Month: April 2017

Earlier this morning, we reported that “In An Aggressive Push, Trump Seeks Friday Passage Of Revised Healthcare Bill“, and has instructed Mike Pence to rattle the cages of both conservative and moderate Republicans, to see what the bid/ask difference is. Among the things the White House was willing to concede on: i) granting a waver to States from some, if not all, Obamacare insurance rules including the minimum benefits; and ii) a $115 billion “stability fund” for the states would be narrowed to be spent specifically on high-risk pools, as a form of coverage for those with pre-existing conditions.

Some expressed optimism that Trump’s renewed interest to pass Trump/Ryancare could take place as soon as this Friday, with Rep. Chris Collins adding “this could move fairly quickly.”

Freedom Caucus leaders said they’re open to the idea but want to see the legislative text, meanwhile White House officials were hoping to send the text to Capitol Hill as early as Tuesday night.

Or maybe not, because as Reuters reports, House Speaker Paul Ryan on Tuesday poured cold water on expectations that after last month’s Republican failure to pass their own Healthcare bill, a quick deal to repeal and replace ObamaCare would not happen and declined to say whether the House would hold a vote by the end of the week. As The Hill adds, his remarks followed a flurry of meetings between Vice President Mike Pence, other top White House officials, the Tuesday Group of centrists and the ultraconservative House Freedom Caucus.

“These are ongoing talks. We want our members to talk with each other about how we can improve the bill to get consensus. Those productive talks are happening. We’re at the concept stages right now,” Ryan told reporters after a closed-door meeting with Republicans earlier. “So right now, we’re just at that conceptual stage about how to move forward in a way we can get everybody to 216 [votes]. … It’s premature to say where we are or what we’re on because we’re at that conceptual stage.”

“We don’t have a bill text or an agreement, but these are the kinds of conversations we want — all the various caucus members, the administration, those productive kinds of conversations are happening right now,” Ryan said. “It’s all about getting the premiums down.”

The House breaks for a two-week spring recess at the end of the week, creating a sense of urgency for Republicans who don’t want to return to their districts and face constituents without a healthcare victory. At least two Republicans stood up during Tuesday’s GOP conference meeting and told leadership the House should delay its recess until it passes a health bill, sources in the room said.

But when asked if there will be a health vote by the end of the week, Ryan said he didn’t know.

“I don’t want to put some kind of artificial deadline because we’re at that conceptual stage,” Ryan said. “We have very productive conversations occurring with our members. But those are productive conversations; it doesn’t mean we have language and text that’s ready to go and the votes are lined up.”

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At the end of 4Q 2016, we noted that NYC real estate sales volumes were collapsing as sellers seemed to be having a difficult time accepting the fact that clearing prices had dropped below their exorbitant asking prices…here was our conclusion then (see “More Bad News For NYC Real Estate As Luxury Co-Op Contracts Collapse 25%“):

“The lesson seems to be that the marginal New York City buyer has been priced out of the market while sellers have not yet accepted that the bubble has burst deciding instead to maintain listing prices while letting their apartments sit on the market longer amid growing inventory levels…that should work out well…”

Now, it seems that growing fears over the flood of new inventory slated to hit the New York market combined with the Fed’s promise to keep hiking interest rates has sellers slightly more willing to compromise. 

Per the following quarterly Manhattan market update from Douglas Elliman, the median sales price for apartments in the Big Apple dropped 3.3% YoY in 1Q 2017 prompting a ‘surge’ in deal volumes which were up 0.5%.

 

As Bloomberg notes, discounts versus asking prices also rose for every type of property tracked by Douglas Elliman.

Sellers who had been holding fast to ambitious pricing goals are softening their stances as they face the prospect of higher mortgage rates and more listings being added to the Manhattan market. In the three months through March, buyers of resale homes got discounts averaging 4.5 percent off the last asking prices, up from 2.7 percent reductions a year earlier, Miller Samuel and Douglas Elliman said. Discounts also increased for all other property types tracked by the firms — condos, co-ops, new development and luxury homes — as well as for the market as a whole.

 

“Sellers getting more relaxed with their pricing has certainly helped create a lot more transactions,” said Pamela Liebman, chief executive officer of Corcoran Group, which released its own report on the market Tuesday. “With prices stabilizing, buyers feel that they’re making a safer bet now.”

Meanwhile, the number of people willing to pay over asking price for the already exorbitantly prices NYC real estate continued to hover a multi-year lows. 

