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Analyst Upgrades/Downgrades

$MS Has 20 Stocks For Your Long Term Consideration

“In the near-term, investors are having a tough time deciding how to position themselves with stocks near their all-time highs.

But those thinking longer-term are probably more concerned about which stocks they should be in.

Morgan Stanley just published a massive 32-page report for its “20 For 2016,” a list of 20 stock picks.

“The main criterion is sustainability — of competitive advantages, business model, pricing power, cost efficiency, and growth,” the analysts wrote.

“We are taking a long term view,” they continued. “There was no prerequisite in our analysis that they be rated Overweight, nor specific assumptions about where we are in the economic cycle or any other valuation considerations. Our driving principle was to create a list of companies whose business models and market positions would be increasingly differentiated by 2016.” ….”

Full list & article

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Commodities Pro Andrew Su: WTI to $75 Per Barrel

“The price of West Texas Intermediate (WTI) crude oil is set to plummet to $75 per barrel as increased use of shale oil in the U.S. blots out demand for the energy source, one expert told CNBC.

Andrew Su, CEO of Sydney-based commodities trading firm Compass Global Markets, gave a bearish forecast for WTI on CNBC’s “Asia Squawk Box” on Tuesday, saying its value would drop around 18 percent in value by the end of the second quarter of 2013 and even further beyond that.

“Shale oil is the reason why oil prices fell last year and the reason why it will continue to fall in the next few years,” said Su.

“Shale oil will reshape the way that the entire oil industry is run and the U.S. will become an exporter of oil in next five to 10 years. That will have a significant impact on the U.S. and the global economy,” he added.

Shale oil – also known as kerogen oil – is an unconventional form of oil extracted from shale rock formations, only made possible in recent years through technological breakthroughs.

The revolution in shale oil and gas production has the potential to give the world’s largest economy energy independence and provides a substantial threat to the competitiveness of oil.

According to a PricewaterhouseCoopers study published in February, shale oil will contribute 14 million barrels per day towards global oil supply by 2035, roughly 12 percent of the global oil supply today….”

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Analysts Are Convinced Italy’s New Government Will Maintain Austerity, Forecast Euro to Go Higher

“Foreign-exchange strategists are convinced that Italy’s new government will maintain austerity measures that preserved the currency union during the region’s sovereign crisis even as the euro tumbles from a 14-month high.

Analysts raised their second-quarter forecasts for the 17- nation currency to $1.32 from $1.28 at the end of December as Italy’s Feb. 24-25 election ended without a clear winner, according to the median of more than 60 estimates in a Bloomberg News survey. That 3.1 percent increase is the second-biggest among the Group of 10 currencies after the Swedish krona.

While traders pushed the euro down to $1.3018 today from this year’s high $1.3711 on Feb. 1 as anti-austerity parties led by three-time premier Silvio Berlusconi and former comedian Beppe Grillo won blocking minorities in the Senate, strategists are looking to the debt markets. Italy’s borrowing costs have fallen from a three-month high on Feb. 27 as European Central Bank President Mario Draghi said his untapped bond-buying program, known as Outright Monetary Transactions, remains in place as an “effective” backstop…..”

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$BAC: Hit the Bid on Your Banks Stocks

“Bank stocks have undoubtedly been one of the leaders in the latest stock market rally.

The chart below, normalized to 100 at November 15 prices (the starting point), shows how bank stocks have outperformed. The red line is the KBW Banks Index (ticker symbol: BKX) and the blue line is the S&P 500.


KBW Banks Index versus S&P 500

Bloomberg, Business Insider


After a bit of a pullback, the KBW Banks Index surged to new highs in the last few weeks of 2013.

On the back of this rally, BofA analysts Erika Penala and Mary Ann Bartels say now might be the time for those invested in the banks to sell….”
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Analysts Expect Major Trouble From Italy’s Downgrade

“Italy could see its borrowing costs rise above those of troubled Spain this week, analysts told CNBC on Monday, with a credit rating downgrade on Friday and continued political deadlock posing an ever larger threat.

“Italy is really going to blow it up this week,” Joe Rundle, head of trading at ETX Capitol, told CNBC. “There is the downgrade that happened on Friday but now there is the Italian yield and the spread narrowing tothe Spanish yield and there is the possibility that Italy gets more expensive than Spain. The last time we saw that we were in the middle of a euro zone crisis,” Rundle told CNBC Europe’s “Squawk Box”.

Rundle added that while political uncertainty lived on in Italy, there was the potential for Italy to “come unwinding very quickly.”

On Sunday, Beppe Grillo’s anti-establishment 5-Star Movement reiterated that it wanted to lead Italy’s next government rather than form an alliance with any other party.

