(GS) Equities still the best positioned asset class

--> this is the note mentionned in the ZeroHedge Article in my earlier bbg, "US equity market to underweight relative to other equity markets over 3 months following strong performance" (Page 4)

* Macro outlook: Accelerating DM growth
We believe there will be a sustained acceleration in US and European growth in the first half of the year. This and the related upward pressure on real bond yields are likely to shape the strategic landscape. We expect US unemployment to reach the Fed’s 6.5% unemployment threshold by the 3rd quarter. This together with above-trend growth increases the risk that investors will question the prevailing outlook for rates to be unchanged for a long period of time. We therefore see the risk to other assets from higher rates this year as somewhat back-end loaded.

Our views across asset classes
Equities: We remain overweight over 3 and 12 months with higher conviction over 12 months. Returns should be supported by better global growth, healthy earnings growth and still high risk premia, in our view.
Commodities: We are neutral over 3 months as geopolitical uncertainty for oil markets remains high. We stay underweight over 12 months, where we see significant downside potential for gold, copper and soybeans and downside risks from supply to our relatively benign price forecast for oil.
Corporate credit: We expect the search-for-yield environment to remain strong and push spreads a bit tighter from here. Corporate re-leveraging remains the main risk to credit quality, in our view. Within credit, we prefer high yield over investment grade. We stay neutral on the asset class.
Government bonds: The steep yield curve should offer some protection against a significant further rise in 10 year yields in the near term and we stay neutral over 3 months. Longer term, we continue to expect yields torise as growth improves. We remain underweight over 12 months.

(ZH) Goldman Downgrades US Equities To "Underweight", Sees Risk Of 10% Drawdown

Goldman Downgrades US Equities To "Underweight", Sees Risk Of 10% Drawdown

Link to article {http://bit.ly/Kf04aZ}
It was inevitable that virtually at the same time as Goldman said the S&P is overvalued "by almost every metric" that the firm would go ahead and slam US equities in only its first tactically bearish call on US stocks in over a year.
Recall from Friday night:
S&P 500 valuation is lofty by almost any measure, both for the aggregate market (15.9x) as well as the median stock (16.8x). We believe S&P 500 trades close to fair value and the forward path will depend on profit growth rather than P/E expansion. However, many clients argue that the P/E multiple will continue to rise in 2014 with 17x or 18x often cited, with some investors arguing for 20x. We explore valuation using various approaches. We conclude that further P/E expansion will be difficult to achieve. Of course, it is possible. It is just not probable based on history.
The current valuation of the S&P 500 is lofty by almost any measure, both for the aggregate market as well as the median stock: (1) The P/E ratio; (2) the current P/E expansion cycle; (3) EV/Sales; (4) EV/EBITDA; (5) Free Cash Flow yield; (6) Price/Book as well as the ROE and P/B relationship; and compared with the levels of (6) inflation; (7) nominal 10-year Treasury yields; and (8) real interest rates. Furthermore, the cyclically-adjusted P/E ratio suggests the S&P 500 is currently 30% overvalued in terms of (9) Operating EPS and (10) about 45% overvalued using As Reported earnings.
Sure enough, here comes Goldman's global portfolio strategy research team headed by Nielsen, Oppenheimer, Kostin, Garzarelli, and Himmelberg, and pulls another leg out of the Fed-driven rally.
We downgrade the US equity market to underweight relative to other equity markets over 3 months following strong performance. Our broader asset allocation is unchanged and so are almost all our forecasts. Since our last GOAL report, we have rolled our oil forecast forward in time to lower levels along our longstanding profile of declining prices. We have also lowered the near-term forecast for equities in Asia ex-Japan slightly. Near-term risks have declined as the US fiscal and monetary outlook has become clearer.
Our allocation is still unchanged. We remain overweight equities over both 3 and 12 months and balance this with an underweight in cash over 3 months and an underweight in commodities and government bonds over 12 months. The longer-term outlook for equities remains strong in our view. We expect good performance over the next few years as economic growth improves, driving strong earnings growth and a decline in risk premia. We expect earnings growth to take over from multiple expansion as a driver of returns, and the decline in risk premia to largely be offset by a rise in underlying government bond yields.
Over 3 months our conviction in equities is now much lower as the run-up in prices leaves less room for unexpected events. Still, we remain overweight, as near-term risks have also declined and as we are in the middle of the period in which we expect growth in the US and Europe to shift higher.
Regionally, we downgrade the US to underweight over 3 months bringing it in line with our 12-month underweight. After last year’s strong performance the US market’s high valuations and margins leaves it with less room for performance than other markets, in our view. Our US strategists have also noted the risk of a 10% drawdown in 2014 following a large and low volatility rally in 2013 that may create a more attractive entry point later this year.
Of course, how the above trade fits with Goldman's top trade #1 for 2014 revealed in November, which was to go long the S&P funded by an AUD short, one can only wonder.
And now the muppets start to wonder: should we do what Goldman is telling us to do, and blow up as always, or do what Goldman's trading desk is doing, which probably is buying risk from all those who are selling. Ah, questions.

