Archive - May 2014 - Story

First it was Tweeter (TWTRQ), then Nester Entertainment (NEST), and then Oculus VisionTech (OCLS)... and now - courtesy of Apple's planned acquisition of Beats, the total muppetry that we call a 'market' has bid shares of BioTelemetry (BEAT) up over 4% this morning...

Immediately 'excretive'? It seems the early sentiment regarding Tim Cook's decision to purchase private company Beats is that it is not helping... (likely more crucially... it's $3.2bn that is not going to buybacks and the market is upset about that). It's early yet though...

Remember all of those credit card and loan offers you used to receive in the mail? Bad credit? No credit? No problem.  0% APR for the first six months. Free balance transfers. No money down. And my personal favorite– no credit check. These were all classic signs that the mother of all liquidity bubbles was upon us. Looking at the expansion of credit across the West, though, it’s happening again. Fool me twice, shame on me. But this is a worldwide phenomenon now.

A day after Russia shocked the world with an impressive demonstration of military preparation for what it dubbed was a "massive nuclear attack", the country is celebrating its traditional May 9 national holiday which marks the Soviety victory over Nazis in World War II. Among the people watching the traditional and impressive military demonstration on Red Square was Russian president Vladimir Putin. However it is not Putin's presence as the rally that was notably, but what he did after, when hours after the he watched the tanks rumble on Red Square Putin flew to Crimea for the first time to oversee Russia's newest territorial expansion. This happened even as both Ukraine, Germany and the head of NATO all voiced strong objections to such a visit by Putin which not only formalizes the expansion, but spits in the eye of Western attempts to contain the Ukraine conflict and/or de-escalate

Goldman, it would appear, are desperate to not be forced to admit they are wrong once again. On the heels of their dramatic and humiliating swing from expectations of a +3.0% Q1 GDP growth rate at the start of the year to a current -0.6% expectation, the hockey-stick-believers are out with their latest piece of guesswork explaining how growth will explode to 3.9% in Q2 (a full percentage point higher than their previous estimate).The platform for this v-shaped recovery - "consumer spending will probably grow strongly, while the housing market should gradually improve." So 'probably' and 'should' it is then.

For those who believe they can predict the Apple's acquisitive future based on the company's historical M&A pattern, here is a summary of the company's acquisition history over the last two decades.

• Omnicom, Publicis call off proposed $35 billion merger (Reuters)
• Apple in talks for $3.2bn Beats deal (FT)
• Alibaba IPO Grew Out of ’80s Chaos and Guy From Goldman (BBG)
• Nigeria's president at WEF pledges to free kidnapped girls (Reuters)
• JPMorgan Joins Wells Fargo in Rolling Out Jumbo Offerings (BBG)
• It's 1999 all over again: Young Bankers Fed Up With 90-Hour Weeks Move to Startups (BBG)
• ECB stimulus talk knocks euro, peripheral yields (Reuters)
• Deutsche Bank Currency Crown Lost to Citigroup on Volatility (BBG)
• London Taxis Plan 10,000-Car Protest Against Uber App Use (BBG)
• Pfizer Holders Could Face Tax Hit in a Deal for AstraZeneca (WSJ)

It has been a very quiet session so far, and despite the slow-mo levitation in the USDJPY, its impact on US equity futures has been minimal if not negative. In fact, following yesterday's latest late day tumble, which Goldman summarized as follows, "Equities tried and failed again to break 1885, it continues to be the level that we can’t escape"... it would appear we are increasingly changing the trading regime, and as Guy Haselmann explained simply, markets are slowly but surely coming to the realization that the Fed's crutches are being taken away (that they may well return following a 20%, 30%, or more drop in the S&P is a different matter entirely) and that the economy will not grow fast enough to make up for this. Perhaps the most notable "event" is the sheer avalanche of banks pushing up their forecasts for an ECB rate cut (and or QE start) to June following Draghi's yesterday comments. And so the 1 month countdown begins until the end of forward guidance, or until the ECB "shatters" its credibility as expained yesteday.