Grillo’s comments followed a credit rating downgrade of Italy by Fitch on Friday. The country was downgraded to BBB plus with a negative outlook. The downgrade was attributed to inconclusive election results in February that have led to a power vacuum and delays to structural reform as no one party gained a majority to form a government…..”

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Soc Gen Upgrades U.S. Economy, Treasury Yields Likely to Bottom Out

“Analysts at French bank Societe Generale have a big report out titled The Return Of Yield: Preparing For Rising Long Term Rates.


The theme is very great rotation-y in that they argue that the economy is turning the corner, and interest rates are about to rise.

Their language is strong and dramatic. A watershed moment for the US economy is at hand, and the risk are that it will happen sooner rather than later.

We believe that 2013 will be a breakout year for the US economy. As this realisation sets in and markets begin to price the end of asset purchases and focus on the exit sequence, Treasury yields are likely to bottom out. There is a significant gap between current yield levels and fair values, and we believe that the end of the QE programme will have compressed the 10-year term premiums by perhaps as much as 140bp. The question is how quickly this compression will be unwound. Our central scenario assumes a 2.75% year-end target, but here we evaluate the possibility and implications of a more rapid correction to 3.50%.

It has been our longstanding view that 2013 will see an inflection point on growth. After sequential deleveraging of households, small businesses, state and local governments and now the federal government, the structural headwinds to growth are beginning to fade. (Admittedly, fiscal deleveraging is only beginning, but we believe that the modest drag will be offset by improving private sector fundamentals). Whereas we doubted previous growth spurts in US data, we believe that this time the improvement is Ifor real. We expect this to be a breakout year for the US economy, with growth firmly above trend levels by the end of the year. Ironically, the Fed’s harsh lessons from the previous false starts have led them to adopt a far more accommodative approach with the goal of dampening the bond market’s reaction to any data improvements….”

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Fitch Threatens U.S. Downgrade Again Over Debt Ceiling

“Fitch Ratings reiterated that another so-called debt ceiling crisis would probably lead to a reduction in the U.S. credit rating.

“The debt ceiling limit which comes back into force on May 19, certainly if that wasn’t addressed in a timely fashion, we don’t think another debt ceiling crisis like we had in August 2011 would be consistent with the U.S. retaining its AAA rating,” David Riley, managing director of sovereign ratings, said on Bloomberg Surveillance in an interview with Sara Eisen.

Congress suspended the U.S. debt ceiling until May 18. Failure to increase the limit “in a timely manner,” which Fitch said it doesn’t expect to happen, “would prompt a review and likely downgrade of the U.S. sovereign rating,” the company said in a statement Feb. 27.

Federal spending will be reduced by $85 billion in the final seven months of the fiscal year ending Sept. 30 and by $1.2 trillion over the next nine years in automatic cuts set to start before midnight…”

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$GS Downgrades $DB

Deutsche Bank AG (DBK) fell the most in more than five months after Goldman Sachs (GS)Group Inc. cut the company to sell from hold, saying it may have to transfer $13 billion to its U.S. unit under new capital rules.

Deutsche Bank slid as much as 6.2 percent, the biggest intraday drop since Sept. 26, and traded at 33.07 euros at 1:40 p.m. in Frankfurt. The stricter requirements may hurt profit atEurope’s biggest bank by assets and require it to ask shareholders for more money, Goldman Sachs analysts including Jernej Omahen wrote in an e-mailed report from London today….”

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Wall St. Upgrades $JPM With 15-35% Upside

“It is usually interesting when Wall St. brokerage firms and research firms issue analyst coverage on each other. Sometimes the coverage is positive and sometimes it is negative. Many investors likely have to wonder just how much finger-pointing is taking place. Or maybe the analysts are talking up their own firm’s value in disguise.

So far on Wednesday, we have seen two very favorable calls on J.P. Morgan Chase & Co. (NYSE: JPM). The calls are also in favor of Jamie Dimon. Maybe Wall St. firms do not always bash their competitors after all.

Bank of America Corp. (NYSE: BAC), with its Merrill Lynch unit, has maintained its Buy rating and also has raised the price target to $55 from $52. The firm raised earnings estimates to $5.85 from $5.70 for 2013, to $6.00 from $5.92 for 2014, and to $6.10 from $6.05 for 2015.

The research team said:

J.P. Morgan remains the cheapest P/E stock in our coverage universe at 7.9-times expected 2014 earnings, and given 14% tangible return potential, looks cheap on tangible book value as well. Also, if the market continues to sell risk, J.P. Morgan should outperform its peers. Lastly, we continue to get pushback that J.P. Morgan is over-owned, implying no incremental buyers for the stock.

It also said….”

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