Thursday, May 31, 2012

Top Stocks For 2012-1-31-11

Reinsurance Group of America Inc (NYSE:RGA) will present at the Keefe, Bruyette & Woods Insurance Conference on Wednesday, September 7, at approximately 8:45 a.m. (ET). A live audio webcast of the presentation will be available online at: http://www.kbw.com/news/conferenceInsurance2011.html. Webcast viewers are encouraged to visit the website at least 15 minutes prior to the presentation to download and install any necessary software.

Reinsurance Group of America, Incorporated, an insurance holding company, engages in individual and group life, annuity, asset-intensive, critical illness, and financial reinsurance in the United States, Canada, Europe, South Africa, and the Asia Pacific.

CIT Group Inc. (NYSE:CIT) announced that it will redeem an additional $1 billion of its 7% Series A Second lien Notes maturing in 2014. In addition to this redemption, CIT also announced that it completed open market repurchases of approximately $400 million of Series A debt in August, including approximately $300 million of 2014 Series A Second lien Notes and $100 million of 2017 Series A Second lien Notes. Following this redemption and debt repurchase, approximately $464 million principal amount of the 2014 Series A Second lien Notes will remain outstanding and approximately $3.1 billion principal amount of the 2017 Series A Second lien Notes will remain outstanding.

CIT Group Inc. operates as the holding company for CIT bank that provides commercial financing, leasing products, and other services to small and middle market businesses.

CNA Financial Corporation (NYSE:CNA) resented its Safety in Excellence Award to Fresenius Medical Care North America, the North American operations of Fresenius Medical Care AG & Co. KGaA. CNA’s award recognizes a company’s national leadership and dedicated commitment to employee health, safety, loss prevention and risk control. For more than a decade, Fresenius has demonstrated significant reductions in employee lost time injury rates.

CNA Financial Corporation, through its subsidiaries, provides property and casualty insurance products to small, middle-market, and large businesses and organizations primarily in the United States, Europe, Canada, and Hawaii.

Cleantech Transit, Inc. (CLNO)

Cleantech Transit Inc. was founded to capitalize on technology advances and manufacturing opportunities in the growing clean energy public transportation sector. The Company has expanded its focus to invest directly in specific green projects. Recognizing the many economic and operational advances of converting wood waste into renewable sources of energy, Cleantech has selected to invest in Phoenix Energy (www.phoenixenergy.net). This project could benefit the Company’s manufacturing clients worldwide.

Burning biomass is not the only way to release its energy. Biomass can be converted to other usable forms of energy like methane gas or transportation fuels like ethanol and biodiesel. Methane gas is the main ingredient of natural gas. Smelly stuff, like rotting garbage, and agricultural and human waste, release methane gas - also called “landfill gas” or “biogas.” Crops like corn and sugar cane can be fermented to produce the transportation fuel, ethanol. Biodiesel, another transportation fuel, can be produced from left-over food products like vegetable oils and animal fats. Biomass fuels provide about 3 percent of the energy used in the United States. People in the USA are trying to develop ways to burn more biomass and less fossil fuel. Using biomass for energy can cut back on waste and support agricultural products grown in the United States.

Cleantech Transit, Inc. (CLNO) is pleased to announce it has met its funding requirement to secure the Company’s ability to earn in 25% of the 500KW Merced Project.

The Company is in the final stages of closing its initial interest in the Merced Project and is currently working on completing the necessary documentation and expects closing the transaction soon. As previously announced Cleantech has the option to earn up to 40% of the Merced Project and the Company plans to continue to work towards increasing its interest in the Merced Project as they move ahead.

For more information about Cleantech Transit, Inc. visit its website www.cleantechtransitinc.com

Top Stocks For 2012-1-31-12

BlackRock, Inc. (NYSE:BLK) announced that Laurence D. Fink, Chairman and Chief Executive Officer, is scheduled to speak at the Barclays Capital 2011 Global Financial Services Conference in New York on Monday, September 12, 2011 beginning at approximately 12:45 p.m. (eastern time)

BlackRock, Inc. is a publicly owned investment manager. The firm primarily provides its services to institutional, intermediary, and individual investors. It also manages accounts for corporate, public, union and industry pension plans, insurance companies, third-party mutual funds, endowments, foundations, charities, corporations, official institutions, and banks.

Crown Equity Holdings, Inc. (CRWE)

Crown Equity Holdings Inc. (CRWE) is pleased to announce that it has entered into a joint venture to deploy VoIP (Voice over Internet Protocol) technology delivering voice, video and data services to residential and commercial customers. The joint venture company is Crown Tele Services Inc. which was a wholly-owned subsidiary of Crown Equity Holdings Inc. Crown Equity Holdings Inc. will own fifty percent (50%) interest in the joint venture.

Commenting on the joint venture, Kenneth Bosket, President of Crown Equity Holdings Inc., said: “We are excited to deliver VoIP communications solutions specifically designed to meet the business and residential market needs in this fast-growing global market.”

Crown Equity Holdings Inc’s selection of Core Link reflects recent diversification beyond CRWE’s original charter as a provider of services and knowledge to small business owners taking their own companies public. In addition to these services, Crown Equity Holdings Inc has transitioned into a multifaceted media organization that publishes clients’ news online; sells advertising adjacent with its digital network targeted at a high-income audience; designs, hosts and maintains websites; produces marketing videos from concept to final product; crafts press releases and articles for maximum SEO; develops email campaigns; and forges branding campaigns to bolster client company images.

Online Marketing or Internet Marketing is basically marketing your product over the internet. Whether you are introducing a business proposal, or selling goods and services, the bottom line here is you want to attract audience and generate potential client and buyers. This is a process of developing awareness on the web through SEO, social network and other marketing strategies.

Crown Equity Holdings Inc. together with its digital network currently provides electronic media services specializing in online publishing, which brings together targeted audiences and advertisers. Crown Equity Holdings Inc. offers internet media-driven advertising services, which covers and connects a range of marketing specialties, as well as search engine optimization for clients interested in online media awareness.

For more information, visit http://www.crownequityholdings.com

Wells Fargo & Company (NYSE:WFC) said it has formed a Treasury Management California Sales Region. Jeff Tinker, a company veteran and longtime Bay Area resident, has been named sales manager of the new region.

Wells Fargo & Company, through its subsidiaries, provides retail, commercial, and corporate banking services primarily in the United States. The company operates in three segments: Community Banking; Wholesale Banking; and Wealth, Brokerage, and Retirement.

Tyler Technologies, Inc. (NYSE:TYL) has signed an agreement with Sussex County, Del., for Tyler’s Munis� enterprise resource planning (ERP) solution. The agreement, valued at approximately $1.1 million, includes related professional services, maintenance and support.

Tyler Technologies, Inc. provides integrated information management solutions and services for local governments in the United States, Canada, Puerto Rico, and the United Kingdom.

Your Self Improvement Guide to Success

Everyone really wants to be successful in class, really like or career. On the other hand, to realize Success, you have to strive, have an optimistic outlook in existence, and in addition you must be ready to consider dangers. When you have these characteristics but nonetheless don’t possess a idea how you can start off, this is usually a self-improvement manual to help you accomplish Success. Determine the significance of Success. You should have a apparent definition on which Success strategy for you personally. Be practical which have quantifiable standards. It’s finest to focus on targets that may perhaps be accomplished moderately, which could supply you with the sensation of satisfaction and self-assurance.

Watching effective people may have a great impact on your image at life. Effective people can provide you with motivation, permitting you to definitely continue to work harder and stick to the path they required. Spend some time with one of these people, be an assistant and request advice. You can study a lot by watching, studying and doing stuff that effective people do. Don’t let yourself be afraid to consider risks. Get as they are and learn something totally new. You can’t be effective if you don’t goal high and act high. Don’t watch for possibilities to knock in your door. Come out and search for them. In a take into account life, effective people gamble. They create large decision and large opportunities. Risks are a part of our way of life and you’ve got to manage them. However, make certain to review the chances clearly and when you believe the effects are great for you, go for this. Be daring.

Quitting won’t be considered a selection. Be persistent and don’t stop just because you’ve made an error or else you unsuccessful. Failure will invariably consider part in Success. Every powerful person has experienced failure 1 from the techniques or even the other. 1 element that separates these phones everybody else will be the persistence to run more difficult and research for far better options. Think of options to your inquiries. To achieve Success, 1 should be willing to obtain solutions even how hard it could possibly seem. Attempt each and every way feasible when you are creative.

You have to have confidence in yourself whatsoever occasions. Be familiar with your personal talents and weak points. Develop individuals talents and focus on your weak points. You need to know what stuff you can handle achieving to ensure that you are able to be realistic. Also have an optimistic attitude in life. If you think maybe that can be done anything and you will fare better, you may be motivated to operate onto it and become effective.

Change may possibly be the sole constant issue in lifestyle. Understand how to acknowledge modifications in your Success. For those who really feel the existence you’ve now is not what you’d like, generate a change. Strengthen your attitude, your focal points at the same time as your options. For those who wish to be efficient in everyday living, you will want the spirit to manage every change you may encounter. For those who wish to be successful, strive onto it. Never anticipate superior stuff to cross your path if you’re not performing anything good. Success includes uphill battle, willpower and sacrifice. You might need to enhance the time in the office, extra issues you can do, extra challenges to resolve. This self-improvement guide is simply one way that can allow you to concentrate on your supreme goal for Success plus the choice to act onto it is actually with you.

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What It Takes To Become Defence Lawyers

Though different countries around the globe may have different approaches to what is needed to become defence lawyers the similarity lies in the fact that it is a time-consuming process that requires a person to be very dedicated in order to succeed.

