Archives for October 2012

October 2012 - Page 10 of 20 - Money Morning - Only the News You Can Profit From

This Buying Spree Dwarfs The One That Shook the World in the 80s

They're baaaaack. While the Chinese are busy grabbing all of the headlines, it's really the Japanese who are making the biggest moves.

So far this year, they've very quietly spent $101 billion on overseas acquisitions in a global buying spree that now dwarfs the one undertaken in the late 1980s and early 1990s according to Edward Jones of Dealogic.

S&P Capital IQ reports 45 deals with a value of $18.7 billion year-to-date involving a Japanese investor or buyer and U.S. assets alone. That's a 50% increase in the number of deals and a 64% increase in the valuation versus last year at this time.

To put this binge into perspective, not only is this the highest year on record, but it is on a pace that's three times the acquisition rate that had everybody quaking in their boots 30 years ago.

I think that's very telling on a couple of levels.

First, Japan's economy is faced with a triple disaster. When you add up private, corporate and government debt, it's nearly 500% of GDP according to numbers from Goldman Sachs earlier this year, which makes the Greeks look positively miserly. Even our own fiscal cliff pales in comparison.

Second, fully 25% of their population is going to die off by 2050, according to the Japanese Health Ministry, further exacerbating the near-complete shutdown in domestic demand that repeatedly plagues any attempt to jump-start the Japanese industrial machine.

And third, Japanese corporations themselves are struggling on every level. Decades of low and no growth have paralyzed even the best companies.

That's why so many Japanese companies are now turning their attention to global markets. They have to – it's the only way they're going to survive.

The Japanese Hunt For Growth

Japan's economy is not growing at 7% a year; instead it's fighting to maintain any kind of positive momentum whatsoever.

Its executives are struggling to cope with highly competitive markets that move faster and more decisively than they are prepared to accept. According to McKinsey, productivity per worker is one of the lowest of any developed country.

In short, the Japanese economy is vulnerable rather than in a position of strength.

This changes the game significantly and gives the Japanese a new sense of urgency. Japanese companies literally have no alternative. Almost every market they've dominated for years is failing.

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Inflation-Proof Investments: Go Beyond Gold and Oil with These Two Sectors

By now, most investors know that the U.S. Federal Reserve and other global central banks continue to engage in dangerous, currency-debasing forms of monetary stimulus – meaning it's time to stock your portfolio with inflation-proof investments.

Known as quantitative easing on this side of the pond, there are dire consequences to just one tryst with QE.

But here in the U.S., we're on our third go-round with the QE addiction.

This means we're headed down a dangerous path.

That's because too much money supply triggers inflation. While it's not definite that QE3 will bring about a return to the old Weimar Republic or the problems Zimbabwe has had to deal with recently, there is almost no getting around the fact that a financial system awash in liquidity is a financial system vulnerable to inflation.

Over the course of history, gold has been the favored destination for investors looking to combat inflation, but there is more to the story these days. The good news is inflation can be fought myriad ways and that includes going beyond the usual suspects.

Here are a few other overlooked inflation-proof investments that'll let you profit while prices soar.

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Why Citigroup CEO Vikram Pandit Was Forced Out (NYSE: C)

Citigroup CEO Vikram Pandit announced today (Tuesday) he has made an abrupt departure from the troubled bank, the day after it reported third-quarter earnings that beat estimates.

The story became more interesting as the day wore on after it was announced he was forced out by the board.

The theories as to why Pandit would be asked to leave got juicier as the Citigroup Inc. (NYSE: C) CEO's exit was paired with the co-resignation of Citi COO John Havens, a long-time associate of Pandit.

Mike Holland, chairman of New York-based Holland & Co, which oversees more than $4 billion of assets told Reuters, "It's not a shock that [Pandit] is no longer there, but the surprise is this is all happening very quickly. Why is he leaving so quickly? I'm not a Citi shareholder, but if I were I'd be disappointed that Havens is gone, in some ways more than Pandit."

The timing hinted the two exits were not simply a natural transition, but instead related to some skeletons lurking in the bank's boardroom.

Just as quick and startling was the immediate removal of Pandit's name and photo from Citigroup's Website.

The swift announcement that Michael Corbat, previously chief executive for Europe, Middle East and Africa, would replace Pandit as Citi's CEO and board member also raised some eyebrows.

So what could've caused this sudden changing of the guard?

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Stock Market Today: It's Easy to Beat Earnings Estimates When You Aim Low

The stock market today opened higher as earnings continue to be "not as bad as expected" and industrial production shows signs of stabilizing.

Here's our market roundup for investors:

  • Earnings continue to beat estimates– The third quarter was supposed to be a dismal earnings season but lowered expectations are giving companies a boost. Johnson and Johnson (NYSE: JNJ) and Goldman Sachs Group Inc. (NYSE: GS) reported better-than-expected profits this morning and each offered investors something else to cheer about. JNJ's third-quarter profits fell 7% from last year but its adjusted EPS of $1.25 beat Wall Street's estimates of $1.21. Goldman had a third-quarter profit of $1.51 billion, compared with a year-earlier loss of $393 million and easily beat both earnings and revenue forecasts. Besides the strong earnings, Goldman announced that it would increase its quarterly dividend to 50 cents from 46 cents and JNJ raised its 2012 earnings forecast. JNJ stock is up 1.4% in early trading and GS stock is up 1.0%.

