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Monthly Archives: July 2011

Fed Minutes Reveal More Stimulus is Being Considered

There is disagreement, but some fed officials are in favor of more stimulus if it is needed while others want to hike rates if inflation persists.

For now the fed expects growth to pick up, inflation to moderate, and for interest rates to remain low for some time to come.

Full article

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U.S. Manufacturers Can Not Find Skilled Workers

The Obama administration and congress are pushing for manufacturers to hire, but they can not get he skilled workers needed. Jobs have gone from not needing any real skills to highly intricate skills needed.

Perhaps some targeted stimulus and companies could train people willing to learn, but can not afford to pay for education or take time off from that menial job paying the bills.

Full article

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Alert: Moody’s Downgrades Ireland to Ba1

Via Moody’s

Moody’s Investors Service has today
downgraded Ireland’s foreign- and local-currency government bond ratings
by one notch to Ba1 from Baa3. The outlook on the ratings remains

The key driver for today’s rating action is the growing possibility that
following the end of the current EU/IMF support programme at year-end
2013 Ireland is likely to need further rounds of official financing
before it can return to the private market, and the increasing
possibility that private sector creditor participation will be required
as a precondition for such additional support, in line with recent EU
government proposals.

As stated in Moody’s recent comment, entitled “Calls for Banks to Share
Greek Burden Are Credit Negative for Sovereigns Unable to Access Market
Funding” (published on 11 July as part of Moody’s Weekly Credit Outlook),
the prospect of any form of private sector participation in debt relief
is negative for holders of distressed sovereign debt. This is a key
factor in Moody’s ongoing assessment of debt-burdened euro area

Although Moody’s acknowledges that Ireland has shown a strong commitment
to fiscal consolidation and has, to date, delivered on its programme
objectives, the rating agency nevertheless notes that implementation
risks remain significant, particularly in light of the continued weakness
in the Irish economy.

The negative outlook on the ratings of the government of Ireland reflects
these significant implementation risks to the country’s deficit
reduction plan as well as the shift in tone among EU governments towards
the conditions under which support to distressed euro area sovereigns
will be made available.

Despite the increased likelihood of private sector participation, Moody’s
believes that the euro area will continue to utilise its considerable
economic and financial strength in its efforts to restore financial
stability and provide financial support to the Irish government. The
strength and financial capacity of the euro area is underpinned by the
Aaa strength of many of its members including France and Germany, and
indicated by Moody’s Aaa credit ratings on the European Union, the
European Central Bank and the European Financial Stability Facility.

Moody’s has today also downgraded Ireland’s short-term issuer rating by
one notch to Non-Prime (commensurate with a Ba1 debt rating) from Prime-3.

In a related rating action, Moody’s has today downgraded by one notch to
Ba1 from Baa3 the long-term rating and to Non-Prime from Prime-3 the
short-term rating of Ireland’s National Asset Management Agency (NAMA),
whose debt is fully and unconditionally guaranteed by the government of
Ireland. The outlook on NAMA’s rating remains negative, in line with that
of the government’s bond ratings.


The main driver of today’s downgrade is the growing likelihood that
participation of existing investors may be required as a pre-condition
for any future rounds of official financing, should Ireland be unable to
borrow at sustainable rates in the capital markets after the end of the
current EU/IMF support programme at year-end 2013. Private sector
creditor participation could be in the form of a debt re-profiling —
i.e., the rolling-over or swapping of a portion of debt for
longer-maturity bonds with coupons below current market rates — in
proportion to the size of the creditors’ holdings of debt that are coming

Moody’s assumption surrounding increased private sector creditor
participation is driven by EU policymakers’ increasingly clear preference
— as expressed during the negotiations over the refinancing of Greek
debt — for requiring some level of private sector participation given
that private investors continue to hold the majority of outstanding debt.
A call for private sector participation in the current round of financing
for Greece signals that such pressure is likely to be felt during all
future rounds of official financing for other distressed sovereigns,
including Ba2-rated Portugal (as Moody’s recently stated) as well as

Although Ireland’s Ba1 rating indicates a much lower risk of restructuring
than Greece’s Caa1 rating, the increased possibility of private sector
participation has the effect of further discouraging future private
sector lending and increases the likelihood that Ireland will be unable
to regain market access on sustainable terms in the near future. This in
turn implies that some Irish government bond investors would need to
absorb losses. The increased risk of a disorderly and outright payment
default or of a disorderly debt restructuring by Greece also increases
the risk that Ireland will be unable to regain access to private sector

The downward pressure that this creates is mitigated in Ireland’s case by
the strong commitment of the Irish government to fiscal consolidation and
structural reforms, and by its success, so far, in achieving the fiscal
adjustment required by the EU/IMF programme. To date, Ireland has met all
of its objectives under that programme. In the first half of 2011, the
primary balance target was exceeded, with tax revenues on track and
lower-than-anticipated government expenditures. However, Moody’s cautions
that implementation risks related to the overall deficit reduction aims
of the three-year programme are still significant, particularly in light
of the continuing weakness of domestic demand.

