• Senate Democratic leaders late yesterday (Thursday) abandoned plans for an overhaul of the nation’s $2.4 trillion healthcare system before Congress recesses in August – dealing U.S. President Barack Obama a major political blow. The decision was delivered by U.S. Senate Majority Leader Harry Reid, D-Nev., who said that “it’s better to have a product based on quality and thoughtfulness rather than try to jam something through.” The decision to reject President Obama’s ambitious timetable – he wanted a vote on the plan before Congress adjourned – had been anticipated for weeks. Sen. Reid’s comments mirrored those of Republicans, who feared the implications of a quick vote on such a politically charged issue.

• Sagging worldwide PC and server sales resulted in a 17% revenue decline and a 29% drop in Microsoft Corp.’s (Nasdaq: MSFT)fourth quarter ended June 30. The company reported a net income of $3.05 billion, or 34 cents per share on revenue of $13.1 billion, compared to a net income of $4.29 billion, or 46 cents per share on revenue of $15.83 in the same quarter last year. For the year, the software giant posted a net income of $14.56 billion, or $1.63 a share on revenue of $58.43 billion, compared to a net income of $17.68 billion, or $1.90 per share on revenue of $60.42 billion in the same quarter last year.

• Initial unemployment benefit claims in the United States grew by 30,000 to 554,000 for the week ended July 18, according to the Department of Labor. However, the less volatile four-week moving average shrank, falling by 19,000 to 566,000. “The numbers have come down but they still have a ways to go down before the bleeding of jobs is over,” said Andrew Gretzinger, a senior economist at MFC Global Investment Management in a Bloomberg News interview. “The labor market is still weak and is going to remain that for some time to come.”

• Deutsche Bank AG (NYSE: DB) has raised its target for Apple Inc. (Nasdaq: AAPL) from $150 to $225 following its strong second quarter showing and impressive iPhone sales. Apple moved 5.2 million units of its lucrative iPhone, exceeding Deutsche’s projection of 5 million. Deutsche estimates iPhone margins to be roughly 60%. Another reason for Deutsche’s optimism regarding Apple is it expects the iPhone’s international reach to expand from 18 to 80 countries by the end of the September quarter, with a possible partnership with China Unicom Limited (NYSE ADR:CHU) as early as this fall, representing the iPhone’s debut in the emerging market.

• Existing home sales in June rose by 3.6% to a 4.89 million annual rate from a revised 4.72 million in May, when the number rose by 2.4% according to the National Association of Realtors. “Housing may no longer be the weakest link,” said Joel Naroff, president and chief economist at Naroff Economic Advisors Inc. “Demand has clawed itself back to where it was a year ago, a very nice signal that the market has not only hit bottom but is making its way back.” In another sign the housing market may be on the upswing, rates on fixed-rate mortgages increased this week to 5.20%, up from 5.14% last week, Freddie Mac (NYSE: FRE) Vice President and Chief Economist Frank Nothaft said in a prepared statement.

• Increasing landline cancellations and heavy iPhone subsidies contributed to a 15% drop in profit for AT&T Inc. (NYSE: T). The company reported a net income of $3.2 billion, or 54 cents a share on revenue of $30.73 billion for the quarter ended June 30. That compares to a net income of $3.8 billion, or 64 cents a share on revenue of $30.86 in the same quarter last year. The company did benefit from the new iPhone model released last month, activating 2.4 million accounts for the smartphone in the United States.

• Rising customer traffic and operating income could not helpMcDonald’s Corp.’s (NYSE: MCD) profit, which fell 8.1% in the second quarter due to currency fluctuations, the company said. The fast-food chain posted a net income of $1.09 billion, or 98 cents a share on revenue of $5.65 billion for the quarter ended June 30. That compares to a net income of $1.19 billion, or $1.04 a share on revenue of $6.08 billion in the same period last year.

