Fund My Mutual Fund

Market Montage Officially Launches Tomorrow

2011-12-13T15:40:00.012-05:00

Dear readers,

After a long period of introspection (nearly 3 minutes) I've decided to follow the ideology of the boxing world and come out of retirement.

I shall continue my career in prose at MarketMontage.com beginning tomorrow. Hope to see some of you there. :)

Goodbye and Goodnight Fund My Mutual Fund

2011-12-13T15:30:00.005-05:00

With post #8286 I am officially retiring (see the post at 3:40PM before you panic).

This blog started Aug 6, 2007 with a few test posts and Aug 7 the real thing began to an audience of.... errr... 3 or 4. I might be over estimating. :) Of course at the time, I had no idea we were about to embark on one of the most mind melting and audacious economic (and market) periods in history. In retrospect it was a good time to start a market blog. Thankfully I made some pretty good "Roubini" like calls back in the early days (before he became a well known name) [See Economic Forecasts/Track Record] so that, along with the concept of the site, seemed to appear to draw in a decent sized crowd for a "no name" dude.

Some 3.6 million+ page views later...here we are.

Some of you veteran readers of FMMF may remember the super fashionable green + purple template this site had the first year and a half or so. I believe that caused a few regulars to develop eye problems, so thankfully a good reader helped bring us to this more sensible color arrangement.

Obviously, this blog was created for a reason - and quite an outrageous one when you think about it. But as our former president famously said....

I don't think anyone who does not run a blog understands the work that goes into it - this site often has seen 6-8 posts a weekday, 52 weeks a year. And for every 1 post on the site, often 5-10 articles are read - so as to pass along interesting information via internet osmosis. Thankfully there was always an ultimate goal and light at the end of the tunnel to be reached, which was a motivating force some of these long days.

A big thanks out to all the readers, and those who posted comments all these years. I found out very early that if you were lazy in your work there would be very smart people out in the interwebs who would call you out on it, so in many ways this website helped me expand my knowledge base and trading tactics. But the comments section was definitely among the most fun I had here, since it allowed me to "meet" many people - from all over the world.

So with that, I bid you farewell after nearly 4.5 years.... as I move on to the next chapter in life.

EDIT: perhaps some of the sarcasm was not apparent - see the post at 3:40 PM for the next venture. :)

Nothing Much from the Fed Other than a Few Words Changed

2011-12-13T14:37:00.006-05:00

Carry on...

Most importantly a few hawks exit stage right in 2012, and more Yellen and Bernanke types will enter. Also with the 'inflation is easing' commentary they take care of any issues with those who claim there should be a break from even easier money due to potential inflation pressures.

The Federal Reserve on Tuesday left monetary policy on hold but said financial market turbulence posed threats to economic growth, leaving the door open to further easing next year. The Fed characterized the economy as expanding moderately despite an apparent slowing in global growth, though it added that unemployment remains elevated and housing activity depressed. "Strains in global financial markets continue to pose significant downside risks to the economic outlook," the central bank said in its post meeting statement.
Offering no new guidance on its evolving communications policy, the Fed repeated that it expects inflation to settle at levels at or below those consistent with its price stability mandate. (key word "below")

Markets have sold off a tad thus far.

We're now at 3 years of "the zero bound" in rates - many more years ahead in my opinion.

Can you believe a year and a half ago the Fed was actually considering shrinking the balance sheet?

~~Bed time reading~~ full report here.

[Videos] Howard Davidowitz Grumpy as Usual

2011-12-13T13:55:00.000-05:00

As we await the first Fed meeting in a while that no major policy easing or language change should occur, we bring one of FMMF's favorite grumpy eccentric uncles - Howard Davidowitz. At this point, some of what he is saying is purely for entertainment purposes although there is some underlying reality in much of it. For those who don't know, Davidowitz plys his trade as a retail analyst so maybe you will take more from the first video than the second, although both provide ear candy. ;) Warning - he is a tad partisan. :)

Howard Davidowitz: Consumers In TERRIBLE Shape and “It’s Going to Get Worse”

6 minute video - email readers will need to come to site to view

Weak data on November retail sales and an earnings miss from Best Buy on Tuesday poured ice-cold water on the whole "strong holiday shopping season" meme.

All the upbeat commentary about Black Friday, Cyber Monday and the like was always specious, according to Howard Davidowitz, CEO of Davidowitz and Associates. Like Barry Ritholtz, Davidowitz says Black Friday data, particularly, can't be trusted and is annually hyped by the retail industry to encourage consumers to get out and spend.

In his own inimitable style, Davidowitz explains why the consumer is in "terrible shape" and why "it's going to get worse," citing the following:

Crushing Debt Load: Consumer debt is 117% of disposable income.
Help Not Wanted: Even November's "strong" report included more people dropping out of the labor pool (315,000) vs. those who found work (278,000), according to the Labor Department's household survey.
Reverse Wealth Effect: Household net worth fell 4% in the third quarter, a drop of $2.4 trillion, according to the Fed. That's the biggest drop since 2008 and would be hard to overcome even if wages were rising sharply, which they're most certainly not.
Housing Bust Rolls On: Residential housing remains depressed, which is putting tremendous pressure on Americans' net worth and sense of financial confidence. Davidowitz, among others, sees more downside for housing prices and another increase in foreclosures in 2012.

Longtime viewers will note "it's going to get worse" is a familiar refrain for Davidowitz, going back to at least 2009. In the accompanying video, I asked what it would take for him to feel like things are getting better. As he's wont to do with most subjects, Davidowitz answered that question with a stinging critique of President Obama.

