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3Q GDP Growth Revised to 2.8% – Analyst Blog

Dirk Van Dijk — Tue, 24 Nov 2009 16:29:18 +0000

This is a revision to the post I put up when the first cut at the GDP report came out on 10/30. In it the new numbers are in bold and the original estimates are put in parentheses, thus a number in parentheses does not mean that it has a negative value (those will have a minus sign in front of them, numbers relating to the first or second quarters are left unchanged. New text will be in italics. This should give the reader a clear sense of not only how strong GDP and its components, but also how the latest numbers match up.

The recession is over! In the third quarter GDP grew by 2.8% (3.5%), slightly below (comfortably ahead) of expectations for 2.9% (3.0%) growth. This is a huge improvement over the 0.7% decline in the second quarter and the 6.4% plunge in the first quarter.

The internals of the report were strong as well, although it appears that much of the growth came from things like the Cash for Clunkers program and the extraordinary levels of support that are currently being given to the housing sector.

I will first go over the percentage growth rates for the main components of GDP, and then how much each part contributed to, or subtracted from, the 2.8% (3.5%) growth rate. This is probably the more important part since the size of the different parts of GDP are very different, and a small percentage change in a big component can have more impact than a large change in a small component. Just as a reminder: GDP is equal to the sum of Consumer spending, Investment spending, Government spending and net exports, or Y = C + I + G + (X – M) and I will be using that framework for the discussion.

Growth Rates

The overall 2.8% (3.5%) growth of GDP was almost matched by its biggest component, Personal Consumption expenditures, or PCE, which grew 2.9% (3.4%), a big improvement over the 0.9% decline in the second quarter and the 0.6% increase in the first three months of the year.

It is important to note that during the recession, consumer spending declined far less than did overall GDP, especially in the first quarter, so the consumer was becoming a much bigger part of the overall economy. This is not healthy over the long run, but at this point I think people are happy to get some growth where ever we can find it

Consumers spend on both goods and services, and goods are broken down into durable and non durable goods. The big mover in the third quarter were goods, which increased by 7.2% (8.1%) following a decline of 3.1% in the 2Q and an increase of 2.5% in the 1Q. Spending on durable goods was the real driver, growing at an annualized rate of 20.1% (22.3%) in the 3Q, following a 5.6% decline in the 2Q and a 3.9% increase in the 1Q.

Spending on non-durable goods tends to be much more stable than spending on durable goods. Non-durable goods spending rose by 1.7% (2.0%) reversing a 1.9% decline in the 2Q, which was in turn a reversal of a 1.9% increase in the 1Q. Spending on services tends to be even more stable than spending on non-durable goods. Service spending grew at an annualized rate of 1.0% (1.2%) in the 2Q up from a 0.2% increase in the 2Q and a 0.3% decline in the 1Q

Historically, spending on durable goods has been one of the key drivers to getting us out of a recession, and not spending on durable goods one of the key reasons for falling into recessions. It is the volatility in the sector that makes it important more than its absolute size.

Now, you might wonder, what caused the recession to be so nasty last winter when Consumer spending wasn’t really all that bad? The answer is that Investment really fell of a cliff. The good news is that it is starting to come back.

Overall Gross Private Domestic investment grew at an 8.4% (11.5%) annualized rate in the 3Q, but it still has a lot of lost ground to make up from the earlier part of the year. In the second quarter overall investment spending fell at a 23.7% annualized rate

Now here is the kicker -- that was actually a dramatic improvement over the 1Q when investment spending absolutely collapsed, falling 50.5%. Clearly the biggest collapse in investment spending since the Great Depression (and it came on the heels of a 24.2% decline in the 4Q of 2008). To anyone who understood what was going on, those were really terrifying times, and the turnaround from them is absolutely spectacular

There are two basic types of investment: fixed and inventory, and right now we are concerned with fixed investment (I will cover inventory later in the contributions to GDP part).

Fixed investment is broken into two parts, Non-Residential or business investment and Residential investment, which is mostly homebuilding.

Overall Fixed investment rose by 0.3% (2.3%) following declines of 12.5% in the 2Q and 39.0% in the 1Q. Business investment, however, continued to decline, but at a much slower rate, falling 4.1% (2.5%) after 9.6% and 39.2% declines in the 2Q and 1Q, respectively. With massive amounts of unused capacity it is not surprising that businesses are cutting back on their capital spending still.

Business investment comes in two flavors, spending on structures like building new factories, malls and office buildings and spending on equipment and software to go into them. Spending on structures continues to be very weak, falling at a 15.1% (9.0%) annualized rate in the 3Q, but that marks an improvement over the 17.3% decline in the 2Q and the 43.6% collapse in the 1Q. With massive amounts of space sitting idle in offices and empty strip malls littering the landscape, look for new investment in commercial real estate to continue to decline in coming quarters.

Moody’s has estimated that the value of commercial real estate has plunged by 41% since the peak a little over a year ago, and that is hardly an inducement to build more. If a business needs the space, it's far cheaper to just buy some existing space.

Spending on Equipment and Software (E&S) on the other hand is starting to come back, if only feebly, rising 2.3% (1.1%) after a 4.9% decline in the 2Q and a 36.4% plunge in the 1Q. Look for some stability in this line going forward as the new Microsoft operating system will probably generate a new PC cycle, but with capacity utilization still around 70% I would not expect a boom in orders for new factory equipment.

The real star of fixed investment though came on the residential side, which rose 19.5% (23.4%). This is the first increase in almost four years, and follows declines of 23.3% in the 2Q and 38.2% in the 1Q. The long string of declines had brought residential investment to a record low share of GDP. The extraordinary support of the housing sector by the government, including the first time buyer tax credit, the Fed buying up $1.25 Trillion of Fannie (FNM) and Freddie (FRE) backed paper to artificially suppress mortgage rates and the FHA acting like the old New Century Financial or Washington Mutual on their worst days have played a big role in the turnaround. I seriously question the sustainability of it after the support is removed, and I don’t think the support can continue indefinitely.

Government spending grew by 3.1% (2.3%) in the 3Q, a big slowdown from the 6.7% increase in the 2Q, but more than the 2.6% decline in the 1Q. It was all at the Federal level where spending rose at an annual rate of 8.3% (7.9%) down from a 11.4% increase in the 2Q, but up from the 4.3% decline in the 1Q.

Remember this measure of government spending does not include spending on transfer payments like Social Security and Medicare, which are largely captured in the consumption numbers. Defense spending was the big driver -- we are still a nation fighting two wars. It grew at an annual rate of 8.3% (8.4%) down from a 14.0% rate of increase in the 2Q but up from a 5.1% decline in the 1Q.

Non-defense spending rose at a 6.9% (6.8%) annual rate following a 6.1% increase in the 2Q and a 2.5% decline in the 1Q. State and local spending on the other hand is constrained by balanced budget laws and falling tax revenues. It declined 0.1% (1.1%) in the 3Q following a 3.9% increase in the 2Q and a 1.5% decline in the 1Q. They were able to increase spending in the 2Q due to support for the Federal government as part of the stimulus package. Now that support looks like it is being overwhelmed by the plunge in property, income and sales taxes.

International trade has started to rebound, and we saw an increase in both imports and exports. Increasing exports are good for GDP and increases in Imports are bad for GDP, and unfortunately imports rose more than did exports. We were able to improve our overseas sales by 17.0% (14.7%) in the 3Q -- a nice turnaround from the 4.1% decline in the 2Q and the 29.9% plunge in the 1Q. Unfortunately we also increase what we bought from overseas by 20.8% (16.4%), a big turnaround from the 14.7% decline in the 2Q and the 36.4% plunge in the first three months of the year. Keep in mind that we import a lot more than we export, so not only was the percentage increase bigger for imports, it was coming off a higher base.

Contributions to Growth

The biggest part of the economy is the Consumer or PCE, over all it contributed 2.07 (2.36) of the 2.80 (3.50) points of total growth. In the second quarter it caused 0.62 of the 0.70 total decline in the 2Q. In the first quarter it actually offset 0.44 points of the 6.40 total decline. In other words, excluding the consumer the economy would have contracted 6.84% rather than 6.40%.

Within consumer spending, spending on goods added 1.60 (1.79) points after subtracting 0.71 points in the 2Q and adding 0.56 points in the 1Q. Spending on durables was the main driver, adding 1.34 (1.47) points after subtracting 0.41 points in the 2Q and adding 0.28 in the 1Q. Non durable goods added 0.26 (0.31) points after subtracting 0.29 in the 2Q and adding 0.29 in the 1Q.

While spending on services is much more stable than spending on goods, it is also a much larger portion of the consumer wallet. Service spending added 0.47 (0.57) points to the overall GDP growth in the 2Q, up from adding 0.09 points in the 2Q and subtracting 0.13 in the 1Q. It is the volatility that gives durable goods there importance to the economy not the overall size. In the third quarter total spending on durable goods was at a $1.055 Trillion annual rate, just 15.4% of the $6.852 Trillion spent on services, but durables goods had an impact on economic growth that was 158% bigger.

Investment spending was a big swing factor in the 3Q. It added 0.91 (1.22) points to overall growth. That is a HUGE improvement over the 3.10 point subtraction in the 2Q and the 8.98 point implosion in the 1Q. Unfortunately. 0.87 (0.94) points of that contribution came from inventories. Inventory investment is the “worst" type of GDP growth since large increases in one quarter are usually reversed in the next quarter, or in this case, large declines being reversed upwards.

In the 2Q inventory investment subtracted 1.42 points from overall growth and in the 1Q they subtracted 2.36 points. Even in the 4Q they subtracted 0.64 points from growth. Three straight quarters of sharply lower inventories is highly unusual and we were due for a bounce. Perhaps we have one more quarter of a solid contribution from inventory investment, but I would not expect it to last much beyond that.

Overall fixed investment added just 0.04 (0.28) points to growth, but that sure was a nice improvement over the 1.68 point subtraction and the 6.62 point disaster that was the 1Q.

However, it was not coming from the business side. Business investment subtracted 0.40 (0.24) growth points in the 3Q, so it is still very soft, but at least it is not imploding like it was earlier in the year. In the 2Q it subtracted 1.01 points and in the 1Q it took away 5.29 growth points. Within business investment it was spending on structures that caused the problem with a deduction of 0.55 (0.32) growth points while spending on E&S offset 0.15 (0.08) points of that. In the 2Q both sides of business investment were drags on the economy with investment in Commercial real estate subtracting 0.69 growth points and spending on equipment deducting 0.32 points. The 2Q was in turn a major improvement over the 1Q disaster where spending on structures subtracted 2.28 growth points and equipment spending subtracted 3.01 points.

Housing finally helped the economy in the 3Q, adding 0.45 (0.53) points to growth, after a string of 15 straight quarters where it was a drag on the economy. In the 2Q it was a 0.67 point drag and in the 1Q it was a 1.33 point drag. The long decline has, however, made housing a much smaller share of the overall economy. In the 3Q residential investment totaled only $360.9 billion, or 2.52% of the overall economy. At the peak of the housing bubble it represented 6.34% of the overall economy. Thus the 19.5 (23.3%) increase in residential investment had far less of an overall impact than it did in the past.

While residential investment is still near a record low share of the overall economy, I have serious questions about the sustainability of the increase. The extension and expansion of the tax credit as is now moving through the Congress might keep things going for the next few quarters, but after that things are likely to fall apart again. Most of the tax credit is going to those who buy existing homes, rather than new homes, and thus it is a very inefficient way of increasing residential investment. It is however, an open question if we really want to be directing resources into housing given the glut of housing units in the country. Just like we saw with the Cash for Clunkers program, it is probably just encouraging those folks who might have bought later to buy now. Cash for clunkers was a much smaller program, totaling only $3.0 billion, yet is had a huge impact on the economy, most of the improvement in consumer durable goods came from autos.

The tax credit is also tricking people into thinking that the house is more affordable that it really is, just the way that teaser rate ARM’s did, and we saw just how well that worked out. The FHA is handing out mortgages with only 3.5% down and people can use the tax credit for that ridiculously small down payment. This has future disaster of biblical proportions written all over it. The next bailouts will not be of the banks like Bank of America (BAC) and Citigroup (C) but of the FDIC and the FHA.

Direct government spending had a small but positive impact on overall growth in the 3Q, adding 0.63 (0.48) points a fairly significant slowdown from the 1.33 contribution in the 2Q, but better than the 0.52 point drag in the 1Q. All the help came from Washington , not city hall or the statehouse.

The Federal government added 0.65 (0.62) growth points, down from 0.85 points in the 2Q but up from a 0.33 point drag in the 1Q. The Pentagon was the main factor in all three quarters, with defense spending adding 0.48 (0.45) points in the 3Q following a 0.70 addition in the 2Q and a 0.27 point drag in the 1Q. Non-defense spending was sort of a non issue, adding just 0.17 (0.17) points in the 3Q, not much difference from the 0.15 point contribution in the 2Q, and up a little bit from the slight 0.06 point drag in the 1Q.

