Next week will be busy. There is considerable interest in the Fed's very large POMO operation on Thursday.» Read More
Autohome (ATHM), a Chinese online auto site, priced 7.8 million shares at $17 last night, above the raised price talk of $14 to $16, and opened this morning at $30.16.
500.com (WBAI), a sports lottery business, priced 5.8 million shares at $13 ... now trading at $25, up almost 100 percent, a few days after going public.
Sungy Mobile (GOMO), which offers mobile Internet products (app management, for example), priced 5.4 million shares at $12 a few days ago, now trading over $16.
What's going on?
First: massive growth potential. We had the CEO of Autohome on this morning—he said most of the people who visited his site were buying a car for the first time in their lives! Think about that! China has 1.6 billion people. There are hundreds of millions who have never owned a car. Or a watch. Or insurance.
Second: Transparency issues have gone away. Remember all the worries about whether you could believe the numbers coming out of these Chinese companies? What happened to all those worries? As far as I can tell, nothing has changed. Nobody has made any moves to revamp the accounting procedures, or improve transparency. Heck, sometimes you can't even get info on these companies. Some Chinese companies don't even file quarterly reports. It's just that more than a year has passed since it was an issue and everyone has forgotten. Oh sure, there was a brief period of six or seven months earlier this year when Chinese IPOs evaporated here. But that started changing in the second half. China is "out of the penalty box," as one trader said.
Third: Deals doing well spur even more deals. It helps that 500.com and Sungy Mobile have done so well in the past two weeks; it also helps that the markets are holding up so well. There are now 10 Chinese IPOs waiting to go public at the NYSE.
That's something, considering that there have only been seven or eight this year, all of them in the second half of the year. And they have done well, for the most part. The only dog has been LightInTheBox (LITB).
Chinese IPOs this year: Percent change from initial price ...
Capping a big year for buybacks on Tuesday night, MasterCard announced a 10-for-1 stock split (effective January 9th), as well as an 83 percent dividend increase and a $3.5 billion stock buyback program.
This highlights one of the main drivers of the stock rally in the last few years: strong buybacks and dividend hikes. From 2010 to 2012, Mastercard paid roughly $288 million in dividends and repurchased $2.9 billion worth of shares. In 2013 alone, the company paid $182 million in dividends and repurchased $1.7 billion in common stock...about two percent of the market cap.
They will likely buy back about 2 million shares in 2014, again reducing shares outstanding by roughly 1.6 percent. Baird estimates that each 1 million share repurchase adds a little less than one percent to annual earnings per share (EPS) growth. Bottom line: the new buybacks will increase the chances for upward earnings revisions in 2014.
This is it...the last week for IPOs before it dries up for the holidays.
This a high-quality IPO week. Very few dogs here. The list of companies going public include a couple well-known names (Hilton, AMC Entertainment), a hot Chinese internet company (Autohome), and a company with new technology in the hot storage space (Nimble Storage).
Pricing tonight: Autohome (ATHM) and Valero Energy Partners (VLP).
Autohome is a Chinese online auto site seeking to raise 7.8 million shares at $14-$16. I know--a Chinese online auto site. Huh? There's demand: Initial price talk was $12-$14, it's now $14-$16.
Why? They are the number one auto website in China in terms of daily visitors and time spent per user. The advertising money comes from roughly 100 auto makers. (Yes, there are 100 automakers in China!). Dealers pay a subscription fee, which gives them stability in their revenues. Sales are $195 million this year; operating profit of $96 million, so they are profitable. Sales for the nine months ending in September grew 67 percent.
And Chinese IPOs, after a long period of dormancy, have suddenly become hot: Take 500.com (WBAI), a sports lottery business that went public last month, pricing 5.8 million shares at $13....now trading at $25.
Or Sungy Mobile (GOMO), which offers mobile internet products (app management, for example), pricing 5.4 million shares at $12, now trading over $15.
Here's what's interesting: one of their main competitors, Bitauto Holdings (BITA), which went public at the NYSE in February, is trading at 25 times 2014 earnings, according to analysts. Autohome is trading at 18 times forward earnings.
Valero Energy Partners is offering 15 million shares at $19-$21, a Master Limited Partnership (MLP) that is an oil pipeline/terminal operator affiliated with refiner Valero (VLO).
Pricing Wednesday: Hilton Worldwide (HLT), AMC Entertainment (AMC), and ARAMARK (ARMK).
Hilton Worldwide is offering 112.8 million shares at between $18 and $21. The biggest hotel operator, with 4,000 hotels and almost 700,000 hotel rooms. I wrote about this in my morning Trader Talk note.
AMC Entertainment, one of the world's largest movie screen chains (343 theaters with 4,937 screens), is offering 18.4 million shares at $18-$20. It is owned by the Wanda Group, a Chinese real estate company.
ARAMARK Holdings, one of the leading providers of food and uniform services to healthcare, education, sports centers, and prisons, is pricing 36.3 million shares at $20-$23.
Pricing Thursday: Cheniere Energy Partners (CQH) and Nimble Storage (NMBL).
Cheniere Energy Partners is offering 30 million shares at between $19 to $21, a limited partnership (LP), will own a 55.9 percent interest in Cheniere Partners, which owns liquid natural gas facilities.
Nimble Storage is pricing eight million shares at $16-$18, an enterprise storage business, which incorporates high-performance flash storage. It's a technology change because flash is a quicker, more reliable medium than traditional disk-based storage. This is a hot space, and we could see a nice move up.
