Previously I posted how absurd the Fed's statements were weeks ago that growth and inflation risks were relatively equal. Now Donald Kohn is helping the Fed to backtrack and setting the stage for a much needed rate cut in December.........
Rate-Cut Hopes Lift Stocks
Stocks took a bull run on Wednesday, spurred by non-stop good news, including rising hopes for a Fed rate cut, signs of recovery in the battered financial sector and a stabilizing dollar.....
.......There was at least one spark for the day's gains, however: rekindled hopes for a further rate cut by the Federal Reserve. Fed Vice Chairman Donald Kohn said credit conditions had deteriorated again in previous weeks, and suggested the Fed could step in to bolster the economy. The remarks seemed less hawkish than those of other Fed speakers recently, implying the Fed might be more inclined to cut rates at its next policy meeting on Dec. 11.
"The Fed is giving the market hope for rate cuts…while financials are going through some self-help," said Alan Gayle, senior investment strategist.......
By CAROLYN CUI - WSJ
WSJ link here
Wednesday, November 28, 2007
Monday, November 26, 2007
Inflation? Bond Market Doesn't Think So
10-Year Treasury Yield at 2 1/2 Year Low
Treasurys Rally on Credit Market Fears; 10-Year Yield Drops to Lowest Point Since June 2005
NEW YORK (AP) -- Treasury prices rallied dramatically Monday on more credit concerns, pushing the benchmark 10-year note's yield down to its lowest level in two and a half years.
Trading was dominated by a fresh set of worries about the impact of deteriorating below prime home loans on the credit and housing sectors; those concerns led investors away from risk and to again seek the safety of government bonds.....
........The benchmark 10-year Treasury note rose 1 17/32 to 103 20/32 with a yield of 3.85 percent, down from 4.00 percent late Friday. The 10-year yield has not been this low since June 2005.
The 30-year long bond advanced 2 27/32 to 112 1/32 with a yield of 4.25 percent, down from 4.43 percent late Friday. ..........
Full Story Link Here
Treasurys Rally on Credit Market Fears; 10-Year Yield Drops to Lowest Point Since June 2005
NEW YORK (AP) -- Treasury prices rallied dramatically Monday on more credit concerns, pushing the benchmark 10-year note's yield down to its lowest level in two and a half years.
Trading was dominated by a fresh set of worries about the impact of deteriorating below prime home loans on the credit and housing sectors; those concerns led investors away from risk and to again seek the safety of government bonds.....
........The benchmark 10-year Treasury note rose 1 17/32 to 103 20/32 with a yield of 3.85 percent, down from 4.00 percent late Friday. The 10-year yield has not been this low since June 2005.
The 30-year long bond advanced 2 27/32 to 112 1/32 with a yield of 4.25 percent, down from 4.43 percent late Friday. ..........
Full Story Link Here
Tuesday, November 20, 2007
Growth and Inflation Equal Risk? I Don't Think So
I apologize for the infrequent post as of late, hasn't been too much that has riled me up lately, until now. With the Fed releasing it's short and long term forecast and minutes from it's last meeting, obviously they are posturing big time on the threat of inflation. Let me say this for the umpteenth time, inflation is not our problem. Inflation is 2-3 year lagging indicator that has been contained. The Fed needs to be concerned with growth which apparently they are internally by their minutes and externally by their somber forecast. I think they need to continue to cut 25 basis points or more at each of the next 4 meetings and see what happens..............
Squaring the circle over Fed's stance on cuts
Information in the minutes of the last Federal Reserve meeting and the new economic projections by the US central bank provide ammunition for both sides in the rate-cut debate.
On the one hand the minutes devoted greater attention to the risks to growth than the risks to inflation - unlike the statement issued after the meeting, which declared that the risks were "roughly balanced" following the rate cut.
On the other, the economic projections revealed that the Fed has a low assessment of the potential growth rate of the US economy - a view that would make it less inclined to cut interest rates when growth is sluggish for fear of igniting inflation.
The discussion in the minutes is hard to square with the notion that the central bank sees the growth and inflation risks as completely balanced.
"It was a little bit of a stretch for them to get to neutral, given the preponderance of downside risks in the minutes," says Peter Hooper, chief economist at Deutsche Bank Securities..............
Excerpts From Financial Times
For rest of story click here
Squaring the circle over Fed's stance on cuts
Information in the minutes of the last Federal Reserve meeting and the new economic projections by the US central bank provide ammunition for both sides in the rate-cut debate.
On the one hand the minutes devoted greater attention to the risks to growth than the risks to inflation - unlike the statement issued after the meeting, which declared that the risks were "roughly balanced" following the rate cut.
On the other, the economic projections revealed that the Fed has a low assessment of the potential growth rate of the US economy - a view that would make it less inclined to cut interest rates when growth is sluggish for fear of igniting inflation.
The discussion in the minutes is hard to square with the notion that the central bank sees the growth and inflation risks as completely balanced.
"It was a little bit of a stretch for them to get to neutral, given the preponderance of downside risks in the minutes," says Peter Hooper, chief economist at Deutsche Bank Securities..............
Excerpts From Financial Times
For rest of story click here
Sunday, November 11, 2007
A Shot in the Arm for Jumbo Mortgages
Bernanke sets out jumbo mortgage plan
Ben Bernanke, Federal Reserve chairman, on Thursday put forward a plan to help revive the secondary market for jumbo (large denomination) mortgages that would involve Fannie Mae and Freddie Mac, as well as credit guarantees from the federal government.
Mr Bernanke told Congress he would support raising the limit on the size of the individual loans eligible for securitisation by the government-sponsored mortgage finance entities from $417,000 to $1m (€680,000, £475,000) on a temporary basis.
