As long as the music’s playing…
Citi’s credit strategist Hans Lorenzen adds to our euro-nuttiness questions of yesterday. He’s in a more… pragmatic frame of mind. Which doesn’t preclude the use of “frenzied”, but there you go. With our emphasis and his puns throughout:
Is it a bubble? With clear signs of overvaluation, inflows concentrated on return-sensitive investors, spreads largely desensitized to external shocks and fundamentals moving in the opposite direction, the recent and expected further tightening certainly has all the typical hallmarks of one.
But that’s almost beside the point, as we think it will last longer than most people’s investment horizons, leaving them with little choice but to participate. As we see it, the time to exit is the day that the market starts to doubt the ECB’s commitment to buying more.
“It’s official, there are no more sellers of bonds.” An investor told us yesterday, and he’s not alone. Bond buying on ECB QE, the Greek loan extension and recent growth data in the periphery has transformed itself into bond hoarding.
- RBS’ Alberto Gallo and team Read more
Rocket Internet, the German-listed ecommerce investment group, has opportunistically raised about €600m in fresh equity at €49 per share.
In case you had forgotten, the collection of investments in more than 140 loss making businesses is valued by the market at about €7.6bn. Read more
Over in Mac McQuown’s Sonoma Valley workshop, courtesy of Bloomberg Markets…
McQuown says his eBond will enable investors to jettison their credit risk because the swap, which is essentially a form of insurance, will cover their losses should the debtor fail. To garner such protection now, an investor must purchase a swap separately to cover a bond. Read more
Box Inc, just another cloud storage company out of Silicon Valley, looked to be just another SV mania company hitting Wall St when it priced it’s IPO last week. Against an allegedly cautious pricing at $14 a share (one dollar above the indicative range, natch) the market price surged to a day one high of $24.73. But look at the price chart since then…
Over in Russia:
This is illegal interference with my personal life, with my information,” Yakunin told state television. “We are a natural monopoly, we live according to decisions taken by the state, so we make as much as the state allows us to make. Read more
Japan turns even more Japanese:
This is an urgent Alphaville appeal: kill this trend now.
Bloomberg Businessweek already wrote the definitive profile of OnDeck Capital, the latest hot initial public offering for a business with some boiler room characteristics. Check it out to see the company Peter Thiel is keeping these days.
From our perspective, the market valuation of about $1.3bn seems nuts for a far simpler reason, which requires reading 15 words in the prospectus:
We have a history of losses and may not achieve consistent profitability in the future.
Never mind the business partners with colourful backgrounds, hope and fairy dust is what you, dear investor, were invited to buy. Read more
A news story lands, from Bloomberg, entitled “Goldman Sachs outdoes itself…”
Like Meryl Streep at the Oscars, Goldman Sachs Group Inc. isn’t lacking acclaim for its merger and acquisition advisory business. It’s finished first in deal volume for five consecutive years and in nine of the last 10.
Even so, Goldman Sachs outdid itself this year. No top firm has had a larger market-share spread over its nearest competitor since 1998…
As the longtime publisher of this news-paper, it is my duty and unrestrained pleasure to inform you spittle-soaked readers that I have sold The Onion and all of its various holdings to a syndicate of industrious China-men from the deepest heart of the Orient. One of their representatives oozed and crawled from his dank hut to visit me in person at my bedside last week, and make known his superiors’ desire to expand their clammy clutch into the Western world…
Oh, how heavenly it shall be to never again hear the ungodly shriek of a printing press, or breathe the insufferable stench of a news-room full of unwashed scribes churning out mindless pap on the subject of photo-play actresses and their adopted African brood. And as far as the whimpering clods who have the temerity to call themselves “readers” are concerned, I do not suppose I shall miss their ilk in the slightest. Why, just imagining their pallid, toothless faces fills me with such colossal rage that at this very moment my nurse-maid is administering to me a near-lethal dose of laudanum just so I may find the composure to reach the end of this missive.
– “Well, I’ve Sold The Paper To The Chinese,” The Onion, July 20, 2009 Read more
Performance art, the personification of a tech bubble or just a cry for help from an existentially challenged AOL? From the New Yorker on everybody’s favourite digital prophet:
Next, Shingy stopped by the office of Erika Nardini, the chief marketing officer of AOL Advertising, and handed her an iPad Mini. “Wanted to show you a little brain fart I had on the plane,” he said. It was a cartoon he had drawn of a bear wearing zebra-print pants and a shirt covered in ones and zeros.
“Love it, love it, love it,” Nardini said. “I’m thinking of the bears more as a metaphor.”
“A thousand per cent,” Shingy said.
Some semiotics. This is what Americans call a cast iron skillet.
First on Alibaba, the FT reports that the Cayman registered derivative contract vaguely related to ecommerce in China — and which floated on Sept 19 the same day the S&P 500 peaked — has almost broken into the list of the world’s 10 most valuable companies:
Shares of Jack Ma’s Hangzhou-based group climbed as much as 2.8 per cent to touch a new record high of $100.50, lifting its market capitalisation above $247bn. Read more
Unless we’re mistaken, Goldman has come up with its own “This is nuts” top ten. Decent effort:
1. Since the low in the global equity market on March 9, 2009, the MSCI The World index has risen roughly 180% in total return terms, generating an annualised return of a remarkable 20%.
