I’m seeing my eldest child off to college, so postings will be slow. Expect hardcore analysis upon my return. Google Redefined and Apple Everywhere forensic reports, new short scans, and ample macro data, plus the start of “What the MSM and sell side is missing” series – deep dive analytics of popular news stories. The deluge will start by the end of the weekend.
Cheers!
Back in September of 2007 when I was preparing to launch a hedge fund, I came up with this interesting name for a blog. It was BoomBustBlog. What made it interesting is that I can literally blog ad infinitum on the synthetically crafted booms and busts of the global economy, for the method of shepherding the economy in this day and age is actually predicated on the existence and/or creation of Booms and Busts. Of course, from my common sense perspective, one would think that the job of a central banker would be to ameliorate the effects of, and in time eliminate booms and busts… Apparently, that doesn’t appear to be the flavor du jour. As a matter of fact, it appears as if central bankers are doing the exact opposite. Of course, attempting to cure a bust with a boom, or worse yet attempting to prevent a boom from busting with another boom is a recipe for disaster, and worse yet the probability of success is close to nil, yet central bankers try anyway. This leads to overt and explicit policy errors, which leads to outsized profit opportunities to those who pay attention. Enter “The Great Global Macro Experiment, Revisited“, from which I will excerpt below. Please keep in mind that this article was written in October of 2008, and turned out to be quite prescient, I will annotate in bold parentheticals the portions of particularly prescient relevance. The original macro experiment piece was posted on my blog in September of 2007… For those that are interested, I plan on discussing this topic live on Bloomberg TV today: “Street Smart” with Matt Miller & Carol Massar at 3:30 pm.
Bloomberg reports:
Aug. 31 (Bloomberg) — Research In Motion Ltd., maker of the BlackBerry smartphone, fell the most in six weeks in U.S. trading as a Sanford C. Bernstein Ltd. survey found more companies opting for rival devices such as Apple Inc.’s iPhone.
Of 200 companies in the U.S. and U.K. surveyed, 74 percent now let their employees use devices other than BlackBerrys, Sanford Bernstein analyst Pierre Ferragu said in a report today. For the U.S. alone, the figure was 83 percent.
“This phenomenon is very new and we expect it to put increased pressure on RIM’s performance,” Ferragu wrote.
The iPhone and devices based on Google Inc.’s Android software are making inroads into RIM’s dominance in corporate mobile e-mail. The European Commission, the executive arm of the 27-country European Union, this month opted for the iPhone and Android handsets made by HTC Corp. over the BlackBerry, after a similar move by Standard Chartered Bank Plc.
He reiterated his “underperform” rating on Waterloo, Ontario-based RIM’s shares and cut his price target to $40.
RIM fell $2.52, or 5.5 percent, to $43.06 at 2:47 p.m. New York time in Nasdaq Stock Market trading. Earlier, the shares slid as much as 5.7 percent, the steepest intraday drop since July 16. They declined 33 percent this year before today, as Apple gained 15 percent.
Some other studies also suggest BlackBerry loyalty may be fading among bankers, lawyers and government workers, who drove RIM’s initial success. Only 42 percent of BlackBerry users say they want to stick with the brand when they buy a new phone, according to an August survey by Nielsen Co. The rate is 89 percent for iPhone owners and 71 percent for Android devices.
“The idea that BlackBerry isn’t the only alternative to offer employees mobile e-mail has gone a long way,” Ferragu said.
Interested parties can check me out on Bloomberg TV tomorrow: “Street Smart” with Matt Miller & Carol Massar at 3:30 pm.
Last year I took the readers of my blog through a visual tour of the condo market in NY from Chelsea Pier to Prospect Park Brooklyn. Even the born and bred NYers were flabbergasted. See (again) “Who are ya gonna believe, the pundits or your lying eyes?”, “Who are you going to believe, the pundits or your lying eyes, part 2″. Well, things aren’t looking much better a year later. They are still doing construction next to sites that still can’t sell out their inventory next to sites that are falling into disrepair due to unpaid maintenance charges, next to sites that owe the city money, next to… You probably get my drift by now.
Well, the WSJ reports…
Trump SoHo, the flashy 46-story downtown hotel and condominium, is taking another unusual step to boost sluggish condo sales—offering substantial discounts to buyers who have already signed contracts but not yet closed.
