Up 195% from the Nov 2008 lows, the Nasdaq-100 has now broken back above the magical 3000 level. A level first seen in Nov 1999 (back then it took 4 more weeks to hit 4000). How long until CNBC adds a countdown timer to the Nasdaq all-time high?
It's Tuesday. It's a big POMO day. And sure enough, equities are in full-tilt melt-up mode. In the face of a stronger USD, rallying bond market, higher VIX, and widening credit spreads, the S&P 500 has smahed through yet another set of stops, squeezed shorts wherever you can see, and made new all-time highs. Mardi Gras indeed... though one wonders what happens when Europe closes and POMO is over. Will USDJPY 102 mark the 'top' in stocks today?
As reported earlier, at least one prominent hedge fund manager, Dan Loeb, is very bullish on Sony (or at least has played his cards well enough to buy the stock 50% lower and is using today's ramp to offload to unwitting momentum chasers as he did with Herbalife). Whether he is merely using the opportunity to earn some activism brownie points on the background of the overall levitation of the Japanese stock market, or is genuinely convinced there is upside for Sony remains to be seen. However, anyone who thinks that Japanese corporates have no place to go but up, is kindly urged to take a look at one-time Japanese electronics titan Sharp, which posted a whopping loss of $5.36 billion, the biggest loss in the company's 100 year history.
The Buena Vista school district in Michigan accepted $402,000 of aid over three months from the state for a service is was not providing. As RT reports, the school district has taken the drastic steps of firing all of its teachers and shuttering its classrooms before the end of the school-year as the state tries to claw back (or seek an alternative plan) its ill-gotten gains. "We've hit a dead end," the local school district explains, unable to help the school of 400 mostly black and poor students, explaining that they are hesitant to bailout school districts and set a bad precedent. One parent exclaimed, "Our kids ain't really learning like they used to," adding that, "being out of school this early is going to hurt them a lot." The local democratic Representative added helpfully, "we know from past history that students have been treated differently - going back to Brown vs Board of Education." Buena Vista teachers had offered to work without pay for a week, but that was not enough to keep the district's schools open. Instead, the district may offer a “skills camp,” a voluntary substitute paid for by federal grants, and run six hours per day for up to six weeks.
Following the just concluded recent visit by John Kerry to Russia, one may have been left with the impression that the tensions of the Cold War are dead and buried. Just the opposite it appears. In what may be a well-timed and orchestrated announcement, moments ago Russia announced that it had caught an American, Ryan Fogle, a third-secretary at the US Embassy in Moscow, "red-handed" as he tried to recruit a Russian intelligence officer to work for the CIA. There goes any leverage the US may have had in attempting to persuade Russia to relent on the joint-Western push to "liberate" Syria. Just as Russia, run by a former KGB spy, had intended all along, and just another slap in the face of the US department of state, which lately can't seem to find its way out of a scandal-ridden (and redacted) paper bag to save its life. But perhaps most amusing is that in the attached letter given to the recruitment prospect, the CIA give out the email address to be used to indicate interest in working for Langley as follows: unbacggdA@gmail.com. How the times have changed.
While every other hedge fund manager is bashing Bernanke, we finally found one who loves the Chairman, unabashedly. The last time the outspoken hedge fund manager appeared on CNBC it was to pump financials into his asset sale in Europe (and here). Today he could not have been more upbeat about the US economy, US banks, and US manufacturing as he is "overwhelmingly bullish," adding that "the numbers are truly amazing". Sure enough the 'Tepper rally' market responded with its ubiquitous lemming like surge as the Appaloosa manager (with $17.9bn AUM) says: The Economy is getting better; he is bullish On Japan; does not worry about Fed tapering - but does not like bonds (adding that the end of QE2 was bullish (though if you care about facts, it wasn't); his biggest holding is Citigroup; sees a great US manufacturing renaissance; and while the Middle East is a concern, expects only a 5% drop if there is war. If that's not enough for you to back up the truck, he believes the US budget deficit will shrink "massively' and housing will rise. The only thing he is not buying with both hands and feet - Apple. As he said - the numbers are truly amazing, though we suspect we are looking at different numbers.
