Monday, June 27, 2011

Morning Note

June 27, 2011


Equity futures are trading above fair value to start the week. In Europe, Greece will remain the main focus of attention this week as the Greek Parliament begins to debate the medium-term fiscal plan and the implementation laws on Monday. Voting on the legislation will occur on Wednesday for the Medium-Term Fiscal Strategy and Thursday for the implementation law.


Libor fixings 

- Overnight Libor: Dollar: 0.127% vs prior 0.128% ; Sterling: 0.566% vs prior 0.566%; Euro: 0.833% vs prior 0.875%
- 1-month Libor: Dollar: 0.186% vs prior 0.186%; Sterling: 0.628% vs prior 0.628%; Euro: 1.270% vs prior 1.270%
- 3-month Libor: Dollar: 0.246% vs prior 0.246%; Sterling: 0.825% vs prior 0.825%; Euro: 1.468% vs. prior 1.472%

August WTI crude ($0.64) to $90.52

Natural gas ($0.048) to $4.181

Gold +$3.05 to $1502.35

10-year yield 2.878%
30-year yield 4.1976%


Asian Markets

Most Asian markets followed Wall Street down today on worries about Greek debt and US economic growth. Large banks fell on the tentative regulatory agreement on increasing their capital requirements. China rose slightly when a cash shortage eased, a government official said H2 GDP growth would exceed 9%, and Premier Wen Jiabao said inflation would be below 5% for the year. Tech exporters led Taiwan down on fears thatGreece’s debt problems could spread, harming the global economy. But the tourism sector rose, as China’s first individually traveling tourists will arrive on the island this week. South Korea’s fall was exacerbated on negative results from a business sentiment survey. A stronger yen against the euro sent Japan down. Megabanks were sold early on the new capital-adequacy regulation framework approved over the weekend, but they recovered to flat by the end of the day. On the assumption that naming the Ogasawara islands a UNESCO World heritage site will boost business on the liner route between the islands and Tokyo, investors caused Tokai Kisen (9173.JP) to soar 26%. Australia declined with the region, with large banks falling 1%.Japan May restaurant sales (2%) y/y. The yen is trading at 80.76 to the US dollar.

European Markets

European equity markets have traded in a narrow range either side of unchanged as investors adopt a cautious stance ahead of Greece's parliamentary vote on austerity measures. Greek politicians are due to begin the 3-day debate on the austerity package later today. Corporate updates on balance disappointed and there is no significant economic data scheduled for release. Commodity prices traded lower on a generally stronger US dollar. No major releases scheduled. The pound and the euro are trading at $1.5952 and $1.4182 respectively


Today Economic Releases (Eastern Time)

08:30 US Personal Income (May); consensus +0.3%
08:30 US Personal Consumption (May); consensus +0.1%
08:30 US Core PCE (May); consensus +0.2%
Today's Key Events (Eastern Time)

08:00 China Ming Yang Wind Power Group Limited SCD Update: 866.383.8119/Intl 617.597.5344/Hong Kong +852.3002.1672
09:00 Bear Creek discusses adverse developments in Peru647.427.7450 or 888.231-8191
10:30 Maple Group discusses enhanced offer to acquire TMX Group: 888.231.8191 Intl 647.427.7450
11:00 Fed's Kocherlakota speaks
13:00 Fed's Hoenig speaks on Dodd-Frank
—:— 2011 BIO Business Forum
—:— 2011 BIO International Convention
—:— American Diabetes Association ~ ADA
—:— APIC 2011 Annual Educational Conference
—:— Bank of America Merrill Lynch Greater China Cement / Metals & Mining Corporate Day (1on1)
—:— Biochemical & Molecular Engineering XVII
—:— BMC China Growth Conference
—:— BMO Capital Markets China Software and Services Bus Tour
—:— Brean Murray, Carret China Growth Conference
—:— JCI Power Solutions Day
—:— Needham with SPS Commerce
—:— Needham with SPS Commerce
—:— Small & Midcap Conference

