Thursday, April 24, 2008

Thursday's Economic News Roundup

The Major US indices closed in the green today on good news from Ford and an unexpected drop in US Jobless claims:

Wall Street rallied Thursday after the government's jobless claims data and Ford Motor Co.'s first-quarter results helped reinject some optimism about the economy into the market.

The Dow Jones industrial rose more than 80 points as investors focused on the Labor Department data showing weekly unemployment claims dropped and word that Ford had a $100 million profit in the first quarter.

Investors were also able to set aside any concerns about another drop in factory orders for big-ticket manufactured goods and weak forecasts from Amazon.com Inc. and Starbucks Corp.

OK, I'll give the indices credit for this, but what of other news today?


New home sales plunge to lowest level in 16 1/2 years, prices drop by largest amount in 38 years

Sales of new homes plunged in March to the slowest pace in 16 1/2 years as a two-year housing downturn extended into the start of another spring sales season. The median price of a new home in March compared to a year ago fell at the fastest clip in 38 years.

Sales of new homes dropped by 8.5 percent last month to a seasonally adjusted annual rate of 526,000 units, the slowest sales pace since October 1991, the Commerce Department reported Thursday.

The median price of a home sold in March dropped by 13.3 percent compared with March 2007, the biggest year-over-year price decline since a 14.6 percent plunge in July 1970.


As financial markets grow increasingly worried about inflation pressures, Freddie Mac reports that fixed-rate mortgages move higher--Rates on 30-year mortgages now top 6%

"Average rates on mortgages increased across the board this last week as the most recent economic data raised inflationary concerns in the capital markets," said Frank Nothaft, Freddie Mac's chief economist.

Fueling those concerns was a bigger-than-expected 1.1% jump in wholesale prices and a renewed surge in energy costs, which have pushed gasoline and crude oil prices to record levels.


US Airways, following Delta & Northwest, Reports Loss

US Airways Group Inc. said Thursday it swung to a loss in the first quarter, punished like other airlines by the rising cost of jet fuel.

US Airways said it lost $236 million, or $2.56 a share, in the January-March period, compared with a profit of $66 million, or 70 cents a share, a year earlier. Excluding special items, the net loss was $239 million, or $2.60 a share.

US Airways' earnings report came a day after Northwest Airlines Corp. and Delta Air Lines Inc. reported combined losses of more than $10 billion. Most of those losses came on write-downs to reflect a decline in market value.


Motorola 1st-qtr loss widens as mobile-device sales plunge and it forecasts 2nd-qtr loss

Struggling cell phone maker Motorola Inc. disappointed investors Thursday when it posted a wider first-quarter loss and failed to meet revenue forecasts.

The suburban Chicago company, which is in the midst of a massive reorganization that includes splitting itself into two publicly traded companies, said it lost $194 million, or 9 cents per share, for the quarter that ended March 31.

Sales fell about 21 percent to $7.45 billion, down from $9.43 billion a year ago.


Microsoft reports 11 pct profit drop

Microsoft Corp.'s third-quarter profit fell 11 percent, the software maker reported Thursday as executives renewed their warning that they may go hostile or walk away from their $44 billion-plus offer for Yahoo Inc. if Yahoo doesn't agree to a deal by Saturday

Sales of Windows software were not as strong as Microsoft or analysts had predicted in the quarter, despite Microsoft's comments that sales of Vista licenses -- now at 140 million, up from the 100 million mark reached in January -- are on track.

Revenue in that division fell 24 percent to $4.02 billion.


American Express profit falls 6%; New York-based credit-card company slips as U.S. cardholders struggle to make their payments.

American Express Co.'s first-quarter profit slipped 6% as the credit-card lender saw more U.S. cardholders fail to make their payments, it said Thursday.

Like other lenders, the New York-based company has been writing off more loans as unpaid as U.S. borrowers struggle with slumping home prices, rising costs, and a less certain job market.
The company's total provisions for credit losses amounted to $1.27 billion, a 48% increase from the first quarter of 2007.

U.S. card services profit fell 19% to $523 million in the first quarter compared with the same period a year earlier, as profit from international card services rose 30% to $133 million.

