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Monthly Archives: February 2013

$M Beats on Both Top and Bottom Line

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“NEW YORK (AP) — Macy’s reported a fourth-quarter profit that beat Wall Street expectations as its strategy of tailoring merchandise to local markets paid off during the holiday season.

The department store chain, which also operates Bloomingdale’s stores, says it earned $730 million, or $1.83 per share, for the period ended Feb. 2. That compares with $745 million, or $1.74 per share, a year earlier, when the company had more outstanding shares.

Not including one-items such as expenses associated with the early retirement of debt, it earned $2.05 per share. Revenue was $9.35 billion, up from $8.72 billion a year ago.

Analysts expected a profit of $1.99 per share on revenue of $9.35 billion.

Looking ahead, the company said it expects revenue at stores open a year to rise 3.5 percent in 2013.”

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$RSH Might Have to Sell Assets if Earnings Do Not Improve

“(Reuters) – Electronics retailer RadioShack Corp reported lower fourth-quarter sales and said it may have to close stores or sell assets to improve liquidity if business does not pick up by 2014, sending its shares down 6 percent before the bell.

The results underlined the tough task facing new Chief Executive Joseph Magnacca in trying to transform the struggling electronics chain into a specialist retailer of mobile devices.

Despite its ubiquitous presence in the United States, analysts say RadioShack has not done enough to rebrand itself as a destination for mobile phones or to cater to younger customers, who would rather shop online from the likes of Amazon.com Inc or at stores run by phone companies.

The company said in a regulatory filing on Tuesday that its cash and cash equivalents fell to $535.7 million at the end of 2012 from $591.7 million a year ago, as it posted a loss of $139.4 million for the year. (http://r.reuters.com/qak36t)

RadioShack said liquidity may be hurt further in 2013 as it may have to issue letters of credit under a 2016 credit facility. The company said that if operations during the year are significantly worse than 2012, it may have to either borrow against the facility or issue additional letters of credit.

The company reported a net loss of $63.3 million, or 63 cents per share, in the fourth quarter ended December 31, compared with a profit of $11.9 million, or 12 cents per share, a year earlier.

Excluding a $67 million charge to increase a valuation allowance related to deferred tax assets, the company reported earnings of 4 cents per share. Sales fell 7 percent to $1.29 billion.

Analysts on average had expected a loss of 5 cents per share on revenue of $1.36 billion, according to Thomson Reuters I/B/E/S.

Comparable-store sales fell 7 percent….”

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EU Banking Authority Insists Regulatory Action Needed to Eliminate How Banks Calculate Risk on Their Books

“LONDON (Reuters) – Regulatory action may be needed to end variations in the ways banks add up therisks on their books to determine how big their capital buffers should be, the European Banking Authority said.

As regulators put in place tougher capital requirements, known as Basel III, following the 2007-09 financial crisis, they want to be sure calculations used by banks to meet them are sound.

Faith in figures that banks publish is seen as core to restoring investor and public trust in the financial sector.

The EBA released interim results on Tuesday of its probe into risk-weighted assets on the main banking books of 89 banks, which it did not name, from 16 European Union countries.

It found material differences between banks, with half caused by different regulatory approaches and the structure of a bank’s loan portfolio, and the other half because of the way banks calibrated in-house financial models for adding up risks.

Greater disclosure will not be enough to ease concerns raised by investors and market analysts on the reliability of banks’ calculations, EBA chairman Andrea Enria said.

Taking the top 20 banks in its study, the EBA said the difference between the maximum and minimum values for risk was 46 percent.

Enria said that was “significant and calls for further investigations and possibly policy solutions”.

The EBA said it will complete further studies by the end of this year, looking into areas such as banks’ exposure to small and medium-sized enterprises and the home loans market.

BASEL BASHING…”

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European Bank Default Credit Risk Insurance Hits Three Month Highs

“The cost of insuring against default on European bank debt surged to the highest in three months on concern deadlock in Italy’s elections will trigger a flight from risky assets as a political vacuum roils markets.

The Markit iTraxx Financial Index of credit-default swaps on 25 banks and insurers climbed 12 basis points to 163, at 11:30 a.m. in London, the highest since Nov. 28 and headed for the biggest monthly increase since May. Contracts insuring Italy’s bonds rose 43 basis points to a 2 1/2-month high of 293, the biggest jump since December 2011.

Italy’s inconclusive election re-ignited jitters over Europe’s sovereign crisis, sparking concern a rejection of austerity measures will spill into other heavily indebted countries. Italy faces months of political turbulence which may see President Giorgio Napolitano install an interim government to write a new election law as the prelude to another vote.