Apart from Ireland’s adherence to fiscal consolidation, Moody’s also
acknowledges the Irish economy’s continued competitiveness and
business-friendly tax environment. The considerable wage adjustment that
occurred in the course of the crisis reflects the Irish labour market’s
flexibility. Taking Ireland’s economic adjustment capacity into account,
Moody’s expects that, after a period of prolonged retrenchment, Ireland’s
long-term potential growth prospects remain higher than those of many
other advanced nations. While the government’s debt-to-GDP burden is
expected to be high compared to similarly rated sovereign credits,
Ireland has managed elevated levels of indebtedness in the past, and has
shown political cohesion while enacting difficult structural adjustments.


Moody’s would consider a further rating downgrade if the Irish government
is unable to meet the targeted fiscal consolidation goals. A further
deterioration in the country’s economic outlook would also exert
downward pressure on the rating, as would further market disruption
resulting from a disorderly Greek default.

Moody’s also notes that upward pressure on the rating could develop if
the government’s continued success in achieving its fiscal consolidation
targets, supported by a resumption of sustained economic growth, is able
to reverse the current debt dynamics, thereby sustainably improving the
Irish government’s financial strength.


Moody’s last rating action affecting Ireland was implemented on 15 April
2011, when the rating agency downgraded Ireland’s government bond ratings
by two notches to Baa3 from Baa1, and maintained the negative outlook.

Moody’s last rating action affecting NAMA was implemented on 15 April
2011, when the rating agency downgraded by two notches to Baa3 from Baa1
the senior unsecured debt issued by NAMA, which is backed by a full
guarantee from the Irish government. The negative outlook was maintained.

The principal Moody’s rating methodology used in this rating was
“Sovereign Bond Ratings” published in September 2008. Please refer to
the Credit Policy page on www.moodys.com for a copy of this methodology.


For ratings issued on a program, series or category/class of debt, this
announcement provides relevant regulatory disclosures in relation to each
rating of a subsequently issued bond or note of the same series or
category/class of debt or pursuant to a program for which the ratings are
derived exclusively from existing ratings in accordance with Moody’s
rating practices. For ratings issued on a support provider, this
announcement provides relevant regulatory disclosures in relation to the
rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider’s credit rating. For provisional ratings, this
announcement provides relevant regulatory disclosures in relation to the
provisional rating assigned, and in relation to a definitive rating that
may be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior to
the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings tab
on the issuer/entity page for the respective issuer on www.moodys.com.

The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.

Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings and
public information.

Moody’s considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing a

Moody’s adopts all necessary measures so that the information it uses
in assigning a rating is of sufficient quality and from sources Moody’s
considers to be reliable including, when appropriate, independent

third-party sources. However, Moody’s is not an auditor
and cannot in every instance independently verify or validate information
received in the rating process.

Moody’s Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the credit rating action. Please see the
ratings disclosure page on our website www.moodys.com for
further information.

Please see Moody’s Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time
before Moody’s ratings were fully digitized and accurate data may not
be available. Consequently, Moody’s provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody’s legal entity that has issued
the rating.

Moody’s Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

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Today’s Biggest Large Cap Losers

No. Ticker % Change Market Cap
1 MCHP -13.13 7,140,000,000
2 MXIM -7.12 7,510,000,000
3 NXPI -6.92 6,260,000,000
4 ADI -5.60 11,550,000,000
5 ATML -5.33 6,350,000,000
6 LRCX -5.31 5,580,000,000
7 INFY -4.87 37,190,000,000
8 ASML -4.55 16,120,000,000
9 AVGO -4.41 9,230,000,000
10 XLNX -4.23 9,470,000,000
11 AUO -4.21 5,460,000,000
12 STM -4.16 8,470,000,000
13 LLTC -4.14 7,430,000,000
14 GMCR -3.97 13,440,000,000
15 ARMH -3.88 39,270,000,000
16 YPF -3.81 17,740,000,000
17 MCO -3.80 8,570,000,000
18 DAL -3.72 7,610,000,000
19 FAST -3.56 10,610,000,000
20 TXN -3.39 37,670,000,000
21 ASX -3.36 6,520,000,000
22 ALU -3.23 12,630,000,000
23 KLAC -3.22 7,100,000,000
24 ADSK -3.21 9,000,000,000
25 DOW -2.79 41,240,000,000

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As per FOMC minutes.

