by Zero Hedge - September 28th, 2016 12:08 pm
With rumors swirling that Twitter may be acquired at any moment, with such suitor names thrown out as Disney, Salesforce, and even Google, overnight Citigroup released a scathing report explaining why a Twitter acquisition would be a bad idea. As the bank’s Jason Bazinet, who probably is catering to clients who are short TWTR says, “at a superficial level, this sort of transaction seems to make sense. With its recent BAMTech investment, Disney is taking early steps to pivot its cable nets business to the web. And, of course, Twitter recently took steps to move into live video including on-line streams of NFL games. That’s interesting. But, there are four reasons we don’t like this potential transaction…”
Here are Citi’s 4 reasons why a Twitter deal makes no sense:
Reason #1: History Suggests Internet M&A Fraught with Challenges
In the last 15 years, we cannot think of a single web based property that was successfully acquired by a traditional media firm. This includes both AOL/Time Warner (in 2000) and MySpace/News Corp (in 2005). If history is any guide, Twitter entails significant risks for the buyer.
Reason #2: Twitter Trends are Troubling
Two key US metrics – including monthly average users (MAUs) and ad revenue per MAU – have deteriorated sharply in recent quarters. Moreover, Twitter has experienced an unusual level of management turnover in recent years. These metrics suggest successful integration may be challenging.
Reason #3: All Cash or All Stock Deal Apt to Hurt Disney’s Stock
We ran the Twitter merger math two ways: 100% cash and 100% equity. The cash offer would lower Disney’s stock by $5 per share. The equity offer would lower Disney’s stock by $9 per share.
Reason #4: Unclear How Disney’s Content Helps Twitter
We believe both Yahoo! and Twitter lost significant money when they streamed NFL content over the web. That is, the NFL charged far more for the Internet rights than either firm generated in advertising. This suggests that even if Disney brings more content to Twitter, it’s unlikely to be financially beneficial (unless the NFL materially lowers the cost of on-line rights).
Of all the specific reasons listed, we found #1 the most convincing, courtesy of the following note and chart:
Despite the different
by Zero Hedge - September 28th, 2016 11:50 am
This is the most difficult, treacherous and damnable investing environment there’s ever been. As Bloomberg’s Richard Breslow retorts, that’s what you hear on an almost daily basis. And certainly in monthly investor performance reports.
“The market’s in a dangerous bubble, now let’s talk about the following stocks you just have to chase because they’re cheap.”
We all know there are bubbles galore. That’s called received monetary policy wisdom. And every time they assure in speech or testimony that an end is conceivable something conspires to pull them back in.
The latest policy maker “do as I do, rather than say” was caused by today’s eyebrow-raising decision by the BOJ to follow last week’s big discussion on steeper yield curves with a business-as-usual purchase of super-long JGBs.
Investors who figured it was prudent to decrease duration and, perhaps, do Kuroda a solid in helping his latest policy twist were rewarded with a bull flattener, with 5s30s moving as much as 4bps. Have a nice day.
[Which, as the following chart shows, has crushed the banks once again... in a total policy failure...]
Therein lies the problem for building a portfolio.
We know the price of most assets are hopelessly distorted, yet prudence has had a very high price.
For too long a time, traders got by figuring they could front-run (trust) quantitative easing and disregard the rest. That game is getting long in the tooth as monetary policy runs out of gas and policy-makers are trying, unsuccessfully, to play it by ear. But what to do in response?
No one knows and, as a result, a lot of important assets are confusingly and maddeningly trapped in tight, uninformative ranges. No one wants to buy, no one can afford to sell and nobody’s happy.
U.S. 5-year Treasury yields have ground to a halt after a wild start to the year. USD/JPY, EUR/USD are boring. So’s gold. Oil’s ranges are narrowing. SPX and SHCOMP have flat- lined.
The only things moving are sideshows like Mexican peso, which have nothing to do with the global economy.
by Zero Hedge - September 28th, 2016 11:32 am
In what is surely the most stealthy version of Wednesday humor we have ever posted, Bloomberg reports that according to Yigit Bulut, chief adviser to Turkish President Recep Erdogan, Turkey should consider “using a new wealth fund or a group of state-owned banks to buy” the embattled Deutsche Bank. Bulut made the proposal on Tuesday via his Twitter account, saying Germany’s largest lender should be made into a Turkish bank.
