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Argentina Is Getting Ready To Default…..Again. Should You Care?

Fool me once, shame on you. Fool me twice, shame on me. Fool me three times and I am a fucking moron. Fool me four times? I just got Argentinized.

That’s right, Argentina is about to default on its debt for the 4th time. If anyone cares, make that 1982, 1989, 2001 and 2014. That is what happens when you elect a crazy woman to be your president. The president who blames banks, grocers and businesses for her economic problems.  The political party that spends lavishly on infrastructure projects it can’t afford and then decides that it is a good idea to redistribute wealth to its lower middle class.  

With inflation surging close to 20%, foreign currency reserves down to a minuscule $28 Billion and the credit-default swaps suggesting an 85% probability of a  default, it’s a done deal. Basically, with the US economic and credit slowdowns just around the corner, it would impossible for Argentina not to default. Take note, France. That what happens when you go a little crazy on the “Socialism” and start killing off businesses.

Should you care? No, not really. At the end of the day no one cares about Argentina.  

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Argentina Is Getting Ready To Default…..Again. Should You Care? Google

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argentinaArgentina: Repeat Economic Offender

How many Argentines does it take to screw in a light bulb?
 
Three: two to grill up meat while the other guy bribes the electrician.
 
That extemporaneous wisecrack has been winning me free alfajores at Miami bakeries for more than a decade now.
 
And why not? The rent may be too high in Buenos Aires, for everything from apartments, to beef, to auto parts. But Argentina doesn’t seem to care. This is, after all, an economic recidivist, having defaulted on its debt in 1982, 1989, and 2001—and it is about to do so yet again even as it still fights jilted creditors over the last reneg.

Argentina’s borrowing costs now stand near a two-year high; its government notes due 2017, which have fared the worst in a basket of 65 emerging markets clocked byJPMorgan Chase (JPM), yield 19.25 percent. That is painfully hard to service when your holdings of foreign currency stand at a seven-year low: $28 billion now compared with $53 billion just three years ago. The market for credit-default swaps suggests an 85 percent chance of Argentina defaulting again within five years.

Buenos Aires allowed the peso to tank 19 percent last month amid at least 25 percent inflation and the widest budget deficit in nearly two decades. Something is about to give.

Leftist President Cristina Fernández de Kirchner this week pointed the finger at bankers, grocers, and her critics in the local press for Argentina’s runaway inflation and withered domestic investment. “We are not going to allow them to continue looting the Argentine people’s pockets,” she vowed in a speech.

Thanks to Argentina’s endowment of agricultural commodities, which have enjoyed a bull run since its last default, Fernández and her late husband (the former president) have doubled government spending from 15 percent of gross output since 2003. That largesse was showered on costly transportation and electricity subsidies and cash payouts to the country’s lower class.

Companies were appropriated and delisted from Argentina’s stock market. Foreign investors fled. Argentina, which used to be an envied emerging market, was recently demoted to a “frontier” economy alongside the Philippines and Ghana. Communication from the Fernández administration has lately slowed to a trickle.

“The situation is a lot more serious than the government is letting on,” says Kathy Lien, managing director of foreign exchange strategy at BK Asset Management in Manhattan. “If we were to see them default in this environment, it would have global repercussions. While the world is very different than it was in 2001, I don’t think other economies will escape without damage.” Lien says she is watching the rest of Latin America, as well as Turkey, where there is also a paucity of foreign reserves.

In 2015, Argentina must pay $5.9 billion of local-law bonds. The government’s present plan of currency devaluation to make ends meet could send inflation jumping above 40 percent, according to Bank of America (BAC) Merrill Lynch analysts Marcos Buscaglia and Jane Brauer. “This,” they write, “would decrease Argentina’s payment capacity, not improve it, and would therefore put the [2015 bond] payment more in danger.”

That prospect, says Lien, would then spawn the game of “who’s next?” on trading floors in London and New York. How would teetering Venezuela—Argentina’s socialist brother-in-arms—continue to service its debt, especially if crude oil prices take a hit? How would that news be received in Brazil, which is grappling with a plunging currency, anemic growth, and capital flight? It all could quickly race up the pyramid to China and its heavily dependent Asian “tiger cub” economies.

Even in this globally promiscuous lending environment, with tiny interest rates seemingly everywhere, Argentina is blackballed from easy access to international debt capital markets. The lender of last resort, of course, is the International Monetary Fund, which would exact the pain of austerity, including popular subsidy pullbacks, to give Buenos Aires the $10 billion-plus credit infusion it would desperately need to function after a default, according to BCP Securities (BCP:PL).

