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Monthly Archives: January 2013

Finding Good News in Yesterday’s GDP Report

“Some good summarizing thoughts here from Consumer Metrics Institute:

– As detailed above, the contraction was driven primarily by dramatic (but not unexpected) reversals to the one-quarter spikes in government spending and inventory growth, which sharply (and conveniently) improved the headline number just prior to the November election. At best both of those one-quarter binges simply brought zero-sum economic activity forward by a quarter, and at worse we will see both of these surges later treated as data anomalies that disappear in future revisions.

– For those of us who follow these numbers closely (and perhaps foolishly try to make some longer-term sense of them), the inexplicable economic surge reported for the third quarter has now at least reversed, and the general weakening pattern previously recorded for 2012 seems to have been confirmed.

– The consumer data was actually a modest bright spot. Per-capita disposable income increased substantially, as did personal consumption expenditures for both goods and services. Similarly commercial fixed investment expenditures improved.
But there are several longer term issues with the data:

– We have mentioned before that the BEA is notoriously poor at recording turning points in the economy in “real time.” The first quarter of 2008 was a classic example, initially being reported in “real time” as yet another quarter of sustained growth before being revised downward several times over some 40 months to become the first quarter of contraction leading into what we now call the “Great Recession.” We fully expect that ultimately the surprising economic upturn seen in the 3Q-2012 data will largely vanish in future revisions….”

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DICK bove: Bank Stocks Headed for 14-Year Rally

“Bank stocks have been on a tear for the past year, with the KBW Bank Index soaring 27 percent. And renowned banking analyst Dick Bove thinks the party will keep going — for another 14 years.

“What I’m suggesting is for the next 14 years — you’ll have some setbacks, some recessions — [but] bank earnings will do what they did from 1992 to 2006,” Bove told reporters, according to CNBC.

“They’re going to go straight up.”

Economic growth will fuel the rally, says Bove, who has moved to Rafferty Capital Markets from Rochdale Securities. He expects gross domestic product to expand 3 percent this year, despite its 0.1 percent decline in the fourth quarter.

Strength in the real estate, healthcare, automobile and electronics sectors will “drive the economy,” Bove says.

He thinks the Fed’s quantitative easing will help support the economy too. That’s because through its purchases of mortgage-backed securities, the Fed “is taking the money and investing it directly into an industry — housing.” …”

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Art Laffer: ‘Whole Economy is Shrinking’

“Economist Art Laffer Wednesday called the contraction in the U.S. economy “catastrophic” and predicted that it would continue to shrink without spending restraints and lower business tax rates.
“You have the whole output of the economy shrinking. Not just expanding more slowly, it`s absolutely shrinking,” Laffer told Fox News’ Eric Bolling Wednesday.
“That’s catastrophic,” the former adviser to President Ronald Reagan added.
“You can explain some of that by sequestration, and defense spending was down lot and all that. But you still have a rotten economy. And it’s still too bad. We know how to fix it, by the way, a low rate flat tax, spending restraint, sound money, free trade.”
Laffer was responding to reports Wednesday that the U.S. economy contracted 0.1 percent in the last quarter of 2012, marking the worst quarter performance since the recovery began more than two years ago.
The White House blamed the surprising slowdown on Republicans in Congress, accusing them of creating uncertainty during the fiscal cliff crisis.
But Laffer dismissed that criticism as an excuse for bad economic policies that he insisted have left businesses and consumers in a state of confusion. He agreed with most Republicans that it’s a spending problem, not a revenue problem. Yet, he declined to lay all the blame on President Barack Obama, noting that former President George W. Bush started the spending binge, which he said led to the so-called “great recession” beginning in 2008….”

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Wiedemer Dismal GDP Could Be ‘Significantly Worse’ Than What Govt Claims Read Latest Breaking

“While many economists say the 0.1 percent decline in the fourth-quarter gross domestic product (GDP) isn’t as bad as it looks, financial commentator Robert Wiedemer, best-selling author of “Aftershock,” says the number is actually worse than it looks.

That’s because the government only adjusts GDP numbers by an annual inflation rate of 0.6 percent, even though the Consumer Price Index rose 1.7 percent last year, he tells Newsmax TV in an exclusive interview. And given the slim magnitude of GDP change, the inflation number makes a big difference.

“I think this number could actually be significantly worse than what the government is saying,” Wiedemer notes. While government spending, particularly defense, was blamed for much of the slip, Wiedemer says it’s really just the vagaries of how the government measures its spending….”