>>> Lululemon shares plunge 11% following lowered Q4 guidance

Lululemon shares plunge 11% following lowered Q4 guidance
  • lululemon athletica (LULU $52.20 -7.40) issued lowered guidance for the fourth quarter with EPS of $0.71-0.73 from prior guidance of $0.78-0.80 with revenues of $513-518 million from prior guidance of $535-540 which are both below expectations.
  • Co's current guidance is based on comparable-store sales in the negative low-to-mid single digits on a constant-dollar basis. This compares to the Company's previous guidance of net revenue in the range of $535 million to $540 million for the fourth quarter based on flat comparable-store sales on a constant-dollar basis.
  • "We were on track to deliver on our sales and earnings guidance through the month of December; however, since the beginning of January, we have seen traffic and sales trends decelerate meaningfully. Based on this recent performance and assuming these trends continue through the remainder of January, we are reducing our outlook for the fourth quarter...As we end 2013, we are starting to see the results of the significant investments we made throughout this past year to strengthen and enhance our back-of-house product operations structure. While we realize that it will require continued investment and time to get to best-in-class status, with our new leadership in place we are very focused on building on this stronger foundation to execute our long-term growth strategies."

(BFW) Schaeffler CEO Says Too Early to Talk About Possible IPO Plans

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BN 01/13 12:41 *SCHAEFFLER CEO SAYS CO.'S FINANCING IS SOLID BN 01/13 12:41 *SCHAEFFLER CEO SAYS TOO EARLY TO TALK ABOUT POSSIBLE IPO PLANS BN 01/13 12:27 *SCHAEFFLER CEO ROSENFELD SPEAKS AT PRESS CONFERENCE IN DETROIT BN 01/13 12:26 *SCHAEFFLER CEO: NORTH AMERICA SALES GREW BY ABOUT 13% IN 2013 BN 01/13 12:25 *SCHAEFFLER TO OPEN NEW PLANT IN PUEBLA, MEXICO IN 2014: CEO

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Schaeffler CEO Says Too Early to Talk About Possible IPO Plans 2014-01-13 12:44:07.140 GMT

By Brian Lysaght Jan. 13 (Bloomberg) -- Says financing is solid. * See Oct. 4: Schaeffler Replaces CEO Amid Post-Continental Strategy Shift {NSN MU58DV6KLVRS <go>} Link to Company News:{CON GR <Equity> CN <GO>} Link to Company News:{42386Z GR <Equity> CN <GO>}

For Related News and Information: First Word scrolling panel: {FIRST<GO>} First Word newswire: {NH BFW<GO>}

To contact the editor responsible for this story: Brian Lysaght at +44-20-7330-7908 or blysaght@bloomberg.net

(BFW) GEA Group Says Order Intake to Increase Above EU6b for 2013

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DBF 01/13 12:30 DGAP-News: GEA Group Aktiengesellschaft: GEA order intake to increase above EUR 6bn (news with additional features) BN 01/13 12:35 *GEA'S '13 ORDER INTAKE EX HEAT EXCHANGERS UP 5%-6% ORGANICALLY BN 01/13 12:32 *GEA GROUP TO ISSUE PRELIMINARY '13 FIGURES, OUTLOOK ON FEB. 6 BN 01/13 12:30 *GEA GROUP ORDER INTAKE TO INCREASE ABOVE EU6B FOR FY '13 BN 01/13 12:30 *GEA GROUP AG GEA ORDER INTAKE TO INCREASE ABOVE EU6BN (NEWS

