The Banking and Strategy Initiative

In Tomorrow’s mid week update

zyakaira — Thu, 23 May 2013 05:15:48 +0000

- US -

Ford comes back with good news for US economic data with increasing production

From ring shaped spaceships in California (Apple Campus 2) to 95 ft Spherical biosphere cacti in Seattle signalling Tech tax tribulations a new cash option?(ft.com: subscription required)

From minutes to April data signals requiring bigger liquidity boosts for Ben? (Really we listened and did not see the confidence required to get out of QE in the JT ECONOMIC COMMITTEE with Brady and Amy Klobuchar)

Ratings agencies prove their quest for opacity missing the agency MBS market now ready to bite in 5..4..3..2..1?

At least a quarter of the current stock of MBS should be investment grade(Ft.com: subscription required)

UK survives Q1 growth scare to plunge headlong into Q2 gloom with retail sales negative on Monday..

The Dollar ready for a slide soon after it is already at 84

- Global -

Ford comes back with good news for US economic data with increasing production, toll brothers looking at housing demand exploding this year and Saks for sale as Target about to miss sales peg(Reuters Insider/Bloomberg Tv)

Dan loeb scores a soft big hug from Sony and the deal perks look increasingly low margin Asia business

The Yuan’s strength, what mirage of hope is holding that up!! China PMI flashes marks of a tough changeover for big brother

Mitsubishi, now did that ever make cars?

From ring shaped spaceships in California (Apple Campus 2) to 95 ft Spherical biosphere cacti in Seattle signalling Tech tax tribulations a new cash option?(ft.com: subscription required)

Ratings agencies prove their quest for opacity missing the agency MBS market now ready to bite in 5..4..3..2..1?

At least a quarter of the current stock of MBS should be investment grade(Ft.com: subscription required)

UK survives Q1 growth scare to plunge headlong into Q2 gloom with retail sales negative on Monday..

The Dollar ready for a slide soon after it is already at 84

Sucker’s bets, Seeking alpha and the season of transcripts coming to an end

Detroit ready to report a Chapter IX event in 6 months (Reuters insider)

whats driving dropping euro zone yields and how much is that appetite

Asia Wednesday 9 am: Rupee weakness predates another correction of the US Dollar

zyakaira — Wed, 22 May 2013 06:04:23 +0000

JP Morgan is of course sitting pretty on the best outcome of yesterday’s vote with a 68% vote agreeing with Jamie Dimon’s exemplary record and granting him no interruptions from institutional shareholders Blackrock apparently did not vote for the resolution. even thus, Other bank AGMs this week will likely be low key affairs in the fourth estate and for the bank investors with the Q2 pick me up in business frittered away in a slow May, retail sales and inflation in the US crossing into dangerous territory before today’s expert testimonies by Ben Bernanke and Jack Lew. As US Treasuries and 10 Y sell off continues despite China and Japan holding on, the JGB sell off the RBA rate cuts and the weakness in China and trade in Europe ensure that the Euro and the Yuan continue to gain while the Aussie and the Yen could bring back a stronger dollar only if the sell off in those currencies becomes bound again and not a little subdued at 0.98 and 102.7 respectively.

The impact on India – unnecessary though – and imputed by the same banks with big business in Transaction Banking in the Rupee – seems to be a quasi subsidy transaction trying to average back the 2013 rates of the rupee by letting the rupee easily slide in the window before the Dollar weakness comes back and thus the rupee is now smarting towards 56 levels and may likely slide further to 57 before its rise against the dollar thus caps the upside to 54

Being a non free market adjustment trade, the weakness in the rupee obviously has failed to entice the bears and those looking to match the correlation between fx and equities should even ignore this week’s data as equities continue to climb.

Qatar continues to focus on the opportunity tio extend its stakes in larger financial plays globally buying stakes in VTB and Deutsche Bank even if GS commentators’ lack of oratory skill on Indian television could trace back to their losing control in the region’s growth stories. The exit for Goldman Sachs from ICBC would now run into some headwinds as Asia progresses from a story of Frontier markets to a large play for global financials across the trade strories from malaysia, Thailand, Singapore Indonesia, Korea and India, even Turkey and the Middle east growth story where local investment bankers like HSBC and even CIMB hold sway and JPMorgan, Nomura, Goldman Sachs UBS and even Stanchart investments have yielded squat.

Meanwhile midcap traders like Ashwini Gujral and SS (TV18) continue to look for the elusive IT comeback in Infosys or exit Lupin even though the rally in Sun pharma seems to be at an end ( and would seem to be that 5% of market which has completed with honors in the run to 6200 and are twiddling thumbs) before the shift to infracos which offer deep value

Earnings growth in this results season was again led by private banks and Yes Bank and ICICI Bank remain great values. HDFC is a little bit near its edge at 900 with not many FIIs allowed to add tot hat exposure and J&K Bank being in ‘uncharted territory’ I agree is a risky trade though a great fundamental value for an institutional portfolio. The buzz around CAPITAL GOODS makers Crompton Greaves, L&T and BHEL is probably out to emulate that of unethical operators in PSU banks and so should be a big AVOID esp as turnkey project pipelines have been showing the weakness in PMIs and the weakness in Capital Goods trade data wreaking havoc on Japan globally