Newspaper Articles / Headlines

Barron's
- The Trader: US stocks fell again on worries about Greek debt. Stocks that use cash to reduce debt do better than those that use it to raise dividends, who outperform those who use it to buy back shares. Bed Bath & Beyond (BBBY) gets a negative mention; Google (GOOG) gets a slightly negative one.
- International Trader (Europe): Safran (SAF.FP) is looking good.
- International Trader (Asia): Warren Buffett may end up losing from his bet on BYD (1211.HK), which should be avoided for now.
- Current Yield: Worries about eurozone debt caused investors to pile into Treasuries last week, depressing yields.
- Up and Down Wall Street: Ralph Nader wants Cisco's (CSCO) management to use its cash to raise its dividend.
- D.C. Current: Is critical of Fed chairman Ben Bernanke for being partisan rather than independent, though the people the columnist interviews do not share his view.
- Technology Trader: Companies are diversifying away from the PC business as fast as they can. The column says Micron (MU), Applied Materials (AMAT), ASML Holding (ASML), KLA Tencor (KLAC), and Lam Research (LRCX) are so cheap that they should be looked at.
- Plugged In: Chinese smartphone manufacturers will eventually make the products more affordable for everyone.
- Gadget of the Week: Delorme's PN-60w handheld GPS system.
- Fund of Information: It's not clear who will win the battle between Wall Street and Dodd-Frank.
- ETF Focus: Last week was "miserable" for ETFs.
- Speaking of Dividends: Dividend-paying stocks are an excellent idea right now; McDonald's (MCD), Coca-Cola (KO), Emerson Electric (EMR), and Johnson & Johnson (JNJ) get specific positive mentions.
- Barron's is positive on Interpublic. Barron's thinks the company is likely to continue to raise its margins, which would justify its eradicating the deficit at which it trades, compared to peers. The article gives much of the credit for the company's turnaround since 2005 to CEO Michael Roth. If Standard & Poor's raises the company from junk, as Moody's recently did, it will be able to return to the commercial-paper market. Some think the company could return $500M of cash to shareholders; it also has $200M of Facebook shares it can sell.
Barron's interviews Bob Turner, head of Turner Investments. Turner tells Barron's that he thinks growth and technology stocks will lead a new market rally. High prices don't scare him if they are justified by the ability to beat expectations over time. His top picks: Apple (AAPL), despite its price
Arm Holdings (ARMH), which he thinks can grow at twice its historical 25% rate. SalesForce (CRM), which is benefiting from cloud computing. Acme Packet (APKT), which can take market share from weak competition
Lululemon (LULU), which makes clothing that people can both exercise and be fashionable in. Turner also likes Fortinet (FTNT), Check Point Software (CHKP), and Las Vegas Sands (LVS)
Barron's cover discusses China's military rise. Barron's reports that China's military spending is still small compared to the US's, but China's is growing while the US's shrinks. China says it does not want to challenge the US, but the words don't ring true to everyone. The article says Lockheed Martin (LMT) and United Technologies (UTX) will probably benefit from greater global spending as the US cuts back, and Northrop Grumman (NOC) will also benefit if the US decides to pursue a new long-range bomber. Nonetheless, the article says that China is going to make its own arms/planes/ships, and some Chinese companies are going to become part of investors' vocabularies:
Xi'an Aero-Engine (600893.CH)
China Shipbuilding Industrial (601989.CH)
AVIC Heavy Machinery (600765.CH)
Barron's feature is positive on DIRECTV. Barron's says the market may not fully appreciate DirecTV's future earnings growth. The article points out that while analysts are looking for a 30% increase to $3.26 a share this year, that may understate the contribution from South America, which some think could account for 30% of earnings within a few years, up from a current level of 15%. Barron's adds that Latin America is particularly important to DirecTV given the maturation of the US market. The article notes that the company's lone satellite rival, Dish Network (DISH), operates only in the US and Mexico, while DirecTV has begun serving Brazil, Argentina, Mexico, Puerto Rico, the Dominican Republic and several other central American countries. The article goes on to highlight the company's competitive advantages vs cable in the region, particularly in terms of its digital high-definition transmissions for sporting events. Barron's is also positive on the company's aggressive buyback program, which could shrink the share base by 20% over the next 12-24 months.
Barron's feature is cautious on the mortgage insurers. Barron's says that the next domino to fall in the wake of the housing crisis is likely to be the private mortgage industry, which allows buyers to purchase homes without making a full 20% down payment. The article points out that ~$700B of US mortgages carry this insurance, with most of it owned by Fannie and Freddie.
According to the article, the most at risk are the three companies that specialize almost exclusively in the coverage and comprise 60% of the industry: MGIC Investment (MTG), Radian Group (RDN) and PMI Group (PMI).
Barron's argues that the companies appear "woefully undercapitalized" to meet claims over the next couple of years, adding that there is a distinct possibility that a coming wave of defaulted mortgages could more than wipe out the three companies' shareholder equity, with no new sources of capital available.
Barron's feature is positive on Gilead Sciences. Barron's says that concerns about patent expirations and healthcare reform have kept shares ofGilead, the dominant player in the treatment for HIV, in a tight 10-point trading range for the past year, with the stock fetching just 10.1x this year's estimate earnings of $3.96 a share. Barron's contends that investors may be overlooking a number of new drug combinations, whose approval could boost revenue and EPS to nearly $9B and $4.53, respectively, in 2012. The article notes that some bulls think the stock could be worth $48. Barron's highlights Gilead's attractive pipeline, noting expectations for near-term FDA approval of its new combo drug, Btripla, which pairs Truvada and a newly approved J&J (JNJ) drug that prevents HIV from spreading to healthy cells. The company is also expected to gain approval in early 2012 to market the Quad, a combo therapy that incorporates four HIV drugs. The article goes on to discuss a favorable pricing backdrop, the company's strong balance sheet and the likelihood that it will use free cash to acquire or invest in early-stage products, as well as some of the risks surrounding a recently received Justice Department subpoena.

