Meeting 12-28-2010

We will not meet on Thursday, December 30.  Our next meeting is January 3, 2011 at 10:00 AM.

 

MSFT bought in MB and Ellen’s accounts as a fill in

MB is interested in the Dogs of the Dow

 

Income ETF’s: Ellen sent around some information last week about actively managed income ETF’s.  Short trading history, but these are run by PIMCO and could be worth looking at.  MINT, 0-3 yrs, 1% yield and MUNI, 0-3 yrs, 2.3% yield.  This could be a good alternative for some of our clients, especially as we go into next year. 

 

Paper companies: Weyerhaeuser (WY) recently converted to a REIT.  Maisa is a sustainable paper play currently in the Highwater Universe (Not the Fund)

 

Gold and Silver versus miners and other industrials: Discussion about the asset and comparing it to owning industrials and miners.  Overall, agree that it is a good asset to have in client accounts, but need to continue to discuss the level to hold and whether a bubble is building as more and more investors pile in. 

 

Other industrial names to consider: Vulcan Materials, Heidelberg Cement (trades on the German Exchange)

 

 

Baldwin Brothers

 

Polly Talbott

 

204 Spring St, Marion, MA 02738

Ph (508) 748-0800

Facsimile (508) 748-0806

 

www.baldwinbrothersinc.com

 

This message contains information from Baldwin Brothers, Inc. that may be confidential.  This message is directed only to the individual or entity named above.  If you are not the intended recipient, please be aware that any disclosure, copying, distribution, or use of the contents of this email is prohibited.  If you received this email in error, please notify the sender immediately and delete the message and any attachments.

 

Dallas Federal Reserve Paper on Housing.

Click HERE to open PDF file

Stock Meeting 12-19-2010

Stock Meeting 12-19-2010
Reminder- we won't meet Thursday

Twin Focus sees the 10 year falling back to 2.3%

Fred Hickey piece has good review of MSFT Kinect.

(BN) Gross's Pimco Total Return to Invest Up to 10% in Equity-Linked Securities

Bloomberg News, sent from my iPad.

Pimco Total Return May Buy Equity-Linked Securities

Dec. 16 (Bloomberg) -- Bill Gross's Pimco Total Return Fund, the world's largest mutual fund, is expanding its policy to allow investments in equity-linked securities for the first time since 2003.

Pimco Total Return may put as much as 10 percent of assets in securities including preferred stock and convertible bonds as early as the second quarter of next year, according to a filing today with the U.S. Securities and Exchange Commission. The fund won't invest in common stock, the Newport Beach, California- based firm said.

Gross, who said in October that asset purchases by the Fed will probably signify the end of the 30-year rally in bonds, has invested the Total Return fund in a mix of government-related debt, mortgage securities and emerging market bonds. A top performer over the past five years, the fund trailed most of its large rivals during a debt selloff in the past month.

"This brings Pimco in line with other bond funds in the same category and gives them more flexibility," Miriam Sjoblom, an analyst with Morningstar Inc. in Chicago, said in an interview. "In moderation, this could increase returns without adding considerable risk to the portfolio," she said.

Kathleen Gaffney, who co-manages the $19 billion Loomis Sayles Bond Fund with Dan Fuss, said in August that the fund has increased investments in convertible notes, which can be exchanged for stock, to boost returns for investors.

Bond Selloff

Treasuries fell today, pushing the 10-year note yield to a seven-month high, as evidence the U.S. economy is recovering reduced demand for safety. The decline in bonds, which accelerated after the Federal Reserve on Nov. 3 pledged to buy an additional $600 billion in assets to revive the economy, prompted investors to pull money from taxable bond funds in the week through Dec. 8, the first week of net redemptions in two years.

Gross had reduced government debt for four straight months through October. Pimco Total Return, which according to Morningstar Inc. lost $1.9 billion to investor withdrawals in November, has declined 2.2 percent over the past month, trailing 93 percent of peers.

The $250 billion fund has advanced 7.8 percent in the past five years, beating 98 percent of similarly managed rivals over that period, according to data compiled by Bloomberg.

Pimco said in today's filing that the move to invest in equity-related securities came after the fund's board decided to repurchase shares owned by Japanese investors and end selling the fund there. Pimco Total Return stopped making equity-related investments in 2003 as Japanese securities law restricts such purchases for bond funds.

Pimco, a unit of Munich-based insurer Allianz SE, manages about $1.2 trillion in assets. Mark Porterfield, a spokesman for Pimco, declined to comment on the filing.

To contact the reporter on this story: Sree Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

(BN) U.S. Economy Set to `Run Fast' With Emerging Markets, Pimco's Kiesel Says

Bloomberg News, sent from my iPad.

U.S. Economy to 'Run Fast' With Emerging Markets, Pimco Says

Dec. 16 (Bloomberg) -- Pacific Investment Management Co. says the U.S. economy is poised to "run fast" along with emerging-market countries, to the benefit of banks, secured loans and bonds, and junk-rated debt that may be upgraded to investment-quality.

"The experience of running fast, or at least running faster, is something the U.S. economy is finally set to do," Mark Kiesel, global head of corporate bond portfolios at Pimco, wrote on the firm's website. The fund favors credits in emerging markets, the U.S. and countries "tied into strong emerging markets growth," such as Canada and Australia, he wrote.

The biggest bond-fund manager boosted its forecast for U.S. economic growth by 1 percentage point to as much as 3.5 percent after President Barack Obama agreed to extend tax cuts enacted by his predecessor and as Federal Reserve Chairman Ben S. Bernanke seeks to reduce unemployment and avert deflation by buying Treasuries. Pimco is based in Newport Beach, California.

"The U.S. economy has turned the corner from a cyclical perspective due to the combination of accommodative monetary policy and increased near-term fiscal stimulus along with gradually improving trends in underlying economic fundamentals," wrote Kiesel, who was nominated yesterday for fixed-income manager of the year by Morningstar Inc.

