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Archive for October, 2011

FA Notes Monday October 31, 2011

October 31st, 2011 No comments

pmi

Markets have over-interpreted comments by incoming European Central Bank chief Mario Draghi on the bank’s readiness to go on buying the bonds of troubled euro zone states, outgoing ECB President Jean-Claude Trichet said. Link

Industrial conglomerate 3M Co. singled out Europe as a chief contributor to its poor third-quarter performance. In Western Europe, 3M saw its organic volumes fall 4% in the third quarter after a flat second quarter and a 4% increase in the first three months of the year. Source: WSJ

Acer originally expected its notebook shipments to remain flat in the fourth quarter of 2011, or rise by up to 5% from the preceding quarter, but now has lowered the fourth-quarter estimate to a decrease by 5-10% on quarter due to short supply of hard disk drives (HDDs) due to the flooding in Thailand.. shortages have caused an increase in HDD prices of 5-20% and Acer has decided to hike prices for its notebooks in November to reflect its increased costs, Wong indicated. Based on a lead time of about two months, the global supply of HDDs will be 25% short of demand from mid-December 2011 to February 2012, according to Taiwan-based notebook ODMs Link

Japan intervened to weaken the yen for the third time this year and pledged more sales after the currency’s gain to a postwar high against the dollar threatened a recovery from the March 11 earthquake and nuclear disaster. Link

Google engineer posts on Jeff Bezos (expand first blog post) Link

NFLX CEO on what went wrong Link

Chanos on Europe and China. He’s still (surprise!) bearish Link

Protestors are probably in in the top global 1% Link

In late 2010, Mr. Corzine started making big bets on bonds issued by European countries. He sometimes placed orders himself based on a list of prices left with an assistant, according to people familiar with the situation. Mr. Corzine, who made his name and fortune as a Treasury bond trader at Goldman, was convinced that sovereign debt from countries like Italy and Spain with high yields was a steal, these people said.

"Europe wouldn’t let these countries go down," Mr. Corzine, who is also chairman of MF Global, told another executive at the New York City company early this year. When the lower-ranking official suggested that the trade was too big, Mr. Corzine brushed the concerns aside, responding that his career on Wall Street and in politics made him confident about the bets.

It was the kind of gutsy trade that helped make Mr. Corzine a star at Goldman in the 1990s. "If it was a good trade for $100, he wanted to make it $1,000 or $1 million," a former colleague recalls.

He set out on a five-year makeover, but it wasn’t easy. Last year, stocks rose, but interest rates that MF Global relies on to profitably lend to clients stayed stubbornly low, hurting profits. "We have to take risks," he said in an interview.

Last year, Mr. Corzine immersed himself in the idea of making bets on European sovereign bonds. He asked colleagues what they thought of the financial situation in Europe, talked to MF Global’s risk officers and board of directors, and then starting putting on the trades in September, according to people familiar with the situation.

Mr. Corzine oversaw the European sovereign-debt trades largely on his own even after hiring a new trading chief earlier this year, a person familiar with the matter says. In one quarter where the trade worked well, it represented 12% of the firm’s revenues, according to Christopher Allen, an analyst with Evercore Partners Inc. Mr. Corzine regularly reviewed the positions with the company’s directors, and he was allowed by the board several times to increase MF Global’s exposure to Europe, these people said.

Investors in debt issued by MF Global were pleased, too. In August, they lent the company money at a lower interest rate if Mr. Corzine stayed at the company instead of leaving for a federal-government post, such as Treasury secretary.

One person who has worked with Mr. Corzine at MF Global says he was uncomfortable that so much of the firm’s strategy essentially boiled down to a bet by Mr. Corzine on European bonds. "There was no one else at the firm who was helping him think about what to do on this trade," this person says. Link

Barton Biggs, the hedge fund manager who bought stocks when the market bottomed in 2009, boosted bullish bets on equities in his Traxis Global Equity Macro Fund after European leaders took action to contain the debt crisis. Link