“It’s clear the government there doesn’t really care how it’s viewed by world markets,” says Craig Shealy, an investment banker now working on several deals across Latin America. “But it also doesn’t fully appreciate what it’s setting its people and infrastructure up for.” New business and capital formation, he hears from sources, is drying up dramatically in and around Buenos Aires, as money flees and everyone from financiers to peddlers face prohibitive borrowing costs.

“This,” he says, “is not about the little guy vs. foreign bankers. This is about stifling the guy trying to start a food cart, for years to come.”

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Is China’s Default Problem Much Bigger Than Anyone Thinks?

While on the surface China looks like a shiny example of economic prosperity, in reality, it is a rotten corpse of bad debt. I have written about China extensively in the past. About its economic growth, shadow banking, bad loans, empty cities and speculation in various sectors of the economy. Just ask any taxi driver in China and he will assure you that real estate never goes down. 

In a shocking development, now even the Chinese brokerage houses are coming out with statements like “China’s bond market will definitely see its first default this year,” and “There should be a default in China’s onshore bonds this year”.

Why should we care and what will the impact be? 

Listen, there is no doubt that China will face a lot of economic problems over the next decade. So much so that I fathom it might even lead to some sort of social unrest or even a revolution. Everyone needs a good revolution now and then. With that said, China will do what it need to do in order to keep its economy going. No matter how bad it gets, China will try to paper over any bad debts with more liquidity, shadow banking, off balance sheet entries and so forth.

Will we see a collapse? Probably not, but we will see a lot of defaults throughout the Chinese economy over the next few years. As such, it would be prudent not to have any debt exposure to the Chinese market. 

shanghai

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——————————————————————————————————————Junk Yield Premiums Soar on China’s Looming First Default

The extra cost to borrow for China’s riskiest companies is at the highest in 20 months as soaring interest rates heighten concern the nation will experience its first onshore bond default.

The yield gap on five-year AA- notes over AAA debt jumped 27 basis points last month to 224, the most since June 2012, Chinabond indexes show. Ratings of AA- or below are equivalent to non-investment grades globally, according to Haitong Securities Co., the nation’s second-biggest brokerage. The similar spread in the U.S. is 403 basis points, Bank of America Merrill Lynch data show.

The failure of coal companies to meet payment deadlines for trust products has increased concern over debt defaults, with the equivalent of $53 billion of bonds sold by renewable energy, construction materials, metals and mining companies due in 2014. A report on Jan. 30 signaled China’s factories are contracting for the first time since August amid signs of financial stress including mounting losses and bailouts.

“China’s bond market will definitely see its first default this year,” said Xu Hanfei, a bond analyst in Shanghai at Guotai Junan Securities Co., the nation’s third-biggest brokerage. “The economy is slowing while the government seems still confident about growth, which means the authorities probably won’t announce any measures to avert the slowdown. This is the worst scenario.”

Financial Panic

A further $21 billion of securities in those three sectors mature in 2015, the Bloomberg data show, with companies including Baoshan Iron & Steel Co., China Minmetals Corp. and Wuhan Iron & Steel Co. among the most indebted. Bonds of steel and coal companies are under added pressure considering the government’s campaign to reduce smog, and industry overcapacity, according to Moody’s Investors Service, which has a negative outlook on both.

LDK Solar Co. is looking at ways to restructure obligations on its offshore yuan debt after missing payments on its dollar debt last year. Zhuhai Zhongfu Enterprise Co. (000659), a manufacturer of beverage packaging, said on Jan. 28 its 2015 debentures may be suspended from trade after its estimated net loss was as much as 450 million yuan ($74.2 million) in 2013. The yield on the 5.28 percent notes has climbed 217.5 basis points this year to 18.76 percent, exchange data show.

Steel, Shipping

The world’s second-biggest economy slowed in the fourth quarter to 7.7 percent from 7.8 percent in the previous three months as Premier Li Keqiang drove up money-market rates to encourage companies and local governments to deleverage.

China’s central bank signaled in a Feb. 8 report that volatility in money-market interest rates will persist and borrowing costs will rise, further underscoring the risk of defaults which could weigh on confidence and drag down growth.

China Credit Trust Co. reached an agreement last month to repay bailed-out investors in a high-yield product whose threatened failure spurred concern bad debts will rise in the nation’s $1.7 trillion trust industry.

The gap between top-rated and lower-rated bonds in China may widen further this year as news about possible defaults shakes the market, according to Cheng Qingsheng, an analyst at Evergrowing Bank Co.

“There should be a default in China’s onshore bonds this year,” Shanghai-based Cheng said. “Privately issued bonds have higher default risks than publicly traded bonds.” A first default may happen in the steel, coal, shipping or photovoltaic power industries, Cheng said.

