Tag: finance

• Lost Jet’s Path Seen as Altered via Computer (NYT)
• Fed Links Low Rates to “Persistent Headwinds” in Economy (Hilsenrath)
• Top German Court Clears Euro-Zone Bailout Fund (WSJ)
• U.S., EU set sanctions as Putin recognizes Crimea “sovereignty” (Reuters)
• Indian wealth effect: Sensex, Nifty hit life highs as domestic-focused firms rally (Reuters)
• China bond default has positive effect on local government groups (FT) – unless it’s negative
• Russia tensions  risk higher gas prices (FT)
• China Home-Price Growth Slows in Big Cities on Tight Credit (BBG)
• ECB’s Weidmann says German surpluses “here to stay” (Reuters)
• Microsoft Office for iPad (AAPL) to be introduced this month (The Verge)
• Walmart to Offer Customers Credit for Used Video Games (NYT)
• BlackRock Hires JPMorgan’s Jones as Stock Investment Chief (BBG)
• Xbox chief Marc Whitten leaves Microsoft for Sonos (Verge)
• Hertz Spinning off Its Equipment Rental Business (AP)
• Renzi Wins Merkel Confidence Vote for Economic Change in Italy (BBG)

 

Overnight Media Digest

WSJ

* Surging prices for food staples from coffee to meat to vegetables are driving up the cost of groceries in the United States, pinching consumers and companies that are still grappling with a sluggish economic recovery.

* General Motors said it recalled 1.7 million more vehicles as Chief Executive Mary Barra stepped up her response to the company’s vehicle-defect problem, announcing three new safety recalls and vowing to change the way the auto maker handles recalls.

* A feud has erupted among distillers Brown-Forman Corp and Diageo Plc over a seemingly simple question: When is a whiskey “Tennessee Whiskey”?

* WhatsApp will soon belong to Facebook but the messaging app maker says it won’t approach privacy the same way as its soon-to-be-parent company. On Monday, WhatsApp updated its app, rolling out a new user settings screen dedicated to privacy. It also published a blog post promising not to change what data it collects from users, and how it collects it.

* General Electric Co’s retail credit business is facing a pair of probes from federal regulators over possible violations of consumer financial laws, disclosures that were released in paperwork for a planned initial public offering of the business.

* Langham Hospitality Group tapped on Monday a Ritz Carlton veteran as its new chief executive, part of the Hong Kong-based company’s plan to expand its brands worldwide.

* Amazon.com Inc will begin shipping its long-awaited video-streaming device in early April, through its website as well as retailers including Best Buy Co and Staples Inc, said people familiar with the company’s plans.

 

FT

General Motors Co’s new chief executive on Monday recalled more than 1.5 million vehicles, including some current models, acknowledging the Detroit automaker fell short in catching faulty ignition switches linked to 12 deaths.

The Bank of England is likely to announce an overhaul of its top officials as soon as Tuesday, as Governor Mark Carney prepares to unveil major reforms to the way Britain’s central bank is managed.

Barclays Plc will try to take the sting out of a heated debate over bankers’ bonuses on Tuesday by pointing to a drop in the value of shares given to its top executives even as the lender’s Chief Executive Antony Jenkins is awarded a 4 million pound ($6.66 million) payout.

Irish brewer Guinness, owned by Diageo Plc, dropped sponsorship of New York City’s St. Patrick’s Day celebrations amid growing criticism of organizers’ exclusion of gay and lesbian groups from the event.

Nigeria’s suspended central bank Governor Lamido Sanusi has released a 27-page rebuttal to allegations of “gross misconduct”, calling on President Goodluck Jonathan to reinstate him as the outrage grows over his accusations about missing oil revenues.

 

NYT

* Mary T. Barra, General Motors’ chief executive, announced another round of wide-ranging recalls on Monday, a sign that the company was moving with a new sense of urgency on safety problems after it disclosed a decade-long failure to fix a defect tied to 12 deaths.

* Tesla Motors, the maker of high-end all-electric cars, has time till April 1 to comply with New Jersey’s restrictive dealership laws that prevent the company from making any direct sales to customers. After Texas, Arizona and New Jersey, Ohio too is considering passing a similar legislation that protects the interests of car dealers and franchises.

* About 10 days after being identified by Newsweek magazine as the mysterious creator of the digital currency bitcoin, Dorian Nakamoto, a 64-year-old semi-employed engineer, has hired a lawyer and issued a statement unconditionally denying that he had any involvement in bitcoin.

* A bond insurer on Monday struck a blow against Detroit’s proposal to exit bankruptcy, arguing in a new lawsuit that Detroit’s approach would illegally discriminate against the city’s third-biggest group of creditors – the investors who provided $1.4 billion for its workers’ pensions nearly a decade ago.

* American manufacturing output recorded its largest increase in six months in February and factory activity in New York State expanded early this month, the latest signs that the economy is gaining momentum after being dampened by severe weather.

 

Canada

THE GLOBE AND MAIL

* Russia’s quick recognition of Crimea as an independent state is risking a second round of more damaging sanctions by the United States and the European Union that could unleash a new Cold War.

* Canada is joining the European Union and the United States in slapping additional sanctions on those it blames for threatening Ukraine’s sovereignty, retaliating against what Prime Minister Stephen Harper has branded the “Putin regime.”

Reports in the business section:

* Whitecap Resources Inc said on Monday that it was buying Western Canadian oil and gas properties from Imperial Oil Ltd for C$855 million ($773.65 million). The deal pushes the energy industry’s tally for merger and acquisition activity for the quarter to C$7 billion.

NATIONAL POST

* Zach Paikin, a rising star in the Liberal party, has decided not to run in the next election because leader Justin Trudeau has broken a “key promise” to hold open nominations in federal ridings across the country.

* Donna Kennedy-Glans became the second MLA to announce she would sit as an independent, further imperilling Alberta premier Alison Redford’s already-shaky long-term leadership prospects.

FINANCIAL POST

* Canada and the European Union have reached an agreement in principle on a free-trade deal that will give Canadian businesses preferential access to an EU market of 500 million consumers and lead to what the federal government says are cost savings for consumers.

* BlackBerry Ltd has laid off 120 employees in its product development and wireless technology divisions as part of an ongoing cost-cutting plan, the company said.

 

Hong Kong

SOUTH CHINA MORNING POST

— Hutchison Whampoa has put on hold plans to build a luxury house at a government-owned green-belt site on The Peak after neighbours voiced their opposition and district councillors demanded a rethink.

— The People’s Bank of China has issued two drafts for consultation aimed at cracking down further on internet finance by limiting online shopping and money transfers for online-payment service providers, according to mainland media reports.

— Hong Kong exporters are much more confident about their prospects in the first quarter of 2014, driven by machinery product orders as manufacturers gear up for a rebound in demand, a quarterly survey by the Hong Kong Trade Development Council showed.

THE STANDARD

— Mainland police have handed over the two men alleged to have brutally hacked former Ming Pao chief editor Kevin Lau Chun-to in Sai Wan Ho last month.

— MTR Corp will invite developers to submit expressions of interest for the Lohas Park phase four project in Tseung Kwan O on Tuesday, sources said. The development is expected to fetch as much as HK$2.5 billion ($321.93 million).