"Europe appears sick and is set to 'run slow' on a relative basis, with subpar economic growth," he wrote.

Junk, or high-yield, bonds and leveraged loans are rated below Baa3 by Moody's Investors Service and lower than BBB- by Standard & Poor's.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Stock Meeting 12-16-2010

Stock Meeting 12-16-2010

Meetings next week Monday only.

Energy name EOG
xom pt $87

Merrill lynch review of their outlook
Commodities - 2011 outlook choppy with an upward bias.
E M- s Africa no. 1pick Prefers Latin America over Asia. Latin America looking at Chile, Columbia, Peru Mexico, Argentina
Breakout in the small and Mid cap names.
Retail $ on the sidelines and could stay that way.
Dogs of the Dow - Energy? P. 23
P. 52 interest rates
P. 70 Sector
Consumer staples and discretion will see more pass through 2011. TIPs a buy in first Q

China
NYTIMES 2 recent articles on Wind power
Economist article China Friend or foe?

Harding Frontier Fund worth watching

Shipping Mega vessels up 6 fold. 61 ships floating 144 on order and working by 2014. All of it in prep for the open for the Panama Canal.

Mutal bond fund returns since September
VIPSX -2%
PTTRX -7.8%
VBMFX -3.1
VFSTX -1.1

FW: Monday Meeting 12-6-10

Monday Meeting 12-6-10
For Thursday
Taylor will join to discuss performance and reporting and foreign held
securities
Large cap multinationals (industrials, etc., see below)

Discussion
*India versus China: Ellen prefers India and suggests trimming Matthews
Asia due to its China exposure
*Arms-Continue to see over bought conditions, market doesn't have vol
support in the rallies
*ISI raised their forecast
*China should be watched
*Bond bull market ending and he need to play it
*13d on currencies is a good read
*60 Minutes Bernanke interview
*NYT yesterday
-GE NYT article
-Muni market
*SI an additional play?
*PHG could be switched out or used for tax loss. Not seeing strong
short term catalyst
*UPL could be a good short term play due to energy policy and switching
by utilities to natty power plants
*Canadian Railroad ?
*Could US companies outperform?
-CEO's want clarity, yes. Taxes, healthcare.
*Will 2012 EPS be better?
-Cyclical names? They have perf well. Is it worth it to look at them
again with an eye to better growth than anticipated? Or is better
performance baked in?
-Pharmaceuticals? PFE?
-Stocks EOG, CNI, large cap names? Multinationals?
*ITRI could be in a good position for 2011, Terry Murphy likes it,
thinks Bernstein is Way off.
*HTC ticker is HTCXF

Stock Meeting 12-2-2010

Stock Meeting 12-2-2010
HTC-Add to Buy list at 2. Pre-christmas could initiate a 1% position. Would continue to add after holidays.
-Selling @ 2x sales. See 25 pct return possible.
- interesting story-good marketing
-Good integration of the Android OS
-Entry? Start here and average into the position. Holiday expectations high.

SI
-Watch list
Buyer below $110

Buy and Watch List review next week

NYT: Breaking Away From Coal

·         Progress Energy is converting coal-fired plants to gas due to costs associated with installing updated emissions reducing scrubbers.  Cost difference $500M.

·         Over the last year and a half, at least 10 power companies have announced plans to close more than three dozen of their oldest, least efficient coal-burning generators by 2019—some will be replaced by coal plants, but more are being replaced by gas.

·         Compliance with new federal coal plant regulations could require $70 billion of investments over the next decade

·         gas prices have remained at depressed levels over the last two years, coal prices have increased by more than a third this year because of higher production costs linked to tougher regulations and increased demand from China

·         New gas generation capacity will outstrip new coal generation capacity by more than 30 percent through 2020, according to projections from the Energy Department. Credit Suisse predicts that the replacement of coal plants by gas plants over the next seven years could lower annual demand for steam coal by 15 to 31 percent and increase demand for gas by 8 to 16 percent

 

By CLIFFORD KRAUSS

HOUSTON — Progress Energy Carolinas, one of the South’s larger utilities, faced a dilemma last winter.

Several of its coal-fired power plants were aging and needed scrubbers to reduce emissions and meet North Carolina pollution laws. Executives figured that even tougher regulations were coming from Washington, and overhauling 11 generators at four plants would have cost nearly $2 billion, which would have been passed on to the company’s 1.5 million electric customers.

Plunging natural gas prices, however, offered Progress Energy an alternative that would save money and help it achieve pollution goals at the same time: scrapping the coal plants and replacing them with two gas plants over the next four years, at a cost of $1.5 billion.

“It’s a turning point,” said Bill Johnson, chairman and chief executive of Progress Energy, the parent company. “We’ve been a coal-based generator for decades, and until a few years ago, we thought we would remain largely coal-based and nuclear until people started talking about carbon regulation. We decided we had to do something about it.”

A lot of utilities are coming to a similar conclusion. Over the last year and a half, at least 10 power companies have announced plans to close more than three dozen of their oldest, least efficient coal-burning generators by 2019. A few are being replaced by new, more efficient coal plants, but many more are being replaced by gas-fired plants.

Coal still accounts for about half of the country’s electrical power generation, compared with about a quarter for natural gas, but that ratio has been shifting gradually toward gas over the last decade or so.

Gas burns cleaner than coal, helping utilities meet state and corporate goals for reductions in greenhouse-gas emissions. Older coal plants, on the other hand, require expensive upgrades, including scrubbers and other controls, to meet coming compliance rules to reduce mercury, nitrogen oxide and sulfur dioxide emissions. Energy specialists estimate that compliance with new federal regulations alone could require $70 billion of investments over the next decade for replacing or retrofitting the coal power fleet.

Just as significant, gas prices have remained at depressed levels over the last two years after a two-thirds collapse from the 2008 economic tumult, while coal prices have increased by more than a third this year because of higher production costs linked to tougher regulations and increased demand from China. Many people in the industry believe that gas prices will stay relatively low because of the proliferation of gas drilling in shale fields across the country over the last five years.

