Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Not strictly part of the global demographic tailwind, but close if it affects the development of the Brazilian middle class. (One of these days I may get into trouble with the FT - it has a minatory bit of boiler plate when one copies a piece.)
All I have in Brazil is a bit of BRF.
FT
Back in February, in an earlier Insight column, we highlighted the major build up of consumer debt at extremely high rates of interest, putting a significant cash flow burden on the repayment capacity of borrowers.
Since then, the situation has deteriorated further. Pressures are building in the Brazilian credit cycle.
The average rate of interest on consumer lending has jumped from 41 per cent in 2010 to 47 per cent most recently in May 2011. This rise from an already elevated level reflects the cumulative effect of tightening by the Brazilian central bank in order to contain inflation.
The consumer debt service burden, which stood at 24 per cent of disposable income in 2010, is now slated to rise to 28 per cent in 2011.
This compares with 16 per cent for an “overburdened” US consumer and a mid-single digit reading for other emerging markets such as China and India.
In short, the cash flow burden is astronomical and rising.
We calculate that the debt service burden for the so-called “middle class” in Brazil has now breached 50 per cent of disposable income, as high income earners have little need to borrow at rates which are punitive and most of the consumer credit is therefore being directed to the “middle class” for consumption.
The strain is already evident among the smaller banks, which are finding it difficult to access funding. The central bank has now rescued or taken over three banks in distress over the past six months.
Meanwhile, delinquencies in Brazil (defaults in excess of 15 days) have begun to move up rapidly, from 7.8 per cent to 9.1 per cent of total loans between December 2010 and May 2011. Delinquencies are now rising at a very hectic rate. They have risen at 23 per cent in the first five months of this year in absolute terms or at an annualised rate of 55 per cent.
This is troubling as credit indicators have deteriorated even as the economy has stayed strong and the unemployment rates are at a record low.
Normally credit indicators cyclically follow (read lag) the economic cycle. When they begin to deteriorate before any economic weakness it usually represents a structural problem relating to underlying cash flow or underwriting weakness in the quality of credit – Brazil has both problems.
Over time as the economy weakens this is only likely to exacerbate weakness in the domestic credit cycle and could potentially create a fully fledged credit crisis.
Ultimately, Brazil needs to restructure the way it dispenses credit to consumers. More of the lending needs to be collateralised (ie housing related).
And the infrastructure to support credit expansion needs to be put in place, via a credit bureau which is able to share “positive” data (before a customer default) across the industry.
More strategically, we believe the country has to build a higher savings rate and reduce cross subsidies to bring down the cost of credit to levels which are less punitive than currently both in nominal and, more importantly, real (adjusted for inflation) terms.
Brazil has a national savings rate which was 17 per cent for 2010 (this includes savings by consumers, corporates and the government). This compares with a developed market average of 19 per cent and is significantly lower than an emerging market average of 32 per cent.
Hence, if Brazil is to grow to its “potential”, it has to build a reasonable stock of savings which allows it to invest as the economy grows without creating bottlenecks and inflationary pressures that exist as a growth constraint today.
These three basic foundations (ie the right level of collateralisation, the right infrastructure to support credit extension and the right level of lending rates) need to be in place to create a self-sustaining positive cycle.
Without these buildings blocks we are afraid that Brazil will be exposed to significant boom-bust cycles. Unfortunately, we are currently at risk of transitioning from a boom to bust.
The markets seem to be taking cognisance of these factors gradually with the Bovespa index now down 10 per cent since the start of 2011 in local currency terms, making it among the worst performing markets globally.
Despite this, most analysts and investors still seem to be sanguine about the prospects for Brazil. The disconnect will be answered one way or the other before the end of this year.
WSJ. Does Nissen have an association with Pfizer?
Pfizer Inc.'s smoking-cessation drug Chantix was linked to a 72% increase in risk of cardiovascular problems, including stroke and congestive heart failure, according to a new analysis of medical studies.
Researchers looked at 14 clinical trials of the drug, involving 8,216 patients, and concluded that the medicine "was associated with a significantly increased risk of serious adverse cardiovascular events" compared with patients given a placebo.
The findings, published Monday in the Canadian Medical Association Journal, came from professors at Johns Hopkins and Wake Forest Universities' Schools of Medicine and from the University of East Anglia in England.
Lead author Sonal Singh of Johns Hopkins said people "don't need Chantix to quit and this is another reason to consider avoiding Chantix altogether." Co-author Curt D. Furberg of Wake Forest contended "the sum of all serious adverse effects of Chantix clearly outweigh the most positive effect of the drug."
