Tag: finance

Another week, another Chinese default.

A month after Chaori Solar’s default turned on its head a long-held assumption that even high-yielding debt carried an implicit state guarantee, another Chinese firm has succumbed to the inevitable outcome resulting from a lack of cash flows. As a reminder, a technical default late last month by a small construction materials firm, Xuzhou Zhongsen Tonghao New Board Co Ltd, was the first in China’s high-yield bond market. However, in that case the guarantor of that bond eventually agreed to fund the required interest payment, resulting in the first bailout of the first high yield default. Still if Xuzhou didn’t want the distinction of the first Chinese HY default, many are lining up for that particular prize – such as a small manufacturer of polyester yarn based in China’s wealthy Zhejiang province has declared bankruptcy, threatening its ability to meet an interest payment on a high-yield bond due in July.

According to Reuters, the firm sold 60 million yuan ($9.7 million) in bonds in a private placement in January 2013 at an interest rate of 11 percent. The next interest payment is due on July 23, while the bond matures in January next year.

Reflecting the government’s new attitude towards default, the China Securities Regulatory Commission (CSRC) described the Xuzhou Zhongsen default as a commonplace event.

 

“(The Xuzhou Zhongsen bond) was issued to investors according to regulations, and the default is an isolated risk event. The commission will abide by market-based principles and handle the case according to law,” CSRC spokesman Deng Ge said at the agency’s weekly press conference on Friday.

And it is no secret that as the weeks keep rolling in, so will many more defaults:

Analysts widely expect more defaults on loans, bonds, and shadow bank products this year. Semiconductor, software, and commodities firms are among the most at risk for default, a Reuters analysis of more than 2,600 Chinese companies showed.

The Xuzhou Zhongsen default marked the first ever in China’s high-yield bond market, which the securities regulator launched in June 2012 in a bid to offer a new financing channel for small, private firms. Such firms often struggle to access credit in China’s state-dominated financial system. Zhejiang Huatesi’s bond was also issued in that market.

Pengyuan Credit Rating Co Ltd gave Zhejiang Huatesi Polymer’s bond an A+ rating when it was issued. That is among the lowest ratings at which bonds are commonly sold in China’s market.

Naturally, there is the possibility that this too bankruptcy will be delayed by a post-last minute payment by the guarantor, another polyester firm.

An executive at Dongguan Securities Co Ltd, which served as underwriter on the bond, told Reuters on Tuesday that the guarantor on the bond is likely to meet its obligation to make interest and principal payments if the issuer is unable to do so.

The bond carries an unconditional guarantee by Tianlong Holding Group Co Ltd, another polyester firm in Zhejiang. It is also secured by land rights owned by the company and personal assets owned by the controlling shareholder, the underwriter said.

“There are various different reasons (for Zhejiang Huatesi’s problems). Factors affecting that sector, the influence of industrial restructuring, etc,” the executive said.

Still, even with a bailout, the scariest thing is that the value of the assets backing the bond at the originator level is a resounding zero: “The phone number on Zhejiang Huatesi’s website has been disconnected, according to an automated message.“

Expect many more phone disconnections in China as the biggest ever Minsky moment begins to unwind.

via Zero Hedge http://ift.tt/1eju1FH Tyler Durden

• Top Medicare Doctor Paid $21 Million in 2012, Data Shows (BBG)
• Separatists build barricades in east Ukraine, Kiev warns of force (Reuters)
• Greece launches sale of five-year bond (FT)
• High-Frequency Trader Malyshev Mulls Accepting Outside Investors (BBG)
• U.S. defense chief gets earful as China visit exposes tensions (Reuters)
• GM Workers Who Built Defective Cars Fret About Recall (BBG)
• Kerry, Congress Agree: Superpower Status Not What It Was (BBG)
• Crimeans Homeless in Ukraine Seek Solace in Kiev Asylums (BBG)
• JPMorgan’s Dimon says U.S. banks healthy, Europe lagging (Reuters)
• Manipulate Me: The Booming Business in Behavioral Finance (BBG)
• Toyota to recall nearly 6.5 million vehicles for steering, other faults (Reuters)
• In smartphone mass-market, Samsung, Apple have margins on their minds (Reuters)

 

Overnight Media Digest

WSJ

* The top 1 percent of 825,000 individual medical providers accounted for 14 percent of the $77 billion Medicare costs in 2012, according to an analysis of federal data that lays out details of physicians’ billings. (http://ift.tt/1mWXU0X)

* Google Inc is moving boldly to play a larger role in booking hotel rooms – at the risk of offending some of its most important advertisers. Google is adding more photos and reviews to its hotel listings, so they increasingly resemble those of travel search sites such as Priceline Group Inc , Expedia Inc and TripAdvisor Inc. (http://ift.tt/1ivPGat)

* Goldman Sachs Group Inc executives have broached the subject of closing its so-called dark-pool trading operation, Sigma X – one of the world’s largest private stock-trading venues, in conversations with market participants over the past several months, according to people familiar with the matter. (http://ift.tt/1ivPGqI)

* As the government pressure on SAC Capital Advisors LP intensified last year, the hedge-fund firm’s billionaire founder, Steven A. Cohen, and his top lieutenants issued a consistent message to senior investment managers: “Put your heads down. Let’s make money.” (http://ift.tt/1ivPGqM)

* Comcast Corp on Tuesday submitted a lengthy document to federal regulators to justify its $45 billion proposed purchase of Time Warner Cable Inc. But its filing also had the effect of showing the many ways in which the combined entity could use its leverage over both cable lines and programming to pressure competitors. (http://ift.tt/1ivPGqQ)

* Federal auto safety regulators blasted General Motors Co for failing to answer questions about its ignition switch recall, levying a $28,000 fine and warning it could seek stiffer penalties through the federal courts. (http://ift.tt/1mWXUhh)

 

FT

The Madrid stock exchange showed signs of market trust recovering with the listing of eDreams Odigeo, the first company to launch an initial public offering since Spain emerged from recession.

British private equity fund CVC Capital Partners is the front-runner in a race to buy Spanish olive oil bottler Deoleo , people close to the sale said late Tuesday.

Miner Ferrexpo Plc, which is one of the most exposed UK-listed companies to Ukraine, said its iron ore production in Ukraine rose by 1.8 percent in the first three months despite the political tension created with Russia’s over the annexation of Crimea.

Chancellor Angela Merkel’s cabinet approved on Tuesday a reform of Germany’s renewable energy law designed to curb a rise in the cost of electricity in Europe’s biggest economy driven by the rapid expansion of green power.

