Thursday, August 4, 2011

Oil wipes out all of 2011's gains on signs recovery is stalling

Oil wipes out all of 2011's gains on signs recovery is stalling.

Just another cycle. Aivars Lode

Economic slowdown creates downward pressure on demand

August 4, 2011 3:25 pm ET

Oil fell to the lowest level in more than five months in New York, erasing 2011 gains amid growing evidence the U.S. economic recovery is stalling and sapping demand in the world's biggest consumer.

Futures dropped 5.8 percent as a U.S. government report showed limited improvement in the labor market. The Dollar Index gained as much as 1.5 percent, curbing commodities' appeal as an alternative investment, and the MSCI All-Country World Index of stocks slid 10 percent from the year's May high.

“What you're looking at here is concerns about what demand is going to be doing because of the economy,” said Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington. “The result of all this could be slower growth and the result of slower growth is less oil demand.”

Crude for September delivery declined $5.30 to $86.63 a barrel on the New York Mercantile Exchange, the lowest settlement since Feb. 18. It was the biggest one-day drop since May 5. The contract has fallen 5.2 percent in 2011.

Brent for September settlement on the London-based ICE Futures Europe exchange fell $5.58, or 4.9 percent, to $107.65 a barrel at 2:31 p.m. in New York. For the year to date, Brent is up 14 percent. The European benchmark contract was at a $21.02 premium to U.S. futures, after reaching a record $22.67 on Aug. 2.

2011 Decline

Futures have tumbled 25 percent in New York since reaching a two-year intraday high of $114.83 a barrel on May 2 as European officials struggled to contain a debt crisis, U.S. lawmakers attempted to stave off a default and global economic growth showed signs of slowing.

U.S. gasoline demand, averaged over four weeks, slipped 23,000 barrels, or 0.3 percent, to 9.07 million barrels a day in the period ended July 29, its fourth consecutive decline and the lowest level since a report through May 27, the Energy Department reported yesterday.

Applications for jobless benefits decreased 1,000 in the week ended July 30 to 400,000, the fewest in almost four months, the Labor Department said in Washington. The four-week average also fell to the lowest level since April. Consumer confidence dropped to the lowest level in more than two months last week in the Bloomberg Consumer Comfort Index.

Slowing Growth

The U.S. economy grew at a 1.3 percent annual rate in the second quarter, the Commerce Department reported last week, less than the 1.8 percent median estimate of economists surveyed by Bloomberg News. The government also revised down its first- quarter estimate to 0.4 percent, less than the 1.9 percent previously indicated.

“With this continuous stream of poor economic data and the dollar really making impressive gains today, it's no wonder why the front-month contract is really under pressure,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

The Dollar Index, which tracks the U.S. currency against those of six trading partners, surged 1.5 percent to 75.140. The Standard & Poor's GSCI Total Return Index of 24 commodities tumbled 3.7 percent to 646.89. Twenty-one of the commodities dropped, led by silver, gasoline and crude oil.

The MSCI All-Country World Index of stocks in developed and emerging markets dropped 3.6 percent to 313.14, extending the decline from the near-three-year high on May 2 to 12 percent. The Standard & Poor's 500 Index fell 3.3 percent to 1,218.82, and the Dow Jones Industrial Average tumbled 345.39 points, or 2.9 percent, to 11,551.05.

Technical Support

Oil breached technical support at $89.84, the 50 percent retracement level on a Fibonacci study from the record $147.27 a barrel price set in intraday trading July 11, 2011, Armstrong said.

President Barack Obama signed a bill Aug. 1 that averted a debt default in the world's largest economy with one day to spare. In Europe, officials are trying to put a firewall around Italy and Spain, where bond yields have surged to euro-era records on concern that they will have to follow Greece, Ireland and Portugal in seeking bailouts.

“Even though the U.S. avoided a debt default, the specter of a potential systematic failure of the sovereign debt market has engendered a big drop in most markets,” said Jason Schenker, president of Prestige Economics LLC in Austin, Texas.

Prices also fell after crude stockpiles advanced for a second week in the seven days ended July 29, according to Energy Department data yesterday. U.S. inventories rose 950,000 barrels to 354.9 million barrels.

Oil volume in electronic trading on the Nymex was 857,518 contracts as of 2:35 p.m. in New York. Volume totaled 658,645 contracts yesterday. Open interest was 1.54 million contracts.

--Bloomberg News--

Monday, August 1, 2011

Ville Marie: Collapse illustrates depth of infrastructure crisis

With brand new cheap infrastructure in places like Phoenix, Florida and Nevada how long do you think it will take people to start moving there as taxes increase to pay for the old stuff being repaired?