Jamie Dimon under pressure ahead of JPMorgan Chase investor vote(suntimes.com)
Rupee hits 6-month low at 55.41, slumps 30p Vs dollar(news.in.msn.com)
RBI finds ‘aberrations’ at ICICI, HDFC, Axis Bank(rediff.com)
India Morning Report: Buoyant results lead the revival of interest(awardz.wordpress.com)
India Morning Report: Yen progresses weakness strategy to new levels(awardz.wordpress.com)
India Morning Report: Just Dial IPO great hai ji, Rupee feeling quiggly(awardz.wordpress.com)
India Morning Report: Breakdown trades in progress, don’t get fooled again(awardz.wordpress.com)

India Morning Report: Why some rating agencies get ‘brand mileage’ from obscure imperfections and markets rest..

zyakaira — Tue, 21 May 2013 05:30:48 +0000

Let’s face it. Any null hypothesis you can think of about the market’s strength or in S&P’s case (as rating agency) and that of even a few (investors)who believe in India’s fundamental turnaround from here (6130) to be of limited capacity which is most of us, a ‘need for caution’ or ‘continued weakness’ are dependent on the thinking that there being a finite supply of money flowing to markets esp defined assets and market segments (“emerging Markets” in this case) . In the current global scenario even as Gold and Silver sharply ticked back yesterday matching the direness of US markets in face of a withdrawal of liquidity, there is (sic!) still a question of being shallow by insinuating such limits to money supply. However, investors are pretty satiated after Nifty 50 here hit near 6200 levels and is coasting this week at 6150. The reason is a ‘wait for’ and a relative ‘comfort in the knowledge’ that enough erstwhile underweight sectors are being rerated to absorb new inflows from FIIs in the near future whether in infracos or private banks. And similarily the reason for the markets again perpetrating the illusion of the state of rest is that investors being choosy cannot be easily swayed by ‘stories’ like Sun Tv or even more obscure ones like Adani Power I unfortunately forgot to remember from the traders that follow the deluge of a well formed trend for their investors and followers. Adani power is of course rid of the scourge of sourcing restrictions on coal for its newly contracted power plant

Debt trading segments in USE, BSE and the enhanced NSE however remain limited plays currently and the ECB/FII interest may well continue to gladden OTC markets in the region than such networks. Meanwhile CAG remains the only institution globally that continues to spew out half cooked assumptions a s full fledged anti incumbent reports and is soon likely to be put in the same basket as INdia’s defunct non parliament attending ‘national’ opposition.

Morgan Stanley’s sale of its Wealth management business of $800 mln AUM and 30% of its India revenues to Stanchart probably also has a feeble correlation to what drives ratings agencies to make a grab for an institution status for themselves in that bid to be cautious, much like the mistake traditional bankers trend to in underwriting credit, in being allowed to say they are conservative for ther laziness to fill in their information gaps or resist beating their own skew increasingly becoming a habit with S&P especially after in made noisy downgrades in Europe only under pressure and has updated India ratings in the nine months of this rally from 40% chance of downgrade to 33% of downgrade underlining a little bit of the informational opaqueness preferred by global information agencies for India and even other Asia to an extent and somehow more of the opaqueness related to not having to follow objective decision makly are more ing models a practice no eschewed by Moody;s are or suitably compensated by Fitch in openly absorbing positive developments in its qualitative ratings decisions

India Businesses similarily on the other side of the transaction understand this opaqueness and are much less willing to pay for expenses like ratings or even other investment bank and advisory businesses as undoubtedly the sharper colleagues in China would be able to raise an international ruckus over. We luckily or unluckily are more reputation averse ( positive or negative) in debates and are also ignored frequently in international power plays / diplomacy.

The euro plus bid is back in play with euro debt buyers unrelenting and the yen could well continue ‘down’ to 110 levels against the Dollar with jgb sell downs finally happening. However the rupee trend that are independent may strengthen only after the trend fatigue sets in on other asian currencies between the won and aussie trying to depreciate, sgd and the yuan. Indian yields I agree, will stop around 7.25% and 50 bp rate cuts immediately before policy results are absorbed by markets in the next stage (Indranil pan, Kotak) but India has likely been marked for many more rate cuts and much better growth performance now in 2013 as well as 2014 i.e. FY 2015

NAMA is “directly” paying the ratings agency which gave it an impressive thumbs-up(namawinelake.wordpress.com)
S&P warns of rating downgrade(thehindu.com)
Why India DESERVES a rating upgrade(rediff.com)
India Morning Report: Rupee weakness predates another correction of the US Dollar(awardz.wordpress.com)
India Morning Report: Just Dial IPO great hai ji, Rupee feeling quiggly(awardz.wordpress.com)
India Morning Report: Infosys shows a lack of forebearance in a sack sack play(awardz.wordpress.com)

India Morning Report: Why some rating agencies get ‘brand mileage’ from obscure imperfections and markets rest..