As of 2012, the most recent year for which data are available, there were about 49 million Americans who, sadly, describe themselves as "food insecure," meaning they have limited access to sufficient amounts of food, according to the U.S. Department of Agriculture. Interviews with several food banks around the country suggest things haven't really improved since then. A new report from the hunger relief charity 'Feeding America' throws the nation’s struggle with hunger into an even starker light. The report, titled "Map the Meal Gap 2014," breaks the USDA’s data down county by county, giving a more nuanced picture of food insecurity. As the Interactive report below reveals, HuffPo notes that there are 16 counties in the U.S. with more than 100,000 "food insecure" children -- a number you might expect to see in a developing country rather than the world’s wealthiest nation.

Some people are either born or nurtured into a time warp and never seem to escape. That’s Janet Yellen’s apparent problem with the “bathtub economics” of the 1960s neo-Keynesians. As has now been apparent for decades, the Great Inflation of the 1970s was a live fire drill that proved Keynesian activism doesn’t work. That particular historic trauma showed that “full employment” and “potential GDP” were imaginary figments from scribblers in Ivy League economics departments—not something that is targetable by the fiscal and monetary authorities or even measureable in a free market economy. Even more crucially, the double digit inflation, faltering growth and repetitive boom and bust macro-cycles of the 1970s and early 1980s proved in spades that interventionist manipulations designed to achieve so-called “full-employment” actually did the opposite—that is, they only amplified economic instability and underperformance as the decade wore on.

In our busy days, it is all too easy to fall into the trap of hearing (and believing) the latest headline and its associated spin. For some reason, three minute videos can quickly and easily remove these 'spins' without the need for a PhD. And so we decided to dust off today's 3:06 un-spin clip, addressing the broken-window-fallacy  as the seen versus unseen impact of the idiocy of a broken-window's (or war, or destroying homes, or...) positive impact on an economy is explained in cartoon style. The sad fact is that this fallacy remains at the core of mainstream policy-making and as the video notes, the government's 'creation' of jobs via public works programs (or any number of stimulus-driven enterprises) it does so at the expense of the tax-payer via higher taxes or inflation and that 'spending' which would have otherwise gone to new fridges or iPads is removed and this does nothing to significantly improve aggregate demand (should there be such an amorphous thing) and in fact (as we recently noted here and here) leaves us more and more dependent on the state for corporate profit margins leaving any organic growth a dim and distant memory.

The US approach to the Russia/Ukraine situation reflects a serious misunderstanding of the situation. Russia has little choice but to try to raise the price of products it is selling, any way it can. It needs to cut out those who cannot afford its products, including the Ukraine. If Europe increasingly cannot afford its products, Russia needs to find customers who can afford them. There is little chance that the United States is going to be able to help Europe with its natural gas needs in any reasonable timeframe. Our best chance at keeping the global economy “working” for a little longer is to try to keep globalization working as best we can. This will likely require “making nice” to countries we are unhappy with, and putting up with what looks like aggression. Policymakers like to think that the US has more power than it really does, and like to encourage stories suggesting great power in the press. Unfortunately, these stories are not true; we need policymakers who understand our real situation

With the Biotech bubble busted and social media stocks slaughtered, it seems disappointment is spreading for the world's wealthy living off the fat of the Fed. As NY Times reports, on Wednesday, many in the art world converged upon Sotheby’s for the sales of Impressionist and modern art... but nearly a third of the art went unsold. The mediocre results followed an unexciting night at Christie’s on Tuesday and suggest that yet another central-bank-fueled excess-money-has-to-spill-out-of-our-silk-lined-pockets-somewhere trickle-down bubble is bursting. With Chinese property prices tumbling and PBOC cracking down on Macau money-laundering, it is perhaps no surprise that what demand Sotheby's saw was Asia buyers.

The marriage rate in the United States has fallen to the lowest level ever recorded. So why is this happening? Well, the truth is that there are a lot of reasons why so many young people are choosing not to get married today. One big reason is money. Young adults in the U.S. are really struggling to find good jobs, and many are hesitant to take a big step like marriage without achieving a certain level of financial security first. And as you will see below, many young adults (especially women) do not even want to date someone that is not employed. In this harsh economic environment, money makes a big difference in the world of romance.

"fragile" comes to mind... but the excuse factory will be working overtime this year: Q1 was cold weather; Q2 will be Ukraine; and Q3 will be El Nino...