It didn’t hurt that Caterpillar saw the recession coming more clearly than most large companies. Top management, realizing the company’s susceptibility to GDP shifts, had once asked Cat economists to find a leading indicator. "We’ve got good news and bad news," the economists reported, as CFO Rapp tells it. "The good news is, we found an indicator that predicts shifts in U.S. GDP with a lead time of six to nine months. The bad news is, it’s our own sales to users." Using that metric, Cat anticipated the U.S. recession coming in the third quarter of 2007 and said so publicly, triggering a 2.6% one-day drop in the S&P 500. Link

Soros – said that the 50pc "haircut" on private bond holders would only reduce Greek debt by 20pc.. "It will bring relief partly because the markets were so obsessed by the lack of leadership. The mere fact that something was achieved was a major relief and it will be good for any time from one day to three months. Link

Categories: News

FA Notes Friday October 28, 2011

October 28th, 2011 No comments

Bill Ackman Lecture “If you’re so smart, why aren’t you rich?” Link

Hedge funds reduced bets that stocks will rise to almost the lowest level since 2009 this week, according to International Strategy & Investment Group. ISI’s index of “net exposure” to stocks slipped to 44.7 on Wednesday, compared with its 2011 high of 54.2 in February, according to a note sent to clients. The measure climbed to 45.5 on Oct. 12 after declining to 44 on Sept. 21, the lowest level since April 2009. Link

Chinese and European officials sought to play down expectations about when and how China may deploy its vast financial resources to help bail out indebted countries in Europe. A Chinese Vice Finance Minister said China must first see the details of a new European bailout fund before making any commitments. "We of course must wait until its structure is extremely clear," Zhu Guangyao told a press briefing. "And moreover, this investment must be decided on after serious, technical discussions." Jin Liqun, chairman of sovereign wealth fund China Investment Corp., made clear in London last month that CIC wouldn’t offer handouts. "The $3 trillion in reserves are the fruits of the hard work of the Chinese people," he said. "We’re willing to work with those European countries in distress for a better solution. But…we have to be accountable to the people." Link

WHR – "During the quarter, we experienced weaker than expected global industry demand and elevated material costs," said Jeff M. Fettig, Whirlpool Corporation chairman and chief executive officer.  "Consumers continue to show strong preference for our unmatched global brand portfolio and new product innovations, and we are beginning to see the benefits from previously announced price increases.  However, our results were negatively impacted by recessionary demand levels in developed countries, a slowdown in emerging markets and high levels of inflation in material costs

Categories: News

FA Notes Thursday October 27, 2011

October 27th, 2011 No comments

Top European Central Bank officials offered a skeptical appraisal of Europe’s latest plan to solve its debt crisis, suggesting that the central bank may be forced to maintain the emergency measures it has adopted to keep the problems from spreading.

The ECB purchased Spanish and Italian government bonds on Thursday, a trader said, hours after European leaders inked a three-pronged deal they hope will solve the region’s debt crisis through a mix of Greek debt restructuring, bank recapitalizations and leverage of Europe’s bailout fund to give it extra firepower. Details still need to be ironed out, which could take weeks.

Despite the show of support from the ECB, Italian government-bond yields fell only modestly Thursday, suggesting investors still have doubts about whether the package will ultimately work. Link

“Companies have recently raised prices for their external hard drives by 10-20%, amid speculation that recent flooding in Thailand might cause tight supply for HDDs and related components, according to industry sources… potential HDD and key component shortages might propel demand for solid state drives (SSD) in consumer PCs, the sources indicated.” Link

“Asustek Computer and Gigabyte Technology, facing weak market demand in Europe, the US and China, are expected to fail to achieve their motherboard shipment goals for 2011 and only ship 22 million and 17.5-18 million units, respectively, about one million units less than their original targets” Link

Categories: News

FA Notes Wednesday October 26, 2011

October 26th, 2011 No comments

New ECB head: "The Eurosystem (of central banks) is determined, with its non-conventional measures, to prevent malfunctioning in the money and financial markets creating an obstacle to monetary transmission," he said in typically coded ECB language in a speech text released in Rome.” Link

Chinese Premier Wen Jiabao said that economic policy will be fine-tuned as needed and the industry ministry said it is studying “stimulative policies” for smaller companies as a global slowdown threatens growth. Link

AMD NVDA – “Since high-end discrete graphics cards are currently seeing weakening sales, while demand for mid-range and entry-level graphics cards is gradually being replaced by AMD and Intel’s GPU-integrated processors” Link

