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Monthly Archives: July 2011

Novus Ordo Seclorum

No conspiracy theory here;  just a report out of Societe Genrale on supply chain demand and a potential paradigm shift.

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Marianas rig damage may delay Ghana drilling

From Bloomberg:

Kosmos Energy Ltd. said damage to Transocean Ltd. (RIG)’s Marianas rig may delay drilling of a well off Ghana’s coast.

A force majeure notice was delivered to the government of Ghana and Ghana National Petroleum Corp. after an anchor- handling accident damaged the rig, Dallas-based Kosmos said today in a statement. The Marianas was scheduled to arrive July 10 for drilling, Kosmos said.

Kosmos said it anticipates that either the Marianas or a substitute rig will be “available soon” to drill the Cedrela-1 well in the West Cape Three Points Block. Transocean, based in Vernier, Switzerland, reported yesterday it evacuated 108 of 121 workers on the rig after it took on water while preparing to leave an Eni SpA drilling site off Ghana.

The market for deep-water rigs in that part of the world is so tight that Kosmos will likely have to wait at least a month for a comparable drilling vessel, said Brian Uhlmer, an analyst at Global Hunter Securities in Houston. Moving an unused rig from the Gulf of Mexico could take about 45 days.

“There’s literally nothing in Ghana that can come back to work quickly,” Uhlmer said. “I think the most likely is to pull something from the Gulf.”

The Marianas rig, which was used in 2009 to start drilling the Macondo well for BP Plc in the Gulf of Mexico, may be out of service for as many as 180 days with most of the time taken up by moving it to a yard and final inspections, Uhlmer said. “It’s not like fixing your kid’s soccer ball,” he said.

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Investors not bullish on Treasuries

The following article clip is based on results from a survey of bond investors.

For the first time since 2005, investors held no outright bullish positions on Treasury prices, according to a closely watched survey of bond investors’ sentiment by J.P. Morgan Chase & Co.

The survey showed most investors remain neutral rather than bearish, an indication that many may not be ready to call an end to the three-month-long bull run.

Some Treasurys had rallied for 11 weeks in a row until last week, their worst week in two years. Treasurys had been finding buyers despite near-record low yields, the end of the Federal Reserve’s Treasury-buying program and uncertainty over the debt ceiling. They have been seen as a safe investment, particularly amid worries about Europe and U.S. economic growth.

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30 year fixed mortgage rate rises

WASHINGTON (AP) — Fixed mortgage rates rose this week by the most in four months.

The average rate on the 30-year loan increased to 4.60 percent, up from 4.51 percent a week ago, Freddie Mac said Thursday. It hit its lowest level of the year three weeks ago, at 4.49 percent.

The average rate on the 15-year fixed mortgage, a popular refinancing option, rose to 3.75 percent. It reached its low point of the year two weeks ago, at 3.67 percent.

Rates typically track the yield on the 10-year Treasury note, which has been rising. And mortgage rates could rise further now that the Federal Reserve’s $600 billion bond buying program has ended.

The Fed has purchased around $75 billion worth of bonds each month since November. That drove the yield on the 10-year Treasury note lower than 3 percent this spring. As a result, rates on mortgages and other loans also fell.

Still, low mortgage rates and plummeting home prices have done little to boost the troubled housing market. Tougher lending standards and bigger down payment requirements have prevented many people from taking advantage of the ultra-low rates. Many people who can qualify are holding off, worried that prices have yet to bottom out.

Most economists say home prices will keep falling through the rest of the year. Many forecasts don’t anticipate a rebound in prices until at least 2013.

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Banks margins shrink in low interest rate environment

Interesting take on the trouble with low yielding savings environments.

Though they pay their depositors zilch, commercial banks’ margins are shrinking while loans stagnate.

Time was that banks used to feast on cheap money. Bank stocks would rally on the hint of Federal Reserve interest-rate reductions since the banks would cut the rates they paid to depositors with greater alacrity than what they charged borrowers, just as big oil companies are apt to lower the prices at the gasoline pump more slowly than crude oil comes down in price.

