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1. Bill Gates' New Energy Investment
2. Case-Shiller Housing Index Indicates Bear Market
3. Unemployment At Five-Year Low Ahead of Elections
4. Service Economy Expands At Brisk Pace
1. Bill Gates' New Energy Investment
Bill Gates, via his personal investment vehicle Cascade Investments LLC, is
partnering with PNM Resources to start a new company in the unregulated energy
sector. The Wall Street Journal first reported the deal early this morning based
on people familiar with the matter and the company announced details today.
The new company, which is temporarily dubbed EnergyCo LLC, will focus on markets
in the Southwest, West, and Texas. Cascade and PNM will each own 50 percent of
the company.
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Cascade already owns approximately 6.5 million shares, or 9.4 percent, of
Albuquerque-based PNM, reports the Associated Press. Those shares were bought
back in 2001. Last year, Cascade infused another $100 million into PNM to help
fund the acquisition of Fort Worth-based TNP Enterprises, reports The Street.com
In the joint venture, Cascade will provide capital for the company to expand its
business in unregulated energy markets such as retail electricity sales,
operation and ownership of generation assets, and wholesale marketing and
trading, reports the AP. PNM will not have to add to its $2.5 billion debt load,
says the Journal.
PNM may also contribute existing unregulated assets to the new company and
Cascade will match those contributions with cash, adds the AP. The new company
could eventually result in dividing PNM into two entities, one the regulated
utility PNM and the other the unregulated joint venture EnergyCo LLC, posits the
Journal.
"Our partnership with Cascade enables us to execute our unregulated growth
strategy faster than we could have otherwise," said PNM chief Jeff Sterba.
"Together, we will create a growth vehicle that has the expertise, resources and
flexibility needed to meet the rising demand for power in the markets we serve,
while delivering clear benefits to customers and shareholders alike."
Editor's Note:
2. Case-Shiller Housing Index Indicates Bear Market
Housing futures based on the S&P Case Shiller composite index are predicting a
7.3 percent decline from August 2006 to August 2007 in all 10 housing markets
around the country, says CNN Money.
Karl E. Case and Robert Shiller developed the S&P Case Shiller indexes as a way
to measure the housing market, something that was heretofore not easily done.
In an interview with Yale Economics Prof. Robert Shiller in the April issue of
Financial Intelligence Report, he explained the purpose of the index, "You can
commit to buy or sell a home at a date in the future and see all of these future
selling prices today. … If you're worried about prices on homes falling, you
could buy put options, which go up when housing prices go down."
And it looks as if traders are predicting that housing prices are about to go
down. According to the futures, Miami is facing the worst housing market with an
8 percent, says CNN Money. Boston, with a drop of "only" 5.8 percent in prices,
is likely to fare the best, predicts the futures market.
"I've been poring over the data for a long time now, given the anecdotal
information we've been reading about home prices," Fritz Siebel, director of
housing derivatives at Tradition Financial Services, which trades futures of the
Case Shiller indexes. "I think the latest price drops are significant. These are
pretty big numbers."
Siebel adds, "The underlying metrics of the market - inventory, rate of sales
have not cleared. I don't see it getting better soon."
Editor's Note:
3. Unemployment At Five-Year Low Ahead of Elections
The unemployment rate dropped to a five-year low of 4.4 percent in October as
employers added 92,000 new jobs -- flashing a picture of a strong labor market
as the midterm elections draw near.
The latest report, released Friday by the Labor Department, showed that the
civilian unemployment rate fell 0.2 percentage points from 4.6 percent in
September. It marked the third month in a row that the politically prominent
jobless rate declined.
The tally of new jobs added to the economy in October fell short of economists
expectations for an increase of around 125,000 positions, however. Nonetheless,
job gains in both August and September turned out to be much stronger than
previously estimated -- and that took a lot of the sting out of October's
less-than-expected payroll performance.
Economists were expecting the unemployment rate to hold steady in October or
possibly edge up a notch.
"The job market is healthy even though the economy has been slowing. This report
tells us the economy is holding its own, not spiraling downward," said Stuart
Schweitzer, global market strategist for JPMorgan Asset and Wealth Management.
Friday's report provided the last snapshot of the nation's employment scene
before next week's elections.
Workers saw solid wages gains last month.
Workers' average hourly earnings climbed to $16.91 in October, a sizable 0.4
percent increase from September. That increase was bigger than the 0.3 percent
rise economists were expecting. Over the last 12 months, wages grew by 3.9
percent.
