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 Strategies & Market Trends | Guidance II

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To: 2MAR$ who wrote (1476)8/22/2011 6:01:38 PM
From: 2MAR$   of 1764
 
Michael Pettis: Long-Term Outlook for China, Europe, and the World; 12 Global Predictions

howestreet.com 
Monday, August 22nd, 2011 | Filed under Mish's Global Economic Trend Analysis | Posted by Mike 'Mish' Shedlock

Via email, Michael Pettis at China Financial Markets shared his outlook for China, Europe, and the world. The overall outlook is not pretty, and includes a breakup of the Eurozone, a major slowdown for China, and a smack-down of the much beloved BRICs.

Pettis Writes …

August is supposed to be a slow month, but of course this August has been hectic, and a lot crueler than April ever was. The US downgrade set off a storm of market volatility, along with bizarre concern in the US about whether or not China will stop buying US debt and the economic consequence if it does, and equally bizarre bluster within China about their refraining from buying more debt until the US reforms the economy and brings down debt levels.

What both sides seem to have in common is an almost breathtaking ignorance of the global balance of payment mechanisms. China cannot stop buying US debt until it engineers a major adjustment within its economy, which it is reluctant to do. Until it does, any move by the US to cut down its borrowing and spending will trigger a drop in global demand which will cause either US unemployment to rise, if the US ignores trade issues, or will cause Chinese unemployment to rise, if the US moves to counteract Chinese currency intervention.

The Big Picture Rather than try to wade through all the news this month, much of which doesn’t seem to have much informational content, I thought I would duck out altogether and instead make a list of things I expect will happen over the next several years. We are so caught up in noise and market volatility – as the market swings first in one direction and then, as regulators react, in the other direction – that it is easy to lose sight of the bigger picture.

My basic sense is that we are at the end of one of the six or so major globalization cycles that have occurred in the past two centuries. If I am right, this means that there still is a pretty significant set of major adjustments globally that have to take place before we will have reversed the most important of the many global debt and payments imbalances that have been created during the last two decades. These will be driven overall by a contraction in global liquidity, a sharply rising risk premium, substantial deleveraging, and a sharp contraction in international trade and capital imbalances.

To summarize, my predictions are:


  1. BRICS and other developing countries have not decoupled in any meaningful sense, and once the current liquidity-driven investment boom subsides the developing world will be hit hard by the global crisis.
    2. Over the next two years Chinese household consumption will continue declining as a share of GDP. Chinese debt levels will continue to rise quickly over the rest of this year and next. Chinese growth will begin to slow sharply by 2013-14 and will hit an average of 3% well before the end of the decade. Any decline in GDP growth will disproportionately affect investment and so the demand for non-food commodities. If the PBoC resists interest rate cuts as inflation declines, China may even begin slowing in 2012. Much slower growth in China will not lead to social unrest if China meaningfully rebalances. Within three years Beijing will be seriously examining large-scale privatization as part of its adjustment policy. European politics will continue to deteriorate rapidly and the major political parties will either become increasingly radicalized or marginalized. Spain and several countries, perhaps even Italy (but probably not France) will be forced to leave the euro and restructure their debt with significant debt forgiveness. Germany will stubbornly (and foolishly) refuse to bear its share of the burden of the European adjustment, and the subsequent retaliation by the deficit countries will cause German growth to drop to zero or negative for many years. Trade protection sentiment in the US will rise inexorably and unemployment stays high for a few more years.


Read more: businessinsider.com  No BRIC Decoupling Since most global consumption comes from the US, Europe and Japan, the collapse in their demand will ultimately be very painful for the BRICs and the rest of the developing world. The latter have postponed the impact of contracting consumption by increasing domestic investment, in some cases very sharply, but the purpose of higher current investment is to serve higher future consumption. In many countries, most notably China, the higher investment will itself limit future consumption growth, and so with weak consumption growth in the developed world, and no relief from the developing world, today’s higher investment will actually exacerbate the impact of the current contraction in consumption.

2. Near-Term Decline in Chinese Consumption By 2013 Chinese household consumption will still not have exceeded the 35% of Chinese GDP reached in 2009. In fact it will probably be lower.

Premier Wen listed the need to raise the consumption share of GDP second in his speech last March before the unveiling of the new Five-Year Plan.

But I remain very, very skeptical. Low consumption levels are not an accidental coincidence. They are fundamental to the growth model, and the suppression of consumption is a consequence of the very policies – low wage growth relative to productivity growth, an undervalued currency and, above all, artificially low interest rates – that have generated the furious GDP growth. You cannot change the former without giving up the latter. Until Beijing acknowledges that it must dramatically transform the growth model, which it doesn’t yet seemed to have acknowledged, consumption will continue to be suppressed.

3. Chinese Debt Levels will Continue to Rise Very Quickly The attempts to rein in debt growth will fail because they address specific areas of debt and not the overall tendency of the system to generate debt.

China funds almost all of its major investments with bank debt, and it long ago ran out of obvious investments that are economically viable – at least investments that are likely to be generated by what is a distorted system with very skewed incentives – so increases in investment must be matched by increases in debt.

To the extent that investments are not economically viable, this means that the value of debt correctly calculated must rise faster than the value of assets. By definition this results in an unsustainable rise in debt.

4. By 2013-14 Chinese GDP Growth will Slow sharply I don’t expect a significant growth slow-down until after the new leadership takes power in late 2012, but my guess (and hope) is that by 2013 the stubborn refusal of consumption to rise as share of GDP, and the continuing surge in debt, will have convinced all but the most recalcitrant that China needs a dramatic change of policy.

Why do I say we will be talking about 3% growth soon? Two reasons. First, I am impressed by the bleakness of historical precedents. Every single case in history that I have been able to find of countries undergoing a decade or more of “miracle” levels of growth driven by investment (and there are many) has ended with long periods of extremely low or even negative growth – often referred to as “lost decades” – which turned out to be far worse than even the most pessimistic forecasts of the few skeptics that existed during the boom period. I see no reason why China, having pursued the most extreme version of this growth model, would somehow find itself immune from the consequences that have afflicted every other case.

Second, I just use a very simple calculus. Remember that rebalancing is not an option for China. It will happen one way or the other, and the sooner the less disruptive. And for China to rebalance in a meaningful way, consumption growth is going to have to outpace GDP growth by at least 3-4 full percentage points (and even then, at that rate, it will take China over five years to return to the 40% that was not long ago considered astonishingly low).

5. Non-Food Commodities Disproportionately Affected The decline in Chinese growth will fall disproportionately on investment and, because of this, it will severely impact the price of non-food commodities. The implications are inescapable, although I think many people, especially in the commodities sector, have missed them.

6. Significant Slowing Could Start in 2012 What happens to real interest rates will determine when the process of Chinese adjustment begins. In fact there is a chance that we may see growth in China slow significantly in 2012, perhaps even to 7%, although I suspect that it will probably be in the 8-9% region.

What the PBoC does to interest rates is likely to be the outcome of a struggle in the State Council between policymakers that are worried about growth and those that are worried about imbalances. If the PBoC can hold off the former, and especially if wages continue rising, we might begin to see Chinese rebalancing taking place a little earlier than expected. Of course this must, and will, come with much slower GDP growth.

7. Social Unrest Not a Given Growth rates of 3% will not necessarily lead to social and political instability. Most analysts argue that China needs annual growth rates of at least 8% to maintain current levels of unemployment. Anything substantially lower will cause unemployment to surge, they argue, and this would lead to social chaos and political instability.

I disagree. The employment effect of lower growth depends crucially on the kind of growth we get. Since rebalancing in China requires less emphasis on heavy investment and more on consumption, and since rebalancing also means a sharp reduction in free credit provided to SOEs and local governments and cheaper and more available credit for efficient but marginal SMEs, a rebalancing China would presumably see much more rapid growth in the service sector and in the SME sector, both of which are relatively labor intensive. Much lower growth, in that case, could easily come with minimal changes in overall employment. Japan is a useful reminder of what can happen.