State and Local governments are not allowed to run operating deficits, and so when faced with declining tax revenues they have to cut back, unless Uncle Sam helps them out. Well Washington is helping, but its not enough and S&L spending was a 0.02 (0.14) point drag in the 3Q. The Federal help was enough in the 2Q and so the contribution to growth in the 2Q was a positive 0.48 points. In the 1Q, before the stimulus package could get much traction S&L spending was a 0.19 point drag.

Net exports had been just about the only bright spot in the first half of the year, even though it came the wrong way, from both imports and exports plunging, only with imports falling more than exports did. That reversed in the 3Q as both showed a nice expansion, but our appetite for foreign goods outstripping the desire for U.S. goods and services abroad. The increase in exports added 1.71 (1.49) points to growth, but the increase in imports was a 2.53 (2.01) point drag, for a net negative contribution from net exports of 0.82 (0.52) points. In the 2Q falling exports subtracted 0.45 points but plunging imports added 2.09 points, for a net imports net help to the economy of 1.64 points.

In the first quarter, as world trade came to a near standstill, net exports were just about the only positive you could find for the economy. Yes, plunging exports subtracted an awful 3.95 points of growth, but the fact that we were buying practically nothing from overseas added 6.58 growth points for a net aid to the economy of 2.85 points. In other words, if the U.S. were a closed economy in the first quarter, growth would have fallen not at a 6.4% rate, but at a 9.25% rate.

Overall

Relative to the first cut at the data, the downward revisions were broad based, with smaller contributions from all major areas of the economy, with the exception of the government. Of particular concern is that fixed investments contribution to growth virtually disappeared.

Investment’s share of GDP is near all time low’s and that is not a good thing for the future of the country. Inventory investment really does not count in this regard. The trade deficit (net exports) continues to be a major problem. While consumption spending growth was revised lower, it still grew faster than overall GDP, indicating that it continues to grow as a share of the economy.

This country needs to move its economy towards one that is focused on investment and exports, not one dominated by consumption, and consumption of imported goods in particular. Still, even though it was not as good a report as the original, it sure is an improvement over the second quarter, and especially over the fourth quarter.

Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market-beating Zacks Strategic Investor service.

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What’s better than gold? Anything!

Andrew Snyder — Tue, 24 Nov 2009 15:03:47 +0000

pBaltimore #8212; (a href="http://todaysfinancialnews.com" target="_blank"TFN/a): One good thing about kids is they are predictable. Give them five bucks and say they’ve got just one hour to spend it or it goes into their savings account and can bet another five bucks the cash will be spent by minute 59./p pIt’s the same way for politicians. Give them some cash and they’ll have it spent in no time flat, even if they can’t find anything worth buying./p pTake, for example, the infamous Troubled Asset Relief Program, TARP in informal nomenclature. Passing the $700 billion program was a matter of financial and economic life and death according to Washington./p pThey gave us the same panicky “must-have” arguments as a six-year-old in the toy aisle./p pBut once they got#8230;/p

Partisan bickering is not the solution for fostering economic growth

Prieur du Plessis — Sat, 21 Nov 2009 07:05:28 +0000

The main theme of the opinion piece by Representatives Hensarling and Ryan in the Wall Street Journal is poor economic policy choices of the current administration. "Economic history paints a very different picture from the opinion piece. Should political leaders be engaged in partisan rhetoric or in a serious discussion of how to make policy choices that will foster sustained economic growth?," asks Asha Bangalore in this guest contribution.

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Initial Jobless Claims Flat(-ish) – Analyst Blog

Dirk Van Dijk — Thu, 19 Nov 2009 15:10:28 +0000

This week, initial claims for unemployment insurance (or jobless claims) were 505,000, the same as last week’s revised figure. However, the initial read was 502,000, so it is just as valid to see this as a 3,000 increase.

That, however, is not much in the overall scale of things. The four-week average fell by 6,500 to 514,000, and is now almost 145,000 below its mid-April peak.

The graph below (from http://www.calculatedriskblog.com/) shows the very significant progress that has been made in brining initial claims down, but also the long way we still have to go. The four-week average is still above the peaks of the two previous recessions. It is also still at a level that would indicate continuing net job losses. We probably have to see initial claims fall below the 400,000 level to indicate that, on balance, the economy is adding jobs.

On the positive side, there is no real evidence of a stalling in the decline, or the formation of a high plateau like we saw in those two downturns. So far, the decline looks more like the pre 1990 downturns, which partially assuage fears of a jobless recovery -- but it is too early to celebrate this. It would be better to plateau at a level around 400,000 like we did coming out of the 2001 recession than to be at a level of over 500,000.

The news on continuing claims was more mixed. Regular state claims for unemployment insurance, which run out after 26 weeks, declined by 39,000 to 5.611 million. If you are out of work for longer than that, then you are eligiable for extended claims, which are paid by the Federal Government as part of the Stimulus program. More than one third (35.6%) of all the unemployed currently have been out of work for more than six months and half have been out of work for at least 18.7 weeks.

There are two major extended benefit programs, and combined they are providing benefits to 4.113 million more workers -- an increase of 119,000 from last week (although the data for extended claims is one week behind the data for regular continuing claims, and two weeks behind initial claims).

Those extended claims do not last forever, but fortunately Congress passed a bill that was signed on November 6th that further extended claims for up to another 20 weeks (depending on the level of unemployment in that state). Unfortunately, we learn from this morning's New York Times that the bill was very poorly crafted in the fine print, and there is still the possibility of millions losing this economic lifeline:

“The record extension of emergency benefits that was signed into law on Nov. 6 was widely praised as a lifeline for hundreds of thousands of Americans who had spent a year or more in fruitless searches for jobs.

"The new law provided up to 14 weeks of federally paid aid to unemployed people who had exhausted existing state and federal limits, benefits that already lasted up to 79 weeks in many states. And for the majority of states with particularly high unemployment, it added six more weeks of payments, bringing the potential total to 99 weeks.

"But many legislators, state aid officials and struggling workers apparently failed to read the fine print. The added federal benefits were built on a series of previous extensions that are slated to end on Dec. 31, unless Congress renews these programs. People who lost their jobs after July 1 of this year, for example, would receive no federal extensions once their customary six months of state aid ran out." (Click here to read more.)

The real number to focus on, then, for evaluating the level of continuing claims is not the regular state benefit numbers, but the combination of the regular state and the extended claims, which now stands at 9.774 million. While we have seen some real progress, if one were to just look at the regular continuing claims data -- which peaked at the end of June at 6.904 million -- that is mostly an illusion, since the extended claims have picked up that slack and then some, rising from 2.430 million, an increase of 1.733 million. Thus, combined continuing claims have actually risen by 440,000 since they “peaked" on just a regular continuing claims basis.

With the pace of hiring as slow as it is, this hole in the safety net will have to be repaired as soon as possible. With no income, and more than six job seekers for every available job, those people are going to be in a world of hurt. Most Americans have very little in the way of savings to fall back on, especially outside of IRA’s and 401k plans. Tapping those would expose people to a 10% penalty and it would be considered taxable income for them. Yet many of them will probably be forced to do so, even if unemployment insurance is extended to them.

It is not just for humanitarian reasons that benefits should be extended. Without an income, people will have to do their banking at the local food bank, not at Bank of America (BAC), and even the local food bank needs a bailout these days. People will be hard-pressed to shop at even the Salvation Army, let alone Wal-Mart (WMT).

Extending benefits is one of the most effective forms of economic stimulus there is. It is far more effective than extending lavish tax credits to move-up homebuyers with incomes up to five times the national median. Unfortunately, the unemployed to not have as effective a lobby as the used home dealers (aka Realtors).

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More than 130 banks will have failed by the end of 2009. Is Your Bank Safe?

Jim Musselwhite — Thu, 19 Nov 2009 02:25:07 +0000

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Power3 Investors Looking Forward to Expo (OTC:PWRM)

Jay Garcilazo — Wed, 18 Nov 2009 15:23:21 +0000

Miv Investments Inc. has initiated an independent bullish technical trading alert for 11/18/09 on Power3 Medical Products, Inc. (OTC:PWRM). Shares of the company finished the day at $0.129, up 69.74% from the ...

Power3 Investors Looking Forward to Expo (OTC:PWRM)

Jay Garcilazo — Wed, 18 Nov 2009 15:23:21 +0000

Prieur’s readings (November 18, 2009)

Prieur du Plessis — Wed, 18 Nov 2009 11:06:59 +0000

This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy. Please also add the links to any other worthwhile articles you would like to share to the comments section.

Should “Big Tobacco” run the government?

Andrew Snyder — Wed, 18 Nov 2009 09:55:49 +0000

pBaltimore #8212; (a href="http://www.todaysfinancialnews.com" target="_blank"TFN/a): If politicians would get their heads out of their re-election campaigns, they would not have to make hasty, thoughtless decisions that cost you and I money./p pIn the days following Obama’s inauguration, Washington quickly passed a wide set of tax reforms. Part of the legislation included a $400 tax break for the country’s working class and increased healthcare funding for the country’s poor, unhealthy children thanks to increased taxes on the tobacco industry./p pIt is no surprise neither measure has worked out as planned./p pAccording to reports today, more than 15 million of us will have to pay back the $400 we saved in taxes over the last few months due to an error on Washington’s end./p pI hope Uncle Sam#8230;/p

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Dr. Stock Pick — Tue, 17 Nov 2009 22:44:50 +0000

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Merge Raising Gross Proceeds – Analyst Blog

Zacks Market Commentaries — Tue, 17 Nov 2009 21:45:22 +0000

Merge Healthcare Incorporated (MRGE) decided to raise up to $27.3 million in gross proceeds, before placement agency fees and other expenses, by offering 9,084,032 shares of the company’s common stock at a purchase price of $3.00 per share. The offer is only for select institutional investors and is expected to close on Nov. 18, 2009.

Merge will use the proceeds primarily to prepay in full its senior secured notes held by Merrick RIS, L.L.C. due June 2010. The remaining amount will be used for general corporate purposes like the working capital financing.

William Blair & Company, L.L.C. is the lead placement agent for the fund raising offer. Craig-Hallum Capital Group LLC and Robert W. Baird & Co. Incorporated are the co-placement agents for the offering.

Merge is a healthcare software and services company focused on integrating radiology workflow to improve productivity, profitability and patient care by fusing business and clinical workflow, and intelligently managing and distributing diagnostic images and information throughout the healthcare enterprise.

Merge was paralyzed by several issues in the past like a dwindling cash balance, management turnover, accounting miscues and litigations. The real turnaround started from the second quarter of 2008 when the company received a much needed cash infusion of $20 million from Merrick RIS, LLC in May 2008.

Merge Healthcare recently tapped the Chinese healthcare market by forming an alliance with Shanghai Kingstar Winning Co., a leading healthcare IT provider in China. The alliance is likely to widen Merge's customer base and increase its top line. Congress' approval of more than $20 billion in spending on health information technology is also likely to benefit the company. However, a majority of the spending in the U.S. will be felt between 2011 and 2015.

Merge’s main competitors include AllScripts-Misys Healthcare Solutions (MDRX) and Amicas, Inc. (AMCS).
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PWRM, NGSX, DrStockPick.com Stock Report! Power 3 Medical Products Inc. and NeurogesX, Inc.

Dr. Stock Pick — Tue, 17 Nov 2009 13:45:34 +0000

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Dr. Stock Pick — Mon, 16 Nov 2009 21:37:17 +0000

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If this is true, we all need a vaccine

Andrew Snyder — Mon, 16 Nov 2009 15:51:33 +0000

pBaltimore #8212; (a href="http://www.todaysfinancialnews.com" target="_blank"TFN/a): It’s confirmation! On Friday I wrote how I may have a touch of the flu or some other mind-altering ailment because my thoughts were far more liberal than I am comfortable with admitting./p pWell, it turns out my ultra-liberal, straight-ticket voting, French-guy marrying sister has a verifiable case of the pig flu. And guess who I had dinner with on Thursday night? You betcha, big sis. /p pThere we have it: cause and effect./p pFortunately, my head case was short-lived. By the time my venison sausage and eggs were off the front burner on Saturday morning, I was back to my old self, almost knocking my O.J. off the table stomping my fist over a local political battle./p pIn Friday’s edition#8230;/p

NVAX, PWRM, DrStockPick.com Stock Report! Novavax Inc. and Power 3 Medical Products Inc.

Dr. Stock Pick — Mon, 16 Nov 2009 14:13:53 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Monday November 16, 2009 DrStockPick.com Stock Report! NVAX, PWRM ************************************************************** NVAX, Novavax Inc. NVAX is a clinical-stage biotechnology company, creating novel vaccines to address a broad range of infectious diseases worldwide, including H1N1, using advanced proprietary virus-like-particle (VLP) technology. The company produces potent VLP-based recombinant vaccines utilizing new and [...]

