Category Archives: Past the Post

Carl’s wisdom…

… oh dear! Pinkers having another go at Carl Icahn? Really trying hard not to but his widely reported statement that there “could be a big drop around the corner” is a true classic!

Dear Carl, a little more commitment please!

Alarm bells…

Pinkers is worried.

Yesterday, the Telegraph: Equity strategists at UBS told their clients to pile in and expect further stock market gains, setting a year-end target for 2014 of 7,400.

Today, the Times: Patrick Moonen, an ING equity strategist , said for the first time in five years he could not see any “event risks” on the horizon.

How did she put it again, Her Royal Majesty, when receiving a group of eminent economists in 2008…? Wasn’t it along the lines of: “It’s awful. Why did nobody see it coming?”

No more to be added. Good luck to all of us!

Twitter’s share price

Today’s FT is full of it: Twitter’s extraordinary debut on the NYSE. A 73% rise on the first day of trading. Yes, this is impressive. Well, it may sound impressive. Pinkers , however, thought this was rather conservative, expecting a mark-up of more than 100% – in line with previous comments posted in The In & Out column.

Pinkers is a fairly conservative investor, strongly believing in the combination of traditional valuation methods and charts – always looking at the balance sheet first and then analyzing the charts over 20, 50, 100, and 200 days.

Taking these yardsticks into consideration, Twitter’s current valuation simply looks barmy! A company not making a penny of profit valued at $25 billion??? Surely, that does not make sense and any sound financial analyst would advise NOT to buy or SELL OUT as quickly as possible. Even the brilliant James Mackintosh – a truly lateral thinker – supports this argument, especially in the light of the expensive US equity market as a whole (Pinkers agrees!).

However, when it comes to Twitter, Pinkers begs to differ. For once, all traditional yardsticks have to be abandoned and, frankly, ignored. There simply is no point whatsoever trying to justify either the current price or, indeed, trying to predict the future price of this stock. The difference between Twitter and all other companies (not only the so-called ‘social networking’ ones) is simple: Twitter is not really a business in the traditional sense but a platform or let’s call it a foundation for something MUCH bigger. A ‘business’ that has the power to facilitate major political upheaval (revolutions such as the ‘Arab Spring’) simply is in a completely different league.

There is only one other comparable company (incidentally equally derided in its early days) and that is Google.

A by far more pertinent question would be trying to justify Facebook’s valuation. Now… THAT is a joke!

Last but not least a word of warning: As Twitter is more of a ‘project’ rather than ‘business’ investment, it will be a very rocky ride over the next three years, at least.

Mince Pies: Rally, flop… or sell-off?

It’s official. Christmas has arrived. Well… at least in the shops. As the Times reported, yesterday, “one in three Britons is set to eat the first mince pie this weekend, six weeks early.”

So what about the markets? Any early preparations for the traditional Christmas rally? The world’s leading indices have been moving up all year, hitting record high after high after high… high on heroin! Pinkers suggested we should see a healthy correction to facilitate a rally but, so far, no sign of it! So the question is: How can there be an Xmas rally if there has already been a rally throughout the whole year? An even steeper increase on higher volumes, perhaps? Highly unlikely.

Pinkers is worried. There are ominous signs on the horizon. Whilst the US and UK economies are picking up in speed, the Eurozone is still marred by the dynamic of a deeply flawed monetary union. The ‘one-size-fits-all’ monetary policy does not work as long as there no proper fiscal union. Financial analysts tend to question data released by China but surely it is European data that is fundamentally skewed as there is no exchange rate flexibility, causing huge discrepancies between individual countries: just think about cooking… the ingredients Germany and Greece might both begin with the letter ‘G’ but… sorry… they just don’t make for a tasty meal in one pot.

With the US in recovery mode, tapering is back on the agenda and the Eurozone sliding in the opposite direction, deflation that is… well, bad news all round. This is supposed to be a global economy but more appropriate would be to quote the new major of New York, Bill de Blasio: “A tale of two cities.”

Icarus

Pinkers being a collector of art, cannot help having some sympathy with Steve Cohen’s current predicaments. As head of the hugely successful hedge fund SAC Capital, Cohen is a major player in the art market and, over the years, has built a truly impressive collection from Damien Hirst (acquiring his ultimate iconic masterpiece ‘The Shark’ from Charles Saatchi for a mere $8mio in 2004) to Picasso (‘Le Reve’ he acquired from Steve Wynn for rather more…).

His company seemed extremely well-run and he was brilliant at choosing his lieutenants. But now the rot has set in. Big time. It appears he took his eye of the ball. Delegating rather than ‘control freakery’ is a great skill but perhaps he was little too nonchalont? Major blunders followed and his fund has now been ordered to pay $1bio in fraud fines. That alone could have been ‘digested’. But the real issue is to plead guilty (hats off!) – as a fund, that is, not the individual Cohen. As a result SAC Capital is now finished in its current form.

Well, Cohen can hardly be considered a pauper and still has his own $9bio to look after… but he does belong to the old guard and perhaps it was just the inevitable tale of Icarus flying too close to the sun?

Yes again, Soros was a step ahead of the game and closed his fund months ago to outsider investors precisely for the reasons that have now brought SAC to its knees.

One thing this tale does prove: Tighter regulation driven by public sentiment IS kicking in… and there will be a lot more digging to come… this is only the beginning.