— Mainland industrial park developer Optics Valley Union opens its retail book to raise up to HK$1.09 billion in its Hong Kong initial public offering. Trading debut is scheduled for March 28.

HONG KONG ECONOMIC JOURNAL

— Tencent on Wednesday and Thursday sold an aggregate 563 million shares of ChinaVision Media for HK$1.01 billion ($130.06 million), reducing its stake to 1.23 percent from 8 percent, according to a stock exchange disclosure. The share sale came a day after Alibaba announced the acquisition of 60 percent of ChinaVision for HK$6.2 billion.

HONG KONG ECONOMIC TIMES

— Lee & Man Paper Manufacturing, which registered HK$1.95 billion net profit for 2013, expects its paper sales to achieve double digit growth this year as a new machine commences production, according to chief executive officer Lee Man Bun.

APPLE DAILY

— China Resources Power has no intention of participating in the Hong Kong power supply business and the suggestion from two of its executives to “nationalise” the city power supply assets was their personal view only, said executive vice chairman Zhang Shenwen.

 

Britain

The Telegraph

MONEYSUPERMARKET CO-FOUNDER BANKS 100 MLN STG

Simon Nixon, the businessman who founded the price comparison site Moneysupermarket.com after dropping out of university, has landed another 100 million pound ($166.44 million) windfall after selling a further 10 percent stake in the company.

DIAGEO TAKES ON JACK DANIEL’S IN ROW OVER HOW WHISKY CAN BE MADE

Diageo wants distilleries to be allowed to make Tennessee whiskey in reusable barrels, much to the horror of Jack Daniel’s maker Brown-Forman Corp.

The Guardian

BANK OF ENGLAND REFORM ANNOUNCEMENT EXPECTED FROM MARK CARNEY

A major overhaul of the Bank of England is expected to be signalled today alongside the appointment of a new deputy governor.

VODAFONE’S PURCHASE OF ONO FUELS TALK THAT BIG UK ACQUISITION MIGHT BE NEXT

Vodafone has sparked speculation that it might be on the verge of a big UK acquisition after confirming it has used 6 billion pounds of its cash warchest to buy Ono, Spain’s largest cable operator.

MORRISONS EMPLOYEE ARRESTED AS PART OF SALARY LEAK INVESTIGATION

A Morrisons employee has been arrested in connection with the theft and publication of personal details of thousands of the supermarket’s staff last week.

JUST EAT AIMS TO RAISE 100 MLN STG IN FLOTATION

Just Eat, which uses the slogan “give hunger the finger”, has announced plans for stock market listing that could value the online takeaway service at as much as 900 million pounds.

DYSON RECALLS ‘FIRE-RISK’ HEATERS

Dyson is recalling more than 1 million hot and cool fans over fears they could pose a fire risk. The recall was issued by the company on Monday after “a small number” short-circuited, causing a small internal fire.

The Times

ROYAL MAIL TURNS CLOCK BACK WITH CAPITAL CONTRACT

The pleasure of delivering many Londoners their council tax bills, parking fines and other local bureaucratic paperwork is to revert to the Royal Mail.

CUTTING HS2 COST WOULD BE IRRESPONSIBLE, SAYS NEW BOSS

Crewe should become the centre of transport for the North, David Higgins, the new boss of the HS2 high-speed railway, said in a report that argues in favour of accelerating the project.

CAPITA LANDS 90 MLN STG CALL CENTRE DEAL WITH JOHN LEWIS

John Lewis has chosen Capita to manage one of its online operations in a contract worth more than 90 million pounds. The outsourcing company will manage the retailer’s call centre for its internet shopping service.

The Independent

SIR JON CUNLIFFE WARNS GLOBAL BANKS ‘STILL TOO BIG TO FAIL’

Bank of England deputy governor Jon Cunliffe has warned there are still global banks which could not be wound up successfully without causing damage.

 

 

Fly on the Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Consumer Price Index for February at 8:30–consensus up 0.1% from prior month
Housing starts for February at 8:30–consensus up 3.4% from prior month
Building permits for February at 8:30–consensus up 1.6% from prior month

ANALYST RESEARCH

Upgrades

21Vianet (VNET) upgraded to Outperform from Neutral at Credit Suisse
Alliance Fiber Optic (AFOP) upgraded to Buy from Neutral at B. Riley
CACI International (CACI) upgraded to Sector Perform from Underperform at RBC Capital
CM Finance (CMFN) upgraded to Outperform from Market Perform at Raymond James
Flowers Foods (FLO) upgraded to Outperform from Market Perform at BMO Capital
Fortress (FIG) upgraded to Outperform from Market Perform at JMP Securities
HP (HPQ) upgraded to Overweight from Equal Weight at Barclays
L-3 Communications (LLL) upgraded to Sector Perform from Underperform at RBC Capital
Marketo (MKTO) upgraded to Neutral from Sell at UBS
Nabors Industries (NBR) upgraded to Neutral from Underperform at Credit Suisse
North American Energy (NOA) upgraded to Buy from Hold at Jefferies
Pan American Silver (PAAS) upgraded to Sector Performer from Underperformer at CIBC
Universal Health (UHS) upgraded to Buy from Hold at KeyBanc

Downgrades

Astoria Financial (AF) downgraded to Market Perform at Keefe Bruyette
Cisco (CSCO) downgraded to Equal Weight from Overweight at Barclays
E-House (EJ) downgraded to Buy from Conviction Buy at Goldman
Fortuna Silver Mines (FSM) downgraded to Sector Performer from Outperformer at CIBC
Umpqua Holdings (UMPQ) downgraded to Sector Perform from Outperform at RBC Capital

Initiations

Chicago Bridge & Iron (CBI) initiated with an Outperform at Cowen
Coach (COH) initiated with an Equal Weight at Barclays
Community Bank System (CBU) initiated with a Neutral at Sterne Agee
EP Energy (EPE) initiated with a Buy at Topeka
Fluor (FLR) initiated with an Outperform at Cowen
Foster Wheeler (FWLT) initiated with a Market Perform at Cowen
G-III Apparel (GIII) initiated with an Overweight at Barclays
Kate Spade (KATE) initiated with an Overweight at Barclays
M/I Homes (MHO) initiated with a Neutral at Citigroup
Michael Kors (KORS) initiated with an Underweight at Barclays
NCI Building Systems (NCS) initiated with a Neutral at Citigroup
Nordstrom (JWN) initiated with an Equal Weight at Barclays
PVH Corp. (PVH) initiated with an Overweight at Barclays
Popular (BPOP) initiated with a Buy at BTIG
Ralph Lauren (RL) initiated with an Overweight at Barclays
Sequential Brands (SQBG) initiated with an Overweight at Piper Jaffray
Vince Holding (VNCE) initiated with an Equal Weight at Barclays
Wynn Resorts (WYNN) initiated with a Hold at Ascendiant

