Filed under: United Parcel’B’ (UPS), Analyst initiations

MOST NOTEWORTHY: Danaher, United Parcel Service and Atmel were today’s noteworthy initiations:

• Danaher (NYSE:DHR) was initiated with a Buy rating and $100 target at Banc of America. The firm believes the stock’s premium valuation is warranted given the company’s free cash flow performance and feels DHR’s Emerging Medical platform is likely underappreciated by the Street.
• United Parcel Service (NYSE:UPS) was assumed with a Market Perform rating at William Blair, as they believe the company is positioned favorably for long-term price appreciation.
• Friedman Billings expects Atmel (NASDAQ:ATML) to pursue various actions to unlock shareholder value that include mix shift towards high-margin microcontroller products, reduced exposure to expensive manufacturing sites, and rationalizing its most profitable opportunities. The firm started shares with an Outperform rating and $6 target.

OTHER INITIATIONS:

• Morgan Stanley assumed coverage of AutoZone (NYSE:AZO) with an Equal Weight rating.
• Credit Suisse initiated Deltek (NASDAQ:PROJ) with an Overweight rating and $22 target.
• Lehman started CME Group (NYSE:CME) with an Equal Weight rating.

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Filed under: Analyst upgrades and downgrades, Starbucks (SBUX)

MOST NOTEWORTHY: Regional banks, Starbucks and Medarex were today’s noteworthy downgrades:

• Keefe Bruette downgraded regional banks, including Cullen/Frost Bankers (NYSE:CFR) and Susquehanna Bancshares (NASDAQ:SUSQ) to Market Perform from Outperform and BB&T Corp (NYSE:BBT) to Underperform from Market Perform, on valuation and new economic baseline.
• Goldman downgraded shares of Starbucks (NASDAQ:SBUX) to Neutral from Buy on U.S. competition and consumer demand concerns.
• Bear lowered its rating on Medarex (NASDAQ:MEDX) to Peer Perform from Outperform

OTHER DOWNGRADES:

• Morgan Stanley downgraded DeVry (NYSE:DV) to Equal Weight from Overweight.
• B. Riley lowered Hill International (NASDAQ:HINT) to Neutral from Buy.
• HSBC downgraded Nikon Corp (NINOY) to Underweight from Neutral.

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Filed under: Analyst reports, Burger King Hldgs (BKC)

MOST NOTEWORTHY: UBS AG, Burger King and SAIC, Inc were today’s noteworthy upgrades:

• Bear Stearns upgraded shares of UBS (NYSE:UBS) to Outperform from Peer Perform after UBS announced a $10B write-down and replenished capital, as they now believe the subprime issue is broadly behind the company and capital ratios are restored.
• Goldman raised its rating on Burger King (NYSE:BKC) to Buy from Neutral as they expect it to outperform the broader restaurant segment amid the current consumer weakness.
• SAIC, Inc (NYSE:SAI) was upgraded to Buy from Hold at Jefferies following the better-than-expected Q3 results, as they believe the company continues to outperform competitors and that margin expansion should continue.

OTHER UPGRADES:

• eBay (NASDAQ:EBAY) was added to Citigroup’s CIR Recommend List.
• Banc of America upgraded Reliant Energy (NYSE:RRI) to Neutral from Sell.
• MasterCard (NYSE:MA) was upgraded to Outperform from Market Perform at Keefe Bruyette.

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Filed under: Analyst reports, Forecasts, China, Economic data

The inflation rate in China was 6.9% in November, setting off all kinds of concerns that the economy there could overheat. Food costs rose at an annual rate of over 18%.

According to Reuters, “last week China’s top leaders announced they would shift to a ‘tight’ monetary policy from what they called a decade-long ‘prudent’ stance. The stubbornly high consumer price inflation should reinforce their determination, analysts said.”

The Chinese central government has no one to blame but itself. It has kept the economy moving up by offering easy credit to both businesses and consumers. As long as it was possible, it kept the price of commodities like food and oil down by underwriting the difference between what the world market pays for goods and services and what was paid by people inside China. Gasoline and diesel still sell for a small fraction of their price in the US. But, as the government starts to move toward an open market economy, those prices are spiking up.

As the government privatizes large companies it owns and more foreign products come into the country, prices are rising. China can either continue to provide capital and watch that drive inflation to over 10%, or it can cut capital and potentially decrease GDP growth.

Giving consumers and businesses a credit card with no limit on it has not done China any favors. There is now a large amount “past due.”

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Forecasts, Other issues, Economic data, Federal Reserve

Economists surveyed by The Wall Street Journal say the risk of a U.S. recession is rising, and the U.S. Federal Reserve should cut key short-term interest rates to address it.

