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Monthly Archives: February 2013

Draghi: We are Far From Exiting Stimulus

“ECB President Mario Draghi is giving a speech in Munich.

A notable quote from the speech just crossed the wires and instantly sent the euro a bit lower against the U.S. dollar.

According to Bloomberg, Draghi said the ECB is “far” from having an exit in mind for its monetary stimulus measures, in contrast to recent arguments from a number of analysts who assert that the ECB is beginning to tighten monetary policy passively….”

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Tim Cook: We’re ‘Seriously Considering’ Returning Cash to Shareholders

“Editor’s NoteApple is hosting its annual shareholder meeting today in Cupertino, Ca. and the big question looming over the event is if CEO Tim Cook will discuss what the company’s plans are for it’s nearly $140 billion cash pile.

Historically, the two-hour meeting is pretty straightforward, but this year Apple may feel pressure to shed more light on its cash strategy because of activist shareholder David Einhorn’s public shaming of Apple for not distributing more cash to shareholders.

(Read More: Court Rules in Favor of Einhorn in Apple Dispute )

Einhorn, who is president of the hedge fund Greenlight Capital, recently sued Apple over a proposal in its proxy and was successful in blocking shareholders from voting on the measure today. Einhorn’s aim is to get Apple to unlock more value to investors.

Chip Cobb, senior vice president at BMT Asset Management, said that while he is unsure if Apple will disclose any increase in dividend today, he does think that Einhorn’s activism has pressured Apple to start giving some answers.

“Einhorn, he’s raised the bar a little bit on putting the pressure on Apple. I wouldn’t expect a lot at this meeting today, but it’s certainly a possibility that you’re going to see the dividend increase beyond that, roughly 2.4 percent. It absolutely has become a value play,” Cobb said.

Live Blog…”

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Seasonal Patterns for March

“Here’s some perspective on the historical view of the markets in the month of March.  This sort of data is certainly no holy grail, but it provides perspective on what can be a very seasonally sensitive world at times (via the Stock Trader’s Almanac):

In this next chart, DJIA’s 1-Year Seasonal Pattern for years 1950-2012 has been plotted (green line). Post-election years from 1950-2009 (black line) as well as 2013 year-to-date (blue line) are also presented. In all years, DJIA is on average unchanged in February. In post-election years, Februarys on average have declined just about 1.5%. As of today’s close, DJIA is down 0.55% for February, a little worse than all Februarys since 1950, but still faring much better than the typical post-election year February….”


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Hidden Middle Class Taxes

“FORTUNE — Okay, middle-class taxpayers: Listen up. Our national government in Washington is screwing you again. This time the screwing involves the way that two new income tax surcharges, supposedly designed to affect only the “rich,” will reach deeper and deeper into the middle class unless something is done now to rein them in.

I’m talking about the 0.9% tax surcharge on the amount by which individuals’ “earned income” — such as salaries and fees — exceeds $200,000 this year, and the 3.8% surcharge on some or all the investment income of single households with an adjusted gross income of more than $200,000, and married households with an adjusted gross of $250,000 and up.

These surcharges were built into the Affordable Care Act (a.k.a. Obamacare). The screwing isn’t the tax surcharges themselves — it’s the fact that the thresholds for them aren’t indexed for inflation. This means that unless something is done, more and more people will be subject to these taxes as inflation boosts incomes.

Let me show you how this works, using numbers from a study that the nonpartisan Tax Policy Center did a year ago.

For 2013, the TPC said, about 2.4% of households would pay one or both of the surtaxes. By 2022, the level will have risen to 4.6%. Project it out another decade, and you’re at 9%. Given how things work, you would probably be looking at the surtaxes affecting 20% or more of taxpayers in places like New York and California. (You can find the relevant page from the TPC study here.)

You can make the case that people who are currently subject to either or both taxes — who include me — are upper middle class or rich, and can and should fork over some extra money to help the rest of the country. But when you look 10 or 20 years out, you see that unless you index the tax thresholds, these taxes will have expanded well beyond the “rich,” however you define that, and will be clawing away at increasing swaths of the middle class…..”

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Michael Milken Said to be Under SEC Investigation

“FORTUNE — The Securities and Exchange Commission is investigating the relationship between Michael Milken and Guggenheim Partners, Fortune has learned.

The federal agency is examining whether Milken, the one time king of junk bonds who agreed to a lifetime ban from the securities industry, is violating the terms of that ban in his dealings with Guggenheim, which manages $170 billion and led a consortium last year that bought the Los Angeles Dodgers.