In Canada, for example, if you’d like to become a defense lawyer you will need to prepare yourself by entering a university in completing an undergrad program. I’m similar to other careers, where you must take specific courses in order to get in to the specialized school choice there are no specific courses necessary in the early stages, allowing you to pick any undergraduate program keeping in mind that you’re reading or writing skills are critical therefore it is advisable that you pick at least some courses that will show off your abilities in the subject.

It will also be important that you are the type of person that is not uncomfortable speaking with others and are not socially shy as discussing facts and cases with the people involved, such as victims, police officers and clients will be an important skill on a daily basis. This is something that will also pay a large role in deciding if you are prepared to become a lawyer.

Once you’ve completed your undergraduate degree you must decide which law school you will apply too. Before being accepted, you’ll be required to complete a law school admission test. It is very important you work hard to achieve your highest score possible since these scores are a strong deciding factor in choosing students with most of the law schools. The admission programs also look very highly upon those students who have taken the initiative to get involved with their local communities.

In order to become a Canadian lawyer you are required to enter into an apprenticeship program. During the program you will be exposed to those things that you’ll will regularly be required to do such as legal writing, drafting, learn how to deal with litigation, be taught how to talk with clients, as well as how to properly deal with negotiations.

Completing law school does not mean that you’re able to immediately go practice law you will still need to pass the bar exam before finally being considered, a practicing lawyer. The bar exam itself is a written test that covers all topics related to the law. Every province has an exam and therefore it will be necessary for you to call within the province you intend to have your practice.

Many opportunities may be presented to you after you have completed all of your education. Though many people choose to open their own business and run a private practice others opt to work within the government or in a large firm. Some lawyers choose to work with the public through programs such as legal aid, which allow the lower income population to access the legal system when necessary.

You will notice many defence lawyers begin their careers as prosecutors allowing them to basically act in the interest of the victim of a crime. In this position, they don’t actually have a client as they are neither the lawyer for the victim or the person being accused of the crime.

Looking for an experienced criminal lawyer in toronto? With over 15 years of experience, you can trust that the one of the best criminal defence lawyer toronto will provide you with the best defence possible.

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Stocks Galloping Ahead of Own Earnings Pace

The year certainly got off to a hot start, with the S&P 500 adding almost 5% through Jan. 27, but a weak fourth-quarter earnings season suggests stocks might — just might — have gotten ahead of themselves.

The tepid economic recovery in the U.S., signs of recession in Europe and cyclically peak corporate profit margins led analysts to cut their forecasts heading into the reporting season, meaning companies should have had little trouble beating Wall Street estimates. And yet, in the aggregate, fourth-quarter reports have had a hard time exceeding even the most tempered expectations.

Of the 184 companies in the S&P 500 that have reported fourth-quarter earnings so far, just 59% have beaten Street expectations, according to data from Thomson Reuters. That’s the lowest “beat” rate in more than a decade, or since the fourth quarter of 2001.

Also troubling is that the fourth-quarter earnings growth rate for the S&P 500 stands at 7.9% so far — or pretty much in line with expectations — except that’s mostly thanks to Apple‘s (NASDAQ:AAPL) blowout report. Exclude Apple, the second-biggest company in the S&P 500 by market cap after Exxon Mobil (NYSE:XOM), and the market’s growth rate drops to just 4.7%, according to Thomson Reuters data.

Additionally, top-line growth continues to disappoint, with only 54% of companies beating Street revenue estimates. That’s the weakest revenue beat rate since the bull market began nearly three years ago. We’ve also seen more “split” reports, where companies exceed bottom-line results but fail to hit analysts’ average sales forecast.

“In addition to the lower than average percentage of companies beating earnings estimates, this earnings season has seen a significant number of companies beating earnings estimates, while missing on revenues,” Thomson Reuters analysts Jharonne Martis and Greg Harrison wrote in a note to clients.

Finally, and perhaps most disconcerting, is that guidance has been pretty lousy, too, notes Bespoke Investment Group. Recall that stocks are forward-looking (because they represent a claim on future earnings). Unfortunately, more companies are cutting forecasts than raising them for the second consecutive quarter. Indeed, the ratio of companies slashing vs. lifting outlooks this earnings season hasn’t been this bad since the fourth quarter of 2008.

“Citing global economic concerns, debt and credit worries, and other man-made and natural disasters, 101 companies in the S&P 500 have issued negative earning guidance compared to only 32 that have issued positive earnings guidance for the fourth quarter,” note the Thomson Reuters analysts.

If there’s a silver lining to the earnings season, it’s that the forward price-to-earnings ratio on the S&P 500 was already quite low heading into it. And even now, at just 12.5, the S&P 500′s forward P/E still is more than 25% below its historical average. That’s a blessing, because it means investors aren’t paying fat premiums for future earnings growth. A good part of companies’ poor profit guidance likely is already reflected in share prices.

Significantly, the market has shrugged off the poor earnings season so far, indicating traders are keying on something other than fundamentals. The most likely culprit is anticipation of a third round of quantitative easing from the Federal Reserve. Chairman Ben Bernanke appears to have paved the way for more stimulus last week — and Friday’s underwhelming GDP report only bolstered the case. If past is prologue, expectations that the Fed could run the printing press will shore up share prices no matter how disappointing the� earnings season ultimately turns out.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

US Pending Home Sales Down Again

The latest National Association of Realtors Pending Home Sales Index indicates a slight drop in pending home sales for the month of December, falling 3.5% from the same period last year. Even so, analysts say the trend is still high due to above-average performance in the last two months, and the fact that December marked the first decline in 19 months. Contract failure appears to still be a problem, but home prices and favorable credit conditions are helping to keep buyers in the market. For more on this continue reading the following article from Property Wire.

After reaching a 19 month high, pending home sales in the United States eased in December but stayed above year ago levels, according to the latest figures from the National Association of Realtors.

Its Pending Homes Sales Index, a forward looking indicator based on contract signings, declined 3.5% to 96.6 in December from 100.1 in November but is 5.6% above December 2010 when it was 91.5.
 
But Lawrence Yun, NAR chief economist, said that the trend line remains positive. ‘Even with a modest decline, the preceding two months of contract activity are the highest in the past four years outside of the homebuyer tax credit period,’ he explained.

‘Contract failures remain an issue, reported by one third of realtors over the past few months, but home buyers are not giving up,’ he added.

Yun said some buyers successfully complete the sale after a contract delay, while others stay in the market after a contract failure and make another offer.

‘Housing affordability conditions are too good to pass up. Our hope is lending conditions will gradually improve with sustained increases in closed existing home sales,’ he concluded.

The PHSI in the Northeast declined 3.1% to 74.7 in December and is 0.8% below a year ago. In the Midwest the index rose 4% to 95.3 and is 13.3% higher than December 2010.

Pending home sales in the South slipped 2.6% to an index of 101.1 in December but are 4.9%  above a year ago.
And in the West the index fell 11% in December to 107.9 but is 3.7% higher than December 2010.

Oil falls as euro-zone woes spur demand concerns

SAN FRANCISCO (MarketWatch) � Crude-oil futures declined Monday as lingering concerns about the euro zone made investors call global oil demand into question and as the U.S. dollar traded higher.

Crude for March delivery �fell 78 cents, or 0.8%, to $98.78 a barrel on the New York Mercantile Exchange.

Click to Play MF Global's money said 'vaporized'

Nearly three months after MF Global collapsed, officials hunting for an estimated $1.2 billion in missing customer money increasingly believe that much of it might never be recovered.

Oil has ended lower for two sessions, as it inched 0.1% lower Friday after weaker-than-expected fourth-quarter U.S. economic growth also raised doubts about demand outlook.

�We are seeing the old risk-off day,� said Jim Ritterbusch, an oil analyst in Illinois.

Gasoline also ended lower, slipping off a five-month high reached Friday on refinery concerns. Such concerns were likely overblown last week to begin with, Ritterbusch said.

A higher dollar also pulled prices lower and outweighed geopolitical tensions surrounding Iran and the European Union�s recent decision to embargo many imports, including oil, from the Middle-Eastern nation.

�In contrast with the worries over Iran, global oil production looks as though it is high and rising,� said Timothy Evans, energy analyst at Citi Futures Perspective.

�The real key to the Iranian situation in our view is not whether they stop selling to Europe, but to what extent they end up curtailing production,� Evans said.

Iranian authorities have delayed a vote on whether to immediately stop sending oil to Europe, preempting the European Union embargo, which is expected to be in place by July.

Meanwhile, European leaders gathered in Brussels on the heels of Greece saying would not accept budgetary supervision as a condition of receiving more financial help. Greece�s efforts to restructure it debt have made little progress so far.

Also Monday, investors parsed news that U.S. consumers spent less in December, saving more of their rising incomes. The Commerce Department said personal income rose 0.5% last month, while personal spending fell less than 0.1%.

Economists polled by MarketWatch had expected income to rise by 0.4% and spending by 0.1%.

The Dow Jones Industrial Average DJIA �traded 0.1% lower, recovering some ground after a sharp early pullback. European and Asian stock markets mostly fell on Monday. as well Read more on Asia Markets.

The dollar index DXY , which compares the U.S. unit to a basket of six currencies, stood at 79.157 compared to 78.854 late Friday. The dollar lost some steam, however, as the day progressed. Read Currencies report.

Talks between Greece and its debt holders had continued over the weekend. Read more about negotiations between Greece and its lenders.

Investors were also digesting news that Greece�s finance minister had rebuffed reports of the imposition of a European Union commission with veto powers over Greek government budgets. Read more about Greece�s rebuttal.