“Gridlock in parliament means gridlock in the economy,” Alberto Gallo, the head of European macro credit research at Royal Bank of Scotland Group Plc in London, wrote in a client note. “The longer the instability lasts, the more the recession can deepen, pushing up unemployment, defaults and bad loans. In the worst-case scenario, the weaker banks could see deposit outflows re-emerge.” …”

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The Euro Tries to Pare Losses After Hitting 7 Week Lows

“The euro strengthened from a seven- week low against the dollar as Italian and Spanish bonds trimmed losses on easing concern that inconclusive elections in Italy will deepen Europe’s debt crisis.

The euro advanced versus 12 of its 16 major counterparts as investors bet the European Central Bank will step in to limit any losses in so-called peripheral bonds following GovernorMario Draghi’s pledge in July to safeguard the currency union. The yen weakened on speculation Japan’s Prime Minister Shinzo Abe will select Haruhiko Kuroda, who favors additional stimulus, as the next central bank governor. South Africa’s rand rose as economic growth quickened.

“The political uncertainty in Italy may be euro negative, but it’s not as bad as what happened inGreece,” said Geoffrey Yu, a senior currency strategist at UBS AG in London. “Draghi’s ‘whatever it takes’ pledge is a strong deterrent to a selloff. The market is not ready to challenge him yet. And those who missed the euro rally, especially versus the yen, are trying to get back in.”

The euro gained 0.2 percent to $1.3089 at 7:20 a.m. New York time after dropping to $1.3018, the weakest level since Jan. 7. The single currency advanced 0.4 percent to 120.37 yen. Japan’s currency fell 0.2 percent to 91.97 per dollar.

The 17-nation currency halted losses from yesterday amid speculation Democratic Party leader Pier Luigi Bersani and resurgent ex-Premier Silvio Berlusconi will seek to avoid a ballot that would favor populist Beppe Grillo, whose movement was the top vote-getter in its first national contest. No formal steps can be taken until a new parliament convenes March 15…”

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The EU Will Target The End of March to Complete Basel Rules

“The European Union must press ahead with global bank capital standards to avoid fresh delays and to give certainty to lenders that must abide by the overhaul, the bloc’s financial services chief said today.

“We need agreed rules as soon as possible so that banks know which way they are going,”Michel Barnier said in an interview on the sidelines of a conference in Paris.

Lawmakers and EU negotiators will meet tomorrow to try to break logjams over banker bonuses, financial reporting requirements and the amount of power retained by national regulators. An EU planning document warned the EU should finish its laws on the new rules by March 22.

If the measures aren’t finalized next month, the EU may run out of time to hit its January 2014 target date to implement the so-called Basel III accord, according to the Feb. 22 document drawn up by Ireland’s EU presidency and obtained byBloomberg News. Missing the March deadline may force the EU either to shorten its transition period, putting undue strain on lenders to adjust by the start of next year, or delay starting the new bank rules until July 2014 or January 2015.

Barnier said he’s working “on the hypothesis there won’t be a delay” so the EU can stick to its schedule. He reiterated the Brussels-based commission’s goal of regulating when countries can set their own safeguards for lenders.

“The commission is very attached to having a working single regime,” Barnier said. He said EU lawmakers are focused on issues relating to banker pay….”

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$GS Thinks the Gold Cycle Has Turned

“Gold’s price cycle has probably turned as the recovery in the U.S. economy gathers momentum and investment holdings collapse, according to Goldman Sachs Group Inc., which reduced forecasts for the metal.

The bank cut its three-month target to $1,615 an ounce from $1,825 and lowered the six- and 12-month forecasts to $1,600 and $1,550 from $1,805 and $1,800. Goldman reversed an assumption exchange-traded products holdings will expand in 2013, analysts Damien Courvalin and Jeffrey Currie wrote in a Feb. 25 report.

Gold has dropped 4.8 percent this year as economic data improved, equities advanced and some U.S. central bankers sought more flexibility in their stimulus program. An inevitable unwind of gold’s 12-year bull market has begun, Credit Suisse Group AG said in a Feb. 21 report. ETP holdings are poised for the biggest monthly decline since January 2011.

“The turn in the gold cycle has likely already started,” the Goldman analysts wrote in the report, after predicting an end of gold’s bull run in a Dec. 5 note. “The latest collapse in gold ETF holdings stands in sharp contrast to our assumption that ETF positions were likely driven by longer-term allocation rather than short-term trading.”