He suggested that Fannie and Freddie could pay insurance premiums on these loans to the federal government, which would "act as guarantor" by taking on some of the credit risk.
Charles Schumer, the Democratic chairman of the Joint Economic Committee, enthusiastically welcomed the idea and said he would try to insert it into legislation already before Congress.
The unusually specific proposal by Mr Bernanke reflects his disappointment at the continued problems in the jumbo market, and concern that this will aggravate the US housing downturn.
By Krishna Guha - Financial Times
Full Story Link Here
Ben Bernanke, Federal Reserve chairman, on Thursday put forward a plan to help revive the secondary market for jumbo (large denomination) mortgages that would involve Fannie Mae and Freddie Mac, as well as credit guarantees from the federal government.
Mr Bernanke told Congress he would support raising the limit on the size of the individual loans eligible for securitisation by the government-sponsored mortgage finance entities from $417,000 to $1m (€680,000, £475,000) on a temporary basis.
He suggested that Fannie and Freddie could pay insurance premiums on these loans to the federal government, which would "act as guarantor" by taking on some of the credit risk.
Charles Schumer, the Democratic chairman of the Joint Economic Committee, enthusiastically welcomed the idea and said he would try to insert it into legislation already before Congress.
The unusually specific proposal by Mr Bernanke reflects his disappointment at the continued problems in the jumbo market, and concern that this will aggravate the US housing downturn.
By Krishna Guha - Financial Times
Full Story Link Here
Silicon Valley Q3 Venture Capital Still Rolling
Start-ups fatten up: Venture capital spigot flows freely in Q3
MERCURY NEWS SPECIAL REPORT: VENTURE CAPITAL
With investments in the emerging "clean tech" industry continuing to soar, Silicon Valley companies received more than $2.48 billion in venture capital in the third quarter of 2007 - a sign that the valley's entrepreneurial culture is thriving despite broader economic worries.
The quarterly MoneyTree Report found that the valley's total venture investments, while dipping slightly from the previous quarter, represented robust 9 percent year-over-year growth. As usual, Silicon Valley and the broader Bay Area outpaced other tech hubs by a wide margin, reaping 35 percent of the $7.1 billion in venture investments in the United States........
For the venture capital industry, the upbeat quarter came at a time the U.S. economy quivered from the rippling effects of the subprime mortgage meltdown. The ensuing credit crunch as well as rising fuel prices have economists warning of a marked slowdown and a potential recession.
But the valley's tech-driven economy seems cushioned from the domestic worries as it relies increasingly on expanding global markets. VCs, in particular, exhibit a buoyant mood, according to a quarterly survey by University of San Francisco Professor Mark Cannice that is compiled in the university's Silicon Valley VC Confidence Index........
By Scott Duke HarrisMercury News
For Full Story Click Here
MERCURY NEWS SPECIAL REPORT: VENTURE CAPITAL
With investments in the emerging "clean tech" industry continuing to soar, Silicon Valley companies received more than $2.48 billion in venture capital in the third quarter of 2007 - a sign that the valley's entrepreneurial culture is thriving despite broader economic worries.
The quarterly MoneyTree Report found that the valley's total venture investments, while dipping slightly from the previous quarter, represented robust 9 percent year-over-year growth. As usual, Silicon Valley and the broader Bay Area outpaced other tech hubs by a wide margin, reaping 35 percent of the $7.1 billion in venture investments in the United States........
For the venture capital industry, the upbeat quarter came at a time the U.S. economy quivered from the rippling effects of the subprime mortgage meltdown. The ensuing credit crunch as well as rising fuel prices have economists warning of a marked slowdown and a potential recession.
But the valley's tech-driven economy seems cushioned from the domestic worries as it relies increasingly on expanding global markets. VCs, in particular, exhibit a buoyant mood, according to a quarterly survey by University of San Francisco Professor Mark Cannice that is compiled in the university's Silicon Valley VC Confidence Index........
By Scott Duke HarrisMercury News
For Full Story Click Here
Wednesday, November 07, 2007
With Productivity Up Sharply Fed Can Cut More
Productivity Rises, Easing Inflation Fears
WASHINGTON -- U.S. productivity jumped last quarter at its fastest pace in four years while labor costs fell, a welcome relief for Federal Reserve officials worried about the inflationary effect of rising energy and commodity prices.
Still, the productivity rebound may prove temporary if the economy slows as expected in the fourth quarter and in early 2008.
Nonfarm business productivity swelled at a 4.9% annualized rate between July and September, the Labor Department said Tuesday. That is more than double the 2.2% rate in the second quarter, which was revised down from a previous estimate of 2.6%. Productivity is defined as output per unit of labor.
The third quarter productivity gain was well above Wall Street expectations of a 3.4% rise. The increase reflects the recent mix of strong economic growth data with slower gains in payrolls.
Unit labor costs -- a key gauge of inflationary pressures -- fell 0.2% last quarter, the biggest drop since the second quarter of 2006. Economists had expected a 0.8% rise. Still, labor costs were up 4.3% from a year ago, suggesting some pressures linger.......
By BRIAN BLACKSTONE - WSJ
For WSJ Article Click Here
WASHINGTON -- U.S. productivity jumped last quarter at its fastest pace in four years while labor costs fell, a welcome relief for Federal Reserve officials worried about the inflationary effect of rising energy and commodity prices.
Still, the productivity rebound may prove temporary if the economy slows as expected in the fourth quarter and in early 2008.
