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Monthly Archives: February 2013

Birinyi: Stock Market Rally Will Run a Few More Years

“Stocks have soared 128 percent during the bull market that began in March 2009, and equity guru Laszlo Birinyi, president of Birinyi Associates, expects the party to continue for one to three more years.

He doesn’t pay attention to many of the fundamental factors that influence other prognosticators. Instead, he puts market statistics together with some of his own judgments, The New York Times reports.

For example, Birinyi looks at investment flows into and out of stocks, and he monitors business news to discern investors’ mood.

“We don’t worry about the cosmic issues that a lot of people get concerned about,” Birinyi tells The Times. “We worry about the stock market ticker. And it’s telling us the market is going up.”

For one to three more years anyway.

Bull markets have four phases, with the final one being exuberance, he says. That’s the phase we just began, Birinyi says.

“This is a point where people say, yes, the economy isn’t going into recession right away, companies are making money, interest rates are not going through the roof and all the concerns we have had for some time perhaps were too negative.”

When that exuberance gets irrational, it’s time to head for the hills, he suggests.

“The market isn’t like the New York subway system. There isn’t another train coming right after this one. This is it, this is the last train. You’d better get on board,” he warns….”

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China Withdraws Market Liquidity For the First Time in Eight Months

“Since institutional memories are short, it is time to remind readers that it was the threat, and subsequent reality, of China overheating in the spring and summer of 2011 (when record high food prices sent the entire North African region in a state of coordinated revolt and gradually moved far east), when even the Great firewall of China could not block news of frequent break outs of localized violence from hungry and angry mobs, that halted and broke the spine of the great reflation trade then (and yes, 2013 has so far been a carbon copy replica of 2011 as we summarized in “It’s Deja Vu, All Over Again: This Time Is… Completely The Same“).

Furthermore, as only Zero Hedge forecast back in mid-2012, when ever other commentator was shouting over the rooftops that an RRR or interest rate cut out of Beijing was imminent, the PBOC would be the last to stimulate the market with monetary easing as it was well-aware that an entire developed world reflating at the same time would hit none other than China the fastest as the hot money flew straight into Shanghai. Just as it did in 2011. So instead China proceeded to engage in a series of daily reverse repos, or ultra-short term liquidity injections that prevented the advent of wholesale inflation: after all the Fed, the BOJ, the ECB and soon, the BOE, were doing it for them. And the last thing the country with the highest allotment of CPI, or book inflation, to food and energy can afford, is to let foreign central banks dictate its price level. After all, it has more than enough of its own.

Well, the Chinese New Year celebration is now over, the Year of the Snake is here, and those following the Shanghai Composite have lots to hiss about, as two out of two trading days have printed in the red. But a far bigger concern to not only those long the SHCOMP, but the “Great Reflation Trade – ver. 2013″, is that just as two years ago, China appears set to pull out first, as once again inflation rears its ugly head. And where the PBOC goes, everyone else grudgingly has to follow: after all without China there is no marginal growth driver to the world economy.

End resultChina’s reverse repos, or liquidity providing operations, have ended after month of daily injections….”

Full aticle

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Freight Shipment Finds a Fourth Consecutive Month of Free Fall, Worst Levels Hit in Two Years

“Freight shipment volumes are rather obviously seasonal, but as Bloomberg Brief notes, the Cass Freight index shows shipment volumes have slumped for four consecutive months and are back to their worst levels in two years. This is the first year-over-year contraction since the 2007-2009 Great Recession – and places the reality of the dismal Q4 GDP print in context. If that wasn’t enough good news about the real economy, the cyclicality of the shipments are losing momentum (i.e. each seasonal rebound in the last three years has been weaker – just as we saw in the lead up to 2008) and freight expenditures fell in January leading to a 1.6% drop over the last year – compared to a 27.2% rise in January 2011, and 22.2% rise in January 2012. As Cass noted, these volumes will not be enough to “have a significant impact on the unemployment numbers.” …”

Full article and charts

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Small Caps Have Been Crushing it Lately

“You probably know that stocks are on a major tear.

But if you’re just watching the S&P 500, you’re missing the real party.