Among other energy products, February gasoline �dropped 6 cents, or 1.9%, to $2.88 a gallon.

February heating oil �declined 2 cents, or 0.6%, to $3.05 a gallon.

The February contracts for gasoline and heating oil expire on Tuesday.

March natural gas �was off 4 cents, or 1.6%, to $2.71 per million British thermal units.

Wednesday, May 30, 2012

Thursday FX Interest Rate Monitor

Rising risk aversion caused by a threatened downgrade to the sovereign status of Greek debt sent the yield on 10-year German bunds to a cycle low of 3.10% today. Meanwhile the spread between German and Greek maturities widened out 14 basis points to 352 basis points while yields at the two-year Greek maturity shot up like a rocket to 6.28%. The daily change was a surge of 61 basis points. Growing global risk aversion contrasts with a firmer tone from Fed Chairman Ben Bernanke who spoke of the “nascent” U.S. recovery. His continued use of the “extended period” phrase in reference to easy monetary policy provoked a gentler sloping yield curve as buyers locked into declining yields across all maturities.

Eurodollar futures – In addition to the soothing nature of Mr. Bernanke’s words, a slump in new home sales and a decline in mortgage lending attracted Eurodollar buyers in the belief that there are unlikely to be any near or even medium term changes to short term interest rates. The spread mapping the gradient of the one-year curve starting next month eased to 90 basis points today with a four basis point rally for the March 2011 contract comparing to a two basis point rally in the contract expiring next month. The flattening nature of the spread compares to a far steeper 160 basis point curve evident at the turn of the year.

March treasury notes added a further half point to 118-16 this morning as demand for the relative safety of U.S. government debt continues to rebound from lows seen last Friday when the 10-year yield spiked to 3.90%. The rally today has sent the yield down to 3.63% as global risk aversion manifests itself in triple digit losses for the Dow industrials index.

Initial jobless claims data reported on Thursday indicated deterioration in the labor market with claims through last Saturday uncomfortably close to 500,000. The market has become accustomed to a gradual improvement in this data series, which has foreshadowed an underlying improvement in job creation. Unless this week’s data is well and truly accounted for by an administrative backlog on account of adverse weather-related conditions, the economy just took a step backwards and one that’s uncomfortably consistent with the reported downturn in consumer confidence by the Conference Board.

European short futures – Euroland market action continues to react to the ticking time bombs of peripheral European governments. When Standard & Poors rating agency announced overnight that it might further downgrade the long term credit rating of Greece before the end of March, investors plundered the domestic bond market and sent investors scurrying for the relative safety of core German bunds. The March bund contract is currently higher by 22 ticks to 124.23 driving prices are following through on.

Euribor futures continue to push to new highs as the cash curve slips and investors consider the double-whammy being served up. Ongoing fiscal austerity will slow Eurozone demand, while making the ECB’s retreat from ultra low interest rates ever harder. As bond yields push lower investors may yet consider how the monetary-fiscal mix is now creating tighter conditions that could conceivably provoke calls for further monetary relaxation from the ECB. The official policy rate is still at twice the interest rate in the U.K. and four times that of the U.S.

British interest rate futures – The British yield curve continues to flatten following official color on the hapless state of the domestic economy with its downside risks. And while the pound is also falling investors continue to assume low interest rates will remain in place for the months ahead.

Next week represents the one-year anniversary of the Bank of England’s final half point cut to leave its bank rate at 0.5%. At that time the March 2011 future reached a peak implying that rates would rise sharply over the next two years through expiration. The implied yield that day reached 2.67% indicating a strong degree of optimism that monetary policy would heal the economy looking forward. Indeed it was not until October 2009 that the March contract traded at a lower implied yield as slowing growth rekindled doubts that interest rates would be lifted. Since then and with the exception of a hiccup at the start of 2010 the March contract has moved higher at a 45 degree angle as implied yields slip.

Today March 2011 contract is priced at 98.58 and still implies a yield of 1.42% but it does illustrate the ongoing reining in of expectations over the future course of monetary policy. The March 2010/ March 2011 calendar spread has halved from 150 basis points on January 21 to 75 basis points today. That’s a major flattening of interest rate expectations especially against the backdrop of ongoing chatter about the neck brace the government finds itself in over Britain’s comparable debt burden.

Australian rate futures –A jump in the value of the Japanese yen knocked confidence in exporters share prices and added to already broadly weaker stock market prices as risk aversion mounted. Australian government bond prices continued to rise as regional stocks fell. The 10-year note slipped to 5.48% while shorter term bill futures ticked marginally higher ahead of next week’s RBA meeting. The December contract has a huge range of 95.26 seen after the RBA unexpectedly left rates unchanged and a low of 94.87 when the subsequently released minutes revealed more rate increases on the cards. Today the contract is trading at 95.04 implying a yield of 4.96% by the end of this year.

Canada’s 90-day BA’s – The 10-year Canadian yield continues to shadow comparable 10-year U.S> treasuries with the yield on the decline by five basis points today to 3.39%. Bill prices gained by five basis points with the June10/ Jun11 calendar spread at 142 basis points today, which compares to a 120 bp spread for the equivalent Eurodollar spread.

Japan – Weakness in regional stocks saw government bond yields sink to a seven week low at 1.28%. Next week brings news on consumer prices, expected to show ongoing deflation.

Coke Follows Pepsi’s Lead in Changing the Model

Last April, PepsiCo (PEP) announced that it would purchase two bottling operations and gain absolute control over 80% of its North American bottling operations. Speculation swirled as to how Coca-Cola (KO) would respond, and today it announced that after nearly a year of negotiations it would in fact buy the North America bottling operations of its largest bottler Coca-Cola Enterprises (CCE). Both Pepsi and Coke had spun out these capital intensive bottling groups years ago, and the stockholders of KO in particular proved to benefit greatly as a result. However, they both believe that the market is changing as consumers prefer healthier and more extensive options than just carbonated soft drinks. These deals will give the companies much more control and flexibility in the distribution of their products.

Coke’s move reverses a strategy to divest bottling operations that began 23 years ago, although it never totally gave up all interest in CCE as it did still own 34% coming into the deal. Judging by the relative performance of the stocks during that time, it is clear that the strategy had proved its worth. Since CCE began trading in late 1986 it has returned just 249%, while Coca-Cola has enjoyed much faster growth as its stock advanced 1113% over the same period. In terms of average annual return, CCE gained just 4% versus nearly 11% for Coke, as a benchmark, the S&P 500 returned about 5.5%. When looking at the deal through the prism of history, it appears that Coke is trading growth for greater flexibility to address modern challenges. In the case of Pepsi, the opposite is actually true as the bottling stocks outperformed their former parent company.

The deal valued at about $12.2 billion is actually an asset swap that will give Coca-Cola 90% control over its North American bottling, but will decrease its ownership of European bottling. Coke is absorbing $8.88 billion worth of debt held by the bottler, but they say they will save $350 million in costs over the next four years and if the Pepsi deal provides any guidance it could be significantly higher. CCE shareholders will get a $10 per share special pay-out and will receive one-share in the European-focused company.

While Coca-Cola has achieved impressive growth in emerging markets, volume in North America has been in steady decline since 2005. It is still the largest and probably most important market, and Coke and Pepsi are confronting consumers changing tastes head on. Control over bottling operations gives them the opportunity to more quickly shift priorities and strategies as they see fit. However, the bottling operations come with lower margins and higher fixed costs than the old model of producing concentrate and selling that to the bottlers to mix and bottle it.

We had just upgraded CCE to Fairly Valued from Overvalued as of this week’s report, which gives us some concerns over the purchase price Coke is paying for this slower growth business line. However, it is clear that both Pepsi and Coke see a changing environment in North America, and they must proactively seek solutions to new challenges as the cola business evolves. Integrating the supply chain may put a slight drag on growth and apply pressure to margins, but in the end, unless Coke can more aptly serve North American consumers changing tastes, growth would continue to dwindle anyway.

Original post

Post Earnings, ABB a Short-Term Buy

ABB Ltd. (ABB) reported fourth-quarter 2010 basic earnings per share of 31 cents compared with 24 cents in the prior-year quarter. The Zacks Consensus Estimate for the quarter was 34 cents.

For 2010, basic earnings per share were $1.12 compared with $1.27 in 2009. The Zacks Consensus Estimate for the year was $1.14.

Total Revenue

Total revenue in the quarter was $9,179 million compared with $8,761 million in the prior-year quarter. Revenue was up 5% year over year and 6% on local currency basis. The company benefited in the quarter from sturdy demand for energy efficient and productivity increasing solutions. Rising investment in the power infrastructure was also a beneficiary for the company.

For 2010, total revenue was $31,589 million compared with $31,795 million in 2009. Revenue inched down 1% and 2% in terms of local currency.

During the quarter, base orders were up 17% year over year, as order level increased in all the divisions benefiting from rising requirements of the industrial clients for energy efficiency. ABB received a number of large power transmission contracts in Europe and the Middle East, leading to a receipt of more than $15 million of large orders, up 21% year over year.

Segment Performance

Power Products revenue in the quarter decreased by 9% year over year (down 11% in local currency) to $10,199 million, due to decreased order rate in the recent quarters. Orders in the quarter were down 11%, driven by a drop in demand for large power transformers and certain types of high-voltage equipments, partially offset by increased demand for medium-voltage products and distribution transformers.

Power Systems revenue in the quarter increased by 9% (10% in local currency) to $2,088 million, aided by sturdy order backlog and contribution from Ventyx acquisition. Orders climbed 41% year over year, benefiting from double-digit growth in all the business regions apart from Asia, as order level declined in India.

