Jim Rogers is Long of Farmland

Does he see something were not being told ?

Talk about total withdrawal from the economy. First, famed investor Jim Rogers left the US to go to China, basically as a big short of Western Civilization. And now he’s apparently hedging against modern life by going long farmland.

Speaking on CNBC he said:

“We’re still going to eat, probably; we’re still going to wear clothes, probably. Farmers cannot get loans for fertilizers right now. So the supplies of everything are going to continue to be under pressure.”

Lovely.

For what it’s worth Marc Faber, Dr. Boom Doom Gloom has also recommended buying farmland since, and we’re paraphrasing, ‘when the war comes, the bombs will predominantly fall on urban areas.”

Go figure

NEW YORK (Reuters) – One in five U.S. homeowners with mortgages owe more to their lenders than their homes are worth, and the rate will increase as housing prices drop in states that have so far avoided the worst of the crisis, a new study shows.

About 8.31 million properties had negative equity at the end of the year, up 9 percent from 7.63 million at the end of September, according to the study released Wednesday by First American CoreLogic. The percentage of “underwater” borrowers rose to 20 percent from 18 percent over that time.

The study covered 43 U.S. states and Washington, D.C.

While states such as California, Florida and Nevada were particularly stressed, the study showed worrying signs of deterioration in relatively healthy parts of the nation.

“The economic slowdown is broadening,” said Sherrill Shaffer, a banking professor at the University of Wyoming at Laramie and a former Federal Reserve official. “As more people lose jobs, it will be more difficult to sustain the levels of pricing and home ownership, and that is a big factor driving down housing prices in more parts of the country.”

Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio remained the most stressed states, with 62 percent of underwater borrowers and just 41 percent of mortgages.

Other areas, though, also face more stress. Connecticut, for example, saw a 25 percent increase in homes with negative equity, while Washington D.C. had a 44 percent increase.

“Even I continue to be surprised at the tentacles of this financial and economic debacle,” said Robert MacIntosh, chief economist at Eaton Vance Management in Boston. “More people are being laid off, resulting in reduced income and therefore less consumption. That leaves fewer people with money to buy homes, and the mentality is that people believe they should wait six months rather than buy now. Less demand means falling prices.”

Roughly 68 percent of U.S. adults own their own homes, and about two-thirds of these have mortgages. Many economists expect the nation’s unemployment rate to rise above 9 percent before the recession ends, up from January’s 7.6 percent.

CALIFORNIA, NEVADA UNDER STRESS

California had 1.9 million borrowers with negative equity, more than any other state, followed by Florida’s 1.28 million. About three in 10 borrowers in both states were underwater.

By other measures, Nevada was the most stressed, with 55 percent of owners having negative equity and borrowers on average owing 97 percent of what their homes are worth. About 28 percent owe more than 125 percent of their homes’ value.

Michigan had 40 percent of its homeowners underwater, while Arizona had 32 percent.

New York fared best, with just 4.7 percent of borrowers with negative equity and an average 48 percent loan-to-value ratio, though this could change as employment and bonuses slide in the financial services industry.

According to the S&P/Case-Shiller Home Price Indices, prices of U.S. single-family homes slumped 18.5 percent in December from a year earlier, the biggest drop in the 21-year history of the data. Continued…

Cautious consumers eat into retailers profits

NEW YORK (Reuters) – U.S. retailers Costco Wholesale Corp and Big Lots reported lower quarterly profit on Wednesday as cautious shoppers avoided splurging on discretionary items, like furniture or jewelry, and stuck to buying basics, like food.

But Costco’s drop in quarterly profit was larger than Wall Street expected after the No 1 U.S. warehouse club operator cut prices to win market share during the year-end holiday season.

“Our quarterly results were hurt by the continued weakness in non-foods sales and related margins,” said Costco Chief Financial Officer Richard Galanti in a statement. “Margins in foods and non-foods were also negatively affected by increased pre-holiday seasonal markdowns and other selective price reductions to drive sales and increase market share.”

Costco’s profit was $239.7 million, or 55 cents per share, for its fiscal second quarter ended February 15, down from $327.9 million, or 74 cents per share, a year earlier.

Analysts, on average, expected earnings of 60 cents per share, according to Reuters Estimates.

Big Lots’ net income was $78.77 million, or 96 cents per share, for the fiscal fourth-quarter ended January 31, down from $92.02 million, or $1.04 per share, a year earlier.

Income from continuing operations was $81.8 million, or $1.00 per share, compared with $85.6 million, or 97 cents per share, a year ago.

Analysts had been expecting it to earn 93 cents per share.

