Markets Limp into Month End

February 27, 2012

G-20 officials are calling for a larger rescue fund in spite of German protestations. German Finance Minister Wolfgan Schaeuble came out against an increase, saying “economic stimulus is ineffective in the face of major structural shortcomings. The strategy of piling up more debt will stunt rather than stimulate growth in the long run.”

Warren Buffet has been on the interview circuit the last few days after posting his annual letter. In the letter the Oracle of Omaha assures investors a succession plan is in place in case he dies or retires (Mr. Buffet is 81). He also disclosed that Berkshire wrote down a $2 billion investment in the bonds of Energy Future Holdings (formerly TXU)as collapsing natural gas prices have pushed the company to extend debt maturities and seek to swap existing debt with new securities.

The Limited (LTD) reported a 210 bps increase in their gross margin last quarter even though merchandise margins were pressured by promotions and cotton costs. The company is expecting cotton prices to fall in the 2^nd half of the year, benefiting clothing retailers.

APAC markets fell last night as concerns over rising oil prices pressures markets. The Shanghai Composite was the only index up last night, rising 0.3% for a seventh consecutive increase.

Copper futures have been sliding as oil has increased, and fell another 0.5% last night in London.

Last week the National Association of Realtors (NAR) reported that US home resales rose to their highest level in 18 months, and the inventory of unsold properties fell to its lowest level in seven years. The NAR numbers tend to be overly bullish, but the trend seems to be accurate. It will be interesting to watch the inventory number over the next few months as the foreclosure moratorium from 2011 fades,.

Microsoft (MSFT) is in the process of consolidating all of its somewhat separate online accounts--Windows Live ID, Xbox LIVE, Zune and Zune Pass, and many more--into a single aggregate account it will call Microsoft Your Account.

From the Washington Post: “On Dec. 31, the George W. Bush-era tax cuts are scheduled to expire. The potential shock to the nation’s pocketbook is so enormous, congressional aides have dubbed it ‘Taxmageddon’. Obama and congressional Republicans say they hope to avert the coming blow, which stands to suck roughly $500 billion out of the economy in 2013 (nearly $5 trillion over the next decade). But both sides are bracing for another epic showdown in the weeks after the November election, as Democrats prepare to use Taxmageddon to break the partisan impasse over taxes that has blocked action on an array of issues, from modernizing the nation’s infrastructure to taming national debt.”

If I’m not here next Monday, it’s because I’ll be doing trying this next weekend: http://www.youtube.com/watch?v=LEFCQRwj28w Checklist: helmet, wing suit, video camera, insurance policy. Check, check, check, check.

Eric Bolling (Fox Business Channel's Follow the Money) test drove the
Chevy Volt at the invitation of General Motors.

For four days in a row, the fully charged battery lasted only 25 miles
before the Volt switched to the reserve gasoline engine.
Eric calculated the car got 30 mpg including the 25 miles it ran on the
battery. So, the range including the 9 gallon gas tank and the 16 kwh
batery is approximately 270 miles. It will take you 4 1/2 hours to
drive 270 miles at 60 mph. Then add 10 hours to charge the battery and
you have a total trip time of 14.5 hours. In a typical road trip your
average speed (including charging time) would then be 20 mph.

According to General Motors, the Volt battery holds 16 kwh of
electricity. It takes a full 10 hours to charge a drained battery.

The cost for the electricity to charge the Volt is never mentioned so I
looked up what I pay for electricity.

I pay approximately (it varies with amount used and the seasons) $1.16
per kwh.

16 kwh x $1.16 per kwh = $18.56 to charge the battery.

$18.56 per charge divided by 25 miles = $0.74 per mile to operate the
Volt using the battery.

Compare this to a similar size car with a gasoline engine only that
gets 30 mpg.

$4.50 per gallon divided by 30 mpg = $0.15 per mile.

The gasoline powered car costs about $15,000 while the Volt costs $46,000.

So Obama wants us to buy Volts? The net is that the Volt costs 3 times as much as a comparable car and costs 5 times as much to run and takes 3 times as long to drive on a trip. Sounds like his presidency, doesn't it?

In a throwback, The Artist won the Best Picture award last night, and of course Meryl Streep won another best actress award. Jean Dujardin won the best actor role. The Artist, with a budget of $15 million, won five awards. The producers were able to save money in the production by using black and white film and eliminating most of the dialogue. Brilliant!

Have a great day

Ned