Nonfarm business productivity swelled at a 4.9% annualized rate between July and September, the Labor Department said Tuesday. That is more than double the 2.2% rate in the second quarter, which was revised down from a previous estimate of 2.6%. Productivity is defined as output per unit of labor.
The third quarter productivity gain was well above Wall Street expectations of a 3.4% rise. The increase reflects the recent mix of strong economic growth data with slower gains in payrolls.
Unit labor costs -- a key gauge of inflationary pressures -- fell 0.2% last quarter, the biggest drop since the second quarter of 2006. Economists had expected a 0.8% rise. Still, labor costs were up 4.3% from a year ago, suggesting some pressures linger.......
By BRIAN BLACKSTONE - WSJ
For WSJ Article Click Here
Monday, November 05, 2007
Keep Cutting
Excerpts from James C. Cooper - Businessweek - Business Outlook
On Guard Against Recession
All signs suggest meager growth—if that—in the fourth quarter, with little improvement in early 2008. So the Fed is taking preemptive action
The goods news: The government says the economy grew 3.9% in the third quarter. The bad news: That's the last of the good news on growth. In the fourth quarter, look for the full brunt of the credit crunch, the latest downturn in the housing slump, $90-a-barrel oil, and growing caution by consumers and businesses to take their tolls. Most economists expect growth of only 1% to 2% this quarter, with little improvement in early 2008, and many of those folks have their fingers crossed. The risks to that somber forecast are almost all to the downside.
On Guard Against Recession
All signs suggest meager growth—if that—in the fourth quarter, with little improvement in early 2008. So the Fed is taking preemptive action
The goods news: The government says the economy grew 3.9% in the third quarter. The bad news: That's the last of the good news on growth. In the fourth quarter, look for the full brunt of the credit crunch, the latest downturn in the housing slump, $90-a-barrel oil, and growing caution by consumers and businesses to take their tolls. Most economists expect growth of only 1% to 2% this quarter, with little improvement in early 2008, and many of those folks have their fingers crossed. The risks to that somber forecast are almost all to the downside.
It is the unknowns that prompted the Federal Reserve to take out some more recession insurance on Oct. 31 by lopping a quarter-point off its target interest rate, bringing it to 4.5%. Whether the economy will be derailed by the tighter financial conditions caused by the mortgage-related turmoil in the credit markets remains the biggest unknown. Federal Reserve Chairman Ben S. Bernanke and other influential policymakers have noted recently that in times of high uncertainty, strong, preemptive action may be the right policy to prevent broad damage to the economy.......
........The problem is that the third quarter started strong but finished much weaker, with manufacturing, hiring, and confidence on the wane. The Conference Board's October index of consumer confidence dropped for the third month in a row, to a two-year low, partly reflecting job worries.....
......Business confidence is also slipping, which puts capital spending and payroll gains at risk. Companies are hesitant to commit money to new projects. Orders for capital goods other than aircraft have stagnated since April, and production of business equipment has made no progress since July. A credit squeeze could be one reason. Yield spreads between investment-grade corporate bonds and riskless Treasury notes, a gauge of investors' risk aversion, remain wide, even for AAA-rated companies.........
Thursday, November 01, 2007
Housing Bottom?
Is the Bottom Near for Housing?
.......There's a lot of money to be made in picking the tops and bottoms of cycles. But it's an extremely difficult exercise, and even a minor error in timing can lead to severe losses.
With that said, I'd like to examine some possible events that could signal that the bottom of the housing and credit cycle is near.
Off with their heads!During a crisis, the public needs someone to blame. Ivan Boesky, Ken Lay, and Bernie Ebbers are some of the toppled titans who have been the focus of public ire. It's part of the cathartic experience to dispatch those deemed responsible and to start fresh with a new era.
At many major banks, we can see that the catharsis has begun. The CEOs of Citigroup, Bear Stearns, and Merrill Lynch have fired underlings they deemed accountable for the crises. And in the case of Merrill Lynch, CEO Stan O'Neal politely retired today, leaving a big void.
However, analysts, shareholders, and the general public don't seem satisfied. They seem to want to fry bigger fish in an attempt to close the books on the current era of the housing bubble.
Berkshire Hathaway enters the frayIn an interview with Fox Business News, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) Chairman Warren Buffett said he hasn't bought any homebuilder shares yet because he doesn't think they're underpriced. No doubt Buffett is paying very close attention to the industry and may be simply waiting for his price.
In fact, the four largest homebuilders -- D.R. Horton (NYSE: DHI), Pulte (NYSE: PHM), Centex (NYSE: CTX), and Lennar (NYSE: LEN) -- sport a combined $15 billion market cap. If you assume the shares of those homebuilders will slide another 20%, then the price tag would fall to $12 billion, plus a takeout premium. That's very doable for Berkshire and its $40 billion cash hoard.
In addition, if Berkshire were to buy several major homebuilders, it could be taken as a self-fulfilling prophecy that the end of the housing slump is near. Although the top 10 homebuilders have only a combined 23% market share, according to an article by the Dallas Morning News, markets are extremely local.......
By Emil Lee - Motley Fool
.......There's a lot of money to be made in picking the tops and bottoms of cycles. But it's an extremely difficult exercise, and even a minor error in timing can lead to severe losses.
With that said, I'd like to examine some possible events that could signal that the bottom of the housing and credit cycle is near.
Off with their heads!During a crisis, the public needs someone to blame. Ivan Boesky, Ken Lay, and Bernie Ebbers are some of the toppled titans who have been the focus of public ire. It's part of the cathartic experience to dispatch those deemed responsible and to start fresh with a new era.
