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Monthly Archives: October 2012

$INTC and $IBM Say Global Technology Spending is Slowing Down, Both Companies Miss and Guide Lower

“The global economic slowdown is prompting companies to curtail technology spending and pushing consumers to favor mobile devices like Apple Inc.’s iPhone over personal computers, eroding profitability at Intel Corp. (INTC) and trimming sales for International Business Machines Corp. (IBM) .

Intel, the largest chipmaker, forecast fourth-quarter gross margins that missed analysts’ estimates, while IBM, the biggest computer-services provider, reported third-quarter revenue that fell short of projections. Shares of both companies declined in late trading yesterday and German trading today.

IBM customers, hurt by anemic demand in home markets, put off software purchases and computer-maintenance contracts. Budget-strapped consumers are shunning PCs to buy cheaper handheld devices such as the iPhone, while businesses are shying away from servers that run networks, sapping demand for Intel chips. The reports bode ill for Microsoft Corp., the No. 1 software maker, which releases results tomorrow.

“It’s not looking good out there,” said Alex Gauna, an analyst at JMP Securities.”

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The Doubling of Mortgage Banking Revenue Helps $USB to Post a 16% Increase in Earnings

U.S. Bancorp (USB), the nation’s biggest regional lender, said third-quarter profit climbed 16 percent to a record, beating analysts’ estimates as mortgage-banking revenue more than doubled.

Net income rose to $1.47 billion, or 74 cents a share, from $1.27 billion, or 64 cents, a year earlier, the Minneapolis- based company said today in a statement. The average estimate of 31 analysts surveyed by Bloomberg was per-share profit of 73 cents.

U.S. Bancorp is focusing on taking market share in mortgage banking, a business that has been a “real positive” for the company, Chief Executive Officer Richard Davis, 54, told investors at a conference last month. Historically low interest rates and government incentive programs are fueling demand for home loans.”

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$BNY Sees 3rd Quarter Earnings Rise by 11%

Bank of New York Mellon Corp., the world’s largest custody bank, said third-quarter earnings climbed 11 percent as rising stock prices helped expand customer assets.

Net income increased to $720 million, or 61 cents a share, from $651 million, or 53 cents, a year earlier, the New York- based bank said today in a statement. Analysts had expected the New York-based company to report a profit of 54 cents a share, according to the average of 16 estimates in a Bloomberg survey.

“It was a better than expected quarter,” Marty Mosby, a Memphis, Tennessee-based analyst at Guggenheim Securities LLC, said in a telephone interview. “It showed they can generate some revenue growth while still holding down expenses.” Mosby, who rates the shares a buy, predicts improvement next year as the bank adds customers and benefits from cost-cutting.”

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Jobless Claims Fall Unexpectedly in the U.K.

“U.K. jobless claims unexpectedly fell and payrolls rose to a record high as the London Olympics helped boost hiring.

Jobless-benefit claims fell 4,000 to 1.57 million in September, the Office for National Statisticssaid today in London. The number of people in work surged 212,000 to 29.6 million in the quarter through August, the highest since records began in 1971. Separately, minutes of the Bank of England’s policy meeting this month showed that officials are divided on the need for more stimulus for the economy.”

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Spanish and Italian Bond Yields Fall on Optimism

Spain’s government bonds advanced, pushing 10-year borrowing costs to the lowest in more than six months, after Moody’s Investors Service said it would keep the nation’s credit rating at investment grade.

Italian and Portuguese securities also rallied amid optimism the euro region is making progress to contain the debt crisis. Moody’s cited a reduction in the risk of Spain losing market accessbecause of the European Central Bank’s willingness to buy the nation’s bonds. German 10-year bunds fell for a third day while two-year notes were little changed after the nation sold 4.19 billion euros ($5.5 billion) of the securities.

Pedestrians pass a Spanish national flag on Cibeles square in Madrid. Photographer: Angel Navarrete/Bloomberg

Moody’s decision is “obviously quite a positive development, as is reflected in this morning’s price moves,” said Brian Barry, an analyst at Investec Bank Plc in London. “I would expect Spanish and Italian debt to trade better today, and for the positive tone to spread across to other risk assets, with safe havens to come back a bit.””

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Austria Says No to Sales on CDS

“Austria is forbidding insurers from selling credit-default swap debt protection because the derivative contracts circumvent industry rules.

“CDSs are usually meant to cover a certain economic risk of a third party,” the nation’s Finanzmarktaufsicht regulator said in a circular sent to insurers in the Alpine country that was published today. “But they intentionally aim to reach that goal with other means than insurance, because the regulations applicable to the insurance business are to be avoided.”

