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Monthly Archives: June 2013

$CRM To Buy Software Marketing Firm ExactTarget for $2.5B

“(Reuters) – Web-based software maker Salesforce.com Inc said it would buy marketing software provider ExactTarget for $2.5 billion as it looks to build a marketing platform that will tap increasing use of mobile devices and social networks.

The offer price of $33.75 for each ExactTarget share represents a 53 percent premium to the stock’s closing on Monday on the New York Stock Exchange.

ExactTarget shares rose 53 percent in premarket trading on Tuesday, while Salesforce.com’s shares fell 3 percent to $39.85.

ExactTarget, Salesforce.com’s eighth acquisition in the past year, has 6,000 customers including Coca-Cola Co, Gap Inc and Nike Inc….”

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U.S. Home Prices Rise the Most in Seven Years

“WASHINGTON (AP) — U.S. home prices soared 12.1 percent in April from a year earlier, the biggest gain since February 2006, as more buyers competed for fewer homes.

Real estate data provider CoreLogic says prices rose in April from the previous April in 48 states. Price also rose 3.2 percent in April from March, much better than the previous month-to-month gain of 1.9 percent.

Prices in Nevada jumped 24.6 percent from a year earlier….”

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$DG Reduces the High End of Its Profit Guidance

“(Reuters) – Discount chain Dollar General Corp cut the top end of its full-year profit forecast, citing moderating sales growth and a lower gross profit rate, sending its shares down 5 percent in premarket trading.

The company, which prices most of its merchandise below $10, cut the high end of its earnings forecast range to $3.22 per share from $3.30. The low end is unchanged at $3.15.

Analysts on average were expecting a profit of $3.28 per share, according to Thomson ReutersI/B/E/S.

The company said it expected sales of non-consumable items – higher-margin goods such as home products and apparel – to remain under pressure as frugal customers opt for lower-margin products.

However, Dollar General said it expected same-store sales to increase by 4-5 percent through the year as key initiatives, including the rollout of tobacco products, gain traction….”

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WTI Gets Weak in the Knees as Supplies are Expected to Rise Again

“West Texas Intermediate crude fell after the biggest gain in a month, amid forecasts that inventories of gasoline expanded last week in the U.S., the world’s largest oil consumer.

Futures retreated as much as 0.8 percent in New York. Gasoline stockpiles probably climbed by1.2 million barrels last week, while distillate supplies, including heating oil and diesel, may have gained 1.5 million barrels, according to a Bloomberg News survey before an Energy Information Administration report tomorrow. Crude inventories declined by an estimated 650,000 barrels last week, sliding from an 82-year high, the survey showed.

“The market is in bad shape,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “Demand is sluggish, and supplies are ample.”

WTI for July delivery slid as much as 72 cents to $92.73 a barrel in electronic trading on theNew York Mercantile Exchange and was at $92.83 as of 12:21 p.m. London time. The volume of all futures traded was 8 percent below the 100-day average. The contract rose $1.48 to $93.45 yesterday, the biggest gain since May 3.

Brent for July settlement dropped as much as 46 cents, or 0.5 percent, to $101.60 a barrel on the ICE Futures Europe exchange. The European benchmark grade was at a premium of $8.89 to WTI, up from $8.61 yesterday.

Chart Resistance…”

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BASF Will Invest 10 Billion Euros in the Asia Pacific Area, Company Expects to Double Profits

BASF SE (BAS) plans to invest 10 billion euros ($13 billion) in the Asia-Pacific region as it shifts research and procurement to the world’s fastest growing chemical market to help double profitability there.

The Asia-Pacific division, which saw margins deteriorate to 10 percent last year, has a “good chance” to reach the average profitability of the group, Martin Brudermueller, deputy chief executive officer and head of the region, said today at a press conference in Hong Kong. On a group level, BASF aims to lift margins to 20 percent by the end of the decade from a current 14 percent.