Barring a Supreme Court ruling that Obamacare is unconstitutional and/or victory in November by any "sensible" Republican -- Davidowitz thinks both Mitt Romney and Newt Gingrich qualify -- there isn't much about 2012 he's looking forward to, as you'll see in the accompanying video.

---------------------------

Ok this one below might have some more of the 'hyperbole' angle to it ;)

HOWARD DAVIDOWITZ: Ben Bernanke Will Go Down In History As The Fed Chairman Who Destroyed The Country

4 minute video - email readers will need to come to site to view

Frequent DailyTicker guest Howard Davidowitz of Davidowitz & Associates has no doubt about what Ben Bernanke's legacy will be. Ben Bernanke, says Davidowitz, will forever be known as the Fed Chairman who destroyed the dollar, bailed out the banks, and perpetuated a monetary Ponzi scheme that will ultimately end in collapse.

But wait. Didn't Ben Bernanke save the country from a second Great Depression? Absolutely not, says Davidowitz.

Far from saving the country, Bernanke and his fellow White House confederates President Obama and Treasury Secretary Tim Geithner did everything they could to avoid fixing the problem. They bailed out the banks, and as a result, the banks have not been fixed. They pumped money into the economy and postponed the inevitable day of reckoning. They heaped additional regulation atop an already crushing regulatory burden. And in so doing, they helped ruin the country.

THAT will be Bernanke's legacy, insists Davidowitz. Not his creative use of a multiplicity of techniques to avoid bank failures and keep liquidity flowing through the American and European economies. Bernanke's mission in life, says Davidowitz, is to destroy the dollar. Eventually he will be successful. And this contribution to American history will never be forgotten.

Bad Economy? Yeah Right - Not in the Farming Heartland

2011-12-13T12:57:00.001-05:00

While I believe in the long term thesis in farming (indeed I said in 2007-2008 farmland would probably be the best long term i.e. decades long, investment) year over year gains of 40% in Nebraska and 31% in Iowa just are not sustainable. Easy money needs to find a home in something, and this time around farmland is one of them - long time readers will now the horde of investment money coming into this space via pension funds and the like. [Jun 14, 2008: Bloomberg: Farmland Reaps Bonanza for TIAA] [Jun 5, 2008: NYTimes: Food is Gold, So Billions Invested in Farming] Good times for the farmer set - until one day it is not.

I eagerly await for signs of Ferrari dealerships in the Omaha, NE or Cedar Rapids, IA as a mark of a "top" in the farmland boom. Party on Garth. AP reports:

An Illinois farmer made so much money this year he made loan payments on one tractor a year in advance and exchanged some older ones for newer models. An Iowa farmer upgraded his combine and also paid off debt, while an elderly Oregon farmer poured into retirement funds a bundle of his $2 million take from a well-timed sale of much of his turf and equipment.
While much of America worries about the possibility of a double-dip recession, such stories of prosperity are cropping up as U.S. farmers enjoy their best run in decades, thanks to high prices for many crops, livestock and farmland and strong global demand for corn used in making ethanol.
Farm profits are expected to spike by 28 percent this year to $100.9 billion, and the amount of cash farms have available to pay bills also is expected to top $100 billion — the first time both measures have done so, according to the U.S. Department of Agriculture. All the while, crop sales are expected to pass the $200 billion mark for the first time in U.S. history, and double-digit increases are expected in livestock sales. "We're just experiencing the best of times," said Bruce Johnson, an agricultural economist at the University of Nebraska in Lincoln. "It's a story to tell."
........most of the talk about U.S. farming remains bullish, with analysts widely trumpeting "the new normal" in U.S. agriculture: Demand in China, India and other developing countries for U.S. agricultural exports — and hunger for corn for ethanol — has been keeping prices high and farming profitable.

[Nov 16, 2011: Farmland Boom (and Brewing Bubble) Continues as Midwest Land Jump 25%, Led by Nebraska's 40%]

[May 16, 2011: U.S. Plains States Farmland Boom Continues, With 20% Year over Year Gains]
[Mar 11, 2011: [Video] Former FDIC Head Bill Isaac Talks about the Dud that is Dodd-Frank, and the Potential for a Farmland Bubble]
[Mar 7, 2011: NYT - In Prices of Farmland, Echoes of Another Boom]
[Feb 16, 2011: WSJ - Midwest Farmland Surges Double Digits in Q4 2010 Alone]
[Nov 15, 2010: Farm Economy Headed for Record]
[Dec 31, 2009: Bloomberg - Ethopian Farmers Lure Investor Funds as Workers Live in Poverty]
[Jun 2, 2009: The Economist - Outsourcing's 3rd Wave - Buying Farmland Abroad]

Marketwatch: Why Did 24 Hour Trading Never Take Off?

2011-12-13T10:25:00.050-05:00

I remember when the first discussions of 24 hour trading gained force in the late 90s thinking to myself "oh no.... won't they ever let us sleep? This is ridiculous."* (then again the stock market was "fun" and "easy" then because we all could become millionaires trading NASDAQ stocks - why not have fun 24 hours a day!)

*that said, a lot of us now wake up all sorts of crazy hours in the middle of the night to check to see what ~~greek~~ ~~irish~~ ~~portuguese~~ ~~spanish~~ italian bond debt is doing!

Frankly with the way markets now work, I think we could have a 90 minute trading session because most days are dominated by gap ups or downs, and the rest of the session not much happens. The only people benefiting are those who trade futures all night. Marketwatch looks at why this (dumb) idea never took off.

