Mid-Day Market Report
Seth Klarman Tells His Investors: Central Banks Are Treating Investors Like “Foolish Children”
"Surreal doesn't even begin to describe this moment," Seth Klarman noted in his second-quarter letter to the Baupost Group investors. Commenting on the market developments over the past six months, the value investor stated that events, which would typically occur over an extended time frame, had been compressed into just a few months. He noted Read More
- US: Dow: 12831.69 (-0.33%), S&P 500: 1345.10 (-0.49%), NASDAQ: 2919.38 (-0.40%)
- Europe: CAC: 3375.64 (-0.26%), DAX: 6728.19 (-0.15%), FTSE: 5899.87 (-0.10%).
- Asia: China: 2344.77 (-0.30%), Hong Kong: 20917.83 (0.15%), India: 5417.95 (0.51%), Japan: 9052.07 (0.58%)
- Metals: Gold: 1716.00 (-0.52%), Silver: 33.33 (-1.16%), Copper: 3.81 (-0.89%)
- Energy: Crude Oil: 100.41 (-0.50%), Natural Gas: 2.53 (3.99%)
- Commodities: Corn: 6.35 (-0.70%), Soya Bean: 12.59 (0.52%), Wheat: 6.38 (-0.58%)
- Currency: EUR/USD: 1.3110 (-0.5767%), GBP/USD: 1.5673 (-0.5940%), USD/JPY: 78.4435 (1.1235%)
- 10 year US Treasury: 1.924% (-0.050)
Market News Update
Wall Street dips: U.S. stocks retreated Tuesday afternoon as Wall Street’s economic and eurozone concerns were renewed by a weaker-than-expected retail sales report and the cancellation of a key meeting on the Greek bailout. As of 1:05 p.m. ET, the Dow Jones Industrial Average fell 53.44 points, or 0.42%, to 12820.76, the Standard & Poor’s 500 slipped 7.22 points, or 0.53%, to 1344.54 and the NASDAQ Composite declined 15.56 points, or 0.53%, to 2915.84. http://money.cnn.com/2012/02/14/markets/markets_newyork/index.htm?iid=HP_LN
Retail sales weaker than expected: U.S. retail sales rose less than expected in January as consumers cut back on car purchases and did less online shopping, while import prices, particularly in energy, pushed higher. http://www.reuters.com/article/2012/02/14/us-usa-economy-idUSTRE7BM0AB20120214
Italy, Spain debt cost falls to lowest level in almost a year: Italy’s three-year borrowing costs hit their lowest since March at an auction on Tuesday, with an overnight sovereign rating cut having little impact as cheap ECB loans continued to support demand and ease its path towards an ambitious refinancing goal. Spain, also caught by Moody’s downgrade of six euro zone states, and Belgium each saw their cost of funds fall further at bill sales on Tuesday, while even Greece, seen at risk of a chaotic default next month, managed to place three-month paper.
Oil declines: Oil declined in New York, reversing an earlier advance of 0.9 percent. Oil for March delivery fell 27 cents, or 0.3 percent, to $100.64 a barrel at 1:02 p.m. on the New York Mercantile Exchange. Earlier the contract climbed to $101.84, the highest price since Jan. 19.
Company News Update
- Bank of America (BAC) dropped 3% after being downgraded to “neutral” from “buy” by analysts at Citigroup amid concerns about earnings headwinds.
- Goodyear (GT) notched its first annual profit in four years, but the tire maker’s fourth-quarter non-GAAP profit of 3 cents a share badly missed Wall Street’s expectations for 20 cents. Revenue rose 12% to $5.7 billion, trailing forecasts for $5.88 billion.
- Apple (AAPL) is testing a new tablet device that will feature a smaller, 8-inch screen as the consumer electronics maker looks to capture market share, The Wall Street Journal reported. It’s not clear what the new device would be called. Apple is also preparing to unveil in March the iPad 3, which will feature a higher resolution screen as its predecessor, the paper reported.
- Boeing (BA) on Tuesday landed its biggest-ever commercial jet order valued at about $22.4 billion with Lion Air, as demand for its more fuel-efficient aircraft continues to surge. Indonesia’s largest carrier by passenger volume ordered 230 planes, including 201 of Boeing’s latest passenger jet still in development, 737 MAX, and 29 next-generation 737-900 ERs.
