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Monthly Archives: May 2011

Upgrades and Downgrades This Morning


JNJ – Johnson & Johnson upgraded to Outperform from Market Perform at Bernstein

AAPL – Apple ests and target raised to $450 at Wedbush on iPad demand and timing of iPhone 5

CB – Chubb upgraded to Buy from Neutral at Janney Montgomery Scott

AXS – AXIS Capital upgraded to Buy from Neutral at Janney Montgomery Scott

LEAP – Leap Wireless initiated with Positive at Citadel

BPI – Bridgepoint Education upgraded to Overweight from Neutral at Piper Jaffray

BSX – Boston Scientific upgraded to Neutral from Sell at Goldman

SPRD – Spreadtrum Comms upgraded to Outperform from Market Perform at JMP Securities

CECO – Career Education upgraded to Neutral from Underweight at Piper Jaffray

RRR – RSC Holdings upgraded to Buy from Neutral at Goldman

NTLS – Ntelos Holdings upgraded to Overweight from Neutral at JP Morgan

SOLR – GT Solar target raised to $18 from $15 at Brean Murray

AZO – AutoZone: Another strong quarter of growth; valuation still a road block – Morgan Joseph TriArtisan

PAY – VeriFone upgraded to Outperform from Market Perform at Raymond James

FLEX – Flextronics upgraded to Outperform from Market Perform at Raymond James

ARIA – Ariad Pharm resumed with a Buy at Brean Murray; tgt raised to $11

SCHN – Schnitzer Steel upgraded to Buy from Neutral at Davenport


PCS – MetroPCS initiated with Neutral at Citadel

FRO – Frontline downgraded to Neutral from Buy at Sterne Agee

TREX – Trex: Lowering Q2 estimates on weather/macro issues – Stifel Nicolaus

JNPR – Juniper Networks downgraded to Hold at Auriga; tgt lowered to $40

VOD – Vodafone PLC downgraded to Neutral from Buy at Nomura

SAPE – Sapient downgraded to Neutral from Buy at Goldman; removed from Conviction Buy List

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Gapping Up and Down This Morning

Gapping Up

CEDC +5.8%, VVUS +4.8%, FMCN +2.9%, QIHU +3.5%, STD +0.8%, LTXC +7.7%, QIHU +5.1%,  IPAR +2.9%, ANR+2.8%, MEE +2.7%, AVGO +2.2%.ORBK +0.9%, TOL +2.8%, AVGO +2.7%, RBS +2.2%, CS +1.4%, UBS +1.2%, HBC +1.1%

Gapping Down

PSS -12.9%, AMAT -1.5%, EXLP -4.5%, TWO -3.6%, KEM -2.7%, MCP -2.6%, AIG -1.6%,KNSY -1.3% PLUG -8.8%, BAMM -7.2%, FRO -6.4%, EXPR -6%

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U.S. Futures Down Marginally For Opening Trade

“NEW YORK—U.S. stock futures leaned lower as investors moved cautiously following a disappointing outlook from Applied Materials and a large share offering from AIG, and ahead of durable-goods data.

About 90 minutes before the opening bell, Dow Jones Industrial Average futures had slipped 14 points to 12313, while Standard & Poor’s 500 stock index futures eased 1 point to 1313 and Nasdaq 100 futures were down 2 points to 2300. Changes in stock futures don’t always accurately predict stock moves after the opening bell.

Data on orders for durable goods in April will be released at 8:30 a.m. EDT, while a March reading on home prices is due out at 10 a.m.”

Full article

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U.S. Lawmakers Continue Debate on $1 Trillion in Deficit Cuts

“US lawmakers are weighing $1 trillion in deficit-cutting measures as part of a possible deal that would allow an increase in the country’s borrowing authority, Vice President Joe Biden said on Tuesday.

Financial Woes

Biden’s comments were a sign that despite wide skepticism, Democrats and Republicans may be able to hash out a deal that would tame the national debt and give Congress enough political cover to lift the $14.3 trillion debt limit before an Aug.2 deadline.

“I think we’re in a position where we’ll be able to get well above $1 trillion pretty quick in terms of what would be a down payment on the process,” Biden said after a three-hour meeting on Capitol Hill with top lawmakers.”

Full article

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OECD: Debt Risks to Global Recovery Remain Significant

“The US and Japan “have yet to produce credible medium-term plans” to stabilise their debt, while other countries need to provide more clarity on how their fiscal consolidation targets will be met, according to the Organisation for Economic Cooperation and Development’s 2011 Economic Outlook, which says that risks to the global recovery remain significant.

