Tag: news

One of the great “paradigms” of the New Normal tech bubble that supposedly differentiated it from dot com bubble 1.0 was that this time it was different, at least when it came to advertising revenues. The mantra went that unlike traditional web-based banner advertising which has been in secular decline over the past decade, social media ad spending – which the bulk of new tech company stalwarts swear is the source of virtually unlimited upside growth – was far more engaging, and generated far greater returns and better results for those spending billions in ad bucks on the new “social-networked” generation. Sadly, this time was not different after all, and this “paradigm” has also turned out to be one big pipe dream.

According to the WSJ, citing Gallup, “62% of the more than 18,000 U.S. consumers it polled said social media had no influence on their buying decisions. Another 30% said it had some influence. U.S. companies spent $5.1 billion on social-media advertising in 2013, but Gallup says “consumers are highly adept at tuning out brand-related Facebook and Twitter content.” (Gallup’s survey was conducted via the Web and mail from December 2012 to January 2013. The survey has a margin of error of plus or minus 1 percentage point.)

In a study last year, Nielsen Holdings NV found that global consumers trusted ads on television, print, radio, billboards and movie trailers more than social-media ads.

 

Gallup says brands assumed incorrectly that consumers would welcome them into their social lives. Then they delivered a hard sell that turned off many people.

 

More recently, changes in how Facebook manages users’ news feeds have hindered brands’ ability to reach their fans. Rather than a largely chronological stream, Facebook now manages the news feed to feature items it thinks users will want to see.

 

The result: Brands reached 6.5% of their fans with Facebook posts in March, down from 16% in February 2012, according to EdgeRank Checker, a social-media analytics firm recently acquired by Socialbakers.

One case study:

Indian Road Cafe in New York City estimates it spent about $5,000 on Facebook ads, and its page now has about 13,000 fans. “But the return is really disappointing,” says co-owner Jason Minter. “Unless you spend to boost a post, you only reach 300 to 400 people. I’ve certainly noticed the loss of organic reach. You spend all this time, and unfortunately, the return is not there.” Mr. Minter says the restaurant still uses Facebook, but in a more targeted way, and is looking to a new website and other digital marketing approaches rather than building up the Facebook audience.

Another:

In May 2013, Ritz-Carlton Hotel Co. bought ads to promote its brand page on Facebook. After a few days, unhappy executives halted the campaign—but not because they weren’t gaining enough fans. Rather, they were gaining too many, too fast “We were fearful our engagement and connection with our community was dropping” as the fan base grew, says Allison Sitch, Ritz-Carlton’s vice president of global public relations.

 

Today, the hotel operator has about 498,000 Facebook fans; some rivals have several times as many. Rather than try to keep pace, Ritz-Carlton spends time analyzing its social-media conversations, to see what guests like and don’t like. It also reaches out to people who have never stayed at its hotels and express concern about the cost.

 

Ritz-Carlton illustrates a shift in corporate social-media strategies. After years of chasing Facebook fans and Twitter followers, many companies now stress quality over quantity. They are tracking mentions of their brand, then using the information to help the business.

“Quality over Quantity” means the days of blindly scrambling to gain followers no matter the cost, are over.

“Fans and follower counts are over. Now it’s about what is social doing for you and real business objectives,” says Jan Rezab, chief executive of Socialbakers AS, a social-media metrics company based in Prague.

 

When many companies joined Facebook in the late 2000s, they used it as another brand website where they provided links, contact information and monitored consumer gripes. Then, they got caught up in the numbers game, trying to rack up raw masses of fans and followers, believing they were building a solid marketing channel. But that often wasn’t the case.

There is the engagement issue. But the main reason behind the growing disappointment with social media advertising is what we explained back in January in “It’s A Click Farm World: 1 Million Followers Cost $600 And The State Department Buys 2 Million Facebook Likes” – in short, pervasive click fraud and fake followers, the scourge of any advertising IRR analysis.

Another reason companies are looking beyond fan numbers is that the numbers are easily gamed. Researchers say many fans are fake, or automated, accounts designed to inflate numbers.

 

Italian security researcher Andrea Stroppa says he found a new breed of sites offering Facebook fans or Twitter followers for pennies. In experiments, Mr. Stroppa paid 42 cents for 700 retweets and seven cents for 100 likes on a Facebook post.

For now, however, companies stumped for revenue leads are still using social media: “while companies are adjusting their social-media strategies, they continue to advertise on Facebook. First-quarter net income nearly tripled at the social-network on a 72% increase in revenue.”

In other words the social-media ad spending model still works for some, like the Facebooks of the world: those who pocket the ad spend. As for the companies who do the actual spending – not so much.

Still, with the deteriorating finances of the US consumer directly impacting the discretionary spending vertical, one thing is certain: as companies become increasingly more cash strapped their ad budgets will dwindle, which in turn will impact how much money is allotted to the “New advertising paradigm“, and sooner or later ad purchasing managers will revert to old and familiar forms of advertising using legacy media.

What this means for the generation of social media companies, still incubate in private at stratospheric valuations or going public assuming virtually unlimited (ad revenue) growth is still unclear, but is hardly optimistic. Because once the ad spending plateaus and reverts to a downward trendline as seen in virtually all other ad models, the current infatuation with “eyeballs” will end with a bang, as it did over a decade ago. Because while everything else changes, it never is diferent this time.

via Zero Hedge http://ift.tt/1q0Q2x5 Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Those who see the current era as the New Normal also have one logical action: sell now at the top and wait for the smoke to clear in 2016.

In The Generational Short: Banks, Wall Street, Housing and Luxury Retail Are Doomed, I addressed how generational changes in values could affect the stock market. That values change over time is common sense, and so is the idea that values drive choices about purchases, debt and investments that ultimately influence stock valuations.

The implicit conclusion: the Baby Boomers won't have anyone to sell their stocks, real estate and bonds to. Correspondent Eric A. demolished the fantasy that Gen X will have the income and assets to buy the Boomers' stocks held in IRAs, local government and union pension funds and 401K accounts in Generation X: An Inconvenient Era (May 23, 2013).