8. Large-Scale Privatization Because of its rapidly rising debt burden, the only way for China to manage a smooth social transition will be through wealth transfers from the state sector to the household sector. In the past, Chinese households received a diminishing share of a rapidly growing pie. In the future they must receive a growing share. This will probably be accomplished through formal or informal privatization.

9. Disruptive European Politics European politics will become much more difficult and disruptive. The historical precedents are clear. During a debt crisis the political system becomes fragmented and contentious. If the major parties don’t become radicalized, smaller radical parties will take away their votes.

Remember that the process of adjustment is a political one. We all know someone has to pay for the massive adjustment countries like Spain must make. The only interesting question is about who will be forced to take the brunt of the payment – workers in the form of unemployment, the middle classes in the form of confiscated savings, small businesses in the form of taxes, large businesses in the form of taxes and nationalization, foreigners, or creditors.

Deciding who pays is a political process, and because the stakes are so high it will be a very bitter process. This means, among other things, that politics will degenerate quickly, and of course if Europe doesn’t arrive at fiscal union in the next year or two, it probably never will. This conclusion is also the reason for my next prediction.

10. Spain, other PIIGS Leave Euro Spain will leave the euro and will be forced to restructure its debt within three or four years. So will Greece, Portugal, Ireland and possibly even Italy and Belgium.

The only strategies by which Spain can regain competitiveness are either to deflate and force down wages, which will hurt workers and small businesses, or to leave the euro and devalue. Given the large share of vote workers have, the former strategy will not last long. But of course once Spain leaves the euro and devalues, its external debt will soar. Debt restructuring and forgiveness is almost inevitable.

11. Germany Will Not Voluntarily Share Costs Unless Germany moves quickly to reverse its current account surplus – which is very unlikely – the European crisis will force a sharp balance-of-trade adjustment onto Germany, which will cause its economy to slow sharply and even to contract. By 2015-16 German economic performance will be much worse than that of France and the UK.

For one or two years the deficit countries will try to bear the full brunt of the adjustment while Germany scolds and cajoles from the side. Eventually they will be unable politically to accept the necessary high unemployment and they will intervene in trade – almost certainly by abandoning the euro and devaluing. In that case they automatically push the brunt of the adjustment onto the surplus countries, i.e. Germany, and German unemployment will rise. I don’t know how soon this will happen, but remember that in global demand contractions it is the surplus countries who always suffer the most. I don’t see why this time will be any different.

12. Expect US Rising Trade Protection Sentiment As the US fights over the fiscal deficit and whether or not it is the right way to expand domestic demand, more and more politicians will focus on the expansionary impact of trade protection. There will be an increasing tendency to intervene in trade – in fact I think of quantitative easing as a policy aimed at trade and currency imbalances as much as one aimed at domestic monetary management.

As unemployment persists, and as the political pressure to address unemployment rises, the US will, like Britain in 1930-31, lose its ideological commitment to free trade and become increasingly protectionist. Also like Britain in 1930-31, once it does so the US economy will begin growing more rapidly – thus putting the burden of adjustment on China, Germany (which will already be suffering from the European adjustment) and Japan.

Trade policy in the next few years will be about deciding who will bear the brunt of the global contraction in demand growth. The surplus countries, because they are so reliant on surpluses, will be very reluctant to eliminate their trade intervention policies. Because they are making the same mistake the US made in the late 1920s and Japan in the late 1980s – thinking they are in a strong enough position to dictate terms – they will refuse to take the necessary steps to adjust.

But in fact in this fight over global demand it is the deficit countries that have all the best cards. They control demand, which is the world’s scarcest and most valuable commodity. Once they begin intervening in trade and regaining the full use of their domestic demand, they will push the adjustment onto the surplus countries. Unemployment in deficit countries will drop, while it will rise in surplus countries.



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From: 2MAR$8/24/2011 1:27:32 AM
   of 1764
 

New-home sales fall, 2011 could be worst year yet Sales fell 0.7 pct. in July.; 2011 shaping up to be worst on records dating back 50 years




Builders frame a new home Monday, Aug. 22, 2011, in Queen Creek, Ariz. The number of people who bought new homes fell for the fourth straight month. Sales this year are on track to finish as the worst on records dating back half a century. (AP Photo/Matt York)






Derek Kravitz, AP Real Estate Writer, On Tuesday August 23, 2011, 4:42 pm EDT
WASHINGTON (AP) -- Sales of new homes fell for the third straight month in July, a sign that housing remains a drag on the economy. If the current pace continues, 2011 would be the worst year for new-home sales on records dating back at least half a century.

Sales fell nearly 1 percent in July to a seasonally adjusted annual rate of 298,000, the Commerce Department said Tuesday. That's less than half the 700,000 that economists say represent a healthy market.

Last year, 323,000 homes were sold -- the worst year on records that go back to 1963.

While new homes represent less than one-fifth of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.

High unemployment, larger required down payments and tougher lending standards are preventing many people from buying homes.

Plunging stocks and a growing fear that the U.S. could tip back into another recession are also keeping people from entering the troubled housing market.

Renewed concerns about job security likely weighed on many would-be buyers' minds, said Mark Vitner, senior economist at Wells Fargo.

A slowdown in the U.S. economy has more than offset any boost from super-low mortgage rates, said Paul Dales, senior U.S. economist at Capital Economics.

"A new home is a luxury that many Americans can no longer afford," Dales said.

All home sales remain weak. The sales pace for previously occupied homes is trailing last year's 4.91 million sales, the fewest since 1997. In a healthy economy, people buy roughly 6 million existing homes annually.

A report last week showed that more home sales than usual fell apart at the last minute, a sign that many buyers may be nervous about the economy. At least 16 percent of deals were canceled head of closings last month -- four times the rate in May.

The troubled housing industry is hurting the broader economy. After previous modern-day recessions, housing contributed up to 20 percent to U.S. economic growth. That has fallen to 4 percent following the Great Recession.

Sales rose in July for new homes valued at less than $150,000. They also increased for those going for more than $750,000. But mid-priced home sales fell.

Outside of luxury markets, builders are struggling to compete with foreclosures and short sales, which have forced down prices. A short sale is when a lender accepts less than what is owed on the mortgage.

Those homes are selling at an average discount of 20 percent, and they lower neighboring values. That's made many re-sales a bargain compared with new homes, creating an average 30 percent disparity in prices.

Sales of new homes doubled in the Northeast in July, but the region has the weakest sales in the country by far. In the South and West, sales fell 7.4 and 5.9 percent, respectively. Sales rose 2.4 percent in the Midwest.

The median price of a new home fell more than 6 percent to $222,000 nationally. But it is still roughly 27.5 percent higher than the median price of a re-sold home, which was $174,000 in July.

The number of new homes for sale at the end of the month dropped to a record low of 165,000, down 0.6 percent from June. At the July sales pace, it would take 6.6 months to exhaust the current supply. Economists consider a 6-month supply a normal level, indicating that builders are heavily cutting back construction.

Sales of new homes have fallen 18 percent in the two years since the Great Recession officially ended.

A telling sign of how bad things have gotten for the housing industry: Prices have dropped more since the recession started, on a percentage basis, than during the Great Depression of the 1930s.

And it took 19 years for prices to fully recover after the Depression.

