Posts Tagged ‘Japan’
5/6/2011 7:04 PM ET
(RTTNews) – Billionaire Warren Buffett’s Berkshire Hathaway Inc. (BRK.A; BRK.B) said Friday after the markets closed that its first quarter profit dropped 58% from last year, hurt by huge insurance losses stemming from earthquakes in Japan and New Zealand as well as floods in Australia and Cyclone Yasi.
The Omaha, Nebraska-based company reported net earnings for the first quarter of $1.51 billion or $917 per Class A share, compared to $3.63 billion or $2,272 per Class A share for the year-ago quarter.
Excluding investment and derivative gains and losses, operating earnings for the first quarter were $1.59 billion or $966 per Class A share, compared to $2.22 billion or $1,390 per Class A share in the prior year quarter.
Total revenue for the first quarter rose 5% to $33.72 billion from $32.04 billion in the same quarter last year.
Berkshire had warned last week that it expected to report sharply lower first quarter profit due huge losses from the March 11 earthquake in Japan, as also from catastrophes in New Zealand and Australia. Friday’s results matched the preliminary figures announced on April 30.
Insurance underwriting generated an operating loss of $821 million in the first quarter, compared to operating earnings of $226 million in the same quarter last year. Berkshire’s insurance group include GEICO and General Re among others. The latest quarter operating loss include an estimated pre-tax catastrophe losses of about $1.7 billion from Japan and New Zealand earthquakes and Australian floods and Cyclone Yasi.
Insurance investment income for the quarter fell 4% to $952 million from $988 million a year ago.
First quarter operating earnings from the company’s non-insurance businesses rose 133% to $1.56 billion from $1.05 million a year ago. Both the periods include results of Burlington Northern Santa Fe that was acquired in February last year.
The company also said it recorded other-than-temporary impairment losses in earnings of $506 million in the 2011 first quarter related to certain equity securities, including $337 million related to its investments in Wells Fargo & Co. (WFC).
Berkshire, which is now a constituent of the S&P 500 index, is a holding company owning subsidiaries that engage in a number of diverse business activities including property and casualty insurance and reinsurance, utilities and energy, finance, manufacturing, services, retailing and railroad.
The company has over 80 units with businesses as varied as insurance, restaurants, furniture, clothing, candy companies, natural gas, railroad and corporate jet leasing.
(RTTNews) – Berkshire also holds significant stakes in many top-notch companies such as Coca-Cola Co. (KO), Wells Fargo & Co. (WFC), American Express Co. (AEP) and Procter & Gamble Co. (PG) among others.
In March, Berkshire announced a definitive deal to buy lubricant maker Lubrizol Corp. (LZ) for $135 per share or for a total value of about $9.7 billion, including $0.7 billion in net debt.
However, the deal has taken its toll on the company. David Sokol, who was seen as a strong contender to succeed Warren Buffett, unexpectedly resigned from the company later that month over insider-trading allegations.
Berkshire said last month that its audit committee has determined that Sokol violated the company’s standards of business ethics and its insider trading policies by purchasing shares of Lubrizol while serving as a Berkshire representative in connection with a possible business combination.
Berkshire said Friday that it currently expects the deal to close in the third quarter of 2011.
Berkshire’s Class A shares closed Friday’s regular trading session at $120, 280, up $925. The company’s Class B shares closed the day’s session at $80.21, up 55 cents but lost 10 cents in after hours trading.
Read the entire article HERE.
Here’s the Setup for the Con of the Decade
The Con of the Decade, which I described last July, is being set up nicely.
I described The Con of the Decade last July (2010). The Con makes me a heretic in the cult religion of Hyperinflation. I consider myself an agnostic about the destruction of the U.S. dollar and hyperinflation (basically the same thing), but my idea that hyperinflation is fundamantally a political process makes me a heretic. I skimmed a few of the dozens of comments posted on Rick’s Picks and Zero Hedge after they posted one of my expositions on this dynamic, and didn’t see even one comment in favor of this perspective.
The Con is being set up right now, and the outlines are clearly visible. The Con works like this:
1. The Financial Elites/Oligarchy raked in billions in private profit from the orgy of leverage, credit expansion, fraud, embezzlement and misrepresentation of risk that resulted in the Housing Bubble.
2. The losses were transferred to the public (Federal government, i.e. The central State) or its proxy, the Federal Reserve (i.e. the central bank), via bailouts, backstops, guarantees, the Fed’s purchase of taxic assets, and an open window for the financiers to borrow billions at zero interest (ZIRP) for further speculations.
3. The Treasury now borrows $1.6 trillion every year, fully 11% of the nation’s GDP, as the Central State has replaced private demand and credit expansion with its own borrowing and spending.
4. Non-U.S. central banks have largely ceased to support this unprecedented scale of borrowing, so the Federal Reserve now buys most of the Treasury’s issuance of debt via QE2 (quantitative easing, the direct purchase of $600 billion in Treasury bonds).
5. Unlike Japan, the U.S. cannot self-fund its own government borrowing: while U.S. investors, banks and insurance companies do own a significant chunk of Treasuries, the U.S. savings rate (capital accumulation) is still abysmally low, around 4%, which is half the historical average savings rate.
