Jerry Yang, who previously quit as YHOO CEO, has just announced his final resignation as Chairman of the company, in what appears to be a (pyrric) victory for Dan Loeb, who made the ouster of Yang his number one goal in life. Well, Yang is now gone, and Loeb can proceed with the value maximing exercise. We have a very distinct feeling Loeb will be rather disappointed with what he discovers. It may be even more difficult for Loeb to remind the general population that Yahoo is not Friendster, and is actually still in existence. Of course, the pain trade is fading all the MSFT for YHOO rumors which will start hitting the tape every day at 9:45am like clockwork. Stock was up as much as 5% after hours. Now fading.
Alcoa was expected to generate $(0.03) in EPS in Q4 and so it did. However, it took it 5.99 billion in top line revenue just to not miss traditionally lowered Wall Street estimates. This compares to the $5.7 billion it was expected to make: so there goes your margin. And when one looks at EPS on a purely operational basis, the Company had a loss from operations of $193 million or $(0.18) EPS which included a $74 million benefit from taxes. But of course who cares: after all Alcoa reported "restructuring and other charges" of a whopping $232 million for the quarter, just to make sure everything is apples to oranges. Otherwise the reported $445 million in EBITDA (on $449 million in consensus) would have been more like $200 million. Even so: EBITDA margin dropped from 13.8% in Q4 2010, and 12.8% in Q3 2011, to a measly 7.4% in Q4 2011. Other notable items: CapEx jumped from $325 million in Q3 to $486 million in Q4, meaning that based on the traditional Free Cash Flow definition of EBITDA-CapEx, that used for bond indenture purposes, Alcoa actually burned cash in Q4. Finally, the company forecasts global aluminum demand and supply deficit (probably does not explain why it has been shuttering smelter capacity all around the world) of 7% in 2012- a big drop from recent years. All in all - not quite the right way to start the new year.
Looking for a reason why the surge of BAC has been abruptly halted after hours? Look no further - as predicted earlier, when we commented on the periodic reincarnation of the always false global refi rumor which served among other things to push BAC higher by almost 10%, the rumor was found to be false... all over again. In other words no refi, no benefit to TBTF, and all of today's gains are based on what Bloomberg noted was a report issued yesterday by a Jaret Seiberg, who until recently was an employee of MF Global, and has since been acquired with his entire Washington Research Group by none other than Guggenheim partners, which just happens to be run by former Bear Stearns exec Alan Scwhartz. From Bloomberg, here is the official denial (which came literally seconds after market close):
- White House Has No Plan for Mass Home Refinancing, Person Says
Incidentally, even if the rumor was true, here is JMP explaining why it would have no real impact on Bank of America
UPDATE: ORCL missed. $8.8bn Rev vs $9.23bn exp., 54c EPS vs 57c exp. - Stock -9% AH
With ES (the e-mini S&P futures contract) managing to pull over 40 points off overnight lows (bringing back memories of the 11/30 global bailout rampfest), we saw correlated risk assets disconnect one by one as the day proceeded. First to leave the party was FX carry (or more simply the USD) just before Europe closed. Then Gold stabilized and stopped accelerating and credit markets also went only gently higher/stable in the afternoon. Oil kept on lifting with stocks - helping Energy stocks lead the way (up over 4% on the day) - but even Oil went flat within an hour or so of the close. The only other asset that seemed to be correlating and self-reinforcing was the Treasury complex - most specifically the 10Y and the 2s10s30s butterfly but it was the former that had the highest correlation overall and kept going right to the end. Volume did die away towards the end but surged right at the close as average trade size picked up and ES started to roll over a little - pros selling into the close? Who knows but there was little else supporting ES up here on the day and with the 'news' ahead on LTRO take-up - maybe better safe than sorry.
As of minutes ago, BAC stock hit the nearly 3 year low value of $5.01 which immediately set off algorithmic defense programs, because as has been explained previously, should the stock trade under $5.00 during regular hours, instead of the After Hours session, when it hit $4.90 a few weeks ago, it will most likely set off numerous selling programs from plain vanilla funds which despite what pundits claims, have a hard floor of $5.00 (these are the same "pundits" who believe a downgrade of the EuropeAAAn club will have no impact on asset vallue) for held stocks.The result would be unpredictable so it is better to eat losses on algo all bid programs than to find out what would happen when the stock has $4 handle.
After hours last night, when all but the most dedicated of market savants (or late stumblers home from a night out checking the Bloomberg one more time) are sleeping, China released its Non-manufacturing PMI data and it was a howler. The series is very cyclical but we note that the November print fell dramatically to its lowest level since the middle of 2008's global economic meltdown. Dropping below the 50 (deteriorating) line for the first time since Feb2011 and combined with the dismal manufacturing PMI print from earlier in the week, we are reminded of David Rosenberg's critical insight 'Don't confuse resilience with lags' when we hear further chatter about the US apparent miracle decoupling. It seems that this 'lag' is already impacting US firms, as we noted earlier, and with EM nations increasingly starved of credit via European bank deleveraging, it seems a game-of-chicken between the Fed and the PBOC may begin on who prints/QEs first to save the world from reality once again.
Barely has the USD/Renminbi (or RMB) contract started to trade on the CME and already the exchange decided to hike the margin by 18.5%. And not only: in a broad action across the board, the CME hiked margins in some key FX contracts, including Aussie Dollar, Yen, Canadian Dollar, Forint, Zloty, and the Koruna. In addition, CME hiked two Interest Rate products including EM and I3. So if anyone was wondering why the AUDXXX dropped after hours, now you know.
