Archive - May 2014 - Story

• Alibaba files for what may be biggest tech IPO (Reuters)
• Early Tap of 401(k) Replaces Homes as American Piggy Bank (BBG)
• Developers Turn Former Office Buildings Into High-End Apartments (WSJ)
• Thai court orders Yingluck Shinawatra to step down as PM (Guardian)
• German industry orders fell 2.8% in March, the biggest drop in one and a half years (RTE)
• Ukraine Bulls Scatter as Death Toll Mounts (BBG)
• China Property Slump Adds Danger to Local Finances (BBG)
• Stein Says Fed May See Bouts of Volatility as It Approaches Exit (BBG)

Perhaps the most important "news" of the day is that it is non-Tuesday. Yes, there was actual news news, like German factory orders dropping -2.8% on expectations of a 0.3% increase, French industrial production down -0.7% on expectations of a 0.3% increase (both misses driven by a soaring Euro which is now spitting distance away from the 1.40 ECB "redline"), the Nikkei tumbling 2.9% to just above 14000, the Shanghai Composite down 0.9%, SocGen Q1 profit plunging 13% and conveniently blaming it on Russia, speaking of Russia things continue to deteriorate even though Interfax reported that the country has received the first part, some $3.2 billion, of the promised IMF bailout - money which will be used to promptly pay Gazprom... and buy gold, a sudden conflict between China and Vietnam escalating over the placement of an offshore oil rig and so forth, but in the new normal, none of this matters.

"I got to ask [Bernanke] all these questions that had been on my mind for a very long period of time, right? And then on the other side, it was like sort of frightening because the answers weren’t any better than I thought that they might be." - David Einhorn

Over the weekend of May 3 and 4, China sent an oil rig into disputed waters of the South China Sea to begin oil exploration. The rig is near the Paracel Islands, inside the 200-mile exclusive economic zone of Vietnam, which angrily protested the decision. The Vietnamese government insists that the waters, as well as the oil and gas reserves held beneath, belong to Vietnam.

VIETNAM CANNOT ACCEPT AND STRONGLY OPPOSES CHINA RIG PLACEMENT

The question now becomes, after his recent Asia trip, is this another red line being crossed for President Obama?

There are a few crucial tenets that everyone must live by... "never fight a land war in Asia", "don't mess with Texas", and, of course, "eat more bacon." The first two have occasionally been broken (with dire conseuqnce) but now, as the following clip shows, thanks to the soaring inflation in food prices that we have been documenting, the price you are paying for a package of bacon is flat as the size of the package collapses... less is more is never acceptable when it comes to bacon...

Amidst the deepening war of words over Moscow’s annexation of Crimea, U.S. President Barack Obama on April 28 added more Russian individuals and companies to a sanctions list that already included influential members of Russian President Vladimir Putin’s inner circle and Bank Rossiya, which has close ties to the Russian leadership. The new list freezes the assets of Igor Sechin, head of Russia's major oil company, Rosneft, six other individuals and 17 companies. Significantly, the new U.S. list does not include Alexei Miller, CEO of the Russian natural gas state monopoly, Gazprom. Although the European Union has imposed its own tough sanctions on 48 Russian individuals, Gazprom is arguably where daylight exists between the Obama administration and the EU on the issue of penalizing Moscow for its actions in Ukraine. The numbers make it clear why...

Virtually everything that you do is being watched.  Do you drive a car?  Do you watch television?  Do you use a cell phone?  As you do any of those things, information about you is being recorded and tracked.  We live at a time when personal privacy is dying.  And it is not just governments that are doing this.  In fact, sometimes private companies are the biggest offenders.  It turns out that gathering information about all of us is very, very profitable.  And both government entities and private companies are going to continue to push the envelope when it comes to high tech surveillance until people start objecting to what they are trying to do.  If we continue down the path that we are currently on, it is inevitable that we will end up living in an extremely restrictive “Big Brother” police state where basically everything that we do is very closely watched, monitored, tracked and controlled.  And such a day may be much closer than you think.  The following are 10 examples of how “Big Brother” is steadily creeping into our daily lives…

"as a businessman, I’m thrilled... never dreamed we'd [borrow so cheaply] at artificial rates... it's Nirvana... unless you look at the truth of the matter and the impact it has on your customers and your employees... that’s a much darker story... for every businessman in America and any economist that has their heads screwed on right, it’s an ominous situation... But look at it from a consumers’ point of view or a working person’s point of view, who’s paying for all this cheap money? Well, right now, the Fed is. I thought Bernie Madoff went to jail for that."

When it comes to the San Francisco Fed, it is best known throughout the financial community as the group of crack economists who spend millions of taxpayer funds to investigate such probing, for kindergarteners at least, topics as: is water wet, do trees make a sound when they fall in the forest, is it still worth going to college, and are hedge funds important in a crisis. Little did we know that, at least some of them, are homicidal psychopaths with suicidal tendencies. Because this is precisely what was revealed moments ago when Bloomberg reported that the chief operating officer of the Federal Housing Finance Agency and 26-year San Fran Fed veteran, Richard Hornsby, is facing a felony charge for threatening to kill the agency’s former top official, Ed DeMarco, and then kill himself.

Judging by the narrative promoted after last Friday's idiotically connived jobs report, any job is a good job... however, as The Guardian reports, that does not include a job working for Amazon.com. Quarter after quarter, we highlight the growth in Amazon employees (and death-cross-like plunge in annual sales growth). While Amazon makes no secret of the fact that it relies on seasonal work force, what went unsaid and unnoticed during President Obama's visit last year, was that the Amazon 'employees' would not have jobs or prospects after the holidays. Many of the people in those Amazon warehouses were among the long-term unemployed – shuffling from one temporary job to another to another; and due to this unstable employment, a growing number of them have found themselves living in shelters... 'employed' but homeless (or "the working poor" in America).

Wall Street is back in the business of lending money at the Fed’s gifted rate of zero plus a modest 80 basis point spread - so that the fast money can buy CLO paper on 9 to 1 leverage. There is your triple shuffle. It didn’t work out last time, but that doesn’t matter because the game is obvious. After enough buying on Wall Street’s triple leverage, junk loan prices might temporarily rebound. Then the brokers will put out the call to retail: The junk loan asset class is rebounding - its time to come back. For the final shearing, that is!

So much for the recovery... As WaPo reports, the American economy is less entrepreneurial now than at any point in the last three decades. A rather damning new Brookings Institution report shows that US businesses are being destroyed faster than they're being created. As the authors of the report ominously explain: If the decline persists, "it implies a continuation of slow growth for the indefinite future," as new business creation has been cut in half since 1978.

“If I had an hour to solve a problem and my life depended on it, I would use the first 55 minutes determining the proper question to ask, for once I knew the proper question, I could solve the problem in less than five minutes.” - Albert Einstein

It seems "market conditions" are right for the big one...

ALIBABA FILES IPO INITIAL REGISTRATION $1B;  ALIBABA HOLDER YAHOO BENEFICIALLY OWNS 22.6%
2013 EBITDA: $2.7 billion, 2013 Free Cash Flow: $3.2 billion; Pro Forma cash $7.9 billion

Here are some of the key details, formerly non-public, from its IPO filing...

While we recently roasted IBM for engaging in an unsustainable debt-funded buyback program, in which IBM has used every dollar of debt issued since 2012 to buyback its stock, moments ago another company showed why management teams would much rather buyback their stock than invest in CapEx in a market that only reward instant gratification in the form of shareholder friendly activity and furiously punishes any attempts to grow for the future.