“Coal is losing its advantage incrementally to gas,” said Michael Zenker, a gas analyst at Barclays Capital, “and as long as gas prices stay as low as they have been, it’s going to continue indefinitely.” New gas generation capacity will outstrip new coal generation capacity by more than 30 percent through 2020, according to projections from the Energy Department. And Credit Suisse predicts that the replacement of coal plants by gas plants over the next seven years could lower annual demand for steam coal, which is burned for electricity, by 15 to 31 percent and increase demand for gas by 8 to 16 percent.

“It has the potential to reshape energy consumption in the United States significantly and permanently,” said Dan Eggers, a Credit Suisse energy analyst.

Although coal is also being replaced by nuclear and renewable energy sources in some places, energy specialists say that gas will be the main benefactor because of availability and cost.

Since burning gas emits a fraction of the greenhouse gas of coal, environmentalists tend to favor the switch, although some worry that more gas drilling could pollute groundwater because of the chemicals used in breaking up shale rock.

Pollution laws generally make gas more appealing than coal. Even as many states like Colorado and Michigan enacted stricter pollution laws, the Environmental Protection Agency last summer imposed new limits on sulfur dioxide and nitrogen oxide emissions in 31 Eastern states and Washington by 2014.

Under court order, the E.P.A. is due to set a national standard for mercury emissions next year that will be phased in over the next three years or so. The E.P.A. is also pressing for efficiency improvements at existing coal plants to lower carbon emissions linked to climate change.

“The biggest challenge we face in this industry is this tsunami of regulatory requirements,” said Frank Prager, vice president for environmental policy at Xcel Energy, a Minneapolis-based utility that has proposed to close four or five coal-fired generators in Colorado and replace them with two gas-fired plants to comply with a new state air pollution law.

“It will be more cost-effective to get off coal and turn toward natural gas than it is to retrofit a lot of these facilities,” Mr. Prager said.

Seventy percent of the nation’s coal plant fleet is more than 30 years old and a third is over 40 years old. Credit Suisse estimates that more than 30 percent of the American coal generating fleet have no emission controls at all, while another third lack either a scrubber for removal of sulfur dioxide or other controls for nitrogen oxides. Those plants, which are largely inefficient, will need expensive overhauls under the new rules.

Sonny Garg, president of Exelon Power, said he expected that the plants with no emission controls would probably be closed by their owners, who he says will be wary of investing billions of dollars on old equipment. “It’s a significant transformation,” Mr. Garg said.

Exelon Power has already announced the closing of three Eisenhower-era, coal-fired generators in Pennsylvania by May 2012 because low gas prices have made retail electricity rates so low the plants are no longer economical to run.

Of course, not everyone thinks gas makes more economic sense. For example, a coalition of investors is building a $4 billion coal-fired generation plant in Illinois, betting that coal prices will remain low enough and regulations light to outperform gas.

Indeed, retrofitting a coal plant can be somewhat cheaper than constructing a new combined cycle gas turbine, industry officials say.

“A very wide range of utilities are wrestling with this issue of identifying what plants they would close because they are anticipating these regulations and there is a lot of planning going on right now,” said Revis James, director of energy technology assessment center at the Electric Power Research Institute.

Utility executives have long been cautious about using gas because its price has historically bounced around unpredictably while coal prices have typically been low and stable. But that appears to be changing. Over the last decade, new drilling techniques have brought a century’s supply of reserves within reach.

For Progress, the decision to scrap coal-fired plants and replace them with gas-fired plants was a drastic change in its business plan. It meant reducing the utility’s coal-fired production capacity by 30 percent while increasing gas power from less than 4 percent of its production capacity to a projected 25 percent after the gas plants are built.

“You had to believe that gas was available long term” at reasonable prices, Mr. Johnson, Progress’s chief executive, said of the decision. “Around the country, people are having to have the same discussion, and what I think you are going to see is a significant move from older coal plants to newer gas plants.”

Barron's: A Slimmed Down Siemens Girds for Growth

Slimmed-Down Siemens Girds for Growth

By CHRISTOPHER C. WILLIAMS | MORE ARTICLES BY AUTHOR

The German industrial giant has undergone one of the lengthier restructurings in corporate history. The result could be fatter profits and a more valuable stock.

SIEMENS MIGHT BE 163 years old, but the German industrial giant is acting as nimble as a teenager these days. Credit that to a 12-year—yes, 12-year—restructuring program focused on cutting costs, workers and underperforming units. The results enabled the Munich-based company to weather the financial crisis of the past two years relatively smoothly, while rivals such as General Electric stumbled.

Under CEO Peter Löscher, who has run Siemens since 2007, the company has continued to prune highly cyclical and underperforming businesses.

Coming out of the crisis, a slimmed-down Siemens (ticker: SI) is poised to gain more market share in its three lines of business—industrial, health care and energy. The company also has redoubled its focus on shareholders, who have benefitted this year from a 25% rally, to 114, in Siemens' American depositary receipts. That performance, which Chief Financial Officer Joe Kaeser calls "a reward for the efforts on transformation," has left both GE (GE) and Switzerland's ABB (ABB) in a cloud of dust. Siemens could keep climbing to 140 per ADR as the global economy improves, lifting demand for gas turbines, high-speed trains and medical equipment.

In the thick of the global recession, in 2009, Siemens' earnings from continuing operations jumped 32%, to €2.5 billion, or €2.58 a share. The company followed up, in the fiscal year ended Sept. 30, with earnings before special charges of €4.1 billion, or €4.49 a share, on revenue of €76 billion. Buoyed by a 25% rise in orders in the fiscal fourth quarter, and an €87 billion ($115 billion) order backlog, management, led by CEO Peter Löscher, 53, announced plans to raise the dividend 69%, to €2.70 a share, the first increase in three years, for an indicated yield of 3.1%.