Gold for April delivery traded at $1,595.70 an ounce on the Comex at 9:30 a.m. in London, poised for a fifth monthly drop in what would be the worst run since 1997. Holdings in ETPs, also known as exchange-traded funds, fell to a five-month low of 2,536.289 metric tons yesterday and have shrunk 2.9 percent this month, data compiled by Bloomberg show…”

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The U.K. Pressures RBS to Sell More Assets to Recoup Bailout Funds

Royal Bank of Scotland Group Plc Chief Executive Officer Stephen Hester is being pressed by the U.K. government to sell more assets and bolster capital as the Treasury tries to recoup some of its 45.5 billion-pound ($68.9 billion) investment in the bailed-out lender.

RBS (RBS) will this week announce plans to sell a stake in Citizens Financial Group Inc. and shrink assets at its investment-bank by as much as 30 billion pounds, said a person with knowledge of the plans, who asked not to be identified because the matter is private. As recently as August, Hester said he didn’t intend to sell the U.S. consumer and commercial lender it acquired in 1988.

“RBS is clearly under pressure from the government to shrink and make the bank much simpler,” said Ian Gordon, an analyst at Investec Plc (INVP) in London, who values Citizens at about 8 billion pounds and has a sell rating on the stock. “Regulators seem to be saying that RBS needs to raise capital.”

Hester, 52, has cut assets by more than 800 billion pounds, eliminated 36,000 jobs and scaled back RBS’s securities unit since he took over from Fred Goodwin in 2008. The shares are still little more than half the price the government paid for its 81 percent stake when it rescued RBS during the financial crisis, the biggest bank bailout ever.

Post Loss…”

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Italian Election Deadlock Sends Stocks and Bonds Lower While CDS Rise

Italian stocks and bonds fell, while the cost of insuring the nation’s debt against default climbed to the highest this year, as the country’s election deadlock reignited concern Europe’s debt crisis will deepen.

The FTSE MIB Index slid 4.6 percent at 1:17 p.m. in Rome as UniCredit SpA and Intesa Sanpaolo SpA, the nation’s biggest banks, slumped at least 8 percent. Italy’s 10-year bond yields jumped 29 basis points to 4.78 percent after rising as high as 4.93 percent. Credit-default swaps insuring Italian bonds jumped as much as 43 basis points to 293, the highest since Dec.

As results pointed to a hung parliament, Italy was headed toward a political stalemate that threatens to derail 15 months of austerity under Prime Minister Mario Monti’s technocrat government, reviving speculation the country will struggle to pay its debt. Italy, the world’s third-biggest debtor after the U.S. and Japan, is in its fourth recession since 2001.

“Given last year’s sharp economic contraction, it is not wholly unsurprising that the electorate is suspicious of the need for further reform,” Jane Foley, a senior foreign-exchange strategist at Rabobank International in London, wrote in an e- mail. “Without it, however, there is a heightened risk that investors will remain suspicious of the ability of Italy to improve competitiveness and growth potential sufficiently to allow a significant reduction in its debt pile.” …”

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Emerging Markets Hit Two Month Lows

“Emerging-market stocks sank to a two-month low, currencies weakened and borrowing costs rose as Italy’s inconclusive election revived European debt concerns and investors speculatedChina will announce new property curbs.

OTP Bank Nyrt. (OTP), Hungary’s biggest lender, headed for the biggest loss since Oct. 18 as the benchmark BUX Index led declines among major emerging markets. OAO Mosenergo, a Russian power company, dropped to a six-week low after RIA Novosti reported PresidentVladimir Putin ordered a cap on increases in household utility bills. Evergrande Real Estate Group Ltd. (3333) slid to the lowest level in three months in Hong Kong. Russia’s ruble and theIndian rupee weakened at least 0.2 percent per dollar, while Poland’s zloty sank 0.4 percent versus the euro.

The MSCI Emerging Markets Index (MXEF) retreated 1.1 percent to 1,042.99 as of 12:25 p.m. inLondon, poised for its lowest close since Dec. 17. Early results suggested Italy’s election would lead to a hung parliament and another vote. The 21 countries in the developing-nations gauge send about 26 percent to the European Union on average, data compiled by the World Trade Organization show.

“Emerging markets in Europe have been hit by renewed worries about the euro zone,” Gaelle Blanchard, an emerging-market strategist at Societe Generale SA in London, said by e-mail. “The zloty is the highest beta in the region. It’s generally the proxy for eastern Europe.”

Hungary’s BUX Index sank 2.1 percent to the lowest level since Dec. 28, and the forint weakened 0.2 percent against the euro. Hungary’s central bank will probably cut the benchmarkinterest rate for a seventh month to a record low today as policy makers look to fight a recession at President Andras Simor’s final policy meeting, according to a Bloomberg survey of 26 analysts….”

