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Japan Joins The Negative Interest Rate Club
Well just when you think Central Banks can’t get any more stupid Japan’s central Bank announced it is joining the likes of Switzerland, Sweden and Denmark with negative short run interest rates (link1) (link2). The effect was a big surprise as is reflected in the collapse of the 10 year bond yield from 0.21% to 0.09% in one day, that is, a 12 basis point fall. What central banks don’t seem to understand is that low interest rates are distorting the global capital markets, leading to too much debt creation, pushing up artificially asset and property prices and keeping open zombie companies and destroying incentives to save. T... -
Finance 0
Tri Pointe Group Puts Its Balance Sheet On The Line
In its Q3 2015 earnings report, TRI Pointe Group, Inc. (TPH) reported $97.0M in cash and cash equivalents. Thanks to real estate inventories, total assets come to $3.1B. TPH’s cash and cash equivalents dropped 43% from Q2 to Q3 Source: Q3 2015 earnings report On January 27, 2016, TPH decided to put that balance sheet on the line by authorizing a buyback of $100M that is larger than current cash holdings: “Under the program, the company may repurchase common stock with an aggregate value of up to $100 million through January 25, 2017. The share repurchase program does not obligate the company to repurchase any particular amount of comm... -
Finance 0
WTI Crude Slides Despite Significant Rig Count Decline
The U.S. total rig count dropped 18 to 619 in the last week with a drop of 12 in oil rigs (to 498) as the ongoing lagged drop of crude drives rig counts every lower. Perhaps oddly, given the rig count decline, WTI is tumbling as a 12 rig drop is clearly not enough… *U.S. TOTAL RIG COUNT DOWN 18 TO 619 , BAKER HUGHES SAYS *U.S. OIL RIG COUNT DOWN 12 TO 498, BAKER HUGHES SAYS The trend continues… And it appears the market wanted more rig count declines… Charts: Bloomberg... -
Finance 0
Silver May Be Ready To Resume Its Bullish Trend
Silver prices had given up near to 50% of their gains from the rally which started on January 12 and the $13.72 level. While I anticipated a decline in yesterday’s outlook, the current drop is slightly deeper than expected. At this stage it’s hard to attribute the decline to any specific factor and with this in mind I am placing extra emphasis on the technical outlook. The overall trend is bullish above the January 22 low of $14, and as long as this level holds I anticipate that silver will reach the December 7 high of $14.58. Using gold prices to predict where silver should be trading, my simple fair-value model suggests that silver s... -
Finance 0
Weekend Reading: Mental Floss
Over the last couple of week’s most of the weekend reading list has been attributed to the market’s stumble since the beginning of this year. Importantly, as we rapidly head into January’s close, there seems to be little to reverse the negative tide sweeping through the market. As I wrote earlier this week, this isn’t a good thing. “It would seem logical that a weak performance in January would lead to some recovery in February. Markets are oversold, sentiment is bearish and February is still within the seasonally strong 6-months of the year. Makes sense. Unfortunately, the historical data suggests that this will likely not be the... -
Finance 0
Eurekahedge: Performance After The ECB Underwhelms
The latest Eurekahedge report says that regional mandates for the month of December 2015 produced quite mixed results. Asia ex-Japan managers yielded the best results, gains of 1.45%. Their Japanese counterparts produced 0.27%. In annual terms, Asia ex-Japan funds delivered 8.23% in 2015. Such funds saw an annual AUM growth of $10.7 billion. In the table below, all figures are stated in U.S. billions, and rounded off to one decimal place. Looking at performance by strategy, CTA/managed futures had a really lousy month, at the bottom of the heap in performance, losing more than $5 billion of their investors’ money due largely to the European... -
Finance 0
The Post-BoJ Landscape
After the Bank of Japan action… I have let things settle out and even though I am short an investment bank, a bank index and a Semi equipment company, I am positive on the day. That is not to minimize the fact that today would be much nicer had I held SPY and GOOGL, but it is what it is. Not bad. Going right into Kuroda’s wheel house I purchased a stock that just yesterday I noted as being a formerly over hyped (though high quality) Machine Tool company pitched by financial suits as a Robotics company… A Prime Machine Tool Builder w/ a Hyped Twist Falls Flat in Q4 Fanuc got hammered again today and considering BoJ’s stance on the ... -
Finance 0
Norway’s Kroner Conundrum Deepens As Central Bank Buys Record Amount Of Currency
“The paradox of Norway’s oil exports is that lower foreign earnings translate into more, not less, demand for NOK.” That’s from Deutsche Bank and it sums up the conundrum facing Norwegian officials as they attempt to cope with the sharp decline in crude prices that threatens to cripple the country’s economy. Norway’s prime minister, finance minister and central bank governor held an extraordinary meeting last week to discuss the possibility of implementing emergency measures to shore up the economy in addition to record fiscal stimulus. It’s “not a crisis,” they concluded, an assessment that’s sharply at odds with comment... -
Finance 0
Regulation A+ Funding Update: Elio Motors
On Monday, one of the first Regulation A+ deals will successfully close. Elio Motors says it’s raised about $16 million so far on StartEngine.com. Thousands, probably tens of thousands, of investors have participated. Elio had hoped to raise up to $25 million in the offering, which ends February 1. But it’s not bad for one of the first deals ever. For those of you who missed my initial coverage of Elio back in October, here’s a summary. Elio is building a three-wheeled vehicle designed to get 84 mpg and cost $6,800. Ambitious, I know. Here’s a picture: Note for new readers: Regulation A+ fundraises have been referred to as an “IPO-... -
Finance 0
ROIC: The Paradigm For Linking Corporate Performance To Valuation
The purpose of the capital markets is to allocate capital to its most efficient use. Research on economies around the world shows that functioning capital markets are positively correlated with economic growth. The more liquid and efficient the stock market is, the more the entire economy thrives. Since capital markets exist to maximize allocative efficiency, we would expect the agents of capital—corporate executives—to focus on that goal. Yet, we know they do not. There are simply too many disincentives, such as huge bonuses tied to performance metrics that do not resemble shareholder value creation, including GAAP earnings Reported ca...
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