Analysts expect Siemens to earn €6.72 a share in fiscal 2011, and nearly €8 a share in fiscal '12. Industrial equipment and solutions account for about 46% of annual revenue; energy-related businesses chip in 34%, and health care, 16%.

Notwithstanding Siemens' operating strides, its shares trade for only 13 times this fiscal year's expected earnings. That multiple is in line with GE's valuation, but below Siemens' 10-year average price/earnings ratio of 18, and ABB's P/E of 14.

Siemens' shares are cheap for several reasons. Investors are skeptical of turnaround stories generally, and the company must live down a history of creating a bloated corporate structure and overpaying for acquisitions. Siemens took an impairment charge of €1.2 billion in the fourth quarter in its health-care diagnostics segment, continuing a troubling trend of such year-end writedowns.

Another knock on Siemens is the company's involvement in what some observers have called one of the worst scandals in corporate history. In 2008 the company paid $1.6 billion in fines to settle allegations it paid bribes and kickbacks to secure contracts. According to the company, European and U.S. regulators concluded their investigation last year of charges that dated back to 2006.

One positive consequence of this dismal chapter in Siemens' history was the arrival of Löscher, an Austrian native and former Merck (MRK) and General Electric executive, who was hired as CEO in 2007. Under his guidance, Siemens accelerated its restructuring, ultimately reducing its operating sectors to three from a prior 11. The company exited highly cyclical businesses such as telecommunications to focus on more stable and faster-growing industries; tied executive pay more closely to performance, and pushed the surviving businesses to be first in their markets.

SIEMENS OPERATES IN MORE THAN 190 countries, deriving only 15% of its revenue from Germany. Overall, Europe, the former Soviet Union, Africa and the Middle East account for 55% of revenue; the Americas, 27%, and Asia and Australia, 18%. While geographic diversity can be a plus, it exposes the company to political and currency risks. Morningstar analyst Daniel Holland noted in a recent report that Europe's recession looks to be "a bit more severe" than the slowdown in the U.S. "We expect the drag of [Europe's] economy to take its toll on Siemens," he wrote.

Siemens by the Numbers

Germany's Siemens has focused on industrial, energy and health-care applications, and has diversified well beyond Europe.

Holland pegs fair value for the company at $100 per ADR.

Both Wall Street analysts and Kaeser, the CFO, expect Siemens to earn a higher multiple as investors come to view the company as growth-oriented, not a restructuring play. Consistent earnings gains will help, too, as will more positive earnings surprises, such as Siemens' fourth-quarter report, which beat both revenue and order-growth estimates.

Money manager Todd Lowenstein owns ABB and GE shares, and has been buying Siemens ADRs in recent months for his portfolios at Los Angeles-based HighMark Capital Management. Lowenstein notes that Siemens is more diversified than ABB, a specialist in power products and process automation, and lacks the financial-services exposure of GE, with its giant finance subsidiaries. "Siemens is transitioning from a turnaround/restructuring story to a cyclical growth story levered to emerging-market growth and alternative energy," says Lowenstein, who praises the company's "shareholder-friendly" moves and has a price target of 140.

IN KAESER'S VIEW, SIEMENS NEEDS to "ignite" growth not just in emerging-market countries, but from highly installed bases in the U.S. and Germany. Among other projects, the company is building a natural-gas turbine plant in North Carolina, and betting companies in the U.S. will begin to spend more on medical equipment now that health-care reform has passed.

The Bottom Line

Siemens American depositary receipts are up sharply this year, to 114.50, but could keep climbing to 140 as the global economy improves, spurring increased demand.

Still, emerging markets are driving much of Siemens' growth, and that of many other global concerns. Green technology is another growth driver; Siemens sells more environmental products and solutions than any other company, and management aims to grow its green portfolio to €40 billion in four years from €28 billion now.

Siemens' restructuring is almost complete, says Nick Heymann, an analyst at Sterne Agee, although more pruning could occur. The company is considering an initial public offering of its Nokia Siemens Networks, a joint-venture with Nokia (NOK) to supply telecommunications carriers. A separation of that business, which has been underperforming, would please analysts and investors, as would other smart capital-allocation moves, such as the increased dividend.

Above all, a streamlined Siemens, with attractive growth prospects worldwide, would merit a higher stock price and richer valuation. 

Power Players

Siemens is more diversified than ABB, and lacks GE's exposure to the recently troubled financial-services sector. The company trades below its historical price/earnings multiple and ABB's P/E, but in line with GE's.

Company/Ticker	Siemens/SI*	General Electric/GE	ABB/ABB
Recent Price	$114.50	$15.94	$19.98
12-Mo Change	13%	-1%	4%
Market Value (bil)	$104.7	$169.8	$46.1
2011E Revenue (bil)	$105.5	$146.2	$33.4
2011E EPS	$8.99	$1.27	$1.42
2011E P/E	12.7	12.6	14.1
*Fiscal year ends September. E=Estimate Source: Bloomberg

 

 

 

Monday. November 22, 2010 Meeting Notes

EOG to Buy List, Rank 1, PT 110

 

Please review the Watch List and the Buy List, send Polly all of your recommendations for cutting from either list.  Eventually we will combine the two lists.

 

Ellen will send out information on Siemens

 

Dylan will work on Schneider Electric.  HWGF recently swapped out PHG for Schneider.

 

What if has opened a position in EOG

 

We will return to our regular meeting schedule next week.

 

 

Stock Meeting 11-18-2010

Stock Meeting 11-18-2010
Monday Reminder! We will only meet on Monday for a combined planning and stock meeting.
Review the Buy list and Watch list. Come to the meeting Monday with stocks you want cut or kept. We will combine the two lists

Bond Market
Hold where we are and continue to communicate with bond desk.

Monday Meeting 11-15-2010

Monday Meeting 11-15-2010
ETF column in Barrons
Bond market off this morning
Greenspan cautioned an upward spike in rates which could cause a double dip
NYT article on bond volatility. Fed targeting 5to7 yr. Chris advocates getting out of anything in the late teens.

