Joseph Lazzaro
New York - http://
Joseph Lazzaro is a veteran financial editor with more than 10 years in financial news and financial publishing. Lazzaro served as Managing Editor of New York-based financial news web site WallStreetItalia.com / WallStreetEurope.com for four years. Lazzaro, who holds an ABD/Ph.D. in American Government and International Economics from the University of Connecticut, also served as a News Editor for the Pulitzer Prize-winning Hartford [Connecticut] Courant, prior to graduate school. He is based in New York.
Posted Sep 4th 2008 2:02PM by Joseph Lazzaro
Filed under: Forecasts, Economic data, Politics, Presidential elections, Housing, Recession
With a home near
the capital of the world, decades ago the parents of yours truly were able to locate and purchase the best and most effective books for their children during their grade school development years.
Dad usually chose books that emphasized cognitive development, while Mom emphasized books and exercises that stimulated creativity, and that had happy endings.
To be sure, Morgan Stanley economist
Stephen Roach's macroeconomic reports would not have met Mom's requirement for happy endings.
Roach's post-bubble worldRoach, who now also serves as
Morgan Stanley's (NYSE:
MS) Asia Chairman, takes the pulse of the U.S. and global economies, the housing slump, the credit crisis, and the financial system, in his most recent report. (
pdf)
And, consistent with Roach's reputation for sobering analysis, his economic forecast for the quarters and years ahead is not pleasant, and it differs markedly from the current consensus in financial circles.
That current consensus argues that the U.S. Federal Reserve's recently-established liquidity facilities, combined with the U.S. Treasury's back-up measures, will enable banks and others with bad mortgages and bad mortgage-backed bonds to muddle-through, slowly working-off these debts as revenues increase as the U.S. economy recovers. Likewise, the U.S. housing sector and consumer demand also will recover, as home prices stabilize and consumption returns to more-normal levels as U.S. GDP increases. It's a sort of 'end to the banking and housing crises by a growing U.S. economy better-able to service those bad debts' argument.
Continue reading Which candidate, Obama or McCain, will favor $500 billion in fiscal stimulus, if needed?
Posted Sep 4th 2008 12:26PM by Joseph Lazzaro
Filed under: Forecasts, Good news, Commodities, Oil
Oil fell $2.24 to $107.11 per barrel Thursday at mid-day despite the fact the
U.S. Energy Information Administration announced that weekly crude oil inventories unexpectedly fell by 1.9 million barrels.
Economists
surveyed by Bloomberg News had expected crude oil inventories to increase by 450,000 barrels last week.
Gasoline supplies fell by 400,000 barrels to 194.4 million barrels. Meanwhile, refinery capacity rose to 88.7%, compared to 87.3% a week earlier, and 85.7% two weeks ago.
'It's all about slowing global growth'Energy Trader Jim Dietz said the fact that oil fell despite the unexpected decline in weekly oil inventories underscores "a really troubling oil demand picture."
"Right now, it's all about slowing global growth. The oil market is definitely in sell mode now. The market senses global oil consumption growth will slow in Asia and when you add that to lower oil consumption in the U.S., we could see building inventories, which means oil is headed lower," Dietz said. "We still have to watch [Hurricane] Ike in the Atlantic because it may track toward the Gulf of Mexico but right now lower demand dominates [the market]."
Dietz added that he was currently short unleaded gasoline and oil, with monthly contracts.
Continue reading Oil falls to $107 despite drop in weekly U.S. inventories
Posted Sep 4th 2008 9:15AM by Joseph Lazzaro
Filed under: International markets, Federal Reserve, Recession
These days, the U.S. Federal Reserve is not getting a great deal of help from its companion major central banks regarding monetary policy stimulus to pull the global economy out of is pronounced slowdown.
In the case of the Bank of England, it kept interest rates the same despite anemic GDP growth. In the case of the European Central Bank, it kept it's key rate at a seven-year high.
Economist: Two terrible decisionsToday, the
BOE kept its benchmark interest rate at 5%, the
ECB did the same at 4.25%, and London-based economist Mark Chandler is happy with neither.
"Just two terrible decisions stemming from flawed reasoning. Just dreadful," Chandler said. "The BOE and ECB are putting too much responsibility on the Fed to stimulate demand when we need all three central bank engines pulling at once to get out of this economic rut."
