Archive - Oct 6, 2014

While the WSJ already broke the news yesterday that Hewlett Packard would split in two companies, and as such today's "shocking" announcement will hardly have the impact of the just as "surprising" split of PayPal which came on the last day of September, what is probably most notable - in addition to the news that HPQ will fire another 5,000 workers, bringing the total to 55,000 - is that just as in the case of PayPal, so for Hewlett-Packard, the financial advisor, i.e., the company which pitched the spin off to executives, was none other than Goldman. One wonders where else Goldman is advising on "spin offs" to take advantage of the bubbly stock market valuations. As a reminder, HPQ is only doing this deal and accessing the public markets now because several years ago it tried to do exactly the same thing in a private transaction with a strategic or financial buyer, and found no bids. Luckily, now we have central bank froth and pervasive risk euphoria to help management bail out at the highest possible stock price.

While the biggest micro news of the weekend is certainly the report that Hewlett-Packard has finally thrown in the towel on organic growth (all those thousands laid off over the past ten years can finally breathe easily - they were not fired in vain), and has proceeded to do what so many said was its only real option: splitting into two separate companies, a personal-computer and printer business, and corporate hardware and services operations (which will certainly lead to even more stock buybacks only not at one but two companies) which in turn has sent its stock and futures higher, perhaps the most notable development in the macro world is Japan's realization finally that the weaker Yen is crushing domestic businesses, which has resulted in the USDJPY sliding to lows last seen at Friday's jobs report print, and also generally leading to across the board wekness for the dollar, whose relentless surge in the past 3 months is strongly reminiscent of the euphoria following the Plaza Accord, only in the other direction (and making some wonder if the Plaza Hotel caterer are about to see a rerun of September 22, 1985 in the coming weeks).