In the survey, 50 of 52 economists expect the Fed to cut its Federal Funds rate — the rate charged on overnight loans between banks — The Journal reported Monday. Only two see the Fed holding the rate steady at 4.5%, and none expects a rate increase. Some 61% say a quarter-percentage-point cut is the right move, while 27% say the Fed should cut rates by one-half point.

Also, the economists on average now put the chances of a recession at 38%, the highest in more than three years, up from 33.5% in the November 2007 survey, The Journal reported. They also reduced gross domestic product estimates across-the-board: Q4 growth is seen at a slim 0.9% annual rate, down from a prediction of 1.6% in the previous survey, with six economists expecting either a negative or flat reading. Three economists project an economic contraction in Q1 2008, with the average growth forecast at 1.5%, down from 1.9% in November 2007.

Continue reading Economists say rising recession risk requires Fed rate cut

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Filed under: Other issues, Exxon Mobil (XOM), Commodities, Oil, Stocks to Buy

By now, many investors/readers have heard the statistic: if ExxonMobil’s 2007 revenue of $390.2 billion were listed as GDP, it would rank as the 31st largest nation in the world, in purchasing power parity terms.

It’s easy to criticize Exxon (NYSE: XOM). When you’re the world’s largest integrated oil company in a world that’s increasingly seeing both the financial and environmental costs of oil, it’s hard not to be criticized. Moreover, Exxon, like other oil companies, may face additional operational constraints regarding fossil fuels, moving forward — particularly if the Democratic party wins the White House in 2008. Further, it’s not entirely clear that the company will remain a leading provider of energy when that energy becomes primarily renewable and alternative.

Continue reading ExxonMobil (XOM): Own a giant

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Filed under: Good news, Google (GOOG), Private equity, Next big thing, Entrepreneurs, Technology

It seems that Google (NASDAQ: GOOG) is not only interested in conquering virtual space but outer space as well. Through the ever expanding horizons of billionaire Google co-founder Sergei Brin, Google has created together with the X PRIZE Foundation the Google Lunar X PRIZE. Like so many Google activities, this is a very long-term enterprise.

Our architecture practice has done work for the aerospace industry, including the structural test lab for the space shuttle and other unique projects. This created the impetus for our involvement with numerous interesting organizations, one of which is the X-Prize Foundation. It and the Ansari Family Foundation were instrumental in the promotion through a $10 million prize to privately fund sub-orbital travel.

We had the spectacular privilege of being present at both launches of Space Ship One from the Mojave Spaceport (thanks JSS) near Edwards Air Force Base that managed to put a manned vehicle outside the atmosphere for a duration of 60 seconds twice in a ten-day period. Space Ship One, the winning entry, was designed and built by Burt Rutan, supported by funding from Paul Allen.

While Burt Rutan is working on Space Ship Two in partnership with Sir Richard Branson’s Virgin Galactic, another challenging project with a new mission is starting up. The Google Lunar X PRIZE has offered $30 million to the first private enterprise team to achieve the soft-landing of a robotic craft on the moon and start roving on the surface. This mission has never been done without government support.

The following just arrived in my “in-basket”:

• The first official team has completed registration for the Google Lunar X PRIZE. Odyssey Moon, from the Isle of Man, announced its contention for the prize on December 6th at the Space Investment Summit in San Jose, CA. The brainchild of Robert Richards, one of the founders of the International Space University, Odyssey Moon views the Google Lunar X PRIZE as a short term goal. Long term, they will work toward lowering the cost of going to the moon by an order of magnitude and eventually to the peaceful development of the moon. In all, the Google Lunar X PRIZE has received 350 requests for information from more than 40 countries, 11 of which have started or completed letters of intent.

The United States economy has long depended on being at the forefront of the latest technologies. Although there will be entries from all over the world in this competition, the focus is here in the U.S. and Google in concert with the X PRIZE Foundation is helping to reinforce that goal. It just needs to continue to stimulate larger numbers of students to pursue engineering and science careers, so that we can continue to maintain our (eroding) edge. This will also be a major challenge.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.

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Filed under: Products and services, Google (GOOG), Microsoft (MSFT), Marketing and advertising

Microsoft (NASDAQ: MSFT) says it has launched mobile advertising on its MSN Mobile portal optimized for viewing on smartphone and cellphone screens. It’s about time — mobile advertising, as many industry pundits has said for years, is the next frontier of online advertising. Competitor Google (NASDAQ: GOOG) is right there as well, and company CEO Eric Schmidt never misses a chance to say how important mobile web access is to global internet users.

MSN Mobile will now feature miniature banner ads suited specifically for each web browser type and screen size resolution based on the type of device each mobile customer uses to visit MSN Mobile. Microsoft services like Hotmail, MSN Messenger, Live Search and others are all available on the portal. The question is whether customers will use them in increasing fashion. When it comes to mobile web access, Microsoft definitely does not enjoy the monopoly it holds with its desktop software and operating system presence.