zyakaira — Tue, 21 May 2013 05:30:48 +0000

Let’s face it all null hypothesis you can think of about the market’s strength or in S&P’s case and that of even a few who believe in India’s fundamental turnaround from here to be of limited capacity which is most of us, a ‘need for caution’ or ‘continued weakness’ are dependent on there being a finite supply of money. In the current global scenario even as Gold and Silver sharply ticked back yesterday matching the direness of US markets in face of a withdrawal of liquidity, there is still a question of being shallow by insinuating such limits to money supply. However, investors are pretty satiated after Nifty 50 here hit near 6200 levels and is coasting this week at 6150. The reason is wait for and a relative comfort in the knowledge that enough erstwhile underweight sectors are being rerated to absorb new inflows from FIIs in the near future whether in infracos or private banks. And similarily the reason for the markets again perpetrating the illusion of the state of rest is that investors being choosy cannot be easily swayed by ‘stories’ like Sun Tv or even more obscure ones I unfortunately forgot to remember from the traders that follow the deluge of a well formed trend for their investors and followers.

IT’S MONDAY: The Fed purchase program is quite a workout for the Market

zyakaira — Mon, 20 May 2013 13:49:21 +0000

Fisher seems to have kicked things off immediately with his comments positing that slowing down the $85B monthly bond purchase program could do US some good, Then Chicago Fed reported an ever worsening Midwest CFNAIdata for the month of April even as the moving average improves and auto sales and gasoline trends look well about to turn on themselves. The Consumer credit report that most added $15 B in Student loans rolling over from Banks to the Fed Balance sheets apart, Evans is also followed by Dudley speaking tomorrow and then Wednesday will be busy with Ben Bernanke testifying on the mount and the MBS might just choke up a few minutes there.

Till then the US also gets buffetted by the plethora of April’s weak retail sales data from around the globe, RBA’s meeting minutes ont he latest rate cut and yet another negative GDP report from Singapore and the ever precarious manufacturing PMI flash from China. Italian industrial sales and new orders data started things off positively across the pond, even as the Euro gave up gains to 1.28 last week despite what we thought were better monthly reports and a known weakness had already been discounted as the Euro trade on the third leg against the Yen led weakness in the Dollar seemed to have wound down.

That apart, new positions are still likely to be bullish on the euro as Euro zone debt rushes for better yields, Monday morning TBill auctions will remain much better covered as amounts have been pegged lower by the Treasury A lot of senior speak is due in Brussels too but nothing is slated per se for the new union or the common economic government et al (WSJ blogs)

UK inflation and PPI data will also affect the Dow open somewhat tomorrow as the GBP had quite overtaken the Euro in a jagged edge last month even as banks work out a new two faced trade plus survey substitute for the LIBOR and corporate credit conditions ease up as do trading in the month of April and one guesses May. At hand are conflicting reports however with JPMorgan getting volumes and ready to toughen underwriting while others easing up underwriting to get better loan volumes. Q1 investment bank activity in Asia and US was debt led with US majors JP Morgan and BofA Merrill Lynch scoring 65% of their comeback advisory income of $1.3 B each from Bond and Loan syndication. HSBC managed another $10 B debt raising mandates in Asia this week to Friday even as Global G3 issuers also managed to raise $3 B from Asia.

Thursday PMI reports for May will post rush verdicts on the Euro across the pond with all the 17 reporting PMI behind the consolidated Euro PMI before the afternoonr eports of Manufacturing and Services PMI in the US and the monthly leading indicators reports including the new ECRI data also cycles in with confirmation of the debate on the recovery verdict before Friday is over

New Home Sales and Mass Layoffs reports could interest you too on Thursday. Ryanair is reporting results if you are still stuck on new financials as do Vodafone, Home Depot, Marks & Spencer and SAB Miller on Tuesday when no news could be the spin from JPMorgan on its say on directors say vote while Deutsche Bank and Goldman Sachs AGMs are also marked for Thursday, HSBC on Friday

Markets are sitting pretty with Yahoo’s tumblr buy bringing the 13F rush into this week esp with Gold and Silver recording the most exits in recent history. Danone is trying again in China with two JVs with mengniu defining its market reach in minority stakes , one of which is the elusive yogurt market

Bottomline: The uptick has to be sustained in the second half in economic data for the Fed to go through with cuts in liquidity to help raise back interest rates and further stimulate the growth-inflation interaction

India Morning Report: Just Dial IPO great hai ji, Rupee feeling quiggly(awardz.wordpress.com)
India Morning Report: 5900 is holding, India inc waiting for RBI to respond(awardz.wordpress.com)
RPT-FED FOCUS-US job market gains could lead Fed to taper QE3 early(xe.com)
Markets Solid Despite Fed Policy Speculation(theepochtimes.com)
Key Events And Market Issues In The Coming Week(zerohedge.com)
What You Know About Fed ‘Exit Strategy’ May Be Wrong(cnbc.com)

India Morning Report: A new bank, not Citi, 8 not 4 and numerous other slips to the mile..

zyakaira — Fri, 17 May 2013 05:32:54 +0000

English: Morgan Stanley – logo (Photo credit: Wikipedia)

Vikram Pandit’s new efforts in India with Kampani’s JM Financial may get JM a 10% bump in stock quotes but it is unlikely that his 50% buy of the subsidiary and 490 million warrants worth 3% of the listed company with Hari Aiyar and wife in the new bank application at this stage will build on anything like branch infrastructure in at least the next decade, so watch out for questions on the application being followed closely in the media?