Round-the-clock stock trading, once considered a natural and inevitable next step in an increasingly technology-driven, global market, is now widely seen by U.S. traders and exchanges as undesirable and unnecessary. The reasons range from the practical — pallid investor demand that’s kept liquidity low — to the parochial. Stocks remain a local market for investors.
“The difference between stocks and commodities is that there are people all over the world wanting to buy wheat. [But] not everyone around the world wants to buy Chuck E. Cheese stock. At some level, it’s that simple,” said Ian Domowitz, managing director at Investment Technology Group, an independent agency research broker.
And even for well-known issues, like Apple Inc.’s stock, regulatory barriers make it tough for non-U.S. investors to buy stocks while America is asleep. “Actually, turning on the trading engine is very easy to do, but then there is a lot of back-office arrangements that have to be made,” said Peter Clifford, deputy secretary general at the World Federation of Exchanges in Paris.
The idea of a 24-hour market started as an exciting realm of possibility in the 1990s, when stock exchanges enabled trading outside of the 9:30 a.m.-4:00 p.m. Eastern session, as part of efforts to fend off competition from other trading venues, such as electronic communication networks. But it never took off, even as multiple boom-and-bust cycles came and went in the following years.
Few dispute the advantages of continuous trading, like the ability to act immediately on news — such as Microsoft Corp.’s earnings, or China’s inflation data. For non-professional investors, the convenience of selling stock at 11 p.m., after finishing daily chores or putting the kids to bed, could be useful. The required physical infrastructure is also in place, thanks to the ability of electronic networks to connect buyers with sellers.
But if investors still can’t trade stocks as easily as they can bank at an ATM, it is largely because trading volumes remain thin outside regular hours, amplifying risks: Thinly traded markets are more volatile, and transactions there are costlier. “It all revolves around liquidity — that’s the golden goose which provides efficient markets for investors,” said Bryan Harkins, chief operating officer at Direct Edge. “Ultimately, exchanges are typically doing what brokers want … There is just not enough liquidity in the middle of the night and investors are not really demanding that. One way to look at it is, ‘Convenience is great, but I’d rather have a better price,’” he said.
Trading in foreign exchange and Treasurys takes place 24-hours a day for the most part of a week. Commodity and stock index futures also can be traded virtually around the clock every trading day. But trading hours in the world of individual stocks are much shorter.
Outside of the regular hours, NYSE Arca, the full-electronic exchange owned by NYSE Euronext, is currently open for business from 4 a.m. to 9:30 a.m., and then from 4 p.m. to 8 p.m., Eastern. Meanwhile, Nasdaq Stock Market, owned by Nasdaq OMX Group Inc., is open from 7 a.m. to 9:30 a.m. in pre-open and between 4 p.m. and 8 p.m. in the after-hours. Direct Edge currently opens at 8 a.m. in the pre-market and operates until 8 p.m. in the after-hours. Other exchanges and venues, such as Electronic Communication Networks, also offer trading beyond the regular hours for similar durations.
Still, stock trading in the U.S. continues to be concentrated during the regular session. Direct Edge’s Harkins said more than 95% of its volumes are transacted between 9:30 a.m. and 4 p.m. although the exchange is open on either side of that window. And while other trading venues have attempted to widen the trading hours, he added, “I would say their success is modest at best.”
Earlier this year, a Nasdaq spokesman told MarketWatch that about 2% of the volume on Nasdaq and NYSE was generated during off-hours.
The risks linked with low volumes have prompted U.S. regulators to place some restrictions during extended-hours trading. One example is that investors in the after-hours marketplace must submit limit orders — which can only execute at the investor stipulated order price, or better — and can’t present market orders, which execute at whatever the best price is at the time.
It’s not just the lack of demand that makes after-hours trading thin. The supply is also affected as several market-makers — firms that buy and sell stock for their own account or on behalf of clients — aren’t active during the extended hours.
Liquidity during off-hours could improve, at least in theory, if investors outside the U.S. were able to trade stocks here during their day. But that has its own difficulties. For cross-border stock trading to become possible, issues outside a stock exchange’s control — such as where the shares will be delivered, or who the custodian will be — first need to be addressed, said Clifford, the World Federation of Exchanges official.
But even if policy makers addressed those technicalities, he added, investors might still want to trade stocks in the most liquid market during their day — most likely their home market. In other words, Hong Kong investors may not want to trade New York-listed stocks during the Asian day, any more than Americans would like to trade Hong Kong equities during the U.S. day.

Going to my point of why this idea was "super cool" in the late 90s, but not so much after the twin bear markets of the 00s:

“Everybody needs to take some rest,” said Peter Cardillo, chief market economist at Rockwell Global Capital, a boutique investment banking firm. “If you had a super bull market all the time, I think people would enjoy it, but if you have a super bear market, they wouldn’t.”

Still Holding On

2011-12-13T09:20:00.000-05:00

The 'Battle of the 200 Day's' looked to potentially be resolved mid afternoon yesterday but a stick save late in the session pushed the S&P 500 back over the 200 day exponential moving average. There was essentially a bounce off the 50 day moving average ...

Over at the DJIA things are actually looking more bullish and one could create a case for a 'bullish flag'. You can see how the 200 day simple moving average has been support multiple times, and a perfect bottom yesterday.

The NASDAQ on the other hand has a similar situation to the S&P 500 - and perhaps a tad weaker.

This morning's modest gap up should provide some buffer for the S&P 500 and NASDAQ as we await the wisdom from our council of elders at the Fed.

