Last Call: The Cyprus Effect
And I'm caught one more time
Up on Cyprus Avenue
-Van Morrison, "Cyprus Avenue"
Market Musings With Earnings Impresario Juan Aruego
A down (Oh no, Cyprus!), up (Cyprus isn't that bad), down (Maybe tail risk really is up) day.
It was enough to give the major indexes their worst losses in three weeks. Financials led the decline all day long, but in the afternoon selling picked up in energy stocks, materials and consumer discretionaries. Vix spiked 18%, but gold rose less than 1% and oil rose after being down much of the day.
Color this market wary and a touch confused.
The Word on the Street Tonight
Gartman on Cyprus: 'Don't Mess With Russian Mafia'/CNBC: "The decision to tax Cyprus bank deposits to fund a bailout by the EU was "egregiously bad," Dennis Gartman of The Gartman Letter said Monday on CNBC. "Everybody knows that the vast majority of the deposits in Cyprus are from Russia," he said. "They're Russian government officials, they're Russian businessmen, it's Russian mafia - and you don't mess with the Russian mafia." On "Fast Money," the editor of The Gartman Letter said that the move would not sit well with a powerful contingent of Cyprus bank account holders. "People around the world don't kidnap Russians because they know that the Russians will deal with you in a very efficient and very ugly manner," he said. "I think the decision here was egregiously bad. I think this was lunacy on the part of the European monetary authorities, the banking regulators, or whoever it was responsible for making this decision in Cyprus. They have stepped on Russian toes, and the Russians are not going to be happy about this. Somebody will have to pay for it. I think this is very stupid."
Cramer: Bears Overhyped Cyprus Bailout Plan/CNBC: "Although global stock markets were spooked by news of Cyprus' plan to tax bank depositors to help fund a multi-billion dollar bailout from various central banks, U.S. stocks were able to trim their losses before all three major averages closed in the red on Monday. The news marks the first time depositors have been asked to contribute to a financial-rescue plan during the long-running euro-zone debt crisis. Some stock market commentators feared a run on bank deposits and predicted panic in the stock market, but as Jim Cramer noted, none of it came to fruition. "We opened down hard then rallied into the green and then gave it up near the bell, but it was a totally garden variety give up," Cramer said. "Nothing catastrophic like the bear claws that I was supposed to have all down my back today." ... "It looks like the bears overplayed their hands, or their paws, once again," Cramer complained. "They are so desperate to get this market down that they would not let the facts of this little nation get in the way of the big story."
Electronic Arts CEO to Step Down/CNBC: "Electronic Arts CEO John Riccitiello is stepping down as CEO effective March 30 after over six years on the job. Board member and former CEO Larry Probst will take over as executive chairman as the company looks for a new CEO. Riccitiello said in a letter that his decision to leave is "really all about my accountability for the shortcomings in our financial results this year. It currently looks like we will come in at the low end of, or slightly below, the financial guidance we issued to the Street, and we have fallen short of the internal operating plan we set one year ago. And for that, I am 100 percent accountable." The video game giant warned that it expects revenue and earnings for the current quarter to be at the low end or slightly below previously-issued guidance. Those results are due out on May 7."
EBay CEO's Compensation Jumped 80% in 2012/WSJ: "EBay gave Chief Executive John Donahoe $29.7 million last year, up 80% from $16.5 million a year earlier, granting him a big bump in stock awards based on the Internet company's continued turnaround. According to eBay's annual proxy statement released Monday, the company boosted Mr. Donahoe's stock awards to $23.7 million last year from $8.85 million a year earlier, while his salary rose to $970,353 from $945,577 in 2011."
Lululemon Pulls Yoga Pants From Stores/WSJ: "Lululemon Athletica said it was pulling its popular black Luon yoga pants after some of them, sold since the beginning of the month, were found to be overly sheer. Shares fell 4.8% to $62.75 after hours, as the Canadian company said its fiscal first-quarter same-store sales and revenue would suffer as a result. ... The company said that certain shipments of Lululemon pants and crops available in stores since March 1 don't meet its technical specifications. While the ingredients, weight and longevity quality of the affected pants remain the same, "the coverage does not, resulting in a level of sheerness in some of our women's black Luon bottoms that falls short of our very high standards." Lululemon said it has pulled all of the problematic pants from its stores, showrooms and online site, and is working to replace them. The company said the problem affected around 17% of all women's bottoms in stores, and it expects a near-term shortage."
