Archive - Apr 2013
April 29th
A BaSeMeNT, a BuLL HoRN and a JuNK ASS...
Submitted by williambanzai7 on 04/29/2013 11:25 -0500More from Dr Krugman...
Deutsche Bank To Sell Up To 90 Million Shares, Will Raise €2.8 Billion In New Capital
Submitted by Tyler Durden on 04/29/2013 11:13 -0500And just like that, European banks are back in capital raising mode, starting with what is perceived by some as Europe's strongest bank (alternatively, the most undercapitalized): Deutsche Bank, which at least check had a Core Tier 1 cap ratio somewhere south of 2%.
- DEUTSCHE BANK TO SELL UP TO 90 MLN NEW SHARES TO RAISE EU2.8B
- DEUTSCHE BANK SAYS NO PUBLIC OFFERING PLANNED
- DEUTSCHE BANK SHRS WILL BE PLACED VIA ACCELERATED BOOKBUILD
Since this is about 10% of the company's total float, the stock is not happy. The question why DB announced this just ahead of its earnings release should certainly make one ask just how well capitalized Europe (where every bank purports to having a fortress Basel III balance sheet) truly is?
Jim O'Neill's Farewell Letter
Submitted by Tyler Durden on 04/29/2013 11:03 -0500
Over the years, Jim O'Neill, former Chairman of GSAM, rose to fame for pegging the BRIC acronym (no such luck for the guy who came up with the far more applicable and accurate PIIGS, or STUPIDS, monikers, but that's neither here nor there). O'Neill was correct in suggesting, about a decade ago, that the rise of the middle class in these countries and their purchasing power would prove to be a major driving force in the world economy. O'Neill was wrong in his conclusion as to what the ultimate driver of said purchasing power would be: as it has become all too clear with the entire world drowning in debt (and recently China), it was pure and simply debt. O'Neill was horribly wrong after the Great Financial Crisis when he suggested that it would be the BRIC nation that would push the world out of depression. To the contrary, not only is the world not out of depression as the fourth consecutive year of deteriorating economic data confirms (long since disconnected with the actual capital markets), but it is the wanton money (and bad debt) creation by the central banks of the developed world (as every instance of easing by China has led to an immediate surge of inflation in the domestic market) that has so far allowed the day of reckoning, and waterfall debt liquidations, to take place (and certainly don't look at the stock index performance of China, Brazil, India or Russia). Despite his errors, he has been a good chap having taken much of the abuse piled upon him here at Zero Hedge somewhat stoically, as well as a fervent ManU supporter, certainly at least somewhat of a redeeming quality. Attached please find his final, farewell letter as Chairman of the Goldman Asset Management division, as he moves on to less tentacular pastures.
Wall Street Is A Rentier Rip-Off: Index Funds Beat 99.6% Of Managers Over Ten Years
Submitted by Tyler Durden on 04/29/2013 10:29 -0500
It may seem uncharitable to note that only 0.4% - that's 4/10th of 1% - of mutual fund managers outperform a plain-vanilla S&P 500 index fund over 10 years, but that is being generous: by other measures, it's an infinitesimal 1/10th of 1%. So what do we get for investing our capital in mutual funds and hedge funds? The warm and fuzzy feeling that we've contributed the liquidity needed to grease a monumental skimming operation. Ten out of 10,000 is simply signal noise; in effect, nobody beats an index fund. The entire financial management industry is a rentier arrangement: they skim immense profits and return no productive yield at all.
This Is What Passes For A Good Earnings Season In The "New Normal"
Submitted by Tyler Durden on 04/29/2013 10:13 -0500
"With earnings reports in from more than half the companies in the Standard & Poor's 500-stock index, first-quarter revenue for the group is expected to shrink 0.3% from a year earlier, according to Thomson Reuters. That would cut short the sales improvement reported at the end of last year and mark the third quarter out of the past four in which revenues have failed to grow by 1% or more. The sales figures are a troubling sign that business and consumer demand remain weak nearly four years after the recession. They are also evidence that a soft patch is developing in the U.S. economy, as optimism earlier in the year gives way to more sobering data on growth in gross domestic product, retail sales and manufacturing. In response, many companies are cutting jobs and curbing investments in an effort to prop up profits, moves that could make it harder for demand to recover."
Dallas Fed Implodes: Biggest Drop And Miss On Record Send Market To Intraday Highs
Submitted by Tyler Durden on 04/29/2013 09:45 -0500If this doesn't send the S&P to new all time highs nothing will. Moments ago the Dallas Fed reported its April General Business Activity report and in short it was the biggest miss to expectations on record, plummeting from 7.4 to -15.6, on expectations of a 5.0 print and the lowest since July 2012. It was also the biggest one month drop on record. Since all of this will be attributed to balmy spring weather in New Zealand, extra rainfall in the Russian Steppes, the US sequester, evil European fauxterity, Cyprus deposit confiscation, and of course, Bush, there is no point in commenting on this disaster at all. And why comment: judging by the market's response which is now at the day's highs, it is not as if anyone even pretends any data matters. The only hope now for those expecting a 20,000 on the DJIA is that the ISM due out soon, will print at 0 and everything will be permanently fixed. In other news the daily prayer to praise St. Bernanke begins at 11 am when POMO ends. Please orient yourself to face the Marriner Eccles building when bowing down.
