Some Fed Members Still Think 2015 Rate Increase Is Best

At its September meeting,the Federal Reserve's Open Market Committee declined to raise interest rates and left a sense of uncertainty over investors.Just after the meeting,three Fed members advocated raising rates this year.
I argued against the decision,St.Louis Federal Reserve Bank President James Bullard said.Holding rates steady yet again seems to have created rather than reduced global macroeconomic uncertainty.*
San Francisco FRB President John Williams and Richmond FRB President Jeffrey Lacker also called for a near term rate hike.*
If 2015 is the year the Fed will raise rates,it will have to be in December,since there is no press conference scheduled for the October meeting,suggested Tony Nash,chief economist and managing partner at Complete Intelligence,who focuses on Asia.
In the US,you have a lot of people checking out of the work force between 30-55 years of age,those peak earning years,which limits the consumer.We do see opportunities in the emerging markets short term;in the longer term,debt issues are more troubling.
If we see a very small rate rise and a very slow pace,the emerging markets will suffer,but the magnitude of the suffering will be very shallow.Among the emerging markets,India has a very weak portfolio of ministers.Prime Minister Narendra Modi is going to have to change it up,if he wants to improve the economy.*
iShares MSCI Emerging Markets ETF (EEM)

Monday Newsline:China,Japan,Syria

China's exports dropped 18.5% in February-the most since 2009.A 7.5% increase had been anticipated.The Asian New Year may have been partly to blame.Still,the MSCI Asia Pacific index fell 0.96% on that news,plus the fact that Japanese growth was only up 0.7%,which was less than expected.Japan will raise the sales tax next month as well.*
New York copper prices dropped for the second day on concern that China demand will fall with the decline in exports.Goldman Sachs nonetheless sees Chinese stocks as desirable,since they could rise 24% from their decades low valuation.*
In the next six months,most emerging markets will be involved in political or economic problems,said Victor Shvets,a managing director at Macquarie Securities.You never have revolutions when people are happy.You start with marginal areas like Ukraine or Argentina.There is a lack of reformm and liquidity.The only way out is to enact reform.
Below a certain level of GDP growth,social problems emerge.Reform can keep the wolves at bay,Mr.Shvets told Bloomberg TV.*
Thirteen Greek Orthodox nuns from Ma'aloula,Syria have been released by the Syrian government in a deal arranged by a Lebanese general,in which about 150 women and children prisoners were freed by the Syrian authorities.The nuns had spent more than two months in captivity after being abducted from their convent.

Facebook and WhatsApp-what's up with that

Facebook is acquiring mobile messaging service WhatsApp for 19 billion dollars.It is a cross-platform mobile messaging app which allows you to exchange messages without having to pay for it.It works with Android,iPhone,BlackBerry,Windows Phone and Nokia.It may also be downloaded to your PC via DownloadApper.com.There is a nominal subscription charge of one dollar a year.The Mountain View,California company was founded in 2009 by CEO Jan Koum and Brian Acton.*
CNBC's tech analyst John Fortt commented on the move,saying we're in this interesting land grab period for mobile and social.Facebook CEO Mark Zuckerberg spent 10% of his company for this.That's a lot.It has no revenue raising opportunity.Its users are mostly in the emerging markets and are not willing to pay much more.It's gigantic.A couple of bucks a year in some of these countries is a lot of money.
I don't say it's a bad move.It's a move to increase scale,to take out a potential competitor.Facebook and WhatsApp have it cut out for them to scale it and make it succeed financially.There are lots of different ways to look at the strategic value of something like this,and we won't know for a couple of years how good it was.Facebook investors never got to go to WhatsApp and look into it,Fortt pointed out.*
His colleague,CNBC Contributor Jon Steinberg,added that the rules have changed,and you have to take bold moves.WhatsApp is way bigger than Twitter.With this move,Facebook is now diversified.
Everyone in the Valley has been talking about this company for months.Everybody wanted to buy this company.Shareholders should bear in mind that Zuckerberg made a good move that was an expensive move,but they should be glad they have a CEO willing to take bold action in a rapidly changing field.*
Facebook might not make much money off the move initially,but that doesn't mean they had a choice if they want to stay in the big leagues of mobile and social media.*
Facebook(FB)

