. Based on GCA’s first results, the fields have a minimum of 4 trillion cubic meters of gas… and as much as 14 trillion cubic meters of gas, a truly staggering sum. The announcement put Yoloten-Osman among the four or five largest natural gas fields in the world.

The country’s biggest field was Dowalatabad, a rich and extraordinary field in its own right. Yoloten-Osman is at least five times as large.

And Turkmenistan has many gas fields not yet explored.

“Without doubt,” the Asia Times weighed in, “Turkmenistan is closing its gap with Russia and Iran, hitherto listed as having the world’s largest and second largest gas reserves… If the GCA results are confirmed, Turkmenistan will have reserves just 20% lower than that of Russia and outstrip Iran by far.”

Turkmenistan has the potential to rival Russia’s clout in natural gas and provide an alternative for Europe. By creating a pipeline from Turkmenistan, through Azerbaijan, Georgia and onto Turkey, the EU could bypass Russia entirely.

You can be sure the Russians won’t like that. Again, from the Asia Times : “[Russia] is no longer the superpower in the world of natural gas, as was widely regarded… Turkmenistan is, unquestionably, also a gas superpower of comparable muscle power to Russia.”

The effort to bypass Russia via a southern route is an old game. Tamerlane, the 14th century conqueror of Central Asia, wanted to do the same thing when he sought to divert trade from the northern Silk Road — controlled by the Golden Horde — to a more southerly course through Bukhara and Samarkand (in present-day Uzbekistan).

Today, the five Islamic republics that were once part of the Soviet Union are back on the center stage of geopolitics. Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan — all have huge oil and gas reserves. The names sound odd today, perhaps. But Americans will get to know their names as well as they know those of Iran, Iraq and Afghanistan.

The race is on to court these countries of the steppe, taiga and desert. In this, China may already have a lead, as it often seems to when it comes to securing energy supplies. Beijing is financing a $2.6 billion pipeline through which natural gas will flow from Central Asia to China. It’s doing its best to cozy up to the fab five.

Russia, too, is already close to them. Russia relies on Turkmen gas to meet its obligations to Europe, for instance. Russia and Turkmenistan have an agreement in place through 2009. But the powers that be in old Ashgabat have been sticking it to Russia. They’re making Russia pay up for its gas supplies. In 2007, Ashgabat raised the price to $100, from $65, per 1,000 cubic meters. Then in 2008, the price went to $130… and then to $150 in June 2008.

As the Asia Times remarked, “Russia will have to rework its bonding with its Central Asian partners.” It’s as if Turkmenistan just drew an ace face up — and now Moscow is starting to sweat it a bit. Turkmenistan now has even more clout to peddle with eager Americans, Europeans and the Chinese — all who want Turkmen gas and the opportunity to build out the infrastructure. Russia will have to play the game like everyone else. Turkmenistan is in the driver’s seat.

Source: Turkmenistan Emerges as Serious Natural Gas Player

Considered to be a beneficiary of the tightened household budgets, the company reported a paltry 1.7% increase in same-store sales. As a result, it cut its earnings outlook.

Thomson-Reuters was right about one thing, though: Higher-end retailers got spanked – some of them quite dramatically. For example, Saks (NYSE: SKS) posted a 20% decline in same-store sales, while Gap (NYSE: GPS) sales sank by 14%.

So how can investors play this? If you’re like me, when bad news hits, you look to snap up quality companies on the cheap. But retail stocks are just too dangerous right now. While taking the opposite approach of the main sentiment often pays off, I expect retail to head lower for the next few months.

If you’re looking for bargains, buy the retailers’ goods, not their stocks.

A New Cold War

No progress.

That’s the verdict from the latest round of talks aimed at solving the increasing crisis over Russia’s decision to cut off gas supplies to the Ukraine – one that is affecting gas supplies throughout Europe in the depths of winter.