However, J. Taylor Hays, a Mayo Clinic doctor who has received funding from Pfizer for research on Chantix, responded in a commentary, "The risk for serious cardiovascular events is low and is greatly outweighed by the benefits of diminishing the truly 'heartbreaking' effects of smoking.' "
Gail Cawkwell, Pfizer's vice president for medical affairs, said in an interview that "about one in 100 people in the studies had cardiovascular problems." Pfizer's research has shown that a higher number of people were able to stop smoking than those not using the drug.
Steven Nissen, the Cleveland Clinic's chief of cardiovascular medicine, said, "There is uncertainty about this finding." The current study "has some weaknesses," he said.<snip>
600 calories? I'd be dead. I start off with about 1/2 that with my daily ration of wine.
Since you lead a sheltered life in the Boston area, you may not have heard that the NYT has a pretty consistent agenda on petroleum fuels. Which is why the op-ed on ethanol, even as an op-ed, surprised me.
Another view on the use of the food part of corn to make ethanol. It would seem that the MON process is restricted to the biomass.
Intuitively it would make sense to use the ear - that's where the energy (sugar) is.
(There was a Wiki entry describing the ethanol process that incorporated the use of the ear, but I'm darned if I can find it again no matter how I Google it.)
The Great Corn Con
By STEVEN RATTNER
FEELING the need for an example of government policy run amok? Look no further than the box of cornflakes on your kitchen shelf. In its myriad corn-related interventions, Washington has managed simultaneously to help drive up food prices and add tens of billions of dollars to the deficit, while arguably increasing energy use and harming the environment.
Even in a crowd of rising food and commodity costs, corn stands out, its price having doubled in less than a year to a record $7.87 per bushel in early June. Booming global demand has overtaken stagnant supply.
But rather than ameliorate the problem, the government has exacerbated it, reducing food supply to a hungry world. Thanks to Washington, 4 of every 10 ears of corn grown in America — the source of 40 percent of the world’s production — are shunted into ethanol, a gasoline substitute that imperceptibly nicks our energy problem. Larded onto that are $11 billion a year of government subsidies to the corn complex.
Corn is hardly some minor agricultural product for breakfast cereal. It’s America’s largest crop, dwarfing wheat and soybeans. A small portion of production goes for human consumption; about 40 percent feeds cows, pigs, turkeys and chickens. Diverting 40 percent to ethanol has disagreeable consequences for food. In just a year, the price of bacon has soared by 24 percent.
To some, the contours of the ethanol story may be familiar. Almost since Iowa — our biggest corn-producing state — grabbed the lead position in the presidential sweepstakes four decades ago, support for the biofuel has been nearly a prerequisite for politicians seeking the presidency.
Those hopefuls have seen no need for a foolish consistency. John McCain and John Kerry were against ethanol subsidies, then as candidates were for them. Having lost the presidency, Mr. McCain is now against them again. Al Gore was for ethanol before he was against it. This time, one hopeful is experimenting with counter-programming: as governor of corn-producing Minnesota, Tim Pawlenty pushed for subsidies before he embraced a “straight talk” strategy.
Eating up just a tenth of the corn crop as recently as 2004, ethanol was turbocharged by legislation in 2005 and 2007 that set specific requirements for its use in gasoline, mandating steep rises from year to year. Yet another government bureaucracy was born to enforce the quotas.
To ease the pain, Congress threw in a 45-cents-a-gallon subsidy ($6 billion a year); to add another layer of protection, it imposed a tariff on imported ethanol of 54 cents a gallon. That successfully shut off cheap imports, produced more efficiently from sugar cane, principally from Brazil.
Here is perhaps the most incredible part: Because of the subsidy, ethanol became cheaper than gasoline, and so we sent 397 million gallons of ethanol overseas last year. America is simultaneously importing costly foreign oil and subsidizing the export of its equivalent.
That’s not all. Ethanol packs less punch than gasoline and uses considerable energy in its production process. All told, each gallon of gasoline that is displaced costs the Treasury $1.78 in subsidies and lost tax revenue.
Nor does ethanol live up to its environmental promises. The Congressional Budget Office found that reducing carbon dioxide emissions by using ethanol costs at least $750 per ton of carbon dioxide, wildly more than other methods. What is more, making corn ethanol consumes vast quantities of water and increases smog.
Then there’s energy efficiency. Studies reach widely varying conclusions on that issue. While some show a small saving in fossil fuels, others calculate that ethanol consumes more energy than it produces.
Corn growers and other farmers have long exercised outsize influence, thanks in part to the Senate’s structural tilt toward rural states. The ethanol giveaway represents a 21st-century add-on to a dizzying patchwork of programs for farmers. Under one, corn growers receive “direct payments” — $1.75 billion in 2010 — whether they grow corn or not. Washington also subsidizes crop insurance, at a cost of another $1.75 billion last year. That may have made sense when low corn prices made farming a marginal business, but no longer.
