BofAML Warns “US 10Y Yields Have Reached Massive Resistance”

Since mid-October the US$ has been under siege. However, As BofAML’s MacNeill Curry notes, that decline is showing signs of exhaustion from which a base and correction higher is likely. Curry’s “basing” view is further supported by the US Treasury market, where yields (particularly 5yrs and 10yrs) are poised to bottom and turn higher over the coming sessions

US Treasury yields set to base

US 10yr yields have reached “Massive” resistance. Specifically, the 2.474%/2.399% zone has been a long standing pivot which has repeatedly repelled. With momentum (14d RSI) at its most overbought since May, odds favor a medium term bearish turn in trend towards the mid-Oct highs at 2.759%.

 

 

Source: BofAML


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/E4OtjUm7i7Y/story01.htm Tyler Durden

BofAML Warns "US 10Y Yields Have Reached Massive Resistance"

Since mid-October the US$ has been under siege. However, As BofAML’s MacNeill Curry notes, that decline is showing signs of exhaustion from which a base and correction higher is likely. Curry’s “basing” view is further supported by the US Treasury market, where yields (particularly 5yrs and 10yrs) are poised to bottom and turn higher over the coming sessions

US Treasury yields set to base

US 10yr yields have reached “Massive” resistance. Specifically, the 2.474%/2.399% zone has been a long standing pivot which has repeatedly repelled. With momentum (14d RSI) at its most overbought since May, odds favor a medium term bearish turn in trend towards the mid-Oct highs at 2.759%.

 

 

Source: BofAML


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/E4OtjUm7i7Y/story01.htm Tyler Durden

Guest Post: The Plan Is Not Working

Submitted by Jeffrey Tucker of Laissez Faire Club blog,

You didn’t want to be the guy chosen to tell Stalin that the wheat crop failed or the production quotas on trucks and cars were not met. Why?

Because despots always blame people, not systems.

In the same way, you don’t want to be the guy chosen to tell Obama that his health care websites are a disaster. But that’s what they are, and he’s managed to blame everyone but himself.

At his hilarious and embarrassing press conference on Monday, the president first assured us that “no one is madder than me” about website failures. Then, of course, he lashed out at the critics and implicitly blamed them for technical failures.

“It’s time for folks to stop rooting for its failure, because hardworking, middle-class families are rooting for its success.”

Someone needs to explain to this guy that rooting one way or another does not cause a website to fail. Crop failures in Russia were not because of the enemies of communism, and the failure of Obama’s health care websites are not due to his political enemies, either. The problem is that government is a bad developer, even when it’s contracting out.

Then Obama said, “We did not wage this long and contentious battle just around a website. That’s not what this was about.”

There he goes again, defining his own reality. By plunging into direct provision of a commercial service and forcing people to cough up for it, Obamacare and its website must be prepared to be accessed just like any other private market service.

People don’t like it when websites are flaky and do not perform. By dismissing this feature — treating the website as if it is just a luxury feature that has nothing to do with the program itself — he reveals that he’s stuck in the past.

A website is not just a convenience. It is the heart and soul of a service that purports to serve everyone. In some ways, this is the most important website this government has ever produced. People don’t use the sites of the Pentagon or Housing and Urban Development. But this one people not only use, but are forced to use. Its failure is epic.

The president then made matters worse. He pointed out that people can download a form and mail it in. Also that people can go to centers where there are people who can help. Then he even rattled off an 800 number that people could call.

As The New York Times said with a funny blandness: “Several calls to the number immediately after he read it produced busy signals.”

Busy signals? I think the last time I heard one of those I was in seventh grade. No one under the age of 25 even knows what a “busy signal” is.

The terrifying thing is that all the troubles with HealthCare.gov foreshadow what’s coming with the new system of health care. Who can doubt it? It is going to be thrown back, inefficient, backward-looking, full of bureaucracy, insanely expensive, characterized by busy signals, and ultimately ending with a demand to come back another day.

Let’s talk about expenses. The website Digital Trends estimates costs between $500 million and perhaps as much as $2 billion before the end of 2014 just to operate the website. This is, quite frankly, unthinkably absurd:

“Facebook, which received its first investment in June 2004, operated for a full six years before surpassing the $500 million mark in June 2010. Twitter, created in 2006, managed to get by with only $360.17 million in total funding until a $400 million boost in 2011. Instagram ginned up just $57.5 million in funding before Facebook bought it for (a staggering) $1 billion last year. And LinkedIn and Spotify, meanwhile, have only raised, respectively, $200 million and $288 million.”