Discrete Automation and Motion revenue was $1,657 million, up 13% year over year (14% in local currency), led by strong backlog in shorter-cycle businesses. Order level increased at double digit rate in Europe, the Americas and Asia. Order growth was particularly impressive in China, rising by 40% year over year.

Low Voltage Products revenue was $1,254 million, up 13% year over year (16% in terms of local currency). Order level was up 15%, led by increased demand in businesses in all regions.

Process Automation revenue was $2,101 million, up 2% year over year (4% in local currency), led by stronger product volumes, lifecycle services and benefits from ongoing projects. Orders increased 10%, witnessing double-digit growth rate in Europe and North America.

Margins

Operational EBIT margin for the quarter was 12.3% compared with 12.7% in the prior- year quarter.

With the end of 2010, the company completed its $3 billion cost take-out program. The program concentrated mainly on reducing its cost of sales as well as general and administrative expenses. Total reduction for the quarter amounted to approximately $370 million and for 2010 amounted to approximately $1.5 billion.

Balance Sheet and Cash Flow

At the end of the fourth quarter of 2010, net cash came in at $6.4 billion compared with $5.3 billion at the end of the prior-year quarter. Cash flow from operations was $1.8 billion in the quarter, almost in line with cash flow in the prior-year quarter.

Acquisition

The increasing demand for energy-efficient motors favors the long-term prospects of the company. The acquisition of Baldor Electric Company (BEZ), closed in January 2011, will further enhance the company’s scope in high-efficiency motors. The U.S. market for these motors is expected to grow 10% to15% in 2011.

ABB’s total expenditure on acquisitions in 2010, amounted to $1.3 billion. The company acquired the U.S.-based software supplier Ventyx during the year, increasing its expertise and global presence in energy management software solutions.

Outlook

The emerging markets have been a significant beneficiary for the company and expected to be a major driver of growth. With an increasing rate of industrialization in these regions, demand for energy efficient solutions like electrical grids, and productivity enhancing means is on rise.

In 2011, the company expects to benefit in the emerging markets as well as in other regions, aiding its customers to construct and improve power infrastructure and enhance industrial efficiency and productivity.

The company intends to continue its cost reduction efforts in 2011 and expects to reduce cost by more than $1 billion during the year.

ABB Ltd.’s power and automation technologies offer a solution for sustainable development, thus helping to shield the world's resources. The company has a number of technologies for the solar power industry and also a growing installed base. ABB Ltd.has witnessed improving signs in late-cycle power, with some recent large contracts.

However, ABB's results are likely to be adversely affected by macroeconomic weakness as more than 80% of the company's orders are derived from outside the U.S. A major competitor of ABB Ltd. is Siemens AG (SI).

ABB Ltd. is a Zurich (Switzerland) based power and automation technology company. The company operates in approximately 100 countries, structuring its global organization into five regions: Europe, Americas, Asia, the Middle East and Africa.

We have a Zacks #2 Rank (short-term Buy recommendation) on ABB Ltd.

Fossil Digs Up New 52-Week High, as Do Orsus and Quidel

After spending six-days in the red, yesterday stocks snapped their longest losing streak in over a year.

However, today, trader optimism seems quelled, with mixed economic news from China causing all three major indexes to drop this morning — though a handful of stocks like Fossil (NASDAQ:FOSL), Orsus Xelent Technologies (NYSE:ORS) and Quidel Corp. (NASDAQ:QDEL):

China — the world’s largest exporter and second-biggest economy — posted a smaller-than-expected $13.1 billion trade surplus in May, due to weaker global demand, combined with increased import costs. Chinese sales to the U.S. and EU fell to their lowest level over two years.

As a result, a number of Chinese stocks are making headlines today, hitting either new 52-week highs or lows. A full synopsis is provided below.

Stocks hitting new 52-week highs

Orsus Xelent Technologies (NYSE:ORS): The Chinese designer of cell phones and mobile communications equipment is up about 30% so far today. The stock appears to be recovering from a hit it took earlier this week after Interactive Brokers Group (NASDAQ:IBKR) banned money lending on the stock, due to fear of an accounting scandal within the company.

Quidel Corp. (NASDAQ:QDEL): The U.S. developer of diagnostic testing solutions for infectious diseases and women�s reproductive health has gained about 3.5% so far this morning. Earlier in the week William Blair investment firm upgraded the stock to �market perform�, citing the company�s strong timing for its product pipeline.

Fossil (NASDAQ:FOSL): The fashion accessory company, best known for its Diesel, DKNY and Armani brands, is trading about 0.5% higher so far today. Earlier in the week investment firm ISI Group initiated the stock with a �buy� rating and set a $120 price target on the stock. FOSL is currently trading around $106.

Stocks hitting new 52-week lows

China Natural Gas (NASDAQ:CHNG): The Chinese distributor of natural gas and gasoline products is off about -10% so far this morning. The stock has been falling sharply all week and seems to be experiencing technical vulnerability.

Akamai Technologies (NASDAQ:AKAM): The U.S. tech company, which delivers services to improve the speed, content and delivery of applications over mobile and Internet devices, has slipped around-2.3% so far today. Traders seem to be reacting negatively to a comment made by Akamai�s President, David Kenny, in which he urged companies to be more aware of Internet security, following a recent wave of hacker attacks on Sony (NYSE: SNE) �and Lockheed Martin (NYSE: LMT).

Staples (NASDAQ:SPLS): The global office products company has dropped about -2.3% this morning. Reduced business spending and lower consumers purchasing is causing perceived weakness in the office supplies sector.

As of this writing, Deborah O’Malley did not own a position in any of the stocks named here.

RBS Paying Large Bonuses; Commerzbank Bankers Get Zero

Over the past few days, a number of major European banks have announced earnings results. Two of the most dismal results were registered at the British company Royal Bank of Scotland (RBS) and at Germany’s Commerzbank (CRZBY.PK). However, the similarity ends there because, while Commerzbank investment bankers received no bonus, the bankers at government-controlled RBS received billions of dollars in bonuses. In my view, this difference highlights a cultural divide on compensation between financial services-dominated countries like the U.S. and the U.K. and industry-driven economies like Germany.

Large losses and zero bonuses at Commerzbank

Let’s start with Commerzbank. Thursday, in the links I posted a Bloomberg story “Commerzbank Doesn’t Pay Bonuses to Investment Bankers for 2009” which outlines the recent bonus and earnings numbers:

Commerzbank AG, Germany’s second- largest bank, isn’t paying investment bankers bonuses for 2009 after the company posted a 4.5 billion-euro ($6.1 billion) loss.

“We de facto didn’t pay variable compensation components in investment banking in 2009,” Chief Executive Officer Martin Blessing said at a press conference in Frankfurt today. Michael Reuther, Commerzbank’s head of investment banking, said the U.K. bonus tax will therefore have no impact on Commerzbank.

So Commerzbank’s stance is that, having lost billions during the financial crisis, it cannot pay bonuses. This is the second year in a row that Commerzbank has said they weren’t paying bonuses. See my post “No one gets a bonus at Commerzbank and no dividend either” from last February.

Large losses but large bonuses at RBS

At RBS, the results were similarly catastrophic but RBS is paying £1.3 million (Guardian) or £1.7 billion (Times of London) depending on which account you read.

Jill Treanor of the Guardian writes:

Royal Bank of Scotland faced renewed criticism over its decision to hand out £1.3bn of bonuses to its investment bankers this morning as the state-controlled bank reported a loss of £3.6bn.

Stephen Hester, the chief executive who has waived his £1.6m bonus, warned that "2010 will be a year of hard slog" as he battles to restore the bank, which is supported by up to £54bn of taxpayers’ money, to profitability.

The losses, an improvement on the record £24bn lost in 2008, were caused by impairment charges on loans which have turned sour to the tune of £13.8bn, although Hester said it now appeared that these may have peaked.

Treanor explains the crux of RBS’ bonus payments as coming from the divergence between catastrophic full-year results at RBS and a glorious operating result in global banking and markets. But, there is a different, more pressing rationale offered by RBS chief Stephen Hester, namely that staff are leaving in droves because of poor pay.

Philip Aldrick of the Telegraph writes:

Speaking after RBS unveiled a £3.6bn loss last year , chief executive Stephen Hester claimed a thousand top bankers quit in 2009 for better pay elsewhere, adding: "This year will look a lot like the last… The people who left us last year would have increased our profits by up to £1bn… [This year] we will lose uncomfortable amounts of staff."

The Telegraph goes on to reveal that more than 100 people earned bonuses in excess of £1 million at RBS – most of whom I suspect are on the investment banking side of the business where the operating results were fantastic.

The problem with large bonuses

Here’s the problem. While RBS’ global banking and markets business may appear to be firing on all cylinders right now, the fact is it is those same groups who caused the catastrophic losses and government takeover in the first place. Compensation at RBS rewards bankers for immediate results when, in fact, their investment decisions have longer-term consequences on the bottom line at RBS.

This is what we have witnessed during the financial crisis – bets that once looked brilliant and earned the too big to fail employee punter a shed load of cash went decidedly pear-shaped later, exposing RBS and UK taxpayers to tens of billions in losses. To my mind, it is wholly unjustifiable to pay large bonuses unless these are specifically linked to the longer-term outcomes of the specific investment decisions upon which those bonuses are based. You have to either do this, base bonuses on long-term company results, or institute some clawback mechanism.

Moreover, RBS, Commerzbank and other too-big-to-fail institutions like them which have benefitted from government largesse NEED more capital. Every dollar awarded in compensation is a dollar that could be used to bolster the capital base in order to promote the lending that is clearly not taking place in Europe right now.

If I were the American President Barack Obama, I might say something like:

I, like most of the American people, don’t begrudge people success or wealth. That is part of the free- market system.