At long last, the enormity of the nation’s budget deficit has added momentum to the forces of reason. While only a symbolic move, the Senate recently voted 73 to 27 to end ethanol subsidies. That alone helped push corn prices down to $7 per bushel. Incredibly, the White House criticized the action — could key farm states have been on the minds of the president’s advisers?
Even farm advocates like former Agriculture Secretary Dan Glickman agree that the situation must be fixed. Reports filtering out of the budget talks currently under way suggest that agriculture subsidies sit prominently on the chopping block. The time is ripe.
Steven Rattner was formerly counselor to the secretary of the Treasury and lead auto adviser. He has spent nearly 30 years on Wall Street as an investor and investment banker and is a contributing writer to Op-Ed.
to really break the backs of the speculators
A one shot amount equal to less than 75% of world consumption will break the back of the speculators?
Like bagasse?
When I traded "up" to a flex fuel Silverado last year, I lost 2mpg.
I do not understand these renewable (hardly!) fuel ideologues.
Boeing has said that its inability to come to a labor agreement with the union in Washington was a factor in the decision to expand elsewhere, but has denied that it was punishing workers and says it has added jobs at unionized plants in the Puget Sound area.
I'm too dumb for the current crowd in Washington. That should put a double line under it, but apparently it doesn't?
High praise for a drug that hasn't entered trials.
Because high grade PC is rare?
Agreeing that the production can be broken down into manageable segments, customer universe must be fragmented. Anyway, they are getting bought recently, so they must be doing something right.
I have holes in that segment of my portfolio - got stopped out of POT for instance - and I should probably work on repairing those lacunae before opening up new frontiers.
Phosphates 'r us? Complex company, lots of moving parts.
For example - our products cover a broad range of applications including water, paper and metal treatment, agriculture, electronics, textiles, tablets, meat preservation and detergents. For example, specialty phosphates act as flavor enhancers in beverages, leavening agents in baked goods and cleaning agents in toothpaste.
Getting your arms around such a company would be a daunting task - Bunge is simplicity itself by comparison. Hell of a move today and yesterday, though I couldn't find a reason
Have you ever looked at BG itself, a processor/marketer rather than a producer?
Good numbers, decent volume, horribly oversold chart.
Favorable tax regime for patents in UK
First Published Friday, 10 June 2011 02:25 pm - © 2011 Dow Jones
LONDON -(Dow Jones)- GlaxoSmithKline PLC (GSK) Friday welcomed the U.K. government's latest proposals to cut the rate of corporation tax on income resulting from patents--the life-blood of the pharmaceuticals industry.
Plans for a "patent box," which would lower the tax rate on profits from successful product launches resulting from patents registered and then manufactured in the U.K., were published Friday by the U.K. Treasury. The plans, which are now open to consultation until September, would apply a 10% corporation tax rate to profits attributed to patents from April 2013, compared with a 26% rate currently.
The Treasury said its proposals will further simplify the scheme by, among other things, changing the rules to extend the credit to include costs of more contract workers carrying out research and development work.
The U.K.'s pharmaceuticals and biotech industry regards the initiative as essential for encouraging investment in the sector.<snip>
Re Margin clerks- the word of the margin clerk out weighs all other considerations at Fidelity and Schwab as well.
CIM, which I own, is looking very weak on the chart. I'm beginning to wonder if the mortgage reit business model is showing cracks.
I don't understand how people can rely on mechanical TA based indicators when the stock in question is facing an unpredictable market reaction to unknown news.
You'd buy volatilities in the 60% range?
The difference is that so many of the domestic blow ups had ridiculous bubble type ratios. Stupidly high P/Es, PS, PBs.
Now take a look at SKBI, which I no longer own. If those numbers are not fraudulent, it's a compelling buy.
There are probably many other such out there, but it's hard to pick low hanging fruit when the picking trips the guillotine.
Other NY listed Chinese companies are being tarred with the fraud brush. The trick will be to identify those who are clean and are now undervalued.
For myself, I'm gunshy of all of them.
The fact seems to remain that on that day the market declared the deal was mispriced.
Interesting. Does the problem apply also to titanium, and to the partial implants where the pelvis remains intact - no metal on metal?
temporary loss of mind is a very common side effect among us posters on message boards
An old tennis pro once told me that I was like everybody else - once I step on a tennis court, my IQ goes down 50 points.
me either
Inconvenient because it's six characters long but not particularly difficult to pronounce, "Aventis" is transliterated as "anmante", which seems odd, but that's what it is.
http://www.sanofi-aventis.cn/l/cn/zh/index.jsp
I wouldn't agree that Chinese cooking ever was lo-fat (Peking duck, any sidewalk food vendor in a Kowloon back street), but I'd agree that sugar is a culprit.
