We expect dividend hikes from the Dow Jones Industrial Average components Exxon Mobil Corp. (NYSE: XOM), Chevron Corp. (NYSE: CVX), Johnson & Johnson (NYSE: JNJ) and International Business Machines Corp. (NYSE: IBM). One company that could almost be a DJIA stock is Dow Chemical Co. (NYSE: DOW), and we see a dividend hike there too.

As far as what these dividends will go up to, here are the current quarterly dividend payouts and what we think they will rise to:

• Exxon Mobil — $0.57 now, likely $0.65 ahead
• Chevron — $0.90 now, likely $0.95 or $1.00 ahead
• IBM — $0.85 now, probably to $0.95 ahead
• Johnson & Johnson — $0.61 now, probably $0.65 ahead

Exxon could boost that dividend more than 30% to an annualized $3.00 if it really wanted to, and that would get it more competitive with Chevron. Chevron already yields 3.0%, versus just 2.5% from Exxon Mobil. These two oil giants pay out only about 30% of expected income, and that still leaves plenty of room for buying back shares as well.

IBM really needs to play catch up here. Its dividend yield is a full point behind Cisco Systems Inc. (NASDAQ: CSCO), and Cisco has paid dividends for only two years. IBM pays only half the yield of Microsoft Corp. (NASDAQ: MSFT) as well. If IBM is going to have $20 in earnings per share in 2015, then a $3.40 payout going up to $4.00 is not a real chore, and it still leaves plenty of cash to keep buying back shares.

Johnson & Johnson is already yielding 3%, and its last dividend hike was 7%. Its payout is expected to rise roughly the same as what would keep its earnings payout close to the same as before, and the stock did just hit a new all-time high.

General Electric Co. (NYSE: GE) remains a dividend wild card for us. We know a hike is coming, but we are not sure if Jeff Immelt will wait until the end of this year or whether he will raise it sooner. The company has forecast that its payout will go up at the same rate as earnings. That being said, the $0.19 payout would likely go to $0.21 per quarter. GE already outyields its conglomerate peers with a 3.3% yield.

Dow Chemical is already paying out more than half of its adjusted earnings, and it yields 4%, versus only about 3.5% to 3.6% for the DJIA stock rival E.I. du Pont de Nemours and Co. (NYSE: DD), better known as DuPont. Any gains we see there likely would be nominal, but we do expect gains. As far as why we expect gains in the payouts, the $0.32 quarterly payout now compares to $0.42 per quarter back before it cut the dividend going into the recession.

The press has focused recently on the number of senior executives who have left Zynga. Chief marketing and revenue officer Jeff Karp just departed. If Zynga loses its best people, it will be harder for the company to recover.

Of course, Zynga’s problems go well beyond the success or failure of Facebook, a fact that was lost when its share rocketed up 10%. Its Farmville franchise is old as far as players of the game are concerned. Farmville 2 and games developed with TV personality Ryan Seacrest and with Hasbro Inc. (NASDAQ: HAS) are supposed to reverse Zynga’s slide, at least in the opinion of company management. Zynga wants to prove it can expand beyond its relationship with Facebook. There is absolutely no evidence that will work. Outside the Facebook universe are companies that have competed for the gaming interests of Americans for years. First among those is Electronic Arts Inc. (NASDAQ: EA), which is just as desperate as Zynga is to reach beyond the markets in which it was initially successful.

To point out that Zynga is trapped between its faltering relationship with Facebook and its long-shot attempts at diversification repeats a set of facts that already have been stated over and over. It is worth repeating them again when Zynga’s shares surge 10% without reason.

Douglas A. McIntyre

Achuthan made this prediction in late-2011 that the U.S. was headed for a recession.  He said today, “Yeah…I think a lot of people forget what our call was. What we said back in December was that the most likely start date for the recession would be in Q1 and if not then, by the middle of 2012. I’m here to reaffirm that. I think we’re in a recession. I think we’re in a recession already. As I said back there, it is very rare that you know you’re going into recession when you’re going into recession. It often takes some big hit on top of the head. In the last recession, it took Lehman to wake people up and the recession before, it took 9/11.”

As far as his definition he said, “What is a recession? It is not a statistic; it is a process between production, employment, income and sales. When you look at those four measures, they are rolling over.”

