The Dawn Patrol – 16.11.12 – Ups & Downws, GS interesting piece on S&P cash use and more…


No indication or no direction on the European futures this morning. The Fiscal cliff remains the top concern in the US and we saw a very choppy session (talking about the market, not the surf which was perfect yesterday). Correlation is back up as macro is driving the market again. Gold at $1713.9 and EURUSD at 1.2756. Today, we have options expiry today (worth c. $450bn) and this could lead to a very volatile sessionss in the US as several levels were breached. On the macro front: EU car registration, US IP and capacity utilisation.

Again, please enjoy your Week End, winter is coming… Get your running shoes and go for a jog, or at least a brisk walk. Go and see Argo if you haven’t yet… And enjoy!

HENKEL numbers look OK EBIT reached €631m vs the €620m expected (on Bloomberg). Emerging Markets represent 44% of sales, and this should continue to increase.

RECKITT offer may spark bidding war for Schiff: Reckitt Benckiser has trumped Bayer’s$1.2bn deal to buy Schiff Nutrition International, with a $42 a share offer for Schiff, the US vitamins and nutritional supplements company. The bid represents a 23.5% premium over the $34 per share offer that Bayer and Schiff agreed on October 30, and values Schiff at about $1.4bn.
KIRIN HOLDINGS’ shares fell 2.6% in Tokyo on concerns it may overpay for the food and beverage unit of Singapore-based Fraser & Neave.
BP agrees record Gulf settlement; pleads guilty to 14 criminal charges: The $4bn settlement relating to those charges includes a fine of $1.256bn, the largest financial penalty ever imposed by US authorities.
STMICROELECTRONICS said to back away from split amid discord (I thought they already said they would back away… I wouldn’t touch these).

ALCATELLUCENT weighs patents sale to boost cash pile. This could be interesting. I’m no expert on this, but they should get something out of this, and then there will be nothing left…


DELL. Shares down 2.2% afterh hours. The company published Q3 sales/EPS of $13.7bn/39c vs estimates of $13.9bn/40c. As expected, PC sales plunged: desktops down 8% and laptops down 26% vs last year… It kept its full year guidance of $1.70EPS.
GPS GAP moved up 3% last night as it now expects EPS to come in between $2.20 and $2.25 vs $1.95 to $2 a share. The stock is already up 79% YTD and I’m going back to their stores…
SHLD Sears shares down 6% after hours on weaker 3Q same store sales.


ATLAS COPCO Raised to ‘Buy’ at Nordea
BAYER Raised to Overweight from Neutral at JPMorgan
HANNOVER RE Raised to Equalweight at Morgan Stanley
INDITEX raised to buy vs neutral at BOFAML
INTERPARFUMS Raised to Outperform from Neutral at Exane
NEXT rated new outperform at Credit Suisse, PT 4,200P
PENNON GROUP Cut to Equalweight from Overweight at Barclays
SIEMENS PT Raised to EU85 From EU76.50 at Bernstein
WM MORRISON cut to neutral vs buy at UBS
XSTRATA Cut to ‘Sector Perform’ at RBC Capital


BP agrees record Gulf settlement; pleads guilty to 14 criminal charges:
The $4bn settlement relating to those charges includes a fine of $1.256bn, the largest financial penalty ever imposed by US authorities. BP is also paying a further $525m for civil fraud charges brought by the SEC, and will still face civil claims from the US government.

On the Middle East
This looks bad. Sirens were heard in Tel Aviv for the first time since 1991 as missiles were shot at the city. Israeli troops are amassing near the Gaza border and Ehud Barak said there will be a price to pay. Neither side showed signs of yielding as international diplomacy ramped up. Hamas kept up rocket fire in the most


GS (Sneider) Portfolio Strategy Research
Cash uses: How the S&P 500 will spend money in 2013

S&P 500 non-Financials firms hold $1.2 trillion in aggregate cash Despite record earnings and large cash balances, US firms have spent conservatively citing the uncertain low-growth environment. Cash/asset ratio for S&P 500 non-Financials firms stands at 10.8%, a near record high.
We expect firms will spend $1.9 trillion in 2013, up 5% vs. 2012 We expect the growth of cash use in 2013 will favor M&A and dividends over capex, research & development, and buybacks. The mix will still be dominated by capital expenditures ($648 billion; 35% of total). Other growth uses include R&D ($224 billion; 12%) and cash M&A ($266 billion; 14%). Roughly 40% of cash spent in 2013 will be returned to owners via buybacks ($405 billion; 22%) and dividends ($334 billion; 18%).
Dividend taxes could alter the mix of cash returned to shareholders We assume dividend taxes, currently 15%, will rise in 2013 to a level near 25% instead of the scheduled 43.4% rate. We expect dividend tax rate will remain in-line with the capital gains tax. If the dividend tax rate rises substantially above the capital gains rate, firms will likely reduce dividend growth rates and return more cash to shareholders via buybacks.

Max Kamir

Louis Capital Markets UK,LLP

Authorised and regulated by the FSA and Banque de France

39-41 rue Cambon

75001 Paris

T +33 (0)1 53 45 10 74

E mkamir


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