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From: 2MAR$8/24/2011 7:17:33 PM
   of 1764
 
Expectations for 2012 Begin Falling (all the stats)
finance.yahoo.com 


Dirk Van Dijk, On Tuesday August 23, 2011, 1:00 am EDT
Key Points:



  • Almost done with earnings season, with 486 or 97.2% of S&P 500 second quarter results in. Total earnings growth low at 12.0%, but mostly due to one stock (BAC). Ex-Financials growth is 19.8% year over year. Total revenue growth 10.9%, 11.3% ex-Financials. Median earnings surprise 3.13% and median sales surprise 1.81%. Remaining firms (14) expected to grow 10.8%, but only 1.1% of expected total earnings.
  • If remaining firms all report in line, we have 98.9% of earnings in. Final growth to be 12.0%, 19.8% ex-Financials. At start of earnings season 9.65% growth expected, 12.18% ex-Financials.
  • Earnings beats top misses by 3.49 ratio, sales beats top misses by 2.49 ratio; 69.8% of all firms report positive earnings surprise, 70.6% beat on revenues. Growing earnings firms outpace declining earnings by a 3.13 ratio, Revenues at a 5.15 growth ratio.
  • Full-year total earnings for the S&P 500 jumps 45.5% in 2010, expected to rise 15.9% further in 2011. Growth to continue in 2012 with total net income expected to rise 9.5%. Financials major earnings driver in 2010. Excluding Financials, growth was 27.7% in 2010, and expected to be 18.8% in 2011 and 8.9% in 2012. One month ago, growth of 15.7% for 2011 and 13.9% for 2012 expected. Ex-Financials, 18.6% and 10.3%, respectively.
  • Total revenues for the S&P 500 rise 7.88% in 2010, expected to be up 6.67% in 2011, and 6.28% in 2012. Excluding Financials, revenues up 9.16% in 2010, expected to rise 11.08% in 2011 and 5.65% in 2012.
  • Annual Net Margins marching higher, from 5.88% in 2008 to 6.40% in 2009 to 8.64% for 2010, 9.34% expected for 2011 and 9.67% in 2012. Margin expansion a major source of earnings growth. Net margins ex-Financials 7.79% in 2008, 7.07% in 2009, 8.27% for 2010, 8.84% expected in 2011 and 9.12% in 2012.
  • Revisions ratio for full S&P 500 at 1.53 for 2011 (bullish), at 1.18 for 2012 (neutral). Ratio of firms with rising to falling mean estimates at 1.33 for 2011, 1.26 for 2012, bullish readings. Total revisions activity near its peak, but will fall rapidly over next month.
  • S&P 500 earned $546.5 billion in 2009, rising to $795.0 billion in 2010, expected to climb to $921.3 billion in 2011. In 2012, the 500 are collectively expected to earn $1.008 Trillion. On 7/22, 2012 expectations were $40 billion higher, with Financials responsible for $30 billion of the decline.
  • S&P 500 earned $56.77 in 2009: $82.61 in 2010 and $95.74 in 2011 expected, bottom-up. For 2012, $104.78 expected. Puts P/Es at 13.7x for 2010, and 11.8x for 2011 and 10.8x for 2012, very attractive relative to 10 year T-note rate of 2.25%. Top-down estimates: $96.26 for 2011 and $105.44 for 2012.


The Earnings Picture

Second-quarter earnings season is almost over with 486 or 97.2% of the reports in. With the exception of a handful of financials, most notably Bank of America (NYSE: BAC - News), which had a $12 billion negative swing in net income from last year, this is another great earnings season.

The year-over-year growth rate for the S&P 500 is 12.0%, way off the 17.6% pace those same 486 firms posted in the first quarter. However, if you exclude the Financial sector, growth is 19.8%, actually up slightly from the 19.7% pace of the first quarter. The 97.2% reported figure slightly understates how far we are along in earnings season. If all the remaining firms were to report exactly in line with expectations, we now have 98.9% of the total earnings in. At the beginning of earnings season, growth of 9.7% was expected; 12.2% ex-Financials.

Top line results are also very strong, with 10.94% year-over-year growth for the 486, actually up from growth of 8.73% in the first quarter. The top line results are even more impressive if the Financials are excluded, rising to 11.25% from the 9.45% pace of the first quarter. Top line surprises have been almost as good as the bottom line surprises, with a median surprise of 1.81% and a 2.49 surprise ratio.

The revenue growth in the first half is remarkable, given only 0.4% GDP growth in the first quarter and just 1.3% in the second, with low overall inflation. High commodity prices helped revenues among the Energy and Materials sectors, and higher growth abroad and currency translation effects from a weak dollar have also helped.

For those (14) still to report, the rate of growth is expected to be well below what we have seen already, with growth of 10.8%. With nine sectors now done, and many more sectors with only one or two firms left to go, use caution in interpreting the “expected tables at the sector level. Revenue growth for the remaining firms is also expected to slow, rising 7.87% among those yet to report, down from 9.05% reported in the first quarter.

Net margins have been one of the keys to earnings growth, but cracks in the story are starting to appear. The 486 that have reported have net margins of 9.20%, up from 9.11% a year ago. However, that is due to the Financials, especially BAC. Excluding Financials, next margins have come in at 8.55%, up from 7.94% a year ago.

On an annual basis, net margins continue to march northward. In 2008, overall net margins were just 5.88%, rising to 6.40% in 2009. They hit 8.64% in 2010 and are expected to continue climbing to 9.34% in 2011 and 9.67% in 2012. The pattern is a bit different, particularly during the recession, if the Financials are excluded, as margins fell from 7.78% in 2008 to 7.07% in 2009, but have started a robust recovery and rose to 8.27% in 2010. They are expected to rise to 8.84% in 2011 and 9.12% in 2012.

The expectations for the full year are very healthy, with total net income for 2010 rising to $795.0 billion in 2010, up from $544.3 billion in 2009. In 2011, the total net income for the S&P 500 should be $921.3 billion, marking increases of 45.5% and 15.9%, respectively. The expectation is for 2012 to have total net income passing the $1 Trillion mark to $1.008 Trillion, for growth of 9.5%. That will also put the “EPS for the S&P 500 over the $100 “per share level for the first time at $106.99. That is up from $56.77 for 2009, $82.61 for 2010, and $95.74 for 2011.

In an environment where the 10 year T-note is yielding 2.06%, a P/E of 13.7x based on 2010 and 11.8x based on 2011 earnings looks attractive. The P/E based on 2012 earnings is 10.8x. However, the 2012 expectations have fallen significantly in recent weeks as the economic outlook has softened. Relative to a month ago, expected total earnings for 2012 are down by $40 billion, with $30 billion of that decline coming from the Financial sector. This is an important thing to watch going forward.

Estimate revisions activity is near its seasonal peak. During the last seasonal decline in revisions activity, the ratio of increases to cuts also declined sharply, from over 2.0 at the height of the last earnings season to slightly below 1.0 for both this year and next. It then rose sharply during the height of earnings season again, but now has stated to fall. The revisions ratios stands at 1.53 (up from 1.62 last week) for 2011 and 1.18 (down from 1.4 last week) for 2012.

The Bigger Picture

It is an open question right now if we are going to fall back into recession later this year or early next year. I still think the most likely case is that we muddle through with slow but positive growth, but the odds of a recession seem to be growing. The economic news this week was not that good. We started out the week learning that the American Institute of Architects billing index fell again to 45.1 from 46.3, its lowest level since February 2010 and the fifth drop in a row. It is a Magic 50 index where any reading below 50 means contraction. Since non single family home construction almost always requires an architect, this pretty much insures that we will be seeing a renewed downturn in Commercial construction later this year and into 2012.

Existing Home Sales came in well below expectations and were down 3.5% from June. They were up year over year by 21.0% but that was due to an exceptionally easy comps from last year (after the end of the home buying tax credit). Months of supply rose to 9.4 months from 9.2. A healthy market has 6 months worth of supply and four months was the norm during the bubble. This pretty much means that home prices are going to continue to fall (oh and the median price of an existing homes was down 4.4% year over year). With existing home prices still falling, it is very hard to see any near term rebound in New Home Construction, which is normally the locomotive that pulls us out of recessions.

