Buy stocks and sell your bonds….
Comments »Monthly Archives: February 2012
Bankrate Study Gives Cause for Celebration
Don’t Worry About Iran; Oil and Gas Prices Will March Higher Without Conflict
Tax Laws are About to Change Dramatically
…and that government of the people, by the people, for the people….Scratch Out People
U.S. Equity Preview: TXRH, LZB, DELL, TRAK, BRCD, & CELL
Brightpoint Inc. (CELL) : The wholesaler of mobile phones reduced its forecast for 2012 earnings excluding certain items to no more than $1.13 a share from as much as $1.17.
Brocade Communications Systems Inc. (BRCD) : The maker of switches for data-storage networks forecast revenue in the second quarter of $530 million to $545 million, compared with the average analyst estimate of $537.7 million.
DealerTrack Holdings Inc. (TRAK) : The maker of software for car dealerships forecast revenue in 2012 of no more than $372 million, falling short of the average analyst estimate of $380 million.
Dell Inc. (DELL) : The third-largest maker of personal computers forecast fiscal first quarter revenue that missed analysts’ estimates as lackluster demand for PCs and competition from Apple Inc. eroded growth.
La-Z-Boy Inc. (LZB) : The maker of living-room recliners reported third-quarter earnings of 19 cents a share excluding some items, topping the average analyst estimate by 1 cent.
Texas Roadhouse Inc. (TXRH) : The steakhouse chain forecast earnings in 2012 will rise 5 percent and boosted it’s share buyback by $100 million.
Comments »Gapping Up and Down This Morning
Gapping Up
FIRE +13.1%, TXRH +8.6%, CSIQ +8.4%, PKT +7.1%, BRCD +6%, MOS +4.4%, HLF +3.9%, INTU +3.4%, LZB +2.1%, GNK +1.9%, TS +1.4%, BIOD +33.8%,
GRMN +9.6% , PKT +7.1%, BRCD +6%, YNDX +4.8%, HLF +3.9%, INTU +3.4%, RRC +2.7% , LZB +2.1%, GNK +1.9% , FTE +1.8%, DX +0.4%, GNOM +6.7% ,
CSIQ +6.2% , GM +0.3% , BX +1%, URBN +2.4% ,
Gapping Down
TRAK -8%, YGE -6.2%, IFT -5.6%, DELL -5%, CAKE -5%, CELL -5%, NRF -4.8%, NBR -2.8%, TWO -2.7%, WPRT -1.9%, FST -1.3%, NFLX -1.2%,
REXX -5.4%, PTNR -5%, MGM -4.2%, CAKE -4%, CNK -3.4% , TOL -3%, NBR -2.8%, BAS -1.9%, FST -1.3% , VOD -2.2% , GSK -1.2% , WBMD -3.7%, WTS -1.1% ,
NBG -8.1%, ING -1.8%, UBS -1.3%, CS -1.3%, C -1.2%, BCS -1.0%, GILD -1.1% ,
Comments »Upgrades and Downgrades This Morning
Advanced Semiconductor Engineering, Inc. (NYSE: ASX) Cut to Neutral at BofA/ML.
Apple Inc. (NASDAQ: AAPL) Reiterated Outperform but raised target to $600 at Credit Suisse.
The Blackstone Group LP (NYSE: BX) Raised to Buy at Goldman Sachs.
Broadcom Corporation (NASDAQ: BRCM) Reiterated Buy with $46 target at Argus.
Ciena Inc. (NASDAQ: CIEN) Maintained Buy with $21 target at Argus.
Comerica Inc. (NYSE: CMA) Cut to Sell at Stifel Nicolaus.
Dell Inc. (NASDAQ: DELL) Cut to Neutral at Citigroup; Cut to Hold at Needham.
Dendreon Corporation (NASDAQ: DNDN) Started as Neutral at Citigroup.
E-commerce China Dangdang Inc. (NYSE: DANG) Raised to Outperform at Credit Suisse.
Gilead Sciences Inc. (NASDAQ: GILD) Cut to Market Perform at Bernstein.
Medtronic, Inc. (NYSE: MDT) Cut to Neutral at Credit Suisse.
The Mosaic Co. (NYSE: MOS) Raised to Buy at Canaccord Genuity.
