http://crackerjackfinance.com Crackerjack Finance - Investing A Step Ahead Wed, 30 May 2012 16:45:51 +0000 en hourly 1 http://wordpress.org/?v=3.2.1 http://crackerjackfinance.com/2012/05/how-heavily-shorted-is-facebook/?utm_source=rss&utm_medium=rss&utm_campaign=how-heavily-shorted-is-facebook http://crackerjackfinance.com/2012/05/how-heavily-shorted-is-facebook/#comments Wed, 30 May 2012 14:52:20 +0000 crackerjack http://crackerjackfinance.com/?p=2254 It is well known how the Facebook (FB) IPO is setting up to be the flop of the decade. Stunning that one of the profound technological/media companies of a generation is now such a historically awful IPO. There are plenty of negatives stemming from the debacle including: Continued disillusion from retail investors who heavily participated in the deal Additional mistrust of Wall Street as issues regarding conflict of interest and fiduciary duty get scrutinized Another instance of poor judgment at a Wall Street brokerage, Morgan Stanley, right on the heels of JP Morgan’s risk management, which was, well, “flawed, complex, poorly reviewed, poorly executed, and poorly monitored.” A few items to think about for longer-term investors who are looking to a position in the shares: 1)  Facebook shares have been made available to hedge funds for shorting earlier than normal based on very high demand and a short base is building. How large is it? 2)  Options trading began yesterday with volume in put options greatly outweighing volume in the calls. With such high demand for put positions there is additional selling/shorting pressure on the shares. 3)  The technical are horrible. 4)  Although the deal price getting raised all the [...]]]> http://crackerjackfinance.com/2012/05/how-heavily-shorted-is-facebook/feed/ 5 http://crackerjackfinance.com/2012/05/heinz-an-emerging-market-food-leader/?utm_source=rss&utm_medium=rss&utm_campaign=heinz-an-emerging-market-food-leader http://crackerjackfinance.com/2012/05/heinz-an-emerging-market-food-leader/#comments Tue, 29 May 2012 14:16:08 +0000 crackerjack http://crackerjackfinance.com/?p=2246 Heinz (HNZ) had an Analyst Day on Thursday last week with about four hours of management presentations and Q&A posted on the investor relations section of the Heinz website. This presentation is a wonderful way to understand the Heinz business model and appreciate the strategic vision of the company. Heinz stock had a relatively strong run hitting new all-time highs around $55. Post-results the shares have pulled back based on fears relating to the extent of reinvestment into restructuring projects, weakness in the frozen entrée category, exposure to Europe, and a near-term reduction in sales expectations as the company is being hit by foreign exchange and focusing on some low hanging fruit margin opportunities. Despite the concerns, Heinz is very well positioned strategically with a number of positives within the US listed food space. Here are the emerging market related strengths:   Heinz has acquired and organically grown food businesses in the largest emerging markets including: China, Brazil, Russia, India and Indonesia. Heinz over-indexes to emerging markets with 21% of sales coming from this region and near-term visibility to get to 25% of sales. Heinz margins are held back in EM through reinvestment but are set to expand over the [...]]]> http://crackerjackfinance.com/2012/05/heinz-an-emerging-market-food-leader/feed/ 2 http://crackerjackfinance.com/2012/05/europe%e2%80%99s-prisoner%e2%80%99s-dilemma-%e2%80%93-ltro-needs-to-continue-for-years/?utm_source=rss&utm_medium=rss&utm_campaign=europe%25e2%2580%2599s-prisoner%25e2%2580%2599s-dilemma-%25e2%2580%2593-ltro-needs-to-continue-for-years http://crackerjackfinance.com/2012/05/europe%e2%80%99s-prisoner%e2%80%99s-dilemma-%e2%80%93-ltro-needs-to-continue-for-years/#comments Tue, 22 May 2012 04:49:54 +0000 crackerjack http://crackerjackfinance.com/?p=2241 European leaders have inadvertently created one of the financial world’s largest negative feedback mechanisms. By issuing long-term refinancing operations (LTRO) with cheap ECB funding for terms up to three years and encouraging European banks to take the funding and purchase assets such as sovereign debt, the ECB effectively has encouraged the European financial system to purchase and hold “money good” European sovereign debt. With cheap funding available and the ECB encouraging banks to take the money and invest/lend a situation was created where the natural buyers of sovereign debt were propped up and supported. With many of the bonds in Spain and Italy having maturities in the vicinity of 5-10 years, there is a good chance that the LTRO will need to continue for a number of years until the debt can be run-off the financial sector’s balance sheet. Moreover, until the economies in Italy and Spain are growing there will continually be difficulty finding new sovereign debt investors as bonds get rolled over. It is likely that the ECB’s LTRO will be forced to continue until Europe is no longer in a recession and the universe of Italian and Spanish debt buyers is sufficiently broadened. For now there is [...]]]