Continue reading Fed getting little help from ECB, BOE on stimulus policy
Posted Sep 3rd 2008 4:40PM by Joseph Lazzaro
Filed under: International markets, Forecasts, Morgan Stanley (MS), Economic data, Recession
Wall Street, really a typical, small, village-like setting, save for the fact that about $8-12 trillion dollars in capital passes through its vortex daily, is a pulse-taking community. And for a dose of reality to counter-balance the sometimes too-rosy institutional research, the Street looks to the 'perpetual pessimist,' Stephen Roach,
Morgan Stanley's (NYSE:
MS) Asia Chairman.
Roach's take on economic state-of-things as the United States gets back to work this fall? Don't play
"Happy Days Are Here Again" just yet. Roach said the global economic slowdown has only just begun, with the United States heading into a recession and the impact of the credit crunch still roiling through financial institutions around the world,
Bloomberg News reported. "There's more to this macro event than just the credit-market contagion itself,"
Roach told Bloomberg News. "Maybe two-thirds of that is behind us, but the impacts on the real side of the U.S. economy and the global economy are at an early stage.''
U.S., global economies slow togetherEconomist David H. Wang told BloggingStocks Wednesday Roach's analysis and comments should not be ignored by executives, small business owners, or typical citizens as they set their budgets and financial plans for the year ahead.
Continue reading MS's Roach says we've only just begun, regarding economic slump
Posted Sep 3rd 2008 1:35PM by Joseph Lazzaro
Filed under: International markets, Good news, Commodities, Oil
The winds of change are swirling around us.
In politics, the United States will elect either its
first African-American as President of the United States,or its
first woman as Vice President of the United States in November.
In baseball, the
Tampa Bay Rays are poised to make the play-offs and contend for the American League pennant.
(The Tampa Bay Rays!?) And the New York Yankees most likely won't.
And in the oil market, oil is set to test the
psychologically-important $100 level, only this time via a downtrend.
That's right, you read correctly: an oil price downtrend. Oil's slide continued Wednesday as initial reports indicated only minimal damage to oil rigs and refinery infrastructure in the Gulf of Mexico from Hurricane Gustav,
Bloomberg News reported Wednesday. Oil fell $2.10 to $107.61 per barrel Wednesday at mid-day. Oil hit a record high of $147.27 per barrel on July 11, 2008. The other major energy commodities also fell Wednesday.
Unleaded gasoline dropped 5 cents to $2.68 per gallon,
heating oil declined about 4cents to $3.02 per gallon, and
natural gas sank 21 cents to $7.05 per million BTUs.
Energy Trader Jim Dietz said the operative phrase in the energy markets now is not 'hurricane' but changing economic winds -- the global economic slowdown. "Each week I review individual country GDP reports to cross-reference institutional data on economic conditions, and they point to one thing, a global slowdown," Dietz said. "If developing world oil consumption growth slows, oil will continue to trend lower, and we'll test $100 in week or less." Dietz added that he was currently short unleaded gasoline and oil, with monthly contracts.
Continue reading Oil's slide continues as Gulf of Mexico output resumes
Posted Sep 3rd 2008 12:35PM by Joseph Lazzaro
Filed under: Industry, Employees, Boeing Co (BA)
For
Boeing (NYSE:
BA), there's more hinging on today's machinists' contract vote than the company's primary labor costs over the next three years.
"The fate of future orders for the 787 Dreamliner could weigh in the balance," stock analyst C. Leonard Bauer told BloggingStocks Wednesday.
About 27,000 members in the International Association of Machinists and Aerospace Workers union in Washington State, Oregon and Kansas will vote today concerning whether to accept a three-year contract,
The Associated Press reported Wednesday. Contact vote results are expected Wednesday night.
Shares of
Boeing (NYSE:
BA) rose 90 cents to $66.79 in Wednesday morning trading.
Despite Boeing's offer of a $5,000 signing bonus and a pay increase totaling 11% over the 3-year contract, its passage is hardly a slam dunk, Bauer said. "I know the media likes to portray every major union contract as a big deal, but this one really is a big issue. There are a lot of nervous parties watching this vote, parts suppliers to Boeing, businesses in the affected regions, and of course, almost every major airline around the world," Bauer said. "A protracted strike at Boeing would jeopardize several commercial airplane delivery timetables."
Work stoppage could hurt 787 orders
Continue reading Boeing 787 Dreamliner backlog seen hinging on strike vote
Posted Sep 2nd 2008 2:20PM by Joseph Lazzaro
Filed under: Middle East, Commodities, Oil
Just when the
oil market gets one storm out the way, it appears another 'storm' may be building. And we're not talking about
Tropical Storms Hanna, Ike, or Josephine in the Atlantic Ocean.