Ex-Barclays chief Bob Diamond says it is the beginning of deals in sub-Saharan Africa, and they would continue soon after his Africa-focused shell company Atlas Mara acquired BancABC, a stake in Development Bank of Rwanda.

 

NYT

* Federal regulators on Tuesday approved to increase the leverage ratio for banks to 5 percent from 3 percent. Leverage ratio measures the amount of capital that a bank holds against its assets. The move could force the eight biggest banks in the United States to round up as much as $68 billion in loss-absorbing capital. (http://ift.tt/1mWXR5j)

* Federal safety regulators fined General Motors Co $28,000 on Tuesday, saying it had not provided information requested for an investigation into a recall of about 2.6 million cars with an ignition switch defect. (http://ift.tt/1ivPEzk)

* Comcast Corp presented regulators on Tuesday with 650 pages of reasons to approve its takeover of Time Warner Cable Inc, saying a merger of the two largest cable television companies would spur rather than inhibit competition. (http://ift.tt/1ivPEzm)

* Comcast on Tuesday unveiled plans to increase spending and include new attractions at Universal Studios Hollywood. The new enhancements, part of a $1.6 billion overhaul of the theme park, will remake 70 percent of the California park by 2016. (http://ift.tt/1mWXRlB)

* Average gasoline prices should be lower than current prices, the Energy Department said. A gallon of regular gasoline would cost $3.57 on average nationally, down a penny from last summer, the Energy Information Administration projected on Tuesday. (http://ift.tt/1mWXRlD)

* A software bug called “Heartbleed,” which may compromise communication security over the Internet, has prompted several tech giants such as Yahoo Inc, Google Inc, Facebook Inc and Amazon Web Services to release software updates and fix the problem. Researchers say users’ personal information like passwords, bank details and social security numbers could be compromised because of the bug. (http://ift.tt/1mWXRlF)

* Imax, the Canadian large-screen movie company, said it would sell a fifth of its Chinese subsidiary to China Media Capital and private equity firm FountainVest Partners for $80 million. The Chinese investors in turn plan to help Imax China complete a public offering of shares to finance expansion. (http://ift.tt/1mWXU0J)

* Companies are rushing to sell their shares on the Wall Street, and this week is expected to be the busiest for IPOs in more than seven years. But even as soaring stocks have fueled a surge in IPOs, there are signs that investors are beginning to sour on the fresh arrivals. This week could provide a barometer for just how many new stocks investors will receive enthusiastically. (http://ift.tt/1ivPFTV)

* Target Corp announced on Tuesday that it would expand its inventory of “natural, organic and sustainable” goods to meet growing customer demand. The company said it would introduce more than 120 new products over the next several months. (http://ift.tt/1mWXU0N)

 

Canada

THE GLOBE AND MAIL

* Former Canadian Prime Minister Brian Mulroney is calling on Ottawa to show greater leadership in getting Canada’s natural resources to world markets, warning the country needs a federal persuader-in-chief to secure support for major projects or risk being outmanoeuvred by foreign rivals. (http://ift.tt/Q3ZT5J)

* Philippe Couillard, the newly elected Premier of Quebec said on Tuesday he will use Quebec Liberal Party’s majority to revive a right-to-die bill, to draft a limited secular charter, to bring public finances under control and to ramp up infrastructure spending to boost the provincial economy. (http://ift.tt/Q3ZVdM)

Reports in the business section:

* Auto makers spent $17.6 billion around the world in 2013 to increase vehicle-making capacity, but not a dime of that money was invested in Canada. It’s the third year in the past four that Canada has been shut out of investment in new plants or expansions that lead to increased production, according to an annual study done by the Office of Automotive and Vehicle Research at the University of Windsor. (http://ift.tt/Q3ZVdQ)

NATIONAL POST

* The Quebec election severely rattled the incumbent Parti Quebecois on Monday, but Liberal premier-elect Philippe Couillard said the most significant shift in the province’s politics occurred below the surface. “There was a realignment of the political forces in Quebec,” he said. (http://ift.tt/Q3ZVua)

* Toronto Mayor Rob Ford has added two more people on his re-election campaign – Ben Johnson, the disgraced sprinter who is best known for losing his 1988 Olympic gold medal in a doping scandal, and a cast member from the Trailer Park Boys known as the Greasy Caveman. (http://ift.tt/1ej4lJ9)

FINANCIAL POST

* Osisko Mining Corp Chief Executive Sean Roosen thinks Goldcorp Inc has internal problems to deal with. And he suspects that will prevent it from making another offer for his company and its giant Canadian Malartic mine in Quebec. Goldcorp launched a $2.8 billion hostile bid for Montreal-based Osisko in January. (http://ift.tt/Q3ZTmd)

* Quebec’s Liberal premier-elect Philippe Couillard has buried the issue of sovereignty for the next four years. Now the markets will turn their attention to whether he can bring the province’s listless economy back to life. The Liberals believe their financial program should boost Quebec’s nominal GDP growth to reach the Canadian average of 4.5 percent over the next five years. (http://ift.tt/Q3ZTCv)

 

Britain

The Telegraph

SCOTTISH INDEPENDENCE WOULD ADD 9 PCT TO UK DEBT BURDEN, SAYS NIESR

(http://ift.tt/1iwCXnR)

An independent Scotland would “not have the resources” to pay its share of national debt and would leave the rest of the UK shouldering an extra burden of 143 billion pounds, the National Institute of Economic and Social Research (NIESR) has said.

ABI BOSS SAYS HE KNEW OF INSURANCE REVIEW FOR MONTHS

(http://ift.tt/1mXm1MV)

The boss of the Association of British Insurers knew of the City regulator’s plans to review the insurance industry as far back as December but said he did not expect the idea to be “market sensitive.” Otto Thoresen told the Treasury Select Committee that he had been taken by surprise by the stock market rout two weeks ago.

The Guardian

MIDCOUNTIES BOARD REJECTS LORD MYNERS’ REFORMS FOR CO-OPERATIVE GROUP

(http://ift.tt/1iwCZfB)

The board of Britain’s largest independent co-operative society has voted not to support the reform proposals drawn up by Lord Myners to shake up the scandal-hit Co-operative Group of supermarkets, funeral homes and pharmacies.

