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Five Things You Need to Know for Friday


What you need to know (and what it means).


Five things you need to know to stay ahead of the pack on Wall Street.

1. Payrolls

March nonfarm payrolls came in at 211,000, higher than expected.

  • Minyanville Professor Scott Reamer notes that of the current month's 211,000 jobs added, 135,000, or 64%, were birth/death adds.
  • Of the 2.23 million jobs created over the last year, fully 40% or 875,000 of them, were created from the birth/death adjustment.
  • What exactly is the birth/death adjustment?
  • In simplest terms, the birth/death adjustment tries to take into account the number of jobs created by companies being "born," and jobs lost by companies going out of business.
  • Why does the Bureau of Labor Services do this?
  • Well, the government assumes that both new and dying companies are missed by its employment survey.
  • Ok, we can buy that. It sounds reasonable. So, how does the BLS arrive at the Birth/Death Model calculation.
  • Two components. The first component uses business deaths to impute employment for business births.
  • The second component is an ARIMA time series model designed to estimate the residual net birth/death employment not accounted for by the imputation.
  • Sadly, Professor Reamer notes, "there is no way to independently confirm that these figures are real; the BLS will not release the ARIMA model to outside scrutiny."

2. Copper

Copper hit another record high today, nearing $6,000 a metric ton.

  • Copper is a key building component and used widely in electronics manufacturing.
  • So far this week, copper has risen more than 8%, and is up 32% year-to-date.
  • London Metals Exchange inventory of copper fell by 625 tons to 113,300 it was announced Thursday. That is the equivalent to about two days of global consumption.
  • For comparison's sake, three years ago, LME copper stocks were 800,000 tons.
  • Stoppages and strikes are also creating supply fears. Mining at Mexico's second- largest copper mine has been halted for two weeks because of a strike.
  • Canada's Ivanhoe Mines Ltd. said on April 5 that its Monywa copper venture in Myanmar was temporarily closed in March, and that its output this year will drop by more than half.
  • CSFB analysts said this week that copper demand could exceed production this year by 100,000 tons.
  • A pound of copper costs $2.63, while a pound of copper pennies, approximately 160, costs $1.60.

3. Like a broken down horseplayer asking his bookie for an extra hundred dollars in credit, and one last chance to cash a ticket on a hopeless longshot in the 10th and final race at Aqueduct in late December, Ford taps the corporate bond market and agrees to pay the extra vig.

Ford Motor Company's (F) finance unit is paying the highest yield since 1992 for access to the corporate debt market.

  • Yields on $1.5 billion floating-rate notes that Ford Motor Credit sold last week were the highest since 1992, even with an option allowing investors to sell the bonds back to Ford in 2 1/2 years.
  • According to Bloomberg, the last time Ford paid investors that much the automaker locked in rates for four decades.
  • Ford's credit rating was reduced below investment grade in May.
  • Ford will initially pay a 9.45 percent yield on the notes due in 2012.
  • In 1992, the company sold 40- year debt at 9.95 percent.
  • Ford hasn't sold a six-year bond with a yield that big since at least 1971.
  • In 1992, the benchmark 30-year Treasury bond's yield ranged between 7.2 to 8.1%. Right now, the 30-year yields 4.96%.
  • Ford is having to pay the extra "vig" to compensate investors for the risk the company may default.
  • Meanwhile, president and chief operating officer, Jim Padilla has stepped down and his duties will be assumed by Chairman Bill Ford, great-grandson of founder Henry Ford.

4. Can anyone make Sensex of this?

The Indian stock market, the Sensex, reached a new intra-day high today, just shy of 12,000, led by fresh buying in tech stocks.

  • The stock market barometer for India is the 30-share Bombay Stock Exchange sensitive index or Sensex.
  • Market watchers in India say massive investment inflows into Asia's second-fastest growing economy behind China is helping the Sensex to record highs.
  • This coming week, a number of closely-watched Indian "Blue Chip" companies report earnings: Infosys Technologies, Tata Consultancy Services (TCS), Associated Cement Companies and Wipro.
  • Sensex breached the 11,000-mark for the first time in history on March 21.
  • The 11,000 level was reached in less than six weeks after the index moved past 10,000 on Feb 6.
  • The Sensex rose more than 40 percent in 2005 and is trading more than 18 percent higher year-to-date.
  • Foreign institutional funds pumped a record $10.7 billion into the stock market in 2005 and have year-to-date bought $4 billion in stock.

Looking Good, Billy Ray!

5. Venezuelan government loses Klonopin, Dilantin and Tranxene prescriptions, resulting in seizures.

Venezuela has seized oil fields operated by French and Italian companies opposed to President Hugo Chavez's plan to raise production royalties and impose back taxes on profits.

  • Venezuela seized two oil fields from France's Total SA and Italy's Eni SpA.
  • The seizures occurred after the companies failed to comply with a government demand that operations be turned over to state oil company Petroleos de Venezuela, or PDVSA.
  • Private oil companies had run 32 oil fields in Venezuela independently under contract with the government.
  • Some companies have sold their stakes instead of facing the changes, including Exxon Mobil, which sold its holdings in the 15,000-barrel-a-day Quiamare-La Ceiba field in December to its partner, Repsol.
  • Chevron agreed to pay $74.8 million in taxes and fines for late payment to retain its operations.
  • Venezuela is the world's fifth largest oil exporter and one of the United State's main suppliers.
  • Mixing the Venezuelan oil seizures with anti-seizure medications is like a mixed metaphor of sorts, we think, or maybe something like a trope?
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