The world’s largest chemical company will hire 9,000 people and double sales to 25 billion euros in Asia-Pacific by 2020. Competition in the region is intensifying and BASF is looking to avoid developments in the agrochemical market, where it fell behind peers expanding in Asia.

“The competitive environment has become sharper and more challenging than we had thought,” Brudermueller said today. “We have to change and accelerate the change. We have to be creative and take out costs.”

One-quarter of research and development will take place in the region in an effort to shift the Ludwigshafen, Germany-based company’s focus to a service provider from a chemical producer and differentiate it more from local competitors, Brudermueller said.

Chinese Pressure…”

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The EU Proposes Power to Shut Down Banks and Force Losses on Crisis Hit Lenders

“The European Commission is seeking to give itself the power to shut down failing euro-area banks as part of a draft crisis blueprint that defies German calls for a more decentralized approach.

The Brussels-based authority is set to propose that decisions to force losses on crisis-hit lenders’ creditors, as well as other steps to prevent a disorderly collapse, should be taken largely out of national hands, according to a document obtained by Bloomberg News. While the system would include a “newly-created central resolution body,” final decisions would be taken by the commission itself.

“Among EU institutions, the commission is best placed to play this role, bolstered by its experience of bank restructuring during the crisis under state-aid control, and given the need to ensure expeditious and effective decision-making,” according to the document.

The move puts the commission at odds with Germany (GDBR10), which has said that a centralized approach to bank resolution in the euro area should only come once the bloc has taken further steps toward common fiscal and economic policies. German Finance MinisterWolfgang Schaeuble has warned that a strong single authority couldn’t be set up under the EU’s current treaties, and that the euro area should opt in the first instance for a networked approach that is reliant on national regulators.

Both the European Central Bank and the commission have, instead, urged rapid progress toward a centralized system in a bid to bolster confidence in the bloc’s banks, and break the financial link between lenders and sovereigns.

Resolution Agency…”

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Foreign Bond Holders Take Aussie Bond Holdings to the Lowest Level in 2.5 Years

“Foreigners’ holdings of Australian government securities fell to the lowest proportion of the total in 2 1/2 years, as an improving global outlook damped demand for the safety of the top-rated debt.

Offshore holdings declined to 68.9 percent of total outstanding debt as of March 31, down from 70 percent three months earlier and the least since the third quarter of 2010, according to government data compiled by Bloomberg. Non-residents owned A$206.4 billion ($200.8 billion) worth of government bonds and bills, down from A$207 billion at the end of the prior quarter.

Australian government bonds fell for a second quarter in the three months ended March 31, the first back-to-back declines since the first half of 2009. Foreign holdings of the nation’s debt peaked at a record 77 percent in June 2012, up from 59 five years earlier, boosted by purchases from foreign central banks.

“The magnitude of those flows are a lot less than they perhaps were a couple of years ago,” said Sally Auld, a Sydney-based interest-rate strategist at JPMorgan Chase & Co. “That’s consistent with this idea that central banks have moved from the build-up phase of their portfolio in Aussie bonds to a maintenance phase.”

Offshore demand for Australian government securities remains strong, with foreign central banks holding notes across the yield curve, Rob Nicholl, head of the Australian Office of Financial Management, said today in Sydney.

Price Declines…”

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RBA Says There is Still Room to Cut Rates a the Aussie Remains High Against Peers

Australia’s central bank said it still has room to cut the benchmark interest rate from its record-low level and judged that the nation’s exchange rate remains high even after the biggest monthly drop since 2011.

Governor Glenn Stevens and his board kept the overnight cash-rate target at 2.75 percent, theReserve Bank of Australia said in a statement today in Sydney. “The inflation outlook, as currently assessed, may provide some scope for further easing, should that be required,” Stevens said. The pause was predicted by 24 of 26 economists surveyed by Bloomberg News….”