At many major banks, we can see that the catharsis has begun. The CEOs of Citigroup, Bear Stearns, and Merrill Lynch have fired underlings they deemed accountable for the crises. And in the case of Merrill Lynch, CEO Stan O'Neal politely retired today, leaving a big void.
However, analysts, shareholders, and the general public don't seem satisfied. They seem to want to fry bigger fish in an attempt to close the books on the current era of the housing bubble.
Berkshire Hathaway enters the frayIn an interview with Fox Business News, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) Chairman Warren Buffett said he hasn't bought any homebuilder shares yet because he doesn't think they're underpriced. No doubt Buffett is paying very close attention to the industry and may be simply waiting for his price.
In fact, the four largest homebuilders -- D.R. Horton (NYSE: DHI), Pulte (NYSE: PHM), Centex (NYSE: CTX), and Lennar (NYSE: LEN) -- sport a combined $15 billion market cap. If you assume the shares of those homebuilders will slide another 20%, then the price tag would fall to $12 billion, plus a takeout premium. That's very doable for Berkshire and its $40 billion cash hoard.
In addition, if Berkshire were to buy several major homebuilders, it could be taken as a self-fulfilling prophecy that the end of the housing slump is near. Although the top 10 homebuilders have only a combined 23% market share, according to an article by the Dallas Morning News, markets are extremely local.......
By Emil Lee - Motley Fool
Thursday, October 25, 2007
Could This Be The Bottom?
Despite getting caught in the cross hairs of the mortgage and credit debacle of September new homes sales were up month over month. Sales in the west were up a remarkable 38% in September. Since the west led this housing recesssion, possibly it will soon lead the U.S. out...............
excerpts from WSJ
New-Home Sales Rose Last Month,But August Drop Revised Lower
........Overall, the median price of a new home increased by 5.0% to $238,000 in September, compared with September 2006. But the average price declined by 2.8% to $288,000 from a year earlier.
The ratio of new houses for sale to houses sold, an indicator of supply, fell during September, going to 8.3 from 9.0 in August. There were an estimated 523,000 homes for sale at the end of September, down from August's 531,000.
Regionally last month, new-home sales increased 37.7% in the West and 0.5% in the South. Sales decreased 6.6% in the Northeast and 19.5% in the Midwest.
By ELIZABETH PRICE - WSJ
excerpts from WSJ
New-Home Sales Rose Last Month,But August Drop Revised Lower
........Overall, the median price of a new home increased by 5.0% to $238,000 in September, compared with September 2006. But the average price declined by 2.8% to $288,000 from a year earlier.
The ratio of new houses for sale to houses sold, an indicator of supply, fell during September, going to 8.3 from 9.0 in August. There were an estimated 523,000 homes for sale at the end of September, down from August's 531,000.
Regionally last month, new-home sales increased 37.7% in the West and 0.5% in the South. Sales decreased 6.6% in the Northeast and 19.5% in the Midwest.
By ELIZABETH PRICE - WSJ
Sunday, October 21, 2007
Venture Capital Best since 2001
Venture Capital is the main leading indicator of job growth and strengh in the bay area economy. Also note that 2.52 billion dollars flowed into bay area companies last quarter which represents over 31% of all venture capital in the united states. California accounted for 44% of U.S. venture capital..........
U.S. Venture Capital Investment Reaches Highest Level Since Q1 2001, Rises 8% to $8.07 Billion in Third Quarter of 2007
Venture capitalists continued to put more money to work with entrepreneurial companies, as overall U.S. venture capital investment climbed 8% in the third quarter of 2007 compared to the same period last year to reach $8.07 billion, according to the Quarterly Venture Capital Report released today by Dow Jones VentureOne and Ernst & Young LLP. This marked the ninth consecutive quarter of gradual year- over-year growth in dollars invested and is the highest quarterly investment total since the first quarter of 2001.......
.......Two-thirds of all capital invested in the third quarter -- some $3.81 billion -- was put to work in 224 later rounds, the most invested in late- stage companies since 2001, while combined seed and first round investment remained steady year-on-year at $1.74 billion. These sizable later rounds helped to push the overall median for a venture capital deal in the third quarter to $7.92 million, a new record.
......California dominated the venture capital activity in the third quarter, representing 44% of both the nation's deal flow and its capital invested. ...........................
-AP Newswire
Full Story Link Here
U.S. Venture Capital Investment Reaches Highest Level Since Q1 2001, Rises 8% to $8.07 Billion in Third Quarter of 2007
Venture capitalists continued to put more money to work with entrepreneurial companies, as overall U.S. venture capital investment climbed 8% in the third quarter of 2007 compared to the same period last year to reach $8.07 billion, according to the Quarterly Venture Capital Report released today by Dow Jones VentureOne and Ernst & Young LLP. This marked the ninth consecutive quarter of gradual year- over-year growth in dollars invested and is the highest quarterly investment total since the first quarter of 2001.......
.......Two-thirds of all capital invested in the third quarter -- some $3.81 billion -- was put to work in 224 later rounds, the most invested in late- stage companies since 2001, while combined seed and first round investment remained steady year-on-year at $1.74 billion. These sizable later rounds helped to push the overall median for a venture capital deal in the third quarter to $7.92 million, a new record.
......California dominated the venture capital activity in the third quarter, representing 44% of both the nation's deal flow and its capital invested. ...........................
-AP Newswire
Full Story Link Here
Friday, October 19, 2007
More Jobs for Bay Area
Bay area is definitely on a roll with new job announcements....
One of the world's largest manufacturers of solar power systems has chosen San Francisco for its North American headquarters, a move that could bring hundreds of jobs and solidify the city's place at the forefront of clean energy.