New Rules for Bank Overdraft Fees – Analyst Blog

Zacks Market Commentaries — Fri, 13 Nov 2009 14:01:43 +0000

On Thursday, the Federal Reserve finally announced rules that will prohibit banks from charging overdraft fees at ATMs and one-time debit card transactions without the consent of customers.

The rules, which will be effective July 1, 2010, appear in response to growing consumer dissatisfaction with the overdraft charges that they often do not realize until they receive their monthly statement. Banks previously added overdraft protection automatically to most accounts regardless of the amount that was withdrawn.

According to the new regulations, consumers must be given a notice explaining a financial institution's overdraft services, including an explanation of the fees associated with the services.

The Federal Reserve took this decision primarily based on its investigation which showed that banking customers only want overdraft services if they know the details of what is required. However, some consumers do want overdraft protection services to make sure that some time-sensitive payments like rent and bills are covered, as long as they know the charges.

The Fed's rules appear mostly in line with the new trend that some of the banks have already begun moving toward. In September, Wells Fargo & Company (WFC) said that it will not charge fees from customers if they overdraw their accounts by $5 or less. Following that, in October, Bank of America Corporation (BAC) announced that it will eliminate fees if a customer’s account is overdrawn by less than $10 in a single day.

Congress wants stricter rules going forward. Very soon, the Senate Banking Committee will discuss legislation that would go further than the current overdraft fees rules. We will keep an eye on this.
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CEPH, PWRM, DrStockPick.com Stock Report! Cephalon Inc. and Power 3 Medical Products Inc.

Dr. Stock Pick — Fri, 13 Nov 2009 13:58:05 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Friday November 13, 2009 DrStockPick.com Stock Report! CEPH, PWRM ************************************************************** CEPH, Cephalon Inc. CEPH engages in the discovery, development, and commercialization of products for central nervous system, inflammatory disease, pain, and oncology therapeutic areas. According to a Securities and Exchange Commission filing yesterday, CEPH will give Barr Pharmaceuticals Inc. (which [...]

American Refiners Have a Problem… And the Government is Making it Worse

Investment U — Thu, 12 Nov 2009 19:24:07 +0000

American Refiners Have a Problem… And the Government is Making it Worse by Sheena Martin, Investment U Contributing Editor America’s refining companies are under severe financial pressure. As the recession has blanketed the markets, demand for petroleum products has collapsed, causing refiners to scale back production. And a bill currently working its way through [...]

Initial Jobless Claims Continue Decline, 502K Figure Beats Expectations

QualityStocks — Thu, 12 Nov 2009 17:36:57 +0000

Labor Department statistics released today showed a marked decline in initial jobless claims, extending a run of such declines. Initial claims are an important barometer for layoffs and hiring. A 12K decline to 502,000 from the previous week, and a drop in the 4-week average to 519,750, is a strong indicator of improvement. The [...]

COV, PWRM, DrStockPick.com Stock Report! Covidien Plc and Power 3 Medical Products Inc.

Dr. Stock Pick — Thu, 12 Nov 2009 13:37:40 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Thursday November 12, 2009 DrStockPick.com Stock Report! COV, PWRM ************************************************************** COV, Covidien Plc COV is a leading global healthcare products company that creates innovative medical solutions for better patient outcomes and delivers value through clinical leadership and excellence. COV manufactures, distributes and services a diverse range of industry-leading product [...]

PWRM, CELG, DrStockPick.com Stock Report! Power 3 Medical Products Inc. and Celgene Corporation

Dr. Stock Pick — Wed, 11 Nov 2009 15:34:19 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Wednesday November 11, 2009 DrStockPick.com Stock Report! PWRM, CELG ************************************************************** PWRM, Power 3 Medical Products Inc, PWRM.OB Power3 Medical Products, Inc. is a leading bio-medical company engaged in the commercialization of neurodegenerative disease and cancer biomarkers, pathways, and mechanisms of diseases through the development of diagnostic tests and drug [...]

Proposing Restrictons on FED

Frode Haukenes — Tue, 10 Nov 2009 23:22:54 +0000

Chairman of the US Senate Banking Committee, Christopher Dodd porpose a new financial overhaul bill before the Congress. The bill includes the establishement of a financial regulatory administration that will take away the supervision authority of Federal Reserve and FDIC, and limit the FED’s lending. “The Federal Reserve will focus on monetary policy without being distracted by [...]

PWRM, TEVA, DrStockPick.com Stock Report! Power 3 Medical Products Inc. and Teva Pharmaceutical Industries Ltd.

Dr. Stock Pick — Tue, 10 Nov 2009 21:02:31 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Tuesday November 10, 2009 DrStockPick.com Stock Report! PWRM, TEVA ************************************************************** PWRM, Power 3 Medical Products Inc, PWRM.OB Power3 Medical Products, Inc. is a leading bio-medical company engaged in the commercialization of neurodegenerative disease and cancer biomarkers, pathways, and mechanisms of diseases through the development of diagnostic tests and drug [...]

Notes on Janet Yellen Speech – Analyst Blog

Dirk Van Dijk — Tue, 10 Nov 2009 19:02:53 +0000

This morning, Janet Yellen, the President of the San Francisco Fed, spoke about the state of the economy. Below are key excerpts from the speech, as well as my reaction to them (spoiler alert: I am in overall agreement with her).

"This is the first talk I’ve given since the economy has officially been reported to be growing again. The economy’s return to growth after a year and a half of recession marks a major turn, and it looks like more than a flash in the pan. It seems to me that the economy has entered a sustained period of expansion.

"We’ve seen meaningful upturns in areas as diverse as housing, consumer spending, industrial production and foreign trade. And, a number of factors bode well for the future, including a better functioning financial system, low mortgage interest rates, a resurgent stock market, a stabilization of house prices and stronger growth abroad."

Yes, overall, things are much better now than they were a year ago, with the glaring exception of unemployment. Rising output, but done with fewer workers means that productivity is rising, but that is sort of a double-edged sword given the level of slack in the economy (see Economic Productivity Surges).

"All the same, I am not going to paint an entirely rosy picture for you. The strength and durability of the expansion is in question. Some of the rebound is due to temporary government programs and a swing in inventory investment that will not provide an ongoing source of growth.

"Financial conditions have improved markedly in some respects, but many financial institutions are still hobbled with bad loans. The outlook for consumer spending is in doubt because households remain burdened with debt, and they have taken enormous hits to their wealth from declines in house and stock prices in recent years.

"And it’s particularly sobering that labor markets continue to deteriorate badly, leaving many millions of our fellow Americans unable to find jobs. Just last week, we found out that the unemployment rate passed 10 percent in October. The 10.2 percent jobless rate is the highest since 1983.

"Today I will consider this mixed picture in some detail and focus on two subjects of professional interest to many of you -- the residential and commercial real estate markets. I want to stress that my comments are my own and do not necessarily reflect the views of my Federal Reserve colleagues."

It would be too much to ask to have everything perfect just a year after the biggest financial freeze-up in 70 years. Bad debt is still choking the system, particularly at the consumer level, which then flows back to the banks. This is going to take a long time to fix. And the burden of debt is, of course, much higher when you are unemployed than when you have a job.

"As we look at the national economy, it’s important to keep things in perspective. It’s not fun to ponder a subdued recovery. But a year ago, after the near-collapse of the global financial system, there was a real possibility of an outright depression.

"Fortunately, we avoided that. But what we did suffer through was bad enough -- the worst downturn since the Great Depression of the 1930s. The recession began at the end of 2007. Economic output has dropped by just over 3½ percent. Over seven million jobs have been lost in the nonfarm sector of the economy. And the unemployment rate has soared by over five percentage points.

"Few, if any, parts of the economy were unscathed. The labor market was devastated, and housing, consumer spending, business investment, exports and imports all fell off the table."

Imports "falling off the table" actually provided a substantial lift to the economy. The rest of the stuff falling really hurt, though. The decline in business investment, to the lowest share of the economy in the post-war era, is particularly troublesome (see The Shape of GDP).

"Against this backdrop, the nation’s third-quarter return to growth was a great relief. Real gross domestic product -- which is the economy’s total output of goods and services -- increased at a solid annual rate of 3½ percent. The recession hasn’t officially been declared over, but a wide array of data suggests that the corner has been turned.

"In the third quarter, residential investment -- which was at the center of the downturn -- rose at nearly a 25 percent annual rate, albeit from a very low level. Home sales, prices and housing starts are once again climbing. Meanwhile, manufacturing is also beginning to show signs of strength. This was helped by a rebound in motor vehicle production, boosted by the government’s temporary Cash-for-Clunkers program. Our exports surged as growth abroad picked up. And, importantly, consumer spending finally is growing."

In the short-term, growing consumer spending is a good thing, but in the long term it is the last thing we need. Sort of like a shot of Jack Daniels can help a bit with a hangover.

"To me, the explanation for this turnaround is clear: Massive and concerted responses by governments and central banks around the world rescued the financial system, brought down interest rates, provided emergency support and broke the economy’s downward spiral. On the monetary policy side, the Fed has pushed its traditional interest rate lever -- the federal funds rate -- close to zero. And, in order to provide additional stimulus, we put in place an array of unconventional programs to spur the flow of credit to households and businesses.

"These measures provided funding to banks and restored liquidity to a range of markets. We’ve increased the flow of credit for securities backed by small business loans, consumer loans, and other assets. Our large-scale purchases of Fannie Mae and Freddie Mac debt and mortgage-backed securities (MBS) helped lower mortgage rates and bolstered the housing market. We’ve also bought longer-term U.S. Treasury debt to help bring private borrowing rates down."

These policies are likely to stay in place for a while to come, and will only gradually be lifted, particularly the low fed funds rate. What happens to mortgage rates once the Fed stops buying every scrap of paper ever issued or backed by Fannie (FNM) and Freddie (FRE) is very much of an open question. Oh, the buying of longer-term treasuries was just to bring private rates down -- it had nothing to do with keeping the interest costs to the government down .

"These initiatives appear to have eased financial conditions. Clearly, the financial system is not yet back to normal, but it has bounced back notably. The stock market has soared since its low in the winter. That rally has helped households recover some of their lost wealth and provided a much-needed psychological boost.

"Investors perceive that economic risks are not as dire as they once seemed to be. Interest rates on corporate bonds -- especially for less-than-prime firms -- have dropped sharply and issuance has been brisk. And the markets that financial institutions and corporations rely on for short-term funding are functioning reasonably well again, due in part to Fed intervention."

Big firms that can tap the credit markets on their own are in much better position than small firms that have to rely on bank loans. Remember that spreads on low-grade corporate debt last winter were higher than the spreads during the Great Depression. While the Fed intervention has not helped everyone, it clearly has helped many.

"Federal government policies also have contributed, including the fiscal stimulus program passed by Congress in February. Tax cuts have raised disposable income, and government spending is directly adding to payrolls. Much of the stimulus money authorized by Congress remains to be spent and will spur growth in coming quarters. Other government initiatives contributed to the third-quarter expansion as well, including the Cash-for-Clunkers program and the $8,000 tax credit for first-time homebuyers.

"The normal dynamics of the business cycle have also turned more favorable. Demand for houses, durable goods such as autos, and business equipment is beginning to revive as households and businesses replace or upgrade needed equipment and structures. A particularly hopeful sign is that inventories of unsold goods, which have been shrinking rapidly, now seem to be in better alignment with sales. Manufacturers had slashed production dramatically in the face of slumping sales. Recent data suggest that this correction may be near an end, setting the stage for more production."

It is hard to tease out how much of the increased demand for housing and autos is due to the government subsidies, and how much is "real" pent-up demand. The October auto sales were somewhat encouraging in this regard, since Cash for Clunkers was not a factor. The rebound to profits at Ford (F) was real, even if it could be laid at the feet of the Clunkers program. The inventory bounce is real, but is probably temporary.

"The big issue is how strong the upturn will be. With such enormous reservoirs of slack in the form of high unemployment and idle productive capacity, we need a strong rebound to put unemployed people back to work and get underutilized factories, offices and stores humming again. Unfortunately, my own forecast envisions a less-than-robust recovery for several reasons. As the impetus from government programs and inventories diminishes in the quarters ahead, private final demand will have to fill the breach. The danger is that demand may grow at too anemic a pace to support vigorous expansion."

While many criticized the stimulus program as being too back-end loaded, as we move into next year people should be thankful that there is still some of it at work. However, it is the change in stimulus that provides the momentum for growth, which after all is the change in GDP. Thus as we move into the second half of next year, while the stimulus spending might be $75 billion in the third quarter, if it was $100 billion in the second quarter, it will be a net drag on growth.

"First, it may take quite a while for financial institutions to heal to the point that normal credit flows are restored. The credit crunch hasn’t entirely gone away. In the face of massive loan losses, banks have clamped down on underwriting and credit terms for both businesses and consumers.

"Smaller businesses without direct access to capital markets are particularly feeling the pinch. Lenders have had to run hard just to stay in place: Rising unemployment, business failures and delinquencies in real estate markets have fed additional credit losses and made it more difficult for financial institutions to get their balance sheets in good order.