The Fed has pegged the cost of money virtually at zero—technically a target for the overnight federal funds rate of 0-0.25%—since December 2008 at the depth of the credit crisis. And it looks as if the fed-funds rate won’t be lifted off the floor for a year or so, by the reckoning of the financial-futures market, and may climb to just 0.5% by the time of the Federal Open Market Committee meeting scheduled for Oct. 23-24, 2012.

You’d think the prospect of free money would be just the “juice” that would permit banks to perform like Barry Bonds when he was bashing baseball’s home-run records. But you’d be wrong.

It seems that zero percent money is a drug that loses its potency the longer it’s administered. Even banks may be beginning to feel the same effects as their long-suffering depositors—dwindling income from interest rates so tiny you need a magnifying glass to see.

Citigroup’s bank analysts led by Keith Horowitz slashed estimates for large regional bank companies because continued rock-bottom interest rates will mean markedly lower earnings for 2012 than had been expected. This realization was a contributor to a weak financial sector Tuesday, with the KBW Bank SPDR exchange-traded fund (ticker: KBE), which tracks the Keefe Bruyette & Woods bank-stock index, falling more than 1% in a relatively quiet session.

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Upgrades and Downgrades This Morning


KLAC – KLA-Tencor upgraded to Buy from Neutral at UBS

KOG – Kodiak Oil & Gas upgraded to Outperform from Market Perform at Northland Securities

V – Visa target raised to $101 from $94 at RBC Capital Mkts

ENOC – EnerNOC upgraded to Outperform at Pacific Crest

ENR – Energizer upgraded to Buy from Neutral at UBS

AVP – Avon Products upgraded to Buy from Neutral at UBS

P – Pandora Media initiated with an Overweight at Global Equities

ASML – ASML Holding upgraded to Buy from Neutral at UBS

PNC – PNC downgraded to Hold from Buy at Deutsche Bank


IBM – IBM downgraded to Neutral at Davenport

GS – Goldman Sachs  cut at Bernstein

CEL – Cellcom Israel downgraded to Sell from Hold at Citigroup

FST – Forest Oil target lowered to $37 at RBC Capital Mkts

YUM – YUM Brands downgraded to Sell from Neutral at Goldman

FAST – Fastenal downgraded to Hold from Buy at BB&T

NE – Noble Corp target lowered to $44 from $50 at RBC Capital Mkts

SBUX – Starbucks downgraded to Neutral from Buy at Goldman

CSIQ – Canadian Solar downgraded to Hold from Buy at Jefferies

Read more: http://www.briefing.com/InPlayEq/InPlay/LiveHeadlines.htm#ixzz1RQMh60X1

LNKD – LinkedIn initiated with a Sell at Capstone

MS – Cut at Bernstein

STEM – StemCells initiated with a Sell at WBB Securities

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Gapping Up and Down This Morning

Gapping Up

OCZ +4.3%, PMI +4.9%, AIR +9.6%, GOLD +1.3%, RIG+1.5%, DANG +1.6%, ZUMZ +2.1%, CDE+2.3%, RENN +3.7%, SINA +1.9%, LVS+1.1%, SOHU +1%, JAG +2.0%,BHP +1.3%, RIO +1.2%, BBL +1.2%,TGT +5.3%, KLAC+0.7%, WDC +1.1%,STX +2.9%, TSL +1.2%, M +2.2%, ZUMZ +2.1%, GPS+2.0%, BABY +1.2%, RIG +1.5%, S +3.4%, ASML +2.1%,

Gapping Down

ILMN -2.3%, FRO -1.6%, LPS -3.4%, THG -1.5%, AFFX -19.4%, TSRA -9.7%, DRWI -0.7%, QPSA -6.9%,  V -0.6%AIXG -2.9%, SHLM -2.6%, 


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Food Inflation Remains Vigilant

The world food index rose on higher sugar, meat, and wheat costs. New highs were reached in February and prices are reaching back for old highs.

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