Emerging Markets Slide;Gold Sales,London Homes Up

Emerging market stocks declined markedly in early Monday trading.The problem is,emerging markets have not addressed their domestic issues.They don't have very strong growth momentum.They really have to look at their own economies,and not blame the Federal Reserve or other developed markets,an analyst at Bank Julius Baer noted.*
Australia's sovereign wealth fund racked up record gains in 2013.As well,the Perth Mint,a refiner of gold and silver bullion into coins and bars,has posted higher sales for January as gold prices rose.Sales climbed 10% as investors sought refuge from an equities market weakened by slowing Chinese growth and Fed tapering.The price of gold fell 28% last year,but has risen 3% so far in 2014.*
Two trillion dollars of equity have been lost since the Fed started tapering its bond buying programme.We've had PE multiple expansion in markets without the earnings to back it up,points out Nick Xanders,global equity strategist at BTIG.
Both the Thai baht and stock market staged a relief rally Monday when national elections went off peacefully,although many polling places were blockaded by opposition protestors.*
Rubber prices dropped to a 16 month low on the Chinese manufacturing pullback.*
London home prices are surging because of an influx of Asian buyers.There are fears a housing bubble may be in the making.*

Cisco Craters on Poor Revenue,Guidance

Shares of tech titan Cisco Systems lost more than a tenth of their value in Thursday trading after an appalling earnings report and conference call.Revenue missed expectations and the guidance for the new quarter was devastating.
Cisco delivered earnings per share of 0.53 per share and revenue growth of 2% year over year,CEO John Chambers said on the company's conference call.While not inconsistent with some of our large peers,this was below our expectations for the quarter.The last month of our quarter was during the U.S.Government shutdown.The impact on our federal business was approximately 50 million.Our team there did an exceptionally good job managing through this challenging period.However,the shutdown,debt ceiling negotiations and delayed key decisions exasperated the lack of confidence among business leaders we had highlighted over the past few quarters.
From a macroeconomic perspective,in the last two quarters our order growth rate in emerging countries,which is 20% of our product business,has gone from a positive 13% in total in Q3 to a negative 12% in Q1 of this year.You can do the math,but that's a drag of between 4 to 5 percentage points on our growth for this quarter.
The set-top box orders which are approximately 20% of our total service provider business was also down 20%,Mr.Chambers noted.
CFO Frank Calderoni added that,as a point of reference,approximately 70% of our product revenue is dependent on new orders each quarter.With that in mind,we expect total revenue to decline in the range of 8-10% on a year over year basis.
CNBC analyst Jim Cramer was not amused.Open rebellion has begun,Cramer said.My charitable trust owned this,blew it out,made a huge mistake believing.They should have pre-announced the guidance.This was not the ride othe Valkyries call.This was Tristan and Isolde,which ends badly.
There's a kind of a moment here where I think social media has overrun all bounds.You need seventeen year olds in the board rooms.I'm not being facetious.If you don't know what these people are doing-they understand that social media rules,taht the cell phone rules.The older people don't get it.You get a seventeen year old in PR.You've got to do something.It's a gold rush.You never have to show strong earnings,and you're dominant.They all want to be Amazon;they don't want to be Cisco.
Look,Mr.Chambers has been around a long time.They've got a lot of good employees.I know some of them.But the orders was just staggering.It was staggering.My charitable trust was just slack-jawed,CNBC's popular Jim Cramer complained.
Cisco Systems,Inc.(CSCO)

Asia This Day-plus Syria

Australian elections have been called for Saturday 7 September.This sent the ASX 200 index up 1.04%.*India's GDP for Q2 was up 4.4 year over year,down from 4.8 in Q1.The country's inflation and fiscal deficits are very high,noted Rajiv Biswas,Chief Asia Economist at IHS.*China's official August PMI was 51.0,indicating that a manufacturing recovery is underway.*You have to approach it from a corporate governance point of view,said Sam Le Cornu,Portfolio Manager at Macquarie Asia.You need to do a lot of work,meeting with management personally.We particularly like consumer discretionary.We really like Chinese equities.We're buying the Hang Seng.*We have a very strong ASEAN watch list.We're waiting for prices to come down.*EM is cheap.We're staying long China.We like North Asia.We're adding to Korea and like Taiwan.*We're looking for high quality management and strong balance sheets.We still say today Asia is full of risk.Our job as analysts is to quantify risk,Mr.Le Cornu told Bloomberg TV.*The MSCI Asia Pacific index was up 0.39% in early Monday trading.Gold and oil prices fell on the delay of US military action against Syria,which is widely seen as weakness.This goes to the core of American credibility in foreign policy and I believe Congress will do the right thing,Secretary of State John Kerry said.The President of the United States has the right to do this.He doesn't have to get approval.*Members of Congresss got lengthy classified breifings on Syria Sunday by administration officials,but some expressed a high degree of scepticism.*Syrian opposition leaders are bitterly critical of the delay,while Syrian officials reportedly believe Congress will not approve a military strike against them.