Milken has been a longtime client of the firm and at times has had as much as $800 million invested with Guggenheim, some of it in a hedge fund run by the firm’s president Todd Boehly. News of the investigation, as well as his relationship with Milken—who in the past sometimes spoke to Boehly multiple times a week—is contained in a cover story about Guggenheim in the March 18 issue of Fortune. (You can read the story here: Guggenheim is flexing its $170 billion muscles)

Milken’s settlement with the SEC for his role in the 1980s Wall Street scandals allows him to manage his own money. But he is banned from acting as an investment advisor or broker. The SEC is looking at whether Milken is violating that ban by effectively acting as a manager of Guggenheim investments beyond his own, according to sources familiar with the investigation. The question is: Has Milken provided advice in exchange for some form of compensation? The SEC is looking at a number of transactions that Milken has done with Guggenheim. In one instance being investigated, Milken and the firm jointly invested in an energy company called Milagro, which says the infusion helped it buy the Gulf Coast operations of Petrohawk Energy for $825 million in 2007.

Boehly has been subpoenaed by the SEC and the firm has handed over tens of thousands of documents, including trading records and emails, to investigators. SEC investigators are in regular contact with Guggenheim, but so far the probe—which has been going on for two years—hasn’t resulted in any formal action.

Guggenheim denies that Milken has managed others’ accounts. “Mike doesn’t have an ownership or managerial role of any kind at Guggenheim,” says its CEO, Mark Walter. “The firm’s interaction with him is no different than it is with a number of its clients, including during 2008-09 when many called several times a week at various times.”

SEC spokeswoman Christina D’Amico declined to comment…”

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Wall Street is Dumping Junk Bonds

“Wall Street junk-bond underwriters, selling debt at a record pace after the securities returned 19 percent last year, say it’s obvious that prices will drop when interest rates rise. So don’t blame the banks.

“Our job first and foremost is to properly structure deals for companies that can support their debt and perform well,” said Craig Packer, the New York-based head of Americas leveraged finance for Goldman Sachs Group Inc. “The interest-rate risk is just a law of nature.”

JPMorgan Chase & Co., Deutsche Bank AG, Citigroup Inc. and Bank of America Corp. are leading firms benefiting from growth in a market where the average underwriting fee is almost three times as big as for selling more creditworthy bonds. At the same time, bankers warn that demand underpinned by Federal Reserve debt purchases could evaporate, driving down prices.

Banks have underwritten $89.6 billion of high-yield debt so far this year, up 36 percent from the same period in 2012, according to data compiled by Bloomberg. Last year’s $433 billion of sales was an all-time high for the asset class and produced about $6 billion in fees, the data show. Meanwhile, investors poured $33 billion into mutual funds and exchange- traded funds dedicated to junk bonds last year, 55 percent more than in 2011, according to Morningstar Inc.

Misleading Investors…”

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Investment Capital From China Appears to be Moving Into Europe and Not the U.S.

“A large amount of Chinese investment capital is moving abroad, and most of it is landing in Europe rather than in the United States, The Washington Post reports.

A new report by research consultant Rhodium Group estimated that over the past two years, Chinese companies invested more than $20 billion in the European Union, but only $11 billion in the United States.

The growth in foreign direct investment from China is expected to continue to grow, as the country attempts to rely less on exports and internal investment and invests its massive annual budget surpluses in other ways…..”

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Cap. Ex. Spending Plans Increase The Most in a Year

“A gauge of planned U.S. business spending increased by the most in just over a year in January and new orders for long-lasting manufactured goods excluding transportation rose solidly, pointing to underlying strength in factory activity.

The Commerce Department said on Wednesday non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, jumped 6.3 percent, the biggest gain since December 2011, after slipping 0.3 percent in December.

Economists had expected this category to only rise 0.2 percent.

“The strong gains in core capital goods orders suggests that business investment activity, which has been one of the sour points of this economic recovery, could provide a meaningful lift to overall economic activity this quarter,” said Millan Mulraine, a senior economist at TD Securities in New York.

U.S. stock index futures were little changed and U.S. government debt prices were higher in morning trading. The dollar pared losses against the yen after the data.

Durable goods orders excluding transportation increased 1.9 percent, the largest gain since December 2011, after increasing 1 percent in December. That was well above economists’ expectations for a 0.2 percent increase…..”

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BCA Research: Global Stocks Have ‘Running Room’

“The world economic outlook is set to brighten despite slack business conditions, creating a “sweet spot” for global equities, according to Montreal-based BCA Research.

BCA said a variety of factors — including a recent steep fall in European sovereign spreads, a decline in the yen and better prospects for the United States and China — give hope for investors and could outweigh current reasons for gloom.

“These conditions give global equities running room,” BCA said in a blog posted on its website.

