Stock Market News & Stocks to Watch from StraightStocks » France

Clenergen Corp.’s (CRGE.OB) Management Leads Innovative Push into Renewable Energy

QualityStocks — Wed, 25 Nov 2009 20:22:44 +0000

Clenergen Corp. is approaching the renewable energy/biofuels sector from a unique perspective – an agronomy/ plantation standpoint rather than from a purely technical/engineering standpoint. Clenergen’s goal is produce high-density, short-rotation biomass (non-food) crops to use as feedstock for advanced gasification technologies to produce electricity. The company is led by an outstanding management group. Here is a [...]

Magna Bags GM Contract – Analyst Blog

Zacks Market Commentaries — Wed, 25 Nov 2009 15:00:00 +0000

Magna International (MGA) has reported that it has won a contract to make the new generation of frames for General Motors’ (MTLQQ) full-size light-duty pickups and sport utility vehicles despite their disputed relationship over the Opel deal. According to Magna, the new third generation of frames would replace GMT 900, which is the frame for Chevrolet’s Suburban, Tahoe and Silvarado models.

Magna will manufacture the frames at its Cosma unit in St. Thomas, Ontario, and the Saltillo plant in Mexico. The St. Thomas plant has been manufacturing frames for General Motors (hereafter, GM) since 1999 and the Saltillo plant currently builds the GMT 900. The Canadian auto parts maker has not disclosed the value of the deal. Magna’s relationship with GM has suffered over the former’s acquisition of the Opel/Vauxhall business in Europe from the latter.

GM had granted a preliminary approval to sell a 55% stake in Opel to Magna, backed by Russia’s Sberbank. However, the Detroit-based automaker scrapped the deal recently in order to retain the unit. GM had been in a dilemma while choosing Magna as the preferred bidder for Opel. The German Government preferred Magna as it had promised not to close any of the four Opel plants in the state.

The Magna deal was supported by a €1.5 billion ($2.15 billion) German Government-backed bridge loan. However, GM was afraid of losing Opel's technology to the Russian car industry. Thus, if Magna had won the deal, GM may have lost Russia’s increasingly important market for its models, such as Chevrolet. Secondly, it also feared losing the Opel engineers, who are integral to GM's overall strategy.

Magna and Sberbank were planning to manufacture Opel cars in Russia with the biggest automaker in the nation – Gaz Group – jointly owned by the tycoon Oleg Deripaska and Avtovaz (partly owned by France’s Renault).
Read the full analyst report on "MGA"
Read the full analyst report on "MTLQQ"
Zacks Investment Research

How and Why China Will Flood the Gold Market

Contrarian Profits — Wed, 25 Nov 2009 14:58:29 +0000

The Chinese government is telling people gold and silver are good investments that will safeguard their wealth. After last year's meltdown in the stock market, people believe it. After all, Chinese citizens don't receive government retirement money... and they don't have company pension plans like people in many other countries do.

The week ahead

Prieur du Plessis — Sat, 21 Nov 2009 07:15:37 +0000

The video clips in this post provide a handy summary of the reports expected on the economic, financial and corporate front around the globe during the week ahead.

Cowen’s Stone Maintains Suntech (NYSE:STP) at NEUTRAL on Q3 Earnings Report

Small Cap Pulse — Fri, 20 Nov 2009 21:06:00 +0000

November 20, 2009 ndash; Analyst Comments ndash; Cowenrsquo;s Rob Stone weighed in on Suntechrsquo;s (NYSE:STP) Q3 financial results this morning noting that given the delayed ramp of Pluto and thin-film production, and outstanding GSF A/R exposure, he thinks shares are fairly valued. He maintains a NEUTRAL rating on the stock. Q3 Results Suntech (NYSE:STP) reported Q3 revenues of $473.1 million, compared with revenues of $594.4 million for the same period last year, and $320.9 million in Q209. Gross margins in Q3 were 17.7%, down from 18.5% in Q2, and 21.5% in Q308. Net income was $30,1, or $0.16 per diluted ADS, compared with $42.5 million for the same period last year and $9.6 million in Q208. Highlights for the quarter included hitting 16.53% conversion efficiency. Management increased its FY09 shipment target from 600MW to a range of 640MW to 660MW, and an increase in total cell and module production capacity to 1.4GW by mid-2010, of which 450MW will be Pluto-enabled. Stonersquo;s Key Takeaways middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Shipments to Germany should continue to grow, but account for a smaller percentage, with stronger growth in the rest of Europe (Italy, France, Czech Republic) middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; U.S. distribution and utility scale projects, China and other Asian markets (Australia, Korea and Japan) should also drive growth middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Raising 2009-12E shipments to 640MW, 1.1GW, 1.6GW and 2.2GW including system integration of 37MW, 100MW, 160MW and 230MW middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Mix of systems reduces GM by about 60 basis points in 2009, 80-100 basis points in 2011/12 but GM in 2010 reflect better H1 module ASPs middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Raised EPS to $0.35, $0.65, $0.99 and $1.35 on revenue of $1.6B, $2.1B, $2.7B and $3.5B

Prieur’s readings (November 20, 2009)

Prieur du Plessis — Fri, 20 Nov 2009 09:26:14 +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.

Gap Inc. – Growth And Income – Zacks Rank Buy

Alex Kolb — Thu, 19 Nov 2009 05:00:00 +0000

Gap Inc. (GPS), which announces third-quarter results after today's closing bell, just declared a quarterly dividend of $0.085 per share, which translates into an industry-leading dividend yield of 1.5%. The company also reported sales growth for the month of October.

Company Description

Gap Inc. is a global specialty retailer that sells clothing, accessories and personal care products for men, women, children and babies under the Gap, Old Navy, Banana Republic, Piperlime and Athleta brands. The company operates stores in the United States, Canada, the United Kingdom, France, Ireland and Japan.

Gap also has franchise agreements with unaffiliated franchisees to operate Gap and Banana Republic stores in many other countries around the world. Under these agreements, third parties operate or will operate stores that sell apparel, purchased from Gap, under Gap's brand names.

Estimates are Bullish Ahead of Earnings Announcement

Analysts polled by Zacks have been upbeat on GPS ahead of today's third-quarter report, pegging earnings at 43 cents per share for the third quarter. Last month, analysts were forecasting 37 cents.

For the current full year, the Zacks Consensus Estimate of $1.49 per share was increased from last month's $1.40.

For the following year, Zacks analysts boosted the earnings forecast from $1.53 per share to $1.62 over the past 30 days.

Rewarding Shareholders with Competitive Income

The company just declared a quarterly dividend of $0.085 per share, which translates into an industry-leading dividend yield of 1.5%.

The dividend is payable on January 27 to shareholders of record at the close of business on January 6.

Stellar Sales

Gap's October net sales of $1.14 billion came in 5% above last year's $1.08 billion. Comparable store sales spiked 4% year-over-year. Zacks Investment Research

Zacks Analyst Blog Highlights: Apple Inc., Microsoft Corp, Quality Systems Inc., Allscripts-Misys Healthcare Solutions, Inc. and Cerner Corp. – Press Releases

Zacks Market Commentaries — Mon, 16 Nov 2009 13:45:26 +0000

For Immediate Release

Chicago, IL – November 16, 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: Apple Inc. (AAPL), Microsoft Corp (MSFT), Quality Systems Inc. (QSII), Allscripts-Misys Healthcare Solutions, Inc. (MDRX) and Cerner Corp. (CERN).

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 Friday’s Analyst Blog:

Apple Opens New Store in New York

To ensure a high-quality buying experience for its products, in which service and education are emphasized, the company has expanded and improved its distribution capabilities by opening its own retail stores in the U.S. and internationally.

The company operates a network of 280 retail stores in 10 countries across the world, including the U.S., U.K., Italy, Australia, Canada, Japan, China, Switzerland, Germany and France to drive the demand for its other products. Further, Apple is soon to open two new stores in Shanghai as well as London and Paris.

The company further plans to open 40 to 50 new larger retail stores next year, about half of which are expected to be outside the U.S. Apple had earlier estimated that it would open 25 to 50 new stores.

Retail sales increased 4.0% to $6.57 billion (averaging $26.0 million per store annually). Store traffic grew to around 170 million in fiscal 2009. The company has extended its footprint in international retail markets. Growing its presence in the international retail market, Apple opened its first store in Sydney and Beijing and opened stores in Switzerland, France and Germany during the calendar year 2008.

Apple's business strategy leverages its ability, through the design and development of its own operating system, hardware and many software applications and technologies, to provide its customers around the world with compelling new products and solutions, superior ease-of-use, seamless integration and innovative industrial design.

To attract customers during the holiday season, the company plans to offer gift-wrapping of any iPod or portable Mac for just $5. It will also allow customers to set aside a gift and pick it up at their local Apple store for free from Dec. 15 to Christmas Eve.

Apple’s stores hosted 42.7 million visitors during the last quarter, an increase of 7% from the year-ago period. The stores posted revenue of $1.87 billion ($7.6 million per store) in the quarter, the highest level ever and up 15% from the year-ago period.

Last month, Microsoft Corp (MSFT) announced the opening of its own first retail store in Arizona. But we do not expect Microsoft to catch up anytime.

Quality Systems Barely Beats

Quality Systems Inc. (QSII) reported fiscal second-quarter earnings of 41 cents, beating the Zacks Consensus Estimate by a penny and the year-ago earnings by 4 cents.

Total revenues for the quarter increased 21.5% to $71.69 million from $58.98 million. The company’s NextGen Healthcare Information Systems division posted revenue of $67.4 million for the reported quarter, representing a 23% increase from the previous year.

Category-wise, System sales, including software, hardware and supplies, increased 5.9% to $26.24 million from $24.78 million. Revenues from maintenance, electronic data interchange (EDI), revenue cycle management (RCM) and other services grew 32.9% to $45.46 million from $34.19 million in the year-ago period.

The total cost of system sales, including software, hardware and supplies increased 16.8% to $7 million. Total cost of maintenance, EDI, RCM and other services for the quarter were $21.27 million as against $15.2 million in the year-ago quarter, up 39.9%. Consequently, total cost of revenues for the quarter increased 33.4% to $28.3 million. The company reported a gross profit of $43.4 million for the quarter opposed to $37.8 million in the year-ago period, up 14.8%.

Research & development spend for the quarter increased 30% to $4.34 million for the quarter. Selling, general and administrative expenses for the reported quarter increased 11.7% to $20.4 million.

Quality Systems exited the quarter with cash and cash equivalents of $75.4 million opposed to cash and cash equivalents of $70.2 million at the end of fiscal 2009.

Quality Systems, headquartered in Irvine, California, develops and markets healthcare information systems that automate certain aspects of medical and dental practices, networks of practices such as physician hospital organizations and management service organizations, ambulatory care centers, community health centers, and medical and dental schools. The company competes with players like Allscripts-Misys Healthcare Solutions, Inc. (MDRX) and Cerner Corp. (CERN).

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The week ahead

Prieur du Plessis — Sat, 14 Nov 2009 05:16:00 +0000

The video clips in this post provide a handy summary of the reports expected on the economic, financial and corporate front around the globe during the week ahead.

Apple Opens New Store in New York – Analyst Blog

Zacks Market Commentaries — Fri, 13 Nov 2009 22:45:25 +0000

Apple Inc. (AAPL) will open its newest retail store with an 8,500 square feet retail space in New York tomorrow. The store will help Apple deliver more Macs, iPods and iPhones, taking advantage of the coming holiday season. The new store is the fourth in Manhattan and fifteenth in New York.

To ensure a high-quality buying experience for its products, in which service and education are emphasized, the company has expanded and improved its distribution capabilities by opening its own retail stores in the U.S. and internationally.

The company operates a network of 280 retail stores in 10 countries across the world, including the U.S., U.K., Italy, Australia, Canada, Japan, China, Switzerland, Germany and France to drive the demand for its other products. Further, Apple is soon to open two new stores in Shanghai as well as London and Paris.

The company further plans to open 40 to 50 new larger retail stores next year, about half of which are expected to be outside the U.S. Apple had earlier estimated that it would open 25 to 50 new stores.

Retail sales increased 4.0% to $6.57 billion (averaging $26.0 million per store annually). Store traffic grew to around 170 million in fiscal 2009. The company has extended its footprint in international retail markets. Growing its presence in the international retail market, Apple opened its first store in Sydney and Beijing and opened stores in Switzerland, France and Germany during the calendar year 2008.

Apple's business strategy leverages its ability, through the design and development of its own operating system, hardware and many software applications and technologies, to provide its customers around the world with compelling new products and solutions, superior ease-of-use, seamless integration and innovative industrial design.

To attract customers during the holiday season, the company plans to offer gift-wrapping of any iPod or portable Mac for just $5. It will also allow customers to set aside a gift and pick it up at their local Apple store for free from Dec. 15 to Christmas Eve.

Apple’s stores hosted 42.7 million visitors during the last quarter, an increase of 7% from the year-ago period. The stores posted revenue of $1.87 billion ($7.6 million per store) in the quarter, the highest level ever and up 15% from the year-ago period.

Last month, Microsoft Corp (MSFT) announced the opening of its own first retail store in Arizona. But we do not expect Microsoft to catch up anytime.

We maintain our Outperform rating on Apple, partly because of the remarkable success of the Apple Store.
Read the full analyst report on "AAPL"
Read the full analyst report on "MSFT"
Zacks Investment Research

Richard Russell: Six reasons to invest in gold

Prieur du Plessis — Fri, 13 Nov 2009 07:38:54 +0000

This post features excerpts from Richard Russell's latest Dow Theory Letters, arguing the case for gold bullion.

A Green Energy Investing Guideline

Investment U — Wed, 11 Nov 2009 16:03:54 +0000

A Green Energy Investing Guideline by Louise Harris, Investment U Research Typically, when investors think about making money from climate change, they think about buying shares of companies that specialize in biofuels or alternative or green energy. But those aren’t the only ways to profit from the green movement. Deutsche Bank Group (NYSE: DB) [...]

Dollar Decline in Perspective – Analyst Blog

Dirk Van Dijk — Tue, 10 Nov 2009 21:44:42 +0000

The dollar has clearly been under pressure this year. Most of the graphs of it that you have seen probably look like the first graph below, which shows what the dollar has done against two indexes since the start of the year. The blue line is how the greenback has fared against the major currencies like the Euro and the Yen, and the red line includes those, but also looks at how it has fared against a much broader collection of currencies.

Since March 9th, the day the market hit bottom -- and the dollar hit its high for the year -- it is down 14.4% against the major currencies and down 11.5% against the broad basket of currencies.

This has a number of implications. For starters, anyone from outside the country has seen nice gains if they invested in the U.S. market, but not nearly as eye-popping as the returns that domestic investors have seen. It also means that commodity prices have gone up much less for people based in Europe or Japan than they have for people in the U.S. Yes, the price of oil is up in Yen and Euros this year, but not by nearly as much as in the U.S.

There are those (many with very large soapboxes) who would have you believe that the decline in the dollar is a crisis. I, however, beg to differ.

While in the big picture over time it is not desirable to have the currency constantly devalued, at this point the decline is not likely to cause major problems. The major downside to a falling dollar is that it makes our imports more expensive, and thus can contribute to inflation. This is particularly true in the case of oil, which tends to rise as the dollar falls. After all, why should the price of oil for someone in France or Japan go down just because the dollar is weak?

However, right now such inflation is just offsetting deflation in other parts of the economy. The biggest weighting in the CPI is owner’s equivalent rent, or what it would cost you to rent a home identical to the one you own next door to your house. It makes up almost 24% of the overall CPI. Add in the rent that people pay to landlords if they don’t own a house and the figure gets close to 30%. It is part of core inflation, so if you strip out food and energy prices it is almost 40% of the core basket of goods.

Due to the weak housing market, and rapidly rising rental vacancy rates, rents are likely to be under substantial pressure for some time to come.

There is one currency, though, that the dollar has not declined against, and that is the Chinese Yuan, since the Chinese peg it to the dollar. Since we import a lot of goods from China, the decline in the dollar is not going to cause inflation in those prices.

The upside is that it means that our exports are much more competitive. This applies even in China, since we are often going head to head, not against local Chinese companies, but against European or Japanese firms. More exports mean more jobs, and a lower trade deficit.

Remember that net exports are a direct input into the GDP calculations. With an unemployment rate of 10.2% and rising, getting the economy moving again is a FAR higher priority than fighting inflation during a time of major deflationary pressures.

Since many U.S. companies have substantial operations abroad, or export goods, the decline in the dollar means a major tailwind to their earnings, since the euro they earned is worth more in dollars today than the euro they earned a few months ago was worth then. For the S&P 500 as a whole, more than 40% of the earnings come from abroad. For many companies like Coca Cola (KO) and Colgate Palmolive (CL), it is much higher than that.

One also has to take a longer-term look. The dollar has been slipping against both indexes since 2001, but there was a huge and sharp counter-trend rally a year ago as the world economy saw the wheels come off. The U.S. has always been a safe haven in times of distress, and around the world people flocked to pull their money out of Pounds and Rupees as they tried to find a safe place to hide in the turmoil.

The dollar still has not returned to the lows it saw early last year. Seeing the dollar decline as a crisis is sort of like seeing the decline in the TED spread as a crisis. It is not -- it is a sign that things are getting back to normal.

Also, the dollar has suffered far greater declines in the past with no major ill effects on the economy. To believe that a 14.4% decline in the dollar today is going to cause major havoc in the economy, then one must remember the last half of the 1980’s -- when the dollar fell by almost 40% against other major currencies -- as a period of economic disaster. Somehow that is not my recollection of the time.

Given the chronic trade deficits this country is running, and has been running for a long time, a weak dollar might not be good, but it is necessary. The last quarter we ran a trade surplus in was the 3Q of 1980. That’s right, when Jimmy Carter was in the White House.

While recently the trade deficit has come down, it was still 2.71% of GDP in the third quarter. That is still an awful number for our long-term economic health. However, it looks great when you consider that the trade deficit has averaged 4.575 of GDP so far this century and was over 5% of GDP for three straight years, from the second quarter of 2004 through the second quarter of 2007.

It is the trade deficit that determines how indebted we are to the rest of the world, not the fiscal deficit. We have run up big debts to the rest of the world, resulting in China for example owning over $1.5 Trillion in T-notes. In return, we got all the stuff that line the shelves of Wal-Mart (WMT). Now the credit card statement has come and we have to start paying. As the dollar falls it means we get to pay that debt back cheaper. We have to make and sell less stuff overseas compared to the stuff that was made abroad and sent here.

Now, other countries might not be all that happy about it, but what are they going to do? Sell their dollars so we can repay even cheaper? As long as the decline in the dollar is gradual and orderly, it will help boost the economy. The stock market realizes this. The fact that the market bottomed on the same day the dollar peaked out was no coincidence.
Read the full analyst report on "KO"
Read the full analyst report on "CL"
Zacks Investment Research

Pasko: Dvorishchi ain’t no Cape Town

Robert Amsterdam — Tue, 10 Nov 2009 19:03:05 +0000

The last week of October was a tense time for the bureaucrats at Minprirody, Russia's Ministry for the Protection of the Environment and Natural Resources, and naturally for Minister Yuri Petrovich Trutnev. He went all the way to Cape Town,...

McDonald’s Outdoing Rivals – Analyst Blog

Zacks Market Commentaries — Tue, 10 Nov 2009 15:30:10 +0000

McDonald’s Corporation’s (MCD) comparable sales for the month of October 2009 showed a sluggish growth of 3.3% as against the rise of 8.2% in the same month last year, exposing its sensitivity to rising unemployment, economic downturn, and the discount war amongst fast-food chains to lure consumers.

The company faces stiff competition from Burger King Holdings Inc. (BKC), Wendy’s/Arby’s Group, Inc. (WEN) and Yum! Brands Inc. (YUM). However, these quick-service operators are faring better than casual dining restaurant chains, such as Cosi Inc. (COSI) and Red Robin Gourmet Burgers Inc. (RRGB), as cash-strapped consumers are trading towards fast-food centers due to relative cheap dining options.

System-wide sales at McDonald’s worldwide restaurants climbed 10.3% for the month of October. However, in constant currencies, the rate of increase in system-wide sales dipped to 5.2%.  In the United States , comparable sales remained flat falling 0.1% in October (versus 5.3% increase last year for the comparable month). New menu products, including Angus Third Pounders and McCafe premium coffee line-up continued to support the month's results.

The fast-food giant had earlier indicated that U.S. sales for the month of October would be weak. Still the month’s result fared better than the overall quick-service restaurant industry.

In Europe, comparable sales increased 6.4% in October (versus 9.8% increase last year for the comparable month) fueled by strong performance in the U.K. , Germany and France . A variety of mid-tier items and premium menu options contributed to sales.  Comparable sales in Asia/Pacific, Middle East and Africa (APMEA) rose 4.7% in October (versus 11.5% increase last year for the comparable month) driven by Australia and Japan, partly offset by China.
Read the full analyst report on "MCD"
Read the full analyst report on "BKC"
Read the full analyst report on "WEN"
Read the full analyst report on "YUM"
Read the full analyst report on "COSI"
Read the full analyst report on "RRGB"
Zacks Investment Research

MoneyGram Rewards Reaches Canada – Analyst Blog

Zacks Market Commentaries — Fri, 06 Nov 2009 16:47:56 +0000

MoneyGram International Inc. (MGI) announced the expansion of MoneyGram Rewards into Canada, a loyalty program that offers members fee discounts, receive notices, and fast and convenient money transfers.

MoneyGram Rewards were expanded earlier this year into Germany, Spain and France. It was first introduced in the U.S. in 2008 and now has more than 3.5 million customers who enjoy the benefits of membership, which include discounted transactions, a personalized card for expediting money transfers, quarterly statements and the ability to manage one’s account and profile online.

Further in September, MoneyGram added a feature to the program that allows members to be notified via SMS text message when their money transfer transaction has been picked up by the receiver.

The expansion of the program is a part of MoneyGram’s growth plans in Canada. In July, the company announced the roll-out of thousands of additional Canada Post locations, resulting in MoneyGram money transfer services available at more than 5,000 Canada Post outlets coast to coast.

On Oct 30, MoneyGram reported third-quarter loss of 25 cents, substantially short of the Zacks Consensus estimate of 3 cents. The downside was mainly due to $37.4 million in one-time costs for a patent lawsuit, a legal settlement with the Federal Trade Commission, stock-based compensation and severance costs, asset write-downs and securities gains.
Read the full analyst report on "MGI"
Zacks Investment Research

Celanese Beats Zacks Estimate – Analyst Blog

Zacks Market Commentaries — Tue, 03 Nov 2009 21:55:33 +0000

Celanese Corporation (CE), a leading global chemical company, reported net earnings of 58 cents per share in the third quarter of 2009, beating the Zacks Consensus Estimate of 42 cents. Results, however, were lower than last year’s 78 cents.

Weak pricing and lower volumes, especially for Acetyl Intermediates and Industrial Specialties products on weak global demand led to net sales of $1.3 billion in the quarter, down 28% from the same period last year. The Acetyl Intermediates segment primarily serves customers in the chemical, paint and adhesives industries.

Consumer Specialties: Net sales slid 8% to $271 million in the quarter, driven by lower sales volumes primarily in North America and Europe and negative currency impacts. However, higher pricing, lower raw material and energy costs and benefits from the company’s fixed cost reduction efforts drove a 24% rise in operating profit to $52 million. Consumer Specialties continued to deliver strong performance as higher pricing and Acetate Products venture growth in China -- as well as lower overall costs -- offset modest volume declines resulting from softer product demand.

Advanced Engineered Materials: Significantly lower volumes in many of its end-use industries continued to impact year-over-year performance in the segment. Net sales decreased 19% to $220 million in the quarter, primarily driven by lower volumes in the U.S. and European automotive markets, as well as other consumer and durable goods segments. Operating profits improved 61% to $21 million on lower raw material and energy costs.

Industrial Specialties: Net sales of $236 million reflected a 38% year over year decline driven by lower volumes associated with softer demand for PVOH. The decrease in net sales was also attributed to lower pricing and the negative impacts of currency. However, volumes increased sequentially on improved demand in North America, Europe and Asia, particularly in the company’s emulsions business. Operating profit more than doubled to $44 million compared with $18 million in the same period last year. Margins expanded in the core businesses, following lower raw material costs and the benefits of the company’s fixed spending reduction efforts.

Acetyl Intermediates: Net sales declined 37% to $666 million in the quarter compared with $1,067 million in the same period last year, primarily due to lower pricing and modestly lower volumes. Lower year-over-year industry utilization rates caused by reduced global demand, coupled with lower raw material costs, drove the pricing decline. The company’s operating rates for its acetic acid facilities remained at high levels during the quarter; however, volumes in vinyl acetate monomer and other derivative products were lower, reflecting the reduced demand.

