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Before The Bell: Unhappy With Japan, Oil Service Upgrade


Investors are pulling their funds out of Japan. Transocean was upgraded. Futures are flat on this Cyber Monday


Morning Perspective: Out of Japan

Bloomberg reports hedge funds are shifting their investments out of Japan due to poor returns and poor corporate governance. Japan's average return on equity this year is about 10.2% compared with 20% in the U.S. and 15.7% in Asia. Further, corporate governance standards in Japan are low relative to the rest of Asia as companies fend off purchases by foreign firms using poison-pill and cross-shareholding practices. For more context, read Jeff Saut's Flat and Nervous.

From the Bull Pen: Those looking for an unwind of the Japanese Yen carry trade may look to the UUP, which is the Powershares US Dollar Index Bullish Fund, with a stop below $23.

From the Bear Cave: Japan bears may look for downside plays in Toyota (TM) and Honda (HMC). Buy-stops may be set above the 50 dma ($111.99) for Toyota. A possible option for Honda may include entry after a rally to the 200 dma ($34.83). Buy-stops may be set above.

RIG Upgrade

Credit Suisse upgraded the price target and raised EPS estimates for Transocean (RIG). The firm's action was done to account for figures from its recent merger with GlobalSanteFe (GSF). Citing modest synergies and reduced share count, the firm raised its 12-month price target on the company from $135 to $168, assuming 10 times cash flow per share. Toddo mentioned Transocean last Friday in Random Thoughts.

From the Bull Pen: Those who remain bullish on Transocean may set sell-stops below the 50-DMA ($116.36). A tertiary play could include Baker Hughes (BHI) with sell-stops below the uptrend from the March low ($78).

From the Bear Cave: Tidewater (TDW) has been a laggard in the oil service sector. Those who remain bearish may press the down-side with near-term buy-stops above $53.

Click on Minyanville's Stocks To Watch for more company-specific ideas.

Quick Check Around the World

The Minx has already shaken off its case of the Mondays as foreign markets greet us in the green.

Asian trading closed with the Hang Seng +4.09%, Nikkei +1.66%, Sensex +2.09%, Taiwan +2.23% and Shanghai -1.46%.

A quick check towards Europe finds the CAC -0.69%, DAX -0.03%, FTSE -0.23%.

A Look At Commodities

Crude oil is lower by +0.25 to 98.43. Gold is up +8.2 to 833.0. Silver is up +0.15 to 14.88. Copper is up +3.20 to 306.15.

As of 8:45 AM EST, S&P futures are lower by -0.40 points and Nasdaq futures are up by +1.50 points.

On the Radar

There are no economic events scheduled for today.

It's Cyber Monday today... Good luck!

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No positions in stocks mentioned.

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