European Union officials, plus those from Russia and the Ukraine were set for more negotiation in Brussels today, but those talks were cancelled, despite a meeting between Russia’s Gazprom CEO Alexei Miller and Oleg Dubyna of Ukrainian firm Naftogaz in Moscow on Wednesday evening.

The dispute stems from a disagreement over prices, contracts, unpaid bills from the Ukraine to Russia in 2008, and Russia’s accusations that the Ukraine has stolen gas from pipelines that pass through the country. And as tensions have risen, Russia shut the taps off a week ago – a move that has resulted in some EU nations (mostly in eastern and central Europe) seeing their gas supplies dramatically curtailed, or cut off entirely, because Russia accounts for about 25% of EU gas supplies – 80% of which are pumped through the Ukraine, according to the BBC.

Countries not receiving any gas at all from the Ukraine include the Czech Republic, Romania, Greece, Austria, Bulgaria, Hungary and Croatia.

Flash back two years and you’ll find a mirror image of the situation today, when Gazprom and Ukraine battled over gas supplies and caused shortages in several EU nations.

This dispute will eventually be resolved, but with much of the EU in the midst of a brutal cold spell, it can’t come soon enough. Meantime, Gazprom has vowed to pump extra supplies to the EU through other non-Ukrainian pipelines.

Source: Retailers Battle Sales Slump… Bank Of England Battles Recession… Russia And Ukraine Battle Each Other

• More than $48 billion was withdrawn from emerging market funds in 2008, with the largest chucks of change pulled from funds tracking Asia, according to EPFR Global. An emerging markets bellwether, the MSCI Emerging Markets Index, dropped 54% last year, its worst performance since it was created in 1987, Bloomberg reported.

• Bank of America Corp. (BAC) sold 5.62 billion of its China Construction Bank Corp. shares, raising $2.83 billion. Based on the Construction Bank’s IPO price, Bank of America realized a profit of about $1.13 billion, Reuters reported.

• Bargain retailer Family Dollar Stores Inc. (FDO) closed its fiscal fourth quarter with a 14% rise in profit and raised its annual forecast, Reuters reported. The compact expects to earn $1.63 to $1.81 a share, up from $1.58 to $1.78, in its fiscal year ending August 29. It also expects sales, same-store sales and total sales to rise as well.

• Orbitz Worldwide, Inc. (OWW), an online travel agency, announced a new president and chief executive, and that it would institute more measures to save an additional $20 to $25 million annually. Barney Harford will replace Steve Barhart as CEO, The Wall Street Journal reported.

• Russia cut off all gas supplies to Europe through Ukraine yesterday (Wednesday) leaving more than a dozen countries struggling with dwindling energy supplies in the depths of winter, The Associated Press reported. “It is unacceptable that the EU gas supply security is taken hostage to negotiations between Russia and Ukraine,” said European Union spokeswoman Pia Ahrenkilde Hansen.

• Monsanto Co. (MON), the world’s largest producer of genetically modified seeds, closed up more than 17% yesterday (Wednesday) after the company reported that first-quarter profit more than doubled. Revenue jumped 29% to $2.65 billion from $2.05 billion.

• India’s Sun Pharmaceuticals Industries Ltd. said yesterday (Wednesday) that it’s secured U.S. Food & Drug Administration approval to sell a generic tablet version of the painkiller Vicodin. The U.S. market for branded and generic versions of that drug is worth $540 million. Sun has also received approval for generic versions of cholesterol-fighting Lopid, for Aredia, which is used to treat high blood calcium, and for the anti-allergent drug Phenargen, in multiple strengths, Reuters reported.

• Light, sweet crude for February delivery yesterday (Wednesday) tumbled 12%, or $5.95, to settle at $42.63 a barrel on the New York Mercantile Exchange. The drop was the mainly the result of a report from the Energy Information Administration said U.S. inventories of commercial crude inventories rose by 6.7 million barrels.

Source: Global Investing Roundups Thursday, January 8th, 2009