Industry demand in Asia has continued to increase sequentially from its lowest levels in the fourth quarter of 2008. Demand in Europe and the Americas remained weak in comparison, but showed modest improvement during the same period.

Cash and cash equivalents at the end of the quarter were $1.3 billion compared with $548 million at the end of the third quarter of 2008. In 2009, the company received net cash of $168 million from the sale of the PVOH business and an advance payment of $412 million related to the relocation of Ticona’s business in Kelsterbach, Germany. Celanese reduced its net debt at the end of the reported quarter to $2.3 billion from $3 billion last year. However, debt to capital ratio of above 80% is our major concern.

Going forward, Celanese plans to reduce fixed spending by $100 million in 2010, as it streamlines manufacturing operations and administrative functions, including the closure of its facility in Pardies, France. The company also expects volumes to increase across all of its businesses and an adjusted tax rate of below 20%. Celanese expects these changes to add $1 to earnings per share next year.
Read the full analyst report on "CE"
Zacks Investment Research

Global Manufacturing, France Outperforms, As Spain Continues To Flounder

Edward Hugh — Tue, 03 Nov 2009 14:15:00 +0000

Well, it is not as if I relish rubbing salt into old wounds, but this quote from the a href="http://www.ft.com/cms/s/0/8bb0da5a-c7dc-11de-8ba8-00144feab49a.html"latest piece by Ben Hall in Paris and Ralph Atkins in today's Financial Times/a is just too good to resist.br /br /blockquoteFrench manufacturing output rose at its fastest rate for nine years, according to a survey on Monday, confirming that France has become the economic powerhouse of continental Europe. Purchasing managers’ indices for manufacturing showed France performing significantly better than the continent’s other main economies – thanks to robust domestic demand./blockquotebr /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SvASaIFOk2I/AAAAAAAAPjI/Xa0wjOVFc3A/s1600-h/france+manufacturing.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 213px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5399836193272533858" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SvASaIFOk2I/AAAAAAAAPjI/Xa0wjOVFc3A/s400/france+manufacturing.png" //abr /br /Plenty of food for thought in this paragraph it seems to me. As a href="http://spaineconomy.blogspot.com/2009/10/french-rebound-continues-in-october.html"foreshadowed in this earlier post/a, it is the French economy - and not the German one - which is rebounding sharply, and this seems to be for essentially three reasons:br /br /i) there is still life in domestic demand, due to the fact that demographics are good, and lending to households (at an average rate of increase of 11%) was a lot less during the last boom than it was in the bubble societies (20% per annum in Spain and Irelandbr /br /ii) France's more favourable demography means that the French government has more space for fiscal stimulus (when compared with Germany) which means the "cash for clunkers" can roll on a bit longer.br /br /br /iii) the combination of these above two factors means that stimulus actually can work, since it can fire up domestic consumption which is not already dead on its feet. That is, the situation is a win-win one in the classic sense (although, as I was arguing at the end of last week, the ECB will now need to do some pretty adroit monetary footwork if it wants to avoid firing up an asset bubble in France, to follow hot on the heels of the one which has just deflated in Spain.br /br /As Jack Kennedy, economist at PMI survey organisers Markit put it:br /br /blockquote“The strong recovery in French manufacturing continued in October, with output rising at the fastest pace for nine years. While some of the current strength reflects a rebound from the extreme financial crisis, it nevertheless offers further evidence that the France is towards the front of the pack among developed economies in emerging from the downturn. Domestic demand remains the key driver of growth as confidence continues to recover.”/blockquotebr /br /strongClimbing The Tourmalet/strongbr /br /The current recovery could be conceptualised as a group of Tour de France cyclists set on scaling the slopes of the notorious Tourmalet. One group of riders - mainly emerging economies like China (current PMI 55.4), Brazil (53.7), India (54.5) and Turkey (52.8) are out in front, with just two developed economies having "escaped" from the main group to try and catch them, France (55.6) and Sweden (56.7).br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SvAXJ5ORgNI/AAAAAAAAPjQ/1ouB0sLKseE/s1600-h/sweden.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 228px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5399841411964174546" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SvAXJ5ORgNI/AAAAAAAAPjQ/1ouB0sLKseE/s400/sweden.png" //abr /br /Then comes the main group, who continue to show a modest recovery, howevering around or even (at last) somewhat over the 50 point break even mark (Germany (51), the US (55.7), Japan (54.3), the UK (53.7), the Netherlands (50.5), Austria (51.1), etc). In Eastern Europe, the Czech Republic (49.8) and Poland (48.8) though still weak continue to gain ground, while the Russian team this month unexpectedly had a puncture, and dropped back into contraction territory (49.6), after registering growth in September.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SvAYQ5usHjI/AAAAAAAAPjY/f2hEzuEg6cQ/s1600-h/russia.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 244px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5399842631870848562" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SvAYQ5usHjI/AAAAAAAAPjY/f2hEzuEg6cQ/s400/russia.png" //abr /br /br /And then come the stragglers lead by Italy (which is peddaling furiously, but - with a PMI of 49.2 - doesn't seem to ever quite make it over that critical 50 mark, oh well, next month perhaps),followed closely by Hungary (48.2), Greece (48), Ireland (48), South Africa (47.8) and of course, in last place, I think the rider is now so weary he is getting off to walk the bike up the hill, comes poor old Spain (46.3), where more or less predictably, the contraction continues. In particular Spain stands out as almost the worst case scenarion now, with a manufacturing sector which continues to bleed jobs in a country where no one seems to have any serious proposals about what to do except wait in the hope that things might get better eventually, and of their own accord. The sky in front with always be clearer mañana, of course.br /br /strongItaly/strongbr /br /Commenting on the Italy Manufacturing PMI survey data, Andrew Self, economist at Markit said:br /br /blockquote“Italian manufacturers reported that their recession which has spanned eighteen months finally ended in October, two months behind the Eurozone as a whole. Production rose for the first time since March 2008, driven by a marginal return to growth of new orders. Although the October survey represents a step in the right direction on the road to recovery, weakness persists which suggest that a sustainable upturn is by no means guaranteed."/blockquotebr /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SvAZhSahMMI/AAAAAAAAPjg/eR-WP40rM1w/s1600-h/italy.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 211px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5399844012886667458" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SvAZhSahMMI/AAAAAAAAPjg/eR-WP40rM1w/s400/italy.png" //abr /br /strongHungary/strongbr /br /Hungary's manufacturing purchasing manager index dropped 0.8 percentage points to 48.2 points in October, according to the Hungarian Association of Logistics, Purchasing and Inventory Management (HALPIM). The October reading suggest the steady improvement that started in the spring may now have come to a halt.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SvAaRIs7jvI/AAAAAAAAPjo/TqC6X2j8l-Q/s1600-h/hungary.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 228px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5399844834913259250" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SvAaRIs7jvI/AAAAAAAAPjo/TqC6X2j8l-Q/s400/hungary.png" //abr /br /strongGreece/strongbr /br /The seasonally adjusted Markit Greece Purchasing Managers’ Index fell marginally to 48.0 in October from 48.5 in the previous month. The latest reading signalled another slight deterioration in operating conditions across Greece’s manufacturing economy.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SvAa59cg8WI/AAAAAAAAPjw/xF8gF6eN3Us/s1600-h/Greece.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 228px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5399845536266252642" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SvAa59cg8WI/AAAAAAAAPjw/xF8gF6eN3Us/s400/Greece.png" //abr /br /Commenting on the Greece Manufacturing PMI survey data, Gemma Wallace, Economist at Markit said:br /br /blockquote“The hope raised in August of an imminent recovery in Greek manufacturing production has dwindled somewhat over the past two months, as the PMI has sunk back into negative territory. Nevertheless, the headline index continued to signal only a slight weakening of the business environment. Additionally, almost all of the surveyed variables are improved on their twelve-month averages – in most cases noticeably so. These are clear signs that progress has been made and therefore show that the sector is on the right path to stabilisation and recovery, even if it has not quite got there yet.”/blockquotebr /br /strongIreland/strongbr /br /In Ireland the October data indicated that, while operating conditions at Irish manufacturers continued to deteriorate during the month, the sector moved a step closer to recovery. Both output and new orders fell only slightly, and purchasing activity decreased at a markedly slower rate. The seasonally adjusted NCB Purchasing Managers’ Index rose to 48.0 in October, from 46.6 in the previous month. This signalled that the rate of deterioration in business conditions eased to the weakest since February 2008.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SvAbY_LAqrI/AAAAAAAAPj4/hOUvnTJ-B5U/s1600-h/ireland.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 189px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5399846069305649842" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SvAbY_LAqrI/AAAAAAAAPj4/hOUvnTJ-B5U/s400/ireland.png" //abr /br /Commenting on the NCB Republic of Ireland Manufacturing PMI survey data, Brian Devine, economist at NCB Stockbrokers said:br /br /blockquote“The output and new orders components very nearly breached the sacred 50 mark in October. New export orders did however fall away marginally after breaching 50 last month. The fall in new export orders reflected sterling weakness which is continuing to squeeze the manufacturing sector. With UK exports under pressure it is a welcome sign that the US economy posted impressive GDP growth in Q3, even when account is taken of their scrappage scheme. With global economic activity gathering momentum we are still hopeful that the Irish economy will begin growing in Q4 of this year and the latest PMI was comforting in this regard.”/blockquotebr /br /strongSouth Africa/strongbr /br /South Africa’s purchasing managers’ index rose to its highest level in 16 months in October as the country’s first recession in 17 years eased, according to the monthly report from Kagiso Securities. The seasonally adjusted index increased to 47.6 from a revised 45.9 the month before. The index has been below 50, which points to a contraction in output, since May 2008.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SvAcJidpVcI/AAAAAAAAPkA/8r1-4UayMyA/s1600-h/south+africa.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 238px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5399846903412774338" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SvAcJidpVcI/AAAAAAAAPkA/8r1-4UayMyA/s400/south+africa.png" //abr /br /br /strongSpain/strongbr /br /Operating conditions in the Spanish manufacturing sector continued to deteriorate in October. Output fell further over the month, while new orders contracted at the sharpest pace since May. Supplier lead-times lengthened for the first time in nineteen months.br /br /The seasonally adjusted Markit Purchasing Managers’ Indexcontinued to signal a marked decline in overall business conditions, posting 46.3 in October. Operating conditions have worsened in each month since December 2007. Output decreased modestly in October as the wider recession in Spain continued to impact negatively on demand. Production has now contracted in twenty of the past twenty-one months.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SvAcixPLCcI/AAAAAAAAPkI/hPnxmfd7Mbc/s1600-h/spain.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 220px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5399847336875329986" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SvAcixPLCcI/AAAAAAAAPkI/hPnxmfd7Mbc/s400/spain.png" //abr /br /Commenting on the Spanish Manufacturing PMI survey data, Andrew Harker, economist at Markit, said:br /br /blockquote“Spain's recovery continues to lag the upturn seen across the Eurozone as a whole, and a steeper contraction of manufacturers' order books in October will be of particular concern as it points to a further delay to any prospects of stabilisation.Competition is so intense that firms are being forced to slash prices, despite their raw material prices increasing. The stabilisation of unemployment in the third quarter signalled by official figures is likely to be only temporary with PMI data continuing to show considerable falls in employment in the manufacturing sector as firms seek cost cuts.”/blockquotebr /strongbr /Global Improvement - But Watch Out For The Stragglers, And Those Overly Dependent On Exports/strongbr /br /So, as JPMorgan say in their Global Manufacturing report, the Global Manufacturing PMI hit a 39-month high in October, and at 54.4 posted its highest reading since July 2006. The PMI has now remained above the neutral 50.0 mark for four successive months. But while the general picture is one of solid, if modest, growth, the group of stragglers at the back of the pack (to which would could add names like Latvia, Portugal, Romania, Finland, and Ukraine, where PMI surveys do not currently exist) point to potential problems further on down the line in 2010.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SvAd2ZMzgEI/AAAAAAAAPkQ/hpgOEjv2w8I/s1600-h/JPMorgan+Global.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 226px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5399848773531959362" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SvAd2ZMzgEI/AAAAAAAAPkQ/hpgOEjv2w8I/s400/JPMorgan+Global.png" //abr /br /Also of concern is the way the index in export dependent countries like Germany and Japan (both suffering the added impact of having a high currency following the ongoing dollar weakness) continue to struggle for air. This is more apparent in the German than the Japanese case at this point, but the survey organisers specifically highlightend the way in which survey respondents in Japan are already reporting a lack of "bounce" in export orders, and this once more serves to highlight the weak spot in the current recovery picture - where are all the customers for all those exports eventually going to come from.br /br /Commenting on the Nomura/JMMA Japan Manufacturing PMI data, Minoru Nogimori, Economist of Financial amp; Economic Research Centre at Nomura, said:br /br /blockquote“October’s Japan Manufacturing PMI fell for the first time in nine months, by 0.2 points to 54.3. It remains above the key dividing line of 50.0, indicating that production activity continues to recover, but suggesting that the pace of improvement is slowing. The New Export Orders Index, a leading indicator of Japanese exports, fell 2.5 points to 51.6. Although this is the fifth consecutive month in which the figure has been higher than 50.0, the October reading suggests that the pace of improvement has obviously slowed. An improvement in export demand was the main factor behind the rebound in Japanese manufacturing output. Therefore, we think that the strong rebound in production activity in Q2 and Q3 now looks likely to run out of steam from 2009 Q4.”/blockquotebr /br /br /This final point, along with the negative impact that problems among the "stragglers" may present for the main group later on up the hill suggests, to me at least, that while many emerging markets remain strong, we will almost certainly not see anything resembling a "V" shaped global recovery, and especially not in the OECD countries. As far as I am concerned this hypothesis can already be safely discarded.div class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/7353833406525447404-8047735750934718335?l=frencheconomy.blogspot.com' alt='' //div

Will Russia Deliver On Iran?

Robert Amsterdam — Tue, 03 Nov 2009 12:28:09 +0000

Today's POLITICUS in the New York Times tries to fathom the extent to which NATO and the Western powers really trust Russia to cooperate in putting pressure on Iran, regarding its nuclear programme. Whilst certain recent moves by the West...

AGCO’s Outlook Remains Weak – Analyst Blog

Zacks Market Commentaries — Mon, 02 Nov 2009 22:27:58 +0000

Last week, AGCO Corp. (AGCO) reported third-quarter results. The company posted earnings of 13 cents per share, compared $1.01 per share in the prior-year quarter. The significant decline in quarterly earnings was driven by lower sales volumes, weaker product mix and the negative impact of currency translation.

Net sales in the quarter were $1,403.7 million, down 32.7% compared to the third quarter of 2008. AGCO is experiencing soft demand conditions in most of its markets. Lower commodity prices, along with expectations of decreased farm income, are hampering investments in farm equipment around the world. AGCO is aggressively cutting production in order to reduce its own and dealer’s inventories.

Sales in North America were down 31.9% on a constant currency basis due to weaker sales of low horsepower tractors and hay products, as well as reduction in dealer inventory. Unit retail sales of lower horsepower tractors were down due to weakness in the landscaping, residential construction and dairy sectors. This weakness is expected to continue for the remainder of the year.

In the EAME region, quarterly sales were down 30.3%, excluding the impact of foreign currency translation, due to lower volumes in Eastern Europe, Russia, France, Germany, Finland and Scandinavia. The company experienced major demand weakness from the diary and livestock sectors.

Sales from the South American region were down 20.5% (excluding foreign currency exchange impact) due to due to dry weather conditions and the impact of tightened credit on planted acreage and car production. The company saw improved demand conditions in Brazil during the quarter as the Brazilian government’s special financing plan for small farms continued to stimulate sales of lower horsepower tractors.

AGCO expects full year revenue in the range of $6.4 - $6.6 billion, compared to $8.4 billion in 2008. The revenue forecast includes unfavorable currency translation impacts of approximately $500 - $600 million. The company anticipates full-year EPS in the range of $1.30 - $1.50. We concur with the company that the demand for farm equipment is not expected to recover in the near-term.

We maintain an Underperform rating on the stock.
Read the full analyst report on "AGCO"
Zacks Investment Research

A New Spectre Is Haunting Europe, A Spanish One

Edward Hugh — Sat, 31 Oct 2009 08:00:00 +0000

A spectre is haunting Europe, but this time it is not the spectre of revolt by the popular masses, or even one of yet another wave of bank bailouts. No, the spectre which is currently stalking the corridors of Europe's most prestigous institutions is one of a Spanish economy which stays on a flatline while Europe's other economies, one by one, start to struggle back to life. And the main reason that this particular ghostly image is giving everyone so many sleepless nights is because Europe's current institutional structures, and especially the monetary policy tools available at the ECB are scarcely prepared for such a nighmare eventuality.br /br /br /strongFrance Is Recovering, And The Rebound Is Robust/strongbr /br /First it was just a rumour, then it was a possibility, and now it has become a reality - some of Europe’s economies are springing back into life. But only some. It all began quietly, with a barely noticeable 0.3% quarterly growth in French and German GDP in the second three months of this year. France and Germany will have maintained their modest growth into the third quarter , while Italy has now joined them, leaving only Spain among the Eurozone big four, registering yet another quarter contraction, and, more importantly, showing no evident sign that an early return to normal activity is anywhere near to the horizon.br /br /br /br /pa href="http://4.bp.blogspot.com/_ngczZkrw340/SurqRKoziMI/AAAAAAAAPiI/vmgkIPslnsU/s1600-h/gdp+one.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 218px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5398384683991140546" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SurqRKoziMI/AAAAAAAAPiI/vmgkIPslnsU/s400/gdp+one.png" //abr /br /In fact Spanish gross domestic product fell 0.4 percent quarter on quarter in the third quarter following a 1.1 percent drop between April and June , according to the Bank of Spain monthly bulletin. Spain's GDP also contracted 4.1 percent year on year in the quarter, after a contraction of 4.2 percent in the second three months.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SurqWT7L9oI/AAAAAAAAPiQ/PEXboiAyo0Q/s1600-h/gdp++two.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 215px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5398384772383504002" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SurqWT7L9oI/AAAAAAAAPiQ/PEXboiAyo0Q/s400/gdp++two.png" //abr /br /'This is the least pronounced contraction since the beginning of the recession ... and this improvement is linked to state-backed measures with a temporary effect,' the bank said.br /br /To this government stimulus effect, I would also add the net trade effect which is being felt as a result of the strong fall in imports, and the consequent closing of the current account deficit. With imports falling faster than exports (on an annual basis) the net impact is positive growth in the headline GDP number, and the Spanish CA deficit was closing very rapidly indeed in the third quarter (see chart below).br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/Suvh0JFbtvI/AAAAAAAAPi4/b1z6il8uIDo/s1600-h/current+account+balance.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 244px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5398656864241825522" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Suvh0JFbtvI/AAAAAAAAPi4/b1z6il8uIDo/s400/current+account+balance.png" //a/ppThe impact of the stimulus package can also be seen in the seasonally adjusted unemployment numbers supplied to Eurostat by the Spanish Statistics Office (INE). Unemployment (which hit 19.3% in September - see chart below) has been rising continuously since mid 2007, but the sharpest increases were registered during the fourth quarter of 2008 and the first quarter of 2009. br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/Suvh9KzYqkI/AAAAAAAAPjA/DQs6kBFtJDA/s1600-h/unemployment+one.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 212px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5398657019321821762" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/Suvh9KzYqkI/AAAAAAAAPjA/DQs6kBFtJDA/s400/unemployment+one.png" //abr /br /It is very hard to see any real difference in the trend rate of increase between the second and third quarters of 2009, and we should expect this trend job attrition rate to continue until it once more accelerates under the impact of either the government being unable to continue funding the stimulus, or the banking sector having a financial crisis (possibly induced by someone being forced into trying to sell some of the housing units they are accumulating only to discover that there are no buyers, since the market is effectively dead).br /br /strongLife, Unfortunately For Spain, Is Elsewhere/strongbr /br /But for all our preoccupations growth in 2009 is now no longer the issue. All eyes are gradually moving towards the outlook for 2010, and it is here that those little red lights have suddenly started flashing over at the European Central Bank.br /br /br /And the problem is a real and growing one, since according to a series of reports which have been published during the last week, while activity in the export dependent German economy remained very fragile, the French one has really starting to hum. The first sign of this came on Tuesday, with the initial reading for the October Purchasing Manager Index which showed that while the Eurozone economy in general entered the fourth quarter on a strong note, with growth accelerating in both manufacturing and services sectors, the private sector in France started to earn alpha grades by clocking up a third successive month of accelerating growth, leaving us with the impression that France is now seeing its steepest output expansion in nearly three years.br /br /Then on Wednesday the ECB presented its monthly bank lending data, which showed that lending to the euro area private sector shrank by an annualised 0.3 percent in September, the first such contraction since the series began in 1992. But looking a little more closely at a lending activity on a country by country basis, we find that while lending continues to contract in Spain, in France the credit cycle has turned, and indeed lending to households is now once more rising steadily (see chart below), indeed it never fell below an annual 4% rate of increase and the annualised quarterly growth rate in lending has been rising since the end of the first quarter.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/Suvf0cirFJI/AAAAAAAAPio/J8AVRFIl0Pw/s1600-h/french+credits+three.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 335px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5398654670441485458" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/Suvf0cirFJI/AAAAAAAAPio/J8AVRFIl0Pw/s400/french+credits+three.png" //abr /br /That is to say, credit is once more starting to flow freely round the French economy, while here in Spain banks continue to accumulate reserves, lending generously to the government, while money for struggling small companies and for young people looking to buy homes is hard to find. What is more, if we look at the chart below (which was prepared by Dominique Barbet and Martine Borde for PNB Paribas) we will see that the stock of unsold new homes – which was in any event never very high in France, maybe 100,000 in the spring – is down by 20% as sales steadily pick up again, while here in Spain we continue to play a guessing game to decide just how many (more than a million surely) such properties there are here, and the number is growing, not declining, since real new sales to private individuals (as opposed to newly completed properties contracted two years or so ago, or exchanges between developers and banks) are almost non existent at this point. Everyone knows prices will fall further, and are waiting for them to go down.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/Suvhp1Dk9-I/AAAAAAAAPiw/pv8qhhmyCJM/s1600-h/France+Housing+Stock.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 288px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5398656687066642402" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Suvhp1Dk9-I/AAAAAAAAPiw/pv8qhhmyCJM/s400/France+Housing+Stock.png" //abr /br /br /Then on Friday we had the key piece of information, which confirmed what many of us already suspected, since Markit PMI data for October retail sales made plain the presence of very divergent trends across the Eurozone, with ever more robust growth in France contrasting with falling sales in Germany and Italy. As Jack Kennedy, economist at survey organisers Markit Economics said “While the sense of growing optimism should be treated with some caution – it appears the increase in sales was also supported by widespread discounting and the continuation of the government’s car scrappage scheme – the outperformance of France relative to Germany and Italy offers further evidence that it is France that is leading the Eurozone recovery.”br /br /And here, with this very outperformance comes the problem, since the ECB policy rate will be set to target average eurozone inflation, which will certainly be lower than inflation in France, and possibly significantly lower. Which means the ECB policy rate will be below the one which the French economy will, in reality, need.br /Between 2000 and 2008 the structural dynamics of the Eurosystem were different from now. Spain was the "exceptional student", with above-average growth, and inflation which was consistently over the Eurozone average, and for long periods above the ECB policy rate. This had the consequence, of course, that French inflation was nearly always below the average. Now things have changed. We are coming out of recession with a eurozone divided into three groups. French growth is becoming robust, while Germany and Italy are dependent on exports and just keeping their head above water. Spain, on the other hand, fails to recover and continues to contract. This is what makes the current situation critical, since starting in 2010 France will have an inflation rate over the EU average, and in all probability over the ECB interest rate. Which means that if something isn't done, and soon, to force the situation in Spain, and produce a recovery, France will have negative interest real rates during a sharp economic rebound, with all the risks that that implies.br /br /Only last Wednesday Norway became the first western European country to raise interest rates since the start of the financial crisis after its central bank reported finding “signs of renewed growth” in the global economy. Central bankers from across the global, from Washington, to Sydney, to Delhi and to Oslo are all now busily telling us they are going to take increasing account of future accelerations in asset prices in an attempt to avoid repeating policy mistakes that are presumed to have inflated two speculative bubbles in a decade – and left the entire Spanish economy in a lamentable state. If France had its own monetary policy I have no doubt La Banque de France would be itching to follow the Norges Bank and raise rates, but there is one small problem, La Banque de France has no capacity to decide on monetary policy in this way, and herein lies the heart of what is now Europe and the ECB’s greatest dilemma. /pdiv class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/7353833406525447404-3684463336628684327?l=frencheconomy.blogspot.com' alt='' //div

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 [...]