Otherwise of course the Chinese continue to prefer the number of wealth ’8′ in their phones and registration plates for the cars that are sold and you should avoid gifting them anything with the number ’4′ thats sound like the word for ‘death’ and Morgan Stanley leads the list of suitors looking for a bear to hold as Indian markets sit pretty on last year’s prudent calculations still not outrunning the underperformance in sensex companies in the quarter gone by. Markets are headed to all time highs probably but the next target is 6350, steady as she goes..

A wonderful FNO pick on Tata motors reversed my earlier opinion of the TV18 guest who chose Tata motors again but as stock vols (option vol in current month series) closed above 40 the bid to range the 280-310 stock trade with a bought put at 305 on a strike of 290 as recommended should gladden many a margin accounts. The strategy is brilliant only if when it opened this Friday, the bids in the normally not so liquid stock family would not have quoted the ratio spread at a profit. Buy three puts at 290 at today’s open and sell four 280 puts in a minor tweak to the strategy played on the network but you could leave it a t 1:2 as well

[contact-form]

Do write to us above and link in with your blog / facebook page in the comments. 2013′s dull exports and consumption story for India in the meantime cannot stop cosmopolitan urban India from turning Jiading(F1 track) and Pudong (Shanghai) and Lavie and “Caprese” luxury bags with Gucci stores springing up here now much after China’s $15 b market accepted them despite our protestations to the contrary .If not the Chinese predilection for lucky numbers, one could still catch a fancy to under-reporting ages , the ilk spied upon by Jug Suraiya on Page 3 in his TOI op-ed of today

ITC results should be eagerly anticipated and with infracos back in demand together ITC and IDFC will garner a lot of new outstanding demand volumes ( open interest) esp as JP Associates has completed a first rush yesterday to 80 on the futures. Sun TV is much better than Satyam though but both are equally risky on corporate fundamentals after the corporate governance in churn in either of the scrips. Sales of $1.6B at ITC in the quarter reflect the last of the big consumer companies making a sustained comeback after the jump in Q3. Europe based consumer goods giants including Nestle, Diageo and Unilever have already been singled out for investor attention in growth deficit hungry Europe for their stronger Asia businesses (ref FT.com, subscription required)

The New Drug policy is out though impacting margins at Pharma MNCs and Cipla & Lupin will also trend down on the repricing of margins across the board. Yesterday’s results from Bajaj Auto were pretty sweet on the Topline but dropping margins and uneven Export markets leave outlook dull and hazy, (not recommended) in Indian driving conditions (sic!)

The main topic on this busy day could still have been the new RBI trend policy established by the WPI falling below 5% and the CPI having come in earlier. Though loath to check the sub indices this morning i see a Core inflation at 2.77% near all time lows and I do not believe we have seen the last of food inflation though April did not get to be a major run on the home makers’ wallets. The Austin mini meanwhile was launched on finance terms in India but unlike US where high end models are staple for salaried professionals ready to lease without down payment or China where the ernai tugging officials make it a staple despite open hostility from the poor, in India, wealth and ersatz symbols are simply a focussed analysis of your where withal to manage jealousy and preferably pay in cash depending on your tax returns(salaried), or business returns as applicable

10 Y yields on the new bond have already responded vertically to near the 7.25% mark and thus RBI will take the whole term down immediately in the next three-four months before growth actually responds, likely leaving the rates below 7% forcing banks down on deposits despite the flagging demand and without more than a signalling cut in CRR. The news of more cuts was however the most important one behind Thursday’s heart of a rally.

India Morning Report: Don’t fall for that downtick again – Nifty keeping gains (awardz.wordpress.com)
India Morning Report: 5900 is holding, India inc waiting for RBI to respond (awardz.wordpress.com)
India Morning Report: That was the best buying level available this year (awardz.wordpress.com)
India Morning Report: A late last minute judgement call but that pair trade was ill advised (awardz.wordpress.com)
India Morning Report: Really, the failure of the food bill? (awardz.wordpress.com)
India Morning Report: Keeping the faith or sticky inflows (awardz.wordpress.com)
India Morning Report: Markets horrified by ‘unaffected airs’ slip back to keep rate cut (awardz.wordpress.com)

India Morning Report: Yen progresses weakness strategy to new levels(awardz.wordpress.com)
India Morning Report: Really, the failure of the food bill?(awardz.wordpress.com)
India Morning Report: Don’t fall for that downtick again – Nifty keeping gains(awardz.wordpress.com)

The mid-week trend update (US Economy and Markets): European GDP, Housing starts on the upswing, PPI weakens further

zyakaira — Fri, 17 May 2013 00:50:56 +0000

Industrial production down 0.5%, Jobless claims back up at to 360k

The Thursday Morning shocker from the Housing report was no reason for markets to worry about US economic recovery in 2013 but a drop in Industrial production for April by 0.5% underlined a likely softness in Q2 GDP growth and jobless claims rose sharply to 360k showing up proponents of growth and in that unusually twisted way accustomed for market players during the crisis, the flurry of bad data from GDP and another negative cut of PPI and CPI turned into timed expectations of the roll down of the QE program being misplaced.