This is the result of the Keynesian Cult’s One Big Idea, which is to pull demand forward and encourage borrowing and spending now by any means necessary, and thus sacrifice capital formation/saving.
So the basic outline of the Con is that private losses from the financialization of the U.S. economy were shifted to the public. Now to keep the Status Quo and Financial Plutocracy from imploding, the public is on the hook for $1.6 trillion in additional borrowing every year until Doomsday (around 2021 or so).
Having secured the backing of the Central Bank and Central State, the Plutocracy’s only problem now is that it needs a risk-free source of high-yield income. Yes, it has a trillion dollars or so sitting in bank reserves, collecting interest from the Federal Reserve; this is certainly risk-free, but the Fed’s Zero Interest Rate Policy (ZIRP) keeps the rate of return absurdly low.
Here’s where we see the Con taking shape. The ideal setup for risk-free returns is to own Treasurys that pay a high yield. The way to get higher interest rates is to first make the Treasury market supremely dependent on a central bank or single buyer: Done. That buyer is the Federal Reserve.
Next, have that buyer stop buying. Suddenly, interest rates start moving up. If you don’t believe this is possible, or part of a larger project, then please explain why PIMCO sold all its Treasuries. Duh–because interest rates are set to rise, and not by a little bit or for a brief span, but by a lot and for years.
That means holders of long-term Treasuries (and other debt) will be cremated as rates rise. (Holders of TIPS will do OK, unless the government fraudulently sets the rate of inflation well below reality. Hmm, isn’t that exactly what’s it’s already doing?)
Once long-term rates have leaped up, then start accumulating the high-yield bonds. Why would rates jump? Supply and demand: as the demand for low-yield Treasuries dries up, the supply keeps rising: every month, the Treasury has to auction tens of billions of dollars of bonds, or even hundreds of billions of dollars. There is no Plan B, the bonds must be sold, and if there are no buyers, then the yield has to rise.
Once rates have been engineered much higher, the Financial Oligarchy accumulates the high yielding bonds.
Here’s where “austerity” comes in. Once rates are so high that they’re choking the real economy, then voices arise demanding the Federal government stop borrowing and spending so much. Austerity (forced or otherwise) soon reduces the supply of bonds hitting the market and so rates decline, boosting the value of the high-yield debt.
To service the cost of all this Federal borrowing, taxes are raised on what’s left of the productive members of society.
To add insult to injury, it will become “patriotic” to “buy bonds.”
OK, let’s check the setup:
1. Treasury market now dependent on one buyer: check.
2. That buyer stops buying, pushing rates higher: no QE3. Check.
3. “Austerity” is now seen as inevitable–but not just yet: check.
What the true believers of hyperinflation and the destruction of the dollar cannot accept is that debt is an asset to the owner of that debt. In focusing solely on the advantages of inflation to borrowers, they ignore the critical fact that inflation quickly destroys the value of the asset that debt represents to the owner. And debt is a primary asset to pension funds, insurance companies, banks, and indeed the entire financial sector.
So in claiming high inflation is guaranteed, adherents are claiming that the entire financial sector will accept being wiped out, just so Mr. and Mrs. Taxpayer won’t have to pay interest on the ballooning government debt.
That’s exactly backward: the entire point is for Mr. and Mrs. Taxpayer to pay high yields on Treasury debt, owned by the Financial sector’s Oligarchs. The Con is to stripmine the public coffers, then impose higher rates and “austerity”, buy the debt with the cash plundered from the public, and then sit back and enjoy risk-free returns as taxes are raised on the remaining tax donkeys. Inexpensive Bread and Circuses (SNAP food stamps and the political theater of the two parties staging a partisan “fight to the death”) will keep the peasantry entertained and complicit.
As I concluded in the first foray into the Con:
In essence, the financial Elites would own the revenue stream of the Federal government and its taxpayers. Neat con, and the marks will never understand how “saving our financial system” led to their servitude to the very interests they bailed out.
The circle is now complete: in “saving our financial system,” the public borrowed trillions and transferred the money to private Power Elites, who then buy the public debt with the money swindled out of the taxpayer. Then the taxpayers transfer more wealth every year to the Power Elites/Plutocracy in the form of interest on the Treasury debt. The Power Elites will own the debt that was taken on to bail them out of bad private bets: this is the culmination of privatized gains, socialized risk.
In effect, it’s a Third World/colonial scam on a gigantic scale: plunder the public treasury, then buy the debt which was borrowed and transferred to your pockets. You are buying the country with money you borrowed from its taxpayers. No despot could do better.
This is the ultimate endgame of the financialization of the U.S. economy and the concentration of wealth and thus political power in the hands of those who skimmed the immense gains from that financialization.
Read the entire article HERE.
By Angela Moon and Ryan Vlastelica
NEW YORK | Sun Mar 20, 2011 6:16pm EDT
Cataclysmic events including a nuclear disaster in Japan and the prospect of rising oil prices after military air strikes on Libya will keep investors reacting to headlines.