COMPANY NEWS

Hertz (HTZ) announced a new $1B share repurchase program, says board approved separation of equipment rental business; Hertz CEO Mark Frissora will continue as CEO of Hertz after HERC separation
Wal-Mart (WMT) to accept used video games for store credit
Microsoft (MSFT) says Marc Whitten, Chief Product Officer of Xbox, to leave company
American Express (AXP) announced plans to spin off its business travel unit and form a joint venture with an investor group led by Certares; the joint venture investor group will invest $900M for a 50% stake
Prosensa Holding (RNA) reported “encouraging” results from a Phase II trial of drisapersen for the treatment of Duchenne Muscular Dystrophy
Galena Biopharma (GALE) disclosed an SEC investigation into the company related to an outside investor relations firm retained by Galena in 2013
Alphatec (ATEC) announced an agreement with OrthoTec to settle its ongoing litigation, with Alphatec agreeing to pay OrthoTec $49M over the next seven years in cash

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Global Power Equipment (GLPW), Kythera (KYTH), Apricus Biosciences (APRI), Trovagene (TROV)

Companies that missed consensus earnings expectations include:
Hertz (HTZ), Fortuna Silver Mines (FSM), Synergy Pharmaceuticals (SGYP), Galena (GALE), Health Insurance Innovations (HIIQ), Acorn Energy (ACFN), DTS, Inc. (DTSI), Fate Therapeutics (FATE), Intrawest Resorts (SNOW), Connecticut Water (CTWS), Mirati Therapeutics (MRTX)

Companies that matched consensus earnings expectations include:
Alphatec (ATEC)

NEWSPAPERS/WEBSITES

Amazon (AMZN) to ship video-streaming device in April, WSJ says
Amazon’s (AMZN) set-top box will have Chromecast-like form factor, TechCrunch says
Comcast (CMCSA) may be pushing into new digital home market, DigiTimes says
General Electric’s (GE) retail credit unit facing federal probes, WSJ reports
Microsoft (MSFT) to discuss cloud, mobile computing at event on March 27, Re/code says
Microsoft Office (MSFT) for iPad (AAPL) to be introduced this month, The Verge says
BlackRock (BLK) hires JPMorgan’s (JPM) Christopher Jones as chief investor officer for stocks in the Americas, Bloomberg reports
Caterpillar (CAT) protests rail contract awarded to Siemens (SI), Cummins (CMI), WSJ reports

SYNDICATE
Choice Hotels (CHH) files to sell 3M shares of common stock for holders
Criteo (CRTO) files to sell 5.25M American Depositary Shares
First Republic Bank (FRC) files to sell 3.5M shares of common stock
Golub Capital (GBDC) files to sell 3.5M shares of common stock
Sprouts Farmers Markets (SFM) files to sell 15M shares of common stock for holders
Tompkins Financial (TMP) files to sell $70M of common, preferred stock
Veeva (VEEV) files to sell $300M in common stock for holders

via Zero Hedge http://ift.tt/PLuS6Y Tyler Durden

Today’s prime time geopolitical risk event is Putin’s speech to parliament, in which he will address the Crimean crisis. No major surprises are expected, with mentions of retaliatory sanctions and the formal annexation of Crimea expected to be the main talking points, although it is the nuances and the phrasing that threaten to pull the USDJPY lower potentially into the double digit territory at which point all bets are off, if only for the Nikkei and the future of Abenomics. Watch Putin’s speech live below.

via Zero Hedge http://ift.tt/1gBMJ9F Tyler Durden

Has the market done it again? Two weeks ago, Putin’s first speech of the Ukraine conflict was taken by the USDJPY algos – which seemingly need to take a remedial class in Real Politik – as a conciliatory step, and words like “blinking” at the West were used when describing Putin, leading to a market surge. Promptly thereafter Russia seized Crimea and is now on the verge of formally annexing it. Over the weekend, we had the exact same misreading of the situation, when the Crimean referendum, whose purpose is to give Russia the green light to enter the country, was actually misinterpreted as a risk on event, not realizing that all the Russian apparatus needed to get a green light for further incursions into Ukraine or other neighboring countries was just the market surge the algos orchestrated. Anyway, yesterday’s risk on, zero volume euphoria has been tapered overnight, with the USDJPY sliding from nearly 102.00 to just above 101.30 dragging futures with it, in advance of Putin’s speech to parliament, in which he is expected to provide clarity on the Russian response to US sanctions, as well as formulate the nation’s further strategy vis-a-vis Crimea and the Ukraine.

In addition to Ukraine, concerns are finally starting to mount over the previously reported second Chinese default in under a month, only this time the bail out wild card may be used as usual. Bloomberg reports that officials from Ningbo branch of People’s Bank of China and China Banking Regulatory Commission have joined talks on collapsed real estate developer Zhejiang Xingrun Real Estate Co., according to officials familiar with the matter. Possible resolutions include local government bailing out co., which has 3.5b yuan in debt, according to the officials.

Away from the developments in EM, today sees the start of a 2-day FOMC gathering, and the first chaired by Yellen. This will be followed by the release of the Fed’s latest economic projections as well as a press conference given by Yellen. Whilst the huge weight of Fed speak so far this year suggests another $10bn taper there is debate as to what the Fed will do with its forward guidance, specifically the 6.5% unemployment rate threshold that seems fast headed to irrelevance given the unemployment rate is hovering at 6.7%. The challenge the Fed faces is altering its guidance without leading the market to bring forward expectation of future rate hikes. Given the Fed’s seeming commitment to shrinking its asset purchases this is important as holding down interest rate expectations will increasingly become the Fed’s key expansionary tool.

On the macro front, moments ago Germany reported a collapse – the third in a row – in the German ZEW Survey, where expectations crashed from 55.7 to 46.6, on expectations of a 52.0 number. That soaring EUR is starting to really hurt Europe, but feel free to take your complaints to the PBOC which has been gobbling up EURs with panache in recent weeks, as well as the department of magic at the ECB. Aside from this we will also get US CPI (markets expecting this to be unchanged at +0.1% MoM), housing starts (consensus +3.4% MoM) and building permits (consensus +1.6% Mom)

Bulletin news summary from Bloomberg:

• Treasuries gain, 7Y and 10Y notes lead, as Fed’s two-day meeting begins today amid expectations for additional $10b cut in QE and possible changes to forward guidance and 6.5% unemployment rate threshold.
• Putin supported a request from Ukraine’s separatist region of Crimea to join Russia, defying U.S. and EU sanctions in the worst standoff between Russia and the West since the Cold War
• Germany’s ZEW Investor Confidence fell to 46.6 (est. 52) in March from 55.7 the prior month, the third straight month decline as political uncertainty in Ukraine threatens to weigh on a recovery in Europe’s largest economy
• China’s central bank and China Construction Bank held emergency talks today over whether or not to bail out Zhejiang Xingrun Real Estate, FT reports without saying where it got the information
• China’s benchmark money-market rate climbed to the highest level in almost two weeks as the central bank stepped up cash withdrawals
• Greece will probably sell bonds for the first time in four years before May as the nation seeks to rebuild its finances following an international bailout, Infrastructure Minister Michalis Chrisochoides said
• Australia’s central bank said it saw more signs record-low interest rates were boosting growth, and reiterated a period of steady borrowing costs was likely
• Ben Broadbent, an external member of the Bank of England’s Monetary Policy Committee, will replace Charlie Bean as deputy governor for monetary policy
• A snapshot of Obamacare enrollment in seven states suggests the law hasn’t significantly increased competition in health insurance markets, the Kaiser Family Foundation reported
• Sovereign yields steady. EU peripheral spreads little changed. Asian equities gain. European equity markets, U.S. stock-index futures decline. WTI crude gains, gold lower, copper little changed