Suntech Power Holdings Co. has subleased half of the eighth floor at 188 Embarcadero, said Roger Efird, president of Suntech America, its U.S. subsidiary. Up to 15 senior employees are expected to be working there within 30 days and more than 50 by the end of 2008. The company is "in merger and acquisition mode," Efird said, and depending on its success with that in the months to come, could easily employ "four, five, six times that many."
Based in Wuxi, China, Suntech rocketed to the top of the solar industry in a short time. Founded in 2001 by Zhengrong Shi, it employs 4,000 worldwide and maintains four factories in China. It listed on the New York Stock Exchange in 2005 and now has a market cap of $6.45 billion. Shi, Suntech's 44-year-old CEO and chairman, made Forbes' list of the world's billionaires this year with an estimated net worth of $2.2 billion.
Suntech America has been operating out of Olney, Md., and was heavily recruited by cities and states around the country, including Oakland. An announcement of its move to San Francisco is expected within days.......
-Excerpt from San Francisco Business Times - by Elizabeth Browne
One of the world's largest manufacturers of solar power systems has chosen San Francisco for its North American headquarters, a move that could bring hundreds of jobs and solidify the city's place at the forefront of clean energy.
Suntech Power Holdings Co. has subleased half of the eighth floor at 188 Embarcadero, said Roger Efird, president of Suntech America, its U.S. subsidiary. Up to 15 senior employees are expected to be working there within 30 days and more than 50 by the end of 2008. The company is "in merger and acquisition mode," Efird said, and depending on its success with that in the months to come, could easily employ "four, five, six times that many."
Based in Wuxi, China, Suntech rocketed to the top of the solar industry in a short time. Founded in 2001 by Zhengrong Shi, it employs 4,000 worldwide and maintains four factories in China. It listed on the New York Stock Exchange in 2005 and now has a market cap of $6.45 billion. Shi, Suntech's 44-year-old CEO and chairman, made Forbes' list of the world's billionaires this year with an estimated net worth of $2.2 billion.
Suntech America has been operating out of Olney, Md., and was heavily recruited by cities and states around the country, including Oakland. An announcement of its move to San Francisco is expected within days.......
-Excerpt from San Francisco Business Times - by Elizabeth Browne
Tuesday, October 16, 2007
MySpace Adding Jobs in Bay Area
Story from San Francisco Chronicle........
MySpace, the popular social-networking destination, is opening an office this week in San Francisco and plans to hire as many as 200 employees as it moves to redesign its site, introduce features and fend off rivals such as Facebook.
The San Francisco office, in the SoMa neighborhood near AT&T Park, will focus on enhancing MySpace's infrastructure, creating products and forging strategic partnerships - some of which are expected to be announced this week.
The move is the latest sign of growth for the Los Angeles company, which was acquired two years ago by Rupert Murdoch's News Corp.
Most of the new hires will be engineers.
"We literally planned out all the products we're going to build in the next year or two. We don't have enough engineers to do what we want to do," MySpace Chief Executive Officer Chris DeWolfe said. "Clearly, San Francisco and Silicon Valley attract the top engineering talent in the world. ... It's going to allow us to develop incredibly rapidly."
By Ellen Lee, San Francisco Chronicle
For Full Story Link Here
MySpace, the popular social-networking destination, is opening an office this week in San Francisco and plans to hire as many as 200 employees as it moves to redesign its site, introduce features and fend off rivals such as Facebook.
The San Francisco office, in the SoMa neighborhood near AT&T Park, will focus on enhancing MySpace's infrastructure, creating products and forging strategic partnerships - some of which are expected to be announced this week.
The move is the latest sign of growth for the Los Angeles company, which was acquired two years ago by Rupert Murdoch's News Corp.
Most of the new hires will be engineers.
"We literally planned out all the products we're going to build in the next year or two. We don't have enough engineers to do what we want to do," MySpace Chief Executive Officer Chris DeWolfe said. "Clearly, San Francisco and Silicon Valley attract the top engineering talent in the world. ... It's going to allow us to develop incredibly rapidly."
By Ellen Lee, San Francisco Chronicle
For Full Story Link Here
Sunday, October 14, 2007
Bright Spots in Real Estate
It's not all bad out there in the residential real estate world. Areas with less for sale inventory and lower supplies of land have faired quite well this last year despite national woes. Areas such as Portland, Seattle, and some trophy areas of California. I was especially intrigued by this relatively recent article in Wall Street Journal regarding America's Riviera, Santa Barbara, and the strength of its housing market..............
The New Gold Coast
One Stretch of California Defies Housing Slump;
Median Sale, $1 Million
CARPINTERIA, Calif. -- Other than an 18-foot-tall rooftop Santa Claus visible from the highway, this middle-class beach town used to be but a blur for wealthy vacationers speeding toward tony Montecito and Santa Barbara, about 10 miles up the road. Today, the statue is gone, and a clutch of the megarich have made Carpinteria an unlikely stop for buyers who can afford any ocean view in the world.
Public records show that New York billionaire hedge-fund manager Bruce Kovner spent $83.3 million this year to amass 15 bluff-top acres, including a luxury villa, near the end of a highway exit ramp. He also has agreed to buy part of Kevin Costner's field of dreams next door: Last year, the actor acquired 17 grassy acres dominated by a polo field for $28.5 million. Just down the road, a beachfront house on a mere quarter-acre is listed for sale at $24 million.
Carpinteria's arrival on the luxury-estate scene illustrates how California's gold coast is defying the downdraft in the national housing market. Eye-popping sales are spreading along a 40-mile stretch of southern Santa Barbara County, through sprawling ranch lands and past hillside homes, to the enclave of Carpinteria. In July, when existing-home sales slumped by 9.3% nationally and plummeted 23% in California compared with a year ago, sales along the county's southern coast soared nearly 28%, according to the California Association of Realtors. It also was the only region of California where the median sales price surpassed $1 million.