Inflation came in a bit hotter than expected at 0.5% on headline, although the core was in line with expectations at 0.2%. With oil prices falling again, we should see headline below core again next month. Still it will add some ammo to the argument of those who are against the Fed taking any more aggressive actions to help the economy. Within the core, housing costs were a big upward driver, with both Rent and Owners Equivalent Rent rising 0.3%, the fastest in a very long time. Together they make up 31% of the overall CPI. Also the Philly Fed index plunged to a -30.7, an exceptionally poor reading, down from a positive 3.2 and one that in the past has always signaled recession. One “sure fire recession signal that we have not seen yet, nor are we likely to given the current Fed policy is an inverted yield curve (short rates higher than long rates). On the other hand the index of Leading Economic Indicators actually increased to 0.5% from 0.3%. Thus overall there is not a slam dunk case either way as to if we are headed into a recession.

Initial claims for unemployment insurance, a bright spot the week before, disappointed a bit and rose back over the key 400,000 level to 408,000. That is a level that is consistent with job growth, but not enough to bring down the unemployment rate. The August jobs report will probably look a lot like the July jobs report, with about 150,000 or so private sector jobs added offset by the loss of about 40,000 government jobs and the unemployment rate staying about 9.1%.

The humiliation of Standard & Poor’s for its recent downgrade of T-notes continued. The yield on the 10 year actually briefly fell below 2% for the first time since before WWII, before ending the week at 2.06%. When a bond gets downgraded, it is supposed to see its yield rise, not fall off a cliff. That is what normally happens when you get a downgrade in the Corporate or Muni bond market. Even in the Sovereign debt market, when a country like Greece or Portugal gets downgraded, investors flee away from the debt and interest rates rise sharply. That did not happen here.

Instead we saw a stunning rally in the bond market and yields plunging, along with a plunging stock market. It was not really a big drop in the inflation expectations component of interest rates, but a plunge in the real rate. It was the first time in history that the 10 year real interest rate had fallen to negative territory. In other words, people are actually paying in real terms for the privilege of lending to the U.S. Treasury. Sure there are lots of pundits out there who point to things like the rise in the price of gold and the expansion of the Fed’s balance sheet and say we are just around the corner from high inflation or even hyperinflation like in Zimbabwe or the Weimar Republic. The bond market emphatically disagrees.

In time of stress, T-note are still going to be the first place that institutions look to park money when they want to flee to a safe place, regardless of what S&P says about how safe they are. There are simply no other markets that are big enough to do the job. Not the Swiss Franc, not gold, not AAA corporates. All of them are simply too small to do the job. S&P downgraded Japan a long time ago, and their long term bond rates are even lower than ours are and have been since they were downgraded. Are the Chinese going to dump their Treasuries? NO. What would they do with the money if they did? Buy bonds in Euros or Yen? If they did so they would have to sell dollars and buy either Yen or Euros. That would weaken the dollar and strengthen those currencies. That would make our exports cheaper and imports more expensive, and thus lower our trade deficit. That would be a very good thing for the economy. Go ahead China, make our day and sell your T-notes.

Does that sound to you like a crisis in confidence about the ability of the U.S. Government to repay its debts? It sure doesn’t to me. Rather what it suggests is that economic growth is going to be much lower than people expected. Real interest rates usually reflect the rate of growth in the economy. What the market really fears is not the deficit, or the accumulated debt, but that the misguided austerity measures now underway not only here, but across the Atlantic, are going to further slow growth.

The current debate has it all wrong, or at least is putting the cart before the horse. If we can bring down unemployment, the deficit will follow. The reverse is decidedly not true. Current efforts to bring down the deficit are making unemployment worse, not better, and will in the end undermine the objective of bringing down the deficit. A Trillion dollars of Spending Cuts is not going to lead to a Trillion dollars of deficit reduction. Perhaps $500 billion worth if we are lucky.

That is particularly true if the cuts are front end loaded and happen while the economy is operating well below its potential. Spending cuts when the economy is humming along will not have such a terrible effect on the overall economy. Tax revenues rise and fall by more than the amount of economic growth. There is a lot of spending that kicks in automatically as the economy falls. Food Stamps would be one example of that. When the economy is operating near its potential, then government spending can crowd out productive private investment. When the economy is operating far below its potential, as it is today, then the only thing that government spending crowds out is idleness and unemployment.

Bringing the Trade Deficit under control on the other hand would bring down unemployment and thus the Budget deficit. That will really require us to do two things. First see a much weaker dollar so our goods are cheaper abroad, and foreign goods are more expensive here. Of course, that would require other currencies get stronger, and no government right now really wants a strong currency. Even the Swiss have been intervening in the markets to weaken their currency.

The second thing would be to rapidly move to the use of Natural gas as a transportation fuel. We have lots and lots of it here and it is cheap. The technology for running cars on NG is well established. We already have a good distribution system for natural gas, but not for refueling cars with it.

At the micro level, earnings and valuations provide plenty of reason to be bullish. This is particularly true when one looks at the prevailing level of interest rates. Currently 235 S&P 500 (47.0%) firms have dividend yields higher than the Friday yield on the 10 year t-note (2.06%), and over two thirds (339, or 67.8%) yield more than the five year note (0.95%). Heck, 1.05 or 21.0% yield more than even the 30 year bond (3.39%). Keep in mind that 116 or 23.2% of the S&P 500 stocks pay no dividend at all, so no matter how far the market falls, they will still have a 0.0% dividend yield.

Many of those companies, such as Apple (NasdaqGS: AAPL - News) with its $76 billion cash hoard could easily pay a dividend if they wanted to. Of the dividend paying stocks, 61.2% yield more than the 10 year and 88.3% yield more than the five year. Those sorts of numbers have not been seen since the early 1950s. One thing is absolutely certain, the coupon payment on those notes will never go up, while companies have been raising their dividends at a rapid pace of late. Nearly one quarter of the firms in the S&P 500 have raised their dividend at more than a 10% per year rate over the last five years, and those five years include the worst economic downturn since the 1930s. Almost one third of the dividend payers have increased their dividend by more than 10%.

At these levels it is clear to me that the market is pricing in not just slower growth, but an outright recession, either underway or just about to get underway. Despite that reassurance, the economy remains very fragile, and is thus very susceptible to any outside shocks. There is a potential 8.5 on the Richter scale looming in Europe’s problems. There is a very real chance that the Euro will not even exist in a few years, or if it does, it will be a diminished version where the common currency only applies to Germany and the Netherlands, and perhaps France. The Greeks and the Italians would go back to having Drachma and Lira. Getting from here to there has the potential for enormous dislocations, and hence big damage to the European economy.

That would inevitably spill over to the U.S. The French President Sarkozy and the German Chancellor Merkel got together and threw cold water on the idea of creating Eurobonds, or bonds that were backed by all of Europe. Instead they proposed the creation of a council of all the heads of government for the 17 countries using the Euro that would set national economic fiscal policies throughout Europe. This would probably require changes to the Constitutions of every one of those countries. I just don’t see that happening.

Ultimately, one of two things is going to have to happen. Either fiscal policy will have to be consolidated in Europe as a whole (what Merkel and Sarkozy were suggesting), which means that the individual countries will have to give up most of their sovereignty. Essentially Italy will have to become like Florida, and Germany like California. For that to happen, the overwhelming majority of people in Europe will have to think of themselves first and foremost as Europeans, not as French, German or Italian, just as most people here tend to think of themselves first and foremost as Americans, not as New Yorkers, Buckeyes, or Hoosiers. Given historical, cultural and language differences, that seems unlikely to happen. It would also mean that people in Germany and the Netherlands would see a big part of their tax dollars flowing to Greece and Spain, just like people in Connecticut and New Jersey see a big part of their tax dollars flowing to Mississippi and Alaska.

