Month: October 2019

Last week we explained how the global IPO market was unraveling. Then this morning, we outlined how the devastating impact of WeWork’s catastrophic failed IPO had damaged capital market sentiment. It’s likely that 2019 will go down in history as the worst year for IPOs, not just in the US, but also globally. 

As the global IPO bubble implodes, there’s a new report from Reuters that warns how global mergers and acquisitions (M&A) are also plunging, a sign that economic uncertainty surrounding the trade war has frightened capital markets.  

As corporate sentiment deteriorates around the world, many believe a global trade recession could arrive as early as 2020, which has sparked a massive push into money markets, precious metals, and government bonds in the last six to eight months. 

With the expectation of economic doom ahead, management teams of multinationals are quicky pulling M&A deals. This was evident in 3Q19 figures, where global M&A plunged 16% YoY, one of the lowest quarterly volume prints since 2016. 

“M&A volumes have dissipated because there are concerns that risks may be rising in several spots, in markets and elsewhere,” said Michael Carr, global co-head of M&A at Goldman Sachs Group Inc.

A lot of the uncertainty was seen in the US, M&A volume collapsed by 40% YoY in 3Q19, to $246 billion, the lowest quarterly level since 2014.

M&A volume in Asia was weakening as well, down 20% YoY to $160 billion, the lowest level since 2017.

Robin Rankin, global co-head of M&A at Credit Suisse Group AG, told Reuters that valuation concerns of companies have slowed down M&A transactions.  

“Companies looking at deals have become more risk-averse, and this is likely to bring M&A volumes down for the year. But we expect M&A activity to be strong going into next year,” said Rankin. 

Deal making in Europe was an exception. M&A volume across the Eurozone jumped 45% YoY in 3Q19.

“In Europe we have seen a real mix of different kind of deals which were spread across various sectors and geographies,” said Eamon Brabazon, co-head of EMEA M&A at Bank of America Corp .

“This is a sign of a healthy market because we’re not relying only on a particular strand. There’s no obvious reason to believe the M&A market will turn south in the foreseeable future,” he added.

One of the largest M&A deals that went bust in the quarter was Marlboro maker Philip Morris International Inc’s bid to merge with Altria Group Inc, would have created a market value of $200 billion. The deal was scrapped when government officials opened investigations into Altria’s Juul e-cigarette, for the possibility of triggering a dozen or so vaping-related deaths. 

Waning capital market sentiment because of trade wars and recession threats could lead to more management teams pulling deals. It certainly seems that the windows for IPOs and M&As are closing, as economic turmoil could flare up in 2020. 

A slowdown in M&A deals is an ominous sign that Wall Street banks will see declining revenues in the quarters ahead

Authored by Eric Posner via Project Syndicate,

America’s Democrats have made a serious mistake by launching impeachment proceedings against President Donald Trump. They are replaying the Republican impeachment of Bill Clinton in 1998, a futile exercise that damaged Republicans, enhanced Clinton’s power, and caused institutional damage as well.

The common factor of the two impeachments is that it was clear from the start that the US Senate would never convict, which requires a two-thirds majority. The 45 Senate Democrats were not happy that Clinton perjured himself before a grand jury, obstructed justice, and conducted an extramarital sexual affair with a White House intern, Monica Lewinsky. But they did not believe that this behavior was grounds for removal from office. The behavior was not sufficiently egregious to overcome their political loyalty to a president who remained popular with voters.

Republicans leading the impeachment knew that few if any Senate Democrats would vote to convict (in fact, none did). But Republicans hoped to embarrass the Democrats and damage Clinton, believing that they would pick up some seats in the November 1998 election by launching impeachment proceedings before then. They were wrong. Clinton’s popularity rose after the impeachment proceedings ended. Most Americans believed that impeachment was a mistake.

Many people worried that the Clinton impeachment would damage the presidency, but its main impact on presidential power was the opposite. Republicans eventually agreed with Democrats that responsibility for the debacle lay with Kenneth Starr, the independent counsel whose investigations of Clinton’s real-estate dealings years earlier eventually led him to Lewinsky. The two parties allowed the independent counsel statute to lapse, freeing the presidency from a powerful form of oversight, much to Trump’s benefit a generation later.