New Oriental Education & Technology Group Inc. (NYSE: EDU) Started as Buy at Jefferies.
Siliconware Precision Industries Co., Ltd. (NASDAQ: SPIL) Cut to Neutral at BofA/ML.
Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE: TSM) Cut to Neutral at BofA/ML.
In Play and On the Wires
Fitch Downgrades Greece Citing Default is Highly Likely
Garmin Ltd. Blows Away Street Estimates
Ford to Place $3.8 Billion into Pension Funds
The Volcker Rule May Hinder Liquidity in the Muni Bond Markets
“(Reuters) – Some public agencies that rely on the municipal bond market for financing fear that a landmark financial reform rule will cripple their ability to sell bonds and make it more expensive to raise money for crucial services.
The Volcker Rule was designed to curb the risks that banks take with depositor dollars, a practice known as proprietary trading. But the rule risks ensnaring public agencies ranging from housing agencies to hospital authorities because the way muni bonds are sold and traded results in banks risking their own capital — the very practice banned under the Volcker Rule.
And although the rule, a key component of the Dodd-Frank reform law passed in the wake of the 2008 financial crisis, did include an exemption to ensure that state and local governments would still be able to raise money in the municipal bond market, it left a gaping hole.
As a result, state and local authorities are worried that the rule will inhibit banks from underwriting bonds and trading, inadvertently driving up water and sewer bills, delaying public transportation projects and making affordable housing scarcer unless changes are made.
The rule exempts about 60 percent of municipal bonds from the restrictions on banks’ proprietary trading.
Bonds issued by states and their political sub-divisions – such as counties and cities – will be excluded from the ban, but debt issued by public agencies or authorities would be subject to the restriction.
“It could have a very detrimental effect on trying to make the investments in public infrastructure that many of us have felt could be and should be the core of economic recovery,” said Washington State Treasurer James McIntire, who otherwise supports the Volcker Rule….”
Comments »AP Source: Obama Seeks 28% Corporate Tax Rate
“WASHINGTON (AP) — President Barack Obama is proposing to cut the corporate tax rate from 35 percent to 28 percent and wants an even lower effective rate for manufacturers, a senior administration official says, as the White House lays down an election-year marker in the debate over tax policy.
In turn, corporations would have to give up dozens of loopholes and subsidies that they now enjoy. Corporations with overseas operations would also face a minimum tax on their foreign earnings.
Treasury Secretary Timothy Geithner on Wednesday was to detail aspects of Obama’s proposed overhaul of the corporate tax system, a plan the president outlined in general terms in his State of the Union speech last month.
Chances of accomplishing such change in the tax system are slim in a year dominated mostly with presidential and congressional elections. But for Obama, the proposal is part of a larger tax plan that is central to his re-election strategy.
The corporate tax plan dovetails with Obama’s call for raising taxes on millionaires and maintaining current rates on individuals making $200,000 or less.
The 35 percent nominal corporate tax rate is the highest in the world after Japan. But deductions, credits and exemptions allow many corporations to pay taxes at a much lower rate.
Under the framework proposed by the administration, the rate cuts, closed loopholes and the minimum tax on overseas earning would result in no increase to the deficit.
That means that many businesses that slip through loopholes or enjoy subsidies and pay an effective tax rate that is substantially less than the 35 percent corporate tax could end up paying more under Obama’s plan. Others, however, would pay less while some would simply benefit from a more simplified system….”
Quality Assurance VP: Citigroup ‘Defrauded’ Fannie and Freddie
“Citigroup Inc. (C), which last week admitted breaking Federal Housing Administration rules and paid a fine, also violated regulations for home loans sold to Fannie Mae (FNM) and Freddie Mac (FRE), according to a whistle-blower’s complaint.
The bank “defrauded, falsified information or misled federal government entities” by selling or securing insurance for mortgages with defects such as improper appraisals and paperwork errors and not reporting them as required, Sherry Hunt, a Citigroup quality-assurance vice president, said in her complaint, which was unsealed yesterday. It was filed under the False Claims Act in federal court in Manhattan in August.
For Citigroup, the third-largest U.S. bank by assets, the high defect rates could be costly. It might be forced to buy back substandard mortgages sold to government-controlled Fannie and Freddie, who buy or guarantee most U.S. mortgages.