Bloomberg
Bloomberg discusses the obstacles surrounding mortgage principal reduction. The article does not really break any new ground, but notes that banks continue to push back against calls for principal reduction given that the math still does not work for them. Bloomberg adds that the banks are not the only problem, as Fannie and Freddie, which own most of the mortgages, do not allow principal reductions, nor do private mortgage investors.
In addition, the FHFA, which is managing the GSEs, bans writedowns given that they would lower the values of Fannie and Freddie, both of which require taxpayer support to operate.
- Automakers asked to analyze the effects of a 56.2 mpg fuel-economy target,
Citing sources and a recent Detroit News report, Bloomberg says that the Obama administration recently asked the three largest US automakers to analyze the effects of an average 56.2 mpg fuel-economy target by 2025. According to the article, the target represents an improvement of ~5% a year in each company's fleetwide average fuel economy from 2016, when they are required to have a 35.5 mpg average for vehicles sold in the US. The article, which points out that there is still a ways to go when it comes to establishing fuel economy standards for 2017-2025, notes that a document prepared last year by the EPA and National Highway Traffic Safety Administration revealed that increasing fuel economy to an average of 56.2 mpg could cost at least $2,100 per vehicle.

Business Spectator
BHP Billiton may finish its $10B share buyback six months early, says Australian Financial Review. The AFR reports that the program could be finished within days, raising the possibility of the company's returning more cash to shareholders.

Cinco Dias
- Obrascon Huarte Lain to focus on bidding for Brazilian airport package going to tender in December. Sources familiar with the company's plans tell Cinco Dias that OHL may look for a local partner to join a consortium to bid for the concessions.

Daily Mail
Northumbrian Water to sell out to private equity. As usual, Geoff Foster simply reports a rumor and gives no backing to cause one to think it may be true.