> http://crackerjackfinance.com/2012/05/europe%e2%80%99s-prisoner%e2%80%99s-dilemma-%e2%80%93-ltro-needs-to-continue-for-years/feed/ 3 http://crackerjackfinance.com/2012/05/deja-deja-vu-%e2%80%93-a-third-summer-of-european-crisis/?utm_source=rss&utm_medium=rss&utm_campaign=deja-deja-vu-%25e2%2580%2593-a-third-summer-of-european-crisis http://crackerjackfinance.com/2012/05/deja-deja-vu-%e2%80%93-a-third-summer-of-european-crisis/#comments Fri, 18 May 2012 13:58:16 +0000 crackerjack http://crackerjackfinance.com/?p=2234 Over the past week, it has become clear that a third annual conflagration throughout Europe is upon us. The crisis has morphed yet again, and like The Hydra, it has come back in a more menacing form. The issue this summer is more profound than the “sovereign debt crisis” which struck last summer. Last summer’s issues were always containable with simple resolve from the ECB. The market forced the issue in sudden manner and eventually a fix came in the form of 3-year long-term refinancing operations (LTRO).  Astute observers will notice that today, sovereign debt rates, while higher, have not flared up to the levels they reached last year. European interest rates should not approach summer levels because there is a set playbook that works to contain sovereign rates as soon as the ECB feels the sufficient amount of urgency to spring into action. Over the past 6-months, fiscal austerity has been implemented across much of Europe and it simply hasn’t shown any evidence of success. Closing budget deficit gaps and paying down debt is a solution that works quickly when growth is high and works over a stretched out period when growth is slow or even flat. If growth [...]]]> http://crackerjackfinance.com/2012/05/deja-deja-vu-%e2%80%93-a-third-summer-of-european-crisis/feed/ 1 http://crackerjackfinance.com/2012/04/like-qe-the-ecb%e2%80%99s-long-term-refinancing-operations-will-continue-for-years/?utm_source=rss&utm_medium=rss&utm_campaign=like-qe-the-ecb%25e2%2580%2599s-long-term-refinancing-operations-will-continue-for-years http://crackerjackfinance.com/2012/04/like-qe-the-ecb%e2%80%99s-long-term-refinancing-operations-will-continue-for-years/#comments Mon, 23 Apr 2012 12:59:49 +0000 crackerjack http://crackerjackfinance.com/?p=2224 I came across an article in The Telegraph by Ambrose Evans-Pritchard which does a good job of highlighting the circularity of the ECB’s LTRO and associated bond buying. As banks throughout Europe took advantage of ECB stimulus, which they were de facto encouraged to do by Mario Draghi and the ECB, it is clear that both the stimulus itself as well as ECB sovereign debt purchases will be needed until there is a solid economic recovery throughout the periphery of Europe. With austerity implementation to reduce deficits, economic recovery for many counties in Europe could be years away. With the automatic stabilization mechanisms in peripheral Europe broken as weaker economic growth leads to higher interest rates it will become necessary for Europe to continue to cap interest rates to avoid a crisis. There is simply no choice in this matter. Since the ECB has shown ability to avoid a collapse last year, they will go right back to the same playbook when pressed by the markets. Germany will ultimately lessen resistance to interventionist ECB policies in the future because there is too much to lose. The German economy is very strong relative to the rest of Europe with unemployment at [...]]]> http://crackerjackfinance.com/2012/04/like-qe-the-ecb%e2%80%99s-long-term-refinancing-operations-will-continue-for-years/feed/ 2 http://crackerjackfinance.com/2012/03/bernanke%e2%80%99s-labor-market-speech-%e2%80%93-the-case-for-continued-accommodative-policy/?utm_source=rss&utm_medium=rss&utm_campaign=bernanke%25e2%2580%2599s-labor-market-speech-%25e2%2580%2593-the-case-for-continued-accommodative-policy http://crackerjackfinance.com/2012/03/bernanke%e2%80%99s-labor-market-speech-%e2%80%93-the-case-for-continued-accommodative-policy/#comments Fri, 30 Mar 2012 06:45:22 +0000 crackerjack http://crackerjackfinance.com/?p=2216 Ben Bernanke made a highly referenced speech earlier this week, which was credited with fueling a sharp rally in the stock market. The speech was colorfully titled: “Recent Developments in the Labor Market” and is a worthwhile read for investors and those interested in the US economy. The speech highlights a growing controversy in the labor market regarding the constraints on hiring. The traditional school of economic thought focuses on the cyclical factors which have depressed hiring and constrained labor market improvements. In Fed speak this is described as insufficient “aggregate demand”. A new school of thought is emerging focusing on the bottlenecks in the job market stemming from; the aging of the workforce, globalization, and technological change. Obstacles based on these reasons are described as “structural impediments”. Ben Bernanke’s answer on which factor is muting the pace of hiring relative to past expansions? Drumroll please…….. He doesn’t know. The Fed correctly concludes that the factors constraining the job market could be based on a lack of aggregate demand and “cyclical factors” but they also could be based on “structural forces”.  Don’t expect an answer anytime soon. It will take academic economists many years to determine labor market imbalances and [...]]]> http://crackerjackfinance.com/2012/03/bernanke%e2%80%99s-labor-market-speech-%e2%80%93-the-case-for-continued-accommodative-policy/feed/ 0