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Hostess CEO Says Stalking-Horse Bids Total $858 Million

“Hostess Brands Inc. Chief Executive Officer Greg Rayburn said initial or stalking-horse bids for assets of the bankrupt maker of Twinkies and Wonder bread now total $858 million, with about $100 million more for sale.

In a Bloomberg Television interview today, Rayburn said he probably will leave the company after the auction process is completed….”

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Fetus Would Be Rape Evidence as Republicans Push Abortion Bills

“When pregnancy results from rape or incest, destroying the evidence — the fetus — would become a felony in New Mexico. Women might need to wait six days before undergoing an abortion in South Dakota. And Mississippi would redefine the word “person” to apply to a fertilized egg.

Those proposals are among dozens of abortion-related bills that state lawmakers are set to consider in 2013. The November elections left Republicans in control of both legislative chambers in 26 states and with new majorities in Wisconsin, Arkansas and Alaska. That’s emboldened abortion opponents to continue the momentum of the past two years, when a record 135 restrictions on the procedure were passed….”

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$STZ Falls 20% as DOJ Blocks Their Acquisition of Grupo Modelo

“WASHINGTON—The Justice Department filed suit Thursday to block Anheuser-Busch InBev NV’s ABI.BT -0.35% $20.1 billion deal to buy Grupo ModeloGMODELO.MX -6.96% SAB, saying U.S. consumers would suffer harm if the makers of Bud Light and Corona Extra merged.

AB InBev made the deal for Grupo Modelo last summer, hoping to augment its position in the fast-growing Mexican market while expanding the reach of Modelo brands globally.

The news also served to torpedo shares of Constellation Brands Inc., STZ -19.21%which had a side deal as part of the takeover plan.

AB InBev already owns a 50% noncontrolling stake in Modelo, whose stable includes Corona Extra, the best-selling imported beer in the U.S., as well as Modelo Especial and Pacifico. It proposed to buy the rest from the Mexican families that control Modelo in a cash deal.

The Justice Department said it filed suit in U.S. District Court for the District of Columbia seeking to prevent the companies from merging. The deal “would result in less competition and higher beer prices for American consumers,” said the department’s antitrust chief, Bill Baer. “This lawsuit seeks to prevent ABI from eliminating Modelo as an important competitive force in the beer industry.” ..”

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Senators Seek Permanent Extension Of Internet Tax Ban

“Congress is looking to keep popular Internet-only services, such as email and social networks, permanently free of taxes. Sen. Kelly Ayotte and Sen. Dean Heller areseeking a permanent extension of the original 1998 Internet Tax Free Act, which is set to expire in November 2014. “E-commerce is thriving largely because the Internet is free from burdensome tax restrictions. Unfortunately, tax collectors see it as a new revenue source, and they must be stopped,” said Ayotte, in a statement….”

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IDC: Worldwide Tablet Shipments Hit A Record Total Of 52.5M Units In Q4 , Including 22.9M iPads

“Apple’s iPad led the charge as total worldwide tablet shipments hit a record 52.5 million units in the fourth quarter of 2012, according to IDC’s preliminary data from its Worldwide Quarterly Tablet Tracker, but its market share continued to slide due to competition from Samsung. Meanwhile, PC shipments declined during the quarter for the first time in more than five years. The tablet market grew 75.3 percent year-over-year, and increased 74.3 percent from the previous quarter’s total of 30.1 million units, helped along by holiday purchases, lower average selling prices and a wider range of products.

“We expected a very strong fourth quarter, and the market didn’t disappoint. New product launches from the category’s top vendors, as well as new entrant Microsoft, led to a surge in consumer interest and very robust shipments totals during the holiday season,” said Tom Mainelli, tablet research director at IDC….”

Full article with company breakdown of sales


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$NOK Re-brands Itself by Signing Up $TM Europe for in Car Maps

“Nokia’s rebranded HERE mapping service has snagged another car-maker — signing Toyota Motor Europe to use Nokia Local Search for Automotive for its Touch & Go in-car navigation and infotainment systems. As well as digital maps, Nokia’s service will bring community-generated content to the in-car systems — including “millions” of ratings, reviews and images.

Toyota said the Nokia powered mapping technology is expected to be in Toyota systems that are on sale from early 2014 in Europe, Russia and the Middle East.

In September last year, prior to the HERE rebranding of its digital mapping service, Nokia signed location deals with BMW, Mercedes A-Class, Garmin, Hyundai, Pioneer and Volkswagen Group.

