Activist Shareholder

We noted yesterday the apparent perfect (ill)-market-timing of increases in corporate buybacks and nowhere is this more evident than across Europe. The following chart might just make all those activist shareholder mom-and-pops, demanding CEOs 'use' their cash hordes, think twice... it appears the CEOs really don't have better crystal balls than the rest of us...

• G20 struggles over forex, at odds over debts (Reuters)
• Alwaleed Sells Airbus A380 to Invest in Middle East Firms (BBG)
• GOP Stalls Vote on Pick for Pentagon (WSJ)
• ECB officials rebuff currency targeting as G20 meets (Reuters)
• Not good for the reflation effort: Muto leads as Japan PM close to choosing nominee for Bank of Japan chief (Reuters)
• M&A Surges as Confidence Spurs Deals in Computers to Consumer (BBG)
• JPMorgan’s head of equity prop trading Gulati to launch own fund (FT)
• Tiffany & Co. sues Costco over engagement rings labeled ‘Tiffany' (WaPo)
• JPMorgan Said to Fire Traders, Realign Pay Amid Slump (BBG)
• Broker draws Tullett into Libor scandal  (FT)
• Airbus drops Lithium-Ion batteries for A350 (Reuters)

• Obama Paints Wider Role for Government in Middle Class Revival (BBG)
• Obama to Seek a New Trade Deal With EU (WSJ)... or this is strawman why 2016 GDP will be higher
• Mobile phone sales fall for the first time since 2009 (Telegraph)
• Sequester Looms, No Deal in Sight (WSJ)
• Neither US party swallows a compromise (FT)
• Embattled Economies Cling to Euro (WSJ)
• For China, Spending Is Harder Than It Looks (WSJ)
• Bank of England's Sir Mervyn King says recovery in sight (BBC) - just a little more inflation first
• G7 fails to defuse currency tensions (FT)
• Japanese Leader Urges Firms to Boost Wages (WSJ) - so does the US one
• Fed Bank Chiefs Back Money-Fund Overhaul (WSJ), or force everyone out of MMFs and into stocks

Following yesterday's G-7 announcement which sent the USDJPY soaring, and its embarrassing "misinterpretation" clarification which undid the entire spike, by an anonymous source in the US who said the statement was in fact meant to state that the Yen was dropping too fast and was to discourage "currency wars", it was only a matter of time before another G-7 country stepped into the fray to provide a mis-misinterpretation of the original G-7 announcement. That someone was the BoE's outgoing head Mervyn King who at 5:30 am eastern delivered his inflation reporting which he said that "it’s very important to allow exchange rates to move," adding that "when countries take measures to use monetary stimulus to support growth in their economy, then there will be exchange rate consequences, and they should be allowed to flow through." Finally, King added that the BOE will look through CPI and relentless UK inflation to support the recovery, implicitly even if it means incurring more inflation.

This graph shows everything we need to know about the geopolitical reality of Predator Drones (coming soon to the skies of America to hunt down fugitives?) - the American public loves drone strikes. Let’s be intellectually honest. If a country engages in a military program that carries out strikes that kill hundreds of civilians - many of whom having no connection whatever with terrorism or radicalism - that country is going to become increasingly hated. People in the countries targeted - those who may have lost friends, or family members - are going to plot revenge, and take revenge. That’s just how war works. It infuriates. It radicalises. It instils hatred.

Excess cash on corporate balance sheets has been a hot topic the better part of the last decade, but ConvergEx's Nick Colas believes it's about to become even more important to capital markets.  U.S. companies have, after all, regained all the profitability they collectively enjoyed prior to the Financial Crisis.  Moreover, they've accomplished that by rationalizing their business models to succeed in a period of distinctly sub-par growth.  Combine that with markets that will likely offer only average returns, and activist investing seems like a worthwhile approach to alpha generation.  Sometimes, however, it pays to look at the world through the eyes of the fox rather than the hounds. As the Einhorn-Cook battle commences, we graciously offer up a few kernels of advice for other companies who get the "Where’s my money at?" call from an activist. E.g. #1 – The country’s central bank doesn’t think we are really out of the crisis – why do you?

Forget Ackman, Einhorn, Bass, And Hendry. There is only one name in the world of equity market performance in 2012 - Rachel Fox, of 'Desperate Housewives' fame. With a 30%-plus performance, the day-trading debutante has turned from actress to activist as she day-trades her way through the day. The 16-year-old actress who made 338 trades last year, based mostly on technicals, ""...fell in love with the idea and the concept of being able to just buy something, have it go up, or have it go down, depending on which way you bet it and have it make you money. I thought, oh, my, gosh, that's amazing, and so easy, I have to do this." If ever there was a sign of the extreme bubble that central planning has re-created for us - it has to be this. Her advice: "you have to really just trade on your own instincts and not just be like, oh, this person says this is great, let me just go for it." LOL, OMG, IKR ;-( Our advice: next time readers are discussing stock tips with a random employee of Hustler Club, Scores or Spearmint Rhino - don't just stare, listen! Said 'random employee' is almost certainly outpeforming the "smart money", and the broader market, by a wide margin. Thank you Ben.