ROLLS-ROYCE ENGINEER LOSES TRIBUNAL CASE ON ‘WHISTLE-BLOWING DISMISSAL’

(http://ift.tt/1iwCZvP)

An employment tribunal has dismissed a claim from a senior Rolls-Royce engineer saying he was sacked for blowing the whistle on allegations of potentially serious problems with the company’s jet engines.

The Times

CLIFFORD CHANCE TO INVESTIGATE BRIEFING THAT CAUSED HAVOC FOR INSURERS

(http://ift.tt/1mXm0IQ)

Clifford Chance will investigate the controversial pre-briefing of a regulatory review into legacy products that sent insurers’ share prices into a tailspin 12 days ago.

DIAMOND RAIDS BARCLAYS TO POACH VITALO

(http://ift.tt/1iwCXnX)

Bob Diamond has poached Barclays executive John Vitalo to run Atlas Mara, the London-listed shell company that he set up last year to buy banks in Africa.

Sky News

METRO BANK FOUNDER GOES DIGITAL WITH ATOM

(http://ift.tt/1mXm1N1)

The founder of Metro Bank is switching his attention from high street to digital banking with secret plans for the launch of a new national retail and business lender.

TESCO SIDELINES TOP MARKETER AS SHARE SLIDES

(http://ift.tt/1iwCZvV)

 

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Wholesale inventories for February at 10:00–consensus up 0.6%

ANALYST RESEARCH

Upgrades

AmSurg (AMSG) upgraded to Buy from Hold at Cantor
Bank of Marin (BMRC) upgraded to Outperform from Market Perform at Raymond James
CBOE Holdings (CBOE) upgraded to Buy from Neutral at BofA/Merrill
Carlyle Group (CG) upgraded to Outperform from Perform at Oppenheimer
Cepheid (CPHD) upgraded to Outperform from Market Perform at JMP Securities
FireEye (FEYE) upgraded to Buy from Hold at Topeka
First Interstate (FIBK) upgraded to Overweight from Equalweight at Barclays
Fortune Brands (FBHS) upgraded to Outperform from Neutral at Credit Suisse
Gray Television (GTN) upgraded to Outperform from Market Perform at Wells Fargo
Hibbett Sports (HIBB) upgraded to Overweight from Neutral at Piper Jaffray
LinkedIn (LNKD) upgraded to Buy from Hold at Topeka
Mallinckrodt (MNK) upgraded to Buy from Neutral at UBS
NXP Semiconductors (NXPI) upgraded to Strong Buy from Outperform at Raymond James
Nexstar (NXST) upgraded to Outperform from Market Perform at Wells Fargo
Penn National (PENN) upgraded to Overweight from Equalweight at Barclays
Philip Morris (PM) upgraded to Neutral from Reduce at Nomura
Quanex (NX) upgraded to Buy from Hold at BB&T
SAIC (SAIC) upgraded to Market Perform from Underperform at Wells Fargo
Seadrill (SDRL) upgraded to Hold from Sell at Societe Generale
Sinclair Broadcast (SBGI) upgraded to Outperform from Market Perform at Wells Fargo
Yelp (YELP) upgraded to Buy from Fair Value at CRT Capital

Downgrades

Aeropostale (ARO) downgraded to Underweight from Neutral at Piper Jaffray
Alpha Natural (ANR) downgraded to Sell from Neutral at UBS
Apache (APA) downgraded to Hold from Buy at Deutsche Bank
Arch Coal (ACI) downgraded to Sell from Neutral at UBS
Credit Suisse (CS) downgraded to Underweight from Neutral at JPMorgan
First Niagara (FNFG) downgraded to Underweight from Overweight at Barclays
General Motors (GM) downgraded to Underweight from Equal Weight at Morgan Stanley
Hershey (HSY) downgraded to Sell from Neutral at Goldman
JMP Group (JMP) downgraded to Market Perform from Outperform at Keefe Bruyette
John Wiley (JW.A) downgraded to Hold from Buy at Stifel
NASDAQ (NDAQ) downgraded to Neutral from Buy at BofA/Merrill
Walter Energy (WLT) downgraded to Sell from Neutral at UBS

Initiations

AMRI (AMRI) initiated with an Overweight at Morgan Stanley
Aegion (AEGN) initiated with a Buy at DA Davidson
American Midstream Partners (AMID) initiated with an Overweight at Barclays
Cabela’s (CAB) initiated with a Neutral at DA Davidson
Chevron (CVX) initiated with a Buy at Jefferies
Exxon Mobil (XOM) initiated with a Hold at Jefferies
Federal Agricultural Mortgage (AGM) initiated with an Outperform at Keefe Bruyette
Gentiva Health (GTIV) initiated with a Buy at CRT Capital
Intuitive Surgical (ISRG) initiated with an Underperform at Sterne Agee
Lumenis (LMNS) initiated with a Buy at Jefferies
MedAssets (MDAS) initiated with a Neutral at SunTrust
Mondelez (MDLZ) initiated with a Reduce at Nomura
Premier (PINC) initiated with a Buy at SunTrust
The Advisory Board (ABCO) initiated with a Buy at SunTrust

COMPANY NEWS

Toyota (TM) announced a recall of over 6M vehicles worldwide
General Motors (GM) was fined $28,000 by the NHTSA for timeliness of response to inquiry
Alcoa (AA) said year to date productivity gains ahead of schedule
United Airlines (UAL) said March traffic increased 0.7%, capacity increased 2.7% vs. a year ago
Intuitive Surgical (ISRG) gave a Q1 revenue outlook that widely missed expectations and saying it will take a $67M charge in the quarter related to legal settlements
Constant Contact (CTCT) gave a preliminary Q1 revenue outlook that beat estimates and raised FY14 revenue guidance
Senomyx (SNMX) entered into research agreement with PepsiCo (PEP), terms not disclosed

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Tech Data (TECD), Consumer Portfolio (CPSS), SAIC (SAIC), Alcoa (AA)

Companies that missed consensus earnings expectations include:
Penford (PENX), WD-40 (WDFC)

Companies that matched consensus earnings expectations include:
Healthcare Services (HCSG)

NEWSPAPERS/WEBSITES

Big banks (JPM, C, GS, WFC, MS, BAC, USB) must add capital to comply with new rules, WSJ reports
JPMorgan (JPM) CEO Dimon says U.S. banks ‘healthy,’ Europe lags, Reuters reports
Intel (INTC) plans 1,500 job cuts in Cosa Rica, WSJ reports
Goldman Sachs (GS) considers shutting down dark pool Sigma X, WSJ reports
New York regulator issues subpoenas to insurers (CB, CNA, NAVG) on Iran, WSJ says
Bank of America (BAC), Allstate (ALL) to end toxic mortgage suit, Reuters reports
Daimler (DDAIF) says 2014 profit growth strategy to pay off, Bloomberg reports
Flexible PCB samples delivered for Apple (AAPL) iWatch validation, DigiTimes says