US Event Calendar

• 8:30am: CPI m/m, Feb., est. 0.1% (prior 0.1%); CPI Ex Food and Energy m/m, Feb., est. 0.1% (prior 0.1%)
• 8:30am: Housing Starts, Feb., est. 911k (prior 880k); Housing Starts m/m, Feb., est. 3.5% (prior -16%); Building Permits, Feb., est. 960k (prior 937k, revised 945k)
• Fed opens 2-day FOMC meeting
• 11:00am: POMO – Fed to purchase $1b-$1.25b in 2036-2044 sector

The full overnight recap via DB

China and Ukraine have been the dominant themes over the last few trading sessions but now we have a 2-day FOMC meeting to help distract us, the first chaired by Mrs Yellen. This week has so far started off a lot better than last week ended, with the S&P 500 (+0.96%) managing to retrace about half of last week’s losses yesterday. The positive momentum has carried through to overnight markets where we are seeing a constructive market tone for the second day running.

Taking a quick look at Asian markets, the gradual move higher in USDCNH (+0.2%) and USDCNY (+0.2%) continues today. The PBOC’s renminbi fixing came in at 6.1341 today, which is 20pips weaker than the 6.1321 set yesterday. Today’s move brings the cumulative devaluation of the CNY and CNH to around 2.5% since January. This is relatively small in a global context, but fairly notable relative to the recent history of the renminbi. DB’s FX strategist Bilal Hafeez writes that the CNY has been too strong compared to other EM surplus currencies – most of which reached a high against the US dollar in early 2012. The extraordinarily high carry was no doubt a key factor that allowed CNY to march higher against the dollar. With that support gone, CNY should weaken with levels such as 6.30 or more possible over the course of this year. Asian equities are enjoying a solid session led by a bounce back in the Nikkei (+1.4%) and solid gains in the KOSPI (+0.8%) and the Hang Seng (+0.5%). Chinese equities are lagging the broader rally somewhat (Shanghai Comp +0.2%) with some concern over the reported collapse of a local property developer owing more than US$500m in bank loans (Zhejiang Xingrun Real Estate). The story was run by a number of newswires yesterday, but it’s safe to say that the quality of Chinese bank loans made to real estate developers is not a new concern for markets. China’s National Bureau of Statistics published its latest new home prices in China’s 70 major cities which showed that prices rose 8.7% yoy in February, versus 9.6% a month earlier. Elsewhere the RBA minutes contained no major surprises, and AUDUSD is largely unchanged this morning.

In terms of the latest on Ukraine and Russia, shortly after EU and US sanctions were declared against Russian/Crimean individuals, the Kremlin announced that Putin signed a decree officially recognizing Crimea as a “sovereign and independent state” called the Republic of Crimea. This came after Russia made its first offer of a diplomatic solution to the Ukraine crisis by suggesting that a international support group be used to help mediate between Western governments and Russia whilst guaranteeing “territorial integrity and neutral military-political status” for Ukraine. The negotiation offer was swiftly dismissed because one of the conditions was recognition of the Crimean referendum. In terms of the sanctions themselves, they were not deemed at this stage to materially threaten economic trade flows or the supply of energy into the EU, and do not apply to Putin. This was a relief to many yesterday. So what next for Ukraine and Russia? Firstly in terms of sanctions against Russia, both the EU and US have left the door open for the broadening of injunctions. An EU heads of government meeting in Brussels on Thursday may lay out a tougher range of economic sanctions to be imposed if there is fresh Russian intervention. Similarly, President Obama added that going forward the US can calibrate its response based on whether Russia chooses to escalate or de-escalate the situation. In terms of Russia’s next move, a reportedly defiant Putin will address a joint session of Russia’s parliament today to speak about Crimea – scheduled for 3pm local time or 11am London time. Some expect Putin to endorse a request from Crimea’s parliament to annex it in keeping with the results of Sunday’s referendum (NY Times).

DB’s EM strategists think that Russian military intervention in eastern Ukraine is a tail risk at this stage though further agitation in some eastern cities would not be a surprise (EM Daily 18th March). That aside, there are already a number of processes in place to fast track the integration of Crimea into the Russian Federation. Russian lawmakers said they would accelerate bills to give out Russian passports to local Crimean residents (AFP). Crimean lawmakers have approved legislation to make the Russian ruble the official currency alongside the Ukrainian hryvnia. The hryvnia remains an official currency until January 1, 2016. Lawmakers also adopted a resolution stating that on March 30, Crimea will move to Moscow Standard Time. A big unknown at the moment is how Crimea will deal with its energy and water requirements. According to CNN, 90% of Crimea’s water, 80% of its electricity and roughly 65% of its gas comes from Ukraine. In addition to that, about 70% of Crimea’s $1.2bn budget comes directly from Kiev.

Away from the developments in EM, today sees the start of a 2-day FOMC gathering, and the first chaired by Yellen. This will be followed by the release of the Fed’s latest economic projections as well as a press conference given by Yellen. Whilst the huge weight of Fed speak so far this year suggests another $10bn taper there is debate as to what the Fed will do with its forward guidance, specifically the 6.5% unemployment rate threshold that seems fast headed to irrelevance given the unemployment rate is hovering at 6.7%. The challenge the Fed faces is altering its guidance without leading the market to bring forward expectation of future rate hikes. Given the Fed’s seeming commitment to shrinking its asset purchases this is important as holding down interest rate expectations will increasingly become the Fed’s key expansionary tool. As DB’s Peter Hooper sees it, the Fed has a number of options. It could do nothing in the hope that not changing the message even as it becomes irrelevant will mean no change in market expectations. It could drop the specific mention of the 6.5% threshold whilst leaving in place its current reference to other labour market and inflation indicators, or it could drop mention of the 6.5% threshold and strengthen its current references to other labour market indicators – for example highlighting their commitment to substantial further progress in reducing unemployment and raising inflation up to target, so long as inflation expectations remain stable. Peter expects the Fed will opt for this final option possibly adding some indication that most members of the Committee currently expect economic conditions to allow them to begin to raise rates sometime after mid-2015. The press conference and the release of the economic projections certainly give the Fed a range of communication options which they aren’t scheduled to have again until the June meeting so it is fair to say that something is expected from the Fed tomorrow.

