We have some great news for those Americans who are still in the labor force (so that excludes about 92 million working age US citizens) and still have a (full-time) job: you are now working longer than ever! In fact, as JPM's Michael Cembalest observes using Conference Board data, the average manufacturing workweek is now just shy of 42 hours - the longest in over 60 years. And there are those who say Americans are lazy...
KIEV CLASHES RESUME BETWEEN PROTESTERS, POLICE: CHANNEL 5 TV
KIEV PROTESTERS ATTACKED AFTER POLICE INJURED ACTIVIST: TV 5
UKRAINE PROTESTERS THROW MOLOTOV COCKTAILS, ROCKS AT POLICE
UKRAINE POLICE RESPOND WITH RUBBER BULLETS, STUN GRENADES
UKRAINE POLICE BLAME PROTESTERS FOR BREAKING TRUCE: STATEMENT
Ukrainian protesters erected more street barricades and occupied another government ministry building on Friday after the failure of crisis talks with President Yanukovich, as opposition leader Klitschko feared "more deaths" pointing to a weekend of increasingly violent protests. Reuters reports that Yanukovich's party stated "the situation has grown sharper throughout the country," and called on people to disregard the calls of "radical troublemakers" to turn out for protest rallies. Klitschko punched back, "Yanukovich has declared war on his own people. He is trying to hold on to power at the price of blood and de-stabilization of the situation in the country. He has to be stopped." The international community is getting involved with Hollande calling for "dialogue" but it is Biden's threat of "consequences" that spurred a different protest at the US embassy - "The US is behind everything that is happening in Kiev’s downtown right now."
- Emerging market sell-off raises specter of contagion (Reuters)
- China Bank Regulator Said to Issue Alert on Coal Mine Loans (BBG)
- Argentina to Ease FX Controls After Peso Devaluation (BBG)
- Pimco's Gross problem: who can succeed the 'Bond King'? (Reuters)
- Ukraine protesters seize building, put up more barricades (Reuters)
- Mideast Turmoil Dominates Gathering of Business Elite (WSJ)
- Central Banks Withdraw Dollar Funding (WSJ) - oh really?
- Samsung warns of weak earnings growth this quarter (FT)
- Three explosions rock Cairo, killing 5 (USA Today)
UltraCoin -> PayPal -> Disintermediation -> Margin Compression -> Icahn -> Old School
When it comes to staying relevant (and profitable) in today's rapidly changing technological world, one of the key requirements is constantly being one step ahead of the competition. Which, for tech stocks, implies investing significantly in research and development. So, off the top of one's head, when one thinks who invests more in R&D as a percent of revenue, say between Nokia - which failed to innovate fast enough and as a result got run over, and Apple - which is best known for its innovative (if NSA infiltration-riddled) products, one would be tempted to say Apple. However, the reality is quite the opposite. As the chart below shows, when plotting the R&D to sales ratio for the diametrically opposite Nokia and Apple, one sees a constant increase in research spending at Nokia on one hand, and a consistent decline at Apple, on the other.
Nearly two years ago, before the topic of (the great and constantly missing) Capex became a mainstream media mainstay, we said that as long as the Fed was actively engaged in manipulating the capital markets - and this was before the Fed launched its endless QEternity - the bulk of corporate cash would go not into investing for growth, i.e., capital spending and/or hiring, but dividends and (levered) stock buybacks. Nearly $1 trillion in stock buybacks later, and zero growth Capex, we were proven right, much to the chagrin of permabulls who said the capex spending spree is just around the corner again... and again... and. Of course, if this were to happen, it would promptly refute our fundamental thesis that the Fed's presence in the market results in the terminal misallocation of efficient corporate capital. We were not concerned. We are even less concerned now having just read an FT piece forecasting that "capital spending by US companies is expected to grow this year at its slowest pace for four years, in a sign of corporate caution over the outlook for global demand." And like that, dear permabuls, the key pillar beneath all "corporate growth" thesis was yanked. Again. Fear not. There is always 2015. Or 2016. You get it.
- Gross Told El-Erian ‘Hell No’ Seeking to Stop Departure (BBG)
- How Caterpillar got bulldozed in China (Reuters)
- Davos Bankers Struggle to Convince Elite That Markets Are Safer (BBG)
- Lucrative Role as Middleman Puts Amazon in Tough Spot (WSJ)
- Arctic Air Blankets Northern U.S. as Texas to Get Snow (BBG)
- Lenovo buys IBM's server business in China's biggest IT acquisition (Reuters)
- SEC judge bars "Big Four" China units for six months over audits (Reuters)
- U.S. Accuses Security Background Check Firm of Fraud (WSJ)
- RIP BOE forward guidance: Bank of England rate rise is 'still some way off' - Fisher (Reuters)
And sure enough, less than 24 hours later, here comes the now well-known Icahn Tweet-pump
Since tweeting about our large position in $AAPL on Aug 13, when the stock was 468 per share, we’ve kept buying shares of this ‘no brainer.’