• 3M Co. (NYSE: MMM) suffered an 18% drop in its profit, but beat expectations due to stronger demand for electronic healthcare products in its second quarter ended June 30.  The conglomerate posted a profit of $783 million, or $1.12 a share on revenue of $5.7 billion, compared to a net income of $945 million, or $1.33 a share on revenue of $6.7 billion in the same quarter last year.

Source: Investment News Briefs Friday, July 24, 2009

Good day… Not sure when all of you will be receiving this today, as it took nearly over a half hour for my computer to boot up this morning. But its all good news for currency investors, so I’ll get it written and out to you as quickly as I can. The dollar slowed its decent overnight, but continued to fall vs. most of the major currencies as the US Senate rejected the $14 billion bailout for the auto industry.

The big winner in the Senate rejection of the bailout plan was the Japanese yen, as Japanese car makers are predicted to grab an even bigger piece of the US auto market. The yen, which has been rallying due to global deleveraging and carry trade reversals, suddenly had another reason to rally. The yen rose to a 13 year high, trading below 90 yen per dollar, and some are now predicting a rise to 80. Finance Minister Shoichi Nakagawa boosted the yen further after telling reporters in Tokyo that Japan isn’t considering intervening in the currency markets.

But even before the automakers got the bad news from the Senate, the dollar was falling faster than we’ve seen in the past few weeks. Chuck shouted out across the trade desk around noon yesterday that the dollar index, which tracks the greenback against the euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc, had fallen below the 55 day moving average. This is a major level for technical traders, and signaled the dollar could be headed for a further fall.

The data released yesterday showed initial jobless claims in the US surged to a 26 year high as the recession deepened. Claims increased to 573,000 last week, an increase of 58,000 from a revised 515,000 the previous week. The total number of workers staying on the benefit rolls jumped to just below 4.5 million, the most since November 1982.

While the markets had predicted another increase in the jobless claims, the trade deficit numbers were a big surprise. US exports slid to a seven month low causing the trade deficit to widen to $57.2 billion in October. No one I read was predicting a widening deficit. The worsening trade balance removes what has been the sole source of support for the economy during this recession.

A separate report issued by the Federal Reserve showed US household wealth fell by the most on record in the third quarter. Net worth for households and non-profit groups decreased by $2.81 trillion, the most since records began in 1952. So we have record unemployment, a widening trade deficit, and falling consumer net worth; not a good picture for the incoming President. But President Elect Obama has a plan, we can just spend our way out of this problem!! Chuck sent me the following comments yesterday afternoon:

“So… All this week I’ve talked about the President-elect’s plan to spend more money since 1950 on infrastructure, which is fine in good times, but these are faaaaaaaaarrrrrrrr from “good times” for the economy… Well… Yesterday the P/E said this, “We understand that we’ve got to provide a blood infusion to the patient right now to make sure that the patient is stabilized. And that means that we can’t worry about the deficit.”

Can’t worry about the deficit? Did I hear that correctly? Geez Louise, here we go again, sliding down the same old slippery slope of “deficits don’t matter”! Aye, yi, yi! What is everyone smoking? I’ve said this before many times at presentations, and here in the Pfennig, but I can’t pass this up… These people, who should know better, that claim that deficits don’t matter, remind me of the guy standing on top of the Empire State Building, and decides to jump off… As he passes the 56th floor he says… “So far… So good!”

Well, that’s right, so far he hasn’t hit the ground! And… So far deficits have only bruised us, but they haven’t hit the ground yet either! A quick look at my fave book on deficits, I.O.U.S.A. tells me that we’ve passed the $10 Trillion mark for Federal Debt… “today’s deficits reduce national savings, which dramatically decreases productive investment and wealth-creating activities. Increased indebtedness to foreign lenders puts future financial decisions in the hands of people who may or may not have our interests in mind when they make them. Further, interest payments that have historically stayed home now provide more and more income to investors abroad.”

“At the current rate, with existing laws, by 2040 the federal government will be spending twice as much as it takes in from taxes. Our children and grandchildren already face a more competitive, challenging, and uncertain world than most Americans have grown accustomed to.”

