It has been several years since the disjointed, confused, and extremely disorganized Occupy Wall Street movement made any headlines. Alas, in the interim, the career prospects of those who comprise its up prime age demographic have gone nowhere but down while inversely impacting the nominal free time of said cohort, which is why we were somewhat surprised it took as long as it did for the same individuals, best known for camping out in Zucotti Park (until it started snowing of course), to stage a daring comeback. Which they did today, following a weekend in which New York City was overrun with "The People's Climate March", protesting against climate change by... leaving behind them tons of non-biodegradable garbage. It is this same group that has once again made its way all the way down into the Financial district, and specifically in front of the TV studio formerly known as the NYSE.
It has been quite an eventful week between Scotland's battle over independence, the Federal Reserve's FOMC announcement and the markets making new all time highs. The FOMC announcement was more comedy than anything else as the continued facade of the Fed's forecasting capabilities was revealed, it appears the biggest factor in the world of investing and for this weekend's list of "Things To Ponder" we have accumulated a few reads relating to the Fed.
Cable (GBPUSD) is surging as the first results from the Scottish Referendum hit and a resounding "No" to independence appears confirmed. Almost back to pre-Scottish-Vote-fears level (1.66), cable is up 250 pips in the last 24 hours (its biggest move in over a year). GBP is also strengthening notably against EUR (2-year highs), CHF (2 year highs) and of course the JPY (6 year highs) as the Japanese government admits defeat and downgrades its economic assessment for the first time in 5 months (hence sell JPY as they 'must' do more money printing (despite Japanese businesses all pushing for a stronger JPY). FX markets are extremely volatile this evening and implicitly, equity futures are clanging around cluelessly. The USD Index is flat (gaving retraced all FOMC gains). Gold is down on the Japan news (below $1220).
Minutes ago the Yen hit another multi-year low against the dollar, which sure enough, is great for the nominal value of Japanese stocks, if horrible for the actual Japanese companies, the Japanese middle class, and pretty much everyone except for a few superrich people. Such as Sony. Because the (now former) electronic giant, which once upon a time was the target of an activist campaign by none other than Dan Loeb who mysteriouly saw value in the company, once again stunned everyone when it reported overnight that it expects its annual loss to swell to $2 billion, but, far worse, canceled the payment of its dividend for the first time ever after writing down the value of its troubled smartphone business.
China warns "the outside world doesn't get it, we do," in a statement related to the "stealth QE" they unleashed yesterday, noting investorsd "do not realize that today's Chinese economy is moving towards "new normal" in the process," and "need to accept the volatility of economic data," during this transition. Crucially, PBOC adviser Chen Yulu clarifies what Western central banks simply cannot grasp: "Hoping for stimulus policies in the face of increased economic pressure is short-sighted and does no good to long-term economic development," warning investors should not expect "strong stimulus." Wall Street is less than exuberant about the liquidity injection, as the impact on real economy may be limited due to lenders' risk aversion.
The Fed Chairman has some words of encouragement for the tens of millions of Americans who live at or below the poverty level, including that threatened with extinction class, affectionately known as "the middle." Her message? Build assets, or said otherwise... get rich.
Aside from the "sure thing" of buying the Alibaba IPO, achieving a 10% yield return in the new normal world requires leverage and excess risk-taking. To compare the risk/reward of various assets, Citi accounts for haircuts and leverage costs of the typical investor and finds an investors needs a 1.9x leverage in the S&P 500, 8.1x leverage in Treasuries, and 2.3x leverage in high-yield to achieve (based on historical norms) the required return. However, after accounting for downside risks, high-yield cash and leveraged loans both top the S&P 500 as the best way to meet a 10% bogey yield.
Because what's two weeks between propaganda spewing friends?
In the New Normal, yellow may or may not be the new black, but stock buybacks are certainly the new CapEx. And yet, companies are still forced to continue their sad existence in which the bulk of their cash is handed over to a few loud activist investors, and thus have no choice but to spend the bare minimum on capital investments. The following table shows where it all goes.
Even the most avid Bulls should grasp that market corrections of 10% to 20% are statistical features of all markets. Cranking markets full of financial cocaine so they never correct simply sets up the crash-and-burn destruction of the addict.
Something appears to have changed not only because the USDJPY is not some 100 pips higher overnight on, well, nothing but because the S&P, which is treading water, has yet to spike on no volume reasons unknown. That something may be algos which are too confused to buy ahead of this week's Fed announcement which may or may not have some notable changes in language or the Scottish referendum on the 18th. Or it could simply be that algos are no longer allowed to openly manipulate and rig the market on the CME as of today now that "disruptive market practices" are banned (why weren't they before)? In any case, keep a close eye on the market today: not all is at it has been for a while, unless of course it is still just a little early and the rigging algos (which haven't gotten the Rule 575 memo of course) haven't woken up just yet.
The depression that followed the stock-market crash of 1929 took a turn for the worse eight years later, and recovery came only with the enormous economic stimulus provided by the second world war, a conflict that cost more than 60 million lives. By the time recovery finally arrived, much of Europe and Asia lay in ruins. The current world situation is not nearly so dire, but there are parallels, particularly to 1937. Now, as then, people have been disappointed for a long time, and many are despairing. They are becoming more fearful for their long-term economic future. And such fears can have severe consequences.
While we doubt the pope is much of a trader, based on his latest comments, speaking during a visit to Italy's largest military cemetery, where he was commemorating the centenary of World War I and where he said that a "piecemeal" World War III may have already begun, we assume he too would join the confusion of the BIS and every other carbon-based life form, wondering how it is possible that risk assets are at all time highs which the world is not only teetering on the edge of a new global conflict but may have already in fact entered it. Oh wait, the central banks, never mind.
- Olive Garden's breadsticks are part of the brand equity, as they come to every table. The breadsticks need to be of the highest quality, with a better taste and a firmer texture, and each table must receive hot breadsticks.
- The pasta at Olive Garden must be significantly improved. It must be prepared at the proper water temperature, boiled in salted water, precisely timed to not overcook, and tossed with sauces for each dish instead of the current practice of ladling sauce on top of heaps of coagulated pasta.
- We must rethink the amount of items from the flyer. Most fried foods are not authentically Italian and it slows service.
- We will explore a few gluten-free options, as many consumers prefer gluten-free dishes (1) Based on extensive research and discussions with culinary experts and suppliers, we believe we can accomplish these goals at Olive Garden's current price points without hurting margins
Even the escalating cold war (as in European winter cold) between Russia and the west will pale by comparison to what may happen in the far east, if the pent up for generations tensions between China and Japan, which have historically hardly been in a state of "amicable relations", finally spill over into an all out war. Which, incidentally, is precisely what a majority, or 53% of Chinese respondents, and some 29% of their Japanese peers, expect will happen in the coming years.