Estates in the exclusive Hope Ranch and Montecito communities set the standard in an area long prized by tycoons and Hollywood players for its mild climate, natural beauty and low-key sophistication. Indeed, at Oprah Winfrey's Montecito fund-raiser tomorrow for Democratic presidential candidate Sen. Barack Obama, more than her political firepower will be on display. Ms. Winfrey's 40-acre hillside estate, bought six years ago for around $50 million, has swelled in value to $84.7 million, according to public county-assessor records.
Santa Barbara's high-end housing market is set for its best year ever, according to Wendy Gragg, chief executive of the Distinctive Real Estate agency. Just counting properties with a value of at least $10 million, the area notched more than $195 million in sales so far this year, putting it on track to beat last year's local record of $219 million............
By JONATHAN KARP - WSJ
For rest of article click here
The New Gold Coast
One Stretch of California Defies Housing Slump;
Median Sale, $1 Million
CARPINTERIA, Calif. -- Other than an 18-foot-tall rooftop Santa Claus visible from the highway, this middle-class beach town used to be but a blur for wealthy vacationers speeding toward tony Montecito and Santa Barbara, about 10 miles up the road. Today, the statue is gone, and a clutch of the megarich have made Carpinteria an unlikely stop for buyers who can afford any ocean view in the world.
Public records show that New York billionaire hedge-fund manager Bruce Kovner spent $83.3 million this year to amass 15 bluff-top acres, including a luxury villa, near the end of a highway exit ramp. He also has agreed to buy part of Kevin Costner's field of dreams next door: Last year, the actor acquired 17 grassy acres dominated by a polo field for $28.5 million. Just down the road, a beachfront house on a mere quarter-acre is listed for sale at $24 million.
Carpinteria's arrival on the luxury-estate scene illustrates how California's gold coast is defying the downdraft in the national housing market. Eye-popping sales are spreading along a 40-mile stretch of southern Santa Barbara County, through sprawling ranch lands and past hillside homes, to the enclave of Carpinteria. In July, when existing-home sales slumped by 9.3% nationally and plummeted 23% in California compared with a year ago, sales along the county's southern coast soared nearly 28%, according to the California Association of Realtors. It also was the only region of California where the median sales price surpassed $1 million.
Estates in the exclusive Hope Ranch and Montecito communities set the standard in an area long prized by tycoons and Hollywood players for its mild climate, natural beauty and low-key sophistication. Indeed, at Oprah Winfrey's Montecito fund-raiser tomorrow for Democratic presidential candidate Sen. Barack Obama, more than her political firepower will be on display. Ms. Winfrey's 40-acre hillside estate, bought six years ago for around $50 million, has swelled in value to $84.7 million, according to public county-assessor records.
Santa Barbara's high-end housing market is set for its best year ever, according to Wendy Gragg, chief executive of the Distinctive Real Estate agency. Just counting properties with a value of at least $10 million, the area notched more than $195 million in sales so far this year, putting it on track to beat last year's local record of $219 million............
By JONATHAN KARP - WSJ
For rest of article click here
Monday, October 01, 2007
Keep Cutting
Below are some excerpts from and excellent article by James C. Coooper from the October 1 issue of Businessweek. He makes a strong case (and I concur) that the Fed definitely has further to go on rate cuts......
Rate Cuts: The Fed May Just Be Warming Up
The half-point reduction isn't enough to erase the risk of recession Score one for the Fed.
Facing both deteriorating financial conditions and new risks to economic growth, the Federal Reserve stepped up to the plate on Sept. 18 and hit more than just a solid single. This one went for extra bases. The Fed's half-point cut in its target interest rate, to 4.75%, was well beyond the quarter-point reduction most Wall Streeters were expecting. And the policymakers left the door cracked for further trimming "as needed." The question now: Will more be necessary?
Probably. The big cut lessens, but does not eliminate, the chance the Fed will cut again at its Oct. 30-31 meeting. The Fed sounded as uncertain about how the recent credit turmoil will play out as anyone, so much so that it avoided offering its usual assessment of whether economic growth or inflation was its primary concern.Nevertheless, as long as uncertainty and fear continue to prevent the proper functioning of the credit markets, economies in the U.S. and abroad will be at risk. The Fed's action will go a long way toward restoring confidence in businesses' access to the funding they need to operate, but even a half-point decrease won't quickly thaw out frozen markets or reverse the downdraft already hitting economic activity........
Full Story Article Link Here
Tuesday, September 25, 2007
Green is Good: In Silicon Valley
Silicon Valley companies going green in a big way
Silicon Valley companies are focusing more than ever on climate change, energy and the environment, turning the area into a hub for "clean tech" research.
That's the conclusion of a report released today by the Silicon Valley Leadership Group, a public policy organization whose members include many of the region's biggest companies.
More than 100 Bay Area companies now concentrate on solar power research, development or installation, according to the report. Venture capitalists are pouring money into clean technology companies, with most of that money - about $1.13 billion in 2005 - going to California companies.......
David R. Baker, Chronicle Staff Writer
Monday, September 24, 2007
For rest of story go to Link Here
Silicon Valley companies are focusing more than ever on climate change, energy and the environment, turning the area into a hub for "clean tech" research.
That's the conclusion of a report released today by the Silicon Valley Leadership Group, a public policy organization whose members include many of the region's biggest companies.
