Economics

Presidential Visit Puts Myanmar Investment Theme in Spotlight

ETF Professor — Sun, 19 May 2013 15:11:48 +0000

Six months after President Barack Obama visited Myanmar, that country's president, Thein Sein, will visit the White House.

Sein's visit to Washington, D.C. marks the first such visit by a leader from the Southeast Asian nation in nearly five decades and it is one that again puts the spotlight on Myanmar's burgeoning but controversial investment thesis.

As is often the case with many countries sporting the emerging or frontier labels, Myanmar possesses ample economic potential. For investors, there is also plenty of risk. After serving as a stage for allied and opposing forces' operations during World War II, Myanmar's infrastructure was ravaged. Military rule dominated the country during the 1990s despite supposedly free elections.

Today, the country lacks a sophisticated legal structure, an advanced banking system and robust foreign exchange operations. Those factors make for a series of red flags for even the most adventurous investors. An unfortunate reality is that Myanmar, a country as large as France, has lost 50 years of economic progress, according to Economy Watch.

However, Sein is working to change his country's image and his visit with Obama plays a part in that mission. It also serves as a reminder that Myanmar, currently a virtually inaccessible to most U.S. investors, is worth keeping an eye on.

Vital Statistics
Numbers do not lie and that saying is encouraging when it comes to Myanmar. Granted, the country is starting from a low base, but its real GDP has grown an estimated five to six percent over the past four years and that number could climb to six to eight percent over the next decade, according to Economy Watch. Assuming a growth rate of six to seven percent, ...

Weekly Preview: FOMC Minutes in Focus, Earnings Season Wanes

Matthew Kanterman — Fri, 17 May 2013 20:29:42 +0000

In the upcoming week, market focus shifts back to the Fed as the FOMC minutes of the latest meeting are released. Also, Fed Chairman Ben Bernanke is set to speak as earnings season slows down, although there are still some key earnings set to be released.

Key Earnings

This week, the earnings calendar is light in volume but still has some big reports due out. Earnings from Salesforce.com (NYSE: CRM), Pandora Media (NASDAQ: P), and the Gap (NYSE: GPS) are expected.

Salesforce.com

Customer-relationship management software company Salesforce.com is set to report first quarter operations for its 2014 fiscal year on Thursday, May 23. Analysts are expecting EPS of $0.10 vs. $0.09 a year ago on revenue of $887.1 million vs. $695.47 million a year ago.

Analysts at Oppenheimer are bullish on the stock ahead of the report. “We view CRM as the best long-term growth investment in our coverage universe, and we anticipate positive 1Q results for Salesforce.com despite facing tough y/y comparables, seasonal headwinds, and more adverse FX effects since guidance. We estimate PF revenue of $887M (+28% y/y) and PF EPS of $0.10, which is in line with consensus.”

“Our recent checks suggest CRM is not experiencing any slowing in its business and rather point to increases in average deal sizes. We are bullish on CRM's many growth opportunities in 2013 as the secular trends around enterprise- wide SaaS adoption continue to strengthen.”

Analysts at Goldman Sachs are also bullish on the stock ahead of earnings. “We think there is upside risk to the Street's revenue and non-GAAP EPS estimates of $887mn and $0.10 (GSe: $887mn/ $0.11). Guidance is for revenue of $882- 887mn and non-GAAP EPS of $0.10-0.11 ($0.40-0.42 pre the 4 for 1 split).”

“We expect CRM to raise its FY14 revenue outlook off of a strong F1Q14. Also, we expect cash flow guidance to remain at low 20% growth (consensus 23%) while we expect Street bookings growth of 21% yoy to remain relatively the same despite a bigger FX headwind. We think M&A continues to be an overhang for the shares post the company's $1bn convertible issuance. In our view CRM remains a key beneficiary in the movement to the cloud and it continues to be a top long-term pick.”