Buzzkill: Coca-Cola Finds No Sales Lift from Online Chatter/Ad Age: "A Coca-Cola study finds online buzz has no measurable impact on short-term sales, but online display ads work about as well as TV, said a company executive in a presentation at the Advertising Research Foundation's Re:think 2013 conference in New York today. It's a stunning admission for a company who's flagship brand has 61.5 million fans, more than any other brand on Facebook. But Eric Schmidt, senior manager-marketing strategy and insights at Coca-Cola, isn't giving up on buzz just yet. And he cautioned against reading too much into the research, noting that it covers only buzz, not sharing, video views or other aspects of social media. ...Coke research was far more favorable for digital display advertising, which it found on average to be 90% as effective as TV at generating sales on a per-impression basis, Mr. Schmidt said. Search was 50% as effective as TV - about the same as out-of-home - with radio coming in between TV and search and print scoring slightly more effective than TV. One problem Coca-Cola has is determining whether buzz is actually positive or negative in the first place. In one 2010 study where Coke pulled out more than 1,000 social-media messages randomly and had human raters compare them to automated sentiment analysis by one vendor, there were widespread differences."
Washington Post to Start Charging for Digital Access/AP: "The Washington Post plans to start charging for some digital content starting this summer, becoming one of the last major U.S. newspapers to reach into readers' wallets for new online revenue. Online readers of the Post will be required to pay a subscription fee after accessing 20 free articles per month. Subscribers to the print edition of the newspaper will have free access to all of the Post's digital content. The Post, which made the announcement on Monday, hasn't announced how much it will charge."
Amazon Sellers Unhappy About Fee Hikes, Eye Rivals/Reuters: "A brewing conflict between Amazon.com. and its merchants over fee hikes could benefit rival eBay Inc., and provide an opening for Walmart and Google, which are dipping their toes into the online marketplace. Amazon's online bazaar generates margins many times higher than traditional retail as the company takes a cut of every sale on its site made by a merchant, known as a third-party seller, and charges extra fees for handling logistics. The growth of this business, which now accounts for almost 40 percent of unit sales, has helped push Amazon shares to record highs. But a series of fee hikes over the past year and a half have alienated many merchants, and some are threatening to defect."
Affymax May Consider Filing for Bankruptcy; Cuts Workforce by 75 percent/Reuters: "Drug maker Affymax said it may consider selling itself or filing for bankruptcy among a range of strategic alternatives as it struggles with the recent recall of its sole commercial product, the anemia drug Omontys. Shares of the company slumped over 50 percent to $1.34 in extended trade on Monday after being halted earlier. Affymax also fired its chief commercial officer and slashed about 230 jobs, or about 75 percent of its workforce, as part of a plan to cut costs."
Yucaipa Taps Into U.S. Craft Beers/WSJ: "Ron Burkle's Yucaipa Cos. is the latest investment firm to tap the small but fast-growing craft beer industry, taking a majority stake in a startup company that plans to spend more than $100 million to build five new breweries. Instead of brewing its own beer, Brew Hub of St. Louis, Mo. hopes to fill each facility with at least half a dozen small brewers who want to expand production but face capacity constraints. The new venture will also offer brewers other fee-based services, including distributing and marketing support. Roughly three of four beers sold in the U.S. are brewed by two multinational giants: Belgium's Anheuser-Busch InBev NV, which makes Budweiser and Bud Light, and MillerCoors , a joint venture between the U.K.'s SABMiller and Denver-based Molson Coors Brewing, which makes Coors Light and Miller Lite. But most of the industry's expansion is being fueled by hundreds of small and independent brewers, or so-called craft brewers, whose shipments have grown by a double-digit percentage three straight years as more Americans branch out from mainstream lagers. Craft volumes surged 15% to 13.2 million barrels in 2012, compared with 1% growth for the U.S. beer industry as a whole, the Brewers Association estimated Monday. Retail sales of craft beer also topped $10 billion for the first time last year, or about one-tenth of U.S. beer sales, as the number of breweries climbed 18% to 2,403, according to the industry group."
Apple Co-Founder Steve Wozniak's Former Home For Sale/Zillow: "...In addition to designing one of the most iconic personal computers, Wozniak designed a modern home in Los Gatos in 1986. His former home is now back on the market for $4.395 million. It was previously listed for February 2012 for $5 million and sustained price cuts in March and July 2012 before dropping off the Silicon Valley market."