A common study habit—the all-nighter—is a bad idea. Although 60% of college students stay up all night at some point in school, the practice is linked to lower grades, says Pamela Thacher, an associate professor of psychology at St. Lawrence University in Canton, N.Y., based on a 2008 study of 120 students. It also impairs reasoning and memory for as long as four days. Link

Categories: News

FA Notes Tuesday October 25, 2011

October 25th, 2011 No comments

MMM – “The business environment remains challenging, as the economic softening that we experienced late in the second quarter continued into the third,” said George W. Buckley, 3M chairman, president and chief executive officer. “While growth rates were good across much of our portfolio, LCD TV remained weak and momentum slowed in other parts of electronics following several quarters of very good growth. In addition, ongoing policy uncertainty and austerity are affecting growth in Western Europe, which reduced sales in the quarter. As is typical, we are seeing the impact of these changes earlier than most as our customers decrease production in order to lower their inventories. Conversely, we should benefit more quickly when those markets recover.”

"The quarter turned out to be a very different one than what we expected," 3M Chief Executive George Buckley told analysts on a conference call. "Cause No. 1 was worries about European sovereign debt and the European economy. Cause No. 2 was the rapid contraction of the electronics end markets."

MMM “Canary in coal mine about the economy?” Link

Notes from a session with Felix Zulauf. Link

A celebration of Steve’s life video. Link

Apple’s Jon Ive interview excerpts. Link

Barrons: Trouble at Fairholme. Crazy story how he hires a guy with no investment experience to be his #2. Link

More Jobs book excerpts. Link

DeMark on a SP500 bull-trap. Link

Fortune writer reminisces about Steve Jobs. Link

Categories: News

FA Notes Monday October 24, 2011

October 24th, 2011 No comments

Eurozone Flash Manufacturing PMI 47.3 vs. 48.1 est. 48.5 prior
Eurozone Flash Services PMI 47.2 vs. 48.6 est. 48.8 prior

HSBC Flash Manufacturing PMI 51.1 vs. 49.9 prior Link

German October manufacturing PMI 48.9 vs. 50.0 est. 50.3 prior Link
German October services 52.1 vs. 49.7 est. 49.7 prior

France October Manufacturing PMI 49 vs 48 est. Services 46 vs. 50.5 est. Composite 46.8 vs. 50.2 est. Link

France Composite PMI vs. France GDP Chart


Source: Markit

"If they are having a bad year in that returns are down but can explain it in a way that convinces us they haven’t lost their discipline, then we might give them a pass," said Sam Katzman, the chief investment officer of Constellation Wealth Advisors, which invests in hedge funds and has $4.5 billion under management. Constellation is likely to redeem from some managers who have underperformed this year, he said. "In times like these, investors will give you a chance if they understand your thought process and strategy," Ms. Tapia said. Link

60 Minutes video segment on Steve Jobs. Link

PBS video interview with Michael Lewis. Link

Charlie Rose interviews Ray Dalio, PM of largest hedge-fund in the world. Link

Categories: News

EU Considers SPV Plan Similar to Geithner’s PPIP Failure

October 22nd, 2011 No comments

According to the WSJ, the EU is considering a private capital funded SPV (special purpose vehicle) leverage European sovereign debt insurance plan instead of the EFSF funded plan.

“One option would be to create a special purpose vehicle uniquely devoted to insuring investors against losses. The idea would be to draw in private investors and others, like sovereign wealth funds, to create a “bazooka” fund, the person said.” WSJ Link

This is very similar to the Geithner’s PPIP toxic mortgage security plan. The main problem is when we’re in world where every sell-side and buy-side investor is on earnings conference calls with banks and institutional funds telling them to lower European sovereign debt exposure, there is simply NO private capital demand for an SPV like this.

“Under PPIP, announced by Geithner in March 2009, the Treasury and private investors ultimately committed $14.7 billion in equity to funds run by eight money management teams. The Treasury agreed to provide $14.7 billion in low-cost loans to the funds” Bloomberg Link

Geithner promised a trillion dollar+ of bazooka fire-power raised from private capital for his PPIP SPV plan. In the end only $14.7 billion was raised.

