HFS

This HFS Business Update is a published by Hanover Financial Services

The Biggest Lie About U.S. Companies: You may have heard recently that U.S. companies have emerged from the financial crisis in robust health, that they've paid down their debts, rebuilt their balance sheets and are sitting on growing piles of cash they are ready to invest in the economy. It all sounds wonderful for investors and the U.S. economy. There's just one problem: It's a crock.

Facts and Figures: Industrial output in China has slowed as a result of tightening measures put in place by the government and potential weakening global demand. The slowdown is more healthy than threatening, with a decline of 2.8% from May to June.The Chinese government is struggling to deal with the consequences of $1.14 trillion in loans banks made to local governments from January 2010 to June. There are questions about the loan collateral and whether a slowdown will impact repayment. The IMF has removed a negative tag from its description of China's yuan, noting that it is no longer "substantially" undervalued. The change in IMF commentary is a result of the country's efforts to boost domestic consumption and changes in the exchange rate.

American manufacturers account for only about 12 percent of U.S. GDP, but they handed out 25 percent of the 8 million pink slips generated during the downturn.

2010 Social Security Outlook Grim: According to the Social Security Administration, the long-range outlook for the program's trust funds "remains unchanged. Social Security is set to run a $41 billion deficit excluding interest income due to the downturn and corrections of excess revenue created to trust funds in past years, the first shortfall since 1983," It also projects that the program costs will exceed tax revenues in 2010 and 2011, be less than tax revenues in 2012 and 2014, and then permanently exceed tax revenues beginning 2015, one year earlier than estimated in last year's report."

Microsoft to Issue Record Number of Patches: Microsoft will issue 14 security bulletins on Tuesday to plug 34 holes, including eight that are critical, in Windows, Office, Internet Explorer, SQL and Silverlight, the company said on Thursday. Affected software includes: Windows 7; Windows XP; Vista; Windows Server 2003 and 2008; Windows Server 2008 release 2; IE 6, 7 and 8; Office XP Service Pack 3; Office 2003 Service Pack 3; 2007 Microsoft Office System Service Pack 2; Office 2004 and 2008 for Mac; Office Word Viewer; Office Compatibility Pack for Word, Excel and PowerPoint; 2007 File Formats Service Pack 2; Microsoft Works 9; and Silverlight 2 and 3.

Apple Readies Fix for iPhone Browser Security Hole: Apple says that it has a fix for the browser security flaw discovered earlier this week on its iOS-powered devices.
After the iPhone Dev Team released the latest jailbreak software hack for the iPhone over the weekend, it became apparent that the way the jailbreak worked--via an iPhone's mobile Safari browser--that the phone has a security vulnerability when it comes to the way it loads PDF files from the Web.

German Business Confidence Unexpectedly Surges as BMW raises its 2010 sales and earnings forecast: German business confidence unexpectedly surged to a three-year high in July after exports boomed and economic growth accelerated. The LFO institute said its business climate index, based on a survey of 7,000 executives, jumped to 106.2, the highest since July 2007, from 101.8 in June. That’s the biggest monthly increase since records for a reunified Germany began in 1990. Economists expected a decline to 101.5, according to the median of 41 forecasts in a Bloomberg News survey. The report is the latest to suggest Europe’s recovery may be stronger than economists forecast even as governments cut spending to rein in budget deficits and investors fret over the health of the region’s banks. “The outlook for economic growth in Europe has been too pessimistic,” said Klaus Baader, chief euro-area economist at Societe Generale in London. German data in particular “show astonishing strength in all sectors of the economy,”

Bayerische Motoren Werke AG (BMW), the world’s largest luxury carmaker, on July 13 raised its 2010 sales and earnings forecast. Its rival Daimler AG, the second-largest luxury car manufacturer, increased its full-year forecast last week after second-quarter profit beat analysts’ estimates.

Wind Power Goes Mainstream: For the second year running both the U.S. and Europe added more power capacity from renewable energy sources such as wind and solar, than from traditional fossil fuel based sources like coal and gas. According to a recently released United Nations report, renewables made up more than 60% of newly installed capacity in Europe and more than 50% in the U.S. last year. That high percentage was achieved despite the fact that overall investment in renewables decreased by 7% in 2009 to $162 billion. Looking ahead, industry watchers are now predicting that globally, renewable capacity additions will exceed conventional additions as early as this year.

Drilling Rig Count Up Slightly: Baker Hughes has issued the rotary rig counts as a service to the petroleum industry since 1944, when Hughes Tool Company began weekly counts of U.S. and Canadian drilling activity. The North American rig count is released weekly at noon central time on the last day of the work week. The international rig count is released on the fifth working day of each month. National Rig Map.

Analyst upgrades For August 4, 2010.......Barnes & Noble (NYSE:BKS) upgraded two notches to Neutral from Sell at Goldman Sachs... Bed Bath & Beyond (NASDAQ:BBBY) initiated at Buy at Jefferies... Chipotle Mexican Grill (NYSE:CMG) initiated at Buy at Janney Montgomery... ESCO Technologies (NYSE:ESE) upgraded to Sector Performer from Underperform at RBC Capital... First Industrial Realty Trust (NYSE:FR) upgraded to Outperform from Neutral at Macquarie... Leap Wireless International (NASDAQ:LEAP) upgraded to Buy from Hold at Auriga... MetLife (NYSE:MET) upgraded to Buy from Neutral at BofA/Merrill... Parexel International (NASDAQ:PRXL) upgraded to Conviction Buy from Buy at Goldman Sachs... Royal Dutch Shell (NYSE:RDS.A) initiated at Outperform at Bernstein... Solarfun Power Holdings (NASDAQ:SOLF) upgraded to Buy from Hold at Jefferies... Texas Capital Bancshares (NASDAQ:TCBI) upgraded to Outperform from Neutral at Credit Suisse...

Analyst downgrades August 4, 2010....American Electric Power (NYSE:AEP) downgraded to Neutral from Buy at Goldman Sachs... BP (NYSE:BP) initiated at Market Perform at Bernstein... Buckeye Partners (NYSE:BPL) downgraded to Hold from Buy at Wunderlich... Burger King Holdings (NYSE:BKC) downgraded to Neutral from Outperform at RW Baird... Dow Chemical (NYSE:DOW) downgraded two notches to Neutral from Conviction Buy at Goldman Sachs... Emulex (NYSE:ELX) downgraded to Hold from Buy at Jefferies... FirstEnergy (NYSE:FE) downgraded to Market Perform from Outperform at FBR Capital... Kopin (NASDAQ:KOPN) downgraded to Hold from Buy at Wunderlich... Navistar International (NYSE:NAV) downgraded to Underweight from Neutral at JP Morgan... Parker Hannifin (NYSE:PH) downgraded to Market Perform from Outperform at Wells Fargo... Super Micro Computer (NASDAQ:SMCI) downgraded to Neutral from Buy at Merriman.

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