Achuthan also said, ““It is not all about GDP. It is about jobs. It is about income and sales. A recession is a vicious interplay among output input employment, income and sales. When you look at 2001, you can’t find two negative quarters in a row, yet you lost 3 million jobs. Or half the value of the NASDAQ. How are you going to tell someone that wasn’t a recession? When you look at the data today, you see that industrial production is off of its April high. Manufacturing and trade sales, much broader than retail sales, is off its December high. Real personal income growth, which does not always go negative during a recession, has been negative for several months so it is consistent with a recession having already started.”

If you want to watch that full interview it is found here.  We just identified a BLS report showing that there are 3.6 million job openings versus 12.7 million unemployed.  It has been impossible to ignore the recession in Europe and a slowing of growth in BRIC nations which effectively resembles a recession.  This is an election year to boot.

JON C. OGG

Really?  Heins must be suffering from a serious bout of rectal-cranial convergence.  The dismal RIM earnings report proved that things are more wrong than even the most bearish analysts and investors thought.  Sure, it is understandable that he has to maintain a positive stance.  But still.. Really?  RIM has gambled its future on its new O/S but that has now been delayed into next year and that means that RIM will miss the entire holiday sales.  It also comes at a time where Apple Inc. (NASDAQ: AAPL) has opened up more and more iPhone relationships.

Google Inc. (NASDAQ: GOOG) and its Android O/S has been taking market share as well, even if Microsoft Corporation (NASDAQ: MSFT) and Nokia Corporation (NYSE: NOK) are so far behind in the smartphone race now that we do not even count them in the running.  Back to RIM… RIM is in a death-spiral and not just because we named it as a brand which will die in 2013.

RIM is laying off even more workers now and the company is facing operating losses. Shipments are running worse than expected, sales are down massively, and no one cares about a keyboard any longer.  The company even lost CNBC’s Maria Bartiromo as some of its best free advertising and she is now iPhone user.

Here is an excerpt from the full CBC Radio interview:

“This company is not ignoring the world out there, nor is it in a death spiral,” Heins said… “Yes, it is very, very challenged at the moment — specifically in the U.S. market. The way I would describe it: we’re in the middle of a transition,” he said. “All that is in the making, it’s in the works. This company is in the middle of it and I’m positive we will emerge successfully from that transition.”

RIM is down another 1.4% at $7.40 this morning against a 52-week range of $7.14 to $33.54 and its total market capitalization rate is now under $4 billion.  The company can talk about its $2 billion in cash all it wants because that will erode rapidly if (or when) operating losses continue.

To offer both sides of the story, one firm did manage to find the gumption to upgrade RIM shares on Monday when Hudson Square Partners raised the rating to Buy from Hold.  The upgrade was a valuation of the intellectual property, its substantial network build out, and on the hope that a foreign player would want the company for that combined package.

In all honesty, we would love to see RIM actually manage a turnaround here.  That being said, we said the same thing about Palm.  Also about ‘the other Canadian tech disaster’ which is Nortel.  There is nothing with hope, but the caveat is that hope is awful if it is the primary exit and business strategy.

JON C. OGG

Television interviews, or any interviews for that matter, are not exactly market moving events in most cases.  What is so unusual here is that Eddie Lampert almost never gives interviews and he really avoids the media spotlight in most cases.

So the speculation here is rather simple from the trader logic… Lampert is likely set to report some more big news between now and tomorrow’s interview that will be good for shareholders.  If Lampert shuns the media, chances would seem to be low that he would be coming on live for the opportunity to talk down the Sears hopeful story.

Keep in mind that Sears shares have also more than doubled since the start of 2012.  Shares are up 2% at $68.05 and the 52-week trading range is $28.89 to $87.66.

JON C. OGG

An interview with the CEO on Reuters signals that the company is open to selling all or part of the company.  More importantly it was noted that it is expected to have data ready for potential buyers fairly soon. Reuters quoted the CEO as saying, “At a certain price, anything’s for sale.”  FULL REUTERS REPORT

Monster shares are not exactly screaming higher because many investors believe private equity may not be interested and because social media is hurting job search websites just like websites of this sort killed the “Classifieds” business of the newspapers.

The stock is only up 1.5% at $9.44 and the 52-week range is $6.34 to $18.47.  Unfortunately this stock trades at about 35-times expected 2012 earnings estimates, sales are expected to decline, and investors are not certain at all as to whether the company can hit its earnings estimates.  The company’s market value is $1.1 billion, which was also its total shareholder equity value at the end of 2011.  Unfortunately, its net tangible assets after backing out liabilities was in the red by almost $20 million.

As far as what analysts think this is worth on a per share basis, Thomson Reuters lists the consensus target price from analysts as $11.38 on this stock.

