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Monthly Archives: April 2013

El-Erian: Central Bank Efforts ‘May End in Tears’

“Global central banks are accelerating mostly ineffective policies because they feel they have no choice but to keep trying, Pimco’s Mohamed El-Erian told CNBC.

Monetary policy took market focus Thursday after the Bank of Japan said it would amp up its bond-buying program in an effort to stimulate growth that has not come despite two decades of similar effort.

But El-Erian, co-CEO of the firm that run’s the world’s biggest bond fund, said markets may have a hard time handling such aggressive measures.

“This is the most experimental we’ve ever seen central banking,” he said during an interview on the “Squawk on the Street” program. “They are venturing deeper and deeper, using imperfect tools, and they’re not getting the response they expect.”

The BoJ measures resemble a similar program by the U.S. Federal Reserve, which has taken its balance sheet past $3 trillion as it has bought government debt in an effort to flood liquidity into the markets and reduce unemployment while stoking inflation.

Both central banks have met uneven success with their efforts. In the U.S., thestock market has zoomed higher, but the economy remains mired to weak growth.

“Rather than step back and ask why (the measures have not succeeded), they just go deeper and deeper,” El-Erian said. “The question is, will they finally succeed in transitioning from assisted growth to real growth, or will it end in tears? I think that’s a major uncertainty and the market doesn’t quite understand just how binary this outcome is.” …”

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Kyle Bass Calls Longs of Japanese Stocks “Macro Tourists” , Says Things May Not End Well For Them

Kyle Bass has been betting that Japan, which has the highest government debt-to-GDP ratio in the world, will eventually lose control of the bond market once investors wake up to this concept.

(Shorting Japanese bonds is known as the widowmaker trade, because it seems like an obvious conclusion to many traders, but it never bears itself out.)

Naturally, Bass is also bearish on the yen. If the Bank of Japan lost control of the bond market, it would presumably be bad news for the country’s currency. So, he’s been doing well in recent months as the yen has quickly declined against the dollar.

Betting against the yen has become one of the hottest trades in the world. A natural extension of that trade for many has been to buy Japanese stocks. After all, a weaker yen usually means higher stocks, as Citi strategist Steven Englander pointed out yesterday.

Bass doesn’t think the “buy stocks” part of the trade is such a great idea.

Kyle Bass was on CNBC today to discuss the BoJ’s decision last night to double the size of its asset purchases over the next two years, and he even went so far as to call those investing in Japanese stocks “macro tourists.”

Below is what Bass had to say….”

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$GS Discusses a Weak Global Economy

Goldman Sachs macro analysts Noah Weisberger and Aleksandar Timcenko are out with a new presentation on the state of the global economy.

The title: “Slipping into slowdown.”

According to the data, it looks like the global recovery story may be on hold for now, and markets around the world are not sending encouraging signals.

And some of the most important positive themes are being called into question….”

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$FB’s Home App Takes $GOOG to the Mat on User Experience

Facebook just unveiled Home, a new app which more or less takes over the user experience on phones running Google‘s Android operating system.

The whole point of Android is to get people to use Google’s services, like Gmail and Google Web search. Home basically kills that.

Home shows updates and notifications from friends on the phone’s home screen. It also provides one-tap access to the Facebook mobile app and Facebook Messenger.

Finally, there’s an app launcher, to help you get to everything else you might want to do on your phone.

What’s missing? Search.

People have already noticed how users are searching less, as mobile devices and apps command more and more of their time. Already, Facebook and Instagram account for about a quarter of time spent on mobile devices….”

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Jim Chanos Opines on A House of Cards Within Our Business Culture

“Hustlers. Cheaters. Crooks. American business has always had them, and sometimes they’ve been punished. But today, those who cheat and put the rest of us at risk are often getting off scot-free. The recent admission of Attorney General Eric Holder that systemically dangerous megabanks may escape prosecution because of their size has opened a new chapter in fraud history. If you know your company won’t be prosecuted, a perverse logic says that you should cheat and make as much money for shareholders as you can.