FTE Hurt by Economy & FX – Analyst Blog

Zacks Market Commentaries — Fri, 30 Oct 2009 14:47:59 +0000

French telecom giant France Telecom (FTE) has reported operating results for third-quarter 2009 with revenue falling 6.4% year over year to €12.69 billion (US$18.1 billion), primarily due to unfavorable exchange rate fluctuations (British pound versus Polish zloty) and reduced mobile termination rates (inter-operator fees). Revenue was also hurt by the recession-driven discontinuation of landline phone use by customers.

EBITDA & Margin

France Telecom, which operates two of the leading telecom brands in Europe (Orange and Wanadoo), reported EBITDA of €4.6 billion (US$6.6 billion) which declined 8% from the year-ago quarter, resulting in a fall in EBITDA margin to 35.9% from 36.6%. This decline is a result of stringent price regulation and adverse currency exchange swings.

Revenue by Key Markets

Reported revenue in France (46% of group sales), the company’s largest market, declined 1.6% year over year to €5.9 billion (US$8.4 billion) largely due to a decline in legacy fixed-line business, partly offset by growth in wireless and data services.

The company’s second largest market, UK posted 15% year over year decline in revenue to €1.3 billion (US$1.9 billion) as a result of beleaguered economic conditions and regulatory pressure. The company’s UK operation (Orange UK) remains challenged by the cutthroat price competition as bigger rivals such as Telefonica’s (TEF) O2 UK and Vodafone (VOD) continue to boost their respective market share. Revenue in Spain and Poland fell by 4.7% and 29.3%, respectively.

Subscriber Trends

At the end of the quarter the company had 189.1 million subscribers across its vast operating territories, a 6.6% year over year increase, equating to 11.7 million net additions. Total cellular customer base grew 9.5% year over year to 128.8 million. Wireless subscriber accretion in the third quarter was healthy with 3.3 million net additions.

The company’s European subscriber base increased 35.5% year over year to 3.8 million (including 2.1 million in France). Momentum for ADSL broadband Internet also remains strong with 6% year over year growth in total customer base to reach 13.4 million at the end of the quarter.

Broadband usage was healthy as the Digital TV subscriber base increased 67% year over year to 2.9 million, while the VoIP customer base increased 22% to 7.3 million.

Outlook & Action Plans

France Telecom has reaffirmed its expectation of generating stable cash flow at the 2008 level of €8 billion (US$11.4 billion). Capital expenditure as a proportion of revenues is forecasted to be less than 12% in 2009 and the company is expected to spend more in the fourth-quarter. Revenue is expected to remain pressured due to economic and regulatory factors.

The company remains firm in its aggressive cost cutting initiatives as it aims to prevent EBITDA margin from further declines and to cope with the tighter regulatory environment.

France Telecom plans to retain its dividend policy with a distribution rate of 45% or more of organic cash flow while maintaining a healthy liquidity position. The company will continue its debt reduction policy as it targets to achieve a net debt to EBITDA ratio of less than 2. Moreover, France Telecom will continue to pursue acquisitions in high-growth markets.

To strengthen its foothold in the UK’s wireless market, France Telecom is merging its Orange UK operation with Deutsche Telekom’s (DT) subsidiary T-Mobile UK (fourth-largest mobile carrier in the UK) under a 50-50 joint venture. The combined entity would dethrone O2 UK as the largest wireless operator in the UK with roughly 37% market share. Orange UK is currently the third-largest operator in the British mobile market with roughly 21% share.

Orange UK also has won the rights to market Apple Inc’s (AAPL) iPhone (3G and 3GS) in the UK. iPhone represents a significant opportunity for the company to further bolster its presence in the UK’s mobile market by attracting new high-end subscribers.

France Telecom recently postponed all corporate restructuring initiatives until at least the end of 2009. The company is increasingly under pressure following a series of suicides by its employees, believed to be the result of continuous workforce restructuring. France Telecom recently revealed its plan to earmark €1 billion (US$1.5 billion) on account of a part-time job scheme to mitigate stress among its French workforce.

Note: France Telecom does not disclose net profit figure at the first-quarter and third-quarter stages.
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Colgate Reports Modest Earnings – Analyst Blog

Zacks Market Commentaries — Thu, 29 Oct 2009 21:23:42 +0000

Colgate Palmolive Company (CL) reported results for the third quarter of 2009 with earnings of $1.12 per share, which was a penny above the Zacks Consensus Estimate of $1.11. Earnings were up 13.1% year-over-year, driven by effective price implementation and ongoing aggressive cost savings program.

Net sales for the quarter were flat year-over-year declining marginally by 0.3% to $3.9 billion as unit volume increased 1.5% and pricing contributed 5.0%. This was partially offset by negative foreign exchange translation of 6.5%. Organic sales (excluding foreign exchange, acquisitions and divestitures) increased 7.0% in the quarter.

North American sales increased 3.0% driven by 1.5% pricing and 5.0% unit volume growth, partially offset by 0.5% negative currency translations. In Latin America, sales grew 5.0% as unit volume increased 3.0% driven by solid gains in Venezuela which were partially offset by an 11.0% negative foreign exchange impact.

In Europe/South Pacific, sales declined 5.5%; however, unit volume increased 2.5% as volume gains in U.K. and Greece, were more than offset by the declines in France, Germany the U.K., Denmark, Greece, Portugal and the GABA business. Sales in Greater Asia/Africa declined 3.0% while unit volume declined 2.5% as volume gains in India, Thailand and Turkey were more than offset by declines in Russia, the Philippines, South Africa and the Ukraine.

Sales in the Hill’s Pet Nutrition business grew 1.5%, however unit volume declined 2.5% and foreign exchange had a negative impact of 0.5%, which was partially offset by a 4.5% increase in pricing. Demand was strong for existing products such as Science Diet Culinary Creations feline products and the expanded line of Science Diet Simple Essentials Treats Canine.

Gross margins expanded 313 basis points (bps) to 59.2% from 56.1% in the prior-year period driven by benefits of restructuring activities and pricing. The operating margin also increased 333 bps to 22.2% versus 19.8% in the prior-year quarter, driven by a 30 bps decline in advertising. Capital expenditures for the first nine months of 2009 were $347 million.

Year-to-date net cash provided by operations increased 34% to $23.7 billion, due to efficient working capital management, especially a reduction in receivable days outstanding. The company has a debt-to-total-capitalization ratio of 52.5%.

Concurrent with the earnings release, management provided the outlook for the remainder of fiscal 2009. Management expects continued improvement in gross margins for the rest of the year, due to moderation in commodity costs and benefits from pricing and cost reduction programs.
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DrStockPick.com Stock Report! 10/29/09, REIS, CSRH, T, PRVT, REVU, TGAL

Dr. Stock Pick — Thu, 29 Oct 2009 13:59:00 +0000

Dr Stock Pick HOT News & Alerts! _______________________________________ FREE Daily Stock Alerts From DrStockPick.com _______________________________________ Thursday October 29, 2009 DrStockPick.com Stock Report! ************************************************************** Consorteum Holdings Inc. (OTCBB: CSRH) announced that it has proceeded to launch its consumer stored value rebate card. The consumer rebate card program will offer manufacturers and retailers a new way to process mail-in rebates that [...]

Sanofi drags Hospira and Apotex (NYSE:SNY)

Jyotsna Ramani — Tue, 27 Oct 2009 16:54:31 +0000

Sanofi-Aventis SA (ADR) (NYSE:SNY), France’s biggest pharmaceutical group has accused Hospira Inc and Canada’s Apotex Inc of infringing patents for the cancer drug Taxotere. Sanofi-Aventis has said that both the companies have tried to copy ...

Beyond The Consensus On European Bank Credit

Edward Hugh — Tue, 27 Oct 2009 14:58:00 +0000

Well, I never thought I would have to wait very long to get some confirmation of my last post on things that could go bump in the night in France, but even I wasn't expecting confirmation of what I was trying to get at so quickly. Now, according to a href="http://www.ft.com/cms/s/0/f7e77b94-c2e0-11de-8eca-00144feab49a.html"Frank Atkins in The Financial Times this morning/a:br /blockquoteThe eurozone has reported the first year-on-year fall in bank lending to the private sector, strengthening the case for the European Central Bank to maintain its ultra-loose interest rate policy. The latest eurozone credit statistics indicated lending had been scaled back at an unprecedented pace, even though signs have become stronger that the 16-country region’s economy has stabilised./blockquotebr /br /What are we talking about here?br /br /Basically bank lending to the euro area private sector shrank by an annualised 0.3 percent in September, according to the European Central Bank's monthly report, making for the first contraction in lending since the series began in 1992. In fact, as Frank Atkins points out, there is some positive gleem in the data, since month-on-month there was €14bn pick-up in lending to households in September. Nevertheless lending to households was still 0.3 per cent lower than a year before. That compared with a year-on-year contraction of 0.2 per cent in August. However, before we start talking about whether to put a positive spin on the tealeaves we should make ourselves awar that this entire way of reading things is deeply problematic, since it ignores two vital points (which is why I head this post "beyond the consensus", since from time to time you can read things here on this blog that you normally won't even find in the analyst surveys): br /br /i) when you get near turning points inter-annual data becomes increasingly inadequate, and hence we now need to follow quarterly and even monthly data, or we will miss the turn.br /br /ii) aggregate data masque the big differences we have between the different euro area economies, and this is how Spain and Ireland got into the mess they are in. The big news of the moment, I would argue, is that the credit cycle has clearly TURNED in France, as I will show in the accompanying charts below indicating quarterly annualised movements. In other countries (and particular Spain) the downward drift continues. So basically relying on the average number hides a multitude of sins, as it did last time round when Spain got into the mess it is now in, and this is one of the things I think we should be learning this time round, since if not,..................br /br /br /strongThe French Credit Cycle Turns/strongbr /br /The chart below (which comes from the Bank of France, based on data to September) shows total credit to the private non financial sector. As we can see, on a year on year basis, the rate of credit increase continues to fall (thick blue line). But if we look at the three month annualised rate, we will see that this rebounded after June (narrow black line). What I interpret this to mean is that the credit cycle in France has now turned, and looking at the interannual data you miss the bottom. This finding is pretty important I would say.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SucHukVaMUI/AAAAAAAAPfA/-flxNO84mNQ/s1600-h/french+credits+three.png"img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 335px;" src="http://2.bp.blogspot.com/_ngczZkrw340/SucHukVaMUI/AAAAAAAAPfA/-flxNO84mNQ/s400/french+credits+three.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5397291175035679042" //abr /br /Corporate borrowing (SNF) has also bottomed, although even on a quarterly annualised basis it is still negative. Even corportate borrowing should turn positive in the next quarter, and it will be this that should allow the government to take the hand of the "G" button and start to rein-in the fiscal deficit, as win-win growth and inflation dynamics start to set in. But what this also will mean is that the ECB, at least in the case of France, now need to start take off the ultra-loose monetary policy. What a dilemma! br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SucHnfG0rtI/AAAAAAAAPe4/Zzlcj-UmRvc/s1600-h/french+credits+two.png"img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 323px;" src="http://3.bp.blogspot.com/_ngczZkrw340/SucHnfG0rtI/AAAAAAAAPe4/Zzlcj-UmRvc/s400/french+credits+two.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5397291053373238994" //abr /br /Household credit growth never even reached negative in France, and is now clearly on the rebound too, and with it the French housing market. (Menages in French is households).br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SucHgdG6xOI/AAAAAAAAPew/m_MG80ub-fQ/s1600-h/french+credits+three.png"img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 335px;" src="http://1.bp.blogspot.com/_ngczZkrw340/SucHgdG6xOI/AAAAAAAAPew/m_MG80ub-fQ/s400/french+credits+three.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5397290932577682658" //abr /br /For fuller explanation of the deep significance of having the credit cycle turning in France significantly ahead of the rest of the euro area see a href="http://frencheconomy.blogspot.com/2009/10/eurozone-flash-pmis-france-rebounds.html"The French Rebound Continues In October While Germany Moves Sideways/a.div class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/7353833406525447404-3624629569620319856?l=frencheconomy.blogspot.com' alt='' //div