And The Squeeeze Goes On...
Submitted by Tyler Durden on 04/29/2013 09:29 -0500
In the last five days, the 'most-shorted' names in the Russell 2000 index have surged over 7.3% from their lows. During the same period, the index itself has managed a still-impressive 2.4% gain. The epic triple-beta dash-for-trash continues to rage and tear the faces off every short who dare use reasonable valuation (macro- and micro-) perspectives to make investment decisions. When will it end?
Gold's Bear Market
Submitted by thetechnicaltake on 04/29/2013 09:03 -0500What used to be no longer exists. This is what happens when markets change regimes.
Confused By What Is Going On At JCP? Here's The Pro Forma Cap Table And The Cliff Notes
Submitted by Tyler Durden on 04/29/2013 08:59 -0500
Ever since JCP entered the death watch with its absolutely abysmal 2012 year end results which saw the firm report something like negative $1.5 billion in Free Cash Flow (frankly we stopped counting there), and just ahead of the heavy inventory rebuild season so just as net working capital would demand another billion or so in cash, much has happened at the company.
These Three Economic Bellwethers Indicate Danger Lies Ahead!
Submitted by Phoenix Capital Research on 04/29/2013 08:55 -0500
We’ve seen this kind of divergence between stocks and the economy before in 2008. We all know how that ended.
European Depositors Don't Take Fright from Cyprus
Submitted by Marc To Market on 04/29/2013 08:40 -0500This is a descriptive not a normative claim. My focus is on what people are actually doing, not what they might have done or what some think they should have done.
Italy: "An Orgy Worthy Of Bunga Bunga"
Submitted by Tyler Durden on 04/29/2013 08:26 -0500
All of the EU “hails, welcomes and applauds” the new Italian government. Mr. Grillo thinks that the new government will last but a few scant months as Europe breathes a sigh of relief that the 5 Star Party is not in control. Far better to deal with the devils that you know rather than new ones that may be far worse. Beyond the politics of the moment Italy is besieged by a very serious crisis. As the various central banks dump money into the system the yields on Italian sovereign debt have gone down but this does not change the economic difficulties. Italy’s difficult position was enumerated in a Bank of Italy report to parliament last week which said the economy was going through its most acute crisis since World War II. Mr. Grillo’s response to the new government was amusing: “An orgy worthy of bunga bunga.”
Spending On Services Jumps By Most Ever As Incomes Disappoint, Savings Rate Near Five Year Lows
Submitted by Tyler Durden on 04/29/2013 08:05 -0500Despite expectations that following several months of subpar income growth offset by rampaging spending and thus a plunging savings rate, March incomes would rise by 0.4%, while spending would be flat, this did not happen, and instead both spending and incomes rose by the same amount, or 0.2% in the past month. Worse, when adjusting for inflation, real disposable income rose just 1.1% compared to last March, and just barely above the 0% breakeven. On the other side, real spending was up 2.2% Y/Y just barely above the 2% recessionary threshold. And even that number is misleading as spending on Total Goods (including durable, already known as being quite abysmal, and non-durable), dropped by $32.8 billion in nominal dollars. What was the offset? Why a massive surge in consumption expenditures on services, which rose by $53.8 billion, which absent the spending aberation for September 11, 2001, which was reversed in the following month, was the biggest monthly increase on record! What drove this record services spending spree is anyone's guess.
Student Loan Bubble Cracks With Pulled Sallie Mae Bond Deal
Submitted by Tyler Durden on 04/29/2013 07:19 -0500
In 2007 a small number of French hedge funds imploded over sudden losses stemming from highly leveraged bets made on the unstoppable subprime mortgage market. At the time, a few saw the writing on the wall; but many simply wrote it off as just another over-levered hedge fund and the subprime mortgage market was 'fine'. Fast forward six years and as we have discussed numerous times (most recently here and here) there is a bubble, potentially far bigger than subprime, in student loan debt. As one of the last remaining outlets for state-sanction credit creation, this is a big deal; but, of course, the popping of the bubble (or even a slight leak) is eschewed since there is so much 'reach for yield' and the Fed's got your back. That is until this week. As WSJ reports, Sallie Mae (SLM), the nation's largest non-government student lender just cancelled a $225 million debt offering as investors decided they simply were not getting paid enough for risk - amid rising student loan defaults. Simply put, there's a limit to what investors will tolerate.