Wedbush analysts jump into the bullish bandwagon on Salesforce.com, noting that it is also one of their top picks. “For 1Q, we expect revenue over $5M above consensus, and we are a penny above EPS consensus. Our revenue estimate reflects 28% Y/Y growth in total revenue and subscription revenue, and is over $5M above the consensus estimate.”

“Looking forward to 2Q, we believe the company has plenty of room to guide ahead of consensus revenue of $935M. Our revenue estimate of $950M is predicated on 27% Y/Y organic subscription growth, which looks achievable given CRM's deferred commissions growth of 34%+ in each of the last four quarters. On the EPS line, we expect guidance will include consensus (and our estimate) of $0.12.”

“We reiterate our OUTPERFORM rating and 12-month target price of $51. Our target price is based on a combination of our P/E, EV/FCF, and DCF approaches. Our estimates are unchanged; our target price is adjusted for a 4:1 stock split on April 18th.”

The Gap

The Gap Inc. is expected to report first quarter results on Thursday as well. Last week, the company raised guidance for the quarter for EPS to $0.68-0.69 per share vs. the consensus estimate at the time of $0.56 as well as a rise of 7% in same store sales in April. Now, analysts are still expecting EPS of $0.58 vs. $0.47 a year ago on revenue of $3.68 billion vs. $3.49 billion a year ago.

Analysts at Goldman Sachs commented on the guidance raise ahead of earnings. “EPS include $0.04 of tax benefits, so on an operating basis the $0.64 adjusted number is still nicely ahead of expectations. We estimate margins expanded +260 bps on the back of cost deflation and fixed cost leverage.”

“We ...

Market Wrap for Friday, May 17: Stocks Gain on Late Day Rally

Luke Jacobi — Fri, 17 May 2013 20:25:21 +0000

Markets surged Friday afternoon, bringing the Dow near a record high at 15,354.40.

The S&P 500 closed up almost one percent, with the Nasdaq up slightly more than that.

The rise in stock prices this week can be largely attributed to the end of earnings season, job numbers, and positive information from Japan.

Commodities

Crude Oil traded up slightly today to $95.19, while gold declined $24.80 to $1359.30.

Bonds

The iShares Barclays 20+ Yr Treasury Bond ETF (NYSE: TLT) droped over one percent today to 117.07 near the close.

This pushed the 5, 10 and 30 year bond yields up 0.06, 0.08, and 0.08 ...

Mid-Afternoon Market Update: SolarCity Continues to Rise as Gold Bugs Get Smashed

Jake L'Ecuyer — Fri, 17 May 2013 19:54:26 +0000

Toward the end of trading Thursday, the Dow was up 0.77 percent to 15,249.41, while the NASDAQ rose 0.89 percent to 3,496.33. The S&P was also up 0.97 percent to 1,666.90.

Top Headline
Gold has plummeted 4.8% as the week comes to a close, dropping below $1,390 an ounce, the lowest level seen since April 17. The precious metal has lost almost 25% over seven months, and founder and chief investment strategist at Hays Advisory Group, Don Hays, believes that the metal could continue to fall in the coming months down to $1,100 an ounce. Many attribute this decline in gold prices to the strengthening of the US dollar and the gains seen in by equities. These two factors could have affected investor interest in gold in the recent past, in addition to the continuing sales of gold backed ETFs. Shares in the SPDR Gold Trust (NYSE: GLD) had dropped 5% week-on-week and more than 14% quarter-to-date.

Equities Trading UP
National Bank of Greece SA (NYSE: NBG) shot up, gaining ...

Mid-Day Market Update: Gold Prices Fall on Strength in US Dollar, Stock

Jake L'Ecuyer — Fri, 17 May 2013 16:48:29 +0000

Midway through trading Thursday, the Dow was up 0.43 percent to 15,298.41, while the NASDAQ rose 0.49 percent to 3,482.33. The S&P was also up 0.51 percent to 1,658.90.