In terms of yesterday’s US data, there were two key manufacturing data points worth highlighting. The first of these was the February industrial production report which impressed on the headline (0.6% MoM vs 0.2% consensus). The gain was driven by manufacturing production which rose 0.8% versus expectations of a 0.3% gain. DB’s Joe Lavorgna interprets the February data as suggesting that the drags from weather are abating and thereby clearing the way for a late-quarter or early Q2 snapback in hiring, production and consumption. The second datapoint to highlight was the NY Empire Fed survey which disappointed relative to expectations (5.61 vs 6.5 exp). On a more positive note it did improve 1.1pts versus February’s 4.5 reading and new orders (+3.1 vs. -0.2), shipments (+4.0 vs. +2.1) and inventories (+7.1 vs. -5.0) improved modestly in the month – perhaps suggesting that manufacturing is picking up following the inclement weather earlier in the year. Across the Atlantic, Euroarea CPI again disappointed expectations by falling to +0.7% yoy (vs 0.8% previous and expected) which is a 4.5yr low. The EURUSD was  little changed on the data however.

Reviewing some of the other headlines over the last 24 hours, Moody’s downgraded Argentina’s sovereign bond rating by one notch to Caa1 late yesterday. The rating agency cited the country’s significant fall in official reserves which have dropped to $27.5bn from a high of $52.7bn in 2011. The Argentine Peso was quoted around 0.3% weaker at 7.925 in late Monday trading. In China, there was an interesting article in the FT suggesting that all the negative attention on China’s corporate defaults has caused a flight to the relatively safety of bonds issued by local government financing vehicles (LGFVs). LGFVs have created headlines over the last few years with many blaming these financing platforms for the build up in leverage at the local government level – however they were described in the article as a relative “safe haven”. In Europe, Italian PM Renzi said after meeting with Angela Merkel that Italy “is not asking to exceed treaty limits” with regards to the budget.  Renzi has said recently that his goal is to bring in tax cuts and boost growth in Italy, which will hopefully reduce Italy’s debt as a percentage of output (Reuters).

Turning to the day ahead, the latest ZEW survey will be key data release in Europe which will be followed by US CPI (markets expecting this to be unchanged at +0.1% MoM), housing starts (consensus +3.4% MoM) and building permits (consensus +1.6% Mom). Putin’s speech to the Russian lower parliament may provide clues as to Russia’s next move in Ukraine. The speech is scheduled for 11am London

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

While Marc Faber is adamant that “there’s lots of funny things that are happening in China. And when the whole thing unwinds it will be a disaster,” it is his comments with regard Ukraine (and Russia) that are worth paying significant new attention to. As The Gloom, Boom & Doom Report editor notes in this brief Bloomberg TV interview, if you put yourself in Putin’s shoes “he did the right thing from his perspective,” given Crimea’s strategic importance. However, as Faber concludes, “Crimea moving to Russia gives essentially a signal to China that one day they can also move and seize some territory that they perceive belongs to them.”

 

 

Faber On Russia, Ukraine and its signaling to China…

Mr. Putin did the right thing from his perspective. We have to look – put ourselves into his shoes. He did absolutely the right thing at the right time.

 

…By that I mean that there was interference by foreign powers in Ukrainian politics that were unfavorably from the perspective of Russia.

 

…The Crimea is strategically most important for Russia. It has practically no meaning strategically to the United States or to Europe. But for Russia it’s very important. I don’t think that Russia will move further into Ukraine unless there is serious provocation. But I doubt it will happen. But I think the wider implication is that we have now border lines. In other words, the US would intervene if a foreign power would establish bases in Haiti and in Cuba and so forth and so on, and the Chinese will react if foreign powers threaten Chinese access to resources.

 

…

 

This is very important because the occupation or say the referendum (ph) in Crimea and Crimea moving to Russia gives essentially a signal to China that one day they can also move and seize some territory that they perceive that belongs to them.

Faber confirms his perspective on China…

…we had a colossal credit bubble in China and that this credit bubble is now being gradually deflated and will bring about problems in the real estate market and among some major players in the commodity markets as well. So overall, if I look at export figures from China, and they are very closely correlated to overall economic growth, then there is a huge discrepancy between what China reports and what China’s trading partners are reporting.

 

So if you look at the figures of China, exports are still growing. If you look at the trade figures China exports to Taiwan, so China records exports of so and so much. The Taiwan report imports from China at a much lower level. So which figures are more reliable? I think the figures of the trading partners of China are more reliable. And they would suggest that growth has slown down considerably.

 

…

 

Governments will always publish the statistics that they wish to show irrespective whether that is in China or in other countries. Governments control basically the statistical offices, so they can show whatever they want. As Stalin said, it’s not important who votes but who counts the votes. And the government counts the statistics.

 

…the fact is simply that Chinese stocks have been just about the worst performing stocks since 2006. Now analysts will dismiss that and say everything is prefect in China, but the stock market does not seem to believe everything that the government is saying about the economy. And clearly there are strength signs in the Chinese economy. In particular, as I said, we have this huge explosion of debt. Debt as a percent of GDP has increased in the last five years by more than 50 percent. Total debt is now over 215 percent of GDP, and a lot of it is trade finance that is being rolled over.

 

In addition to that, there are lots of funny deals. A friend of mine who analyzes China very carefully, Simon Hunt (ph), he pointed out that trade finance between one state-owned enterprise and a private company has amounted to over $5 trillion by continuing to roll over the same collateral several times. There’s lots of funny things that are happening in China. And when the whole thing unwinds it will be a disaster.

 

…

 

I think that investors are not sufficiently aware that the Chinese economy is far more important for other emerging economies than the United States because China is a large importer of resources. In other words, iron ore, copper, zinc (inaudible). And at the same time, they are a huge exporter to commodity producers of their own manufactured goods, as well as Korean exports. The commodity producers are much larger than Korean exports to the US or to the U (ph).

So if the Chinese economy slows down, commodity prices – industrial commodity prices are likely to remain under pressure. They already come down a lot. They remain under pressure and the resource producers have less money. In other words, the Brazilian goes into recession. The Middle East does not grow as much as before. Central Asia, Africa and so forth all contract, and then they buy less from China and you have a vicious cycle on the downside.

via Zero Hedge http://ift.tt/NpP105 Tyler Durden

It would appear that the widening of the daily trading bands (we discussed last night) are having a directional effect on USDCNY as the devaluation continues on the back of forced carry-trade unwinds. At 6.19, CNY is its weakest in 11 months (2.5% weaker than its lows in January) and the last 2 months have seen by far the biggest weakening in the currency on record. This ‘implied’ easing is modestly supporting the stock market and copper for now (though we suspect that is more spillover from risk-on squeezes post-Ukraine). While Goldman and BofA are adamant that widening the bands will not mean a change in trend overall, it seems clear that hot money is outflowing and driving a trend change anyway as corporate bond prices are not rising and home-price appreciation is slowing in the major cities.

 

USDCNY drops 100 pips to 6.19 – lowest in 11 months…

 

Via The FT,

China’s decision to squeeze speculators out of its currency is causing pain for local companies and individual investors.

 

http://ift.tt/1kYHNPP…

 

…

 

China is attempting to reduce the amount of money flowing into the country from foreign investors looking to profit on a rise in the yuan. The government sees this cash as inflating asset prices and making the economy more vulnerable to financial shocks.

 

But the currency’s decline is having a broader impact, particularly on Chinese companies that had placed bets on an appreciating yuan, traders and analysts say.

 

These companies have placed such bets in recent years to guarantee steady revenue from exports as the currency’s value climbed steadily against the dollar.