SALES DECLINE AS SHOPPERS SEEK BASICS

Costco’s quarterly sales fell 1 percent to $16.49 billion, excluding membership fees, which increased about 4 percent to $355.6 million. Sales at clubs open at least a year, a key retail gauge known as same-store sales, fell 3 percent.

February same-store sales also fell 3 percent, worse than the 2.7 percent decline analysts were expecting.

Costco has said it would be aggressive in cutting prices or delaying price increases to retain its shoppers during the recession, though Wall Street analysts have said that strategy would hurt profits.

Last month, Costco warned that its second-quarter results would be “substantially below” the First Call consensus of 70 cents a share after it reduced prices to attract shoppers during the holiday season.

Meanwhile, Big Lots, which specializes in sales of excess inventory, said fourth-quarter net sales fell to $1.37 billion from $1.41 billion, while sales at its stores open at least two years, or same-store sale, fell 3.2 percent.

Big Lots has said that in the year-end holiday quarter, sales of discretionary items, like furniture and toys, were challenging and shoppers gravitated toward buying basics, like food or household cleaners.

The world finds some hope

March 4 (Bloomberg) — European and Asian stocks advanced, pushing the MSCI World Index higher for the first time in six days, and U.S. futures rose on speculation China will broaden efforts to boost growth in the world’s third-largest economy. The Shanghai Composite Index jumped the most in four months.

BHP Billiton Ltd. and Alcoa Inc. added more than 3 percent as copper and aluminum climbed on optimism metals consumption in China will increase. Aluminum Corp. of China Ltd. jumped 9 percent as a former statistics chief said China’s Premier Wen Jiabao will announce a new stimulus package tomorrow. Standard Chartered Plc, the U.K.’s second-largest bank by market value, gained 8.3 percent as UBS AG recommended the shares on “robust” earnings.

The MSCI World Index added 0.5 percent to 709.17 at 11:39 a.m. in London. The deepening global recession, a third government rescue for Citigroup Inc. and dividend cuts at companies from General Electric Co. to JPMorgan Chase & Co. have sent the of 23 developed countries to a 23 percent drop this year, the worst start since the gauge was created in 1970.

“The Chinese are about to come up with another huge fiscal push,” said Philip Manduca, who oversees $1 billion as head of investments at ECU Group in London. “They are going to pump an enormous amount of money in. This will help in the long term,” he said in a Bloomberg Television interview.

Treasuries fell, extending the worst losses in five years, and the yen slipped as the rally in stocks curbed demand for assets perceived as safe. The yield on the 10-year Treasury note rose 10 basis points to 2.98 percent, according to BGCantor Market Data. The yen traded at 99.36 per dollar, the weakest since Nov. 10.

Futures on the Standard & Poor’s 500 Index rose 1.7 percent. The gauge closed below 700 for the first time since October 1996 yesterday after Federal Reserve Chairman Ben S. Bernanke said the banking system still hasn’t stabilized.

European, Asia Stocks

Europe’s Dow Jones Stoxx 600 Index climbed 2.2 percent, rebounding from the lowest level since 1996. Zurich Financial Services AG climbed after JPMorgan said Switzerland’s biggest insurer’s “solvency position is strong.”

The MSCI Asia Pacific Index rose 0.6 percent as China’s Jiangxi Copper Co. and Japan’s Seven & I Holdings Co. advanced. Wen will announce a new stimulus package tomorrow, adding to a 4 trillion yuan ($585 billion) spending plan, former Statistics Bureau head Li Deshui said today, without elaborating.

The Shanghai Composite Index jumped 6.1 percent, the biggest gain since Nov. 10, when it climbed 7.2 percent after the government announced its 4 trillion yuan plan. China’s rally helped send the MSCI Emerging Markets Index 2.1 percent higher.

BHP, Rio

Companies whose profits are most tied to economic growth led Europe’s rally, with gauges of basic-resource producers, automakers and construction shares climbing more than 4 percent.

BHP Billiton, the world’s largest mining company, added 6.6 percent to 1,106 pence in London. Rio Tinto Group, the third biggest, gained 7.4 percent to 1,738 pence. Xstrata Plc, the largest exporter of coal used by power plants, rallied 11 percent to 368.75 pence.

Copper futures advanced in Shanghai and London on optimism metals consumption in China may pick up as government stimulus packages take effect. Nickel gained 1.6 percent in London, climbing with aluminum, zinc and lead.

Alcoa, the largest U.S. aluminum producer, added 3.1 percent to $5.70 in Germany.

Standard Chartered

Standard Chartered gained 8.3 percent to 682.5 pence. UBS raised its recommendation to “buy” from “neutral” following “robust” earnings reported yesterday.