Some Caution Now Technically on the Gold (GLD) Trade

2011-12-12T12:33:00.000-05:00

Please note I am using the Gold ETF (GLD) rather than the commodity as stockcharts.com has a 1 day delay on the actual underlying.

Gold is acting punk today - a lot of people are trying to find reasons why. I thought perhaps this would be due to Monti remarking Thursday morning that a bazooka of European QE is not coming anytime soon, but if so you would have seen more weakness the previous 2 sessions. Could be some liquidations, could be a lot of factors - I clearly don't know. But the one nice thing about technicals are the fundamentals really don't matter much to assessing what is happening. And right now we're flashing some caution flags.

It's still not a red zone situation as we still see the metal over the 200 day moving average, plus the late Sept and Oct lows, but it would definitely be something to have a yellow flashing warning light focused on. There was a huge 'triangle' formed by a series of lower highs and higher lows. We've broken out of that triangle to the downside. A much shorter time frame example of this was seen in the S&P 500 just a few weeks back and we promptly saw a 8%ish loss in that index.

I've been a long time proponent of this trade from a 'debasement' perspective (rather than inflation), but I would certainly at this point be looking to be watching much closer as there is some potential for a breakdown if things continue down this path in the next month or so. One to keep an eye on.

(and if you don't believe in the technical mumbo jumbo I'm spitting out, I can respect that - but also respect the fact a lot of the 'fast money' types do follow this stuff, and it tends to self reinforce)

No position

USA Today: As Bernanke Punishes American Savers, the Search for Yield Overseas Shows Pitfalls

2011-12-12T11:15:00.000-05:00

This is an interesting piece by John Waggoner of USA Today, especially on a personal level, as I've been looking at a host of yield producing products to 'barbell' against an equity exposure. With the war on savers that Bernanke has waged - and will continue to wage for many years ahead [Mar 31, 2010: Bernanke Content to Sacrifice American Savers to Recapitalize Banks and Benefit Debtors] the choices all come fraught with risk, which many people have learned the hard way of late. While it's one thing to have avoided European debt for all the obvious reasons, even what was considered 'safe' like Australian debt has been punishing for American investors.

....taking on extra risk for a higher yield really can be a mistake. Today's case in point: international bond funds.
If you depend on interest income for your retirement, you have an enormous problem. The average money fund yields 0.02%, which wouldn't buy dust at a thrift store. To get more interest, you either have to lock up your money or take the risk of losing part of your principal. But even locking up your cash for longer isn't much help. A 10-year Treasury note now yields about 2% — less than the current inflation rate of 3.5%.
Because rates are so low, income investors have had to take the risk of losing principal. Rates are higher in some places overseas, so mutual funds that invest in international bonds seemed to be a reasonable bet.
The funds, currently yielding about 3%, have been red-hot sellers the 12 months ended Oct. 31, according to Lipper:

Global income funds, which invest in U.S. and international bonds, pulled in an estimated net $23.9 billion.
Emerging-markets debt funds attracted an estimated $15.2 billion.
International income funds saw $4 billion in new money come in the door.

Unfortunately, one area that offered particularly tempting yields was Europe. As the European crisis unfolded, traders dumped their bonds like they were a reality show groom. Prices of European bonds got clobbered, as did many of the funds that invest in them.
The past three months through Friday, international income funds fell 3.8%. For people used to watching the stock market, that's not a tremendous loss. For conservative income investors, however, any loss is bad news. And some funds fared far worse than average:

WisdomTree Australian and New Zealand Debt fund, down 16.1% the past three months, including reinvested interest.
Forward Emerging Markets debt, down 8.7%.
Templeton Global Bond, down 5.9%.

Normally, rising interest rates are the main factor in bond returns: When rates rise, bond prices fall, and vice versa. But European bonds have been hit by worries that they will default — known as credit risk.
Another problem is currency risk. Mutual fund shares are priced in dollars. When foreign currencies fall in value, U.S. investors lose money.

Risk Off for the Day it Appears

2011-12-12T09:49:00.001-05:00

I did not really "get" the happiness Friday, as not much seemed to be resolved other than some language for more unity and to "hold people accountable" for excessive debt in the Eurozone. However, the current treaties are supposed to "hold people accountable" for excessive debt, and hasn't done a darn thing. I guess expectations were just so low, anything would have made the market happy for the day.

Well here we are Monday and Italian 10 year debt yields have again exploded upward, and we have another warning - this time from Intel (INTC). They are blaming the Thai floods (i.e. supply chain) rather than end demand, so some are viewing it differently than the Dupont, Altera, and Texas Instruments warnings. But for fans of 'decoupling' (the current hot meme on CNBC - recycled from late 2007 and early 08) we're starting to see more chinks in that armor.

The S&P 500 remains in the battle of the 200 days.... until we break out one way or the other the Pavlov dogs will buy the bottom of the range and flip towards the top. Rinsing, washing, and repeating along the way. This is the 8th session we've been wholly contained within the 200 day EMA and SMA.

On the economic front, we have retail sales tomorrow, some regional fed type of surveys later in the week, and inflation gauges (which no one cares about since there is no inflation reading that will stop the Fed from staying in ultra ease mode). Also a Fed meeting tomorrow with no expectation and a ton of bond auctions Thursday. But Europe dominates everything...

Zynga (ZNGA) Heads the List on Busiest IPO Week Since Nov 07

2011-12-12T08:20:00.061-05:00

Looks like on sheer number of new issues, this is going to be the biggest IPO week since the pre crisis era. Hope it doesn't take away the shine away from (ahem) the most important debut of the week....