Expansion
Unibail-Rodamco may invest €500M in Spain. Industry sources tell Expansion that Unibail is considering buying two shopping centers. The company would pay €300M for Marineda City in La Coruña, and €200M for Splau in Barcelona. The article says Marineda City is owned by businessmen, and Splau was "developed" by Acciona Inmobiliaria (ANA.SM), thoughExpansion does not make it clear if the company still owns the property

Financial Times
Treasuries could take $100B hit in the event of a US downgrade. Citing estimates from S&P, the FT reports that investors in the USgovernment bond market could face losses of up to $100B if the country looses its triple A rating. According to the article, S&P believes that a downgrade to double A or single A would trigger a decline of 2% and 3.2%, respectively, in the price of a 10-year note, while the price of a 30-year bond would fall by 3.9% and 6.3%, respectively, under these scenarios.
- FT discusses new justice department guidelines. The FT reports that companies may now be subject to restrictions on their actions after a deal has been closed, so-called behavioural remedies. The article notes that a more flexible approach could mean good news for AT&T (T) and its deal to buy T-Mobile USA (DTE.GR)
Lloyds Banking Group has largest exposure to risky mortgage loans. The FT, citing date from ther Bank of England, reports that its exposure is more than double that of any of its rivals about a quarter of its mortgage book has a loan-to-value ratio of at least 90%. RBS's (RBS.LN) andSantander's (SAN.SM) number is around 12% of their mortgage book, while the number is smaller for Barclays (BARC.LN) and HSBC (HSBA.LN).
Microsoft (MSFT) consortium trialing mobile broadband technology in UK. The FT reports that the consortium, which includes BSkyB (BSY.LN) and BT (BT.A.LN) are looking into using radio spectrum, not used for terrestial TV, for mobile broadband networks.
Capgemini looking at US acquisitions. In an interview with the FT, CEO Paul Hermelin says he is looking for a "string of pearls" to get Capgemini into the top 10 in the US IT services market
AstraZeneca to stop paying for doctor's travel expenses to conferences. The FT reports that the company is taking the step as part of a stricter code of ethics. The article notes the payments have sometimes been viewed as aggressive marketing.
FT discusses the boom in generator sales. The FT article notes that energy shortages across the world, especially emerging markets are helping companies such as Aggreko
- E.ON embracesrenewable energy. In an interview with the FT, CEO Johannes Teyssen, says Germany's switch to renewable energy is "a huge opportunity". "Eon will position itself in this process-and then takes what it learns out into the world"
Citi tells government officials that hackers stole $2.7M from customers. The FT reports that money was taken from 3,400 credit-card customers, less than 0.01% of Citi's North American customer accounts.
News of the early-May hacking came out 8-Jun.
EMI could end up in hands of one of its competitors. The article is basically a summary, breaking no news. The FT notes: Citi will probably pick the bidder who offers the highest price, combined with the lowest risk of regulatory delays. Many think that BMG, which is backed by KKR (KKR), may have an edge, since it will not pose substantial regulatory issues.
Decreasing CD sales suggest that the large record labels have less control of the market now than they did ten years ago, though the CEO of Merlin notes that the big four have bullied Spotify and iCloud, suggesting that they still have a fair amount of power.
Newmont Mining under investigation in Indonesia. Officials at the Corruption Eradication Commission (KPK) tell the FT that they are looking into whether Newmont tried to keep control of PT Newmont Nusa Tenggara despite being required to sell out of its majority holding. The KPK thinks Newmont indirectly holds 2.2% through PT Indonesia Masbaga Investama, which would leave it with a majority even after it sells 7% to the government.
- Ocado directors not planning disposals when lock-up period ends 5-Jul – FT, citing people close to the situation. A “seasoned supermarket watcher” tells the FT, however, that the directors might be well advised to “take a little money off the table.” The article also says, without citing sources, that the company is expected to announce 27-Jun it is adding capacity to its Hatfield warehouse.