Citi Likes Emerging Market Stocks

Citigroup predicts a nearly 27% upside to emerging markets stocks in the next year.Our main reasons for optimism:consensus is too bearish/underweight emerging markets,liquidity is ample,economic surprises are improving,earnings are outperforming developed markets,and valuations look cheap,Citi said in a note. The Federal Reserve program has propped up emerging market currencies,equities and bonds as it pumped liquidity into the financial markets. The emerging markets central banks' balance sheets should provide enough liquidity to take up the slack of a Fed withdrawal.In aggregate,the balance sheets of growth emerging markets central banks are still expanding by 6.1% on a year-on-year basis .A strong relationship exists between the growth rate of the asset side of central banks' balance sheets and price to book valuations.Expand the central banks' balance sheets and price to book valuations follow,the note goes on to say. Citi favours Asia over the Middle East and Latin America.It prefers China,South Korea and Taiwan in Asia. iShares China 25 Index Fund(FXI),iShares Emerging Markets Index Fund(EEM)

Should You Buy International Paper Shares

International Paper is a cash flow story,said CEO John Faraci.We just invested 100 million dollars in a West Virginia factory.The dividend isn't at the expense of other things.We've repositioned all our businesses.We're quite confident in our cash flow even in a tough environment.
We've got positions in paper and packaging in the emerging markets.
I think we'll have an agreement on the budget in at the 11th hour and the 59th minute because everyone knows what the fiscal cliff would mean.The economy is going sideways.We're seeing the US basically flat.
Our business is actually up in Russia and Eastern Europe.
China feels to us like 2-3% growth.Brazil is like the US.I do think China will come back,though,the International Paper CEO John Faraci indicated.
International Paper shares closed up 0.79 at 37.59 in Monday trading.
International Paper(IP)

Xerox the Consistently Underrated

Despite the impression its low share price may convey,Xerox is both a services and a technology company.The company has been using data to broaden the solution set that we have,said CEO Ursula Burns.We see uptick in the developing economies;while in America,we started to see growth in large enterprises.Europe is totally uneven.We're still profitable there.Uncertainty is one of the worst things you can have for business,and we certainly have that in Europe right now.The prospects for growth in Europe are high for our services business.They will need to engage.They can't be in austerity forever.Most of our contracts are written;83% of our business is an annuity business,so I think we're gonna be O.K.As those contracts come to fruition,we will be able to progress to a strong margin base.Initial public offerings are as much media events as they are real events.Facebook will settle in and become a normal trading company.They will have to get women and diversity on the board,or it will hurt them,Ms.Burns observed. Xerox is trading at well below book value,and paid a 2.4% dividend as of the close of trade on Friday. Xerox(XRX)

Job Market Clues:Where Executives Are Being Sought

The financial crisis has had a big impact on the job market.Companies are reorganizing,according to Jeanne Branthover of Boyden Global Executive Search.Many of our clients have changed what they want people to do.There are not a lot of these people around to fill the jobs of today,such as software engineers. Asia is hiring and busy,but they want local talent,and there is not a lot of it.Clients say their growth is gonna be in the emerging markets,including South Africa,so our office there is very busy also,as well as in Latin America,where there has been a 300% increase in business.U.S. business has increased by only a little as companies implement plans.In Europe,things are slowing down-particularly in London,which has selective hiring,and they are worried. Ms.Branthover is Managing Director of Boyden's New York office and Head of its Global Financial Services Practice.The company has 70 offices around the globe.