Zynga (ZNGA) is the star of the week [Sep 9, 2011: Zynga - Virtual Goods, Real Profits], but definitely should have came to market last spring when the hype was hottest (along with Groupon). That said, I expect it to fare better once public than the Chicago based coupon magnet. We also get a new way to play the 'upper income consumer' via Michael Kors. Jive Software is also getting some buzz simply because it's in the super hyped social networking space.

Eleven firms, including the social-gaming start-up Zynga, are expected to launch as publicly traded companies next week, in potentially the busiest IPO week in four years. Zynga leads the pack as the latest in a wave of social-media initial public offerings. Also drawing attention is Jive Software, a social business-software-platform company, and Michael Kors Holdings, the luxury fashion company.
If all firms push ahead with their IPOs, it would make next week the busiest since November 2007, when 13 companies made their public trading debuts in a single week, according to Scott Sweet, senior managing partner at IPO Boutique. Sweet noted that next Thursday will be particularly crowded, with six deals expected to launch.
Zynga’s position among those on deck is a key reason. The San Francisco–based tech company, which is offering 100 million shares at a price range of $8.50 to $10, is set to raise as much as $1 billion. That would make Zynga’s offering the biggest Internet IPO since Google Inc.’s launch in 2004, according to Renaissance Capital.
In a sign of the growing prominence of social-media IPOs, Jive Software also is expected to enjoy a strong debut. The Palo Alto, Calif.–based company makes software to help businesses set up their own social networks. It had total revenue of $54.8 million for the nine-month period ended Sept. 30 — up 73% from the same period last year. Net losses totaled $38.1 million for the recent nine-month period. Jive is offering 11.7 million shares at a price range of $8 to $10. The stock is expected to begin trading Tuesday.
Another relatively high-profile IPO for next week is that of Michael Kors Holdings, the fashion design company, which is offering 41.7 million shares at a range of $17 to $19.
Other companies expected to go public are five oil or energy companies: Bonanza Creek Energy, Sanchez Energy Corp., Mid-Con Energy Partners, Inergy Midstream and Laredo Petroleum. Also going public are Luxfer Holdings, a materials technology company; FusionStorm Global, which offers information technology hardware, software and services to businesses; and GSE Holding, a maker of containment products in mining, waste management and environmental protection.

--------------------------

More on Zynga here as we have updated financial information; revenue growth impressive but profits actually shrinking as costs skyrocket. I'd expect a nice pop upon IPO however:

For its IPO, Zynga said it plans to sell 100 million shares at a price range between $8.50 and $10 per share. Underwriters have been granted an additional 15 million shares to cover over-allotments. The company said in its updated filing with the Securities and Exchange Commission on Friday morning that it expects to have about 699.4 million total shares outstanding following the debut, which includes Class B and C shares that won’t be offered to the public.
That would give the company a total market value of about $7 billion — if the offering was priced at the high end of its expected range. Previous valuation targets leaked to media outlets had the number around $10 billion.
Scott Sweet of IPO Boutique said Zynga’s anticipated valuation is “significantly lower” than previous estimates. He pointed to the recent debuts of Groupon and Angie’s List— both of which are trading at or below their IPO prices just weeks following their debut. “Certainly the weakness post-IPO of Groupon and Angie’s List has cast a pall on the sector,” Sweet said in an e-mail. (why Angie's List is being compared to these other companies is beyond me....)
Even so, a market cap of $7 billion would put Zynga relatively on par with Electronic Arts, one of the largest video game publishers in the market. Sweet also noted that neither founder Mark Pincus nor key venture capital backer Kleiner Perkins are selling shares in the offering, which he said would likely be a “big selling feature” for the deal.
Zynga makes games played primarily over Facebook. Popular titles have included “CityVille,” “FarmVille” and “Mafia Wars.” The company said in its filing on Friday that it now has about 227 million average monthly users, which play the games for free and purchase items through micro-transactions within the games that makes up the bulk of the company’s revenue.
For the nine months ended Sept. 30, Zynga claimed total revenue of $828.9 million — more than double the $401.7 million in revenue from the same period last year. Net income for the recent period was $30.7 million, down from $47.6 million in the comparable period thanks to a sharp rise in marketing and R&D expenses.
Zynga plans to trade on the Nasdaq under the ticker symbol “ZNGA.” It plans to use the proceeds from the offering for general corporate purposes and possibly acquisitions. About $83.6 million will go towards satisfying tax withholding obligations related to the vesting of restricted stock units.

[Jun 29, 2011: Zynga Could File for IPO as Early as Today]
[May 25, 2011: Sources - Zynga Ready to File for IPO]

No position

Move Day Next Week

2011-12-09T16:40:00.006-05:00

About to put this horse out of its misery....

;)

See video below for shout out to some of our more 'mature' audience members who were kind enough to notify me about a wonderful show which signified an era when men were proud of the hair on their chest, and drank whiskey just for kicks.

Update on the Battle of the 200 Days

2011-12-09T11:34:00.000-05:00

Still in between the two of 'em. The Tom Demark Dec 21st top (and 2 week rally) still has a chance as we've held the 200 day exponential late yesterday....

One assumes a horde of silicon and carbon based buy stop orders are waiting somewhere up there in the 1268-1270 range. Demark says S&P 1330+ by the 21st, if he nails this, it would be quiet fun to watch. Even though his system still sounds "Greek" to me.