“All of this suggests that the world economy will probably continue to operate at a pace that closes the output gap very slowly. This assessment is supported by the global inflation picture, which is either low of falling.”

The success of BCA’s forecast is at least partly dependent on continued easy monetary policy by governments. In addition, both nominal and real interest rates must stay low.

“This creates a ‘sweet spot’ for equity investors — modest growth, low inflation and negative real rates will support corporate earnings and embolden risk taking,” BCA predicted.

However, Marc Faber, publisher of the Gloom, Boom & Doom Report, predicts that global stocks may rise a bit further in the near term, but most countries will see drops of up to 20 percent this year.

And why will stocks fall?….”

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Obama Rejects GOP Plan for More Leeway in Budget Cuts

“President Barack Obama brushed off a Republican plan Tuesday to give him flexibility to allocate $85 billion in looming spending cuts, wanting no part of a deal that would force him to choose between the bad and the terrible.

Three days out and no closer to any agreement, both parties sought to saddle the other with the blame for the painful ramification of the across-the-board cuts set to kick in Friday. Obama accused Republicans of steadfastly refusing to compromise, while the top Senate Republican, Mitch McConnell, chided Obama’s effort to “fan the flames of catastrophe.”

McConnell and other top Republicans were lining up behind a plan that wouldn’t replace the cuts but would give Obama’s agency heads, such as incoming Defense Secretary Chuck Hagel, greater discretion in distributing the cuts. The idea is that money could be transferred from lower-priority accounts to others that fund air traffic control or meat inspection.

But Obama, appearing at a Virginia shipbuilding site that he said would sit idle should the cuts go through, rejected the idea, saying there’s no smart way to cut such a large chunk from the budget over just seven months — the amount of time left in the fiscal year.

“You don’t want to have to choose between, ‘let’s see, do I close funding for the disabled kid, or the poor kid? Do I close this Navy shipyard or some other one?'” Obama said. “You can’t gloss over the pain and the impact it’s going to have on the economy.”

Giving the Obama administration more authority could take pressure off of Congress to address the sequester. But the White House is also keenly aware that it would give Republicans an opening to blame Obama, instead of themselves, for every unpopular cut he makes.

Not all Republicans were on board, either….”

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$QCOM Will Introduce Ultrasound Transmitters to Smartphones and Tablets

“Mobile chipmaker Qualcomm has a track record of pushing new capabilities into its chips faster than its competitors in a bid to carve out a bigger chunk of the market. Last year, for instance, its LTE Snapdragon processor helped it to take a 48 per cent revenue share in H1 (Strategy Analytics‘ figure), helping to drive more LTE handsets into the market which in turn accelerated the rate of 4G adoption.

The company made an interesting acquisition last November, buying some of the assets of an Israeli company called EPOS which makes digital ultrasound technology. Ultrasound may seem an odd technology to push into consumer electronics but Qualcomm clearly sees it as another differentiator for its chips, thanks to its potential to offer some novel additions to the user interface space — both for stylus-based inputs and even touch-less interfaces like gestures.

Discussing Qualcomm’s interest in ultrasound at the Mobile World Congress tradeshow in Barcelona, Raj Talluri, SVP of Product Management, explained that to put the technology to work in mobile devices an ultrasound transmitter could be located in a stylus, with microphones sited on the mobile device that can then detect the position of the pen.

Samsung has already included a capacitive stylus with its Galaxy Note phablet but Talluri said an ultrasound-based stylus would extend the capabilities — allowing a stylus to be used off-screen, say on the table top next to where your phone is resting, and still have its input detected.

“It’s is better [than a capacitive stylus] in some key different ways which we’re working on getting to market – for example you could write here [on the table next to the phone] and it will still detect where it is. So let’s say you have a [paper] notepad… and you have a phone [nearby on the table] and you can start writing on your notepad it will actually also be transcribed into text on the phone because what happens is the ultrasound can be used to calibrate any reasonable distance,” he told TechCrunch.,,,”

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Kindle Update for iOS Has a Major Bug Erasing Your Entire Library

“Amazon yesterday updated its Kindle for iOS app, which works across iPhone, iPad and iPod touch, to version 3.6.1. The update was meant to fix a few bugs as well as the registration process. Instead, that update seems to be wreaking havoc on bookworm-style iThing owners who watched as their Amazon digital libraries and saved settings were erased before their eyes.

Here’s just a taste of the reviews on Amazon’siTunes page:

The update deleted all books from my iPad, and I had to register again, creating a second name for the same iPad. It’s like starting all over again. Now I have to upload over 130 books from the cloud.

Amazon has acknowledged the bug right on its own iTunes page, saying “There is a known issue with this update. If you are an existing Kindle for iOS user, we recommend you do not install this update at this time.” …”

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Christie Gets Interweb Gambling Approved for N.J.