In short, this stuff redefines the word “boondoggle.” And it’s not like the typical Pentagon scandal because, again, this is a regular commercial webspace. Every business in America builds websites. The big difference is they do it with their own money. People know how much sites cost and how they are supposed to operate. That’s why this government website failure is so significant.

It is worth asking why a government with half a billion dollars and vast amounts of time and personnel to make a great site can’t actually manage to do it. It’s not as if the government didn’t have the incentive to do it right. The most powerful people on Earth wanted it to succeed — and in this respect, there is no question that Obama is telling truth. He really did wish upon a star.

The problem is that government is not the best means to do anything well. The problem is the absence of two crucial things: the knowledge to assemble the resources properly and the means to make the economic assessment of the value of competitive resources. This is what happens when you eliminate the profit-and-loss system. You can throw massive resources at a problem with the end result being disappointing.
You didn’t want to be the guy chosen to tell Stalin that the wheat crop failed or the production quotas on trucks and cars were not met. Why?

Because despots always blame people, not systems.

In the same way, you don’t want to be the guy chosen to tell Obama that his health care websites are a disaster. But that’s what they are, and he’s managed to blame everyone but himself.

At his hilarious and embarrassing press conference on Monday, the president first assured us that “no one is madder than me” about website failures. Then, of course, he lashed out at the critics and implicitly blamed them for technical failures.

“It’s time for folks to stop rooting for its failure, because hardworking, middle-class families are rooting for its success.”

Someone needs to explain to this guy that rooting one way or another does not cause a website to fail. Crop failures in Russia were not because of the enemies of communism, and the failure of Obama’s health care websites are not due to his political enemies, either. The problem is that government is a bad developer, even when it’s contracting out.

Then Obama said, “We did not wage this long and contentious battle just around a website. That’s not what this was about.”

There he goes again, defining his own reality. By plunging into direct provision of a commercial service and forcing people to cough up for it, Obamacare and its website must be prepared to be accessed just like any other private market service.

People don’t like it when websites are flaky and do not perform. By dismissing this feature — treating the website as if it is just a luxury feature that has nothing to do with the program itself — he reveals that he’s stuck in the past.

A website is not just a convenience. It is the heart and soul of a service that purports to serve everyone. In some ways, this is the most important website this government has ever produced. People don’t use the sites of the Pentagon or Housing and Urban Development. But this one people not only use, but are forced to use. Its failure is epic.

The president then made matters worse. He pointed out that people can download a form and mail it in. Also that people can go to centers where there are people who can help. Then he even rattled off an 800 number that people could call.

As The New York
Times said with a funny blandness: “Several calls to the number immediately after he read it produced busy signals.”

Busy signals? I think the last time I heard one of those I was in seventh grade. No one under the age of 25 even knows what a “busy signal” is.

The terrifying thing is that all the troubles with HealthCare.gov foreshadow what’s coming with the new system of health care. Who can doubt it? It is going to be thrown back, inefficient, backward-looking, full of bureaucracy, insanely expensive, characterized by busy signals, and ultimately ending with a demand to come back another day.

Let’s talk about expenses. The website Digital Trends estimates costs between $500 million and perhaps as much as $2 billion before the end of 2014 just to operate the website. This is, quite frankly, unthinkably absurd:

    “Facebook, which received its first investment in June 2004, operated for a full six years before surpassing the $500 million mark in June 2010. Twitter, created in 2006, managed to get by with only $360.17 million in total funding until a $400 million boost in 2011. Instagram ginned up just $57.5 million in funding before Facebook bought it for (a staggering) $1 billion last year. And LinkedIn and Spotify, meanwhile, have only raised, respectively, $200 million and $288 million.”

In short, this stuff redefines the word “boondoggle.” And it’s not like the typical Pentagon scandal because, again, this is a regular commercial webspace. Every business in America builds websites. The big difference is they do it with their own money. People know how much sites cost and how they are supposed to operate. That’s why this government website failure is so significant.