Back in 2008, Volkswagen briefly became the most expensive stock in the world on what would become the case study of an epic short squeeze when following some (malicious) capital structure drama, the short interest became greater than the total outstanding float, sending the stock up 500% in a few short weeks. German billionaire Adolf Merckle committed suicide as a result. We may be in for a redux, courtesy of yet another car company: Tesla, whose most recent short interest as of 41.5%, has led to a surge in the stock price of nearly 300% in the past few weeks, and which covering rampage shows no signs of abating. Will Volkstesla be the new Volkswagen?
It is just a few hours old, and already the Department of Justice's (legal) AP phone spying scandal has generated unintended consequences, by alienating and confronting Obama with his traditionally strongest constituency: labor unions, in this case the Newspaper Guild. From the Guild's shocked statement: "There could be no justification or explanation for this broad, over-reaching investigation. It appears officials are twisting legislation designed to protect public safety as a means to muzzle those concerned with the public’s right to know." They sound legitimately surprised.
- Controversies give Obama new governing headaches (Reuters)
- About that Capex... BHP to Rein In Investment, Chief Says (WSJ), considers returning cash to shareholders (FT)
- Bloomberg users’ messages leaked online (FT)
- Japanese mayor sparks China outrage with sex-slave remarks (Reuters)
- Economists Cut China Forecasts (WSJ)
- U.S. oil boom leaves OPEC sidelined from demand growth (Reuters)
- U.S. banks push back on change in loan loss accounting (Reuters)
- Fed’s Plosser Says Slowing Inflation No Concern for Policy (BBG)
- Watchdog probes 1m US swap contracts (FT)
- Used Gold Supply Heads for ’08 Low as Sellers Balk (BBG)
- Ex-BlackRock Manager Said to Be Arrested in U.K. Probe (BBG)
Dan Loeb Goes Activist On Sony: Demands Partial Spin Out Of Sony Entertainment, Sees 60% Stock UpsdeSubmitted by Tyler Durden on 05/14/2013 - 07:18
Can Sony repeat the magic of the Walkman, the Playstation and the Trinitron? Maybe, maybe not not, and judging by the stock price, soaring recently due to the plunge in the Yen which to many implies a ramp in future profitability (the jury is still out on that), it may not have to. However, activist investor Dan Loeb is not waiting. In a letter filed overnight, Third Point announced it has accumulated 64 million shares in the one time electronics and entertainment giant, making it the largest single shareholder of Sony. As a result, Loeb has a suggestion which is to partially (15-20%) spin off Sony Entertainment, in which Third Point would backstop a $1.5-$2 billion rights offering, with the resulting liquidity could go to boost Sony Electronics, as well as push off debt into the newly-created entity, reducing leverage at the parent company. Following this, the company could focus on restructuring Sony Eletronics, where Loeb believes there is untapped value, which could be as large as ¥725/share when factoring in for EURJPY moves. End result, Loeb sees 60% upside in Sony stock. We wish him the best of luck: other firms, such as Warren Lichtenstein's Steel Partners attempts to go activist in Japan in the past decade have largely crashed and burned. Perhaps for Loeb, the time of Abenomics will be different.
There was a time three months ago, when "beating" German confidence served as an upward stock and EURUSD catalyst not once but twice in the same week. One would therefore assume a German confidence miss, such as with today's German ZEW, which barely budged from 36.3 to 36.4 on expectations of a rise to 40.0, with the current situtation dropping from 9.2 to 8.9, on expectations of a rise to 9.8, should be risk negative. Well, it wasn't: it is the new normal after all, and in fact the EURUSD jumped in a kneejerk reaction at 5 am, rising over 1.3000, albeit briefly, assisted by ZEW members saying that respondents do not see a further ECB rate cut - well, of course not - they are Germans, and Draghi isn't. Perhaps the news of a better than expected Eurozone Industrial Production print, which rose from 0.3% to 1.0%, on expectations of a more modest increase to 0.5%, is what catalyzed the subsequent drop in both the EUR, and US stock futures. The IP strength was driven by Germany, Spain and Netherlands offset be decline in France and Italy.