"Second, households have been pummeled and prospects for consumer spending are cloudy. Consumers have surprised us in the past with their free-spending ways, and it’s not out of the question that they will do so again. But I wouldn’t count on them leading a strong recovery. They face high and rising unemployment, stagnant wages and heavy debt burdens. Their nest eggs have shrunk dramatically as house and stock prices have fallen, and their access to credit has been squeezed.

"It may be that we are witnessing the start of a new era for consumers following the harsh financial blows they have endured. We often hear the word 'deleveraging' used to describe the push by financial institutions to scale back debt and build equity. Households too have now begun to pay down debt and rebuild their savings. This phenomenon can be seen not only in the United States, but in most countries that experienced similar housing booms.

"The United States was hardly the only country where households borrowed heavily just before a severe housing bust set in. And those countries with greater increases in debt relative to income before the crisis experienced greater declines in consumption spending once the crisis began."

The consumer spending question is a huge conundrum. At almost 71% of the economy in the third quarter (a post-war record, by the way), it is hard to see how the economy moves forward if it is contracting.

However, it is simply not healthy to have such a large percentage of the economy based on consumption. We need more savings in the economy, and more productive capacity. By not saving we are eating our seed corn, but if we don’t eat that seed corn now, we will be malnourished. True, that it is happening in other countries as well, but the need for consumer deleveraging is much greater here than anywhere else.

Ideally, the savings rate would be rebuilt by income rising a lot, and spending growing very slowly. But if consumers are not spending, then companies will not hire, and incomes will tend to fall not rise, making it even harder to rebuild our savings.

"In the United States, the personal saving rate, which had fallen to an incredibly low 1 percent in early 2008, has averaged 4 percent so far this year and may well rise higher. In the current environment, such belt-tightening makes great sense from the standpoint of individual households. In fact, some households may have no other option because their access to credit has been crimped.

"Over the long run, higher saving is surely a good thing for our economy because it provides capital that can be devoted to modern infrastructure, technology and other productive investments that enhance our standard of living. All the same, the transition to a higher saving plane could be painful if it reduces the growth rate of consumer spending for an extended period."

Back in the 1950’s and 1960’s a savings rate of 9 to 10% was normal. That was the period when U.S. economic dominance was at its greatest. We have had the wind at our backs for decades now as the savings rate declined as a falling savings rate translates into higher economic growth, at least in the short term. We have finished coasting downhill, and now have to climb back up. You go slower and have to work harder to ride a bike up a hill than down it.

"Weakness in the labor market is another factor that may keep the recovery sluggish for quite some time. Payroll employment has been plummeting for more than a year and a half, and even though the pace of the decline has slowed, unemployment now stands at its highest level since 1983. In addition, many workers have seen their hours cut or are experiencing involuntary furloughs.

"To bolster earnings in the face of weak revenue growth, employers have been aggressive in cutting labor costs and jobs, and my business contacts say they will be reluctant to hire again until they see clear evidence of a sustained recovery. Weak demand for workers is also putting a lid on paychecks. Wages are barely rising. A well-known measure of overall employment costs rose by only 1¼ percent over the past year, the smallest increase in the history of the series. High unemployment, weak job growth and paltry wage increases are a recipe for sluggish consumer spending growth and a tepid recovery."

Yup, hard to save more when you are unemployed or have seen your hours cut back drastically. The only way is to spend less, and that means a slow recovery.

There was much more to the speech, you can read it in its entirety here: http://www.frbsf.org/news/speeches/2009/janet_yellen1110.html
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Prieur’s readings (November 10, 2009)

Prieur du Plessis — Tue, 10 Nov 2009 07:35:48 +0000

India China: hoarding gold and shunning dollars

Byron King — Mon, 09 Nov 2009 16:32:05 +0000

pByron King, a href="http://www.whiskeyandgunpowder.com"Whiskey and Gunpowder/abr / Let’s review the big picture for gold. What’s going on? And what are people saying?/p pFor much of 2009, gold traded in the range of low-mid $900 per ounce. There was a dip over the summer, with a strong upswing starting in September. Gold is now trading well over $1,000 per ounce, in fact just under $1,100./p pTurns out that the government of India was buying gold in mid-October. Over a two-week span, the central bank of India bought 200 tonnes (metric tons) of gold from the International Monetary Fund (IMF) at an average price of $1,045. The IMF — over which the U.S. holds veto power for most actions — got approval to sell the gold from#8230;/p

CVAT, PWRM, PSFT, AQNM, CSRH, DrStockPick.com Weekend Update!

Dr. Stock Pick — Sat, 07 Nov 2009 19:56:06 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Saturday November 7, 2009 DrStockPick.com Weekend Update! CVAT, PWRM, PSFT, AQNM, CSRH ************************************************************** PSFT, Powersafe Technology Corp., PSFT.PK PSFT subsidiary Amplification Technologies Inc. (www.amplificationtechnologies.com) (ATI), is offering higher performance thermoelectrically cooled discrete amplification single photon counting solid state photodetectors. These photodetectors are mounted on a two stage thermoelectric cooler [...]

Prieur’s readings (November 7, 2009)

Prieur du Plessis — Sat, 07 Nov 2009 08:10:26 +0000

CVAT, SBUX, PWRM, CVS, PSFT, SWKS, AQNM, IBM, CSRH, DrStockPick.com Stock Report!

Dr. Stock Pick — Fri, 06 Nov 2009 20:03:45 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Friday November 6, 2009 DrStockPick.com Stock Report! CVAT, SBUX, PWRM, CVS, PSFT, SWKS, AQNM, IBM, CSRH ************************************************************** PSFT, Powersafe Technology Corp., PSFT.PK PSFT subsidiary Amplification Technologies Inc. (www.amplificationtechnologies.com) (ATI), is offering higher performance thermoelectrically cooled discrete amplification single photon counting solid state photodetectors. These photodetectors are mounted on a [...]

Is it time to panic?

Andrew Snyder — Fri, 06 Nov 2009 16:08:12 +0000

pBaltimore-(a href="http://todaysfinancialnews.com" target="_blank"TFN/a):Time to panic? If you are part of the Obama administration the answer is yes. If you are an American investor, hold off on the freaking out for at least another month or so./p pWith the nation’s unemployment rate officially in double-digit territory and the under-employed rate ready to the 20% mark, the politicians that promised bliss in the days ahead are eating their words today./p pAnd that means Wall Street is eating its recent gains./p pFor nearly a month, the Dow has hovered around the 10,000 mark. After hundreds of billions of dollars were withdrawn earlier this year, it was relatively easy to put that money back to work and send the equities market higher./p pBut now that the economic data is showing#8230;/p

Stock Market News for November 5, 2009 – Market News

Zacks Market Commentaries — Thu, 05 Nov 2009 14:20:04 +0000

U.S. stocks ended mixed Wednesday after a late-session profit taking almost wiped off a 156-point rally in the Dow average that was fueled by the Fed’s encouraging assessment of the economy and its decision to keep interest rates low for an extended period. The optimism was short-lived as investors appeared jittery ahead of the October jobs report on Friday. Fresh concerns over bank earnings resurfaced after the House of Representatives passed a bill curbing credit card rate increases.

After the house vote, financials slumped 1.5% and led the decliners among the S&P 500 industry groups. Analyst Meredith Whitney noted the biggest U.S. banks may face declining values on home-loan bonds with government backing as the Fed moves towards ending its $1.25 trillion purchase program. Whitney said bank earnings are far from approaching "normalcy," and will reflect regulatory changes for an extended period. JPMorgan (NYSE:JPM) fell 1.2% to $42.21 and Wells Fargo (NYSE:WFC) retreated 3.1% to $26.82. Citigroup (NYSE:C) slipped 1.7% to $3.97.

On Wednesday, the 30-stock Dow Jones industrial average closed up 30.23 points, or 0.31%, at 9,802.14. The broad Standard & Poor's 500-stock index edged was up 1.09 points, or 0.10%, at 1,046.50. The tech-heavy Nasdaq ended the day almost unchanged. On the New York Stock Exchange, eight stocks advanced for every seven that declined as volume slowed to 1.35 billion shares.

Meanwhile, gold prices continues their upward run and hit an intraday record high of $1098.50, before giving up most of that gain to settle at $1087.30. The US dollar retreated 0.5% against a basket of currencies.

Yesterday, investors breathed a sigh of relief after the Fed’s announcement to keep interest rates near historically low levels for an extended period. The Fed, in its policy assessment, noted the economic activity was likely to remain weak for some time and ruled out any plans of a premature exit. As it continued with its highly accommodative monetary stance, the Fed offered a reminder that the current recovery still lacks strength to be self-supportive.

Healthcare shares Wednesday rose 1% and led the gainers within the S&P500 industry sectors as Republican gubernatorial wins were seen as votes against President Obama's healthcare initiative, likely to result in further delays to changes to the healthcare program. The Senate unanimously voted to extend jobless benefits and broaden homebuyer tax breaks, with the Congress expected to vote before week's end. Helped by the news housing shares finished higher, with Pulte Homes (NYSE:PHM) up 3.5%, Lennar (NYSE:LEN) up 3.4%, and DR Horton (NYSE:DHI) adding 3.2%.

Zacks Investment Research

Prieur’s readings (November 5, 2009)

Prieur du Plessis — Thu, 05 Nov 2009 09:50:16 +0000

An interview with Charlie Gasparino

Prieur du Plessis — Thu, 05 Nov 2009 09:46:25 +0000

Dan Holland has just interviewed Wall Street chronicler Charlie Gasparino's. Excerpts from the interview are published in this post.

PWRM, INTC, PSFT, JPM, AQNM, MSFT, CVAT, STEC, CSRH, DrStockPick.com Stock Report!

Dr. Stock Pick — Wed, 04 Nov 2009 19:20:12 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Wednesday November 4, 2009 DrStockPick.com Stock Report! PWRM, INTC, PSFT, JPM, AQNM, MSFT, CVAT, STEC, CSRH ************************************************************** PSFT, Powersafe Technology Corp., PSFT.PK PSFT subsidiary Amplification Technologies Inc. (www.amplificationtechnologies.com) (ATI), is offering higher performance thermoelectrically cooled discrete amplification single photon counting solid state photodetectors. These photodetectors are mounted on a [...]

PWRM, PSFT, AQNM, CVAT, CSRH, DrStockPick.com Stock Report!

Dr. Stock Pick — Tue, 03 Nov 2009 20:46:06 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Tuesday November 3, 2009 DrStockPick.com Stock Report! ************************************************************** PSFT, Powersafe Technology Corp., PSFT.PK PSFT subsidiary Amplification Technologies Inc. (www.amplificationtechnologies.com) (ATI), is offering higher performance thermoelectrically cooled discrete amplification single photon counting solid state photodetectors. These photodetectors are mounted on a two stage thermoelectric cooler inside a hermetically sealed [...]

Landmark Depression Treatment Studies to be presented by CNS Response Inc. (CNSO.OB) at U.S. Psychiatric and Mental Health Congress

QualityStocks — Tue, 03 Nov 2009 19:53:38 +0000

CNS Response Inc. has developed a data analysis capability that, when paired with a non-invasive EEG, analyzes a patient’s brain waves and compares those results to a patient outcome database, generating an rEEG report that allows psychiatrists to create personalized medication regimens for the patient. According to the company, depression costs U.S. employers $83 billion [...]

Gas Prices/Climate Bill – Expert: Major Savings at Gas Pump Expected Under 2 Federal Policies

Dawn Van Zant — Tue, 03 Nov 2009 13:00:00 +0000

WASHINGTON, D.C. - November 3, 2009 - Good news for American motorists: Despite doomsday prediction from energy-industry-funded interest groups, U.S. consumers actually will see a net reduction of $13 billion in 2020 and $46 billion in 2030 in their gasoline expenditures ($100 and $326 in average net savings per household, respectively) if Congress moves ahead to impose a cap-and-trade system, according to a new report from the American Council for an Energy-Efficient Economy (ACEEE).

Interview: Professor David Colander tells Congress econ models are flawed

Prieur du Plessis — Tue, 03 Nov 2009 08:07:46 +0000

This post features an interesting interview with Professor David Colander on flaws in economic models.

Interview: Professor David Colander tells Congress econ models are flawed

Prieur du Plessis — Tue, 03 Nov 2009 08:07:46 +0000

This post features an interesting interview with Professor David Colander on flaws in economic models.

PVTB, PWRM, DrStockPick.com Watch List! for Tuesday November 3, 2009, Privatebancorp Inc. and Power 3 Medical Products Inc, PWRM.OB

Dr. Stock Pick — Tue, 03 Nov 2009 03:12:42 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ DrStockPick.com Watch List! My Picks for Tuesday November 3, 2009, are: ************************************************************** PVTB, Privatebancorp Inc. PVTB is a growing diversified financial services company with 34 offices in 10 states and approximately $12.1 billion in assets as of September 30, 2009. Through its subsidiaries, PVTB delivers customized business and personal [...]