The idea that Gen-Y will have the wealth (not to mention the desire) to buy the Boomers' stock market portfolios at nosebleed valuations poses a peculiar conundrum: the only way Gen-Y will have the wealth to buy Baby Boomers' assets is if the Boomers sell their assets and pass the wealth along to Gen-Y.

So if both Gen-X and Gen-Y are out as buyers, who's left to buy the tens of trillions of dollars of Boomer assets at bubblicious prices? Given that other nations face the same demographic dilemma, the answer appears to be: no one.

Let's move on to the question of whether the current valuations are an aberration or the New Normal. This matters, because if the period from 1994 to 2014 is a one-off aberration, that means stock valuations will eventually revert to historical levels far below current valuations.

Here is a chart of the Dow Jones Industrial Average (DJIA) from 1955 to the present. Does the current era of bubbles and crashes look remotely normal, compared to the decades prior to 1994?

If this is the New Normal, then what that means is a bubble and crash every 7+ years is now the expected cycle. Here is an annual chart of the DJIA (courtesy of Harun I.; comments by CHS) that shows the megaphone pattern that's been traced out in the New Normal era of huge bubbles and equally monumental crashes:

If this is indeed the New Normal, wouldn't it make rather obvious sense to sell at the top (i.e. now) and wait for the New Normal crash and bottom around 2016?What evidence is there that this latest and greatest bubble is sustainable?

Next, let's look at the fundamental relationship of stocks to the nation's gross domestic product (GDP), a broad measure of the economy. Current sky-high stock valuations are not just aberrations in terms of previous stock prices–they're aberrations in terms of stocks' valuations compared to the nation's entire economy.

Doesn't it boil down to this? If we can't come up with a viable cohort who can afford (and is willing to place that generational bet) to buy Baby Boomer assets at current bubble-level prices, then it follows that as the first Boomers start selling their assets, prices will fall as there is nobody left to buy them, at least at these valuations.

Those who see the current era as an aberration have one logical action: sell now and get out while the gettings good.

Those who see the current era as the New Normal also have one logical action: sell now at the top and wait for the smoke to clear in 2016.

Now that it's evident that central banks have been buying stocks to prop up the bubble-level valuations ("Cluster Of Central Banks" Have Secretly Invested $29 Trillion In The Market — Zero Hedge), some may assume the central banks will buy another $29 trillion in stocks from the Boomers–or what the heck, make it $50 trillion or $100 trillion–there's no limit, right?

How safe is that bet, i.e. that central banks will be able to buy most of global stock market without any consequences or blowback?

It might be safer to hope the Martian Central Bank prints a few trillion quatloos and shows up to save the bubble-era Boomer portfolios from self-destruction.

via Zero Hedge http://ift.tt/1m4QF11 Tyler Durden

Following our comprehensive update yesterday, there is not as much to report, but for all those following the Iraq situation closer than the surgeon general recommends, here are the latest updates.

ISIL Controls Western Borders; Kerry in Bagdad: Oil extends gain as conflict in Iraq escalates with ISIL-led militants capturing border crossings with Syria and Jordan and gaining territory.

From Reuters: U.S. Secretary of State John Kerry met Iraq’s prime minister in Baghdad on Monday to push for a more inclusive government, even as Baghdad’s forces abandoned the border with Jordan, leaving the entire Western frontier outside government control.

Sunni tribes took the Turaibil border crossing, the only legal crossing point between Iraq and Jordan, after Iraqi security forces fled, Iraqi and Jordanian security sources said.

The tribes were negotiating to hand the post over to insurgents from the Islamic State in Iraq and the Levant who took control of two main crossings with Syria over the weekend.

Kurdish forces control a third border post with Syria in the north, leaving central government troops with no presence along the entire Western frontier which includes some of the most important east-west trade routes in the Middle East.

FRONT-LINE FIGHTING
===================

• Militants control all border crossings to Syria and Jordan
• Capture Rutba along the road to Baghdad and Qaim, Rawa and Anah along the Euphrates River
• ISIL take over Tal Afar airport
• Iraqi govt troops retain control of 310k b/d Baiji refinery, but facility surrounded by territory held by militants

FOREIGN POLITICS
================

• U.S. Secretary of State John Kerry visits Baghdad, presses leaders to “rise above sectarian motivations” and form a united govt
• U.S. to send 300 military advisers to Baghdad; lack sufficient intelligence for imminent air strikes: Gen. Dempsey
• Iran opposes US intervention in Iraq
• Saudi Arabia warns against outside intervention in Iraq, blames “exclusionary policies” of Iraqi cabinet: Saudi ambassador writes in Telegraph

PRESSURE ON MALIKI

==================

• Obama declines to endorse Maliki, stops short of calling for him to step down
• Maliki faces revolt from Shiite backers

OIL PRODUCTION IN NORTHERN IRAQ
===============================

• Current output from Iraq’s northern fields cut to 30k b/d; supplying Kirkuk refinery
• Northern fields were producing ~650-700k b/d before March 2 closure of export pipeline to Turkey

IRAQ’S NORTHERN EXPORTS

=======================

• Exports from Iraq’s northern fields cut since March 2 when the Iraq-Turkey pipeline was bombed
• Link repair impossible as ISIL controls territory
• Exports of Kirkuk crude from Turkish port of Ceyhan fell to 24k b/d in March, zero in April: Oil Ministry
• Iraq still exports crude from southern fields via Persian Gulf