Growth in wages is good for workers, but a rapid and sustained advance makes
economists fret about inflation flaring up. That's not good for the economy or
workers' pocketbooks, ultimately, because inflation can eat into everybody's
buying power.
The hunt for a job got shorter.
The average time that the unemployed spent in their search for work in October
was 16.5 weeks, an improvement from the average 17.4 weeks registered in
September.
How voters view job availability, wage growth and other economic conditions is
likely to play a role in the balloting nationwide on Tuesday. Republicans,
fighting to retain control of Congress, say Americans are mostly better off,
while Democrat rivals disagree, saying low- and middle-income workers are
struggling.
President Bush's approval rating on the economy is at 40 percent, among all
adults surveyed in an AP-Ipsos poll. That remains near his lowest ratings. Those
surveyed trusted Democrats more than Republicans to handle the economy.
On the payroll front, job losses in manufacturing, construction and retail
offset gains in professional and business services, education and health,
government and elsewhere.
Factories shed 39,000 jobs in October, marking the fourth straight month of
employment cuts. Construction companies got rid of 26,000 jobs, while retailers
trimmed 3,500 positions.
Professional and businesses services, meanwhile, added 43,000 jobs. Education
and health expanded employment by 28,000, and the government payroll swelled by
34,000.
All told the 92,000 total net jobs added in October were the fewest in a year,
when the economy was suffering the blow of the Gulf Coast hurricanes.
That disappointment, however, was offset by much better job gains in the
previous two months. Employers added 148,000 jobs in September, versus the
51,000 first reported. Payrolls grew by a robust 230,000 in August, stronger
than the 188,000 slots previously recorded.
The 4.4 percent unemployment rate was the lowest since the spring of 2001.
The jobless rate for blacks fell to 8.6 percent last month, from 9.2 percent in
September. The unemployment rate for Hispanics dropped to 4.7 percent, from 5.4
percent. The jobless rate for teen-agers declined to 15.4 percent from 16.4
percent.
The employment gains come against a backdrop of a slowing national economy.
Given these circumstances, the Federal Reserve held interest rates steady last
week for the third meeting in a row but made clear that policymakers will keep a
close eye out for inflation.
To fend off inflation, the central bank since June 2004 had hoisted rates 17
times, the longest string of increases in Fed history. The Fed's goal is to slow
the economy sufficiently to thwart inflation but not so much as to push it into
recession.
Economic growth slowed to a 1.6 percent annual rate in the late summer, the most
sluggish pace in more than three years. The housing slump was a major factor in
the slowdown. Economists believe growth in the current October-to-December
quarter will turn out better.
© 2006 Associated Press.
Editor's Note:
4. Service Economy Expands At Brisk Pace
The nation's service economy grew in October at a quicker pace than in
September, and faster than analysts had expected.
The Institute for Supply Management said Friday its index of business activity
for the service sector registered 57.1 in October. That's above September's
reading of 52.9, which was a three-year low, and above August's reading of 57.
Analysts had been predicting a reading of 54.5.
The service sector, which includes banking, construction, retailing and travel,
generates about two-thirds of the nation's economic activity.
A reading above 50 signals expansion, while a reading below 50 indicates
contraction.
The October figure represented the 43rd consecutive month of growth in the
service sector.
The report of expanding services growth came on the heels of a Labor Department
report earlier Friday that the unemployment rate dropped to a five-year low of
4.4 percent in October as employers added 92,000 new jobs. The rate was down 0.2
percentage point from 4.6 percent in September, and marked the third consecutive
monthly jobless rate decline.
The service sector report indicated inventories grew at a faster pace, with the
inventories index rising to 53.0, up from 50.5 in September. The new export
orders index also climbed, rising to 63.5 in October from 59.0 in September.
The industries contributing most to the uptick were utilities, information, and
retail trade. The industries reporting the biggest drops in activity were real
estate; rental & leasing; and arts, entertainment and recreation.
The index of prices paid registered 51.9 in October, down sharply from 56.7 in
September.
The new orders index registered 56.5, down slightly from September's reading of
57.2, while the backlog index was at 51.5 in October, down from a reading of 53.
The employment index was at 51.0, down from 53.6 a month earlier.
Stocks climbed Wednesday morning on Wall Street after the ISM report and
employment data were released. The Dow Jones industrials were up 0.25 percent to
12,048.15, while the Nasdaq composite index was up 0.18 percent to 2,338.14. The
broader Standard & Poor's 500 index was up 0.21 percent to 1,370.49.© 2006
Associated Press.
Editor's Note:
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