Categories: News

FA Notes Friday October 21, 2011

October 21st, 2011 No comments

“Europe’s efforts to deliver a comprehensive plan to resolve the euro-zone debt crisis were in danger of unraveling Thursday as disagreement between Germany and France over virtually every point forced the 27-nation bloc to concede a much-anticipated summit of European Union leaders on Sunday won’t produce an agreement.” WSJ

“Federal Reserve officials are considering a new program of buying mortgage-backed securities to boost the ailing economy, though they appear unlikely to move swiftly in this direction..A new Fed mortgage-bond-buying program isn’t a certainty. If inflation doesn’t recede as many officials expect, or if the economy picks up with surprising vigor on its own, such a program might not win broad support inside the Fed.” WSJ

China – “private bosses are known for being savvy and resilient, many have turned from manufacturing – where labor and material costs are rising dramatically – to the much more lucrative business of speculating in the real estate marketLink

Tom DeMark uncertain about near-term SP500 direction. Link

Jim Chanos Presentation – Beware: The Global Value Trap. Link

David Pogue loves Dropbox. Link

60 Minutes: Steve Jobs biographer Link

STX on Thailand floods – “How bad is this situation for the computer industry? Extremely bad. Luczo, for one says this is a “much more significant” supply chain interruption for the technology business than anything that happened after the recent tsunami in Japan.” Link

Steve Jobs Bio excerpts:

His pre-Apple job as a technician at Atari paid $5 per hour. He saw a classified ad in the San Jose Mercury News, went to visit the company and informed them he wouldn’t leave unless they hired him.

Apple’s first president, Mike Scott, was hired mainly to manage Jobs, then 22. One of his first projects: getting Jobs to bathe more often. It didn’t really work.

Apple sued, and Jobs told Isaacson in an expletive-laced rant that Google’s actions amounted to "grand theft."

"I will spend my last dying breath if I need to, and I will spend every penny of Apple’s $40 billion in the bank, to right this wrong," Jobs said. "I’m going to destroy Android, because it’s a stolen product. I’m willing to go thermonuclear war on this." Link

Categories: News

FA Notes Thursday October 20, 2011

October 20th, 2011 No comments

Silver Lake, Canada Pension Plan Investment Board, and Microsoft working on a Yahoo bid. WSJ

FCX – “Despite the strike, Grasberg has been operating at about 80% capacity, he said. "Our hope is that we get the strike resolved and we get everybody back to work," he said.” Freeport’s total copper production fell 8.7% in the quarter, while gold production dropped 22%. Molybdenum output increased 21%. WSJ

“main problem with aluminum is that energy accounts for 30% of smelting costs. In an era when global energy demand is climbing fast”

WDC call: “As a result of these activities, at this point in time, we estimate that our regular capacity and possibly our suppliers’ capacity will be significantly constrained for several quarters.

Steve Eisman to start a new hedge-fund. Link

WSJ video interview of Joel Greenblatt Link

Semiaccurate says Nvidia Tegra slips Link

Categories: News

FA Notes Wednesday October 19, 2011

October 19th, 2011 No comments

INTC – updated model Link

AAPL – updated model Link

According to a report by BAC published on Monday, the top 100 most shorted stocks were up 13.9% since the Oct. 3 low—outperforming the 100 least-shorted by 2.5 percentage points. Link

Top 20% of earners bear 68% of the federal tax burden. The bottom 20% bear <1% of the federal tax burden Link

FBHS – Bill Ackman’s long Fortune Brands Home & Security thesis. Link 

Dropbox $4 billion start-up story. Link

Market Folly’s Value Investing Congress Day 1 Notes Link

Talking tech valuations with Blackstone’s Eric McAlpine Link

Profile of Brazilian billionaire Jorge Paulo Lemann Link

With total assets under management of some $11 billion–making FX Concepts the world’s largest foreign-exchange fund manager–it is tricky to turn returns around, Taylor said. "When you have billions of dollars of positions, it takes us something like 10 days to turn it Link

The spot price of polysilicon, the raw material for most solar panels, fell 5.9 percent on an oversupply of the modules, according to data from EnergyTrend. Link

Categories: News