Source: Bloomberg

via Zero Hedge http://ift.tt/1puiwM1 Tyler Durden

• The Man Who Broke the Middle East (Politico)
• Kerry presses Maliki as Iraq loses control of Syrian, Jordanian borders (Reuters)
• Hank Paulson takes on global warming next: The Coming Climate Crash – Lessons for Climate Change in the 2008 Recession (NYT)
• In Yellen We Trust Is Bond Mantra as Inflation Threats Dismissed (BBG)
• After port fraud, China’s vast warehouse sector under scrutiny (Reuters)
• Draghi Says Unlimited Cash Through 2016 Is Rate Signal (BBG)
• Tapes Said to Reveal Polish Minister Disparaging U.S. Ties (NYT)
• CDC reassigns director of lab behind anthrax blunder (Reuters)
• BNP set to receive ban to transact in USD as part of $9 billion settlement (WSJ)
• GE Clears Last French Hurdle to Clinch Alstom Deal (BBG)
• Al Jazeera journalists jailed in Egypt, supporters stunned (Reuters)
• ISDA Asked to Rule If Argentina Credit-Default Swaps Triggered (BBG)
• Prison Inmates Offer Captive Market For Gadget Makers (NBC)
• Wealth Managers Exit India as Millionaires Hard to Entice (BBG)
• U.S. Workers Can’t Get No (Job) Satisfaction (WSJ)
• Isis jihadists using World Cup and Premier League hashtags to promote extremist propaganda on Twitter (Independent)
• MH370 captain plotted route to southern Indian Ocean on home simulator (Telegraph)
• DOD and VA Can’t Prove Their PTSD Care is Working, Study Claims (NBC)

 

Overnight Media Digest

WSJ

* BNP Paribas SA and U.S. prosecutors have agreed to broad terms of a deal in which the bank would pay $8 billion to $9 billion and accept other punishment based on what investigators say is evidence the bank intentionally hid $30 billion of financial transactions that violated U.S. sanctions, according to people close to the probe. (http://on.wsj.com/1mczqji)

* The French government struck a deal to purchase a stake in Alstom SA from its leading shareholder, Economy Minister Arnaud Montebourg said Sunday, clearing the way for General Electric Co. to complete its acquisition of most of the French industrial firm. (http://on.wsj.com/1lJYVYx)

* The federal government is stepping up scrutiny of how U.S. companies are valued for employee-stock-ownership plans, a vital source of retirement savings for millions of workers. (http://on.wsj.com/1io4zko)

* Lululemon Athletica founder Dennis “Chip” Wilson is working with bankers at Goldman Sachs Group Inc as he weighs options for shaking up the company’s board and gaining more influence over the yoga gear maker’s operations, people familiar with the situation said. (http://on.wsj.com/1yCXEZ5)

* Harbinger Group Inc, the holding company headed by hedge-fund titan Philip Falcone, is preparing to make an unsolicited offer to acquire Central Garden & Pet Co. for about $1.1 billion, according to a person familiar with the matter. (http://on.wsj.com/1nXo16n)

* Venture-capital firm Andreessen Horowitz, known for backing Facebook Inc and Pinterest Inc, is investing $90 million in Tanium Inc, which helps companies pinpoint security threats and manage their sprawling computer networks. Andreessen Horowitz’s investment values seven-year-old Tanium at $900 million, according to people familiar with the transaction. (http://on.wsj.com/1inHUo4)

 

NYT

* The last major obstacle to General Electric Co’s $13.5 billion acquisition of Alstom’s energy assets fell on Sunday, when the French government agreed to buy a stake in the French industrial conglomerate from the billionaire Bouygues family. (http://nyti.ms/1uVtQCi)

* Michael Isikoff, the investigative reporter who recently left NBC News, is joining Yahoo Inc News as its chief investigative correspondent. Yahoo is expected to announce Isikoff’s hiring on Monday. (http://nyti.ms/1m39wti)

* AbbVie Inc is considering raising its takeover bid for Shire Plc after the European drugmaker rejected its latest offer for about $46.5 billion. While its initial bid was rejected, people briefed on AbbVie’s plans say it is determined to pursue Shire, or find another foreign company to buy. (http://nyti.ms/UTDif0)

* General Motors Co is nearly ready to begin compensating those left injured by the defective ignition switches that led to the recall of 2.6 million vehicles. (http://nyti.ms/T2jV1F)

* Regulators in Europe are pressing for new ways that would make it impossible to disable safety and communications systems on commercial airliners. Officials from the European Aviation Safety Agency and the European Commission have scheduled a meeting for July 8 with experts from the 28 member states of the European Union to discuss new requirements aimed at ensuring the continuous transmission of location data for all aircraft – regardless of their country of manufacture or registration – throughout the flight. (http://nyti.ms/1mcKVHh)

 

Canada

THE GLOBE AND MAIL

* The federal Conservatives are playing defense in the western strongholds of Alberta and British Columbia amid rising tensions over two divisive decisions – the crackdown on temporary foreign workers and approval of the Northern Gateway pipeline. (http://bit.ly/1p8M4mH)

* Justice Department’s finest legal minds are falling prey to a garden-variety Internet scam. An internal survey shows almost 2,000 staff were conned into clicking on a phony “phishing” link in their email, raising questions about the security of sensitive information. (http://bit.ly/1uVTl6t)

Reports in the business section:

* The founder of Lululemon Athletica Inc is preparing to go back into battle with the yoga-wear retailer as it struggles to recover from a string of setbacks. Chip Wilson is talking with bankers at Goldman Sachs Group Inc in considering a host of options, including teaming with a private-equity firm to mount a buyout or selling his holdings in the company, a source familiar with the situation said Sunday. (http://bit.ly/1qDNrJJ)

NATIONAL POST

* Two weeks after their helicopter escape from a Quebec jail sparked an international manhunt, three alleged gangsters were recaptured as they slept early Sunday morning when a police tactical unit busted into an upscale condo near Montreal’s Old Port, taking them without firing a shot. (http://bit.ly/1nvK4zu)

 

Hong Kong

SOUTH CHINA MORNING POST

— Police are investigating the disappearance of tens of thousands of dollars worth of the virtual currency bitcoin in a move that could open the floodgates for more potential victims to come forward. Scrutiny has fallen on the conduct of industry newcomer Hong Kong Crypto Exchange whose operation appears to have ground to a halt. (http://bit.ly/1pBvycI)