Default Swaps

As default concerns escalate, the cost of insuring the nation’s debt against non-payment is rising. China’s credit-default swaps have increased 13 basis points this year to 93 as of Feb. 7. Theyuan fell to 6.0646 per dollar on Feb. 7, the lowest level this year. It was little changed at 6.0605 as of 10:32 a.m. in Shanghai.

There have been no defaults in China’s publicly traded domestic debt market since the central bank started regulating it in 1997, according to Moody’s.

Local governments have helped some companies avert missing payment deadlines, according to Yao Wei, the Hong Kong-based China economist at Societe Generale SA. CHTC Helon Co., a fiber maker which used to be called Shandong Helon Co., repaid 400 million yuan of notes in April 2012 even as it failed to make loan repayments.

Shanghai Chaori Solar Energy Science & Technology Co. (002506), which averted default on an interest payment last year and had just 618.7 million yuan cash as of September, will pay 898 million yuan of debt in March, according to Guotai Junan. The solar-panel maker’s debt-to-asset ratio was 90.1 percent at the end of the third quarter, according to a company financial report released Oct. 27.

High Cost

Other companies are receiving help from related entities. Changzhou Wintafone Chemical Co., a maker of herbicides and insecticides based in the eastern province of Jiangsu, said last month it’s stopped production and can’t repay notes due in March. Changzhou Qinghong Chemical Co., the note’s guarantor, repaid 36.9 million yuan on its behalf on Jan. 17.

A first default may be avoided if local governments continue to step in, said Beijing-based Yang Feng, a bond analyst at Citic Securities Co., the nation’s biggest brokerage.

“The cost of a default on a bond would be very high,” said Yang. “If a company in Shanghai defaults, it would be difficult for every company in the city to raise money.”

Turning Cautious

The yield on AA- rated five-year corporate bonds climbed 13 basis points last month to 8.38 percent. The rate on the benchmark five-year government bond dropped 24 basis points to 4.22 percent over the same period.

The average yield on high-yield Dim Sum bonds, or yuan-denominated notes sold in Hong Kong, has climbed 14 basis points this month to 5.66 percent on Feb. 6, the highest since October, according to an index compiled by HSBC Holdings Plc. Yields averaged 5.52 percent on Dec. 31.

U.S. dollar-denominated 13.25 percent notes sold by Glorious Property Holdings Ltd. (845) in February last year and due in 2018 were yielding 19.61 percent on Feb. 7, Bloomberg-compiled prices show. The company’s chief executive officer and chief financial officer resigned last week, less than one month after shareholders rejected an offer by Chinese billionaire Zhang Zhirong to take the developer private.

“Investors have turned cautious on high-yield bonds,” said Guotai Junan’s Xu, who forecasts China’s economy will grow 7 percent this year. “Since China’s onshore bond market hasn’t had a default, the market may not have priced in all the risk it should have.”

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Economic Survey Proves, Most Economists Are Worthless

If the article below does not prove that the economists are no better than clowns in forecasting future events, nothing else will. I don’t know why the profession exists, but I guess someone must get paid for taking past events and forecasting them into perpetuity. If you have wondered why 99.5% of the economists, including Bernanke, Greenspan and Yellen missed the 2000, 2007 and the rest of the bubbles, wonder no more.

In the past I used to think that they really know, but for one reason or another, mislead the public into believing that everything is fine. However, after watching them in action for some time, I am really beginning to think that they believe in their interpretation of reality and their “lets print our way to prosperity” approach.   Making them not only reckless, but pretty damn stupid. 

Based on the survey, the economy is about to accelerate because the weather is getting better, the emerging markets distress is over, the stock market correction is over, the unemployment rate is collapsing, corporations are hiring by the millions and only sunshine and flowers are on the horizon. Yet, you know better dear reader.  

EconomistsMessedUp

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Economists: U.S. will see better growth in ’14

Despite some disappointing economic news recently, economists surveyed by USA TODAY expect the recovery to accelerate this year.

The U.S. economy is headed for stronger growth in 2014 that will steadily chip away at the unemployment rate, top economists predict in a largely optimistic USA TODAY quarterly survey.

The jobless rate, which dipped to a five-year low of 6.6% in January, will fall to 6.3% by the end of the year, their median forecast indicates.

Job gains, which averaged 194,000 a month last year, will reach a monthly average of 200,000 this year, they predict. Employers added 113,000 jobs in January, well under many economists’ forecasts, the government reported last week.

The economy got off to a slow start in January as a result of financial turmoil in emerging markets, a stomach-churning drop in stock prices and extreme winter weather that kept many shoppers at home. But the economists surveyed expect growth to accelerate after a weak first quarter, reaching a solid 2.8% rate for the year.