“A few members noted that, depending on how economic conditions evolve, the Committee might have to consider providing additional monetary policy stimulus, especially if economic growth remained too slow to meaningfully reduce the unemployment rate in the medium run.”

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Italy too big to bail out

From Forbes:

As contagion sends ripple effects through the European periphery, with Italy in the eye of the storm amid rumors that the European Central Bank (ECB) has intervened and bought Italian sovereign bonds on the secondary market, analysts are coming to the conclusion that Italy is too big to bail given massive funding requirements and total debt outstanding of €1.6 trillion ($2.2 trillion).

Italian equities managed to record some gains during Tuesday’s session, up 1.3% after a terrible two-day beat-down that led to some of the largest spread moves in sovereign bonds in the European Monetary Union’s History and to what Italian’s called “Black Friday”. Yields on benchmark 10-year Italian bonds fell marginally on Tuesday and stood at 5.66%, just below Spain’s 5.96%.

With a plethora of negative news coming out of Europe on a daily basis, it is hard to attribute this Italian crisis to one event, but what is undeniable is that markets are coming to the realization that Italy is a whole different animal from Greece, Ireland, and Portugal, and that bailing it out might deliver a final blow to the beleaguered European Union. (Read Euro Contagion: Italian Equities Tank, Yields And CDS Jump).

Differences are staggering. While funding requirements for 2012 the three PIIGs that have already been bailed out totals €91 billion ($127 billion), Italy’s funding requirements reach a massive €250 billion ($350 billion). Total outstanding debt for the country run by Prime Minister Silvio Berlusconi is around €1.6 trillion ($2.2 trillion), compared with €345 million for Greece, and about €150 billion each for Portugal and Ireland, according to numbers crunched up by Nomura.

If Italy were to fail, the problem would be that it is too big to bail. Nomura’s analysts point out that current European Financial Stabilization Facility (EFSF) mechanisms were designed to deal with failure of relatively small countries being bailed out by a relatively large group of participating Eurozone countries. The equation changes for Italy.

Currently, the EFSF has an effective lending capacity of €320 billion ($448 billion) out of a total of €440 billion ($616 billion); Italy’s funding needs over the next two years exceed €500 billion ($770 billion). Not only would the EFSF (and its successor, the European Stability Mechanism-ESM-with total authorized capital estimated to be around billion) lack the capacity to bail out Italy, the number of countries ready and willing to lend Rome a hand would be reduced to only two: France and Germany. (Read French Banks Hold $93B In Greek Debt As Sarkozy Announces Rollover Deal).

If Europe’s two big dogs were forced to cough up €500 billion for their Italian buddies, that would constitute approximately 10% of their combined GDP (around €5 trillion, according to Nomura). According to the note:

At some point the load will be too big for France and Germany too. For example, would France be able to sustain an AAA rating with contingent liabilities to Italy in excess of 10% of GDP?

There is not enough capacity to bail out Italy within the current bail-out infrastructure. And even an expanded EFSF may not be able to provide a credible backstop over the medium-term

One possible alternative is central bank intervention to lower rates. Traders on Tuesday were pretty sure they saw the hand of the ECB, through the Bank of Italy, in sovereign bond markets for Italian debt. And on Monday, a meeting of European Finance Ministers allowed for the possibility that the EFSF could be allowed to buy sovereigns in the secondary market.

But this might not be enough, as FT Alphaville notes. While the ECB has already tried these interventions with Greece, Portugal, and Ireland, it has not succeeded in ensuring “depth and liquidity in those market segments which are dysfunctional,” as trade volumes in those suggest. And, given the size of the Italian bond market, with “daily turnover in May of €12 billion” and gross issuance in the third quarter of €31 billion in two, five, and ten-year bonds, it would be a disaster for the ECB to make Italy “a regular patient.”

The situation is dire indeed. The political battle to bail-out small nations in Germany was massive, eroding much of Chancellor Angela Merkel’s political capital. Bailing out Italy, then, seems like an economic, political, and social impossibility.

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Today’s Winners and Losers

No. Ticker % Change
1 CDTI 62.47
2 RADS 30.51
3 GBE 26.02
4 CABL 18.18
5 FTWR 16.79
6 CLNE 15.32
7 GMR 13.33
8 SYMX 12.67
9 RXII 12.10
10 BMTI 11.70
11 PRKR 11.10
12 FUEL 9.56
13 MASC 9.14
14 IPSU 8.80
15 OWW 8.76
16 MBI 8.51
17 SYSW 8.33
18 WPRT 8.22
19 CPTS 7.32
20 UTSI 7.30
21 RITT 7.15
22 CHCI 7.14
23 ALN 7.02
24 ARWR 7.00
25 VALV 6.99
No. Ticker % Change
1 JVA -20.95
2 TREX -14.36
3 ADLR -14.18
4 MCHP -12.70
5 TSL -12.35
6 QSFT -11.51
7 ORCT -11.49
8 NVLS -11.13
9 ALTI -11.11
10 FARM -9.55
11 EFOI -8.77
12 PARD -8.70
13 CPRX -8.54
14 ENTG -8.30
15 AXTI -8.05
16 SOLR -8.03
17 KLIC -7.95
18 DQ -7.88
19 HSOL -7.88
20 WWW -7.82
21 FFHL -7.57
22 UTEK -7.55
23 DGLY -7.50
24 ANO -7.43
25 ASYS -7.38

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Companies leaving California in droves

This gives me so much pleasure.

