Quotable Quotes and Notable Notes - 8/27/2012August 27, 2012 @ 8:22 AM EST
The first down week in seven was marked by a high stakes game of “Truth or Dare” , as the markets dared FOMC Chair Ben Bernanke and ECB President Mario Draghi to “Tell the Truth” about their real plans for further easing. Each whiff of dissembling was met with a hissy fit of selling and each hint of possible action to come spurred enthusiastic buying.
For the week the SPX was down a modest -0.5%, the Dow -0.9% and the NASDAQ -0.2%. However, there was a move of 2% from highs to lows on the week, as comments from Draghi, Merkel, Samaras, Regional Fed Presidents Bullard, Evans and Lockhart, and Bernanke’s “letter” played what a trader quoted by Barron’s called “Ping Pong” with the markets.
So what were they saying this week?
“It is absolutely misleading to report on decisions which have not yet been taken.” --ECB spokesperson on reports of imposing a cap on borrowing costs for countries including Italy and Spain. Mr. Draghi, through channels, also said that, according to Bloomberg, “the ECB may wait until Germany’s Constitutional Court rules on the legality of Europe’s permanent bailout fund before unveiling full details of his plan to buy government bonds.”
“I want Greece to stay in the euro zone and that’s what I’m working for.” --Chancellor Merkel
"Germany needs a strong Eurozone. And if a country is forced out of the euro, it would probably not be the last, at least that's what the financial markets would see, and to fight against that would be difficult." --Greek PM Samaris
“Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.” --FOMC minutes
“The minutes are a bit stale. We have some data since then that is stronger.” --Federal Reserve Bank of St. Louis President James Bullard
"There's a lot of reason to do more.” --Chicago Fed Pres. Charles Evans
"There is a risk to monetary policy being employed too aggressively and without effect to address economic problems that can be resolved only by fiscal reforms that involve making tough choices…It's a cost-benefit calculation to consider more monetary stimulus and someone like me has to do his best to really carefully weigh the costs and benefits. I'm not finished with that process." --Atlanta Fed Pres. Dennis Lockhart
The whipsaw action engendered what some were calling “speculation fatigue”. “Who knows what is priced in anymore?” seemed to be the general sentiment and “When in doubt just buy gold” seemingly might have been the rallying cry. (A piece by yours truly asked if we had seen “The Kardashian Top”, referring to Kim Kardashian tweeting on AAPL’ s new record market cap).
Amidst this backdrop, the S&P briefly touched a new high for the year (and four-year high), although CNNMoney, Bloomberg and others reporting that underperforming hedge funds still had “record levels of cash”. Schaeffer’s’ Investment Research, however, said a pick-up in recent put-buying might be a contra-indicator “pointing toward hedge fund players moving toward a position of having more long equity exposure.”
But surely there had to be something else out there this week beyond the mind-numbing global bank guessing game?
“Apple Rids Samsung From Its Core.” --this and other similar headlines over the weekend, as AAPL, according to the Huffington Post and Reuters, “scored a sweeping legal victory over its arch-rival as a U.S. jury on Friday found the Korean company had copied critical features of the hugely popular iPhone and iPad and awarded the U.S. company $1.051 billion in damages.”
Samsung vowed to carry on a fight against the ruling, saying the decision was “a loss for the American consumer….This is not the final word in this case or in battles being waged in courts and tribunals around the world, some of which have already rejected many of Apple's claims.”
“Morgan Stanley's ‘Triangle of IPO Terror’: FB - GRPN - ZNGA has lost $62 billion in market cap.” --Zero Hedge, commenting on the post-IPO results of Facebook, Groupon, and Zynga, among calls for “more adult supervision” at Facebook.
And speaking of FB, according to Mashable and others,”Facebook has hired world-renowned architect Frank Gehry to design its campus extension, Facebook West.” Mark Zuckerberg said, “I’m excited to work with Frank Gehry to design our new campus. The idea is to make the perfect engineering space: one giant room that fits thousands of people, all close enough to collaborate together. It will be the largest open floor plan in the world.”
The other big news on Facebook continued to be the end of first lock-up period, with Jim Cramer going on one of his epic rants on the sale by insider investor Peter Thiel of what was reported to be a majority of his stake, "I find the sale completely outrageous in light of the seemingly endless decline of Facebook's stock. Call me naive, but I had hoped the insiders would actually be buying stock as a way to show faith in the underlying company and its longer term growth." (Business Insider)
Jeff Macke posted a piece on the 2nd Qtr. earnings wrap, where “of 2300+ companies reporting, 58% beat on EPS and only 48% on revenues, the lowest since Q1 of 2009.” (HP and Dell were notable reporters this week and ended up both disappointing for a variety of reasons, not the least the PC growth outlook going forward, with HPQ off about 9% on the week and DELL down 8%. BBY also missed badly, and was off around 15%, then naming a new CEO, Hubert Joly, which also underwhelmed the Street).
Bill Gross of PIMCO seemed convinced that QE3 was coming for sure eventually, and that “investors should buy what the Fed is going to buy.”
Barron’s’ Randall Forsyth said, “Beware the Seinfeld Rally”, asking if the gains in the equity markets so far this year were “something about nothing”.
Bloomberg said “the cost of beef will likely rise 5% next year”, off thinning herds and the impact of the drought conditions. (This begs the question on whether or not Goldman Sachs’ beloved Shake Shack will have to raise prices?)
While the sports media was anointing USC the pre-season BCS football favorite and #1 rank, West Virginia University was topping the Top 10 Party Schools by The Princeton Review.
And there was no shortage of sports news, with the Red Sox/Dodgers epic deal, Roger Clemens’ minor league comeback at age 50, the normally non-controversial Boomer Season knocking Tim Tebow, Lance Armstrong’s decision to give up his long-term fight over doping charges, and Augusta National accepting its first two female members, including Condi Rice.
But another Armstrong made the bigger headlines, with early Astronaut and 1969 moon-walker Neil Armstrong passing, with the somewhat reluctant hero remembered for his many accomplishments and leadership, but once saying, “Pilots like to be remembered for their flying and landing, not for their walking.”