 

Temporary pricing blip or beginning of a long unwind?  Tough call….$2.1 million seems like such a good deal for 1,000 square feet…that’s enough space for a bedroom AND a living room.

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Authored by Sven Henrich via NorthmanTrader.com,

I had an opportunity to speak with the Fast Money crew on CNBC last night about the Nasdaq and following the interview I received a bunch of questions via twitter and email. There’s only so much you can pack into a 4-5 min segment so I wanted to briefly expand a bit on the reasoning behind my position.

In last night’s segment I called the Nasdaq a beast, but one we were interested in fading knowing we are within the confines of continued upside risk in markets as I outlined in the recent “Final Wave“. Seasonality is generally positive in April and markets tend to have a very solid month before turning more shaky into May.

So why the thought of fading “the beast”?

Firstly for reference here’s the full clip of last night’s show including the FM crew’s comments:

Firstly we talked about negative divergences. On the $NDX specifically we see recent new highs coming on lower relative strength, that’s a negative divergence:

I’ve drawn some basic fib retraces presuming current highs hold which we can’t be certain of, but it highlights the extent of the move since the November lows and how basically uncorrected it remains.

Why are negative divergences important? Because they signal underlying problems with a rally. In this case also note that new highs have continued to come with fewer and fewer of the $NDX components above their 50 day moving average:

As I also outlined previously tops are processes and take quite a while to play out whereas bottoms tend to be more likely to be events. Take a long term chart of the $SPX as an example:

I also mentioned negative divergences on the $NDX and its components on multiple time frames.

Here is a monthly chart for example and note the resistance against a multi year trend line:

Similar divergences can be noted in individual stocks:

In addition, I mentioned large scale disconnects from longer term moving averages that make a reconnect at some stage ever more likely.

Finally i mentioned the $VIX. The pattern I discussed recently on Trading Nation is still active and I highlighted the 2 recent tags of the 200MA and note the tag again yesterday:

Is it a reasonable expectation to presume that the $VIX will never close above its 200MA in 2017? Frankly no. We are already in the historically most compressed time period in recent history with valuations at the very high end and mega cap tech stocks technically vastly disconnected.

I’m not saying any of these companies mentioned are bad, or are doing badly. I’m not saying this at all. Nor am I saying a top is in. But what I am saying is that they are technically stretched, the index and many of these stocks are completely uncorrected and to a large degree probably over-owned. In short, they have been in beast mode and risk/reward is setting up for a sizable corrective move. Even a beast needs some rest at some point.

What happens after the first real $VIX spike, when we get it, will then determine whether this market can make new highs or not. If it can’t then we may embark on what I described the coming bear market.

Given how moderately many asset classes have performed since the highs almost 2 years ago in May of 2015 a rebalancing of pricing may pose a challenge for a wide array of narratives:

Banks and tech, for example, have done very well. Other sectors or indices are either kinda flat or very much challenged.

So far $SPX has made an all-time high at the beginning of March. Yesterday $NDX made a new high almost a month later. The last time we saw an $SPX peak followed by an $NDX peak almost a month later? 2007.

My take fwiw: Bulls need a new $SPX high in April or the beast may turn on them.

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Just days after a post-Brexit UK cabinet put Europe on edge when a former Conservative leader said on Sunday that Theresa May “would go to war” to protect Gibraltar, Spain has tested the former EU member’s resolve when on Tuesday afternoon the Gibraltar government tweeted that a Spanish gunship has made an illegal incursion into British waters off Gibraltar amid rising Brexit tensions over the territory.

According to SkyNews which broke the story, the Royal Navy told the ship to leave but the incident, the seventh of its kind this year, is likely to escalate already rising tensions over the sovereignty of the Rock.

Illegal incursion into #British #Gibraltar Territorial Waters by Spanish Navy patrol ship Infanta Cristina this afternoon. #BGTW http://pic.twitter.com/IkYadi8XNn

— HM Govt of Gibraltar (@GibraltarGov) April 4, 2017

The alleged incursion comes the day after Spanish foreign minister Alfonso Dastis told the UK not to “lose tempers” after the EU Brexit negotiation guidelines effectively gave Spain significant power over Gibraltar’s future.