— Y???T BULUT (@yigitbulutt) September 28, 2016
“For months on TV programs, I’ve been calling on Turkey’s private and public capital: ‘Some very good companies in the EU are going to fall into trouble and we need to be ready to buy a controlling stake in them,’” Bulut wrote on Twitter. “Wouldn’t you be happy to make Germany’s biggest bank into a Turkish bank!!” the advisor said, cited by Bloomberg.
Aside from the farcically comical overtones of the proposal, the suggestion will likely infurate Germany and may ignite political opposition in Europe’s strongest economy, where Deutsche Bank has long been viewed as a national champion and has played an integral role in Germany’s economy.
Going with the flow, Bloomberg does a “serious” analysis of the proposal and notes that Turkey’s financial industry, long viewed as a source of strength for the $700 billion economy, “has suffered some loss of market confidence over the past few years.”
The market capitalization of the country’s publicly traded lenders stands just above $49 billion, roughly the size of General Motors Co. and about half what it was in 2013, while that of Deutsche Bank is almost $17 billion. Banking assets in the country amounted to about $836 billion at the end of July, while Deutsche Bank had total assets of 1.63 trillion euros ($1.83 trillion) at the end of last year.
Yeah, the numbers don’t really work but that’s the smallest issue facing the “contemplated” transaction. There is a bigger problem.
Back in July, Turkish Prime Minister Binali Yildirim announced that the government was planning to form a wealth fund to finance investments in infrastructure mega-projects, stabilize markets and keep growth on track. The fund could be as large as $200 billion, Maritime and Communications
by Zero Hedge - September 28th, 2016 10:51 am
Despite its peg, Spot Riyal is trading at its weakest in 8 months as turmoil mounts in The Kingdom as a failed ‘deal’ in Algiers, pay cuts for royalty, and now growing concerns that the US vote/veto on 9/11 Legislation will delay Saudi Arabia’s first international bond sale. Forward bets on Saudi currency devaluation are surging and default risk is on the rise again as Bloomberg reports, a Senate vote to override President Barack Obama’s veto could cause some investors to balk at the issue.
The country is planning to sell at least $10 billion of bonds next month, four people said. As Bloomberg adds,
Senate leaders in both parties said Tuesday they expect the vote to succeed, though Congress has yet to override a veto by Obama. Senator Ben Cardin of Maryland, the ranking Democrat on the Foreign Relations Committee, said last week that the Saudi government has warned that enacting the bill would cause a “significant change” in the U.S.-Saudi relationship. Saudi stocks tumbled and the currency weakened the most in four months.
Overriding the bill “could dent investor demand in near term,” said Kaan Nazli, who helps oversee $4.8 billion of emerging-market debt at Neuberger Berman Europe Ltd. in The Hague.
“It would subject the new bonds to some headline noise but ultimately the U.S.-Saudi relationship is very deep and the thinking would be that this issue would be overcome somehow.”
he Saudi Arabian riyal weakened the most since January…
And one-year forward contracts for the currency (Devaluation bets) headed for the biggest increase since July…
Saudi stocks lost the most in the world for a second straight day. The Tadawul All Share Index was the worst performer among more than 90 gauges tracked by Bloomberg, falling 4.5 percent as of 2:11 p.m. in Riyadh to the lowest level in more than eight months (near its lowest sicne 2009)
So now we know why Obama was so adamant to veto the bill… The Saudis have a lot to lose… this is not about US blowback.
