New York Stock Exchange
The massive outperformance of the smallest and most trashy companies over the past year, month, week, day etc... stalled this afternoon. No news; no macro data; no change in the situation in DC. So what was it? We suspect the answer lies in the all-time record levels of margin that we recently discussed holding up the US equity market. Interactive Brokers, it would appear, have seen the light and over the next week or so will be increasing maintenance margin to 100% - effectively squeezing the leveraged momentum chasing muppets out of the market (or at the very least halving their risk-taking abilities).
We identify the six investment themes that look likely to generate alpha over the coming decade.
UPDATE: *NASDAQ, NYSE ARCA, AMEX OPTIONS REVOKE SELF-HELP AGAINST CBOE
The stock market is trading down - therefore, options markets have broken:
- *BATS OPTIONS HAS DECLARED SELF-HELP VS CHICAGO BOARD OPTIONS
- *BATS: ROUTING TO CHICAGO BOARD OPTIONS EXCHANGE SUSPENDED
- *NASDAQ OPTIONS MARKET (NOM) HAS DECLARED SELF HELP AGAINST CBOE
Seems that options markets were not broken last night as VIX was banged into the close?
- U.S. Government Shut Down With No Quick Resolution Seen (BBG)
- 12 House Republicans now say they’d back a ‘clean’ CR (WaPo)
- Republicans’ 2014 Senate Edge Muddied by Shutdown Message (BBG)
- Obama Shortens Asia Trip Due to Government Shutdown (WSJ)
- Fed Said to Review Commodities at Goldman, Morgan Stanley (BBG)
- Foreign Firms Tap U.S. Gas Bonanza (WSJ)
- Behind Standoff, a Broken Process in Need of a Broker (WSJ)
- Japan Awaits Abe’s Third Arrow as Companies Urged to Invest (BBG)
- Microsoft investors push for chairman Gates to step down (Reuters)
As stocks press back towards all-time highs amid a US government shutdown, extreme weakness in earnings pre-announcements, slower-than-expected China growth, Europe's recovery in doubt, and a looming debt-ceiling debate in the US, we look at four 'big picture' charts of dismal divergences that suggest it's not different this time at all...
Last Thursday when we reported the surreal sequence of investor disinformation events facilitated by both JCP's management team, CNBC and a conflicted "source", we said that "it was only a matter of time before lawyers started making phone calls, and before someone got implicated in what in retrospect can be construed as very serious, and costly, 10(b)-5 securities fraud." Sure enough, it took a little under 48 hours before the first (of many) lawyers smelled blood, and resulted in Shareholder Rights Law Firm Johnson & Weaver, LLP starting an investigation " if a securities violation was committed by J.C. Penney Company, Inc., when it made specific representations about the company's liquidity and the need to raise cash." The answer: yes. The only question is who is guilty, and how much the settlement will be for all those who lost cash on the second most active trading day of JCP stock in history (followed only by the next trading day in which the stock tumbled another 6% from the Goldman follow on offering price to a fresh 13 year low).
It's official: the absolute wreck of a soon to be insolvent retailer that is JCPennyless, has just announced the pricing of its 84 million shares (thank you Goldman Sachs), and the price is $9.65. Putting this into context, this offering price is 25% below the $12.90 price at which Bill Ackman dumped his entire stake a month ago to even more clueless "investors", and about 26% below the $13/share price at which Vornado sold its entire stake last Friday. Existing shareholders: congratulations, you just got diluted by 44% (with the full overallotment), but at least you get to enjoy your misery for a few more months as the melting icecube of a company does what it does best: continues melting.
So Many Lies, So Little Time: JCP Sells 84 Million Shares Via Goldman Sachs Hours After Telling CNBC It Won't Sell EquitySubmitted by Tyler Durden on 09/26/2013 16:08 -0500
Remember when one after another JCPenney executive lined up earlier today, mostly using that damage control TV outlet known as CNBC, to promise that JCP does not, repeat not, need emergency public equity funding? Guess what: they were lying. Just out from Bloomberg:
J. C. PENNEY ANNOUNCES PROPOSED PUBLIC OFFERING OF COMMON STOC
J. C. PENNEY COMMENCED PUBLIC OFFERING OF 84 MILLION SHARES
And the punchline:
- JC PENNEY TO OFFER SHARES VIA GOLDMAN SACHS
Yep: the same firm that just killed JCP two days ago, is now diluting the stock some more.
UPDATE: BATS Halted trading
- *BATS Y HALTED TRADING AT 9:44 A.M., COMPANY SPOKESMAN SAYS
- *BATS Y EXCHANGE EXPERIENCING 'INTERNAL NETWORKING ISSUE'
Just 12 hours after NYSE and NASDAQ agree to collude on fixing the "glitches", we get another broken market...