Theresa May and Foreign Secretary Boris Johnson have moved to reassure the people of Gibraltar that the territory will remain under British control. Lord Howard told the Sophy Ridge on Sunday programme: “I think there’s no question whatever that our Government will stand by Gibraltar.” As we reported previously, over the weekend former Conservative leader Lord Howard told Sky News Theresa May could be willing to defend the British territory – like Margaret Thatcher had over the Falklands.

He said: “Thirty-five years ago this week, another woman prime minister sent a task force half way across the world to defend the freedom of another small group of British people against another Spanish-speaking country.

“I’m absolutely certain that our current prime minister will show the same resolve in standing by the people of Gibraltar.”

 

Downing Street said it would not be sending a task force to Gibraltar but did not condemn Lord Howard’s comments. A spokesman said on Monday: “All that Lord Howard was trying to establish is the resolve that we will have to protect the rights of Gibraltar and its sovereignty.”

Spain has a long-standing territorial claim on Gibraltar, which has been held by the UK since 1713 and has the status of a British overseas territory; recent post-Brexit developments suggest that Europe, and especially Spain, may have renewed claims on the territory.

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I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make offline so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do…Click Here To See

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Authored by Tom Elliott, originally posted at Grabien News,

Since news broke Monday that the Obama Administration's National Security Adviser, Susan Rice, directed the "unmasking" of NSA intercepts of Trump associates, CNN has raced to shoot down the blockbuster report.

CNN Tonight's Don Lemon went so far as to announce he would ignore the news at all costs.

While interviewing a Democratic congressman, CNN's Chris Cuomo claimed it was "demonstrably untrue" Rice sought surveillance of the Trump team, even as that's exactly what yesterday's reports prove.

Over the last 24 hours, the network has also repeatedly called on its chief national security correspondent, Jim Sciutto, to dismiss the reports as a non-story; Sciutto has even excused Rice claiming ignorance of the unmasking scandal two weeks ago, arguing Rice "wasn't aware" what unmasking Rep. Devin Nunes (D-Calif.) was referring to.

And on Tuesday's "New Day," anchor Alisyn Camerota openly pleaded with Sen. John McCain to write-off the news as unimportant.

Last night, Lemon began "CNN Tonight" with an announcement that the Rice report a "fake scandal ginned up by right-wing media and Trump" that he would not be baited into justifying with coverage.

"On this program tonight, we will not insult your intelligence by pretending," it's legitimate, he said. "Nor will we aid and abet the people trying to misinform you, the American people, by creating a diversion. Not going to do it."

Sciutto also claimed the story was "ginned up" to distract from Trump tweeting that the Trump Tower was "wiretapped," when it was in fact communications were picked up through ordinary NSA surveillance.

"Again, to note by senior intelligence officials who work for both Democrats and Republicans, this appears to be a story, largely ginned up, partly as a distraction from this larger investigation," Sciutto told Anderson Cooper, explaining that "someone close to Ambassador Rice" told him this type of unmasking is "not unusual." 

In another appearance, Sciutto even attempted to excuse Rice from claiming to have no knowledge of the unmasking she's been caught orchestrating.

"From her perspective she didn’t know what specific unmasking Devin Nunes and others are talking about, in part because that is something she asks — or asked during the regular course of her work as national security adviser," he said. "I do know from speaking to people yesterday close to her that she doesn’t know specifically what Devin Nunes and others are accusing her of when it comes to unmasking because that was something sets in the regular course of her job."

And in yet another appearance, Sciutto also setup something of a strawman, arguing that the unmasking story is not important because "unmasking is not leaking."

During an interview with Sen. John McCain, CNN's Camerota plainly tried nudging the Arizona senator into dismissing the Rice bombshell:

CAMEROTA: “Okay, senator, I want to move on to other news of the day and that is, as you know, the Trump White House has talked about what they see or they say they see as a controversy of the former national security adviser Susan Rice unmasking a name, someone on team Trump, that was somehow caught up in some incidental collection of surveillance. They say that this is a controversy, it shows that she has done something wildly out of the bounds of normalcy. Is this business as usual for a national security adviser to ask for a name to be revealed, an American name, if she wants to know more or is this some sort of a controversy?”

 

McCAIN: “I think the circumstances indicate that there’s a possibility that that request could have been politically motivated. But we need to get to the bottom of it. As I’ve said, and I’ll probably say many more times because I’m kind of boring, this is a centipede. A shoe will drop every few days, the latest the meeting in Seychelles. This is a requirement, in my view, why we need a select committee in order to get through all this because there’s lots more shoes that will drop. I can’t make a judgment on what I just heard. She did have the authority to do it. What was the motivation for doing it, I think is the question.”