[Video] ECRI Still Sticking with Recession Call Despite Wall Street Mocking It

2011-12-09T10:14:00.002-05:00

Last time we reviewed the ECRI call for a recession we noted Lakshman Achuthan saying it will be obvious in retrospect and usually their calls are 6-ish months early - i.e. the data has to be revised down the road to reflect reality. Wall Street has been mocking this call of late as the "meh" data continues to come in domestically, rather than data points that signal recession. The opening question in this Bloomberg interview yesterday pretty much sums up the attitude of the "what have you done for me lately, instant gratification" crowd. It is sort of funny.

Outside of the economic data, bulls point to the continued strength in corporate earnings and the lack of warnings from corporations who in theory have better sight lines on what is happening than anyone else. Well guess what has recently been changing? I neglected to mention both Texas Instruments (TXN), and Altera (ALTR) warned last night - so both chemicals and semis have seen a change in condition very recently. Both of these groups are 'deep cyclicals'. Somewhere this morning the folks at ECRI need to be smiling.

8 minute video - email readers will need to come to site to view

DuPont (DD) Warns this Morning as "Decoupling" Theory of 2007-2008 Shall Prove Silly Once MOre

2011-12-09T08:49:00.001-05:00

Those of you who have been around a while remember all the 'decoupling' talk of 2007-early 2008. That is (was), weakness in one part of the globe would not affect another, and please feel free to buy equities. While decoupling proved to be a complete failure over time, leave it to Wall Street to have a short memory as old ideas are recycled and sold as fashionable once more. That decoupling talk has begun to resurface as economic data in the U.S. - while "meh" in a general sense - has outperformed that of Europe. (Of course one area is running 10% deficits to create such data points)

This morning, Dupont (DD) is out with lowered guidance which is a hit to 'decoupling'. Much like copper, chemicals are in every part of the global economy, so when a Dow or Dupont start offering warnings it is smart to listen. (As an aside, despite the giddiness in the markets since early October, neither the bond markets or things such as copper are feeling very happy - see this WSJ story yesterday) I was especially surprised by the warning on consumer electronics, because if you listen to the media there is insatiable demand for the newest phone, tablet, laptop, video game platform, etc.

Via Reuters:

Chemical maker DuPont cut its full-year profit outlook, citing slower growth in some of its business due to weakness in its end markets. For 2011, the company sees earnings in the range of $3.87-$3.95, down from earlier forecast of $3.97-$4.05.
"The earnings revision reflects destocking across polymers and certain industrial supply chains that has accelerated during the fourth quarter," Chief Executive Ellen Kullman said in a statement. "Consumer electronics demand has further softened, and housing and construction markets remain weak," Kullman added.
"We are seeing slower growth in certain segments during the fourth quarter, driven by global economic uncertainty. This uncertainty is contributing to ongoing conservative cash management in some supply chains."

No position

There Was Just another Rumor Released Via a News Agency

2011-12-08T15:51:00.005-05:00

I'm not even going to justify the rumor of the day (today's source FT.com) - this has so jumped the shark. Let's just say it was denied quicker than the one yesterday -- after moving the market. It's actually disgusting these news agencies now will release just about anything a source gives them. Even if these sources are apparently sparrows sitting on a building ledge somewhere in Brussels.

This is truly reaching a pathetic proportion. Three of four days this week we've had one ....

Q3 Was Not a Good Quarter for American Wealth - Worst Since Dark Days of 2008

2011-12-08T15:24:00.004-05:00

Remember the reason for QE2... that whole "wealth effect" thing? Well the problem with temporary manipulation of asset prices is just that... it's temporary. Blow $600B through the hole, and while it creates temporary "happy happy time" (for a narrowing portion of our society) [Nov 10, 2010: Who Will Any Form of Intermediate Wealth Effect Really Help? Not the Masses], eventually market forces come back. As The Bernank would say ... it's transitory. And Q3 was another quarter of "giving back". That said with the one of the greatest months ever in October 2012.... barring a disaster in these last 3 weeks, Q4 should again take us to a happy place.... and if the ECB can do their thing in 2012.... we can all party like it's 1999 (NASDAQ).

Until we pay for it down the road.....

Via Bloomberg:

Household wealth in the U.S. fell from July through September for a second straight quarter as the European debt crisis depressed stocks and home values decreased. Net worth for households and non-profit groups decreased by $2.45 trillion to $57.4 trillion (-4%), the Federal Reserve said today in its flow of funds report from Washington.
Americans reduced debt in the third quarter, extending a string of declines dating back three years. (much of this is through mortgage default, but hey - beggers can't be choosers)
A 14 percent slump in the Standard & Poor’s 500 Index, the worst quarter since 2008, combined with another decrease in households’ real estate values in the third quarter.
The value of household real estate decreased by $98.3 billion in the third quarter after dropping by $37 billion in the previous three months. Owners’ equity as a share of total household real-estate holdings was little changed at 38.7 percent last quarter, today’s report showed.
The volume of outstanding home mortgages was $9.93 trillion at the end of the second quarter, the lowest since the end of 2006, according to separate Federal Reserve data. That means U.S. mortgage debt, a driver of consumer spending during the real estate boom, may be about to enter its fourth year of decline as foreclosures wipe out home loans and housing purchases fall.
The value of financial assets, including stocks and pension fund holdings, held by American households decreased by $2.78 trillion in the third quarter, according to the flow of funds data.
Household debt dropped at a 1.2 percent annual rate last quarter. Mortgage borrowing decreased at a 1.8 percent pace. Other forms of consumer credit, including auto and student loans, increased at a 1.2 percent pace.
Stock portfolios make up about 15% of Americans' wealth. That's less than housing but ahead of bank deposits. Most stock wealth is owned by the richest Americans, who also account for a disproportionate amount of consumer spending. Eighty percent of stocks belong to the richest 10% of Americans.