Although the week was not expected to produce hope in large scores after retail sales drops attributed to weather , tax refund delays and even the payroll tax break withdrawal in Monday reports continued to Tuesday’s reports of Chain Store Sales reported a 1.1% cut in comps. Walmart results did not help the markets either, comps down 1.4% on year . Walmart sales were up 30% in the online world much to the chagrin of my favorite digital competitors at Amazon.

The hidden Housing miracle

The share of distressed home sales including foreclosures and short sales was down drastically as expected and thus the smaller 853k growth in Housing starts. Single Family starts were up more than 20% year/year and were down only 2% from March. Single Family data is also confirmed by the NAHB Builder confidence number at 44, up from 41 in March. March also showed large gains in multi family units, Single family units starts and permits

Housing completion rates are down again as we find everyone waiting for real hard signs of a recovery to emerge. Completions are down to 536k from 594k in March.

Housing starts by intent shows commercial interest rising in single family units now, up 40% from 2012Q1 . Housing starts are up in the Midwest from the exceptionally low numbers till 2012. price reports for March also confirm uptick int he richer West and the Midwest regions. Permits were up 36% nationally year/year and probably reflected the shift for builders to single family units with completions still lagging

European GDP Data

Foreign buying of US securities did pick up in March to %5 B but did not stem outflows of $13.5 Bln for the month. This ofcourse is consistent with the sell down in bonds as 10Y yield ticks up to 1.87%. More importantly however, Germany’s positive 0.1% growth in Q1 reported yesterday was a rare blip in Eurozone reports showing France contracting 0.1% Q/Q, Holland 1.7% (contraction), Italy 0.5% (contraction) and especially Portugal 3.9% (contraction) and Greece 5.3% (contraction)

Eurozone GDP was down 0.2% as a whole even as Britain followed on with a improvement in unemployment rate to 7.8% and Mervyn King’s last report confirmed a GDP projection trending towards a whole point in 2013 and an inflation close to 3%. The verdict. German expectations confirm a slowdown , retail sales have been bad and production is down across Eurozone except in Britain where inflation remains high.

US Inflation reports

While the expected cuts in the Empire state and Philly indices materialised at -1.4 and -5.2, inflation data was also ignored during trading hours at a subdued 1.7% before markets were overshadowed by uncertainty on QE flows and closed with a sharp correction.

Q2 growth prospects have been accepted as dim by markets with today’s inflation report pegging CPI at an all time low 1.1% with monthly contraction of 0.4% spurred on by the second monthly cut of 4.3% in energy prices, Gasoline down 8% (natural gas inventories were also up by 5% showing a weakness in demand the harbinger of this drop in prices) for the month Core inflation was down to 1.7% . of course at these low prices, Gasoline demand could spur back the recovery immediately rather than later

The production contraction can also to an extent be explained by a 3.7% cut in utilities that followed a similar jump in March and indices for food, beverages and tobacco were positive (Econoday)

PPI was affected by the gasoline price drop as food prices also dropped 0.8% negating the growth in March. Gasoline dropped 6% on a 6.8% fall in March. pharma prices rose while Autos and PCs reflected the decrease in demand and PPI was up 0.1% month/month excl food and energy, holding 1.7% year/year

Asia and BRIC growth reports

FDI data from China confirms to an extent, the resilience of the Chinese standoff as they try to change over trends to new growth weighted by domestic consumption but Singapore and Korean data showed the frailty of those depending on Global trade. Singapore reported a deep cut in retail sales at 7.4% while Korea reported another month of deflationary prices with a PPI cut of 0.2%

Retail Sales reports from Brazil and South Africa were robust with growth of 4.5% and 2.8%.

The myth about Japan’s Abenomics?

Japan managed to gild in a second quarter of back to back growth , with a positive 0.9% GDP performance likely scoring high for the incumbent Prime Minister. Business investment as however conspicuous by its absence and that dry run could spell another disaster for Japan, with JGB sales continuing to raise prospects of a positive inflation supporting growth. Consumer spending was up 0.9% in Q1 and exports went up by 4% outpacing a 1% rise in imports and improving trade surplus data, frequently questioned in neighbouring China’s reports for veracity of data and for its role in increasing domestic consumption. Both deflation and business investments have to move up before a verdict on Abenomics is possible

Dell offer looks much better after results

Operating Profits were down 73% at the PC maker and the share price dipped below the Silver Lake/Dell offer of $13.65 per share or $24.4 billion . PC division sales were don another 10% at $8.9 B and overall sales ticked lower to $14.1 B with enterprise sales of $3.1 B

Brazil wrests control of WTO

Robert Azevedo from Brazil defeated Mexican and OECD preferred candidate Hermino Blanco without protest from US and Europe and FT refers(subscription required) in muted terms that this might still mean more marks for protectionism in domestic markets It remains to be seen if WTO remains relevant as global trade becomes the fevered instrument for growth

UK and Google improve on lead in ‘circles’

UK managed to build on the discomfort of trading partners in the Eurozone with only Germany reporting growth in Q1 GDP while UK growth was robust at 0.3% despite a small QE program of just GBP375 bln

Meanwhile Google’s All Access music subscription service launch seems to have music companies backing it as Apple fell 3.4% and Google market cap crossed $300 B into positive territory. FT reports(subscription required) 20m subscription service customers worldwide may be growing. Google as always launched its service at a 20% discount to other monthly rates from Spotify, while iTunes continues to boast of the largest collection of music properties

Digital followers may also like to comment on the new argument over Facebook driving out Google Ads with the surge in its new mobile revenues. Google’s lead in Android based smartphone installs is dwarfed by its own miniscule 18% global share in revenues from App stores.