FTD
Ferrostaal fine in bribery case may be lowered. According to their Spiegel, Ferrostaal may have to pay a lesser fine than expected in connection with the bribery scandal that remains one of the hurdles for a merger between MAN and Scania (SCVB.SS). According to a report in Der Spiegel magazine Ferrostaal will have to pay €177M while prosecutors had asked for a fine of €277M.

Globe and Mail
Maple Group embarks on PR blitz as finish line for race for TMX Group approaches. Though it speaks with Maple Group head Luc Bertrand, the article is a summary, breaking no news. It notes that Maple Group is holding a conference call 27-Jun, shareholder votes have to be cast by 28-Jun, and the TMX Group general meeting is 30-Jun.

Guardian
Jane Norman to enter pre-pack administration; plan could be approved today (27-Jun in Europe). A source tells the Guardian that Debenhams (DEB.LN) and Edinburgh Woollen Mill remain interested in buying at lest parts of the company.
- Betfair looking for successors to CEO David Yu. Citing sources close to the company, the Guardian reports that Yu is thought to want to return to America.

Investor Business daily
The following changes were noted in the latest IBD 50 List.
Added: LULU, ULTA, PCLN, RVBD, SOLR, BPI, APKT, TIBX, AVGO, ACOM, TPX, BIDU, ARUN, NETL, SMTC
Deleted: CELG, VECO, MDCO, WPI, NTES, DSW, LO, RES, SHOO, ISRG, FTNT, COH, NUVA, MELI, EW

Las Vegas Review - Journal
MGM Resorts quietly raising emphasis on nongaming ventures. The article is a summary, breaking no news. In what reads like an interview, Gamal Aziz, the president/CEO of MGM Hospitality, tells the Las Vegas Review-Journal that the company is focused on international markets, and it hopes to estabilsh its brand in cities including SingaporeLondonParis, and Hong Kong. MGM Hospitality has 18 hotels in development, and it will manage all of them, since it does not franchise its brands.

London Telegraph
- HMV Group sells 125-door Canadian business to Valco Capital Partners. Without citing sources, the Sunday Telegraph reports that suppliers are thought to have been told last week that the sale had been agreed upon. The article says the price was no more than £5M, but since the division loses money, investors will probably welcome the development. Also without citing sources, the article says HMV will probably say that music companies are willing to extend it credit through Christmas.

London Times
- BT Group could be forced to block access to Newzbin2. The Times reports that in a case to be heard tomorrow, the Motion Picture Association is seeking a court order calling on BT to halt access on the basis that the website has pirated films and music.
Malcolm Walker in talks for financing to allow him to buy Iceland back. Without citing sources, the Times reports that Walker -- who has the right of first refusal on any offer for the portion of the company that he does not now own -- doesn't want help from private equity, but he is talking with Goldman Sachs (GS) about a funding package. Walker may use private equity despite his disinclination to do so, and he may purchase some rather than all of Landsbanki's 67% stake in the retailer. The article notes that the UK's large supermarkets are all possible bidders in the £1.5B auction, and Asda (WMT) seems particularly interested.
London Stock Exchange will not sell itself if takeover of TMX Group (X.CN) fails. CEO Xavier Rolet tells the Times that if Maple Group wins the bid for TMX, the LSE will try to turn itself around rather than join the current global consolidation. The article notes that Nasdaq OMX Group (NDAQ), Hong Kong Exchanges and Clearing (388.HK), and the Singapore Exchange (SGX.SP) may look to buy the 20% stake in LSE that the Dubai government is thought to be selling.
European drug companies stopping shipments to certain Greek hospitals. The Times reports that Roche (ROG.VX) and Sanofi-Aventis (SAN.FP) have stopped shipments of certain medicines to hospitals that have not paid bills since September, Nycomed may do the same, and Abbott Labs (ABT) calls the situation "not sustainable." The unpaid bills are reported to be hundreds of millions of euros. GlaxoSmithKline (GSK.LN) tells the Times that the company is in talks with hospitals that owe it money, but does not say whether it has stopped any shipments. Roche is still supplying medicines it deems lifesaving. The article says that Novo Nordisk (NOVOB.DC) halted deliveries of some insulins last year after the Greek government imposed a 25% price cut, but resumed shipments after negotiating a better deal.