2. 2013 was one of the strongest years on record for the equity markets. The US managed a price return of 30% and the Sharpe Ratio of the S&P 500 ranked in the 98th percentile since 1962.
3. Perhaps even more striking is that bond markets have continued to perform strongly. Since the 2009 low in equities, the JP Morgan GBI global bond index has risen 24%.
Alibaba this week…
The calm after Wednesday’s one-day storm is downright weird. No?
Eight minutes of wonder for the S&P 500.
Let’s call it the Alibaba indicator, with thanks to BofAML’s Thundering Word:
The S&P500 index peaked at 2019 roughly 8 minutes after the Sept 19th launch of the Alibaba IPO.
A competition. What is the portfolio with the greatest hope to value ratio?
To start you off, here are the top ten holdings of the Edinburgh Worldwide Investment Trust plc, managed by Baillie Gifford. (Click to enlarge):
Some clown’s made up a spoof investment pitch for Rocket Internet, the German e-incubator planning to float in Frankfurt next month at a valuation of something north of €6bn.
Alibaba has started trading and its current market valuation is about $227 billion. Yahoo! Inc., which currently owns a little more than 16 per cent of the Chinese conglomerate, is currently valued at just over $40 billion. Yahoo also owns a 35 per cent stake in publicly-traded Yahoo! Japan, which currently has a market cap of about $23 billion.
Let’s do some arithmetic to see how much Yahoo’s core business is currently worth: Read more
This of course is Alibaba, the Cayman e-commerce site. Click the image above for the SEC filing; click the image below for the corporate structure. Read more
Felix Salmon on the redundancy of banks, in Friday’s FT:
Today’s big Silicon Valley deals are not based on corporate synergies, or the amount that earnings per share will increase after the deal closes. They are not, therefore, based on the sort of thing that bankers can model. (Very few of the acquired companies have any earnings at all; some even lack revenues.)
This valuation will self destruct in ten, nine…
Snapchat is worth $10bn, according to Alibaba. The yet to list Chinese ecommerce company is in talks to inject a round of financing that would make the company worth as much as Dropbox and and Airbnb, reports Bloomberg. Read more
We’ve been worried about the lack of liquidity in the bond market for yonks. Some at the Fed (though not Janet Yellen) share the concerns, and have been talking about whether to add exit charges to bond funds to prevent a potential run on the market.
Now the Bank of England has weighed in, warning investors that they are paying more and receiving less when it comes to liquidity, particularly in bonds.
Here’s a few choice comments from the Bank’s Financial Stability Report today: Read more
Dubai stocks went bonkers last year, along with Qatar, distorting the performance of the (anyway tiny) frontier markets index.
Locals rediscovered their lust for equities, while foreigners were excited by a potential upgrade to emerging market status and the billions of dollars of inflows from index funds that would represent. In total the index more than tripled in two years.
In the past month it’s all gone wrong, and strategist Andrew Howell at Citi has a good reason why: the performance of Dubai, represented by the MSCI UAE index, looks very much like the out-of-control price inflation represented by the Nasdaq during the dotcom bubble. Read more
Back in September we calculated that the average London house had earned more in the previous year than its average occupants.
The difference then was small, a capital gain of £38,729 in the year to July, against a post-tax income of £38,688 in 2011, the last year for which the ONS has statistics.
Fast forward the best part of a year and your London house has had a raise, is flicking through the Audi catalog and considering exotic holidays. Read more
So you like the idea of a buy-to-let property empire but don’t have the cash, time, or expertise?
Fear not, because with the liberal application of crowdsauce, you too could become a landlord with as little as £500. And you’ll get a 5 per cent annual return from day one…
Come with us to the Northeast, where the bleeding edge of crowdfunding is to be found: Read more
There have been protests. There has been legal risk. There has been disruption. And there have even been questions about whether breaking all the rules is really all that innovative.
But Uber, the taxi app formed by Garrett Camp and Travis Kalanick in 2009, is heading for a funding round anyway, and it’s doing so at a proposed market value of $10bn. (Note to FT Alphaville selves — we must really get round to launching that Shut App!* idea we’ve had.)
Is that sort of valuation justified? Who knows. Read more
Apple, that ultra-secretive, profit maximising, cash hoarding, phone making, tax
dodging efficient maker of phones and stuff is supposed to be the sensible one. It sells actual things for a profit and is not known for pouring money down speculative drains.
But, as the FT’s Matt Garrahan and Tim Bradshaw revealed, it wants Beats Electronics for $3.2bn. Beats makes headphones, like Apple does, and, er, even longtime Apple analyst Gene Munster is scratching his head.
We are struggling to see the rationale behind this move. Beats would of course bring a world class brand in music to Apple, but Apple already has a world class brand and has never acquired a brand for a brand’s sake (i.e., there are no non-Apple sub-brands under the company umbrella). Separately, we are not aware of any intellectual property within Beats that would drive the acquisition justification beyond the brand.