- Watchmaker Fossil (FOSL) reported a much stronger-than-expected fourth-quarter profit on sharply higher watch sales in North America and an increased presence in Asia.
- Shares of Michael Kors (KORS) popped after the fashion label posted better-than-expected fiscal third-quarter earnings and revenue, and also issued upbeat guidance for the fourth quarter.
- Masco (MAS) shares plunged after the home improvement and building products maker reported a narrower quarterly loss, but missed analysts’ expectations.
- Shares of Hospira (HSP) rose after the maker of injectable drug technologies reported quarterly results that beat analysts’ expectations.
- Avon Products (AVP) reported weaker-than-expected fourth-quarter results as sales slid in every market except Latin America and the company saw a three percent drop in the number of representatives who sell its cosmetics directly to consumers.
Hedge Fund News Update
- Point State Capital, one of last year’s most celebrated new hedge funds, for the first time has revealed what it owns, showing a taste for some industry favorites like Apple and some recent winners like drug company Gilead . Point State was founded by Sean Cullinan and a handful of colleagues who left Duquesne Capital Management when industry titan Stanley Druckenmiller announced in August 2010 that he would close his famed, decades-old fund.
- Yesterday, two former Bear Stearns hedge fund managers settled S.E.C. civil-fraud charges by paying $1.05 million and being banned from the securities industry for a few years, (of course) without admitting or denying they engaged in any wrongdoing. The pair, Ralph Cioffi and Matthew Tannin, who ran a couple of leveraged subprime-laden hedge funds that imploded in 2007, faced criminal-fraud charges in a 2008 case.
- New York-based hedge fund Starboard Value and paper products company Wausau Paper have agreed to new members for Wausau’s board. Under the terms of the agreement, Wausau has agreed to nominate two new directors recommended by Starboard who are not affiliated with either firm, according to a company statement.
- A former proprietary trader who ran the oil trading desk at Goldman Sachs until he left in December is planning to launch a commodities hedge fund later this year. Taimur Hassan, a managing director who was responsible for oil trading across Europe, the Middle East and Asia, at the US bank has set up Frere Hall Capital Management, according to documents filed at Companies House.
- Octavian Special Master Fund, a US hedge fund, has failed in court to have Balda Chairman Dr Michael Naschke dismissed, Balda said in a press release.
- Koch Industries is being sued in relation to the biggest Ponzi scheme in U.S. history. The hedge fund fraud that Bernie Madoff pulled off received money from a Koch feeder fund, according to Irving Picard, the Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC. The company run by billionaire brothers Charles and David Koch, is being sued for $21.5 million, according to the complaint filed Feb. 9 in U.S. Bankruptcy Court in Manhattan. Madoff is currently serving 150 years in federal prison.
- London-based boutique investment firm Aros Capital Partners has reported that its main hedge fund Aros Paradigm Fund returned 14.54% in January compared to its benchmark, HFRX Macro Index (EUR) which was down 1.28% during the same period. The strong results also brought the fund’s assets to $33.10m as at the end of last month. Aros Capital’s AuM is pegged at $410m.
- Craig deLaurier, who most recently worked at Paul Singer’s Elliot Management, is planning to launch his own hedge fund later this year, according to news reports this week. To be known as Cerro Capital Management, it will implement a credit strategy focused on convertible arbitrage and is slated to launch this summer with between $50 and $100m.
- Northern Trust Alternatives Group has hired several hedge fund veterans to build and strengthen its capabilities for institutional and individual clients. Anthony Zanolla has been named head of Portfolio Management, Tony Lissuzzo as director of Hedge Fund Research, Bob DiCarlo will serve as chief administrative officer and Aimee Wright was appointed as investor relations consultant, according to a company statement.
- Pamplona Capital Management LLP, the asset manager founded by former Alfa Bank Chief Executive Officer Alex Knaster, plans to raise as much as $300 million for a new fund to invest in structured credit in Europe. The Debt Partners II fund is targeting an annual return of between 15 percent and 20 percent by buying BB to AA rated portions of U.K. mortgage-backed securitizations and European collateralized loan obligations, according to Zoran Kozic, a partner at London-based Pamplona