The French Rebound Continues In October While Germany Moves Sideways

Edward Hugh — Tue, 27 Oct 2009 07:30:00 +0000

Whoever would have thought that some people once called economics the most dismal of sciences? Certainly, as the current crisis goes on and on, those of us who consider ourselves to be economists scarcely are able to find the time to squeeze in a dull moment, even here and there. But even at a broader level, interest in that most dismal of dismal topics - the theory and practice of central banking - seems now to fire up levels of enthusiasm here in Spain that make even the appetising prospect of a forthcoming Real Madrid-Barça football match pale in intensity. Even if it is the case, I have to admit, that the everyday Johnny (or Jill) come lately sitting in the bar still - truth be told - prefers the sports columns of the daily newspapers, or the lacivious details of the latest romantic adventure of one of the rich and famous to a careful perusal of the detailed minutes of the last policy rate setting meeting over at the central bank.br /br /br /The reason for the sudden and unexpected upsurge in interest should, I would have thought, be obvious - since with 85% of Spanish mortgages being variable (and thus determined by the ECB policy rate), and Spain's economy sinking into an ever deeper pit, the impact of the coming decisions (or even the hints at possible future decisions) have entered peoples lives like never before. And this is doubly the case in an environment where - as a href="http://www.bloomberg.com/apps/news?pid=20601089amp;sid=aIYvRd5Zjf2Y"Bloomberg inform us this morning/a - central bankers from across the global, from Washington, to Sydney, to Oslo are likely to take increasing account of future accelerations in asset prices in an attempt to avoid repeating policy mistakes that are presumed to have inflated two speculative bubbles in a decade, culminating in the worst financial crisis since the Great Depression.br /br /By way of illustration for their feature story the Blomberg reporters single out the prime example cases of Norway and Australia, countries whose recent stronger than average inflation and growth performance is now so well known to regular investors for the mention of their name in such reports to have become a mere commonplace, with the respective currencies being eagery purchased to the sound of hearty lipsmaking at the thought of all the juicy carry which lies ahead. Personally though, had I been doing the writing, I would have chosen a rather different example, one much nearer to the heart of Europe (and thus a little closer to my own) - France.br /br /And why France you may ask? Well quite simply because the French economy is now plainly and evidently on the mend. That is the big, big news which can be gleaned from last Friday's Flash Markit PMI readings (see detailed breakdown below). Now those who regularly follow this blog will know that this seemingly unexpected leap into poll position hardly comes as a surprise to me, since I have long been arguing that the French economy would emerge as the strongest among the EU economies from the present deep recession, and some of the theoretical justification for this view a href="http://bonoboathome.blogspot.com/2008/01/french-economy-is-back-at-number-5.html"can be found in this post here/a, while a href="http://frencheconomy.blogspot.com/2007/08/france-europes-new-sick-man.html"an earlier piece from Claus Vistesen in 2006 /aalso gives an illustration of how we might conceptualise the problem.br /br /So one epoch ends, and another begins, inauspicious as the beginnings may be. To summarise briefly the argument which will be presented below, there is both good and bad news here, since this early and isolated recovery in France is bound to create difficulties of the "exit thinking" kind for policymakers over at the ECB. The most pressing of the problems will concern what to do about containing French inflation if exit dependency in Germany means that a full recovery there remains out of reach, while Italy languishes where it has always languished and Spain's seemingly intractable difficulties only increase. In other words, what will happen if - as seems obvious - the eurozone economies are in fact diverging, and not converging, and the divergence far from reducing is in fact increasing.br /br /As we will see in the charts which follow the long term decline in the GDP share of French manufacturing, which is closely associated with the steady opening of a trade deficit there, poses special threats and problems for ECB monetary policy. This long term manufacturing decline and growing external deficit are, in my opinion, the tell tale first signs of larger structural problems to come should inappropriate monetary policy be applied too hard for too long. That is to say France is well positioned to get a distortionary bubble next time round (of the exactly the kind the newly vigilant central banks should be at pains to avoid, and indeed precisely the bubble they successfully avoided last time round) unless the ECB and the French government are very clever and very agile indeed.br /br /strongAbove-par Inflation Looming Just Over The Horizon/strongbr /br /In essence the return of growth in France will be welcomed with open arms across the euro area, since with it comes the prospect of opening up a larger French current account deficit and this will, of course, clearly help soak up all that newly found need to export which exists elsewhere in Europ (and especially in the South and the East). But if this should be the fate which befalls an unsuspecting French citizenry, and living in a Spain which has already been processed along this very same pipeline, then all I can say is "heaven help them" for what will then follow.br /br /Again, all the early warning signs are there, including the prospect that France will begin to sustain above eurozone average inflation starting next year, and this will be the first time - as can be seen in the chart below - this has really happened on any sustained basis since the euro was introduced.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SuRz0DpvACI/AAAAAAAAPao/IDbnKecP790/s1600-h/france+and+eurozone+cpi+one.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 219px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396565591667441698" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SuRz0DpvACI/AAAAAAAAPao/IDbnKecP790/s400/france+and+eurozone+cpi+one.png" //abr /In fact, if we look at the second chart, which is only the above one with the reverse overlay, we can see that French inflation really only peaked its head above the average in late 2003/early 2004, and the overshoot was not that substantial.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SuRz446M5xI/AAAAAAAAPaw/XpMsSLhc3CI/s1600-h/france+and+eurozone+cpi+two.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 221px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396565674683066130" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SuRz446M5xI/AAAAAAAAPaw/XpMsSLhc3CI/s400/france+and+eurozone+cpi+two.png" //abr /br /This time things could well be very, very different, and the big change here is of course a direct result of what has just happened to Spain. Since given that Spain has now been catapulted from a high to a low growth (or even negative growth) mode, France has been ramped up the euro league table, moving from Mr Average to Monsieur Outperform, and this will have the consequence that the ECB policy rate - which will, remember, target eurozone average inflation -will be below the one which the French economy will, in reality, need. What this will mean in practice is that there is a real danger the French inflation rate will be above the policy rate - that is that negative interest rates will be applied. As we can see in the chart below, negative interest rates were applied to the Spanish economy between early 2002 and late 2006, and we all know what happened afterwards. With the return to growth French inflation is likely to rebound, and an annual rate of headline consumer price inflation of between 1.3% and 1.5% seems not unrealistic, which means, should the ECB not start to raise its refi rate early next year then France will be rebounding strongly under the twin tailwind effect of significant fiscal stimulus AND negative interest rates.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SuX_OJ8-VtI/AAAAAAAAPeY/IHhoFOJUMJ0/s1600-h/CPI+and+ECB+interest+rates.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 255px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5397000347128321746" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SuX_OJ8-VtI/AAAAAAAAPeY/IHhoFOJUMJ0/s400/CPI+and+ECB+interest+rates.png" //abr /br /So France is about to become the ECB's stellar pupil, but looking at what actually happened to the previous prize students (Ireland and Spain) somehow I doubt that those responsible for running things at La Banque de France and the Elysee Palace will be jumping up and down with joy at the prospect. The bottom line then is that lots of difficult decisions are now looming for European policymakers - assuming they are sharp enough to spot them at this point. p/pbr /br /pNote - the next section is essentially a detailed breakdown of this month's Flash PMI data (the flash historically bears a reasonably good resemblance to the final data). If you are not especially interested in such detail you may be well advised to glance at the charts and skip to the section - France, Not Spain, Is Different!.br /br /br /strongEurozone Composite PMI/strongbr /br /Summary:br /br /Flash Eurozone Composite Output Index(1) at 53.0 (51.1 in September). 22-month high.br /br /Flash Eurozone Services Business Activity Index(2) at 52.3 (50.9 in September). 20-month high.br /br /Flash Eurozone Manufacturing PMI(3) at 50.7 (49.3 in September). 18-month high.br /br /Flash Eurozone Manufacturing Output Index(4) at 54.1 (51.7 in September). 23-month high.br /br /The Markit Flash Eurozone Composite Output Index, based on around 85% of normal monthly survey replies, rose from 51.1 in September to 53.0 in October, registering an increase in private sector output for the third successive month and the strongest monthly gain since December 2007.br /br /Commenting on the flash PMI data, Chris Williamson, Chief Economist at Markit said: /pbr /br /br /br /blockquote“The flash PMIs indicate that the Eurozone economy has entered Q4 on a strong note, with growth accelerating in both manufacturing and services. The data are consistent with GDP rising at a quarterly rate of around 0.4% in October. Reassuringly, job losses also slowed, and forward-looking indicators such as service sector confidence and manufacturing order-to-inventory ratios suggest that the labour market could stabilise early next year.”/blockquotea href="http://1.bp.blogspot.com/_ngczZkrw340/SuRvgyZHvkI/AAAAAAAAPaQ/0U2K7MXm7lQ/s1600-h/Eurozone+Composite.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 227px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396560862570331714" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SuRvgyZHvkI/AAAAAAAAPaQ/0U2K7MXm7lQ/s400/Eurozone+Composite.png" //abr /br /Employment in the Eurozone fell for the sixteenth successive month, even if the rate of job loss eased compared to September. The rate of decline is much slower than that seen in the spring but remains high by historical standards. Both manufacturing and services saw reduced rates of job losses, though the former continued to see the sharper rate of job shedding, despite seeing the smallest cut in headcounts for a year.br /br /Growth was driven primarily by manufacturing, where output rose for the third month running and new orders showed the strongest gain since August 2007. Despite the recent strength of the euro, new export orders showed the largest rise since January 2008, but the rate of growth remained very subdued.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SuRvlXb7hCI/AAAAAAAAPaY/4Lw69YDjwt8/s1600-h/eurozone+manufacturing.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 229px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396560941233701922" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SuRvlXb7hCI/AAAAAAAAPaY/4Lw69YDjwt8/s400/eurozone+manufacturing.png" //abr /br /Activity in the Eurozone services sector meanwhile rose for the second month, expanding at the sharpest rate since February of last year, though the rate of increase remained modest and continued to trail that of manufacturing.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SuRvpcU5ilI/AAAAAAAAPag/KLsqJaXZUfA/s1600-h/eurozone+services.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 230px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396561011265866322" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SuRvpcU5ilI/AAAAAAAAPag/KLsqJaXZUfA/s400/eurozone+services.png" //abr /br /br /strongGerman PMIs Dissapoint/strongbr /br /Key points:br /br /Flash Germany Composite Output Index(1) at 52.6 (52.4 in September), 2-month high.br /br /Flash Germany Services Activity Index(2) at 50.9 (52.1 in September), 3-month low.br /br /Flash Germany Manufacturing PMI(3) at 51.1 (49.6 in September), 16-month high.br /br /Flash Germany Manufacturing Output Index(4) at 54.9 (52.8 in September), 17-month high.br /br /Output levels in the German private sector economy continued to expand in October, led by the strongest rise in manufacturing production for seventeen months. Service sector business activity also increased again, but at the slowest rate in the current three-month period of growth. The seasonally adjusted Markit Flash Germany Composite Output Index, which is based on around 85% of normal monthly survey replies, rose fractionally from 52.4 in September to 52.6. The index has now registered above the 50.0 no-change mark for three consecutive months, yet the rate of expansion has remained extremely modest.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SuR4-FcXNUI/AAAAAAAAPbI/lVeCjGYqEc4/s1600-h/german+composite.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 216px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396571261505058114" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SuR4-FcXNUI/AAAAAAAAPbI/lVeCjGYqEc4/s400/german+composite.png" //abr /br /Commenting on the Markit Flash Germany PMI survey data, Tim Moore, economist at Markit said:br /br /br /br /blockquote“The German economy started the final quarter of the year in growth territory, with the manufacturing sector the main driver of expansion. Manufacturing firms posted the fastest rise in new orders since August 2007 while employment fell more slowly, contributing to an above-50 Manufacturing PMI reading for the first time in 15 months. Meanwhile, service providers saw only a modest improvement in activity as demand continued to recover only gradually in the sector.”/blockquotebr /br /Signs of excess capacity in the German economy persisted in October, despite solid rises in output and new business. Latest data indicated a further drop in backlogs of work and continued job shedding among private sector companies. Reduced staffing numbers were recorded in both the manufacturing and service sectors, primarily reflecting workforce restructuring following sharp declines in new work at the start of the year. Some firms also commented on the need to cut costs as margins remained under pressure in October.br /br /Average prices charged by private sector firms in Germany were reduced for a twelfth month running and again at a faster pace than input costs. Manufactures and service providers both signalled marked declines in average output charges. Panellists generally attributed this to strong market competition and a resultant lack of pricing power. Meanwhile, input costs dropped only marginally in October and at the slowest rate in the current twelve-month period of decline. Data indicated that lower costs were largely confined to the manufacturing sector. Those reporting a reduction in purchasing costs frequently commented that subdued demand for raw materials had contributed to successful price negotiations with suppliers.br /br /In the manufacturing sector, higher levels of private sector business activity were driven by a further solid expansion of incoming new work. The latest increase in new business was the strongest for a year-and-a-half. The manufacturing sector continued to lead the way, as new order volumes rose at the fastest pace since August 2007. This was supported by a robust increase in new export orders, with a number of firms pointing to stronger demand from China and Eastern Europe.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SuR45Vv_KuI/AAAAAAAAPbA/y75lp7pAKZQ/s1600-h/German+manufacturing.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 216px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396571179982990050" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SuR45Vv_KuI/AAAAAAAAPbA/y75lp7pAKZQ/s400/German+manufacturing.png" //abr /br /Meanwhile, service providers recorded only a modest improvement in new business levels in October. Anecdotal evidence suggested that clients remained hesitant to commit to new expenditure, leading to only a gradual recovery in demand. Nonetheless, service sector companies were confident regarding the twelve-month outlook for activity at their units, with 32% expecting a rise against just 18% thatforecast a decline.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SuR40bwRVjI/AAAAAAAAPa4/rMAWynNEjTQ/s1600-h/German+Services.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 216px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396571095695447602" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SuR40bwRVjI/AAAAAAAAPa4/rMAWynNEjTQ/s400/German+Services.png" //abr /br /strongFrench PMI - Robust Growth Registered/strongbr /br /br /What stands out in this months data, however, is the performance of the French economy. The output Index, which is based on around 85% of normal monthly survey replies, indicated that growth of the French private sector was sustained into a third successive month – and at an accelerated rate. Climbing to 58.4, from 54.8 in September, the headline index indicated that growth accelerated markedly to reach its steepest in nearly three years.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SuR7s7jwFOI/AAAAAAAAPbg/_EbX79P6XbA/s1600-h/france+composite.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 211px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396574265328800994" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SuR7s7jwFOI/AAAAAAAAPbg/_EbX79P6XbA/s400/france+composite.png" //abr /br /Commenting on the Markit/CDAF Flash France PMI data, Paul Smith, Senior Economist at Markit, said:br /br /br /br /br /blockquote“Expansion of the French private sector continued to gather pace in October, reaching its highest in just shy of three years. Output was sustained through higher gains in new business, particularly from the domestic market, although in part this was driven by continued discounting amid strong competitive pressures. While employment continues to fall, emerging signs of capacity pressures and optimism in the strength of the upturn raise hopes that job losses will dwindle over the coming months.”/blockquotebr /br /pHigher output was again broad-based, with both manufacturing and service sectors registering strong growth. Manufacturing output increased for a fourth successive month and at the steepest pace since May 2006. Outstanding business in the French private sector rose in October for a second successive month. In a sign of emerging capacity pressures – particularly in manufacturing – overall growth was the steepest in 19 months.br /br /Despite rising backlogs, French private sector companies continued to reduce employment in October. The rate of contraction remained historically marked, with job losses most acute in services (job losses in manufacturing were the slowest for 14 months). Cost cutting and restructuring were noted by panellists. Input prices continued to fall in October, extending the current period of deflation to 12 months.br /br /However, the rate at which costs declined was only modest, with manufacturing registering a net rise in their purchase prices. Inflation here was linked to higher steel and oil-related product prices. Strong competitive pressures led to another reduction in output prices during October, with the rate of decline remaining sharp. Output charges have now fallen throughout the past year.br /br //pbr /pa href="http://3.bp.blogspot.com/_ngczZkrw340/SuYGwzE_KiI/AAAAAAAAPeg/scdvP5fgiu4/s1600-h/France+manufacturing.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 211px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5397008638864730658" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SuYGwzE_KiI/AAAAAAAAPeg/scdvP5fgiu4/s400/France+manufacturing.png" //abr /Services activity rose at a slower pace than manufacturing output, but still - at a level of 57.8 - registered a strong gain, indeed the rate of expansion was the best since February 2008.br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/SuR7n6A6kII/AAAAAAAAPbY/Br1iegy4TIk/s1600-h/France+manufacturing.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 211px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396574179014905986" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SuR7n6A6kII/AAAAAAAAPbY/Br1iegy4TIk/s400/France+manufacturing.png" //a/pbr /pstrongbr /This Time France, Not Spain, Is Different, But Is It Really A Case Of Vive La Difference?/strongbr /pSo French industrial production has been steadily recovering in recent months and the latest business surveys show this should continue, even if activity is still significantly (12%, much less than many other euro area countries) below its pre-crisis level. Consumer confidence has been steadily rising for over a year - even if, again, it continues to be weak by historic standards. Household consumption has also been rising, and in fact remained positive on an annual basis throughout the crisis (see chart below), and even if the potential for substantial further acceleration seems limited, this is still the key difference between France - where there is sufficient autonomous domestic demand left for the stimulus package to work - and the other euro area economies. /pbr /pa href="http://3.bp.blogspot.com/_ngczZkrw340/SuYI6cG9n_I/AAAAAAAAPeo/1Jz5hYU3NUM/s1600-h/France+quarterly+private+consumption.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 229px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5397011003520950258" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SuYI6cG9n_I/AAAAAAAAPeo/1Jz5hYU3NUM/s400/France+quarterly+private+consumption.png" //abr /br /Why should this resilience be? Well in the first place I would single out France's rather favouralable demographics. But this alone cannot explain the situation. In addition I would add France also probably has had:br /br /i) much better lending regulation than some of the bubble economies in the key years.br /ii) no housing BUBBLE (as opposed to boom)br /iii) a large population on fixed as opposed to variable interest rates for mortgagesbr /br /France was also the only eurozone country who really had a more or less approriate interest rate applied by the ECB during the critical years from 2001 to 2007, so there are less structural distortions in the economy (not NONE, but less). On the other hand, as far as France's fiscal budget trajectory goes there are both long term structural and short term fine-tuning deficit issues to think about. The deficit has nearly doubled during the first eight months of this year (widening from EUR 67.6bn in 2008 to EUR 127.6bn in 2009), and although the French budget normally has a surplus in the last four months of the year, this is unlikely to be the case this year, so the deficit will undoubtedly widen further possibly reaching 7.3% of GDP (or 8.2% including social security)./pbr /pThe main reason for the increasing deficit is evident - the collapse on the revenue side. VAT income, for example, fell by EUR 10.4bn, or 12.0%, over the first eight months of the year. Overall total income fell 23.1% during the first eight months of the fiscal year, and although the pace of decline may slow over the whole year the government still expect the 2009 deficit to reach EUR 141bn for the central government and EUR 158bn (or 8.2% of GDP) for the government spending in general (including social security).br /br /Since the various French stimulus packages only amount to an estimated 1.2% of GDP this means that the so called automatic stabilisers (i.e. the “natural” drift of the deficit on a no policy change assumption) account for 3.6 percentage points of the 4.8% of GDP increase in the general government deficit from 2008.br /br /Looking forward, France's 2010 budget is based on a reasonably cautious economic forecast of 0.75% growth, following something like a 2.5% - 2.25% contraction in 2009. Despite this cautious approach there is still a considerable degree of uncertainty about the behaviour of tax income in the wake of the recession, and this is why the budget deficit is also expected to grow. On the inflation side the government forecasts an inflation rate of 1.2% in 2010, following 0.4% in 2009, but since the growth forecast is conservative the inflation outlook will be subject to upside risk, which is why I think 1.3% to 1.5% is a much more likely band.br /br /Part of the deficit will naturally disappear as tax revenues recover. However, due to structural biases in the cost components of the budget there is still plenty of upside potential in debt to GDP moving forward - the latest forecast is for around 91% in 2013/14 - and substantial action will still be needed to lower the deficit in the years ahead. The public deficit is currently expected to fall in 2011 (from 8.5% in 2010 to 7.0%), but the numbers involved are still very large, and France is one of the best case scenarios, so this really begin to give us a picture of the severity of the downturn we have just been through. And of course we are by no means out of the woods yet.br /br /br /strongFrench GDP On The Rebound, And Looking Onwards And Upwards/strongbr /br /French GDP surprised positively with a 0.3% quarterly gain in the second quarter. Given the data we are seeing, a forecast of 0.2% quarterly growth for both the third and final quarters would not seem to be an unreasonable expectation at this point, which would mean the French economy would shrink by something under 2.5% in 2009, well below the average Eurozone contraction rate. /pbr /pa href="http://4.bp.blogspot.com/_ngczZkrw340/SuWNK2nRn-I/AAAAAAAAPco/DwrgNhAnUgk/s1600-h/gdp+two.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 229px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396874946071863266" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SuWNK2nRn-I/AAAAAAAAPco/DwrgNhAnUgk/s400/gdp+two.png" //a/pbr /br /All the data we have seen for August and September confirm the view that the French economic environment is improving considerably, although the presence of continuing weak spots (especially on the employment front) mean real GDP growth will probably remain modest during the rest of this year.br /The monthly survey of business sentiment was up sharply in September (at 92 against 89 in July). This indicator has moved even further away from its all-time low (68 in February and March), while remaining far below its long-run average.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SuWWJG9SmdI/AAAAAAAAPcw/kraouWEmp-0/s1600-h/french+business+confidence.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 213px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396884811704080850" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SuWWJG9SmdI/AAAAAAAAPcw/kraouWEmp-0/s400/french+business+confidence.png" //abr /br /Order books are also picking up -59 showing in September versus -68 in July. Export order books are also looking better too at -65 versus -66 in July. The consumer goods component in industrial goods orders improved markedly in September (-32 versus -37 for total orders, and -39 versus -33 for export orders), which indicates that domestic consumption spending is likely to be less depressed than it was in July and August. Likewise "capital goods" orders showed a slight improvement in September ( -68 for total and -70 for export orders versus -69 and -73 in July). If this improvement continues in October the ongoing deterioration in investment spending (see chart below) might be drawing to a close.br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/SuWaMQ9vKuI/AAAAAAAAPdA/uNYKVLLls_Y/s1600-h/france+quarterly+fixed+investment.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 230px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396889263976426210" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SuWaMQ9vKuI/AAAAAAAAPdA/uNYKVLLls_Y/s400/france+quarterly+fixed+investment.png" //abr /This improvement is also corroborated by the surge in the October manufacturing PMI. Activity in services also picked up again sharply in October as did activity in the construction sector - hence the interannual drop in GDP should be significantly under the Q2 level of 2.6% by the time we reach the end of the year.br /pa href="http://4.bp.blogspot.com/_ngczZkrw340/SuWNE_eViRI/AAAAAAAAPcg/e3xaaLRVos8/s1600-h/GDP+one.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 229px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396874845371074834" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SuWNE_eViRI/AAAAAAAAPcg/e3xaaLRVos8/s400/GDP+one.png" //abr /br /It is also worth remembering that long term growth in French GDP has really been remarkably constant in recent times (see ten year moving everage chart below), at just a little over 2%. Previously this might have been considered rather low by many commentators, but in the light of what we have just seen happen to the "out-performers" the French result looks reasonably solid and sustainable, which means we could expect a pretty solid "V" shaped rebound in 2010 (especially during the second half) and the big danger is that excessively loose monetary conditions for the Eurozone as a whole and ongoing fiscal stimulus could send the French economy shooting upwards above its long term sustainable trend.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SuWM_Q20d_I/AAAAAAAAPcY/OBlkCfNap5Q/s1600-h/France+long+term+GDP.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 226px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396874746957953010" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SuWM_Q20d_I/AAAAAAAAPcY/OBlkCfNap5Q/s400/France+long+term+GDP.png" //abr /br /br /strongIndustrial Output/strongbr /br /br /French industrial output rose more than expected in August, rising 1.8 per cent from the previous month on the back of a surge in car production, according to new data. The monthly rise contrasted with a forecast rise of 0.5 per cent from economists and was fuelled by an 11 per cent rise in production of transport equipment, including an 18.2 per cent rise in the car component. Nonetheless French industrial output remains down around 12% in comparison with a year earlier, even though - as I keep stressing - this is considerably less than the drop in most other Eurozone economies.br /br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/SuR--wHyhtI/AAAAAAAAPbw/XSIwzXBGWz8/s1600-h/ip+yoy.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 211px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396577870031259346" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SuR--wHyhtI/AAAAAAAAPbw/XSIwzXBGWz8/s400/ip+yoy.png" //abr /br /Although the industrial output collapse has been a little less dramatic than in other eurozone countries, the rebound in France seems to remain largely in line with its peers. Industrial production in fact outpaced the GDP collapse in late 2008, so that it may now also be overstating the rebound.br /br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/SuR-5meb_eI/AAAAAAAAPbo/omEGdAZ0ceM/s1600-h/ip+index.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 210px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396577781542551010" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SuR-5meb_eI/AAAAAAAAPbo/omEGdAZ0ceM/s400/ip+index.png" //abr /br /French retail sales have been falling, but not to anything like the extent we have seen elsewhere in Europe. They were down 3.75% year on year in July.br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/SuR_L6TS8wI/AAAAAAAAPcA/rYsZELJzzxk/s1600-h/france+retail+sales.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 211px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396578096102175490" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SuR_L6TS8wI/AAAAAAAAPcA/rYsZELJzzxk/s400/france+retail+sales.png" //abr /br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SuR_HqeMyZI/AAAAAAAAPb4/_QZ_xuJxAg8/s1600-h/france+retail+sales+index.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 210px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396578023133464978" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SuR_HqeMyZI/AAAAAAAAPb4/_QZ_xuJxAg8/s400/france+retail+sales+index.png" //abr /France's construction sector also seems to be on the long road to recovery, thanks to a correction in the housing sector. A combination of lower prices and very low interest rates have boosted new home sales. Housing investment dropped over the last five quarters, losing an annual 8.7%, making for the worst recession in the sector in the last thirty years. Housing affordability has now rebounded sharply thanks to the interest rate component and a sharp fall in existing home prices (down about 10% year on year) which has allowed a rebound in new home sales and a decline in the stock of new homes for sale. To get some sort of comparison France had approximately 100,000 unsold new housing units at the end of 2008, compared with over a million in Spain. This inventory has now fallen to around 80,000.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SuR_dQl30wI/AAAAAAAAPcQ/RAHTMUmcNsU/s1600-h/france+construction+YoY.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 211px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396578394143445762" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SuR_dQl30wI/AAAAAAAAPcQ/RAHTMUmcNsU/s400/france+construction+YoY.png" //abr /br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/SuR_YnVX4uI/AAAAAAAAPcI/2OoRk1k9RU0/s1600-h/France+Construction+Index.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 210px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396578314348913378" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SuR_YnVX4uI/AAAAAAAAPcI/2OoRk1k9RU0/s400/France+Construction+Index.png" //a /pbr /pAccording to the latest provisional INSEE data French household spending decreased slightly in Q3 (-0.2% q/q), despite the end of quarter rebound recorded in September (up a monthly 2.3%). Real spending was up a monthly 2.3% in September, after following a 1.1% fall in July and a 1.0% drop in August - so the long march upwards in consumption is not yet that robust. In fact the stats office data show that this September rise was mainly due to a surge in car sales. In line with a sharp rebound of new vehicles registrations (up 7.3% on the month), car sales were up by 10.2% in September over August, offsetting the falls recorded from the beginning of the quarter. Consequently, car sales were roughly flat in Q3 (down 0.1% over Q2), following a 5.7% quarterly rise in Q2./ppa href="http://4.bp.blogspot.com/_ngczZkrw340/SuWaBBEQuII/AAAAAAAAPc4/5UHgqQOxXfk/s1600-h/France+quarterly+private+consumption.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 229px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396889070730262658" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SuWaBBEQuII/AAAAAAAAPc4/5UHgqQOxXfk/s400/France+quarterly+private+consumption.png" //abr /br /On the other hand, general sales were down by a quarterly 2.5% in Q3, while "other manufactured products" sales, that represent more than 40% of the consumption, remain sluggish, rising by a quarterly 0.1% in Q3 following a drop of 0.1% in Q2. So at the end of the day the data tend to confirm the idea that the evolution of total spending has been largely dependant on car sales and government incentive scheme since the beginning of the year. Despite the rebound recorded in September, the stabilisation of car sales in Q3 resulted in a slight decrease of overall spending, that was down by 0.2% in Q3 when compared with Q2, following a 0.7% rise in Q2. As can be seen in the chart below (which was prepared by Dominique Barbet and Martine Borde for PNB Paribas) even while headline GDP shot down at the end of 2008 Private Consumption Expenditure (PCE) recovered rapidly due to the impact of the stimulus programme.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SuWbC6I6O0I/AAAAAAAAPdI/eOt898kPJLM/s1600-h/consumption+and+GDP.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 287px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396890202742078274" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SuWbC6I6O0I/AAAAAAAAPdI/eOt898kPJLM/s400/consumption+and+GDP.png" //a And as we can see in the following chart, while consumption in France has proved quite robust over the years, the manufacturing share in GDP has been declining steadily. This is, of course, quite a worrying trend. We can also see quite a clear indication of why France doesn't have the kind of problems Ireland and Spain have when we look at the construction share, since while this rose slightly between 2004 and 2007, at around 6% of GDP it was a far cry from the Irish and Spanish levels (which were twice as big at around 12%), and hence the French economy now has far less difficulty sweating down the capacity and inventory overhang.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SuWbNxBCcEI/AAAAAAAAPdQ/9h_NJMuqA_U/s1600-h/manufacturing+GDP+share.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 269px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396890389271703618" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SuWbNxBCcEI/AAAAAAAAPdQ/9h_NJMuqA_U/s400/manufacturing+GDP+share.png" //a And lastly (in this set of charts) we can see that while the trade share in French GDP has been growing steadily since the early 1990s, this increase in trade openness has also been accompanied by an increase in import penetration, and a steady widening of the trade deficit. It is this problem which could well turn critical during the next upturn if corrective measures are not taken in time.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SuWbhFqjZCI/AAAAAAAAPdY/okT70PgGpQA/s1600-h/trade+gap.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 270px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396890721232053282" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SuWbhFqjZCI/AAAAAAAAPdY/okT70PgGpQA/s400/trade+gap.png" //abr /Evidently French exports remain weak, and can in no way explain the recent recovery in industrial pooduction. The export rebound which took place in July was short-lived, and the narrowing of the deficit we have seen between 2008 and 2009 has primarily been due to lower crude oil prices. On the other hand euro appreciation is not the main reason for the poor export performance, as the deficit is wider with eurozone trading partners than with others. The drop in imports is adequately explained by the fall in domestic demand, and is not a sign of improved domestic competitiveness. At the same time the non-goods surplus has narrowed significantly, because of smaller surplus on services and the decline of the surplus on the income account. Thus while the current account deficit has narrowed somewhat, and is expected to stay contained over the next twelve months, the risk of a sharp widening in the years to come is clear enough.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SuXcLBTtyQI/AAAAAAAAPdw/B5FCh2gM648/s1600-h/France+CA+deficit.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 210px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396961810361207042" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SuXcLBTtyQI/AAAAAAAAPdw/B5FCh2gM648/s400/France+CA+deficit.png" //abr /strongA Tale Of Two Population Pyramidsbr //strongbr /Basically, a large part of the differential performance between France and Germany can be explained by comparing the two population pyramids. France has an annual population growth rate of around 0.5% while Germany has a population SHRINKAGE rate of around 0.1%. France has a total fertility rate of around 2.0, while the German one is around 1.35.br /br /Thus the French population pyramid (above) is evidently far more stable than the German one (following), and this means that:br /br /a) French domestic consumption is far more stable and dynamic (I would say that this by now should have attained the status of being a "self evident truth").br /br /b) the French government debt to GDP problem, while being important, can be corrected over a longer period than the German one, since France is not ageing so rapidly. This does NOT mean that France should not be doing anything to put its house in order, clearly the underlying structural problems in the public deficit situation - health and pensions - need addressing, but France has more margin of manoeuvre to do this. The important thing is that the French administration do not put this off and off until they reach the same state of mess that the Germans are now in. France should, nonetheless be given credit for having done her homework on fertility.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SuXbZraADII/AAAAAAAAPdg/PRj1-ZOVrQ4/s1600-h/Population+Pyramid+2009.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 278px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396960962668399746" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SuXbZraADII/AAAAAAAAPdg/PRj1-ZOVrQ4/s400/Population+Pyramid+2009.png" //abr /br /Basically one look at the unstable shape of this pyramid should give us plenty of course for concern about Germany's future.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SuXbsVmFDeI/AAAAAAAAPdo/yxqyh9uA3MU/s1600-h/Germany+Population+Pyramid.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 278px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396961283230993890" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SuXbsVmFDeI/AAAAAAAAPdo/yxqyh9uA3MU/s400/Germany+Population+Pyramid.png" //abr /br /Frankly this differential situation, and its implications, has still failed to sink in in many quarers. The Economist Intelligence Unit, for example, in their recent piece - a href="http://viewswire.eiu.com/index.asp?layout=VWArticleVW3amp;article_id=324924617amp;refm=vwHomeamp;page_title=Latest+analysisamp;rf=0"France Easy Does It/a (20th October 2009) - says the following:br /br /"However, after several years of budgetary vigour Germany's public finances are now in far better shape than those of France, while the German government has secured approval of a law establishing the principle of a balanced budget in the German constitution. A persistent, large-scale asymmetry in the fiscal policies of the euro area's two largest member states could become a significant source of tension in the period ahead."br /br /This is simply nonesense. German finances (despite the sacrifices which ordinary Germans have evidently made) are NOT in better longer term shape than French finances, and this for the reason that:br /br /a) German trend growth (under 1%) is now significantly below French trend growth (around 2%).br /br /b) German structural deficits related to ageing are going to be much more serious in the coming decade.br /br /And signs of the problems this is creating are to be found all over the place. Only last week the two parties in the new German government coalition were toying with the idea of setting up a €60bn fund whose explicit objective was to cover expected welfare-system deficits over the next four years. That would have raised new government borrowing for 2009 from just under €50bn to over €90bn – but would have had the advantage that it would have made it easier for the government to fulfil a constitutional amendment passed this year, which obliges the federal and state governments to reduce their deficits year by year starting in 2011. Basically, what is the value of having a constitutional ammendment to limit the deficit, if the very next minute you start to look for ways to get around it in order to meet the needs of short term expediency?br /br /Clemens Fuest, head of the finance ministry’s council of economic advisers, accused the incoming government of “false labelling” in claiming the special fund was just to cover welfare cost overruns. “The real reason is tax cuts,” he told the Financial Times. “The coalition has manoeuvred itself into a kind of cul-de-sac by saying on the one hand we’re going to have broad income-tax cuts, but on the other, we won’t do that by borrowing more. Of course that’s impossible.”br /br /Rainer Brüderle, one of the FDP’s economics experts, on the other hand denied the plan was mere "trickery” and noted that special funds had been used before to finance the extraordinary burdens of German unification and the recent bank bail-out fund. The point here is not to get bogged down in the ins and outs of fiscal rectitude, but to see the stark and evident fact that the German government far from having, as the EIU puts it, secured a law which means their fiscal position is in better shape than that of French faces stark and difficult choices in carrying through what will remain a knife edged balancing act over the years to come.br /br /The background here is that in June 2009, Germany introduced ammended its constitution by passing a law that will only allow federal deficits of up to 0.35% of GDP during normal times starting in 2016. After 2020, regional state deficits are to be abolished, while parliament can only suspend the rule in the event of “natural catastrophes or other unusual emergency situations."br /br /The very presence of this law should give us an indication of just how critical German public finances may become. In order to comply with the law, Germany will have to implement spending cuts or raise taxes starting in 2011 regardless of whether they have weaker tax revenue, rising welfare bills, or need more stimulus measures and spending for bank bailouts.br /br /On October 8, 2009, the German newspaper Handelsblatt reported that till 2013 Germany will have to raise taxes or cut spending equivalent to 34.3 billion euros in order to comply with the debt brake. Even if growth should be a full percentage point above the current forecasts the hole in German government finances will still stand at 29 billion euros. Therefore even if the economy improves more than expected the coalition will not enjoy ample scope with regards to public finances. (Handelsblatt; October 8, 2009)br /br /In the end the proposal to borrow extra money this year was ditched even though a 24 billion- euro tax cut programme aimed at low and mid-level earners was adopted. Basically the "creative accounting" proposal might well have satisfied the needs of the new constitutional law, but they would not have helped with the excess deficit criteria applied by Eurostat and the EU Commission, since when the German social security system (which - remember - forms part of the government sector according to the Eurostat rules) spent the money and actually ran the deficits in 2011 or 2012, this would have been recorded as a deficit for the German public sector according to the Eurostat rules no matter when the money was borrowed. So the new government now adding tax cuts to the earlier deficits is very likely to put it in breach of the EU's Stability and Growth Pact concept of a 3-percent limit and will in all likelihood put Berlin in conflict with Brussels.br /br /br /According to the most recent government forecast Germany GDP will now contract by 5% in 2009 (as compared to around minus 2.5% in France) and will the grow by about 1.2% next year. As a result net new borrowing is forecast by the latest government budget calculations to almost double next year to 86.1 billion euros from a record 47.6 billion euros this year. In an interview with Financial Times Deutschland, Jurgen von Hagen from the Institute for International Economics put it like this "Germany’s fiscal policy has been totally misguided, as it persistently ignored the inter-relationship between deficits and growth. Debt ceilings, such as the recently agreed constitutional change, do not work as they are too mechanistic, and lead to policy mistakes."br /br /Germany's debt to GDP is estimated at 79% for 2009 and 87% for 2010, up from 67% in 2008, according to the IMF (World Economic Outlook) and on October 7, 2009, the European Commission issued a formal warning about Germany's large deficit - normally the initial step before opening an excessive deficit procedure.br /br /To return German public debt to a sustainable path, UniCredit have calculated that the primary balance (budget balance minus debt interest payments on debt) would have to be increased by close to a full percentage point. This is equivalent to savings or additional revenues of almost EUR25 billion. To bring the debt ratio back below 60% in the next 20 years, the primary balance would have to be increased by 2 percentage points, and of course stay there (Unicredit research note, 25 June 2009) /ppstrongKeeping Credit Growth In France Under Controlbr //strong/ppIn this post we have covered a lot of ground. We have:/ppa) suggested that the whole covergence idea (that all eurozone economies where converging to a common profile) did not offer an adequate description of the actually economic processes we can see on the ground, and that, in fact, the economic profile varies widely from one country to another. It is more a question of "vive la difference"/ppb) examined how, in terms of the Eurozone's two largest economies - France and Germany - the paths are very divergent. Germany has an export dependent economy, which has been severely savaged by the present deep recession, and recovery is fragile (Axel Weber's expression) and will remain so until other economies recover and export growth can resume. /ppc) seen that while both countries suffer from important structural problems in the public finances, with debt to GDP in both cases being around 90% of GDP in 2011, in fact the country which is likely to face the more extreme difficulties over the coming decade is likely to be Germany due to the more rapid population ageing which is taking place there and the excessive dependency on exports which this produces. /ppd) spelt out how the ECB may well now be facing its "finest hour", as it has to rise to the challenge of adapting a one size fits all interest rate policy to a world where one size evidently doesn't fit all, and where the danger of fuelling an excessive consumer boom in one country (France) will have to be set against the risk of sending the banking system of into meltdown in another (Spain). This is clearly the banking equivalent of being stuck between a rock and a hard place new tools and new thinking will need to be developed if we are to finally steer that path between the insatiable appetite of Scylla and the never ending thirst of Charybdis. /ppFinally, just to make all of this very concrete, lets take a look at the different rates of new credit creation as between French and Spanish households - courtesy again of one of those very useful charts prepared by Dominique Barbet and Martine Borde for PNB Paribas). As we can see in the following chart, annual growth in total household credit in France never went about around 11% to 12% during the boom, and has now not fallen much below 3% during the slump.br //pa href="http://1.bp.blogspot.com/_ngczZkrw340/SuXfWwjirqI/AAAAAAAAPeA/Iroqr_7NIVI/s1600-h/Credit+to+households.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 293px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396965310557499042" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SuXfWwjirqI/AAAAAAAAPeA/Iroqr_7NIVI/s400/Credit+to+households.png" //a In Spain in contrast, the annual rate of new household credit creation was more like 20% during the boom years, and this has steadily dropped since the start of 2007, and finally went negative in August (latest data). It is of course still falling. And this is the danger, that consumer borrowing in Spain remains weak (even as exports are lacklustre), while in France the excessively loose monetary conditions send consumers off to the banks to borrow and then on to the shops to spend.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SuXfmD9WJ_I/AAAAAAAAPeI/Wf8u1_1GLoo/s1600-h/spain+bank+lending+to+households.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 240px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5396965573464041458" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SuXfmD9WJ_I/AAAAAAAAPeI/Wf8u1_1GLoo/s400/spain+bank+lending+to+households.png" //adiv class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/7353833406525447404-3061103062089715926?l=frencheconomy.blogspot.com' alt='' //div