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Abenomics Helps Wages to Increase the Most in a Year

Japan’s wages rose by the most in a year in April, a gain that supports Prime Minister Shinzo Abe’s campaign to reflate the world’s third-biggest economy after 15 years of falling prices.

Monthly wages including overtime and bonuses rose 0.3 percent from a year earlier to 273,427 yen ($2,746), the Labor Ministry said today in Tokyo. Abe aims to sustain investor and public confidence amid market volatility, with the Topix index of stocks swinging betweens gains and losses today….”

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The Yen and the Aussie Dollar Weaken on Waning Speculation the Fed Will Taper

“The yen weakened as Asian and European stocks gained amid waning speculation that theFederal Reserve will reduce monetary stimulus.

Japan’s currency depreciated beyond 100 per dollar after climbing to the strongest in three weeks yesterday. Australia’s dollar declined versus all of its 16 major counterparts after theReserve Bank said the inflation outlook provided some scope for further monetary easing. South Africa’s rand strengthened for a second day against the U.S. currency amid demand for higher-yielding assets.

“The market is giving back some of its recent moves, with the yen weakening,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The performance of the U.S. economy and Fed policy direction will be important for the yen.”

The yen fell 0.4 percent to 99.90 per dollar at 7:09 a.m. New York time after depreciating to 100.42. It appreciated to 98.87 yesterday, the strongest since May 9. Japan’s currency declined 0.5 percent to 130.85 per euro after gaining 1 percent during the previous two days. The euro was little changed at $1.3091.

Japan’s currency will weaken toward 110 per dollar over the next 12 months, Bank of Tokyo-Mitsubishi’s Hardman said.

The MSCI Asia Pacific Index of shares gained 1.1 percent and the Stoxx Europe 600 Index advanced 0.3 percent.

Fed Stimulus…”

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$ELN Succeeds in Winning a Court Order to Halt the Takeover of an Irish Drugmaker by Royalty Pharma

Elan Corp. (ELN) won an order from a U.S. judge temporarily blocking Royalty Pharma AG from attempting a $6.4 billion hostile takeover of the Irish drugmaker after Elan sued to halt what it called a “coercive” tender offer.

U.S. District Judge William Pauley in Manhattan yesterday issued a temporary restraining order blocking Royalty and related parties from “consummating or closing defendants’ tender offer” for the outstanding shares of Elan. Pauly scheduled a June 11 hearing to consider whether to issue a preliminary injunction.

Pauly’s order came after Elan filed a complaint claiming that Royalty Pharma made “material misrepresentations” in its revised tender offer. Elan said “shareholders who do not tender their shares may find themselves trapped in a company under Royalty Pharma’s control.” The offer gives stockholders until June 6 to determine whether to waive their shares, Elan said.

Elan, which receives royalties on Biogen Idec Inc. (BIIB)’s multiple sclerosis treatment Tysabri, said yesterday in a yesterday won a ruling from an Irish court restraining Royalty Pharma from distributing a proxy to shareholders. Judge Gerard Hogan left the injunction in place at a hearing today in Dublin pending further hearings this afternoon.

Royalty Pharma on May 20 issued a revised proposal to buy the stock of the company at $12.50 per American depositary receipt, raising its bid from $5.7 billion to $6.4 billion.

Pharmaceutical Royalties…”

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Get Ready to be “CYPRUSED” at a Bank Near You

“…..Below is a copy from a Laikie Bank customer’s business account. This was one of the “bad” banks in Cyprus. This puts into clear terms what happened to client’s funds. As they say a picture tells a thousand words. (This image is published courtesy of MarketOracle.Co.UK).

No wonder the European Central Bank has ceased providing accurate information on Euro wide bank liquidity levels. According to sources of mine funds are transferring out of Euroland at an alarming rate. Given what is currently being discussed in Dublin who would blame any corporate entity or individual removing all  Euro funds from possible confiscation….”