by Zero Hedge - September 28th, 2016 10:38 am
Following the surprising across-the-board inventory draws report by API overnight, DOE confirmed crude’s overall draw (-1.88mm bartrels vs +3mm exp). However, gasoline saw the biggest build in 4 months (as distillates saw the biggest draw in almost 2 months). Crude production dropped very modestly on the week but remains stuck around 8.5mm barrels. Oil prices popped then dropped and remain lower for now…
- Crude -752k (+3mm exp)
- Cushing -832k
- Gasoline -3.7mm
- Crude -1.88mm (+3mm exp)
- Cushing -631k
- Gasoline +2.03mm (+500k exp)
- Distillates -1.915mm
Total U.S. imports of crude 7835k b/d vs 8309k
- PADD1: 866k vs 883k
- PADD2: 2437k vs 2664k
- PADD3: 2980k vs 2875k
- PADD4: 354k vs 367k
- PADD5: 1197k vs 1520k
Imports into U.S. by country in b/d:
- Canada imports 3194k vs 3460k
- Saudi Arabia imports 1272k vs 1100k
- Venezuela imports 775k vs 791k
- Mexico imports 434k vs 561k
- Colombia imports 353k vs 547k
- Ecuador imports 259k vs 218k
- Nigeria imports 302k vs 141k
- Kuwait imports 340k vs 155k, highest since wk of July 22
- Iraq imports 352k vs 358k
- Angola imports 99k vs 64k
For the 4th week running crude inventories fell but Gasoline saw the biggest build in 4 months…
Total stocks fell modestly to 503mmbbl…
… which narrowed the surplus over 2015 to 45mmbbl, or 10%, although the surplus to the 10 year average remains a whopping 155mmbbl, or 45%.
Domestic production fell very modestly but remains glued to the 8.5mm barrel levels…
Crude ripped and dipped on the mixed headlines, but RBOB is tumbling on the big build.
“Everything is still headline driven out of Algiers,” says Petromatrix analyst Olivier Jakob. “Directionally it’s difficult to trade when you’ve got so many conflicting headlines coming out of there”
Live Feed: FBI Director Comey Takes Stand Again To Answer For “Handing Out Immunity Agreements Like Candy”
by Zero Hedge - September 28th, 2016 10:21 am
As the credibility of the FBI continues to dwindle away over it’s handling of the Hillary email investigation, FBI Director James Comey is back on the Hill today to explain why he was “handing out immunity agreements like candy.” Comey has come under consistent attack recently from members of the House Oversight Committee who have alleged political bias in an investigation that granted immunity to 5 of Hillary’s top aides and IT professionals while seemingly receiving minimal cooperation in return.
Allegations of impropriety were exacerbated by the FBI’s decision to, not once but twice, dump information on the media late on a Friday afternoon in an obvious attempt to “bury the story.” The latest 189-page, Friday afternoon document dump included, among other things, new revelations that Hillary maintained a gmail account while Secretary of State and that Obama, after previously denying knowledge of Hillary’s private server, actually communicated with her on that server using a pseudonym.
According to the Wall Street Journal, the FBI usually only “proffers” immunity deals in return for genuine information and requirements that the recipients cooperate with other investigating bodies, such as Congress. That said, in this specific case its unclear what the FBI received in return for their immunity deals other than what they could have otherwise taken with a subpoena. As Jim Jordan (R-OH) said, “if the FBI wanted any other Americans’ laptops, they would just go get them—they wouldn’t get an immunity deal.“ But, of course, by offering immunity, the FBI exempted the laptops and their emails as potential evidence in a criminal case.
But, Comey says that granting immunity deals was a much faster way to gather evidence as the alternative was to get a grand jury to subpoena the laptop, which he said could have ignited a years long legal fight because Mills was also acting as Hillary’s attorney. Per the Washington Times:
“The FBI judgment was we need to get to that laptop. We need to see what it is,” he said. “This investigation’s been going on for a year. And this was, in the negotiation, a tool that her lawyer asked for, that the Department of Justice granted so we could get the laptop.”
Others offered immunity included Bryan Pagliano, the Clinton campaign
by Zero Hedge - September 28th, 2016 10:01 am
by Zero Hedge - September 28th, 2016 10:01 am
This morning, Janet Yellen testifies before the House Financial Services Committee on financial regulation topics. While there us unlikely to be much talk of monetary policy, it may come up, although most of the lawmakers’ questions are likely to relate to the Fed’s oversight of banks; other questions may touch on the Fed’s recent bank commodity oversight push, the November election, and especially the recent Wells scandal.
Here are the main things to watch for, courtesy of the WSJ:
- Big Bank Stress Tests
The Fed announced major changes to its stress testing regime on Monday, detailed in a new rule proposal and a 29-page speech from Fed governor Daniel Tarullo. Expect Ms. Yellen to get quizzed about the changes, which generally make the tests easier to pass for regional banks and tougher on global megabanks. Several lawmakers, especially Republicans, have their own ideas about how the Fed should make further changes to the tests, including by revamping the way it measures banks’ riskiness.