Under the Feb. 15 settlement with the U.S. on FHA loans, Citigroup will pay $158.3 million. TheJustice Department reserved the right to pursue criminal and other charges related to mortgages originated or underwritten by Citigroup and not insured by the FHA.
“Everyone is a little bit guilty for not keeping an eye on the processes and doing what we should have been doing,” Hunt said in a phone interview from her home in Silex, Missouri. “Managers have to take ownership of their area, know what’s going on and make sure they’re doing the right thing.”
Comments »Former BoJ Deputy Governor Warns of a Bond Bubble and Yield Spikes
“Japan’s swelling bond sales risk pushing the world’s most indebted nation to a “trigger” point where capital inflows reverse and bond yields rise, former Deputy Bank of Japan Governor Toshiro Muto said.
“It’s common sense that huge bond issuances aren’t sustainable,” Muto, 68, who served as the BOJ’s deputy chief for five years until March 2008, said in an interview in Tokyo yesterday. “I don’t know how much time we have,” he said, noting that he doesn’t see the nation reaching the tipping point in the near future.
Prime Minister Yoshihiko Noda is struggling to double the sales tax to rein in debt expected to reach 1 quadrillion yen ($13 trillion) next year just as policy makers in Europe work to contain their fiscal crisis. Standard & Poor’s this week maintained a negative outlook on Japan’s sovereign rating and warned a downgrade is likely if growth prospects weaken.
“I have no doubt that a rating cut will take place” if the government can’t raise the 5 percent sales tax, said Muto, who also worked at the Finance Ministry for 37 years and is currently chairman of the Daiwa Institute of Research. “I don’t think the cut will cause a market rout, but we have to keep in mind the unwinding of capital inflows may happen” if Japan repeatedly fails to get its finances in order, he said….”
Comments »Hawkish Sentiment Within the BoE Thwarts Stimulus
“Bank of England policy makers Adam Posen and David Miles were defeated in their bid to raise stimulus by 75 billion pounds ($118 billion) as the majority argued such a move might provoke alarm on the economy.
Seven of the nine-member Monetary Policy Committee, including Governor Mervyn King, voted to raise the asset- purchase target by 50 billion pounds to 325 billion pounds, according to minutes of the Feb. 8-9 meeting published today in London. They argued a larger increase “risked sending a signal that the committee thought the economic situation was weaker than it was.”
“Recent data on the domestic and international economies had on balance been more positive than might have been anticipated towards the end of 2011, pointing to the possibility that growth might be stronger than expected in the near term,” the majority argued, according to the minutes.
The pound fell against the dollar after the report and was trading at $1.5717 at 10:31 a.m. in London, down 0.4 percent on the day. Gilts advanced, pushing the yield on the 10-year bond down 5 basis points to 2.17 percent.
Posen and Miles called for 75 billion pounds of additional quantitative easing because of “the considerable margin of spare capacity remaining in the economy and the extent of deleveraging still likely to be required,” the minutes showed. They saw a risk of a “prolonged period of depressed demand causing inflation to fall materially below” the central bank’s 2 percent target….”
Comments »China’s Manufacturing Sector Expected to Shrink More Given Preliminary Data
“China’s manufacturing may shrink for a fourth month in February, indicating the world’s second- biggest economy remains vulnerable to a deeper slowdown as Europe’s crisis caps exports and the housing market cools.
The preliminary 49.7 reading of an index from HSBC Holdings Plc (HSBA) and Markit Economics today compared with a final 48.8 in January. A number below 50 points to a contraction. January and February economic data are distorted by a weeklong holiday.
China is cutting banks’ reserve requirements from Feb. 24 to support an economic expansion that Nomura Holdings Inc. estimates may be 7.5 percent this quarter, the least since the global financial crisis. In today’s report, a measure of export orders fell to an eight-month low, underscoring Commerce Minister Chen Deming’s Feb. 9 caution that the government is not optimistic about the outlook for trade after a decline in shipments in January.
“With a meaningful rebound of domestic demand not in sight, external weakness is starting to bite, adding more downside risks to growth,” said Qu Hongbin, a Hong Kong-based economist for HSBC. The central bank “should step up policy easing as inflation pressures continue to ease,” he added….”
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