The Federal Reserve should consider raising interest rates, while the European Central Bank should hold off on further tightening, the report advised.

A two-speed recovery where emerging markets outpace developed markets is causing capital to flow into non-OECD economies and this is creating inflationary pressures and prompting policy restraint which threatens to endanger the global recovery, the OECD said.”

Full article

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U.K. Exports Help GDP Growth by 0.5%

“U.K. exports helped the economy resume growth in the first quarter and outweighed the biggest slump in company investment andconsumer spending in almost two years.

Exports rose 3.7 percent in the quarter and net trade added a record 1.7 percentage points to gross-domestic-product growth, the Office for National Statistics said today in London. Consumer spending dropped 0.6 percent and company investment plunged 4.4 percent. GDP rose 0.5 percent on the quarter and 1.8 percent from a year earlier, matching initial estimates.

The Bank of England and the government are counting on the pound’s weakness to help rebalance the economy toward manufacturing and exports. The drop in sterling since 2007 is fuelling a surge in inflation, dividing policy makers on whether to keep the benchmark interest rate at a record low of 0.5 percent to nurture the recovery.”

Full article

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The Dollar and the Swiss Franc Strengthen on Euro Debt Concerns

“The dollar and the Swiss franc rose against higher-yielding counterparts on concern that Europe’s leaders will struggle to find a solution to the debt crisis, threatening the region’s economic recovery.

The Dollar Index approached a seven-week high and the franc climbed to a record against the euro. GfK AG said its German consumer confidence index will fall for a third consecutive month in June, with speculation Greece may need to default clouding growth prospects. Orders for U.S. durable goods probably declined in April, a separate report may show. The Swedish krona climbed as the central bank said inflation will accelerate and unemployment fell more than predicted.

“The euro-zone debt crisis is still the main concern with the unsolved problems,” said You-na Park, a currency strategist at Commerzbank AG in Frankfurt. “The Swiss franc is a traditional safe haven, therefore when you have uncertainty it can gain. The dollar is still a haven currency.”

The dollar gained 0.1 percent to $1.4080 per euro as of 7:31 a.m. inNew York. It appreciated to $1.3970 on May 23, the strongest level since March 17. The greenback advanced 0.1 percent to 82.06 yen. The Swiss franc jumped 0.7 percent to 1.2320 per euro after being as strong as 1.2230. It climbed 0.5 percent to 87.60 centimes per dollar.”

Full article

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Sony Closes Down Thai and Canadian Web Pages To Protect Against Cyber attack

Sony Corp. (6758), reeling from the second- largest online data breach in U.S. history, shut down some Internet services in CanadaThailandand Indonesia after detecting unauthorized intrusions.

Intruders stole the names and e-mail addresses of about 2,000 customers at Sony Ericsson Mobile Communications AB’s Canadian website, while a site in Thailand may have been modified to help send fraudulent e-mails, spokesman Atsuo Omagari said. The company also suspended a site in Indonesia because of a suspected attack and found Web codes for the Japanese music unit were stolen, he said.

The incidents fuel investor concerns over Sony’s online security after hackers stole data from possibly more than 100 million user accounts last month, crippling its PlayStation Network and costing the company an estimated 14 billion yen ($171 million). The new intrusions indicate Sony is failing to contain the situation, analysts including Nobuo Kurahashi said.”

Full article

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Asian Markets Fall on Slowing Growth and Euro Zone Debt Worries

“Asian stocks fell, with the region’s benchmark index sinking for the third day in four, as lower profit forecasts fueled concern that a slowing global economic recovery will crimp earnings.

Tokyo Electron Ltd., Japan’s biggest manufacturer of chip- making equipment, declined 2.1 percent in Tokyo, leading chipmakers lower after Applied Materials Inc., the world’s largest producer of chipmaking equipment, forecast third-quarter profit and sales that missed analyst estimates. Austal Ltd. (ASB), an Australian shipbuilder, plunged 9.7 percent in Sydney after lowering its full-year earnings forecast. Toyota Motor Corp. (7203) led Japanese carmakers higher after a report predicted auto production will recover from the country’s March earthquake.

The MSCI Asia Pacific Index fell 0.6 percent to 130.99 as of 6:38 p.m. in Tokyo, reversing an earlier gain of as much as 0.4 percent. More than two stocks fell for each that gained on the gauge, which last week slid for a third straight week as Greece’s debt crisis intensified, Japan’s economy contracted, and disappointing U.S. economic data fueled concern about the global recovery.”