If that doesn’t happen, the common Euro currency has to fall apart. Italy and Greece, unlike the U.S. do not have their own printing press (hence when they get downgraded, their interest rates soar, not sink like here). They have to rely on the printing press of the ECB, and that is largely controlled by the Germans. The process of unscrambling the Euro egg and going back to Drachmas and Liras is going to be a very messy one, and will result in huge dislocations, and thus potentially cause economic collapse. For example, if someone in Italy owes $1 million Euros, how many Lira will that be when there is no longer a Euro to pay back? European banks are heavily invested in the bonds of the PIIGS, and there is a real threat to the stability of the European banking system. If the European banking system goes down, ours will follow as night follows day (or at the very least we will need to see Son of TARP). This is not a problem caused here, and is not the fault of Obama, or Bush, or Congress or even the Tea party, for that matter. It is a mess of the Europeans own making, but its effects will be felt here, just as the effects of the mortgage mess of our making were felt there.

The debt ceiling deal means that the government is out of any potential options to deal with the aftermath of such a shock. In the second quarter the economy grew at only 1.3%, far below the consensus estimates of 1.7% growth (we will get the second look at second quarter growth on Friday). The real shocker in the report were the downward revisions to past quarters. Most notably, the first quarter was revised down to just 0.4% from 1.9% and the fourth quarter was revised down to 2.3% from 3.1%. It also showed that the recession was FAR worse than previously reported, with a total decline in Real GDP of 5.1%, not the 4.2% we thought we had suffered. We need at least 2% growth to bring down unemployment.

Obama now says he wants to fight for jobs. Unfortunately, he just bargained away all of the ammo he needs to fight with. It is not that the current round of spending cuts are that big in the short term, they aren’t. The problem is it precludes taking any other fiscal action that could help on the growth and employment front. It is an open question still if the two measures that were taken to sustain growth this year (the payroll tax cut and the extension of unemployment benefits) will even be renewed next year. If they both expire, growth will probably be about 1.0% below what it would be if they are continued, or about 0.5% lower if either one of them is allowed to lapse. In our slow growth environment, 1.0% can make a big difference. Barring a real collapse of Europe, it now looks like 2012 will be a year of positive but still very low economic growth. More of the pseudo recovery where the economy grows, but unemployment remains very high, or possibly even rises a bit.

The Fed realized that at their last meeting, but only took a baby step towards addressing the problem. They finally were a bit more explicit about what they meant by “an extended period of exceptionally low interest rates. The new provisional definition is at least until the middle of 2013, something that will keep rates very low out to the two to three year part of the curve. However, even that baby step caused the most dissention at the Fed in my memory, with three dissents. My reading of the Fed statement was the Fed saying that the economy is running too cold with inflation for the foreseeable future running at below optimal levels, and unemployment remaining exceptionally high for a long time, but that the Fed Cavalry was not about to ride to the rescue of the settlers.

The big event of the week will be Bernanke’s speech in Jackson Hole Wyoming on Friday. Last year he telegraphed QE2 there. Given the dissention on the Fed board, I don’t think we will see QE3. There are some steps that could be done however. First and foremost of these would be to stop paying banks 0.25% on their excess reserves. That effectively rewards them for not lending. I would cut that to zero, or possibly even consider making the rate slightly negative.

Stay Invested but Buy Insurance

I am still inherently optimistic. The U.S. has weathered many storms before (world wars, depressions, terrorist strikes) and has always proved resilient. Stock market valuations remain compelling, and it is good to buy when things are cheap. Usually the end of the world does not happen. There are plenty of companies that are in great shape and will continue to grow and prosper. In the final analysis, the value of a company is based on what it will earn in the future, and what interest rate you have to discount those future earnings by. Corporate earnings are still very strong and interest rates are very low. With the exception of the darkest days of late 2008-early 2009, the 12 month forward P/E ratio is at its lowest level in decades.

Still, these are perilous times on a macro level. I first suggested taking out insurance against a debt ceiling fiasco in the June 30th edition of Earnings Trends. Then the 120 September SPY puts (my suggested vehicle, but just an example) were trading for $0.89. On Friday they are going for $9.05. Two weeks ago, I suggested selling off half of those, and selling off the other half if the S&P were to hit 1100. You have not been stopped out yet, but have come close a few times over the last two weeks. At this point I would say hold out for 1100 on the S&P until Labor Day. If we get to Labor Day and still have not hit 1100, go ahead and close out the position then.

On balance I remain bullish. I am however, pulling back on my year end target price for the S&P 500. I had been looking for about 1400 by the end of the year (since December). With the slower economy, and the turmoil on both sides of the Atlantic, something more on the order of 1325 now looks more realistic. Getting there is going to be a bumpy ride. Strong earnings should trump a dicey international situation, and the drama in DC. Valuations on stocks look very compelling, with the S&P trading from just 12.8x 2011, and 10.8x 2012 earnings. Put in terms of earnings yields, we are looking at 8.45% and 9.25%, while T-notes are only at 2.25%. The old “Fed Model suggested that the forward earnings yield (call it 8.85%) should be in line with the 10 year note.

On that basis, stocks are wildly undervalued. Even based on the 10 year trailing P/E, which includes two periods of very depressed earnings and does not take into consideration interest rates, stocks are just about fairly valued. However, even though we are seeing more analysts raise their estimates for 2012 than cut them, the overall expected total net income for 2012 has started to fall off by a total of about $40 billion over the last month. Of that $30 billion has come from the Financial sector. While that still implies growth of 9.45% over the expected 2011 levels, it is down from growth of 13.5% a month ago. That is a trend that bears watching very closely.

Long-term investors should start to take advantage of the current valuations. However I would not be shooting for the stars. Look for those companies with solid dividends (say over 2.5%), low payout ratios, solid balance sheets and a history of rising dividends, which are still seeing analysts raise their estimates for 2012. I don’t know if you will be happy doing so next week or even next month, but I am pretty sure that you will be quite satisfied five years from now if you do so...

Scorecard & Earnings Surprise

  • Another great earnings season. So far, 459 (91.8%) reports in. Total Growth looks low at 12.18% but that is entirely due to a handful of Financials). We have a 3.49 surprise ratio, and 3.13% median surprise. Positive surprises for 69.9% of all firms reporting.
  • Positive year-over-year growth for 349, falling EPS for 107 firms, a 3.26 ratio; 76.0% of all firms reporting have higher EPS than last year.
  • Nine sectors done, most others down to one or two left to go, but should not have much effect on final numbers.
  • Autos, Discretionary and Tech lead in surprise; Transports, Industrials lag.



more....

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From: 2MAR$8/24/2011 8:00:30 PM
   of 1764
 
Steve Jobs speech at Stanfor How to Live Your Life
June 19th, 2005 at 05:02pm ted.com 


This excellent, simple and practical speech was made by Steve Jobs, CEO of Apple at Stanford to the commencement (convocation) address to the graduating class at Stanford University. Its a must read for all young people. The past and the present of Steve is really amazing. He is “the” person responsible for Apple, and the comeback of Apple!

Here is the text of the speech…

Stanford Report, June 14, 2005
‘You’ve got to find what you love,’ Jobs says

This is the text of the Commencement address by Steve Jobs, CEO of Apple Computer and of Pixar Animation Studios, delivered on June 12, 2005.

I am honored to be with you today at your commencement from one of the finest universities in the world. I never graduated from college. Truth be told, this is the closest I’ve ever gotten to a college graduation. Today I want to tell you three stories from my life. That’s it. No big deal. Just three stories.

The first story is about connecting the dots.

I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in for another 18 months or so before I really quit. So why did I drop out?

It started before I was born. My biological mother was a young, unwed college graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife. Except that when I popped out they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking: “We have an unexpected baby boy; do you want him?” They said: “Of course.” My biological mother later found out that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would someday go to college.