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Euro-zone, U.S. Compounding Errors! Trillions of Dollars Being Printed

“You’re not to be so blind with patriotism that you can’t face reality. Wrong is wrong, no matter who does it or says it. – Malcolm X

Over the last couple of months we’ve heard the IMF, ECB and US Federal Reserve all come out and tell us that they have the right policies in place and things are getting better. Unfortunately, the statistics just don’t bare that out even though they’re often biased in favor of the very governments that produce them. On Friday I saw that unemployment has reached a new high in the Eurozone while inflation remains well below the European Central Bank’s target, underscoring just how severe a challenge EU leaders face to revive the bloc’s sickly economy. Joblessness in the 17-nation currency area rose to 12.2% in April, this according to Eurostat on Friday, marking a new record since the data series began in 1995.


With the Eurozone also in its longest recession since its creation in 1999, consumer price inflation was far below the ECB’s target of just below 2 percent, coming in at 1.4 percent in May, slightly above April’s 1.2 percent rate. Some think the slight rise may quiet concerns about deflation, but the deepening unemployment crisis is a threat to the social fabric of the Eurozone, with almost two-thirds of young Greeks unable to find work exemplifying southern Europe’s threat of creating a ‘lost generation’. Policy makers have expressed concern that the greatest threat to the unity of the Eurozone is now social breakdown from the crisis, rather than market-driven factors.

In France, Europe’s second largest economy, the number of jobless rose to a record in April, while in Italy, the unemployment rate hit its highest level in at least 36 years, with 40 percent of young people out of work. Some economists expect the ECB, with meetings on June 6, to act to revive the economy and go beyond another interest rate cut and consider a US style money-printing program known as quantitative easing. With the Organization for Economic Cooperation and Development forecasting this week that the euro zone economy would contract by 0.6 percent this year, unemployment is set to worsen long before it turns around.

In April, 5.6 million people under 25 were unemployed in the European Union, with 3.6 million of those in the Eurozone. Even if governments take on unions and vested interests to enact reforms, they will need time to produce benefits. Meanwhile the impact of the Eurozone’s debt and banking crises has been sapping confidence from companies and households. Private consumption saved Germany from slipping into recession in the first three months of this year, but retail sales still fell unexpectedly in April because of the cold European winter. In France consumer spending dropped again in February, falling by 0.2 percent after contracting in January. French household purchasing power contracted in 2012 for the first time since 1984.

Meanwhile across the pond the consumer spending in the U.S. unexpectedly declined in April as incomes stagnated, putting the biggest part of the US economy on shaky ground at the start of the second quarter. Household purchases, accounting for about 70 percent of the economy, dropped 0.2 percent after a 0.1 percent rise the prior month that was smaller than previously estimated, this according to a Commerce Department report on Friday. Personal income, meanwhile, decreased 0.1%” in April after a revised 0.3% gain in March, mostly because of lower rents and farm-related earnings. The personal savings rate held steady at 2.5% and remains near a five-year low. Inflation as gauged by the core PCE price index increased less than 0.1% in April, and it’s up just 1.1% in the past 12 months. That’s the lowest level since March 2011 and just a notch above an all-time low. Overall PCE declined by 0.3% and is up a meager 0.7% in the past year. That’s the lowest rate since October 2009.

Many believe the data underscore the risk to the economy from the federal budget cuts that began in March and a higher payroll tax implemented at the start of 2013. The drop in spending last month was the first since May 2012. The Commerce Department’s price index tied to spending, the gauge tracked by Federal Reserve policy makers, fell 0.3 percent in April, the biggest drop since December 2008, as fuel costs retreated. The so-called core price measure, which excludes food and fuel, was unchanged from the prior month and was up 1.1 percent from April 2012, matching a record low. Adjusting consumer spending for inflation, which renders the figures used to calculate gross domestic product, real purchases rose 0.1 percent, the smallest advance since October, after a 0.2 percent increase in the previous month, today’s report showed.