Today, Senate Republicans may well be privately concerned about Trump’s behavior. But there is no indication that even one would vote in favor of removal. While Trump is nowhere near as popular as Clinton was, he retains the loyalty of his base, who dominate the Republican primaries, and, unlike Clinton, he enjoys majority support in the Senate. Indeed, the extraordinary enthusiasm of Trump’s supporters – their indifference to his many other scandals – almost guarantees that any additional information that might materialize during the impeachment hearings will not influence Republican senators.

Some supporters of impeachment argue that the gravity of the accusations against Trump – that he enlisted a foreign country to harass a political opponent – will ensure his conviction. But we have been through this before. Democrats who abhor sexual harassment and perjury supported Clinton because they saw the alternative as worse. Republicans will make the same calculation. Perhaps the story would be different if Trump had persuaded the Ukrainians to arrest Joe Biden while sightseeing in Kyiv. The president’s behavior, as odious as it is, is a far cry from Richard Nixon’s involvement in espionage against the Democratic Party – the single historical example of impeachment proceedings leading to the removal (in Nixon’s case, resignation) of the president.

Others argue that even if Trump is not removed, impeachment in the House – which the Democratic majority virtually guarantees – will send a strong signal that the president’s behavior violates American values. But impeachment has its own narrative logic: once the Democrats initiate it, they either win or lose. If they lose, they will be seen as losers who wasted public resources for a futile goal.

Still others believe that impeachment hearings will reveal that Trump has committed crimes or betrayed the country in as yet undisclosed ways, or that the hearings will enable Democrats to convey the seriousness of all the president’s wrongdoing in a way that will galvanize the public. But the leaky Trump administration has kept few secrets so far, and much of his behavior has been normalized, at least for his Republican supporters. Impeachment proceedings, unlike judicial proceedings, are a cumbersome mechanism for developing evidence. Nothing new was learned about Clinton after the Starr Report was issued, and nothing new will be learned about Trump.

Indeed, Trump’s character flaws and misbehavior are already so well known that the impeachment proceedings will most likely blow back and cause more harm to Democratic politicians than Republicans. Again, the Clinton impeachment offers lessons. Everyone knew, or suspected, that Clinton was a womanizer (or what today might be called a sexual predator) and a serial liar. People were not quite as aware that Republican Speaker Newt Gingrich had also conducted an extramarital affair, as did his successor, Bob Livingston. Both resigned; Clinton remained in office. Trump’s greatest skill is in turning his prosecutors into the accused. Expect this to happen again, with Trump using his Twitter account to shine a spotlight on whichever Democrats have the greatest political vulnerabilities.

None of this is rocket science.

So, why would a canny politician like Speaker of the House Nancy Pelosi yield to other members’ pressure for impeachment (though she is clearly temporizing – for example, by refusing to hold a vote in the House to authorize the impeachment proceedings)? The answer stems from the basic logic of Congress in a polarized era.

Congress is a collective body. Its members are beholden to voters in specific districts or states rather than the country as a whole. House Democrats from more liberal districts fear that they will be defeated in primaries by more forcefully anti-Trump challengers. The only way to counter such challenges is by supporting impeachment. As more Democrats jump on the bandwagon, more moderate Democrats join in to avoid looking like defenders of Trump’s misconduct.

Mark Twain supposedly joked that “history does not repeat itself but it often rhymes.” But in this case, repetition seems to be the right word. The political logic that trapped the Republicans in 1998 will operate the same way on the Democrats in 2019.

Earlier this year, Japan’s SoftBank Group Corp. announced a $5.5 billion share buyback program as it said valuations for its technology investments continued to soar. Eight months later, and those technology investments are imploding, has since sent Softbank’s stock into a bear market. 

SoftBank’s share buyback program included measures to repurchase 112 million shares worth $5.5 billion through 1Q20, or about 10% of its current outstanding shares, excluding treasury stock.