JON C. OGG

This may be good for Starbucks Corporation (NASDAQ: SBUX) as Einhorn believes that the deal is not as positive as the bulls believe and that Starbucks looks to be getting the better end of the profits.  Einhorn did disclose having a position (obviously a short-sell position).  What investors need to know is that this observation is crushing the stock and it is having more of an impact (on the flip-side) than if Warren Buffett had disclosed a position.

Einhorn often challenges companies.  He went against The St. Joe Company (NYSE: JOE) and Bruce Berkowitz of Fairholme Capital earlier this year saying that St. Joe was too aggressive in acquiring property and called it very overvalued.  It turns out that this one did fall and it sits very close to 52-week lows and trades at half the peak of the last year or so.

It looks as though Einhorn was probably caught long and wrong in Sprint Nextel Corporation (NYSE: S) from when he called it an undervalued real estate play due to vast spectrum assets.

Einhorn had also made decent sized bets disclosed in May of this year in Best Buy Co. Inc. (NYSE: BBY) at about 6 million shares worth over $172 million (down to around $150 million today on a static basis) and General Motors Co. (NYSE: GM) with a new position of more than 3.5 million shares worth more than $100 million (down close to $80 million today on a static basis). 

Betting against companies and being vocal about them is one thing.  It certainly does not assure success.  What is funny is that Green Mountain was just featured as a very expensive stock by us due to the market valuations but also as one of the dozen or so companies which are expected to outperform the fanboy holders of Apple Inc. (NASDAQ: AAPL).  

Green Mountain shares are down 11% at $81.76 and now the implied upside would be closer to 50% if the analysts are correct in their price targets.  If…  Einhorn is having a sharp impact today and now the battle will be known in time over whether or not he was right or if the bullish analysts were right for remaining so positive.

JON C. OGG

If you invest in companies with high exposure to China, this might matter.  If you invest in key ETFs like iShares FTSE/Xinhua China 25 Index (NYSE: FXI), SPDR S&P China (NYSE: GXC), and Guggenheim China Real Estate (NYSE: TAO) or if you prefer closed-end funds like The China Fund, Inc. (NYSE: CHN) or Templeton Dragon Fund Inc. (NYSE: TDF) then this really matters.  Keep in mind that Jim Chanos has been bearish on China for some time.  The problem is that with things slowing elsewhere the issues at hand could be coming to a real head.  These funds and ETFs are generally down about 25% from year highs and most are closer to their lows of the last year.

Chanos recently spoke to Carol Massar on Bloomberg TV in this video.

On the debt issue… “The Chinese government’s balance sheet directly does not have a lot of debt. The state-owned enterprises of the local governments and all the other ancillary borrowing vehicles have lots of debt and its growing at a very fast rate. The assumption is that the state stands behind all this debt. We see that the debt in China, implicitly backed by the Chinese government, probably has gone from about 100% of GDP to about 200% of GDP recently. Those are numbers that are staggering. Those are European kind of numbers if not worse.”

The property bubble… “I think that will be the surprise going into this year, and into 2012 – that it is not so strong. The property market is hitting the wall right now and things are decelerating. The CEO of Komatsu said last week that he is having trouble getting paid for his excavator sales in China. Developers are being squeezed. They’re turning to the black market for lending, this shadow banking system that is growing by leaps and bounds like everything in China.

“Regulators over there are really trying to get their hands around the problem. In the meantime, local governments have every incentive to just keep the game going. So they will continue with these projects, continuing to borrow as the central government tries to rein it in.”

What Chanos is shorting… “We are short Chinese banks, the property developers, commodity companies that sell into China, anything related to property there is still a short.”  Oddly enough, Melco Crown Entertainment Ltd. (NASDAQ: MPEL) might be an indirect winner as Chanos is long the Macau casinos which are growing at a faster rate even than the property developers.

Chanos also outlined an IMF downgrade to China’s growth he outlined tha the write-offs make China’s 9% growth really about zero.

Chanos has been shorting China for some time and a recent CNBC video shows more on the matter.  Oddly enough, in August the Asian sector funds netted in a half-billion dollars in inflows.

JON C. OGG

No money was injured while filming

The American Jobs Act is a bill which is supposed to be “fully paid for.”  It isn’t.  In the attack on wealth at all costs, the measure to tax municipal bond interest for the wealthy ($200K individuals and $250K households) is already coming under fire.  When Obama made his speech last week, we noted that the line in the sand was just drawn much deeper.  Including the muni-tax is something that his the bond sector of investors a bit up in the air.  The good news is that most of what we have found and most of what we have been told directly by market participants indicates that this tax is probably a bit of an over-reach.