Jim Chanos is one of America’s best-known short-sellers, famed for his early detection of Enron’s fraudulent practices. In deciding which companies to short (short-sellers make their money when the price of a stock or security goes down), Chanos acts as a kind of financial detective, scrutinizing companies for signs of overvaluation and shady practices that fool outsiders into thinking that they are prospering when they may be on shaky financial footing. Chanos teaches a class at Yale on the history of financial fraud, instructing students in how to look for signs of cheating and criminal activity. I caught up with Chanos in his New York office to ask what’s driving the current era of rampant fraud, who is to blame, what can be done, and the ways in which fraud costs us financially and socially.

Lynn Parramore: You’re often characterized as a short-seller. How does fraud become a concern in that context?

Jim Chanos: One of things we like to say is that in virtually all cases of major financial market fraud over the past 20 years, the only people who really brought forth the fraud into the light were either internal whistleblowers, the press, and/or short-sellers. It was not the normal guardians of the marketplace – regulators, law enforcement, external auditors or people like that — that did it. It was people who had an incentive to come forward either for personal reasons or for profit to point out what was going on at the Enrons and the Sunbeams and Worldcoms. Short-sellers played an important role in the marketplace not only in terms of capping, sometimes, irrational exuberance in terms of prices, but also in ferreting out wrongdoing.

LP: Researchers have created all kinds of tools, like software to detect speech patterns associated with lying, to try to detect fraud. What are some of the best tools for catching financial fraudsters?

JC: There’s no single tool that works all the time, and some of them are kind of interesting, like the voice detection, or Bedford’s law, which looks at numbers and repetition patterns in accounting. But we have seen some models that we work with and I teach in my class– frameworks of fraud and fraud analysis – that have been helpful in looking down through the years where we’ve seen patterns continue. One is a wonderful checklist, the Seven Signs of Ethical Collapse in an organization. Some are clearly intuitive, such as a board full of one’s cronies or an obsession with making earnings forecasts. But some are not so obvious, for example, doing good to mask doing bad….”

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Small Bombs Under $10 With Analyst Blessings

“If there is such a thing as conventional wisdom in investing, which may be doubtful, one often touted rule is to avoid low-priced stocks. The most common reason given for this advice is often that they are low-priced for a reason. Fair enough, but it is important for investors to remember that at one time smartphone and tablet giant Apple Inc. (NASDAQ: AAPL) was a single-digit priced stock. Investors who bought Apple at the bottom made a tremendous amount of money.

Another reason cited by some trading pundits is that low-priced stocks, especially those under $5, are not marginable. Again, a true statement. Investors looking to get leverage on stocks have a built-in advantage with low-priced names. They already are priced low, so more shares can be bought and require less capital than high-priced stocks. In addition, many low-priced shares have options traded on the underlying shares. Investors can always seek leverage via the option markets.

We looked through our research database for solid names that not only had good stories, but had Wall St. coverage. Typically the last thing large bulge bracket firms, or any firm for that matter, wants to do is pitch a low-priced name that gets crushed. Here are the names we found that investors may want to consider….”

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Jeffery Skilling of Enron May Get an Early Leave from the Clink

“Former Enron CEO Jeffrey Skilling, who is serving a 24-year prison term for his role in the energy giant’s epic collapse, could get out of prison early under an agreement being discussed by his attorneys and the Justice Department, CNBC has learned.

Skilling, who was convicted in 2006 of conspiracy, fraud and insider trading, has served just over six years. It is not clear how much his sentence would be shortened under the deal.

A federal appeals panel ruled in 2009 that the original sentence imposed by U.S. District Judge Sim Lake was too harsh, but a re-sentencing for the 59-year-old Skilling has repeatedly been delayed, first as the appeals process played out, and then as the negotiations for a deal progressed.

Those talks had been a closely guarded secret, but Thursday the Justice Department quietly issued a notice to victims required under federal law:

“The Department of Justice is considering entering into a sentencing agreement with the defendant in this matter,” the notice reads. “Such a sentencing agreement could restrict the parties and the Court from recommending, arguing for, or imposing certain sentences or conditions of confinement. It could also restrict the parties from challenging certain issues on appeal, including the sentence ultimately imposed by the Court at a future sentencing hearing.”

Judge Lake, who imposed the original sentence, would have the final say in the sentence. The posting of the notice, however, suggests the parties have some indication he will go along. Lake held a private conference call with attorneys for both sides last month….”