On a “global average basis”, Nokia said it now powers four out of five cars with “fully-integrated in-dash navigation systems”. ”Location & Commerce continue to build partnerships with a number of major industry players, particularly in the area of automotive-grade maps content and solutions. We are providing content to partners including Audi, BMW, Chrysler, Dacia, ESRI, Ford, Garmin, Hyundai, Kia, Mercedes, Nikon, Pioneer, Scania, Toyota and Volkswagen,” a company spokeswoman added.

Earlier this month, Google announced its own mapping win in the in-car space, signing Hyundai Motor Company — which owns the Hyundai and Kia car brands — to use Google Maps and Places in its telematics systems, specifically for Hyundai’s Blue Link and Kia’s second-generation UVO eServices….”

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New Patents From $AAPL Could Turn iTunes into Mobile Micro Lender


“Today the USPTO published an Apple patent application (spotted by UnwiredView) that ventures a little farther afield than most, and describes a mobile banking concept that is truly innovative, which could essentially turn iTunes into a micro-lending bank. The patent outlines a system whereby a user would post requests for small amounts of cash using their iPhone, which other nearby users could respond to to provide some quick funds when there’s no ATM nearby.

The lending party would be paid the full amount from an account (which, while not named specifically, could easily be an iTunes account), which would first deduct that total, plus a small service fee, from the iTunes account of the person making the cash request. So, in a real world example, I could open this “Cash Transfer Application,” type that I need $20 and that I’m at the Starbucks at 4th and Main, enter a search range and send it out. Then, anyone within that radius also using the app would get the request, and be able to volunteer to walk over to my location and provide me with the amount requested on the spot….”

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The Savings Rate Climbs to Its Highest Levels Since 2009

“One look at the headline December data and one would get the impression that millions of Americans had started dealing meth out of some New Mexico RV, as personal income exploded by the most in 8 years, soaring some 2.6% in December to $13.936 billion. And since the surge in income, which was expected to rise some 0.8%, was hardly matched by a comparable boost to spending which missed expectations of 0.3%, rising just 0.2% – somewhat paradoxical considering the biggest boost to the otherwise negative Q4 GDP print was precisely this: spending and consumption, meant that the personal saving rate (which is merely a function of income less spending) soared to 6.5% or the highest since May 2009 – superficially an indication that consumers are hunkering down in expectation of something very bad.

Breaking Bad jokes aside, just how did the US consumer see their personal income soar as much as it did? …”

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Bill Gross Descibes the Credit Bubble as a Supernova

“There may be a natural evolution to our fractionally reserved credit system which characterizes modern global finance. Much like the universe, which began with a big bang nearly 14 billion years ago, but is expanding so rapidly that scientists predict it will all end in a “big freeze” trillions of years from now, our current monetary system seems to require perpetual expansion to maintain its existence. And too, the advancing entropy in the physical universe may in fact portend a similar decline of “energy” and “heat” within the credit markets. If so, then the legitimate response of creditors, debtors and investors inextricably intertwined within it, should logically be to ask about the economic and investment implications of its ongoing transition.
But before mimicking T.S. Eliot on the way our monetary system might evolve, let me first describe the “big bang” beginning of credit markets, so that you can more closely recognize its transition. The creation of credit in our modern day fractional reserve banking system began with a deposit and the profitable expansion of that deposit via leverage. Banks and other lenders don’t always keep 100% of their deposits in the “vault” at any one time – in fact they keep very little – thus the term “fractional reserves.” That first deposit then, and the explosion outward of 10x and more of levered lending, is modern day finance’s equivalent of the big bang. When it began is actually harder to determine than the birth of the physical universe but it certainly accelerated with the invention of central banking – the U.S. in 1913 – and with it the increased confidence that these newly licensed lenders of last resort would provide support to financial and real economies. Banking and central bankswere and remain essential elements of a productive global economy.
But they carried within them an inherent instability that required the perpetual creation of more and more credit to stay alive. Those initial loans from that first deposit? They were made most certainly at yields close to the rate of real growth and creation of real wealth in the economy. Lenders demanded that yield because of their risk, and borrowers were speculating that the profit on their fledgling enterprises would exceed the interest expense on those loans. In many cases, they succeeded. But the economy as a whole could not logically grow faster than the real interest rates required to pay creditors, in combination with the near double-digit returns that equity holders demanded to support the initial leverage – unless – unless – it was supplied with additional credit to pay the tab. In a sense this was a “Sixteen Tons” metaphor: Another day older and deeper in debt, except few within the credit system itself understood the implications….”

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$WHR Posts a 40% Drop in Profits

Whirlpool Corp.’s WHR +2.32% fourth-quarter profit sank 40% as the home appliances company was bogged down by one-time charges, although core earnings improved sharply and came in above Wall Street estimates.