PWRM, AMLN, DrStockPick.com Stock Report! Power 3 Medical Products Inc. and Amylin Pharmaceuticals, Inc.

Dr. Stock Pick — Mon, 02 Nov 2009 15:44:32 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Monday November 2, 2009 DrStockPick.com Stock Report! PWRM, AMLN ************************************************************** PWRM, Power 3 Medical Products Inc, PWRM.OB Power3 Medical Products, Inc. is a leading bio-medical company engaged in the commercialization of neurodegenerative disease and cancer biomarkers, pathways, and mechanisms of diseases through the development of diagnostic tests and drug [...]

PWRM, PSFT, AQNM, CVAT, CSRH, DrStockPick.com Weekend Update!

Dr. Stock Pick — Sat, 31 Oct 2009 16:04:40 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Saturday October 31, 2009 DrStockPick.com Weekend Update! PWRM, PSFT, AQNM, CVAT, CSRH ************************************************************** PSFT, Powersafe Technology Corp., PSFT.PK PSFT subsidiary Amplification Technologies Inc. (www.amplificationtechnologies.com) (ATI), is offering higher performance thermoelectrically cooled discrete amplification single photon counting solid state photodetectors. These photodetectors are mounted on a two stage thermoelectric cooler [...]

Too big to fail, is still heavy in the derivative market, and primed for a gigantic collapse.

Dr. Stock Pick — Fri, 30 Oct 2009 18:02:13 +0000

Dr Stock Pick HOT News & Alerts! _______________________________________ FREE Daily Stock Alerts From DrStockPick.com _______________________________________ Friday October 30, 2009 DrStockPick.com Article ************************************************************** Too big to fail, is still heavy in the derivative market, and primed for a gigantic collapse. Congress needs a chimney sweep to clean the soot from the smoke they’ve been blowing. Our do nothing congress; well we can’t really say do [...]

PWRM, PFE, DrStockPick.com Stock Report! Power 3 Medical Products Inc. and Pfizer Inc.

Dr. Stock Pick — Fri, 30 Oct 2009 16:16:40 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Friday October 30, 2009 DrStockPick.com Stock Report! PWRM, PFE ************************************************************** PWRM, Power 3 Medical Products Inc, PWRM.OB Power3 Medical Products, Inc. is a leading bio-medical company engaged in the commercialization of neurodegenerative disease and cancer biomarkers, pathways, and mechanisms of diseases through the development of diagnostic tests and drug [...]

Zacks Bull and Bear of the Day Highlights: CarMax, Genomic Health Inc., J.C. Penney, Macy’s and Bank of America – Press Releases

Zacks Market Commentaries — Fri, 30 Oct 2009 14:05:11 +0000

For Immediate Release

Chicago, IL – October 30, 2009 – Zacks Equity Research highlights CarMax (KMX) as the Bull of the Day and Genomic Health Inc. (GHDX) the Bear of the Day. In addition, Zacks Equity Research provides analysis on J.C. Penney (JCP), Macy’s (M) and Bank of America (BAC).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676

Here is a synopsis of all five stocks:

Bull of the Day:

CarMax (KMX) focuses on penetrating new markets through store openings. The company has kept its inventories closely aligned with sales trends, which has allowed it to optimize gross profit per unit besides offering great value to customers. These have helped the company to maintain a favorable position among its peer group.

CarMax has reported profit in the second quarter, reflecting a significant improvement from the Zacks Consensus Estimate. It has experienced a significant rebound in CarMax Auto Finance income to $72 million in the quarter versus a loss of $7 million in the prior year quarter.

These lead us to upgrade the stock to an Outperform recommendation with a target price of $25.

Bear of the Day:

Genomic Health Inc.’s (GHDX) lead product is Oncotype DX, which is used for early stage breast cancer patients to predict the likelihood of cancer recurrence.

Even though sales of Oncotype remain robust and the company remains optimistic about its prospects, we are highly concerned about the company's reliance on the product for growth. We believe that Genomic needs to expand its product portfolio in order to sustain growth.

Furthermore, we are also concerned about the company's weak pipeline. These concerns have caused us to downgrade the stock to Underperform.

Zacks Analyst Blog Highlights: Bank of America, Citigroup, Motorola Inc., China Mobile Ltd. and Mylan, Inc. – Press Releases

Zacks Market Commentaries — Fri, 30 Oct 2009 13:45:37 +0000

For Immediate Release

Chicago, IL – October 30, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Bank of America (BAC), Citigroup (C), Motorola Inc. (MOT), China Mobile Ltd. (CHL) and Mylan, Inc. (MYL).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Thursday’s AnalystBlog:

Contributions to GDP Growth

It is also tricking people into thinking that a house is more affordable that it really is -- just the way that teaser-rate ARM’s did, and we saw just how well that worked out. The FHA is handing out mortgages with only 3.5% down, and people can use the tax credit for that ridiculously small down payment. This has future disaster of biblical proportions written all over it. The next bailouts will not be of the banks like Bank of America (BAC) and Citigroup (C) but of the FDIC and the FHA.

Direct Government spending had a small but positive impact on overall growth in the 3Q, adding 0.48 points -- a fairly significant slowdown from the 1.33 contribution in the 2Q, but better than the 0.52 point drag in the 1Q. All the help came from Washington, not City Hall or the Statehouse.

Motorola Shows Signs of Revival

Motorola Inc. (MOT) today declared financial results for the third quarter 2009. Quarterly net income from continuing operations was $12 million or 1 cent per share, compared to a net loss of $397 million or 18 cents per share in the prior quarter. Third quarter adjusted (excluding special items) EPS was 2 cents, easily beating the Zacks Consensus Estimate of a break-even quarter.

Improvement in net income was primarily due to the huge reduction in operating expenditure. Quarterly total revenue was $5,453 million, down 27.1% year-over-year and also below the Zacks Consensus Estimates of $5,564 million.

Gross margin in the third quarter was 33.2% compared to 24.1% in the prior-year quarter and 31.1% in the previous quarter. Quarterly operating expenditure was $1.68 billion compared to a massive $2.26 billion in the year-ago quarter.

Quarterly revenue was $2 billion, down 15% year-over-year. Operating income was $199 million compared to an operating income of $263 million in the year-ago quarter. During the third quarter, Motorola conducted the world's first live 2.6GHz TD-LTE mobile demonstration for China Mobile Ltd. (CHL) and shipped 3.3 million digital entertainment devices.

Mylan Beats, Raises Outlook

Mylan, Inc. (MYL) reported third quarter earnings per share of 32 cents, above both the Zacks Consensus Estimate of 27 cents and 23 cents in the prior-year period. The company reported revenues of $1.26 billion, a 24% decline from the year-ago period.

However, the year-ago period included $455 million of revenue related to the sale of the product rights of Bystolic. Excluding this, total revenues increased 5.2% over the third quarter 2008. Revenues would have increased 9%, but for the unfavorable movement of foreign currency.

From this quarter onwards, Mylan has decided to report its results in two segments -- Generics and Specialty -- following the acquisition of approximately 24% of the remaining interest in Matrix and the related de-listing. The former Matrix segment has been included in the Generics segment. The Generics Segment, accounting for about 88% of total revenues during the quarter, increased marginally (3.7%) to $1.12 billion. Revenues from Specialty recorded a huge increase of 20.3% to $150.9 million.

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A Tough Nut to Crack

Jeffrey Miller — Thu, 29 Oct 2009 21:18:00 +0000

House Speaker Nancy Pelosi has an impressive record with passing big votes, but according to this article on The Hill a robust public option may be too much for the Congress to handle. Pelosi is relying on a complex series of whips to keep the factional Democratic party in line. There are two votes that [...]img src="http://feeds.feedburner.com/~r/ElectionStocks/~4/E_nXcWd3tg8" height="1" width="1"/

Continuing Jobless Claims Fall – Analyst Blog

Dirk Van Dijk — Thu, 29 Oct 2009 19:47:33 +0000

Almost overlooked with this morning's big news on third quarter GDP was the unemployment claims report, which was a slight positive. Initial claims for unemployment insurance fell by 1,000 to 530,000. For a change, the previous week's numbers were not revised.

The four-week moving average fell 6,000 to 526,250 and are now 132,500 below their mid-April peak. This is good news, but it is not good enough -- we really need to see another decline of that magnitude to indicate that the economy is actually adding jobs. Note that even with the decline that we are still above the highest point hit in either of the prior two recessions.

Still, you have to crawl before you can walk, and walk before you can run. The graph below (from http://www.calculatedriskblog.com/) shows the history of the four-week moving average. A peak in the moving average historically has been a pretty good signal that a recession is shortly about to come to an end, something that was confirmed today by the GDP release (see "GDP Notes - In Depth" and "Contributions to GDP Growth").

I will note that after the last recessions there was an initial sharp decline in the level of new claims, but then we hit a plateau that lasted a long time, a sign of a jobless recovery. I suspect that we may see that again this time around. While the GDP report was better than expected, big parts of it appear to be unsustainable for more than the next quarter or so.

The news on the continuing claims side was, at face value, even better news. Continuing jobless claims dropped by 148,000 to 5.797 million, which is the biggest drop we have seen in this cycle. Even extended claims dropped by 71,000 to 3.893 million. Thus combined, there are now 9.69 million people getting unemployment benefits.

However, even extended benefits don’t last forever, and an estimated 7,000 people a day are losing that last lifeline. In Congress, the House has passed an extension, but the Senate continues to dither as the extension is being filibustered. After cloture is invoked, those senators who think that having millions of Americans suffering is a good thing (builds character, you know) plan to offer all sorts of unrelated amendments related to Acorn to further delay the bill.

This delay is not only callous as a humanitarian matter, but it is very stupid economic policy. If people have no income, and they have already run down their savings, they can either starve or turn to "extra-legal" ways of getting income. They certainly can’t be spending a lot of money at J.C. Penney’s (JCP) or Macy’s (M). The bank that becomes important to them is the local food bank, not Bank of America (BAC).

Extended unemployment benefits are among the best targeted stimulus dollars there are. They go directly to people who are in the most need, and to people who are likely to spend them quickly, thus creating a multiplier effect.

In contrast, the very people who are opposing the unemployment extension are among the people sponsoring the extension and expansion of the tax credit for home buying. This is a very poorly focused way of spending stimulus money, with the vast majority of the money going to people who would have bought houses anyway.

The expansion now even includes move-up buyers, and aside from generating commissions for realtors, I am at a loss to see how that does anything for the overall economy. Further, the benefits are going to people who earn far more than the median household does. More reverse-Robin Hood politics, afflicting the afflicted and comforting the comfortable.

Read the full analyst report on "JCP"
Read the full analyst report on "M"
Read the full analyst report on "BAC"
Zacks Investment Research

Contributions to GDP Growth – Analyst Blog

Dirk Van Dijk — Thu, 29 Oct 2009 18:02:59 +0000

Not all components of GDP are created equal. Some are very big, and others relatively small. Some tend to be very stable over time, and some tend to swing violently from quarter to quarter. The bigger and more volatile they are, the more they will impact the overall growth rate of GDP.

Thus looking at just the percentage changes in the components does not tell the full story. Of the 3.5% total growth, how many points were added or subtracted by each part of the economy?

The biggest part of the economy is the Consumer, or PCE -- overall it contributed 2.36 of the 3.50 points of total growth. In the second quarter it caused 0.62 of the 0.70 total decline in the 2Q. In the first quarter it actually offset 0.44 points of the 6.40 total decline. In other words, excluding the Consumer the economy would have contracted 6.84% rather than 6.40%.

Within Consumer spending, spending on Goods added 1.79 points after subtracting 0.71 points in the 2Q and adding 0.56 points in the 1Q. Spending on Durables was the main driver, adding 1.47 points after subtracting 0.41 points in the 2Q and adding 0.28 in the 1Q. Non-Durable goods added 0.31 points after subtracting 0.29 in the 2Q and adding 0.29 in the 1Q.

While spending on Services is much more stable than spending on Goods, it is also a much larger portion of the Consumer wallet. Service spending added 0.57 points to the overall GDP growth in the 2Q -- up from adding 0.09 points in the 2Q and subtracting 0.13 in the 1Q.

It is the volatility that gives Durable goods their importance to the economy, not the overall size. In the third quarter, total spending on Durable goods was at a $1.055 Trillion annual rate, just 15.4% of the $6.852 Trillion spent on Services, but Durable goods had an impact on economic growth that was 158% bigger.

Investment spending was a big swing factor in the 3Q. It added 1.22 points to overall growth. That is a HUGE improvement over the 3.10 point subtraction in the 2Q and the 8.98 point implosion in the 1Q. Unfortunately, 0.94 points of that contribution came from Inventories.

Inventory investment is the "worst" type of GDP growth, since large increases in one quarter are usually reversed in the next quarter -- or in this case, large declines being reversed upwards. In the 2Q, Inventory investment subtracted 1.42 points from overall growth and in the 1Q it subtracted 2.36 points. Even in the 4Q, it subtracted 0.64 points from growth. Three straight quarters of sharply lower inventories is highly unusual, and we were due for a bounce. Perhaps we have one more quarter of a solid contribution from Inventory investment, but I would not expect it to last much beyond that.