- Banks in the Commodities Business
Last week, the Fed took another regulatory action that is sure to generate attention from members of Congress: It proposed new rules targeting some of banks’ commodity-market businesses, citing the risk of outsize liabilities in the event of an environmental disaster. Lawmakers might take the view that the rules are an end-run around Congress, which explicitly allowed banks to engage in those activities in 1999. Big banks have also lobbied extensively against the rules, with help from local officials who say they rely on banks to help finance purchases of natural gas and other commodities for their municipalities.
- Wells Fargo and Executive Compensation
Republicans are likely to ask Ms. Yellen why the Fed and other regulators didn’t do more to stem misconduct at Wells Fargo, while Democrats will push for her to commit to finishing the incentive pay rules soon—a promise Comptroller of the Currency Thomas Curry made last week.
- Monetary Policy
Fed policy makers’ decision last week to hold interest rates steady while hinting at an increase in the near future could easily come up Wednesday. The Fed chief made clear she was ready for a bump up in borrowing costs, saying the case for a rate increase “has strengthened.” Democrats could press Ms. Yellen on the
by Zero Hedge - September 28th, 2016 9:17 am
Crowds gathered after an unarmed black man who was “behaving erratically” died after being shot by a police officer in El Cajon in southern California on Tuesday, the local police department said, appealing for calm.
Officers responded to an erratic subject that ended with an officer involved shooting. We will post updates here as they are available.
— El Cajon Police (@elcajonpolice) September 27, 2016
The death comes less than two weeks after black men in Charlotte, North Carolina and in Tulsa, Oklahoma, were shot dead by police, sparking protests. In Charlotte, rioting prompted the authorities to impose a state of emergency.
— ana. (@ana_lauraSD) September 28, 2016
As Reuters reports, EL Cajon Police Department spokesman Rob Ransweiler told reporters that two officers responded to a call about an “erratic subject” who was claimed to be walking into traffic. The man refused their instructions to remove his hand from his pocket and then pulled out an object from his pants and pointed it at them, the department said in a statement. The officers then simultaneously shot and Tasered the man who died after being taken to hospital, the department said.
A woman on the scene who claimed to be his sister is saying that she was the one who called the police, because her brother needed medical attention, NBC-owned local channel KNSD reported. A witness who lives nearby told KNSD that he saw police officers surround a black man with their guns drawn. He described the man as seeming fearful and lurching to the side with his hands up before being shot five times by the police. A second witness claimed to have seen the same thing.
However, an employee at the restaurant of the parking lot where the confrontation took place claimed to have recorded the entire incident. Her manager told KNSD that she had seen the video and heard police instruct the victim to remove his hands from his hip. It is not known whether his hands were in his pockets, pants or just on his hip. The video allegedly also showed the victim’s sister pleading for her brother to cooperate. Police have viewed the video and interviewed the employee.
An additional witness was recorded in a Facebook
Core Durable Goods Orders Contract For 20th Straight Month – Longest Non-Recessionary Streak In US History
by Zero Hedge - September 28th, 2016 8:42 am
In the last 60 years, the US economy has never suffered such a long contraction in core durable goods orders (20 months) without officially being in recession.
It’s probably nothing… US Durable Goods New Orders Ex Transports YoY down for the 20th straight month…
Headline (short-term) data beat thanks to notably lower revisions.
- Durable Goods Orders unchanged MoM (exp -1.5%, prior revised markedly lower from +4.4% to +3.6%)
- Durables Ex Trans -0.4% MoM (exp -0.5%, prior revised lower from +1.3% to +1.1%)
- Capital Goods New Orders Non-Defense, Ex-Aircraft +0.6% (-0.1% exp but prior revised from +1.5% to +0.8%)
But for the 4th month in a row, Capital Goods Shipments (Ex Air) fell MoM – down 0.4%, missing expectations of a 0.1% rise, and historical data was revised lower.
Thank the lord of war for saving the economy again…
- 5.8% drop in Computer new orders
- 0.5% drop in Machinery
- 0.5% drop in Fabricated products
- 2.0% drop in Communication equipment
- 2.5% drop in Electrical equipment and appliances
- 21.9 drop in Nondefense aircraft and parts
- 23.6% surge in defense capital goods new orders