Also....

Today’s report also showed the balance sheets of businesses are faring better relative to households. Companies had $2.11 trillion in cash and other liquid assets at the end of the third quarter, up from $2.07 trillion in the prior three months.
Total non-financial debt last quarter rose at a 4.3 percent annual pace, led by a 14.1 percent increase by the federal government and a 3.5 percent gain among businesses. State and local government borrowing was little changed.

The Battle of the 200 Days?

2011-12-08T13:19:00.003-05:00

Interesting spot we are in - 200 day simple moving average to the top, 200 day exponential moving average to the bottom. Amazing how one-two sentences changed the whole complex of the day - the S&P 500 was trading in the 1273s pre market, above resistance, with yet another gap up open - before Draghi crushed the free and easy money crowd, and it's been downhill since.

[Click to enlarge]

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Over in the entertainment section of the day - Corzine says he is very sorry... but please don't ask him for clawbacks. The compensation to destroy a company in about 12 months time is very high, and very well earned. Hopefully the people who lost their jobs due to his "bets" (and they were bets) understand sorry is enough. Also he has named the company in his testimony "FM Global" more than once, so apparently he didn't realize he was working at MF Global. One wonders if he thought he was governor of "Jersey New" all these years as well.

Just remember, these people are paid extravagant amounts as CEOs because they are one in a kind talents, who know everything about a company. Except the parts that could get them in legal trouble - for those parts they have no knowledge, or recollection. It's amazing how knowledge and memory is so selective, right Mr. Fuld? Cayne? Thain? Mozilo?

I think we've seen this party before.

Ford (F) Halted, Reinstates Dividend

2011-12-08T12:07:00.002-05:00

Thought when Ford (F) was halted it might be news of CEO Mulally announcing retirement, which has been in the local papers as rumor. Instead Ford has reinstated their dividend after many lean years.

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Ford to pay a quarterly dividend of 5 cents per share
Business performance and balance sheet improvements allow Ford to resume regular payments
Dividend begins at level sustainable through economic cycles

The Board of Directors of Ford Motor Company (NYSE:F -News) today declared a quarterly dividend of 5 cents per share.

"We have made tremendous progress in reducing debt and generating consistent positive earnings and cash flow," said Bill Ford , executive chairman, Ford Motor Company. "The board believes it is important to share the benefits of our improved financial performance with our shareholders. We are pleased to reinstate a quarterly dividend, as it is an important sign of our progress in building a profitably growing company and our confidence in the future."

Lewis Booth , Ford executive vice president and chief financial officer, said the company's strong liquidity and balance sheet improvements provide the underlying financial strength to resume paying a quarterly dividend. "Building a strong balance sheet that supports our growth plans remains a core part of our One Ford strategy," said Booth. "We have demonstrated our capability to finance our plans and we are confident that we can begin to pay a dividend that will be sustainable through economic cycles."

The dividend is payable March 1, 2012 , to shareholders of record of Class B and common stock on Jan. 31, 2012 .

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Obviously it's not been a good road here for the stock despite improving auto sales in the U.S. - a lot of auto dealership stocks are making 52 week highs so the action in the Ford (F) and General Motors (GM) of late versus the dealership stocks is striking.

No position

[Video] Marc Faber Visits Bloomberg

2011-12-08T10:36:00.004-05:00

Draghi really put a fork into spirits this morning... wow, it's amazing to see how everyone is demanding printing.

The always entertaining Marc Faber visited Bloomberg yesterday to give his latest thoughts on a wide range of subjects. Marc was more behaved than usual . He is also surprisingly bearish on China...

7 minute video - email readers will need to come to site to view

On the market now:

“Right now, the market is in neutral territory. It was very oversold on October 4th when the S&P dropped to 1,074. Now around 1260, the upside in my opinion will be between 1,280 and 1,350 because there’s a lot of supply around that area. But if there is some good news coming out of Europe, and good news would simply mean postponing the problems for another few years with some kind of money printing operation, either by that ECB or IMF or EFSF, [that] lift stock prices higher.”

“[Postponing problems] is not good news, but it is better news than if the whole eurozone falls apart. It gives some time to maybe find better solutions. I doubt they will be found, but with money printing you can hide a lot of things and you can postpone problems as we have seen in the U.S.”

hat tip Ritholtz

Draghi Announced 4 Non Standard Measures at Presser, Speculators Given Pacifier and Now Sated - Updated: Now a Bit Less Sated

2011-12-08T08:43:00.006-05:00

It's all good again and for the upteempth time in the past week and a half we are ready to gap up. This time of course over that very annoying S&P 1265 which has provided resistance the past 3 sessions.

Some of these things at the Draghi press conference, were talked about the past few days such as easing collateral requirements, but per the usual the market is acting 'surprised'. Reserve ratio was dropped from 2 to 1%.... 36 month loans (rather than 24 month loans expected) etc.

Back on the home front initial jobless claims fell to 381K which is almost at a level where one can get bullish on that angle (370K or below). Lowest reading since February.

"Risk On!" (ETN: ONN)

Update 8:52 AM - Draghi just said he was surprised that his comments re: fiscal compact (see previous post) had the market assuming there would be more bond buying post fiscal compacts... the market is not happy with that.

Also the rate cut was not unanimous. Futures selling back down on those comments...

"Risk Off!" (ETN: OFF) (at least for the next 2 minutes)

yes every word changes the whole complexion of things.... remember it's the nonsense market, completely reliant on interventions.