These discount offers run to around 25% of the agreed-upon purchase price, according to documents reviewed by The Wall Street Journal. They’re being used as a special encouragement to convince buyers who might be getting cold feet to close their deals.
Discounts are being offered to prod Trump SoHo buyers to close.
Rodrigo Nino, president of Prodigy International, the sales and marketing company for Trump SoHo, declined to discuss the size of the discounts or how many buyers have accepted them. He said Trump SoHo “is not unilaterally offering concessions. The requests have been handled on a case-by-case basis.”
Even taking into account these markdowns, Mr. Nino added, “the average net closing price is in excess of $2,500 per square foot.”
The price cuts aren’t the first measure Trump SoHo has taken to get committed buyers to close on their deals. The developers, the Sapir Organization and Bayrock Group, are putting together a plan to offer direct financing to potential buyers who can’t secure enough credit to purchases condos. Mr. Nino said the program would be implemented “shortly.”
So it has been a month and a week since turning bearish on Research in Motion, and after more than 100% gains in ATM options, a launch of the companies most pivotal product and the figurative obliteration of market share by competitors Apple and Android, Rethink Wireless reports:
After a burst of enthusiasm around RIM’s launch of its latest BlackBerry, the Torch, the firm’s shares have slid again, amid reports of disappointing initial performance. The Torch 9700, the first smartphone to run the company’s upgraded operating system, BlackBerry OS 6, is seen as RIM’s crucial device to fend off the rising attack on its market from Apple and Android.
But online retailer Amazon has already slashed the price of the device to $99, less than a week after the phone shipped in the US on August 12, with an AT&T exclusive. It will soon appear in some European markets with Vodafone. According to estimates from analysts at Stifel Nicolaus and RBC, as reported by The Wall Street Journal, the Torch has sold just 150,000 units since launch, compared to 1.7m iPhone 4s in the first three days of that handset’s availability (and despite ‘Antennagate’).
Crains NY ran a happy, go lucky article today:
The stubbornly dismal economy means at least one thing: an extended stay in the spotlight for a handful of star analysts whose defining characteristic is their extraordinary bearishness. And, of course, their accuracy.
There’s Albert Edwards, a London-based analyst from France’s Société Générale, who believes the Standard & Poor’s 500 will sink to 450, a sickening 57% drop from its current level. There’s David Rosenberg, chief economist at Toronto money manager Gluskin Sheff, who warns that deflation is going to pull down the U.S. economy for years.
And then there’s the New York star of this gloomy show: Reggie Middleton, a Brooklyn entrepreneur who turned to analyzing global markets after a stint buying and renovating apartments in Fort Greene and Clinton Hill. (See “Prophet of doom,” April 19.)
Bad as things may be for the economy, Mr. Middleton warns that they’re poised to get much worse. Prices of real estate, stocks and bonds are all headed for serious falls… Wages will decrease, unemployment will increase. Fun, eh?
…
The culprit, Mr. Middleton says, is Washington. The bank bailouts, nationalization of Fannie Mae and Freddie Mac, and other interventions during two presidencies prevented the market from bottoming out in 2009 like it should have, he says. Now that the economy is weakening again and the heavily indebted U.S. government has fewer rescue options, the reckoning is coming. Markets of all kinds in the United States and Europe will get hit—hard.
“In my opinion, the amount of risk in the system is even higher than in 2008,” he says, adding this rare dash of hope: “2013 might be a good time to start taking a look at buying assets again.”
Mr. Middleton has been startlingly accurate in the past. He forecast the collapse of the housing market in 2007, and in early 2008 warned of the demise of Bear Stearns weeks before it happened. Earlier this year, he said that Ireland’s finances were in terrible shape long before Standard & Poor’s got around to downgrading that nation’s credit rating.
For those of you who don’t follow my blog, Mr. Elstein (the article’s author) was referring to:
Following up on my Research in Motion commentary in This Quarter Offers a Lot of Challenges for Smart Phone Vendors with Fruit in Their Names!, I’d like to comment on potential future paths for the company. From what I see from their public announcements, I remain as unimpressed now as I was just before (After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play) and after (RIM Smart Phone Market Share, RIP?) the OS6/Torch launch. The tricky part is that RIMM is now starting to look rather inexpensive relative to consensus earnings and historically projected growth rates. This is where a little strategic foresight comes into play. I have made available for download (for all paying subscribers) the Mobile Operating System Market Share Model which illustrates, on a very granular level, the market share movements (gains and losses) of the major mobile OS providers.