 

Many companies borrow money to make these trades, magnifying gains when the yuan rises but opening them up to big losses if the currency falls.

 

With the yuan down 2% against the dollar this year, more of the bets are losing money, said Geoff Kendrick, head of Asian currencies and rates at Morgan Stanley.

 

…

 

He estimates that paper losses on one popular way companies hedge their yuan exposure and individual investors bet on the yuan, through what is known as target redemption-forward products, have hit $2.3 billion, on contracts valued at $150 billion.

 

…

 

“In the past, when the [yuan] had a clear one-way trend, it used to be really easy for corporates. But now, with two-way volatility it becomes very tricky for them to manage,” he said. “It’s going to be a very different market from here.”

 

…

 

For now, most of the losses remain on paper because investors and companies haven’t yet sold their positions. However, banks are asking both corporate and individual clients with losing bets to pony up more collateral, traders in Hong Kong say. Banks also are advising companies to restructure their investments around weaker levels for the yuan, a cheaper alternative than completely unwinding millions of dollars of the products, which were originally designed to help companies hedge against gains in the yuan.

 

While the recent declines likely aren’t big enough to trigger a stampede out of the yuan, the added volatility in the exchange rate may give some investors pause.

 

…

 

“If the currency appreciation is no slam dunk anymore…part of the attraction of owning Chinese equities and bonds is being erased,” said Greg Anderson, global head of foreign-exchange strategy for BMO Capital Markets, a subsidiary of BMO Financial Group. “The result will probably be less foreign portfolio investment in China.”

 

…

 

“Some hedge funds are closing up positions,”… Even a small drop in the yuan could trigger big losses. Many investors are vulnerable if the yuan weakens to 6.20 to the dollar

And with home price appreciation slowing, perhaps thinsga re moving a little too fast for the PBOC to manage?

via Zero Hedge http://ift.tt/1g4B1G6 Tyler Durden

With Bitcoin’s erstwhile founder (according to NewsWeek) denying it all, we thought it might be useful to hear from ‘the horse’s mouth’ just what Bitcoin is. While many have heard “shit bitcoin fanatics say“, Conan O’Brian’s interview ith the “Bitcoin COO” is full of clarifying knowledge… (and sadly reflects most people’s perspective still on the virtual currency space)

 

Shit Bitcoin Fans Say…

 

And Bitcoin’s COO explains it all…

 

h/t Mike Krieger of Liberty Blitzkrieg blog

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

Submitted by Ron Paul of The Ron Paul Institute,

The reaction of Sen. Dianne Feinstein (D-CA) to last week’s revelations that the CIA secretly searched Senate Intelligence Committee computers reveals much about what the elites in government think about the rest of us. “Spy on thee, but not on me!”
 
The hypocrisy of Sen. Feinstein is astounding. She is the biggest backer of the NSA spying on the rest of us, but when the tables are turned and her staff is the target she becomes irate. But there is more to it than that. There is an attitude in Washington that the laws Congress passes do not apply to Members. They can trample our civil liberties, they believe, but it should never affect their own freedom.
 
Remember that much of this started when politicians rushed to past the PATRIOT Act after 9/11. Those of us who warned that such new powers granted to the state would be used against us someday were criticized as alarmist and worse. The violations happened just as we warned, but when political leaders discovered the breach of our civil liberties they did nothing about it. It was not until whistleblowers like Edward Snowden and others informed us of the abuses that the “debate” over surveillance that President Obama claimed to welcome could even begin to take place! Left to politicians like Dianne Feinstein, Mike Rogers, and President Obama, we would never have that debate because we would not know.
 
Washington does not care about our privacy. When serious violations are discovered they most often rush to protect the status quo instead of defending the Constitution. Senator Feinstein did just that as the NSA spying revelations began to create pressure on the Intelligence Community. Her NSA reform legislation was nothing but a smokescreen: under the guise of “reform” it would have codified in law the violations already taking place. When that fact became too obvious to deny, the Senate was forced to let the legislation die in the committee.
 
What is interesting, and buried in the accusations and denials, is that the alleged CIA monitoring was over an expected 6,000 page Senate Intelligence Committee report on the shameful and un-American recent CIA history of torture at the “gulag archipelago” of secret prisons it set up across the world after the attacks of 9/11. We can understand why the CIA might have been afraid of that information getting out.
 
When CIA whistleblower John Kiriakou exposed the CIA’s role in torturing prisoners he was sent to prison for nearly three years. But Senator Feinstein and her colleagues didn’t lift a finger to support him. So again you have the double standards and hypocrisy.
 
The essence of this problem has to do with the difficulty in managing the US empire. When the government behaves as an empire rather than as a republic, lying to the rest of us is permissible. They spy on everybody because they don’t trust anybody. The answer is obvious: rein in the CIA; remove its authority to conduct these kinds of covert actions. Rein in government. Lawmakers should not defend Fourth Amendment rights only when their staffs have been violated. They should do it all the time for all of us. The people’s branch of government must stand up for the people. Let’s hope that Sen. Feinstein has had her wake-up call and will now finally start defending the rest of us against a government that increasingly sees us as the enemy.

via Zero Hedge http://ift.tt/1gHAm8p Tyler Durden

Just last week Goldman noted that February was "the busiest month in the buyback desk's history," so one has to wonder just what management is thinking when the Wall Street Journal reports that corporate insiders are more bearish than they have been at least since 1990. According to this adjusted measure, there have been two prior occasions when the insider ratio got almost as bearish as it is today – early 2007 and early 2011 – and the first came a half a year before the beginning of the worst bear market since the 1930s. Simply put, it seems management teams are using their company's balance sheet as their own personal piggybank.

 

As we noted last week, Goldman is concerned that the party is ending:

With stocks rising to record high after record high, and with even Goldman's clients now asking "When does the party end?" as noted by Goldman's David Kostin overnight, the answer is simple: nothing has changed. Specifically, between the Fed's ongoing monetization of tens of billions monthly in bonds, the missing piece to the equation is also a known one – corporate buybacks. In fact as Goldman admits, "February was the busiest month in our buyback desk’s history." (which surely is Chinese walled off from Goldman's prop trading desk). Why? Because as Reuters reported previously, this was the second-busiest week ever recorded for high-grade bond issuance. And with the use of proceeds certainly not going to capex, companies continue to buyback their shares in record amounts to mask the decline in actual cash earnings by lowering the amount of shares outstanding and thus keeping EPS rising or flat.

 

But aren't companies leery of buying back their shares at all time highs?

And this "adjusted" measure (discussed by the Wall Street Journal's Mark Hulbert) supports these concerns as  the traditional insider-buying/selling measure is misleading, says Nejat Seyhun, a finance professor at the University of Michigan who has extensively studied insider behavior…

Corporate insiders are more bearish than they have been at least since 1990.

 

That isn't good news for the stock market, since these insiders—corporate officers and directors—know more about their companies' prospects than the rest of us. You may want to take their pessimism as a signal to ditch some of your stocks or shift into industries in which insiders aren't heavily selling, such as energy, financials and basic industrials.