“I think we will regain momentum and not fall on our face,” says Diane Swonk, chief economist of Mesirow Financial, drawing a contrast with previous ups and downs in the five-year-old recovery.

Many of the 40 economists surveyed Feb 5-6 recently cut their first-quarter forecasts. Most of the change is due to the adverse January weather and an expected pull-back in business stockpiling after firms aggressively replenished shelves in the second half of 2013.

While growth late last year was driven largely by the stockpiling, this year’s expansion will be fueled by higher consumer and business spending, says Dean Maki, chief U.S. economist of Barclays Capital.

“It’s more durable,” he says.

Many were anticipating a breakout year in 2014, signaling a new course for a generally sluggish recovery. Households have shed much of the debt they amassed during the mid-2000s real estate bubble. A stock run-up and rising home prices have made consumers feel wealthier. And the effects of federal spending cuts and tax increases are fading, while state and local governments are poised to increase outlays after years of austerity.

Several economists say those improving fundamentals remain intact. Some see financial troubles in emerging markets such as Turkey and Brazil as risks to the USA’s outlook. Chris Varvares of Macroeconomic Advisers has trimmed his growth forecast, saying the turmoil could curtail U.S. exports and stock prices, crimping business investment and consumer spending.

But more than eight in 10 of those surveyed said January’s stock sell-off and emerging markets’ woes have not caused them to be less optimistic about growth this year. Sixty-four percent said their 2014 forecasts are more likely to prove too conservative than too rosy.

Maki says the recent stock swoon pales compared to last year’s market gains and is unlikely to hurt consumer spending this year. Rising interest rates may cause Americans to buy smaller homes, but they shouldn’t deter purchases, he says.

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Weekly Stock Market Update. InvestWithAlex.com February 8th, 2014

2/8/2014

daily chart Feb 7, 2014

Continue to maintain a LONG/HOLD position -OR- In CASH .

Weekly Summary: 

Quite a volatile week. We started off with a massive drop on Monday, subsequent stabilization and a rally towards the end of the week. When it was all said and done the Dow Jones gained 95 points (+0.61%) while the Nasdaq gained 22 points (0.54%).  The volatility is back and that’s a good thing. Structurally, the market did very well, leaving only one gap unfilled. That was on Thursday (around 15,500) and it is highly probable (based on my work) the market will go back to close this gap next week.  

The question on everyone’s mind is…..

Is this correction over? Can we get on with the bull market?

Not so fast. As I have indicated many times on this blog already, the Dow Jones topped out on December 31st, 2013 at 16,588. My mathematical analysis and work confirm that. What we are witnessing right now is the first stage of the bear market that will take us into the 2017 bottom. Again, the structure of the upcoming bear market move will be very similar to the bear market move between January of 2000 and March of 2003.

In short, a lot of volatility, a lot of violent ups and downs and a general downtrend that will take us into the 2017 bottom. Such internal market structure will make it very difficult for all (longs, shorts and traders) to make money in this market. You only have two options.

First, you can simply go short for the duration of the move. But only after the bear market is confirmed. If that is not exciting enough, you might want to concentrate on timing bull/bear moves over the next few years to maximize your returns. BTW, that is exactly what we specialize in here. Please check out our +Subscribe section.

Thus far, our model portfolio (within our premium section) has been in cash @ 10 Year Note, helping us avoid the decline while we wait for a bear market confirmation. Otherwise, I recommend people to maintain their LONG/HOLD positions.  

Remember, there is vast difference between proper or exact timing and smart money management.   

Fundamental Analysis: 

There has been no change in the fundamental picture. As you know, my fundamental case remains fairly straight forward and clear cut. All stocks and most other markets (credit and real estate) are substantially overvalued due to massive infusion of credit by the FED over the last few years and pure speculation. How overvalued are we?  

market to gdp

The chart above is just another data point we can use in our analysis and comes to us via courtesy of Dshort.com. The chart essentially indicates that today’s overall market valuation is above 2007 valuation levels. Looking back, we know that valuation levels at 2007 were extreme and subsequent collapse to the tune of 60% proved that without a shadow of the doubt.

While we have already surpassed 2007 levels, the market is still below 2000 levels. Does that mean you can breathe a sigh of relief? Not in the slightest.

Here is why…..

Speculative levels of 2000 tech bubble were caused by simple speculation in the tech sector and subsequent excesses throughout the economy/markets. Today’s valuation excesses are caused by massive infusion of credit. When we take that into consideration, I would argue that today’s valuation levels (once again, driven by credit) are higher than 2000 valuation levels. When the credit is finally withdrawn or becomes ineffective, both occurring simultaneously in today’s environment, the valuations are bound to collapse.    