ECB "Only" Cuts Rates Back to Record Lows by 0.25%

2011-12-08T07:59:00.005-05:00

The whining has already begun as the ECB "only" cut rates by 25 basis points, back to a record low of 1% versus "demands" of 50 basis points. The 'markets' are used to Bernanke who will only ask how high to jump when the 'markets' ask him to. Of course if the ECB was run by the Bernank there would have been a way found around the 'legalities' (see 2008) of unlimited bond buying long ago and we'd probably be 10,000 points higher ;). Draghi already has cut rates twice in his very short tenure at ECB head, and now we await the press conference at 8:30 AM EST. Please bring your pacifier in case any of the 'free market capitalists' are in the crowd.... the whining for extraordinary intervention is getting overbearing. I believe these folks will eventually get their way - they are just used to nearly immediate gratification by Uncle Ben. "Robust action" is coming in one form or another....

Last week, Mr Draghi hinted at "robust action" in a speech to the European Parliament, but highlighted the need for governments to take the lead, saying that "sequencing matters".

This has been widely interpreted as a demand for an agreement on government borrowing limits in Brussels on Friday as a precondition for the ECB rescuing Italy.

Analysts expect think this rescue may take the form of a loan from the central bank to the International Monetary Fund.

The IMF would then in turn provide the loans - with tough conditions attached - needed by Rome.

This action was not enough to get S&P futures (which have seemingly been up sharply the past week and a half almost every session) over that lauded 1265 level that every carbon and silicon based life form is waiting to "buy buy buy" Maybe Draghi while whisper "robust" multiple times in the 8:30 AM hour and that will do the trick

And... IMF Official Denies Rumor

2011-12-07T15:59:00.003-05:00

And in breaking news the stock market has not turned into a computerized headline driven casino....

Per Mr. Liesman of CNBC on twitter:

@steveliesman IMF official denies 600b aid rumor.

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Well that was short lived...

How pathetic... S&P dropped like a rock in the closing minute or two.

Need a Rumor to End the Day Right? Got One

2011-12-07T15:46:00.005-05:00

G-20 CONSIDERING IMF LENDING PROGRAM FOR EUROPE: NIKKEI; G-20 CONSIDERING $600B IMF LENDING PROGRAM FOR EUROPE: NIKKEI

(link here but it requires subscription)

S&P 500 spikes to... where else... 1265. I tweeted this morning when the market was actually down asking what time the rumor would be released - it's about an hour or two later versus normal.

Are We Making Too Much of the Drop in Labor Force Participation Rate? Is It Mostly Due to Boomers Hitting the Links? Evidence Says No

2011-12-07T14:27:00.004-05:00

A good analysis from Tim Duy's Fed Watch on the issues with the labor force participation rate, that many (hands raised) have cited as a significant reason the unemployment rate has been so "good" the past few years (i.e. not as bad as it could have been). With a more normal labor force participation rate, the unemployment rate would be ~2 to 3% higher. We'll skip all the other reasons the unemployment rate is under counting the unemployed - we went through that ad nauseum in 2008-2010. [Apr 2, 2008: The Underemployment Rate is Rising]

His analysis starts with a Bloomberg article which takes the easy way out and says its the boomers retiring that is creating the structural shift.

At play is a decline in the share of the working-age population, known as the participation rate, meaning that the economy needs to create fewer jobs to bring down unemployment. While some of the decrease has been caused by discouraged workers dropping out of the labor force, another driver is that the baby-boom generation is starting to move into retirement, according to economist Dean Maki.
“Demographic forces are the single biggest factor pushing the participation rate down,” said Maki, chief U.S. economist at Barclays Capital Inc. in New York and a former economist at the Federal Reserve. “This is a bit of a slow-moving drama but it’s likely to become more important in coming years.”

Is it Mr. Maki??

A deeper look beneath the surface says something perhaps more ominous - most of the degradation is happening in the 16-24 and 25-54 age ranges. Clearly some of this (in the former group) is young adults staying in college (longer), and perhaps more of the population going to college (I don't have the data) but it surely doesn't explain the cliff drop. My thought is older workers now are doing the work that once was left for the young - a "crowding out" if you will. [May 9, 2009: The Curse of the Class of 2009 - Lower Wages for Up to a Decade]

[click to enlarge]

As for the 25-54s - we've simply lost a lot of those jobs "away" to technological effeciences [Mar 28, 2011: Productivity - Wo(man) vs Machine] , outsourcing, and lack of bubbles (i.e. construction boom, realtors & mortgage processors needed at far lower levels). I recall a story I read (perhaps posted) in 07-08 time frame where 1 in 7 people in California had a real estate license... not quite so needed nowadays. This one is probably the most disconcerting simply because its the middle of the bell curve for working Americans - even a 1% drop can have dramatic effects.

As for those more mature folk? Indeed the 65+ crowd is working MORE, not LESS (more are in the job market) as the twin stock bubbles, housing bubble, and war on savers the past 3-4 years has wrecked retirement plans for many. [Dec 15, 2010: USA Today - American Workforce Graying as the Young Increasingly Locked Out]

Can't blame the drop in labor force participation rate on near retirees either. [Sep 1, 2008: AP - Laboring Longer is Growing Trend for Americans]

Good stuff !! Read the entire post here.

[Feb 7, 2011: BW - The Youth Unemployment Bomb] [Oct 4, 2010: WSJ - Americans Souring on Free Trade as Losing Their Jobs Overpowers Lower Prices]