- The new normal name of a broken market: glitches - NYSE, Nasdaq Consider Cooperating to Address Glitches (WSJ)
- Early Thursday Humor: Abe Tells Wall Street Japan’s Economy Is Exceptionally Good (BBG)
- Rising Rates Seen Squeezing Swaps Income at Biggest Banks (BBG)
- JPMorgan Mortgage Talks Said to Discuss $11 Billion Deal (BBG)
- Can't make this up: HFT firm "finds" Fed did not leak data early to benefit HFT firms (FT)
- Hertz Cuts Full-Year Forecast on Weak U.S. Airport Rentals (BBG)
- Greece does not need third bailout, seeks debt 'reprofiling' - deputy PM (Reuters) - right, it needs a fourth and fifth
- Hezbollah gambles all in Syria (Reuters)
- Twitter Adds J.P. Morgan and Morgan Stanley as Bankers on IPO (WSJ)
- Messi in Court Shows Tax Collectors Set to Pursue Star Athletes (BBG)
With enough real and electronic ink spilled over the past two weeks to describe every nuance of the Lehman crisis (as if anyone can ever forget those vivid days) that nearly 3 months worth of Treasury issuance could be monetized, we decided to go further back, some 140 years back in fact, to this day in 1873 which just happens to be day the first Great market Panic gripped the US, and resulted in the first ever shutdown of the New York Stock Exchange. Granted, these days the NYSE or N-ICE as it is currently known, and the NASDARK shut down on a daily basis courtesy of a billion collocated vacuum tubes and the rigged casino formerly known as the stock market, on a virtually daily basis. But back then, when the general population was still largely clueless just how broken and corrupt the ideal of market efficiency would become when commingled with political and corporate interests, it was quite a shock.
- JPMorgan Guilty Admission a Win for SEC’s Policy Shift (BBG)
- Pricing Glitch Afflicts Rollout of Online Health Exchanges (WSJ)
- This will end well: Japan LDP Considers Draft Bill to Put Government in Control of Fukushima Cleanup (WSJ)
- How a German tech giant trims its U.S. tax bill (Reuters)
- Despite Merkel's Popularity, Angst Creeps In (WSJ)
- Hank Paulson warns of regulatory conflict (FT)
- Rajan Surprises With India Rate Rise to Quell Inflation (BBG)
- Apple Begins Selling New iPhones (WSJ)
- Pope Says Church Should Stop Obsessing Over Gays, Abortion (BBG)
- Fed likely to reduce bond buying, pass policy milestone (Reuters)
- Fall in Home Loans Pushing Fed Away From Taper in Mortgage Bonds (BBG)
- Russia says U.N. report on Syria attack preconceived, political (Reuters)
- China House Price Surge Raises Prospect of Steps to Cool Market (FT)
- Cyprus Plans to Complete End of All Capital Controls... some time in 2014 (FT)
- GOP Reworks Budget Terms (WSJ)
- U.S. Navy was warned that Washington shooter 'heard voices' (Reuters)
- Berlusconi Impeachment Vote Looms (WSJ)
- Ageing could weaken central banks, spur rate volatility (Reuters)
Policy officials believe that growth and inflation would fix the problem of large debts, but growth fueled by public spending that is financed by debt or central banks is not sustainable. Like most Ponzi schemes, it doesn’t end well. Reducing total debt was always a better solution, but it would have resulted in even slower economic activity and lower living standards. However, in the long run, the system would have been purged of unsustainable excesses. ‘Short term pain’ for ‘long term gain’ is often shunned for fear of electoral defeat and lobby group pressure. Now, we are stuck with financial repression. Investment is being directed toward funding the public sector. Policy rewards debtors over creditors. Such policy cannot go on forever. In reality, “unlimited” rarely means unlimited, because imbalances become too great. The Fed’s current quagmire has aspects resembling the Triffin Dilemma. The recent adverse spillover from Fed policies in emerging market economies and currencies may be the first hint of cracks in the global monetary system. At a minimum, foreign central banks have deviated from good policy in order to prevent sharp destabilizing fluctuations in the value of their currencies and to arrest volatile inflows and outflows of capital.
- Hedge Funds Cut Back on Fees (WSJ) as we predicted would happen in May
- Syria's Assad denies chemical weapons use; U.S. presses case for strike (Reuters)
- Unemployment Falling for Wrong Reason Creates Fed Predicament (BBG)
- U.S. tapped into networks of Google, Petrobras, others (Reuters)
- Chinese Zombies Emerging After Years of Solar Subsidies (BBG)
- Monte Paschi doubles planned capital hike to 2.5 billion euros (Reuters)
- Loan Size to Be Cut for Fannie, Freddie (WSJ)
- Japan Growth Revision Opens Door to Sales Tax Rise (FT)
- Inside the End of the U.S. Bid to Punish Lehman Executives (NYT)
- Financial Crisis: Lessons of the Rescue, A Drama in Five Acts (WSJ)
- Time Warner Joins IBM in Health Shift for Retirees (WSJ)
- Mideast Derails Key Issues in Congress (WSJ)