Austrian insurers have written only a “limited amount” of credit protection through swaps, FMA spokesman Klaus Grubelnik said by phone from Vienna. The circular clarifies existing laws prompted by an isolated violation, he said. He declined to elaborate.”

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The Euro Hits a One Month High on Crisis Optimism, Moody’s Let’s Spain Keep it Investment Grade Rating


“The euro strengthened to a one-month high against the dollar after Spain kept its investment grade credit rating from Moody’s Investors Service, spurring a rally in Spanish and Italian bonds.

The 17-nation currency appreciated for a fifth day versus the yen amid speculation European Union leaders meeting in Brussels tomorrow will reach an agreement on providing more help forGreece. The dollar weakened before a U.S. report that economists said will show house building climbed last month, damping demand for safer assets. The pound rose against the greenback after U.K. jobless claims unexpectedly declined.

“It’s about potential relief with regard to Spain” and optimism that Greece will receive additional bailout payments, said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. (BK) in London. “Those two factors are the key to understanding why the euro is going higher.”

The euro gained 0.5 percent to $1.3116 at 7:01 a.m. New York time after rising to $1.3129, the highest level since Sept. 17. The common currency advanced 0.2 percent to 103.22 yen, extending its rally over the past week to 2.5 percent. The dollar declined 0.3 percent to 78.70 yen.

Moody’s said yesterday it kept Spain’s credit rating at Baa3, one step above junk, as the risk that the nation would lose market access had fallen because of the European Central Bank’s willingness to purchase its bonds.”

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Black Gold Touches One Week Highs on Hopes of a Better Upcoming Global Outlook


“Oil traded near the highest level in a week in New York on signs Germany may ease its resistance to a Spanish bailout and after industrial production rose more than forecast in the U.S., the world’s biggest crude consumer.

Futures were little changed after rising as much as 0.7 percent today. Two German lawmakers said the country is open to Spain seeking a precautionary credit line. Output at U.S. factories, mines and utilities rose 0.4 percent in September, twice as much as the median forecast of economists surveyed by Bloomberg News, data from the Federal Reserve in Washington showed yesterday.

“All the measures taken to show some progress in the European debt crisis should improve sentiment for commodities and for crude as well,” said Hannes Loacker, an analyst at Raiffeisen Bank International AG in Vienna, who predicts Brent crude will trade at about $114 a barrel at the end of the year.”

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Thailand Cuts Interest Rates to Stimulate a Weak Economy

“Thailand’s central bank unexpectedly cut its benchmark interest rate for the first time since January as a faltering global economy damps exports, days after the governor said there was no need to ease policy.

The Bank of Thailand cut its one-day bond repurchase rate by a quarter of a percentage point to 2.75 percent, it said in Bangkok today. The decision was predicted by three of 23 economists in a Bloomberg News survey, while the rest expected no change. The monetary policy committee voted 5-2 in favor of a cut, it said in a statement, without disclosing names.

Thailand’s move today contrasts with Governor Prasarn Trairatvorakul’s stance in an Oct. 13 interview that there was no need for a rate cut, even after Finance Minister Kittiratt Na-Ranong called for lower borrowing costs and a weaker baht to help exporters. The central bank said today there was no political interference in the decision, as it joined South Korea and Brazil in reducing borrowing costs to shield growth.”

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Japan Announces the Drawings of New Stimulus Despite Running Out of Cash by Next Month

Japan’s government plans to tap discretionary budget funds to counter an economic slowdown as a legislative stalemate threatens to leave the Noda administration running out of cash as soon as next month.

Prime Minister Yoshihiko Noda today ordered his Cabinet to draw up economic stimulus measures by November, Chief Cabinet Secretary Osamu Fujimura said. With Finance Minister Koriki Jojima telling reporters that the idea of a supplementary budget would be considered later, the government can use around 1.3 trillion yen ($17 billion) in reserves from this year’s budget.”

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Gold Moves Higher on a Weaker Dollar

“Gold gained for a second day in New York before European Union leaders hold a summit this week amid speculation Spain will move toward seeking financial assistance.

Germany is open to Spain seeking a precautionary credit line from Europe’s rescue fund, two senior German coalition lawmakers said, prompting speculation that the Iberian nation may take the aid and help contain the euro-zone’s debt crisis. The euro rose to a one-month high against the dollar before trading up 0.5 percent. The U.S. Dollar Index, a gauge against six counterparts, fell for a second day, dropping 0.5 percent.

“Gold and the precious complex have been held afloat overnight and this morning by a stronger euro,” Edel Tully, an analyst at UBS AG in London, wrote today in a report. “Gold’s ability to stay buoyed today will be dependent on foreign exchange moves and risk appetite.””