Time for New Stock Market Leadership?

Frank Holmes — Mon, 26 Oct 2009 05:00:00 +0000

This analysis is from John Derrick, U.S. Global Investors Director of Research. The market has rallied dramatically since the March 9 low, with the biggest beneficiary of this rally being low-quality companies. This intuitively makes sense, given that companies with the most troubled outlooks are the ones most likely to have a strong recovery when the dire outcomes predicted at the bottom of the crisis failed to transpire. Quality may have different meanings to different investors, but in a recent research piece, Citigroup ranked performance based on multiple definitions of quality. Samp;P earnings quality ranking, debt-to-capitalization ratio and return on equity were used as proxies for quality. The research universe was the small-cap Russell 2000 Index, but I believe broader market conclusions can be drawn as well. Based on Samp;P earnings quality rankings, companies with C or D (the two lowest categories) ratings returned about 55 percent over the past six months, while the highest-rated stocks returned about 11 percent. As a whole, the Russell 2000 universe returned 30 percent over that time period. This trend is also broadly true for the other measures of quality. Generally speaking, companies with higher debt burdens outperformed companies carrying low debt, and companies with negative return on equity outperformed the broader market as well as the companies with the highest return on equity. Morgan Stanley also recently released a research report that looked at low-priced stocks as a proxy for low-quality and found that Samp;P 500 stocks trading below $5 dramatically outperformed. The same analysis was conducted on the MSCI Europe Index with very similar results, indicating a broad-based global phenomenon. Morgan Stanley highlighted that the recovery so far has been driven by multiple expansion ndash; the valuation that investors are willing to pay has increased, but that has not been supported by an increase in earnings in the current period. But we are now potentially at an inflection point at which the junk rally has more or less run its course and the market is beginning to focus on earnings growth. The business cycle plays a significant role in market valuations in the sense that the market anticipates a recovery and pays up for the anticipated earnings stream. Once the recovery takes hold, however, investors focus on actual earnings power as the primary driver of valuations. One persuasive indicator that the recovery has indeed taken hold can be seen in the ISM Manufacturing Index, which moved above 50 about six weeks ago, indicating that the economy is expanding. What has worked so far in this stock market recovery will not likely carry us into 2010 and beyond, so the time could be right to reposition for the next leg of the recovery. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The Russell 2000 Index is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000. The Russell 3000 Index consists of the 3,000 largest U.S. companies as determined by total market capitalization. The MSCI Europe Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of September 2002, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. The Samp;P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The ISM manufacturing composite index is a diffusion index calculated from five of the eight sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states. #09-734

YUM Downgraded to Neutral – Analyst Blog

Zacks Market Commentaries — Fri, 23 Oct 2009 21:06:06 +0000

We are downgrading Yum! Brands Inc. (YUM) to Neutral from Outperform. Although the company reported strong third quarter results, the recession is impacting growth. With cash-strapped consumers dining out less, traffic has declined worldwide, prompting management to lower its same-store sales growth targets for 2009.

The restaurant industry is reeling under the current economic crisis in the U.S., which is exerting pressure on consumers’ disposable income. The company is reporting sagging same-store sales and declining traffic as cash-strapped consumers prefer to dine at home.

Further, the competition among Quick Service Restaurants is expected to remain fierce with respect to price, service, location and concept in order to drive traffic, which may adversely affect the company’s restaurant operating margins and profits.

However, Yum!’s China Division offers immense growth potential with its two leading brands KFC and Pizza Hut. Moreover, the company’s competitive advantage helped management to test additional restaurant concepts of East Dawning (Chinese food) and Pizza Hut Home Service (pizza delivery). Management’s earnings growth model includes annual operating profit growth of 20% in the China Division.

In addition, overseas expansion remains one of the key growth drivers. The company always seeks opportunities to expand in new markets including India, France and Russia.

YUM Brands Inc. owns, operates, and franchises major fast food concepts such as KFC, Pizza Hut, Taco Bell, Long John Silver’s and A&W All-American Food Restaurants in more than 110 countries.
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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...

Outsourcing Firms Quarter Results UP

Outsourcing Insider — Wed, 21 Oct 2009 13:51:29 +0000

With the United States market still in slump, businesses project difficulties in profit increase in the next 7 years. Job cuts continue in the US and the rate of job creation of 25 per year is not sufficient to offset job losses in the next 5 years. On...

Energy Blast – Oct 21, 2009

Robert Amsterdam — Wed, 21 Oct 2009 08:10:04 +0000

Luke Harding has two pieces on Russian climate change in today's Guardian: an audio report on Northern-Siberia's seasonal shifts, and a special report on the Yamal peninsula. Rumors abound that China, Japan, Russia and France have been in secret talks...

DrStockPick.com Stock Report! 10/20/09, UNH, INO, ITLN, XCEL, FCFS, GTLS

Dr. Stock Pick — Tue, 20 Oct 2009 10:30:17 +0000

Dr Stock Pick HOT News & Alerts! _______________________________________ FREE Daily Stock Alerts From DrStockPick.com _______________________________________ Tuesday October 20, 2009 DrStockPick.com Stock Report! ************************************************************** UnitedHealth Group (NYSE:UNH) reported third quarter results today, including growth in revenues and net earnings and a continued strong financial position. Stephen J. Hemsley, president and chief executive officer of UnitedHealth Group, said, “We combined [...]

Beacon Enterprise Solutions Group, Inc. (BEAC.OB) Continues Engagement with Fortune 100 Pharmaceutical Company

QualityStocks — Mon, 19 Oct 2009 18:20:03 +0000

Today, Beacon Enterprise Solutions Group, Inc., an emerging global leader of high performance Information Transport Systems (“ITS”) infrastructure solutions, announced that it has expanded its relationship with an existing Fortune 100 pharmaceutical client to provide ITS infrastructure documentation, design, installation and ongoing management services. Valued at approximately $27 million, the engagement will initially focus on [...]

Energy Blast – Oct 19, 2009

Robert Amsterdam — Mon, 19 Oct 2009 08:44:04 +0000

The International Atomic Energy Agency (IAEA) is hosting today's Vienna meeting between Russia, France, the U.S, and Iran, which will attempt to finalise an agreement on sending Iranian uranium abroad for enrichment. Iran says it will enrich the uranium itself,...

Energy Blast – October 14, 2009

Robert Amsterdam — Wed, 14 Oct 2009 09:39:22 +0000

Gazprom and the Chinese National Petroleum Corporation have come to an agreement on the framework of gas deliveries to China; issues related to pricing still remain. Apparently Russian Deputy Prime Minister Igor Sechin has said Russia could start gas deliveries...

ProLogis Goes Strong in France – Analyst Blog

Zacks Market Commentaries — Tue, 13 Oct 2009 18:27:07 +0000

In a marked development signifying the probable redemption of investor confidence, ProLogis (PLD), one of the leading global providers of distribution facilities, has recently signed three leasing agreements in France, totaling 341,000 square feet.

ProLogis leased 139,000 square feet at ‘ProLogis Park Clesud’ in Southern France to a leading manufacturer and retailer of the country. The leased facility provides immediate access to multiple freeways and easy railway connectivity. The undisclosed company is one of the existing clients of ProLogis, currently occupying 77,000 square feet of space in France and the U.S.

Approximately 136,000 square feet of newly developed distribution space was leased at ‘ProLogis Park les Portes de Vemars’, which is located about 18 miles north of Paris. The lessee is Geodis, a third-party logistics and international transport provider and subsidiary of the SNCF (Société Nationale des Chemins de fer français or the French National Railways). The current lease was the 20th of its kind between ProLogis and Geodis, and the latter presently occupies 3.3 million square feet of ProLogis’ distribution space across Europe.

ProLogis leased 67,000 square feet at ‘ProLogis Park Rennes’ in north-western France to Transport Breger, a third-party logistics provider. The leased facility is located along N157, the national highway within the special economic zone of Zone d'Activites du Haut Montigne.

ProLogis owns and manages interests in over 2,500 distribution facilities, service offices, and properties spanning 475 million square feet of space (including properties under development). As of June 30, 2009, the company had 200.5 million square feet of direct-owned industrial properties, 81.5% of which was located in North America, 14.2% in Europe and 4.3% in Asia. In France, ProLogis’ portfolio included 25 million square feet of distribution space.
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Barclays Could Sell £4B in Assets – Analyst Blog

Zacks Market Commentaries — Mon, 12 Oct 2009 17:01:39 +0000

Barclays Plc (BCS) is contemplating to spin off a £4 billion portfolio of complex credit assets as part of the initiative to clean up its balance sheet and alleviate shareholder concerns over its risky investments.

The move is similar to the transaction it undertook last month with a £12.3 billion portfolio. The portfolio is made up of collateralized loan obligations (CLOs). CLOs are instruments that repackage portfolios of loans into tranches of different risks and returns.

Barclays could choose between two options for the sale of £4 billion of its toxic assets. It could either make a deal similar to the Protium deal which means that Barclays traders would leave the portfolio, or it could divest the whole to a third-party buyer.

Barclays seems more interested in a third-party transaction as CLO valuations have leapfrogged in recent months. A number of other banks worldwide − including Belgium’s Fortis (FORB), France’s Natixis and a number of German banks − are also in the market looking for similar deals.

If Barclays opts for a similar course of action for its CLO portfolio that it did for Protium, it might spur some controversy. The Protium deal was criticized as being a mere means to obscure the performance of the underlying assets. Barclays is still exposed to the risk as its sale is backed by a loan on the balance sheet. Hence, loan repayments could be jeopardized if the underlying assets deteriorate further. However, Barclays believes that the Protium structure gives it safer and more regular cash flows and frees it from the risk arising from the write-down of the assets.

Several banks including Citigroup Inc. (C) have been concerned about investor sentiment over the continuing risk posed by toxic assets on their balance sheets. During the second quarter of 2009, Citigroup reported results separating the firm into Citicorp and Citi Holdings. The company is currently undergoing a major restructuring in its businesses and plans to hold down its assets and divest non-core businesses in Citi Holdings.
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Kraft to Construct New R&D Center – Analyst Blog

Zacks Market Commentaries — Fri, 09 Oct 2009 17:15:31 +0000

Kraft Foods Inc. (KFT), a leading manufacturer and marketer of packaged food and grocery products worldwide, announced its plans to invest about €15 million (approximately $20 million) to establish a new biscuit research and development (R&D) center in Saclay , France , a suburb of Paris .

The new facility is expected to serve as the company's European Center of Expertise for Biscuits. The primary focus being on innovation and new product development for many of Europe's most loved biscuit brands, including LU, Mikado, Oreo, Prince, Saiwa and TUC. The facility will also be responsible for bringing forward major biscuit technology platforms for the European market and beyond.

The new R&D center, once completed will add to the other 11 existing Kraft Foods R&D centers that support its businesses around the globe.

The new center that is scheduled to open during the first half of 2011, will host a team of researchers, product and packaging developers, and nutritionists dedicated to supporting the European biscuit business. These employees are currently located in leased space within the Groupe Danone R&D Center in Palaiseau , France , very close in proximity to the new Center.

Management considers France as an important strategic market for biscuits and for Kraft Foods globally. It states that the investment makes business sense, since it allows the company to continue to drive biscuit innovation and future growth.

Earlier in September 2009, Kraft Foods made a takeover bid for Cadbury (CSY) at a purchase price of $16.2 billion (£10.2 billion). However, Cadbury rejected the offer, saying it was a significant undervaluation of the company.
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Two Sagging Economies… Two Laid-Back Banks

Investment U — Fri, 09 Oct 2009 16:59:40 +0000

Two Sagging Economies… Two Laid-Back Banks by Martin Denholm, Senior Editor Anemic. Stagnant. Plodding. Pick your favorite… it doesn’t matter. They all describe the state of the British and Eurozone economies. Two weeks before the official third quarter U.K. GDP figure is released, the National Institute of Economic and Social Research (NIESR) delivered a somber verdict. [...]

TEF Bids to Expand in Brazil – Analyst Blog

Zacks Market Commentaries — Thu, 08 Oct 2009 16:31:07 +0000

Spain’s incumbent telecom carrier Telefonica SA (TEF) has reportedly made an all-cash bid to acquire Brazilian telecom operator GVT Holding SA in an effort to expand its presence in the lucrative Brazilian telecom market.

The Spanish operator’s Brazilian fixed-line subsidiary Telecomunicacoes de Sao Paulo (Telesp) has offered BRL48 (US$27.2) per share of GVT to acquire atleast 51% of the company, equating to a total investment of €2.55 billion (US$3.75 billion). This offer, which is subject to regulatory and shareholders approvals, has outbid the BRL42 (US$23.8) per share offer made by France-based media company Vivendi SA in September 2009. Telefonica targets to eventually acquire 100% stake in GVT.

Large telecom carriers across the US and Europe are increasingly focused on expanding their foothold in under-penetrated markets given the limited growth prospects in their matured domestic markets. With its vast population and relatively low wireless and broadband penetration, Brazil offers an attractive growth opportunity for overseas telecom operators.

Wireless penetration in Brazil is expected to increase by 15% or more over the next two years. The country will also host the 2016 Olympic Games.

Latin America remains the principal growth region for Telefonica. Healthy revenue and subscriber growth from this region continues to partly offset declines across the company’s domestic and European markets due to recession and intense competition.

Through a joint venture with Portugal Telecom (PT), Telefonica operates Brazilian wireless operator Vivo (VIV), the leading wireless carrier in Brazil with a customer base of approximately 46.8 million and roughly 30% market share. However, Telefonica’s Brazilian presence is currently limited to Sao Paulo, the country’s largest and most lucrative market.

Telefonica is exposed to increased competition in Brazil , the largest contributor to the company’s Latin American revenues. Competition has intensified with the country’s fourth-largest mobile operator Tele Norte Leste Participacoes’s (TNE) acquisition of 61.2% stake in Brasil Telecom (BRP), the third-largest fixed-line carrier in Brazil. This strategic investment has resulted in the creation of a national telecom giant with approximately 17% and 70% control of Brazil ’s cellular market and fixed-line market, respectively.

GVT Holding operates primarily in Brazil ’s center-west, Southern and Northern regions with roughly 2.3 million subscribers across 86 Brazilian cities. The company’s focus on high-usage and high-margin customers has enabled it to grow at a healthy pace, making it an attractive acquisition target.

Over the years Telefonica has focused on growth through acquisitions. By acquiring GVT, the company will be well positioned to expand beyond its core Sao Paulo market to other regions of the country. Moreover, GVT is the fourth-largest broadband service provider in Brazil , which will boost growth opporutnities in this market.

While the GVT deal represents a significant growth prospect for Telefonica given the attractive potential for synergies, resources spent on acquiring a controlling stake in the entity is likely to constrict returns to investors in the form of dividend and share buybacks.
Read the full analyst report on "TEF"
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Read the full analyst report on "VIV"
Read the full analyst report on "BRP"
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YUM Beats Expectations – Analyst Blog

Zacks Market Commentaries — Wed, 07 Oct 2009 14:01:10 +0000

The operator of Taco Bell, Pizza Hut and KFC fast food chains -- Yum! Brands, Inc. (YUM) -- recently reported better-than-expected third-quarter 2009 results buoyed by commodity deflation, lower costs and strong performance by its China division.

Yum!’s quarterly earnings of 70 cents a share (excluding special charges) comfortably surpasses the Zacks Consensus Estimate of 59 cents, and surged 21.0% year-on-year from 58 cents posted in the prior-year quarter.

Lower labor (down 9.0%) and food costs (down 7.0%), slide in G&A expenses (down 9.0%), and operating profit growth in both China (up 32.0%; up 31.0% excluding FX [foreign exchange] impact) and the U.S. (up 18.0%) divisions drove the earnings. These were partially offset by a 13.0% decline in Yum! Restaurants International Division’s (YRI) operating profit and a negative impact of 2 cents a share from foreign currency translation.

The strength in the China division and a lower-than-expected full year effective tax rate prompted management to raise its 2009 EPS guidance from $2.10 to $2.14 (up 12.0% year-on-year). Yum! expects EPS growth of 10.0% in 2010.

Comparable restaurant sales remained flat in mainland China and in other international markets. However, comps fell 6.0% in U.S., including a 13.0% decline in Pizza Hut. Yum!’s total revenue slipped 2.0% to $2,778 million, registering a 12.0% drop in YRI and a 13.0% fall in the U.S. divisions, offset by 22.0% growth in the China division.

Yum! seeks to expand globally, led by its highly profitable China operations. During the quarter, the company opened 88 restaurants in mainland China and 165 restaurants in the markets under YRI. Management expects to open at least 500 restaurants in China and about 900 units in international markets in 2009. The international markets comprise Asia (excluding China), Australia, Continental Europe, Latin America, France, Russia, India and the U.K.

Yum! and other fast-food chains like Burger King Holdings (BKC), McDonald’s Corporation (MCD) and Chipotle Mexican Grill (CMG) are faring better than casual and upscale dining restaurants, as budget-constrained consumers are trending towards lower-priced dining options.

Recently, Yum! raised its quarterly dividend by 11.0% to 21 cents a share, marking the fifth consecutive annual increase since the inception of its dividend program in 2004, and also increased the share buyback program by $300 million. Over a decade, the company has returned more than $6 billion to shareholders via share buybacks.

We believe that despite economic headwinds, Yum! is actively managing its capital, returning much of its free cash to shareholders. Furthermore, the stock provides relative safety and moderate growth in a turbulent environment and exposure to faster-growing international markets. As such, we retain our Outperform recommendation on the stock.
Read the full analyst report on "YUM"
Read the full analyst report on "BKC"
Read the full analyst report on "MCD"
Read the full analyst report on "CMG"
Zacks Investment Research

Prieur’s readings (October 7, 2009)

Prieur du Plessis — Wed, 07 Oct 2009 09:33:55 +0000

Energy Blast – October 7, 2009

Robert Amsterdam — Wed, 07 Oct 2009 09:30:02 +0000

Russia has denied yesterday's report in the Independent that the country discussed changing the dollar as the global currency of oil; France has called it speculation. Iran's finance minister Shamseddin Hosseini says he has occasionally discussed a move away from...

Carlisle Companies – Growth And Income – Zacks Rank Buy

Alex Kolb — Wed, 07 Oct 2009 05:00:00 +0000

Carlisle Companies Inc. (CSL) is outpacing the market and seeing bullish Zacks Consensus Estimates ahead of reporting. Full-year projections of $1.83 per share jumped from $1.43 over the past 3 months. CSL reports on Oct 20.

Company Description

Carlisle Companies is a diversified global manufacturing company that serves a wide variety of industries, including construction materials, commercial roofing, specialty tire and wheel, foodservice and aerospace to name a few.

Recent Acquisitions

The company recently announced that it acquired from its joint venture partner, The Yokohama Rubber Company, Ltd., the remaining interest in Japan Power Brake, Inc. (JPB) of Atsugi, Japan.

Carlisle stated that with annual sales of approximately $10 million, JPB is a leading provider of high performance braking solutions for off-highway equipment, primarily in the mining and construction industries in Japan.

Carlisle also recently announced the acquisition of privately-held Electronic Cable Specialists, Inc. (ECS), a leading designer and manufacturer of electrical and structural products and services for the aviation, medical and industrial markets.

ECS has annual sales of $50 million and it is headquartered in Franklin, WI with various distribution points in the US, France and the United Kingdom.

A Recent Dividend Hike

Carlisle boosted its quarterly dividend 3.2% to 16 cents per share. The dividend was paid out on Sept 1 and marked the 33rd straight year of dividend increases.

The company's dividend yield of 2% is in line with the industry average.

Solid Momentum and Higher Forecasts

Carlisle is outpacing the market and seeing bullish Zacks Consensus Estimates ahead of reporting. Full-year projections of $1.83 per share jumped from $1.43 over the past 3 months.

For 2010, analyst polled by Zacks are calling for earnings of $2.13 per share, versus the 3 months-ago projections of $1.65.

Third-quarter forecasts of 68 cents per share were increased from 50 cents over the past 3 months.

The company is scheduled to report third-quarter results on Oct 20.

Second Quarter Results

The second quarter saw earnings of 79 cents per share, beating the Zacks Consensus Estimate by 76%. Earnings per share were ahead of the consensus by an average 18% over the past 4 consecutive quarters.

David A. Roberts, Chairman, President and CEO, said, "Our end market conditions continue to be a challenge. However, despite a 28% decline in our second quarter sales, we were able to increase our operating margins. We were especially pleased with results at our Construction Materials segment, which increased their operating margin to 16.3%, as compared to 12.2% for the same period last year, despite a 29% decline in sales.

Roberts added that in addition to the margin improvement, the company continued its strong cash flow performance in the quarter, generating $205 million in net cash from operations.

"As a result of the positive cash flow, we were able to reduce our outstanding debt by $185 million during the second quarter. Our balance sheet and available credit lines position us to take advantage of potential acquisitions and further invest in our core businesses to grow our revenue and expand our operating margins," said Roberts.

Zacks Investment Research

Demand for Gold, Stocks & Bonds? – Analyst Blog

Charles Rotblut — Tue, 06 Oct 2009 19:52:55 +0000

There is a dichotomy occurring today. Gold is at record highs. Stocks are jumping. And bonds -- well, today's Treasury auction was oversubscribed.

