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Monthly Archives: May 2011

JPM Sees More Cash Flow For Gaming Stocks

“Over the last year, returns on invested capital (ROIC) and value spreads (ROIC-weighted average cost of capital, WACC) increased for most of the gaming operators and lodging companies in our coverage universe, after posting declines during the prior two years.

For the gaming operators, ROICs and spreads suffered in 2008 and 2009, before rebounding in 2010, as invested capital (capex) increased for many operators and much greater volatility (beta) increased the theoretical cost of equity. For lodging companies, ROICs and value spreads also hit a trough in 2009 and 2010, after peaking in 2006 to 2007.

As we look toward 2012, the Asia/Macau-based operators ( Wynn Resorts (ticker: WYNN), Las Vegas Sands (LVS) and Melco Crown Entertainment (MPEL) should generate ROICs in 2011 and/or 2012 that exceed prior peaks given recent Macau strength and meaningful free-cash-flow generation. In our view, this should help to maintain current enterprise value/earnings before interest, taxes, depreciation and amortization (EV/Ebitda) valuations.”

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U.S. Default Swaps Triple In the Last Six Trading Days

It sounds dotty to suggest the US is at imminent risk of default. A country that has rarely been able to borrow so cheaply, that issues debt in its own currency and has just demonstrated that it can print as much money as it likes need never miss a coupon payment.

U.S. Savings Bonds

Yet in the past fortnight traders have come to the conclusion that America might breach its own constitutional clause that its debt “shall not be questioned”. According to Markit, the cost of one-year US credit default swaps, which insure against default, almost tripled in six trading days.

According to this – far from perfect – measure, the US is now more likely to default than Indonesia or Slovenia in the next 12 months.

America’s dysfunctional politics is starting to infect the markets. To blame are congressmen who, like House Speaker John Boehner, argue it would be less damaging to default than to raise the debt limit without dealing with the deficit. Traders had assumed this was political brinkmanship as usual until Mr Boehner was publicly supported by Stanley Druckenmiller, an eminent former hedge fund manager. He told the Wall Street Journal earlier this month that a few days of missed payments would be worth it to force the White House to accept cuts.

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David Einhorn has called for Microsoft Corp Chief Executive Steve Ballmer to step down

“NEW YORK/SEATTLE (Reuters) – Influential hedge fund manager David Einhorn has called for Microsoft Corp Chief Executive Steve Ballmer to step down, saying the world’s largest software company’s leader is stuck in the past.

“His continued presence is the biggest overhang on Microsoft’s stock,” Einhorn said in reference to Ballmer.

The comments by outspoken Einhorn, who made his name warning about Lehman Brothers’ financial health before the investment bank’s collapse, are the most pointed yet from a high-profile investor against Microsoft’s leadership.

Microsoft shares, which have been static for over a decade, gained 0.87 percent in after-hours trading after Einhorn’s comments, the most of any Dow Jones industrial average component.”

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Chinese Accounting Practices For the Birds

After the melamine in milk, plastic in rice, led in children’s toys, and other harmful chemicals in pet foods…..should we have expected accounting standards to be  kosher ?

“Can any accounting out of China be trusted?  This is what prudent investors have to start asking themselves.  Since early this year a new report comes out nearly every week that reveals some alleged misbehavior on the part of yet another China-based firm. The first firm to earn the spotlight was a billboard company, but now some of China’s biggest state-owned firms are taking the stage.  If the state-owned firms are fudging on the books or ‘overlooking’ key data, how on earth do investors trust any company’s reports in China?

Aluminum Corporation of China, or Chinalco, is a holding company and the controlling shareholder in Aluminum Corporation of China Ltd. (NYSE: ACH), or Chalco. Along with China National Offshore Oil Corp. and China Unicom, which respectively control Cnooc Ltd. (NYSE: CEO) and China Unicom (Hong Kong) Ltd. (NYSE: CHU), Chalco has been named as one of 17 state-owned enterprises to have irregularities and other violations in their financial statements to the Chinese government in fiscal year 2009. China’s Xinhua news agency reports that by March of this year 735 irregularities had been corrected and “65 people responsible for the irregularities or violations have been punished.”

The accounting irregularities for the 17 companies included overstatement of assets, profits, and liabilities by $292.4 million, $405 million, and $528 million, respectively. Undercounted assets totaled $446 million, while undercounted profits totaled $185 million, and undercounted liabilities totaled $385 million….”

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Japan’s Earthquake Seen Hurting U.S. Economy More Than Expected

“The Japanese earthquake and tsunami in March appears to have damaged the US economy much more than expected and could set back hopes for a robust recovery.

A series of analysts have recently cut their second-quarter gross domestic product projections, based in large part on impact that the Japan disaster is having on the automotive industry.

Factory shutdowns and ensuing problems with getting parts have slowed vehicle production, a move likely to drive up prices, increase unemployment and slow consumer spending, according to recent projections from economists at Goldman Sachs and Deutsche Bank.

Japan is having an impact across a swath of the economy, but is being felt most acutely on vulnerable Detroit automakers, whose business was just beginning to recover when the disaster hit March 11.”