More than 100 Bay Area companies now concentrate on solar power research, development or installation, according to the report. Venture capitalists are pouring money into clean technology companies, with most of that money - about $1.13 billion in 2005 - going to California companies.......
David R. Baker, Chronicle Staff Writer
Monday, September 24, 2007
For rest of story go to Link Here
Tuesday, September 18, 2007
Finally!
Well the Fed finally seems to be listening. The market, myself, anyone who lives in the real world have begged for this cut for many months. The Fed acted boldly after playing it close to the vest, waiting it out, then cutting 50 basis points from the Funds rate today to the cheers of many. I'm terribly relieved that they acted, and I hope they continue to move in the neighborhood of 50-100 more by the end of the year. There is no inflation threat right now, only deflation of many American assets as the demand for money increased and liquidity stalled out. I think Larry Kudlow did an excellent job of calling for the cut, some excerpts from his latest blog postbelow describe the immediate market affects:
Bernanke Gets It Right
Once in a while you get it right. One time in a row.
I talked about this in my last column,
Goldilocks 2.0. The Bernanke Fed made a good strong move this afternoon. The stock market applauded loudly with a 250-point rise in the Dow. Essentially, the Fed followed Treasury market rates lower. The 4 percent Treasury bill rate had been urging the Fed to make this move.
By itself, this action will not heal the credit markets overnight. But it will help. Lowering the cost of money will -- over time -- raise asset values across-the-board. New cash injections at the new target rate of 4.75 percent will raise the low 2 percent growth of the monetary base in order to accommodate the banking system’s unusually high cash demands.
Adjustable rate mortgage holders will get almost immediate relief.
This is a confidence-inspiring move by the Fed. Lenders will be more apt to lend and investors will be more apt to take risks..........
Saturday, September 15, 2007
Roll the dice: 25 or 50?
As the Fed prepares to make one if it's most important policy decisions under Bernanke, I'm elated that we are at least seemingly locked into a rate cut which I have been clamoring for months. Unfortuantely, I don't think the Fed will take out the insurance policy necessary by cutting 50 basis points this week. They will again, continue to fall behind the curve of the economic slowdown and most likely take it 25 basis points at a time. This will be a defacto rate increase as the effective Fed Funds rate has been hovering below 5.00% and the market and the economy will be disappointed. We can only hope for more cuts sooner rather than later.......Economists predict/debate on WSJ economics blog.........
Economists Debate: A Quarter Point or a Half?
This Tuesday, the Fed is expected to lower the target for the federal-funds rate — therate at which banks lend to each other — for the first time in over four years. The key question is how much will the Fed cut? Economists preview the rate decision, and what they expect the Fed statement to say, below.
We look for a 25-basis-point rate cut from the FOMC this Tuesday …, although we believe a larger 50-basis-point cut still carries significant probability. We expect further cuts in the discount rate [currently at 5.75%], possibly of greater magnitude than the drop in the funds rate [currently at 5.25%]. We expect the FOMC statement to emphasize that the downside risks to the growth outlook are the predominant policy concern. – Credit Suisse
While we certainly would not be surprised if the FOMC cut the fed-funds target rate by 50 basis points [by 1/2 percentage point, to 4.75%] next Tuesday, in our view, a 25 basis point cut by a slim margin seems the more likely outcome. Even though the FOMC appears to be trying to move toward greater transparency, we think that this Tuesday’s FOMC statement may be a situation in which the less said, the better. …. The outlook for the economy, the credit markets, and the financial markets is highly uncertain right now. In times of great uncertainty, we think the FOMC generally favors an incremental approach to policy changes. – Friedman, Billings, Ramsey Economic Research
For blog link and further debate click link here
Thursday, September 06, 2007
Productivity Strong and Inflation Low
Simply stated - more head room for the Fed to do what it needs to do - cut the Fed Funds Rate................
Productivity Grows at Faster Pace
US Worker Productivity Rebounds Strongly, Wage Pressures Ease Sharply in the Spring
WASHINGTON (AP) -- Worker productivity rebounded, growing at the fastest pace in nearly two years, while wage pressures eased sharply in the spring -- developments that should reduce inflation worries.
The Labor Department reported Thursday that productivity, the amount of output per hour of work, jumped to an annual growth rate of 2.6 percent in the April-June quarter, even better than the 1.8 percent increase that was originally reported.
Wage pressures, as measured by unit labor costs, slowed to an annual growth rate of 1.4 percent, slower than the initial estimate that labor costs were rising at a 2.1 percent rate..................
................The increase in productivity and the reduction in labor costs were better than had been expected, raising hopes that the Federal Reserve will have the leeway to cut interest rates at its next meeting on Sept. 18...........
-By Martin Crutsinger, AP Economics Writer
For rest of story link here
Productivity Grows at Faster Pace
US Worker Productivity Rebounds Strongly, Wage Pressures Ease Sharply in the Spring
WASHINGTON (AP) -- Worker productivity rebounded, growing at the fastest pace in nearly two years, while wage pressures eased sharply in the spring -- developments that should reduce inflation worries.
The Labor Department reported Thursday that productivity, the amount of output per hour of work, jumped to an annual growth rate of 2.6 percent in the April-June quarter, even better than the 1.8 percent increase that was originally reported.
Wage pressures, as measured by unit labor costs, slowed to an annual growth rate of 1.4 percent, slower than the initial estimate that labor costs were rising at a 2.1 percent rate..................
................The increase in productivity and the reduction in labor costs were better than had been expected, raising hopes that the Federal Reserve will have the leeway to cut interest rates at its next meeting on Sept. 18...........