JGB Futures Narrowly Avoid Third Halt In Three Days (By A Tick); 5Y Yields Jump To Highest In 22 MonthsSubmitted by Tyler Durden on 05/14/2013 - 02:07
JGB Futures avoid a third halt in three days by 1 tick (drop 0.99 vs 1.00 handle limit) but two words spring to mind - not orderly. It seems the pendulum of 'inflation repricing channel through the JPY' has begun to swing back towards the JGB market - not what Abe and his cohorts would have hoped for given the deluge of monetization they are up to. As we originally discussed here, the inflation expectations can be spread across bonds or FX and just as we saw in 2007, 2008, and 2011, the initial burst takes place in one market and the normalizes as the other catches up. In this case it was a massive devaluation of the JPY that is now being 'caught up' to by the JGB yields rising. 5Y JGB yields just topped 40bps (from a 9.9bps low on March 5th!!) and their highest since July 2011. Of course, the problem with rising rates is the burden it puts on the government as cost-of-debt accelerates beyond tax revenues with negative trade balances; and if the JGB channel is now 'inflation security of choice' then JPY devaluation will take a back seat (and so will JPY carry trades driving risk-on around the world - as we noted here). And as if that wasn't all exciting enough, Japanese Machine Tool Orders re-accelerated to the downside -24.1% YoY (worst since January).
While most consider the Middle-East a hot-bed of geopolitical risk (prone to flare at any moment), it seems hot money flows and territorial disputes are rapidly turning the South China Sea into a powder-keg. As Japan vs China is off the front pages for a moment (and US and South Korea engage in joint naval exercises) it seems Taiwan and the Philippines are escalating rapidly following the death of a Taiwanese fisherman last week after Filipino military fired on his vessel in supposedly disputed territory between Taipei and Manila. The situation is evolving rapidly as the Philippines' un-apology (though they sent their condolences) may prompt Taiwan to send F-16 fighters, Kidd-class destroyers, and three or more warships, according to The Liberty Times. The threat of escalation is premised on a formal apology coming within 72 hours. As Stratfor notes, Taiwan's territorial 'claims' are "outrageously ambitious" but the various island nations all appear set on rattling sabres as mainland China stiffens its resolve against Japan over the Senkakus. Given the movements of the Navy (below), it would seem the US is well aware of where tensions are starting to rise...
China is in the midst of an urban revolution, with hundreds of millions of migrants moving into cities every year. Since 2011, for the first time in history, more than half of China’s 1.3 billion citizens (690 million people) are living in cities. Another 300-400 million are expected to be added to China's cities in the next 15-20 years. New Premier Li Keqiang recently proposed accelerating urbanization in China, and said urbanization is a “huge engine” of China’s future economic growth. Yet, China’s urban dream may be derailed by the lack of affordable housing in cities for the massive influx of urban residents.
ConvergEx's Nick Colas undertook a recent trip to Afghanistan. As he notes, the country has a long way to go to reestablish a viable economy and political stability, but he saw enough to be optimistic on both counts. Security around the capital is tight, and Afghan troops look professional and disciplined. There is ample food on display in countless local grocery stands. Girls go to school throughout the city, although women are a less common sight on the streets. Scarcity makes for odd economic outcomes – the only passenger car you’ll see is a Toyota Corolla, imported from different countries. No Afghan will be surprised that you are a tourist in their country – they are still very proud of its history and resilience. Westerners there will assume you are “On business.” Here are seven “Postcards from Kabul” with his last observations from this trip.