And 17 years later I did go to college. But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents’ savings were being spent on my college tuition. After six months, I couldn’t see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn’t interest me, and begin dropping in on the ones that looked interesting.

It wasn’t all romantic. I didn’t have a dorm room, so I slept on the floor in friends’ rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example:

Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer, was beautifully hand calligraphed. Because I had dropped out and didn’t have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can’t capture, and I found it fascinating.

None of this had even a hope of any practical application in my life. But ten years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, its likely that no personal computer would have them. If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the dots looking forward when I was in college. But it was very, very clear looking backwards ten years later.

Again, you can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something – your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.

My second story is about love and loss.

I was lucky – I found what I loved to do early in life. Woz and I started Apple in my parents garage when I was 20. We worked hard, and in 10 years Apple had grown from just the two of us in a garage into a $2 billion company with over 4000 employees. We had just released our finest creation – the Macintosh – a year earlier, and I had just turned 30. And then I got fired. How can you get fired from a company you started? Well, as Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well. But then our visions of the future began to diverge and eventually we had a falling out. When we did, our Board of Directors sided with him. So at 30 I was out. And very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.

I really didn’t know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down – that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure, and I even thought about running away from the valley. But something slowly began to dawn on me – I still loved what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love. And so I decided to start over.

I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.

During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought NeXT, I returned to Apple, and the technology we developed at NeXT is at the heart of Apple’s current renaissance. And Laurene and I have a wonderful family together.

I’m pretty sure none of this would have happened if I hadn’t been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don’t lose faith. I’m convinced that the only thing that kept me going was that I loved what I did. You’ve got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don’t settle.

My third story is about death.

When I was 17, I read a quote that went something like: “If you live each day as if it was your last, someday you’ll most certainly be right.” It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: “If today were the last day of my life, would I want to do what I am about to do today?” And whenever the answer has been “No” for too many days in a row, I know I need to change something.

Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything – all external expectations, all pride, all fear of embarrassment or failure – these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas. I didn’t even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctor’s code for prepare to die. It means to try to tell your kids everything you thought you’d have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes.

I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and I’m fine now.

This was the closest I’ve been to facing death, and I hope its the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept:

No one wants to die. Even people who want to go to heaven don’t want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life’s change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.

Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma – which is living with the results of other people’s thinking. Don’t let the noise of other’s opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation. It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late 1960's, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and polaroid cameras. It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions.

Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: “Stay Hungry. Stay Foolish.” It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you.

Stay Hungry. Stay Foolish.

Thank you all very much.

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From: 2MAR$8/26/2011 12:08:05 AM
   of 1764
 
S&P 500 Analyst Target Price Changes for Aug. 23
bloomberg.com 

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From: 2MAR$8/27/2011 7:36:25 PM
   of 1764
 
Hurricane Irene Impact Potential as it approaches the east coast

Hurricane Irene is expected to hit North Carolina on Saturday and continue up the eastern seaboard towards New York. Irene is expected to hit New York on Sunday. An estimated 50 mln people may be impacted by the storm, which was recently downgraded to a Category 2 hurricane. While the impact of the storm will play out over the weekend, we wanted to highlight some sectors that are beginning to react to the storm.

Insurers: Insurers could be facing massive bills from the hurricane if there is significant damage. Summer storms have already taken a toll with damages being racked up to ~$5 bln. Shares of ALL, MET, and TRV fell ~3% Thursday and are modestly lower today in anticipation of the hurricane. Initial insured loss projections have been as low as $1 bln and as high as $11 bln. However, the projected path of the storm keeps changing and the level of losses depends on where it makes landfall. Other notable insurance cos include: ACE, AIG, AFL, Y, PGR, KIE, IYR, PRU.

Refineries: There are numerous refineries on the East Coast -located in New Jersey, Delaware, Virginia and Pennsylvania- which account for around 7% of the refining capacity in the US. Ahead of the impact of Hurricane Irene, a number of these refineries are being shut down. Companies that own/operate on the East coast include: COP, SUN, HESS Yesterday, gasoline futures rallied as much as 3% as a temporary shut down will disrupt supply. The possibility of closing New York harbor also could boost gasoline prices. The Coast Guard recently stated that it has no plans as of yet to shut the harbor.

Retailers: Retailers of consumer staples will likely see a boost to this week's sales as consumers flocked to stock up on the essentials: WMT, TGT, COST, BIG, SVU, WFM, SFY, WAG to name a few. Still, it is hard to assess how much of these sales will cannibalize future sales over the near term. Home improvement (HD, LOW,) retailers may see a boost is damages are widespread across the eastern seaboard.

Contractors: FBR Capital put out a note this morning highlighting potential beneficiaries of significant infrastructure damage. Firm cited PIKE as a largest emergency response electrical distribution contractor (25% of FY09 rev from emergency repair/storm work), with PWR and MTZ as other potential beneficiaries. TTEK is a water engineering/services play; they note other contractors to consider are DY, MTZ, UNTK and EME.



Company Winners & Losers Expected From Hurricane Irene (ALL, TRV, CB, BRK-A, DUK, D, ETR, AWK, VZ, HD, LOW, URI, PPG, BECN, IBI, BGG, GNRC, CRD-B, CLH, NYX, NDAQ)

Read more: Company Winners & Losers Expected From Hurricane Irene (ALL, TRV, CB, BRK-A, DUK, D, ETR, AWK, VZ, HD, LOW, URI, PPG, BECN, IBI, BGG, GNRC, CRD-B, CLH, NYX, NDAQ) - 24/7 Wall St. http://247wallst.com/2011/08/26/company-winners-losers-expected-from-hurricane-irene-all-trv-cb-brk-a-duk-d-etr-awk-vz-hd-low-uri-ppg-becn-ibi-bgg-gnrc-crd-b-clh-nyx-ndaq/#ixzz1WH8nrpNX

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To: 2MAR$ who wrote (1474)8/28/2011 2:58:48 PM
From: 2MAR$   of 1764
 
Top Analyst Calls of the Week (AAPL, BAC, BSX, GOOG, HGSI, JNPR, NDAQ, NEM, P, PCLN, RIMM, SGEN, SQNM, SLM, VVUS, VMW, INT, JPM, GOOG BGFV, BIIB, ETN, HIG, REGN, RIMM, RUE, VMW, INT

Read more: Top Analyst Upgrades & Downgrades (BGFV, BIIB, ETN, HIG, HGSI, P, REGN, RIMM, RUE, SQNM, VMW, INT) - 24/7 Wall St. http://247wallst.com/2011/08/26/top-analyst-upgrades-downgrades-bgfv-biib-etn-hig-hgsi-p-regn-rimm-rue-sqnm-vmw-int/#ixzz1WLv4iKrA

Apple Inc. (NASDAQ: AAPL) was in the news after the departure of Steve Jobs as CEO. What is interesting is that almost every research analyst out there came out and defended Apple saying that this was mostly factored in and that the prospects for Apple remain solid. Here were some of the calls that we saw:


  • Maintained Overweight at JPMorgan;
  • Maintained Outperform at Credit Suisse;
  • Maintained Buy at BofA/ML;
  • Reiterated Buy at Canaccord Adams;
  • Maintained Buy at Gabelli;
  • Maintained Buy at Deutsche Bank.

      Bank of America Corporation (NYSE: BAC) had a huge week after securing Warren Buffett as an investor and on news that it was set to sell half its stake in China Construction Bank as another stealth capital raise. Here is what was odd. On a day that a crazy rumor was out there that BofA might be taken over by J.P. Morgan Chase & Co. (NYSE: JPM), J.P. Morgan’s credit analysis team actually raised their ratings on the Bank of America credit calling the selling way overdone on the downside. BofA’s equity research team repaid the favor the day before Buffett’s investment by downgrading estimates and targets of rival money center banks.