Iran Tuesday said OPEC may need to cut oil supplies by up to 1.5 million barrels per day to balance what it believes will be a global market imbalance by early next year,
Reuters reported Tuesday. OPEC will meet next week in Vienna to discuss oil production.
Ali Khatibi, Iran's OPEC governor,
told Reuters. "The current market is not balanced, it is oversupplied," adding that the oversupply cannot continue because it will hurt oil's price.
Oil fell $6.41 to $109.05 per barrel Tuesday at mid-day. Earlier in the day oil had fallen to as low as $105.46 after reports indicated oil companies were preparing to resume production from rigs closed by Hurricane Gustav,
Bloomberg News reported Tuesday. Economist: OPEC supply cut 'would be a mistake'
Economist David H. Wang told BloggingStocks Tuesday now is not the time for OPEC to consider a production cut. "We have all three major economic regions of the world, U.S., Europe, Asia, decelerating, in good part due to the sky-high oil prices of the past two years. Now, just went we get some relief, OPEC says it's time to cut production?" Wang said. "It's way too premature to think about a production cut. We haven't seen Q3 oil consumption statistics from Asia yet. They could show an increase, which would be bullish for prices."
Continue reading Post-Gustav, Iran says OPEC may need to cut oil production soon
Posted Sep 2nd 2008 1:55PM by Joseph Lazzaro
Filed under: Forecasts, Other issues, Federal Natl Mtge (FNM), Federal Reserve
The comeback of the beleaguered dollar continues.
The dollar strengthened to a six-month high versus the euro Tuesday, and also rose against the world's other major currencies on a growing consensus in foreign exchange circles that global economic fundamentals are shifting in favor of the greenback.
The
dollar strengthened about 1.5 cents to $1.4465 versus the
euro, and about 1.4 cents to $1.7877 versus the
British pound Tuesday at mid-day. The buck also gained one-half yen to 108.62 versus
Japan's yen. Pivotal for dollar: Europe, Asia GDP Further, although Tuesday's dollar catalyst was the realization that Hurricane Gustav would cause considerably less-than-forecast damage to Southeast U.S. oil production and the refinery infrastructure, trader Andrew Resnick told BloggingStocks the longer-term focus remains regional GDP growth.
"With Hurricane Gustav out of the way, sentiment's building that this dollar rally has legs. European growth has slowed to recession levels, and China's economy has slowed as well. For Europe, lower interest rates are likely to follow, and that's dollar bullish," Resnick said. Resnick added that he expects the Bank of England to cut its benchmark interest rate by a quarter-point to 4.75% when it meets September 4. He doesn't expect the European Central Bank to lower its 4.25% refinance rate on September 4, but that stand-pat policy may change to accommodation, later this fall.
Continue reading This dollar rally may have legs
Posted Sep 2nd 2008 11:35AM by Joseph Lazzaro
Filed under: Forecasts, Other issues, Economic data
The losses from Gustav are significant, but not nearly as bad as they could have been.
That's the early read regarding onshore / offshore property and infrastructure damaged caused by Hurricane Gustav, with losses pegged at $4 billion to $10 billion,
according to estimates by Risk Management Solutions. In contrast, Hurricane Katrina in 2005 caused about $50 billion in damages.
Risk Management said losses from Gustav were lessened by the fact that the storm weakened, and hit the coastline as a Category 2 hurricane, and the fact that it came ashore about 70 miles southwest of New Orleans. Those factors, combined with better preparation by companies with vulnerable property in the area, will result in lower damages totals, Risk Management said.
However, RMS was quick to point out that the $4-10 billion damage total does not include loses from flooding in New Orleans that could occur in the days ahead.
Gustav: Little U.S. GDP impactEconomist David H. Wang, who runs U.S. GDP models each quarter, said Tuesday he expects "only a minimal U.S. GDP impact from Gustav."
"Of course human safety is the primary concern. But regarding regional GDP, the Southeast U.S. will incur a 0.1-0.3% GDP reduction in the third quarter from the hurricane, but the overall impact on U.S. GDP will be minimal," Wang said.
Continue reading Gustav's insured losses could reach $10 billion, fraction of Katrina's
Posted Aug 31st 2008 4:30PM by Joseph Lazzaro
Filed under: Forecasts, Good news, Commodities, Oil
An oil price of $80 per barrel in 2009?