BTIG‘s Dan Greenhaus — in last night’s Bedtime With BTIG note — puts the market gains into some nice perspective. Note the comment in bold.

Seven weeks in a row the S&P 500 traded higher although with no single day closing up or down more than 2.5 points, it certainly wasn’t a rousing move to the upside. More impressive though are small caps; the Russell 2000 isn’t just up all seven weeks this year, its higher in twelve of the last thirteen weeks. For the large caps, the past two weeks has certainly seen a slowing of gains; the index is up less than 0.5% over that period. For every GE (NBC universal deal and buyback), GOOG (core business doing fine) and CMCSA (up 6.5% this week after reporting), there’s a CTL (cut dividend, weighing on whole telecom space), MHP (credit rating cut) and MRK (Venezuela, Vytorin). The result is the lack of movement and complete reversal of the VIX spike from Monday the 4th.

Here’s a chart since november comparing the S&P 500 (red line) vs. the Wilshire Small Cap Index (blue line), which is a close approximation of the Russell 2000…”

 

Full article and chart

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$GS Says Don’t Sweat the Currency War as it is AKA Dovish Easing Policy

”  “Currency wars” are all the rage right now.

In Japan, Switzerland, and the U.K., currencies are rapidly falling, and many are accusing these countries of purposely depressing their currencies in order to boost exports at the expense of other nations.

One could argue that this is the case in Japan. However, reality may be decidedly less exciting.

In a note to clients this morning, Goldman Sachs analyst Kamakshya Trivedi says the evidence points to a much more basic phenomenon: these countries are simply trying to boost stagnant economies via monetary easing.

The title of Trivedi’s report is perfect: Currency Wars? No, Just Monetary Easing.

It’s true that a side-effect of these monetary actions actions is, of course, a weaker currency – but that’s only a secondary phenomenon.

The real story is the attempt by various countries (notably Japan) to lower real interest rates, writes Trivedi….”

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Ackman Feels the Edge As $HLF Falls Below His Short Entry Price

$HLF @ $38.25…

“The hedge fund war over Herbalife keeps heating up.

Right now, shares of Herbalife are trading back below the pre-Bill Ackman short levels.

Ackman, who runs $12 billion Pershing Square Capital Management, believes the multi-level marketing firm that sells nutrition products is a “pyramid scheme” and he’s shorting more than 20 million shares with a price target of $0.

Last Thursday evening, legendary billionaire investor/long time Ackman rival Carl Icahn disclosed a 12.98% stake in Herbalife which includes shares underlying call options.  That news caused the stock to spike more than 18% – way above the pre-Ackman short level.

The SEC filing also said he intends to have discussions with management “regarding the business and strategic alternatives to enhance shareholder value, such as a recapitalization or a going-private transaction.”

The next day, Icahn appeared on CNBC in a live telephone interview around 12:30 p.m. to talk about his stake.  He told CNBC that he thinks Herbalife is a “very undervalued situation” and that his stake is not a personal vendetta against Ackman, but rather it’s about making money. During his appearance, the stock started to slip, but was still up on the day….”

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Gapping Up and Down This Morning

NYSE

GAINERS

Symb Last Change Chg %
TRLA.N 35.35 +4.85 +15.90
ABBV.N 37.58 +1.01 +2.76
USPH.N 25.50 +0.54 +2.16
ZTS.N 33.98 +0.71 +2.13
RHP.N 44.13 +0.69 +1.59

LOSERS

Symb Last Change Chg %
RKUS.N 19.61 -3.15 -13.84
ASGN.N 21.87 -2.79 -11.31
GFI_w.N 9.38 -0.79 -7.77
RIOM.N 4.93 -0.23 -4.46
AGI.N 13.93 -0.60 -4.13

NASDAQ

GAINERS

Symb Last Change Chg %
XOOM.OQ 25.49 +9.49 +59.31
MEIL.OQ 5.40 +1.39 +34.66
VBFC.OQ 2.57 +0.58 +29.15
BIOF.OQ 6.73 +1.24 +22.59
URRE.OQ 3.11 +0.53 +20.54

