Archive - Sep 2013

It's official: the absolute wreck of a soon to be insolvent retailer that is JCPennyless, has just announced the pricing of its 84 million shares (thank you Goldman Sachs), and the price is $9.65. Putting this into context, this offering price is 25% below the $12.90 price at which Bill Ackman dumped his entire stake a month ago to even more clueless "investors", and about 26% below the $13/share price at which Vornado sold its entire stake last Friday. Existing shareholders: congratulations, you just got diluted by 44% (with the full overallotment), but at least you get to enjoy your misery for a few more months as the melting icecube of a company does what it does best: continues melting.

Following yesterday's modest bounce in equities punctuated by the traditional last minute spike, sentiment has reverted lower once again, driven by the uncertainty surrounding debt ceiling talks in the US, where lawmakers have until next Tuesday to agree to a spending bill, or much of the government will shut down. The Senate will vote on a spending bill later today, which will then be sent back to the House putting republicans in a quandary (Politico explains the complications surrounding the GOP's "Plan C"). It was reported that US House leaders are considering postponing action on a bill to extend the US government's borrowing power, with the leadership discussing a change of strategy to complete action on the stopgap spending bill before debating the debt-limit debate. In FX, GBP strengthened across the board this morning after BoE’s Carney said he does not see a case for more quantitative easing.

Don't touch, you'll get a rash...

Supreme Court Justice Antonin Scalia spoke yesterday at the Northern Virginia Technology Council’s (NVTC) Titans breakfast gathering in McLean, Virginia. He discussed the fact that prior to a Supreme Court decision in 1967, there were no constitutional prohibitions on wiretaps because conversations were not explicitly granted privacy protection under the Fourth Amendment. He goes on to imply that he thinks it was better before such privacy rights existed... describing privacy protections as (among other things) "...blah, blah, blah, garbage..." With Justices like this...

As we pointed out earlier, today the investing public was witness to perhaps one of the most epic (and backfiring) media PR clusterfucks in history. And it just got so much better.

Goldman Sachs Analyst Index (GSAI) tracks manufacturing and service sectors based on bottom-up analyst input on a firm by firm basis to generate a real-time indicator of US economic strength akin to the ISM data. After spiking to multi-year highs in August, it has collapsed by the most in a year in September as the New Orders sub-index retraced its outsized gains from August. The sales/shipments index fell, while the employment index stayed flat and below the 50 mark. The underlying composition of the GSAI weakened in September with a few sectors noting lower sales and/or a downgrade in expectations, and on balance sentiment with respect to business conditions seemed a touch weaker since August and employment remained below 50 for the sixth month.

If you want to live the high life, you don't have to become a rap star, a professional athlete or a Wall Street banker.  All it really takes is winning an election.  Right now, more than half of all the members of Congress are millionaires, and most of them leave "public service" far wealthier than when they entered it.  Since most of them have so much money, you would think that they would be willing to do a little "belt-tightening" for the sake of the American people.  After all, things are supposedly "extremely tight" in Washington D.C. right now.  In fact, just the other day Nancy Pelosi insisted that there were "no more cuts to make" to the federal budget.  But even as they claim that things are so tough right now, our politicians continue to live the high life at the expense of U.S. taxpayers.

Greek government authorities are on alert after a union of Greek army reservists of Special Forces issued a statement urging the Greek administration to step down and make way for a national unity government. As Keep Talking Greece notes, the statement on the union' website included 15 demands - including the resignation of the Greek President - and urged people to gather at the infamous Syntagma Square on Saturday. The statement was interpreted by some as a call to a "coup d'etat" - denied by the union - but prompted Greece's Supreme Court to meet to discuss it.

Things are getting better; the nice man on the TV said so...

"In every city and state I have visited, the jails have become the de facto mental institutions," warns the president of the American Jail Association as the WSJ notes, America's lockups have become its new asylums. After scores of state mental institutions were closed beginning in the 1970s, few alternatives materialized. Many of the afflicted wound up on the streets, where, untreated, they became more vulnerable to joblessness, drug abuse and crime. Stunningly, the number of mentally ill prisoners the country's three biggest jail systems - Cook County, IL; Los Angeles County; and New York City - handle daily is equal to 28% of all beds in the nation's 213 state psychiatric hospitals. "We're finding sicker and sicker people all the time" who have to be treated for their mental illnesses. Prisons "can't say no to the mentally ill. They have to solve the problem."

BREAKING. Iranian FM Zarif: there has to be a lifting of all sanctions, hope to be able to move in that direction in a short span of time

— Charlie Kaye (@CharlieKayeCBS) September 26, 2013

The primary trend of the AUD is down. Bernanke has provided us the opportunity to sell the rally and profit from a primary trend continuation.

"Has J.C. Penney (JCP) bottomed? How many times have I heard that one? It has to be the most asked question now that we are seeing some of the highest quality hedge funds in the situation, including Perry Capital (run by my old friend Rich Perry) as well as Glenview Capital and Kyle Bass. Suffice it to say that I don't think there could be many investors as wise as these people. They aren't approaching the situation idly and I think they are going to be right. To me, that's a lot of ways to get the stock to $18.... Can this stock go up $5 on a new CEO and a better holiday season? Yes. And that's why it is worth joining these great hedge funds. Not because they are in it. But because the time and the price are right. You don't need to know anything else for the moment."

- Jim Cramer, September 5, 2013

Remember when one after another JCPenney executive lined up earlier today, mostly using that damage control TV outlet known as CNBC, to promise that JCP does not, repeat not, need emergency public equity funding? Guess what: they were lying. Just out from Bloomberg:

J. C. PENNEY ANNOUNCES PROPOSED PUBLIC OFFERING OF COMMON STOC
J. C. PENNEY COMMENCED PUBLIC OFFERING OF 84 MILLION SHARES

And the punchline:

• JC PENNEY TO OFFER SHARES VIA GOLDMAN SACHS

Yep: the same firm that just killed JCP two days ago, is now diluting the stock some more.

You may have seen recent revelations that Detroit routinely raided its pension funds to award extra cash – including bonuses dubbed “the 13th check” – to both retirees and active employees. These payments were far in excess of the city’s negotiated obligations and hidden from both the public and Detroit’s bond investors. There may be no cleaner account of the repercussions of handing power to those who show their compassion with the public purse. However well meaning the union reps controlling Detroit’s pension board may have been, their politics clearly compromised the city’s long-term health.