SYNDICATE

Ashford Hospitality (AHT) files to sell 7M common shares
Aviv REIT (AVIV) files to sell 8M common shares
Hi-Crush Partners (HCLP) files to sell 4.25M common units
La Quinta (LQ) 38.25M share IPO priced at $17.00
New Source Energy (NSLP) files $500M common, preferred unit shelf
Pacira Pharmaceuticals (PCRX) 1.6M share Spot Secondary priced at $64.00
Relypsa (RLYP) files to sell $80M of common stock
iKang Healthcare (KANG) 10.9M share IPO priced at $14.00

via Zero Hedge http://ift.tt/1ejpAuw Tyler Durden

The positive sentiment stemming from a positive close on Wall Street and saw Shanghai Comp (+0.33%), Hang Seng (+1.09%) trade higher, failed to support the Nikkei 225 (-2.10%), which underperformed its peers and finished in the red amid JPY strength as BoJ’s Kuroda failed to hint on more easing. Stocks in Europe (Eurostoxx50 +0.32%) traded higher since the open, with Bunds also under pressure amid the reversal in sentiment.
Alcoa kicked off earnings season yesterday, with shares up 3% in after-market hours. Focus now turns to the release of the FOMC meeting minutes.

Taking a look at Asian markets this morning, firm technicals in cash credit markets and reports of continued inflows into hard currency EM assets is allowing a number of new deals to be priced in Asia today. Equity markets are trading firmer, with the sole exception of the Nikkei (-1.9%) which  hasn’t been able to catch up in the last few sessions. Japanese equities are down for the fourth straight session, losing almost 5% in the process as a stronger yen weighs on sentiment. Japanese department store operator Takashimaya said that revenue in the first week of April fell 25% compared to the same period last year after the introduction of the country’s sales tax hike on April 1st. The result appears to have come from the pull forward of demand ahead of the tax hike, given that March sales were up 32% yoy. Nonetheless, one gets the feeling that investors are waiting for the next catalyst from the BoJ. They seem to be content to wait for now. It’s a different picture in Chinese equities where the HSCEI is up 13% from the March lows, consistent its EM peers elsewhere, as talk of government stimulus packages percolates. The People’s Daily reported that the government has incrementally expanded its railway building program for 2014 (7000km of new lines this year from previous target of 6600kms). Assets linked to Chinese growth such as iron ore, copper and AUDUSD have all been surging of late. On a less positive note, in yet another sign of  tightening domestic credit conditions in China, another small $10m bond issuer (a small polyester manufacturing firm in the Zhejiang province) has called for bankruptcy protection. A month or so ago, the news would have to prompted a small wobble in AUDUSD, but the Australian dollar has appreciated another 0.15% against the Greenback this morning. Elsewhere in Asian FX, EM currencies such as the IDR (+0.15%) and MYR (+0.3%)  are continuing their run higher against the USD.

Taking a look at some of the headlines over the last 24 hours, the Fed announced that a number of regulatory bodies including itself, the FDIC and Office of the Comptroller of the Currency have adopted a final leverage ratio rule, applying to the eight largest US bank holding companies. The rule mandates a minimum leverage ratio of 5% (defined roughly as equity capital to assets) which is more stringent than a 3% ratio targeted by the Basel Committee. The 5% ratio is broadly in line with expectations prior to yesterday’s announcement. Regulators said that approximately $68bn of additional capital would be needed in total across the eight banking groups which could be met largely through retained earnings and some asset selldowns. This news is a timely reminder that the newsflow in the sector is still very relevant for wider markets.

Turning to the day ahead, markets will be focused on the release of minutes from the March 18-19th FOMC which will be released towards the end of US trading. We’ll be looking for more colour around the Fed’s shift to qualitative guidance and further information on the recent changes in the Fed’s rate expectations. The IMF’s Global Financial Stability Report is released in advance of the spring meetings this week. On a related note, the Fed’s Tarullo speaks today on financial stability, where we may hear more about the recently announced leverage rule. The major data releases today are US wholesale inventories and German/UK trade. Brazil’s March inflation report is worth watching, and the US retail reporting season gets underway with Bed Bath & Beyond’s quarterly filing.

Bulletin Headline Summary from Bloomberg and RanSquawk

• Treasuries fall with JPY, first decline in five days for longer maturities; 3Y-10Y yields yesterday closed at lowest levels since March 18, extending moves spurred Friday by March jobs report.
• Auctions continue with $21b 10Y reopening. Notes to be sold today yield 2.704% in WI trading; drew 2.729% in March
• ECB’s focus on ABS for monetary easing risks guiding it toward a policy that might be slow to evolve and far smaller than the EU1t in bond purchases it has already simulated
• Pro-Russian activists released most of their hostages in Ukraine’s eastern city of Luhansk today; U.S. Secretary of State Kerry accused Russia of using “special forces and agents” to fuel unrest
• Defense Secretary Chuck Hagel meets Chinese President Xi Jinping today after being told the U.S. refocus to Asia won’t contain China or affect its claims to territory and resources disputed with American allies
• Greece plans to announce syndicated 5Y note sale today; may pay 5.3%-5.4% for that maturity, analysts estimate, about double Greece’s record-low auction rate of 2.71%
• China is investigating some companies’ use of bond proceeds, people familiar with the matter said, as concerns mount defaults may increase in the nation’s $4.2t onshore debt market
• Global regulators’ failure to align efforts to reform the $693t derivatives market threatens to undermine economic growth, according to the International Swaps & Derivatives Association
• Toyota Motor Corp. called back more than 6 million vehicles to fix a range of safety defects in one of the biggest recalls in automotive history.
• With an anti-EU, anti-immigration message, Great Britain’s UKIP is vying with Cameron’s Conservatives and the opposition Labour Party to place first in next month’s elections to the European Parliament
• Sovereign yields mixed; bund and gilt yields slightly higher. Asian stocks mixed, Nikkei falls 2.1%, Shanghai +0.3%. European equity markets, U.S. stock futures higher. WTI crude and copper lower, gold higher