The fracas over Gold

While Gold has lost over 6% in 6 days, the downward pressure on the metal may not materialise as a flurry of opinions tries to track the change in trend, and it still does not look likely that with contraction in Europe, Gold prices will go below 1350 in the next few days

More of S&P’s relevance insight?

S&P was prompt to downgrade Berkshire Hathaway lining up against the Buffett vehicle for its revenues from Insurance mentioning its cash pile of $49 B a source of concentrated risk from his choice for large exposures. Berkshire is meanwhile lined up in search for another large elephant after a $28 B stake in Heinz . Buffett does own a stake in rival Moody’s which also uses the same default and risk models (pretty similar) The new stock of earnings from BNSF was seen as another contributing factor. S& has actually corrected its valuations of insurance businesses likely categorizing weaker insurance claims in larger risk buckets, necessitating the downgrade

Weak Estimate of EU GDP by Eurostat(politicaldeficit.com)
ZeroHedge: Futures Rise As European GDP Declines At Worst Annual Pace Since 2009(silveristhenew.com)
JP Morgan cuts 2013 Taiwan GDP growth projection to 2.7%(wantchinatimes.com)
Goldman Sachs releases American economy Rorschach chart(qz.com)
Japan GDP Jumps Most in Year as Consumers Open Wallets: Economy – Bloomberg(bloomberg.com)
Housing Starts Alway Plunge During a Housing Recovery – Right?(theburningplatform.com)
Tragic Trifecta: Initial Claims Soar, Housing Starts Plunge, CPI Below Expectations(zerohedge.com)
Eurozone recession continues as GDP falls by 0.2% – live – The Guardian(guardian.co.uk)

Of Buffett and Soros – No just a lot of the Ira Sohn conference

zyakaira — Tue, 14 May 2013 04:53:57 +0000

Our Monday morning riser was holding a lot of this so we dedicated a new post to more from the Ira Sohn Conference note. In short, ( pun not intended) buy Korea is right, sell Japan is more like a new post in the Abe government or Central Bank if you prefer, Sell Seagate was well times, einhorn being long Apple is welcome but don’t you think someones should be twisting intel too and the end of the pc era has much more for leverage followers than the believers in the next three-four years?

The Ira Sohn Conference too with its longs on Apple and P&G underlined a positive tone last week. Housing prices and Starts data for April come in towards the end of this week while all that discussion will keep the indices in old standing water before and after data busy before the focus on JP Morgan next week. Retail Sales data will hold interest much of the week though the NY and Philadelphia manufacturing indices do come in as well. At the Ira Sohn again, we liked the longs on Korea as well and think the so called shorts on Japan are as much ‘in cahoots’ with the current government’s policies as Abenomics itself increasing the expected objectives of growth and growing interest rates with the sell down at this point in the commodities cycle. The last one in 2009 if you remember was important to throw instead because of the super inflation wrought by the extreme peaks in commodities charts thence and the liquidity ran awash without any tie back to any growth.

Dimon’s threats to quit have sweetened the media focus on Financials as shareholder activists might not get what they ant risking as per Mayo 10% cut in J Morgan’s current price not too good on funds that rode the Financials comeback since October 2012. Of course most analysts like us could ignore the event pooh poohing the notion much like Barclays that these say on pay and Director election votes can define Corporate Governance

China started off Monday on a positive note with retail Sales maintaining near 13% rise on year and Industrial production at 9.3% fueling more into the Yuan jets looking to cream the whopping 1% plus gain in the currency for 2013 as well, looking to stay barely above 6 by the end of the year and not helping KFC and Burger King outlets. Shorting China though..a BIG NO! Already industrial commodities exports are up from their bottom and China is manufacturing well. Equities and Banks stocks in particular may have already had a lot of undue attention and might not respond to more shorting because of the extreme liquidity,. even if equities do, the macroeconomic bug catches fast esp for China as big brother in the region handholds all commodities economies. Still good to bet against the commodities currencies like Brazilian Reais and the Aussie Dollar ( again much in favor of central bank policy of the country long awaiting such die hard hedge fund support to bring their currency down and let back growth and a healthy inflation as vanishing consumption remains the worry globally and Keynesian economies grow old, very very old..

Also, our two bits on JP Morgan’s No Sell in may opinion, we agreed already in the first of the IT’s MONDAY series we started in April. Imagine the kind of Institutional allocations post sell offs in US and Japan Fixed income and how they will exceed all due and undue to high yield, eurobonds, municipals and even if you want to compete within the asset class neighbours, IPOs and structured ETFs and you can see that the commodity cycle bottom is just providing a positive take off point for more US, India but not China or european equities , the only class that has actually reached a stage of euphoria and got cut from portfolios because of the real recession that will stay in there.