Research in Motions recent equity share decline stems not only from market share loss, but from the apparent lack of a clear cut and believable plan to stem that market share loss.
Bloomberg writes, Blackstone Returns Fees to Investors in First Clawback Triggered at Firm, I excerpt below:
Aug. 27 (Bloomberg) — Blackstone Group LP is refunding some performance fees earned during the commercial real estate boom, the first time fund investors have clawed back cash from executives at the world’s largest private-equity company.
Blackstone and some of its managers returned $3 million in carried interest to investors in Blackstone Real Estate Partners International LP during the second quarter, said a person with knowledge of the payments. They may pay back an estimated $15.7 million this quarter to another fund, Blackstone Real Estate Partners IV, according to the person and a regulatory filing.
Blackstone’s property buyout funds recorded performance fees totaling $1.74 billion, some of which was allocated to the firm’s partners, as the market for office towers, hotels and apartments soared from 2004 to 2007. Prices have slumped about 39 percent since then, leaving New York-based Blackstone and its rivals in a position similar to that of venture capital firms about a decade ago, when the collapse of technology stocks forced them to return profits earned on Internet companies during the 1990s.
“The acute situation for clawbacks is when you have had a very successful period of gains and then the remaining deals don’t do well,” said Michael Harrell, co-head of the private funds practice at the New York-based law firm Debevoise & Plimpton LLP. “That is what happened when the Internet bubble burst and there is certainly the potential for that with the sharp downturn in the real estate market.”
Clawback Provisions
Private-equity funds, which raise money from institutions including pensions and endowments, pay a share of profits from investments, usually 20 percent, to the firm and its investment managers. If the fund’s remaining holdings suffer a permanent decline in value, clawback provisions can require the executives to rebate cash distributions in order to prevent their share of profits from exceeding the 20 percent.
So, S&P finally gets around to Cutting Ireland’s Rating on the Cost of Bank Support, as reported by CNBC:
Ireland’s financial headache worsened on Wednesday after Standard & Poor’s cut its credit rating in a move criticized by the country’s debt management agency.
…
The premium investors demand to hold Ireland’s 10-year bonds over German bunds has been steadily widening in the past few weeks and remained elevated at 327 basis points on Wednesday.
The spread finished at 330 bps on Tuesday, its highest level since the Greek financial crisis broke in May.
Brenda Kelly, an analyst at CMC Markets, said she expected Irish borrowing costs to climb on the back of S&P’s move.
“I think we are going to have to an awful lot more in interest payments,” she said.
Although Ireland has raised virtually all of the 20 billion euros of long-term debt targeted for 2010, S&P’s move may make it more difficult for the country’s banks to extend the maturity of their funding later this year and eventually wean themselves off a state guarantee on their debt.
…
S&P cut Ireland’s long-term rating by one notch to ‘AA-’, the fourth highest investment grade, and assigned the country a negative outlook late on Tuesday saying the cost to the government of supporting the financial sector had increased significantly.
Rating agencies have been steadily hacking away at Ireland’s credit rating and S&P’s is now on a par with Fitch and one notch below Moody’s, which cut its rating to Aa2 last month.
S&P said it expects Ireland will need to spend 90 billion euros to support its banking system, up from its prior estimate of 80 billion euros including capital used to improve the solvency of financial institutions and losses taken from loans the government acquired from banks.
Ireland’s budget deficit ballooned to 14 percent of gross domestic product, the highest in Europe, last year due to the cost of propping up nationalized lender Anglo Irish ANGIB.UL and it could climb higher if Dublin injects an additional 10.05 billion euros into the bank…
I’m not going to say I told you so, but I did throw some pretty strong hints…
On April 29th, I was quite blatant in stating “Beware of the Potential Irish Ponzi Scheme!”, urging my susbscribers to review the 
Irish Bank Strategy Note and the Ireland public finances projections that I made available earlier that month. You see, unlike many of the pundits in Europe who state that Ireland has moved beyond the worst of its problems and is an example of how austerity should work, I believe that Ireland is in very, very big trouble and I outlined the reasoning behind such in my very first posts on the Pan-European Sovereign Debt Crisis.
Recent Comments