Macroeconomic Analysis: 

An interesting week. Both Ukraine and Argentina are putting capital controls into their markets, indicating an upcoming economic collapse in both countries. A number of economist came out blaming “Emerging Markets” for market instability within the US. Of course, they are once again wrong. It is the not the Emerging Markets that are causing problems throughout the world, but the US Economy and the end of the credit binge that is causing all sorts of problems. It simply being felt more prominently in a weaker emerging market economies. That will soon change.  

Japan continues to try spark its economic growth through monetary intervention, currency devaluation and angering menstruating women.  All idiotic moves leading to an eventual disaster.  The UE bureaucrats continues to pretend that everything is fine by offering Greece further extensions in hopes that Greece will pay them back. I think it’s time for the EU to admit that it is never going to happen. In fact, they might as well usher in the unavoidable and the unthinkable. Greek default.  

Technical Analysis: 

While the overall technical picture continues to remain murky, the resolution should be just around the corner.

Long-Term: The trend is still up. Market action in January-February could be viewed as a simple correction in an ongoing bull market. 

Short-Term: Even though the market bounced from Tuesdays lows, the short term picture remains down. Please see my timing analysis for further instructions. 

Overall, we must wait for a confirmation before taking a short position. 

Mathematical & Timing Analysis: 

We have two possible scenarios playing out.  

As mentioned in our daily updates, my mathematical timing work indicates a significant turning point on February xxxx with the initial price target of xxxx. As of right now, I believe the bounce we have experienced over the last few days is just that, a bounce. As such, I anticipate the market to roll over early in the week and continue its bear move to hit the price/time targets below.

However, in case we do get a follow through of the current rally early next week, I would have to adjust my view and call for a top (instead of a bottom) on February xxxx. If this scenario comes to fruition we might be at an important juncture of bear market confirmation. As such, the first few trading days of the upcoming week is incredibly important.  

Time Targets: xxxx

Price Targets: xxxx

CONCLUSION: 

If you are out of the market as we have been, stay out. If you are still fully invested consider liquidating your positions as we go through a rebound over the next few weeks. Once the rebound plays itself out and the market confirms the next bear leg down, I would recommend going short at that time. 

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section

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Weekly Stock Market Update. InvestWithAlex.com  February 8th, 2014 Google

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Are Stock Valuation Higher Than 2000 and 2007 Tops? You Bet Your Sweet Ass They Are!!!

Well, kind of. The chart below is a very simple, yet a power look at today’s valuation levels. It shows that while we have already surpassed 2007 valuation levels, we are still a few clicks away from the 2000 levels. At the same time this is not the main issue here.

It is important to understand where we came from, what we are comparing and why it is incredibly important for your overall portfolio. The late 90’s and subsequent top in January of 2000 were caused by the tech bubble. We all know that. As a result of its collapse, the FED’s had opened the flood gates of credit to stabilize the economy and to avert a deep recession. That money flowed directly to real estate, mortgage finance and the stock market….creating a powder keg that exploded in 2007-09. 

The FED’s, once again, raced to the rescue, scared to death, trying to avoid the next “Great Depression”. This time around, not only did they flood the market with cheap credit, but they went as far as creating money out of thin air and monetizing the debt to the tune of $3 Trillion over the last 3 years alone. The money, once again, flowed into the stock market, and to a lesser degree real estate, creating overvaluations and speculation in every sector of the economy. 

So, let me ask you. Is it different this time? Can a collapse/recession be avoided? Are these valuation at an appropriate level or is the stock market incredibly overpriced? 

I think you know what my answer will be. It’s clear (as per chart below) that the market is above 2007 levels. What that chart does not show is that today’s values, as opposed to values in 2000, are driven by credit. Meaning, in real terms, today’s market is likely to be a lot more expensive than it was at  the high of the tech bubble. 

Dr. Marc Faber clearly agrees in the article below. As always, his analysis is right on the money. I highly encourage you to read it. 

Finally, I have clearly stated a number of times on this blog and as per my mathematical/timing work, the bull market from the March of 2009 bottom has topped out on December 31st, 2013. Further, this same mathematical work indicates that the market is set for a bear market leg that will last into 2017. As such, it would be prudent to educate yourself on the matters above while protecting your overall portfolio and wealth. 

I wish you luck. 

Chart Courtesy Of dshort.com

market to gdp

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Dr. Doom: Tech stocks even more overvalued now than in 2000

With stocks worldwide off to a bad start in 2014, one man isn’t surprised by any of this.

Dr. Marc Faber, editor and publisher of the Gloom, Boom, and Doom Report, thinks the drop in the markets, particularly with US stocks, were nothing compared to what they could – or should – have done.