Indpendent
Everything Everywhere to lose Phil Roberson to HTC (2498.TT). Insiders tell the Independent that Roberson has told colleagues he is leaving, though he has not yet resigned. Roberson is in charge of EE's range of devices and oversaw the negotiations that saw the iPad and iPhone come to T-Mobile (DTE.GR), as well as the negotiations that brought the Motorola (MOT) Atrix to Orange (FTE.FP).

Les Echos
Dexia entered talks sell its Turkey operations to Axa (CS.FP) and Metlife (MET). Citing sources, the newspaper reports Metlife and AXA have entered into negotiations with Dexia to buy its operations in Turkey. Sources report that Metlife may acquire Deniz Emiklilik, Dexia's life insurance arm in Turkey while Axa is likely to reach a distribution agreement to distribute Deniz Emliklilik's non life-insurance products.

New York Times
- NYT discusses News Corp's approach to team owners in Formula One. The NYT, citing people with knowledge of the talks, reports that News Corp is pitching
that it will do the same for F1 that it did for English soccer, generating interest in markets that have lagged such as the US that by aligining themselves with Agnelli, team owners may be able to get more money from themselves rather than paying a large part to the central organisation
- Canadian parliament orders postal union back to work. Officials from Canada Post say the mail service should resume by Tuesday.
LVMH Moet Hennessy chairman Bernard Arnault says John Galliano will not be rehired
NY Times discusses concerns about the natural gas rush. Citing hundreds of industry emails and internal documents and data from thousands of wells, the Times reports that natural gas may not be as easy and cheap to extract from deep underground shale formations as suggested by natural gas companies, some of which may be overstating the productivity of their wells and their reserves. The article notes that active wells are often surrounded by large zones of unproductive wells that tend to cost more to drill and operate than the gas that they produce is worth. In addition, production is falling much faster than initially projected, exacerbating concerns about an increase in drilling and the accompanying environmental issues related to hydraulic fracturing, or hydrofracking. The Times goes on to note that while there has been a pickup in concerns about the widespread fallout from a potential natural gas bust, many industry executives remain confident, citing technological improvements, higher gas prices and better demand with help from increased federal subsidies being considered by Congress.
Hip implants show that newer is not always better in medicine. The Times discusses the heightened scrutiny surrounding metal-on-metal hip implants, which were regarded by medical device makers and surgeons as a meaningful improvement over earlier designs that used both metal and plastic. Recall that last month, the FDA ordered manufacturers of all metal hips to conduct emergency studies of patients.
The article notes that as the number of patients across the country affected by metal-on-metal hip implants rose, it came to light that the devices shared the same trait as other failed innovations in that most of them had not been tested. Under FDA rules, most metal-on-metal hip implants do not have to undergo clinical trials, they just have to be tested in labs on simulation machines.
Luxury brands increase focus on Asia, because that's where the money is now. The article, inspired by Prada's (1913.HK) first day of trade inHong Kong yesterday, is a summary, breaking no news.

New York Post
Michael Kors seeking to raise $500M to fund expansion plans. Sources tell the NY Post that the label will sell 25% of its equity within months in a deal valuing it at 23 times EBITDA. The article says the money will be raised from private investors and does not mention anything about listing. Sources indicate that Kors has been using advisers, including Morgan Stanley.

Nikkei
- Fiat, Suzuki (7269.JP) broaden alliance; terms unrevealed. Without citing sources, the Nikkei reports that startnig next year, Fiat will provide Suzuki with 20-30K 1.6-liter engines each year for Suzuki's SX4.

Paid Content
Hulu reaches tentative content deal with Disney. A source familiar with the situation tells paidContent the deal means that Disney's content will be supplied to Hulu regardless of who owns the service, and more ads will be allowed.