-By Martin Crutsinger, AP Economics Writer
For rest of story link here
Monday, August 27, 2007
Rate Cuts = Stronger Dollar
Fed Ease Means Dollar StrengthRate
Increases have rarely constituted “tightening” when it comes to restoring the greenback’s value.
By John Tamny & Paul Hoffmeister
The Federal Reserve’s change in bias last week toward cutting the federal funds rate, along with its half-point cut in the discount rate, offers an opportunity to test the widely held belief that rate cuts weaken the dollar while exacerbating existing inflationary pressures. In truth, the opposite is typically the case, since dollar-demand shifts when the Fed acts.
Last week, the market response to the Fed’s new course was profound: Gold began a new short-term downtrend. The dollar adjusted for gold started a short-term uptrend compared with the euro adjusted for gold. The 30-year Treasury yield began a short-term downtrend. And the Russell 2000 Index — comprising small-cap companies and arguably the most sensitive equity index to monetary policy error — ended its recent short-term downtrend.
Overall, lower gold prices, a stronger dollar against the euro, lower long-term bond yields, and rising equity valuations are indisputable hallmarks of a disinflationary environment — not a resurgence of inflation........
Full Story Link Here
Increases have rarely constituted “tightening” when it comes to restoring the greenback’s value.
By John Tamny & Paul Hoffmeister
The Federal Reserve’s change in bias last week toward cutting the federal funds rate, along with its half-point cut in the discount rate, offers an opportunity to test the widely held belief that rate cuts weaken the dollar while exacerbating existing inflationary pressures. In truth, the opposite is typically the case, since dollar-demand shifts when the Fed acts.
Last week, the market response to the Fed’s new course was profound: Gold began a new short-term downtrend. The dollar adjusted for gold started a short-term uptrend compared with the euro adjusted for gold. The 30-year Treasury yield began a short-term downtrend. And the Russell 2000 Index — comprising small-cap companies and arguably the most sensitive equity index to monetary policy error — ended its recent short-term downtrend.
Overall, lower gold prices, a stronger dollar against the euro, lower long-term bond yields, and rising equity valuations are indisputable hallmarks of a disinflationary environment — not a resurgence of inflation........
Full Story Link Here
Wednesday, August 22, 2007
Fed Needs to Finish the Job - Part 2
Joseph Mason, an economist at Drexel Univerisity, discussed today why the Fed's Discount Rate cut is only a short term bandaid at best...............
Mr. Mason’s comments:
Let’s be direct. While markets may have been temporarily assuaged by Friday’s Discount Rate cut, the problem at the heart of current credit difficulties is over-leverage. Structured finance conduits (like subprime) are failing because they sold too much high-rated credit and not enough risky credit. That is, they over-leveraged. CDOs bought those over-leveraged structures and then leveraged the structures some more. Hedge funds bought the CDOs and then borrowed to buy more, leveraging themselves 10 or more times over in the process. Over-leverage is a condition of over-borrowing. While discount window lending to insolvent institutions as a broad based bailout policy was attempted in the Thrift Crisis and the Great Depression in the US, and many times elsewhere, it has never once meaningfully addressed industry-wide problems of over-leverage or help restore banks to solvency.
The point is, over-borrowing has not once been reconciled through more borrowing, whether through the discount window or elsewhere. Here are two relevant articles. One is the Federal Reserve Bank of St. Louis’ Homer Jones Memorial Lecture given by Anna Schwartz (Milton Friedman’s co-author on the Monetary History of the United States) in 1992, and one is authored by myself, published in 2001. Both show the frivolity of discount window lending in cases of industry-wide difficulties. Discount window policy will help the industry weather a few weeks of transitory market difficulties, but discount window policy is unlikely to help in the long term. Given the magnitude of interest rate resets increasing well into 2008, more meaningful policy geared toward providing transparency toward RMBS, CDO, Hedge Fund, and Mutual Fund holdings needs to be developed in the few weeks we have bought with the discount window policy. Financial panics tend to happen in the fall, and that time is soon upon us.
- From WSJ Real Time Economics Blog
Blog Link Here
Mr. Mason’s comments:
Let’s be direct. While markets may have been temporarily assuaged by Friday’s Discount Rate cut, the problem at the heart of current credit difficulties is over-leverage. Structured finance conduits (like subprime) are failing because they sold too much high-rated credit and not enough risky credit. That is, they over-leveraged. CDOs bought those over-leveraged structures and then leveraged the structures some more. Hedge funds bought the CDOs and then borrowed to buy more, leveraging themselves 10 or more times over in the process. Over-leverage is a condition of over-borrowing. While discount window lending to insolvent institutions as a broad based bailout policy was attempted in the Thrift Crisis and the Great Depression in the US, and many times elsewhere, it has never once meaningfully addressed industry-wide problems of over-leverage or help restore banks to solvency.
The point is, over-borrowing has not once been reconciled through more borrowing, whether through the discount window or elsewhere. Here are two relevant articles. One is the Federal Reserve Bank of St. Louis’ Homer Jones Memorial Lecture given by Anna Schwartz (Milton Friedman’s co-author on the Monetary History of the United States) in 1992, and one is authored by myself, published in 2001. Both show the frivolity of discount window lending in cases of industry-wide difficulties. Discount window policy will help the industry weather a few weeks of transitory market difficulties, but discount window policy is unlikely to help in the long term. Given the magnitude of interest rate resets increasing well into 2008, more meaningful policy geared toward providing transparency toward RMBS, CDO, Hedge Fund, and Mutual Fund holdings needs to be developed in the few weeks we have bought with the discount window policy. Financial panics tend to happen in the fall, and that time is soon upon us.
- From WSJ Real Time Economics Blog
Blog Link Here
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