While turmoil in emerging markets is often cited as the culprit for stocks’ decline, others are pointing the finger at the Federal Reserve Bank for tapering its monetary stimulus. Faber believes the fall in equities is the fault of the Fed, but not because of tapering.

“It’s easy to blame someone else for ones problems,” says Faber. “Emerging markets central bankers are blaming now the Fed for the tapering… The Fed has brought about problem in emerging economies. But, it’s not the tapering. It’s the previous bubble they created because investors were chasing yield. They bought emerging market stocks, emerging market currencies, and bonds. They pushed up these asset prices to relatively high levels.”

Though the correction in stocks caught some off guard, Faber says he wasn’t surprised by anything other than people’s reaction.

“The market in the US, the S&P went from 666 in March 2009 – almost five years ago – to 1,850,” says Faber. “Now the market dropped 7% and it seems that it’s the end of the world. This is ridiculous.”

“Compared to the previous increase in prices,” says Faber, “the market retreat of 7% is nothing, nothing at all!

Where Faber sees a bubble is in the tech sector, particularly with social media stocks. He was short Twitter, which until Wednesday was up 45% from its IPO closing price of $44.90. He says he covered his short as shares dropped to $50 per share Thursday. However, he is generally not hopeful for the sector.

“Social media stocks are more overpriced than the internet shares were in year 2000,” says Faber.

Besides Twitter’s staggering 24% drop on Thursday, Pandora was down 10% and LinkedIn took a 7% hit in afterhours trading before Friday morning’s opening bell.

Faber warns investors hoping to make easy money by shorting social media stocks that they may get hurt. Yet he doesn’t buying them to make a quick buck is a good idea, either. In other words, investors should just stay away from social media stocks.

“In year 2000, between January and March, [internet stocks] still went up 30%…. And then, it collapsed,” says Faber. “I’m not saying that individual investors should short these stocks because they may get burned. But, by and large, the fact that they still go up doesn’t make them good value from a long-term perspective.”

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Stock Valuation Higher Than 2000 and 2007 Tops? You Bet Your Ass They Are!!! Google

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Bitcoin Wild Swings Continue. Down 25% In Two Days.

Check out the chart below. Is that something you want to invest in? 

If your answer is YES, you have got more balls than brains. Taking merits of this digital currency aside, at the end of the day no one really knows how much bitcoins are worth. They could be worth $1 Million or they could be worth $1. It is purely arbitrary. You can’t value it and as such it is not an investment. It is a pure speculation. Anyone who claims otherwise is full of shit.

Is there utility in Bitcoin. Certainly. However, the utility part can be equated to early American colonial times, where every little town had its own currency. Same thing will happen with onslaught of digital currencies over the next decade. Who will win?  One thing is for sure. I am not smart enough to figure it out, but good luck speculating in Bitcoins.    

bitcoing chart

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Bitcoin Wild Swings Continue. Down 25% In Two Days.  Google

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AOL Wages War Against Pregnant Women…It’s About Time

Sometimes, something magical happens. Sometimes a red blooded American stands up, cuts through all the bullshit and calls it like it is. Today was one of those days and I solute you Tim Armstrong, the CEO of AOL. Too bad you will now be crucified by the feminist Nazis and the traditional media outside of AOL. 

WOW. AOL spent $2 Million on just 2 “distressed babies”. What the hell is a “distressed baby” anyway? Here is the bottom line. The companies still have no idea what ObamaCare will cost them over the next few years and how it will change our healthcare system. Actually, no one knows. The best analyst covering the sector are basically sitting with a thumb up their ass without the slightest clue of what the system will look like over the next 5 years and what kinds of extra costs business will have to carry…..

One thing becoming painfully obvious.  It will cost a lot more than anyone anticipated. In both premiums, healthcare costs as well as jobs lost. What AOL did is just the beginning. As soon businesses find out the true costs, you will see cuts across the board. Hitting you where it hurts the most. Your pocket. You wanted change? You got it. 

AOL 2013 Digital Content NewFront———————————————————————————————————-
AOL CEO Blames Workers’ Costly Pregnancies, Obamacare for 401(k) Cuts

AOL CEO Tim Armstrong

Can a coworker’s pregnancy hurt your 401(k) plan? If you work at AOL (AOL), the answer appears to be yes.

CEO Tim Armstrong on Thursday blamed a change in AOL employees’ 401(k) match on new costs associated with Obamacare, as well as $2 million AOL spent for two employees’ “distressed babies,” according to Capital New York, which said it obtained a transcript of Armstrong speaking on an internal conference call.