US Event Calendar

• 7:00am: MBA Mortgage Applications drop -1.6%, prior -1.2%
• 10:00am: Wholesale Inventories m/m, Feb., est. 0.5% (prior 0.6%, revised 0.7%)
• 10:00am:  Wholesale Sales m/m, Feb., est. 1% (prior -1.9%, revised -1.8%)
• 1:00pm: U.S. to sell $21b 10Y notes in reopening
• 2:00pm: Fed issues March 18-19 FOMC minutes
• 11:00am POMO: Fed to purchase $900m-$1.15b notes in 2036-2044 sector

EU & UK Headlines

Combination of supply from Germany and the upcoming Greek 5y syndication, together with higher stocks weighed on Bunds since the open. As a result, peripheral bond yield spreads tightened, particularly the short-end of the curve, as spec of QE, prospects of which were reminded by ECB’s Provopoulos, buoyed demand for higher yielding paper. According to sources, Greece is expected to raise EUR 2.5bln in 5y bond syndication on Thursday and today, Greek 10y bond traded near its lowest level since March 2010. This morning also saw the release of worse than expected German Trade Balance and Current Account Balance data, which German Economy Minister linked to a strong  EUR.

US Headlines

Alcoa kicked off earnings season with a beat on EPS which saw shares trade higher by 3% after-market. Elsewhere, USTs traded lower this morning, weighed on by Bunds amid pick up in risk sentiment and ahead of the 10y note auction by the Treasury later in the session. Shortly after will see the release of the FOMC meeting minutes.

Equities

Stocks in Europe (Eurostoxx50 +0.32%) traded higher since the open, benefiting from a positive close on Wall Street, after S&P 500 snapped 3 days of negative closes (S&P 500 +0.4%) and after Alcoa kicked off earnings season with a beat on EPS which saw shares trade higher by 3% after-market.

FX

EUR/USD and GBP/USD failed to benefit from the risk on sentiment which also resulted in USD/JPY recovering overnight
losses supported the USD index.

Commodities

WTI and Brent Crude futures trended lower, as reports of easing tensions between Ukraine and Russia, together with a large build in API crude oil inventories released yesterday weighed on prices. However heading into the North American open, prices have since reversed and both WTI and Brent crude futures are seen little changed.

US API Crude Oil Inventories (Apr 05) W/W 7080k vs. Prev. -5800k; this build comes ahead of today’s DoE crude inventories which are expected to show a build of 750k.

– Cushing Crude Inventories (Apr 05) W/W 204k vs. Prev. -1520k
– Gasoline Inventories (Apr 05) W/W -3650k vs. Prev. 18k
– Distillate Inventories (Apr 05) W/W 293k vs. Prev. -17k

* * *

In conclusion, here is Jim Reid’s overnight recap:

After a volatile first two months of the year, US equities seem to be in a bit of a holding pattern as we hold out for the next big theme. Indeed, yesterday saw the S&P 500 (+0.38%) cross back above the flat line (+0.19% YTD) for the ninth time this year. Of those nine times, two thirds of those have occurred in the last five weeks or so, giving us the impression that we’ve been stuck in a fairly directionless range of late, at least compared to what has happened with other asset classes in EM and periphery Europe. The recent shakeout in tech stocks appears to have stabilised for the time being, but a number of events are looming on the horizon which could shake us out of the lull. These events include today’s March FOMC minutes, tomorrow’s Chinese export numbers and Friday’s World Bank/IMF spring meeting.

Perhaps the next big catalyst will come in the form of the US earnings season, which unofficially started with Alcoa’s Q1 result after the closing bell yesterday. We’ll only start to get a firmer picture of earnings growth around this time next week, after the first of the US major banking groups have reported. But as one of the industrial bellwethers, Alcoa’s earnings are always interesting in one form or another and there were a couple of positive signals for the broader market from the company’s Q1 filing. Looking through the multitude of restructuring charges that the company booked, adjusted earnings were 9c a share which was a solid beat against expectations of 5c. Perhaps more indicative of underlying performance, EBITDA jumped around 20% sequentially on better margins in its Engineered Products and Rolled Products divisions. Management commentary was fairly upbeat and they talked up the prospects from the auto and aerospace industries. Of interest to macro players, the company said that the Aluminium market is now expected to be in supply deficit in 2014 versus a previous expectation of surplus when they announced their FY13 results. According to Bloomberg, the aluminium market has been in surplus for almost a decade. Alcoa said that global end market demand remains solid and that it still sees demand growth at 7% in 2014. The shares traded about 1% higher in the after-market, but S&P 500 futures were unchanged on the announcement.

Taking a look at Asian markets this morning, firm technicals in cash credit markets and reports of continued inflows into hard currency EM assets is allowing a number of new deals to be priced in Asia today. Equity markets are trading firmer, with the sole exception of the Nikkei (-1.9%) which  hasn’t been able to catch up in the last few sessions. Japanese equities are down for the fourth straight session, losing almost 5% in the process as a stronger yen weighs on sentiment. Japanese department store operator Takashimaya said that revenue in the first week of April fell 25% compared to the same period last year after the introduction of the country’s sales tax hike on April 1st. The result appears to have come from the pull forward of demand ahead of the tax hike, given that March sales were up 32% yoy. Nonetheless, one gets the feeling that investors are waiting for the next catalyst from the BoJ. They seem to be content to wait for now. It’s a different picture in Chinese equities where the HSCEI is up 13% from the March lows, consistent its EM peers elsewhere, as talk of government stimulus packages percolates. The People’s Daily reported that the government has incrementally expanded its railway building program for 2014 (7000km of new lines this year from previous target of 6600kms). Assets linked to Chinese growth such as iron ore, copper and AUDUSD have all been surging of late. On a less positive note, in yet another sign of  tightening domestic credit conditions in China, another small $10m bond issuer (a small polyester manufacturing firm in the Zhejiang province) has called for bankruptcy protection. A month or so ago, the news would have to prompted a small wobble in AUDUSD, but the Australian dollar has appreciated another 0.15% against the Greenback this morning. Elsewhere in Asian FX, EM currencies such as the IDR (+0.15%) and MYR (+0.3%)  are continuing their run higher against the USD.

Taking a look at some of the headlines over the last 24 hours, the Fed announced that a number of regulatory bodies including itself, the FDIC and Office of the Comptroller of the Currency have adopted a final leverage ratio rule, applying to the eight largest US bank holding companies. The rule mandates a minimum leverage ratio of 5% (defined roughly as equity capital to assets) which is more stringent than a 3% ratio targeted by the Basel Committee. The 5% ratio is broadly in line with expectations prior to yesterday’s announcement. Regulators said that approximately $68bn of additional capital would be needed in total across the eight banking groups which could be met largely through retained earnings and some asset selldowns. This news is a timely reminder that the newsflow in the sector is still very relevant for wider markets.