EOG on the agenda for Thanksgiving week

11-22-2010 meeting Monday at 10 am. This is a combined Monday planning and stock meeting.

More BS @ the BLS

First, Let's Lower the Bar

I was sitting in London when the employment numbers came out last Friday, and I didn't have time to really get into the data. I did send you Lacy Hunt's quick analysis as to why it was weaker than it appeared, but something else did not seem right. I follow a few people who are pretty good at predicting the employment numbers (like Philippa Dunne of The Liscio Report). Most were expecting numbers in the 60,000 range. Most unusual for there to be such a big miss from these guys. I read the press release and saw nothing to raise my eyebrows. And then Alan Abelson in Barron's gave us the following, after reciting the headline number:

"Happily, the always astute Stephanie Pomboy of MacroMavens provided a quickie explanation:

" 'The seasonal bar which the payroll data must jump was (inexplicably and dramatically) lowered from prior Octobers.

" 'Thus, in October 2009, the BLS set the bar at 870,000 jobs, similar to the 840,000 it anticipated in October 2008. This year, by contrast, it lowered the bar to 768,000. Mumbo, jumbo, payrolls presented "an upside surprise" of 100,000.'

"According to John Williams at Shadow Government Statistics, the BLS' fiddling with the figures via what he calls 'seasonal-factor games' actually created 200,000 phantom jobs last month. John cites such finagling as the reason his prediction of an October decline and a rise in the jobless rate was wrong. It also explains why seasonally adjusted payrolls were revised upward by 110,000 in September, including 56,000 in August."

In the opinion of your humble analyst, if they are going to make such changes, they should be announced up-front or noted prominently in the press release. People (foolishly) trade on these numbers and money is made and lost. This is serious stuff.

Mauldin post on borrowing

They Need to Borrow How Much? Really?

The team over at Recovery Partners sent this note along:

"This week we heard from the IMF that the total borrowing requirements of key governments in 2011 will amount to around $10.2 trillion. The estimate represents a rise of 7% from 2010 and over 27% of the annual GDP of the developed economies.This rollover profile exposes the vulnerabilities in thematurity composition of Sovereign liability portfolios and thelikelihood that most Sovereigns will find it impossible to appropriately de-risk their financial exposures by extending term or otherwiseexecuting an immunization strategy. The bottom line is that unless deficit control and the establishment of debt management performance benchmarks is adopted as a matter of urgency in many economies, it becomes very easy to envision the near term onset of another round of severe financial turbulence."

That is obviously a lot of money. It is also government borrowing that is crowding out private investment. And as we look over the "pond," the euro is again under pressure. Just when you thought QE2 was going to tank the dollar.

Stock Meeting 11-11-10

Stock Meeting 11-11-10

ST still Iooks good. Chris sent a piece around.

Graph - tech resistance spot at 68.1. More and more indications it's toppy. $ printing starts tomorrow. Bubble building, no choice but to play it, but play it carefully.

Grantham interview worth the half hour

Copasa not for every client. On the Watch List.

EOG -Chris working on it. Management first rate.

WIP and TIP to the Watch List

SI as a potential replacement for GE and/or Phillips. Expect margins to improve, 87 B backlog.

CSCO-F11 1.65 to 1.63. Cheap but not sure the reset can happen as quickly as they say it will.

Ag Sector: JCWIX is the John Hancock agribiz fund, but not available via Fideltiy's platform. Cou,d do a small pot of securities. Includes Yara, potash, Deere, Syngenta, Wilmar International, The Mosaic Co, CF Industries, Monsasanto, Bunge Ltd.

Monday Meeting

Monday Meeting
PIMCO Bill Gross in Barron's
MB is going to circulate John Maudlin piece on Canada

BRAQ: Lulu's choice elected. Is it time to pull the trigger on it?

For Thursday:
Fed action
TIPS
discuss buy and watch lists, clean them up, add and remove tickers
Consumer ETF
Canon

Stock Meeting 10-28-2010

Stock Meeting 10-28-2010

WES. Added to the Buy list, BT $27

WES: below average risk profile in natty gas. Fixed fee contracts. Would buy $27 and below.

Consumer stocks
Inflation is hidden in new packaging, lighter contents
Will look at ETF's as an alternative to individual equities

Novozymes have had a good run over the last couple of weeks
ITRI bought for MB & Ellen
Highwater has bought Canon
Chris has been buying Accretive Health

Brazilian investment foreign tax still some uncertainty

Next week:
Fed action
TIPS
discuss buy and watch lists, clean them up, add and remove tickers
Consumer ETF

Microsoft, it's so uncool, that's cool.

2000 revenues per share: $1.50 / Today: $7.50
2000 eps: $0.50 /  Today: $2.50
90% share in the applications market (most of you are using MSFT product to read this).
90% share in the O/S market.
Mobile: left for dead, negative value ascribed to the stock for this (Mobile 7? hmmmm).
Monster upgrade cycle underway for Win7, SQL Server, Xbox, Office.
Yeah, it's over for them.

MSFT is a Dying Consumer Brand

Highlights:

MSFT has been late to the game in mobile, search, media, gaming and tablets.  Now it’s falling behind in web browsing.  Bing has gained market share, but not at GOOG’s expense but at Yahoo!’s (MSFT’s partner)

MSFT has some of the best talent in the industry, they see the trends coming and begin researching it but they often miss their opportunity (example: iPad out for 7 months, MSFT is still sitting on the sidelines and several PC makers have already said they will not use Windows 7 as the OS, it’s not optimized for a tablet).  The race is to the swift—“you cannot afford to be an hour late or a dollar short.”

Xbox sold well to hard core gamers—along came Wii which snagged the casual gamer market.  Mobile phone didn’t do well and with 5% market share, developers aren’t feeling any pressure to step up and begin designing for the newest OS.