Overall Fixed investment added just 0.28 points to growth, but that sure was a nice improvement over the 1.68 point subtraction and the 6.62 point disaster that was the 1Q. However, it was not coming from the business side. Business investment subtracted 0.24 growth points in the 3Q, so it is still very soft, but at least it is not imploding like it was earlier in the year. In the 2Q it subtracted 1.01 points and in the 1Q it took away 5.29 growth points.

Within business investment it was spending on structures that caused the problem, with a deduction of 0.32 growth points while spending on E&S offset 0.08 points of that. In the 2Q, both sides of business investment were drags on the economy with investment in Commercial real estate subtracting 0.69 growth points, and spending on equipment deducting 0.32 points. The 2Q was in turn a major improvement over the 1Q disaster, where spending on structures subtracted 2.28 growth points and equipment spending subtracted 3.01 points.

Housing finally helped the economy in the 3Q, adding 0.53 points to growth -- after a string of 15 straight quarters where it was a drag on the economy. In the 2Q it was a 0.67-point drag and in the 1Q it was a 1.33-point drag.

The long decline has, however, made housing a much smaller share of the overall economy. In the 3Q, residential investment totaled only $360.9 billion, or 2.52% of the overall economy. At the peak of the housing bubble, it represented 6.34% of the overall economy. Thus the 23.4% increase in residential investment had far less of an overall impact than it did in the past.

While residential investment is still near a record low share of the overall economy, I have serious questions about the sustainability of the increase. The extension and expansion of the the tax credit by Congress might keep things going for the next few quarters, but after that things are likely to fall apart again. Just like we saw with the "Cash for Clunkers" (C4C) program, it is probably just encouraging those folks who might have bought later to buy now.

It is also tricking people into thinking that a house is more affordable that it really is -- just the way that teaser-rate ARM’s did, and we saw just how well that worked out. The FHA is handing out mortgages with only 3.5% down, and people can use the tax credit for that ridiculously small down payment. This has future disaster of biblical proportions written all over it. The next bailouts will not be of the banks like Bank of America (BAC) and Citigroup (C) but of the FDIC and the FHA.

Direct Government spending had a small but positive impact on overall growth in the 3Q, adding 0.48 points -- a fairly significant slowdown from the 1.33 contribution in the 2Q, but better than the 0.52 point drag in the 1Q. All the help came from Washington, not City Hall or the Statehouse.

The Federal government added 0.62 growth points, down from 0.85 points in the 2Q but up from a 0.33 point drag in the 1Q. The Pentagon was the main factor in all three quarters, with Defense spending adding 0.45 points in the 3Q following a 0.70 addition in the 2Q and a 0.27 point drag in the 1Q. Non-Defense spending was sort of a non-issue, adding just 0.17 points in the 3Q, not much difference from the 0.15-point contribution in the 2Q, and up a little bit from the slight 0.06 point drag in the 1Q.

State and Local governments are not allowed to run operating deficits, and so when faced with declining tax revenues they have to cut back, unless Uncle Sam helps them out. Well, Washington is helping, but it's not enough, and S&L spending was a 0.14 point drag in the 3Q. The Federal help was enough in the 2Q and so the contribution to growth in the 2Q was a positive 0.48 points. In the 1Q, before the stimulus package could get much traction, S&L spending was a 0.19 point drag.

Net exports had been just about the only bright spot in the first half of the year -- even though it came the wrong way, from both imports and exports plunging, only with imports falling more than exports did. That reversed in the 3Q, as both showed a nice expansion, but our appetite for foreign goods is outstripping the desire for U.S. goods and services abroad.

The increase in exports added 1.49 points to growth, but the increase in imports was a 2.01 point drag, for a net negative contribution from net exports of 0.52 points. In the 2Q, falling exports subtracted 0.45 points, but plunging imports added 2.09 points, for a net imports net help to the economy of 1.64 points.

In the first quarter, as world trade came to a near-standstill, net exports were just about the only positive you could find for the economy. Yes, plunging exports subtracted an awful 3.95 points of growth, but the fact that we were buying practically nothing from overseas added 6.58 growth points, for a net aid to the economy of 2.85 points. In other words, if the U.S. were a closed economy in the first quarter, growth would have fallen not at a 6.4% rate, but at a 9.25% rate.

Overall

Overall this is a very welcome report. It confirms that the recession is over and that we are on the right track. However, I am not thrilled about the overall composition of the growth. Over time we need to see the consumer become a much smaller part of the overall economy, and real business investment become a much bigger share.

Unfortunately, we seem to be headed in the wrong direction, with the growth in consumer spending nearly keeping up with the overall growth of the economy. This is especially true if you consider Residential Investment as primarily part of Consumption. We need net exports to play a bigger and more positive role in the economy, and ideally have that happen through exports growing faster than imports, not from a plunge in imports like we saw in the first half of the year.

Seeing net exports turn into a drag again is disappointing. A big part of that, however, is due to oil imports, and the increase in the price of oil. That is a long-term structural problem that needs to be addressed. Fortunately, the opening-up of the shale gas plays gives us a chance to finally do something about it, but I’m not sure how fast that will occur. That, along with more efficiency and alternative energy sources, can make a dent over time, but not overnight.

But it is a fertile place to see an increase in Investment spending, so it could have a double-barreled effect -- on both the investment line and on the net exports line. The contribution from inventories is not sustainable long-term, but given how much they fell prior to this rebound, we might see a bit more of it in the 4Q, though not much beyond that.

The increase in Consumption spending was largely due to the C4C program, which is now over, so don’t look for a big contribution from Durable goods spending in the fourth quarter.

All in all, a better-than-expected report, but don’t be deluded into thinking that we are out of the woods and the coast is clear. We still face major challenges, and getting complacent here would be a big mistake.
Read the full analyst report on "BAC"
Read the full analyst report on "C"
Zacks Investment Research

CSRH, EXC, PSFT, DB, PWRM, AVP, AQNM, RF, CVAT, LMT , DrStockPick.com Stock Report!

Dr. Stock Pick — Wed, 28 Oct 2009 19:33:47 +0000

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Dr. Stock Pick — Wed, 28 Oct 2009 17:20:30 +0000

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PWRM, STEM, DrStockPick.com Stock Report! Power 3 Medical Products Inc. and StemCells Inc.

Dr. Stock Pick — Wed, 28 Oct 2009 15:38:10 +0000

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DrStockPick.com Stock Report! 10/28/09, ANAD, CVAT, CNSO, NOC, PNY, RTN

Dr. Stock Pick — Wed, 28 Oct 2009 14:42:24 +0000

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Prieur’s readings (October 28, 2009)

Prieur du Plessis — Wed, 28 Oct 2009 07:39:49 +0000

Improving financial regulation and supervision

James Hamilton — Wed, 28 Oct 2009 03:03:58 +0000

There were some other very interesting presentations at the conference hosted by the Federal Reserve Bank of Boston last week. Fed Chair Ben Bernanke spoke on Financial Regulation and Supervision after the Crisis while Princeton Professor Alan Blinder's message was It's Broke, Let's Fix It: Rethinking Financial Regulation. Here I summarize four key reforms these speakers addressed.

(1) Capital adequacy. The key principle for preventing the "bank run" dynamics of the recent financial turmoil is to make sure that financial institutions have a sufficient cushion of equity capital to be able to absorb liquidation and delinquency losses on assets without sacrificing the institution's ability to repay short-term creditors. Equity capital is also a critical tool for addressing the core incentive problems arising from gambling with other people's money. As Chair Bernanke observed:

Through the course of the crisis, it became increasingly clear that many firms lacked adequate capital and liquidity to protect themselves as well as the financial system as a whole.

Professor Blinder elaborated:

the real leverage problems arose with (a) investment banks that operated (under a different regulatory regime [from commercial banks]) with 30 times leverage and more, and (b) gimmicks such as thinly-capitalized SIVs and conduits that (legally) avoided capital requirements...

Both Bernanke and Blinder further called attention to the problems with procyclical capital requirements. Standard capital requirements become looser when times are good, but that is exactly when it's most feasible and desirable for them to strengthen the equity cushion. Blinder advocated reverse convertible debentures proposed by Mark Flannery and the Squam Lake Working Group on Financial Regulation as a way to implement countercyclical capital requirements.

Though a conceptually different issue from equity capital, Blinder also favored requiring both mortgage originators and mortgage securitizers to retain 5% of any assets they create.

(2) Compensation. Blinder observed: "Pay plans that are structured in such a 'heads I win, tails I don't lose' way create powerful incentives for traders to go for broke gambling with OPM ('other people's money')." In his spoken remarks he added, "They did go for broke, and a lot of them achieved that objective."

Here were Bernanke's observations on the subject:

flawed compensation practices at financial institutions also contributed to the crisis. Compensation, not only at the top but throughout a banking organization, should appropriately link pay to performance and provide sound incentives. In particular, compensation plans that encourage, even inadvertently, excessive risk-taking can pose a threat to safety and soundness. The Federal Reserve has just issued proposed guidance that would require banking organizations to review their compensation practices to ensure they do not encourage excessive risk-taking, are subject to effective controls and risk management, and are supported by strong corporate governance including board-level oversight.

(3) Derivatives. Though Bernanke did not say much about the explosion of financial instruments such as credit default swaps and their role in propagating the crisis, Blinder highlighted the desirability of changes:

While the regulation of derivatives is fraught with peril, it is not hard to improve upon what we have now-- which is practically nothing. I have argued for years that the most important step the government could take would be to push as much derivatives trading as possible into organized exchanges....

The Treasury White Paper (p. 48) proposes to subject OTC derivatives to a "robust regime" of regulation that includes "conservative capital requirements," margins, reporting requirements, and "business conduct standards."

(4) Resolution mechanism. Finally, both Bernanke and Blinder stressed the need for a mechanism to supervise the liquidation of failing systemically important financial institutions. Blinder advocated:

we could develop a new resolution mechanism, perhaps patterned on what the FDIC now does with small banks (often before the bank's net worth goes negative), that would enable the authorities to wind down a systemically-important financial institution (including a non-bank) in an orderly fashion-- rather than just throwing it to the Chapter 11 wolves. This last idea is among the key ingredients of the Treasury's reform plan, has substantial support in Congress, and may well become law. If so, it would have several desirable effects.

The TBTF doctrine would morph into “too big to be put into Chapter 11," but not "too big to be seized and its management thrown out." That change alone would go a long way toward reducing moral hazard.

Taxpayers would (mostly) be relieved of the burdens of costly bailouts....

Regulators would no longer have to keep large "zombie banks" (and non-banks) on life support for fear of the systemic consequences of shutting them down.

Bernanke endorsed this reform as well:

the Congress should create a new set of authorities to facilitate the orderly resolution of failing, systemically important financial firms.... In light of the experience of the past year, it is clear that we need an option other than bankruptcy or bailout for such firms.

A new resolution regime for nonbanks, analogous to the regime currently used by the Federal Deposit Insurance Corporation for banks, would permit the government to wind down a failing systemically important firm in a way that reduces the risks to financial stability and the economy. Importantly, to restore a meaningful degree of market discipline and to address the too-big-to-fail problem, it is essential that there be a credible process for imposing losses on the shareholders and creditors of the firm. Any resolution costs incurred by the government should be paid through an assessment on the financial industry and not borne by the taxpayers.

One detail I'd stress is the need for integration of the approaches to items (3) and (4) above. One of the problems that makes bankruptcy messy for these institutions is that outstanding derivatives contracts can assume a life of their own, sucking assets out of the firm as the market moves against the firm's bets and in practice giving these contracts seniority over conventional debt. From the perspective of society's best interests I don't think such seniority can be justified. I agree with the assertion in Blinder's spoken remarks that the economic costs of the latest recession exceed the cumulative potential efficiency benefits of what he referred to as "fancy finance."

I would propose that instruments such as the credit default swaps entered into by any systemically important financial institution should be subject to a regulatory stop-loss provision. In a standard clearinghouse mechanism, each party delivers collateral against the possibility of the market moving against their original bet. If the market moves too much, the loser either must add collateral or their position is wiped out. If the institution continues to deliver new margin capital, it can become like the compulsive gambler doubling down as the firm's equity cushion essential for financial stability bleeds away. Like the referee protecting a staggering boxer, the regulator needs the authority to declare "no mas" on an institution's commitment of new capital to such positions.

Bernanke concluded with the following:

we cannot lose sight of the need to reorient our supervisory approach and to strengthen our regulatory and legal framework to help prevent a recurrence of the events of the past two years.

To which I would only add, Amen!

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Dr. Stock Pick — Tue, 27 Oct 2009 19:36:08 +0000

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PWRM, LMT, CVAT, GD, AQNM, IBM, DrStockPick.com Stock Report!