 

…

 

Mr. Seyhun strips out the largest shareholders from the sell-to-buy ratio, and that adjusted figure shows the current record level of insider bearishness. According to his calculations, corporate officers and directors in recent weeks have sold an average of six shares of their company's stock for every one that they bought. That's more than double the average adjusted ratio since 1990, when Mr. Seyhun's data begin.

 

One year ago, Mr. Seyhun's adjusted ratio was solidly in the bullish zone, he says. And in late 2003, the ratio was more bullish still.

 

The current message of the insider data "is as pessimistic as I've ever seen over the last 25 years," he says. What makes this development so ominous, he adds, is that, while no indicator is perfect, his research has shown that "the adjusted insider ratio does a better job predicting year-ahead returns than almost all of the better-known indicators that are popular on Wall Street."

 

There have been two prior occasions when the adjusted insider ratio got almost as bearish as it is today—early 2007 and early 2011.

 

The first came a half a year before the beginning of the worst bear market since the 1930s.

 

…

 

Among the stocks you should be looking to sell are those in industries whose officers and directors are selling particularly aggressively. These sectors, according to Mr. Seyhun, include capital goods, technology, consumer durables (such as automobiles, construction and appliances) and consumer nondurables (food and beverages, clothing and tobacco).

Simply put, it seems management teams are using their company's balance sheet as their own personal piggybank.

via Zero Hedge http://ift.tt/1iXQ4yS Tyler Durden

Submitted by Ben Hunt of Epsilon Theory

The Panopticon: a new mode of obtaining power of mind over mind, in a quantity hitherto without example.

    – Jeremy Bentham, founder of modern utilitarianism (1748 – 1832)

But the guilty person is only one of the targets of punishment. For punishment is directed above all at others, at all the potentially guilty.

    – Michel Foucault, “Discipline and Punish: The Birth of the Prison”

Visibility is a trap.

    – Michel Foucault, “Discipline and Punish: The Birth of the Prison”

There is little doubt that hedge funds have entered a new era of transparency and public openness – a transformation that I believe will benefit investors, the public, and regulators… One immediate benefit of this requirement to your industry should be that transparency will enable you to shed the secretive, “shadowy” reputation that some would say has unfairly surrounded you.

    – Mary Jo White, SEC Chair, speech to Managed Funds Association, October 18, 2013

The advance of civilization is nothing but an exercise in the limiting of privacy.

    – Isaac Asimov, “Foundation’s Edge”

Whatever games are played with us, we must play no games with ourselves, but deal in our privacy with the last honesty and truth.

    – Ralph Waldo Emerson (1803-1882)

 

In 1791, Jeremy Bentham published a book describing what was clearly a revolutionary design for prisons, factories, schools, hospitals – any institutional building where a few administer instruction, discipline, or care to the many. This design, what Bentham called a Panopticon, was trumpeted as “Morals reformed — health preserved — industry invigorated — instruction diffused — public burdens lightened — Economy seated, as it were, upon a rock — the Gordian knot of the poorlaw not cut, but untied — all by a simple idea in Architecture!” No shrinking violet here, but the booming, confident voice of the father of utilitarianism, a man who wrote 30,000,000 words in a lifetime of social activism.

A Panopticon has a large circular watchtower in the middle of a larger circle of cells or offices or classrooms or whatever functional task space is appropriate for the building at hand. The outer circle of cells has inner walls and doors made of transparent windows, and the reverse is true of the central watchtower, which is completely opaque as seen from the outside. From the watchtower you can see perfectly into every cell, but from a cell you can see nothing in the watchtower. Importantly, any occupant of a cell can see pretty much every other occupant of every other cell.

The beauty of the Panopticon, per Bentham, was that the occupants of each cell would soon come to police themselves. That is, the only thing necessary to create the perception of being watched and monitored and punished for bad behavior was the constant possibility of being watched and monitored and punished for bad behavior, together with the communal witnessing of your fellow prisoners behaving as if they were watched and monitored and punished for bad behavior. It’s not  necessary for a guard or overseer to watch each prisoner at all times; what’s necessary is for each prisoner to live in a perfectly transparent cell, so that each prisoner thinks that he is being watched at all times. As Bentham wrote, the Panopticon design was a means of controlling the minds of prisoners or workers through mental force, as opposed to the traditional goal in 18th century prisons and workhouses of controlling bodies through brute force. Just like the warden in Cool Hand Luke, just like Dick Clark with American Bandstand, Bentham understood the enormous power of the crowd seeing the crowd. What he added to the calculus of social control was the important catalyst of transparency.

Thinking of transparency and openness as an instrument of social mind control is a hard pill to swallow in an era of social media and reality TV. So many of us embrace personal openness and the sharing of our thoughts…so many of us, as Christopher Hitchens ruefully noted about himself, run towards a camera instead of run away…that it seems almost un-American, rather impolite, and certainly anti-modern to maintain privacy and secrecy in our social relationships. We live in an age where transparency is lauded as a personal virtue and touted as a hallmark of liberty, where public confession is a celebrated ritual and a trusty engine of popular  entertainment, where our employers expect as a matter of course that our private lives will merge with our business lives to allow constant access and attention. We live in an age where government requires disclosure of private investment strategies and holdings under the guise of “risk management”, where failure to disclose a private opinion on public securities can be a crime, where – as Dave Egger’s chillingly writes in The Circle – “Secrets are Lies”, “Sharing is Caring”, and “Privacy is Theft”.

Transparency has nothing to do with freedom and everything to do with control, and the more “radical” the transparency the more effective the control…the more willingly and completely we police ourselves in our own corporate or social Panopticons. This was Michel Foucault’s argument in his classic post-modern critique Discipline and Punish: The Birth of the Prison, which – just because it was written in an intentionally impenetrable post-modernist style, and just because Foucault himself was a self-righteous, preening academic bully as only a French public intellectual can be – doesn’t make it wrong. The human animal conforms when it observes and is observed by a crowd, at first for fear of discipline but ultimately because that discipline is internalized as belief and expectation.

To be clear, I’m not saying that transparency is a bad thing for the society or institutions that enforce it. I simply want to call it by its proper name…an extremely powerful instrument of social control, not a “benefit” for the watched. Firms like Bridgewater that famously require a culture of transparency are, I believe, far more efficient and robust than their competitors that don’t. To take a trivial example apropos in mid-March, do you think that a lot of time is wasted at Bridgewater during work hours by employees sending around NCAA tournament brackets? Yeah, right. Not because there’s some “rule” against researching your NCAA bracket while at work, but because it would be unthinkable (and I mean that in a purely literal sense of the word) to do so within the glass walls of an effective Panopticon. A Panopticon crushes any sense of complacency in its residents, and that’s a really big plus for a modern institution. For the residents themselves, of course, that lack  of complacency may manifest itself as a wee bit of constant stress. Or to take an example from the investment industry as a whole, SEC Chair Mary Jo White is absolutely right when she says that transparency is good for regulators. Heck, it’s great for regulators. But she’s entirely disingenuous when she touts the removal
of secrecy as a good thing for private investment funds.