Upon the announcement of the buyback program, Softbank’s equity nearly doubled from early February to late April. Then by late summer into early Fall, SoftBank’s shares plunged 28% in the last 42 trading sessions, pressured by troubling issues with the SoftBank Vision Fund, the company’s $103 billion venture portfolio.

SoftBank Vision Fund owns significant stakes in technology companies across the world. Some of the most recent pressures have been the valuation implosion of Uber and WeWork, reported Bloomberg. 

“Uber and WeWork, marquee investments by SoftBank, have both had a lamentable 2019. Uber finally went public in May, however its shares have tumbled more than 30% since then, hit by a $5.2 billion loss in its most recent quarterly earnings. Uber’s growth metrics are also starting to slow down, which is bad news for a company justifying its high burn rate on the basis of prodigious expansion.

WeWork, valued at as much as $47 billion, stumbled when it tried to go public as investors balked at its vertiginous valuation and unconventional governance practices. Chief Executive Officer Adam Neumann stepped down from the post, with Son’s SoftBank Group pushing for change. He is also tapping SoftBank Group Chief Operating Officer Marcelo Claure to help turn the company around, as WeWork faces a liquidity crunch. SoftBank Gives ‘Very Public Lesson’ to Founders in WeWork Ouster,” Bloomberg noted. 

The Vision Fund also owns significant stakes in technology companies in Asia, including a 29.5% stake in Alibaba Group Holding Ltd., one company that has found itself center stage in the trade war between the US and China. 

Alibaba saw its shares slide 11.4% in the last six trading sessions, with a 7.3% drop on Friday, due to new reports the Trump administration could delist Chinese companies from US exchanges.

New delays in the T-Mobile US Inc., Sprint Corp. merger have also added more woes to the fund, thus pressuring SoftBank’s stock. The fund has an 85% stake in Sprint, which SoftBank founder Masayoshi Son has been eager to see the merger close. 

Son’s aggressive risk-taking in technology companies dazzled investors in the last decade — but there are concerns that he might have overlooked valuation metrics for some. 

“The size and pace at which SoftBank made its investments raises issues of whether it paid close attention to the usual valuation metrics,” wrote Barry Ritholtz, a Bloomberg Opinion columnist and chairman of Ritholtz Wealth Management.

“Perhaps the Vision Fund allowed the hype to get the best of its assumptions about future growth and singular domination by these companies.”

SoftBank Vision Fund could be headed for a hard landing after valuation concerns of some of its technology holdings, could send SoftBank shares even lower, despite a $5.5 billion buyback program. 

S&P Global Ratings warned in July that SoftBank’s announcement of Vision Fund 2 is “extremely aggressive growth strategy and underlying financial policy… are likely to continue to restrain its credit quality.”

It’s only when the tide goes out that we find out SoftBank’s Vision Fund, managed by Son, has been swimming naked all along. The company took on too much leveraged and paid too much for unicorns. The tide is going out, and going out quick, SoftBank is likely headed for turmoil. 

The British pound swiftly erased a session’s worth of losses Tuesday evening local time following reports that the EU is ready to work with UK PM Boris Johnson to include a time limit on the controversial Irish Backstop.

Remember: The Irish backstop is a provision in the withdrawal agreement that would purportedly impose a hard border between Northern Ireland and the rest of the UK if the two sides can’t come up with a permanent trade deal during the post-Brexit negotiating period. The provision is a ‘backstop’ – meaning it only comes into effect if no binding agreement is reached.

But according to Bloomberg, the EU is reportedly on the verge of making a major concession to Johnson: Possibly agreeing to time-limit the backstop, which would help assuage British concerns that the backstop could leave them ‘trapped’ in the EU customs regime without any say over policy. Johnson himself has compared this status to being a “vassal state”.

If the report is accurate, this would be the most serious sign yet that the EU might be willing to fold to Johnson and grant him the concessions he needs to pass an updated version of Theresa May’s withdrawal agreement.

Per BBG, any time limit granted by the EU could be linked to giving the Northern Ireland Assembly a vote in whether the province remains in the backstop, which is designed to prevent a hard Irish border, the people said.

The news sent the pound surging.

