Buzz on the Street: Will 2014 Be the Year of the Polar Bear?
A look back at the happenings on Wall Street this week, as seen by Minyanville's Buzz & Banter.
Here is a small sampling of the 120+ posts seen on the Buzz & Banter this week:
Monday, January 6, 2014
Bonds, Bonds, Everywhere Are Bonds
I am wary towards a leak lower or outright sell-off in Treasuries this week. There is $14 billion in net new Tsy paper this week, but no T-note maturities. So, the $64 billion in new coupons will have to be absorbed. I'd rather not see a rally into the auctions because that tends to leave most of the auction longs underwater coming out -- not a good thing. Additionally, the corporate issuance floodgates will open today, even though syndicates are expecting 10% less this year then last. Icahn Enterprises (NASDAQ:IEP) has the honor of being the first, on my screen at least, selling $3.5 billion of 3-year, 5-year, and 7-year senior debt to refinance existing debt. FedEx (NYSE:FDX) and Berkshire Hathaway (NYSE:BRK.B) are also selling debt.
The 3-year is trading specially in repo markets at -1.05% this morning, though there will be $30 billion of new paper issued on Tuesday. Could it be that flattener positions are using the 3-year as the spot in the front end? Very likely. The current 2-year would be subject to 0 rates through 2015, so the 3-year is much more vulnerable to any pick-up in economic activity.
Mohamed El-Erian was on CNBC this morning. He stated that forward guidance was not priced into the Treasury market. I haven't looked in a few weeks; the first rate hike has moved up to August 2015 in the recent backup in rates from November to December 2015 prior to the recent Fed meeting, pushing up the implied 10-year rate by 14bps. The forward curve has moved in lockstep with the Treasury curve, so no great change -- still a very high (relatively) risk premium. Don't think that high of a risk premium is totally unwarranted because the econ data has been so good. What El-Erian implies is that the Fed is trying to push the first rate hike out into 2016, but the market isn't buying it, literally.
Muni closed-end funds are ripping today. I don't think they're done by any stretch. Peter Tchir made a great point on Bloomberg Radio this morning. If you're expecting mid-single-digit equity returns this year because of the banner year last year and if you can earn a tax-equivalent yield of 6%+ in munis -- they're already pricing in a LOT of credit risk -- they will seem quite attractive. You still have to worry about interest rate risk, which I agree is to the upside. Lastly, as an FYI, David Kotok -- the founder and CIO of Cumberland Advisors -- is hosting a Q&A for institutional investors next Wednesday about investing in Puerto Rican debt. Seems to me like the tide is turning for muni debt with all of the negative information out there.
Tuesday, January 7, 2014
Cloud Cup & Handles
Workday (NYSE:WDAY) was a long idea from last night's stock report, and it was part of the Daily Market Report. The setup derived from Workday's pivot out of a 3-month (90-degree) Cup & Handle, which occurred on expanding volume.
The breakout was a clue as to the move in other names in the group, such as VMware (NYSE:VMW). VMware gave no inkling of its explosion today, but like Workday, it was also coiled in a Cup & Handle. When VMware triggered an Opening Range Breakout (ORB) at 91.90 this morning, the benefit of its underlying 4-month Cup & Handle perpetuated an immediate and powerful extension. A measured move intraday projects to around 95.60.
Below, see a daily VMware chart from September and a 10-min VMware chart for today.
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Below, see a daily Workday chart from October and a 10-min Workday chart for today.
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Click to enlarge
Wednesday, January 8, 2014
Apollo Education Group Follow-Up
You may recall my conversation with Minyan Mike back on October 24 about Apollo Education (NASDAQ:APOL). I mentioned that as long as it could maintain the pro-gap that it had created, that it wants to go much, much higher. Well, here we go again. When stocks go from a dog to a momentum name so quickly, it really sets the chart on fire by burning the shorts. This stock is doing a great turnaround. We seem to have another pro-gap, but the stock needs rest again. In this one, you continue to treat it the same way, we should have an extension higher tomorrow, a top-out tomorrow or Friday, and then drift between that level and the gap. The gap needs to hold (at least most of it does). I will continue to monitor it and move stops up! Stops can be set at the old pivot high to lock in a good gain.
Click to enlarge
Thursday, January 9, 2014
If you track biotech stocks or top gainers as part of your day, you've certainly seen or heard about Intercept Pharma (NASDAQ:ICPT) today. The stock is up 260% to $264 per share on positive news from a pivotal trial for the treatment of a type of liver malady. Please say a prayer for the folks short 5% of the float of this company's stock who are having a really bad year -- on Day 5.
Is this move justified? Perhaps. It doesn't really matter. The move is what it is. What does matter for those of us not involved in the name is that it's a really fabulous reminder of how great investing long in biotechnology companies can be. Earlier in the week, Epizyme (NASDAQ:EPZM) announced some cash from Celgene (NASDAQ:CELG) because of objective tumor shrinkage in one of their trials. The stock is up around 100%. Puma Biotech (NYSE:PBYI) has more than doubled in the last several weeks due to positive clinical data.
What Intercept Pharma has done is make certain that biotech is back on the minds of generalist investors still hurting from their underperformance in 2013. With the annual JPMorgan (NYSE:JPM) Healthcare Conference set for next week, biotechs are pumping out all the good news they can find. This is all positive for the sector for 2014.
You might remember me writing about the JPMorgan conference in past years. Everyone -- and I mean everyone -- involved in biotech comes to San Francisco for this annual meeting. I arrive on Sunday and have almost every half-hour booked with a different presentation or meeting from Sunday evening until Thursday night when I fly out. Multiply that by 10,000-to-15,000 people, and you get some sense of the scale of this event. Only a few thousand actually walk through the doors of the JPMorgan conference, but everyone is in town for meetings.
If you want to follow the fun on Twitter, pull up hashtag #JPM14.
Biotech almost always starts the year hot. Lots of people say the sector "must" go down after the great year in 2013. Perhaps, but Intercept and Epizyme are good examples of how betting that way can put you in a very big hole very early.
On Twitter: @AlpineBV_Miller
Friday, January 10, 2014
When Good Is Good and Bad Is Bad
Now that we have the NFP number out of the way, we need to remember what the markets were pricing themselves for. The markets have been positively discounting the economy being able to stand on its own two feet without the help of QE3, which we all know is being withdrawn. However, for those that are hoping that the Fed will now change the size of their QE3 reduction or maybe halt the reduction all together, you need to consider a few things. If the Fed were to turn tail on a dime and go back on everything they have said and forecasted a mere 3 weeks ago, they risk having huge egg on their face and having an even greater forecasting credibility issue (it's already rather subjective). Furthermore, many of the Fed members have justified part of their QE3 reduction strategy based on their questioning of the true cost of QE vs. its benefit.
Preliminary earning reports have not been that great. Earnings from most of retail have been atrocious and Alcoa (NYSE:AA) did not have that much good to say about important growth markets (think China). China's equity markets are also giving sell signals.
Many names have run up thanks to end-of-the-year "positioning" and to expectations of the aforementioned economic stability. I think we are in a moment of good-is-good-and-bad-is-bad rather than the opposite that we have all been used to for so long thanks to a reliance on Fed slushy money.
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