It is worth asking why a government with half a billion dollars and vast amounts of time and personnel to make a great site can’t actually manage to do it. It’s not as if the government didn’t have the incentive to do it right. The most powerful people on Earth wanted it to succeed — and in this respect, there is no question that Obama is telling truth. He really did wish upon a star.

The problem is that government is not the best means to do anything well. The problem is the absence of two crucial things: the knowledge to assemble the resources properly and the means to make the economic assessment of the value of competitive resources. This is what happens when you eliminate the profit-and-loss system. You can throw massive resources at a problem with the end result being disappointing.

Again, it is not just about the website. It is about the whole system. The fools who imposed this system had all the expertise, all the arrogance, all the money, and all the power, and they still couldn’t do it. Meanwhile, hundreds of thousands of workable and useful websites go up every day.

Has there ever been in our times a better symbol of the failure of government? The truth is this: Government doesn’t work. Here’s the proof. It’s just the beginning. If you want health care in the future, you are going to have to look outside the system. And plenty of people right now are working on that solution, which, unlike that which the experts create, will actually serve human needs. The fools who imposed this system had all the expertise, all the arrogance, all the money, and all the power, and they still couldn’t do it. Meanwhile, hundreds of thousands of workable and useful websites go up every day.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/tjjaC2zkW3c/story01.htm Tyler Durden

Mark Faber Fears “Stocks Could Be Dead Money For A While” But “Gold Has Bottomed”

“Since September 2011’s $1921 peak, gold has been in correction mode,” Mark Faber tells Barrons in this brief clip, but the overhwleminly bearish sentiment combined with the major accumulation (most notably by China) means “gold prices have probably bottomed,” and some gold mining stocks are well positioned. While Faber has recently expressed concern at the potential for a major correction in stocks, he notes that there are pockets of value worth investigating including European Telcos and Indo-China travel-related stocks. However, the Gloom, Boom & Doom report writer warns that “stocks could be dead money for a while.”

 

On Gold and Gold Miners:

Gold peaked at $1,921 an ounce in September 2011. Since then, it has been in a correction mode. Sentiment is bearish, but some countries are accumulating gold, notably China, which will buy an estimated 2,600 tons this year, exceeding annual production. Prices probably are bottoming.

 

Gold-mining shares aren’t expensive either, although many exploration companies won’t make it. If you buy the miners, look for companies that have raised capital already or have sufficient reserves. They are best-positioned to survive the next few years if there is no upturn in the gold price.

Full Barrons’ Interview below:

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/mbcIR6zsHzg/story01.htm Tyler Durden

Mark Faber Fears "Stocks Could Be Dead Money For A While" But "Gold Has Bottomed"

“Since September 2011’s $1921 peak, gold has been in correction mode,” Mark Faber tells Barrons in this brief clip, but the overhwleminly bearish sentiment combined with the major accumulation (most notably by China) means “gold prices have probably bottomed,” and some gold mining stocks are well positioned. While Faber has recently expressed concern at the potential for a major correction in stocks, he notes that there are pockets of value worth investigating including European Telcos and Indo-China travel-related stocks. However, the Gloom, Boom & Doom report writer warns that “stocks could be dead money for a while.”

 

On Gold and Gold Miners:

Gold peaked at $1,921 an ounce in September 2011. Since then, it has been in a correction mode. Sentiment is bearish, but some countries are accumulating gold, notably China, which will buy an estimated 2,600 tons this year, exceeding annual production. Prices probably are bottoming.

 

Gold-mining shares aren’t expensive either, although many exploration companies won’t make it. If you buy the miners, look for companies that have raised capital already or have sufficient reserves. They are best-positioned to survive the next few years if there is no upturn in the gold price.

Full Barrons’ Interview below:

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/mbcIR6zsHzg/story01.htm Tyler Durden

An Audacious Plan To Fix The QE Non-Taper And Fiscal Non-Action in One Swift Move

Submitted by F.F. Wiley of Cyniconomics blog,

eccles ford map 2

If you’re anything like us, you may have reached the conclusions that:

  1. Our elected officials are charting a course to a fiscal disaster.
  2. The Fed is repeating past mistakes by setting us up for another bust.

After the drama of the debt ceiling debate and the Fed’s non-tapering surprise, we see no reason to doubt these views.

But the latest developments got us thinking, and we have an unusual proposal. Before we share it, we’ll need to provide some background.