Full article

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Aussie, Kiwi, and Loonie All Fall on Debt Concerns and Weak Oil Trade

“The Australian dollar fell to a six- week low versus the greenback and dropped as much as 1.2 percent against the yen as concern thatEurope’s debt crisis is deepening sapped demand for higher-yielding assets.

Australia’s currency also weakened against 14 of its 16 major counterparts as Asian stocks declined and a government report showed construction work completed rose less than economists forecast. New Zealand’s dollar slipped from a three- week high as Finance Minister Bill English reiterated a strong currency is slowing the nation’s recovery.

“The European sovereign issue is hobbling the Australian dollar,” said Teppei Ino, an analyst at Bank of Tokyo- Mitsubishi UFJ Ltd. “Domestic data can hardly become a driver in this risk-off environment and the Aussie is just following broader moves across the world.”

Australia’s currency weakened 0.8 percent to $1.0480 as of 5:35 p.m. in Sydney from yesterday in New York after slipping to $1.0441, the lowest since April 13. The currency declined 0.8 percent to 85.83 yen. New Zealand’s dollar dropped 0.4 percent to 79.28 U.S. cents after rising to 80.16 cents yesterday, the highest since May 3. It depreciated 0.5 percent to 64.93 yen.”

Full article


“The Canadian dollar dropped to its lowest level in almost two months as crude oil fell. The loonie depreciated 0.2 percent to 97.90 cents versus the U.S. dollar after touching 98.16, the weakest level since March 28.”

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Transcript of ECB’s Noyer, why the ECB reject a Greek restructuring

ECB’s Noyer Rejects Greek Restructuring as ‘Horror:’ Transcript

By Mark Deen – May 24, 2011

The following is a transcript of remarks made by Christian Noyer, governor of the Bank of France and a member of the European Central Bank’s governing council. He spoke to journalists in Paris today.

The first section constitutes a statement made by Noyer. The remainder is from a question-and-answer session. Noyer spoke in French.

“If we restructure Greek debt, that means Greece defaults.”

“And what are the consequences of a default? The banks with the most Greek bonds are Greek banks. The Greek banks themselves will be badly damaged. When the banking system is stricken, what do you have to do to prevent the financing of the economy from collapsing? You have to recapitalize the banks. Who will recapitalize the Greek banking system? The Greek state.”

“That means the Greek state will gain nothing. It will invest in the banking sector everything that it has gained in the restructuring.”

“Next there are the Greek insurers and pension funds” who will be hurt. “That means it will weigh on the Greek population’s savings, which could cause a drop in consumer spending and Greek growth will take a hit. This counters the Greek recovery.”

“Then, what else is there in terms of Greek creditors? There’s the European public sector, European governments and the central banks. This is directly tapping the European taxpayer.”

“If we make European states pay, the mechanism of European financing will stop immediately. The states will not continue putting their taxpayers’ money on the line when their loans have just been cleaned out, when they’re taking losses on the money they’re lending. So that’s the end of support from other European states.”

“And for the central banks, what happens? Greek debt will become debt that is no longer worth anything. It’s no longer debt that can be considered as sufficiently safe for operations in the Euro System. That means by definition that to restructure is to become ineligible as collateral. If it’s ineligible, then it means a large part of what the Greek banks bring as collateral for refinancing can no longer be used. That means the Greek banking system can no longer be financed.”

“The next day what happens? Greece needs to find investors because the Greek state won’t move from deficit to surplus overnight. As long as it doesn’t have a primary surplus, the Greek state needs to borrow. International investors, that small group that remains, have just been restructured. It’s not the next day they’ll come back with financing.”

“The Euro System won’t refinance. The European states won’t finance. The IMF won’t go there alone. No one will finance the Greek state in coming years. That means the meltdown of the Greek economy. This is a horror story. That’s why we’re against a restructuring.”

On rescheduling of debt:

“The lengthening of maturities brings very difficult legal questions. There’s a strong chance it will be the equivalent of a default.”

On austerity, asset sales:

“There is another possibility, which is to apply the program. To reduce the stock of debt, the only solution is ambitious privatization. There is no other solution.”

“When we’re in a monetary union and you need to restore your competitiveness, it is necessary to have the equivalent of an internal devaluation. Cut production costs. There is no other solution.”

“The budget adjustment that is being asked for — they’re difficult measures but they’re doable. The IMF has been doing these programs for years. It knows what is doable.”

“Restructuring is not a solution, it’s a horror story. You have to make decisions that are in the interest of the country and its citizens. The best option is the program.”

“Time isn’t a way of lightening the program. A bit more time may be necessary. The program might be longer. The measures are necessary in any case. It’s the same effort over more time.”