Strength in consumer spending and business investment helped the economy weather government cutbacks. Gross domestic product rose at a 2.4 percent annualized rate, and household spending expanded 3.4 percent, the most since the last three months of 2010. Purchases may be underpinned by gains in equity and housing markets. The Standard & Poor’s 500 Index (SPX), which reached a record on May 21, is up 16 percent since the start of 2013 through Friday. The S&P/Case-Shiller index of home values in 20 cities advanced in the 12 months to March by the most in seven years. As a result many are calling for a continued improvement in the housing market.

Lowe’s, the second-largest US home-improvement retailer, is among companies counting on a strengthening housing market to lift demand. The Mooresville, North Carolina-based chain said sales last month also recovered from a cold spring that sapped demand for outdoor merchandise such as flowers and fertilizer. Unfortunately, the chart of Lowe’s may tell us a different story:

Aside from the obvious warning signs we see in the previous chart, there is the issue of plummeting lumber prices:

So for those of you hoping and praying for a housing bubble to support the US economy, you might want to hang your hat on something else. These two charts indicate that the housing market’s best days are behind it.

Strangely enough the Dow is trying to continue higher regardless of the economy. I have to assume that investors have complete faith in Bernanke and his ability to keep a floor under stock prices at all costs. How else can you explain the fact that the Dow has now gone seven months without so much as a 5% correction:

That is something that has never happened before and is in spite of the fact that RSI has been extremely oversold for the better part of 2013. Still the Dow last made a new all-time closing high on Tuesday at 15,409.39, although the Dow’s new all-time closing high went unconfirmed by the Transportation Index as you can see below:

One of the drivers behind the surge in the Dow has to do with companies borrowing cheap to buy back their own stock at nosebleed prices, and doing so in a volume that will soon emulate the carefree abandon of those pre-Lehman days. By some estimates this has driven half the US equity gains this year:

Dollar-value share repurchases amounted to $93.8 billion over the fourth quarter and $384.3 billion for 2012. The fourth quarter total is in-line with that of Q3, but represented year-over-year growth of 9.6%.

Estimates for the first quarter of 2013 approach US $100 billion! Looking forward I see several companies in the S&P 500 have authorized new programs or additions of $1 billion or more since December 31st, including Gap (GPS), Blackrock (BLK), Marathon Petroleum (MPC), L-3 Communications (LLL), Visa (V), Allstate (ALL), Moody’s (MCO), CBS Corporation (CBS), Dow Chemical (DOW), and AbbVie (ABBV). In addition, even larger authorizations were made by United Technologies Corp. (UTX), 3M Co. (MMM), and Lowe’s (LOW), which all announced replacement programs worth approximately $5.4 billion, $7.5 billion, and $5 billion, and Hess Corporation (HES), which announced a $4 billion buyback program on March 4th.

Additionally, a number of banks were approved to buy back large amounts of common and preferred shares in 2013. JPMorgan Chase (JPM) was approved for $6 billion in share repurchases, Bank of America (BAC) was approved for $5 billion in share repurchases plus $5.5 billion in redemption of preferred shares, and Bank of New York Mellon (BK), U.S. Bancorp (USB), State Street Corp (STT), and American Express (AXP) were all approved to repurchase greater than $1 billion worth of shares. Why buy back shares when prices certainly are not cheap? The answer is that much of the buybacks are in conjunction with massive shareholder dilution via stock option grants to executives. Insiders continually unload their shares and corporations buy them back thereby pushing the share price higher.

In spite of the rises in the Dow and S & P 500 there are still a number of companies struggling. This list includes Apple…”

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El-Erian: Market Behavior Signals Volatile Times Ahead

“Volatility is rising, liquidity is falling in some places and anxiety is increasing, according to Mohamed El-Erian, CEO and co-chief investment officer of fund giant Pimco.

El-Erian believes that these changes are not just a “blip,” but rather are “indicative of a deeper change.”

“The related underlying shifts could be secularly beneficial or could well signal more volatile times ahead,” he notes.