      Boston Scientific Corporation (NYSE: BSX) can use all the help it can get usually. This one was reiterated as a “Buy” rating at Zacks Investment Research, but more important is that it was the Value Stock of the Day even though Morgan Keegan cut the rating to a “Market Perform” rating on the same day. Shares were around $6.35 on Friday afternoon and the 52-week range is $5.04 to $7.96. Literally finding anything bullish about Boston Scientific is worth noting these days.





      Google Inc. ( NASDAQ: GOOG) was a strange call this week. S&P removed its sell rating after literally a few days, due to the price target objective being hit. Then on Wednesday came a new coverage call from Robert W. Baird with an ‘Outperform’ rating on the stock.

      Human Genome Sciences Inc. (NASDAQ: HGSI) had a rough week and the call did not really go in favor of the analyst yet. The Lupus drug company was initiated with a “Buy” rating at Brean Murray. More important is the $22.00 price target when you consider that shares are under $13.00. This one has lost its mojo but at least one big bull is still there with a 52-week trading range of $11.84 to $30.48.

      Juniper Networks, Inc. (NYSE: JNPR) has been battered and beaten as a networking equipment stock that lost its way. Shares were under $21.00 on Friday and the 52-week trading range is $19.63 to $45.01. This stock was raised to Outperform from Market Perform at Morgan Keegan and the price target objective was $27.00. This one is on sale now and this call is still well under the consensus price target above $30.00.

      NASDAQ OMX Group (NASDAQ: NDAQ) is believed to not be in as much trouble over any financial transaction tax proposals in Europe. UBS decided on Thursday to raise the rating to “Buy” at UBS. Shares were around $22.65 late on Friday and the 52-week range is $17.81 to $29.71. The report called the electronic exchange a deep discount at great valuations and even noted that it had a defensive nature that would hold up well in a downturn. That logic may seem flawed but the call was a day after Raymond James raised the rating to “Strong Buy” on at least some of the same logic.

      Newmont Mining Corp. (NYSE: NEM) is one of the gold miners that is driving the sector and it has the best dividend of its peers as well. This last Monday it was Raised to Buy from Hold at Citigroup. More importantly, Citi raised the price target to $80 from $55 for a huge gain in the outlook. Everyone knows that gold has to stabilize and/or remain high, but the earnings growth here should be massive considering the higher prices locked in. RBC also raised its rating up to “Sector Perform” later in the week on Thursday due to increased earnings power.

      Pandora Media, Inc. (NYSE: P) managed to do better than expected on earnings as it grew members. It also is not losing as much per customer some thought. Bank of America Merrill Lynch reiterated its “Buy” rating on Friday but raised the target to an above-consensus target at $19.00 now. Shares were around $13.50 late on Friday and that leaves plenty of upside if even the consensus price target of $17.44 is hit.

      Priceline.com Incorporated (NASDAQ: PCLN) is one that had been on a major move this year. Any analyst upgrade or initiation may seem late to the party now. Still, Credit Suisse started new coverage on Tuesday with an Outperform rating. More important is that $720.00 price target. Shares were right around $500.00 late on Friday and the stock was around $450.00 when that positive call was made. That is a 10% gain in the week with a lot of perceived upside left (still over 40%) if it









      24/7 Wall St. Top Analyst Calls of the Week (AAPL, BAC, BSX, GOOG, HGSI, JNPR, NDAQ, NEM, P, PCLN, RIMM, SGEN, SQNM, SLM, VVUS, VMW, INT, JPM, GOOG) Posted: August 27, 2011 at 7:31 am


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      Research in Motion Ltd. (NASDAQ: RIMM) is a stock which we have real questions about in the years ahead, whether Steve Jobs is gone from Apple Inc. (NASDAQ: AAPL) or not. iPhone and Android from Google Inc. (NASDAQ: GOOG) rule, Blackberry does not even serve. It is in the king’s dungeon. To see an analyst upgrade is rare right now, particularly if the call on Friday has any real merit. The stock was raised to “Buy” from Neutral at Stern Agee and the prior $28 target was lifted to $35 on new product hopes. The company went out on a limb with this call noting the new Blackberry 7 OS will help have the strongest product cycle in some time. The caveat is a concern over competitive risks and over margin compression. Those are risks, but the big risk anyone needs to understand is relevance. Shares were back up to over $29 late on Friday, up considerably from the recent lows of about $22.00.

      Seattle Genetics Inc. ( NASDAQ: SGEN) is a call that is so far not working out very well. After it received the first FDA approval this last week, some maintained a positive bias. Not Canaccord Genuity. The firm reiterated its “Sell” rating with a dismal $10.00 price target. Shares closed at $ with $10 target at $15.04 a week ago and the stock was above $16.50 late on Friday.


      Sequenom Inc. (NASDAQ: SQNM) can use all the help it can get after the scandals have rocked the company in the past. The stock was initiated as “Outperform” at William Blair on Friday. The stock was up to $5.65 (over 5%) late on Friday and the 52-week range is $5.07 to $8.71. The consensus price target was $7.85 on this one and it has seemed to begin the process of a turnaround if the research call is correct.
      SLM Corporation (NYSE: SLM) is the old student loan player which saw its business model gutted in education loan reform. It lost most of its fans, and any remaining fans tend to be fair weather fans. Not this last week. On Monday it was surprising to see that SLM was raised by Credit Suisse to ‘Outperform’ from ‘Neutral.’ The price target was lifted to $18.00 from $16.00 as well. Shares were under $13.75 late on Friday.

      VIVUS Inc. (NASDAQ: VVUS) was reiterated as “Buy” with a $9 target on Wednesday at BofA Merrill Lynch. What is interesting about this one is that many analysts have not covered it and this was on the heels of a questionable private financing of $45.8 million at a deep discount this last week. Some brokerage firms use the opportunity to bash a stock or even to throw the towel in for the stock, but not this call. It sounded like a ringing endorsement.

      VMware Inc. (NYSE: VMW) was raised to Outperform at Pacific Crest on Friday. The report calls for its big mistake of its change in pricing as effectively being a mistake learned that it would not repeat. Some are still concerned that real damage was done, but that is still up in the air when you consider that the stock has bounced so much. Shares were up over 4% at almost $84.00 late on Friday and the 52-week range is $71.04 to $111.43.

      World Fuel Services Corporation (NYSE: INT) was not the typical “value stock” we usually track, but don’t tell it to Zacks Investment Research. They named it “Value Stock of the Day” on Friday and shares rose on the report. The company supplies fuel for marine, aviation and land customers at more than 6,000 locations in 200 countries. What is interesting here is that around $35.00, the 52-week high is $42.15 and the consensus analyst price target is still north of $44.00 per share.