Western forces pounded Libya’s air defenses and patrolled its skies Sunday, but their day-old intervention hit a diplomatic setback as the Arab League chief condemned the “bombardment of civilians.”
“It’s (developments in Libya) something that the market is paying a very close attention and not only will oil prices be in focus but the headline grabbing stories out of countries like Iran in the region will keep investors nervous as uncertainty grows,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
Many investors said the sudden increase in uncertainty had caused a corresponding rise in trading based on emotion rather than facts or fundamentals.
The volatility on Wednesday caused the S&P 500 to erase its gains for the year and then rebound more than 1 percent on Thursday.
Besides global developments this week, markets will get to respond to economic data on U.S. housing, gross domestic product and durable goods orders, but these may be relegated to second place behind traders’ reaction to the latest headlines.
Wall Street ended higher on Friday, but indexes finished lower last week. The Dow ended down 1.5 percent, its biggest weekly decline since August. The S&P fell 1.9 percent and the Nasdaq lost 2.6 percent.
“The stock market broke down (last) week, violating support levels and generally turning the technical indicators bearish,” Larry McMillan, president of McMillan Analysis Corp, said in a report.
WALL STREET’S FEAR GAUGE
The CBOE Volatility Index VIX .VIX, Wall Street’s so-called fear gauge, shot up nearly 30 percent on Wednesday when equities swooned after confusing statements from officials on the situation in Japan.
The gauge rose nearly 60 percent above its 50-day moving average, which has happened only a handful of times in the past 20 years.
Despite the 21 percent rise in the VIX for the week, traders bet the fear gauge would move higher. Call buying outpaced put buying on Friday, with about 232,000 calls and 111,000 puts, although both were below their average daily volume, according to options analytics firm Trade Alert.
“While the VIX peaked in the 30 area around mid-week, we won’t have confirmation that a top has been reached until we see a decline below these long-term trendlines and the 20 level,” said Todd Salamone, senior vice president of research at Schaeffer’s Investment Research in Cincinnati, Ohio.
The VIX settled at 24.44 on Friday. The gauge, which often moves inversely to the S&P 500, measures the cost of hedges or protection investors are willing to pay against a fall in the S&P 500. The heavy call volume suggests expectations for more anxiety in the future.
Read the entire article HERE.
Submitted by Tyler Durden on 08/31/2010
As part of the Fed’s latest QE iteration, it has already been made clear that despite initial disclosures that the Fed would stay in the 2-10 Year bound of Treasurys, Ben Bernanke is now also gobbling up the very long end of the curve. For all those who are, therefore, still confused why bonds continue to surge to record levels, don’t be: when there is a guaranteed bidder just below you in the face of the Fed, and who you can turn around and sell to at will, there is no pricing risk. The problem, from a bigger stand point, is what happens when the Fed is actively buying up 30 Year bonds with impunity and the much desired (by the Fed) inflation still does not appear? Well, the Fed then, in Michael Pento’s opinion, will begin to purchase stocks and real estate. And as all those who enjoy comparing the US to Japan can attest, outright purchases of securities by the Japanese government is a long-honored tradition in the ongoing fight with deflation in Japan. However, and as the recent BOJ (lack of) intervention demonstrated, Japan never could do anything with the required resolve, and bidding up one stock here and there would never achieve anything. Which is why in this interview with Eric King, Michael Pento makes the case that as opposed to the occasional market intervention via the President’s Working Group, Bernanke will soon make stock purchases an outright policy of the Federal Reserve as its last ditch attempt to engender inflation before the hundreds of billions of Commercial Real Estate and other bank debt start maturing in 2011/2012. Bernanke is running out of time and he knows it. And once the Fed becomes the bidder of last resort in stocks, all bets are off, as the Central Bank will become the defacto only market in virtually every risky category. And the only safe vehicle, once the market then begins to price in Fed driven asset-price hyperinflation, will be gold.
Pento also provides some perspectives on the Fed’s balance sheet, which he anticipates will expand in a “great fashion”, but a much bigger concern to the recent Euro Pacific Capital addition, is the possible surge in M2: “That base money can expand, M2 which is currently running around 8.5 trillion all the way up to nearly 25 to 30 trillion dollars of money supply and that’s enough obviously to send prices through the roof.” All Bernanke needs to do is light the “alternative asset purchasing” match and all those who wonder what left field hyperinflation could come out of, will get their answer.
Of course, it wouldn’t be a Pento interview without a requisite smack-down, in this case of Dennis Gartman, whose call to sell gold denominated in euros at the very bottom of the recent gold correction needs no further commentary: EUR-denom gold has jumped well over 10% since Gartman said to get out. Pento adds the following: “There is so much misinformation out there, Dennis Gartman was out there saying gold has lost its inflation hedging properties: this is just ludicrous and insane. I can tell you that gold will never lose its inflation lure, and that’s precisely why I’ve stepped up my purchases of gold., I see what the monetary base is doing, I can clearly see Bernanke’s next step to vastly increase the size of the balance sheet and the monetary base. So for me, it’s 100% an inflation hedge.”
Read the entire article HERE.