—By CNBC's Bob Pisani
Stocks are moving in a very narrow range (less than 50 points on the Dow, well below the daily average swing of about 125 points), partly because bond yields are also moving in a very narrow range.
But watch the trend: There are still move stocks advancing than declining, and we once again we have closed at a historic high on the S&P 500.
So what, you say? You say it doesn't take much to close at a historic high? Friend, two weeks ago everyone was bemoaning we seemed stuck at 1,800. Now we are at 1,808 and traders are moaning, "Bob, this is really boring."
Really? I think it's amazing. I think it's amazing that the market may go sideways for a few days, but it doesn't go down.
The NASDAQ is at a 13-year high. Techs, financials, Industrials--all cyclicals--are market leaders.
As one trader pointed out to me: The markets are assimilating Friday's power move higher. Now that we have closed at a new historic high on the S&P, technicians will likely get even more bullish.
One sector that worries me: Energy, particularly Exploration & Production (E&P) stocks. The XOP peaked out in October and is now down 10 percent, while the market is near new highs.
It's a simple story: There is too much oil and gas and not enough demand. And the U.S. has now become a major energy exporter, thanks to the explosion of the shale business.
Even a cold snap, a big storm and a jump in natural gas prices aren't enough to bring the stocks up today.
Paul Sankey at Deutsche Bank has written extensively about the problem: Saudi Arabia is continuing to export oil into an over-supplied U.S. market. At the same time, the U.S. is exporting large amounts of oil, but if there continues to be large excess global refining capacity (and lower demand) that is going to choke off export growth.
Combine that with weaker U.S. demand, and you have a problem for the E&P group.
The hope, as Sankey has pointed out, is that European refiners will cut back on production. Maybe.
There is a second problem: There is no growth in U.S. refining capacity for the next five years, but oil production is growing rapidly. So the U.S. is becoming increasingly oversupplied. Will this result in less drilling? It certainly will if prices continue to drop. How much will it need to drop? West Texas crude is currently at about $97; Sankey thinks $75 a barrel is where supply will start to be constrained.
—By CNBC's Bob Pisani
What's the theme for 2014?
It's still murky, but I'm increasingly warming to the idea of a synchronized--yet very low-key--global economic recovery.
Consider the international developments:
I don't care what anyone tells you--while plenty were expecting a Nonfarm Payroll report over 200,000, but almost no one predicted the markets would react this way.
All week the market has struggled as generally positive economic news has been met with taper fears, with lower prices and higher bond yields.
Now, all of a sudden we get the Mother of All Good News and stocks stage a rally, with little or no reaction in the bond market?
The market today is saying: Don't sell on tapering. Huh?
Does this mean that tapering is less of an issue?
This is the crucial question for the market right now. Taper is the biggest negative the bears have been pointing to.
Are "taper worries" a 2013 issue and not the 2014 issue that we all expected?
That's a problem for active traders, because many aren't positioned for this. Many are positioned for tapering to be a headwind.
Is this theory wrong? Does it prove the stock market might be strong enough to handle a taper with minimal damage? Alan Ruskin at Deutsche Bank voiced this opinion this morning and said the positive market reaction increased the chances the Federal Reserve might begin tapering in December.
I'm not so sure. Remember, this happened last month...we got a better-than-expected jobs report, and the market rallied. It proved to be something of a head-fake for the market. It rallied, but for a few days, and then stalled out.
Second, the bond market HAS responded to better economic news. Bond yields have been running up since late October, moving from roughly 2.50 percent to 2.87 percent. So the bond market has already priced in some moves. I've even heard some try to argue that at current levels one can make the case they are positioned for a January taper to start.
If that's the case, that is a pretty mild reaction.
There are two issues: The timing and aggressiveness of the Fed taper, and how Janet Yellen will cut the Gordian Knot linking tapering to tightening.
First, a lot of traders are arguing that two months of job growth over 200,000 is still not enough to convincingly start rolling back bond buying and that the Fed will still not likely begin paring back before March. That's the position of Jan Hatzius at Goldman Sachs and Michael Gapen at Barclays.
Others, including Drew Matus at UBS, anticipate taper will begin in January.
But perhaps a more important issue to settle is not WHEN the Fed will begin tapering, but how aggressive it will be once tapering begins.
Some believe that while a 200,000 figure is strong, it's not too strong, and that when the Fed begins tapering, it will be a very gentle process. That's the position of Steven Englander at Citi.
Second, there is a growing belief that Janet Yellen will attempt to enforce the concept "tapering is not tightening" by doing something dramatic, like changing the 6.5 percent unemployment threshold the Fed has previously indicated would be the point they would begin increasing interest rates.
Cheers! Today is the 80th anniversary of the repeal of Prohibition. The Twenty-First Amendment to the Constitution was ratified on December 5, 1933. It repealed the Eighteenth Amendment establishing Prohibition, which went into effect on January 17, 1920.
It's the only Amendment that repealed a prior Amendment. It's also the only amendment to be ratified using the state ratifying convention. All other Amendments have been ratified by state legislatures.
The first state to ratify was Michigan on April 10, 1933. On December 5, 1933, Utah became the 36th statet o ratify (Ohio and Pennsylvania had ratified on the same day), which brought the Amendment into effect (there were only 48 states at the time, as Hawaii and Alaska were not yet states).
As for alcohol beverage stocks, it's been a very, er, mixed year. Take a look:
(Read more: Prohibition is over! Here's a bucket of beer stocks)
—By CNBC's Bob Pisani
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