Failure to recognize this by our leaders is the biggest mistake we can make… And comments like the one above from the new PE lead me to believe we’ll have more of the same old “deficits don’t matter” and that, my friends will eventually weigh heavily on the dollar…

Sorry to be so gloom and doom on a Friday… But that comment by the new PE just sent me reeling! Now, back to Chris…”

I’ve known Chuck for nearly 20 years now, and nothing gets his blood boiling as quick as the saying ‘deficts don’t matter’! The leaders of Europe sure think they matter, as the EU decided to trim down a proposed stimulus package, as Germany warded off calls by France and Britain for deficit-boosting programs. This announcement, combined with a statement by ECB council member and Bundesbank head Axel Weber caused the Euro to jump vs. the US$. ECB member Weber cautioned against reducing interest rates below 2 percent, suggesting the bank is probably near the end of its rate-cutting cycle. “If the benchmark rate sinks below 2 percent when medium to long term inflation expectations are just below 2 percent, that implies negative real interest rates,” Weber said in an interview. “I would like to avoid that.”

Weber knows the long term impacts of negative real interest rates, they are very inflationary. The generation before his lived through the German hyper inflation of the early 1920’s which helps explain why financial leaders from Germany are such inflation hawks. So the 75 basis point cut by the ECB last week, which was the biggest in ECB history, will likely be the last cut for some time. The Euro has benefited from this perceived change in attitude. As of this morning, the Euro has risen over 5 percent vs. the US$ this week.

We have been suggesting that the recent dollar rally was not a change in the long term trend for the dollar, and some big name currency traders are starting to jump on our bandwagon. Goldman Sachs Group lowered its forecast for the dollar against the euro and the yen for 2009, saying the repatriation of overseas assets by US investors and demand for the greenback for funding are ‘diminishing’. Goldman is now predicting the Euro will rally to $1.45 per euro by the end of next year, up from their previous prediction of $1.30. “We are at a turning point,” Goldman’s Jens Nordvig wrote in a research report. “We expect the dollar support from temporary deleveraging and funding flows to diminish, and, in that scenario, the underlying pressure from more standard sources should once again become more important.” Sounds like he has been reading the Pfennig, as Chuck has been calling for a return to underlying fundamentals for a while now!

The folks at Citigroup are also jumping on the dollar bear bandwagon. “There are good indications that the US dollar is likely to weaken against many Asian currencies into year-end,” wrote Tom Fitzpatrick and Shyam Devani, analysts at Citigroup. They went on to say the dollar will retreat from a two year high against an index of Asian currencies after breaching levels where orders to buy the greenback are clustered. They believe the dollar will fall vs. the Singapore dollar, Chinese Renminbi, and the Indian rupee.

The Chinese Renminbi continued to rally for a seventh day in a row, the longest winning streak since June. Assistant Finance Minister Zhu Guangyao vowed to keep the currency at a ‘reasonable and balanced’ level after the Chinese let it drop sharply on Dec. 1. China stalled the Renminbi’s appreciation in July to aid exporters after letting it rise 6.6% in the first half of 2008. I think China will continue to slowly let the Renminbi appreciate, but will keep the pace of the appreciation at a manageable rate of 6 to 7 percent per year. China’s economy is slowing, but Asia will continue to be the growth engine of the global economy. I still suggest investors allocate at least a portion of their investments into the Asian currencies of Singapore, Japan, or China.

Currencies today 12/12/08: A$ .6586, kiwi .5453, C$ .8038, euro 1.3363, sterling 1.4962, Swiss .8473, ISK 218, rand 10.2214 krone 6.8858, SEK 7.9616, forint 197.96, zloty 2.9621, koruna 19.488, yen 90.35, baht 35.01, sing 1.4918, HKD 7.75, INR 48.577, China 6.8433, pesos 13.3266, BRL 2.3684, dollar index 83.68, Oil $44.97, Silver $10.10, and Gold… $817.05

That’s it for today… Drove the side streets in to work for the last time today. The highway department shut down a 5 mile stretch of interstate which runs from the front door of our office to my house. After a full year of taking side roads to and from work, I will be able to take the newly refurbished highway on Monday. This will drop my commute big time, and is great news for yours truly!! Chuck is off on his annual Christmas shopping trip with his buddies today. They start first thing in the morning and spend the entire day spreading Christmas cheer around town. Hopefully I will be able to meet up with them this evening, as they typically end their trip at a local restaurant/bar not too far from my home. Hope everyone has a Fantastic Friday, and a Wonderful Weekend!!!