We have been reviewing many comments on this matter and have some serious questions about the effort to tax muni-bonds for the wealthy.  Are the sub-$250K households about to pick up all the slack in the Municipal bond market?  Highly unlikely.  Meredith Whitney has already scared the non-investor class away from munis with her predictions of impending waves of default from cities, counties, and other municipalities.  Sadly, Mr. Obama’s tax ambitions may only make that possibility come closer to the truth.

If there is one asset manager that matters when it comes to municipal bonds, it is Nuveen Asset Management.  Nuveen has more municipal bond funds than anyone else that we have seen. The firm had more than $210 billion of assets under management as of June 30, 2011 and it has published a fairly scathing report called ‘Obama’s Jobs Bill Proposal to Restrict Municipal Tax Exemption: Likely a Non-Starter’

Nuveen noted, “The bill proposes to prevent individuals with incomes of $200,000 or more, and married couples with incomes of $250,000 or more, from deriving more tax savings from the use of tax-exempt bonds and other tax benefits than they would have if they were in the 28% tax bracket.”  It goes on to note, “Nuveen Asset Management believes that the proposal to modify the tax treatment of municipal bonds will ultimately be scrapped. In our opinion, the proposal lacks a broad constituency to support it and likely faces strong and coordinated opposition…”

24/7 Wall St. was forwarded some data from the public relations for the Glenmede fixed income team, a firm with over $20 billion in assets under management.  The team noted, “Their particular focus is on the tax-exempt income aspect. Despite their comments, it’s important to note that their assessment says this has a low probability of passing, but a high probability of stirring passionate investor discussion.” Glenmede’s figures on taxing munis:

• Punitive to high tax bracket investors and all issuers;
• Existing bond prices would fall modestly;
• Future issuance costs would increase;
• Under current tax rates, 10-year municipal yields would increase approximately 32 bps and 60 bps if top marginal rates increased to 40%.

Glenmede’s team further noted, “While we do feel as though tax-exempt bonds are under attack and the probability of a significant change at some point in the future has materially increased during the past two years, we don’t believe this proposal has a high probability of passage.”

We were also given a direct comment from Bryon Townsend, a Certified Financial Planner for W.R. Anderson & Co, LLC in Houston, Texas.  Townsend noted, “President Obama’s attempt to put caps on the “tax-free” status of muni bond income is another attempt to throw something against the wall without thinking about the actual impact in the real world.  This attempt to tax the wealthy, will put even more financial pressure on already struggling State and City governments by increasing the amount they will have to pay to issue debt.  It is seems careless that, in his jobs bill, Obama will risk crippling the one sector of our economy that is already having largest job losses.”

SGI is the institutional name under investment manager Rydex|SGI, which manages about $23 billion in assets under management.  The SGI Mid Cap Value strategy offers access to the same investment team, and while nearing capacity, is currently open to new investors.

On the retail side, Schier also manages an equally notable fund, Rydex Small Cap Value, which is open to new investors and recently attained a 3-year track record Rydex Small Cap Value Fund is rated 5-Stars by Morningstar; the Rydex Mid-Cap Value Fund (SEVAX) is rated 4-stars.

The explanation behind “nearing capacity” is rather simple.  The strategy is currently about $3 billion at SGI. The trick is to avoid owning a fund that is too large compared to its investment targets.  Since the fund has roughly 85 holdings, it is conceivable that the fund could have a real impact down the road on a stock simply by getting in and out of positions or when inflows or if redemptions hit in the future. The fund generally holds 65 to 100 positions.

Schier likes to play his cards close to the vest as he does not like to give away his investment strategy to outside managers and he does not want shadow trading around his entrance and exits of positions.  That being said, Schier did note that three areas offering great opportunity are property and casualty (P&C) insurance and energy, with a surprise sector interest in companies with significant public market exposure in various industries.  The surprise is that in the age of austerity, many companies selling to and servicing the federal government expect caution in orders.

In the realm of property and casualty insurance, or P&C, Schier likes The Hannover Insurance Group Inc. (NYSE: THG).  Despite being down about 30% from its highs in the last year, this one trades at a wide discount to peers.  It also pays a 3.2% dividend for you income seekers out there.  Schier credited them by saying, “They are effective operators.  They are gaining market share and their underwriting results are usually above peers.”  A recent acquisition of Chaucer in the United Kingdom is something the Schier expects will only add to earnings and profitability ahead.