Windows 7 is the fastest selling OS in MSFT history.  To businesses.  Which put off buying PC’s or upgrading the Windows OS because Vista was so bug riddled and despised.

MSFT is at a crossroads.  It could be the next IBM—important to business but an afterthought to consumers.  But the market is different now and MSFT is eyeing the consumer market.  And consumers aren’t buying PC’s.  If Microsoft cedes consumer ground, it risks its enterprise stronghold—businesses are willing to let employees drive which devices they use and use their personal devices for work—which is increasingly becoming Mac’s, Androids, iPhones and iPads.

Microsoft is a dying consumer brand

Steve Ballmer, and the company he leads, are struggling with "the vision thing."  By David Goldman, staff writerOctober 27, 2010: 5:23 AM ET

NEW YORK (CNNMoney.com) -- Consumers have turned their backs on Microsoft. A company that once symbolized the future is now living in the past. 

Microsoft has been late to the game in crucial modern technologies like mobile, search, media, gaming and tablets. It has even fallen behind in Web browsing, a market it once ruled with an iron fist.

Outgoing Chief Software Architect Ray Ozzie called out Microsoft's lost ground in a blog post over the weekend.  "Our early and clear vision notwithstanding, [competitors'] execution has surpassed our own in mobile experiences, in the seamless fusion of hardware & software & services, and in social networking & myriad new forms of internet-centric social interaction," he said.

It's not like Microsoft didn't foresee the changes ahead. With a staff of almost 90,000, the company has many of the tech world's smartest minds on its payroll, and has incubated projects in a wide range of fields that later took off. Experiments like Courier (tablets), HailStorm/Passport (digital identity), and Windows Media Center (content in the cloud) show the company was ahead of the game in many areas -- but then it either failed to bring those products to market, or didn't execute.

"In this age, the race really is to the swift. You cannot afford to be an hour late or a dollar short," says Laura DiDio, principal analyst at ITIC. "Now the biggest question is: Can they make it in the 21st century and compete with Google and Apple?"

Some influential analysts think not. Several have downgraded Microsoft's (MSFT, Fortune 500) stock in recent weeks, as PC sales continue to slow and Microsoft struggles with its tablet strategy.  The company's stock is down more than 17% this year.

What's wrong with Microsoft

A rundown of Microsoft's major consumer projects finds trouble in almost all of them.  Internet Explorer's popularity has been waning for years, and one recent study showed that for the first time in more than a decade, more people are using alternative browsers. The browser is becoming the single most critical piece of software on a device -- potentially eclipsing the operating system -- but all of the major innovations of the past few years, like tabbed browsing and add-on extensions, came from outside Microsoft.

Windows Phone 7 has promise, but Microsoft dug itself an enormous hole with the subpar Windows Mobile platform. With its market share currently sitting below 5%, developers are taking a "wait and see" approach.

0:00 /5:05Ballmer: Windows Phone 7 'different'

Microsoft's media platform Zune was dead on arrival.

Bing is growing, but substantially all of that growth has come at the expense of its business partner, Yahoo -- not its archrival Google.

Microsoft's attempts to build a social network through Windows Live have failed to gain traction. It has no real answer to Facebook.

Six months after Apple's (AAPL, Fortune 500) release of the iPad, Microsoft still has virtually no presence in the tablet market. And its strategy for taking on Apple -- Windows 7 on a tablet, rather than a tablet-specific operating system -- is leaving potential partners cold. Lenovo's technology director recently told PC Mag that his company won't be building around the platform: "The challenge with Windows 7 is that it's based on the same paradigm as 1985 -- it's really an interface that's optimized for a mouse and keyboard."

With Xbox, Microsoft succeeded at innovating: It created a competitive video game brand for hardcore gamers. But even Xbox was outdueled by Nintendo with the Wii, which outsold Xbox by appealing to casual gamers.

Then there's the epicenter of the Microsoft universe: Windows. Microsoft likes to point out that its operating system is its biggest consumer brand and Windows 7 has been selling rapidly. Its new version has sold 240 million licenses in a year, making it the fastest-selling OS in Microsoft's history.

But Windows' momentum isn't from consumers. In fact, consumers are a worry for the Windows division, because they have dramatically slowed their purchases of PCs in recent months.   Rather, the fast sales are coming from businesses, which significantly delayed their purchases of new Windows licenses because Windows Vista was bug-ridden mess. Then the recession hit. A years-overdue corporate PC refresh cycle is now happening all at once.

Meanwhile, Microsoft's executive suite is in turmoil. CFO Chris Liddel, entertainment unit head Robbie Bach, device design leader J Allard and business division chief Stephen Elop have left within the past year. Ray Ozzie joined the exit parade last week.

Consumers matter

Microsoft has a lot of questions to answer, and it will have an opportunity to do so at its Professional Developers Conference in Seattle, which kicks off Thursday.

But PDC, which used to be one of Microsoft's most important and widely attended conferences, is going to be relatively small this year, with only a few thousand people making the trip, analysts say. PDC's hottest news this year is about cloud computing -- vital to enterprises, but not exactly sexy stuff.

So is this Microsoft's Waterloo? Will it become the next IBM -- crucially important to businesses but an afterthought for consumers?

"Microsoft is at a transition point, and there is a risk of that happening," says Al Hilwa, analyst at IDC. "But Microsoft cares much more about consumers than IBM ever did. It's in its DNA, and it understands that it is necessary to stay relevant. I don't see Microsoft ever abandoning consumers."

As Apple has proven, success in consumer products can fuel explosive growth. Apple surpassed Microsoft's market value earlier this year, and is on pace to eclipse the company in sales for 2010.

And if Microsoft cedes consumer ground, it risks its enterprise stronghold. Businesses are becoming more willing to allow employees to use their personal devices for work purposes, and a growing number of those gizmos are Macs, iPads, iPhones and Android smartphones.

So it's up to Microsoft to turn that around by being a leader, rather than a follower, in the consumer market.

