Archive - May 2014 - Story

Back in November, Cisco stock cratered after the company was forced to reset its future revenue guidance when as a result of crashing Chinese sales, it became clear that some $2 billion in quarterly revenue had been wiped away from the previous trendline.  Since then, Cisco has managed to regain some of the lost market value as investors have readjusted to what now appears to be a far slower growth rate for the company. However, one question remained - what was it that caused the collapse in sales, and especially those targeting the Chinese market. For a long time, the most likely speculated reason for the Chinese revulsion against Cisco and its peers were the factual revelations by Edward Snowden detailing the NSA illicit espionage activities, and the role of corporations such as Cisco in them. Today, this speculation is confirmed, following news that none other than Cisco CEO John Chambers has written a letter to Obama, "warning of a collapse of trust in US technology after evidence emerged showing the National Security Agency breaking into his company’s equipment."

It has taken the US a while to realize that the best way centrally-planned economies "grow" (think China) is by allocating taxpayer funds for capex projects: be it replacing windows (of course), roads, highways, building brand new ghost cities, or in this case bridges. As the newnybridge.com website explains, the $3.9 billion replacement for the Tappan Zee bridge over the Hudson river, built by Tappan Zee Constructors, or TZC, LLC, has begun construction. But the most important entity by far in the construction of the replacement bridge is what is known as the "Left Coast Lifter", or what is said to be the world's largest floating crane. Here, courtesy of Bloomberg, is a look at the monster crane, and it's journey to New York.

Yesterday we provided a detailed breakdown of the cost aspect of a college education, particularly for young people who have no choice but to fund their education with student debt, a key part of the equation that the San Fran Fed in its particular cost-benefit "analysis" of college education avoided. There is much information in the post, but one particular aspect of the Pew analysis that the article was based on bears repeating and highlighting for all those less than "1%" young Americans debating whether a college education is worth the tens if not hundreds of thousands of dollars in student loans: the median net worth of "young" households, those where the head is younger than 40 years old, is $8,700, or 20% less than not college educated households with no student debt.

The mainstream media may have long forgotten about the Fukushima tragedy (as it certainly goes against the far more popular and palatable meme of a Japan "recovery" courtesy of Abenomics) but that does not mean it is fixed or even contained. Quite the contrary. As a rare update from Japan's Jiji news agency reminds us, on Friday radiation at five monitoring points in waters adjacent to the crippled Fukushima No. 1 power station spiked to all-time highs according to the semi-nationalized TEPCO.

Just out from Bloomberg:

• Deutsche Bank preparing a capital increase, aims to raise EU8 billion through new shares by end of June, Handelsblatt says, citing unidentified people in the finance industry.
• Deutsche Bank likely to get new single investor
• Deutsche Bank new investor may hold 5%-8% of shares
• Deutsche Bank declined to comment: Handelsblatt

And the punchline: Bank’s new shares may be sold with 25%-30% discount. In other words, it is liquidity scramble time, and the bank is willing to give anyone with deep enough pockets a 30% discount to market price just to get some additional short-term funding.

One glance at the following chart prepared by the Economist, showcasing the world's largest importers of weapons, and more importantly, exporters, and one could almost imagine why both the US and Russia have an interest in a "contained" (or not so much) regional war...

Six months ago, it was this same Switzerland that, contrary to the prerogatives of the pervasive "fairness doctrine" taking the new socialist world by storm, rejected imposing limits on executive pay. Then mere hours ago, in a move that would give president Obama wealth redistribution nightmares for months, a whopping 77% of Swiss voters rejected an initiative for a national minimum wage of 22 francs, or just under $25, per hour, according to projection by Swiss television SRF. And confirming that when it comes to anti-socialism, Switzerland may well be the last bastion, not a single canton supported the measure.

China began evacuating hundreds of its nationals from Vietnam (via at least 2 planes and 5 ships) as the anti-China protests have become increasingly deadly following Beijing's attempt to deploy an oil drill in Vietnamese dispuited waters (detailed here, here, here, and here)...