Turning your growth trade into a value trade is the quintessential sign of a losing trader on Wall Street. 

Some phrases are endowed with immediately recognizable symbolism.  When we hear them, we instantly know who and what the phrases are referring to, and can even gain a greater depth of understanding to a particular situation just by applying them. Throughout history there have always been people who were right, and usually a “majority” that were wrong, on any single issue.  Defenders of institutionalized ignorance argue constantly that truth is “relative”, and that they should not be criticized for having their own "opinions".  They use this relativism as a cover for their unwillingness to admit a lack of knowledge. What they fail to understand is that their “opinions” were never theirs to hold.  What they believe has merely been conditioned into them.  They are willing to embrace the system no matter how unjust, because their entire identity is predicated on its continued existence. We call them sheeple... Sheeple are puppets in the game of political reconstruction, and their job is to cheerlead the establishment and to drown out all honest voices.

As was reported on Monday, among the numerous files hacked and leaked in the past week by the Hacker group Anonymous was a database of some 4606 regional bankers together with copious amounts of confidential information, which according to Anonymous' twitter account was sourced at the very Federal Reserve, which in turn would imply that the Fed itself had been hacked.

This simple piece of legislation proves that you can make a difference at the local level - Councilmember Dede Smith, who voted in favor of the bill, says that drones are “pretty clearly a threat to our constitutional right to privacy.”  We need a lot more of this type of thing all over these United States.  As I have said many times, it’s not that I am against drones in all capacities; however, we must be vigilant about how these things are used and must have serious safeguards in place to protect civil liberties.

Here are eight considerations that will shape the captial markets in the week ahead.  

• U.S. Wants Criminal Charges for RBS (WSJ)
• Bernanke Seen Buying $1.14 Trillion in Assets in 2014 (BBG)
• Irish banks at mercy of international paymasters (Reuters)
• Do badly, and we will let you do even worse: Rehn Signals EU May Ease Spain Budget Goal in Austerity Retreat (BBG)
• Too Soon to Celebrate for Europe's Banks (WSJ)
• Army says political strife taking Egypt to brink (Reuters)
• Media Firms Probed on Data Release (WSJ) - No Criminal Charges Seen
• Japan’s Government Proposes First Spending Cut in 7 Years (BBG)
• Nazi Goebbels’ Step-Grandchildren Are Hidden Billionaires (BBG)
• Goldman seeks to reduce China exposure (FT)
• More than 70% of Chinese airports generate losses (People's Daily)

• Geithner allegations beg Fed reform (Reuters)
• BOJ Adopts Abe’s 2% Target in Commitment to End Deflation (BBG)
• Bundesbank Head Cautions Japan (WSJ)
• In speech, Obama pushes activist government and takes on far right (Reuters)
• Atari’s U.S. Operations File for Chapter 11 Bankruptcy (BBG)
• Israel goes to polls, set to re-elect Netanyahu (Reuters)
• Apple May Face First Profit Drop in Decade as IPhone Slows (BBG)
• EU states get blessing for financial trading tax (Reuters)
• Indian Jeweler Becomes Billionaire as Gold Price Surges (BBG)
• Europe Stocks Fall; Deutsche Bank Drops on Bafin Request (BBG)
• Algeria vows to fight Qaeda after 38 workers killed (Reuters)
• GS Yuasa Searched After Boeing 787s Are Grounded (BBG)
• Slumping pigment demand eats into DuPont's profit (Reuters)

The economy cannot recover without a complete cleansing of the excesses that have built up over the last half century plus. It is not a unique idea. It is a foundational belief of Austrian economics and an integral part of Austrian Business Cycle theory. Ludwig von Mises provided this fundamental observation: "Credit expansion can bring about a temporary boom. But such a fictitious prosperity must end in a general depression of trade, a slump." There has likely never been a boom so great (and so fictitious) as the one that this country experienced for the last several decades. Its origins began with the hubris of government economists in the decade of the 1960s who believed that the economy could be managed like a piece of machinery. This incorrect belief is still fundamental to Keynesian economists, despite the impressive string of failures it has produced. Markets are now trying to right these wrongs. Government is desperately trying to prevent the curative process.