Windows Phone 7 is a good start. Internet Explorer 9 has some exciting new features that other browsers lack. And Xbox's controllerless Kinect -- the first of its kind -- is coming this holiday season.

Microsoft just has to hope it's not too late.

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Lynas Corp – Downgrading to N from OW - JPMorgan

Lynas Corp – Downgrading to N from OW - Following a period of very strong share price out-performance, we downgrade our recommendation on LYC to Neutral and retain our $1.71 Jun11 price target. Since late Jun10, LYC’s share price has risen 184%, compared to a 5% rise in the ASX/S&P 200 and a 10% rise in the ASX/S&P 200 Materials Index. The key driver of LYC’s share price rise has been the sharp increase in rare earths prices. LYC’s Mt Weld rare earths basket price has risen more than 240% from US$17.42/kg as at 28 Jun10 to US$59.77/kg as at 25 Oct10. In turn, the key reason behind the rare earths price increases have been actions by Chinese authorities to reduce China’s rare earths export quotas and initiatives to consolidate domestic supply. On this front, we wait for news of China's export quota for 1H CY11, due to be announced as early as Nov10 or as late as Jan11. Reid https://mm.jpmorgan.com/PubServlet?action=open&doc=GPS-492872-0.pdf

Monday Meeting 10/25

Monday Meeting 10/25
Thursday:
TIPS
Brazil fixed income rule for foreign investors
Consumer stocks
Portfolio Allocation Review

Ricki Otts' presentation on the Gulf spill very worth watching.

WES possible new MLP name. Yielding between 6-7%.

BRAC portfolio review

Brazil USD linked bond

DHR one stand out to the earnings call, wage pressure in EM markets.

Arms: Narrow trading range and low volatility suggest a resistance level has been reached. Very little would cause a criss of the MACD-a negative signal. Sees a turn lower, catalyst would be a rise in the dollar, US and world markets appear to be handcuffed to the value of the dollar.

Portfolio allocation review

Barron's: A Private Party

Big companies are quickly adopting new computer networks known as "private clouds." That may mean trouble for major tech suppliers.

IT TURNS OUT THIS CLOUD has a dark side for technology vendors–and their shareholders.

Corporate adoption of efficiency-enhancing, virtualized computer networks, known as "private" clouds, is going so well that big companies may be ready for the next phase of cloud computing years sooner than either Wall Street or Silicon Valley expected. That's not a welcome development for the technology suppliers that sell Corporate America hardware and software because the next step is the outsourcing of many data-processing services. In other words, corporate customers gradually will be cutting back on big-ticket items and redirecting smaller amounts of money to computer-services providers.

"It's possible that we could see another nuclear winter in tech spending," says Walter Price Jr., who has been managing technology funds for more than 25 years.

The consensus has been that big, global companies, already sitting on record mounds of cash and reporting improved revenues and profits, would steadily increase their spending over the next few years as the recovery gradually gained steam. Information-technology stocks would enjoy the ride.

But that's not really happening. Even without the effects of cloud computing, Goldman Sachs now sees 2009's declining global information-technology sales followed by about 5% growth this year and 3% in 2011 as a subpar recovery takes hold (see chart nearby). Price contends that it could get worse than that. "What's coming is a secular decline in tech spending," he says. "We are headed to an environment where it will be difficult for [tech vendors] to keep revenues growing."

Companies Loosen Purse Strings—Just a Bit

Although spending on technology has rebounded from 2009's lows, it's not expected to sustain strong growth levels into 2011. In the meantime, IT-industry shares have beaten the markets.

Price expects the technology portion of capital-spending budgets to fall as corporate networks head into this new stage–known as "public" cloud computing–in which more tasks are handled, possibly by a new group of technology outfits, for a fee.

To date, Amazon.com (ticker: AMZN) is the leading computer-service provider followed by Google(GOOG) and Microsoft (MSFT). There are numerous companies that provide software-as-a-service from the cloud such as Intuit (INTU). Those with the most to lose in the coming transition are Hewlett-Packard (HPQ), Dell (DELL), Oracle (ORCL), Cisco Systems (CSCO) and IBM (IBM).

The notion of cloud computing comes from the interconnection of computer-data centers via a network connected to the Internet. New virtualization technology is pushing this trend. Server-virtualization software, especially that sold by market-leader VMWare (VMW), allows one computer to take the place of several machines by running more than one operating system and then allocating resources where they're needed to increase efficiency. In short, it takes fewer machines, fewer employees, less electricity and less software to do the same job. The rapid growth of VMWare and its cloud-enabling technology is another sign of companies' speedy adoption of the concept.

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Thomas Reis

A private cloud generally is owned and operated by the company that deploys it. The ultimate transition to a public cloud means that almost all its information-technology operations could be managed by a third party that owns clusters of hugely powerful data centers. That is where Amazon and Google come in. In its simplest form, a company would access its data when it wanted through the Internet, the same way a consumer can now access Turbo Tax software without having to store all the information on his own computer.

The process is well under way. According to a 2009 survey of technology vendors by independent research boutique Primary Global Research, at least 10% of those polled said the cloud would be part of their strategy by 2011. Yet the firm now estimates that 80% of its survey group already are working on an implementation plan that includes cloud computing. Among the early adopters of private cloud technologies have beenRevlon (REV) and Charles Schwab (SCHW). In Europe, the pace is even quicker. Royal Dutch Shell(RDS) has signed a five-year contract to shift its data centers in the U.S., Netherlands and Malaysia to a public cloud run by a Deutsche Telekom unit.

Primary Global, says Chief Executive Unni Narayanan, was sufficiently impressed with the possibilities that it shifted its own human-resources function to a privately held cloud company called HireDesk. Primary Global had paid about $100,000 to install its existing HR software and then roughly $15,000 in annual maintenance. It now pays about $6,000 a year to access this information via HireDesk's cloud-computing operation.