IBM's Chances of Reaching Its Goal

IBM beat on Q3 earnings,logging earnings per share of 3.28 versus an estimate of 3.22;on revenue,Big Blue was at 26.2 billion dollars,versus an estimate of 26.3.The company raised its full year guidance from 13.25 to 13.35 per share.It's pretty much in line with what we were expecting,said analyst Joe Foresi of Janney Montgomery Scott.
On services,IBM had some pretty positive revenue.About 50% of their revenue comes from the services business.It consists of long term,annuity type contracts.
They do a lot of work in the emerging markets,which should help balance any loss in Europe.Given the size of IBM,it's more of a tanker than a speed boat.There's cautious optimism in their guidance.
We have a price target for them of 199.00.If you look over the short term,there will be swings up and down;but over the long term,the fundamentals are certainly there for their 20.00 earnings per share goal within five years,in Joe Foresi's opinion.
IBM's shares fell sharply following its report release,on traders' fears that a global recession could hamper its profitability.
International Business Machines(IBM)

Advantage View:Where the Opportunity Is

Earnings have been very healthy on the back of cost-cutting,according to Steve Barry,co-chief investment officer at Goldman Sachs Asset Management.We see a market with stocks reacting individually.There's only so much you can do on the cost side.You've got to get some revenue growth.
I think you have to look beyond our borders.The U.S. is maybe half to a little more of our company's global results.The middle class of the emerging markets can help drive growth globally.
We see an improvement on the credit side of financials.We're in a world where investors want confirmation,rather than what may happen.Financials look to us to be very opportunistic here.That anticipatory dynamic is core to what we do.Financials are enterprises that behave and adapt,Mr.Barry believes.
Bob Albertson,a principal and chief strategist at Sandler O'Neill Partners,L.P., also likes the financials.He would go into banking.You're seeing accelerating signs of loan growth to businesses.It's a magnetic attraction to see that.The financial sector hasn't participated in the rally.
At the end of the day,credit demand is picking up.The excess capital is overflowing,and the banks don't know what to do with it,Mr.Albertson points out.
Goldman Sachs(GS),iShares Dow Jones U.S. Financial Sector Index Fund(IYF),iShares S&P Global Financials Sector Index Fund(IXG)

Bryn Mawr Trust:2011 Market Outlook

Bryn Mawr Trust is looking at double digit stock market returns in 2011.They like small to mid-cap stocks.They like the emerging markets also.
Bryn Mawr likes the exchange-traded funds VWO,IWM and IJH.Those are areas that they think are gonna do very,very well as we see capital flow into those areas of the stock market.
Eric Thorne is a Vice-President at Bryn Mawr Trust.Founded in 1889,the bank has branches in Chester,Delaware and Montgomery Counties,Pennsylvania.It is focused on helping individuals,affluent families,businesses and organizations create,manage,preserve and transfer wealth,building lasting relationships with them.
Bryn Mawr Bank Corporation(BMTC)

The New Economic World

We're living through change,says PIMCO's co-CEO and co-Chief Investment Officer Mohamed El-Erian.There is lots of transition friction and tension.A lot of improbable things have happened.What the markets are doing is pricing that in.It's more of a square root symbol,leveling off at about 2% growth.There is something fundamental going on,an ongoing structural change.It's all about balance sheets.
The emerging markets had a small heart attack.When the big one came,they had better conditions.It's a good thing we have them there.It's gonna take 2-4 years for the new normal to play out.Only the corporate sector has a healthy balance sheet in the U.S.The market is telling us that balance sheets matter.
The U.S. economy is on a bumpy journey to an uncertain destination-without many spare tires.All indicators are flashing yellow:employment,retail sales and the flow of funds.If you do the bottoms-up analysis,there isn't a sector that's big enough to do the serious heavy lifting.Private sector de-levering and government re-levering are not the formula for growth,but for a multiyear adjustment.We as a financial system are de-levering.Until that is over and we recapitalize,that cycle hasn't been completed.It's definitely a new world,in Mohammed El-Erian's opinion.
Mr.El-Erian is a fan of the New York Mets and Jets,he professes with a smile.

Navios Maritime Notes Improvement

Navios Maritime continues to grow its fleet of dry bulk freighters,buying four new ships for 43 million dollars.The Greece-based firm ships iron ore,foodstuffs and other commodities.Its CEO,Angeliki Frangou,says she is very bullish on China-in roads and railways and every other way.The Baltic Dry Index,which measures demand for shipping,had gone down as low as 650;recently it went back to over 4,000.The BDI had been over 9500 last June.Navios Maritime's trade is based on the emerging markets.It is not based on the consumer at all,Ms.Frangou explained.

Procter and Gamble Grows

Rising commodity and energy costs are affecting Procter and Gamble's business,CEO A.G. Lafley admitted.There is no doubt that the consumer is under pressure,but PG consumer categories are still growing-albeit modestly.Everyday household and personal care products are still being bought on a weekly basis.PG employment and hiring in the U.S. should be up this year.Emerging markets are their engine of growth-and will be into the future,Mr.Lafley observed.