— More than 700,000 ballots have been cast in an unofficial poll on Hong Kong’s electoral reform that a former top mainland official in charge of the city’s affairs dismissed as unrepresentative. (http://bit.ly/1li2IN9)

— Shangri-La Hotel and Resorts and the South China Morning Post, both part of the Kerry Group, are among the top-five most influential brands in Hong Kong, according to a survey by a popular business networking website LinkedIn. (http://bit.ly/1sxJGr4)

THE STANDARD

— There were online blasts on Sunday for the 70 passengers who held a Hong Kong Airlines flight to ransom, saying they were no better than hijackers. The passengers had refused to leave the plane after their flight was delayed on Friday night and staged an 18-hour sit-in until they were given an apology and HK$800 ($100) each in compensation. (http://bit.ly/T24Mxa)

— More than 500 flats from new projects were sold over the weekend, in stark contrast to a frozen secondary market. Grand Austin, from New World and Wheelock, nearly sold out its first batch of 209 units on launch on Saturday. (http://bit.ly/1mcgK38)

— More companies, including herbal tea retailer Hung Fook Tong and wastewater treatment firm Kangda, will take orders from retail investors to raise more than HK$10 billion ($1.29 billion) through initial public offerings this week in Hong Kong amid the release of details on the latest batch of government inflation-linked bonds. (http://bit.ly/1rocnlW)

HONG KONG ECONOMIC JOURNAL

— Henderson Land Development Co Ltd said it would sell its AIA Financial Centre, an office building in Kowloon, to Sunlight Real Estate Investment Trust for HK$1.96 billion ($252.85 million). Sunlight will also issue 201 million new units to Henderson at HK$3.90 per unit for HK$784 million.

APPLE DAILY

— The Hong Kong government is expected to offer seven residential sites and two plots of land for commercial development for sale in the July-September quarter. The residential sites, which are valued at HK$10 billion ($1.29 billion), are expected to provide up to 3,000 flats on completion of development.

Britain

The Telegraph

RATES NEED TO GO UP, SAYS BANK ‘DOVE’ DAVID MILES

(http://bit.ly/1m2lX91)

Britain’s recovery has become entrenched and the Bank of England should start to raise interest rates in the coming months to reflect the stronger economy, according to one of its most dovish policymakers.

LONDON IS NOT IN A PROPERTY BUBBLE, SAYS ZOOPLA BOSS

(http://bit.ly/1qDe3KR)

London is not in a property “bubble” and ought to be an even more expensive place to live, the boss of the property website group Zoopla has claimed.

The Guardian

ASOS WAREHOUSE FIRE IN SOUTH YORKSHIRE LEADS COMPANY TO HALT SALES

(http://bit.ly/1uUNFKd)

Online fashion retailer Asos has been forced to suspend its website and stop taking orders, possibly for several days, after a fire at the firm’s main warehouse in Barnsley.

BRITISH AIRWAYS CABIN CREW ‘READY TO STRIKE’ OVER PAY CLAIM

(http://bit.ly/1jI7DCD)

British Airways is facing the threat of renewed strikes after cabin crew said they were prepared to take industrial action after their pay claims were rebuffed.

The Times

ASOS PREPARES ITSELF FOR THE NEXT ASSAULT

(http://thetim.es/1nvb420)

Asos will attempt to reassure shareholders this morning amid fears that “short-sellers” could try to exploit the closure of the online retailer’s website after a fire at its main warehouse.

BRITISH ECONOMY IN THE FIRING LINE AS IRAQI OIL CRISIS THREATENS DEVASTATING PRICE RISE

(http://thetim.es/T21Hx8)

An oil-price spike driven by the worsening crisis in Iraq could derail Britain’s recovery, drive up government borrowing, put household finances back under pressure, and damage global growth.

Sky News

TRAINLINE TRACKS FLOAT DESPITE TECH WOBBLE

(http://bit.ly/1sxH5xg)

Britain’s biggest online rail booking operation Trainline is on track for a stock market flotation despite disappointment over the performance of technology listings in London so far this year.

RAMADA OWNER WAS 6 BLN STG INTERCONTINENTAL SUITOR

(http://bit.ly/1uUP4QN)

The owner of the Ramada hotel chain was the mystery suitor behind a recent 6 billion pounds takeover offer for the FTSE-100 hospitality provider InterContinental Hotels Group, Sky News reported Saturday.

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS
Domestic economic reports scheduled today include:
Chicago Fed national activity index at 8:30–consensus 0.2
Markit U.S. manufacturing PMI for June at 9:45–consensus 56.0
Existing home sales for May  at 10:00–consensus up 1.9% to 4.75M rate

ANALYST RESEARCH

Upgrades

Ashland (ASH) upgraded to Buy from Hold at KeyBanc
BioCryst (BCRX) upgraded to Outperform from Market Perform at Wells Fargo
Burlington Stores (BURL) upgraded to Buy from Neutral at Goldman
DISH (DISH) upgraded to Buy from Neutral at Citigroup
Express (EXPR) upgraded to Buy from Neutral at Janney Capital
Pearson (PSO) upgraded to Equal Weight from Underweight at Morgan Stanley
Sequenom (SQNM) upgraded to Outperform from Market Perform at William Blair

Downgrades

AMD (AMD) downgraded to Underperform from Sector Perform at Pacific Crest
Casella Waste (CWST) downgraded to Hold from Buy at Wunderlich
Helmerich & Payne (HP) downgraded to Market Perform from Outperform at FBR Capital
Hercules Offshore (HERO) downgraded to Sell from Neutral at Goldman
Nordstrom (JWN) downgraded to Neutral from Buy at Goldman
Owens Corning (OC) downgraded to Neutral from Buy at Longbow
SunPower (SPWR) downgraded to Hold from Buy at Brean Capital
Teradata (TDC) downgraded to Market Perform from Outperform at JMP Securities