Miami is engendering a lot of Conference speak from bankers in 2013, no doubt related to the bigger real estate investors woming out of the wood work after a quiet round of fresh investments in 2011 last. Credit Suisse held its annual event in Miami in February

CIRCLING THE WAGONS!!

A lot of Ira Sohn went by ( a post facto analysis – we weren’t there) with media hunching up on those circling the wagons like the billionaire investors baiting the Fed was quite a catchy theme. No fault of the media and they have done well to bring transparency in ( no tie in to bloomberg, please ) Also Jim Chanos found the worms in Seagate for which the supplier(Seagate) has been adopting a circling the wagons already buying the rest of the industry (Samsung sold its hard drive business to them) as the product ‘hard disk” vanishes from shelfs and PCs much like Sun hardware before this and intel to come? Shorting intel softly could be a good strategy too only not in the next three months and only if you are ready to watch all their supply chain breakpoints in plan every 2- months till they eventually give up on mobile, sell out or otherwise go private like Dell. It is a big change and whether there is a sun shining at the end of the tunnel or not the tunnel journey can be quite profitable for funds and managers.

Though seriously, buying Google? now? really? Druckenmiller is a Soros partner?

Notes from the Ira Sohn Conference, Spring 2013(thereformedbroker.com)
Jim Chanos Short Ideas in PC Sector: Ira Sohn Conference(valuewalk.com)
Stanley Druckenmiller Following Soros into Australian Dollar Short?(valuewalk.com)
Jeff Gundlach Ira Sohn Conference [LIVE](valuewalk.com)

IT’s MONDAY: Eurozone comeback isn’t but Euro’s comeback is

zyakaira — Mon, 13 May 2013 13:47:27 +0000

As a Rabobank strategist put it in today’s Reuters insider videogram, because of the fragmented euro bond markets in 2010 and 2011 , the current strength in the Euro is much more than a euphoric pick up on German manufacturing data that showed flash improvement last week before this months rush on GDP data. The finality of the Euro zone’s recession thus is not turning away bond buyers who can finally bet on the Euro surviving and run to periphery markets for yield. That means Italian debt spreads continue to move lower towards the German Bund but till then there is a lot of demand for today’s Italian and German auctions

English: Jp morgan chase houston (Photo credit: Wikipedia)

The start of the week is of course just going to be about retail sales and CPI inflation data for the 17 countries and the budding stinkeroo in Slovenia is not going to be cooking much. Meanwhile Britain is the only country with a positive GDP in among the 27 members and the liquidity impressed upon by ECB now with the Open Market operations Britain as always gets cagey about this association with the weak euro zone around local Elections but the interlinakges rule out any seriosu move to change the current structure Britain itself setting the out limits of a closer union inadvertently in the process.

Across the pond, drove a hard bargain Friday, the Dollar taking a lull in the euro trade longs to shock up as US 30 year bond yields finally responded to remote telemetry by JGB sales, and were finally chosen for a big sell down after resisting the yen’s move right till the point it crossed what we still call parity at 100 Yen to the Dollars. That means Ben Bernanke’s last scare of the term is headed out of reckoning with inflation likely to respond and yields move into tangible figures across the term structure from 5 to 30 year terms as well as expected by most prudent observers since the Yen free fall started.

JP Morgan and Goldman Sachs were marked for controversy but at the receiving end as reporters were found accessing client login data from their Bloomberg terminals and Bloomberg is doing the explaining to SEC on this count. The vote for split of Chairman and CEO posts at JP Morgan is next week and Dimon might well stay the course though an ex chairman of J&J got a pretty chilly reception when he wrote to JP Morgan shareholders as a Director praising JP Morgan’s practices on the board.

Deal markets are abuzz since Q1 data for IPOs in the US shows $16 B plus being the off take till April and Asia is pretty hot off the charts as well including the continuing stream of Chinese local currency debt

The Dow starts the week well near record levels and retail Sales have already jump started markets before open with ex Auto and Gas sales jumping 0.6% , back to its better days after a depressed Chicago PMI and demand for Gas set the negative CPI / PPI data in a pretty bad context in April and with not much positive coming out of Apple choosing to diversify its China contracts with Hon hai ( choosing Pegatron increasingly) markets were resigned to debating a lot about why not sell in May

Modern Family from ABC meantime consolidates on Disney’s record results at least for investors with an app launch in New York and Philadelphia to start off revenues off streaming video. Upfront week showcasing new fall series’ coincidentally rolls across multiple networks at the same time to entice traditional advertisers without the synergistic digital leverage

April’s retail sales were conservatively expected to stay mildly negative but broke out at 0.1% probably into the green for the indices as well. The Ira Sohn Conference too with its longs on Apple and P&G underlined a positive tone last week. housing prices and Starts data for April come in towards the end of this week while all that discussion will keep the indices in old standing water before and after data busy before the focus on JP Morgan next week. Retail Sales data will hold interest much of the week though the NY and Philadelphia manufacturing indices do come in as well. At the ira Sohn again, we liked the longs on Korea as well and think the so called shorts on Japan are as much ‘in cahoots’ with the current government’s policies as Abenomics itself increasing the expected objectives of growth and growing interest rates with the sell down at this point in the commodities cycle. The last one in 2009 if you remember was important to throw instead because of the super inflation wrought by the extreme peaks in commodities charts thence and the liquidity ran awash without any tie back to any growth.