France Telecom SA gained 2.1 percent to 17.78 euros after Europe’s third-largest phone company raised its full-year dividend to 1.40 euros a share from 1.30 euros paid for 2007. Annual gross operating profit, a measure comparable to earnings before interest, tax, depreciation and amortization, rose 2.8 percent to 19.4 billion euros ($24.3 billion). Analysts had predicted 19.1 billion euros.

Earnings for 244 companies in the Stoxx 600 that have reported earnings since Jan. 12 have dropped 91 percent, according to Bloomberg data. That compares to a 58 percent contraction in profit for the 465 companies that have reported results in the S&P 500 during the same period.

The MSCI World is valued at 10.4 times the earnings of its 1,680 companies, less than half this decade’s average ratio of 21.6, data compiled by Bloomberg show.

Zurich, Metro

Zurich Financial gained 5.5 percent to 159.9 Swiss francs as the insurer was raised to “overweight” at JPMorgan.

“Zurich is now our top pick for three reasons: cost cutting, uplift to operating profit from reinsurance earnings, and strong non-life,” the bank wrote in a report.

Metro AG added 2 percent to 21.23 euros. Bank of America Corp. boosted its recommendation on Germany’s largest retailer to “buy,” saying concern over its operations in eastern Europe is “overdone.”

In Shanghai, Aluminum Corp. jumped 9 percent to 9.61 yuan and Jiangxi Copper Co. surged 10 percent to 16.73 yuan.

China’s Purchasing Manager’s Index, a manufacturing gauge, climbed for a third month. Output and new orders expanded for the first time in five months, signaling that government stimulus is taking effect. A recovery in the first half is “very likely,” central bank Vice Governor Su Ning said yesterday.

Seven & I Holdings, Japan’s largest retailer, climbed 2.9 percent to 2,100 yen in Tokyo. Bank of Japan board member Miyako Suda said today the central bank should signal that it’s prepared to take “bold” measures to counter the recession. Japan’s lower house of parliament approved a bill that will free up about 5 trillion yen ($50 billion) for economic stimulus.

Holcim Ltd. slid 2.2 percent to 34.92 Swiss francs. The world’s second-biggest cement maker said fourth-quarter profit fell 54 percent as it booked 300 million francs ($254 million) in costs to close factories as it combats slumping demand.

Adecco SA slumped 8.3 percent to 31.06 francs. The world’s largest supplier of temporary workers reported a fourth-quarter loss as it wrote down the value of goodwill on its Tuja acquisition in Germany and assets in the U.K.

Hoyer plays 5 year old

WASHINGTON (CNN) — House Majority Leader Steny Hoyer declared Tuesday that Congress, not President Obama, will decide whether to put more limits on earmarks in upcoming spending bills.
The U.S. Senate is voting this week on an emergency spending bill for FY09.

The U.S. Senate is voting this week on an emergency spending bill for FY09.

Asked about White House Press Secretary Robert Gibbs’ statement Monday that the Obama administration was formulating guidelines for earmark reform, Hoyer said flatly, “I don’t think the White House has the ability to tell us what to do.”

He paused deliberately and quipped to reporters in the room, “I hope you all got that down.”

Earmarks are unrelated pet projects that members of Congress insert in unrelated spending bills.

Hoyer pointed out that Democrats have cut down the number of earmarks and now require that all requests get posted on the Internet. But, he conceded, “I think there are additional things we can do and consider.”

And the Maryland Democrat added, “It is certainly appropriate for the White House to suggest ways of going forward so that we can have agreement between the White House and ourselves.”

He said congressional leaders have talked to the White House about “concerns it had,” but refused to offer any specifics.

CNN reported Monday that, according to Democratic sources at a White House meeting last week, Obama urged Democratic leaders to “limit” future earmarks and, in what one official described as a “tense” exchange, the leaders told the president they’ll do what they can to continue reform, but that earmarking projects for districts and states is a prerogative of Congress.

Hoyer, who attended the White House meeting, vigorously defended earmark requests Tuesday, calling them “the congressional initiative process.”

“I philosophically believe it would be an undermining of the Article One responsibilities given to the Congress of the United States if it were to abandon its right to add items that it believes are priorities for our country and for the communities we represent as members of Congress,” Hoyer said.

The majority leader dismissed a reporter’s question on whether the $410 billion spending bill for the rest of this year is becoming an “embarrassment” to Obama, and reiterated Obama’s argument that the package is “last year’s business.”

Hoyer also said that even though Obama, then a senator, did not request any earmarks in last year’s spending bill, he did request projects for Illinois in prior years he served in the Senate.