Decreased expectations have allowed companies to report numbers that might have been disappointing but now look encouraging. JNJ pulled this off as the forecast it issued today for 2012 earnings was lower than the projection it had last quarter. Even though earnings for the most part have beat expectations there is still the uncertainty of the fiscal cliff and slowing economic growth.

"Investors are cycling back into risk as earnings as well as economic numbers in the U.S. are somewhat better than expected," Chad Morganlander, a Florham Park, NJ-based fund manager at Stifel Nicolaus & Co. told Bloomberg News in a telephone interview. "Economic growth will continue to be sluggish even with the flickers of hope that we've seen this morning."

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Earnings Preview: Boston Scientific - Analyst Blog

Boston Scientific (BSX) is scheduled to release its third quarter of 2012 earnings on Thursday, October 18, 2012, before the market opens. The company is expected to report earnings of 11 cents on revenue of $1.761 billion for the quarter, according to the Zacks Consensus Estimate. As per the guidance provided for the third quarter […]

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MICROS Partners with Pestana Group - Analyst Blog

Recently, MICROS Systems, Inc.’s (MCRS) MICROS OPERA solution has been chosen by Pestana Group. This was done with the intent of installing the company’s MICROS OPERA solution across Pestana Group’s 9 properties in Brazil. The company through its MICROS OPERA and MICROS Point-of-Sale (POS) platform will be engaged in providing various cloud-based enterprise solution services […]

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Unless We Act, High-Frequency Trading Will Crash the Markets

High-frequency trading isn't illegal. But the way it is practiced today, it should be.

That's because high-frequency trading, or HFT, doesn't add to market liquidity, stability or efficiency — but it could cause a catastrophic market crash.

Here's what's wrong with allowing high-frequency trading, what HFT practitioners say they're doing that's good for the market (which is rubbish), what could happen based on what has already happened, and what to do to fix this black hole.

The problem is HFT is based on a lie.

High-frequency traders send out tens of millions, if not billions, of orders to exchanges that are never meant to be executed. They are fake orders designed to dump manipulative information onto the nation's exchanges.

And while other market participants are not actually forced to adjust their bids and offers or engage in any of these trades, allowing access to the exchanges to manipulate anybody in any way is something that ought to be outlawed.

Exploiting an Unfair Advantage

In the HFT world it's all about speed. Without it, HFT wouldn't be possible.

There's nothing wrong with employing external innovations that speed up computers or the time it takes for information to get from one server to another. But HFT takes it to an entirely different level.

As I write this, chains of fixed microwave towers are being erected to send market data and orders between New York and Chicago because electromagnetic radiation travels only 2/3 as fast in glass fibers as it does through the air. The towers were designed and are being built by a pair of HFT entrepreneurs who already have HFT customers lined up.

And as soon as this winter passes, Hibernia Atlantic's Project Express will be dropping a more direct new generation transmission cable across the Atlantic so data and trade executions can travel faster between New York and London.

The new cable will reduce the 30 milliseconds travel time it takes now by only a few milliseconds, but space has already been leased to the only takers, the HFT crowd.

It may be unfair that some players are able to pay for a speed advantage by employing new technologies, but it's certainly not illegal.

What should be illegal, and is an abomination, is that the SEC allows exchanges to serve high frequency traders by leasing them co-location space next to the exchange's servers.

Not everyone can afford that access. But because it can be bought, HFT players have a significant speed advantage over everybody else who expects the SEC and the nation's regulated exchanges to guarantee equal access to get data and place trades.

Trust Me, It's Not About Liquidity

The HFT crowd argues that they act as market-makers and add liquidity wherever they practice their trades and both markets and investors are better served by their activity.

That's absolute nonsense.

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A Faltering Carbon Market Means a New Energy Crisis Looms For Europe

As we wait for a clear indication of what the European Central Bank (ECB) intends to do – or, perhaps more accurately, what European political realities allow it to do – yet another crisis has emerged.

This development strikes at the heart of an essential cog in the European energy strategy.

How this one plays out may actually tell us more about recovery prospects on the continent than any action from the EU in Brussels.

On Friday, the Danish Energy Agency released some of what analysts in the region had surmised for a while. The agency is a lobbying group emphasizing EU policies affecting both energy producers and consumers.

Its director of EU affairs, Ulrich Bang, declared in an email that the European Commission (EC, the administrative arm of the EU) had to take immediate action to protect the internal energy market within EU states.

At issue here is the carbon trading system, what most observers acknowledge is the "cornerstone" of the inside energy balance among the 27 EU countries.

Bang said that the system has "almost collapsed," a view widely shared by other European-based specialists.

The statement testified to a rising strain in the energy sector resulting from the push and pull of an ongoing credit crunch on the one hand and sluggish economic recovery prospects on the other.

Trouble in the World's Largest Cap-and-Trade Program

Carbon trading sits smack in the middle of this tug of war.

And its inability to generate adequate pricing may be the clearest indications yet that there are new problems forming.

This is the world's largest cap-and-trade program.

It has become a barometer for levels of investment in market production infrastructure and a projection of expected prospects for manufacturing and consumption.

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Is The Sprint Deal a Sign of Things to Come From Japan?

On Monday Softbank Corp. announced that it had purchased a 70% stake in Sprint Nextel Corp. (NYSE: S). Now that the deal is finalized what can investors take away from the acquisition? Money Morning's Chief Investment Strategist Keith Fitz-Gerald appeared on Fox Business' Varney & Co. this morning to discuss the Sprint deal and the […]

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