Source: Bailout Failure Accelerates Dollars Decline

The US’s minority party routed American taxpayers Tuesday when it mopped the floor with citizen-related issues by blocking a vote that would have:

• Killed corporate oil’s $17 billion tax break.
• Taxed excessive corporate oil profits, unless big oil poured the excess into exploring alternative energies.
• Forced oil futures speculators from big investment banks, hedge funds and brokerages to have a lot more than 5% cash in the margin accounts they use to bet on oil. Such a move would have dramatically cooled speculation, which even oil company executives admit makes a barrel of oil (today) $70 to $80 too much.
• Made it a federal crime to price gouge oil and gas.

On the first two issues, Republicans ignored the minimum $17 billion in taxes that would once again flow to US coffers. Instead, they accused Democrats of merely wanting to punish oil companies as a way of expressing the seething anger most American taxpayers feel over gas prices that have skyrocketed for no apparent reason.

Democrats said, “Yup, making oil companies pay their fair share and punishing them for excessive profits while Americans suffer is exactly what we wanted to do.”

“Why that’s un-American,” screamed GOP senators. All while they rushed to call John McCain in order to congratulate him for admitting that, if elected president, he’d continue a program that secretly wiretaps domestic phone calls made by American citizens.

GOP senators made no comment on the bill’s increased margin account provision. What could they say? Big investment banks, hedge funds and brokerages won. Taxpayers lost a huge one. Best to pretend it never happened.

But, Senator I.M. Forsale did applaud the effort. He said the move is part of an effort to make gas so expensive that “poor people won’t have the gas to drive to the bank to cash welfare checks… perverted homosexxxxxuaaaallls can’t afford to drive to city hall to get married and godless whore women are economically prevented from driving to Planned Parenthood clinics.”

He added, “$5 and $6 gas is finally going to shake the losers, the sinners and the old out of the American family tree.”

Republican leader Mitch McConnell of Kentucky acknowledged that Americans are hurting from the high-energy costs. But, he strongly opposed the Democrats’ response and ridiculed those who “think we can tax our way out of this problem.”

“Republicans by and large believe that the solution to this problem, in part, is to increase domestic production,” McConnell said.

A GOP energy plan, rejected by the Senate last month, calls for opening a coastal strip of the Arctic National Wildlife Refuge in Alaska. Drilling in the ANWR would net the US about 454 days of oil, at its current 22-million-a-day burn rate. And, it would take eight to ten years bring the first of this oil to market.

INTERNAL ENDORSEMENT

Just this Once
BELIEVE THE HYPE!

It was the email that shocked the investment world.

One noted investment authority told his readers to take seven huge stock market gains on one day… SEVEN HUGE WINNERS on one day that ranged from 526% to 102%… seven, and on stocks… not options.

But that was just the beginning! It now looks to be setting up to happen again this year, too.

That’s why you must check out the whole story right here.

I actually believe that oil field technology is advanced enough that it would be fairly safe to drill there.

Of course, there’s the human element to consider… as in shortcuts and corrupt contractors. And, with so much at stake, some people might try to cover up mistakes.

Then, I did some research and discovered just how little oil is in ANWR… modest predictions are 5.5 trillion barrels… best-case predictions suggest 10 trillion barrels.

And, that is quite literally – even at the 10-trillion level – a drop in the bucket.

You see, the US Energy Information Agency reported that if Congress gave the go-ahead to pump oil from ANWR, the crude could begin flowing by 2017. It would reach a peak of 876,000 barrels a day by 2029.

