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Monthly Archives: May 2011

Jim Grant: The Current Monetary System Is “Collectivist Top-Down Tyranny”

“Jim Grant has backed a return to the gold standard in comments made at a debate last night in New York, saying, “American needs a debit card, not a credit card” (via the New York Sun).

Grant was backed in the debate by David Stockman, former Reagan OMB director, said, “The gold standard wouldn’t have allowed forty years of deficits.”

And while Edward Chancellor, of GMO, and Richard Sylla, an NYU professor, both expressed doubts over a return to the gold standard, Grant argued its superiority.

From the New York Sun: ”

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30 States Sign Up for “Bermuda Style Financial Wizardry” for Insurance Companies

“…………

Captives provide insurance to their parent companies, and the term originally referred to subsidiaries set up by any large company to insure the company’s own risks. Oil companies, for example, used them for years to gird for environmental claims related to infrequent but potentially high-cost events. They did so in overseas locations that offered light regulation amid little concern since the parent company was the only one at risk.

Now some states make it just as easy. And they have broadened the definition of captives so that even insurance companies can create them. This has given rise to concern that a shadow insurance industry is emerging, with less regulation and more potential debt than policyholders know, raising the possibility that some companies will find themselves without enough money to pay future claims. Critics say this is much like the shadow banking system that contributed to the financial crisis…………..”

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Upgrades and Downgrades This Morning

Upgrades

BP – BP trading up ~0.7%; Hearing tier 1 firm upgrade

MDT – Medtronic target raised to $48 from $42 at Oppenheimer

QCOM – Smartphone checks indicated solid April sell through trends; QCOM has a leadership position with its broad chipset portfolio and should gain share in 2H/11 – Canaccord Genuity

EFTC – E*TRADE upgraded to Buy from Neutral at Goldman

AWK – American Water upgraded to Buy from Hold at Citigroup

TEVA – Teva Pharma upgraded to Outperform from Market Perform at Bernstein

SPRD – Spreadtrum Comms early strength attributed to tier 1 firm upgrade

ROST – Ross Stores upgraded to Hold from Sell at Citigroup

Downgrades

T – T-Mobile USA reports weak 1Q11; may actually be in better position for T deal – Oppenheimer

TEVA – Teva Pharma upgraded to Outperform from Market Perform at Bernstein

ANR – Alpha Natural Resources: Raising met exposure while resetting MEE Expectations; trimming estimates & target price but future changes to come – FBR Capital Mkts

CCJ – Cameco upgraded to Buy from Hold at TD Newcrest

EOG – EOG Resources: Q1 review; organic growth to continue in ’11 and ’12 – Wunderlich

SPLS – Staples downgraded to Reduce from Neutral at Nomura

ANF – Abercrombie & Fitch downgraded to Neutral from Positive at Susquehanna

PEP – PepsiCo added to Conviction Buy List at Goldman

VRTX – Vertex Pharm upgraded to Buy from Hold at ThinkEquity

ALU – Alcatel-Lucent downgraded to Sell from Hold at Societe Generale

MJN – Mead Johnson Nutrition downgraded to Neutral from Buy at Goldman

APO – Apollo Global Management initiated with a Buy at Goldman

TEF – Telefonica S.A. downgraded to Hold from Buy at Deutsche Bank

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Gapping up and Down This Morning

Gapping Up

SD +5.9%, ONTY +7.8%, DTG +8.7% and HTZ +4.2%, SLV +5.3%,  EOG +2.8%, SLW +2.7%,AUXL +2.6, ELN +2.8%, MOBI +5.1%, TC +4.6%, SYY +3.1%, STO +2%, RIO +1.9%, GG +1.6%, APO +2.7%, PEP +0.8%, AG +4.2%, SLW +3.5%, PAAS +3.3%, VALE +3.3%, DEO +1.4%, BP +1%, BSFT +10.1%

Gapping Down

MDVN -1.7%, IRE -2.6%,BBVA -1.3%, HBC -1.4%,REN -2.9%

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U.S. Futures Pointing Higher on Expectations that Global Growth in Intact

“U.S. stock-index futures climbed, with the Standard & Poor’s 500 Index poised to recover some of last week’s losses, amid optimism that the global economic recovery is intact.

U.S. Steel Corp. advanced 1.4 percent in German trading as Barron’s reported that the nation’s biggest producer by volume may gain as much as 65 percent over the next year. Exxon Mobil Corp. (XOM) and Freeport-McMoRan Copper & Gold Inc. (FCX) increased as commodities rebounded. Hertz Global Holdings Inc. (HTZ) may move after the company offered to buy all the outstanding shares of Dollar Thrifty Automotive Group Inc. (DTG)

Futures on the S&P 500 expiring in June gained 0.4 percent to 1,339.8 at 6:43 a.m. in New York. Dow Jones Industrial Average futures also advanced 0.4 percent to 12,614, while Nasdaq-100 Index futures rose 0.6 percent to 2,388.”

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Greek Concerns Hurt Euro Banks Keeping Markets in the Red

“European stocks fell as banks declined after officials agreed to review the terms of Greece’s bailout, reigniting concern about the region’s sovereign debt crisis. U.S. index futures and Asian equities advanced.

National Bank of Greece SA (ETE) dropped 3.54 percent as the cost of insuring Greek debt climbed to a record. HSBC Holdings Plc (HSBA) slid 1.6 percent after Europe’s largest bank by market value reported higher costs. Centrica Plc (CNA) led utilities lower after saying higher taxes will hurt earnings. MAN SE (MAN) gained 2.6 percent after Volkswagen AG offered to buy the truckmaker.

The benchmark Stoxx Europe 600 Index fell 0.5 percent to 280 at 11:46 a.m. in London, extending last week’s 0.9 percent decline. The measure has still climbed 6.8 percent since March 16 as companies reported earnings that topped estimates and the Federal Reserve pledged to keep interest rates low.”

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German Exports Hit an All Time Record High

“German exports surged in March to the highest monthly value ever recorded, boosting growth in Europe’s largest economy.

Exports, adjusted for work days and seasonal changes, jumped 7.3 percent from February, when they gained 2.8 percent, theFederal Statistics Office in Wiesbaden said today. Economists had forecast a 1.1 percent increase, according to the median of 10 estimates in a Bloomberg News survey. Exports were worth 98.3 billion euros ($141.4 billion) in March, the most since records began in 1950, the statistics office said.”

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U.S. Treasury Will Push China to Raise Rates and Let Yuan Float During This Weeks Meeting

“Treasury Secretary Timothy F. Geithner will urge China to allow higher interest rates when he meets with Chinese leaders this week, as the U.S. extends its push for a stronger yuan.

Geithner will say China should relax controls on the financial system and give foreign banks and insurers more access, said David Loevinger, the Treasury Department’s senior coordinator for China. Officials from both nations are meeting in Washington today and tomorrow as part of the annual Strategic and Economic Dialogue.”

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BOJ Warns of Severe Inflation Based Upon Debasement

“It appears not only Bill Gross is insane enough to realize that direct monetization = inevitable interest rate hike. Slowly, even the central banks are starting to gravitate toward this conclusion.  From The just released minutes by the BOJ: “One member — referring to some recent views that the Bank should underwrite JGBs to fund restoration and rebuilding — expressed the opinion that such an action might initially seem to work well, but lessons drawn from history showed that it would eventually result in severe inflation and thereby inflict substantial damage on people’s living situation. This member continued that the Bank needed to keep working to gain the wider public’s understanding on this point….”

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