Friday, September 20, 2013

World GDP and it's reliance on China

       

       The pace of global growth increased during the second quarter of 2013—only the third quarterly acceleration in three years. Buoyed by increased output in the rich world, global output was 2.4% higher compared with the second quarter of 2012.

But the world is dangerously dependent on China, which continues to grow at a clip.
Since the beginning of 2010 it alone has contributed over one-third of global GDP growth, with another 40% coming from the rest of the emerging world. Weighed down by debt since the financial crisis, the rich world’s growth has been sclerotic. Excluding America, it has provided just 10% of global growth since 2010; America has contributed another 12.5%.
Source:  The Economist
Remember the 60 minutes profile of China's ghost cities?

Australian reporter who "discovered" China's ghost cities two years ago returns to the scene:  

Click the link to see an update:  BusinessInsider

Thursday, September 19, 2013

JP Morgan Fines Now More Than $8 Billion Dollars

Since 2011, JPM has been fined $8B:
$56 million (April 2011)
$153.6 million (June 2011)
$229 Million (July 2011)
$88.3 Million (August 2011)
$5.29 Billion (February 2012)
$110 million (February 2012)
$150 million (March 2012)
$296.9 million (November 2012)
X% of $8.5 billion (January 2013)
$100 million (March 2013)
$410 million FERC settlement (August 2013)
$900 million (September 19, 2013)
Huh? 8 freaking billion?
Listen, I'm all about free enterprise and capitalism and the American way. And I hear and understand the argument for government over-regulation, but what is this company doing?
JP Morgan is not a bank.  It's more like an organization living on the edge between a business entity and a criminal empire.  

Thoughts?  Is this a shakedown? JPM specific?  Is Goldman Sachs smarter, less unscrupulous, or just better connected?
Source:  thedailybeast, TBP

Wednesday, September 18, 2013

I went to cash because (please check one):

There have been plenty of good (and not so good) reasons to sell stock and raise cash over the last few months.  Raging bull markets can make us feel stupid sometimes.  But then again, if lowering your equity exposure helps you sleep at night, it’s worth it.  You can always get back in when your view becomes clearer.
Great list by a good guy, Josh Brown:
I went to cash because (please check one):
1. Sequestration
2. The Taper
3. Obamacare
4. Debt Ceiling
5. Egypt Revolution
6. Portuguese Bond Auctions
7. US Elections
8. Syria Threat
9. Sharknado
10. Chinese GDP
11. London Whale
12. High Frequency Trading
13. Nasdaq Freeze
14. Grexit
15. Marc Faber web video appearance on cnbc.com
16. Larry Summers
17. Low Volume
18. CAPE Valuation
19. Hindenburg Omen
20. Death Cross 

21. Other (please explain): _____________


Taper expectations from Wall Street's top economists:


·         Jan Hatzius, Goldman Sachs: $10 billion all in Treasuries
·         Vincent Reinhart, Morgan Stanley: $10 billion all in Treasuries
·         Aneta Markowska, Societe Generale: $10 billion all in Treasuries
·         Drew Matus, UBS: $7 billion in Treasuries, $3 billion in MBS
·         Joseph LaVorgna, Deutsche Bank: $10 billion in Treasuries, $5 billion in MBS
·         Michael Feroli, JP Morgan: $10 billion in Treasuries, $5 billion in MBS
·         Neal Soss, Credit Suisse: $10 billion in Treasuries, $10 billion in MBS
·         Michael Hanson, BAML: $10-$15 billion total, split evenly between Treasuries and MBS

·         Michael Gapen, Barclays: $15 billion total, split between Treasuries and MBS

It's interesting to keep score, and the market will react on reality vs. expectations.

Source:  Businessinsider

Tuesday, September 17, 2013

GOOG: Lower high. Head and shoulders set-up.

With the market making new highs, the relative weakness of Google is a bad sign.

100 dma = 880.75 = support.

Under $880, the 200 dma @ $823 is the target.




Friday, September 13, 2013

Twitter is already trading in the grey market

I remember getting a call from a broker to buy Facebook 3 months before the IPO.  Insiders had some shares to sell and were marketing them. Fair enough. This happens all the time with private companies and their employees.  I thought a lot about buying stock, as there was a ton of hype regarding Facebook at the time.  But in the end, I decided not to participate.  

FB's IPO was eventually priced @ $38.  On the first day of trading, it opened @ $42.05, rallied to $45, tested $38 and closed @ $38.23.   The next trading day it broke price and melted to $26 over the next month.  It actually touched $17.55 a share 4 months later.  I did the math and I would have lost money even if I flipped my shares @ $38 on the first day of public trading.

IPO's involve a seller and a buyer.  Yeah, no kidding.  But my point is that investment banks have a choice on the valuation they put on a new security.  Which side of the transaction will get the better deal?  The seller is their investment banking client.  The buyers are their retail and institutional customers. 

Twitter will go through the same process as Facebook.  

According to Business Insider, Twitter's privately held shares are currently trading in the grey market as high as $30 and as low as $16.  

Michael Pachter, an analyst at WedBush Securities, said Twitter is now valued at $15 billion to $16 billion based on buying in the private market.

“Over the last couple of months, shares in the secondary market have risen to between $20 and $30. That’s what the private market values it right now, not that investors have any information, but that’s what they are willing to pay.”


Goldman Sachs is leading the underwriting,  JPMorgan Chase and Morgan Stanley will also likely have a role.

Business Insider noted yesterday that a $20 billion valuation of the shares would put Twitter at about 17 times revenues — which seems steep but puts it right where Facebook and LinkedIn are trading.


So if you get a solicitation to buy Twitter anytime soon, realize that markets have become incredibly efficient and your best choice may be to wait until the secondary market does the pricing for you.  