Silicon Alle Insider
Details on Google Offers. In a lengthy article, Silicon Alley Insider paints Google Offers as superior to Groupon. Citing merchants and Google executives, the article says: Google's superior payment terms may force Groupon to revise its own terms. Google will probably need to hire thousands of salespeople if it decides to take Google Offers national. Google's massive number of users gives it access to enough consumers that the fact that Groupon has more subscribers signed up to its deals service is not a concern. Google Wallet, if executed correctly, could make Offers second-nature to many. If Google does not focus on it and commit massive resources to it -- which the author thinks the company won't -- Offers is more likely to fail than succeed.

SkyNews
Lloyds Banking Group to sell much of its asset-finance portfolio. Without citing sources, in his blog, Mark Kleinman says that in his 30-Jun strategic review, CEO Antonio Horte-Osario will indicate: He intends to sell off billions of pounds of shipping loans and the bank's aircraft-leasing business. He will also probably say that he wants the bank to start paying a dividend next year. 15K jobs will be cut over several years.
More than £1B will be cut from annual costs. He may say that Lloyds will sell its stake in St James's Place (STJ.LN). The bank's insurance arm will not be sold.

The Noisecast
Spotify to launch in US between 5-Jul and 15-July. Citing emails with a record executive, a source tells The Noisecast that the price will probably be $10/month, and the service might start as invitation-only.

Times of India
Ballard Power (BLD.CN) may buy up to 10% of Adani Power. An industry source tells the Times of India that the promoters of Adani Power may sell the stake due to a declining share price. StreetAccount notes that Adani's current market cap is INR241.87B ($5.38B).