If HDL's job is to clean up the detritus left behind by LDL as it goes about its job of providing energy, it's plausible that it could be interfering with LDL's useful function. Hence muscle weakness.
Is pharma back?
Maybe too much so. The air is getting rarefied up here and I've been thinking of cutting back on ABT and BMY.
Good yields and decent valuations weren't protective in '08 and early '09.
They look like good trades on Schwab's SSPro, but in the absence of any other news to confirm such a move, I think we're left with the erroneous trades explanation.
Pity
There was a recent article in the NYT Magazine by Gary Taubes which goes into the sugar is poison shtick. Gary Taubes is a nutter on the subject, but I find him persuasive on fructose - what takes place when the fructose hits the liver can be injurious to the body's ability to manage insulin.
I'm lean, but I wish I was 10 lbs heavier, without any adipose tissue around the middle.
I may be wrong, but it's not often that the "stodgy" old Dow beats the S&P by over 35% on a quarterly basis.
It was the emerging market part that stopped me in my tracks. So I bought some for the first time in a long time.
WSJ:
3M Earnings Jump 16%
By JAMES R. HAGERTY
3M Co. reported a 16% increase in first quarter profit and raised its earnings forecast for the full year as sales surged in India, China and Brazil.
The St. Paul, Minn.-based conglomerate cited strong sales of products used in the electronics and renewable-energy industries.
Demand for materials used in the screens for tablet computers "is just going up like a rocket ship," George Buckley, 3M's chief executive officer, said in a conference call. But he said 3M faces continued downward pressure on its films used to brighten the screens of television sets.
Sales in the latest quarter were up 30% in India, 27% in China and 25% in Brazil. 3M said these and other "emerging" markets accounted for 34% of its world-wide sales. Sales also were robust in other parts of the world, rising 13% in Europe and 10% in the U.S.
3M reported a 16% increase in first quarter profit and raised its earnings forecast for the full year as sales surged in India, China and Brazil. Paul Vigna and Stephen Wisnefski discuss.
3M said lingering disruption from the Japanese earthquake will hurt earnings by 10 to 13 cents per share this year. The main effects will be in 3M's businesses supplying parts and supplies to the automotive and consumer electronics industries. But those effects will dissipate in the second half and the company should benefit from higher demand for respiratory masks and other safety products, Mr. Buckley said.
Now Reporting
Track the performances of 150 companies as they report and compare their results with analyst estimates. Sort by date and industry.
[earningspr2]
* More photos and interactive graphics
Net income was $1.08 billion, or $1.49 per share, up from $930 million, or $1.29 per share, a year earlier. Sales grew 15% to $7.31 billion.
3M projected that its earnings for the full year will be $6.05 to $6.25 a share. That's up from the previous forecast of $5.95 to $6.20.
Organic sales growth—which excludes the effects of recent acquisitions, price changes and currency fluctuations—should be 6% to 7.5% this year, up from the previous forecast of 5.5% to 7.5%. Mr. Buckley has touted a goal of raising its average organic sales growth rate to between 7% and 8% a year from a past norm of around 4%, largely by stepping up the pace of new-product launches, focusing on fast-growing markets like China and India, and making acquisitions.
3M's thousands of products include masking tape, protective films, automotive equipment, medical supplies, and cleaning fluids and other materials used in making mobile phones, computers, TV sets and semiconductors.
Write to James R. Hagerty at bob.hagerty@wsj.com
An ill received report tonight may be a nice entry point. I've been going round in circles on finally putting NVS in the shoe box for too long.
Tried once before and got stopped out.
Ditto.
I've become increasingly wary of Brazil and am now down to a few hundred BRF's.
I took comfort in the fact that an arm of Deloitte was CCME's auditor and lost a few bucks.
OTOH, any reputable US firm with an operation in China would be insane not be be monitoring the its situations like a hawk, and that might be some comfort.
I find it unusual that an initial rating of "neutral" would result in an 8% move.
(Not saying I have any idea what precipitated such a move - I don't, but I also don't think the writer has glommed on to the right one. Dew's analyst bombardment is more plausible.)
There's a weird addendum to my melanoma story. My wife was working at the time at the Hospice Thrift store in Hilton Head. One day she noticed a gentleman in the shop who spent all his time staring at her leg - every time she looked up, there he was wordlessly staring at the same spot on her leg. Seemed like a signal that there might be something there to be looked at - and there was: melanoma, caught very early and excised without complication.
We never found out who the silent observer was, but we are grateful to him.
I did, but dropped him. Seemed to me he should have noticed a prominent melanoma on my back in the area he was stethoscoping during a routine check up. When I told him what he'd missed he stopped taking my calls, and refused to refund the six months left on the contract. Cornered him in the parking lot so he did what all conscientious m.d.'s should do - called the cops.