In other news, the IMF’s latest World Economic Outlook, released ahead of its spring meeting this week, now estimates only a 0.1% probability of global recession in 2014, compared with a 6% chance last October (Financial Times). Are the risks really only 1 in a 1000? The risk of a 2015 global downturn are also considered to be low. Most of the IMF’s forecasts were little changed, with expectations of stronger growth in the US, the UK and Germany boosting the outlook offset by weakened growth expectations in EM. Elsewhere markets continue to watch the rhetoric from the Bundesbank’s Weidmann and it seems that he continues to back away from comments suggesting that QE was on the horizon. He clarified that the risk of a deflationary spiral in Europe is low and that the ECB is ready to act to counter low inflation – but this didn’t sound like his base case. He also questioned the effectiveness of any new measures relative to the associated risks. Across the Atlantic, the Fed’s Kocherlakota (a dovish dissenter at the FOMC) signaled that the Fed would continue its taper as long as there are no big changes in outlook but also remarked that the Fed should do more to meet its dual mandate (e.g. cutting IOER). Kocherlakota believes that a return to 2% inflation could take as long as four years which was in contrast to the Fed’s Plosser who indicated yesterday that it would take only about 18 months. There wasn’t much data to report though we noted that US JOLTS job openings rose more than forecast to a six year high. The quits rate, which was 2% when the recession started at the end of 2007, held at 1.7% in February (Bloomberg).

Turning to the day ahead, markets will be focused on the release of minutes from the March 18-19th FOMC which will be released towards the end of US trading. We’ll be looking for more colour around the Fed’s shift to qualitative guidance and further information on the recent changes in the Fed’s rate expectations. The IMF’s Global Financial Stability Report is released in advance of the spring meetings this week. On a related note, the Fed’s Tarullo speaks today on financial stability, where we may hear more about the recently announced leverage rule. The major data releases today are US wholesale inventories and German/UK trade. Brazil’s March inflation report is worth watching, and the US retail reporting season gets underway with Bed Bath & Beyond’s quarterly filing.

via Zero Hedge http://ift.tt/1g73f1s Tyler Durden

Pulitzer-prize winning investigative reporter Seymour Hersh (who uncovered the Iraq prison torture scandal and the Mai Lai massacre in Vietnam) says that high-level American sources tell him that the Turkish government carried out the chemical weapons attacks blamed on the Syrian government.

Indeed, it’s long been known that sarin was coming through Turkey.

Turkey is a member of NATO. So we’re really talking about a NATO member launching a false flag attack against a non-NATO member, and then blaming it on the victim.

Indeed, a new tape recording of top Turkish officials planning a false flag attack to be blamed on Syria as a causus belli was just leaked a couple of weeks ago, and confirmed by Turkey as being authentic.

In other words, since the last big Turkish false flag didn’t succeed in launching war against Syria, they’re going to try again.

This is not the first false flag by NATO members. For example:

• The former Italian Prime Minister, an Italian judge, and the former head of Italian counterintelligence admit that NATO, with the help of the Pentagon and CIA, carried out terror bombings in Italy and other European countries in the 1950s and blamed the communists, in order to rally people’s support for their governments in Europe in their fight against communism. As one participant in this formerly-secret program stated: “You had to attack civilians, people, women, children, innocent people, unknown people far removed from any political game. The reason was quite simple. They were supposed to force these people, the Italian public, to turn to the state to ask for greater security” (and see this)(Italy and other European countries subject to the terror campaign had joined NATO before the bombings occurred). And watch this BBC special

• Quebec police admitted that, in 2007, thugs carrying rocks to a peaceful protest were actually undercover Quebec police officers (and see this)

• At the G20 protests in London in 2009, a British member of parliament saw plain clothes police officers attempting to incite the crowd to violence

• The U.S. has engaged in many false flag attacks (and  has been arming the Syrian opposition since 2006 … even though most of the opposition fighters are Al Qaeda terrorists)

Postscript: We're not picking on NATO members …the Nazis, Soviets, Algerians, Indonesians, Israelis and others have used false flag terror as well.

via Zero Hedge http://ift.tt/1kpxNQ2 George Washington

As we have discussed numerous times, nothing lasts forever – especially reserve currencies – no matter how much one hopes that the status-quo remains so, in the end the exuberant previlege is extorted just one too many times. Headline after headlines shows nations declaring 'interest' or direct discussions in diversifying away from the US dollar… and as SCMP reports, Standard Chartered notes that at least 40 central banks have invested in the Yuan and several more are preparing to do so. The trend is occurring across both emerging markets and developed nation central banks diversifiying into 'other currencies' and "a great number of central banks are in the process of adding yuan to their portfolios." Perhaps most ominously, for king dollar, is the former-IMF manager's warning that "The Yuan may become a de facto reserve currency before it is fully convertible."

The infamous chart that shows nothing lasts forever…

Nothing lasts forever… (especially in light of China's recent comments)

 

As The South China Morning Post reports, Jukka Pihlman, Standard Chartered's Singapore-based global head of central banks and sovereign wealth funds (who formerly worked at the International Monetary Fund advising central banks on asset-management issues), notes that:

At least 40 central banks have invested in the yuan and several others are preparing to do so, putting the mainland currency on the path to reserve status even before full convertibility

The US dollar remains in charge (for now)…but

The US dollar is still the world's most widely held reserve currency, accounting for nearly 33 per cent of global foreign exchange holdings at the end of last year, according to IMF data. That ratio has been declining since 2000, when 55 per cent of the world's reserves were denominated in US dollars.

 

The IMF does not disclose the percentage of reserves held in yuan, but the emerging market countries' share of reserves in "other currencies" has increased by almost 400 per cent since 2003, while that of developed nations grew 200 per cent, according to IMF data.

As SCMP goes on to note, the rising popularity of the yuan among central bankers is probably mainly due to Beijing's extremely favourable treatment of them as it has sought to encourage investment in the yuan.

For example, central banks enjoy preferential treatment in the qualified foreign institutional investor category, both on the size of the quota and the length of the lock-up period. The QFII quotas given to central banks are not publicly known, but some of those announced by investing central banks are up to 10 times larger than others in the programme and, most importantly, free of any capital controls.