Yes, some people most certainly deserve high compensation. But I do want there to be some semblance of reality in compensation structures. Hundreds of employees at companies like RBS that are wards of the state should not be receiving millions in bonuses for the simple fact that their jobs couldn’t exist had it not been for government intervention. The fact that the government had to bail the company out is de facto evidence that not all the performances to which these bonuses are linked justify millions in payout.

This should be patently obvious.

Instead, the executives pretend this isn’t true, relying on the spurious argument that they will lose staff unless they pay them millions. Have you done such an ineffective job of creating company loyalty that you would lose your best corporate citizens because they didn’t receive a large bonus in one particular year? A loyal employee would stick around for the long-term if you could effectively convince her that this was a one-off. Is salary so important to people that they would be willing to jump ship just for a bump-up in bonus? Yes, of course it is.

But, that’s the price you pay for the reckless lending and dodgy investments which brought the global economy to its knees.

Culture plays a large role

The thing is the banking sector in the UK is enormous. I would argue that countries with outsized banking sectors like the UK, Ireland and the U.S. put undue emphasis on the importance of this sector. As I pointed out in my post “Inside the mind of an investment banker: Greece, Goldman and derivatives,” compensation is the most important yardstick now being used to validate achievement, success and self-worth in the industry. So naturally, the tendency is to make all manner of justifications for large bonuses.

There is something cultural here at work as well. Let me give you an example from a high profile deal of yesteryear.

Remember, the huge brouhaha over compensation in the tech bubble-era takeover of Germany’s Mannesmann by Britain’s Vodafone (VOD) (Airtouch)? Back then, the mobile phone market was a huge growth market, with the market doubling between 1997 and 1999 alone. As a result, Vodafone was a darling of technology investors. Buoyed by a bubble in valuation, the company went in search of acquisition targets abroad, quickly coming across Mannesmann, a traditional German industrial company that lucked into the goldmine that was mobile telephony.

Vodafone was rebuffed by Mannesmann management on the grounds that the deal made no strategic sense. Vodafone went hostile and launched a bid anyway. The German labour union IG Metall metal workers union immediately rejected the deal (remember, Vodafone was not a telecom company, but an industrial company with a large Telecom unit). The American labour unions actually supported the deal, highlighting the difference in cultures.

Eventually in 2000, the deal went through. But, the critical feature of the deal in the German press was the enormous bonuses awarded to Mannesmann management – 111.5 million deutsche marks ($77 million). Mannesmann group chair Klaus Esser alone pocketed more than 60 million deutsche marks (about $40 million).

Germans were outraged. The scale of the pay packages was unprecedented. And this was pay which, although technically for past performance at Mannesmann, was being awarded for people who weren’t likely to be a part of the new larger Vodafone enterprise for long. The feeling was that management had rebuffed the initial offer because they did not want to lose their jobs, but took Vodafone CEO Chris Ghent’s sweetened offer because they were effectively being bribed. So, they were sued. Although the men were eventually acquitted, the case has had lasting impact in Germany.

The defendants had argued that such large payments are common practice in other countries such as the United States and that sanctioning the executives would discourage any bold decision-making in German companies in future.

-All Acquitted in Mannesmann Trial, Deutsche Welle, 2004

That’s a long winded way of saying the Germans look askance at Anglo-Saxon pay practices because the Germans are much more sceptical of the large gulf in wealth and opportunity the practices create.

As an aside, one reason the mobile telephony market was so attractive had to do with low interest rates. Telecom companies needed huge investment in fixed capital, especially for the nascent mobile networks. When interest rates are low, it has the effect of shifting investment capital toward longer-term capital intensive businesses (think Enron, WorldCom or Qwest) because the low rates increase the net present value of distant cash flows. When interest rates normalized, the bubble in telecom stocks burst and the malinvestment became evident. Vodafone was forced to take the then-largest writedown in corporate history for the Mannesmann acquisition.

In the end, it isn’t clear to me the money that Mannesmann management received at the beginning of the last decade was any more justified than the money RBS bankers are getting now. Unless pay practices in banking are reformed, I suspect seriously onerous regulation on compensation is coming.

Source

Vodafone’s hostile takeover bid for Mannesmann highlights debate on the German capitalist model – European Industrial Relations Observatory Online

Germany charges six in Vodafone takeover case – Independent

Netflix Is Cooked; Get Out of Amazon and Coinstar As Well

Looks like the rumors are true:

[Click to enlarge]

Put a fork in Netflix (NFLX); it's cooked.

Here's the problem: You get more than the streaming (which incidentally I counted up at ~1,300 movies alone on Amazon (AMZN) this morning ... all of which you can look at before choosing to buy its "Prime" membership) plus you get two-day shipping included on anything you buy from Amazon.

The Prime membership price isn't changing; this is just another "fringe" benefit. And it will stream to a huge number of devices -- arguably more than Netflix covers.

For Prime members, they just lost all reason to have a Netflix subscription. That's going to hurt -- a lot. And for non-members, you're now paying $6.58/month, or less than Netflix is charging, for the streaming video service ... and the two-day shipping on Amazon purchases is included at no cost.

That's how consumers are going to see it.

Redbox (CSTR) has announced its intent to offer a similar service.

The race to the bottom in margins is now in full force in this space. The entirety of the business model for Netflix and everyone else in terms of being able to make money on these offerings, and the valuations in their stock prices, was entirely reliant on that not happening. Add to this the pressures that will come from the CDN and ISP side, and you got trouble.

Now look at the deferred expense issues with Netflix; what I see is big trouble.

Unfortunately, this doesn't make Amazon a buy. When a market becomes filled with people who are willing to undercut one another by 30-50% to make the sale, you've moved from a growth model to one of cannibalization. This is not where M&A occurs (which will be what the crooners will try to sell you), it's where the sharks start eating each other, having insufficient food available to sate themselves by other means.

Stay away from all of these companies. This is a highly-destructive cycle that is likely to lead to severe margin compression for all of these firms. If I had to bet on someone surviving this, it would be Amazon, with Redbox/Coinstar and Netflix being the potential zeros ... but even so, it's going to hurt Amazon's margins as well.

Nobody "wins" these wars. If you have positions in these companies, get the hell out of them while the getting is good.

Tesla Motors: 2 Simple Reasons for Passing

Tesla Motors (TSLA) sounds like a company straight out of the cartoon The Jetsons. This isn’t the future of tomorrow though but the reality of today. The electric car market is now in its infant stages with Tesla Motors having made it go from being purely theoretical to actually feasible and extremely competitive. Still, the jury remains out on whether Tesla Motors is a good stock to buy. Tesla Motors could grow into a sound and profitable company but that doesn’t necessarily mean that it will turn into a great stock pick. This futuristic car company has yet to address key obstacles it faces and it can’t just keep on kicking issues down the road hoping that they go away. The issues we are concerned with are limited global lithium supplies and extreme competition in the electric car market now. From what we know about Tesla Motors at this point we would pass the on stock until the topics are better addressed.

A Dangerous Dependence on Lithium

Tesla Motors is attempting to rapidly expand into the mainstream electric car market but we have concerns with its dependence on lithium. Lithium is believed to have the second smallest accessible metal supply in the world, which stands right above the “rare earth metals” category. Should Tesla be highly successful and sell thousands of its new Model S in conjunction with other large scale electric car competitors there is a real probability that the price of lithium batteries could sky rocket. Given that this is the most expensive part of an electric car this could destroy a profit margin that Tesla doesn’t even have yet. We think Tesla had it right by targeting a very niche luxury market but by going mainstream this early in the game it has increased its own risk profile unnecessarily. Many industry auto experts see lithium as the “ultimate” limiting variable for the electric car market. As a firm it has failed to address this concern and perhaps rightfully so in that it might not really know what to say about the issue at hand. Tesla Motors may sell thousands of affordable electric cars but unless it has a plan to deal with potential supply constraints that could shoot lithium prices higher this company will be six feet underground before it ever gets off the lot.

Cut Throat Competition

It’s unbelievable how competition has come out of the woodwork for the electric car space with big names like Ford (F), Toyota (TM), Nissan (NSANY.PK), and more in the line up. Tesla Motors definitely has heat on its tail and we are concerned that the firm may not be able to adequately compete with much more tenured and well-financed auto companies in the mainstream electric car space. We wish it stayed in the niche luxury market space in order to build the brand up more and to get finances in order first. Going head on against auto companies like Toyota is a high stakes game where it’s a “simple do or die” scenario. If Toyota or other major names find the space unprofitable they can leave it and survive but this isn’t the case for Tesla Motors. Further, big auto names can afford to hang out in this space longer and may even attempt to financially bleed out Tesla Motors. The only hope Tesla Motors has in surviving currently against competition is to start running circles around them in terms of sales numbers. Otherwise it may get squashed like a fly if it stops to take a breather.

Conclusion

Tesla Motors is a pass (AKA: (HOLD) at this point. This is one party that we would prefer arriving to in a “fashionably late” manner. If the firm does manage to succeed in the electric car space we have little doubt the stock will likely skyrocket over the long term and allow for ample opportunity to get in down the line when it has proved itself as a financially viable firm.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Whale Watch: 17 Cash-Rich Companies Owned by Famous Investors

The following list may be interesting to investors who like to follow the smart money.

All of the stocks below are owned by the likes of Buffett, Soros, Paulson, Icahn etc. (based on 13-F filings at the end of 2010). Additionally, all of these companies have high levels of cash, as measured by the trailing 12-month (TTM) levered free cash flows, expressed as a percentage of each company's market cap.