• *CHINA SENDING 5 SHIPS TO VIETNAM TO EVACUATE CHINESE: XINHUA
• *HUNDREDS OF VIETNAMESE SECURITY IN CENTRAL HO CHI MINH CITY
• *VIETNAM PRIME MINISTER ISSUES DIRECTIVE TO PREVENT PROTESTS
• *VIETNAM GOVT TAKES ACTION TO PREVENT RIOTS: BINH

Hundreds of police and security forces are in central Ho Chi Minh city and the Chinese consulate is under heavy guard. Tensions across the ASEAN region are growung as Taiwan is on "high alert" but the bloc’s inability to craft a united response to Chinese aggression signals a further decline in its regional clout.

In the past several years, one of the topics covered in detail on these pages has been the surge in such gimmicks designed to disguise lack of demand and end customer sales, used extensively by US automotive manufacturers, better known as "channel stuffing", of which General Motors is particularly guilty and whose inventory at dealer lots just hit a new record high. But did you know that when it comes to flat or declining sales and stagnant end demand, channel stuffing is merely the beginning? Presenting... Where the World's Unsold Cars Go To Die

As Jalopnik reports, a BMP light tank was reportedly left stalled on a city street near Mariupol... A gassed-up, fully-loaded tank. Ready to roll. Ready to obliterate some separatists. This is what happened next...

As spring unfolds here in the Northern Hemisphere, the future of the free and open Internet hangs in the balance. As such, I strongly believe everyone should have at least some understanding of what is at stake. When most people hear or read the words “net neutrality” their eyes glaze over with a feeling of confusion and despair: “I can’t remember, am I supposed to be for or against this?” This is exactly how the lawyers and lobbyists in D.C. want it, but unless the citizenry is informed we could lose the most important weapon of free speech in the history of mankind. The FCC voted on its proposal this week and it passed with a 3-2 vote... and this is a glimpse of the "room full of lawyers and cops... and a few real human beings speaking reality to them" before they were escorted out.

Forget all the talk about "dots", "6 months", or any other prognostication from the Fed's new leadership about what will happen in the near and not so near future. For the real answer prepare to shelve out the usual fee of $250,000 for an hour with the Chairsatan, or read Reuters' account of what others who have done so, have learned. The answer is a stunner. "At least one guest left a New York restaurant with the impression Bernanke, 60, does not expect the federal funds rate, the Fed's main benchmark interest rate, to rise back to its long-term average of around 4 percent in Bernanke's lifetime. "Shocking when he said this," the guest scribbled in his notes. "Is that really true?" he scribbled at another point, according to the notes reviewed by Reuters."

Be afraid... be very afraid. This is not your father's - or even your older brother's equity market. As we have discussed for over 5 years and Michael Lewis dragged kicking-and-screaming into the world's eyeballs, there is something very different about the world's capital markets than ever before. ConvergEx's all-encompassing "Traders Guide to Global Equity Markets" is, simply put, everything you wanted to know (and perhaps did not) about the world's stock markets but were afraid to ask. The subtle title they chose to explain the various order types and market structure dynamics - "Trading Minefields" - you can't avoid them unless you know where they are.

Hardly a day goes by without some new revelation regarding the US surveillance leviathan's reach. In the following (part 1 of a 2-part series), PBS' FrontLine reveals the dramatic inside story of how the U.S. government came to monitor and collect the communications of millions of people around the world - and the lengths they went to trying to hide the massive surveillance program from the public. From 9/11 to Edward Snowden and on to NSA reform - what must be done... a must-watch for all US citizens (if they can spare some time away from The Voice or Flappy Birds).

On Thursday GM shocked the world when it announced the latest 5 recalls in a seemingly endless series ever since it went under fire before Congress for hiding its unprecedented quality control problem earlier this year, in which it was revealed the bailed out company was willing to risk the lives of its customers just to avoid the cost of recalls, bringing the total number of recalls for 2014 alone to 24, resulting in some 12.8 million cars recalled globally. Putting this number in context...