What’s my investment point in this little diatribe? As investors in highly regulated public markets we are all operating within a Panopticon of sorts. Some of us more obviously than others, but we’re all similarly situated to a rough degree. It’s critical to understand the dynamics of the crowd watching the crowd within a regulatory environment of forced transparency so that we can have a realistic notion of what’s possible and what’s not as we try to achieve our personal or institutional investment goals.

Capturing alpha in an investment strategy requires private information. To the degree that forced regulatory transparency and Big Data technology reduce private information by turning it into common knowledge, there is less alpha in markets. That’s a cold, hard fact. Finding alpha has never been easy. It’s always been the rarest thing in the investing world, but now it’s truly an endangered species, particularly in the stock-picking world of fundamental analysis of public companies. We have moved from a regulatory environment where illegal private information was pretty much defined as stealing the orange growers’ crop report from the USDA a la Trading Places (Mortimer Duke: “Turn those machines back on!”), to an environment where the mere existence of market-beating investment returns is treated as prima facie evidence that you must have been doing something illegal to generate those returns. Professional investors today are scared to death of private information on public companies. It’s never been more expensive or difficult to acquire, and the regulatory assumption is that – if it works – then it must have been illegally obtained. No wonder, then, that so many hedge fund giants accustomed to investing on the basis of private information are sailing as fast as they can for the safe harbor of advocacy and activism, where a large position and a board seat or two may cost you dearly in terms of liquidity but allows you to legally obtain and act on private information as a company insider. And even if you don’t reach the promised land of board membership and true insider status, at least you can talk up your own book with incessant public statements about your “investment thesis” without drawing regulatory scrutiny. All of the big boys play the Common Knowledge game today, because that’s how they adapt to a Panopticon. They make themselves more visible to the crowd and make more public statements because they can create, for a while at least, their own investing reality. They know that if they speak loudly enough and long enough, enough of us little guys will  follow their lead on the stock. It’s what little guys DO.

Wow, that’s a pretty bleak assessment, Ben. Isn ’t there some hope for alpha still out there in the world, even for the little guys? Sure. It’s in your neighborhood. It’s in your family business. It’s in whatever you know really well, some endeavor that by dint of education or experience you happen to have private information about. That’s where you’ll find alpha. Remember Peter Lynch and “buy what you know”? There’s a lot of wisdom in that, so long as you keep in mind that in Lynch’s day you could know an Apple or a Microsoft in a way that is impossible and/or illegal today. In today’s public markets I think it’s still possible to find managers with private information, but you have to look in the cracks and crevices of the market, in relatively small niches where the traders and investors that I refer to as beautiful parasites still live. These managers tend to be relatively small, and they are almost always superb game-players, able to generate alpha by, as Keynes put it, “guessing better than the crowd how the crowd will behave.”

And remember, too, that finding alpha isn’t the only reason to invest in public markets. Liquidity is important. Tagging along with broad-based economic growth through a broad-based capital market is important. But most of all diversification is important. Harry Markowitz, the father of Modern Portfolio Theory, always bristles at that label, saying that there’s nothing modern about it at all. He’s exactly right. Portfolio theory is an old, wonderful idea. You can dress it up in scientific finery as MPT does, and there’s definitely a role for that, but there’s also a very real danger that the arcane language and self-appointed priesthood of modern economic science gets in the way of a personal appreciation of the very real benefits of a diversified portfolio. I’ve written recently about applying the Adaptive Investing lens to questions of diversification, and I’m going to continue focusing on that in the future. Because while alpha in public markets may be rare and getting rarer as private information vanishes before the onslaught of forced transparency, diversification is still there for the taking. And that’s an opportunity I’m happy to use my media microphone to encourage.

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

"Compared to the ones I ran into," noted former-SEC chief, John Babikian's 'AwesomePennyStocks' fraud "is the biggest on ever." As Bloomberg reports, short-sellers and stock promoters have puzzled for years over who operated one of the largest penny-stock websites. A U.S. lawsuit points to a Bugatti-driving 26-year-old from Montreal. The SEC is freezing Babikian’s assets, including two homes and the proceeds of selling a fractional interest in a plane. "The traditional Stratton Oakmont has been replaced by the opt-in newsletter… the world of pump-and-dumps occurs in the shadows." Welcome to the new 'get-rich-quick' bubble euphoria…

 

Via Bloomberg,

"AwesomePennyStocks"…

John Babikian used an e-mail list called AwesomePennyStocks to tout a coal company’s stock while dumping his own shares, the Securities and Exchange Commission said last week in a civil complaint. AwesomePennyStocks’ messages about that firm and 38 others, sent over five years, helped fuel spikes in share prices that boosted the combined value of the stocks by as much as $3 billion, according to data compiled by Bloomberg.

 

Bulk e-mails have long-since supplanted the boiler rooms of the 1990s as the most effective way to hype shares of little-known companies. The value of a prescription-drug distributor that AwesomePennyStocks promoted in 2012 ballooned by more than $700 million within two months. After the messages stopped, the shares collapsed.

 

“Compared to the ones I ran into, that’s big,” Tom Sporkin, the SEC’s former chief of market intelligence, said of the website after Bloomberg News shared the data with him. “It’s the biggest one I’ve heard of.”

The New Wolf of Wall Street…

Babikian owned a Bugatti Veyron — the cars cost more than $1 million and take 2.5 seconds to hit 60 miles (96.6 kilometers) per hour — as well as a Bentley and Lamborghini, according to documents from Revenue Quebec, the province’s tax authority. It obtained a judgment allowing seizure of some of his assets last year, after he left the country, relating to its claim that he owed C$4.6 million ($4.1 million) in unpaid taxes.

 

The SEC is freezing Babikian’s assets, including two homes and the proceeds of selling a fractional interest in a plane, the agency said in a March 13 statement. Babikian bought a boxy, modern Los Angeles house in 2010 for $2.2 million

As things have changed…

AwesomePennyStocks was “one of the biggest promoters,”

 

“The traditional Stratton Oakmont has been replaced by the opt-in newsletter,” Coulson said, referring to the boiler room depicted in “The Wolf of Wall Street,” the 2013 movie directed by Martin Scorsese. “People just get an e-mail and they buy these things without doing any fundamental analysis.”

 

…

 

“It’s what I call the street crime of securities,” Sporkin said. “The world of pump-and-dumps occurs in the shadows.”

 

…

 

"The sheep that buy end up holding the bag and losing everything,”

Mystery Man…

Short-sellers and rival stock promoters said in interviews that AwesomePennyStocks was the biggest and most successful of the penny-stock websites and that they had tried for years to figure out who was behind it.

 

…

 

“It was always kind of a mystery,” Peter Nicosia, who runs a stock-promotion site called Bull in Advantage LLC, said late last year. “They had the market cornered.”

Awesome…

AwesomePennyStocks has closed after “an AWESOME run over the last few years,” according to the website. “We have seen multiple picks soar dramatically from our initial alerts, and we have seen our members reap the profits.”

We are sure this unfortunate promotion will do nothing to sour the get-rich-quick mindset of American investors as they see day-after-day how easy it is to day-trade and make millions from a market that never fails…

via Zero Hedge http://ift.tt/1gA0Axa Tyler Durden