Recall that the Fed extended and released its economic outlook at its non-tapering meeting in September, and the Congressional Budget Office (CBO) published new projections at about the same time.

The chart below compares GDP growth forecasts from both institutions, including one path per FOMC member for the Fed’s outlook (from September’s meeting) and a single path for the CBO’s outlook (from figures published in May and used in the latest projections):

audacious plan

Apparently, the CBO’s Kool-Aid is much stronger than the Fed’s. You might even say it’s more hallucinogen than sugary fruit drink. Forecasting helpers aside, though, note that the predictions fit perfectly with themes favored by each institution:

CBO: The buoyant growth projection is merely an annual renewal of a long-standing CBO assumption that we’ll snap back to normal. It’s not so much a forecast but a connect-the-dots exercise of joining today’s GDP with a long-run trend line. It also explains the popular claim that there’s nothing urgent about our debt problem. By assuming a robust recovery, the CBO bends debt-to-GDP projections downward for the next few years, providing a convenient excuse for inaction. (See here or here for the debt charts and further discussion).

Fed: The unspectacular but unalarming growth forecasts are exactly what you would expect from our monetary policymakers. They’re unalarming for the obvious reason – the FOMC can’t just say the economy’s headed down a sinkhole, at least in public. And they’re unspectacular because policymakers have begun to grasp how broken the economy is, even if they don’t accept that their own policies helped with the breaking. Also, the tepid forecasts justify policymakers’ “whatever it takes” story, preserving both ZIRP and QE.

An intriguing solution

Getting back to our proposal, why not just trade the CBO’s economists for the Fed’s economists? One group of forecasters moves from the Eccles Building to the Ford House, and the other moves in the opposite direction. That’s 2.26 miles according to Mapquest, all in the same taxi zone. Relocation reimbursements would surely be unnecessary.

Think about the policy implications:

  • With a growth outlook matching the Fed’s figures above, the CBO’s projected debt ratios would no longer bend downward. This wouldn’t completely pull the rug out from under the “deficits don’t matter” crowd, but it should have some effect. We should at least see a little more urgency on measures to fix our fiscal problems.
  • As for the Fed, the buoyant outlook reported by the CBO’s economists would make QE less defensible if not redundant. This should encourage policymakers to follow through on their tapering plan, instead of reprising this year’s head fake.

But wait, you say: “Deep down, the CBO doesn’t like delivering bad news; and deep down, the Fed doesn’t want to taper. You can switch economists, but you can’t change outcomes.”

We know.

Even if it were plausible, our proposal wouldn’t necessarily work, and that doesn’t reflect well on the research that shapes public policies.

Which leaves us where?

In all seriousness, CBO and Fed forecasts have been wildly inaccurate, year after year. Evidence shows that these institutions don’t understand our economy. Yet, they refuse to migrate from failed methods to more successful ideas. They may claim to be learning from mistakes, but the basic approach is unchanged. You might say they’re trying to adjust to the automobile age by strapping wheels to a horse.

Take Austrian business cycle theory, for example. Fair-minded people recognize that recent years’ booms and busts were predicted by the Austrian school, even as mainstream macroeconomists were mostly flummoxed. But the mainstreamers refuses to concede that simple truth. Austrian principles are just too far removed from the abstract mathematical modeling that dominates the profession. Acknowledging that real life has proven these principles accurate and the modeling useless would not only devalue resumes but invalidate entire careers.

Unfortunately, much of the establishment considers CBO and Fed pronouncements to be gospel. We know better. The next time you hear someone giving the fiscal “all clear” based on CBO debt projections, pull out the chart above to show what’s really behind them. And the next time you hear someone extolling the Fed’s expertise, point out that a whole school of economists who actually got things right would disagree.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZV7vZ2nmWkg/story01.htm Tyler Durden

How To Play The Next Tech Disruption Wave

Three weeks ago, I outlined six key investment themes for the next decade. I neglected to mention one for wont of space and because I wanted to devote an entire post to it. Namely, further technological disruption to established industries. Everyone knows how the likes of retail and newspapers have been transformed by the internet. Well, there’s much more to come as it’s clear that supermarkets, healthcare and education are next in line for technological upheaval.