For the current year, Whirlpool forecast earnings of between $9.25 and $9.75 a share, above the $9.17 expected by analysts polled by Thomson Reuters.

Chief Executive Jeff Fettig said Whirlpool had successfully improved operating margins through cost-based price increases, product mix, cost and capacity-reduction initiatives and ongoing productivity programs.

“Those actions, combined with improving trends in U.S. housing and growth opportunities in emerging markets, create positive momentum going into 2013,” he said….”

Full report

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$TWC Posts a Two Cent Beat

Time Warner Cable Inc.’s TWC -7.15% fourth-quarter profit fell 9% as the cable television provider saw higher costs and taxes mask improved revenue.

The company also raised its quarterly dividend to 65 cents a share from 56 cents.

Like its peers, Time Warner Cable’s video business faces a soft economy and competition from the likes of Verizon Wireless’s FiOS service. As a result, cable distributors are focusing more on expanding their broadband cable and business services units, where profit margins tend to be higher because they don’t face the high programming costs associated with the video operations.

Time Warner Cable’s core video subscriber business lost 129,000 subscribers from the third quarter, while the company acquired 75,000 broadband subscribers. It gained 34,000 voice subscribers.

Revenue from residential services, which comprises the biggest chunk of the company’s revenue, increased 6.8% to $4.58 billion. Meanwhile, business services revenue jumped 26% to $515 million, while advertising revenue rose 29% to $313 million….”

Full report



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$BX Tops Wall Streets Expectations

Blackstone Group LP BX +4.24% swung to a fourth-quarter profit as the private-equity giant recorded strong revenue, driven by growth in both performance fees and management and advisory fees.

The results beat Wall Street estimates.

As of the quarter’s end, total assets under management reached a record $210.22 billion, up 26% from the year earlier, as all of Blackstone’s investment businesses continued to see net inflows and carrying-value appreciation.

Chief Executive Stephen Schwarzman said the latest quarter “capped a year of record financial performance for Blackstone,” noting that the year’s results were the firm’s best since becoming a public company more than 5½ years ago.

Blackstone posted a profit of $106.4 million, or 19 cents a unit, compared with a year-earlier loss of $22.7 million, or five cents a unit. On the basis of so-called economic net income, the firm reported a profit of 59 cents a unit, versus a profit of 42 cents a unit a year earlier. Analysts surveyed by Thomson Reuters recently expected a per-share profit of 47 cents.

Private-equity firms view economic net income as a better barometer of performance because it includes unrealized gains and employee compensation. The performance metric also accounts for all units, not just those that are publicly traded.

Total revenue climbed 33% to $1.23 billion as total performance fees rose 31% and management and advisory fees climbed 27%. Investment income doubled to $111.7 million. Analysts had expected $1.11 billion in total revenue.

Total expenses jumped 23% to $542.7 million….”

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Gapping Up and Down This Morning



Symb Last Change Chg %
ANFI.N 6.69 +0.27 +4.21
ADT.N 48.00 +1.49 +3.20
LND.N 5.14 +0.09 +1.78
RIOM.N 5.43 +0.08 +1.50
FEI.N 20.80 +0.24 +1.17


Symb Last Change Chg %
BSMX.N 15.20 -1.10 -6.75
WDAY.N 53.24 -2.69 -4.81
CORR.N 6.62 -0.21 -3.07
HCI.N 22.40 -0.65 -2.82
FLTX.N 26.11 -0.67 -2.50



Symb Last Change Chg %
MERU.OQ 3.40 +1.01 +42.26
HTCH.OQ 2.82 +0.53 +23.14
CWBC.OQ 4.34 +0.79 +22.25
USAK.OQ 5.57 +0.91 +19.53
BIOC.OQ 7.21 +1.16 +19.17


Symb Last Change Chg %
VELT.OQ 4.09 -1.38 -25.23
VTUS.OQ 2.53 -0.75 -22.87
EBOD.OQ 2.55 -0.62 -19.56
KTCC.OQ 9.72 -2.19 -18.39
ATTU.OQ 7.15 -1.10 -13.33



Symb Last Change Chg %
REED.A 5.83 +0.42 +7.76
SAND.A 11.87 +0.16 +1.37
WVT.A 11.77 +0.15 +1.29
CTF.A 23.24 +0.24 +1.04


Symb Last Change Chg %
EOX.A 5.93 -0.16 -2.63
SVLC.A 2.57 -0.03 -1.15
BXE.A 4.91 -0.05 -1.01
FU.A 3.32 -0.03 -0.90
MHR_pe.A 24.12 -0.05 -0.21

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