Archive - Aug 2014

Historically market corrections and volatility spikes have been very good entry points for purchasing shares in ZIV

Corporate "inversion" transactions already looked like a potential catalyst for tax reform over the medium term, but an uptick in deal activity seems to have increased the probability of near-term policy activity as well. Goldman's expectation is that such changes might be announced shortly after Congress recesses for the election in early October. Overall, it appears unlikely that Congress or the Treasury will make changes this year that eliminate the tax benefits of inversion, but the probability of incremental changes has increased.

Who could have seen that coming? Oh apart from all the 14 analysts that cover it (9 Buys, 5 holds). KING is down 25% after hours, at record lows after missing on revenues, gross bookings, and active users and slashing outlook:

*KING 2Q REV. $593.6M, EST. $605.7M

In a desperate attempt to save the stock price they announced a huge $150 million (46.9c per share) special dividend...but it's not working.

US equity futures started to slide once German confidence data hit early in the morning (and Treasuries rallied modestly) but as the US opened, the ubiquitous "markets are open and I must buy' rip hit... but didn't last. Stocks leaked lower but stopped as Europe closed (in a mirror of yesterday) but could not hold bounce gains as worries over Russia's convoy weighed on markets late on. The S&P and Dow end the day unch (Russell -0.5%, Trannies up 0.6%) on the week. As stocks old off, somewhat oddly, so did the US Dollar (on EUR strength - reptariation?), US Treasuries, gold and copper. 330RAMPCAPITAL turned up (well it is Tuesday), slammed VIX, and jammed stocks (except Russell) back to green (VWAP) but it didn't hold. S&P futures volume was over 40% below average.

With record rental expenses already forcing millions of Americans to have far less disposable income for everything else once the monthly bill for the roof above one's head is paid, here is a breakdown of 25 selected US metropolitan areas, ranked from most to least expensive, how much it costs to rent a two-bedroom apartment (one can only assume the $1,440 price listed for New York is based on some non-GAAP, magical numbers that exclude reality).

For some, comprehending the demise of the US welfare state ponzi is impossible; and so, in the interests of public safety, we present the illustrated guide to the rapidly approaching (and unstoppable) train wreck...

Despite Dubai's recent explosion of speculative fervor (stocks and real estate), and the world's leaders demanding we believe that global recovery is accelerating, there is yet another awkward anecdotal data point that suggests things are are far from 'normal'. As Bloomberg reports, Dubai’s hotels had the lowest occupancy in at least 18 years in July, standing more than half empty, as more rooms were created and demand declined, according to research firm STR Global.

These bonds are the benchmarks for “risk” in the financial system. Stocks, corporate bonds, mortgages, auto loans, emerging market stocks… everything you can name are ultimately priced based on their perceived risk relative to the “risk free” rate of lending money to the US for 10 years.

The Fed keeps moving their targets, and came up with this ‘slack in the labor force’ argument helped of course by Wall Street or should I say the Big Banks.....

Last Thursday's comments from NATO's Rasmussen on Russian incursions into Ukraine sent stocks reeling... and then the pre-announced end of Russia's military drill sent stocks soaring. All the while Treasuries oscillated in a relatively tight range, unmoved by equity's manic moves. Today, as Russian convoys sit 'aggressively' at the border, Israel plans new fight with Gaza as truce ends, and Iraq is escalating, stocks are fading back to last week's NATO levels (as the dollar, long-end bonds, and gold are all sliding).

Gallup's U.S. Economic Confidence Index dropped slightly to -17 for the week ending August 10th, hovering just off the lows of 2014 as only 38% of Americans believe the economy is "getting better." Perhaps even more concerning, given record high stock prices and cycle low unemployment rates, only 19% of Americans said the economy is "excellent" or "good," - the lowest in 5 months. Gallup concludes, generally speaking, Americans remain more negative than positive about the economy, but are less negative than they were in the first few years after the Great Recession - $4 trillion later.

Or "How I stopped worrying and learned to love bombing Iraq..."

ISIS has attracted an entire generation of radicalized Sunni militants to the region. If one watches interviews with their enemies such as e.g. Peshmerga fighters, one topic that is occasionally mentioned is that they don't seem to fear death much. Combined with their well-known brutality, this undoubteldy makes them a formidable fighting force. However, there is evidently far more to ISIS than that. All of the above suggests that it will be exceedingly difficult to effectively destroy ISIS. It seems to us that if the goals the president has announced in recent days are to be achieved, nothing short of a full-scale invasion of Iraq (as well as of Syria for good measure) is likely to suffice – and even then, success is by no means guaranteed.

There was some doubt, when the 3 Year auction priced at 0.992% or the highest since May 2011, if the August auction would finally see 3Y paper pricing wide of 1%. It did not: in fact, with a When Issue of 0.93%, the auction priced through moments ago, at a high yield of 0.924%, surprisingly the lowest level since April. The internals were somewhat more exciting, with the Bid to Cover dropping to just 3.04, the lowest coverage since June of 2013, which as the only BTC with a 2-handle going back all the way to 2010. As for the takedown, Indirects were largely unchanged at 36.2%, just below the 38.2% last month, offset by a jump in Directs from 12.7% to 19.0%, both in line with average, which meant that Dealers were left holding just 44.8% of the final allocation, the lowest since February.

It may be war, but there's no reason one can't poke some fun at the warring parties. Everything appears to be going according to plan...