Alibaba reportedly plans to stop taking orders for its IPO early, an indication of sizzling demand.» Read More
Everyone is waiting to see what Apple will unveil at its media event on Tuesday. I say it's more about the rumored iWatch and mobile payments application than about iPhone 6. Here are a few reasons why:
a) Mobile payments are key to Apple's future. What can you do to get consumers to part with their credit cards? Digital wallet seem to have been a disappointment, but the merchant processor market is a $10 billion business.
Apple could take a big chunk of this, not directly eliminating card companies but acting as the merchant processor. That's the heart of the mobile payment process.
Scottish independence: The new worry for equities. It always amazes me that equity traders tend not to pay attention to events until they are staring them in the face.
We have known about the Scottish independence referendum for over a year, but no one has paid any attention to it.
Until now. With 10 days to the vote on independence in Scotland, my email has filled up over the weekend about the new worry over Scottish independence.
What's the problem? To be fair, traders didn't pay attention because it looked like Scottish voters would vote to stay with the UK. But over the weekend, a respected poll (YouGov) showed a slim 51 to 49 percent "Yes" vote, with those saying they were undecided excluded.
This has driven the pound down against the dollar, with UK stocks weaker.
Why the worry? There is a lot of uncertainty here:
See what I mean? Uncertainty.
At last, Alibaba has announced its initial public offering (IPO) terms. I was puzzled that Alibaba waited until after the close of trading on Friday, particularly since they want to begin trading just two weeks later.
Here are the big questions that were batted around over the weekend:
a) how will investors fund their purchases of Alibaba? Will there be selling in other Chinese tech IPOs? What's the trade? Several investors tell me that, given all the advance warning about this, there is already ample cash in place for the purchase.
Venice, the historic Renaissance Italian hub, is sinking in more ways than one.
The city's Osteria Do Mori is one of the oldest drinking establishments in the world. Founded in 1462, and said to be a favorite haunt of the legendary lover Giacomo Casanova, this tiny wine bar has been a center for Venetian gossip ever since. The gossip on the morning I visited, however, was decidedly gloomy.
A 30-something attorney who had grown up in this neighborhood just a stone's throw from the Rialto Bridge told me he had left his home town and moved to Stockholm. What was the problem?
"There is no work for a lawyer in Venice," the attorney said. "No work for anyone unless you are in the tourist business."
If you want to see how dysfunctional Italy has become, look no further than Venice, the original Disney World, where tourists have come to gape ever since two ambitious Venetians stole the body of St. Mark from a church in Alexandria in 828 AD.
He's still here, in the church that bears his name, but if he could get up, walk out, have an espresso at the historic Caffe Florian and read the local paper, he would probably demand to be deported.
Venice, which stole not only St. Mark but also a good part of the wealth of the eastern Mediterranean during its thousand-year reign, is currently the object of great amusement in Italy.
Last year the port of Venice proposed banning the largest cruise ships from the area around St. Mark, and with good reason: Not only was there concern about damage to the buildings, but the Costa Concordia disaster of 2012, in which 32 people died when the cruise ship ran aground off the coast of Tuscany, highlighted the potential for grand-scale havoc when these giant cruise ships try to maneuver in tiny spaces surrounded by thousands of tourists.
The port authority said a deeper canal would be dredged to accommodate these large ships away from the city center.
All well and good, but in Italy nothing is ever settled permanently. The regional government overturned the ban. Several weeks ago, the national government stepped in, overturned the regional government's overturning of the ban (you following this?), and decreed that the biggest ships would indeed be banned by 2015.
There's one problem: They forgot to dredge a new canal. The head of the port authority announced last week that he was hopeful it would only take two years to finish, but the work hasn't even started.
So they are banning big cruise ships beginning next year with no place to put them.
Picture this: Tens of thousands of cruise ship refugees rowing to St. Marks in tiny boats from several miles offshore. The gondoliers will make a fortune.
This is nothing: I'm just scratching the surface of the comedy that is Italy. You would think that the mayor of Venice Giorgio Orsoni would play a major role in this farce, but he's gone. He was forced to resign in June and was put under house arrest.
There hasn't been a new mayor since, and there won't be for a while.
Orsoni was deeply involved in one of the grandest boondoggles in Italian history, a massive five-billion euro project to construct underwater barriers to prevent the city from flooding. Dubbed the Moses project (as in "parting the sea"...get it?), it was inaugurated in 2003 under Silvio Berlusconi.
The consortium building the project immediately set about taking care of everyone, Italian-style. The head of he consortium allegedly created a 25 million euro slush fund to secure the cooperation of Orsoni and other officials.
Orsoni said he was shocked--shocked! to discover that large contributions made to his 2010 campaign were illegal.
And the Moses project? It was supposed to be finished in 2012. Now the projected completion date is 2016, with five billion euros and counting.
Berlusconi's former culture minister is accused of taking 200,000 euros to fast-track the project. The former president of the Veneto region is also being investigated. There are secret accounts. In Italy. In Switzerland.
Think about this: Even with all major officials apparently on the take, the project is still years away and billions of euros over budget.
This is fast-tracking in Italy!