“We won’t convince other European countries or the IMF to provide support unless there is a strict application of the program.”

On the ECB refusing Greek debt as collateral:

“What is the fundamental principle that we have to observe? We must, in monetary policy operations, refinancing, take sufficient guarantees. All the central banks of the world do this. You need good-quality collateral. You set the bar at a certain level. We took a simple rule. You need single-A debt as a minimum.”

“During the crisis, given pressure on assets, we accepted temporarily to reduce our minimum level of collateral to BBB. Then the sovereign-debt crisis arrived, the Greek crisis, ratings cuts for Greece.”

“We decided at that moment that when there is a European Union-IMF program that we support, we considered” the assets “were the equivalent of BBB. If the program is no longer respected, if a country is found off track, immediately our assumption of BBB disappears. If it goes out of the EU program, the collateral is ineligible.”

“If the debt is restructured, you can’t say it’s debt of good quality. We need collateral of very good quality. It’s a simple application of reasoning. Ipso-facto, the collateral can no longer be accepted.”

“Don’t think for a minute that we’re against restructuring because French and German banks have Greek bonds. The problem is for Greece itself.”

To contact the reporter on this story: Mark Deen in Paris at [email protected]

Original story

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Definitely Not Macau

“AUCKLAND, New Zealand – Workers at the casino in New Zealand’s largest city have been forced to wear flea collars to work in a bid to ward off the blood-sucking critters, the New Zealand Herald reported Tuesday.

The alarming report follows news of similar infestations forcing nurses at some Auckland hospitals to adopt a similar course of action in December — sparking a warning from health authorities against humans wearing the pet collars, which emit toxins.

Employees at SkyCity Casino were spraying themselves with insect repellent and wearing pet flea collars around their ankles to ward off fleas, according to Unite Union national director Mike Treen.

He said staff had been complaining about infestations on the casino floor “for years” and that although the business had been undertaking a cleaning process, “it doesn’t seem to be working.”

Full article

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Top 10 Toxic Balance Sheets

“James Hamilton unearthed a pretty interesting tool from NYU Stern that helps calculate the systemic risk of specific financial institutions.   He recently described the process that NYU uses to generate their results:

“The first step that Engle and colleagues propose is to calculate what they call the Marginal Expected Shortfall (MES) associated with a given financial institution. This is an estimate, based on recent dynamic variances and correlations of observed stock prices, of how much the stock valuation of a given institution would be expected to fall today if the overall market were to decline by more than 2%. This is essentially a time-varying tail-event beta, details of whose estimation can be found here.”

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AIG Prices Garbagio Shares @ $29

“American International Group’s widely watched stock offering was priced at $29 a share, CNBC has learned, allowing the US Treasury to begin exiting its 92 percent stake in the insurance giant after rescuing it during the 2008 financial crisis.

The secondary offering, which was priced at a 1.5 percent discount to Tuesday’s closing price[AIG  29.46   -0.52  (-1.73%)   ] and represents a 15 percent stake, will raise about $8.7 billion. (Click for after-hours quote)

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Experts say shareholders / tax payers were fleeced

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BRICs Call For The Death of Western Control Within the IMF

“Developing countries  said on Tuesday it was time to end the “obsolete” tradition of the International Monetary Fund always being led by a European, though France’s finance minister appeared to strengthen her lead in the race to replace Dominique Strauss-Kahn.

China, India, Brazil, Russia and South Africa, known as the BRICs, jointly criticized European officials for suggesting the next IMF head should automatically be a European.

They said the selection should be based on competence, not nationality, and in a joint statement called for “abandoning the obsolete unwritten convention that requires that the head of the IMF be necessarily from Europe.”

French Finance Minister Christine Lagarde plans to announce her candidacy on Wednesday after the European Union reached a consensus to back her, diplomatic sources told Reuters.”

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Jim Chanos is Deeply Upset He Can Not Borrow Chinese IPO / Reverse Merger Burritos

“May 25 (Bloomberg) — Jim Chanos, the hedge-fund manager known for predicting Enron Corp.’s 2001 collapse, says he’d short sell Chinese companies listed in the U.S. if it were feasible to borrow shares to open the bearish positions.

The Bloomberg Chinese Reverse Mergers Index has plunged 41 percent since Nov. 8 amid speculation financial statements from companies such as China MediaExpress Holdings Inc. can’t be trusted. The concern intensified this week after Longtop Financial Technologies Ltd., whose initial public offering was underwritten by Goldman Sachs Group Inc. and Deutsche Bank AG, said its auditor quit because of false records.”

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