If this does not have you scratching your head, it should. Because on the surface it does not much sense. So let’s break today's events down.

Gold traded as high as $1.045 per ounce, a new record. Speculators put new money into the metal after two events weakened the U.S. dollar further.

First, Australia unexpectedly raised interest rates by 25 basis points. The Reserve Bank of Australia opined, "It is now prudent to begin gradually lessening the stimulus provided by monetary policy."

Second, a rumor spread about secret talks between Russia, China, Japan, France and Gulf States to replace the dollar as the chief currency for oil. These talks were flatly denied, but the rumor is still having an impact.

Stocks are jumping because of both the rally in commodities and optimism about the economic recovery. Several other metals, in addition to gold, are rising. So is oil. The Australian rate action has some traders betting on a stronger-than-thought global recovery.

Some of the gains might also be attributable the covering of short positions initiated last week.

Treasury bonds are off slightly, but there were a lot of buyers at today's auction. The bid-to-cover ratio, which compares the number of bids to the number of available bonds, was 2.76. This was higher than what we've been seeing over the past several auctions and signals that demand for Treasuries remains strong.

It's pretty easy to draw a correlation between the dollar, gold and stocks. However, if the outlook for the future is so bright, then why did investors compete with each other for the right to lock up their money for 3 years at a yield of 1.445%? (That is what the Treasury notes sold at in today's auction.)

Clearly, not every investor believes the recovery will be V-shaped.

Today is purely a trading rally ahead of the "official" start of third-quarter earnings season. (Alcoa [AA] reports this afternoon.) We will need a good reaction to profit reports to sustain this rally.

As far what your own portfolio, pay attention to trends in earnings estimates. Several analysts have recently cut their 2009 and 2010 forecasts on Barrick Gold (ABX). Conversely, estimates are rising on some cyclical stocks, such as DuPont (DD). Even Caterpillar (CAT) is seeing upward revisions, though changes have not been enough to move Zacks Consensus Estimates higher.

But since the economic recovery will be slow, also keep an allocation to more conservative holdings. For example, food companies such as General Mills (GIS) and ConAgra Foods (CAG) are also seeing rising earnings estimates. Some large drug stocks are also trading at cheap valuations.

Volatility works both ways, and today it is helping stocks. However, this is just one day, and the movement should not sway your opinion any more than last week's activity did.
Read the full analyst report on "AA"
Read the full analyst report on "ABX"
Read the full analyst report on "DD"
Read the full analyst report on "CAT"
Read the full analyst report on "GIS"
Read the full analyst report on "CAG"
Zacks Investment Research

RBA Raises Rates!

Contrarian Profits — Tue, 06 Oct 2009 18:33:59 +0000

pPandora#8217;s Box of rate hikes is opened! Is the dollar being removed from oil trades? Deficits do matter, eh? Gold heads toward its all-time high#8230;And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Terrific Tuesday to you! A Tuesday morning that is seeing a HUGE currency rally VS the dollar on the news that the Reserve Bank of Australia (RBA) opted to go ahead and hike rates now, and not wait for November#8217;s meeting, as I had thought they would do! WOW!/p pThe first hike#8230; It has opened Pandora#8217;s Box of interest rate hikes around the world#8230; For, if the RBA went this soon, then we can expect Norway#8217;s Norges Bank to push their rate hike earlier on the calendar, maybe even later#8230;/p

Energy Blast – October 6, 2009

Robert Amsterdam — Tue, 06 Oct 2009 09:29:17 +0000

The Independent reports that Gulf Arab states have been engaged in secret talks with Russia, China, Japan and France to replace the US dollar with a basket of currencies in the trading of oil: 'This sounds like a dangerous prediction...

Energy Blast – October 5, 2009

Robert Amsterdam — Mon, 05 Oct 2009 09:17:29 +0000

The Financial Times enumerates Gazprom's problems: are its ambitions to increase production any more than pipe dreams? Competition for energy reserves in the Arctic Circle could prompt friction between Russia and NATO, a new commander at the alliance has...

RA’s Daily Russian News Blast – October 2, 2009

Robert Amsterdam — Fri, 02 Oct 2009 08:02:13 +0000

TODAY: Russia keeps its voting rights in Council of Europe; Lavrov says Russia wants unbiased discussions about human rights; French Foreign Minister argues Russia flouting ceasefire; Israeli diplomat makes swift exit; UK Foreign Secretary visit to ease tensions?; Scientology...

ProLogis Announces Spanish Solar – Analyst Blog

Zacks Market Commentaries — Wed, 30 Sep 2009 20:37:18 +0000

ProLogis (PLD), one of the leading global providers of distribution facilities, has recently announced its third new 4.8 megawatt solar project in Spain as part of its renewable energy program. The solar project would be installed on eight rooftops at ProLogis Park Sant Boi in Barcelona and ProLogis Park Alcala in Madrid.

With these installations, ProLogis currently has solar projects on 20 buildings spanning 7.2 million square feet of roof space in the U.S., Japan, France, Germany and Spain. On completion of the new project, ProLogis would generate more than 11 megawatt of energy, which is equivalent to the power consumption in over 1,100 households per year.

For the current solar project in Spain, ProLogis has leased 2 million square feet of roof space to Recurrent Energy, a leading provider of solar energy and power distribution company. Recurrent Energy will own and operate the project, and will sell the energy produced to local utility through a feed-in tariff. On the other hand, ProLogis will earn fees for construction management services and roof rental.

Currently, ProLogis has more than 450 million square feet of roof space across the globe, which offers unobstructed and readily available space for developing large-scale solar projects. Including the new project, ProLogis is utilizing less than 2% of the available roof space, which provides an upside potential for the company.

In order to capitalize on this opportunity and procure new business, ProLogis has formed a Global Renewable Energy Group. This would further enable the company to expand on the wind and solar projects across its industrial rooftops that offer unique host-site opportunities for utilities and private companies that invest in renewable energy.
Read the full analyst report on "PLD"
Zacks Investment Research

Who’s Buying Oil?

Contrarian Profits — Wed, 30 Sep 2009 19:35:14 +0000

pAs the US strategic petroleum reserve (SPR) approaches capacity (721.5 million barrels filled out of a total possible 727 million, and will be filled by January 2010), the federal government will fade out of the oil-buying business. Some bearish traders believe that this factor can weigh in on prices, since most petroleum stocks in the United States are government-held rather than private. Bullish traders have also used the filling of the Chinese SPR as a reason that oil should go much higher./p pThe team at Casey’s Energy Opportunities believe that strongplanned government buying or selling of crude oil for SPRs actually have very little impact in the overall market./strong However, an overall drawdown of worldwide inventory could put downward pressure on the#8230;/p

The Grinder

Dr. Stock Pick — Wed, 30 Sep 2009 19:10:37 +0000

We are proud to broadcast “The Grinder Show” Grinding up and breaking down America’s businesses for you with topical content, facts, and analysis. Every Sunday, corporate leaders, experts in their fields and your opinions and questions revealed. Live Sundays 11 am to 12 pm EST About David Webb David Webb has over a decade of major market local and [...]

Gap Inc. – Growth And Income – Zacks Rank Buy

Alex Kolb — Wed, 30 Sep 2009 05:00:00 +0000

Gap Inc. (GPS) reported comparable store sales slipping by 3% year-over-year. While sales were slightly lower, which is not unique amid the current economic environment, GPS shares continued climbing and are trading close to a 52-high. The company also recently released sad news, announcing that Donald G. Fisher, co-founder of Gap, died after a long and heroic battle with cancer.

Company Description

Co-founder Dies After a Long and Heroic Battle with Cancer

The company recently announced that Donald G. Fisher, co-founder of Gap, died after a long and heroic battle with cancer. He was 81.

Donald Fisher opened his first Gap store 40 years ago last month. A life-long resident of San Francisco, he was also known for his commitment to philanthropic and civic activities. Along with his wife Doris, Mr. Fisher believed that opportunities existed for a retail company that could provide consumers with a variety of fit and style options. In 1969, the Fishers raised $63,000 to launch a single jeans and music store called The Gap (named for "the generation gap") in San Francisco.

"Today we lost a friend, a mentor and a great visionary," said Glenn Murphy, CEO and Chairman of the Board of Gap Inc. "Don and Doris took a simple idea and turned it into a brand recognized as a cultural icon throughout the world and changed the face of retail forever. "

Solid Back to School performance at Old Navy

Gap posted net sales of $1.12 billion for the month of August, a 2% dip from the year-prior total. Comparable store sales slipped by 3% year-over-year.

"During August, customers responded well to our denim collections at Gap and Old Navy," said Sabrina Simmons, chief financial officer of Gap Inc. "We were especially pleased by the progress at Old Navy and its strong back to school performance, which helped support total company merchandise margins significantly above last year."

Old Navy sales came in 4% above the previous year's total.

Bullish Forecasts

Analysts polled by Zacks are bullish on earnings. Current full-year estimates of $1.37 per share up 2 cents in just the past week. For the following year, the Zacks Consensus Estimate of $1.48 per share was also bumped up by 2 cents over the past week.

Gap boasts an impeccable record of exceeding earnings projections. Dating back to December 2004, the company topped the Zacks Consensus every time with the exception of 1 match.

A Strong Second Quarter Helped Push Shares Higher

In mid-August, the company reported second-quarter earnings 33 cents per share, beating the Zacks Consensus Estimate by 3% and outpacing last year's 32 cents.

Net sales of $3.25 billion came in below the previous year's $3.50 billion. Comparable store sales declined 10% year-over-year. Online sales, however, showed an increase of 17% from the year-prior.

"We're proud to deliver second quarter earnings per share above last year, especially during a challenging environment," said Glenn Murphy, chairman and chief executive officer of Gap Inc. "Building upon two years of work improving our economic model, we're now putting further emphasis on changing the trajectory of our top line performance. Our focus is to find the right balance between maintaining our cost discipline and making appropriate, targeted investments to gain back market share."

Shares, which are nearing a 52-week high, climbed higher after delivering a stellar second quarter, outperforming the market by about 10%. For the past year, GPS is more than 20% ahead of the market.

GPS Stacks Up Well Against Industry Numbers

Gap, a Zacks #1 Rank (Strong Buy), has a solid balance sheet, showing no debt. The company's return on equity of 21% nearly triples the industry average of 8%. Its net profit margin of 7% eclipses the industry average of 1%. Gap also offers an industry-leading dividend yield of 1.6%. Zacks Investment Research

Citi Sells Chunk of Diners Club – Analyst Blog

Zacks Market Commentaries — Tue, 29 Sep 2009 18:44:01 +0000

Citigroup, Inc. (C) has sold off a part of its Diners Club credit card processing business to Elavon, a subsidiary of US Bancorp (USB), as it continues to rid itself of unwanted assets.

Elavon acquired Citibank's Diners Club Card merchant-location portfolio in Western Europe, which represents more than 75,000 merchants. Small and mid-size businesses that accept Diners Club cards in the region will now process their transactions through Elavon. Terms of the deal were not disclosed.

Separately, Elavon has also signed an agreement with Diners Club International, a unit of Discover Financial Services (DFS). The agreement will enable Elavon to provide processing, funding and customer support services for merchants that accept Diners Club International cards in the U.K., Ireland, France, Switzerland and Germany.

Citigroup, once the largest U.S. bank by assets, fell behind last year after a series of acquisitions by rivals. The bank has been severely hurt by billions in losses and write-downs of problem loans and toxic assets.

During the second quarter of 2009, Citigroup reported results separating the firm into Citicorp and Citi Holdings. The company is currently undergoing a major restructuring in its businesses and plans to hold down its assets and divest non-core businesses in Citi Holdings.

The U.S. government injected $45 billion in bailout funds into the bank, $25 billion of which was recently converted to a 34% ownership stake. Top-level management at the company is conceiving plans to downsize the government’s stake in the company through a multibillion-dollar stock offering.

Last week, Citigroup also decided to scale back its U.S. retail footprint to just six major metropolitan areas and limit lending mostly to wealthy customers.

Citigroup will release its third quarter 2009 earnings on Oct. 15, 2009 with a conference call scheduled later in the day to discuss its results. Ahead of its results, we maintain our Neutral recommendation on the stock.
Read the full analyst report on "C"
Read the full analyst report on "USB"
Read the full analyst report on "DFS"
Zacks Investment Research

G-20 Heats Up…

Contrarian Profits — Fri, 25 Sep 2009 19:07:47 +0000

p Dollar#8217;s rally is cut short#8230;Major problems for loans still exist#8230;Yen rallies on exporter repatriation#8230;Kiwi gets whacked! And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Happy Friday to one and all! It#8217;s still raining here in St. Louis this morning, but I won#8217;t that get me down, as it is a Friday! G-20 has gotten a bit ugly, folks#8230; Seems everyone just can#8217;t seem to get along! Imagine that! 20 different countries, and now they want to be able to watch another country#8217;s finances and comment on them! Oh, I can see that working out real well! NOT!/p pSo#8230; Yesterday, we had the dollar gaining back the ground that it had lost the previous day, but at the end of the day, we#8217;re#8230;/p

Swiss Banks Choose Safety Over Secrecy – Analyst Blog

Zacks Market Commentaries — Thu, 24 Sep 2009 19:00:28 +0000

On Wednesday, the US and the Swiss governments officially signed the new dual tax treaty which represents an important development for the Obama administration’s endeavor to fight international tax evasion.

The Swiss government has agreed to the international standard on exchange of data. The treaty calls for compulsory arbitration in some tax cases. It also demands changes in the dividend treatments when a pension or retirement fund holds shares.

The US government pursued a tax evasion case against UBS AG (UBS), which was settled last month with the Swiss bank agreeing to provide account details of its 4,450 American clients who allegedly evaded taxes.

Over the years, Swiss banks have enjoyed large foreign deposit inflows as its domestic tax system emphasizes extreme confidentiality. However, adoption of the Organization for Economic Co-operation and Development’s standards for tax co-operation coupled with the lawsuit between the US Internal Revenue Service and UBS led to a dilution of secrecy.

Recently, Switzerland signed an agreement for sharing banking information upon request from France's tax authorities from January 2010. There have been huge outflows of funds as anxious investors eye a safe refuge.

Formed through merger of Union Bank of Switzerland and Swiss Bank Corp. in 1998, UBS is one of the largest banks in the world. The ongoing global economic turmoil has severely hurt its balance sheet since the subprime crisis led to record losses. The investment banking arm of UBS particularly recorded large trading losses after significant decreases in commissions and fee income. Its asset quality is beginning to turn negative and is expected to worsen further in the coming quarters.

Read the full analyst report on "UBS"
Zacks Investment Research

Pity the Investors Counting on a Bull Market

Bill Bonner — Mon, 21 Sep 2009 18:36:11 +0000

pLet’s get this straight./p pHousehold credit is shrinking#8230;br / Profits are shrinking#8230;br / Employment is shrinking#8230;br / Housing values are shrinking#8230;br / The wage base is shrinking#8230;/p pBut the recession is over!/p pWhoa#8230; how is that possible? /p pThis weekend’s news brought no surprises. For example, the housing picture is still depressing – unless you’re a buyer./p pThere’s “no bottom in sight” to Florida condo prices, says Barron’s. And Reuters warns that option ARM mortgages “are about to explode.” At least, that’s what the attorney general of the sovereign state of Iowa says. The option gives the homeowner the right to pay only the interest (or in some cases less than the interest) for the first few years. They’re sometimes called I.O. mortgages (interest only). And now these mortgages, written at the height#8230;/p

Clenergen Corp. (CRGE.OB) Appoints Dale Shepherd as CFO and Abillish Kamti as CFO of Clenergen India Private Ltd.

QualityStocks — Mon, 21 Sep 2009 13:15:46 +0000

Chief Executive Mark Quinn announced this morning that the company has appointed Dale Shepherd as its Chief Financial Officer and Abillish Kamti as the Chief Executive of Clenergen India Private Ltd. Working from 1973 to 1991 for one of the world’s premier global networks, the General Electric Company, Dale’s career has focused on hands on problem [...]

AGCO Lowers Guidance – Analyst Blog

Zacks Market Commentaries — Wed, 16 Sep 2009 21:15:44 +0000

AGCO Corp. (AGCO) recently updated its outlook for 2009. The company now expects net sales to decline by 23% to 25% on a year-over-year basis. During its second quarter conference call, AGCO had provided a guidance of $6.5–$6.8 billion, which represented a drop of 20% to 23% from prior-year revenue of $8.4 billion.

The company reduced its sales guidance due to lower-than-expected demand during the third quarter in its European operations, primarily in Germany, France and the United Kingdom. AGCO is now aggressively cutting production in order to reduce its own and dealer’s inventories.

The company now sees full-year earnings of $1.30 to $1.50 per share. AGCO expects lower sales and operating income in its Europe/Africa/Middle East region due to softening market conditions, reduced order in-take, continuing efforts to reduce dealer inventories and lower-than-anticipated margins.

The company anticipates weak industry demand in Europe due to lower income across the entire farming sector. Demand is expected to be severe in Eastern and Central Europe and Russia due to tighter credit markets.

For the third quarter, AGCO sees sales dropping by 30% to 35% year over year. The company expects quarterly earnings at or slightly below breakeven levels.

We concur with the company that the demand for farm equipment is not expected to recover in the next couple of quarters.

Read the full analyst report on "AGCO"
Zacks Investment Research

Goldman’s seven big questions about the economy

Prieur du Plessis — Tue, 15 Sep 2009 09:14:29 +0000

A recent Global Economics Weekly report from Jim O'Neil and the team at Goldman Sachs Global Economics highlights the answers to seven key questions that, according to them, should provide an indication of whether the improvement in the global economy and performance of world financial markets can be sustained. Read on ...

The ECB’s Balance Sheet at a Glance

Claus Vistesen — Tue, 15 Sep 2009 06:00:00 +0000

What follows is the reason that last week was completely quiet here at Alpha.Sources. Essentially, I was working away on a detailed look at the ECB's balance and the related question of whether we can call, what it is that ECB the is doing quantiative easing or not? Needless to say, I think that this question is an important one in a general context since if I am right and if the crisis has indeed now moved to the center and periphery of Europe, in stead of the US, then a close look at the ECB's policies is not only merited, but quite important.

With the distinct risk of turning this into a cheesy copy of the Oscars show I should thank Edward Hugh for his patient and thorough back-editing of the piece for English language as well as the actual arguments themselves. All mistakes and mishaps naturally fall entirely on my shoulders and criticism should be directed accordingly. I reproduce the executive summary below and the full report is online here where you can view it in Google Docs or download it as a PDF. The analysis includes data up until week 35 (and July for the monthly data). If you want a copy of the spread sheet, please let me know.

---

Executive Summary

Is the ECB deploying a variant of Quantitative Easing in any fashion, way, shape or form?

If you are talking about Quantitative Easing senso strictu then my answer has to be a simple and straightforward no. However, if we stop being quite so by the letter of the book, and broaden our definition slightly, then I would strongly suggest that the battery of credit enhancing measures put in place by the ECB when taken together with
the steady increase in securities accepted onto the balance sheet as collateral, do make it evident that the ECB - whether wittingly or unwittingly - has moved into some form of what we could at least call "quasi" Quantitative Easing.

Is the ECB indirectly monetizing the debt issuance of Eurozone governments?

If my initial answer to this question - before actually going through the books - would have been an outright yes, I now feel the need to tread much more carefully on this point, since I have most definitely not been able to conjure up that proverbial smoking gun. In fact, it has proved very difficult to establish any kind of direct link between the amount of funding drawn from the ECB refinancing operations and the purchase of government bonds by the MFIs at the national level.

This is not to say, however, that circumstantial evidence is not available that this process is taking place to some extent, and in some countries. I do believe, for example, that the massive purchase by Spanish MFIs of government bonds in that country does offer prima facie evidence that some such connection may well exist, and thus all I can say at this point is that further research is called for, and especially a much more detailed and discriminating data-mining dig-down.

What are the prospects and possibilities for a viable exit strategy for the ECB from its non-standard monetary policy measures?

The measures collectively known as Enhanced Credit Support are by their very nature flexible. However, if there is anything we have learnt from the operation of monetary policy in Japan over the last twenty years it is that premature exit from the sort of substantial support the ECB is offering only makes matters worse, and in addition
this kind of massive liquidity easing is a lot easier to get into than it is to get out of.

A true economic recovery will inevitably be somewhat selective, and it is at this point that the ECB's problems will really start, since the recovery will begin in some countries and not in others. To take the extreme case: it will be awfully hard to maintain massive monetary easing for a Spanish economy which remains stuck in an "L" shaped non-recovery if in France headline GDP growth were to start to tick back again towards - say - 2%. Then the real dilemmas which face the ECB will begin in earnest. As such, it is going to be much more difficult for the ECB to instigate that dearly beloved exit strategy than many currently like to believe.

Buy, Sell or Hold: The SPDR Gold Trust ETF (NYSE: GLD) Continues to Offer Investors a Hedge Against Inflation

Contrarian Profits — Mon, 14 Sep 2009 19:45:05 +0000

pThe just-concluded Group 20 (G20) meeting left us with a chorus of very #8220;prudent#8221; governments and central bankers singing the praises of easy monetary and fiscal conditions. So where can we take refuge when all the central banks in the world print money and governments run deficits in order to spend like drunken sailors? The answer is gold. /p pFortunately for us, we foresaw this scenario a while ago. a href="http://www.moneymorning.com/2009/04/20/gold-etf/" target="_blank"On April 20, I recommended that investors diversify their portfolios by adding the strongSPDR Gold Trust ETF/strong/astrong (NYSE: a href="http://www.google.com/finance?q=gld" target="_blank"GLD/a)/strong. The fund is up about 14% since that recommendation, but it’s not yet time to sell, as there are still a number of factors working in gold’s favor./p pFor starters, there is more and more#8230;/p

McDonald’s Loses Momentum – Analyst Blog

Zacks Market Commentaries — Thu, 10 Sep 2009 21:55:30 +0000

McDonald’s Corporation’s (MCD) comparable sales growth lost momentum in the month of August 2009. After increasing 4.3% in the month of July, the rise in comps was restricted at 2.2%, exposing its sensitivity to rising unemployment, the economic downturn and the discount war amongst fast-food chains to lure consumers. Last year, comps had increased 8.5% in the month of August.

System-wide sales for the company’s worldwide restaurants climbed 1.1% for the month of August, after falling 0.3% in July. However, in constant currencies, the rate of increase in system-wide sales dipped to 4.1% from 6.2% in the month of July.

In the United States, comparable sales rose 1.7% in August (versus 4.5% increase last year for the comparable month), boosted by new product offerings -- new Premium products like Angus Third Pounders and Dollar Menu products like the Big Mac and McCafe premium coffees. However, the rise in comps for the month of August slid from 2.6% reported in July.

In Europe, comparable sales jumped 3.5% in August (versus 11.6% increase last year for the comparable month) driven by strong performance in the U.K., Russia and France. However, the rate of increase in comps decelerated. Earlier, in July, comps rose by 7.2%.

Comparable sales in APMEA fell 0.5% in August (versus 10.0% increase last year for the comparable month) adversely affected by China and Japan, but largely offset by robust performance in Australia. Earlier, comps had increased 2.1% in the month of July.

However, McDonald's and other fast-food restaurants, like Burger King Holdings (BKC), Krispy Kreme Doughnuts (KKD), Yum! Brands (YUM), Papa John's International (PZZA) and Chipotle Mexican Grill (CMG) are faring better than casual and upscale dining restaurants, as cash-strapped consumers are trending towards lower-priced dining options.

However, on a broader perspective, rising job losses have weighed on the restaurant industry, as consumers have now become more sensitive towards economic conditions. The current data reveals that the U.S. unemployment rate jumped to 9.7% in August from 9.4% in July.
Read the full analyst report on "MCD"
Read the full analyst report on "BKC"
Read the full analyst report on "KKD"
Read the full analyst report on "YUM"
Read the full analyst report on "PZZA"
Read the full analyst report on "CMG"
Zacks Investment Research

Cemex Announces Public Offering – Analyst Blog

Zacks Market Commentaries — Thu, 10 Sep 2009 16:00:43 +0000

This week, Cemex S.A.B. de C.V. (CX) started a global public offering of 1,200 million Ordinary Participation Certificates (CPO), directly or in form of American Depositary Shares (ADS). The world’s third-largest cement producer has also given underwriters to offer up to an additional 180 million CPOs, directly or in the form of ADSs, to cover overallotments.

The offering includes 595 million CPOs that will be sold on Cemex’s behalf by three of its subsidiaries. Of the 1,200 million CPOs being offered, 900 million CPOs are expected to be offered in the United States and in other countries outside Mexico. Approximately 300 million CPOs will be offered in a concurrent public offering in Mexico. The deal is subject to market and other conditions. The company is likely to offer the CPOs on Sept. 23.