Initiations

Emerald Oil (EOX) initiated with a Buy at Brean Capital
Enable Midstream (ENBL) initiated with a Market Perform at Wells Fargo
LDR Holding (LDRH) initiated with an Outperform at RBC Capital
Rayonier Advanced Materials (RYAM) initiated with an Outperform at RBC Capital

COMPANY NEWS
Alstom (ALSMY) board recommended GE (GE) offer to buy power and grid business (SIEGY)
Google’s (GOOG) Nest acquired in-home camera maker Dropcam 
Santander (SAN) announced plans to acquire GE Money Bank AB (GE) for approximately EUR700M
Avago (AVGO) said it would acquire PLX Technology (PLXT) for $6.50 per share in cash, or approximately $309M
Cubist (CBST) received FDA approval for MRSA antibiotic Sivextro

EARNINGS
Companies that missed consensus earnings expectations include:
Ixia (XXIA)

NEWSPAPERS/WEBSITES

BNP (BNPQY) and U.S near deal to settle charges for $8B-$9B, WSJ says
BofA (BAC), FDIC lawsuit revived, Bloomberg reports
lululemon (LULU) founder talks to bankers as he considers options, WSJ reports
Viacom (VIA) must face Cablevision (CVC) lawsuit, Bloomberg reports
Siemens (SIEGY_ lingers nearby should Alstom (ALSMY)-GE (GE) talks fall apart, Reuters reports
Nissan (NSANY), Honda (HMC) recalling vehicles for defective airbags, AP reports
Wyndham (WYN) was mystery bidder for InterContinental (IHG) earlier this year, Sky News says
Royal Dutch Shell (RDS.A) could pay $51M to settle Nigeria oil spills, Reuters reports
Oracle (ORCL), Red Hat (RHT), BlackBerry (BBRY) working to meet challenges, Barron’s says
Pier 1 Imports (PIR) could rise 20%, Barron’s says
Apache (APA) shares could climb 20%, according to bulls, Barron’s says
PetSmart (PETM) should recover, Barron’s says
Express Scripts (ESRX) could rise 10%, Barron’s says

SYNDICATE

DCP Midstream (DPM) files to sell $500M of common units
Fox Factory (FOXF) files to sell 6.51M shares for holders
RiceBran (RIBT) files to sell 2.94M shares for holders
Six Flags (SIX) files to sell 16.42M shares for holders

via Zero Hedge http://ift.tt/Tnya1q Tyler Durden

Here is the latest from Roger Kubarych c/o Craig Drill Capital — Chris

Four key issues drive policy making in several major countries: national security, energy security, economic growth and prosperity, and global climate protection.  Despite the importance of each, they are often in conflict.

Impressive development over the past four or five years of shale gas and tight oil resources, mainly in the US or by US firms, has yielded broad benefits to global energy security, as well as to the US economy.  But it is not clear that overall US national security has been enhanced or that environmental resources have been adequately protected.

Energy security is not synonymous with energy independence.  The US, for example, is not and cannot be energy independent given the current fleet of over 250 million vehicles that burn gasoline or diesel.  A shift toward electric cars is unlikely to eliminate this oil dependence for at least 20 years, based on likely 15-year useful life of the current vehicle population and prospective additions to the fleet over the medium-term.

So energy independence will indefinitely depend on having some oil imports, admittedly at half or more below the peaks reached in the mid-2000s.  The US, however, could be readily energy independent from the perspective of electricity generation because of bountiful coal resources and growing availability of shale gas. 

Energy security for the US, therefore, must also hinge on providing for enhanced security of key sources of oil imports.  The same is true for China.  By contrast, for many countries in Europe and parts of Asia with more availability of mass transit and smaller distances for drivers generally, energy security hinges on inputs to electricity generation, notably natural gas.

National security requires healthy relations with strong, dependable allies.  Canada is a prime example of a strong US ally.  Retaining access to oil imports from Canada, now running at over 2 million barrels per day should remain a high priority for US energy security.  So too would efforts to engage Canada and Mexico in a hemisphere-wide initiative.

In the view of many Canadian private and public sector observers, however, Canada is being treated shabbily by serial delay in US approval of the proposed Keystone XL pipeline.  Delay is forcing transit via rail.  The latter is not as safe or as cost effective with the result that Canadian oil from Alberta faces discounts of up to $20 a barrel in the marketplace.

And from a purely domestic standpoint, the movement of 750,000 barrels per day of US tight oil is overstressing the rail system, resulting in both serious derailments of oil unit trains and creating other economically significant dislocations in the capacity of railroads to move other commodities, such as fertilizer, grains, and steel with a degree of efficiency.  

Losing the trust and respect of some Canadian leaders is now incentivizing them to reach out to China and other Asian energy-deficit countries jointly to develop pipelines to Canada’s West Coast for long-term shipments to the Asian market, either for oil, liquefied natural gas or both.  A deeper economic relationship between Canada and China, in particular, would seriously impair US energy security and further complicate US-China relations, already strained by Chinese belligerence in the east and south China seas.

Climate threats further confound energy and economic policy decisions.  For now, and well into the 2020s, the single largest contributor to CO2 emissions are coal-fired power plants, which are essential to sustaining rapid economic growth in energy-deficit Asian countries, especially China and India.  No meaningful response to concerns about climate change is feasible without large-scale cuts in coal use there and in several other emerging market countries. 

There is no obvious way for the US or European or other environmentally concerned countries to prod China and India to make convincing cuts in burning coal in the medium term.  Proposed cuts in US or European coal-fired power plants may assuage domestic critics, but will be viewed by Chinese and Indian leaders as largely symbolic. 

Technical advances to reduce greenhouse emissions are being pursued by research oriented universities and engineering centers in the US and elsewhere.  While several avenues appear promising, getting them out of the labs into industrial processes soon is proving to be nearly impossible.