But there is more — MSN Mobile allows movie ticket purchasing, and the downloading of background images and ringtones for any customer who visits. With ad backers Bank of America, Paramount Pictures, and Jaguar, MSN Mobile has some decent partners lined up to begin with. That, of course, does not guarantee success. Google’s mobile ad efforts are proceeding along at lightning speed too.

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Well, you’ve probably heard by now that the Fed lowered rates by .25.   So what does that mean?   A couple of points to think about:

1. What the Fed lowers is the shortest of the short term rates and it typically helps home equity loans but doesn’t matter much to mortgage rates.

2. Why did they lower rates?  Because the financial markets are hurting and they needed to at least appear to help out the economy and the markets.   Just this week (and it’s only Tuesday at 5:00) we’ve seen UBS announce $10 BILLION in writedowns (losses) and Washington Mutual announced $1.4 billion in write downs, laid off 3150 people and said, (I’m paraphrasing,)  “We have no clue what 2008 is going to look like.”

3. Will what the Fed did today help matters at all?   I think the best way to describe it is sort of like putting a Mickey Mouse band aid on a 6 inch gash in your arm.    It doesn’t hurt, but it really doesn’t do much.    The business world will benefit from cheaper borrowings (since prime is dropping) but the big problem in the economy (housing) won’t really be impacted.

4. Did the market like what it got, ahh, that would be a resounding no.    Sort of like a little kid crying to his Mama, the Dow dropped almost 300 points in less than 2 hours. 

Have you ever tried to push a string across the table?   It’s hard to get it to move unless you are pulling it, isn’t it.   Well, that’s sort of what The Fed is doing.   They are using the tools that they have to try to save the market, but the tools that they have aren’t what the market needs, so they aren’t able to be very effective.  

If you want to read what the Fed said, copy this into a browser and check it out……

http://www.federalreserve.gov/newsevents/press/monetary/20071211a.htm

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Mr. Gross has a great article on the folly that is the NAR housing forecasts that have been continually revised downward umpteen times to the delight of blogs such as Housing Panic, this one and others.  Personally I think Slate took a soft line; as the revisions don’t just highlight one man’s tough job of balancing the demands of a trade group who will gladly challenge any Jones Town wannabes to a kool aid drinking contest at the drop of a hat. Rather, they point to potential criminal malfeasance foisted upon the American public by those that would benefit most from the misinformation.

From Slate:

But within the fraternity of financial and fiscal forecasters, the seers at the National Association of Realtors—longtime chief economist David Lereah and his successor Lawrence Yun—may be uniquely ill-equipped to deliver sobering forecasts. They work for a trade group whose mission is to buck up the spirits of real-estate brokers. And real-estate brokers—who live to sell, promote, and market—are constitutionally disinclined to hear anything but good news.

In addition to claiming that the sun is shining brilliantly even as rain pours down from the heavens in a mighty stream, Lereah and Yun have also hazarded optimistic, educated guesses about the future.

These hazardous, optimistic forecasts are not with out a seedy underlying motive.  Think about it - the NAR makes the most money when the housing market is going well.  Their membership swells along with the endless membership dues.  People buy more and sell more, pissing away 6% of their equity with every transaction.  The NAR and Realtors stand to gain the most when everything is coming up roses.  Taking the NAR forecasts as anything other than blatant marketing fraud is inconceivable after the job that David Lereah and Lawrence Yun have done in unwillingly backing away from their erroneous forecasts.

The best thing the NAR could do right now is disband and let a new organization form in its place.  It’s reputation is tarnished beyond repair.  People who wear the Realtor badge are now labeled pariahs - not trusted advisors.  Since this Utopian outcome is as implausible as the NAR making an accurate forecast, the NAR should immediately fire Yun; hire a real economist and apologize profusely for the immense harm they have caused the public via their unrealistic and damaging forecasts.  With that apology they should issue a realistic sales forecast that has a snowflake’s chance in hell of being within a few percent of reality and make a public pledge to put an immediate end to the despicable practice of using the one bright spot in each hurricane of terrible news to cling to their untenable position.

The NAR is a joke and their members should be furious that they continually have their credibility ripped out from under their feet by statements of ineptitude and outright deceit that carry their mark of approval such as this latest one:

The unusual mortgage disruptions that peaked in August were clearly seen in lower home sales that were finalized in September and October, so the market was underperforming,” he said.  “Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels.”

I really have no clue how he can make statements such as this in light of a clearly deteriorating market.  Does he have to go home and shower after putting his name next to these statements?   I know a lot of Realtors - how about you guys start a petition to have this idiot fired instead of sapping every last ounce of credibility you have?

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