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Gapping Up and Down This Morning

SOURCE
NYSE

GAINERS

Symb Last Change Chg %
PF.N 24.22 +0.83 +3.55
CLV.N 18.34 +0.32 +1.78
BPY_w.N 22.90 +0.35 +1.55
SSNI.N 17.23 +0.22 +1.29
CGG.N 22.17 +0.19 +0.86

LOSERS

Symb Last Change Chg %
SSTK.N 38.11 -3.72 -8.89
PBF.N 33.31 -2.92 -8.06
ANFI.N 7.48 -0.46 -5.79
HCI.N 25.50 -1.49 -5.52
MRIN.N 14.80 -0.81 -5.19

NASDAQ

GAINERS

Symb Last Change Chg %
MVIS.OQ 2.53 +0.93 +58.12
NVGN.OQ 6.05 +1.78 +41.69
CHLN.OQ 2.07 +0.41 +24.70
NIHD.OQ 5.05 +0.89 +21.39
UNXL.OQ 27.22 +4.37 +19.12

LOSERS

Symb Last Change Chg %
MSPD.OQ 2.52 -0.49 -16.28
BOSC.OQ 4.12 -0.61 -12.90
IPDN.OQ 6.10 -0.90 -12.86
USMD.OQ 16.15 -2.27 -12.32
IBCP.OQ 7.34 -1.02 -12.20

AMEX

GAINERS

Symb Last Change Chg %
CUO.A 18.20 +0.70 +4.00
DXR.A 7.72 +0.26 +3.49
VII.A 2.78 +0.09 +3.35
VHC.A 17.42 +0.56 +3.32
BRN.A 3.13 +0.08 +2.62

LOSERS

Symb Last Change Chg %
AKG.A 2.82 -0.23 -7.54
SVLC.A 2.11 -0.12 -5.38
SAND.A 8.54 -0.41 -4.58
BXE.A 6.08 -0.28 -4.40
EOX.A 6.51 -0.19 -2.84

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All Eyes on $FB Today as They Hold a Conference Where The Mobile Division is Expected to Drop Details

“NEW YORK (AP) — Facebook is unveiling a new Android product Thursday, a move that comes as a fast-growing number of its 1.06 billion users access it on smartphones and tablet computers.

Advertisers are not far behind. Though mobile ads have been a big concern for Facebook’s investors since before the company’s initial public offering last May, some of that worry has subsided as Facebook began muscling its way into the market.

Last year, the company began showing ads to its mobile audience by splicing corporate sponsorships and content into users’ news feeds, which also includes updates from friends and brands they follow. Among the challenges Facebook faces now is showing people mobile ads without annoying or alienating them.

The mobile advertisement market is growing quickly. That’s thanks in large part to Facebook and Twitter, which also entered the space in 2012. Research firm eMarketer expects U.S. mobile ad spending to grow 77 percent this year to $7.29 billion, from $4.11 billion last year.

As for Thursday’s event at the company’s Menlo Park, Calif., headquarters, speculation has centered on a mobile phone, made by HTC Corp., that deeply integrates Facebook into the Android operating system. The move comes as Facebook works to evolve from its Web-based roots to a “mobile-first”company, as its mantra goes.

“What Facebook wants is to put itself at the front of the Android user experience for as many Facebook users as possible and make Facebook more elemental to their customers’ experience,” said Forrester analyst Charles Golvin.

EMarketer said Wednesday that it expects Facebook Inc. to reap $965 million in U.S. mobile ad revenue in 2013. That’s about 2.5 times the $391 million in 2012, the first year that Facebook started showing mobile ads…..”

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$GM Expects Strong Demand for the Next 4-5 Years

“(Reuters) – General Motors Co Chief Executive Dan Akerson said on Thursday the U.S. auto industry will see strong demand for the next four or five years as more drivers continue to replace their aging vehicles.

U.S. industry executives have repeatedly said pent-up demand is helping to drive sales as customers are forced to replace cars and trucks whose average age tops an all-time high of 11 years.

“There’s this underlying strength that may go for the next four or five years until we get it back to eight, nine (year) range of average age of the car …” in the United States, Akerson said on the CNBC cable news channel.