European and Japanese business and academic experts are concerned that the US will practice a version of “resource nationalism” that the US normally strongly warns against elsewhere.  In part, this could take the form of worrying that the US Navy will withdraw from policing sea lanes, thereby jeopardizing the safe transport of merchandise across the globe.  In part, there is also a fear of shifting some of their industrial companies, and with it jobs, to the US due to the advantage of low natural gas and electricity prices.  These companies already own/control over half of the US chemical industry, so expansion is fairly straightforward.  This is described in the foreign media as unfair behavior by the US.

The US has a compelling comparative advantage in oil refining and has become a substantial net exporter of refined petroleum products, especially diesel.  Partly this is because of Europe’s own policies that discourage new or expanded refineries that are unpopular with voters.  Partly the US enjoys technical advantages gained through expertise in handling heavier Canadian and Venezuelan oil.  This competitive advantage would be further enhanced by construction of the Keystone XL pipeline.

The technological advantage that the US is currently enjoying in fracking will gradually wane and it is likely that numerous countries will begin to adopt the shale technologies in the coming years.  But by 2020, this will make only a modest contribution to global gas and tight oil supplies, given the various geological, water, legal and policy impediments that will not disappear overnight.

Technology on renewables continues to move ahead, but there is a big obstacle to a major shift in electricity generation:  the absence of sufficient storage battery capabilities.  Two CEOs of leading European energy companies cite this deficiency as the critical factor impeding wide market penetration by solar and wind generation.

Finally, it is worth noting that the world has experienced a number of major supply shocks during the same time period in which US tight oil development added over 2.5 million barrels per day to US output, with commensurate declines in US oil imports.  They include Libya, South Sudan, Iran (because of the impact of sanctions), Nigeria, and Syria.  Yet, volatility of global crude oil prices was less in those three years than in the previous twenty years.  This may have been a contributor to lessened US import demand. 

But more significant was the timely and robust responses of Saudi Arabia — and until very recently Iraq — as the swing producers in the OPEC cartel.  US diplomatic overtures to the Saudis were helpful in persuading them to play this market stabilizing role, even as the two countries do not always see eye-to-eye on many foreign policy challenges.

 

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Following last night’s laughable (in light of the slow motion housing train wreck that is taking place, not to mention the concurrent capex spending halt and of course the unwinding rehypothecation scandal) Chinese PMI release by HSBC/Markit (one wonders how much of an allocation Beijing got in the Markit IPO) which obviously sent US equity futures surging to new record highs, it was almost inevitable that the subsequent manufacturing index, that of Europe, would be a disappointment around the board (since it would be less than “optical” to have a manufacturing slowdown everywhere in the world but the US). Sure enough, first France (Mfg PMI 47.8, Exp. 49.5, 49.6; and Services PMI 48.2, Exp. 49.4, Last 49.3) and then Germany (Mfg PMI 52.4, Exp. 52.5, Last 52.2; Services 54.8, Exp. 55.7, Last 56.0), missed soundly, leading to a broad decline in the Eurozone PMIs (Mfg 51.9, Exp. 52.2, Last 52.2; Services 52.8, 53.3, Last 53.2), which meant that the composite PMI tumbled from 53.2 to 52.8: the lowest in 6 months.

Mysteriously, this negative European data somehow led to a drop in European stocks, after 9th weekly gain in 10. Miners outperform, autos lead declines. US equities also somehow stuttered when algos decided that this bit of bad news wasn’t bad enough to “buy the all time high.”

After a relatively quiet end to the week on Friday, there were a number of interesting headlines over the weekend – most of them being central bank related. Mario Draghi was quoted in Netherland’s De Telegraaf that the ECB may look at QE if there was deterioration in inflation expectations over the medium term. However for the moment the ECB remains focused on the measures announced on 5th June. Draghi reiterated that QE “is indeed possible within our mandate, namely if the purchases are aimed at ensuring price stability” and “can include not only government bonds, but also private sector loans”.

In the UK, the Sunday Times reported that the BoE’s Financial Policy Committee is ready to announce measures to restrict mortgage lending this week. The FPC publishes recommendations this Thursday after holding it quarterly meeting on June 17th. Meanwhile, MPC member David Miles, considered one of the more dovish members of the BoE, wrote in an opinion piece in the Telegraph on the weekend that policy normalization “starting at some point in my remaining year on the MPC will become appropriate”. This confirms comments which Miles made to the Times of London one week ago, suggesting that he would vote for a rate hike by May next year.

In emerging markets, Bloomberg is reporting that Argentina plans to “pay in full $1.3bn” to holdout creditors, citing newspaper La Nacion. After indications last week that that the government may be looking to negotiate, the article says that President Cristina Fernandez de Kirchner met with her economic advisers yesterday to discuss payment options. Fernandez will reportedly offer $300m-$400m to holdouts demanding full payment in court this year, and pay the rest in bonds starting next year, when a clause expires that forbids Argentina to voluntarily make a better offer to holdouts than to exchange bondholders.

In other asset news, oil rises as ISIL seized more territory on Iraq’s borders with Jordan and Syria. Treasury yields and western European government bond yields fall. The dollar weakens against most peers, while the pound nears a five year high. Markit U.S. manufacturing PMI, Chicago Fed index, existing home sales due later.

Turning to day ahead, the macro focus will be on the rest of the global manufacturing and service PMIs. The other data highlight is US existing home sales. There are plenty of central bank speakers today including the ECB’s Constancio, Nuoy, Mersch and Nowotny. The BoJ’s Kuroda will be speaking to the Japan Association of Corporate Executives shortly after we go to print.