This comedy highlights one of the major problems that is sinking Venice (literally and figuratively) and the rest of the country: It's impossible to get anything done, and what does get done usually involves kickbacks. It's all part of what is sometimes called the "legal Mafia," the incomprehensible Italian political system.
At least in the United States, there are only two major political parties you have to bribe (Sorry: contribute campaign funds to).
In Italy, there are about ten political parties just on the national level. Can you imagine what happens when you start dealing with local, regional and national governments all at once, with that many parties?
The permutations are mind-boggling. The kickbacks multiply. Exponentially. It's no wonder the Moses consortium had a slush fund.
With this many parties, this many hands out, you need more than a slush fund. You need artificial intelligence. You need Big Data just to sort out who you're giving all the money to.
Tomorrow: What the Venetians think of this farce, and more on why Venice is a microcosm for what ails Italy.
What's up with retail? Several retailers had disappointing commentary, but the issues go beyond individual company problems.
Abercrombie & Fitch (ANF) posted better earnings, but five million fewer shares are outstanding. Same-store sales dropped seven percent. Ouch! We're supposed to be improving. 2014 same-store sales are expected to be down four to six percent, lower than previous guidance of down three to four percent.
Williams-Sonoma (WSM), one of the great retail performers of the last two years (stock has doubled), maintained its guidance for the full year but Q3 guidance is below expectations....the good news is half of their sales are online.
Signet Jewelers (SIG) guided to between $0.12 and $0.14 with current consensus of $0.35...ouch!
Guess (GES) with a 50 percent drop in earnings year-over-year, obviously the assortment didn't go over very well! Talk about losing market share! Lowered guidance as well.
Tilly's (TLYS) guidance was also below consensus of between $0.09 and $0.13, with consensus of $0.19. Same-store sales were down seven percent in Q2, but are projected to be down four to six percent in Q3.
So what are the issues? Several points:
It's the biggest complaint of the trading community this year: where has all the volume gone?
This goes beyond the "seasonally slow" trading that we see during the summer months. Stock volumes have been lousy since April, continuing a pattern that has been declining for years. So has volatility: with the exception of a brief spike during the Flash Crash in May 2010 and the European debt turmoil of 2010—2011, flows have been on a steady decline for five years.
It's not just stocks: volumes for bonds and currencies have dropped as well.
What's going on? There are several explanations:
Alibaba did file an amended statement this morning, and it did contain some important items...except the most important ones: The price and size of the IPO.
The additional info was positive. Revenues were up 46.3 percent in the June quarter versus the June 2013 quarter. That's an increase from the prior quarter.
The key appears to be new mobile users. Thirty-three percent of its gross volume is purchased via mobile devices and 19.4% of its revenue, big increases from a year ago.
The big issue is, when will we see terms? I noted this morning that the Street has been anticipating an IPO in mid-September, but a few months ago everyone had been anticipating an IPO in the first two weeks of August.
Once Alibaba files its terms (size and price), even an average IPO will take a week-and-a-half to get the roadshow together, but this is not an average IPO. Many IPO traders I spoke with said the sheer size of the offering (they will also be marketing this in Europe) mean sit could take two to three weeks for a roadshow to be completed.
So let's assume Alibaba files at the end of the day this Friday. Give it two weeks from Friday, assuming a rush, to complete a madhouse roadshow. Now you could conceivably make the week of September 15th, if you rush like mad.
That sounds like a stretch. If Alibaba announces terms next week, we are almost for sure into the week of September 22nd and beyond.
By the way, the Renaissance Capital IPO ETF (IPO) will be the first to own Alibaba because it can add large IPOs on a fast-entry basis. IPOs have been performing well recently, the IPO ETF is at the highest levels since March.
Amidst the lightest volume of the year, we have seen unusually heavy volume in exchange-traded funds (ETFs) associated with China, Turkey, South Africa, and Brazil. That's an indication that the U.S.-led rally has been broadening, especially in emerging markets, which have benefited from continued low global rates.
We are at or near 52-week highs in the stock markets in Thailand, the Phillipines, Vietnam, India, Brazil and Mexico. The largest emerging market ETF, the iShares Emerging Markets ETF, is at 3-year highs.
Meanwhile, emerging markets are surging this month:
What's up with the flurry of activity around Alibaba?
Wall Street is expecting the hotly awaited initial public offering (IPO) either the week of September 15th, or the week of the 22nd. Market watchers expect the giant's IPO to net as much as $20 billion.
One problem that keeps stoking confusion in the market: they keep updating their filings. On Wednesday, the company released what was at least their third update in as many months. In their latest adjustment to their S-1 filing, they changed their recent revenue figures...revenues for the three months ended June 2013 to June 2014 increased 46 percent to more than $2.5 billion.
Another issue: they keep buying things. Recently, they have taken a stake in a Chinese soccer team (Guangzhou Evergrande), a department store (Intime Retail), a mapping service (AutoNavi) and a 30 percent stake in microblogging site Weibo.
Blackstone is aiming to raise about $16 billion for its latest buyout fund, the Wall Street Journal reported, citing sources familiar with the matter.
Investors are "little behind the curve" on interest rates, Wharton's Jeremy Siegel tells CNBC.
Art Cashin of UBS says investors are repositioning themselves ahead of Alibaba's IPO.