LOSERS

Symb Last Change Chg %
LOGM.OQ 16.65 -7.01 -29.63
NMAR.OQ 7.79 -2.92 -27.26
FOLD.OQ 2.89 -1.00 -25.71
EHTH.OQ 19.71 -5.69 -22.40
BOSC.OQ 3.45 -0.81 -19.01

AMEX 

GAINERS

Symb Last Change Chg %
FU.A 3.23 +0.06 +1.89
REED.A 5.40 +0.05 +0.93
CTF.A 22.80 +0.07 +0.31

LOSERS

Symb Last Change Chg %
SVLC.A 2.28 -0.21 -8.43
SAND.A 10.86 -0.99 -8.35
BXE.A 5.04 -0.12 -2.33
EOX.A 6.43 -0.11 -1.68
ALTV.A 11.40 -0.01 -0.09

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$ESRX Posts In Line, Earnings Jump 74%

“ST. LOUIS (AP) — Mail-order and online druggist Express Scripts said on Monday its earnings jumped almost 74 percent as more people used generic drugs and it continued to absorb Medco Health Solutions.

Express Scripts Holding Co. acquired Medco last April, making it the largest pharmacy benefits manager by far. It now manages more than a billion prescriptions every year.

The company’s outlook for this year also topped Wall Street expectations.

Express Scripts earned $504.1 million, or 61 cents per share, in its fourth quarter, which ended Dec. 31. Its adjusted earnings were $1.05 per share, slightly better than the $1.02 per share expected by analysts polled by FactSet. Revenue more than doubled to $27.41 billion. Analysts predicted $27 billion.

In the fourth quarter a year ago, it earned $290.4 million, or 59 cents per share. Revenue was $12.1 billion.

The company’s $29.1 billion acquisition of Medco made it big enough to handle the prescriptions of more than one in three Americans. Revenue and prescription counts have swelled. In the most recent quarter, the number of claims it handled more than doubled to almost 411 million.

Pharmacy benefits managers, or PBMs, run prescription drug plans for employers, insurers and other customers. They process mail-order prescriptions and handle bills for prescriptions filled at retail pharmacies. They also negotiate lower drug prices and make money by reducing costs for health plan sponsors and members….”

Full report

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$MDT Posts Better Than Expected Earnings, Stock Off Slightly

“Feb 19 (Reuters) – Medtronic Inc on Tuesday reported higher quarterlyearnings as sales rose slightly.

The maker of implantable heart devices, insulin pumps and products used for spine surgery reiterated its outlook for the fiscal year, calling for dilutedearnings per share of $3.66 to $3.70 on revenue growth of 3 percent to 4 percent.

Medtronic said its net earnings increased to $988 million, or 97 cents per diluted share, in the third quarter ended on Jan. 25 from $935 million, or 88 cents per diluted share, a year earlier…..”

Full report

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$BP Will Try its Hand at Trial vs Settlement for Their Role in Gulf Oil Spill Disaster

 

BP BP.LN +0.16% PLC already has agreed to pay more than $30 billion in fines, settlements and cleanup costs for the 2010 Deepwater Horizon explosion and oil spill. Now it is placing a big bet that by going to trial next week, it can hold down the cost of one of its last major potential liabilities for the disaster.

The London-based oil company says both the law and the facts of the case make facing a federal judge in a trial a safer bet than reaching a settlement with Gulf Coast states, businesses, individuals and the federal government for environmental-related claims….”

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Simpson Bowles to Offer Up a New Tax Code

WASHINGTON—Deficit hawks Alan Simpson and Erskine Bowles on Tuesday will propose a detailed plan for rewriting the tax code and implementing deep new spending cuts, hoping to offer a path to compromise for Democrats and Republicans, according to an outline of the plan.

Messrs. Simpson and Bowles co-chaired the White House’s 2010 deficit-reduction panel, which put together a bipartisan package of tax and spending changes that fell flat after the administration and congressional leaders took a look.

They will try once again on Tuesday, at a time when Washington budget talks have entered a particularly frosty period. Republicans and Democrats say they want to reduce the federal budget deficit but are far apart on how and by how much.

Many lawmakers left Washington late last week for recess this week, having made little progress in talks to avert roughly $85 billion in federal spending cuts scheduled to begin March 1. These cuts will run through September unless Congress intervenes, something many analysts believe is becoming less likely each day.