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Luntz Focus Group Of Mostly Former Obama Voters Switch To Romney

A Frank Luntz focus group made up mostly of former Obama voters say they now support Mitt Romney.

“Forceful, compassionate, presidential,” one participant said.
“Confident and realistic,” said another.
“Presidential,” another told Luntz.
“Enthusiastic,” another reacted.
“Our next president,” one man said.
“Dynamo, winner,” said one more.


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Here Are the Richest 24 Men Over the Past 1,000 Years

1. Mansa Musa I, (Ruler of Malian Empire, 1280-1331) $400 billion

2. Rothschild Family (banking dynasty, 1740- ) $350 billion

3. John D Rockefeller (industrialist, 1839-1937) $340 billion

4. Andrew Carnegie (industrialist, 1835-1919) $310 billion

5. Tsar Nicholas II of Russia (last Emperor of Russia, 1868-1918) $300 billion

6. Osman Ali Khan, Asaf Jah VII (last ruler of Hyderabad, 1886-1967) $236 billion

7. William the Conqueror (King of England, 1028-1087) $229.5 billion

8. Muammar Gaddafi (former Libyan leader, 1942-2011) $200 billion

9. Henry Ford (Ford Motor Company founder, 1863-1947) $199 billion

10. Cornelius Vanderbilt (industrialist, 1794-1877) $185 billion

11. Alan Rufus (Fighting companion of William the Conqueror, 1040-1093) $178.65

12. Bill Gates (Founder of Microsoft, 1955- ) $136 billion

13. William de Warenne, 1st Earl of Surrey (Norman nobleman, ??-1088) $146.13 billion

14. John Jacob Astor (businessman, 1864-1912) $121 billion

15. Richard Fitzalan, 10th Earl of Arundel (English nobleman, 1306-1376) £118.6 billion

16. John of Gaunt (son of Edward III, 1330-1399) £110 billion

17. Stephen Girard (shipping and banking mogul, 1750-1831) $105 billion

18. Alexander Turney Stewart (entrepreneur, 1803-1876) $90 billion

19. Henry, 1st Duke of Lancaster (English noble, 1310-1361) $85.1 billion

20. Friedrich Weyerhaeuser (timber mogul, 1834-1914) $80 billion

21. Jay Gould (railroad tycoon, 1836-1892) $71 billion

20. Carlos Slim (business magnate, 1940- ) $68 billion

21. Stephen Van Rensselaer (land owner, 1764- 1839) $68 billion

22. Marshall Field (Marshall Field & Company founder, 1834-1906) $66 billion

23. Sam Walton (Walmart founder, 1918-1992) $65billion

24. Warren Buffett (investor, 1930- ) $64billion

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Air Cargo Spells Contraction for the Global Economy

I guess we can file this in the folder of randomly negative macro indicators: (via Nomura)

“Over the past nine years’ monthly data, there has been an 84% correlation between air cargo volume growth and global industrial production (IP) growth, with an air cargo lead of one to two months”


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Capacity Utilization and the Economy

“One report that rarely receives enough attention is the Federal Reserve’s monthly report on capacity utilization. The industrial production numbers tend to be more volatile and can fluctuate, but the report on capacity utilization intends to show through time a picture of how employers are running their shops, factories and operations. While this ties in with today’s report, we are most concerned with the longer-term issues that this poses.

Today’s report showed a 0.4% production gain, versus a 0.2% gain expected. Capacity utilization also came in as expected at 78.3%. The problem is that this capacity reading is dismal, and it shows that the core economy is not running well even though this is nearly a peak report for the cycle.

The theory is simple enough. If capacity is running low, final demand is low and the need to massively hire workers is low. Of course there are exceptions, and nonfarm productivity can be taken into consideration as well. Still, if businesses are running at low capacity rates, then there is little reason to expect waves of hiring from the nonfarm sector.”

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A123 Files for Bankruptcy

“Electric car battery manufacturer A123 Systems Inc., AONE -74.75% the recipient of nearly $250 million in government grants, filed for Chapter 11 bankruptcy protection Tuesday.

The Massachusetts-based company and two affiliates filed for bankruptcy a day after it said it would be unable to make a $2.8 million interest payment to bondholders due Monday.”

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No Cheese for the Elderly, Social Security Benefits to Rise a Whopping 1.7%

More than 56 million Social Security recipients will see their monthly payments increase by 1.7 percent in January.

Social Security Check
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Social Security Check

The increase was announced Tuesday when the government released a key measure of inflation, which determines whether people who receive Social Security get a cost-of-living adjustment, or COLA.

About 8 million people who receive Supplemental Security Income will also receive the 1.7 percent COLA, meaning the announcement will affect about one in five U.S. residents.”

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