Levered free cash flow is the free cash flow available to the company after paying interest on said company’s debt. It is a measure of the cash flow that is truly available to the company.

Considering the large amounts of cash held by these companies relative to market cap, do you think these names are undervalued? Famous investors seem to agree -- so use this list as a starting point for your own analysis.

Investor ownership sourced from EDGAR, levered FCF sourced from Yahoo Finance, short float and performance data sourced from Finviz.

[Click to enlarge]



List sorted by TTM levered FCF as a percentage of market cap.

1. NRG Energy, Inc. (NRG): Electric Utilities Industry. Market cap of $5.15B. According to 13-F filings at the end of 2010, Carl Icahn owns shares of the company. Levered FCF is 25.63% of market cap (TTM Levered FCF at $1.33B and market cap at $5.15B). Short float at 3.91%, which implies a short ratio of 3.48 days. The stock has lost 10.17% over the last year.

2. GlaxoSmithKline plc (GSK): Drug Manufacturer. Market cap of $100.11B. According to 13-F filings at the end of 2010, Warren Buffett owns shares of the company. Levered FCF is 13.55% of market cap (TTM Levered FCF at $13.55B and market cap at $100.11B). Short float at 0.13%, which implies a short ratio of 1.43 days. The stock has gained 6.32% over the last year.

3. Target Corp. (TGT): Discount Stores Industry. Market cap of $37.63B. According to 13-F filings at the end of 2010, Bill Ackman owns shares of the company. Levered FCF is 11.95% of market cap (TTM Levered FCF at $4.39B and market cap at $37.63B). Short float at 1.04%, which implies a short ratio of 1.17 days. The stock has gained 6.60% over the last year.

4. Enzon Pharmaceuticals Inc. (ENZN): Biotechnology Industry. Market cap of $667.41M. According to 13-F filings at the end of 2010, Carl Icahn owns shares of the company. Levered FCF is 11.86% of market cap (TTM Levered FCF at $79.36M and market cap at $667.41M). Short float at 11.02%, which implies a short ratio of 14.97 days. The stock has gained 18.58% over the last year.

5. Transocean Ltd. (RIG): Oil & Gas Drilling & Exploration Industry. Market cap of $26.52B. According to 13-F filings at the end of 2010, John Paulson owns shares of the company. Levered FCF is 11.74% of market cap (TTM Levered FCF at $3.12B and market cap at $26.52B). Short float at 4.52%, which implies a short ratio of 2.36 days. The stock has lost 2.33% over the last year.

6. The Washington Post Company (WPO): Newspapers Industry. Market cap of $3.78B. According to 13-F filings at the end of 2010, Warren Buffett owns shares of the company. Levered FCF is 11.46% of market cap (TTM Levered FCF at $434.20M and market cap at $3.78B). Short float at 11.91%, which implies a short ratio of 18.7 days. The stock has gained 9.87% over the last year.

7. Best Buy Co. Inc. (BBY): Electronics Stores Industry. Market cap of $12.95B. According to 13-F filings at the end of 2010, George Soros owns shares of the company. Levered FCF is 9.40% of market cap (TTM Levered FCF at $1.24B and market cap at $12.95B). Short float at 4.46%, which implies a short ratio of 1.77 days. The stock has lost 8.19% over the last year.

8. The Hain Celestial Group, Inc. (HAIN): Processed & Packaged Goods Industry. Market cap of $1.33B. According to 13-F filings at the end of 2010, Carl Icahn owns shares of the company. Levered FCF is 7.96% of market cap (TTM Levered FCF at $105.86M and market cap at $1.33B). Short float at 6.39%, which implies a short ratio of 7.69 days. The stock has gained 97.82% over the last year.

9. Biogen Idec Inc. (BIIB): Biotechnology Industry. Market cap of $16.30B. According to 13-F filings at the end of 2010, Carl Icahn owns shares of the company. Levered FCF is 7.73% of market cap (TTM Levered FCF at $1.25B and market cap at $16.30B). Short float at 3.09%, which implies a short ratio of 4.18 days. The stock has gained 19.50% over the last year.

10. Coca-Cola Enterprises Inc. (CCE): Soft Drinks Industry. Market cap of $9.14B. According to 13-F filings at the end of 2010, George Soros owns shares of the company. Levered FCF is 7.73% of market cap (TTM Levered FCF at $690.62M and market cap at $9.14B). Short float at 5.12%, which implies a short ratio of 2.43 days. The stock has gained 102.33% over the last year.

11. Forest Laboratories Inc. (FRX): Drug Manufacturer. Market cap of $9.80B. According to 13-F filings at the end of 2010, Carl Icahn owns shares of the company. Levered FCF is 7.71% of market cap (TTM Levered FCF at $756.75M and market cap at $9.80B). Short float at 8.19%, which implies a short ratio of 10.9 days. The stock has gained 16.73% over the last year.

12. Whirlpool Corp. (WHR): Appliances Industry. Market cap of $6.33B. According to 13-F filings at the end of 2010, John Paulson owns shares of the company. Levered FCF is 6.94% of market cap (TTM Levered FCF at $439.88M and market cap at $6.33B). Short float at 8.94%, which implies a short ratio of 4.18 days. The stock has gained 0.43% over the last year.

13. Monsanto Co. (MON): Agricultural Chemicals Industry. Market cap of $39.80B. According to 13-F filings at the end of 2010, George Soros owns shares of the company. Levered FCF is 6.81% of market cap (TTM Levered FCF at $2.70B and market cap at $39.80B). Short float at 1.21%, which implies a short ratio of 1.26 days. The stock has lost 2.75% over the last year.

14. Comcast Corporation (CMCSA): CATV Systems Industry. Market cap of $70.37B. According to 13-F filings at the end of 2010, George Soros and John Paulson own shares of the company. Levered FCF is 6.66% of market cap (TTM Levered FCF at $4.76B and market cap at $70.37B). Short float at 1.78%, which implies a short ratio of 3.22 days. The stock has gained 60.84% over the last year.

15. Medtronic, Inc. (MDT): Medical Appliances & Equipment Industry. Market cap of $43.23B. According to 13-F filings at the end of 2010, John Paulson owns shares of the company. Levered FCF is 6.63% of market cap (TTM Levered FCF at $2.93B and market cap at $43.23B). Short float at 1.01%, which implies a short ratio of 1.52 days. The stock has lost 5.65% over the last year.

16. Del Monte Foods Co. (DLM): Processed & Packaged Goods Industry. Market cap of $3.70B. According to 13-F filings at the end of 2010, John Paulson owns shares of the company. Levered FCF is 6.57% of market cap (TTM Levered FCF at $243.11M and market cap at $3.70B). Short float at 1.88%, which implies a short ratio of 0.56 days. The stock has gained 56.91% over the last year.

17. Wal-Mart Stores Inc. (WMT): Discount, Variety Stores Industry. Market cap of $195.02B. According to 13-F filings at the end of 2010, Warren Buffett and George Soros own shares of the company. Levered FCF is 6.44% of market cap (TTM Levered FCF at $12.59B and market cap at $195.02B). Short float at 1.61%, which implies a short ratio of 2.54 days. The stock has gained 4.70% over the last year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Tuesday, May 29, 2012

The best way to mend 3m Littman stethoscope.

3m Littman stethoscopes are between the stethoscopes that are acknowledged for their good quality and reliability. For any stethoscope to become capable to final lengthy, it signifies that the 1 using it should acquire excellent care of it.

Nevertheless, accidents do transpire which could direct it to get weakened. This means that one particular will have to assess concerning repairing it or to get a different just one. In most conditions, repairing it’s less expensive than buying a new just one consequently quite a few will opt for it. When buying a new 3m Littman stethoscope, it is vital to verify whether it’s got a warranty as this will likely assist you to in the event that it gets harmed.

All types possess a promise of two ages or maybe to six ages meaning that if it will get harmed, they may should assess it and if the damage will not be caused by negligence, they may go in advance and repair it in your case no cost of cost. However, it can be significant to just take good care of the stethoscope to make guaranteed that it does not get ruined. In case the ear suggestions will be the kinds which are destroyed, you’ll have to eliminate the ear guidelines in the tubing.

This will be finished by twisting and pulling them as this is actually the finest solution to free them. You’ll have to replace the ear tips along with the tubing and discard worn out types. If the acoustic performance of one’s stethoscope has diminished, it signifies that you will need new tubing for your 3m Littman stethoscope. It can be vital to create certain that you simply tend not to expose your stethoscope to extreme heat or chilly since it can destruction the tubing. Should you be not familiar with how to repair service a stethoscope, it is recommended to appear for just a one who discounts with them. It is very crucial to have your 3m Littman stethoscope fixed by an authority.

Getting your stethoscope repaired by a person who does not have the understanding will spoil it wholly. This means that you simply will have to invest more cash than you can have had you opted to acquire the latest one.

3m Littman stethoscopeThis implies that you will have to spend much more cash than you can have had you opted to purchase a different one.

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Buy Timber Stocks and Watch Your Money Grow on Trees

Chances are you've never considered timber stocks in your investing strategy.

But if that's the case, then you've been missing out.

Timber is a long-term investment that can reward your portfolio in good times, and protect it in bad.

In fact, investing in timber has proven to be more profitable - and less risky - than any other asset class for almost 100 years. Investing in timber stacks up well against stocks, bonds, oil and other commodities-even gold.

Here's why...

Timber beats stocks and bonds. Managed timber has actually beaten the stock market - with less risk - over the long run. From 1987-2010, managed timber returned roughly 14% annually, according to The Campbell Group, a timber investment advisor. Meanwhile, the Standard & Poor's 500 Index returned about 9% and bonds clocked in at a little less than 7%. Even better, the returns on timber have been less volatile.