Dr. Stock Pick — Tue, 27 Oct 2009 17:03:45 +0000

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Dr. Stock Pick — Mon, 26 Oct 2009 20:12:27 +0000

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PWRM, BCRX, DrStockPick.com Stock Report! Power 3 Medical Products Inc. and BioCryst Pharmaceuticals, Inc.

Dr. Stock Pick — Mon, 26 Oct 2009 17:33:48 +0000

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Prieur’s readings (October 25, 2009)

Prieur du Plessis — Sun, 25 Oct 2009 09:49:23 +0000

DrStockPick.com Weekend Update! PSFT, PWRM, CSRH, CVAT, AQNM

Dr. Stock Pick — Sat, 24 Oct 2009 16:17:45 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Saturday October 24, 2009 DrStockPick.com Stock Report! PSFT, PWRM, CSRH, CVAT, AQNM ************************************************************** PSFT, Powersafe Technology Corp., PSFT.PK - Powersafe Technology Corp. A breakthrough in the design of photon detectors Powersafe Technology Corp.’s (Other OTC: PSFT.PK) Subsidiary Amplification Technologies has just patented a revolutionary solution for low-level signal detection: multichannel [...]

The Warning

Prieur du Plessis — Sat, 24 Oct 2009 07:29:57 +0000

In the midst of the 1990s bull market, one lone regulator warned about the dangers of derivatives - and overnight became the enemy of some of the most powerful people in Washington ... In "The Warning", veteran Frontline producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. This is a must-view production.

PSFT, AKAM, PWRM, CSRH, ERTS, CVAT, CVS, AQNM, EXC, DrStockPick.com Stock Report!

Dr. Stock Pick — Fri, 23 Oct 2009 19:44:12 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Friday October 23, 2009 DrStockPick.com Stock Report! PSFT, AKAM, PWRM, CSRH, ERTS, CVAT, CVS, AQNM, EXC ************************************************************** AKAM, Akamai Technologies Inc. AKAM provides services for accelerating and improving the delivery of content and applications over the Internet. AKAM, the leader in powering video, dynamic transactions and enterprise applications online, announced [...]

FCC Votes on Net Neutrality – Analyst Blog

Zacks Market Commentaries — Fri, 23 Oct 2009 18:00:13 +0000

The US telecom regulator Federal Communications Commission (“FCC") has reportedly voted unanimously for the implementation of the so-called “Net Neutrality" regulation, which is aimed at preventing Internet Service Providers (ISPs) and cable companies from blocking or restricting access to legal web site contents and applications. If enacted, the open Internet rule, which is presently applicable to wireline networks, will be extended to wireless.

All five FCC commissioners (including the FCC chairman Julius Genachowski), represented by three democrats and two republicans voted in favor of the proposed new rule, which will now invite public comments, a process which is expected to continue till Jan 14, 2010. This will be followed by the review of the public feedback by the FCC with a final rule is expected not before March 2010. However, the republicans remain skeptical about the proposed rule.

The net neutrality regulation, which consists of a set of proposals, represents the first major initiative ever by the U.S. telecom regulator to control the way the Internet industry is managed. The rule is also backed by the Congress and the White House who are in favor of more regulation of the Internet. The FCC has set six principles to guide legitimate network management by the incumbent service providers.

The rationale behind the net neutrality rule is that it will prohibit network operators from restricting any legal online content, devices, applications or services that competitive service providers wishes to run through the respective carrier’s networks. Operators have been accused of blocking or slowing traffic according to the revenues they generate from online contents.

However, the proposed “free and open Internet" rule also offers some flexibility to the network carriers to effectively manage their networks by preventing network congestion and blocking spam, viruses and illegal contents. While operators need to publicly disclose the way they manage their networks, they may be allowed to sell premium Internet services to the customers who pay more for their services.

The release of FCC’s proposal for net neutrality in September 2009 has become a bone of contention between the advocates of the rule and leading U.S. network operators. Large web content and application providers such as Google (GOOG), Amazon (AMZN) and eBay (EBAY) have joined a handful of public interest groups to raise voice against the discrimination by the ISPs and cable companies.

U.S. wireless and cable network operators such as AT&T (T), Comcast (CMCSA), Verizon (VZ) and Qwest (Q) however, have insisted that increased data traffic of bandwidth-intensive services and applications such as video streaming requires them to actively manage their networks.

Moreover, operators have argued that the new regulation will discourage investment associated with expansion and upgrade of their networks and would also throttle innovation and competition. As a result, government intervention through the implementation of net neutrality conjures significant threat to the network service providers. On the contrary, the rule will boost web content providers who will benefit from the increased data traffic over the Internet enabled by the next-generation wireless broadband technologies.

Read the full analyst report on "GOOG"
Read the full analyst report on "AMZN"
Read the full analyst report on "EBAY"
Read the full analyst report on "T"
Read the full analyst report on "CMCSA"
Read the full analyst report on "VZ"
Read the full analyst report on "Q"
Zacks Investment Research

PSFT, VZ, PWRM, CSRH, HD, CVAT, MRK, AQNM, SGP, DrStockPick.com Stock Report!

Dr. Stock Pick — Fri, 23 Oct 2009 17:19:47 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Friday October 23, 2009 DrStockPick.com Stock Report! PSFT, VZ, PWRM, CSRH, HD, CVAT, MRK, AQNM, SGP ************************************************************** VZ, Verizon Communications Inc. VZ provides communication services in the United States and internationally. It operates in two segments, Wireline and Domestic Wireless. Verizon Wireless, the nation’s largest wireless service provider, today announced [...]

PWRM, UTX, DrStockPick.com Stock Report! Power 3 Medical Products Inc. and United Technologies Corp.

Dr. Stock Pick — Fri, 23 Oct 2009 15:31:16 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Friday October 23, 2009 DrStockPick.com Stock Report! PWRM, UTX ************************************************************** PWRM, Power 3 Medical Products Inc, PWRM.OB Power3 Medical Products, Inc. is a leading bio-medical company engaged in the commercialization of neurodegenerative disease and cancer biomarkers, pathways, and mechanisms of diseases through the development of diagnostic tests and drug [...]

AQNM, WMT, PSFT, APA, PWRM, NOC, CSRH, IP, CVAT, CVX, DrStockPick.com Stock Report!

Dr. Stock Pick — Thu, 22 Oct 2009 20:40:25 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Thursday October 22, 2009 DrStockPick.com Stock Report! AQNM, WMT, PSFT, APA, PWRM, NOC, CSRH, IP, CVAT, CVX ************************************************************** WMT, Wal-Mart Stores Inc. WMT operates retail stores in various formats worldwide. WMT today presented its global plans for store and club growth next year at its annual conference for the investment [...]

AQNM, RTN, PSFT, PWRM, MDT, CSRH, SLB, CVAT, BA, DrStockPick.com Stock Report!

Dr. Stock Pick — Thu, 22 Oct 2009 18:16:20 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Thursday October 22, 2009 DrStockPick.com Stock Report! AQNM, RTN, PSFT, PWRM, MDT, CSRH, SLB, CVAT, BA ************************************************************** RTN, Raytheon Co. RTN designs, develops, manufactures, integrates, and supports technological products, services, and solutions for governmental and commercial customers in the United States and internationally. RTN reported third quarter 2009 income from [...]

Energy Blast – Oct 22, 2009

Robert Amsterdam — Thu, 22 Oct 2009 08:19:06 +0000

Gazprom has expressed an interest in acquiring a U.S. shale-gas producer, to access the know-how to develop similar resources domestically, says the Moscow Times. GDF Suez has said it has discussed a 10-20% increase in its Russian gas supply with...

Sprott: US Gov Dead Man Walking

Alex Stanczyk — Wed, 21 Oct 2009 19:20:36 +0000

I have been talking for a time about the US Gov buying its own debt. I do not think they will stop with the QE. They cant. They cant because they will not be able to keep the lights on for one, but also because they cant allow a major financial institution to fail or we have [...]div class="feedflare" a href="http://feeds.feedburner.com/~ff/YourFinancialFuture?a=elvC96Ycda0:xn0bTNwcC3I:yIl2AUoC8zA"img src="http://feeds.feedburner.com/~ff/YourFinancialFuture?d=yIl2AUoC8zA" border="0"/img/a a href="http://feeds.feedburner.com/~ff/YourFinancialFuture?a=elvC96Ycda0:xn0bTNwcC3I:F7zBnMyn0Lo"img src="http://feeds.feedburner.com/~ff/YourFinancialFuture?i=elvC96Ycda0:xn0bTNwcC3I:F7zBnMyn0Lo" border="0"/img/a a href="http://feeds.feedburner.com/~ff/YourFinancialFuture?a=elvC96Ycda0:xn0bTNwcC3I:7Q72WNTAKBA"img src="http://feeds.feedburner.com/~ff/YourFinancialFuture?d=7Q72WNTAKBA" border="0"/img/a a href="http://feeds.feedburner.com/~ff/YourFinancialFuture?a=elvC96Ycda0:xn0bTNwcC3I:V_sGLiPBpWU"img src="http://feeds.feedburner.com/~ff/YourFinancialFuture?i=elvC96Ycda0:xn0bTNwcC3I:V_sGLiPBpWU" border="0"/img/a a href="http://feeds.feedburner.com/~ff/YourFinancialFuture?a=elvC96Ycda0:xn0bTNwcC3I:qj6IDK7rITs"img src="http://feeds.feedburner.com/~ff/YourFinancialFuture?d=qj6IDK7rITs" border="0"/img/a a href="http://feeds.feedburner.com/~ff/YourFinancialFuture?a=elvC96Ycda0:xn0bTNwcC3I:l6gmwiTKsz0"img src="http://feeds.feedburner.com/~ff/YourFinancialFuture?d=l6gmwiTKsz0" border="0"/img/a a href="http://feeds.feedburner.com/~ff/YourFinancialFuture?a=elvC96Ycda0:xn0bTNwcC3I:gIN9vFwOqvQ"img src="http://feeds.feedburner.com/~ff/YourFinancialFuture?i=elvC96Ycda0:xn0bTNwcC3I:gIN9vFwOqvQ" border="0"/img/a /div

BAC, PSFT, PWRM, SO, CSRH, NYX, CVAT, ATVI, AQNM, DrStockPick.com Stock Report!

Dr. Stock Pick — Tue, 20 Oct 2009 18:03:03 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Tuesday October 20, 2009 DrStockPick.com Stock Report! BAC, PSFT, PWRM, SO, CSRH, NYX, CVAT, ATVI, AQNM ************************************************************** BAC, Bank of America Corporation BAC is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset [...]

AAPL, PSFT, PWRM, UTX, CSRH, DD, CVAT, BLK, AQNM, DrStockPick.com Stock Report!

Dr. Stock Pick — Tue, 20 Oct 2009 14:07:50 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Tuesday October 20, 2009 DrStockPick.com Stock Report! AAPL, PSFT, PWRM, UTX, CSRH, DD, CVAT, BLK, AQNM ************************************************************** AAPL, Apple Inc. AAPL and its wholly owned subsidiaries design, manufacture, and market personal computers, portable digital music players, and mobile communication devices, and sell various related software, services, peripherals, and networking [...]

Einhorn on the markets

Prieur du Plessis — Tue, 20 Oct 2009 09:46:35 +0000

David Einhorn, highly respected hedge fund manager of Greenlight Capital and author of "Fooling some of the people all of the time" yesterday delivered the keynote address at the Value Investing Congress. A link to his full speech is provided in this post, as well as excerpts from the talk.

Prieur’s readings (October 20, 2009)

Prieur du Plessis — Tue, 20 Oct 2009 09:43:50 +0000

AMLN, PWRM, MMM, CSRH, MYL, CVAT, STEM, AQNM, DrStockPick.com Stock Report!

Dr. Stock Pick — Mon, 19 Oct 2009 20:22:21 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Monday October 19, 2009 DrStockPick.com Stock Report! AMLN, PWRM, MMM, CSRH, MYL, CVAT, STEM, AQNM ************************************************************** AMLN, Amylin Pharmaceuticals, Inc. AMLN is a biopharmaceutical company committed to improving lives through the discovery, development and commercialization of innovative medicines. AMLN will webcast its Quarterly Update Conference Call for the third [...]

AMGN, PWRM, JNJ, CSRH, GE, CVAT, TEVA, AQNM, DrStockPick.com Stock Report!

Dr. Stock Pick — Mon, 19 Oct 2009 15:53:08 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Monday October 19, 2009 DrStockPick.com Stock Report! AMGN, PWRM, JNJ, CSRH, GE, CVAT, TEVA, AQNM ************************************************************** AMGN, Amgen Inc. AMGN, a biotechnology company, engages in the discovery, development, manufacture, and marketing of human therapeutics based on advances in cellular and molecular biology. The Food and Drug Administration wants more information [...]

PFE, PWRM, BIIB, DrStockPick.com Stock Report!