The writeoff rate in U.S. card services, including both on-balance sheet cardmember loans and off-balance sheet securitized cardmember loans, increased to 5.3% from 3.7% a year ago - faster than the company anticipated.


United hikes fares 3% to 5%, blaming fuel costs; The second-largest U.S. carrier increases almost all of its domestic airfares for the third time in two weeks.

United Airlines, the second-largest U.S. carrier, raised nearly all its domestic airfares by 3% to 5% Thursday as it struggles to cope with soaring fuel costs.

The widespread increase is the third in a row initiated by United in just over two weeks, and will likely entice other carriers to follow suit. The Chicago-based carrier's last two attempts were quickly matched by competitors and remain in place in many markets.

The move comes just two days after Delta Air Lines Inc. Chief Executive Richard Anderson said domestic carriers need to raise tickets 15% to 20% just to break even at existing fuel prices.

"This is the most challenging financial period in the history of the industry," said John Heimlich, chief economist of the Air Transport Association. "Just at the same time we have this unprecedented surge in jet fuel prices with no end in sight, we're bumping up against a weakening economy."


My Thoughts:

Maybe I'm biased, but based on the news reports above, it certainly doesn't look like our economy is getting any better... Could the PPT and pundits possibly be trying to lull the cattle into a false sense of security while leading them to the slaughterhouse? Oh well, until the sheeple (cattle) pull their heads out of the sand there is really nothing I can do about it...


OK, last but certainly not least, here is a very good opinion article that I thought you would enjoy:

The U.S. Dollar has Been the Gold Bug’s Best Friend – Until the “Amero” Debuts

As all gold bugs know, gold’s historic rise since 2001 has largely been attributed to the dilution of the U.S. dollar. Trade deficits, government overspending and the more recent sub-prime mortgage debacle have all helped deflate the greenback while driving up the price of gold.

However, what would happen if the U.S. dollar just disappeared? How would gold and other hard assets be valued then?

This week the three NAFTA amigos, President George Bush, Prime Minister of Canada Stephan Harper and Mexican President Felip Calderon met to ram new polices down our throats which will impact gold and other commodity prices going forward.

The reopening of the North American Free Trade Agreement is the first strategic move toward a North American Union that will create a new currency to compete with the Euro.

On Tuesday, the U.S. dollar sank yet again with the Euro breaching the psychologically significant $1.60 mark for the first time.

It’s only a matter of time before the U.S. dollar collapses to the point of no return internationally. With the Fed unable to manage the slide with higher interest rates due to the economic slowdown in the U.S., the three amigos are setting up the chess pieces for the inevitable next move: the creation of a North American currency, the “Amero.”

The Hallmark of Bush’s presidency could very well be the creation of the Amero, the perfect solution and savior to the failing U.S. dollar. Whether it’s Bush or the next president, at some point in the not too distant future the dollar will be abandoned and a new game will begin.

International trade has already started to price commodities in Euros as foreign governments holding dollars have lost their shirts while holding Euros has increased their buying power.

The Euro was introduced with the same degree of stealth such that the citizens of Europe had little choice but to adopt it.

Some thought a European union was an impossible dream but now they have 27 nations under its authority with more members waiting in the wings.

The U.S. is already facing economic hardship which will only get worse. The Amero will be introduced to the American public as the administrations solution to recover from the current financial mess.

In Canada, the Canadian dollar has been trading at close to par for several months. Canadian politicians can easily sell the idea of the Amero by simply making promises of cheaper gas prices (Americans pay amongst the lowest prices in the western world.) Plus many Canadians who live near the border travel to the U.S. for major shopping binges buying assortment of much cheaper goods from dairy products, used cars, electronics and clothing. If they can get the same prices at home, the NAU will be an easy sell.

As far as the Mexicans are concerned well, doesn’t nearly everyone already speak Spanish from California to Florida?

In the interim, gold’s still got a long way to go so stay tuned. However be aware that the Amero will put the brakes on gold’s march as the illusion of strength and power will put confidence into the world’s latest fiat money system. Also know that in the history of mankind, fiat money systems have always failed. The U.S. dollar is the latest victim. Bill Ridley: jameswinston.com/


Best regards

Randy

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