Longtime pork barrel spending critic Sen. John McCain, who opposes earmarks, offered an amendment to the spending bill Tuesday that would have frozen spending at 2008 levels through the 2009 fiscal year, which ends September 30. McCain’s amendment failed to pass Tuesday, which means the spending bill made up of about 1 percent earmarks will now go to a vote.

Obama has said he will sign the bill by Friday or the government runs out of money.

Critics, including McCain, have said the excessive spending in the bill would be contrary to the president’s recent pledge to cut unnecessary government spending and pork-laden earmarks.

Cutting “wasteful” government spending was a pledge Obama made on the campaign trail and has repeated as president.

Despite Obama’s promise, the administration says it inherited the spending and he will sign it.

On the Senate floor Monday, McCain blasted the president — along with fellow Democrats and Republicans — for the bill’s earmarks.

“If it sounds like I’m angry, Mr. President, it’s because I am. The American people today want the Congress to act in a fiscally responsible manner, and they don’t want us to continue this corrupting practice [of unnecessary spending],” McCain said. “We’re giving them [the American people] a slap in the face, Mr. President … so much for the promise of change.”

Several members of Obama’s administration served in Congress and have earmarks listed on the bill.

Vice President Joe Biden requested $750,000 for a University of Delaware program during his time as a senator from that state. Obama’s Chief of Staff Rahm Emanuel, who was a Democratic congressman from Illinois, requested $900,000 for a planetarium in Chicago, Illinois.

An Emanuel aide told CNN on Monday the request was submitted more than a year ago and is leftover business.

But Sen. Richard Burr, R-North Carolina, said Washington is in a “state of denial.”

“It seems that every morning you pick up the newspaper, you’re reading about another multibillion-dollar government spending plan being proposed or, even worse, passed. … We become numb to what the dollar figures really mean, or the obligation that accompanies them,” he said in the weekly Republican address Saturday.

Last week, the House of Representatives passed the $410 billion spending bill. House GOP leaders said the spending increases in the bill — $31 billion more than the previous fiscal year — are too large.

The bill passed on a largely party-line 245-178 vote, with most Democrats voting in favor of it and most Republicans opposed.

Republicans also criticized $7.7 billion in earmarks designed to support pet projects in individual lawmakers’ districts. Democrats defended the size of the bill, saying it was necessary to help counter the economic downturn.

Taxpayers for Common Sense, a nonpartisan watchdog group, listed some of the earmarks being proposed by members on both side of the aisle.Read more of the group’s analysis

Democrats defended the size of the bill, saying it was necessary to help counter the economic downturn and restore budget cuts made under former President George W. Bush.

India worries over new Obama propositions< /strong>

After a decade of outsourcing helped transform India into much of the world’s back office, Indians are worried that President Obama’s new Administration—and the slowdown in the global economy—will cast a shadow over one of the fastest-growing sectors of their economy. Obama’s $787 billion stimulus plan will make it increasingly difficult for U.S. companies receiving bailout money to hire foreigners on temporary work permits known as H-1B visas. The budget the President recently presented may also make it harder for U.S. companies that send jobs overseas to receive tax benefits.

In India, where the $63 billion IT sector makes up almost 7% of the national GDP, the moves are worrying government officials. Finance Minister Pranab Mukherjee groused about it over the weekend in an interview with CNN-IBN, a content partnership with Time Warner’s (TWX) CNN owned by India’s TV18. “We will have to address this issue,” said Mukherjee, who has spent the last five months trying to restart India’s slowing economy with tax cuts and spending plans. “We are opposing protectionism, not only here but at every forum.”
WHAT’S NEXT?

Even more vexing for India’s outsourcing industry is the lack of clarity about what might be coming next from the U.S. During a Feb. 24 speech to Congress, Obama said the Administration will eliminate “incentives for companies that ship jobs overseas,” but the White House has not provided additional details. A line item in Obama’s budget titled “Implement international enforcement, reform deferral, and other tax reform policies” is the only hint tax experts in the U.S. and in India have had about the policy. The estimates for tax revenues generated by that budget change start at $15 billion in 2009 and go up to $25 billion in 2012. Those inexact estimates, says Rosanne Altshuler, co-director of the Tax Policy Center (a joint venture of two Washington think tanks, the Urban Institute and the Brookings Institution), is an indication that the changes in tax policy have not yet been worked out, and likely will not become public until April.

Indians with a stake in the outsourcing industry are now waiting and watching. “Of course we are concerned,” says Mohandas Pai, a board member and director of human resources at Infosys (INFY), India’s second-largest IT company by revenues. “But nobody knows what the devil is being referred to [in the Obama statement].”