Timber is uncorrelated to stocks and bonds. The Timberland Index maintained by the National Council of Real Estate Investment Fiduciaries (NCREIF) shows timber price movements have a very low correlation with other asset classes.

Timber does especially well in bear markets. During the Great Depression timber was up 233% while the price of stocks fell more than 70%. In fact, during the three worst market downturns of the 20th century (1911-20, 1929-41, and 1966-81), timber outperformed the S&P 500 by a wide margin.

Timber whips inflation. Timber prices have grown at a rate that is approximately 3% greater than inflation for the last century. During America's last major inflationary period - from 1973 to 1981, when inflation averaged 9.2% - timberland values increased by an average of 22% per year, according to Money Morning timber investing research.

Timber Stocks: Real Growth You Can Count OnAnd while timberlands function like low cost warehouses, they also serve as profit-spinning factories.

That's because timber literally grows on trees.

Most timber-grade trees grow an average of 8% per year - which means that every year you don't cut them down, they're worth about 8% more. So while the stock market gyrates, timber keeps growing "on the stump" and increasing in value - year after year.

That's real growth you can count on. And while we can't say for sure what will happen with the world economy, we can safely say that trees will keep growing, and timber will be in demand.

In fact, the United Nations' Food and Agricultural Organization forecasts that world demand for woodwill nearly double by the middle of this century. Even paper recycling efforts have had little effect on demand.

And when it comes to being "green," trees are hard to beat.


As metals and plastics are spewed out by smoke belching factories, wood is adding to the oxygen we breathe. Timber is renewable, recyclable, biodegradable, and produced with clean solar energy. As "green" awareness increases around the globe, timber becomes more attractive than ever.

All of this makes investing in timber stocks a great capital growth vehicle - and a reducer of risk.

How to Invest in Timber Stocks Up until recently, investing in woodlands had been limited to timber investment management organizations (TIMO's) that cater to pension funds and other investors with deep pockets.

But now there are public companies available as investment vehicles for the retail investor. Here a few ways to invest:

Plum Creek Timber Co. Inc. (NYSE: PCL) has a market capitalization around $6.4 billion and nearly 8 million acres of timberland (all in the U.S.) and is focused primarily on owning and managing timberland, although it also sells plywood and wood chips. It is 66% owned by mutual funds. As a Real Estate Investment Trust (REIT), Plum Creek offers an attractive 4.2% dividend yield with an extra plus. Its dividends are treated by the IRS as capital gains instead of ordinary income - another gift for timber investors.

Rayonier Inc. (NYSE: RYN), also a REIT, has a $5.6 billion market cap and manages approximately 2.4 million acres of forest in the United States and New Zealand. The company also produces performance fibers and has a subsidiary dedicated to real estate. Rayonier pays a 3.4% dividend yield, and that dividend has steadily increased.

Timber exchange-traded funds (ETFs) are a relatively new investment option. Two ETF alternatives worth looking at are Claymore/Clear Global Timber Index (AMEX: CUT) and iShares S&P Global Timber & Forestry Index (Nasdaq: WOOD). Both ETFs invest in timber REITs, as well as companies related to the industry: paper, packaging, etc.

So if you believe that small-cap energy and tech stocks may have better short-term prospects, you're correct. But you're not likely to find a better long term holding than timber stocks.

News & Related Story Links:

  • Money Morning: Timber: The Inflation Hedge That Pays Off in Any Market
  • Money Morning:
    The Markets vs Mattress: I Know Where My Money is Going
  • Campbell Group:
    Timber Competitive Returns
  • Investopedia:
    Timber Investments Cut Down Portfolio Risk

Currency Trading:A Beginners Guide to Currency Spread Betting – MarketWatch (press release)

A Beginners Guide to Currency Spread Betting
MarketWatch (press release)
LONDON, January 31, 2012 /PRNewswire via COMTEX/ — Also known as Forex or FX for short, foreign exchange trading is one of the most widely traded markets in the world. However, currency spread betting allows traders to control a much larger position …

and more »

{fcurrency trading} – Forex News

Gold, Silver Dip Against Strong Dollar

The price of gold and silver slipped on news of a U.S. dollar strengthened by profit taking and foreign financial turbulence. Gold for February delivery dropped $3.60 to $1,728.60 an ounce and silver fell $0.40 to $33.38 an ounce, although analysts believe the slide is not indicative of longer-term concerns. Disagreement among European Union (EU) nations about how to handle its financial crisis and an unwillingness of Greece to have its fiscal policy approved by EU advisors helped to boost the dollar’s profile, which in turn took a bite out of two commodities. For more on this continue reading the following article from TheStreet.

Gold prices closed slightly lower Monday as a stronger U.S. dollar and profit taking weighed on the metal.

Gold for April delivery ended down $1 to close at $1,734.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,742.80 and as low as $1,718.80 an ounce while the spot price was shedding $9, according to Kitco's gold index.

Silver prices lost 26 cents at $33.52 an ounce while the U.S. dollar index was rising 0.4% at $79.15.

"Technically and fundamentally nothing has changed the positive course of this market," says George Gero, senior vice president at RBC Capital Markets. "If we have a major pullback, we are likely to see more investors bargain hunt."

Gold was getting hit by profit taking as well as a stronger U.S. dollar. In the latest commitment of traders report, speculative short positions in the dollar decreased by more than 3,100 contracts, which means that some of the dollar's resilience in spite of the Federal Reserve's easy money policy is due to technical trading.

A weaker euro was also propping up the dollar as Greece rebelled against any European government oversight into how it runs its budget and austerity measures. Also, the yield on 10-year Portuguese bonds rose to more than 15%, igniting worries of another bailout.

European Union leaders were also embarking on another EU summit today to discuss fiscal consolidation and the possibility of letting the current bailout fund, EFSF, and the permanent bailout fund, ESM, operate together, a move which Germany opposes. Italy also raised 5.57 billion euros for 5-10 years at lower yields but to relatively tepid demand.

The gold market was also slightly disappointed that the People's Bank of China didn't take any steps to loosen monetary policy by lowering the amount of money banks have to hold in their reserves. However, after strong investor inflows last week, some kind of pause is normal.

"We are cautious of overstretched daily studies," says Barclays Capital, but "the absence of topping signals compels us to stick with the uptrend." Barclays thinks gold could rally towards the $1,760 area with the next target of $1,800. "Any pullback is expected to find buying interest near $1,645."

Stan Dash, vice president of applied technical analysis at TradeStation, says today's trading was not quite a stall. "You've got resistance at $1,767-$1,770 and support at $1,715-$1,718." Dash says if gold does start to stall, prices could consolidate more and gold might sink as low as $1,670 before bouncing higher. "That would not be a breakdown of the trend but a consolidation." Dash sees that kind of move happening between the next 5-10 sessions.

Gold is currently seeing strong investors flows. The SPDR Gold Shares(GLD) added 16 tons last week. Speculative long positions on the Comex increased by 6,100 contracts while short positions only dropped by 88, which means gold's strength didn't come from technical short covering.

"The data show investors are rebuilding long positions across the precious metals complex," says James Steel, analyst at HSBC. "We expect this to continue with a commensurately bullish impact on bullion prices."

Gold mining stocks were lower Monday. Kinross Gold was down 2.14% at $11.41 while Yamana Gold was relatively flat at $17.30.

Other gold stocks, Agnico-Eagle and Eldorado Gold were lower at $37.85 and $14.94, respectively.

 

 

Despite Fatigue, Social Media Advertisers Stick With It

Apparently marketers have forgotten their own mantra.

Just when you become sick of an ad campaign, is exactly when the message is just starting to stick with your target audience.

You see, 51.4% of those polled by the Marketing Executives Networking Group (MENG) say they are tired of hearing the buzz words social media, Twitter, and social networking.

Yet, despite that nauseous feeling, 72% of them plan to invest in social media in 2010:

And, what are they hoping to achieve out of their social media–and other marketing–efforts?

Customer satisfaction? Like it or lump it!

Customer retention? Take a hike!

SEO? Optimize this!

Nope, at the top of marketers 2010 wish list is…drum roll please…marketing ROI!

Click to enlarge:

Ah yes, marketing ROI, she’s an elusive mistress. Just like gravity–you can’t see it, but you know it’s there–ROI from marketing is something that has been the holy grail of marketers for many years!

An Opening for the Bears?

I have long said this is the unshortable market. The strength has been so unyielding, even breaking the 13-day moving average (not to mention something more serious) was impossible. In a normal market, the falling to the 20-day moving average is very normal, even in an uptrend. But those moments have been extremely rare the past six months.

What I was looking for a month ago when the market broke down due to Egypt was a fall through the 20-day moving average. That did happen, and the market closed on the lows of the day (and week). In normal times that is a very bad development for the technical structure of the market.

But I was wary. Why? Because it happened on a Friday, and since March 2009 almost all gains have come on (a) premarket surges Monday morning, or (b) the first day of the month. And after the Friday that Egypt was roiled came Monday + the first day of the month (Tuesday). Like clockwork, the market gapped up Monday and was at yearly highs by Tuesday. So much for the technical condition.

This time around, Monday is still a few days away, as is the first day of the month. So the bears might have a small window of opportunity. Now neither of these days should really mean anything, but the psychological impact of seeing those types of days always works for the bulls and feeds on itself. What would be truly striking would be a poor Monday premarket and/or a poor first day of the month -- talk about a change in character.

[Click to enlarge]

How Badly Do We Need China to Buy Our Debt?