It's possible, so says a hedge fund firm founder, if the right factors line up.
Renee Haugerud, founder of the $2.5 billion commodities hedge fund firm Galtere Ltd.
told Bloomberg News oil may fall to $80 per barrel as supplies of alternative energy sources increase.
Further, Haugerud said the surge in oil has been overdone by investors seeking holdings in raw materials through the Standard & Poor's GSCI Index, a commodity gauge weighted toward energy,
Bloomberg News reported. Oil closed Friday down 11 cents to $115.46 per barrel.
Economist Glen Langan told BloggingStocks a further decline in oil to below $100 is consistent with the recent slowdown in global economic growth, but he'll await further international GDP data before arguing for an oil dip to the $80 range.
"The key here, again, as with the uptrend in the previous four years, is China. If oil consumption growth slows in China, oil will experience a large sell-off, as institutional investors and traders sense that the great bull run in commodities is at least pausing," Langan said. "China is likely to register GDP growth of about 10% in Q3, and if it's below 9% or 8.5%, investors will take that as a sign that a slowdown is ahead, which is bearish for commodity prices." China's economy grew 10.2% in Q2 and 10.4% in 1H 2008.
Continue reading As global economy slows, visions of $80 oil grow
Posted Aug 31st 2008 3:30PM by Joseph Lazzaro
Filed under: Housing, Recession
The real estate research firm
Zillow.com released a sobering statistic, and it took some by surprise: more than one-third of homeowners who bought in the past five years have negative equity in their homes.
Negative equity is owing more on your mortgage than the market value of your home. On the heels of the United States' greatest residential real estate boom in the modern era, how did the above occur?
Two factors, so says economist Peter Dawson.
First, many regions of the U.S., particularly the west, experienced abnormal gains during the 2003-2007 real estate boom. "Total appreciation rates over 300% were not unusual during the period. It was an amazing run, fueled by adequate national GDP growth, and low mortgage rates," Dawson said. "But as we've seen, ultimately the appreciation rates proved to be unsustainable, everywhere they occurred."
Dawson says a 7-9% annual increase in the U.S. median home price is normal, and his models label a 10% annual increase or higher as "outsized" -- a deviation from the mean that calls for a correction at some point in time. "But during the boom, it was not uncommon to see 30%, 40%, 50% annual increases over multiple years," Dawson said. "Clearly unsustainable. Downright frothy. But these conclusions were largely ignored during the boom, on the fallacy of 'what has occurred will continue.' "
Second, a financial habit shifted, Dawson said. Way, way back in the twentieth century, Dawson recalled, the biggest stigma when he grew up in a typical neighborhood in
White Plains, N.Y., a suburb about an hour north of New York City, was... Not gaining acceptance at a good college? No. Not getting the hottest date for the high school senior prom? No. "We learned that the Smith's [not their real name] down the street had to take out...a second mortgage," Dawson said.
Continue reading Some old financial habits experience a comeback
Posted Aug 29th 2008 3:23PM by Joseph Lazzaro
Filed under: International markets, Competitive strategy, China, Politics
New York Times columnist
Thomas Friedman, who perhaps most-accurately conceptualized the revolutionary production shifts implied by globalization in
The World Is Flat, has a 'radical' economic prescription for the United States, as it moves toward the second decade in what is quickly becoming the century of change.
Friedman suggests that the United States try nation-building....at home.
Moreover, Friedman makes the case for nation-building as good for U.S. business - - a much-needed shot-in-the-arm for the U.S. economy.
U.S.: inadequate infrastructures for a major powerFriedman's main concern: the U.S.'s inadequate infrastructure (electric grid, roads/bridges/rail network, air travel system, hospitals, among others), which is antiquated compared to the infrastructure of the U.S.'s chief economic rival, China. Friedman has just attended the 2008 Olympics in Beijing and its clear China's public investments - - better airports, roads, parks, to go along with the sports venues - - have impressed him.
It's also clear to Friedman that the U.S.'s period of underinvestment is holding the nation back economically, and that has to change if the U.S. expects to remain commercially competitive on the global stage. Economist David H. Wang told BloggingStocks he agrees, for the most part, with Friedman's analysis, but adds that the journey to a better infrastructure is not a strictly an economic equation.
Continue reading Is infrastructure investment good for the U.S. economy?