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Government Sach Avoids Long Arm of the Law on Energy Manipulation

Manipulation Case Against Oil Traders

Goldman Accused of manipulation

It is no secret that Zero Hedge follows every utterance by Goldman Sachs (Morgan Stanley, not so much – it is sad just how irrelevant MS has become when it comes to swaying any opinion at all) as pertains to the firm’s outlook on various commodities, simply because by the very nature of the firm’s trading operations, whereby its prop desk (yes, Goldman’s prop desk is alive and well) controls a substantial amount of the actual commodity outstanding (in either paper or physical form) and then advises clients to do the opposite of what the firm itself is doing. In essence: using its economy of scale (or monopoly, however one wishes to define it), Goldman can sway the market this way and that with one simple “client” note. The recent fiasco whereby Goldman downgraded Brent on April 12 only to upgrade it two days ago, using the very same assumptions, is nothing more than just the latest example of what we have claimed over and over is outright market manipulation. Today, we find we are not alone after Oppenheimer’s Fidel Gheit accused the firm of precisely the same thing on Bloomberg TV: “Unfortunately, without repeating the names of the brokers, everybody knows who the usual suspects are. These are the people in 2008 that were making a bet on $200 oil. This is another form of market manipulation in my view.Whether or not they are influencing the market and manipulation could be a stronger word, but they are influencing the market. They are doing things that could be beneficial to them but harmful to the rest of us. That is where government comes in and says stop, enough. You have a Ferrari or a Maserati and can go 120 mph, but guess what? Those of us who can only go 60 miles per hour will be pulverized. That is where the government has to come in and say there is a speed limit here, but that is not happening.” Of course, if Oppenheimer was large enough and influential enough to do what Goldman does, we are 105% confident Fidel would be singing a totally different tune……

[youtube:http://www.youtube.com/watch?v=dPee8W8ecbY 450 300]

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Geithner: “Dark Forces” Working Against Financial Reform

“Treasury Secretary Timothy F. Geithner said “dark forces” are waging a “war of attrition” against efforts to strengthen regulation of the financial system.

“You’re seeing some people run a war of attrition against the reform act,” Geithner said at an event today in Washington, without identifying the people. “They’re trying to starve the agencies of funding so they can’t enforce protections for investors.”

Geithner also said opponents of the Obama administration are trying to block presidential appointments to regulatory agencies “as a way to get leverage over the outcome, and they’re trying to slow down so that they can weaken over time the thrust” of the Dodd-Frank financial overhaul law. “We’re not going to let that happen.”

Republican lawmakers are opposing the nomination of Peter Diamond to the Federal Reserve Board. The White House renominated Diamond in January, marking a third try at confirmation after the Senate adjourned in December without approving him. Diamond’s initial candidacy was returned to the White House in August under a procedural objection.

Asked by a moderator at the breakfast held by Politico to identify the “mysterious forces” working against the administration, Geithner said, “dark forces, I would say.”

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Chanos Gets Aggressive Against Alternative Energy

“Jim Chanos is at Ira Sohn right now.

He’s not talking about his China short… he’s talking about JAPAN and alternative energy.

On alt energy, he said (via our own Katya Wachtel) : “I don’t want to piss off any more countries with 1 billion ppl so today we’ll upset the greenies… A lot less of them.”

The title of his presentation is “Does solar and wind = hot air?”

Per Josh Brown, he’s making some key points about the inefficiency of it all. Wind is 50% more expensive than natural gas. Solar is 4x as expensive.

He’s short Danish windpower company Vestas (via DDInvesting).

On Vestas — he sees evidence of pulling revenue ahead — as well as stiff competition in both the US and China.

Meanwhile, he says it’s SOLAR that he’s most excited about shorting. He sees evidence of waning demand in a market that’s already high dependent on subsidies by countries in bad fiscal shape, like Spain and Italy.

The one name he hates: First Solar due to questionable tech, and a deteriorating edge.”

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Wall Street Bounces on Technicals; Not Terribly Convincing

“(Reuters) – Stocks rose modestly on Wednesday after days of selling produced a technical rebound and investors were lured by attractive share prices.

Stocks reversed losses on manufacturing data pointing to a slowing in the U.S. economic recovery.

Energy shares were among the best performers, gaining on higher oil prices. Homebuilders also advanced.

The S&P 500 index hit its lowest level on an intraday basis since April 19 after closing below its 50-day moving average for a second straight day on Tuesday.

The benchmark index had fallen for three consecutive sessions, dropping 2 percent over that time, with market internals showing declining stocks outnumbering advancers.

“It’s more of a technical bottom — the constant selling just got exhausted,” said Rick Meckler, president of investment firm LibertyView Capital Management, in New York.”

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Ukraine removes grain export quotas

In a move that will surely help major grain operations in the country (including ADM, Cargill and BG), the Ukraine announced that they have removed grain quotas limiting the amount of agricultural products domestic operations could export out of the country.

European wheat prices are presently the equivalent of $345 per tonne for country’s anticipated harvest.

It is anticipated that the country will also move to enforce small taxes on grain exports in the coming days.

Read about it here.