For instance, UK online grocer Ocado appears to have nailed an industrial scale pick and delivery model. For more than a decade, companies have tried and failed to make inroads into the online grocery business, the most notable failure being the 1990s internet-bubble inspired, Webvan. Through trial and error, Ocado seems to have mastered the notoriously difficult logistics involved in the business. And it will soon be out-doing supermarkets, offering a broader range of products, at lower prices and with the convenience of ordering via a simple click of the mouse. What Amazon did for books, Ocado is about to do for groceries.

As investors though, how can you take advantage of the emerging opportunities from the digital revolution? The obvious answer is through up-and-coming tech companies. But this is more difficult than many suppose. For every Facebook, there’s a Myspace – the wannabe Facebook originally backed by media billionaire Rupert Murdoch – and hundreds of others. In other words, the creative destruction in tech is enormous and trying to pick winners requires extensive knowledge and a large dose of luck.

I’d argue that the best way to play future technological disruption is through companies servicing the key players. What I’d term: facilitators. They would seem to be surer bets. For example, the internet’s transformation of retail and soon groceries means supply chains will need to quicken even further. Consumers are going to want goods delivered yesterday. That means quality logistics companies will be in high demand. And industrial warehouses near key airports and ports will be valued at a premium given increased demand for the fast turnaround of goods.

Today, Asia Confidential is going to discuss these opportunities and more, as well as the companies which are likely to benefit.

Digital revolution is just beginning 

There are many who think that tech is a gigantic bubble waiting to burst. You have the IPO of Twitter, a company being valued at US$13 billion and yet doesn’t earn a cent. And on a larger scale, Amazon (Nasdaq: AMZN) is still loss marking despite sporting a US$166 billion market capitalisation.

Then you have the internet start-ups being sold for millions and the venture capitalists backing them becoming quasi celebrities. Not to mention that residential property in Silicon Valley is now one of the most expensive in the United States.

But before writing tech off as a bubble, a few things should give you pause. For one, many large tech companies are now cheap as they’re considered yesterday’s heroes. Apple (Nasdaq: AAPL) is valued at less than 10x earnings if you strip out its enormous cash pile, compared to the S&P 500 12-month forward price-to-earnings ratio (PER) of 16x. Similarly, Microsoft (Nasdaq: MSFT) is on a PER of just 11x. More broadly, the tech sector has actually under-performed the S&P 500 this year. And similar tech under-performance has been witnessed in my neighbourhood of Asia.

The other thing is that history suggests this may not be a bubble. The evolution of railways in conjunction with the industrial revolution in the 1800s resulted in a long series of stock market booms, aka bubbles. The creative destruction involved then was similar to that of tech today.

Finally, if you think about the history of the current digital revolution, you may appreciate the enormous opportunities which lay ahead. Go back to the 1990s and the enthusiasm generated by browser technology. Then there was the advent of domain names and portals as well as email and instant messaging reaching the masses. Domain names assumed less importance with the rise of search and the behemoth, Google. And increased bandwidth has since paved the way for a huge uplift in web traffic.

While the digital revolution has been largely confined to the web so far, that’s starting to change as it moves into the real world. And that’s where things are about to get interesting.

I’ve talked previously about how 3-D printing is transforming the world of manufacturing. Physical objects can be designed on laptops and the designs can be shared online as files. Factories have been able to do this for decades but the big change is that now anyone with a computer can do it.

There are other examples of how the internet is being applied to the real world. You’ll know that smart phones are like quasi-computers these days. But do you know that each phone is uniquely identifiable on the internet? That is, the smart phone which may be in your hand right now has a mobile internet address. That means you can be connected to the internet 24/7. And companies can track your location via your device at any time.

One of Paypal’s latest inventions is Beacon, which gives retailers the power to recognise Paypal members as they enter their store (or walking past) and for these members to be able to make a transaction with a phone swipe or simple nod of agreement. In other words, there’s no need for these people to use credit cards or paper money. A virtual world, indeed. Needless to say, card issuers like Visa aren’t happy about it.

Think about the broader implications of this though. Retail companies no longer have to lure you into their store via your laptop at home. They can track you in real-time to market business opportunities.

Next industries to be hit

< p style="font-family: Georgia, 'Times New Roman', 'Bitstream Charter', Times, serif; font-size: 13px; line-height: 19px;">There are tens of thousands of start-up internet companies which are currently targeting digital applications for the real world. The most vulnerable industries are likely to be those which don’t offer the best prices, broad product ranges and convenience – or a combination of all three.