Many attribute this decline in gold prices to the strengthening of the US dollar and the gains seen in by equities. These two factors could have affected investor interest in gold in the recent past, in addition to the continuing sales of gold backed ETFs. Shares in the SPDR Gold Trust (NYSE: GLD) had dropped 5% week-on-week and more than 14% quarter-to-date.

Equities Trading UP
National Bank of Greece SA (NYSE: NBG) shot up, gaining 14.51 percent ...

An Aussie Spanking Is Preferred Over A Timid EURO

OANDA — Fri, 17 May 2013 13:40:18 +0000

It seems that every time that Capital markets start to feel optimistic this so-called US recovery disappoints. Yesterday's disappointing US data (weekly claims, Philly Fed and housing starts) are renewing the debate whether tapering Fed bond buying in the second half of this year would be premature. An end to ...

The New Hidden Eurozone Risk

investmentcontrarians — Fri, 17 May 2013 13:23:42 +0000

By Sasha Cekerevac for Investment Contrarians

Complacency among investors is extremely dangerous. Many investors, both retail and institutional, have very short memory spans.

It wasn’t too long ago that the eurozone was in the midst of a financial crisis. While the worst appears to be over—at least temporarily—economic growth still remains elusive for the eurozone.

Yet in spite of all the dangers, investors have returned to the eurozone en masse. Spain recently sold one-year bills yielding just 0.994%, the lowest since 2010. Demand is extremely strong for these periphery nations, even though it’s clear that many parts of the eurozone are lacking economic growth.

Currently, Spanish 10-year bonds yield approximately 4.29%, which is down from last summer when they were yielding 7.75%. (Source: Benoit, A., et al., “Spain Sells Bill at 3-Year Low Yield as Banks Hired for Bond,” Bloomberg, May 14, 2013, accessed May 14, 2013.)

Investors are becoming complacent yet again. Instead of simply dipping their toes into the water, they’re plunging into some ...

Boomers Are Cashing in Their IRAs Early According to Report

Jim Probasco — Fri, 17 May 2013 12:28:46 +0000

Most people know they can withdraw funds from their IRA, penalty free, after the age of 59 ½ (earlier for certain exceptions). And, most people have no plans to do so. After all, the money you put into an IRA is for “retirement,” after the age of 65.

According to BloombergBusinessweek, however, a report by the Employee Benefit Research Institute found that 48 percent of people, 61 to 70 in the bottom half of income distribution took funds out of their IRAs during the period from 2002 to 2010. Of those in the top quarter, income-wise, 29 percent of 61 to 70-year-olds pulled IRA funds.

The amount taken out was substantial. High-income earners withdrew 12 percent of total funds, while those at lower income levels took out 17 percent of the money they had been saving for retirement.

The report also found that seniors 71 and up withdrew smaller amounts – often just the minimum required beginning at age 70 ½. Even then, many older seniors found a way to save part of those funds in other types of accounts.

One drawback of the study, according to report ...

These ETFs Could be Affected by Future Rate Cuts

ETF Professor — Fri, 17 May 2013 10:42:21 +0000

In less than two months a dizzying array of global central banks have lowered interest rates. The European Central Bank, the Reserve Bank of Australia, the Reserve Bank of India, the Bank of Israel, the Central Bank of Turkey and the list goes on.

When the domino effect will end is anyone's guess, but it does not appear the end is near. The U.S. and Japan have little or no room for further rate cuts, but plenty of other countries do. Many are emerging markets economies where central banks' hands are being forced due to strengthening currencies.

Other prime candidates for additional rate-cutting are developed markets with significant commodities and/or emerging markets exposure. What is clear is the path of least resistance for international interest rates is lower in the near-term and the following country-specific equity-based ETFs stand to be affected.

iShares MSCI Turkey Investable Market Index Fund (NYSE: TUR)
Earlier this week, Turkey's Monetary Policy Committee lowered rates by 50 basis points to 4.5 percent after country previously said its first-quarter GDP will be weaker than expected. Bankers there said the move was made largely to keep Turkey inline with what other country's are doing on the rate-cutting front.