Maybe by then, the hype will subside and natural market forces will get you a better entry price.  

For example, FB, currently @ $45, has more than doubled off the $17.50 lows it hit 4 months after the date of it's IPO.






Thursday, September 12, 2013

ICYMI: Putin's Op-ed in the NY Times

I learned from bartending to not talk to strangers about 3 things:  Politics, religion, and day-trading.

But sometimes, like the current situation in Syria, one of these soft taboos becomes an influence on our equity market.  Then its not just a matter of being polite, but a matter of fiduciary responsibility to report on it.

So here's the Putin op-ed from the NY Times yesterday:

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MOSCOW — RECENT events surrounding Syria have prompted me to speak directly to the American people and their political leaders. It is important to do so at a time of insufficient communication between our societies.
Oliver Munday
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Readers’ Comments


Relations between us have passed through different stages. We stood against each other during the cold war. But we were also allies once, and defeated the Nazis together. The universal international organization — the United Nations — was then established to prevent such devastation from ever happening again.
The United Nations’ founders understood that decisions affecting war and peace should happen only by consensus, and with America’s consent the veto by Security Council permanent members was enshrined in the United Nations Charter. The profound wisdom of this has underpinned the stability of international relations for decades.
No one wants the United Nations to suffer the fate of the League of Nations, which collapsed because it lacked real leverage. This is possible if influential countries bypass the United Nations and take military action without Security Council authorization.
The potential strike by the United States against Syria, despite strong opposition from many countries and major political and religious leaders, including the pope, will result in more innocent victims and escalation, potentially spreading the conflict far beyond Syria’s borders. A strike would increase violence and unleash a new wave of terrorism. It could undermine multilateral efforts to resolve the Iranian nuclear problem and the Israeli-Palestinian conflict and further destabilize the Middle East and North Africa. It could throw the entire system of international law and order out of balance.
Syria is not witnessing a battle for democracy, but an armed conflict between government and opposition in a multireligious country. There are few champions of democracy inSyria. But there are more than enough Qaeda fighters and extremists of all stripes battling the government. The United States State Department has designated Al Nusra Front and the Islamic State of Iraq and the Levant, fighting with the opposition, as terrorist organizations. This internal conflict, fueled by foreign weapons supplied to the opposition, is one of the bloodiest in the world.
Mercenaries from Arab countries fighting there, and hundreds of militants from Western countries and even Russia, are an issue of our deep concern. Might they not return to our countries with experience acquired in Syria? After all, after fighting in Libya, extremists moved on to Mali. This threatens us all.
From the outset, Russia has advocated peaceful dialogue enabling Syrians to develop a compromise plan for their own future. We are not protecting the Syrian government, but international law. We need to use the United Nations Security Council and believe that preserving law and order in today’s complex and turbulent world is one of the few ways to keep international relations from sliding into chaos. The law is still the law, and we must follow it whether we like it or not. Under current international law, force is permitted only in self-defense or by the decision of the Security Council. Anything else is unacceptable under the United Nations Charter and would constitute an act of aggression.
No one doubts that poison gas was used in Syria. But there is every reason to believe it was used not by the Syrian Army, but by opposition forces, to provoke intervention by their powerful foreign patrons, who would be siding with the fundamentalists. Reports that militants are preparing another attack — this time against Israel — cannot be ignored.
It is alarming that military intervention in internal conflicts in foreign countries has become commonplace for the United States. Is it in America’s long-term interest? I doubt it. Millions around the world increasingly see America not as a model of democracy but as relying solely on brute force, cobbling coalitions together under the slogan “you’re either with us or against us.”
But force has proved ineffective and pointless. Afghanistan is reeling, and no one can say what will happen after international forces withdraw. Libya is divided into tribes and clans. In Iraq the civil war continues, with dozens killed each day. In the United States, many draw an analogy between Iraq and Syria, and ask why their government would want to repeat recent mistakes.
No matter how targeted the strikes or how sophisticated the weapons, civilian casualties are inevitable, including the elderly and children, whom the strikes are meant to protect.
The world reacts by asking: if you cannot count on international law, then you must find other ways to ensure your security. Thus a growing number of countries seek to acquire weapons of mass destruction. This is logical: if you have the bomb, no one will touch you. We are left with talk of the need to strengthen nonproliferation, when in reality this is being eroded.
We must stop using the language of force and return to the path of civilized diplomatic and political settlement.
A new opportunity to avoid military action has emerged in the past few days. The United States, Russia and all members of the international community must take advantage of the Syrian government’s willingness to place its chemical arsenal under international control for subsequent destruction. Judging by the statements of President Obama, the United States sees this as an alternative to military action.
I welcome the president’s interest in continuing the dialogue with Russia on Syria. We must work together to keep this hope alive, as we agreed to at the Group of 8 meeting in Lough Erne in Northern Ireland in June, and steer the discussion back toward negotiations.
If we can avoid force against Syria, this will improve the atmosphere in international affairs and strengthen mutual trust. It will be our shared success and open the door to cooperation on other critical issues.
My working and personal relationship with President Obama is marked by growing trust. I appreciate this. I carefully studied his address to the nation on Tuesday. And I would rather disagree with a case he made on American exceptionalism, stating that the United States’ policy is “what makes America different. It’s what makes us exceptional.” It is extremely dangerous to encourage people to see themselves as exceptional, whatever the motivation. There are big countries and small countries, rich and poor, those with long democratic traditions and those still finding their way to democracy. Their policies differ, too. We are all different, but when we ask for the Lord’s blessings, we must not forget that God created us equal.

Vladimir V. Putin is the president of Russia.