“New Jersey on Tuesday became the biggest state yet to allow regulated online gambling, establishing a template that proponents hope other states will follow for a business that federal authorities long treated as a criminal enterprise.

The new law allows Atlantic City’s casinos to run websites that take bets on games such as blackjack, slots and poker. It also could help legitimize online-gambling companies whose executives the U.S. Justice Department once targeted for offering the same kind of Internet wagers.

The law, passed by the legislature and signed Tuesday by Gov. Chris Christie, for now requires bettors to be physically present in the state, which industry executives and regulators believe can be verified with technology that tracks a user’s location. But bets could conceivably be placed from any device with an Internet connection.

New Jersey’s move marks a significant turning point in the debate over online gambling in the U.S., which has been raging for more than a decade. But while it could encourage similar measures in other states, big hurdles remain to widespread acceptance of such gambling.

Until a year ago, the federal government considered such gambling illegal and targeted online-gambling companies and their partners with criminal and civil lawsuits. But in 2011 the Justice Department reversed itself, prompting many states to consider legalizing online gambling and lottery directors to start selling tickets online.

That process has picked up steam in statehouses and executives’ offices this year since an effort stalled in Congress to pass a law allowing online poker. The first regulated online-gambling networks in the U.S. are expected to be up and running this year in Nevada and Delaware….”

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Gapping Up and Down This Morning




Symb Last Change Chg %
PBYI.N 25.50 +1.44 +5.99
RIOM.N 4.62 +0.20 +4.52
CGG.N 27.14 +1.08 +4.14
GMED.N 13.66 +0.36 +2.71
BERY.N 19.39 +0.47 +2.48


Symb Last Change Chg %
TRLA.N 24.54 -1.06 -4.14
MANU.N 17.33 -0.60 -3.35
RKUS.N 20.62 -0.64 -3.01
AGI.N 14.22 -0.33 -2.27
SSTK.N 34.05 -0.77 -2.21



Symb Last Change Chg %
CMGE.OQ 9.59 +3.79 +65.34
SPEX.OQ 10.07 +3.33 +49.41
MNOV.OQ 2.98 +0.81 +37.33
PRPH.OQ 2.25 +0.49 +27.84
RNIN.OQ 2.36 +0.50 +26.88


Symb Last Change Chg %
FSGI.OQ 2.03 -0.87 -30.00
ENMD.OQ 2.83 -0.64 -18.44
HSII.OQ 13.59 -2.92 -17.69
BDBD.OQ 10.20 -1.85 -15.35
APFC.OQ 19.98 -2.88 -12.60



Symb Last Change Chg %
REED.A 4.29 +0.05 +1.18
MHR_pe.A 24.45 +0.10 +0.41
ORC.A 14.70 +0.03 +0.20


Symb Last Change Chg %
FU.A 3.03 -0.12 -3.81
ALTV.A 10.95 -0.22 -1.97
SAND.A 9.63 -0.19 -1.93
BXE.A 5.26 -0.09 -1.68
EOX.A 6.67 -0.03 -0.45

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Lower Commodity Prices Give the Fed Room to Continue QE Infinity

“The following is an excerpt from today’s Professional Edition Fed Report, Market Liquidity Shortage Will End on March 1

The FOMC minutes are propaganda which the Fed tailors to manipulate the markets in the direction it wants at the time of the release. In early January, it raised the specter of an early end of QE in the minutes of the December meeting. The Fed released its minutes of the January FOMC meeting last week. It played the same game in this release, highlighting a split among FOMC members on the issue of how and when to end QE. That’s a far cry from the QE that the market thought was open ended and would remain in force until employment came down to 6.5% or inflation rose above 2.5%. The Fed wanted to put the fear of god into speculators to keep them from buying commodities, particularly crude oil and the monetary metals. The tactic worked in spades last week as commodities got crushed (charts below).

The release was fortuitously timed to coincide with huge Treasury issuance and the ECB’s LTRO repayment, both of which were going to require that dealers and banks liquidate some things anyway to raise the cash to buy the Treasuries and to repay the LTRO loans. It all came together in a mini-meltdown in most commodities.

Bernanke and Co. must have been patting themselves on the back for their manipulative powers. The Chairman even bragged at today’s Senate hearing that he had the best record on inflation of any Fed Chairman ever (the lucky bastard- woe to his successor). This drop in commodities gave the Fed more breathing room to continue and even add to QE. Adding to QE is not a crazy thought that I just had. The Treasury Borrowing Advisory Committee (TBAC) had suggested that the Fed might increase QE in its February Report to the Secretary of the Treasury, due to the low inflation readings in conventional measures….”

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