Turkey's rate reduction also comes just six months after Fitch Ratings gave the country its first investment grade rating in almost two decades and as the country is angling for ...

Benzinga Market Primer: Friday, May 17

Matthew Kanterman — Fri, 17 May 2013 10:36:17 +0000

Futures Rise Heading Into the Weekend

U.S. equity futures rose slightly in early pre-market trade heading into the weekend after a week marked by small moves in equities in both directions. Stocks look set to test all-time highs again in Friday's session if futures can hold gains into the open.

Top News

In other news around the markets:

The European Union reported EU auto sales rose 1.8 percent in April, the first monthly gain in over 18 months.
Japanese Machine Orders rose a whopping 14.2 percent in March, much better than the 3.2 percent expected gain. However, the data is extremely volatile and may not be a clear sign that stimulus policies are working just yet.
San Francisco Fed President John Williams, a non-voting member of the FOMC this year, spoke yesterday saying that it may already be time for the Fed to begin tapering its bond purchases. Other Fed officials hinted they may first slow purchases of mortgage backed securities to prevent a new housing bubble.
S&P 500 futures rose 4.4 points to 1,652.50.
The EUR/USD was flat at 1.2882.
Spanish 10-year government bond yields fell 2 basis points to 4.29 percent.
Italian 10-year government bond yields fell 1 basis point to 3.97 percent.
Gold fell 0.92 percent to $1,374.10 per ounce.

Asian Markets

Asian shares were mostly higher overnight following the Japanese data. The Japanese Nikkei Index rose 0.67 percent. Also, the Korean Kospi gained 0.79 percent and Australian shares added 0.29 percent.

European Markets

European shares mixed overnight with moves remaining tepid following the auto sales data. The Spanish Ibex Index rose 0.08 percent and the Italian FTSE MIB Index added ...

Nordic American Tanker CEO Says Market Turnaround Will Bring 'Loads of Money'

Luke Jacobi — Thu, 16 May 2013 21:38:18 +0000

Nordic American Tanker (NYSE: NAT) CEO Herbjorn Hansson gave an exclusive interview Thursday morning to Benzinga.

Hansson opened the interview by mentioning his upcoming visit with oil giant Exxon Mobil (NYSE: XOM), commenting Nordic American Tanker has “done a lot of business with them”, along with Shell (NYSE: RDS.A) and BP (NYSE: BP).

Shares spiked six percent Wednesday after it was rumored Hansson would be on Jim Cramer's show Mad Money, a rumor that was first confirmed by Benzinga. Cramer went on to comment that Nordic American Tanker is the “best run company in the industry” and that Hansson is “the most disciplined guy in the industry.”

Despite operating in ...

Market Wrap for Thursday, May 16: A Small Pullback For U.S. Stocks as Economic Data Disappoints

Scott Rubin — Thu, 16 May 2013 20:17:39 +0000

Stocks pulled back late on Thursday as bullish sentiment could not overcome disappointing economic reports. Initial jobless claims, housing starts and a reading of the Philadelphia Fed's Business Outlook Index all surprised to the downside.

Although it is far too early to predict a correction in the market, investors who have been pouring cash into stocks will certainly want to see signs that Thursday's economic reports were a one-off. Even despite the disappointment, the losses on the major averages were minor, underscoring this market's strength.

Major Averages

The Dow Jones Industrial Average fell 42 points, or 0.28 percent, to 15,233.

The S&P 500 lost around 8 points, or 0.50 percent, to 1,650.

The Nasdaq shed around 6 points, or 0.18 percent, to 3,465.

Jobless Claims

Initial jobless claims rose to 360,000 for the week ending May 11 from an upwardly revised 328,000 for the week ending May 4. This compared to consensus expectations calling for an increase to 330,000.