And the “dislocations seem to be cascading gradually from the least liquid [markets] to the more liquid ones,” instead of impacting all the market segments at the same time.

For instance, he explains, Japan’s central bank’s purchases of large amounts of securities has helped sparked a rally in Japan’s stock market.

“In the last few days, however, Japan is no longer emitting a consistently constructive signal,” El-Erian writes in an article for Fortune. “The Nikkei has fallen 12 percent since May 22, with some notable daily drops of 7 percent, 5 percent and 3 percent. The behavior of Japanese government bonds has been quite volatile and increasingly inconsistent. And the yen is now less unidirectional.”

Japan’s government has good cause to be worried, he says. If it cannot get the country on the road to economic growth, the risk of financial turbulence will substantially increase.

“It has no choice but to venture even deeper into experimental territory as it attempts to influence market pricing and investor behavior,” El-Erian states….”

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$MSFT to Restructure Into a Device and Service Company

Microsoft CEO Steve Ballmer is working to restructure the software company to be more focused on providing “devices and services,” according to a report.

The changes will likely include a shake-up of some top executives, according to an All Things D report, which cited sources close to the situation.

Satya Nadella, president of the servers and tools division; Tony Bates, president of Skype; and Don Mattrick, president of the interactive entertainment business, may get expanded roles from the revamp, according to the report.

However, sources also said that the changes are still being figured out and could shift at any time, according to the report….”

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Shareholders Approve the $NYX $ICE Merger

“The NYSE Euronext (NYX) has approved its merger with InterContinentalExchange (ICE), and by a landslide: with about 63 percent of shareholders voting, the approval rate was roughly 99 percent.

ICE shareholders have also approved the merger.

The combined company will have a roughly $20 billion value, with about 116 million shares fully diluted shares.

The most important development is that this deal makes the combined company a true multi-product exchange: they will have exposure to the premier energy futures trading business, as well as trading of interest rate futures. It will also continue to generate significant income from transactions, derivatives, market data, and technology services. And ICE has a significant clearing operation that was a significant part of the deal.

Allowing customers access to multi-product trading…is what it’s all about in today’s global trading environment….”

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$ZNGA to Pink Slip 18% of Workforce After Announcing Poor Earnings

“Zynga confirmed it was laying off 18 percent of its workforce — which represents 520 employees — in a bid to reduce costs, as it seeks to drastically restructure its troubled business.

The move today will affect every part of the San Francisco social gaming company, cutting $80 million in staff costs. It will also include the closing of its offices in New York, Los Angeles and Dallas, as well as other infrastructure costs, adding to the total expense reduction.

In addition, Zynga has now said in a press release that it is downgrading in its investor guidance for the second quarter with results at the lower end of what Wall Street has been expecting….”

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May Auto Sales Get a Boost From Pick Up Truck Sales

“DETROIT (Reuters) – Strong pickup truck sales, spurred by an improving housing market, boosted May U.S. auto sales after a disappointing April, automakers reported on Monday.

The three major U.S. automakers dominate pickup truck sales, which generally are sold at a higher profit margin than other vehicles.

The surge in pickup truck sales began late last year and has continued to outpace growth for the U.S. auto industry through May.

Pickup truck sales in May rose about 2 percentage points to 11.7 percent of the overall industry, Ford Motor Co said.

“Quite simply, it’s a great time to be in the truck business,” said Kurt McNeil, head of U.S. sales operations for General Motors Co . “The housing recovery, relatively stable gas prices, and the release of pent-up demand” have helped pickup trucks sales.

Total U.S. auto sales were on track to exceed analyst expectations of a 6 percent rise from last year, to about 15.1 million vehicles on a seasonally adjusted annualized rate.

GM said that May U.S. sales will be between 15.4 million and 15.5 million on a seasonally adjusted annualized rate.

However, GM, the No. 1 automaker in U.S. sales, missed analysts’ expectations by nearly 6 percent, showing a 3 percent sales gain for May….”

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