AOL, which owns the Huffington Post and Engadget, will now pay out company matching funds in one lump sum at the end of the year, and only to employees who are “active” on Dec. 31. IBM (IBM) made a similar change to its 401(k) plan in 2012, to help cut costs. Armstrong told CNBC that the new health law will impose $7.1 million in new costs on AOL, forcing the company to decide whether to pass those expenses to employees or to “try to eat as much of that as possible and cut other benefits?”

Health care experts questioned the accuracy of the $7.1 million figure, with one noting that employee costs incurred in 2012 would be irrelevant to the company’s costs in 2014. The CEO was more specific later in a conference call with company employees regarding the expenses of providing medical benefits. According to Capital New York, Armstrong said:

Two things that happened in 2012. We had two AOL-ers that had distressed babies that were born that we paid a million dollars each to make sure those babies were OK in general. And those are the things that add up into our benefits cost. So when we had the final decision about what benefits to cut because of the increased healthcare costs, we made the decision, and I made the decision, to basically change the 401(k) plan.

AOL did not respond to an after-hours request for comment. Online, the response was swift.

In a later email memo sent to AOL employees, published by the Huffington Post, Armstrong sought to clarify his remarks. “This morning, I discussed the increases we and many other companies are seeing in healthcare costs,” he wrote. “In that context, I mentioned high-risk pregnancy as just one of many examples of how our company supports families when they are in need. We will continue supporting members of the AOL family.”

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AOL Wages War Against Pregnant Women…It’s About Time Google

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Stock Market Update. InvestWithAlex.com February 7th, 2014

Daily Chart February 7, 2014

Continue to maintain a LONG/HOLD position if invested -OR- be in CASH if not. 

2/7/2014 – Another large rally in the market with the Dow up 165 points (+1.60%) and the Nasdaq up 69 points (+1.69%). 

Many market participants are calling for the end of the correction and continuation of the bull market. I believe they might be premature and the overall notion is beside the point. 

As I have stated so many times before, the Dow Jones topped out on December 31st, 2013, ushering in the next leg of the cyclical bear market scheduled to bottom in 2017. While the long-term technical trend remains up and this could be viewed as a correction, my mathematical work is rarely off. First, it is yet to be seen if the rally over the last couple of days has any legs or if this is a simple bounce. Based on my calculation it is possible that Monday was the bottom, but the point of force was not strong enough to confirm an intermediary bottom. 

Is it possible that the point of force discussed below is the top and not the bottom? Yes, that is a possibility. However, before I change my position to such an outcome, we must first have a strong follow through early next week. If we do not and if the market proceeds to roll over and go lower, the points of force below once again become our primary targets and turning points. 

Either way you twist this, the situation above does not impact our overall trading portfolio. We continue to stay in CASH or LONG/HOLD while waiting for a confirmation that the bear market is indeed here. Please see tomorrows weekly update for a more detailed analysis. 

Short-Term Projections:

As of today, I am not adjusting the points of force below. My mathematical work shows two points of force coming in February. Typically we should anticipate a turning point on such dates. (Would you like to see the exact points of force in both price and time? Please +Subscribe to our premium service above). 

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Book Formlead Big

Stock Market Update. InvestWithAlex.com February 7th, 2014 Google

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LinkedIn (LNKD) Generational Buying Opportunity?

Let’s make this very simple. Great quarter for LinkedIn. Pretty much as good as it gets. They lowered their forward guidance, hence the stock sell off. Should you buy?

Not if you like your money. No doubt, LinkedIn is a very well run company. Yet, it is way too expensive for my taste. With about $25 Billion market cap, forward revenue of about $2 Billion and slowing growth, LinkedIn is too richly priced. Certainty, the company will continue to grow at a fast clip, but even a stampede of unemployed workers coming to LinkedIn’s platform (due to upcoming recession) in order to spam each other about job opportunities won’t justify the valuation.

Now, valuation metrics aside, stocks tend to deviate (sometimes significantly) over a short period of time. Is it possible for LinkedIn to surge higher? Sure, but even technical picture is somewhat deteriorating. Today’s down gap is likely to be closed over the next few days. Yet, will LinkedIn and its expensive stock price be able to avoid the pull of the upcoming bear market? Given its rich valuation and slowing growth trajectory, I don’t believe so. If anything, I wouldn’t be surprised to see Linkedin stock price to be cut in half over the next 3 years.

linkedin chart

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Here is a good analysis

LinkedIn: Why Are Investors Paying So Much For This Stock?

Feb. 7, 2014 10:14 AM ET |  5 comments |  About: LNKD

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…)

LinkedIn’s (LNKD) Q4 and FYR lived up to expectations, but guidance was not what the market had hoped for. So once again the usual pounding happened in after hours trading, but to my surprise, not enough if you ask me.