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$CHK Gives Up Assets to Sinopec for a Third of Estimated Value

“China Petrochemical Corp.’s $1.02 billion deal with Chesapeake Energy Corp. (CHK) gives the second- largest Chinese energy producer a stake in a shale oilfield for less than one-third of its estimated value.

Sinopec, as the Beijing-based explorer is known, will take a 50 percent interest in 850,000 acres Chesapeake controls in the Mississippi Lime formation, the companies said yesterday in separate statements. The price equates to $2,400 an acre, less than the $7,000 to $8,000 at which Oklahoma City-based Chesapeake valued the asset in a July presentation….”

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Aussie Dollar Does a Wash Out Paring Early Losses

Australia’s dollar gained against most of its major peers, erasing earlier losses, as advances in metal prices supported demand for the currency of the resource- rich nation.

The so-called Aussie strengthened versus the greenback and the yen amid speculation central banks in other major economies will continue to loosen monetary policy more than the Reserve Bank of Australia. Japan’s Prime Minister Shinzo Abe is likely to nominate Haruhiko Kuroda asBank of Japan (8301) governor, according to two officials with knowledge of the matter. Local bonds rose, sending 10-year yields to a one-month low on concern Italy’s inconclusive election will result in renewed turmoil in Europe.

“Longer term, we expect the underlying fundamentals for the Aussie dollar to be stronger,” said Janu Chan, a Sydney based economist at St. George Bank Ltd. “While we are expecting the RBA to cut once more, interest rates are going to be relatively high. We still have strong demand for Australian government bonds.”

The Australian dollar rose 0.1 percent to $1.0271 at 4:36 p.m. in Sydney from yesterday, when it declined 0.6 percent. It dropped to $1.0222 on Feb. 21, the lowest since Oct. 15. The Aussie gained 0.3 percent to 94.43 yen, rallying from yesterday’s 2.3 percent drop.

New Zealand’s dollar fetched 83.41 U.S. cents, after falling 0.6 percent to 83.35 yesterday. The so-called kiwi climbed 0.3 percent to 76.70 yen, after losing 2.4 percent by the close in New York.

The yield on Australia’s 10-year bonds fell 12 basis points, or 0.12 percentage point, to 3.38 percent, the lowest since Jan. 25…”

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South Africa’s Economy Grows Faster Than Expected

South Africa’s economy, the continent’s largest, grew at a faster pace in the final quarter of last year than the previous three months as manufacturing and agricultural output expanded, the statistics agency said.

Gross domestic product rose an annualized 2.1 percent from 1.2 percent in the third quarter, Statistics South Africa said in a report released today in Pretoria, the capital. The medianestimate of 20 economists in a Bloomberg survey was for growth of 1.7 percent. The economy grew 2.5 percent for the whole of last year, down from 3.5 percent in 2011.

South Africa’s economy is expanding at less than half the pace President Jacob Zuma says is necessary to slash a 24.9 percent jobless rate, the highest of more than 30 emerging- market nations tracked by Bloomberg. Work stoppages that began at platinum mines in August spread to gold shafts, while thousands of truck drivers went on strike last quarter over higher pay, disrupting output….”

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Asian Markets Fall Over Worries That Italy Will Reignite Europe’s Banking Crisis

“Asian stocks fell, with the regional benchmark index poised to slide for the first time in three days, on concern Italy’s elections may reignite Europe’s debt crisis. Hong Kong’s Hang Seng Index erased its gains this year on a report Beijing may introduce more property curbs.

Sony Corp. (6758), a Japanese consumer electronics maker that gets a fifth of its revenue in Europe, lost 3.7 percent. Shimao Property Holdings Ltd. sank 4.8 percent in Hong Kong. Hanwha Life Insurance Co. plunged 9.8 percent in Seoul after Hanwha Chemical Corp. sold its shares. Global Logistic Properties Ltd. slumped 6.9 percent in Singapore after a sovereign wealth fund in the city-state said it’s selling a stake in the biggest owner of industrial properties in Japan.

The MSCI Asia Pacific Index fell 0.6 to 133.47 as of 5:10 p.m. in Tokyo with more than five shares dropping for each that increased. The gauge has climbed 0.2 percent in February, headed for a fourth month of gains, the longest such streak since September 2009.

“Uncertainty about the Italian election result has sparked fears that they may abandon their austerity drive, possibly sparking another bout of volatility in Europe,” said Matthew Sherwood, head of investment market research in Sydney at Perpetual Investments, which manages about $25 billion. This may “make governing and implementing much-needed economic reforms almost impossible.”