Online companies have been targeting supermarkets for the best part of 20 years. Everyone to date has tried and failed with an online grocery model. The most famous failure was Webvan, which went bankrupt in 2001 as the Nasdaq bubble burst. Amazon has also attempted to make headway in the space with AmazonFresh.  But to little avail.

Now, however, a UK company has emerged and appears as a genuine contender to take on the big supermarkets. Ocado (LON: OCDO) was formed by three former Goldman Sachs bankers in 2002. It received early backing from large UK department store operator John Lewis. And it listed in the UK in 2010 to much investor skepticism.

That skepticism is slowly dissipating though as the company is set to turn its first profit. It follows a huge 25-year deal with UK supermarket chain Wm Morrison to distribute online groceries. Ocado suggests overseas deals may flow from the Wm Morrison agreement.

Other sectors besides supermarkets also appear ripe for tech disruption. Education and healthcare are probably at the top of the list.

With education for instance, everyone know the enormous price inflation which has occurred across universities over the past 30 years. And yet education standards, particularly in the developed world, have shown minimal improvement during that time. What’s worse is that many university graduates don’t have the skills to get jobs in the current tough marketplace.

It doesn’t take a genius to realise how online study could totally displace university lectures and tutorials. And slash university costs along the way. In essence, universities should soon turn into venues where students go to collaborate or discuss what they’ve learned online.

Emerging tech companies worth looking at

But now you’re probably thinking: that’s all great, but how do we, as investors, take advantage of this tech revolution? The easy answer to that is to find the next Google (Nasdaq: GOOG). Only, that’s not so easy.

The U.S. offers some great tech companies, including Google itself as well as the likes of Ebay (Nasdaq: EBAY). These companies are innovators, with enormously scalable business models and generating prodigious amounts of cash.

Less known is that Asia also has some fantastic tech companies which probably offer even greater opportunities. China’s version of Google, Baidu (Nasdaq: BIDU), is one. You also have Sina (Nasdaq: SINA), which owns the Chinese equivalent of Twitter. Then there’s Youku (Nasdaq: YOKU), which you may have guessed is a wannabe Youtube in China.

There are many others which look just as interesting. I’d suggest Naver (KRX: 035420) in Korea is worth a look. It has a 70% share of search in South Korea. And it owns a social messaging service which has attracted more than 250 million users across Asia.

The problem that I have with investing in many of these tech companies is that it’s extraordinarily difficult to predict how the digital revolution will evolve from here. And who the winners will be. If you’re going to invest directly into tech companies, it’d be sound to spread your bets across a variety of companies, given this uncertain future.

But there may be a better way…

Better potential opportunities

Let me give you a rough analogy first. Unless you’ve lived in a cocoon for the past decade, you’ll know about the enormous commodities boom which has taken place. Many mining companies generated an enormous amount of wealth. What’s not publicised to the same degree is the number of failures during the period. I’d estimate 1000 failures for every success story.

Not only that, but even the largest miners wasted enormous amounts of cash on projects which has since been mothballed. Since the pullback in commodity prices from 2011, there’s been much criticism about this and that’s why you see the large mining companies cutting back on capital expenditure and promising to give more money back to shareholders via dividends (a revelation that’s been a decade in the making!)

Anyhow, my point is that investing directly into the mining companies, even the large ones, was not the best bet. For instance, most of these companies trailed commodity indices by a distance.

The companies where investors made more money were those servicing the mining industry. The mining contractors. As well as others servicing the areas where new mines developed, such accommodation providers and so forth. These companies were surer, less risky, but more profitable investments.

I’d suggest that same thinking may be profitable in the digital world too. Rather than playing the tech companies directly, investing in those servicing the industry may have a better payoff.

I’ll give you one example. Think about who else will benefit from the ongoing disruption in the retail sector. Inventory management and distribution have been, and will continue to be, crucial as the industry evolves. That means faster supply chains. To enable faster chains, logistics will be at a premium.

In addition, many distributors will prefer warehouses around key airports and ports, so goods can be turne
d around quickly to consumers across the country or abroad. That means real estate around key infrastructure should become more valuable given relative supply scarcity versus growing demand. And also ports themselves, particularly in oligopoly-type markets should also become more valuable as greater throughput occurs from quickening supply chains.