Actually, the company’s results were great and I don’t think investors could have asked much more from the company. Anything more would have been unrealistic. But once again, the problem is not the results or even the guidance, it’s what you pay for it. And in LinkedIn’s case, investors are paying way too much.

I am not going to bother running down the numbers. The company’s results are here and the presentation is here. If you have not read them yet, go ahead and do so …

Let me tell you what shocked me from yesterday’s report. Earnings aside and taking only revenue into account, the chart below shows the quarterly revenue of LinkedIn over the past several years.

(click to enlarge)

The blue line is the quarterly revenue of the company up until its recent report. The extension to that, beyond Q4 of 2013 (the green line), are numbers filled in by me based on guidance. In other words, irrespective of the actual results, I started with Q1 of 2014 by plucking in $460 in revenue — which is management’s upper limit guidance — and from there I simply increase randomly revenue every quarter thereafter, so as to come within guidance of $2 billion in revenue for all of 2014 (the green line).

The red line calculates year-over-year quarterly revenue growth. Now up to the most recent quarter, quarterly growth on a year-over-year basis has been coming down since about Q3 of 2011. With the most recent results, it is now down to about 40%. But based on management’s guidance, that will come down to about 20% by the end of 2014.

My question is, is LinkedIn worth $26 billion? Is any company with $2 billion in revenue and with forward guidance of 20% revenue growth worth that much? In my book, LinkedIn is not worth $26 billion even with 50% year-over-year quarterly revenue growth, let alone 20%.

But let me ask investors another question. What will happen if the growth trajectory of the company continues to disappoint further in 2015 and 2016? How much of a multiple will the market put on LinkedIn then, if for example management’s guidance calls for 30% revenue growth in 2015 instead of the almost 50% that the market is expecting? Will the market still pay $26 billion for the company’s stock? My answer is no.

And if you want my opinion, if management disappoints again and the market realizes that the super high growth days are over, then it will mark the stock down beyond what anyone imagines. By how much we will have to wait and see, but even $100 a share is pretty farfetched for LinkedIn’s stock if you ask me.

The market was modeling $2.16 in revenue for 2014 and management gave the market around $2 billion. The market is modeling around $2.9 billion in revenue for 2015 and my guess is that analysts will be bringing that figure down. By how much makes no difference, because even with $3 billion in revenue, there is no reason for LinkedIn’s market cap to be around $26 billion anyway.

LinkedIn (LNKD) Generational Buying Opportunity?  Google

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US To European Union, “Straight Up F$%# You”

I am scratching my head here. Yes, yes… everyone knows that the US has the biggest cock on the block, but what the hell is the US doing meddling in Russia’s and EU business is beyond me. What was long speculated upon by Russia and Ukraine was finally revealed to be true. The US is sticking its big nose into Ukraine’s “you know what”, trying to smell what Russia is cooking. 

Yet, the US wasn’t done. One thing we have in excess in the “Land of the Free” is arrogance.  Taking this unlimited natural resource in mind, the US Officials proceeded to accuse Russia of spying on their secret communications.

WTF???  What planet do these people live on. First, NSA spies on every monkey with a cell phone on the face of this earth. Then the US Government tries to engineer or assist in a political coup in Ukraine (territory that Russia firmly controls) and they get “angry” because Russia intercepted their communication. I give up. The Dow is going to 25,000 by March….I better go buy some stocks now.  

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Bloomberg: Intercepted F-Bomb Phone Call Shows U.S. Role in Ukraine

Some undiplomatic language by the top U.S. diplomat for Europe has rattled relations with the European Union and added more tension to the East-West strains over Ukraine’s political crisis.

“F–k the EU,” Assistant Secretary of State Victoria Nuland said in a private phone call, expressing frustration with European Union efforts to resolve Ukraine’s political turmoil.

On the eve of Russia’s showcase Olympics in Sochi, the U.S. suggested yesterday that Moscow’s intelligence apparatus was involved in some way with the leaked recording of the intercepted phone call between Nuland and U.S. ambassador to Ukraine Geoffrey Pyatt. The call was made last month, based on references in the discussion.

State Department spokeswoman Jen Psaki blamed Russian “tradecraft” — a word used to describe espionage activity — after an unknown individual posted the audio recording on Google Inc.’s (GOOG) YouTube. The clip, which was subtitled in Russian rather than Ukrainian and accompanied by photographs and images of people mentioned in the call, was reported by the Kyiv Post earlier yesterday as Nuland arrived for talks in the Ukrainian capital.

US To European Union, “Straight Up F$%# You” Google