European Uncertainty…”

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Italian Elections Kill the Bull Market as Uprising Seen Uncontrollable

“….The markets were hoping for the liberal leader Pier Luigi Bersani to win easily, allowing him to form a coalition government with technocrat leader Mario Monti.

This would ahve paved the way for unpopular austerity and reforms, that the rest of Europe has been very happy to see.

But the voters had a different idea tonight. As Emmanueal Letta — the second in command of the left party — just explained, the voters have entered a “rebellion” and the country appears to be ungovernable.

The Senate is too divided for any party to claim a victory, and in fact Berlusconi, who was thought to be in second place, appears to have won the majority of seats in the Senate….”

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The Bears Get Their First Victory in Months

U.S. equities started off positive this morning and the bulls were sure new highs would be made. The history books had other plans as the bears battled all day long finally taking control. The worrisome part was that the volume was strong. Much stronger than any rally put in in the last few months.

Investors beware that distribution may have begun.

Essentially, the markets were ruled by Italian elections. Every time exit polls showed a potential lead for Berlesconi the European markets and U.S. markets got worse. After Europe closed worries turned to tomorrow’s testimony by Ben Bernanke.

Stay tuned as trading will get very interesting over the next few days. Essentially your looking for the S&P to hold 1450-1455 or to break out above 1525.

DOW off 216

NASDAQ off 45

S&P off 27

WTI off $0.93

Gold up $21

The story 

crying-kids04

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KKR & Co. and TPG Capital Face The Largest LBO Bankruptcy Since Chrysler

“Five years after their record- setting leveraged buyout of Energy Future Holdings Corp., KKR & Co. and TPG Capital are moving closer to a possible new milestone: the biggest bankruptcy of a private equity-backed company since the failure of Chrysler Group LLC.

Texas Competitive Electric Holdings, the utility’s wholesale power unit, faces an October 2014 deadline on the maturity of a portion of its loans. Informal restructuring talks already have taken place, according to two people with knowledge of the matter. Senior lenders — including Franklin Resources Inc., Apollo Global Management LLC, Oaktree Capital Group LLC and GSO Capital Partners — probably would seek to seize the unit if there is a bankruptcy, said one creditor, who asked not to be identified because the process is private.

The buyout of Energy Future, the Dallas-based company formerly known as TXU Corp., in 2007 for $48 billion marked the peak of a private-equity boom that went bust a year later with the onset of the financial crisis. A bankruptcy would wipe out much of the $8.3 billion investment made by buyers including KKR, TPG and Goldman Sachs Capital Partners in what was the biggest LBO in history. It would be the highest-profile private equity-backed company to go under since Chrysler was bailed out by the U.S. government in 2009….”

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Tenth Circuit Court of Appeals Says There is No Right to Carry a Concealed Weapon

“In a sweeping ruling, the Tenth U.S. Circuit Court of Appeals ruled that there is no Second Amendment right to carry a concealed firearm in public. The broad wording of the decision in Peterson v. Martinez creates a far-reaching national precedent against carrying a loaded handgun outside the home.

 

The case began on a narrow point – a challenge by a Washington State man against Colorado’s law to issue CHL permits (“Concealed Handgun License”) only to state residents. But the final ruling held, “In light of our nation’s extensive practice of restricting citizens’ freedom to carry firearms in a concealed manner, we hold that this activity does not fall within the scope of the Second Amendment’s protections.”

The federal court also rejected arguments that Colorado’s CHL law infringed on the the Equal Protection Clause and the Privileges and Immunities Clause.

To bullet-proof the ruling against an appeal to the U.S. Supreme Court, the Tenth Circuit recounted numerous court rulings and state laws dating back to 1813, and based its ruling on prior U.S. Supreme Court cases.

The View from the Ground…”

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Italian Elections Help U.S Treasury Yield to Fall to One Month Lows

“Treasuries rose, pushing 10-year yields to a one-month low, as polls indicated the euro area’s third-largest economy, Italy, may be left with a hung parliament, stoking refuge demand.

U.S. debt gained as preliminary results from Italian elections show former Prime Minister Silvio Berlusconi may have built a blocking minority in the Senate to deny outright victory to opponent Pier Luigi Bersani. Treasuries remained higher after the U.S. sale of $35 billion in two-year notes.

“The concern is that Berlusconi will take off the austerity measures,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “It’s not set in stone, but it’s brought in heavy buying.”

The benchmark 10-year yield dropped five basis points, or 0.05 percentage point, to 1.92 percent at 1:22 p.m. New York time, according to Bloomberg Bond Trader prices, reaching the lowest since Jan. 25. The 2 percent note maturing in February 2023 added 13/32, or $4.06 per $1,000 face amount, to 100 3/4.

Auction Detail…”

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