Bank of America now precisely at $5.00 following an after hours downgrade from A to A-. We note that BofA's CDS widened 10bps today while MER CDS widened 18bps and notably wider (we haven't seen runs post downgrade) and we wonder how this will impact the firm's huge derivative book which was recently moved to the Bank's higher rated, and deposit backed unit for its better rating support. In fact, following such a drastic action, it is quite likely that derivatives units across the board will see counterparties scrambling to demand a far greater cash cushion for fears of the same downgrade waterfalls that took down AIG and MF Global.
Anti-Tilson ETF Goes Ballistic: Netflix Plunges After Company Announces Equity Raise In Sheep's ClothingSubmitted by Tyler Durden on 11/21/2011 18:34 -0400
When we discussed the slow motion trainwreck that is the implosion of Netflix back on October 11, our only outstanding question was "when is the inevitable follow on equity offering coming?" We have the answer, and it is now. Netflix just announced in an 8-K filing that it has raised $200 million in convertible notes. The conversion price is a laughable $85.80 or just 16% above the closing price translating into 2.3 million shares of additional dilution, confirming that this is nothing short of an equity raise in sheep's clothing (on the buyer's terms at that), and indicates that the firm may have well entered a liquidity death spiral courtesy of a business model that still has to generate any substantial free cash flow. Naturally, the second investors realize this they will dump the stock in droves, which is horrendous news for Whitney Tilson, but amazing news for everyone long the Anti-Tilson ETF. In other news, it may just be time for Tilson to call it a career.
UPDATE 1: Chatter that SMP is in BTPs saving the EUR84.50 level again - rest of sovereigns remain weaker.
UPDATE 2: WTI $103
As traders hold their breaths for what will likely be a 'well-managed' French auction this morning, the sentiment from the late US markets is spilling into Europe as Sovereigns - especially France (record wides at 196bps), Italy, and Spain (record wides at 475bps) are all seeing yields and spreads surge. EFSF spread to Bunds just cracked 190bps for the first time as Italian 10Y spreads are back into the record-breaking zone from 11/9 and the Italian 2s10s curve is bear-flattening further by 13bps. ES managed to sustain a low volume recovery off spike lows after hours and is currently +0.5% (though leaking back) as European credit markets open leaking wider with XOver +13bps and Main +4bps. EUR remains under 1.3475 (and EUR-USD swap spread model is reverting back down towards EURUSD) as JPY strengthens modestly. Oil is diverging (higher - breaking $103!) from the rest of the commodity pack and is the main driver of a CONTEXT-based correlated-risk-basket rally (as TSYs drip back towards day low yields levels) that is mildly supportive of ES. Little sign of the ECB yet, but we suspect they are saving their fire-power for pre-auction shenanigans.
Where Are The Pundits And Armchair Analysts When It Becomes Apparent That Apples Is Indeed Susceptible To Google's Android OnslaSubmitted by Reggie Middleton on 11/15/2011 18:11 -0400
Now that my Apple premonitions are coming to pass, I fail to hear the cacophony of zealous punditry rushing to admit that maybe, just maybe, Apple is really a C corporation - just like many others and is vulnerable to competition and business cycles - unlike mythical/marketing product creation gods of lore.
Turd Ferguson is a funny guy. But there's one thing this irreverent, acerbically goofball forecaster is stone-cold serious about: the need to build personal exposure to the precious metals. For him, it's a straightforward mathematical certainty that the global economy must collapse under the weight of the excessive (and exponentially compounding) credit amassed over the past several decades. The debt is simply too large to be serviced. As a growing number of analysts (including Chris) are predicting, Turd sees the replacement of the world's current monetary regimes as the endgame to this story. And he believes we are watching that endgame unfold in real-time now. In this interview with Chris, Turd discusses his reasons why gold and silver offer the best prospect for preserving wealth through the coming devaluation of world currencies, despite his strong conviction that the markets for these metals are heavily price-manipulated.
Netflix Implodes After Reporting Horrific Guidance; Notes It Repuchased Stock At $218 Avg Cost BasisSubmitted by Tyler Durden on 10/24/2011 16:58 -0400
One hopes that the European surprise on Wednesday will be more successful than this. In the meantime, the XIRR on Jim Cramer's recommendation to buy NFLX on Sept 26 at $135 through the current AH price of $87 is -99.6%.
Apple Total Cash Hits $81.6 Billion, Over $5 Billion Increase In The Quarter, $22 Billion Increase In 9 MonthsSubmitted by Tyler Durden on 10/18/2011 17:34 -0400
While the verdict of whether Apple's operations may or may not have peaked, one thing is certain: its cash is growing. In the past (Q4) quarter, AAPL increased its cash, short and long-term investments from $76.2 billion to $81.6 billion (which, however, skeptics will point out was only half the cash growth rate from Q2 to Q3). In 2011 alone, the company that Steve Jobs built generated $22 billion in total cash. Ironically, that is precisely how much the company's market cap is lower by in the after hours session. If AAPL is unsure what to do with all that cash, which would make it the world's biggest hedge fund, it could hire all the stock experts on Twitter, and become the best funded trading operation in the world, which would naturally be buying its own stock all day long (and, if it were to hire a few JPM/BofA/MS traders, buy CDS on itself). Alas, for the CDS plan to work, it would need to issue some debt: the company is still completely debt free.