 

"Central banks and sovereign funds have special treatment," Pihlman said. "They have the ability to invest in a way that any other investor does not have. When it comes to convertibility, there is nothing formally out there, but it is fully convertible."

As Pihlman explains, things are accelerating…

Pihlman said "a great number of central banks are in the process of adding [yuan] to their portfolios".

 

"The [yuan] has effectively already become a de facto reserve currency because so many central banks have already invested in it," he said. "The [yuan] may become a de facto reserve currency before it is fully convertible."

 

The central banks more likely to add yuan holdings in the future were the ones with "strong trade linkages to China" and those which had relatively large levels of reserves which could consider diversifying more for return-related reasons, he said.

 

"The [yuan's] convertibility may be already there for central banks in a way that has got them comfortable to start investing in the currency," Pihlman said.

We leave it to a former World Bank chief economist, Justin Yifu Lin, to sum it all up…

"the dominance of the greenback is the root cause of global financial and economic crises,"

It appears the world is beginning to listen

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Submitted by Zachary Zeck via The Diplomat,

 

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Since 2007, when the financial crisis touched down across the world, the proportion of people going hungry in Europe has soared, according to the OECD. As Bloomberg’s Niraj Shah notes, the number has doubled in Greece alone from 8.9% in 2007 to almost 18% currently unable to afford food. Across the European Union, the proportion of people going hungry ranges from 4.6% in Germany to over 30% in (ironically) Hungary. However, before one gloats at the weakness in Europe and the cleanest dirty shirt the US pretends to be, at 21.1% of Americans unable to afford food, only Hungary and Estonia are in worst shape… USA USA USA…

 

 

Source: @economistniraj via Bloomberg Briefs

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By: Chris Tell at http://ift.tt/146186R

“Bitcoin is the anti currency”; “Bitcoin, the currency of the future”; the “currency of the resistance”; “Bitcoin is a Fad”; “Bitcoin is a fraud”; “Bitcoin is a currency for drug dealers,  kiddy fiddlers and terrorists.”

These are some of the opinions I’ve heard thrown around when discussing Bitcoin.

I have no particularly original insights into Bitcoin, and I won’t pretend to understand the technology behind it. I can barely understand how my coffee machine makes such great coffee. This is the complexity of the world.

Firstly, let me say that we think Bitcoin is “cool”. I love disruptive technologies. 5000 years ago shipping changed the world. I discussed this in depth in an article entitled Predicting Prosperity. I alluded to the “Guano age” of the 1800’s which was destroyed by the advent of nitrate-based fertilizers.

The Internet, at least, the Internet that most of us know has only really existed since the mid-90’s, and even then VOIP and data streaming were far from common. Technologies which we take for granted today have often only been around for less than a decade. Yet we’re all comfortable enough with them.

In the 1990’s the first fibre optic cables where being laid allowing for what would become the world wide web. Who could have known who was going to profit and who was going to fail?

When a friend introduced us to Bitcoin nearly 4 years ago now we were busy, looked quickly at it, decided we didn’t understand it and dismissed it as quackery of some kind. This despite our friend being a man we hold in very high regard. Hindsight, as they say is 20:20. It was still very early days in Bitcoin history.

Fast forward to today and we’ve spent more time learning about digital currency (not Bitcoin per se) and this is how we see it.

The Mania

Markets, especially those affected by revolutionary technology exhibit distinct patterns. This is because human beings really don’t change.

Circumstances change, technology changes, environment changes but human behaviour never changes.

I found the chart below from Gartner. It provides us with a visual image of what I’m talking about.

The crazy, silly hype that existed is now over, and I think we’re in the third stage.

Please note that I’m not a Bitcoin bull or bear. I think people miss the point behind Bitcoin and that point is simply that Bitcoin is at its core a technology. That technology has been replicated to a large extent with dozens of other digital currencies. As such there is no particular moat around Bitcoin other than first mover advantage. First mover advantage in technology is not always all it’s cracked up to be, heck Netscape had first mover advantage to right?

The value lies not in Bitcoin but in the technology. Technology is a market I can understand and play in. Trading, or rather gambling on what price a Bitcoin should trade for isn’t.

How useful then is the technology?

As Goldman Sachs IT analyst Roman Leal argues:

“in 2013 money transfer fees would have fallen by 90% if Bitcoin had been used. Global transaction fees at retail point of sale, meanwhile, were $260bn on over $10trn of sales. Using Bitcoin those fees fall by almost $150bn to $104bn.”

I don’t care who you are, these sorts of numbers are compelling and the odds favour this technology being utilized in the future.

I believe that the technology is here to stay. That doesn’t mean that Bitcoin is here to stay. I have no idea but I do think that the cat is out of the bag in terms of the technology.

How Best to Play It

Investing in core technology (note: I said technology, not Bitcoin) companies that are building the infrastructure for digital currencies is right now the best way to play the odds game.

The market is currently disillusioned with the price of Bitcoin. It’s collapsed from well over  $1,000 to just over $400 today. The companies we’ve been speaking to, who not 6 months ago had all the arrogance of a pimply-faced teenager who’d found the powers of tequila and testosterone, today sport far humbler valuations!

The sector is ripe for discerning investment and we’re actively exploring private equity in this sector. Our friends at Pathfinder Capital have setup the first FSA regulated crypto technology fund. We think they are on the right track! Target the companies building the ecosystem and the platforms that will drive innovation. Let others try to figure out which “currency unit” will win.

– Chris

“Any sufficiently advanced technology is indistinguishable from magic.” – Arthur C. Clarke

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Submitted by Shane Obata via Triggers,

Fundamentals are always important over the long term. That said, it has become quite clear that company financials are not what’s moving this market. As you’ll see in the following chart, QE has been boosting the S&P 500 since 2009.

If fundamentals mattered then the words and decisions of central bankers wouldn’t be the most important headlines. We’ve all seen the charts that compare the S&P 500 and the fed’s balance sheet. Since 2009, the correlation is almost perfect

QE and zero interest rate policies are forcing people to chase for yield. It’s completely unfair to repress interest rates because it punishes savers. Right now, it’s expensive to hold cash because of inflation and low interest rates. By holding down rates, the fed is masking the risk of financial assets. People who would otherwise keep their money in a savings account are buying high yield bonds and stocks because they want to maintain their purchasing power. The following chart shows that the spread between high yield bonds and treasuries has been in decline since the financial crisis. This is a result of a high demand for income generating assets.

n sum, the fed’s policies have caused stock prices to diverge from economic reality. Real median household income has been in decline since the late 90s. In contrast, stock prices have rallied dramatically since the financial crisis in 07-08.