Still, with Parliament in turmoil, it’s unclear whether Johnson would even be able to sell a modified Irish backstop. The deal would also need to be accepted by the Irish government.

But for months now, we’ve been pointing out that the EU doesn’t have the legal authority to force the UK and Ireland to build physical barriers – meaning that the bloc’s refusal to budge on the withdrawal agreement is merely a bluff.

Authored by Mike Shedlock via MishTalk,

Climate change alarmists have convinced the public something must be done now. The reports are easily debunked as fraud…

My Gift To Climate Alarmists

Tony Heller does an amazing job of showing how the fraud takes place in his video entitled My Gift To Climate Alarmists.

The video is only 12.51 minutes long.

Cherry Picking

• Heatwaves increasing since 1960

• Arctic ice declining since 1979

• Wildfires increasing since 1983

• Sea levels rising since 1920

When you want to mislead people with statistics picking the start date is very important.

Alarmist Heat Wave Chart Shown vs Underlying Data

US Wildfires as Presented by Alarmists vs Actual Data

Please compare the right hand portion of the above chart with the lower half of the heat wave chart to see the actual correlation.

Arctic Sea Ice Extent

US Sea Level Since 1920

US Sea Level Since 1850

Sea Level Rising for 20,000 Years

Waverly Ohio

Climate Fraud Tool

Tony Heller devised software to automatically pick the perfect start date for climate alarmists to use to portray what they want.

“Most scientists are keeping their mouths shut because they they have to. They would lose their career and income if they didn’t.”

“Adults won’t take climate change seriously. So we, the youth, are forced to strike.”

“The Green New Deal reads like the communist manifesto”.

Redistribute the World’s Wealth by Climate Policy

The climate change activists will of course claim that such statements are out of context.

I agree they likely are. But the brainwashing of kids isn’t.

Flashback 1989

Entire nations could be wiped off the earth by 2000.

Visit Real Climate Science for more information.

Heller shows some of the tricks alarmists use, but what about the actual long-term data?

Global Warming Swindle

William Land describes the actual underlying data for thousands of years in the “Great Global Warming Swindle“.

The video is long. However, the data aspect is fully covered in the first 35 minutes. The rest covers the politics of what’s happening. Here are some clips that I made.

Facts don’t Fit the Theory

Global Warming Fraud Basics

Co2 and Temp vs Solar Activity and Temp

Carbon dioxide does not fit the global warming cycle at all. Solar activity does.

Al Gores’ Ice Core examples

Al Gore’s ice core tests show Gore is wrong. Carbon dioxide lags temperature by 800 years.

Temperature leads CO2 not the other way around.

Cosmic Rays Inverted vs Temperature

• When cosmic rays went up, temperatures went down. When cosmic rays went down, temperature went up.

• Climate is controlled by the clouds. The clouds are controlled by cosmic rays. The cosmic rays are controlled by the sun.

• Vastly different records come together beautifully.

• It all comes down to the sun, not CO2.

Patrick Moore Greenpeace Co-Founder

Deniers and Heretics

Scientists who speak out face “climate denier” drumbeats.

Anyone who keeps it up long enough is labeled a heretic or worse.

“The environmental movement is really a political activist movement,” says the Greenpeace co-founder.

Worse yet, what should be a scientific debate, is now an unwinnable religious debate with indoctrinated kids used as tools.

A weak Manufacturing PMI and the narrative is shattered…

All the major US equity indices are at (or below) critical technical support levels:

• Nasdaq (upper left) – broken below 50- and 100-DMA

• Russell 2000 (lower left) – broken below 50-, 100- and 200-DMA

• Dow (upper right) – testing down towards 50-DMA

• S&P (lower right) – testing 50-DMA for the 3rd time in a week…

Will 3rd time be the charm for the bears?

 

Leaked audio from internal Facebook meetings feature CEO Mark Zuckerberg talking trash about Sen. Elizabeth Warren, Twitter, and rallying employees against critics. 

(Read the entire transcripts from two meetings here).

Speaking to nervous employees, Zuckerberg addressed calls by 2020 presidential candidates for Facebook to be broken up, answered questions about strong resistance from regulators around the globe concerning the company’s Libra cryptocurrency, and shared why he’s refused multiple requests to testify in Europe. 