Aivars Lode

Ville Marie: Collapse illustrates depth of infrastructure crisis

The Gazette August 1, 2011 7:56 AM

MONTREAL - It's such a fortunate thing that nobody was hurt in Sunday's frightening collapse of a concrete ceiling grid at the eastern end of the Ville Marie Tunnel, a part of the tunnel which is only partially covered, and where the sunken roadway is exposed to perforated daylight.

But that's a small consolation in the larger context of what this incident says, or confirms once again, about the sorry state of transport infrastructure in the greater Montreal region.

This spring and summer has seen a growing number of closures for emergency repairs, and provoked a crisis of public confidence in the reliability of our infrastructure and in the ability of our elected officials and public employees to deal with the problem.

It was instructive to observe the range of emotional reaction to Sunday's incident - from anger to exasperation to dismay to contempt.

To be sure, there is also fear. But fear is a given and the public is long past fear, in terms of its primary emotional reaction. People are mainly angry that it has come to this.

Whether it has been the Champlain Bridge or the Turcot Interchange or the Mercier Bridge or any of the other key bridges or roads that have been at the heart of the infrastructure story dating to September 2006, when five people were killed and six injured by the collapse of the de la Concorde overpass in Laval, people are just beside themselves with anger and exasperation.

It's still too early to start assigning blame for Sunday's event. When the steel-and-concrete ceiling waffle collapsed around 9 a.m., a quiet time for Sunday traffic, nearby construction workers were repairing a section of tunnel wall; it's possible vibrations from their power tools could have played a role. It's also possible that ongoing work on a new pedestrian tunnel linking the Champ de mars métro station to the emerging new Cité de la santé development north of the Ville Marie Tunnel and east of St. Laurent Blvd. had affected the structural integrity of the tunnel. We'll see. A thorough inspection and analysis will be required.

But as far as the daily life of Montreal is concerned, the most pressing challenge right now for public authorities will be to create and articulate a plan to prevent overwhelming new traffic congestion on downtown streets because of the tunnel incident. Even if the tunnel fully reopens sooner rather than later, there are going to be motorists who won't want to use it anymore, at least not for the foreseeable future.

But creating a plan to offset anticipated new congestion will be one thing; communicating it to the public will be another. The committee should not stand by and let Transport Quebec on its own simply put up a few hundred orange cones and detour signs and issue news releases, like it routinely does; a more aggressive communications plan will be needed.

Very likely, a combination of causes will be found to explain what happened Sunday. When the investigation is completed, it will be important to look for some commonalities with respect to causes of problems that have been identified with transport infrastructure elsewhere in the greater Montreal region.

The Johnson inquiry into the de la Concorde collapse found slack managerial and maintenance practices were to blame, among other reasons. Since then, we have seen growing evidence to suggest that the heavy use of salt over the years to thaw roads and bridges in Montreal in winter has been terribly damaging to steel-and-concrete structures. It's clear we need a more focused engineering effort in Quebec to figure out how to build better in the context of this freeze-and-thaw cycle. But in the end, people on the ground need to do a better job, too.

It's clear from all of the full closures and partial closures and temporary closures of roads and bridges in and around Montreal this year that Transport Quebec is becoming more aggressive in its interventions. If things are a mess out there on the roads this summer, it's because action is being taken, not because action is not being taken. People need to remember that. But Sunday's incident reminds us just how monumental the infrastructure challenge facing us truly is.
© Copyright (c) The Montreal Gazette

Read more:

Dividends CA management announced the long-term goal

As we have discussed in this BLOG the move to focus on Dividends vs Growth. CA starts to move that way.

Aivars Lode

JP Morgan North America Equity Research
CA Technologies: Notes from CA Analyst Day

Friday we attended CA’s analyst day in NYC. It has been 15 months since CA’s last analyst day, and we appreciate the additional disclosure that management provided with regards to their business segments, plans to return value to shareholders, and an updated long-term financial outlook. While there was nothing that changes our positive view of the shares, we believe the following to be of interest to investors.
• Share repurchases & dividends. Management announced the long-term goal (for fiscal 2013-15) of allocating 40-50% of free cash flow for dividends and share repurchases. This represents a significant increase versus 28% for both FY11 and FY10 and 9% during FY09.
• FY12 guidance reaffirmed. CFO Rich Beckert reiterated the company’s FY12 guidance.
• Long-term goals revealed. We discuss this herein.
• We continue to rate CA Overweight with a $30 price target based on scenario 3 of our DCF.