Mr. Simpson, a Republican, and Mr. Bowles, a Democrat, say their new proposal would reduce the federal budget deficit by $2.4 trillion over 10 years, more than the $1.5 trillion package that White House officials have said is their goal. Obama administration officials say any deficit-reduction package must include new tax revenue as well as spending cuts.

House GOP leaders have not yet detailed the size of the deficit-reduction package they will propose, but they have said it would balance the budget within 10 years, which would put it in the $4 trillion range. They have said, though, that it won’t include any tax increases….”

Full article

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Reader’s Digest Files for Bankruptcy Again

“Executives at Reader’s Digest must be hoping that the magazine’s second trip to bankruptcy court in under four years will be its last.

The magazine’s parent, RDA Holding, filed for Chapter 11 protection late on Sunday in another effort to cut down the debt that has plagued the pocket-size publication for years. The company is hoping to convert about $465 million of its debt into equity held by its creditors.

In a court filing, Reader’s Digest said it held about $1.1 billion in assets and just under $1.2 billion in debt. It has provisionally lined up about $105 million in financing to keep it afloat during the Chapter 11 case….”

Full article

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Carnival Cruise Nightmare Fire Started by a Fuel Leak

“The fire on board the Carnival Corp cruise ship that drifted for days in the Gulf of Mexico awash in raw sewage started from fuel from a leaking diesel engine line that ignited, the U.S. Coast Guard said on Monday.

More than 4,200 passenger and crew were stranded for five days last week….”

Full article

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$ODP and $OMX Supposedly Near All-Stock Merger

 

“Office supply retailers Office Max andOffice Depot are near a merger that could be announced this week, according to people familiar with the matter.

As of Monday night, the two companies and their advisers were still working toward a price for the deal, expected to be all-stock and originally set to be announced later in the week, one of the people said. However, the announcement could get moved up, given heightened media attention after news of the talks was reported by The Wall Street Journal on Monday, a stock market holiday, two of these people said.

(Read MoreWe Know M&A’s Back—But Where’s It Going Next?)

Representatives for Office Depot could not be reached for comment. A spokesperson for Office Max said it is the company’s policy not to comment on market rumors or speculation.

JPMorgan is advising Office Max, while Morgan Stanley and boutique Peter J. Solomon are advising Office Depot, according to people familiar with the talks. Office Depot hired Morgan Stanley after activist Starboard Value bought a nearly 15% stake in the struggling retailer in September….”

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The Most Unusual Anecdotal Economic Indicators

“Every day, public and private data-gathering agencies publish economic reports that are widely reported on by the business media.

GDP, manufacturing, and labor market data all help to inform us about what’s going on in the economy – but there are other things we can look at to supplement our view.

Some of the more unusual ones we’ve come across include the Guns-to-Caviar Index, Tylenol usage, and the Mosquito Bite Indicator.

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A Computer Security Company Puts Out a Report on Cyber Espionage From China

“The Chinese army appears to be conducting cyberhacking and espionage against large US corporations, according to an extensive report from computer security firm Mandiant.

The report even identifies the unit and the building behind the cyberwar.

Beijing has long been suspected of espionage costing global corporations billions of dollars—such as when a hacking incident at Lockheed Martin was followed by the appearance of suspiciously familiar Chinese jets—though it was hard to find evidence.

Indeed, it makes sense that China, in its breakneck push to become a world power, would use all available technology to catch the west.

Following Mandiant’s 75-page report, however, the cyberwar is all but official.

have distilled the alarming report and uploaded the full Scribed copy below for your perusal.

According to Mandiant, what hacking program coordinators do is seek students with outstanding English skills who are hand picked for Advanced Persistent Threat training (APT). The APT teams are broken down into groups and divided among for locations in and around Shanghai, universities, commercial corridors, and largely innocuous places. Wherever they go, each team is assigned a Military Unit Cover Designator (MUCD). The MUCD is a five digit number by which the unit, its people, its location, and its work is referred to. The designation makes the teams more difficult to isolate and track.

MUCDs report all the way up to the Chinese equivalent to the Joint Chiefs of Staff, according to Mandiant. That implies this practice is part of China’s overt military policy against foreign nations…”

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