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GEA Group Says Order Intake to Increase Above EU6b for 2013 2014-01-13 12:35:44.742 GMT

By Gaurav Panchal Jan. 13 (Bloomberg) -- Says this is in line with market expectations. * Preliminary key figures for fiscal 2013, 2014 outlook expected on Feb. 6 * Statement:{NSN MZCAQ03PWT1D <GO>}

Link to Company News:{G1A GR <Equity> CN <GO>}

For Related News and Information: First Word scrolling panel: {FIRST<GO>} First Word newswire: {NH BFW<GO>}

To contact the editor responsible for this story: Gaurav Panchal at +44-20-7392-0511 or gpanchal2@bloomberg.net

>>> US Early premarket gappers

Early premarket gappers

Gapping up: NPO +37.1%, BEAM +23.2%, CTIC +13.5%, CLVS +11.7%, PLUG +9.6%, STEM +9%, WEN +6.6%, IDIX +5.2%, CKSW +4.5%, QIHU +3.7%, DVAX +3.6%, TWTR +3.2%, GALE +2.4%, TTM +2.2%, SEM +2%, ALU +1.9%, MT +1.9%, BCS +1.8%, VTG +1.6%, MGA +1.6%, IBN +1.6%, ALNY +1.3%, ALNY +1.3%, AAL +0.6%

Gapping down: ICPT -22.6%, BONT -17.4%, CNAT -17.1%, PGEM -14.7%, NIHD -10.3%, QSII -9.7%, LULU -8.9%, ASNA -4.3%, EXPR -4%, SNI -2.5%, BBRY -2.4%, DNKN -1.4%, BP -1.4%, SQNM -0.8%, TOT -0.7%

(BFW) ANZ Takeover of Standard Chartered Is ‘Unlikely,’ Says Citi

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ANZ Takeover of Standard Chartered Is ‘Unlikely,’ Says Citi 2014-01-13 12:33:41.106 GMT

By Howard Mustoe Jan. 13 (Bloomberg) -- Takeover of Standard Chartered by Australia & New Zealand Banking Group after London-based lender’s share price fell by about 30 percent over last 9 months is “possible but unlikely,” Citi analysts led by Craig Williams write in note to investors today. * Dual-traded combined co. would limit tax effect on dividends from transaction for ANZ shareholders: Citi * Dual-traded co. would also limit cost savings: Citi * ANZ spokesman wasn’t available to comment outside of business hours, while a Standard Chartered spokeswoman, Neema Patel in London, declined to immediately comment

For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>

--Editor: Steve Bailey

To contact the reporter on this story: Howard Mustoe in London at +44-20-3525-3182 or hmustoe@bloomberg.net

To contact the editor responsible for this story: Simone Meier at +44-20-3525-7738 or smeier@bloomberg.net

>>> Beam acquired by Suntory Holdings for $83.50/share in cash

Beam acquired by Suntory Holdings for $83.50/share in cash
  • Co announced that they have entered into a definitive agreement under which Suntory will acquire all outstanding shares of Beam for $83.50 per share in cash or total consideration of approximately $16 bln, including the assumption of Beam's outstanding net debt.
  • The transaction consideration represents a 25% premium to Beam's closing price of $66.97 on January 10, 2014; a 24% premium to the volume-weighted average share price over the last three months; and a multiple of more than 20 times Beam's EBITDA for the 12-month period ended September 30, 2013.
  • The transaction, which has been unanimously approved by each company's board of directors, is expected to close in the second quarter of 2014, subject to Beam stockholders' approval, regulatory approvals and other customary closing conditions.
  • "The attractive valuation which has been achieved for Beam stockholders is a result of the successful strategy and excellent execution by the worldwide Beam team...Indeed, Beam will have achieved a total shareholder return of 106%3 since Beam became a standalone spirits company in October of 2011."
  • Suntory intends to fund the transaction through a combination of cash at hand and fully committed financing.