Dr. Stock Pick — Mon, 19 Oct 2009 13:43:50 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Monday October 19, 2009 DrStockPick.com Stock Report! PFE, PWRM, BIIB ************************************************************** PWRM, Power 3 Medical Products Inc, PWRM.OB Power3 Medical Products, Inc. is a leading bio-medical company engaged in the commercialization of neurodegenerative disease and cancer biomarkers, pathways, and mechanisms of diseases through the development of diagnostic tests [...]

NOK, PWRM, MRK, CSRH, TXN, CVAT, HAL, AQNM, DrStockPick.com Stock Report!

Dr. Stock Pick — Fri, 16 Oct 2009 21:05:03 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Friday October 16, 2009 DrStockPick.com Stock Report! NOK, PWRM, MRK, CSRH, TXN, CVAT, HAL, AQNM ************************************************************** NOK, Nokia Corp. NOK is a pioneer in mobile telecommunications and the world’s leading maker of mobile devices. NOK and Accenture announced the completion of Accenture’s acquisition of Nokia’s Symbian Professional Services, which [...]

Hilltop Community Bancorp, Inc. (HTBC) Reports Results for Third Quarter

QualityStocks — Fri, 16 Oct 2009 19:11:48 +0000

Hilltop Community Bancorp, Inc. (HTBC) reported net income of $191,000, or $0.07 per share, for the third quarter of 2009 ending 9/30/2009. The bank earned $266,000, or $0.10 per share, in the same quarter last year. Hilltop Community Bancorp, Inc. issued preferred stock to the U.S. Treasury as part of the Troubled Asset Relief Plan (TARP) [...]

LMT, PWRM, NOC, CSRH, IBM, CVAT, CME, AQNM, DrStockPick.com Stock Report!

Dr. Stock Pick — Fri, 16 Oct 2009 18:25:55 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Friday October 16, 2009 DrStockPick.com Stock Report! LMT, PWRM, NOC, CSRH, IBM, CVAT, CME, AQNM ************************************************************** LMT, Lockheed Martin Corporation LMT is a world leader in systems integration and the development of air and missile defense systems and technologies, including the first operational hit-to-kill missile. It also [...]

PWRM, BAC, AQNM, DrStockPick.com Stock Report!

Dr. Stock Pick — Fri, 16 Oct 2009 16:04:58 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Friday October 16, 2009 DrStockPick.com Stock Report! PWRM, BAC, AQNM ************************************************************** PWRM, Power 3 Medical Products Inc, PWRM.OB Power3 Medical Products, Inc. is a leading bio-medical company engaged in the commercialization of neurodegenerative disease and cancer biomarkers, pathways, and mechanisms of diseases through the development of diagnostic tests [...]

BA, PWRM, PG, CSRH, MA, CVAT, SCHW, AQNM, DrStockPick.com Stock Report!

Dr. Stock Pick — Thu, 15 Oct 2009 19:16:33 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Thursday October 15, 2009 DrStockPick.com Stock Report! BA, PWRM, PG, CSRH, MA, CVAT, SCHW, AQNM, NOK ************************************************************** BA, Boeing Co. BA, together with its subsidiaries, engages in the design, development, manufacture, sale, and support of commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch [...]

US Labor Market Shows Continuing Signs of Improvement

QualityStocks — Thu, 15 Oct 2009 17:28:24 +0000

A continued decline in initial claims for unemployment resulted in roughly 10,000 fewer than last week’s upwardly revised total of 524,000. For the fifth time now in six weeks, this figure has declined, beating the Thomson Reuters forecast by 2%, with the four-week average falling six times in a row to 531,500. The initial claims [...]

PWRM, ACOR, AQNM, DrStockPick.com Stock Report!

Dr. Stock Pick — Thu, 15 Oct 2009 15:34:50 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Thursday October 15, 2009 DrStockPick.com Stock Report! PWRM, ACOR, AQNM ************************************************************** PWRM, Power 3 Medical Products Inc, PWRM.OB Power3 Medical Products, Inc. is a leading bio-medical company engaged in the commercialization of neurodegenerative disease and cancer biomarkers, pathways, and mechanisms of diseases through the development of diagnostic tests [...]

Pay Limit on TARP Recipients – Analyst Blog

Zacks Market Commentaries — Thu, 15 Oct 2009 14:01:06 +0000

The chairman of the House Oversight and Government Reform panel said on Wednesday that Congress will soon investigate executive compensation at companies that received significant amount of taxpayer funds.

The U.S. Treasury's pay czar, Kenneth Feinberg is in charge of deciding compensation packages for the highest-paid employees at all the firms that received bailout money. For seven firms, the situation is critical as these firms received substantial support from the Troubled Asset Relief Program (TARP).

The seven firms whose compensation plans will be scrutinized are American International Group (AIG), Citigroup (C), Bank of America (BAC), Chrysler Financial, Chrysler Group LLC, General Motors and GMAC Inc (GJM).

The U.S. Treasury Department is pressing bailed out insurer AIG to reduce $198 million in scheduled retention payments after the government missed the opportunity to defend against controversial bonuses to AIG employees last year. However, AIG is currently trying to repay its $85 billion loan to the government by selling off some of its assets.

In the course of the review of the aptness of the richest pay packages, the pay czar is planning to cut the annual cash salaries for many of the top executives whose firms accepted bailout funds.

As an alternative to paying large cash salaries, the pay czar is planning to shift a large portion of an employee's annual salary to stock that cannot be accessed for several years. The percentage of salary to be diverted to stock is not yet clear, but it could be above 50% in some cases.

The pay czar has already used his concept with Robert Benmosche, the new chief executive of American International Group. Benmosche's salary was broken into two parts. Benmosche will annually receive $3 million cash salary and $4 million in AIG stock that cannot be accessed for five years.

Some large financial firms that have already repaid government funds are JPMorgan Chase & Company (JPM), Morgan Stanley (MS), Bank of New York Mellon Corporation (BK), Goldman Sachs (GS), U.S. Bancorp (USB), American Express Company (AXP), BB&T Corporation (BBT) and State Street Corporation (STT). However, for many other firms the repayment of TARP money is unlikely for a long time as they face very difficult situations.

We think that the full repayment of government money will enable bailed-out firms to protect their executive compensation packages. Restrictions on pay rules as a result of using government money are a major competitive disadvantage for these firms in retaining talented employees.
Read the full analyst report on "AIG"
Read the full analyst report on "C"
Read the full analyst report on "BAC"
Read the full analyst report on "GJM"
Read the full analyst report on "JPM"
Read the full analyst report on "MS"
Read the full analyst report on "BK"
Read the full analyst report on "GS"
Read the full analyst report on "USB"
Read the full analyst report on "AXP"
Read the full analyst report on "BBT"
Read the full analyst report on "STT"
Zacks Investment Research

ABT, PWRM, CSRH, UPS, CVAT, DELL, AQNM, JPM, DrStockPick.com Stock Report!

Dr. Stock Pick — Wed, 14 Oct 2009 20:42:02 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Wednesday October 14, 2009 DrStockPick.com Stock Report! ABT, PWRM, CSRH, UPS, CVAT, DELL, AQNM, JPM ************************************************************** ABT, Abbott Laboratories ABT manufactures and sells health care products worldwide. ABT posted in third-quarter net income of $1.48 billion, or 95 cents a share, compared with $1.09 billion, or 69 cents a share, [...]

PFE, PWRM, CSRH, MRK, CVAT, WFC, AQNM, WMT, DrStockPick.com Stock Report!

Dr. Stock Pick — Wed, 14 Oct 2009 17:59:32 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Wednesday October 14, 2009 DrStockPick.com Stock Report! PFE, PWRM, CSRH, MRK, CVAT, WFC, AQNM, WMT ************************************************************** PFE, Pfizer Inc. PFE engages in the discovery, development, manufacture, and marketing of prescription medicines for humans and animals worldwide. PFE’s s $68 billion purchase of Wyeth will close Thursday after antitrust regulators in [...]

JNPR, PWRM, FISV, CSRH, CSCO, CVAT, HON, AQNM, HAL, DrStockPick.com Stock Report!

Dr. Stock Pick — Tue, 13 Oct 2009 18:53:03 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Tuesday October 13, 2009 DrStockPick.com Stock Report! JNPR, PWRM, FISV, CSRH, CSCO, CVAT, HON, AQNM, HAL ************************************************************** JNPR, Juniper Networks, Inc. JNPR is the leader in high-performance networking. JNPR offers a high-performance network infrastructure that creates a responsive and trusted environment for accelerating the deployment of services and applications [...]

PWRM, AQNM, DrStockPick.com Stock Report! Power 3 Medical Products Inc, PWRM.OB and Aquentium, Inc., AQNM.OB

Dr. Stock Pick — Tue, 13 Oct 2009 17:07:36 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Tuesday October 13, 2009 DrStockPick.com Stock Report! PWRM, AQNM ************************************************************** PWRM, Power 3 Medical Products Inc, PWRM.OB Power3 Medical Products, Inc. is a leading bio-medical company engaged in the commercialization of neurodegenerative disease and cancer biomarkers, pathways, and mechanisms of diseases through the development of diagnostic tests and [...]

AAPL, PWRM, GOOG, CSRH, C, CVAT, INTC, AQNM, IBM, DrStockPick.com Stock Report!

Dr. Stock Pick — Mon, 12 Oct 2009 19:27:47 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Monday October 12, 2009 DrStockPick.com Stock Report! AAPL, PWRM, GOOG, CSRH, C, CVAT, INTC, AQNM, IBM ************************************************************** AAPL, Apple Inc. and GOOG, Google Inc. AAPL and its wholly owned subsidiaries design, manufacture, and market personal computers, portable digital music players, and mobile communication devices, and sell [...]

JNJ, PWRM, HERO, CSRH, SCHW, CVAT, BX, AQNM, DrStockPick.com Stock Report!

Dr. Stock Pick — Mon, 12 Oct 2009 17:20:21 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Monday October 12, 2009 DrStockPick.com Stock Report! JNJ, PWRM, HERO, CSRH, SCHW, CVAT, BX, AQNM ************************************************************** JNJ, Johnson & Johnson JNJ engages in the research and development, manufacture, and sale of various products in the health care field worldwide. JNJ reports earnings for the third quarter Tuesday morning. ************************************************************** PWRM, Power 3 [...]

PWRM, AQNM, DrStockPick.com Stock Report! Power 3 Medical Products Inc, PWRM.OB and Aquentium Inc., AQNM.OB

Dr. Stock Pick — Mon, 12 Oct 2009 15:41:20 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Monday October 12, 2009 DrStockPick.com Stock Report! PWRM, AQNM ************************************************************** PWRM, Power 3 Medical Products Inc, PWRM.OB Power3 Medical Products, Inc. is a leading bio-medical company engaged in the commercialization of neurodegenerative disease and cancer biomarkers, pathways, and mechanisms of diseases through the development of diagnostic tests and [...]

MBRX, PWRM, CBS, CSRH, CVC, CVAT, NOC, AQNM, UTX, DrStockPick.com Stock Report!

Dr. Stock Pick — Fri, 09 Oct 2009 18:38:06 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Friday October 9, 2009 DrStockPick.com Stock Report! MBRX, PWRM, CBS, CSRH, CVC, CVAT, NOC, AQNM, UTX ************************************************************** MBRX, Metabasis Therapeutics Inc. MBRX, a biopharmaceutical company, engages in the discovery, development, and commercialization of novel drugs targeting the liver and liver pathways. On September 15, 2009, MBRX received a letter [...]

PWRM, SCIL, DrStockPick.com Stock Report! Power 3 Medical Products Inc, PWRM.OB and Scientific Learning Corp.

Dr. Stock Pick — Fri, 09 Oct 2009 16:06:02 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Friday October 9, 2009 DrStockPick.com Stock Report! PWRM, SCIL ************************************************************** PWRM, Power 3 Medical Products Inc, PWRM.OB Power3 Medical Products, Inc. is a leading bio-medical company engaged in the commercialization of neurodegenerative disease and cancer biomarkers, pathways, and mechanisms of diseases through the development of diagnostic tests and [...]

NNAN, PWRM, NOC, CSRH, COP, CVAT, JWN, AQNM, NVDA, DrStockPick.com Stock Report!

Dr. Stock Pick — Thu, 08 Oct 2009 19:17:26 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ Thursday October 8, 2009 DrStockPick.com Stock Report! NNAN, PWRM, NOC, CSRH, COP, CVAT, JWN, AQNM, NVDA ************************************************************** NNAN, NaturalNano Inc., NNAN.OB NNAN is a materials science company focused on developing and commercializing advanced nanocomposites. Series of Cornell’s feasibility studies using NNAN’s Halloysite Natural Tubes has been very successful. The [...]

Initial Jobless Claims Decline to January Levels

QualityStocks — Thu, 08 Oct 2009 17:51:48 +0000

A Labor Department report issued Thursday Oct. 8 shows initial claims for unemployment fell 33,000 from the prior week’s revised total to 521,000, the lowest level since the beginning of 2009. This figure was 19k less than the Thomson Reuters survey, giving some cause for hope amid a generally depressed economic outlook. With the four-week [...]