For logistics companies, you probably have to look to the U.S. as they’re are few quality listed vehicles in Asia. The likes of UPS (NYSE: UPS) and Fedex (NYSE: FDX) would seem to have bright futures.

In terms of industrial real estate around key infrastructure, Goodman Group (ASX: GMG) in Australia and Mapletree Industrial (SGX: ME8U) in Singapore give you partial exposure to this. I also like the world’s largest industrial property operator, Prologis (NYSE: PLD), in the U.S. It focuses purely on property near key infrastructure and is run by one of real estate’s most brilliant minds, Hamid Moghadam.

For exposure to port operators La Ka-shing’s Hutchison Whampoa (HKG: 13) is a great play not only on Hong Kong but European ports too. Chinese state-owned Cosco Pacific (HKG: 1199) also gives you exposure, though the quality of the company is questionable.

The above provides just a few examples of how to potentially invest in those facilitating the digital revolution.

This post was originally published at Asia Confidential: 
http://asiaconf.com/2013/10/27/playing-next-tech-disruption/

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/s9YmkMV-s3w/story01.htm Asia Confidential

Detroit Pensioners Face Miserable 16 Cent On The Dollar Recovery

If there is ever a case study about people who built up their reputation and then squandered it for first being right for all the wrong reasons, and then being wrong for the right ones, then Meredith Whitney certainly heads the list of eligible candidates. After “predicting” the great financial crisis back in 2007 by looking at some deteriorating credit trends at Citigroup, a process that many had engaged beforehand and had come to a far more dire -and just as correct – conclusion, Whitney rose to stardom for merely regurgitating a well-known meme, however since her trumpeted call was the one closest to the Lehman-Day event when it all came crashing down, it afforded her a 5 year very lucrative stint as an advisor. Said stint has now been shuttered.

The main reason for the shuttering, of course, is that in 2010 she also called an imminent “muni” cataclysm, staking her reputation once again not only on what is fundamentally obvious, but locking in a time frame: 2011. Alas, this time her “timing” luck ran out and her call was dead wrong, leading people to question her abilities, and ultimately to give up on her “advisory” services altogether. Which in some ways is a shame because Whitney was and is quite correct about the municipal default tidal wave, as Detroit and ever more municipalities have shown, and the only question is the timing.

However, as Citi’s Matt King recent showed, when it comes to stepwise, quantum leap repricings of widely held credits, the revelation is usually a very painful, sudden and very dramatic one. This can be seen nowhere better than in the default of Lehman brothers, where while the firm’s equity was slow to admit defeat it was nothing in comparison to the abject case study in denial that the Lehman bonds put in. However, as can be seen in the chart below, when it finally came, and when bondholders realized they are screwed the morning of Monday, Septembr 15 when the Lehman bankruptcy filing was fact, the move from 80 cents on the dollar to under 10 cents took place in a heartbeat.

It is the same kind of violent and anguished repricing that all unsecrued creditors in the coming wave of heretofore “denialed” municipal bankruptcy filings will have to undergo. Starting with Detroit, where as Reuters reports, the recovery to pensioners, retirees and all other unsecured creditors will be…. 16 cents on the dollar!…  or less than what Greek bondholders got in the country’s latest (and certainly not final) bankruptcy.

From Reuters:

On Friday, city financial consultant Kenneth Buckfire said he did not have to recommend to Orr that pensions for the city’s retirees be cut as a way to help Detroit navigate through debts and liabilities that total $18.5 billion.

 

Buckfire said it was clear that the city did not have the funds to pay the unsecured pension payouts without cutting them.

 

“It was a function of the mathematics,” said Buckfire, who said he did not think it was necessary for him or anyone else to recommend pension cuts to Orr.

 

“Are you saying it was so self-evident that no one had to say it?” asked Claude Montgomery, attorney for a committee of retirees that was created by Rhodes.

 

“Yes,” Buckfire answered. 

 

Buckfire, a Detroit native and investment banker with restructuring experience, later told the court the city plans to pay unsecured creditors, including the city’s pensioners, 16 cents on the dollar. There are about 23,500 city retirees.