Market Wrap

• S&P 500 futures little changed at 1953.2
• Stoxx 600 down 0.6% to 346.2
• US 10Yr yield little changed at 2.6%
• German 10Yr yield down 1bps to 1.33%
• MSCI Asia Pacific little changed at 144.7
• Gold spot little changed at $1315.2/oz

EUROPE

• 18 of 19 Stoxx 600 sectors fall, with autos leading the drop
• 22.3% of Stoxx 600 members gain, 76.7% decline
• Eurostoxx 50 -0.7%, FTSE 100 -0.4%, CAC 40 -0.7%, DAX -0.8%, IBEX -0.4%, FTSEMIB -1.4%, SMI -0.6%
• Euro area June manufacturing PMI 51.9 vs est. 52.2, services PMI 52.8 vs est. 53.3
• Germany June manufacturing PMI 52.4 vs est. 52.5

ASIA

• Asia-Pacific stocks little changed, with Australian shares outperforming
• MSCI Asia Pacific little changed at 144.7
• Nikkei 225 up 0.1%, Hang Seng down 1.7%, Kospi up 0.3%, Shanghai Composite down 0.1%, ASX up 0.6%, Sensex down 0.6%
• 4 out of 10 sectors rise; materials outperform while telcos underperform

Bulletin Headline Digest From RanSquawk and Bloomberg

• Treasuries steady, 5/30 curve at 174bps after touching steepest since June 6 last week; week’s note auctions start tomorrow with $30b 2Y, yield 0.51% in WI trading vs. 0.392% drawn in May.
• Euro-area manufacturing and services activity weakened in June, falling to 52.8 vs est. 53.4 amid a further slowdown in France’s economy
• Mario Draghi indicated that interest rates will probably remain low for at least another 2 1/2 years as the ECB prolongs banks’ access to unlimited liquidity
• A China preliminary PMI from HSBC and Markit Economics rose to 50.8 in June, a seven-month high, exceeding the 49.7 median est. and May’s 49.4
• The Bank of England said mortgage demand increased significantly this quarter and lenders forecast it will rise further in the coming months
• ISIL fighters seized more territory on Iraq’s borders with Jordan and Syria as U.S. Secretary of State John Kerry rrived in Baghdad to try to get political leaders to set aside sectarian divisions and confront the growing threat
• Leaked recordings of a conversation purportedly between Polish foreign minister Radoslaw Sikorski and former Finance Minister Jacek Rostowski showed Sikorski allegedly saying Poland’s alliance with the U.S. is “worthless” because it fosters “a false sense of security,” breeds conflict with Germany and Russia
• Cameron has overplayed the threat appointing Jean-Claude Juncker to lead the European Commission would pose to the U.K.’s EU membership and his bluff is about to be called, said the head of Germany’s foreign affairs committee
• Israeli aircraft attacked Syrian military sites after a teenager became Israel’s first fatality from more than three years of Syrian conflict, drawing it deeper into its northern neighbor’s fighting
• A special prosecutor should probe the loss of IRS e-mails that may contain facts about its scrutiny of Tea Party groups seeking tax-exempt status, the House Ways and Means Committee chairman said
• Sovereign yields mostly lower. EU peripheral spreads little changed. Asian and European stocks mostly lower; U.S. stock futures mixed. WTI crude, copper higher, gold lower

US Event Calendar

• 8:30am: Chicago Fed Nat Activity Index, May, est. 0.2 (prior -0.32)
• 9:45am: Markit US Manufacturing PMI, June preliminary, est. 56.0 (prior 56.4)
• 10:00am: Existing Home Sales, May, est. 4.74m (prior 4.65m); Existing Home Sales, May, est. 1.9% (prior 1.3%) Central Banks
• 11:00am: Fed to purchase $1.5b-$2b in 2020-2021 sector
• 11:00am: U.S. to announce plans for auction of 4W bills
• 11:30am: U.S. to sell $25b 3M bills, $23b 6M bills

ASIAN HEADLINES

The Nikkei 225 closed up 0.13%, having pared back some advances seen following a strong Chinese PMI number PMI (Jun P M/M 50.8 vs. Exp. 49.7, Prev. 49.4) printing in expansionary territory for the first time in 6 months and thus failed to hold above the 15,400 level. Shanghai Comp closed down 0.1%, having retraced most of the post-PMI gains. Hang Seng underperformed (-1.7%) as the PMI reading was seen as more of a short-term measure while property concerns remain a more prominent long-term threat.

EUROPEAN AND UK

Fixed income products are seen higher across the board as negative sentiment stemming from weak Eurozone PMIs triggers global growth concerns and sees flows away from equities and into both European and US paper, leading Bunds to break back above the 146.00 handle.

ECB President Draghi and Nowotny both signalled that they see lower rates until 2016 with Draghi adding the ECB may turn to quantitative easing if mid-term inflation outlook deteriorates further. (De Telegraaf)

The BoE is poised to rein in mortgage lending this week, with officials expected to make it harder for borrowers to secure high-risk home loans. (Sunday Times) The FPC held its latest quarterly meeting last Tuesday and its decision will be announced on Thursday. This news has weighed upon the UK homebuilders listed in the FTSE 100 this morning.

US HEADLINES

US newsflow remains light as participants look ahead to US manufacturing PMI and existing home sales.

EQUITIES

European stocks trade softer amid global growth concerns following this morning’s disappointing plethora of Eurozone PMIs. European equities saw a particular bout of selling pressure after 22K contracts were traded in Sep Euro-Stoxx 50 futures at 0813BST/0213CDT. As such, European equities are seen lower (Euro Stoxx 50 -0.9%) across the board despite support for basic material names (-0.1%) after the better than expected Chinese PMI number. In stock specific news, the Alstom board has backed the General Electric offer for the Co,’s energy assets, with the board agreeing unanimously to positively recommend GE’s offer. Attention will also be placed on Shire who intend to hold an investor call today with management and a press release on the rejection of AbbVie’s bid at 1200BST/0600CDT.

FX

After opening softer, USD has undergone a mild recovery following last week’s FOMC inspired loses, with Eurozone PMIs assisting the US currency as EUR/USD broke below 1.3600 despite overnight AUD/USD strength weighing on USD. AUD was then provided with further support in the European session as basic materials were lifted while RANsquawk sources reported sovereign names on the offer in AUD/USD at 0.9450. Elsewhere, with the recent downtick in GBP/USD RANsquawk sources report hedge funds taking profit through-out the morning, consequently bringing the pair back towards the 1.700 handle.