At a time when nearly 5 million Americans have applied for unemployment benefits and another 1.7 million are working part-time jobs because they can’t find full-time work, immigration and outsourcing have become key political issues in the U.S. As he did during his campaign, Obama has made clear during the first weeks of his Presidency that he intends to pursue policy changes to discourage outsourcing and the use of U.S. work visas—especially H-1B visas—that could cost American jobs. At no time has he made the exact policies clear, says Altshuler. Even within the government, the changes remain a mystery. Edward Kleinbard, the chief of staff for Congress’ Joint Committee on Taxation, was forced to offer up a guess about the cryptic item in the budget during a meeting with a group of international lawyers last week. “Deferral will certainly be at play,” he said, according to a report in Tax Notes, a publication of the Tax Policy Center. He was referring to how corporations are able to defer paying tax on income earned overseas until they bring that money back to the U.S.

That may not do enough to discourage outsourcing, says Andrew Kokes, vice-president for marketing at Sitel, a Nashville-based outsourcing firm with 4,000 employees in India. Even if the U.S. proposes a punitive tax on companies doing work offshore or offers a tax break for those that do not, the changes wouldn’t be large enough to offset the 20% to 30% benefit companies get in lower labor costs when they do certain work offshore, he says. “A tax break can’t compete with that kind of arbitrage,” says Kokes.

A WORLDWIDE TREND

The U.S. is not alone in this increasing aversion to foreign labor and to outsourcing. As the pain of the global economic crisis intensifies, countries all around the world are adopting policies that make it tougher for foreigners to get jobs. In the Gulf countries, where several million Indians are employed in jobs ranging from construction to banking, governments have cut down on work visas and sent unemployed Indians home by the planeload. A Dubai-based official with an airline (who asked not to be named) says construction companies chartered more than 30 flights in January alone to fly workers back to India. In Malaysia, 43 Indian workers who have overstayed their visas expect to be deported this week, as thousands more leave voluntarily. On Mar. 2, the British government started an inquiry into whether immigrant workers should be restricted to sectors of the economy that have documented worker shortages.

In India, these decisions have raised hackles. India’s IT sector is seen as a source of national pride—an area where Indians see themselves as competing successfully on the global scene. Moreover, the millions of Indians living overseas send back more than $30 billion a year in remittances, making up 3% of the country’s GDP, according to estimates by the International Labor Organization. Political groups, parlaying for support in upcoming elections, have grasped the issue, threatening boycotts and asking the Indian government to intervene on behalf of its expatriates. “We feel that in the current economic environment it is imperative for global corporations to collaborate on technology and innovation,” says Suresh Senapaty, the chief financial officer of Wipro (WIT), one of India’s largest IT services companies. “Policies of protectionism will only hinder the revival of the world economy.”

While the change in rules for H-1B hires may be popular in the U.S., it could have a long-term impact that policymakers are not foreseeing, according to a report released Mar. 2 by researchers at Duke and Harvard universities. Disheartened by the change in visa rules, nearly 100,000 foreign workers could leave the U.S. and return to their home countries, researchers concluded. The two-year study asked those who had returned why they left the U.S., and found that increased opportunities in India and China made it easier for these highly trained workers to leave jobs in Silicon Valley and start businesses back in their home countries. “Short term, this will have no impact on the U.S., but long term this could spell disaster,” says Vivek Wadhwa, the lead researcher on the study and a research associate at Harvard’s law school. “When we start recovering, then the people we need are going to be in India and China.”

Since 1990, the H-1B program has allowed foreigners holding at least a bachelor’s degree to work for six-year spells at U.S. companies and to have a chance to apply for a green card. Companies such as Microsoft (MSFT) and Google (GOOG) have hired thousands of foreign workers on H-1B visas. It is unclear how many of them applied for—or received—green cards, but the green card backlog in the U.S. in 2006, the last year for which data are available, was more than 1 million.

At the same time, Labor Dept. and U.S. immigration statistics indicate that just a little more than half of the allotted H-1B visas went to the high-tech sector; others included workers in fields as diverse as academia, medicine, and the nonprofit world. Several studies have shown that while there is documented fraud in the H-1B visa system and that H-1B workers often depress the local wages for similar U.S. workers, these highly trained immigrants do fuel a disproportionate portion of U.S. innovation. Wadhwa points out that nearly half of Silicon Valley startups—including Google—were started by immigrants, and nearly a quarter of U.S. global patent applications are from foreigners. “Without doubt, these H-1B workers are adding to the innovation pool in the U.S.,” says Wadhwa.