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Energy Department: oil and gas supplies grow

NEW YORK (AP) — The nation’s crude oil and gasoline supplies increased last week as refinery capacity rose, the Energy Department said Wednesday.

Crude supplies rose by 600,000 barrels to 370.9 million barrels, the department’s Energy Information Administration said. The total is 0.2 percentage point more than a week ago and 1.6 percent more than a year ago.

Analysts expected a 1.6 million-barrel decrease in oil supplies, according to Platts, the energy information arm of McGraw-Hill Cos.

Gasoline supplies rose 3.8 million barrels, or 1.8 percent, to 209.7 million barrels, the agency said. The total is about 5.4 percent less than year-ago levels. Analysts expected gasoline supplies to increase by 750,000 barrels.

Demand for gasoline over the four weeks that ended May 20 was 2.1 percent less than it was in the year-ago period, averaging nearly 9 million barrels a day.

The Energy Department said U.S. refineries ran at 86.3 percent of total capacity on average, which was an increase of 3.1 percent. Analysts had forecast refining capacity at 83.6 percent.

Supplies of distillate fuel, which include diesel and heating oil, declined by 2 million barrels, or 1.4 percent, to 141.1 million barrels. The total was 7.5 percent less than a year ago.

Analysts predicted distillate stocks would increase 500,000 barrels.

Benchmark crude rose 16 cents to $99.75 per barrel in morning trading on the New York Mercantile Exchange.

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The Bow Tie Was Early; But Now Hedge Fund Managers See the Light…or Are at Least Betting on it

“(NaturalNews) Going back to the land has always been thought of as a thing for hippies, eco-nuts, and doomsday survivalist, but now hedge fund managers are jumping on the bandwagon too.

The New York Observerrecently spoke to such a hedge fund manager working on a fund that ranks as approximately the 15th largest farmer in America.

The media first picked up on the land investment pattern in 2008 in the FebruaryTimes of Londonpiece, “The Hedge Fund Manager Who Bought a Farm,” which detailed a British hedge fund manager’s attempt to play off the risingpricesof grains in order to get a hold of localfarmland. It was followed shortly by coverage by theFinancial Timesthat said hedge funds and investment banks were “swapping their Gucci for gumboots”.

Today, the increase in the purchase of farmland both in America and abroad is so drastic that in February, Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, warned against the possibilities of a farmland bubble.”

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Forget Smart Phones; Smart Cities Being Planned

“Thanks to numerous sensors, Smartphones make it easy for their owners to organize certain parts of their lives. However, that is just the beginning. Darmstadt researchers envision entire “smart” cities, where all devices present within municipal areas are intelligently linked to one another.

Computer scientists, electrical and computer engineers, and mathemati­cians at the TU Darmstadt and the University of Kassel have joined forces and are working on implementing that vision under their “Cocoon” project. The backbone of a “smart” city is a communications network consisting of sen­sors that receive streams of data, or signals, analyze them, and trans­mit them onward. Such sensors thus act as both receivers and trans­mit­ters, i.e., represent trans­ceivers. The networked communications involved oper­ates wire­lessly via radio links, and yields added values to all partici­pants by analyzing the input data involved. For example, the “Smart Home” control system already on the market allows networking all sorts of devices and automatically regulating them to suit demands, thereby alleg­edly yielding energy savings of as much as fifteen percent.”

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Buffet Touch or Inside Information ?

This article irks me since congressman and senators have knowledge of upcoming bills and how voting may pass on legislation.

Effectively that is equivalent to insider information in my book. Sure it is true that they can not be absolutely certain how voting will go, but they have a good sense before the public and also can hide smaller legislation within larger bills.

“A new study out notes that:

Four university researchers examined 16,000 common stock transactions made by approximately 300 House representatives from 1985 to 2001, and found what they call “significant positive abnormal returns,” with portfolios based on congressional trades beating the market by about 6 percent annually.

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Former Comptroller Walker: US in Worse Shape Than Italy and Spain

“The European debt crisis is gradually spreading to Spain, and some experts say it will hit Italy soon enough. But both nations are in better financial shape than the United States, according to former U.S. Comptroller General David Walker, now head of the Comeback America Initiative.

“Italy and Spain have a higher rating for fiscal responsibility and sustainability under the new Comeback America index than the U.S.,” he tells CNBC. “The question is when are the markets going to come after us.”

Read more: Former Comptroller Walker: US in Worse Shape Than Italy, Spain

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Michigan tourism soars

Break out the fudge and shoot off some fireworks, Michigan’s tourism industry is officially, positively, emphatically on the rebound.

After three down years, travel and tourism spending in the state rose 14% last year to $17.2 billion, up from $15.1 billion in 2009 — the biggest one-year jump in Michigan history, according to the latest annual national survey by D.K. Shifflet & Associates of McLean, Va.

Especially notable was a 21% spike in spending by out-of-state leisure visitors, quite likely linked to the cumulative impact of the state’s first-ever national cable TV buys of advertising time in 2009 and 2010 for the Pure Michigan campaign.

“We always believed we had a national quality product to sell, but we never had the budget before,” said George Zimmermann, vice president of Travel Michigan, the tourism arm of the Michigan Economic Development Corp.

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