Cemex plans to use the proceeds to repay debt, which will be crucial in the coming quarters as its huge leverage is a rising concern. Net debt at the end of the second quarter was $18,272 million and is more than 5x the expected EBITDA for 2009. It is all the more urgent for Cemex as it is battling with leading cement makers like France’s Lafarge SA and Switzerland’s Holcim Ltd in a difficult market.

Cemex intends to reduce its net debt by about $3.6 billion in 2009 to reach $14.3 billion at the end of the year in order to restore financial flexibility as soon as possible and meet its financial commitments. The company is indeed making a huge effort to restore its creditworthiness and adapt itself to new and much more difficult market conditions.

Read the full analyst report on "CX"
Zacks Investment Research

A Recovery Impersonator

Bill Bonner — Wed, 09 Sep 2009 19:06:09 +0000

pThis recovery is wonderful in every way, except the important ones. It is like a shiny new airplane. It has glossy aluminum wings. It has plush seats in the first class section. Trim stewardesses serve drinks. Movies are available on demand in all sections… /p pA majority of those polled by Bloomberg think it’s great; 61% said they thought they economy had taken off and was flying high. Stocks are up. Commodities are up. And here’s another Bloomberg headline: “Global investors give Federal Reserve Chairman Ben S. Bernanke top marks#8230;”/p pThe recovery has won the approval of economists and the public. It has almost everything going for it. It just won’t fly!/p pComes news this morning that the US economy is still on#8230;/p

Ruthless Defaults on Credit Cards – Analyst Blog

Dirk Van Dijk — Wed, 09 Sep 2009 18:20:53 +0000

Banks are trying to recoup some of their massive losses on bad loans by increasing their rates on credit cards and collecting huge overdraft fees on people who use debit cards and pull too much out. There is an interesting article in today’s New York Times on debit card overdrafts.

However, what got my attention was the YouTube video below by a woman protesting the increase in credit card rates by Bank of America (BAC). Essentially she is telling the bank that she is going to ruthlessly default, unless they return her card rate to its previous level (not stated, from the new rate of over 30%). The YouTube clip can be seen here.

While I found much of her rhetoric over the top, she is making a very good point. The costs of the colossal screw-up by the banks are being borne by the middle class, both through eventual higher taxes to pay for the bank bailouts, or through higher fees and expenses when we use the banking system. With banks generally not lending freely, your credit score is less valuable than it used to be, so simply refusing to pay your credit card bill will not hurt as much as it once might have.

Scenarios such as this could lead to many more serious problems in the banking sector. The banks mostly rely on a system of voluntary compliance, where people simply pay their bills on time with nothing more than a statement or invoice being sent out each month.

The person in the video claims that she has the ability to pay, but she simply is deciding not to. If her attitude becomes widespread, the banks are going to be in a tough spot. They already have their hands full with people who would like to be able to pay their bills, but simply are unable to because they have been out of work for a long time.

In previous times, the attitude of her neighbors towards her would be that she was just one step removed from being a thief. However, after seeing the kid-glove treatment that the banks have gotten under both the Bush and Obama Administrations after they had behaved very badly, and seeing the enormous clout that the banking lobby has in Congress, people may feel that this is the only way they have of fighting back.

The U.S. is not France, we don’t do general strikes. The usual political routes have failed. BofA just happened to be the bank that this person was using, but it is far from unique, all the major card companies such as American Express (AXP), JP Morgan (JPM) and Capital One (COF) have been engaging in similar practices and could be at risk.

This could be the start of a quiet rebellion, but one that could ultimately be more effective at curbing the banks than any sort of manning the barricades or letter writing campaign to congressmen. The civil courts are going to be overwhelmed if this takes hold.

Consumer credit might end up contracting not because people are paying off their credit cards, but because they are not. Default reduces the volume of debt outstanding just as much as repayment does, but with very different winners and losers.

Read the full analyst report on "BAC"
Read the full analyst report on "AXP"
Read the full analyst report on "JPM"
Read the full analyst report on "COF"
Zacks Investment Research

Yahoo Flickrs on Mobile Phones – Analyst Blog

Zacks Market Commentaries — Wed, 09 Sep 2009 15:00:07 +0000

Yahoo Inc. (YHOO) recently launched a mobile version of its popular Flickr program, which can be downloaded for free on Apple’s (AAPL) iPhones and Research In Motion’s (RIMM) Blackberry handsets.

The mobile app enables photo and video searching, sharing, uploading and emailing. It also allows automatic geotagging of photos and videos (depending on the model) and allows the user to add personal commentary.

The Flicker app is available in English, French and traditional Chinese languages for users in the UK, France, Singapore, Hong Kong, the U.S. and Canada.

Yahoo has modified its growth strategy this year by increasing focus on the mobile segment. The company revamped the Yahoo Mobile service as a combined application, using mobile versions of Yahoo OneSearch, OnePlace and OneConnect. It makes available search, news, e-mail, social networking, finance, weather, sports scores and other RSS feeds. The company has made the service available as a special app for the iPhone, as well as a browser-based app on more than 400 other mobile devices.

Yahoo also separated the development of mobile applications into general and special categories. The general applications, such as travel, personals or some entertainment sites are available through the browser option. Special applications can be downloaded on specific phones, such as the recently announced Flickr app. The company has also introduced Yahoo Finance and Fantasy Football apps for the iPhone and BlackBerry Bold, Tour and 8900 series.

Yahoo has chosen phones that have the largest number of interactive users, since developing special applications is an expensive affair. Sandeep Gupta, senior director of mobile applications, said that development of applications for other phones like Palm’s (PALM) Pre and Google’s (GOOG) Android-based phones was also underway.

The company has fallen behind third-party application developers that have already launched Mobile Fotos, Darkslide and Flickit. While these Flickr-based apps are likely to increase competition for the company, we expect the Yahoo mobile strategy to be ultimately more successful.

Read the full analyst report on "YHOO"
Read the full analyst report on "AAPL"
Read the full analyst report on "RIMM"
Read the full analyst report on "PALM"
Read the full analyst report on "GOOG"
Zacks Investment Research

How Would You Respond to an Obama Wealth Tax?

Contrarian Profits — Tue, 08 Sep 2009 23:01:03 +0000

p style="margin-bottom: 1em;"Pretend, just for a moment, that emyou#8217;re/em President Obama. You have big spending plans – national health insurance, two wars, and a trillion dollar bailout for your friends on Wall Street. Not to mention paying for the soaring costs of Social Security and Medicare. /p p style="margin-bottom: 1em;"Unfortunately, revenues simply aren#8217;t keeping up./p p style="margin-bottom: 1em;"Your Treasury Secretary – accused tax-evader Timothy Geithner – tells you that the unfolding recession is starving the country’s government for tax revenue. Indeed, just as you unveiled your trillion-dollar national health plan, Tricky Timmy informed you that federal tax revenues were dropping the fastest since 1932 – at the height of the Great Depression./p p style="margin-bottom: 1em;"What to do…cut spending? Well, Obama emdid/em challenge his cabinet in April to come up with a whopping US$100#8230;/p

Prieur’s readings (September 6, 2009)

Prieur du Plessis — Sun, 06 Sep 2009 05:00:17 +0000

In the absence of the “Words from the Wise” review while I am traveling, this post provides links to a number of thought-provoking articles I have read over the past few days that you may also find interesting. Please also add the links to any other worthwhile articles you would like to share to the comments section.

AMB Makes Big Lease in Paris – Analyst Blog

Zacks Market Commentaries — Wed, 02 Sep 2009 20:50:33 +0000

AMB Property Corporation (AMB), a leading real estate investment trust (REIT), has recently signed a leasing agreement for approximately 65,000 square feet in Paris. The deal was signed with Lincoln Electric Holdings Inc. (LECO), a leading welding equipment manufacturing company.

With the deal, the facility at AMB Port of Rouen spanning 275,000 square feet is now fully leased. AMB had earlier leased 210,000 square feet of space at the site to Schenker France, one of the leading international providers of integrated logistics services, and Necotrans Group, another premier logistics company.

Port of Rouen is strategically located at a prime location and provides immediate access to major centers of commerce in the region through highway network, a dense railway system and two major airports at Roissy and Orly. Lincoln Electric intends to utilize these transportation facilities to strengthen its position in the market. The leased facility is also located in close proximity of its French headquarters.

Based in San Francisco, AMB is a leading global owner, operator and developer of industrial real estate in North America, Asia and Europe. By the end of the second quarter of 2009, AMB had more than 14 million square feet of operating and development facilities in Europe, out of which 4.8 million square feet was located in France.

Industry focused REITs have been one of the worst performing sectors in 2009. With a sagging global GDP, demand for industrial space continues to dry up. However, AMB is better equipped than its peers to weather the current downturn due to its strong portfolio and continued leasing activities.
Read the full analyst report on "AMB"
Read the full analyst report on "LECO"
Zacks Investment Research

U.S. Asks UBS for Data – Analyst Blog

Zacks Market Commentaries — Tue, 01 Sep 2009 16:56:03 +0000

The United States has officially started the process of gathering account details on 4,450 American clients of UBS AG (UBS) who have allegedly evaded paying taxes. This formal request has been made after Switzerland agreed to provide the relevant client details.

Over the years, Swiss banks have enjoyed large foreign deposits inflows as a result of its domestic tax system, which comprised extreme secrecy. However, the adoption of the Organization for Economic Co-operation and Development (OECD) standards for tax co-operation coupled with the lawsuit between the U.S. Internal Revenue Service (IRS) and the Swiss bank UBS led to a dilution of secrecy.

Recently, Switzerland signed an agreement to share banking information upon request from France's tax authorities from January 2010. As a result, there have been huge outflows of funds as the anxious investors are eyeing a safe refuge.

UBS, formed after the 1998 merger of Union Bank of Switzerland and Swiss Bank Corporation, is one of the largest banks in the world. However, we expect this news to weigh heavily on UBS whose balance sheet has already been severely impacted by the subprime crisis and has reported record losses.

Moreover, recent global market turmoil has taken a toll on UBS, particularly at the investment bank, resulting in significantly declining commission and fee income and large trading losses. In addition, asset quality has begun to turn negative and will deteriorate further as the business cycle progresses.
Read the full analyst report on "UBS"
Zacks Investment Research

RA’s Daily Russian News Blast – September 1, 2009

Robert Amsterdam — Tue, 01 Sep 2009 08:19:32 +0000

TODAY: 70th anniversary of the outbreak of World War Two - officials meet in Gdansk for carve up of history; Putin acknowledges 'immoral' treaty and Katyn suffering; NATO receptive to plans for Russian defense; Stalin's grandson sues for libel; Other...

Towards a Better Solar Business Model

Small Cap Pulse — Fri, 28 Aug 2009 17:18:00 +0000

August 27, 2009 ndash; LDK Solar (NYSE:LDK) announced an agreement with Yancheng City of Jiangsu Province for the development of a number of PV projects (ground-mount, roof and BIPV) totaling up to 500MW over the next five years. And Canadian Solar (Nasdaq:CSIQ) said it has signed a LOI with the Administration Committee of Baotou National Rare Earth Hi-Tech Industrial Development Zone in Baotou, Inner Mongolia, for rights to design, install, operate and maintain a 500MW solar facilitynbsp; in Baotou. The three-phase project is expected to start in September 2009 and run through December 2011 (phase 1: 100MW; phase 2 and 3: 200MW). These announcements mark an important trend in the solar markets and one that we have been commentating on a lot lately ndash; the further move by midstream solar firms to vertically integrate downstream and even moving into operations of solar facilities. Cowenrsquo;s Raj Seth this morning commented on the LDK announcement stating that it is a positive for the stock (100MW if 6% of 2010 shipment estimate for LDK), but he emphasized that the company remains challenged by falling ASPs, uncertainty about internal poly production and a weak balance sheet. Massive oversupply in the upstream and midstream channels exacerbated by tight credit markets and project delays have been a thorn in the side of solar manufacturing firms and have driven ASPs down ndash; pressures persist. As a means of reacting to these pressures, firms like LDK and Energy Conversion Devices (Nasdaq:ENER) have made moves to acquire ownership in integrators. The primary rationale being that this will create further project opportunities, sales channels, and potentially provide some extra operating leverage. The strategy makes sense and the risk is largely going to be in execution. But vertically integrating system development and installation will likely not be a silver bullet. Just look at the pure play downstream players like Real Goods Solar (Nasdaq:RSOL), Akeena (Nasdaq:AKNS) and Solar Power (SOPW.OB) who have all struggled with their business models to achieve profitability and operating efficiencies. The biggest problems that we see with downstream business is that margins are hard to control/expand (cap intensive and labor intensive) and it is basically a one-off business. Some downstream players are trying to move upstream into manufacturing to create operational leverage of their own (pace Akeena and Solar Power) but it is difficult to compete with the kind of scale that established midstream solar manufacturers have already established, and in the current environment it is no recipe for margin expansion. Frankly, it just adds another layer of execution risk. The model that we think is best suited to survive, and thrive, in the current environment is one that newcomer EPOD Solar (EPDS.OB) is implementing. EPOD is totally vertically integrated. It manufacturers amorphous thin film solar product and it pushes that product into solar parks that it designs, engineers, develops and operates. Its projects create the demand for the solar panels that it is making. The challenge to this model is in the financing of projects but EPOD is mitigating that issue through developing projects with partners that can help capitalize them in part, or in certain cases in full (where it sells 100% of the facility). Canadian Solarrsquo;s announced LOI above reflects a move to this model, and First Solarrsquo;s (Nasdaq:FSLR) purchase of Optisolarrsquo;s projects does as well (note that EPOD purchased Optisolarrsquo;s manufacturing and Ramp;D facilities). And there are variations on this model ndash; pace French utilityrsquo;s EDF who recently announced a venture with First Solar to build a 100MW thin film manufacturing facility in France whereby it has rights to the facilityrsquo;s entire output for the first 10 years. EDF had 20MW installed at the end of 2008 but has plans to ramp its solar project developments. From our perspective, in the current environment where feed in tariffs and long-term PPAs are available, it makes more sense to pursue a strategy in solar to sell electricity instead of panels. Panels will continue to get commoditized and prices will continue to trend lower. Competition will only get more stiff and there will be a shakeout amongst manufacturers. The low cost producers will survive. Attrition will displace the rest. This is good news for solar, because lower panel prices translate into lower system costs and the ability to compete on a non-subsidized basis with conventional energy sources. And manufacturing firms that achieve economies of scale and continue to advance their technologies will make up for the lower pricing with greater efficiency. The Energy Information Association projects that electricity demand will increase by 26 percent from 2007 to 2030, or by an average of 1.0 percent per year. The largest increase is in the commercial sector (38 percent), where service industries continue to lead demand growth, followed by the residential sector (20 percent) and the industrial sector (7nbsp;percent). Population growth and rising disposable incomes increase the demand for products, services, and floorspace, and ongoing population shifts to warmer regions increase the use of electricity for space cooling.nbsp; The EIA expects real retail electricity prices to rise to 10.4 cents per kWh in its 2030 reference case. So with electricity prices expected to remain stable, and with the availability of feed-in-tariffs, which require electricity utilities to buy renewable energy at above market rates (set by the government) from anyone that wishes to produce renewable electricity, the economic advantage of a solar manufacturing firm moving into development and operation of solar parks ndash; electricity sales ndash; is undeniable. Under this model, lower panel costs which translate into lower system costs ultimately result in higher internal rates of return on the solar parkrsquo;s performance. The Street may have a difficult time, initially, coming up with a way to value companies moving towards the manufacturer/independent power producer (IPP) model. Under this model, declining ASPs are meaningless. On the other hand, cost-per-watt and system installed costs are critical, as are the net capacity yield of a solar park and energy system paybacks. At the end of the day, what matters is profitability, and in our opinion, solar manufacturers that take advantage of current market conditions to build, own and operate solar parks that house their panels will gain an advantage. Important Disclosure: SCPEditor is managing partner of Aspire Communications whichnbsp;is engaged by EPOD Solar, and Todd Pitcher has investments in EPOD, LDK and First Solar.

Micros Systems Beats – Analyst Blog

Zacks Market Commentaries — Fri, 28 Aug 2009 15:00:35 +0000

Micros Systems (MCRS) designs, manufactures, markets, and services enterprise information solutions for the hospitality and specialty retail industries. Yesterday, the company posted better-than-expected results for the fourth quarter of fiscal 2009.

Revenue of $224.2 million was down 12.7% from a year earlier but up 8.7% sequentially. Gross margin for the quarter came in at 53.7%, almost flat with the year-ago period. Net income was $24 million, or 29 cents per share, compared to $30.1 million or 37 cents per share, last year.

During the quarter, Micros recorded a one-time restructuring charge of $3.8 million and an impairment charge of $1.3 million related to investments in auction-rate securities. Excluding non-recurring items, earnings per share (EPS) came in at 36 cents easily beating the Zacks Consensus Estimate of 29 cents.

For fiscal 2009, revenue of $911.8 million was down 4.4% from a year ago. Net income came in at $99.3 million, or $1.21 per share, compared to $101.3 million, or $1.21 per share, in 2008. Excluding non-recurring items, EPS was $1.38.

During the reported quarter, Micros repurchased $30 million shares and almost completed the two million buyback authorized by the Board of Directors in February. The Board has approved an additional share repurchase program of two million shares.

Going forward, management is encouraged by improving business conditions like the positive GDP growth in France, Germany and Japan along with increased factory output and consumer confidence, receding jobless claims and the jump in sales of new homes. None of the company’s customers have canceled any ongoing rollouts.

However, management remains cautious as unemployment continues to rise. Most of the positive news in the economy is tied to stimulus spending by the government.

Most Micros customers are either in the hospitality or specialty retail industry. Consumer spending is not expected to improve unless the government creates more jobs. We would like to remain on the sidelines till we have better clarity of its fiscal 2010 growth prospects, given the fact that economic recovery is going to be a slow affair.

Read the full analyst report on "MCRS"
Zacks Investment Research

Europe Shares Rise for 6th Week in 7

Contrarian Profits — Fri, 28 Aug 2009 14:30:10 +0000

pEuropean shares touched a 10-month high on Friday on optimism for a global economic recovery and with Nokia and results from U.S. bellwethers boosting the technology sector./p pThe FTSEurofirst 300 #60;.FTEU3#62; index of top European shares rose 1 percent to 978.34 points. Over the week, the index climbed 1.2 percent, its sixth weekly gain in the last seven weeks./p pThe European benchmark index is up more than 51 percent from its lifetime low of March 9, as investors have become more confident on the prospects of economic recovery./p p#8220;Things look good for the time being, but the higher we go the more we could be setting ourselves up for a disappointment,#8221; said Andy Lynch, a fund manager at Schroders./p p#8220;The world economy is doing well,#8230;/p

Bernanke is No Hero

Bill Bonner — Fri, 28 Aug 2009 11:25:28 +0000

p“They were hunters. They stayed here during the Ice Age, probably hunting reindeer,” said the archaeologist in charge of the site. “But who were they?”/p pstrong“They were Cro-Magnon…they were like us…human./strong They wore jewelry. They drew pictures. They cooked meat. And they used this cave over a period of 30,000 years…”/p pYesterday afternoon, we drove up the valley to a limestone cave owned by friends. There, a group of 20 scientists, archeologists and volunteer workers are digging down through 30,000 years of history, about 20 feet worth of dirt, rock and sediment, 5 centimeters at a time./p pWe’ll come back to the pre-historic world in a minute. First, let’s catch up on what is going on in the world of finance, right now./p pstrongYesterday, most#8230;/strong/p

Don’t Count on China

Bill Bonner — Wed, 26 Aug 2009 17:30:23 +0000

pNow the summer days are dwindling down to a precious few. This morning, it is overcast and chilly here in central France. The leaves on the aspen and linden trees have turned yellow already; whenever the wind blows, they flutter to the ground as if they were trying to get away from something. /p pThis afternoon, we have been invited for a private tour of a grotto not far away. According to our information, the grotto was sealed off by falling rock hundreds of years ago. Thus it was protected and preserved remains of human habitation from 30,000 years ago./p p“Yes, there is a span of about 10,000 years in which there is little evidence of human habitation in Europe,” said the#8230;/p

Beacon Equity Research Featured Company: Empire Film Group Inc. (EFGU.PK)

QualityStocks — Wed, 26 Aug 2009 16:55:39 +0000

Empire Film Group Inc. is an independent film finance, production, and distribution company. The company’s commitment is to developing and producing low-cost, high quality commercial films that will attract talent and strong distribution. They have a management team that has more than twenty-five years of experience in the areas of development, production, distribution, finance, and [...]

European Shares Fall Back From 10-month High

Contrarian Profits — Wed, 26 Aug 2009 16:30:44 +0000

pEuropean shares slipped back from a 10-month closing high on Wednesday, as investors took profits, even as German and U.S. economic data continued to point to recovery./p pThe pan-European FTSEurofirst 300 #60;.FTEU3#62; index of top shares fell 0.5 percent to close at 973.92 points, breaking a four-day winning streak, and having hit its highest close since early October on Tuesday./p pThe European benchmark index is still up 50.9 percent from its lifetime low of March 9, as investors have become more confident on the prospects of recovery./p p#8220;The market has come a long way, and the economics are still supportive,#8221; said Georgina Taylor, equity strategist, Legal #38; General Investment Management./p p#8220;We#8217;re just seeing a little profit taking. Nothing has been derailed. Housing data is#8230;/p

Zacks Analyst Blog Highlights: Sanofi-Aventis, AstraZeneca, GlaxoSmithKline, Baxter and Novartis – Press Releases

Zacks Market Commentaries — Wed, 26 Aug 2009 13:25:41 +0000

For Immediate Release

Chicago, IL – August 26, 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: Sanofi-Aventis (SNY), AstraZeneca (AZN), GlaxoSmithKline (GSK), Baxter (BAX) and Novartis (NVS).

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 Tuesday’s Analyst Blog:

H1N1 Vaccine to Miss Target

Per initial estimates from October onwards, about 94 million doses of vaccine could have been manufactured by the pharmaceutical companies, but this target has already been slashed by 50-75% due to poorer than expected yield from the virus strains.

Almost 25 pharmaceutical companies are racing against time to bring the vaccine to the market. Among these the top five which include, Sanofi-Pasteur of France (the vaccine arm of Sanofi-Aventis [SNY]), AstraZeneca (AZN), GlaxoSmithKline (GSK), Baxter (BAX), and Novartis (NVS) are likely to contribute almost 80% of the total production.

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Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

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Pointing a Finger at the Rich

Bill Bonner — Tue, 25 Aug 2009 18:30:16 +0000

pPity the poor rich! Pity the poor! Pity us all! /p pHere at the a href="http://www.dailyreckoning.com" class="alinks_links"Daily Reckoning/a, we always take the part of the humble#8230; the despised#8230; the oppressed#8230; and the misbegotten./p pToday, that means the rich#8230;/p pYes, dear reader, the rich are getting beaten up. Maligned. Mistreated./p pTheir governments all have in it for them#8230; taxes on ‘the rich’ are rising. In the US, the strongDemocrats are talking about financing the entire nation’s health care system on the backs of the super-rich/strong./p pAnd their salaries are being targeted by prosecutors and politicians. No more million-dollar paydays#8230; not with the feds looking over their shoulders. Oh#8230; and their investment earnings are down too. The dividend yield on the stock market is scarcely 3% #8212; try living#8230;/p

H1N1 Vaccine to Miss Target – Analyst Blog

Zacks Market Commentaries — Tue, 25 Aug 2009 17:55:25 +0000

Although we are waiting eagerly for the first H1N1 vaccine to hit the market, it seems production of the vaccine will be much less than the original estimates. According to a warning from the World Health Organization (WHO), supply will be much less than anticipated earlier, especially with the winter season approaching in the northern hemisphere. Per initial estimates from October onwards, about 94 million doses of vaccine could have been manufactured by the pharmaceutical companies, but this target has already been slashed by 50-75% due to poorer than expected yield from the virus strains.

Almost 25 pharmaceutical companies are racing against time to bring the vaccine to the market. Among these the top five which include, Sanofi-Pasteur of France (the vaccine arm of Sanofi-Aventis, SNY), AstraZeneca (AZN), GlaxoSmithKline (GSK), Baxter (BAX), and Novartis (NVS) are likely to contribute almost 80% of the total production.

Baxter and Novartis are seeking approval to market vaccines made from cell-based cultures, which have better yields than the traditional method of growing viruses in chicken eggs. In a major breakthrough, China-based Sinovac Biotech (SVA) announced that clinical trials have shown the effectiveness of its new vaccine in a single shot whereas earlier it was assumed that two doses per person would be required. This means more people can be vaccinated. The vaccine is expected to be available within a short time from Baxter as the company declared the completion of production of the first batch of the cell-based vaccine Celvapan. On receiving approval from the concerned health authorities, the company will be able to commence shipment. GlaxoSmithKline intends to begin its shipments in late September while Sanofi-Pasteur expects to begin production by year end.