He also said GM is closely watching the tensions between North Korea and South Korea and making contingency plans for employee safety there. The No. 1 U.S. automaker has five plants in South Korea and exports thousands of cars to other markets from there….”

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Planned Job Cuts Fall 11% in March, Still Up 30% Yoy

“The number of planned layoffs at U.S. firms fell in March but downsizing by retail companies still helped the first quarter rack up the largest amount of cuts in over a year, a report showed on Thursday.

Employers announced 49,255 planned job cuts last month, down 11 percent from 55,356 in February, according to the report from consultants Challenger, Gray & Christmas.

But March’s layoffs were still up 30 percent from the same time a year ago, the fourth time in the last six months that monthly job cuts have been higher than the year before….”

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Weekly Jobless Claims Jump 25k to 385k

“The initial jobless claims number is out, and it’s ugly.
Initial jobless claims have spiked by 28K week over week to 385K.
Analysts had expected 353K.
This is the second weak datapoint in a row.
Yesterday we got an ADP report that missed notably….”

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Ex-Goldman Trader Admits to Hiding $8 Billion Position

Matthew Taylor, a former Goldman Sachs Group Inc. (GS) trader, pleaded guilty to concealing an unauthorized $8.3 billion trading position in 2007, causing the bank to lose $118 million.

Under an agreement with the government, Taylor, 34, pleaded guilty to a single count of wire fraud yesterday before U.S. District Judge William H. Pauley in Manhattan federal court. He told the judge he took the position to boost his standing, and his bonus, at Goldman Sachs.

Reading from a prepared statement, Taylor told Pauley that on Dec. 13, 2007, he accumulated a position 10 times the amount he was allowed to take in futures contracts tied to the Standard & Poor’s 500 Index (SPX). He said he made false entries in a manual trading system to hide the position on the CME Globex electronic-trading platform used by Goldman Sachs. He said he lied when questioned about the position by other Goldman Sachs employees.

“I accumulated this trading position and concealed it for the purpose of augmenting my reputation at Goldman and increasing my performance-based compensation,” Taylor said. “I am truly sorry.”

Before accepting the guilty plea, Pauley questioned a provision in the agreement stipulating that the loss, for sentencing purposes, was the $1 million to $2.5 million Taylor hoped to win in bonuses from the trades, instead of the $118 million loss suffered by Goldman Sachs.

Maximum Term…”

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Iron Ore Edges Towards a Bear Market as New Supply Comes to Light

Iron ore is heading toward its first surplus in at least a decade as output expands and Chinesesteel mills, the biggest buyers, boost production at the slowest pace in five years.

Seaborne supply will advance 9.1 percent and demand 8.3 percent in 2013, led by exporters from Perth-based Fortescue Metals Group Ltd. (FMG) to Vale SA (VALE5), Morgan Stanley forecasts. A surplus will emerge in 2014 and keep widening until at least 2018, the bank predicts. Prices will slump as much as 34 percent to $90 a ton by the end of December, according to the median of seven analyst estimates compiled by Bloomberg…”

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Spanish Yields Hit Two and a Half Year Lows

“Spanish government bonds rose, pushing two-year note yields to a 2 1/2-year low, as the nation sold more debt than its maximum target at an auction, underscoring demand for higher-yielding euro-region assets.

Italian bonds advanced for a fourth day after a report showed the nation’s services sectorcontracted less than economists forecast last month. German 10-year bund yields were about two basis points from the lowest since August after the European Central Bank left its key refinancing rate at 0.75 percent. France auctioned 10-year bonds at a record-low yield.

“It was a fairly good auction in Spain,” said Michael Leister, an interest-rate strategist at Commerzbank AG in London. “The size sold was above the top of the range. It confirms Spain’s access to funding is very robust and that should support peripheral debt.”

Spain’s two-year note yields dropped seven basis points, or 0.07 percentage point, to 2.13 percent at 12:47 p.m. London time, after reaching 2.07 percent, the lowest since October 2010. The 2.75 percent security maturing in March 2015 rose 0.14, or 1.40 euros per 1,000-euro ($1,281) face amount, to 101.19.

The Spanish 10-year bond yield declined four basis points to 4.88 percent, while the rate on similar-maturity Italian debt fell eight basis points to 4.51 percent.

Spanish Sale…”

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