But even at peak production, the EIA analysis said, the United States would still have to import more than two-thirds of its oil.

That’s 21 years until peak. And, that peak would be less than one million barrels a day. That’s less than 1/20th of our daily burn.

And, this is a front-burner issue. For whom?

Now, I rarely share with you the thoughts I send in private to my Asia Business & Investing subscribers… but a bit of what I wrote to them on Wednesday is an extension of my thoughts here.

This is what I wrote

Here in the United States… apparently no one in charge is to blame for the state of the economy… fuel and food prices… except, of course, consumers who pay the prices.

Ron Reagan was known as the Teflon President because trouble didn’t stick to him. Today, US leaders in Washington eschew the Teflon, because no one is throwing anything at the White House or Congress.

It’s you and I that need the Teflon.

After all, it was greedy homeowners who created the credit crisis… not nominally regulated banks and lenders.

It is SUV drivers and soccer moms in mini vans who have run up the price of oil – not totally unregulated oil futures speculators (Google “Enron Loophole” for the whole story) or the threatened veto of a farm bill that included a provision to close the seven-year old crooked loophole, which is well known among Washington highest echelons at both ends of Pennsylvania Ave.

…if you’re like me, when you look around don’t you occasionally wonder who led us to the state we are in today… and why everyone in Washington has escaped blame… or worse, won’t accept responsibility?

Instead, what we get is the Mitch McConnells of the world saying “we know Americans are hurting but there’s not a thing Congress can do about it – except to open up oil drilling in the Alaskan Nation Wildlife Refuge…”

See, there it is again… Washington is not to blame… it’s those pesky, do-gooder, unpatriotic, environmentalists who are pissing in the soup.

So, how about this for an idea?

If this oil is so freekin’ critical to the US’s way of life, then we open up the ANWR for oil exploration, but with two huge restrictions.

They would be that ExxonMobil is not allowed to participate in the ANWR.

And, oil company profits would be capped at 6%.

You see, the US Geological Survey estimates that at $30 a barrel, oil company profits would be about 12% on ANWR oil… but, the Department of Energy, on Thursday, said that oil prices will be $129 a barrel in 2009. It should be $86 in 2010. And it should be back over a c-note at $107 in 2015.

So, who knows how high profits would fly on ANWR oil by 2017 when its initial oil came to market.

But, under my restrictions, every penny beyond a 6% profit would evenly flow directly to the Social Security Trust Fund and Medicare.

And, I am certain that as patriotic Americans with the ability to help sustain the American way of life, US oil companies would rush to accept that deal.

Have a great weekend.

Andy

P.S. To let me know what you thought of today’s article, send an e-mail to: feedback@investorsdailyedge.com.

Source: Kiss Your Gas Goodbye

In Russia, they elect the former president of Gazprom as president of the country.

Hmmm… Russia or the USA… Which country does not have an “energy crisis?”

“People we represent are hurting,” says Sen. Leahy of Vermont to the oil company executives. “The companies you represent are profiting.”

Yeah? So what? Oil companies make about 4-cents per gallon gas. The federal govt makes at least 18-cents, and state govts make much more than that. Besides, most oil companies are actually “losing” money on downstream operations. The refining margins just plain suck right now.

And whose fault is it that people “are hurting?” People in the US have made several generations of bad choices in energy policy, to include electing guys like Patrick Leahy to the US Senate. The Patrick Leahys of the world have never done a darn thing to increase the energy supply of this country. They just sit back, pass legislation to lock up areas the size of Maine — as well as 85% of the US Outer Continental Shelf — and then take potshots at the people who put gas into the fuel tanks of America.

Really, Senator… Would you trade the management team of Chevron or Exxon for the mangers of Pemex? You want gas lines? Try that, genius.

Here is the scoop, if you missed the story.

Until we meet again

Byron King

Note: Byron King is a frequent contributor to the free e-letter Whiskey & Gunpowder. To receive daily insights into energy, oil, commodities and other natural resources sign up here!

Source: Congress Beats Up On Oil Execs…