      Read more: 24/7 Wall St. Top Analyst Calls of the Week (AAPL, BAC, BSX, GOOG, HGSI, JNPR, NDAQ, NEM, P, PCLN, RIMM, SGEN, SQNM, SLM, VVUS, VMW, INT, JPM, GOOG) - 24/7 Wall St. http://247wallst.com/2011/08/27/247-wall-st-top-analyst-calls-of-the-week-aapl-bac-bsx-goog-hgsi-jnpr-ndaq-nem-p-pcln-rimm-sgen-sqnm-slm-vvus-vmw-int-jpm-goog/#ixzz1WLqNRzbi

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      From: 2MAR$8/29/2011 10:33:21 PM
         of 1764
       
      NYSE big gainers * note NBG +34% & TNA

      Symbol Name Last Trade Change Volume Related Info

      MILL Miller Energy Resourses, Inc. C 3.65 4:01PM EDT 1.38 (60.79%) 3,935,896 Chart, Profile, More


      VQ Venoco, Inc. Common Stock 11.76 4:03PM EDT 2.78 (30.96%) 3,087,745 Chart, Profile, More

      CIS Camelot Information Systems Ame 5.62 4:02PM EDT 1.12 (24.89%) 1,745,722 Chart, Profile, More

      MTG       MGIC Investment Corporation Com 2.93 4:02PM EDT 0.47 (19.11%) 12,529,501 Chart, Profile, More
      RDN Radian Group Inc. Common Stock 3.51 4:01PM EDT 0.55 (18.58%) 8,794,632 Chart, Profile, More

      HIG-WT       THE HARTFORD FINANCIAL SERVICE 12.10 4:03PM EDT 1.82 (17.70%) 28,252 Chart, More

      RTLA       iPath Long Extended Russell 200 48.50 4:00PM EDT 6.72 (16.09%) 5,360 Chart, Profile, More

      ANW       Aegean Marine Petroleum Network 5.63 4:02PM EDT 0.78 (16.08%) 549,095 Chart, Profile, More

      MEG       Media General, Inc. Class A Com 2.39 4:00PM EDT 0.32 (15.46%) 130,704 Chart, Profile, More

      WG       Willbros Group, Inc. (DE) Commo 6.21 4:03PM EDT 0.83 (15.43%) 909,665 Chart, Profile, More

      PGI       Premiere Global Services Inc 8.43 4:05PM EDT 1.12 (15.32%) 387,219 Chart, Profile, More

      RAS       RAIT Financial Trust New Common 4.01 4:01PM EDT 0.53 (15.23%) 1,708,543 Chart, Profile, More

      ZLC       Zale Corporation Common Stock 4.76 4:03PM EDT 0.62 (14.98%) 769,845 Chart, Profile, More

      NBG-PA       National Bank of Greece SA Spon 6.03 4:00PM EDT 0.76 (14.42%) 296,134 Chart, More

      TNA       Direxion Small Cap Bull 3X Shar 48.55 4:00PM EDT 6.08 (14.32%) 18,839,459 Chart, Profile, More

      URTY       ProShares UltraPro Russell2000 53.36 4:00PM EDT 6.67 (14.29%) 532,455 Chart, Profile, More

      PRO       PROS Holdings, Inc. Common Stoc 15.43 4:05PM EDT 1.90 (14.04%) 248,942 Chart, Profile, More

      OWW       Orbitz Worldwide, Inc. Common S 2.55 4:03PM EDT 0.31 (13.84%) 468,439 Chart, Profile, More

      BBW       Build-A-Bear Workshop, Inc. Com 5.72 4:00PM EDT 0.69 (13.72%) 80,210 Chart, Profile, More

      XNY       China Xiniya Fashion Limited Am 2.50 4:05PM EDT 0.30 (13.64%) 13,578 Chart, Profile, More

      DRC       Dresser-Rand Group Inc. Common 42.61 4:01PM EDT 5.10 (13.60%) 2,543,432 Chart, Profile, More

      SFI       iStar Financial Inc. Common Sto 7.10 4:01PM EDT 0.84 (13.42%) 1,535,285 Chart, Profile, More

      MWA       MUELLER WATER PRODUCTS Common S 2.49 4:01PM EDT 0.29 (13.18%) 1,716,581 Chart, Profile, More

      MSO       Martha Stewart Living Omnimedia 3.45 4:01PM EDT 0.40 (13.11%) 445,233 Chart, Profile, More

      HIG       Hartford Financial Services Gro 19.42 4:01PM EDT 2.23 (12.97%) 11,648,602 Chart, Profile, More

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      From: 2MAR$8/29/2011 10:42:56 PM
         of 1764
       
      NASDAQ gainers

      Symbol Name Last Trade Change Volume Related Info
      CEDC Central European Distribution C 8.20 4:00PM EDT 2.73 (49.91%) 9,775,548 Chart, Profile, More
      CIGX       Star Scientific, Inc. 2.59 4:00PM EDT 0.78 (43.09%) 9,557,610 Chart, Profile, More
      MCOX Mecox Lane Limited 1.85 4:00PM EDT 0.40 (27.59%) 1,571,051 Chart, Profile, More
      NWK Network Equipment Technologies, 2.57 4:00PM EDT 0.53 (25.98%) 182,981 Chart, Profile, More
      SPIR       Spire Corporation 2.11 3:56PM EDT 0.43 (25.60%) 37,523 Chart, Profile, More
      THTI THT Heat Transfer Technology, I 2.59 1:01PM EDT 0.49 (23.33%) 300 Chart, Profile, More
      JVA Coffee Holding Co., Inc. 19.39 4:00PM EDT 3.54 (22.33%) 1,762,499 Chart, Profile, More
      CVTI Covenant Transportation Group, 4.72 4:00PM EDT 0.84 (21.65%) 113,741 Chart, Profile, More
      SKBI       Skystar Bio-Pharmaceutical Comp 2.68 4:00PM EDT 0.46 (20.72%) 66,487 Chart, Profile, More
      VIMC       Vimicro International Corporati 1.53 4:00PM EDT 0.26 (20.47%) 74,976 Chart, Profile, More
      NVAX Novavax, Inc. 1.68 4:00PM EDT 0.28 (20.00%) 1,507,240 Chart, Profile, More
      LGND Ligand Pharmaceuticals Incorpor 14.96 4:00PM EDT 2.49 (19.97%) 445,898 Chart, Profile, More
      DRRX       Durect Corporation 1.77 4:00PM EDT 0.29 (19.59%) 665,964 Chart, Profile, More
      VICL Vical Incorporated 3.86 4:00PM EDT 0.63 (19.50%) 1,594,898 Chart, Profile, More
      MOTR Motricity, Inc. 2.36 4:00PM EDT 0.37 (18.59%) 4,039,024 Chart, Profile, More
      SMTX SMTC Corporation 1.38 4:00PM EDT 0.21 (17.95%) 88,322 Chart, Profile, More
      SCEI Sino Clean Energy Inc. 1.47 3:59PM EDT 0.22 (17.60%) 585,534 Chart, Profile, More
      ROIAK Radio One, Inc. 1.45 3:59PM EDT 0.21 (16.94%) 76,655 Chart, Profile, More
      APPY AspenBio Pharma, Inc. 3.48 3:59PM EDT 0.50 (16.78%) 10,323 Chart, Profile, More
      TWER Towerstream Corporation 3.62 4:00PM EDT 0.52 (16.77%) 498,716 Chart, Profile, More
      WTFCW Wintrust Financial Corporation 14.75 2:58PM EDT 2.10 (16.60%) 1,800 Chart, Profile, More WINN Winn-Dixie Stores, Inc. 7.60 4:00PM EDT 0.99 (14.98%) 2,080,298 Chart, Profile, More
      ICLK interCLICK, Inc. 6.02 4:00PM EDT 0.78 (14.89%) 250,252 Chart, Profile, More
      GLBL Global Industries, Ltd. 4.53 4:00PM EDT 0.58 (14.68%) 1,708,636 Chart, Profile, More
      DXYN The Dixie Group, Inc. 3.94 4:00PM EDT 0.50 (14.53%) 14,514 Chart, Profile, More
      .



      Headlines
      WINN [audio] Winn Dixie Stores Inc Earnings Conference Call (live tomorrow at 8:30 am ET)
        Monday, August 29, 2011

        Sunday, August 28, 2011

        Saturday, August 27, 2011

        Friday, August 26, 2011


        All Headlines for these symbols...

        All headlines for APPY, CEDC, CIGX, CVTI, DRRX, DXYN, GLBL, ICLK, JVA, LGND, MCOX, MOTR, NVAX, NWK, ROIAK, SCEI, SKBI, SMTX, SPIR, THTI, TWER, VICL, VIMC, WINN, WTFCW

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        From: 2MAR$8/31/2011 9:09:47 PM
           of 1764
         
        World Indexes Brazil , Dax. Japan , Hong Kong , Shang Hai
















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