Continuing claims fell to 3.009 million for the week ending May 4 from 3.013 million for the week ending April 27. This compared to the consensus estimate of 3.005 million.

CPI

CPI fell 0.4 percent in April after declining 0.2 percent for the month of March. This compared to consensus estimates calling for a decline in consumer prices of 0.2 percent.

On a core basis, which excludes food and energy, CPI rose 0.1 percent for the second consecutive month. This was slightly less than the consensus which expected prices to rise by 0.2 percent.

Housing Starts

Housing starts declined by 16.5 percent in April to 853,000 from a downwardly revised 1.021 million in March. This was the lowest number of housing starts since November 2012. The consensus had expected housing starts to fall to 970,000.

Philadelphia Fed

In a surprise reading, the Philadelphia Fed's Business Outlook showed that manufacturing activity in the Philadelphia region contracted in ...

Bloomberg Reports on Rise of Possible Housing Bubble

Ari Crane — Thu, 16 May 2013 20:03:24 +0000

Is the U.S. housing market entering the early stages of a possible bubble?

Or is this stagnant industry finally growing? Kathleen M. Howley of Bloomberg published an article earlier Thursday pertaining to these implications in the housing market.

In her article, Howley comments that the Federal Reserves' aim to push down borrowing costs has increased demand in the housing sector. Economists Stan Humphries of Zillow (NYSE: Z), and Mark Vitner of Wells Fargo (NYSE: WFC) agree that low borrowing costs have lead to unstable price rises in some areas.

According to the National Association of Realtors, about 90 percent of 150 metropolitan areas in the United States have showed price increases in the first quarter from a year ago. U.S. home prices have jumped ...

Mid-Afternoon Market Update: Optimer Falls as Halozyme Rockets Upwards

Jake L'Ecuyer — Thu, 16 May 2013 19:35:35 +0000

Toward the end of trading Thursday, the Dow was down 0.10 percent to 15,259.91, while the NASDAQ rose 0.13 percent to 3,476.15. The S&P traded down, falling 0.23 percent to 1,654.47.

Top Headline
US stocks saw some volatility on Thursday, fluctuating between gains and losses, following the disappointing economic data released this morning. While housing starts witnessed a decline, initial jobless claims were up and manufacturing in the Philadelphia region slumped.

While Walmart's (NYSE: WMT) shares plummeted 2.2 percent, Cisco (NASDAQ: CSCO) helped to lift the NASDAQ, after the latter company reported its fiscal third quarter earnings above the analyst expectations. Cisco's CEO, John Chambers, said that the company was witnessing positive signs in the US and other parts of the world.

Equities Trading UP
Cisco Systems, Inc (NASDAQ: CSCO) shot up 13.13 percent to $23.99, breaking through the ceiling that has capped the stock for over two years. Analysts believe that the tech giant is in for a long-term rally, fuelled by the better than expected fiscal Q3 results and upbeat outlook.

Aegerion Pharmaceuticals, Inc (NASDAQ:

Mid-Day Market Update: US Stocks Fluctuate, Cisco Systems Up on Better-than-Expected Earnings

Jake L'Ecuyer — Thu, 16 May 2013 17:38:44 +0000

Midway through trading Thursday, the Dow was up 0.05 percent to 15,282.91, while the NASDAQ rose 0.05 percent to 3,477.15. The S&P traded down, falling 0.08 percent to 1,657.47.

Equities Trading UP
Cisco Systems(NASDAQ: CSCO) shot up 12.12 percent to $23.78, breaking through the ceiling that has capped the stock for over two years. Analysts believe that the tech giant is in for a long-term rally, fuelled by the better than expected fiscal Q3 results and upbeat outlook.

Aegerion Pharmaceuticals, Inc (NASDAQ: AEGR) got a boost, shooting ...