 

CAMEROTA: “What we’ve heard from the reporting, is that if she saw a masked name that said American number one had these conversations with Russians at the same time that President Obama had imposed sanctions, wouldn’t that arouse some curiosity on her part?”

 

McCAIN: “All I can say, Alisyn, is that I don’t know enough to reach a conclusion except to say this is another aspect of this multi-dimensional scandal."

CNN were not alone in this effort to desperately cover up Rice's misdeeds – just skim MSNBC or New York Times' headlines – but CNN does seem the most vociferous in its defense of Rice. Here they are this morning…

This is how CNN opened its Susan Rice segment this morning. What an embarrassment. http://pic.twitter.com/LpVN9iIjqu

— Alex Griswold (@HashtagGriswold) April 4, 2017

Roughly translated: "That Susan Rice story is fake. We know this because Susan Rice's friend says so."

The pushback comes as Sen. Rand Paul (R-Ky.) said on Monday that Rice should testify under oath to address multiple reports she had unmasked the identities of Americans associated with the Trump campaign and transition team.

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Last Thursday, when AMZN stock – currently trading at some ridiculous four or more digit P/E multiple  – made its latest spurt higher, we reported that as a result of the move, Jeff Bezos was now richer than Warren Buffett and fast approaching Bill Gates.

As a reminder, just last Wednesday Bezos added $1.5 billion to his net worth, the day after the e-commerce giant announced it will buy Dubai-based online retailer Souq.com, and has added over $7 billion since the global equities rally began following the election of Donald Trump. As of last week, Bezos had a net worth of $75.6 billion based on the Bloomberg Billionaires Index. That’s $700 million more than Berkshire Hathaway Inc.’s Buffett and $1.3 billion above Ortega, the founder of Inditex SA and Europe’s richest person.

 

That said, as of last Thursday, Bezos remained just over $10 billion behind Microsoft co-founder Bill Gates, the world’s richest person with $86 billion.

But not for long, because fast forward less than a week later, when following a number of more sellside upgrades, Bezos is nearly there.

The latest catalyst: a “research” report from BMO’s Daniel Salmon who upgraded the company to BMO’s Top Pick, boosting his price target from $900 to $1,200. The alleged catalyst: Amazon is next set to challenge Google on its advertising business, to wit:

In this 46-page report, we examine a significant emerging opportunity for Amazon: advertising. We believe Amazon’s ad business is gaining significant momentum, will reach $3.5B in revenue in 2017 (up 65%), and is increasingly being driven by the native, CPC ad product, Sponsored Products. We believe this high margin revenue can buttress our thesis around “investments while growing margins” and could be a greater catalyst for the stock if management shares more data points on it.

 

We believe Amazon will take share of marketing spend from 1) Google, 2) Facebook, 3) other online direct response budgets, 4) offline direct marketing, and 5) retailers’ trade promotion budgets. Amazon is early in its video strategy, including around premium content, so we do not see branding/television budgets at much risk today, though we expect this to ramp in the years ahead. We believe Amazon’s advertising business could have adjusted EBITDA margins in the 50%-70% range and is very accretive to total company margins. We believe the advertising business can be used to offset investments in other areas of Amazon’s business (price, Prime content, India, etc.) while expanding margins.

 

Valuation: We are raising our price target from $900 to $1200 owing to higher estimates and a higher target multiple due to the early stage nature of the high margin ad business. Our new $1200 price target implies 27.1x 2017E EV/adjusted EBITDA, versus our prior 20.7x 2017E EV/adjusted EBITDA.

 

How does Salmon get to a $1,200 price target? Simple: by using a 130x P/E multiple.

While it is easy to dismiss the recent surge in analyst euphoria as nothing more than lemmings chasing momentum to the upside, the outcome for the stock is clear, and as of this morning, AMZN is up another $6, or 0.7%, with the stock trading on top of $900, up $25 in just a few days, and cutting the net worth spread between Bezos and Gates by 20%.

More notable is that should Amazon hit BMO’s price target, as explained last week that would make Bezos the world’s undisputed richest man. But it doesn’t even have to rise that high: in fact, AMZN is now just $100 dollars away from the key $1,000/share level at which point the owner of the Washington Post would surpass $86 billion in value and – assuming MSFT stock does not rise in tandem – would make Bezos the world’s richest man.

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