The vaccine market has emerged as one of the most lucrative segments for pharmaceutical companies. It is expected to grow at a CAGR of over 13% during 2009-2012. The H1N1 pandemic should fuel further growth in this segment.

Read the full analyst report on "SNY"
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Zacks Investment Research

Data Call Technologies, Inc. (DCLT.OB) Featured in Exclusive QualityStocks Interview

QualityStocks — Tue, 25 Aug 2009 13:35:36 +0000

An audio interview with Data Call Technologies, Inc. Chairman Jim Ammons is now available at www.qualitystocks.net/videocharts.php?chartvid_id=335. During the interview, Mr. Ammons provides an overview of the company, along with the growth of the digital signage industry in recent years. Over the past few years, digital signage has been expanding into consumers’ daily lives, being featured [...]

The Future Will Come

Bill Bonner — Mon, 24 Aug 2009 18:39:50 +0000

pIs the rally over? Not at all! The world’s bankers say the economy is recovering. Investors believe them; they’re bidding up stocks. /p pThe Dow rose 155 points on Friday. And today, stocks are rising in Asia. Oil is over $74. Gold rose $13 on Friday#8230; to close at $954. And the dollar is killing us softly#8230; sinking to $1.43 per euro on Friday./p pStocks and oil are at their highest levels so far this year. With such profits at hand people figure they don’t need the dollar. Investors run to the safety of the greenback when financial storms approach. But now#8230; they think it will be clear sailing./p p“Worlds bankers suggest rebound may be under way,” says a headline at the New#8230;/p

European Orders Support the Euro

Contrarian Profits — Mon, 24 Aug 2009 14:34:01 +0000

pEuropean orders increase more than expected#8230; Was Cash for Clunkers necessary?#8230; Roubini sees a #8216;W#8217; not a #8216;V#8217;#8230;br / Lessons from Mary Poppins#8230;And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And welcome to another week, the last one in August! The weather here in St. Louis has shifted toward fall, which is my favorite season. Chuck is flying back home from San Francisco today and will be back in the saddle tomorrow. Both he and the big boss, Frank Trotter, sent me some great Pfennig pfodder over the weekend so lets get right to it./p pThe dollar continued to drift lower throughout the trading day on Friday, with the commodity currencies of Australia, South Africa, and New Zealand leading the way. Confidence is returning to the markets, and#8230;/p

BBV, PWRM, DrStockPick Watch List! for Monday August 24, 2009, Banco Bilbao Vizcaya Argentaria, S.A. and Power 3 Medical Products Inc, PWRM.OB

Dr. Stock Pick — Sun, 23 Aug 2009 20:35:40 +0000

BBV, Banco Bilbao Vizcaya Argentaria, S.A. PWRM, Power 3 Medical Products Inc, PWRM.OB DrStockPick Watch List! DrStockPick Watch List! for Monday August 24, 2009 My Picks for Monday August 24, 2009 are: ************************************************************** BBV, Banco Bilbao Vizcaya Argentaria, S.A. BBV is a financial services group with more than $750 billion in total assets, 48 million clients, 8,000 branches and approximately 108,000 [...]

Suntech Q2 Profit Falls – Analyst Blog

Zacks Market Commentaries — Fri, 21 Aug 2009 22:47:26 +0000

Suntech Power Holdings Co. Ltd. (STP) failed to live up to market expectations of a revival in its fiscal second quarter. Although EPADS of 6 cents during the quarter surpassed the Zacks Consensus EPADS estimate of a penny, this was a far cry from the year-ago EPADS of 31 cents. Also, the quarterly results included a $17.5 million foreign exchange gain on account of the appreciation of the euro versus the dollar. Excluding this impact, the company swallowed a loss per ADS of 5 cents during the quarter.

On the revenues front, Suntech witnessed a marginal growth of 1.7% sequentially to $321 million. The growth came through higher shipments leading to volume growth over the first quarter of 2009. Suntech’s dependence on Germany continues, with almost half of its sales coming from the country during the quarter, and Italy chipping in a healthy 13%. The company also generated revenues from France, Greece, Benelux ( Belgium , Netherlands and Luxembourg ) and the Czech Republic . Overall Europe generated approximately 78% of total sales during the quarter. Besides, the company generated 11% from Asia, 8% from North America and 3% from rest of the world.

In the second quarter, Suntech witnessed 8% lower average selling price (ASP) from the previous quarter. Still, gross margins rose to 18.6% in the second quarter from 17.8% in the prior quarter. This was due to improvements in the company’s cost structure on account of lower silicon wafer costs.

Wuxi, China-based Suntech is a leading solar energy company in the world. The company designs, develops, manufactures and markets photovoltaic cells and modules. Looking forward, Suntech expects more than 50% spike in shipments in the third quarter over the second quarter. However, the company sees no further room for margin expansion in the near term. The company revised its fiscal 2009 shipment guidance to approximately 600MW from the earlier guidance range of 600MW to 700MW.

At present, Suntech is trading at a premium to its comparable peers in terms of price-to-book and price-to-sales on account of its leadership position in cell conversion efficiency and improving module manufacturing cost. However, falling ASPs, pruned expansion plans in light of lower demand and dilutive stock issuances make Suntech’s valuation unappealing in the near term. Thus, we maintain our Neutral recommendation on the shares.

Read the full analyst report on "STP"
Zacks Investment Research

Opel to Choose Suitor – Analyst Blog

Zacks Market Commentaries — Fri, 21 Aug 2009 20:32:02 +0000

General Motors will choose a preferred bidder for a controlling stake in its European Opel/Vauxhall business today. The deal has become a race between two suitors, Canada-based auto parts supplier Magna International (MGA) and Brussels-based industrial investment group RHJ International.

GM sits uncomfortably in the deal amidst the German government’s bias towards Magna. This is because Magna has vowed to make most of its job cuts outside Germany if it wins the deal. Both the suitors had indicated they would cut Opel’s workforce by a fifth – about 10,000 jobs – to make the unit financially viable.

GM is in a dilemma fearing that Magna, backed by Russia’s Sberbank, could capture Opel's technology for the Russian car industry. Thus, if Magna wins the deal, GM may lose Russia’s increasingly important market for its models such as Chevrolet. Magna and Sberbank are planning to manufacture Opel cars in Russia with the biggest automaker in the nation, Gaz Group – jointly owned by the tycoon Oleg Deripaska and Avtovaz (partly owned by France ’s Renault). This has led GM to favor RHJ for the deal.

The German Government has revealed that funds are only available to Magna as the federal government and various German states have agreed to put up the entire €4.5 billion ($6.4 billion) in credit needed to finance the deal.

GM requires clearance from Opel/Vauxhall Trust Board, which holds a 65% stake and a German Government task force for the deal to go through. The five-member Trust Board set up in June includes two voting representatives of the German Federal and Regional Governments and two from GM.
Read the full analyst report on "MGA"
Zacks Investment Research

Mortgage Delinquencies Move Higher…

Contrarian Profits — Fri, 21 Aug 2009 19:03:35 +0000

pMortgage delinquencies move higher#8230;Euro pushed higher by European data#8230;Economist predicts Norway will be first to raise#8230;Mexico to leave rates unchanged#8230;And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And happy Friday! The data released yesterday morning was a mixed bag, as the leading indicators climbed for a fourth straight month and the Philadelphia fed reported a big jump in their gauge of activity, but the initial jobless claims unexpectedly rose. Unemployment in the US will continue to be a drag on the economy, slowing any recovery and possibly pushing the US back into recession (or as some predict a depression). Today we will get some news on the housing market, and while the media will pump up the fact that month on month sales#8230;/p

The Achilles Heel of the World Economy

Bill Bonner — Fri, 21 Aug 2009 17:05:24 +0000

pThe dollar fell to $1.42 per euro yesterday. Many believe it is the Achilles Heel of the entire world financial system – including Warren Buffett. /p pAchilles was said to be dipped in the river Styx and made invulnerable. But his mother held him by his heel, leaving that part untouched by the magic waters. Naturally, that is where a poison arrow got him./p pThe moral of this story is that you have to go all the way. If you want your baby to be invulnerable, put him all the way under the water#8230; even the heels. Or, maybe there’s another point: that there’s always some place where you’re vulnerable./p pFor the purpose of today’s tale, we’ll take the second possibility. Try as#8230;/p

Rationing? I Have to Disagree – Analyst Blog

Dirk Van Dijk — Fri, 21 Aug 2009 14:17:10 +0000

In yesterday’s Wall Street Journal, Martin Feldstein, Ronald Reagan’s top economist and a Harvard professor, claims the current health care proposals are all about rationing. I have to disagree. Excerpts from his article are below, along with my critique.

"Although administration officials are eager to deny it, rationing health care is central to President Barack Obama's health plan. The Obama strategy is to reduce health costs by rationing the services that we and future generations of patients will receive.

"The White House Council of Economic Advisers issued a report in June explaining the Obama Administration's goal of reducing projected health spending by 30% over the next two decades. That reduction would be achieved by eliminating 'high cost, low-value treatments' by 'implementing a set of performance measures that all providers would adopt' and by 'directly targeting individual providers . . . (and other) high-end outliers.'"

First and foremost, it is important to recognize that the current system already relies on rationing. It uses rationing by price. If you can’t afford the treatment, or are one of the over 47 million uninsured, tough.

However, insurance companies like Aetna (AET) and United Health (UNH) will also routinely decide that a treatment is not covered because it is too costly. For many conditions, there are several potential treatment alternatives.

The major health care reform proposals (there are currently 4 on the table, and one more is still being worked on) plan on looking at which methods work best, and eliminating costly treatment options that don’t work very well (but which might be highly lucrative to the doctor and/or hospital) in favor of lower cost, more effective options. If that be rationing, sign me up. Sounds like simple “best practices" to me.

"The president has emphasized the importance of limiting services to 'health care that works.' To identify such care, he provided more than $1 billion in the fiscal stimulus package to jump-start Comparative Effectiveness Research (CER) and to finance a federal CER advisory council to implement that idea.

"That could morph over time into a cost-control mechanism of the sort proposed by former Sen. Tom Daschle, Mr. Obama's original choice for White House health czar. Comparative effectiveness could become the vehicle for deciding whether each method of treatment provides enough of an improvement in health care to justify its cost."

Could, could, could -- but Marty, you provide absolutely no evidence as to the probability of that occurring. If the CER finds, for example, that radiation therapy is more effective than surgery for the treatment of a certain type of cancer, and that radiation therapy is also 30% less expensive, it seems downright stupid to keep having doctors do a lot of that type of surgery. The surgeons might make less money, but that is not anything like the specter that has been floated of the government denying care to old folks.

"In the British national health service, a government agency approves only those expensive treatments that add at least one Quality Adjusted Life Year (QALY) per £30,000 (about $49,685) of additional health-care spending. If a treatment costs more per QALY, the health service will not pay for it.

"The existence of such a program in the United States would not only deny lifesaving care, but would also cast a pall over medical researchers who would fear that government experts might reject their discoveries as 'too expensive.'"

There is nothing in any of the proposals that would prevent people from paying extra to get these marginal treatments, either by paying out of pocket or through supplemental insurance. It would not deny lifesaving care, it would simply decline to pay for every procedure, regardless of how expensive or how ineffective.

It might also focus researchers to look for treatments that bring down costs and are more effective. Those procedures would get a much bigger market share and would be very lucrative.

"One reason the Obama Administration is prepared to use rationing to limit health care is to rein in the government's exploding health-care budget. Government now pays for nearly half of all health care in the U.S. , primarily through the Medicare and Medicaid programs.

"The White House predicts that the aging of the population and the current trend in health-care spending per beneficiary would cause government outlays for Medicare and Medicaid to rise to 15% of GDP by 2040 from 6% now. Paying those bills without raising taxes would require cutting other existing social spending programs and shelving the administration's plans for new government transfers and spending programs."

Note that government spending is about 20% of GDP now, so it is not just existing social spending programs that would have to be cut, but just about everything. That includes the military. Going on the current trajectory on health care spending has the potential to seriously harm national security.

"The rising cost of medical treatments would not be such a large burden on future budgets if the government reduced its share in the financing of health services. Raising the existing Medicare and Medicaid deductibles and coinsurance would slow the growth of these programs without resorting to rationing. Physicians and their patients would continue to decide which tests and other services they believe are worth the cost.

"There is, of course, no reason why limiting outlays on Medicare and Medicaid requires cutting health services for the rest of the population. The idea that they must be cut in parallel is just an example of misplaced medical egalitarianism."

“Misplaced medical egalitarianism" -- we are talking life and death here! Every year, 18,000 Americans die prematurely because they lack access to proper medical care. That is more than 6x as many who died when the Twin Towers came down.

Raising the deductibles and coinsurance for Medicaid? Just who does the good Harvard professor think is on Medicaid? Here is a news flash for ya, Marty -- it's poor people. This would result in rationing of the very worst sort, not you get treatment A instead of treatment B because A is more cost effective, but you get no treatment at all and just suffer or die.

If Grandma can’t afford the higher deductable and copayment then what happens? Does the plug get pulled? Does he seriously think that runaway medical cost inflation outside of Medicare and Medicaid is not a problem for the economy, even though costs in those two programs have already been rising slower than overall medical costs?

"But budget considerations aside, health-economics experts agree that private health spending is too high because our tax rules lead to the wrong kind of insurance. Under existing law, employer payments for health insurance are deductible by the employer but are not included in the taxable income of the employee.

"While an extra $100 paid to someone who earns $45,000 a year will provide only about $60 of after-tax spendable cash, the employer could instead use that $100 to pay $100 of health-insurance premiums for that same individual. It is therefore not surprising that employers and employees have opted for very generous health insurance with very low copayment rates.

"Since a typical 20% copayment rate means that an extra dollar of health services costs the patient only 20 cents at the time of care, patients and their doctors opt for excessive tests and other inappropriately expensive forms of care. The evidence on health-care demand implies that the current tax rules raise private health-care spending by as much as 35%.

"The best solution to this problem of private overconsumption of health services would be to eliminate the tax rule that is causing the excessive insurance and the resulting rise in health spending. Alternatively, Congress could strengthen the incentives in the existing law for health savings accounts with high insurance copayments. Either way, the result would be more cost-conscious behavior that would lower health-care spending."

The result would be to push people out of group employer-sponsored plans and into the individual health insurance market. That market is FAR more abusive than the employer group market. That is where people get rejected for pre-existing conditions. That is where people get their health care coverage cancelled on the flimsiest of excuses as soon as they file a serious claim and actually need the insurance.

While I agree that the self-employed and those who are working for small businesses that don’t offer health benefits deserve a break, absent something reasonable to replace it, it would be reckless to dismantle the employer sponsored system. Now if you want to argue for scrapping the system and replacing it with a single-payer Medicare for All system, that would make a lot of sense.

Our current system is not something that anyone designed, but an outgrowth of wage controls during WWII, and is not what anyone starting from scratch would design. It is the system we have in place, and without a replacement it would be dangerous to get rid of it.

"But unlike reductions in care achieved by government rationing, individuals with different preferences about health and about risk could buy the care that best suits their preferences. While we all want better health, the different choices that people make about such things as smoking, weight and exercise show that there are substantial differences in the priority that different people attach to health.

"Although there has been some talk in Congress about limiting the current health-insurance exclusion, the Administration has not supported the idea. The unions are particularly vehement in their opposition to any reduction in the tax subsidy for health insurance, since they regard their ability to negotiate comprehensive health insurance for their members as a major part of their raison d'être."

Funny, the AFL-CIO has long argued for a single-payer system, one that would completely eliminate that major part of their raison d’etre. It is not just about your preferences for spending more or less on health care. Demand is the combination of desire for something plus the ability to pay for it. If you are poor, your desire to live and not to suffer counts for nothing in the world that Dr. Feldstein inhabits.

"If changing the tax rule that leads to excessive health insurance is not going to happen, the relevant political choice is between government rationing and continued high levels of health-care spending. Rationing is bad policy. It forces individuals with different preferences to accept the same care.

"It also imposes an arbitrary cap on the future growth of spending instead of letting it evolve in response to changes in technology, tastes and income. In my judgment, rationing would be much worse than excessive care.

"Those who worry about too much health care cite the Congressional Budget Office's prediction that health-care spending could rise to 30% of GDP in 2035 from 16% now. But during that 25-year period, GDP will rise to about $24 trillion from $14 trillion, implying that the GDP not spent on health will rise to $17 billion in 2035 from $12 billion now. So even if nothing else comes along to slow the growth of health spending during the next 25 years, there would still be a nearly 50% rise in income to spend on other things.

"Like virtually every economist I know, I believe the right approach to limiting health spending is by reforming the tax rules. But if that is not going to happen, let's not destroy the high quality of the best of American health care by government rationing and misplaced egalitarianism."

For starters there is a typo in the article, it is to $17 trillion, not billion. Leaving that aside, using his numbers, if we could just keep spending at 16% of GDP (keep in mind the next highest level of spending in the OECD is Switzerland at 11% of GDP, and everyone knows what a hellhole Swiss hospitals are), we are talking about a difference of $3.36 Trillion a year by 2035. That is a lot of money in my book.

Dr. Feldstein must have an awfully small circle of economists he knows (doubtful) to make that statement. There are few questions in economics that are universally agreed upon, and that is certainly not one of them. Taxing “platinum plans" might be a useful way to raise some of the revenues needed to help cover the uninsured, but to think just changing the tax code would solve the problem by itself is just plain silly.

The high quality of the best of American health care means little if it is only available to a tiny fraction of the population. If a few people ride around in Mercedes and Bentleys and most people have to walk does that mean you have a great transportation system? The claim that America has the best health care system in the world is not one that Dr. Feldstein should be making.

On every major public health indicator tracked by the World Health organization the U.S. is way down the list, and overall we rank neck and neck with Cuba, and far below places like France, Canada or the U.K. Sometimes when you pay the most, you get the best, other times it just means you are getting ripped off. The latter is clearly the case with the U.S. health care system.
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Dresser-Rand Group Inc. – Value – Zacks Rank Buy

Alex Kolb — Fri, 21 Aug 2009 05:00:00 +0000

Dresser-Rand Group Inc. (DRC) recently posted second-quarter earnings of 74 cents per share, outpacing the year-prior 55 cents and exceeding the Zacks Consensus Estimate by 28%.

Company Description

Dresser-Rand Group manufactures centrifugal and reciprocating compressors, steam and gas turbines, expanders, portable ventilators and control systems at facilities in the United States, France, United Kingdom, Germany, Norway, India and China for the oil and petrochemical industries around the world. The company can trace its roots back to 1840.

Strong Second Quarter Results

The company recently posted second-quarter earnings of 74 cents per share, outpacing the year-prior 55 cents and exceeding the Zacks Consensus Estimate by 28%. Total revenues of $606.1 million came in 12% ahead of the year-prior result.

Vincent R. Volpe Jr., President and Chief Executive Officer, called it a solid quarter with strong top line and bottom line growth, adding that there was improvement in the new units segment with bookings up sequentially from $109 million in the first quarter 2009 to $169 million in the second quarter. "While there is still a ways to go before we get back to 2008 bookings levels, we continue to see a steady flow of inquiries and expect our full year guidance of $700 million to $1.1 billion will be met," said Volpe.

Bullish Forecasts

Analysts polled by Zacks are upbeat on earnings. The full-year Zacks Consensus Estimate of $2.51 per share was increased from last month's $2.42.

For 2010, analysts polled by Zacks are projecting earnings of $2.18 per share, versus last month's $2.15.

Value Fundamentals

Dresser-Rand Group is a Zacks #1 Rank (strong buy) stock. It is trading with a forward P/E of 12. It has a price-to-book of 2.9. The company also has an outstanding return on equity (ROE) of 27.6%, more than doubling the industry average of $12.5. Zacks Investment Research

iPhones Catch Fire the Wrong Way? – Analyst Blog

Zacks Market Commentaries — Thu, 20 Aug 2009 16:27:39 +0000

Recently, several incidents have been reported against exploding Apple Inc. (AAPL) iPhones and iPods. The incidents took place in certain European Union (EU) member states, prompting the European Commission to ask for clarification from manufacturer Apple. It appears that the overheated devices exploded before catching fire.

In the recent past about three such iPhone explosion cases have been registered with the European Union, of which two occurred in France and one in United Kingdom. This iPhone explosion case has been preceded by a similar incident registered in Marseilles, France.

Rapex, which is involved in the rapid exchange of information between the European commission and EU countries with respect to exchange of information on harmful consumer products, has not yet issued any report about the issue. Besides EU countries, the Japanese government has also told Apple to do an investigation regarding the iPod Nano’s catching fire.

Apple was a late entrant into the smartphone market, with companies like Nokia (NOK), Research In Motion (RIMM) and Palm (PALM) already firmly entrenched. However, the company made very rapid progress, wresting share from the existing players.

iPhone 3G and iPhone 3GS were the major growth drivers for the company during the recently concluded quarter. In that quarter, the iPhone handset and accessory revenue reported a 300.0% increase over the year-ago quarter. This apart, the iPod also forms a substantial part of its sales volume, with the company selling around 44.1 million iPods during the first nine months of 2009.

So, being the major growth drivers for the company, Apple should take the utmost care to ensure product quality. All these scattered incidents are affecting the reputation of the company, and are likely to have a negative impact on customer sentiments. While a constructive reply from Apple authorities is still awaited, there is surely some buzz in the market.

Read the full analyst report on "AAPL"
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Zacks Investment Research

GDP – 2Q 2009 signals turn in the making

Prieur du Plessis — Wed, 19 Aug 2009 08:06:51 +0000

By Cees Bruggemans, Chief Economist FNB First the bad news. GDP declined 2% year-on-year in 1H2009, and will probably average -1.5% for the full year. The good news is that the 1Q2009 was by far the worst statistical quarter (-6.4% quarterly annualised), while the real output damage was done in 4Q2008. The 2Q2009 still showed [...]

Gold Will No Longer Be a Toxic Derivative to Central Banks

Adrian Ash — Tue, 18 Aug 2009 21:36:21 +0000

pem“If gold is ‘past its day’, what of toxic derivatives and today’s deluge of US Treasury bonds…?”/em Just like poor Pip Dickens’ emGreat Expectations/em, central banks keep inheriting unwelcome bequests./p pToday’s “legacy assets” are toxic derivatives; a decade ago it was gold reserves. Both are proving hard to shrug off, but for very different reasons. Both legacies also come thanks to previous central-bank history; the fossils remain only too livid today./p pAnd 10 years from now, if not sooner, just how welcome will the current central bank must-have become – freshly printed government debt, bought with money that doesn’t exist until the central bank wills it?/p pSeeking first to defend against inflation and war, the West’s central banks built up huge reserves of the#8230;/p

The Latest Western Insult to Russia

Robert Amsterdam — Tue, 18 Aug 2009 21:23:36 +0000

OK, folks, this has gone far enough. There's no need for the United States and Europe to continue in their unchecked and outrageous aggression against Russia, renewing Cold War tensions and antagonism, no matter how jealous they are of her...

Recovery is Impossible

Bill Bonner — Tue, 18 Aug 2009 18:32:30 +0000

pOh woe! Oh woe! O! Bama! Where is thy recovery? Yesterday, the world’s stock markets took a hit. The Dow lost 186 points#8230; following a very bad showing in China. Is this the end of the rally? /p pCould be. We’re not betting one way or the other. But we’re pretty sure this rally is going to end#8230; and end badly#8230; sooner or later. So far, the rally surpassed the rally in ’29 by a few weeks#8230; but has not quite reached its magnitude. It will need another few hundred points to reach the ’30 level./p pBut when the rally is over#8230; then what?/p pDespite the fact that a majority (!) of economists polled by the Wall Street Journal say the recession is#8230;/p

Global Sell-Off, Long Haul Investing, A Small Cap Opportunity, Commercial Real Estate and More!

Addison Wiggin — Tue, 18 Aug 2009 17:00:57 +0000

pSellers back in control… China, FDIC, U.S. consumers trigger global sell-off#8230; a href="http://www.contrarianprofits.com/articles/author/chris-mayer/" class="alinks_links"Chris Mayer/a examines a disturbing trend among American investors#8230; Signs of the times: Bernanke frets over commercial real estate, Treasury to sell U.S. mortgages to China#8230; Greg Guenthner with a Far East opportunity growing “at an astronomical rate”#8230;/p p strong“Investing in this market is like trying to take cheese out of a set mousetrap,”/strong Chris Mayer begins today. “It’s very tempting to make a grab, but you are also fairly certain about what will happen if you do. The market’s 50% rise from its March lows is stunning. It’s like the cheese in the trap. But we also know that no market moves up like that for long. The kill bar is never far from such#8230;/p