COMMODITIES

Oil prices continue to remain elevated with geopolitical concerns in Iraq and Ukraine adding to the war premium. The latest reports out of Iraq suggest Iraqi Sunni insurgents have made further ground while Russian President Putin has offered qualified support for the peace plan put forward by his Ukrainian counterpart to quell an insurgency in the eastern regions of Ukraine. (FT) Despite a ceasefire being called in eastern Ukraine, Russian President Putin has stated artillery was used on Saturday night. (Rossiya 24) Elsewhere, basic materials have been provided support by the better than expected overnight Chinese PMI.

* * *

DB’s bicycling enthusiast extraordinaire Jim Reid concludes the overnight recap

Today is global PMI day and China has gotten us off to a strong start with a HSBC manufacturing PMI of 50.8, which is 1.4pts above the reading in May and 1.1pts above Bloomberg consensus. The print of 50.8 beat even the highest analyst estimate of 50.4 and is also the first print above 50 in the last six months. In the details, the output sub-index rose to 51.8 (from 49.8 in May), the highest reading since November 2013, and the new order sub-index rose to the highest level since March 2013 (Bloomberg). The data is providing hope that recent stimulus measures from the government and PBoC are starting to work their way through the economy. In currencies, AUDUSD (+0.6%) is at seven-month highs of 0.945 while Chinese copper and iron ore futures are up 2.2% and 2.5% respectively this morning. Asian equity bourses have erased earlier losses and are trading between 25bp to 50bp higher today and Asian USD credit is generally trading a couple of basis points tighter across cash and CDS. Brent is up another 0.25% today, erasing the losses from Friday, and this is capping any meaningful gains in oil-exposed EM currencies such as the IDR (unch). S&P 500 futures have started the week up 0.2%.

After a relatively quiet end to the week on Friday, there were a number of interesting headlines over the weekend – most of them being central bank related. Mario Draghi was quoted in Netherland’s De Telegraaf that the ECB may look at QE if there was deterioration in inflation expectations over the medium term. However for the moment the ECB remains focused on the measures announced on 5th June. Draghi reiterated that QE “is indeed possible within our mandate, namely if the purchases are aimed at ensuring price stability” and “can include not only government bonds, but also private sector loans”.

In the UK, the Sunday Times reported that the BoE’s Financial Policy Committee is ready to announce measures to restrict mortgage lending this week. The FPC publishes recommendations this Thursday after holding it quarterly meeting on June 17th. Meanwhile, MPC member David Miles, considered one of the more dovish members of the BoE, wrote in an opinion piece in the Telegraph on the weekend that policy normalisation “starting at some point in my remaining year on the MPC will become appropriate”. This confirms comments which Miles made to the Times of London one week ago, suggesting that he would vote for a rate hike by May next year.

In emerging markets, Bloomberg is reporting that Argentina plans to “pay in full $1.3bn” to holdout creditors, citing newspaper La Nacion. After indications last week that that the government may be looking to negotiate, the article says that President Cristina Fernandez de Kirchner met with her economic advisers yesterday to discuss payment options. Fernandez will reportedly offer $300m-$400m to holdouts demanding full payment in court this year, and pay the rest in bonds starting next year, when a clause expires that forbids Argentina to voluntarily make a better offer to holdouts than to exchange bondholders.

In Ukraine, markets will be watching the outcome of a short-term ceasefire in eastern Ukraine announced by President Poroshenko. Despite the ceasefire, there were continued reports of violence in the east of the country over the weekend. The US said that Russia continues to build up arms near the Ukrainian border. In addition to that, Putin also ordered large-scale military exercises in central Russia that NATO criticised as likely to raise tensions. In Iraq, US secretary of State John Kerry starts a week-long tour of the middleeast this week to try and corral support for the creation of a new government that will attempt to bridge the sectarian violence in Iraq. The FT reports that Kerry will also be seeking political cover from allies in the Gulf for possible US military action against Sunni militants in northern Iraq. Over the weekend, it was reported that ISIS had secured a number of border crossings into Syria, and potentially Jordan, potentially allowing ISIS to bolster supply lines (Reuters).

On the micro front, the WSJ reports today that US prosecutors have agreed on broad terms of an agreement with BNP Paribas in which the bank will pay up to $9bn in fines as penalty in relation to violations of International Emergency Economic Powers Act sanctions. The article says that the bank will agree to a temporary ban, likely lasting a period of months, on the group’s ability to transact in US dollars (WSJ).

Turning to day ahead, the macro focus will be on the rest of the global manufacturing and service PMIs. The other data highlight is US existing home sales. There are plenty of central bank speakers today including the ECB’s Constancio, Nuoy, Mersch and Nowotny. The BoJ’s Kuroda will be speaking to the Japan Association of Corporate Executives shortly after we go to print.

Further out this week, on Tuesday, the US prints consumer confidence and new home sales data. The German IFO will be released on the same day. The BoE’s Carney, Bean. Miles and McCafferty testify on the central bank’s May inflation report at the Treasury select committee. Portugal’s government releases its year-to-date budget report.

On Wednesday, the US Commerce Department publishes its third estimate of Q1 GDP. A number of Street forecasters have revised their GDP estimates lower in recent weeks and consensus is looking for a -1.8% QoQ outcome. Elsewhere on Wednesday’s data docket, we’ll get the latest US durable goods report and the ECB’s Weidmann will be speaking in Germany.

The main focus on Thursday will be the policy recommendations from the BoE’s Financial Policy Committee which are widely expected to include measures to restrict mortgage lending. The latest US personal spending report will be released. Nike Inc reports earnings on the same day.

Moving onto Friday, Spain and Germany report June CPI which will be closely watched in light of recent ECB policy measures. EU leaders meet in Brussels to discuss candidates for the next European Commission president. Ukraine’s President Poroshenko is expected to sign a controversial free trade agreement with the EU. Japan reports national CPI for May, and the third estimate of UK GDP will be announced. The ONS is expected to revise its original 0.8% reading up to 0.9%, after recent construction data turned out better than expected.

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