NEW YORK (CNNMoney) — Buffeted by high taxes, strict regulations and uncertain state budgets, a growing number of California companies are seeking friendlier business environments outside of the Golden State.

And governors around the country, smelling blood in the water, have stepped up their courtship of California companies. Officials in states like Florida, Texas, Arizona and Utah are telling California firms how business-friendly they are in comparison.

Companies are “disinvesting” in California at a rate five times greater than just two years ago, said Joseph Vranich, a business relocation expert based in Irvine. This includes leaving altogether, establishing divisions elsewhere or opting not to set up shop in California.

“There is a feeling that the state is not stable,” Vranich said. “Sacramento can’t get its act together…and that includes the governor, legislators and regulatory agencies that are running wild.”

The state has been ranked by Chief Executive magazine as the worst place to do business for seven years.

“California, once a business friendly state, continues to conduct a war on its own economy,” the magazine wrote.

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Alan Blinder: We Have a Jobs Emergency

“If we were at 5 percent unemployment, two bad payroll reports in a row would be of some concern yet tolerable,” Blinder writes in The Wall Street Journal. “But when viewed against the background of 9 percent-plus unemployment, they are catastrophic.”

Full article

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Goldman Sachs Puts Out a Report on Italy

Things are bad, but not that bad…..Italy is larger than the PIGS combined and has an economy that is roughly 15% of America’s GDP.

The real scenario is if Greece can not be bailed out then how do you bail out Italy and the rest ?

Full report

Another Outlook

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Jan Poser: America Needs Austerity Not Hypocrisy

Targeted spending is what we need.

Lester Lefkowitz | Stone | Getty Images
The United States may also face a credit crisis

“A US sovereign default is definitely the worst outcome imaginable for financial markets” said Poser in a research note.

“A US interest rate hike would put companies and consumers under pressure and trigger a global recession. Global banks, whose financing requirements depend on the ‘risk-free’ government bonds held on their balance sheets, would immediately become insolvent,” he added.




Full article


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Upgrades and Downgrades This Morning


JAH – Jarden upgraded to Buy from Hold at Jefferies

CLNE – Clean Energy Fuels upgraded to Outperform at Northland Securities

AAPL – Apple ests raised at Ticonderoga

RADS – Radiant Systems target raised to $28 from $24 at Northland Securities

AMZN – Amazon.com initiated with a Outperform at Robert W. Baird

SNDA – Shanda Interactive upgraded to Hold from Sell at RBS

IGT – Intl Game Tech upgraded to Buy from Neutral at Sterne Agee

RAIL  – Freightcar America initiated with a Buy at Sterne Agee

GBX – Greenbrier Comp initiated with a Buy at Sterne Agee

EBAY – eBay initiated with a Outperform at Robert W. Baird

OAS – Oasis Petroleum target raised to $44 at Wunderlich

HFC – HollyFrontier initiated with a Outperform at Oppenheimer

ORCL – Oracle resumed with Buy at Goldman


MCHP – Microchip downgraded to Neutral from Buy at UBS

CHU – China Unicom Hong Kong downgraded to Neutral from Outperform at Credit Suisse

WM – Waste Mgmt downgraded to Underperform at Wedbush

ADBE – Adobe Systems resumed with Sell at Goldman

DELL – Dell initiated with Hold at Jefferies

MXIM – Maxim Integrated downgraded to Neutral from Buy at UBS

HPQ – Hewlett-Packard initiated with Hold at Jefferies

PG – Procter & Gamble downgraded to Hold from Buy at Jefferies

ONNN – ON Semiconductor downgraded to Neutral from Buy at UBS

NVLS – Novellus target lowered to $38 at Needham

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Gapping Up and Down This Morning

Gapping up

JNY +3.7%, ACI +1.2%, MWW+3.1%, NCR+2.1%, ANR+0.9%, CLNE +22%, BGC +2.9%, RADS +30.5%, IGT +2.6%, JNS +2.6%,

Gapping down

SOL -8.1%, AA -3%, NLY -2%, MCHP -8%, NVLS -6%,

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