Convincing Yourself Things Are Getting Better


You could convince yourself things are getting better: Start with factory output increasing more than expected in China, South Korea, and Taiwan, add some stirrings in the M&A world with an offer for Avon Products along with the closing of the (endless) Express Scripts and Medco Health Solutions deal, and then throw in a new resort opening in New Jersey.

China may indeed be heading for a soft landing, but it’s still tough going in Europe. Euro zone manufacturing PMI dropped again last month and has now been showing contraction for eight straight months.

Spain's stock market is set to close at the lowest level since November, with banks notably weaker.


1) A victory for democracy: In Myanmar (formerly Burma), Aung San Suu Kyi’s party reportedly won all the contested seats. Let's hope this encourages the U.S. and Europe to consider lifting sanctions. I met Aung San Suu Kyi in 1996 when I was one of the first visitors in Myanmar after a long period of isolation. My wife and I spent a half hour with her in her home; even then she was under house arrest. She reiterated her belief in non-violent protest, but I was most impressed with the strange dichotomy in her demeanor: great calm, combined with intensity and determination. In the same person! At the end of our brief meeting, I said that I appreciated the time, that I wanted to come by to give her my best wishes. She stared very seriously at me and said, "We very much believe in the efficacy of good will." It wasn't an offhanded, polite comment; she very much said it liked she meant it.

2) New York Stock Exchange investor day today: Tired of the lousy volume? Imagine how the NYSE feels. The investor meeting begins today at 1 p.m. ET (no press). Main topic should be ... the lousy volume. Average daily volume is down notably year-over-year for both the NYSE floor, as well as the consolidated tape (all volume in all NYSE-listed stocks). It isn't just down for the NYSE: Volume on all the exchanges, including the NASDAQ, are down.

Unfortunately, this isn't something the NYSE or anyone else can change — it is what it is. Expect to hear more about cost controls, and plans for the clearing business now that LCH has been acquired by the London Stock Exchange.

The big problem: Lack of revenue growth. Despite efforts to expand, the NYSE still gets about 65 percent of its revenues from Cash Trading and Listings, though that is down from about 73 percent in 2008. Attempts to grow its derivatives business (options, futures) have met with only modest success. That segment has gone from roughly 21 percent of revenue in 2008 to 24 percent in 2011. The technology division, which sells market information, trading technology, and connectivity to the exchange, has had more success, going from about 5 percent of revenues in 2008 to 10.7 percent in 2011.

3) Avon Products jumps 23 percent pre-market after the global beauty franchise said it rejects fragrance maker Coty’s bid to acquire the company for roughly $10 billion. Coty made its proposal public this morning, targeting Avon shareholders, after Coty said it engaged in extensive but unsuccessful talks with Avon. Coty is offering $23.25 per share, which represents a 20 percent premium over Avon's Friday closing price. Avon shares traded above the $23.25 offer price preopen following Coty’s announcement; however, they retreated slightly following Avon’s rejection. Its board said Coty’s offer is not in the best interest of Avon’s shareholders, expressing the offer substantially undervalues the company.

4) Express Scripts shares rise 2.8 percent pre-open after being temporarily halted preceding confirmation Express Scripts completed its previously announced $29.1 billion acquisition of Medco Health Solutions . The offer, first announced in July, weathered an eight-month antitrust inquiry by the Federal Trade Commission, which eventually voted 3-1 to close the probe. Express Scripts and Medco claim the deal will drive down prescription costs for consumers as it combines two of the three largest U.S. pharmacy benefit managers.

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