Archive - Nov 2013

Just days ahead of the most-anticipated IPO of the year, and despite the constant calming language from the mainstream media, as the WSJ notes, investors are stampeding into initial public offerings at the fastest clip since the financial crisis, fueling a frenzy in the shares of newly listed companies that echoes the technology-stock craze of the late 1990s. October was the busiest month for U.S.-listed IPOs since 2007, and while 'everyone' is convinced that the Twitter IPO will be different from Facebook, the early exuberant demand suggests otherwise:

• *TWITTER SEES IPO PRICE $23-$25, HAD SEEN $17-$20

So a 25% rise in the offering price perhas best contextualizes the comments of one broker: "When I hear intelligent investors asking me not which companies are good to invest in, but which IPOs can I get into, it scares the heck of me."

America is not the ‘rich’ country that people think it is. And there ain’t a hell of lot that can be done about that.

In a stunning series of lies, damned lies, and twisted statistics, the Fed's Jim Bullard unleashed a torrent of self-agrandizing comfort-speak on CNBC this morning. From his comment that "bubbles, such as housing and dot-com, were blindingly obvious at the time," despite Bernanke's (and Greenspan's) insistence at the time that they were not to his comments about the size of Fed Treasury holdings (and monetization) as being "average" based on some statistic, the Fed president gave himself one more out as he admonished:

*BULLARD SAYS FED DOESN'T WANT TO SUPPORT 'FISCAL RECKLESSNESS'

Oh no, you'd never want to do that... With an administration lying to the American people's face over Obamacare and now the even more powerful Fed incapable of the truth, what hope is there that anyone gets out of this debacle in tact.

By the Iron Shill himself...

The trouble with Merkels!

If he liked it at $12 he must love it at $6?

But this year was supposed to be different... Early-year prospects for a revival in consumer spending quickly faded in the wake of the lagged impact of the $148 billion tax hike that began the year. As Bloomberg's Joe Brusuelas notes in the following brief interview, combined with a slower pace of hiring and sluggish wage growth, the result will probably be another in a string of disappointing holiday shopping seasons. It is increasingly doubtful that consumers have the wherewithal to meet the ambitious National Retail Federation forecast for a 3.9% increase in holiday spending to $602.1 billion. Brusuelas believes a 2 to 2.5% increases appears closer to the mark given the economic and policy challenges in place this year.

Just over a month ago, when we shared our cynical view on the "hopium" inspired LBO of Blackberry, we commented as follows: "In other words an LBO, one which however has not only one but many outs: "There can be no assurance that due diligence will be satisfactory, that financing will be obtained, that a definitive agreement will be entered into or that the transaction will be consummated." Which means that once the buyers figure out the potential disaster on the books, expect the final price (if any) to be revised lower as one after another MAC clause is triggered." Not even we were right: as it turns out moments ago, the Globe & Mail reported that having looked at the BBRY, not only will the price be revised lower, but the "purchase" price will be eliminated altogether as any deal is now dead, the company will do a convert offering instead and deadpan CEO Torsten Heins is history.

Looking ahead, Thursday will be a busy day with the ECB (plus Draghi’s press conference) and BoE meetings. Some are expecting the ECB to cut rates as early at this week although most believe the rate cut will not happen until December. Draghi will likely deflect the exchange rate’s relevance via its  impact on inflation forecasts. This could strengthen the credibility of the forward guidance message, but this is just rhetoric — a rate cut would require a rejection of the current recovery hypothesis. They expect more focus on low inflation at this press conference, albeit without pre-empting the ECB staff new macroeconomic forecasts that will be published in December.

Google Executive Chairman Eric Schmidt is the latest to admit he is shocked, shocked, to learn there was spying going on in here. In an interview with the WSJ  "bristled" at the recent report that the U.S. government has spied on the company's data centers, describing such an act as "outrageous" and potentially illegal if proven. Then again, since the NSA's domestic espionage is effectively unchecked expect by a secret FISA court which approves virtually every spying request, the legality of the NSA's activity has little relevance but merely confirms what Snowden wrote in his "manifesto", in which he correctely noted that he has opened a long overdue debate over the meaning of civil liberties and lack thereof in the age of the authoritarian superspying big brother state.

• Investors are stampeding into initial public offerings at the fastest clip since the financial crisis (WSJ)
• Kerry hails disgruntled Saudi Arabia as important U.S. ally (Reuters)
• SAC Capital prepares for a second life (FT)
• BlackBerry's Fate Goes Down to the Wire (WSJ)
• Dutch Gamble on U.S. Housing Debt After Patience Wins (BBG)
• U.S. Wants Broad Divestitures From AMR, US Airways (WSJ)
• Tensions with allies rise, but U.S. sees improved China ties (Reuters)
• China berates foreign media for Tiananmen attack doubts (Reuters)
• China manufacturers squeezed as costs rise (FT)
• European Borders Tested as Money Is Moved to Shield Wealth (NYT)
• Zurich Probe Finds No ‘Undue Pressure’ Put on Late CFO (BBG)

Just as Friday ended with a last minute meltup, there continues to be nothing that can stop Bernanke's runaway liquidity train, and the overnight trading session has been one of a continuing slow melt up in risk assets, which as expected merely ape the Fed's balance sheet to their implied fair year end target of roughly 1900. The data in the past 48 hours was hot but not too hot, with China Non-mfg PMI rising from 55.4 to 56.3 a 14 month high (and entirely made up as all other China data) - hot but not too hot to concern the PBOC additionally over cutting additional liquidity -  while the Eurozone Mfg PMI came as expected at 51.3 up from 51.1 prior driven by rising German PMI (up from 51.1 to 51.7 on 51.5 expected), declining French PMI (from 49.8 to 49.1, exp. 49.4), declining Italian PMI (from 50.8 to 50.7, exp. 51.0), Spain up (from 50.7 to 50.9, vs 51.0 expected), and finally the UK construction PMI up from 58.9 to 59.4.

China bought more than 100 tonnes of gold from Hong Kong for a fifth straight month in September as demand for bullion bars and jewellery stayed strong. Chinese demand appears to have fallen marginally in recent days but remains on track to overtake India as the world's biggest store of wealth gold buyer this year.

Since 2008, the Federal Reserve has been trying one program after the other in order to kick-start the US economy. It culminated in currently buying around $1 trillion of bonds a year. But economic growth remains weak. Why does the Fed continue its ultra-lax monetary policy despite evidence it doesn't help much? The people at the Fed are not stupid, so there must be a rational explanation. This is an attempt to figure out their 'game plan'.