The Department of U.S. Treasury announced the revised numbers of major foreign holders of U.S. Debt in their most recent update. Based on the new data, China - not Japan - was indeed the number one holder of U.S. Treasuries holding a total $894.8 billion worth of US. Treasury securities at the end of December 2009. Japan in second place held a total of $765.7 billion, $129 billion less than China. See both data for current and previous data in the charts below.

Updated Chart Previous Chart

We have previously wondered what, if any, impact a decline in Chinese holdings of U.S. Treasuries would have. We also considered whether the recent hike in the discount rate would be some sort of a token gesture to the Chinese that potentially higher yields may be an incentive to keep buying those Treasuries.

While the revised U.S. Treasury data show that China is indeed still holding the largest amount of U.S. Treasuries, there is somewhat of a trend, albeit minute thus far. Both data sets show that China has been reducing its U.S. Treasury holding by $45 billion since last summer. But it is far to early to assume that significant changes in Chinese holdings may take place.

Comparing the recent data with a longer-term view (end of year data), it does however show where China came from and what a potentially devastating effect on Bond markets could ensue if China were to reduce these US Treasury holdings to anywhere close to a level from a decade ago.


Disclosure: no positions

Facebook IPO filing: What to look for

An earlier version of this story misspelled Sheryl Sandberg�s first name. The story has been corrected.

SAN FRANCISCO (MarketWatch) � Facebook is widely believed to be readying its first initial-public-offering papers this week, with its prospective IPO looming as one of the biggest market debuts in history.

The documents to be filed with the Securities and Exchange Commission will provide investors with their first significant glimpse into the social-networking giant�s business performance, as well as at such other matters as its spending, hiring and executive pay. The Wall Street Journal reported over the weekend that the company was selecting its bankers and could make the filing as early as Wednesday.

Click to Play Facebook's high valuation

MarketWatch columnist Mark Hulbert discusses the coming Facebook IPO in relation to valuations of other major tech and Internet companies at the time of their own stock market debuts.

Whether the filing occurs this week or later, here are some of the key points to look for in the documents:

� Revenue growth: The size of Facebook�s current business has been the source of great speculation. Documents leaked back in 2009, when the company was putting together an investment deal with Goldman Sachs GS , showed revenue of $1.24 billion for the nine-month period ending in September 2010 � up nearly 180% from the same period of the previous year. Has that growth rate been maintained, or has it slowed or accelerated?

FACEBOOK: AN IPO MILESTONE


� Facebook or face-plant?
� Facebook set to evolve
� Who's friending Facebook?
� Easy money's already made
� Facebook files for $5 bn IPO
� The year of Facebook
� MW Topics: Facebook
/conga/story/2012/01/facebook_ipo.html190772

� Sales mix: FacebookFB � is thought to generate most of its revenue from online advertising, but the company also gets a cut of transactions executed over the site, such as purchases of games. Social-game maker Zynga ZNGA , whose titles include CityVille and FarmVille, reported revenue of $828.9 million for the nine-month period ended Sept. 30, 2011, and the company keeps 70% of the sales its games generate over Facebook, which implies a maximum revenue cut of about $350 million to Facebook for this period from Zynga alone. What percentage of Facebook�s revenue base is composed of ads, compared to transactions, and are there other significant revenue sources?

� The bottom line: The leaked Goldman documents showed net income of $355 million for the nine-month period ended Sept. 30, 2010, compared with $43.6 million in the previous year. But Facebook has also likely had to spend heavily on network infrastructure, new technology and talent between 2009 and now. Have the company�s costs outpaced its revenue growth rate, and will this moderate over time?

/conga/story/2012/02/facebook_poll.html190349

� Float and market cap: The most oft-cited number thrown around of late has Facebook going public at a $100 billion valuation. But like Groupon�s GRPN �debut last year, Facebook may choose to make a relatively small portion of its shares available in the offering. This allows the company to preserve a larger proportion of ownership for future offerings and to safeguard demand for the stock in the event that would-be investors grow skittish ahead of the offering.

� Risk factors: This section of an SEC filing is often filled with boilerplate language, but it could in this case provide some insights into how Facebook sees its position in the market vis-a-vis the positions of its competitors � most notably Google GOOG , which has launched its own social network and is gunning to become a major force on the same mobile devices that Facebook needs for future growth. Does Facebook see any other companies as significant threats?

� Who gets what: Some early investors take advantage of IPOs to cash out some shares. Early Facebook investors include Peter Thiel and the venture-capital firms Accel Partners, Greylock Partners and Meritech Capital. Software giant Microsoft MSFT �put $240 million into the company back in 2007. Will any executives, such as co-founder and CEO Mark Zuckerberg, Chief Operating Officer Sheryl Sandberg or Chief Financial Officer David Ebersman sell shares in the deal?

� Bankers: The Wall Street Journal report indicated that banking titans Morgan Stanley MS �and Goldman Sachs GS �were vying for the coveted lead spot underwriting the deal. Which wins, and what other firms get a piece of the lucrative deal, will be a focus of great interest on Wall Street. Read related Wall Street Journal report (external link).

Monday, May 28, 2012

Is More Debt What the Doctor Ordered?

Can you get out of a debt crisis by piling on another layer of debt?

That’s the question on everyone’s mind and the one Bill Gross of Pimco attempts to answer in this month’s Investment Outlook. He starts out defining the problem as a lack of aggregate demand – the Keynesian understanding of depression.

To begin with, let’s get reacquainted with the fundamental economic problem of our age – lack of global aggregate demand – and how we got to where we are today: (1) Twenty years of accelerated globalization incrementally undermined the real incomes of most developed countries’ workers/citizens, forcing governments to promote leverage and asset price appreciation in order to fill in what is known as an “aggregate demand” gap – making sure that consumers keep buying things. When the private sector assumed too much debt and asset prices bubbled (think subprimes and houses, or dotcoms/NASDAQ 5000), American-style capitalism with its leverage, deregulation, and religious belief in lower and lower taxes reached a dead end. There was a willingness to keep on consuming, there just wasn’t the wallet. Vigilantes – bond market or otherwise – took away the credit card like parents do with a mall-crazed teenager. (2) The cancellation of credit cards led to the Great Recession and private sector deleveraging, the beginning of government policy reregulation, and gradual deglobalization – a reversal of over 20 years of trade policies and free market orthodoxy. In order to get us out of the sinkhole and avoid another Great Depression, the visible fist of government stepped in to replace the invisible hand of Adam Smith. Short-term interest rates headed to 0% and monetary policies of central banks incorporated new measures labeled “quantitative easing,” which essentially involved the writing of trillions of dollars of checks to replace the trillions of dollars of credit that disappeared after Lehman Brothers. In addition, government fiscal policies, in combination with declining revenues, led to double-digit deficits as a percentage of GDP in many countries, a condition unheard of since the Great Depression. (3) For awhile it seemed that all was well, that the government’s checkbook could replace the private market’s wallet and credit cards. Risk markets returned to normal P/Es as did interest rate spreads, and GDP growth resumed; it was only a matter of time before job growth would assure the world that we could believe in the tooth fairy again. Capitalism based on asset price appreciation was back. It would only be a matter of time before home prices followed stock prices higher and those refis and second mortgages would stuff our wallets once again. (4) Ah, but Dubai, Iceland, Ireland and recently Greece pointed to a potential flaw in the model. Shaking hands with the government was a brilliant strategy in 2009 when it was assumed that governments had an infinite capacity to leverage themselves.

I agree with this brief history. As I have mentioned before, real wages in the U.S. peaked in 1973 in part due to globalization. In order to keep the gravy train going, debt and leverage has been the order of the day ever since. But this all went horribly wrong in the credit crisis and we have been living in quite a different world since. So what’s next? Bill Gross thinks it's a socialization of private sector debts via increasing government debt loads, which Gross says is bad for the relative performance of government debt as compared to corporate debt. He even bolds this section.

Government bailouts and guarantees such as those evidenced and envisioned in Dubai and Greece, as well as those for the last 18 months with banks and large industrial corporations across the globe, suggest a more homogeneous “unicredit” type of bond market. If core sovereigns such as the U.S., Germany, U.K., and Japan “absorb” more and more credit risk, then the credit spreads and yields of these sovereigns should look more and more like the markets that they guarantee. The Kings, in other words, in the process of increasingly shedding their clothes, begin to look more and more like their subjects. Kings and serfs begin to share the same castle.

All of which gets us back to the original question of whether more debt is what the doctor ordered. Gross punts here. Instead he makes a relative value call that is effectively long high quality corporate debt (think Berkshire Hathaway (BRK.B) or Microsoft (MSFT)) and short government debt as spreads narrow. This is what you see in emerging market debt crises when the sovereign is debt-laden. Often, a high quality corporate can have a better credit rating than the sovereign, particularly if it is a multi-national who’s income stream is earned abroad, making it immune to the domestic economy and the sovereign’s taxation policy. To the degree you have exposure to sovereign debt, Gross suggests being overweight those sovereigns that have lower credit and inflation risk (think Germany, Canada or Norway). This is a repeat of the views he expressed a month ago.

The careful discrimination between sovereign credits is becoming more than casual cocktail conversation. A deficiency of global aggregate demand and the potential impotency of policymakers to close the gap are evolving into a life or death outcome for the weakest sovereigns, with consequences for credit and asset markets worldwide.

I suspect Gross is not long Greek sovereign bonds. As to the original question, it is more philosophical than real from an investor’s standpoint. During times of economic volatility, an investor in bonds wants to ensure the return of capital a lot more than the return on capital. And that means shunning risk. Determining relative credit and inflation risk is a lot more important than figuring out exactly how you get out of a debt crisis.

Source

Don’t Care – Bill Gross, March 2010 Investment Outlook, Pimco