One wonders by how many cents on the dollar the recovery to pensioners would increase if the New York-based Miller Buckfire were to cut their advisory fee, but that is not the point of this post (it will be of a subsequent).

What is the point, is that creditors across all products, aided and abetted by the greatest credit bubble of all time blown by Benny and the Inkjets, will find the kind of violent repricings that Lehman showed take place whenever hope dies, increasingly more prevalent. And since retirees and pensioners are ultimately creditors, this is perhaps the fastest, if certainly most brutal way, to make sure that the United Welfare States of America is finally on a path of sustainability.

The only question is how will those same retirees who have just undergone an 84 cent haircut, take it. One hopes: peacefully. Because among those whose incentive to work effectively has just been cut to zero, is also the local police force. In which case if hope once again fails, it is perhaps better not to contemplate the consequences. For both Meredith Whitney, who will eventually be proven right, and for everyone else.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/N2zhEdnrFvY/story01.htm Tyler Durden

“A Market Likely To Suck Everyone In To Its Last Updraft “

From Sean Corrigan Of Diapason Commodities Management

Material Evidence

At present the whole world is happy to treat the post?Shutdown US as a Goldilocks fable. Herein, such good macro numbers as do occur are eitherdeemed an aberration soon to reversed as the supposed disruption of the budget dispute filters its way into the reckoning, or else they serve to underpin the assumptions of higher earnings to come. Weaker ones – like the just?released NFP – are also welcome for their prophylactic effect since they can only continue to disarm an already bedraggled flock of Fed hawks, leaving the rest of us hoarsely Yellen for more.

So, in the run?up to book closing, we may see everyone scramble out to their waiting Sopwith, silk scarf flapping jauntily in the slipstream of the ‘crate’s’ spinning propellers, to the exultant cryof, “Chocks away, Ginger!? Off will go our heroes, soaring not so much to a tumult in the clouds as to the wide, blue yonder of ever higher equity prices and ever fatter bonus cheques.

Ye Gods! Even that discredited old hack, Alan Greenspan ? the man who bears as much responsibility as anyone for the hypertrophy of state- supported finance and thus for the havoc it continues to wreak ? is at it, trying to tell us that because of a low ‘equity premium’ (read: ludicrously intervention?depressed bond yields), the ‘momentum’ of stocks ‘is still relatively up’.

Such a market is therefore likely to suck everyone in to its last, Plinian updraft no matter how stretched everything becomes and no matter how great the risk of being cast into perdition in the pyroclastic collapse to come. That said, one cannot fail to be tempted by the fact that margin debt is in the stratosphere (a new dollar high and a fraction of market cap only outdone in QI’00); sentiment is heavily bullish (the AAII Bull?Bear index is at levels only once beaten to any significant degree in the past since the start of 2006; while that same index multiplied by stock prices is in the 97th percentile of a quarter?century sample), put?call skews are high and vols are low.

In turn, this means that our favourite ‘Blue Sky’ indices (index levels divided by volatility measures, such as OEX/VXO) are off the charts. Indeed, that particular example is now 2.7 sigmas over a 28?year mean, in a 99th percentile which has only once been surpassed, at the start of 2007, before the first rumblings of the CDO cyclone and sub?prime tsunami were audible to any but the most perceptive listener. In Germany, the DAX/VDAX equivalent sits at a major, new 21?year high, a whopping 3.7 sigmas over its period mean.

There are one or two other technical signals, too. The S&P500 ex?financials has all but completed a handsome?looking long?term profile during the DDIE. The financials, meanwhile, have retraced 50% of their LEH?AIG meltdown. Nasdaq has been on one of Didier Sornette’s exponential accelerations, climbing more ever more rapidly on ever shorter timeframes up into the top few percent of another clean, projected top mapped out off the 2009 lows. Looking further back in time, since that same 2009 nadir, the DJIA has ascended by an amount only exceeded in the run up to 1920, 1929, 1937, 1987, and 2000 – all of them major tops. Juicy!

What we must caution here, however, is that anyone tempted to lean into this particular wind must have the patience to wait for signs of even a temporary exhaustion before setting shorts. Critical, too, will be the discipline to stop out if and when those initial selling ‘tails’ start to fill back in, for fear that this is a signal that the mania has not yet ended and that the buyers of dips are still all too dominant.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wmfn3uwhSyU/story01.htm Tyler Durden