The purpose here is not to prove that the S&P 500 is going to drop 86% like it did from 1930 to 1932.

What we’re going to consider is the psychology behind the markets. I feel as though the markets have tended to move in similar waves because of how people think about stocks. Every market cycle is characterized by similar emotions such as greed and fear. The next chart depicts a market psychology cycle. At this point, it’s hard to dispute that we’re in the mid-late stages of the mania phase.

Simply put, the economic fundamentals do not support stock prices. Often times, in the later stages of a bull market stocks will melt upwards before falling abruptly. The next chart courtesy of http://ift.tt/K7p8ck compares today’s market with the 1929 crash and the Nikkei’s 1989 collapse. It’s important to note that the rate of increase in stock prices – was higher right before the subsequent fall. In other words, the slope was steepest immediately before the eventual downturn.

In the next section we’re going to look at some momentum stocks – they’re stocks whose prices are so disconnected from their financials that no one really knows how much they’re worth. What’s interesting that a lot of these companies are exhibiting the same patterns that are often seen with bubbles.

Before we continue let’s talk about the Williams %R Indicator.  It is a momentum indicator that is commonly used to indicate overbought or oversold conditions.  However, through learning the HPTZ Methodology I have considered another perspective. When the indicator reaches extreme levels (-20/-80) it suggests positive or negative pressure on the market that has been shown to sustain runs or trends.  If you examine the writings of Williams he discusses the use of the indicator as overbought or oversold only after an extreme has been reached and after a certain number of bars have passed.

First let’s take a look at $LNG. On the monthly chart we can see that Cheniere has been ramping up for a while now. Furthemore, the monthly williams %R has been trending up steadily for years. On the weekly chart the red arrows indicate 4 different slopes. Each new slope is steeper than the last which means that $LNG’s price is increasing at a faster rate. The Williams %R on the weekly is still above -20 which is indicative of positive pressure.

The hourly chart shows that $LNG continues to rise steadily. On the daily chart we can see that the daily Williams %R is showing signs of positive pressure at -15.53.

The next company that we’re going to look is is $CELG. On the monthly chart it looks as though it almost went vertical. Furthemore, the monthly Williams %R – which is at -49.02 – hasn’t fallen below -80 since the beginning of 2011. The weekly chart shows that after rising steadily from 2009 to the end of 2012, $CELG begin a rapid ascent at the beginning of 2013. It has pulled back since the beginning of 2014 and the Williams %R is at -99.21; this is the first time it has been below -80 since the summer of 2013.

The hourly chart shows that Celgene has been selling off for a little over a month or so. On the daily chart we can see that after an orderly rise from April of 2013 to the beginning of 2014, $CELG has now fallen off a bit. Celgene is now falling at a faster rate and the Williams %R has fallen below -80 remains in a downtrend.

The last company we’re going to look at is Gilead Sciences. It’s rapid ascent is best captured by the monthly chart. The monthly Williams %R is now at -38.42 – the lowest it has been since early 2012. On the weekly chart we can see that $GILD began to accelerate at the beginning of 2013. The recent downfall has sent the weekly Williams %R below -80 for the first time since the fall of 2012.

On the hourly chart we can see that $GILD has been in a downtrend since the beginning of march. The daily chart shows that the Williams %R is at -92.83 and hasn’t been above -20 since late February.

$LNG, $CELG, and $GILD are three examples of stocks that have made tremendous gains over the past few years. The takeaway point is that many stocks are trading above what most people would consider reasonable valuations. A lot of the time, these companies aren’t even profitable. On a trailing twelve month basis, $LNG hasn’t made a profit in the last 5 years. Both $CELG and $GILD are profitable,  however their stock prices are growing at a much faster rate than their cash flows and net income are.

Is this the top? There’s no way to tell. Do some areas of the market look like past bubbles once did? Without a doubt.

The last step up before the fall is often characterized by a feeling that the market is invincible. Despite the S&P’s incredible run, it cannot continue to rally forever. Eventually, economic fundamentals will matter again and when that happens it’s likely that the market will sell off.

George Santayana once said that “those who cannot remember the past are condemned to repeat it”

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Cows in the San Francisco area will be sleeping better at night since, for the last few days, gangs of angry internal combustion engine-likers have taken to a new trend – Smart car tipping. NBC Bay Area found four of the targeted Smart cars between Sunday night and Monday morning. “Whoever is doing this just has misdirected anger,” noted one upset owner, as another witness joked, they reminded him of little dogs: “They look like they are dachshunds sitting up on their hind legs.” The exact motives behind the vandalism are unclear, as a parody Facebook page was set up called “Smart Car Tipping” by a creator who does not “practice, promote or condone Smart Car Tipping,’ and another site called the Smart Car tippers, “heroes.” At a price starting at $13,000 for the tiny cars, perhaps it is the relative cost-benefits that the vandals are considering.

 

This is not an entirely new occurrence – here is a 2011 “tipping”

 

And NBC Bay Area covering the latest rash of Smart Car tipping…

 

As NBC Bay Area reports,

Someone’s been vandalizing compact Smart cars in San Francisco, flipping the tiny vehicles on their front and rear ends in the city’s streets

 

…

 

“Whoever is doing this just has misdirected anger,” Gallivan said.

 

San Francisco Police Officer Gordon Shyy said the suspects are still at large and will face felony vandalism charges if they are caught. Police do have an eye witness account to work from.

 

Brandon Michael was out having a cigarette about 1 a.m. Monday when he spotted about six to eight people wearing hooded sweatshirts flip over the cars.

 

“They looked like they were up to no good,” Michael said. “And sure enough, they huddled around it and lifted it up.”

 

And the vandalized cars? Michael said they reminded him of little dogs: “They look like they are dachshunds sitting up on their hind legs.”

 

…

 

The exact motives behind the vandalism are unclear. The diminutive cars are smaller and lighter than most vehicles. A Smart car weighs about 1,500 pounds; a Ford Focus S Sedan weighs close to 3,000 pounds, and a Hummer clocks in at 8,600 pounds — definitely a heft that would pose a flipping challenge.

 

…

 

One website, however, seemed to be cheering on the tipping. TotalFratMove.com called the Smart car tippers “heroes” and described the cars as “teensy little wheeled boxes.”

The morning after…

 

Not so “Smart” cars…

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