Such economics, says Price, could mean the most dramatic transformation of enterprise technology in 20 years arrives ahead of schedule. It would be comparable to the disruption caused when client-server personal-computer systems surpassed mini-computers and big-iron mainframes. Think Wang, Digital Equipment Corp., Sperry and Burroughs.

In the very near term, companies will continue to invest in their own private cloud-computer systems. That will benefit the traditional tech behemoths that sell servers, storage, personal computers and business software, such as IBM (IBM); HP; Dell; Oracle and Cisco. But the markets already are starting to make longer term distinctions. With the exception of IBM, these stocks have been trading at depressed valuations because they are mature companies, says Paul Wick, technology-portfolio manager at Seligman Investments.

And the clock is ticking for the current giants. The ultimate "public-cloud" model is analogous to power utilities, where computing power would be sold based on usage and need.

Who's Gotten Ahead in the Clouds?

Here are some of RCM portfolio manager Walter Price's top cloud-computing picks.

	Recent	Market	2010E		2011E
Company/Ticker	Price*	Value (bil)	Revenue (mil)	EPS	EPS	P/E
Software As A Servicer
Concur / CNQR	$48.40	$2.5	$293	$0.76	$0.95	50.9
Intuit / INTU	46.12	14.0	3,800	2.41	2.73	16.9
Salesforce.com / CRM	105.30	14.0	1,600	1.18	1.52	69.1
Success Factors / SFSF	24.99	1.8	199	0.01	0.11	219.2
Computer Services
Amazon.com  / AMZN	164.97	74.0	33,000	2.59	3.58	46.1
Google / GOOG	611.99	195.0	2,200	28.67	33.22	18.4

*As of 10/21. E=Estimate. CNQR:For fiscal years ending Sept. 2010 and Sept. 2011. INTU:For fiscal years ending in July 2011 and July 2012.

Source:Thomson Reuters

Primary Global's Narayanan agrees that today's enterprise-technology vendors are at risk of becoming obsolete. "There is a constant tension between addressing short-term immediate problems versus directing resources to potentially huge untapped markets," he says. "And so, technologists vacillate between tactical thinking for today and strategic planning for tomorrow."

Portfolio manager Price is betting that the global scale of Amazon and Google gives them an advantage; their data-center facilities already dot the world, offering the potential for high-quality services, analytics and applications at lower costs. Their shares are pricey, thanks to their core e-commerce and advertising businesses, trading at forward price/earnings ratios of 46 and 18, respectively. But Price argues that investors have to pay up for growth to own the industry leaders. Amazon and Google shares were trading last week around 169.13 and 612.53, respectively.

A new generation of Silicon Valley start ups, such as social-networking and mobile-services companies, have integrated Amazon and Google cloud services into their offerings. As they grow, Amazon and Google will grow, too. Price thinks Amazon's market-cap of $69 billion could grow as much as 45% to $100 billion in just two to three years.

Microsoft has the heft, engineering prowess and potential scale to compete, but it started after Amazon and Google and faces headwinds in its other businesses. Microsoft's Azure unit isn't aimed at offering infrastructure to users the way Amazon and Google do, but is offering a platform as a service where customers can host myriad Web-based software applications. IBM is another possible contender, though to date it's focused on Web services that can facilitate the building of private-cloud networks, Narayanan says.

For client-server era giants like Cisco, Oracle and HP to get in the game, it will probably require some key acquisitions, Price thinks. As their customers turn to the cloud, these fierce competitors will be fighting over a shrinking enterprise pie, increasingly selling their servers, storage and networking gear to what's expected to be just a handful of major cloud-service providers.

Potential targets could include publicly held cloud computing pure-plays, such Rackspace Hosting(RAX), Terremark Worldwide (TMRK), and Savvis (SVVS), says Global's Narayanan. These companies started largely as places where customers could locate their data centers cheaply without having to own the space. They are now tackling the tougher task of evolving beyond this commodity-type business to become value-added cloud-services operations.

But there are a bevy of privately held and well-funded cloud-services outfits that might make for attractive takeover targets, including Joyent and Go Grid. Joyent is a six-year old San Francisco company that provides cloud services to thousands of customers, including professional networking-service Linked In.Intel (INTC) and Peter Thiel, a backer of Facebook, provided venture backing. Go Grid is a smaller private company.

Price's favorite picks to become big winners in the cloud era are software-as-a-service outfits companies that host business software applications and provide them as a subscription service via the Internet.

The poster child is Salesforce.com (CRM), which Price thinks can more than double its $14 billion market valuation to $30 billion in three years. He also predicts that trailing annual revenues of about $1.46 billion can grow 30% a year. Salesforce provides on-demand customer-relations management software applications. Salesforce shares, which trade about 69 times forward-earnings, changed hands at 105 last week.

Price is also high on the growth prospects of Intuit, the creator of Quicken personal-finance software; is poised to become the cloud-based provider of accounting and other financial software to small businesses ("Small Is Bountiful for Intuit," Barron's, Sept. 13). He thinks Intuit's market cap of $14 billion can increase 30% over the next two-three years. Shares were trading about 17 times forward earnings last week, closing Friday at 47.21.

Two other software-as-a-service companies to watch are SuccessFactors (SFSF) and Concur Technologies (CNQR). Price views them as niche players in enterprise applications that could do well in their relatively narrow categories. SuccessFactors, which provides business execution applications such as those used for employee performance, is also pricey with a P/E ratio of 219. Shares closed Friday at 25.87. In a recent story, Barron's found the pricing too rich ("A Poor Review for a Highflying Stock," Oct. 11). Concur provides expense-reporting applications on demand, eliminating the need for paper and pencil reports ("Reining in T&E Costs, the Easy Way," Barron's, July 19). The stock was changing hands at 49.14 at Friday's close, or about 51 times forward-looking earnings.

With the exception of Microsoft, Intuit and Google, these are all pricey stocks. Investors may have to pay up if they want to benefit from companies' zeal to cut their information-technology costs. Remember, this decade's tech star could emerge from this group.