Posted Aug 29th 2008 1:03PM by Joseph Lazzaro
Filed under: Indices, Technical Analysis, DJIA
Oil declines by $30 from record highs. Other commodity prices moderate. The dollar rallies. The nation records better-than-expected GDP growth in Q2.
All are positive data points that suggest that the U.S. economy, while it's certainly not in the midst of robust growth, has not run totally into a ditch, either.
What do the latest economic data points mean for the
Dow Jones Industrial Average, and U.S. stocks, in general, for the next six to nine months? Here's the bullish and bearish cases:
Bullish case: Technical analysts would cite the Dow's close above the
50-day moving average for three consecutive days, the fact that the Dow held support at the 11,000 level, and a series of higher closing highs and higher closing lows in the past two months.
Further, technical analysts would also cite the fact that the Dow has completed the volume-light June-July-August summer season (typically bearish for stocks) during a period of anemic growth (if the U.S. economy isn't already in a recession), without plunging to nerve-wracking lows. True, the Dow fell from about 12,400 in June to 11,000 in July, but technicians would cite the aforementioned positive technicals as an argument that a bottom is in place.
Bearish case: Technical analysts would cite the fact that the Dow, although above the 50-day moving average, nevertheless remains below the
200-day moving average -- the toughest moving average line to break in trading. Also, market 'up days' have lacked sustained buying strength as measured by the
MACD Histogram.Further, and equally important, Dow bears would say that although the Dow has risen from its 11,000 low, the roughly 600-point increase is still well within the range of a correction -- or in this case short-covering -- in a long-term bearish trend. In other words, the Dow's recent rise could be Pyrrhic or false -- a classic example of a 'dead cat bounce.'
Market Analysis: With all due respect to technical analysts and their indicators, the view here argues that investors/ traders should take their cue from the U.S. economy's fundamentals: specifically, corporate profits and job growth. Absent substantial, sustained gains in each, any Dow rally is viewed with skepticism.
**
What's your view of the Dow? Is this stock market rally real? Or is it temporary? Let us know what you think.Posted Aug 29th 2008 9:25AM by Joseph Lazzaro
Filed under: Industry, Employees, Boeing Co (BA)
This is not the way to kick off the fall production season, typically a time when companies introduce new products and plans.
Boeing (NYSE:
BA) could lose up to $3.5 billion per month in revenue if a threatened strike by a machinist union occurs next week,
USAToday reported Friday.
The potential action by the International Association of Machinists and Aerospace Workers could also delay the
787 Dreamliner program and other aircraft programs. About 27,000 machinists in Washington state, Oregon and Kansas would be affected.
Boeing's latest contract offer calls for an 11% pay increase in annual increments of 5%, 3%, and 3%,
Bloomberg News reported Friday. Machinists would also get a $2,500 payment if they approve the new contract by September 3.
Stock Analyst C. Leonard Bauer told BloggingStocks Friday Boeing "will probably have to increase its offer to the IAM, given what's at stake for Boeing."
"Boeing is in a position where it can increase its labor cost base. Revenue remains strong, with large backorders," Bauer said. "Those facts, plus the fact that Boeing can not afford any more delays in the 787 program, means the IAM has the upper hand in these contract negotiations. I'm sure the machinists don't want a strike, either, so my call would be for Boeing to up its pay raise offer to 6%, 5%, and 5% for a 16% pay increase." Bauer added that he does not have a rating on nor own shares in Boeing.
Continue reading Boeing could lose $3.5 billion per month if machinists strike
Posted Aug 28th 2008 1:17PM by Joseph Lazzaro
Filed under: International markets, Forecasts, Bad news, Economic data, Housing, Recession
The protracted housing slump that has devastated U.S. home prices now appears to have fully-enveloped the United Kingdom. Home prices in the United Kingdom in August
fell at their fastest pace in two decades (pdf), U.K.-based mortgage lender Nationwide Building Society announced Thursday.
On a year-over-year basis, the average price of a U.K. home plummeted 10.5% to $301,500 or 164,654 British pounds in August, NBS said. Further, it was the first year-over-year double-digit decline in the U.K. since 1990.
London-based economist Mark Chandler told BloggingStocks Thursday the August U.K. housing data, "is just dreadful."
"Housing in the U.K. is becoming a bit of a 'magical mystery tour,' to borrow a phrase from The Beatles. For a month or so, we thought the declines in home prices had moderated. Apparently not," Chandler said. "Tighter lending requirements and real concern about the economy have sapped sales and it's really showing up in the price data."
Continue reading U.K. home prices record largest annual decline in 20 years
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