According to The Verge, which obtained two hours of audio from the July meetings, notes that Zuckerberg uses language “that is often more candid than he typically uses in his public comments.” 

Select excerpts via The Verge: 

On the potential breakup of Facebook

“You have someone like Elizabeth Warren who thinks that the right answer is to break up the companies … if she gets elected president, then I would bet that we will have a legal challenge, and I would bet that we will win the legal challenge. And does that still suck for us? Yeah. I mean, I don’t want to have a major lawsuit against our own government. … But look, at the end of the day, if someone’s going to try to threaten something that existential, you go to the mat and you fight.” 

Warren responded to Zuckerberg on Tuesday, tweeting “What would really ‘suck’ is if we don’t fix a corrupt system that lets giant companies like Facebook engage in illegal anticompetitive practices, stomp on consumer privacy rights, and repeatedly fumble their responsibility to protect our democracy.” 

What would really “suck” is if we don’t fix a corrupt system that lets giant companies like Facebook engage in illegal anticompetitive practices, stomp on consumer privacy rights, and repeatedly fumble their responsibility to protect our democracy. https://t.co/rI0v55KKAi

— Elizabeth Warren (@ewarren) October 1, 2019

On how Big Tech can “solve the issues”

“It’s just that breaking up these companies, whether it’s Facebook or Google or Amazon, is not actually going to solve the issues. And, you know, it doesn’t make election interference less likely. It makes it more likely because now the companies can’t coordinate and work together.”

“…and why Twitter can’t”

“It’s why Twitter can’t do as good of a job as we can. I mean, they face, qualitatively, the same types of issues. But they can’t put in the investment. Our investment on safety is bigger than the whole revenue of their company.” [laughter]

Twitter communications head Brandon Borrman replied to this – tweeting “It’s not about money, it’s about getting the work done and solving problems for the people we serve. Mark clearly thinks differently. Keeping people safe and secure is in our shared interest as an industry and we ALL have more to do.”

It’s not about money, it’s about getting the work done and solving problems for the people we serve. Mark clearly thinks differently. Keeping people safe and secure is in our shared interest as an industry and we ALL have more to do. https://t.co/Wtg58QBSvk

— Brandon Borrman (@bborrman) October 1, 2019

On refusing to testify before other governments

“I’m not going to go to every single hearing around the world. A lot of different people want to do that. When the issues came up last year around Cambridge Analytica, I did hearings in the US. I did hearings in the EU. It just doesn’t really make sense for me to go to hearings in every single country that wants to have me show up.”

On Libra’s rocky rollout

“The public things, I think, tend to be a little more dramatic. But a bigger part of it is private engagement with regulators around the world, and those, I think, often, are more substantive and less dramatic. And those meetings aren’t being played for the camera, but that’s where a lot of the discussions and details get hashed out on things.”

 

On protecting (PTSD-stricken) contract content moderators who engage in sex and drug use to cope with the horrors of constant beheading videos and other graphic content.  

“Some of the reports, I think, are a little overdramatic. From digging into them and understanding what’s going on, it’s not that most people are just looking at just terrible things all day long. But there are really bad things that people have to deal with, and making sure that people get the right counseling and space and ability to take breaks and get the mental health support that they need is a really important thing.”

On competing with TikTok

“We have a product called Lasso that’s a standalone app that we’re working on, trying to get product-market fit in countries like Mexico … We’re trying to first see if we can get it to work in countries where TikTok is not already big before we go and compete with TikTok in countries where they are big.” 

Zuckerberg has responded to the leaked audio, saying in a Facebook post: “Every week I do a Q&A at Facebook where employees get to ask me anything and I share openly what I’m thinking on all kinds of projects and issues. The transcript from one of my Q&As a few months ago just got published online — and even though it was meant to be internal rather than public, now that it’s out there, you can check it out if you’re interested in seeing an unfiltered version of what I’m thinking and telling employees on a bunch of topics like social responsibility, breaking up tech companies, Libra, neural computing interfaces, and doing the right thing over the long term.”