CIRCLING THE WAGONS!!

A lot of Ira Sohn went by ( a post facto analysis – we weren’t there) with media hunching up on those circling the wagons like the billionaire investors baiting the Fed was quite a catchy theme. No fault of the media and they have done well to bring transparency in ( no tie in to bloomberg, please ) Also Jim Chanos found the worms in Seagate for which the supplier has been adopting a circling the wagns already buying the rest of the industry (Samsung sold its hard drive business to them) as the product ‘hard disk” vanishes from shelfs and PCs kmuch like Sun hardware before this and intel to come? Shorting intel softly could be a good strategy too only not in the next three months and only if you are ready to watch all their supply chain breakpoints in plan every 2- months till they eventually give up on mobile, sell out or otherwise go private like Dell. It is a big change and whether there is a sun shining at the end of the tunnel or not the tunnel journey can be quite profitable for funds and managers.

4 reasons why ‘Sell in May’ won’t happen: J.P. Morgan(blogs.marketwatch.com)
India Morning Report: Yen progresses weakness strategy to new levels(awardz.wordpress.com)
Bloomberg Terminals, Mind of the Trader, and Hypercompetitive News Business(lawandmore.typepad.com)
The Trouble With Bundesbank President Jens Weidmann(bloomberg.com)
Everything That’s Wrong With Slovenia — and Why It’s Not the Next Cyprus(minyanville.com)
$A higher after US unemployment rate drops(news.theage.com.au)
Saxo Bank CEO On The ‘Eurozone Minefield’: “This Crisis Will Not Pass”(zerohedge.com)
Glass Lewis Adds to Pressure on Dimon, J.P. Morgan Board(blogs.wsj.com)
J.P. Morgan CEO: This is what I enjoy(blogs.marketwatch.com)
Petrobras Begins Its Financing Campaign(blogs.wsj.com)

India Morning Report: Yen progresses weakness strategy to new levels

zyakaira — Mon, 13 May 2013 06:47:38 +0000

Even as Yen progresses jump(down) in currency, Dollar progresses on the long cherished goal of yields going in north just in time for Ben Bernanke to not worry about a lower rate of inflation in his last year on the job, likely to also be seen as end of the Fed’s major push to exit recessionary conditions. It should not have mattered as much to India on Monday morning but the relationship linkages with the global economy are a mainstay of this Capital controlled Economy and even as the outsourcing bug in the US designs reverses for Visa hogging engagement strategies at TCS and Cognizant in light of the new bill, the Dollar chose to strike out against the weak Indian currency. The euro will only strengthen and keep transmission of Yen weakness to Dollar strength obscured and thus today’s morning move looks like the week’s top/bottom mark for the Dollar rupee at 55 (54.90) but then the Euro may take its time to get there as results season is over and the economies are sluggish though avoiding the bigger pitfalls.

Curency apart, BOB as we suggested disappointed big after cutting provisions by more than 40% in the quarter with credit growth null and bettered NPAs marginal at best. Akshaya Trithiya seems to be catching on more into the urban youth mindset as well as the Economy struggles to bounce back.

The IIP performance was a wee bit sluggish than expected for us esp with consumer durables continuing to be negative and the mining performance also still more negative than reports would have suggested. However, the correction on the nifty is unlikely to be deeper as the Economy’s score is much past the barrier for bears to feel stronger or easier buying opportunities to emerge than around 6000 levels itself, markets resting at 6080 before consolidating in the rest of this series still carrying chances of a plus volatility up move to another Nifty level.

Yen’s moving to 115 levels and probably even 125 later for a longish innings and the Dollar engendered jump in US yields likely to bring back a bigger rush of green in the second half of the year. The Aussie similarily hopes to maintain weakness against the Dollar and keep the commodity gains for its exports as well

India’s forex reserves down $2 billion (news.in.msn.com)
GLOBAL MARKETS-Firm dollar hits oil, gold, shares; Nikkei jumps on weak yen (uk.reuters.com)
G-7 to discuss ways to ‘nurture recovery’ (omaha.com)
The mystery of Ben Bernanke and the Japanese ketchup is solved! (washingtonpost.com)
Tide turns for Aussie dollar (theage.com.au)

The mystery of Ben Bernanke and the Japanese ketchup is solved!(washingtonpost.com)
Japanese Investors Give in, Yen Falls Below ??100 vs USD(xe.com)

The Banking and Strategy Initiative

In Tomorrow’s mid week update

Asia Wednesday 9 am: Rupee weakness predates another correction of the US Dollar

India Morning Report: Why some rating agencies get ‘brand mileage’ from obscure imperfections and markets rest..

India Morning Report: Why some rating agencies get ‘brand mileage’ from obscure imperfections and markets rest..

IT’S MONDAY: The Fed purchase program is quite a workout for the Market

India Morning Report: A new bank, not Citi, 8 not 4 and numerous other slips to the mile..

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Of Buffett and Soros – No just a lot of the Ira Sohn conference

IT’s MONDAY: Eurozone comeback isn’t but Euro’s comeback is

India Morning Report: Yen progresses weakness strategy to new levels

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