From Economist today. Only company they forgot, Netflix.
SOME time after the dotcom boom turned into a spectacular bust in 2000, bumper stickers began appearing in Silicon Valley imploring: “Please God, just one more bubble.” That wish has now been granted. Compared with the rest of America, Silicon Valley feels like a boomtown. Corporate chefs are in demand again, office rents are soaring and the pay being offered to talented folk in fashionable fields like data science is reaching Hollywood levels. And no wonder, given the prices now being put on web companies.
Facebook and Twitter are not listed, but secondary-market trades value them at some $76 billion (more than Boeing or Ford) and $7.7 billion respectively. This week LinkedIn, a social network for professionals, said it hopes to be valued at up to $3.3 billion in an initial public offering (IPO). The next day Microsoft announced its purchase of Skype, an internet calling and video service, for a frothy-looking $8.5 billion—ten times its sales last year and 400 times its operating income. And those are all big-brand companies with customers around the world. Prices look even more excessive for fledgling firms in the private market (Color, a photo-sharing social network, was recently said to be worth $100m, even though it has an untested service) or for anything involving China. There has been a stampede for shares in Renren, hailed as “China’s Facebook”, and other Chinese web giants listed on American exchanges.
Flooding on the Mississippi River is approaching New Orleans, leaving officials with a dilemma on how to handle it. In about 72 hours, floodwaters will hit the Old River Control Structure — essentially a canal linking the Mississippi River with the Atchafalaya River. This structure controls how much water goes into the two rivers; under normal conditions, the Lower Mississippi gets 70 percent of the flow and the Atchafalaya gets the remainder. The U.S. Army Corps of Engineers is currently debating doubling the flow of water into the Atchafalaya and opening the Morganza Floodway downstream, which — in theory — would remove the flooding threat downstream on the Lower Mississippi, including New Orleans, at the cost of flooding the Atchafalaya Basin, a lightly populated area with only a few thousand acres of cropland. The graphic above shows the worst-case flooding scenario estimated by the Army Corps of engineers if the Morganza Floodway is not opened.
Even though Europe is closed and some may be taking a drink or two, this is almost surreal. TEPOo will save radioactivity from spreading by, yes, pulling out a giant tent. If this is a joke or not, we cannot confirm, but here is the news;
Giant polyester covers will soon be placed around the damaged reactor buildings at Japan’s Fukushima nuclear complex to help contain the release of radioactive substances into the atmosphere, the plant operator said Friday.
Tokyo Electric Power Co. (TEPCO) will install the first cover at the No. 1 reactor, the focus of recent stabilization efforts, starting next month.
Workers will erect a steel framework and place a giant polyester tent-like cover around the reactor building. Similar covers will be placed around units No. 3 and 4. The work is expected to be completed by the end of the year.
As we have been arguing for some time, the market has reached an Inflection Point. The consensus positions, ie everybody trying to chase Alpha, but they only get Beta, are rather worriesome. Every hedge fund is long the inflation trade, long commodities, long equities, short the Usd etc. This is creating some big dynamics in the market. People have given up on shorting the market, vol is at depressed levels, but then all of a sudden you get the Usd stronger and stronger. People double up on Euro longs, buy more oil, silver, gold and wait. What will happen if this goes down a little more? We have built up a huge vacuum on the downside. Everybody is long, anticipating Fed will buy more, but nobody wants Fed’s AIG, nor GM at these prices. All moves are interconnected via Algos, but these Algos are never there when real flow wants to sell anything. We have reached a tipping point, where we believe market could face a real Flash Crash event. Below intraday Euro and Aud/Jpy.
Is the crop actually false?
Usd getting stronger. Euro drifting lower, remember, everybody long this Euro. AudJpy accelarating down. Risk off. SPX lacks momentum to break higher with any decent volumes. Let’s see how crowded these trades are?
Gross argues that increased demand is not the only factor pushing down yields. To fight the crisis, the Federal Reserve has aggressively expanded the money supply, in large part by dumping new money into the Treasury market. “We’ve been supporting Treasuries almost one for one,” he tells me. “At 8 a.m., the Fed calls up and asks our Treasuries desk for offers to buy, and one hour later, the Fed’s asking for bids to sell them.” The Fed, complains Gross, is “picking the pockets” of investors. Though he can’t quite bring himself to blame the financial powers that be. “God bless Ben Bernanke and Tim Geithner for what they’re trying to do, but the net result of a lot of what they’re doing is to take money out of the hands of savers.”
This is exactly the problem, really. Our national conversation about deficits is about politics—about ideology—not math. It’s a proxy war in our eternal battle over how much to tax and spend. Republicans care about deficits when spending is on the table, but as soon as they get a chance to pass some tax cuts, they forget they ever cared. Meanwhile, Democrats, who were outraged—outraged!—when the deficit averaged less than 3 percent of GDP under George W. Bush, are now silent about deficits that are running three times as high, and that are projected to stay above Bush’s even after Obama has left office. Very few true deficit hawks are left in America—only deficit vultures.
Imagine just a small if.
QE is, in fact, a ‘crop failure’ for the dollar. The Fed’s shifting of securities out of the economy and replacing them with clearing balances removes interest income. And the lower rates from Fed policy also reduces interest paid to the economy by the US Treasury, which is a net payer of interest. But the global markets mistakenly believed QE was producing a bumper crop for the dollar. They all believed, and some to the of panic, that the Fed was ‘printing money’ and flooding the world with dollars. So what happened? The tripped overthemselves to rid them selves of dollars in every possible manner. Buying gold, silver, and the other commodities, buying stocks, selling dollars for most every other currency, selling tsy securities, etc. etc. etc. in what was, in most ways, all the same trade.
And so now that the speculators and portfolio shifters have run up prices of all they tripped over each other to buy, the anticipated growth in spending power-underlying aggregate demand growth needed to support those prices- isn’t there. And, to throw more water on the fire, the higher prices triggered supply side repsonse that have increased net supply along with a bit of ‘demand destruction’ as well.
We could see some interesting developments, especially with Euro being at highest long positions in years, every Alpha chasing hedge fund long commodities, and consensus so strong SPX will go to the moon. Just a small reminder of how great equities are. Stoxx is flat since mid 2008. Is it worth the risk? What could happen if the crop is false, and we start moving away from the range we have been trapped in?
The Economist lists the biggest Insider cases from 2000. Raj isn’t that spectacular especially if you compare to the big boys last century.
All these seem small fry by comparison to the great insider trading cases. Ivan Boetsky was fined $100m in 1986 (about $200m in today’s prices); Michael Milken was fined $600m in 1990 (around $1 billion).
Greece needs to take some serious measures, and try to sort out the countrie’s many problems. Riots and demonstrations are becoming increasingly violent. The dilemma greece faces is, more loans, will mean more austerity. With private debt at the same levels as at the peak of the credit boom, austerity isn’t what people want. Watch out for further unrest. Below from Stratfor;
Special edition to all the mega Silver bulls. Seems Silver is stuck in the 30-40 Usd range for the moment.
Forget what you have been taught, portfolio salvation can only be found in real assets and it is the only shelter from inflation, says renowned strategist Philipp Vorndran.
Speaking at Citywire’s Montreux event, the Flossbach von Storch strategist said the audience should stay as ‘far away from classical asset positioning as possible.’
His message to selectors was to invest in tangible assets like gold and silver, but warned them to store their precious metal investments outside of the eurozone due to the possible risk of government confiscation.
‘Silver will hit $100 in the next three years but the question is what the US dollar will be worth at that time. I would argue that gold and silver are not in a bubble, they have not increased in price but paper money has lost its value,’ said Vorndran.