Wall Street Journal
Sina CEO outlines changes he is making to 'Weibo'. In an interview with the WSJ, Charles Chao says the new version of the site will change its look recommending users of interest and offering games and other apps
the original site was a good way to enter the market but now people want to interact with their friends.
Philip Morris to take on Autralian government over logo ban. The WSJ reports that the Australian government wants to ban logos and branding from tobacco packaging, starting January
WSJ discusses boom in Brazilian for-profit education sector, sees potential for US players to expand. The article notes DeVry's (DV) 2009 purchase of Fanor.
WSJ is cautious on shopping-center REITs. A "Heard on the Street" column says current valuations are supported by low interest rates, not operating fundamentals. Therefore, if interest rates rise and the economy doesn't pick up, "investors should take their money and run."
- French banks weigh in on Greek bailout. The WSJ reports, seemingly without citing sources, that French banks have proposed reinvesting half the proceeds from maturing Greek government bonds into new 30-year Greek bonds, prior to a meeting in Rome 27-Jun aiming to encourage bondholders to stay invested a fifth of the proceeds will go to high-quality bonds as insurance to guarantee repayment after 30 years this doesn't solve the dilemma of whether this would be considered a default or not.
Investment banks move away from risk. The WSJ, citing people familiar with the matter, reports that mortgage-bond prices have been falling in May and June, with subprime and commercial real-estate bonds falling 25-30% in a few weeks, wiping out ytd gains. Banks have been selling the bonds or buying protection against defaults in the derivatives market as they reduce exposure to risk some banks will have losses or will have seen their profits wiped out and will show up in upcoming earnings.
- Hulu's owners wondering if maybe selling isn't such a good idea, after all. The WSJ cites people familiar with the matter, but doesn't break much news that has not previously been reported. Hulu's ownership structure is unwieldy, but the article notes that anyone who buys Hulu might take content from other companies. An industry executive says that Hulu Plus lacks the mass of content it needs to effectively compete with Netflix (NFLX) and HBO Go (TWX).
Nike may not be getting enough credit. The "Ahead of the Tape" column notes that shares of Nike have lagged the broader market this year largely due to concerns about gross margin pressures.
However, the paper adds that the company's brands continue to outperform and gain market share. The article also highlights the company's leverage to emerging market growth and planned price increases.
Nokia Siemens Networks shifting focus to restructuring after failing to reach private equity deal. Citing people familiar with the matter, the Journal reports that Nokia and Siemens have shifted their focus to restructuring their telecom networking equipment joint venture, Nokia Siemens Networks. The paper adds that the move comes after failing to reach a deal to sell a controlling stake to a private equity consortium that included Gores Group and Platinum Equity. Recall that a consortium that included KKR and TPG dropped out of the auction earlier this month (see linked comment). The article goes on to discuss Siemens' frustrations with Nokia's inability to find a solution, along with speculation that the German conglomerate could take control.
- Nokia Siemens Networks shifting focus to restructuring after failing to reach private equity deal. Citing people familiar with the matter, the Journal reports that Nokia and Siemens have shifted their focus to restructuring their telecom networking equipment joint venture, Nokia Siemens Networks. The paper adds that the move comes after failing to reach a deal to sell a controlling stake to a private equity consortium that included Gores Group and Platinum Equity. Recall that a consortium that included KKR and TPG dropped out of the auction earlier this month (see linked comment). The article goes on to discuss Siemens' frustrations with Nokia's inability to find a solution, along with speculation that the German conglomerate could take control.
Tight lending standards weighing on housing recovery. Citing its own analysis of mortgage data filed with banking regulators, the Journal reports that the nation's 10 largest mortgage lenders denied 26.8% of loan applications in 2010, up from 23.5% in 2009. The paper adds that recent surveys by regulators show no signs of credit easing so far this year.
The article notes that while lenders were widely expected to pull back from the easy conditions that helped inflate the housing bubble, some economists believe that they have swung too far in the other direction and need to make it easier for qualified borrowers to secure mortgages.
According to the Journal, a lot of the blame seems to be focused on government entities such as Fannie, Freddie and the FHA, which collectively account for more than nine in 10 loans being made today. These entities, which have significant influence over which loans banks approve, are under meaningful pressure to avoid any losses.
BCG (bacillus-Calmette-Guerin) shows promise as therapy for type 1 diabetes in small study. The WSJ reports that researchers say the generic drug seems to stop whatever causes the disorder, and four of six patients found that their pancreases temporarily started producing insulin again.
WSJ says now may be time to sell out of TMX Group. A "Heard on the Street" column says the uncertainty for the company's future no matter which bidding group wins the current takeover battle means that the current price may actually be the best that shareholders will get.
WSJ is negative on RWE. A "Heard on the Street" column that in a tightening regulatory environment, the likelihood that the company will need to raise capital makes it unattractive.
CEO Douglas Miller explores new path to buy Exco Resources. People familiar with the matter tell the WSJ that Miller is now looking at taking only part of the company private through a public stub equity structure, which would require less financing than his previous offer to buy the entire company. The WSJ says that the new idea would still give Miller effective control of all of Exco. The sources tell the WSJ that Exco's special committee thinks Miller's efforts to get financing for his previous offer are becoming a distraction. They say it is unclear if the committee will back the offer that Miller eventually decides to formally present
Goldman Sachs did not protect itself with standard contracts when making $1.3B in trades for Libya's SWF. People familiar with the matter tell the WSJ that the lack of contracts exacerbated the problems between the bank and client when the options lost 98% of their value within months of being bought. The article says it is not clear why the standard contracts were not entered into; people familiar with the Libyan Investment Authority call its operations frequently "disorganized."


Research

Canaccord Genuity: upgraded SFSF
Cowen: downgraded CSCO
Evercore: upgraded UAL
FBR Capital: upgraded HIG, HCBK, FCF
Goldman Sachs: upgrade CAG, CEA, SINA
Janney Capital: downgraded TGT
JMP Securities: upgraded HTS, AGNC
RBC Capital: upgraded HMY; downgraded AU, DROOY
RW Baird: upgraded EXPD
Ticonderoga: downgraded MOLX
UBS: upgraded SAPE


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 *Special thanks to Option Radar, BMO Capital, MEB Options, LiveVolPro, CBOE, Option Monster, T.O.P. group, and all of the options desks and traders we work with to provide the option flow!

 No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

1 comment:

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