— Carl Icahn (@Carl_C_Icahn) January 22, 2014
- Winter Storm Expected to Make Northeast Commutes Harder (BBG)
- Invasion of Spanish Builders Angers France Struggling to Compete (BBG)
- Toronto mayor, caught ranting on video, admits drinking a 'little bit" (Reuters)
- IBM's Hardware Woes Accelerate in Fourth Quarter (WSJ)
- Sharp Divisions Come to Fore as Peace Talks on Syria Begin (NYT)
- Afghanistan cracks down on advertising in favor of U.S. troops (Reuters)
- Microsoft CEO Search Rattles Boards From Ford to Ericsson (BBG)
- Banks Sit Out Riskier Deals (WSJ)
- Netflix Seen Reporting U.S. Web Users Reach 33.1 Million (BBG)
China's Epic Offshore Wealth Revealed: How Chinese Oligarchs Quietly Parked Up To $4 Trillion In The CaribbeanSubmitted by Tyler Durden on 01/21/2014 21:02 -0400
"Close relatives of China’s top leaders have held secretive offshore companies in tax havens that helped shroud the Communist elite’s wealth, a leaked cache of documents reveals" the ICIJ's latest offshore weawlth expose begins. In addition to the usual list of who, what, where, why and when, we learn that once again the two largest Swiss banks are about to be embroiled in yet another money laundering scandal, this time involving the parking of wealth belonging to China's aristocracy - including its princelings - in various Caribbean, mostly British Virgin Island, tax havens. What is notable, if not unexpected, is just how pervasive the parking of offshore capital has been, and confirms that it is not inflow of money that the PBOC has to be afraid of when its internationalizes the Yuan, it is the outflow that will be far more worrysome. But the biggest stunner is the sheer size of the wealth transfer: according to ICIJ estimate, up to $4 trillion in "untraced assets" may have left China since 2000. These are truly epic numbers.
Dan Loeb Goes Activist On Dow Chemical, Reveals DOW As Largest Position, Urges Spin Off Of Petrochem BusinessSubmitted by Tyler Durden on 01/21/2014 09:58 -0400
In a letter posted moments ago on Hvst.com, activist Dan Loeb announced that currently the largest investment of his Third Point is Dow Chemical, where he proceeds to use the usual hack-attack "spin off" proposal , and urges Dow to sell its upstream and downstream Petrochemical businesses (as Dow Petchem Co), about which it says, "the benefits from a spin-off far outweigh the supposed integration benefits." The reason: "Dow shares have woefully underperformed over the last decade, generating a return of 46% compared to a 199% return for the S&P 500 Chemicals... in April 1999 an investor could have purchased Dow shares for the same price that they trade at today." Now imagine where those shares would trade without $10 trillion in liquidity pumped by the central banks. We wish Loeb all the best: recall that precisely this strategy did not quite work out with Sony. The good news: George Clooney will hardly give a rat's ass what Dan Loeb does with some obscure "chemical" company, and thus Loeb's invites to the Hollywood party circuit are secure.
Corporations Have Record Cash: They Also Have Record-er Debt, As Net Leverage Soars 15% Above Its 2008 PeakSubmitted by Tyler Durden on 01/16/2014 16:42 -0400
There is a reason why activism was the best performing hedge fund "strategy" of 2013: as we wrote and predicted back in November 2012 in "Where The Levered Corporate "Cash On The Sidelines" Is Truly Going", US corporations - susceptible to soothing and not so soothing (ahem Icahn) suggestions by major shareholders - would lever to the hilt with cheap debt and use it all not for CapEx and growth, but for short-term shareholder gratification such as buybacks and dividends. A year later we found just how accurate this prediction would be when as we reported ten days ago US corporations invested a whopping half a trillion in buying back their stock, incidentally at all time high prices. Putting aside the stupidity of this action for corporate IRRs, if not for activist hedge fund P&Ls, another finding has emerged, one that was also predicted back in 2012. Because in addition to still soaring mountains of cash, corporations have quietly amassed even greater mountains... of debt. In fact, as SocGen reveals, net debt, or total debt less cash, has risen to a new all time high, and is now 15% higher than it was at its prior peak just before the financial crisis!
- House Unveils $1.01 Trillion Measure to Fund Government (BBG)
- Credit Suisse Tells Junior Bankers to Take Saturdays Off (BBG)
- Spot the odd word out: ECB Sees Bad-Debt Rules as Threat to Credible Bank Review (BBG)
- Insert laugh track here: Spain GDP grows at fastest pace in almost six years (FT)
- Scandinavian Debt Crisis Waiting to Happen Puzzles Krugman (BBG)
- Fed Said to Release Plan to Limit Banks’ Commodities Activities (BBG)
- Thai Protesters Extend Blockade After Rejecting Poll Talks (BBG)
- China provinces set lower growth goals for 2014 (BBG)
With no major macro news on today's docket, it is a day of continuing reflection of Friday's abysmal jobs report, which for now has hammered the USDJPY carry first and foremost, a pair which is now down 170 pips from the 105 level seen on Friday, which in turn is putting pressure on global equities. As DB summarizes, everyone "knows" that Friday's US December employment report had a sizeable weather impact but no-one can quite grasp how much or why it didn't show up in other reports. Given that parts of the US were colder than Mars last week one would have to think a few people might have struggled to get to work this month too. So we could be in for another difficult to decipher report at the start of February. Will the Fed look through the distortions? It’s fair to say that equities just about saw the report as good news (S&P 500 +0.23%) probably due to it increasing the possibility in a pause in tapering at the end of the month. However if the equity market was content the bond market was ecstatic with 10 year USTs rallying 11bps. The price action suggests the market was looking for a pretty strong print.